August 2010
Brett Is Now Blogging on Tumblr!
The Blue Earth Blog is “Where Lifestyle, Clean Tech and Investing Converge”.
Take a look now for fascinating glimpses at the world’s renewable future from an insider point-of-view. Brett talks in his precise yet fun way about eco trends, sustainable technologies and energy, how-to’s for integrating renewables into your lifestyle, and priceless guidance about investing in the clean tech revolution without getting burned.
Tune in — follow the blog — share your own stories and ideas — or simply ask Brett questions to your heart’s content!
June 10, 2010
What Is the BP Spill Teaching Us?
In May, markets around the globe suffered, and US markets led the way with their worst sell-off in 70 years. I attribute this deep and fast correction to the Chinese tightening monetary supply, the BP oil spill going from bad to worse, the US recovery stalling while debt levels get dangerous, and the PIGS of Europe (Portugal, Ireland, Italy, Greece, Spain) pushing downward on the Euro by going through their own debt crisis.
Clean energy stocks have been especially hard hit so far this year, with the wind sector down 27%, and solar down about 22%. These stock corrections are occurring as sales in these markets continue to pick up steam, while prices and therefore margins continue to be under pressure as rising capacity stays ahead of demand. The silver lining for clean tech investors in this seemingly depressing news is that clean energy is poised to bump fossil fuels as our dominant energy source for new energy.
One thing that would hasten the demise of fossil fuels and accelerate a brighter clean tech future would be to stop subsidies for the dirty fuels. Supporting these fuel types has been ingrained in our culture because we’ve deemed them necessary for our nation’s prosperity. Fossil fuels have lost their clout, however, in this new era of technological breakthroughs in clean energy. At one point I am sure most of the country thought we needed newspapers and magazines for the nation to prosper, but that notion has been turned on its head by the digital age.
I am going to make a bold prediction here. Just as hard copy newspapers and magazines are losing audiences to online publications, Google, Craigslist and the iPad, oil and coal companies like BP and Massey Energy will lose investors to First Solar, Vestas Wind and energy management companies like Enernoc.
Coal and oil now enjoy about a 100-to-1 subsidy advantage to clean tech. Some of these fossil fuel subsidies come directly in the form of government tax breaks but others are indirect.
Indirect subsidies can come in the form of externalized costs. In other words, the part of the cost of using the fuel is passed on to someone else. As an example, asthma rates are much higher around trucking corridors where diesel soot hangs in the air. Oil companies are not covering the costs of relocating kids who live in these corridors, paying for medicine or compensating society for the loss of overall productivity as a result of these cases of asthma. So, those costs are externalized to other people by the oil companies.
Coal-fired power plants around the world are largely responsible for the rise of mercury in fish stocks. This in turn affects fish eaters and their offspring by lowering brain capacity and, hence, lowers their earnings. This cost is not borne by the coal producers or power plant operators.
Another example of an indirect subsidy to the oil business is the amount of money the US spends on securing supplies of oil in the Middle East. Most estimates of the cost of wars in Afghanistan and Iraq are above $3.4 trillion. Also, the enemies of the US in its ‘War on Terror’ are largely financed by oil-producing states. The sooner we put them out of business the better.
These subsidies add up fast, and they are often not discussed openly.
The BP oil spill in the Gulf of Mexico is one counter-example of the US government directly charging the oil company with the costs. I guess this is one situation where the costs are just too obvious to bury. Now, we just need to gain awareness of all these other costs and make sure that they are factored directly into the cost of coal and oil. In turn, this will make the cost of renewables relatively less expensive.
As the real costs of oil and coal continue to go up, and the costs of renewables continue to drop, there is little doubt that we will see renewable energy proliferate and fossil fuel usage decline over the next few decades. Although the ethical dimensions of this regime change are profound, the most compelling drivers of adopting clean tech or even ‘True Cost Economics’ will probably be a simple shift in mass perception, as well as a shifting bottom line.
Fossil fuels are no longer cost effective in a networked society that exposes their dangers and damages in real time. We can hope that BP’s latest spill, the worst in history, has already delivered the fatal blow to big oil’s public image (and to fossil fuels generally) – this is a scandal that no PR firm in the world can send into oblivion at the bottom of the sea. Even thousands of feet under the water’s surface in the Gulf of Mexico, BP’s broken valve has a webcam fixed on it: like the eye of a world that can no longer deny how dirty oil is, especially now that we have much cleaner alternatives.
Which investment choices are you making?
August 28, 2009
Using Leverged ETFs to Invest
ETFs are basically stocks that have as their backbone other stocks. The most famous one is the SPY which emulates the movement of the S&P 500 Index.
Just like the foods in the grocery store, ETFs have become more exotic over time. There are ETFs based on sectors like clean tech (PBW or PBD), or even more specific industries like solar (TAN) or wind (FAN). Most of these give owners easy access to foreign-listed companies that they might otherwise miss out on.
There are now fun little ETFs that are leveraged. These give you twice or even three times the exposure per dollar as normal ETFs. I would recommend using these instruments only after really understanding how they work. Because they track movements of the underlying securities on an intra-day basis, they do not act exactly like buying the stocks yourself and going on margin to double your exposure. Some examples of these levered ETFs are SKF (2x Financial), FXP (2x Short China Xihuan Index) and TYH (3x Technology Bull). I like to use these levered ETFs in the short term when the volatility is trending in the right direction.
