Last month we listened to Donald Coxe's weekly presentation to institutional investors. Coxe is the Chairman and Chief Strategist of Harris Investment Management. He has been a bull on the commodity markets for some time now and has correctly pointed out numerous investment opportunities in the energy, metals, and grain markets.
We were surprised when he mentioned the historical nature of the solar cycle and its' potential impact on global weather patterns and the agricultural sector. Most of the time Coxe he restricts himself to ‘worldly' indicators of supply and demand. Apparently an article on the subject recently appeared in Investor's Business Daily.
Since the performance of so much of our portfolio is driven by the weather – especially companies in the energy and agricultural sectors – and since Coxe notes the current sunspot cycle may point to lower global temperatures, we decided to examine the issue. Other long term forecasters we follow have not raised the issue to date.
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Sunspots have been monitored since around 1610, shortly after the invention of the telescope. They provide a long-running direct measurement of the sun's activity. The number of sunspots each year varies significantly, and over the centuries it appears sunspots have an 11-year cycle of activity from peak to trough.
Because accurate weather records extend back only a few centuries scientists must use ‘proxy' records to assess global climate conditions, including ice cores, tree rings, and even records of wine harvests.
Scientists can take ice cores from glaciers in Greenland or elsewhere and correlate sunspot activity with weather – at least weather in that part of the globe. Tree ring studies have also been used to correlate weather patterns with sunspot activity.
Solar activity data appears to indicate that over the last century the number of sunspots rose in number and intensity. At the same time that the Earth's climate became steadily warmer. In theory, the more sunspots the more energy should reach the earth. Some experts argue that greenhouse gasses have enhanced the warming effect, others argue greenhouse gasses have had a minor impact. None-the-less solar activity and temperature appear to correlate.
One solar scientist recently published a paper on the issue of climate and sunspot activity, and found that the most striking feature is that looking at the past 1,150 years the sun has never been as active as it has been during the past 60 years.
Although the relationship between causation and correlation is an issue, global temperatures over the last 60 years have been very warm compared to historical norms.
The Maunder & Dalton Minimums
Coxe pointed out that we are at the low-point of the 11 year solar cycle (see chart above) – at the end of solar cycle 23 and at the start of solar cycle 24. Sunspot activity was expected to pick up significantly the last few months, with experts concerned about the impact of the powerful bursts of radiation on satellites, the electrical grid, and telecommunications systems.
But according to Coxe solar activity has been almost nil. He points out this has happened in the past. From 1645 to 1715 very little solar activity occurred after a normal series of cycles. Solar activity also declined from 1790 to 1830.
It is normal for the sun to have quiet periods between solar cycles, but some experts claim we've seen months of next to nothing activity-wise. While the start of solar cycle 24 seems to have materialized it “then abruptly disappeared.”
These historical periods of solar inactivity – dubbed the Maunder Minimum and Dalton Minimum after the astrologists who studied them - coincided with an irregular periods of rapid climate shifts. The climate cycles brought intensely cold winters, although periodically intense summer heat waves would also appear. The Maunder cycle is often referred to as the "Little Ice Age" – but climate experts claim the period is punctuated by both cold weather and rapid climate shifts.
These periods of low solar activity were also periods of sustained weather driven crop failures. Coxe notes that solar scientists strongly suspect there is a link between the Maunder and Dalton Minimums and the cold weather - but the exact mechanism remains elusive.
The ‘sunspot gap' from 1645 to 1715 – corresponding with the Little Ice Age – can be seen in the charts above.
The question Coxe raises, and one we cannot answer, is whether the lack of sunspot activity in this cycle portends a trend to cooler weather, shorter growing seasons, and increased space heating demands – or is it just a statistical fluke?
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