To the extent my superannuation fund (401k, ROTH, IRA, hard to know what people call this in other economies) is invested in oil, it goes to .. me.
Super funds in Australia, Canada, the US, are now a massive component of capital investment both in the public market and in private equity. Australia's GDP is 2.5T and the super funds are up to 4T or 5T. Thats $trillion. The super funds are bigger than the GDP of the economy they reside in!
Some funds are just venal machines in the for profit sector. Some are run by boards aligned to union sectors, I am in the tertiary education union backed fund in Australia and it's been in the top 5 performing funds for my entire working lifetime, and given me a comfortable retirement. Most of the injection of funds was from me: I paid between 9 and 12% and on occasion up to 15% of my income into this fund over a 35 year working lifetime. Its accrual is all down to my fund manager, and if they invested in oil and have secured a windfall, at the cost of the future climate risk, thats on me, albiet indirectly. 35 years at the 150+ year 6-7% return in the market, (some say this trend is even older) is several doublings over my working lifetime. Those doublings were driven in .. the market.
Me here, is 75% or more of Australia. It's not some amorphous unknown nasty corporate investor in a sharp suit, its ordinary people. Oh, the article even points out that they pay out on insurance and capital costs rebuilding the exploded ships and production facilities. Guess who makes money? Thats right, the superannuation funds invested in the re-insurance market (Warren Buffett's favourite!) or in construction companies, public or private. So.. thats me again.
The money comes to us. Some of us may be in Saud. Sure. The Saudi state pays a huge stipend to its citizens. Some of us may be in Norway. That national investment fund is amazing. Why do you think Norway is now almost completely cut over to private EV drivers?
I'd love to ideate the hateful oil companies as the victors here but the thing is, they don't simply act like Smaug and sit on a pile of gold coins. Thats not held to be useful by them and their peers. They do shave off FAR TOO MUCH to swan about in those aforementioned sharp suits, but enough of the fat trickles into my hands, to keep me in the manner to which I am accustomed, as a retiree.
I'm as complicit, and so are "you" for many people reading this.
> The super funds are bigger than the GDP of the economy they reside in!
You are comparing the absolute value of something versus yearly performance.
Market cap vs revenue.
I agree - they're measuring completely different properties of different populations of things, over completely different time horizons. Comparing them doesn't seem very useful.
Market caps are roughly expected future earnings, discounted back to give some net present value. They're expectations about the profitability of businesses, with expected profits accumulated over forecasts decades into the future. Market caps ignore privately held businesses, small businesses, state owned businesses & economic activity, economic output that might be happening at a household level, etc.
GDP is some peculiar measure of a country's economic output, over one year. It doesn't care if the economic activity is profitable or not & it doesn't care if the surplus of the economic activity is extracted by public companies or not. It's not forward-looking & based on expectations.
all that said, ggm has a fair point that individual investors & retirees with share portfolios directly benefit from the profits of companies whose economic activities may not be particularly pro-social & beneficial to the world. it's similar for climate change -- easy to point the finger at the energy producer, the big dirty brown coal plant. harder to point the finger at the demand side of the same equation - much of which is household demand. but both the individual end consumer households and the energy producer & everyone else involved in the value chain benefit out of the trade, even if the trade is net-negative for the world if we were to properly account for the externalities (e.g. polluting the atmosphere with CO_2 pushes the costs to everyone on the planet, current & future generations, not just the folks benefiting from the trade).
True and fair. I committed a dimension sin.
You can use interest rates and rates of return to convert between stocks and flows of money (or more generally, things we measure using money, like stakes in companies).
If you add that most people have some common sense notion of what reasonable or achievable rates of returns look like, then what you said was just a bit vague and implicit, not necessarily a sin of dimension.
For a similar example:
An CPU designer might tell you that one clock cycle is 'this long' (where she stretches out her arms in front of her). She's not committing a sin of dimension, more likely she's talking about how far electronic signals travel during one clock cycle.
Yes, but I think with bafflingly huge numbers, it's a useful reference point. ~the value of all the stuff and services made in Australia for the year!
