Investing In a Resource-Constrained World (Part V)
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In a previous article I touched the topic of Peak Oil and even mentioned the Malthus Theory. The validity of both theories can not be disputed because both are extremely simple and perfectly logical derivatives of mathematics. In the case of Peak Oil, it's been validated by the peaking of individual giant oil fields, and we are just now experiencing the peaking of global oil supply. In the case of Malthus Theory, it has been validated by hundreds of historic events thoughout the human history.
The purpose of my articles is to talk about investments. But it is necessary to divert away a little bit to talk about the paradigm shift of our society first, before I come back to talk about investment ideas.
We are experiencing a gigantic paradigm shift as a crisis unfolds right in front of our eyes due to natural resource depletion. It is important for individual investors to understand what is this crisis and how do we cope in order to survive and prosper in the looming crisis.
Unlike most Peak Oil advocators who are extremely pessimistic, I am an optimist. I was pessimistic the first time I learned the Peak Oil concept. But the knowledge of the Malthus Theory actually turned me into an optimist. Humanity has faced many many crises before, each of which could have wiped out humanity from the surface of the earth, but we survived for millions of years nevertheless. So the looming resource crisis is no different and probably no worse than any of the previous crises humanity has faced.
Let me explain Malthusian in simple terms. A fish in the ocean, for example, can lay a few million eggs at a time. Each egg, given the proper opportunity, can grow into an adult fish and it can lay a few million eggs of its own. If you multiply a million by a million and keep multiplying, pretty soon you reach an astronomical number that total number of fish can easily fill the whole ocean, or fill up the whole galaxy. Of course that could never happen. Most eggs got eaten by other fish as food, before or after they are hatched.
A pessimist would think that what if all one million eggs are eaten and not even one survives to grow up? Then the fish could become extinct pretty fast. That does not happen either. It just so happens that out of 1,000,000 eggs, 999,999 will not survive but on average exactly one will survive to lay eggs, no more and no less. Nature has a way of regulating the fish population based on available natural resources like food and habitat.
The Malthus Catastrophe happens on a daily basis for fish. But I do not see any fish being pessimistic. They have been living happily for millions of years and just keep laying as many eggs as they can. Life goes on. Shouldn't human society, with our collective intelligence, cope with our own Malthus Catastrophe better than fish?
The unfolding energy and natural resource crises, in my opinion, is a population crisis. The global population simply exceeds what the earth's natural resources can support. If we have one billion people instead of six billion, then we still have plenty of oil and other natural resources left for everyone to consume. There are ways to cope with it, peaceful ways, through conscious population control (like the family planning policy in China), and conscious reduction of consumption.
We must abandon our American lifestyle of materialism. China, with a population five times that of the USA, and consumes only one third of the oil, and it manages a much more robust economy than the American one. So America should be able to survive with much less oil consumption.
The skyrocketing oil price has already forced many American families to try to adapt and cope with over $4 a gallon gasoline prices. Abandoning driving altogether is impossible for most Americans. But abandoning SUVs and big pickup trucks in favor of smaller, more fuel efficient cars is what people have been doing. The trend is very clear - sales of SUVs have stalled, but sales of cars are booming.
The total auto sales in recent month have dropped somewhat, only because auto makers have not been able to respond to the demand change fast enough. My opinion is auto sales actually will see a few years of hyper boom, because people will retire SUVs and other inefficient vehicles well before the useful lifespan of these vehicles. There will be a huge demand on new fuel efficient cars, to replace these SUVs on early retirement.
My advise to people is SELL your SUVs now while you can still fetch a decent price for them and use the proceeds to buy a new fuel efficient car. Wait longer and more of these oil guzzlers will show up to flood the used car market and dent the resale value.
You should also buy a Prius, the most fuel efficient car you can buy today. I do not own stocks of Toyota Motors (TM) and I do not think they make a terrible amount of money on Prius. But I am getting 66.6 miles per gallon so I can afford a much higher gasoline price than most people do. Toyota cannot produce a lot of Priuses due to a battery shortage. It costs a lot of nickel metal to produce the hybrid batteries. So buy a Prius while you can still lay your hands on one.
