Cumberland Advisors Market Commentary – Rome (Earth) Burns: Guess Who Fiddles?

Climate change is real. For the sake of our children and grandchildren, we must be talking about it seriously and thoughtfully.

The 25th UN Climate Summit anniversary meeting is in Madrid in a few weeks. Massively updated data are forthcoming as 200 countries participate. Only the US is in denial and withdrawal. (See “Madrid to host UN Climate Summit after Chile pulls out,” and the UN’s webpage for the meeting:

Today’s commentary focuses on the continuing destruction of our “Earth’s lungs,” as the Amazon rainforest continues to burn. We could also target Indonesia (“A Season of Fire Tests Indonesia’s Efforts to Curb Deforestation,” or California or Australia, where 100 fires are wreaking destruction in New South Wales (NSW) and Queensland (“Australian bushfires: Three dead and thousands forced from homes,” But this time our focus will be a follow-up on the continuing and depressing story in Brazil.

The California fires have been in the headlines in the US recently (“California Fires Update: Many Fires Fully Contained, While Risk Continues,”, including a commentary by our own Patricia Healy, CFA ( and rightly so; but that story masks from American scrutiny the ongoing massive damage in Brazil from fires, logging, and mining. As an Oct. 23, 2019, piece on the Mongabay website explains, while many of the Brazilian fires are now under control, the destruction proceeds unabated:

“The fires are only a symptom of a far greater problem: rampant and rising deforestation. Altogether, 7,604 square kilometers (2,970 square miles) of rainforest were felled during the first nine months of this year, an 85 percent increase over the same period last year.

“Unscrupulous land speculators are growing rich, say experts, as they mine, log and clear rainforest — operations often conducted illegally on protected lands. Typically, the speculators cut valuable trees, burn the remainder, and sell the cleared land at a heavily marked up price to cattle ranchers or agribusiness.

“So far, Bolsonaro has done little to inhibit these activities, while doing and saying much to encourage deforestation, mining and agribusiness. The government has de-toothed the nation’s environmental agencies and slashed their budgets, while hampering officials from enforcing environmental laws.”

(“As 2019 Amazon fires die down, Brazilian deforestation roars ahead,”

President Bolsonaro attended the Future Investment Initiative forum in Riyadh, Saudi Arabia, in late October and delivered a speech in which he fiercely disputed international criticism of his management of the Amazon. Bolsonaro repeatedly described the criticism leveled at him by French President Emmanuel Macron and others as “fake news,” while praising Donald Trump. (“Right-wing Brazil president blasts Amazon critics in Saudi speech,”

The following article in The New York Times focuses on an agreement that was reached 10 years ago between the environmental group Greenpeace and the three largest Brazilian meatpacking companies. The companies agreed not to buy cattle from ranchers who raised the animals in newly deforested areas. According to the Yale School of Forestry and Environmental Studies, Brazil’s cattle industry is responsible for up to 80 percent of the forest clearing in recent years. However, prosecutors, environmentalists, and academics who study the industry say the agreement was only partially kept. According to University of Wisconsin researchers, cattle ranching has been responsible for 18,000 square miles of additional deforestation since the 2009 agreement; and so, in 2017, Greenpeace withdrew from the agreement. (“Why Amazon Fires Keep Raging 10 Years After a Deal to End Them,”

Mining, much of it illegal, also has a large impact on the Amazon and its indigenous people. The following article, by Jon Lee Anderson in The New Yorker, tells the story of the Kayapo tribe of the northern Amazon and their struggle to preserve the rainforest where they live. The Kayapo number some 9000 people today (though their numbers had fallen to just 1300 by the late 1970s, following the construction of the Trans-Amazon Highway). They are the stewards of a 26-million-acre preserve to which they have full legal title. Anderson details the often-destructive, internally divisive concessions the Kayapo have made to gold-mining and logging interests. (“Blood Gold in the Brazilian Rain Forest,” 

This article in National Geographic also focuses on the Kayapo people and their challenges: “Kayapo Courage,”

Forest-destroying Brazilian fires are not confined to the Amazon; they are also endemic in the Cerrado, the vast central savannah region of Brazil. (It’s about half the size of the Amazon, with the federal capital, Brasilia, at its center.)

A hugely biodiverse area (about 40% of the plant and animal species living there don’t occur anywhere else on Earth), the Cerrado is being burned and deforested at a far higher rate than the Amazon is. Fires in the Cerrado were not banned late last summer as they were in the Amazon; so, in August and September, the number of fires there increased by 78%. (“Amazon fires: What’s the latest in Brazil?”

