Investing in Clean Energy: Asking the Right Questions

Often, knowing more about a company is less useful than knowing just a few of the right things. Knowing the right questions to ask can help investors wade through a sea of mostly irrelevant information.

Take a moment to answer the following poll:

Suppose you want to know if fictional solar Company MySolar will outperform other solar stocks. Which fact would be most useful in your decision?(poll)

The key to this question was the stated goal of "outperforming other solar stocks." An investor who is only hoping to achieve returns equal to the average solar stock would most likely choose to invest in an index of such stocks, most likely by purchasing shares of one of the Solar ETFs. Hence, the assumption that an investor considering individual stocks is most likely looking for out performance.

Achieving out performance requires finding market inefficiencies. In general, the market is efficient, meaning that most publicly available information is already incorporated into stock prices. Information which is useful in achieving out performance, in contrast, is either not broadly available, or not broadly acknowledged. Information may be available but not acknowledged because most investors have some behavioral or emotional reason for not seeking it out or believing it.

Hence, the best answer to the poll is "C. The most-followed analyst of MySolar made a mistake in his calculations, without which his estimate for next year's earnings would be 5% higher." Although a 5% earnings mis-estimate is relatively small, all of the other answers refer to information which is likely to already be incorporated in the stock price. The other answers refer to information which is likely to be broadly available, and hence will already be reflected in MySolar's stock price.

Ignoring the Obvious

While the example given above would be useful information, it would also be extremely difficult for a small investor to discover. This is information which has not been incorporated into stock prices because only investors who have spent hours or days combing over analyst reports are aware of it.

Fortunately, it requires much less work to uncover useful information that other investors are ignoring for emotional reasons. In other words, the astute investor can take advantage of others' denial. As Upton Sinclair said, "It's difficult to get a man to understand something if his salary depends on him not understanding it." More generally, we tend to deny the truth of facts that, if acknowledged, would require action we find costly or unpleasant.

I believe that the inconvenience and cost of dealing with the looming crises of climate change and peak oil are the main reasons that there continues to be a broad segment of the population intent on denying that they exist, despite the evidence to the contrary. As a human being, I find this endlessly frustrating. We're likely to continue burning coal and driving Hummers until some disaster forces us to reconsider the implications of our actions, even though the costs of dealing with the problems we are creating continue to escalate in the meantime.

The Fruits of Denial

As an investor, Climate denial and Peak Oil denial are the source of endless opportunities for investment out performance. I may be forced to live on a planet that is being ruined by our collective denial, but at least I can console myself with profits arising from that same denial.

This, of course, is the main reason I focus my investing and writing on clean energy. I don't have the patience to spend hours and hours looking for mistakes in analysts' stock reports. Denial, on the other hand, will end slowly over time, as the defenders of the old order look increasingly more ridiculous. As denial recedes, the facts, which have been obvious for at least a decade to those who were willing to see them, will continue to be incorporated into market prices, broadly helping companies whose business reduced net carbon emissions or oil consumption.

Clean energy investors would find themselves laughing all the way to the bank, if it were not for the fact that we're going to need every penny of profit to deal with the enormous mess we're likely to be in. But that will be a lot better than being broke and in the same mess.

DISCLOSURE: None

DISCLAIMER: The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

Comments

[La Marque:]

Climate change is happening no matter what we do or don't do. Global warming is a political and economic hoax. That said, you are right that we should be going into clean energy sources. Even those have environmental costs. We all want clean air, water, and land. If humans were to cease to exist tomorrow, climate change would still occur.

Peak oil: the easy oil has already been found, so that new supplies are going to be more expensive to acquire and process. You are again right that we should be heading towards clean energy sources before oil is priced out of everyone's reach. Historically, mankind has switched fuels before the common fuels were exhausted; it was in the common interests for progress to do so. This is why today's investor will be profitable going into the future as you say.

Oct 23 09:52 AM

[Dirk McCoy:]

Here are a couple questions I think someone should ask themselves:

1. What happens if global temperatures continue to cool?
2. What happens if Briffa fails to adequately address the Yamal controversy (perhaps on Capital Hill, a la Mann)?
3. What happens if the Senate refuses to ratify a climate change treaty or cap and trade?
4. What happens if conservation efforts and technology meet up to push Peak Fossil event out another 100 years?
5. What happens if there is a serious grid event triggered by wind power variability?

