Since President Bush’s State of the Union Address, the headlines have been numerous and divided on the viability of “Energy Independence”. Most focus on denouncing ethanol as being impracticable, citing studies that ethanol produces 70% of the energy of an equal volume of gas or it takes as much energy to produce as it gives off.
Then there is the food-versus-fuel debate. They pronounce that we are forsaking our nation’s food supply for ethyl alcohol, like a moonshiner with needy children. Even Tyson Foods (TSN) warns that increased ethanol production will create higher global food prices with the consumer withstanding the worst of increased prices. The food vs. fuel debate has been further exacerbated by Lester Brown of the Earth Policy Institution claiming the world will be disabled with higher grain prices. Rick Tolman, CEO of the National Corn Growers Association, quickly countered stating, “All demands for corn-food, feed, fuel and exports are being met”.
Hog wash. 1. President Bush has never used the term “Energy Independence”. He has never stated that ethanol was the panacea. He has set forth policy and initiatives to ease our dependence on foreign oil with a portfolio of energy including, nuclear, biomass, clean coal, ethanol, domestic oil and other renewable solutions. 2. The market will dictate the state of ethanol. There is no current production mandate and our food supply is not being held hostage.
For us to move forward, apart from all this frivolity, three things must emerge:
1. Government Mandates such as Senate Bill 309, amending the Clean Air Act. A reduction in carbon emissions will spur technology towards improving energy efficiency and performance. According to the London Times 34 of (FTSE 100), companies have achieved cost savings directly as a result of setting quantifiable targets to reduce carbon emissions.
2. Government Incentives to seed technological advances in energy production and utilization. 6-7 Billion has been set aside for new nuclear plants but that is down the road. The government needs to follow the venture capital money now.
3. Independent Oversight to insure that special interests and earmarks are held at bay.
A good way to take advantage of this burgeoning trend is Powershares Cleantech Portfolio (PZD). This ETF holds a basket of companies that among other things, improves the efficiency of energy consumption, such as Ballard Power (BLDP) with fuel cells, Evergreen Energy (EEE) clean coal solutions, Syntroleum Corp (SYNM) natural gas to liquid fuel and Itron (ITRI) software solutions for the optimized metering of energy.
Tuesday, January 30, 2007
Wednesday, January 24, 2007
ADDRESSING OUR STATE OF ENERGY
In his State of the Union Address, President Bush outlined his policy initiatives on energy. Briefly:
-Reduction in gas usage/increase in fuel economy.
-Increase in strategic oil reserves.
-Increase in domestic oil production.
-Increase in renewable and alternative fuels.
Time frames although expressed, will be massaged by politics and popular/consumer opinion.
After many years of rhetoric and the formation of altruistic goals, can we proceed substantially in reducing our dependence on foreign oil? If so, what trends will the market embrace?
1. Solar and wind energy, in a viable quantity, require huge installations. Efforts to grow this area will be hindered by environmentalists and the not in my backyard mentality.
2. Biodiesel is in its infancy and has sprouted up as a cottage industry. Many concerns have been expressed about its cost and suitability with current diesel engines.
3. Ethanol is costly to produce and must pass on the cost to the consumer. It competes with a food source for humans and livestock. Current corn prices have provided an incentive to store corn as a hedge giving rise to artificial shortages. Other cellulosic sources such as wood pulp, weeds, and grasses need many more years of technological advances to become viable.
4. Fuel economy is an area we can make huge strides in quickly. Fuel cells put but a tiny dent in the overall picture. We need manufacturers to redefine their mission statement to include economy and drivers to drive less.
5. Coal provides 40% of our electric distribution. We have as much coal as Saudi Arabia has oil. Clean coal technology as well as Coal to Liquid processes are nearing viability.
6. Domestic oil production has stepped up the pace and we will feel the online relief in the near term.
The market will tend to treat such companies as Evergreen Solar (ESLR), Suntech Power (STP), Pacific Ethanol (PEIX), VeraSun (VSE), Aventine (AVN), and not to mention the fuel cell companies, as risky. If one is inclined to invest in this area, a better choice may be PowerShares Wilderhill Clean Energy ETF (PBW). These stocks will rise and fall on rhetoric. Large corporations such as General Electric(GE) or Archer Daniels Midland (ADM) are steady growers with a stake in alternative energy, but little will be added to the bottom line.
The better trend to bet on is coal and domestic oil. Peabody Energy (BTU) and Headwaters (HW) in the coal sector. Most large integrated oil produces and oil service companies in the oil and gas sector. A good play on oil services is the Oil Services ETF (OIH).
The more things change, the more they stay the same. We will lessen our dependence on foreign oil, although at a slower pace than hoped, with a viable alternative. That alternative is our domestic coal and oil.
-Reduction in gas usage/increase in fuel economy.
-Increase in strategic oil reserves.
-Increase in domestic oil production.
-Increase in renewable and alternative fuels.
Time frames although expressed, will be massaged by politics and popular/consumer opinion.
After many years of rhetoric and the formation of altruistic goals, can we proceed substantially in reducing our dependence on foreign oil? If so, what trends will the market embrace?
