Old Energy Beating Cleantech To a Pulp

Most market watchers believed that Tuesday's 390 point rise was yet another one-day wonder. Perhaps. Then again, it was the kind of sharper-than-cheddar rally that told investors why they can't afford to stay sidelined with 100% of their cash forever.

(Note: If you see the economy recovering in the 2nd half of 2008, consider the ETFs in this column.)

Investing involves risk... yes. There's a risk that short-sellers will mercilessly beat the market back down every chance they get. There's also the risk that the U.S. recession becomes something deeper and darker, making it difficult to support a heavy allocation to stock assets. However, there's also the risk of letting fear keep you out of a profitable decision.

For example, few pundits would disagree with the notion that the stock market will be higher 3 years from now than it is today. If that's the case, why not simply invest in the Vanguard Total Stock Market Fund (VTI) this instant and sell on the last day of March in 2011? You'd probably make money, right?

Not everyone enjoys logical arguments. Not everyone values historical information that supports the idea that we've seen the worst of the bear.

The truth is... nobody wants to back the wrong horse. We like winning and we like winners. So if the market seems hobbled, we tend to distance ourselves. (Give me a call when the Dow's back to its winning ways at 14000.)

Speaking of horses, what's happening to alternative energy? Renewable, transitional, clean and green? Wall Street journalists and retail investors used to ask me frequently about exchange-traded fund possibilities.

So I gave them. (Read "Small Energy: Leaner, Cleaner and Greener.")

Yet a large part of "alt energy" investing has fallen 20%-30% from highs. The PowerShares Wilderhill Clean Energy Fund (PBW) has suffered one of the deepest downside slides.

Long-term investors in "alt energy" may certainly like the prospects of their investments doing exceptionally well... 3 years out circa March 31, 2011. Ahhhh... but what about backing the horse that's winning in the moment?

Welcome to old energy via oil and gas exploration. In particular, the S&P SPDR Oil and Gas Exploration/Production Fund (XOP) is one of the only exchange-traded investments that has managed 1-day, 5-day, 1-month, 3-month, 6-month and 1-year gains.

That's correct. Digging/drilling for fossil fuels is making a lot more money in the near-term than the search for solar/wind/biofuel/hydro-electric energy solutions.

Most readers are used to my tongue-in-cheek commentary by now. I am by no means suggesting that the only profitable way forward in energy is through the use of the the S&P SPDR Oil and Gas Exploration/Production Fund (XOP). On the contrary!

I am suggesting that drilling for fossil fuels and producing oil has been making money for investors today. I am also suggesting that clean energy investors will need to consider a longer-term time horizon, as this horse will require a bit of tenderness for its injured leg.

Comments

[Scorpion46]

What a refreshing and clear summary of a real winner in the market. Beautiful contrast of "what's the trend people are talking about" versus the clear and graphic summary of what's REALLY working!

Superb!

[Tom B]

OK, I own a home. How do I install solar panels? Are there tax credits? Can I sell power back to the Grid? There may be simple answers to these questions-- and those answers may differ across the 50 states. I think Solar penetration would be MUCH better if their were a turnkey home solar contractor network.

I also believe using concentrated light to heat fluids to power turbines in power plants is likely to be a better bet than photovoltaics over the next decade.

I also believe our tax system provides absurd subsidies to the fossil fuel industry-- and that's a huge barrier to progress.

Having said that, I can't argue with your numbers.

[jajagabor]

Thomas Barta, great points you made. A lot of us out here are in soooooooo much agreement about the things you mention, like the turn-key business network. As you know, that probably won't happen until either most or all of the states separately have enacted similar net-metering laws, and/or the Feds have really gotten serious about coal, gas, nuclear waste pollution, as well as depending on foreign sources of fuels, and changed their priorities in regard to tax credits, subsidies etc.

Unfortunately, so far, there has not been enough people to really galvanize quick progress. It has been, and will probably continue to be, a turtle's progress in the "good old USA," and not the much more serious commitment that is seen in Europe.

Your comment on thermal-turbine solar technology really hits home. If you want to read a passage from Aldous Huxley in 1939 about thermal-solar turbine power from one of his prophetic novels, you can go here:

www.simpleandclear.com...

I have some off-grid solar that helps me reduce my grid usage.But I would really prefer (at the present time) if I lived in a state with net metering (and more contractors), in which case having an on-grid system would be much easier to accomplish. A combination of off-grid and on-grid solar would be perfect.