I'm a solar believer- but timing is everything, and just like investing in 8% efficient solar would have been a mistake when Jimmy Carter proposed it, I don't believe investing huge sums in current renewables technology in the US today is the best use of global capital- especially if events turn from the perfect storm of government and big business conspiring around the flag of CO2 reduction before consumers understand the economic impact. There is a need for energy expansion around the world- are our actions helping or hurting US companies' ability to participate in that growth?

BTW, there were a couple folks on that TV show whose livlihoods depend on the impression that a climate disaster is imminent- could it be they are they in denial? Have you googled "Yamal trees" and understand the significance of that recent development yet?

Oct 23 09:54 AM

[Alan Young:]

Tom, you might want to edit this to incorporate the poll questions before you give the answer. I can't see them, even after clicking on the link.

Oct 23 10:21 AM

[robdoc:]

It completely befuddles me that there are folks who continue to question the validity of global warming. Seriously reactionary thinking does not do anything to change the reality of the situation. Just because you want something to be so does not necessary make it so.
Happily believing that you are not driving off a cliff does not really do anything to help you as you careen off said cliff.
Wake the F up!

Oct 23 10:21 AM

[Alan Young:]

Instead of rehashing the "global warming wars" like every other thread, I'd like to focus on the (relatively) fresh point Tom is trying to make here: you can get an advantage investing in something that other people are valuing incorrectly because of their prejudices. That is rather profound, I think.

But there's a big problem with it: time. Eventually, reality will sink in. But we've known about these issues for 20, even 40 years. That's a long time to keep your money tied up in unpopular causes that you know eventually will triumph. Or, as the saying goes, "the market can remain irrational longer than most of us can remain solvent."

There's a time to trade on conviction, and a time to trade on trend. The trick is to know which is which.

Oct 23 10:29 AM

[vpratt51:]

Tom, I am glad you reach for new perspectives. I enjoyed this one. It should prove it's worth over time.

I am probably among the lowliest of all investors. For many years now, I have been a clerk in a convenience store, working hard, honestly, and trying to grow my retirement funds. A side effect is that I have been witness to immense stupidity (and more than a few crimes). The most glaring example is in the sale of scratch lottery tickets. The people who buy them REFUSE to accept reality and the most basic logic. Among the questions and comments:

"Which one wins the most?" (the odds are all the same)
"My boyfriend buys them all the time and never loses!" (sure, babe)
"You can't win if you don't play." (you can't LOSE if you don't play)
"I won a dollar." (no, you just got your dollar back and lost on the other four tickets you bought)
"I don't know why I keep buying them, I never win. Give me four more."
"That's ten losers in a row. The next one HAS to be a winner."

The most accurate statement, often coming from the more open minded and logical gamblers, is that it is the "stupid people's tax". (give me four more).

So it is no surprise that some vested interests in our economy are able to count on, and encourage, denial of scientific consensus. "Ignore those geeks in the lab coats! Rolllll them dice again! Daddy wants a new Hummer."

There are climate models based on long term cycles in which we should be entering a cooling trend with glaciers advancing. If those were taken into account, it makes global warming twice as alarming.

But don't worry. It's just one planet. The next one's GOT to be a winner.

End of rant. Thank you for you kind indulgence.
Paxman

Oct 23 01:58 PM

[CEOCXOCORNER:]

Relevant notes I recently posted in my professional Facebook Notes: www.facebook.com/david...

My notes address both Climate Change legislation, as well as, provide links to very important analysis by Lord Monckton, regarding upcoming Copenhagen COP15 and its potential impact upon U.S. sovereignty. Take away thought: beware the "green", "clean", "sustainable" bubble and its impact upon your portfolio. Cheers!

As I've been warning for the last year, U.S. sovereignty is being threatened once again by global elitists and politicians via the most recent "Climate Change" scam and COP15 ("Conference of the Parties" - December Copenhagen conference is the 15th under the United Nations Framework Convention on Climate Change [UNFCCC], hence COP15).