1. Solar and wind energy, in a viable quantity, require huge installations. Efforts to grow this area will be hindered by environmentalists and the not in my backyard mentality.
2. Biodiesel is in its infancy and has sprouted up as a cottage industry. Many concerns have been expressed about its cost and suitability with current diesel engines.
3. Ethanol is costly to produce and must pass on the cost to the consumer. It competes with a food source for humans and livestock. Current corn prices have provided an incentive to store corn as a hedge giving rise to artificial shortages. Other cellulosic sources such as wood pulp, weeds, and grasses need many more years of technological advances to become viable.
4. Fuel economy is an area we can make huge strides in quickly. Fuel cells put but a tiny dent in the overall picture. We need manufacturers to redefine their mission statement to include economy and drivers to drive less.
5. Coal provides 40% of our electric distribution. We have as much coal as Saudi Arabia has oil. Clean coal technology as well as Coal to Liquid processes are nearing viability.
6. Domestic oil production has stepped up the pace and we will feel the online relief in the near term.
The market will tend to treat such companies as Evergreen Solar (ESLR), Suntech Power (STP), Pacific Ethanol (PEIX), VeraSun (VSE), Aventine (AVN), and not to mention the fuel cell companies, as risky. If one is inclined to invest in this area, a better choice may be PowerShares Wilderhill Clean Energy ETF (PBW). These stocks will rise and fall on rhetoric. Large corporations such as General Electric(GE) or Archer Daniels Midland (ADM) are steady growers with a stake in alternative energy, but little will be added to the bottom line.
The better trend to bet on is coal and domestic oil. Peabody Energy (BTU) and Headwaters (HW) in the coal sector. Most large integrated oil produces and oil service companies in the oil and gas sector. A good play on oil services is the Oil Services ETF (OIH).
The more things change, the more they stay the same. We will lessen our dependence on foreign oil, although at a slower pace than hoped, with a viable alternative. That alternative is our domestic coal and oil.
Thursday, January 18, 2007
CRYSTALLEX FEELING THE BIG HURT
Crystallex Inc., a gold miner, was hurt today on rumors Venezuela will nationalize the mining industry. The minister's comments were vague and not on the point. If Hugo nationalizes the foreign interest in mining he will lay an egg that will cost his country billions. He and his ministers are not on the same page. What he will do is tax foreign companies at a rate that will return immediate income. He does not have the resources to initiate nor support a nationalized mining campaign.
Most of Hugo's deputies are fielding questions right and left. They are using talking points without specific guidelines. Even Chavez wakes up each day with a new outline.
What he has nationalized is in place, running on overdrive, and profitable. Mining in Venezuela has mostly been a "cottage industry" and he will not settle for that status quo.
Hugo Chavez is many things, but not stupid.
Most of Hugo's deputies are fielding questions right and left. They are using talking points without specific guidelines. Even Chavez wakes up each day with a new outline.
What he has nationalized is in place, running on overdrive, and profitable. Mining in Venezuela has mostly been a "cottage industry" and he will not settle for that status quo.
Hugo Chavez is many things, but not stupid.
Wednesday, January 17, 2007
Crystallex: KRY Treading Water
Crystallex International Corp (KRY), is a small gold miner based in Canada with current interest in Venezuela. It has been holding permits to mine over 13 million ounces of gold in the Las Cristinas property. But these permits have been wilting in the midday sun.
This stock's future rests entirely on the fickle economic shoulders of Hugo Chavez. Crystallex has the initial permits but is still waiting and waiting and waiting on the environmental go ahead. The NAV has flat lined around 2.70-3.50 for over 3 months, kept there with nothing but hope.
The current political environment has made this stock a day trader's dream. The term, (rocking chair), a stock rocking +/- due to non-internal pressures, allows one to profit many times a day.
Should the environmental and Chavezamental permits be granted, Crystallex will definitely takeoff. But, environmental attitudes are presently in chaos down there. Changes in cabinet, pressure from locals, and generally unpredictable decision making, have stalled the ongoing process. But this stall has kept the stock where it is at and not significantly lower.
If Chavez grants the environmental permits and allows foreign economic interests to displace the local "cottage industry", ie squatters, displace hill sides, and water sheds, the NAV should shoot up 3-7 Dollars, (85% +), overnight.
But before the champagne dries from the shirts of leveraged investors and a few Fidelity fund managers, take your money and run. Why? Copper prices have sunk. This mining region requires copper to be sold to subsidize operations.
This is a very speculative holding and I would give it 2-3 months to play out. Make sure you have a stop-loss in place. I own this stock.
Note: The stock picks I review will include long or short positions as well as duration. I may not always update a position change if the time duration was accurate in the original review. Some of the stocks I review I own in my personal account and will always state such conditions. This site is not intended to replace one's own due diligence in researching stocks nor is it a substitute for advice from your financial planner.
This stock's future rests entirely on the fickle economic shoulders of Hugo Chavez. Crystallex has the initial permits but is still waiting and waiting and waiting on the environmental go ahead. The NAV has flat lined around 2.70-3.50 for over 3 months, kept there with nothing but hope.