The tropical Pantanal wetlands of western Brazil are also being ravaged by fire: “Massive wildfires hit southern Brazil’s Pantanal wetlands,”

Ironically, the fires being set to expand agriculture in Brazil and many other places in the world are contributing to climate warming and may actually end up harming the farms for which the forest is being decimated. In the following article, Scientific American reports on a paper published in August 2019 in Environmental Research Letters. The researchers analyzed satellite data and weather station records from more than 2,000 sites in the Amazon and Cerrado regions and determined that deforestation caused an overall increase of 0.5 degrees Celsius (0.9°F) between 1985 and 2017. Of course, there has been additional warming from greenhouse gases accumulating in the atmosphere; and so, overall, the region has warmed more than one degree C and in some places by as much as two degrees C. (“Deforestation Intensifies Warming in the Amazon Rain Forest,”

A policy brief published by Monica de Bolle, economist and senior fellow at the Peterson Institute for International Economics in Washington DC, warns that deforestation, made worse by the Bolsonaro administration’s policies, could bring the Amazon rainforest to an irreversible “tipping point” in as little as two years. According to a report in The Guardian (,

“After this point the rainforest would stop producing enough rain to sustain itself and start slowly degrading into a drier savannah, releasing billions of tonnes of carbon into the atmosphere, which would exacerbate global heating and disrupt weather across South America.”

The following two articles report on the role the World Bank and its private investment arm, the International Finance Corporation (IFC), have played in Amazon deforestation and other environmental and social catastrophes:

And lest we become too self-righteous in exposing Brazil’s depredations of the environment and indigenous society, we may also wish to consider the likely effects of the Trump administration’s proposal to open Alaska’s Tongass National Forest to logging and road development. Says Scientific American, “At stake is the country’s largest forest. The Tongass is among the world’s best carbon sinks, and it’s one of the largest unfragmented ecosystems in North America. Its trees hold about 650 million tons of carbon, which roughly converts to half of U.S. carbon dioxide emissions in 2017.” (“Experts Dispute Trump Administration’s Rationale for Alaska Logging,”

Meanwhile, Americans witness Trump’s climate denier behavior. Here’s an excerpt about Paris Accord withdrawal and a link to the full article.

”The president held a campaign rally last night in Lexington, Kentucky, a state with thousands of coal jobs. Yet while Trump could once rhapsodize for 27 minutes straight about the alleged unfairness of Paris, he barely mentioned the agreement last night, referring only twice in passing to the “horrible, costly, one-sided Paris Climate Accord.” Secretary of State Mike Pompeo was left to fill the void with a brief press release. There are rumors that the Trump 2020 campaign will try to convince voters of its environmental record, which most Americans disapprove of. Perhaps last night was a preview of that strategy.” (“Trump Isn’t a Climate Denier. He’s Worse.”

By way of juxtaposition, readers might choose to watch Britain’s Margaret Thatcher speak about climate change to the UN Global Assembly thirty years ago, in November of 1989. Here’s a taste of what she had to say (and in part with her own grandson’s future in mind):

  • -“While the conventional, political dangers – the threat of global annihilation, the fact of regional war – appear to be receding, we have all recently become aware of another insidious danger.
  • -“It is as menacing in its way as those more accustomed perils with which international diplomacy has concerned itself for centuries.
  • -“It is the prospect of irretrievable damage to the atmosphere, to the oceans, to earth itself….
  • -“What we are now doing to the world, by degrading the land surfaces, by polluting the waters and by adding greenhouse gases to the air at an unprecedented rate – all this is new in the experience of the earth. It is mankind and his activities which are changing the environment of our planet in damaging and dangerous ways….”

You can watch Thatcher’s speech on YouTube ( or read the transcript (

As we soon gather around our Thanksgiving tables, we might wisely consider and talk about what gratitude for a livable planet (coupled with sheer prudence and good sense on the part of Homo sapiens) actually looks like as we confront the climate crisis.

PS.  A little closer to home here in Florida, there is a developing story about skin cancer versus coral reefs. Even as melanoma rates reach record highs in this state, a drop of sunscreen containing two particular chemicals can wipe out living coral for miles around. Note that an alternative product is in development but that politics, as usual, is the destructive force. Florida has its own battles pitting human needs against the needs of the environment; and this one could, with some sense applied, be resolved with a win-win. No doubt readers across the US and beyond see other analogous issues playing out wherever they live. (

David R. Kotok
Chairman and Chief Investment Officer
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