> my superannuation fund (401k, ROTH, IRA, hard to know what people call this in other economies)
In Canada, the comparable funds are: Canada Pension Plan (CPP, mandatory contribution for all employees), employer-managed pensions (not all companies have one; policies vary such as defined benefit vs. defined contribution), personal RRSP (you make the contribution and you select the investments).
I guess the comparable funds in the USA are: Social Security (mandatory contribution for all employees), employer-managed pensions (not all companies have one; policies vary such as DB vs. DC), personal IRA such as traditional/Roth.
In the book Catch-22 character Milo Minderbender helps the enemy conduct an aerial attack on his own base. He successfully defends his actions by pointing out how profitable his syndicate is. “Everyone gets a share.”
> It's not some amorphous unknown nasty corporate investor in a sharp suit, its ordinary people.
That 'nasty' guy usually serves investors, instead of investing his own money. For all he cares, these investors might be widows and orphans.
Btw, Singapore's sovereign wealth funds are also big players in basically the same space. Their revenue contribution to the national budget is bigger than any single tax we levy.
> they don't simply act like Smaug and sit on a pile of gold coins
That's because a pile of gold coins does not make money. One makes money by investing the coins, not investing in coins.
I always thought Smaug's hoard (as depicted in Jackson's movie) was beyond ridiculous. If it was unleashed on the economy, the price of gold would drop to the point you could pave the roads with it and make sewer pipes out of it.
Thankfully they invented another war soon after to ""iNvEsT"" all that good!
Middle Earth was supposed to be huge, massive, so I wonder if spread evenly that would be so. And I wonder, comparatively, how that hoard would look compared to 10 year's output of any Dwarf gold mine.
Maybe gold was already cheap. Maybe a gold coin was as silver to you and I.
I think I'll have Claude do a deep dive and research into this report, then release a paper on it.
(This goes under the theory of 'the more capacity you have, the more capacity is used' concept, and so, within a few years, we'll have 100 page reports on musings like this, instead of a two or three line post)
Not directly answering your question but the YouTube channel In Deep Geek has a video speculating on the wealth of Smaug. https://www.youtube.com/watch?v=wjASn2VJNbY
I doubt you would pay much for gold if everyone had a bushel of gold coins.
As an Australia, i agree with most of what you say, but you have skipped some important parts of the cycle. Firstly there are many hands along the way asking for their cut. This is why everything is going up so quickly, because there are so many hands, who dont add value but tax the process.
What % of your funds are invested in oil?
no idea. I'm a hands-off investor. I don't ask. I didn't select ethicals either.
About 0.1% (Woodside)
https://www.unisuper.com.au/investments/our-investment-optio...
It's diversified, but the biggest holdings tend to be in Australian Banks, BHP and the "big" US tech stocks.
Energy is 3.7% of VTSAX. Oil is just a portion of that.
that is fundamentally self-centered, the way it is put there. Capital is under the control of certain companies and their decisions are binding financially.. it starts there AFAIK. Upon that stable core is built layer upon layer of related business including things you mention. A framing that the business practices are 'on you' wears thin quickly while simultaneously taking up airspace from very difficult business topics
> I'm as complicit, and so are "you" for many people reading this.
But rather than advocating, or even agitating, for a change in the system that perpetuates unacceptable -- and now unavoidable -- climate risk, you seem pretty sanguine about the whole thing.
With bespoke human-crafted em-dashes, not slop-dashes.
I wish I could downvote this, because what a bunch of baloney! Unless you have hundreds of thousands, and to be precise millions, invested in oil already, you're not going to see any significant changes to your portfolio. The rich will get richer playing the market, the regular folk are left out as always paying the price.
Big US oil companies like Exxon, Chevron, Conoco, et al are mostly owned by mutual funds and index funds. So it really is "regular folk", though of course not everyone has the same size 401k.
Superannuation in Australia is most typically a not-for-profit mutual fund. So .. yes. Most Australians invest in "industry super" which means the union backed nfp model.
