Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. But I can't by law give you advice, and I do make mistakes. Remember: the unexpected sometimes happens. Oddly enough, the expected does too, but all too often it takes longer than you thought it would, or on the other hand happens more quickly than you expected. The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Wednesday, July 23, 2014

Global Warming Stats

I mentioned to someone the other day the words "global warming" and he shrugged and pointed to the chilly outdoors visible through the window.  It is of course midwinter here in Oz, so, especially in the far south it is likely to be cold.  That doesn't mean that just because we have a cold day in midwinter that global warming is nonsense.  Nor, equally, does it mean if we have a warmer than usual day in summer, that global warming is true.  But, if each year the number of extreme heat events is rising and the number of extreme cold events falling, year by year, decade by decade, then what it means is that the mean of the distributions for these events is shifting.  What used to be something that happened four times a year (a 1% event) is now something which happens once every 40 or 10 times a year, as the tail of the distribution shifts in line with its mean. Note that this says nothing about how the distribution itself changes, i.e., whether the standard deviation increases or decreases.  It's just a move of the whole distribution along the x-axis.

But you can also look at the mean, the moving average itself, to get an idea of what's happening.  In the chart below (via NOAA), I've plotted the 60 month (five year) moving average to June.  After record global temperature in May and June I suspected that the 5 year average would be high, and it is.  In fact it's equal hottest to the five years to June 2007.  And it's clear that there isn't much of a "pause" in the inexorable rise in temperatures.

So what about the long pause from the 40s to the end of the 70s?  My guess is that that was due to the releases of aerosols (sulphur dioxide) as industrialisation proceeded apace.  Aerosols reduce global warming.  When the impacts of acid rain became clearer over time, sulphur dioxide emissions were slashed, but carbon dioxide emissions kept on rising, so global temps resumed their rise.  But much of the world's industrial production growth in the last decade or so has come in China and India, where aerosol emissions are prodigious (look at the images of Chinese skies).  This has been one factor (I suspect: others are ENSO and the sunspot cycle) ) keeping the world cooler just as it was (I suspect) between 1940 and 1970.  Which means that as China and India clean up their air, by cutting CO2 and SO2 emissions, global temps will resume their uptrend even as CO2 emissions peak and start to decline.  A terrifying prospect.

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