As a backdrop, we have to remember that for many years other countries have coveted a piece of America's success. Kind of like your neighbor coveting your new Mercedes (or Prius). Nothing new. However, what makes COP15 in Copenhagen this year unique, is that we have a leader who has stated an intent to sign this treaty.

We all know, no matter how much you would like to be a member of a club, to be popular in your neighborhood, to be liked, you don't open your house doors and say anyone can come in anytime, or, say what's mine is yours.

Surely, if you are the owner of a beautiful home, those who are less fortunate would love an opportunity to gain ownership of it... and, of course, would be thrilled if you just decided to give it away out of the goodness of your heart!

If you aren't willing to let all your neighbors own your home and tell you what to do with it, why would you want to do it with the borders of our national home - the USA?

Exactly. That's the point.

Sovereignty means the right to self-determination as a nation - your national home. With your home..what color you paint it, what carpets you install, what you choose to do with each room, what you cook in your kitchen, whom you invite over for dinner - you decide. With our nation, what is important and what we do with it - we decide, together. However, we don't let our national neighbors decide.

Losing our National Sovereignty means losing our Democracy.

If we lose the ability to self-determine, as voters and citizens, what we are and who we are becoming as a nation, then we have lost everything. This is exactly what COP15 is designed to do. Usurp America's right to self-determination.

No matter how much you may want a clean environment (which I wholeheartedly support - with a truly sustainable strategy and plan), giving away your right to decide, is not the way to do it.

Now, you may disagree with much of what I have to say. You may be very liberal. You may not like that I am an Independent, if you are a Republican or Democrat. However, at least we have the right to have this debate.

You and I both have the sovereign right, as citizens of this great country, to have a debate. We have the right to go to the polls and decide. Then, we live with the consequences. I may not agree with your views, but, I will defend your right to decide what you want, with my life. This is what makes America so beautiful. We have freedom. We have sovereignty. We have the right to decide.

<b>The bottom line? Regardless your political persuasion, your views, we ALL need to really understand and study how "climate change" is being used as a political lever to usurp America's - and other nation's - sovereignty.</b>

In this important article and linked presentation and slide set, Lord Monckton - former British Prime Minister Margaret Thatcher's science advisor who has lectured and written extensively on this issue - <b>provides clear facts presents a series of statistics, charts and studies making a compelling case that not only is global warming insignificant - if it exists at all - but is likely not manmade, and more importantly, that the global warming alarmists have repeatedly, blatantly, deliberately lied, suppressing the facts to promote the myth</b>.

Why, you ask, would our leaders want to give away America's sovereignty? Great question. To answer this, we would need to look at world history since the founding of America, and since WWII. For another time.

I hope for now, however, you will agree with me, that regardless of our political persuasion, we are not yet ready to give up our right, America's right, to self determination. If you agree with me here, you owe it to yourself and to me, to read and investigate this information. Then, since you have the right to decide, decide what you will do to keep our sovereignty in tact.

October 21, 2009
<b>U.S. Sovereignty and the Climate Summit</b>
By James Simpson

Not content with his humiliation at Copenhagen this past September, President Obama will be traveling again to the Danish capital in December to attend the U.N. COP15 Climate Change Conference. This agreement would commit the United States to punitive and expensive greenhouse gas regulations dictated by the United Nations without recourse.

COP stands for "Conference of the Parties" and the December Copenhagen conference will be the 15th under the United Nations Framework Convention on Climate Change (UNFCCC), hence COP15. According to their website, it will be one of the largest conferences ever held outside the New York or Geneva headquarters, with an anticipated attendance of over 10,000 people, including governmental representatives from 189 countries, industry groups, and other non-governmental organizations.

The theme of the December 7 - 18 conference is "Hope," so perhaps Mr. Obama will have more luck this time. Instead of soliciting the International Olympic Committee with trite cliché and no payoffs, he will be doing something much easier: selling out our country. After all, ceding power, relinquishing billions in U.S. tax dollars and destroying U.S. economic competitiveness is a pretty easy sell to the countries that will benefit, and he has had a lot of practice doing the same thing here at home. He will have a hard time screwing this one up.