> So it really is "regular folk", though of course not everyone has the same size 401k.
Depends on how you define "regular folk".
40% of American adults don't have any retirement savings account at all. And entirely unsurprisingly whether they do or not correlates extremely strongly with income/wealth.
So one could easily claim that the further from actual "regular folk" you are the more likely you are to benefit.
> Depends on how you define "regular folk".
> 40% of American adults don't have any retirement savings account at all.
So, 60% have, 60% is more than half, so it takes the value of "regular folk". Ah, statistics.
Thats a percentage, not statistics. Statistics would guide you that "regular folk" wouldn't describe the 60% most well-off, but rather the 60% in the middle. Also 'any retirement savings at all' ≠ mutual funds or stock market ownership.
What you said makes no sense. The fact is that most Americans have retirement accounts, and most of that money is invested in stocks. In particular, large cap stocks like Exxon and Chevron.
Any definition of "regular folk" that excludes more than half the population is nonsense.
Its not very helpful to win a few dollars, when your living expenses go up by much more every week.
Anyone can decide to put their spare cash or retirement funds into oil stocks, but I don't think that it's a recipe for getting rich. Renewable energy is rapidly replacing oil, and if the Strait of Hormuz opened and the Ukraine war ended, oil prices would sink and you would end up with huge losses.
Nobody really gets rich by playing the market. You get rich by working hard and/or starting your own business, and investing in a diversified portfolio of index funds and dividend paying blue chips.
Let's not put the horse before the cart.
Exxon is up 40% year-to-date (YTD), BP is up 20% YTD while SNP500 is up 12% YTD.
So I'm not even sure the premise of this tangent is correct; oil stocks aren't shown to be the recipient of the current price spike.
>Exxon is up 40% year-to-date (YTD), BP is up 20% YTD while SNP500 is up 12% YTD.
But it's not sustainable in the medium term.
> But it's not sustainable in the medium term.
You think this is the only basis of investment in a large fund? You think they don't make plays which respect this fact, in their risk profile?
That's the point I was making.
Horses go before carts though, not after. Can't pull a cart from behind it.
> You get rich by working hard
Come on now
Hard and smart, with good negotiating skills, in the right industry.
are you sure you understand what rich is?
“Having money: Owning a large amount of cash, property, or valuable items (wealthy)”
the large in the "owning a large amount of..." is relative. you could think you're rich and i could think you're poor, or i could think you're rich and you could think you're poor.
Rich is just a word that is over-used to push political agendas. It is a relative term. I am rich compared to a huge segment of the world's population. I am poor compared to the top .1% of people.
'Tax the Rich' politicians will never give you a number when you ask just who they are talking about. It has to be fluid. Bernie Sanders used to rail on millionaires until he became one. Now he only says billionaires.
With regards to Senator Sanders, inflation is a thing. Also the massive increase in the cost of housing that increased the middle class net worth. He has been remarkably consistent about the segment of the population he wants to tax.
I'm also poor relative to the to 0.1% of people, but I still make a ridiculous amount of money compared to the minimum wage worker. If were better able to provide for everyone by taxing me more then I'd be all for it.
> Rich is just a word that is over-used to push political agendas. It is a relative term. I am rich compared to a huge segment of the world's population. I am poor compared to the top .1% of people.
i agree. "capitalist" is the word for what people really mean when they talk about "the rich"
Let’s assume you work longer and harder and smarter than 99% of people in the USA at $450k a year.
Let’s also assume you save every penny, you don’t buy a single thing, from food to shelter.
Let’s assume that inflation is zero, and you work for 50 years at this level from 20 to 70.
You will have earned $22.5 million.
Not bad. Remember this is without spending a single cent.
Now how do you think you get to a net worth of $220m? Or $2200 million? By working ten or one hundred times harder
You don’t get rich from working hard. You get rich by being rich and letting it snowball. $40k a year in an 8% return for 50 years gets you about the same.
>You will have earned $22.5 million
Which is rich.
It is kind of on the low end of rich though.
Don't get me wrong. I would love to have that kind of money. I would retire immediately if that was in my bank account.
