I read an interesting critique of the current U.S. economy…the general premise was that a significant amount of American finance has replaced investments in real goods and services with investments in financial derivatives (investments in ‘repackaged money’).
This is a cautionary tale…the more abstract our economy becomes, the more risk our society assumes.
I’ve also read the pros and cons of speculation as ‘indicators’ of where economic sectors are going…and the pros and cons of options and derivative investments to hedge against risk.
As I thought, a light went on about environmental investments. With prudent assessment and valuation, environmental securities have very knowable risk profiles, and the ability to accumulate valuable assets becomes easier than in other securities markets.
I note than there is significant emphasis in the carbon market on environmental registries, and they are important. They need to not only use great care in processing these environmental securities, but go further than merely registering ‘qualified’ credits, etc. In order to reduce risk, we need to connect the security knowably (quantifying both environmental return and risk) to the environmental processes and outcomes that underlie the security.
Is adequate work being done in that area? If it is, environmental markets will surpass other markets because they are the most stable investments.
Richard Pace 
Rick, you hit the nail on the head with derivatives trading. Buffett has been warning about the danger of abstract contracts in his letters to shareholders for years. I remember recalling him saying something to the effect that derivative trading should be outlawed.
Here is a link to an interview with Buffett about a year ago, he calls it “A Fool’s Game”.
http://seekingalpha.com/article/34606-buffett-on-derivatives-a-fool-s-game
Environmental markets are a new opportunity for derivative traders. But also, it seems that commodity folk is headed that way as well. And of course, there will always be a place for these types of investments and trading. But in my view real products and services, in other words real assets, will command a longer-lasting segment of the market.
It’s “the new thing” these days and snake oil salesmen of all varieties will slide in, people just need to be aware of them.
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