I can see there will be continued global nickel shortage due to automakers rapidly ramping up hybrid vehicle production, but also due to ramped up effort to develop deep sea oil resources. You need gigantic oil platforms, called oil rigs, made of millions of tons of stainless steel, which needs nickel. There is a global shortage of oil rigs, so expect stainless steel and nickel demands to ramp up just on this account. Check out the phenomenal rise of Transocean (RIG) and you know there is a severe rig shortage. Buy any producer of nickel while it is now cheap thanks to the recent nickel price correction, which now seems to have bottomed.
That of course includes my favorite palladium stock, North American Palladium (PAL), because nickel is the most important byproduct of PAL. I am also thinking about Taseko Mines (TGB), which I once owned in 2006. I still like its low P/E ratio. Was its recent fall due to nickel? If then, it's good reason to buy on the dip, since I see nickel has bottomed in the current round of correction, especially in light of the big blow up in west Australia.
The solar sector has been hot in recent months but has cooled down somewhat. Do I consider any solar stocks a good buy here? I have longed and shorted Trina Solar (TSL) and LDK Solar (LDK) in the past but I considered them merely trade stocks and I no longer own them. My opinion is Solar PV is NOT the solution of our energy crisis, not silicon based ones, and definitely not the CdTe solar panels that First Solar (FSLR) produces.
I suggest that you read an article called Order of Magnitude Morality. The point to make is production of solar PV products are extremely energy intensive. Although it looks like the energy consumed in producing these solar panels will eventually be paid back, due to their long lifespan, it does take up to ten (10) years to payback the energy consumed, fifteen (15) years if you count in everything, including transportation, sales, installation and maintenance.
Massive ramp up of solar PV production will consume a great portion of our existing limited energy supply, making the energy shortage that much worse, before the energy contributed by these solar panels can start to make a difference.
Because of energy payback time as long as 15 years with everything counted, we could NEVER ramp up Solar PV fast enough to replace our energy supply. We don't have the time.
For example, let's say we immediately dedicate 5% of today's global energy supply to solar PV manufacturing, which is a stretch because the world can hardly afford even 1% of spare energy supply now. But let's say 5% is available. By the end of the year, we will have produced enough solar panel to provide 5%/15 = 0.33% of the world's energy needs, reducing our reliance on fossil fuel to 99.67%. The next year we can dedicate 5%+0.33% = 5.33% of the energy to solar PV industry. And by the year end we have another 0.355% available.
It would take 11 years for solar PV energy supply to reach 5% of the world's needs, and another 11 years to reach 15% of world's energy supply, and another 11 years to reach 35%. 33 years and we are still only at 35% of the world's energy needs.
I do not like any of the solar players in the market today. They all rely on government subsidies in order to prosper. I am a believer of free market and I am against all government intervention in the marketplace. Let the free market speak if it is something beneficial for the society.
Why should my tax dollars help to pay for 60% of the cost of solar installation for my neighbor 100 houses down the street? He may think he got a good deal from the tax break. But he will continue to pay tax to help the No. 99 neighbor to install solar panels, and then No. 98, 97, etc. At the end of day whatever tax break he initially enjoyed, he pays back in future taxes. The tax money doesn't come from no where but from our own pockets.
One exception is Energy Conversion Devices (ENER), which I mentioned before favorably, and still consider it a favorite long term play due to its hybrid battery technology and other unique technologies. I consider inventor Standford Ovishinsky the Thomas Edison of our time. The stock is very volatile so I would recommend to buy it on the dips, not on the rallies.
The solar sector is hyped up by Wall Street. If you have learned a lesson from the 2000 IT bubble, the lesson is don't follow the hypes!