The Hope site optimistically pronounces:

On 7 December, leaders from 192 countries gather for U.N. Climate Change Conference in Copenhagen and decide the fate of our planet...

Decide the fate of our planet... Do these people have any idea how mindlessly grandiose they sound? Of course not. They are out to save the planet, just like Nancy Pelosi! It is hard for a normal person to imagine making such proclamations without embarrassment. But this is today's political class

This agreement will cede U.S. sovereignty permanently and irrevocably to the United Nations. So said British Lord Christopher Monckton at an event at Bethel University in St Paul, Minnesota this past Wednesday, October 14th.

Lord Monckton was former British Prime Minister Margaret Thatcher's science advisor. He has lectured and written extensively on the issue, including an in-depth scientific critique to the 50,000 member American Physical Society, a serious side-by-side comparison slap-down of Al Gore's global warming assertions, and a recent summary of the global warming issue. In introducing his topic at Bethel University, he states unequivocally:

...and I am going to show you the latest science, which now doesn't leave the question unsettled any more, this is now settled science, it is now settled science that there is not a problem with our influence over the climate. The science is in, the truth is out, and the scare is over.

You can watch his entire 1 hour 35 minute presentation here - well worth the time if you can spare it.
www.youtube.com/watch?...

The slideshow he frequently points to in this presentation can be viewed along with the video, here.
www.friendsofscience.o...

Lord Monckton presents a series of statistics, charts and studies making a compelling case that not only is global warming insignificant - if it exists at all - but is likely not manmade, and more importantly, that the global warming alarmists have repeatedly, blatantly, deliberately lied, suppressing the facts to promote the myth.

Despite his effective refutation of manmade global warming, his closing remarks about the Copenhagen treaty are chilling:

I read that treaty. And what it says is this, that a world government is going to be created. The word "government" actually appears as the first of three purposes of the new entity. The second purpose is the transfer of wealth from the countries of the West to third world countries, in satisfication of what is called, coyly, "climate debt" because we've been burning CO2 and they haven't. We've been screwing up the climate and they haven't. And the third purpose of this new entity, this government, is enforcement.

So, thank you, America. You were the beacon of freedom to the world. It is a privilege merely to stand on this soil of freedom while it is still free. But, in the next few weeks, unless you stop it, your president will sign your freedom, your democracy, and your humanity away forever. And neither you nor any subsequent government you may elect will have any power whatsoever to take it back. That is how serious it is. I've read the treaty. I've seen this stuff about [world] government and climate debt and enforcement. They are going to do this to you whether you like it or not.

Watch him make his powerful concluding remarks in this Youtube video. www.youtube.com/watch?... (4 mins.)

You might call it a bit of rhetorical overkill, but given everthing else this administration and Congress have already done, only a bit. As Monckton later stated in a Q & A session, for such a treaty to be ratified requires a positive vote from a two-thirds majority in the U.S. Senate.

It seems difficult to imagine Democrats convincing seven Republicans to assist them in committing national suicide that way. Indeed, a recent Wall Street Journal article quoted Senate Republicans as saying that whatever deal Obama cut at Copenhagen would be dead on arrival:

Wisconsin Rep. James Sensenbrenner, the top Republican on the House Select Committee on Energy Independence and Global Warming, predicts "a repeat of Kyoto -- namely an environmentally ineffective agreement that cannot be ratified" by the Senate.

However, perhaps an easier option would be for Democrats to pass legislation enacting some or all of the proposals. The House has already passed the Waxman-Markey (Cap and Trade) bill. This onerous legislation calls for an 83 percent reduction in greenhouse gasses from 2005 levels by 2050. That means almost complete elimination of carbon based fuels, and parallels the goals identified in COP15, which asks participating countries to reduce global emmissions 50-85% by 2050.

Such reductions would essentially bring our economy to a screeching halt, as Lord Monckton states in his speech. Even the more modest goal for 2020 of a 17 percent reduction will force radical changes in how we do business and conduct our daily lives.