The current political environment has made this stock a day trader's dream. The term, (rocking chair), a stock rocking +/- due to non-internal pressures, allows one to profit many times a day.
Should the environmental and Chavezamental permits be granted, Crystallex will definitely takeoff. But, environmental attitudes are presently in chaos down there. Changes in cabinet, pressure from locals, and generally unpredictable decision making, have stalled the ongoing process. But this stall has kept the stock where it is at and not significantly lower.
If Chavez grants the environmental permits and allows foreign economic interests to displace the local "cottage industry", ie squatters, displace hill sides, and water sheds, the NAV should shoot up 3-7 Dollars, (85% +), overnight.
But before the champagne dries from the shirts of leveraged investors and a few Fidelity fund managers, take your money and run. Why? Copper prices have sunk. This mining region requires copper to be sold to subsidize operations.
This is a very speculative holding and I would give it 2-3 months to play out. Make sure you have a stop-loss in place. I own this stock.
Note: The stock picks I review will include long or short positions as well as duration. I may not always update a position change if the time duration was accurate in the original review. Some of the stocks I review I own in my personal account and will always state such conditions. This site is not intended to replace one's own due diligence in researching stocks nor is it a substitute for advice from your financial planner.
HEADLINES
*Manufacturing growth slows
*Rally in bonds slowing
*Fed more interested in inflation
*Morgan Stanly recommends investors cut stock holdings and turn to cash
*Barclays predicts US Fed to raise rates
*Equity market slowing
*Recession could be looming
*Market over extended
*Liquidity is artificial
As of Dec 2006, the US stock market has been in a bull rally for 3 years and 9 months. The talking heads, portfolio defenders, fund managers, and others can't help but be ecstatic as they trumpet their success. But none are talking about Historical Market/Stock Cycles.
These cycles, (market bottom-top-bottom again), average 53 months in length according to Martin Pring in his book The All-Season Investor. He also notes that these cycles can be altered by Federal Monetary Policy. If we use March 2003 as the start of the current bull cycle, then using his figures, we will have a new cycle beginning in Sep 2007 and would have had a market top in June 2005.
The present cycle has obviously been elongated for many reasons. Two I would like to mention, and not stated often enough: 1. The US Dollar is no longer the lone proxy currency anymore. 2. Emerging markets are almost done emerging. This present cycle, beyond Fed Policy, has been altered by forces beyond our border.
If one looks at the present Market Cycle, it would start out in 2003 at the bottom and begin an Economic Recovery. Consumer Expectations are revived, Industrials, Cyclicals are strong, the price and demand for Raw Materials is increasing, and Basic Industry is smoking. As the rising slope gets steeper we begin to see weakness in Real Estate. Sound Familiar? As we reach the top, Energy prices soar and continue to pace the market until the top begins to ease. In the rest of the model cycle, a decent begins that favors Consumer Staples, Services, Utilities, and Financials.
All this time the Fed worries about the upward pressure on wages, inflation, GDP, and what tie to wear at the next Senate Hearing. While the Fed wrestles with interest rates in light of the Dollar or in spite of the Dollar, Gold is watching this battle from the corner ready to strike at any time.
We are experiencing an extended creep to the market's top and we may be walking on a weakly cantilevered plank over the edge.
*Rally in bonds slowing
*Fed more interested in inflation
*Morgan Stanly recommends investors cut stock holdings and turn to cash
*Barclays predicts US Fed to raise rates
*Equity market slowing
*Recession could be looming
*Market over extended
*Liquidity is artificial
As of Dec 2006, the US stock market has been in a bull rally for 3 years and 9 months. The talking heads, portfolio defenders, fund managers, and others can't help but be ecstatic as they trumpet their success. But none are talking about Historical Market/Stock Cycles.
These cycles, (market bottom-top-bottom again), average 53 months in length according to Martin Pring in his book The All-Season Investor. He also notes that these cycles can be altered by Federal Monetary Policy. If we use March 2003 as the start of the current bull cycle, then using his figures, we will have a new cycle beginning in Sep 2007 and would have had a market top in June 2005.
The present cycle has obviously been elongated for many reasons. Two I would like to mention, and not stated often enough: 1. The US Dollar is no longer the lone proxy currency anymore. 2. Emerging markets are almost done emerging. This present cycle, beyond Fed Policy, has been altered by forces beyond our border.
If one looks at the present Market Cycle, it would start out in 2003 at the bottom and begin an Economic Recovery. Consumer Expectations are revived, Industrials, Cyclicals are strong, the price and demand for Raw Materials is increasing, and Basic Industry is smoking. As the rising slope gets steeper we begin to see weakness in Real Estate. Sound Familiar? As we reach the top, Energy prices soar and continue to pace the market until the top begins to ease. In the rest of the model cycle, a decent begins that favors Consumer Staples, Services, Utilities, and Financials.
All this time the Fed worries about the upward pressure on wages, inflation, GDP, and what tie to wear at the next Senate Hearing. While the Fed wrestles with interest rates in light of the Dollar or in spite of the Dollar, Gold is watching this battle from the corner ready to strike at any time.
We are experiencing an extended creep to the market's top and we may be walking on a weakly cantilevered plank over the edge.
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