And that’s a profit opportunity that you can play.
As President Obama said when he addressed the world in his inauguration speech, “each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.” The speech also promised Americans newly built electric grids, and that the US would “harness the sun and the winds and the soil to fuel our cars and run our factories.”
It’s beautifully emotive and inspiring language. But more than that, it’s enough to get the capitalist in us all chomping at the bit to know how we can make money from this plan.
$150 billion heading into “clean” energy in the next 10 years
According to the Obama/Biden homepage , their plan will “help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future”.
Money should flow into fuel cells, wind power, biofuels, “smart” coal and solar energy, all with the goal of stimulating the development of commercial-scale renewable energy.
OK, so the money that Obama has pledged to pump into renewable energy is pretty small beer. Especially when you consider the other mindboggling numbers we keep seeing. Like the $825 billion for his economic stimulus plan. Or the amount of outstanding US public debt, currently at $10.6 trillion and ticking up.
But it’s a start. And – with my environmental conscience hat on – it’s a welcome change from the policy of the previous administration. Green energy was always on the back burner as far as George Bush was concerned. He was far more interested in trying to secure America’s energy security with an aggressive oil policy.
Here at The Right Side, we’re all for making money from the oil market. My colleague, Manraaj Singh, at Profit Hunter has a number of ways for readers to play that trend. As you’ve read in previous issues, he believes that after the recent savage pull back in oil from July last year until December, oil is ready to move higher again – and he’s already picked a new way to play it.
But we recognise a major trend when we see one coming. And there is a place in all our portfolios – alongside our oil shares – for renewable energy companies. In fact, Manraaj is already looking at renewable energy plays for the benefit of his readers. Now that America is behind it, that’s what we’ll be looking for in the years ahead – how to get on the right side of this trend.
Obama’s new commitment should be a great growth catalyst for a “clean” energy economy. With the weight of government behind it, venture capital companies will be more inclined to invest in the research and development of “cleantech” companies.
In fact, as Sam Hopkins of the Green Chip Stocks notes, in 2008, venture capitalists poured nearly $9 billion into cleantech hatchlings, and the 2009 totals may be higher. Even though bank credit is tight, serial entrepreneurs from Silicon Valley and elsewhere are using their own liquidity to invest in energy efficiency advances and new fuels.”
The incentives that President Obama provides should mean that one day America can depend much more heavily on renewable fuels… and the world will be a better place.
A new gold rush for the modern day
There is already talk about clean energy being like a gold rush for the modern day. The companies that can turn the technologies they are developing into real, credible alternative to fossil fuels could be huge money makers in the years ahead – and fortune-builders for investors in the right ones.
Of course it’s going to be a market full of danger. There will be hundreds of new companies turning up to try to capitalise on the renewable energy trend.
It’ll be just like when there’s a bull market in uranium. You get a thousand “moose pasture” companies springing up in the uranium-rich territories of Canada, trying to pull in money from hyped up investors. They don’t necessarily have any uranium – all they’ve done is bought a patch of moose pasture and given themselves a name with “uranium” or “yellow cake” in it.
So we’ll need to choose carefully. But we don’t doubt the opportunity is there. We’ll be following it all the way – and looking for the right side of the market to play it.
Kind regards,
Frank Hemsley
For Fleet Street Daily
P.S. As I have said, colleague Manraaj Singh is already looking for ways to add renewable energy stocks to his portfolio. He still deep in the research stage, but he has some strong ideas he’s looking at. Meantime, check out the current recommendations that he’s using to play what he believes will be a huge resurgence in the oil market.
Click here for details of his service.
P.P.S. I hope you like the new-look format. Don’t forget to add our new email address to your address book: therightside@fspinvest.co.uk
How fear could be a great hedge for your portfolio
BY THEO CASEYThe Chicago Board Options Exchange (CBOE) Volatility Index, the VIX is a broad measure of fear in the US stock market.
It is one of the best known measures of volatility of options on the S&P 500. A high value means that more investors are using options to ‘insure’ their positions in the S&P.
What we have learnt from watching the VIX since it launched in 1993 is that when the VIX rises, it means investors expect market volatility to ratchet up.
The VIX gained 74% last year, according to the CBOE, as stock indexes were mauled by the market sell-off and finished 2008 deeply in the red. The VIX tends to flatten or decline in quiet market periods, but surge higher in panics.
That is why the VIX is said to have an inverse relationship with the stock market. You can see it in action on the chart below. Note in particular the surge in the VIX as the market cratered in October.
The perfect hedge? – The inverse relationship between S&P 500 and VIX
Source: Bloomberg
Until now, it has been only investors in the complex options market that have been able to use this form of hedging. However, in February Barclays is set to launch the first VIX-based exchange traded notes (ETNs). These will trade like shares and allow investors to hedge against falls in the market. As the market falls… so the ETN should rise.
It’s not a perfect hedge. The VIX and S&P 500 do not have an exact inverse relationship. But some protection against the downturns in the market is better than no protection at all.
The Daily Reckoning – A Nation of Madoffs...
BY BILL BONNER
Yesterday, the Dow rose 58 points. Oil held at $41. The euro at $1.31. And gold fell below $900. The yellow metal still looks good. It is at an all-time high in terms of the euro and the pound. But it still has a long way to go.
Gold is the thing you buy when you suspect that monetary authorities are making a mess of things. The fixers are fixing more than ever before. What are the odds that some of the fixes go bad? We don’t know... but our guess is that gold is looking forward to it.
Meanwhile, consumer confidence in the US is at an all-time low. Fannie and Freddie say they need another $51 billion. Dow Chemical is considering cutting its dividend for the first time since 1912.
Everybody likes the wages of sin... until the devil calls...
This week began with a squabble. John Thain was sacked as head of Merrill Lynch after giving out $4 billion in bonuses – just before announcing $15 billion in losses for the 4th quarter of ’08. The Bank of America, Merrill’s new owner, said it hadn’t approved the bonuses. Thain said it had been ‘informed.’
Then Citigroup announced that it had bought a new corporate jet for $50 million. Seemed a bit rich for a company that had just lost $8.3 billion.
What sort of devilry is this? Where can you can lose billions... take billions in handouts from taxpayers... and still coddle executives with new planes and million-dollar ‘bonuses?’ Penalties would seem to be more appropriate.
*** Meanwhile, The Zurich Club’s investment team has been battening down the hatches… and only going for extremely defensive investments. They’re recommending members buy gold and also position themselves to profit from the deteriorating UK economy and the fall of sterling.
“It’s like a bloodbath out there... with company after company haemorrhaging profits as recession bites,” notes Andrew Vaughan, the Club’s investment director…
To read today’s 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.