But we're comparing to people who have 100x that. Or nowadays apparently literal trillionaires.
Like there's rich and then there's rich
Keep in mind that the situation that the OP suggested is a sort of spherical cow. Substantially more people earn <40k per year than earn 450k per year. It is extremely unlikely to earn that kind of money over that kind of timeframe, nevermind being able to save every single cent of it
Not compared to trillionaires. How much harder do you have to work to become a trillionaire?
That's a fun set of words to say instead of "just be born rich lmao" and yet they mean the exact same thing.
> You get rich by working hard
Yeah, right
That's an oddly disconnected fantasy about modern capital ownership.
Capital, including shares in companies, is greatly concentratred in a few people - the highest concentration in ~ a century. The money is going to those people. You might say they are benefitting from the war.
A great many other people don't own shares or retirement accounts. Studies show that ~50% of Americans can't cover ~$500 for an emergency (yes, liquid cash is different than a retirement account, but you can borrow or withdraw from it in an emergency).
Your comment is now gray (struck a nerve I suppose) but it's right. I hate the tired "The stock market benefits common folks like you and me!" line. It goes unchallenged because it's almost "technically correct" but it ignores proportion. The stock market does not benefit all people uniformly, it benefits people in proportion to how already-rich and already-invested they are. And, at least in the USA, approximately 50% of people don't have any stocks at all, including indirectly through retirement accounts or pensions. So, invested capital benefits about half of us, and disproportionately those at the very top.
> The stock market does not benefit all people uniformly
Do you prefer it benefit everyone uniformly?
Everyone gets the exact same $ dividend whether $100 invested or $100k invested?
Nothing in my comment proposed that, but in general, I'd like to see more institutions that benefit people uniformly and equally, and fewer institutions that provide benefits inversely proportion to need.
A few public servants in Australia, Norway and the kingdom of saud doesn't translate to all the people are benefiting. Nice try to shift the blame to 8.5 billion people instead of oil billionaires and corporations. Old people have set up systems to transfer wealth from future generations. The corporate profits are mirror images of debt: https://www.hussmanfunds.com/wp-content/uploads/comment/mc25...
US has $40T federal debt (+state, +municipal, +household) and probably 100T+ debt worldwide which the future generations have to pay.
Fossil fuel is unsustainable without substantial subsidies from Govts. Global Fossil Fuel Subsidies Reached $7 Trillion in 2022, an All-Time High: https://e360.yale.edu/digest/fossil-fuel-subsidies-2022
More than a century of subsidies and yet not profitable on its own.
> US has $40T federal debt (+state, +municipal, +household) and probably 100T+ debt worldwide which the future generations have to pay.
Future US citizens are clearly not going to repay the debt, simply because they can't feasibly pay that much back in real terms. They cannot achieve the impossible. The magnitude of the debt is far beyond what it makes sense for the US to make good on.
Future generations of the US won't be able to borrow on such favourable terms (ie, people will stop donating to the US cause) and all the capital investment that would have happened in the US to power their consumption happened in China instead - but the effects of the debt won't look like repaying anything.
You don't repay in real terms, you repay in nominal terms. That's priced in. The US isn't going to straight up default but it'll pay you back with inflated currency.
Total US retirement saving is over $50b. Total residential equity is about the same
The Us population can afford to repay the money it owes.
> A few public servants in Australia
A few public servants in Australia? I'm not sure what you mean?
Superannuation may have been limited to a public servants and employees of large corporations in the 1970s, but was expanded to blue collar workers in the 1980s (see industry super funds), and mandatory for all employers in the 1990s. Almost every worker in Australia has a superannuation fund. Whether a given person's fund is invested in fossil fuels is another questio (mine has a radio button to choose green only investments or not).
Okay, assume 100% of people in Australia. 27 million people. The world has 8.5 billion people.
Yeah, the people who didn’t set up the system and don’t control or understand it are responsible for it.
Let’s forget about the people who did set up the system, and do control and understand it.
Very reasonable. Very logical and sensible.