"Clients get this," Vodra says. "They understand peak oil and climate change. They know world oil supplies are finite and prices are going up, and this is a problem that is likely to get worse and not easier. I don't get strong push back that this is a bunch of hooey. Particularly from an investment perspective, clients see the value of having global and energy exposure, global currencies and even global bonds, given the fact that we're importing so much of our oil from a trade deficit position."
To extrapolate his insights about energy-particularly peak oil-and the environment into reality, Vodra continues to refine his unique Worldview Two
portfolio. He says a moderate version of the portfolio has about 20% in cash equivalents; 20% in non-U.S. currencies; and 20% in non-U.S. and inflation-adjusting bonds. Another 30% is in commodities, natural resources and energy investments, which can include commodity price indices, direct investments in energy production and precious metals, options and futures.
Vodra also uses mutual funds and stocks focusing on energy and resources. The rest of the portfolio is invested in a broad range of companies and real estate reflecting the ongoing world economy. "Right now, I don't have a client who has more than 50% in the U.S. economy," Vodra says.
So far, when confronting possible lifestyle changes due to peak oil and climate change, his clients have reacted in different ways, running the gamut from fairly dramatic "green" action plans to what might be termed conservation baby steps. A handful of his investors would like to move to the country so they can create their own farms and convert to solar energy, Vodra says, while at the other end of the spectrum, there are people who believe that simple energy efficient replacement windows in their homes may be a nod in the right direction.
Most clients fall somewhere in the middle. "The back-to-the-land movement is not an option for most people, but staying away from the 7,000-foot home you have to heat and the Land Rover you have to gas up is," Vodra says. "The earlier you can start thinking about these things, the better off you'll be."
While Vodra does not necessarily predict gloom and doom, he reports what he has found and draws a number of conclusions that are far more bipartisan and pragmatic than pundits may want to accept. "There will be less oil and cheap electricity available, and this will lead to the end of a century of cheap and plentiful energy," Vodra says. "It will open up a new energy and economic system, and no one knows what that will look like."
While total solutions aren't really possible-carbon dioxide, for instance, stays in the atmosphere and the oceans for hundreds of years-the problems may be slowed and contained if long-term action is taken fairly quickly. For instance, to slow global warming, it would mean cutting world CO2 emissions by 80% over 40 years. "There aren't any quick fixes," argues Vodra, who also believes that humankind probably does have the will, when facing catastrophe, to avoid worst-case scenarios. "Some of the worst things we predict won't happen [think nuclear war and Y2K], but other things we haven't thought of will happen," the advisor predicts.