That reminds me of another sector Wall Street hyped up two years ago, the ethanol sector. The most notable stock in this sector is Pacific Ethanol (PEIX). I noticed it in early 2006 and I told folks don't buy it at $40. You will lose your money. Turning food, corn, into the fuel ethanol, is never a very profitable idea. It is never a solution to the energy crisis. Don't listen to the hype, even if Bush himself hyped ethanol.
Today, unfortunately, PEIX trades at merely $3 a share. The ethanol price has gone up, but the corn price has gone up even more, making PEIX barely profitable. All of a sudden everyone now denounces the ethanol industry for consuming all the corn in the world, causing global food crisis and famine and all that.
I am a big believer of contrarian thinking. I did not buy James River Coal Company (JRCC) as I watched it rally to $16 in early 2007 when there were all the drum beatings. But I rushed in and bought tons of it at $4 when no one wanted to touch it. Today JRCC is well above $46 and there are lots of drum beatings again. My advice to people is sell JRCC now. I am not saying it is the top. Don't try to catch the top, which no one can do. There are much better opportunities elsewhere than to squeeze the last few dollars out of JRCC.
I am tempted to apply some contrarian thinking to PEIX at below $3 now that no one touches it. I do not view it as the savior of the world. My investment goal is not to save the world. The ethanol industry is not the solution to the world's energy crisis. But it has its reason to exist as a legitimate business, satisfying some legitimate needs. When we truly run into oil shortage, and we can turn corn into ethanol to supplement the gasoline supply, I don't see why not!
Burning food as fuel for transportation needs is nothing new. The First Emperor of China practiced exactly that 2222 years ago, i.e., burning food as bio fuel for transportation needs in order to bring supplies to his powerful army thousands of miles away. The transportation vehicles he used were driven by machines called horses, which consumed food as biofuel in order to obtain the energy to drive the carts. 90% of the food transported was consumed by the humans and horses on the trip, and only 10% reached the destination to supply the army.
If the trucks have no diesel fuel, no food can be delivered to your local stores. I would rather prefer to allow part of my food converted to bio fuel to allow the trucks to bring the rest of food to my grocery store. So maybe we should give it some thought if this is the right time to buy some PEIX or other ethanol players. Could PEIX develop an alternative feedstock than corn?
I have a big dream that the success of Cold Fusion, now called low temperature nuclear reactions, may become a reality and we will have solved humanity's energy crisis for good and saved civilization from catastrophic collapse.
I know that from the fundamental point of view of quantum mechanics, which says that particles always have a certain possibility to tunnel through energy barriers, cold fusion is NOT impossible. Think of all the hundreds of scientists who have resisted tremendous amount of peer pressure and continued the experimental research of cold fusion for 19 years. Do you think they are all clueless crackpots, or they are really up to something?
A recent successful public demo by Yoshiaki Arata, a highly respected physicist in Japan, should bring people renewed hope that cold fusion could become a reality and could be the perfect solution for our energy crisis. Of course if that is the case, the palladium price has got to go up a lot higher. Palladium is used to trigger cold fusion reactions.
I recommend people watch the video series War Against Cold Fusion to understand it. Instead of advocating for drilling the ANWR and depleting America's last bit of remaining oil as fast as possible, shouldn't America at least spend a few million dollars to check out the reality of cold fusion, when other countries like Russia, China, Japan, India and Israel already beat us in the cold fusion research? Shame on the short-sighted politicians who only know ANWR!
Metals are my favorites, base metals and precious metals. My all time favorite metal is tellurium, which I discovered when I studied the prospectus of FSLR. I talked about tellurium here and here.
On a side note, I can not believe how stupid the street is. I talked about FSLR's RoHS risk back on Nov. 27, 2007. It's been so long since my article was published and no one paid any attention. And now they suddenly discovered the toxicity of cadmium, and speculate that CdTe solar panels could be banned in Europe. I think it is irresponsible market manipulation. Any competent analyst should have read FSLR's prospectus from day one and know about cadmium and RoHS.
