With the price of petrol back over £1 per litre, we can’t help but think about energy: about how to find it, how to use it – and how to save it. Of course, as investors, you and I just want to know how to profit from it. And that’s what we’re looking at today…
In December, the United Nations Conference of Climate Change will take place in Copenhagen. In the words of environmentalist Tom Burke, it ‘will do more to shape human destiny and for longer’ that any previous such event. Already environmentalists are limbering up and reminding us in the direst terms of the threats to the planet and the human race.
Why climate change points to a major investment opportunity
Prince Charles, of course, is well to the fore and does not pull his royal punches: ‘The best scientific projections indicate that we have very little time left – indeed, less than one hundred months – in which to alter our behaviour drastically. Although I wish it were otherwise, I fear we have reached the point when if we do too little, too late to tackle this problem, the consequences could be catastrophic.’
But the stock market, punting on a recovery of the banking sector, has taken its eye off the subject of the environment. Back in 2008 before the recession hit, shares in all manner of green cloaks were the rage. A string of new companies came to the stock market promising to do their bit for the environment. They were greeted with enthusiasm, their share prices reached for the sky like rainforest trees, and investors looked far forward to spy their ultimate rewards. But then everything went wrong...
The bear market has changed all that. Worrying about what might happen in a decade or so is a luxury we cannot afford in a crisis. Those same share prices have sunk back to earth. But while the stock market has a rhythm of its own, it is badly out of tune with the insistent beat of global warming. The need for solutions is greater than ever. And, if progress is never as fast as the environmental lobby would like, sticks and carrots are gradually changing our ways.
There are a few ideas out there that sound, frankly, nutty. Take space reflectors for instance. One plan is to form a sixty thousand mile wide cloud of trillions of tiny deflector satellites. They’d be placed about one million miles above the earth, to block the sun’s rays. Then there are the floating sea pipes. Colder water is richer in life that absorbs CO2 from the atmosphere, so another idea is for huge flotillas of vertical pipes to pump cold water from the depths of the ocean up to the surface.
Maybe it will come to this, but the world is likely to adopt simpler and more reliable solutions first. And many of these concern not just finding new, green energy, but making sure that we use less of it in the first place.
Making money from the race to energy efficiency
Nobody is going to be more influential than Dr Stephen Chu. This former Nobel Prize winner is now President Obama’s Secretary of State for Energy, and he is an optimist. ‘With a serious commitment to energy efficiency, widespread deployment of the technologies we already have, and an aggressive investment in science,’ he argues, ‘we can dramatically reduce our carbon emissions’. In particular he believes that huge savings of energy can be achieved by improving buildings – ‘we can give engineers and architects the tools to design buildings that use 80% less energy than today.’
That is some saving and down in the world of penny shares there are plenty of companies that would like to play their part. Take Pentagon Protection (ticker: PPR), for instance. This stock market minnow supplies a transparent film which, when placed on window panes, prevents buildings from absorbing heat thus cutting the air conditioning bill. Then there is energy efficient LED lighting – a subject that I discussed in the last edition of my newsletter Red Hot Penny Shares.
And there is Sabien Technology (ticker: STN), which promises to reduce the energy and carbon emissions from heating and air conditioning systems by up to a quarter. This type of company has government and our social conscience on its side.
You can see the potential. Energy is expensive both in terms of costs to the environment we live in but more importantly (from an investment perspective) in real monetary terms.
With the race on to become more energy efficient, you can be sure that investors will be looking for companies with viable ways to bring costs down. Alongside oil, it’s the other great energy trade.
Good investing,
Best regards,
Tom Bulford
For The Right Side
P.S. By the way, you also need to be invested in oil. There is no doubt about that. That’s why you need to read the brand new report I’m finalising right now: 3 Tiny Stocks and One Big Oil Boom. Look out for this important report when I send it to you in the next few days.
Editor’s Recommendation: I’ve just read more of Tom’s “energy efficiency” idea in his latest issue of Red Hot Penny Shares. He’s found a good way to play it – one he believes could make investors up to 212% gains. You should have a read – just sign on as a trial member to Red Hot Penny Shares now and you’ll receive this latest recommendation right away. Click here for more details.
Note: Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Seek independent financial advice if necessary.
MARKET NOTES
Why we could be facing an age of inflation
BY THEO CASEY
The big question right now is this, “inflation or deflation?” Either we’ll see a 1970s-style monetary expansion causing huge inflation or we’ll see a Japanese style zombie-bank-driven deflationary spell.
What leads The Right Side to believe inflation will be the eventual winner is the advent of “quantitative easing.” The £125 billion spending program launched by the Bank of England in March has already boosted the UK’s monetary base and continues to do so. This means that there is more money sloshing around in the economy.
When you combine a growing monetary base with shrinking national output you get, quite literally, more money chasing fewer goods and services. This is the very definition of price inflation, according to Nobel prize-winning economist Milton Friedman.
You can see from the chart below, that more often than not, when the national money supply is increased, inflation rises as a response.
When money supply rises, inflation rises soon after, could it happen again?
Source: Morgan Stanley, IMF
This is exactly what the Bank of England is hoping for again. This is why they have created the biggest money supply in recent history. And they’re not alone. All over the world other central banks are doing the same thing. While we fight to save our banks, the Americans fight to save their automakers and the Chinese aim to keep the construction business going. Every economy is printing money to protect and ensure the survival of key industries.
And rescue by inflation may initially be successful. But once the “inflation toothpaste” is out of the tube, it becomes very difficult to put back in. We may soon find ourselves in a world where inflation goes through the roof and wise investors should be looking to add intelligent inflation hedges to their portfolio… and soon.
Editor’s recommendation: Theo Casey is the investment director of The Fleet Street Letter. Look out for his team’s brand new report on the coming inflation and how to protect yourself against it… out soon.
The Daily Reckoning – What the very smart money is doing
BY BILL BONNER
London, England
Monday, 8 June 2009
Stocks... oil... both held steady on Friday.
Gold, however, took a big hit – minus $26.
There are three kinds of money in the marketplace. There’s the smart money that goes with the trend. There’s the dumb money that bets against the trend. And there’s the money that doesn’t know whether it is coming or going.
The trouble is always figuring out which is which.
The markets are clearly in a deflationary downturn. No doubt about it. After a long period of credit expansion credit is finally contracting. The smart money is probably betting on lower asset prices.
“Consumer credit falls the second most on record,” reported Bloomberg last Thursday.
Houses, as everyone knows, are deflating. There are signs that the fall in housing prices is becoming less violent, but the trend is still down. This from Robert Shiller, in the New York Times:
“Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline.
“There are many historical examples. After the bursting of the Japanese housing bubble in 1991, land prices in Japan’s major cities fell every single year for 15 consecutive years.
“Why does this happen?”
Shiller goes on to explain that housing markets don’t adjust quickly. People make their housing decisions years in advance based on changes in their lives. They may have found a job somewhere or gotten a divorce, their children may have left home or they might just want to live in a different area… These plans take years to come together - and years to execute. They can be reversed by changes in market conditions... but not quickly.
And then, when people are planning to sell a house, they may not be in a hurry. If prices slip, they may decide to hold off – maybe for years.
Then too, decisions about buying or selling a house are often decisions taken by two people together. The husband may be desperate to get out of a sinking housing market, for example, but the wife may not want to leave her home. Even when they must sell for financial reasons, that decision can take months, even years to reach. Often, they hesitate. The wife expects to get a better job or the husband expects a raise. Or they anticipate some other economic change in their lives that would forestall the need to sell their house.
Read on…
To read the Daily Reckoning in full, click here.
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