Senators John Kerry (D-MA) and the increasingly addled Lindsay Graham (R-SC), put out an Op-Ed in the New York Times last week, under the frighteningly Obamanoid title "Yes We Can," indicating that perhaps Senate Republicans shouldn't be so sanguine either. Their article concludes thusly (emphasis added):

We are confident that a legitimate bipartisan effort can put America back in the lead again and can empower our negotiators to sit down at the table in Copenhagen in December and insist that the rest of the world join us in producing a new international agreement on global warming.

So if Kerry and Graham get their way, not only is America going to agree to U.N. global warming regulations, we are going to lead the charge in getting them imposed!

And the U.N. panel is fully anticipating a more conciliatory approach from the U.S. Recognizing Kerry's efforts, as UNFCCC Executive Secretary Yvo de Boer, stated:

I think that a major shortcoming of Kyoto was that the official delegation came back with a treaty they knew was never going to make it through the Senate. And this time I have the feeling that the communication is much stronger, that the Senate Foreign Relations Committee, through John Kerry, is really expressing strongly what they feel needs to be done in Copenhagen.

Thank you, John Kerry.

The U.N. website states the following about COP15 (emphasis added):

This [the 2009 Bangkok climate change talks] was the penultimate negotiating session before COP15 in Copenhagen in December, at which an ambitious and effective international climate change deal is to be clinched.

Before COP15, there will be a final round of negotiations November 2-6 in Barcelona, Spain at the Barcelona Convention Center.

The most recent UNFCCC Working Group report (181 pages) can be accessed here (wattsupwiththat.files....) in PDF format. Much of it references earlier documents, of which there are many. To fully assess the ramifications of this proposal would likely require referencing these earlier documents as well.

While the prospects for Senate ratification of this treaty are probably in doubt, it seems likely the U.S. Congress may try to pass Waxman - Markey or some other hybrid legislation using the same underhanded tactics now in play on healthcare. All the more reason to redouble our efforts at getting them out in 2010.

Suffice it to say that if the carbon reduction targets already discussed are adapted by this country, never mind whatever other onerous provisions are in this treaty, we might as well all buy a horse and buggy - sorry, rickshaw; horses create methane - because we will be headed back into the 18th century.

Additional Resources:

UNFCCC and Kyoto Protocol: Guide to Climate Change Negotiations (2008)

SourceWatch: UNFCCC summary, listing all participating parties, all COP meetings past and scheduled, and other useful information

Businessman and Examiner.com columnist Jim Simpson is a former White House staff economist and budget analyst.. You may read more of his articles on his blog, Truth and Consequences.

Page Printed from: www.americanthinker.co... at October 23, 2009 - 02:27:53 AM EDT

Oct 23 02:13 PM

[vpratt51:]

CEOCXO, I celebrate and commend your dedication to democracy. But look at the sweep of history for a moment. Tribes had to join and yield to city-states. In turn, the city-states had to form alliances with, and yield to, the formation of nations. After enough bodies had piled up to fill a small sea, it became obvious that the nations had to get their acts together as a cooperative group. This must, no matter how much you dislike the idea, involve world wide acceptance of general treaties for the good of all. If you truly believe in Democracy , you have to accept the fact that a cloth weaver in India has a vote equal to yours, or mine. God did not create me as being equal to ten Indians or ten Chinese. Would you go to the Kalahari and boast that you are more important than 20 Bushmen? True Democracy involves yielding at times to the needs of the many. I would suggest that you take a trip to a poor country and have a brew and share a meal with a family of modest means. There, you will discover that, with great success comes great responsibility. Don't be so worried about "New world order" that you fail to see the advantages and hope of worldwide democracy in action.

Lest you misunderstand, I would be very tough on other nations as far as qualifying to vote. I have always thought that the votes of all nations in the UN should be based upon their "certification", if you will, as open democracies. I am outraged that an ambassador appointed by a dictator or king has the right to vote in anything. By our standards he should represent his people, not his tyrant.