The bottom line is get to know what the ETFs do before investing. When using levered ETFs, go into these only after really understanding them, and then move slowly with small positions while you get to know their personalities. Only stay in levered ETFs as long as the trend is in your favor, and as always set your target price and stop loss price.
June 13, 2009
Why Debt Can Be Good
This weekend, the Economist ran a cover with a baby chained up to a large wrecking ball with the words ‘DEBT The biggest bill in history’ on the ball. There are many gloomy forecasts about the impact this debt will have on the richest nations. Japan's debt stands at 150% of GDP, while the US debt is at 73% and China's is at 20%. Rising debt isn't so good for nations, as it can lead to economic turmoil in the form of bond defaults and rising interest rates.
On the other side of the equation, is there are debt holders. They have enough money to buy up this sovereign debt and get paid interest. Sure, they are taking a default risk, but they think that is very low. With the US racking up 40% of the world's sovereign debt, no one can afford to not lend the US money, because if the US falls, others will suffer. The world needs the US operating properly, so it continues to buy up the US debt.
So, in the end it is a balanced equation. The note holders get to collect interest on the money they loan out, and then put the money to use in other parts of the global economic machine. The borrowers get to use the money to fight wars, provide social good or just prop up the economy.
Sometimes debt after a while simply gets erased - like when GM goes into Chapter 11, a homeowner can't make payments or Argentina defaults on their bonds. This is just part of the nature of debt - it is never risk free. I personally would never expect US government bonds to be risk free. Great civilizations come and go.
In the whole economic system there are still winners and losers every day. Things blossom and they wilt. Never expect markets to perpetually go up, or perpetually go down.
As Jesse Livermore says: "There is only one side of the market, and it is not the bull side, or the bear side, but the right side."
June 6, 2009
Market Blog
Topics: Apple's Dominance Will Rise.
On Monday Apple (AAPL) released a new hardware update on the iPhone called the 3G S. I guess S stands for fast, as the processor is twice as fast as on the old model. There was word that Marvell (MRVL) is providing the processor for these phones, but it is not confirmed.
Apple has done many things right to solidify its position as a key player in the technology universe. First its computers are completely integrated with its software, meaning there are far fewer problems than on the PC platform. Secondly the company opened stores to provide education and service for its gear. This gives it a clear advantage over Microsoft and Dell because customers need this type of interaction to enable them to efficiently use these complex devices. Apple has enabled even my 75-year-old mother-in-law to become a computer user - through lots of one-on-one conversations with Apple Geniuses.
The iphone has been the final piece in the puzzle that will ensure Apple's future dominance.
This "do everything" device is exceeding everyone's expectation of utility. For instance, I have been shopping for a home music system for the last year, and what really accelerated my decision was finding something that integrated with the iPhone. This system from Sonos here in Santa Barbara is a wireless musical wonder. It allows me to set up speakers in zones all over my home. Then, I can have the same music playing all over, or different music playing in each zone. Since the system is on my network, it reads not only everyone's iTunes files on their computers, but it also plays a variety of internet music stations. My favorite is Pandora.
So now I can use my iPhone to control the music being played on my system, including volume and mute buttons of course.
My point is the iPhone has become the Swiss Army Knife for modern living. I have no doubt in the future it will also become a digital wallet. Just imagine the revenue possibilities when apple starts to challenge Visa and MasterCard.
So there you have it. Apple is the all in one tech company serving consumers and busineses very effectively. I think if you have patience, Apple will be a sweet buy that will make you happy for years to come.
Next: Debt - Is It All Bad?
April 22 2009
Market Musings
The market is weaker since earnings season started. After Apple reported a decent quarter yesterday, the market really should have taken off this morning, but is greeting the news with a yawn. Your best bet right now is to stay safe and wait for earnings to play out over the next couple of weeks. All the top companies will have reported by the end of this month.
We are in a tug-of-war with the glimmering of hope in bottom data that things are not getting worse, and the fact that we are still in a crisis. Since every stock has its own journey, it is best to look at specific stocks in strong sectors.
The theme of what is working in this market all comes down to market share. Who is making a new market or taking market from others? Apple is a perfect example. More people are migrating from PCs to Macs. Why? Because the product (software and hardware) is consistently better, and the pieces are integrated to work together. The Iphone, Ipod Touch and Ipod all work really well, and this drives consumers to switch their PCs to Macs. Service and education, which is non-existent in the PC world is superior in the Apple world.
Another company I like is yoga inspired athletic apparel maker Lululemon (LULU). I am very familar with them because I formerly ran US operations and my brother is the founder. Much like Apple, Lululemon sells a superior product and delivers a fantastic customer experience. They have successfully taken market share from Nike and Reebok in Canada, and are now embarking on the same mission in the US. Everything in Lululemon's store is integrated from the core workout wear to the yoga mats to the customer experience. In-store education is expanded beyond product knowledge to personal well-being, athletics and success training. Layered into that is deep community marketing which solidifies the long term relationship with the customer.
In all sectors, look for companies that can deliver beyond just a product. All products are commodities, and what makes them really come to live in this time constrained age is the ability for the company to deliver the integrated value added service components. These are the companies that will thrive in this environment.
Notes on Solar Stocks
Solar stocks right now are bumping along the bottom, and they have lagged other sectors as the market has pulled up. Solar will go through several more months of sideways action, in spite of Obama's programs to get alternative energy rolling. There is simply too much production capacity and not enough demand. This always has the effect of reducing prices. As prices go down, demand will start to pick up. This process will take another six months, so best to stay away from this sector until this time.
