Wildfires in Specific and Natural Disasters in General

Wildfires in Specific and Natural Disasters in General

by Doyle Ranstrom on Aug 13, 2021

When I was ten, my mother gave me a Wood Burning set to stimulate my creative abilities.  I remember reading the directions.  It said do not touch the tip when hot.  Well duh, I could figure that out by myself.  But how bad could be the white part next to the tip?  Keep in mind I am a 10-year old boy.  Turns out pretty bad.  Still, remember where I touched it and how much it hurt.  

Many years later, I was doing a training bike ride going north out of Fargo on a country road.  The country was burning the ditch next to the road with the fire literally next to the pavement.  I blew thru but still remember the intensity of the heat for just a few seconds.  

Whenever I read about wildfires and the brave men and women who fight them, I cannot imagine how difficult it must be for them.  I am nowhere brave enough for that job or any fire-fighting job. Firefighters at any level are American heroes.   

Wherever you are in the US, it is likely you have been affected by the smoke from wildfires and as we see almost every day, thousands of Americans have been directly and tragically affected by wildfires.  According to the Congressional Research Service, in 2020, the US has 58,950 wildfires consuming over 10 million acres, burning almost 18,000 structures of which 54% were residences.  2021 is shaping up to be worse than 2020. 

When I do my Long-Term Trends talk, one trend I discuss is the increasing frequency and cost of natural disasters. For example, I mention in the 1980s, there was a total of 28 billion dollars or more natural disasters events.  By comparison, in the last decade 2010-2019], there was a total of 119 Billion dollars or more events.   The average annual cost in the 80s was $2.8 Billion dollars per year compared to $80.2 Billion dollars annually for the past decade. In fact, led by $306.2 billion total costs in 2017, 2017-2019, the average annual cost was $152.2 Billion.  2020 came in with 22 Billion dollars or more events for a total average annual cost of $95 Billion.  2021 is shaping up to be even higher.  

What does this mean for all of us? Well, it could mean many things.  Two examples are as follows: 

  1. After the wildfires in CA in 2017, thousands of homeowners were having difficulty obtaining homeowners insurance.  The Insurance Commissioner for CA was quoted in 2019 "the new normal could mean a triple or quadruple increase in the cost of premiums".  

  2. Currently, climate change is not priced into 30-year mortgages.  In February 2019, the Federal Reserve Bank of San Francisco stated "climate change could end mortgages as we know them".

If the cost of homeowners policies increases in high-risk areas, how does that affect market values in those areas? Also, how does that affect personal equity?  Or, if we price in climate change into mortgages, how does that affect market values and personal equity?

If this sounds pessimistic it's because it is. But there is also optimism, on a global scale.  For example, the largest institutional money manager in the world, BlackRock Inc. [iShares] is a significant proponent of sustainable development and sustainable investing.  Check out the CEO of BlackRock letter to CEOs on their website [blackrock.com] and their other commitments to sustainable investing.

So, what should you do?  I would suggest there are a variety of considerations.  However, before going further, note I am not giving investment advice or predicting the future in any manner.  

  • Do a personal risk management assessment. 

  • Consider how a change in mortgage financing may affect you in the future.

  • Consider the impact sustainable investing may have on personal assets.

And finally, and perhaps most important.  I would suggest you put natural disasters in specific and climate change in general at the top of your political considerations.  In a very real sense, natural disasters are the price tag of climate change and that price tag has both a National cost and potential personal cost to you.  

Supporting politicians who have a history of denying climate change and the accompanying increase in the cost of natural disasters would be the same as a group in the 1600s who wanted to sail to the New World and hired as the captain of their ship, someone who had never sailed in his life and thought the world was flat.

Planning for and coping with natural disasters are adult problems and they are not going to go away.  However, the US has the education, the research, the scientists, and the tools which include AI and automation to address these problems.  It is vital each of us educate ourselves on long-term strategies and options.   I would suggest both our National financial security and your personal financial security depend on this.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.