Are the choices always clear to men of good will and heart? Of course not. When Sam Houston, as governor of Texas, refused to take an oath of loyalty supporting secession, he was doing the right thing. The good Texans that sent him packing with death threats were decent people. They just failed to see that the union might be right about slavery. They were sure that their state's rights were sanctioned in some higher court and that they had no obligation to re-examine their role in history. Again the bodies piled up.

If you are hesitant to accept the vote of a woman in Pakistan, or Lapland, or Nigeria, here's what you do. Make sure she has the opportunity and right to an education, the freedom to elect her government, and a free press to get the information that she needs. In what universe would this be detrimental to America?

Oct 23 06:04 PM

[Tom Konrad:]

Thanks Alan... unfortunately, the problem is Seeking Alpha. The original post on my site (which they work from) shows the poll inline, rather than just a link. Although I do see the questions here when I click the link... I don't know why that does not work for you.


On Oct 23 10:21 AM Alan Young wrote:

> Tom, you might want to edit this to incorporate the poll questions
> before you give the answer. I can't see them, even after clicking
> on the link.

Oct 23 06:56 PM

[Tom Konrad:]

Thanks Alan. I agree that the timing of these decisions is critical. I have been focused on investing in green energy since 2005, and have see the mood of the country swing in our favor in that time. This trend, along with growing political support, has helped green stocks over that period... see this article from the spring:www.altenergystocks.co...

I think the trend will continue, but I could easily be wrong about that.


As for the mindless Climate denial above, this is also an opportunity for a savvy investor... we have to put up with their inane comments, but at least we can profit from their inane investments.


On Oct 23 10:29 AM Alan Young wrote:

> Instead of rehashing the "global warming wars" like every other thread,
> I'd like to focus on the (relatively) fresh point Tom is trying to
> make here: you can get an advantage investing in something that other
> people are valuing incorrectly because of their prejudices. That
> is rather profound, I think.
>
> But there's a big problem with it: time. Eventually, reality will
> sink in. But we've known about these issues for 20, even 40 years.
> That's a long time to keep your money tied up in unpopular causes
> that you know eventually will triumph. Or, as the saying goes, "the
> market can remain irrational longer than most of us can remain solvent."
>
>
> There's a time to trade on conviction, and a time to trade on trend.
> The trick is to know which is which.

Oct 23 07:07 PM

[Tom Konrad:]

VPratt,
Very real anecdotes. My wife likes to call the stock market "legalized gambling" and far too many people treat it that way.

Even worse than stockmarket gambling is the bigger gamble we're all taking with the planet, as you point out so eloquently.


On Oct 23 01:58 PM vpratt51 wrote:

> Tom, I am glad you reach for new perspectives. I enjoyed this one.
> It should prove it's worth over time.
>
> I am probably among the lowliest of all investors. For many years
> now, I have been a clerk in a convenience store, working hard, honestly,
> and trying to grow my retirement funds. A side effect is that I
> have been witness to immense stupidity (and more than a few crimes).
> The most glaring example is in the sale of scratch lottery tickets.
> The people who buy them REFUSE to accept reality and the most basic
> logic. Among the questions and comments:
>
> "Which one wins the most?" (the odds are all the same)
> "My boyfriend buys them all the time and never loses!" (sure, babe)
>
> "You can't win if you don't play." (you can't LOSE if you don't
> play)
> "I won a dollar." (no, you just got your dollar back and lost on
> the other four tickets you bought)
> "I don't know why I keep buying them, I never win. Give me four
> more."
> "That's ten losers in a row. The next one HAS to be a winner."<br/>
>
> The most accurate statement, often coming from the more open minded
> and logical gamblers, is that it is the "stupid people's tax". (give
> me four more).
>
> So it is no surprise that some vested interests in our economy are
> able to count on, and encourage, denial of scientific consensus.
> "Ignore those geeks in the lab coats! Rolllll them dice again!
> Daddy wants a new Hummer."
>
> There are climate models based on long term cycles in which we should
> be entering a cooling trend with glaciers advancing. If those were
> taken into account, it makes global warming twice as alarming.
>
>
> But don't worry. It's just one planet. The next one's GOT to be
> a winner.
>
> End of rant. Thank you for you kind indulgence.
> Paxman

Oct 23 07:12 PM