After a brief spell of (unwarranted) upward bounce, last week saw the market erase most of its gains and swing back down to 12,600 levels. Though this is still significantly above the low touched on March 10, during the Fed-JPMorgan (JPM)-Bear Stearns (BSC) drama.
Oil continued it's nonchalant upward climb, touching as high as USD 133/barrel. It's difficult not to say that OPEC and the other supply side players are stretching their luck. Though there is no refuting the fact that industrial/consumer growth results in increased demand for several gas-guzzling 'instruments' across both the developed and developing worlds, an unreasonable spurt in prices raise red alarms. It's like a forewarning of future danger due to over-reliance on oil; this in turn shifts tremendous amount of attention on alternative energy - solar being the flavor of the day.
The spike in interest in solar shares has been over an year old (at least) by now, but this is probably the turning point for co-ordinated industry-led investments in solar. An example of the latest news on JPM and Wells Fargo (WFC) funding large banks of solar thermal fields in the west coast and large players like Google (GOOG) and Chevron (CVX) funding research for the same. If anything positive is to come by the recent spike in oil prices (apart from bloated treasuries in the Middle East!), it's this increased attention and serious focus on alternative energy.
Apart from the above trend, continued upward pressure will feed inflationary pressures which has already shown from the US to Europe to Asia. Inflationary pressures amidst a cooling global economy causes unwanted strain and would further slow growth, especially consumer growth. As has been pointed by almost every one from now, this will eventually create a drop in demand for oil and downward pressure in prices.
So, while the oil economies reap immediate gains, this spike is in a sense the worst thing they could have done to themselves longer term. Prices are bound to come back to saner sub-100 levels, at least in the next 6-9 months, and the longer term focus on alternative energy gets a tremendous boost - to everyone's benefit, reducing over-dependence on one single source of energy.
As for the stock picks to cash in on this wave, I frankly haven't done enough research. My brother's (he does private equity research for an India-based shop) favorite pick has been First Solar (FSLR). I ignored the pick way back in its 180s! Now that its up in high 200s, I am still wary due to my P/E-driven view of this stock world. He's probably correct, since everyone from Citi to Jm Cramer has upped their targets on FSLR. And we have another star on the horizon with Evergreen Solar (ESLR) - last week saw news of this player winning wo contracts (from Germany & US) worth almost USD 1 billion - and the shares spiking over 20%!
The next 5-10 years is definitely the time for GREEN - thanks to OPEC and their greed for helping everyone realize that, without doubt!