On this I want to come to FSLR's defense. The company has documented the RoHS risk in the prospectus and in annual filings so it has not hidden anything. A recent news fuss made it sounds like FSLR just made an announcement and that a EU ban on CdTe solar panel is suddenly imminent. I think it remains just as speculative today as last year whether Europe will take actions to ban CdTe solar panel or not. I so far have heard nothing that indicates a move to ban is imminent, so it remains just a speculation of a possible event so far.
Was it an attempt of the street to lure in some unsuspecting fresh shorts and then run another round of short squeeze? I remain skeptical because I know how this market could be rigged in either direction, with analysts often selectively distributing information they see fit.
The real risk of FSLR remains how it is going to resolve its tellurium supply. I talked about it quite a lot and I tried to dig out information. But the FSLR management does insist that it has adequate tellurium supply. Since the company has never revealed the actual data on its tellurium supply, we the outsiders can only speculate and discuss opinions. The fact remains it is something only FSLR knows, until such time it is willing to come to the public and discuss it. Maybe it needs more time for insiders to sell? One thing that I think I am sure is one day my stash of tellurium hoard might be worth its value in gold. I wish there was a tellurium mining stock to buy.
But really palladium and platinum are the next best thing. They are much better than gold and silver. I could never bring myself to like gold. I did once buy gold stocks like NovaGold (NG) and Northgate Minerals (NXG). Now NG is less than half where I last sold it at $16+. I now frankly think gold is the worst commodity investment and gold mining could be worse. Of course as fiat currency depreciates, gold's nominal value in fiat money looks higher. But you still have nothing to gain. Go to Zimbabwe. You can exchange a gold coin for one trillion Zimbabwe Dollars. You feel good being a trillionaire but you are not getting rich.
Gold has been money since ancient time and is still money today. I have a problem with that fact! Money, as an exchange media, must be something that people are willing to take in and equally willing to let go. If people want to hoard it but do not want to let it go, or people are rather happy to give it out and hate to take it in, then it can not be exchanged freely as a trade media. So by the virtue of gold being the money, it is something perceived to have near constant value in real term, people have a neutral sentiment in owning it or dishoarding it. and that is exactly the reality.
There are more than 160,000 tons of gold being hoarded by different people and organizations. Any trade of gold is largely between some hoarders of gold and some other hoarders of gold. The mining supply and jewelry industry demand, in this case, is relatively small in comparison, and does not have a material impact on gold's price. There could never be any shortage nor any surplus of gold. I would rather buy silver than gold on the Friedman Theory.
On silver have a look at Apex Silver Mines (SIL) and Coeur d'Alene Mines (CDE). Could be good bottom fishing target. Pan American Silver (PAAS) is now more expensive than silver itself. If you want leveraged gain on silver then buy some iShares Silver Trust (SLV). Similarly use US Oil Fund (USO) and US Natural Gas Fund (UNG) to play on the oil and natural gas commodity prices.
I would like to look at things from the point of view of the basic supply and demand relationship. If I want to invest in a commodity, I need to know that its price must go up. I need to know that it is in demand and that there is a supply shortage. I also need to know how elastic or inelastic that the price change may affect the supply and demand, and bring back the balance.
Something that is price elastic, that higher price could easily boost supply or cause people to reduce usage or seek alternatives, will have less room for price gain. On the other hand, if it is something price inelastic, that higher price will neither boost supply nor persuade industry users to stop using it. If there is simply no alternative or replacement, then it is a commodity that has a lot more room for price to appreciate.
Palladium and platinum fits such a description of commodity that is in short supply, that is in ever increasing demand that is rigid and non-negotiable. The supply is in shortage because of the ongoing electricity crisis in South Africa, which greatly impacts production in this main PGM metal supplier of the world. The electricity crisis sees no solution until at least 2012, according to ESKOM and other reports from South Africa.
The PGM production disruption is well documented for any one willing to dig out first hand information, instead of relying on second hand guesses. On page 9, table 3, you see the March, 2008 PGM production is down 28% from last March. SA supplies 85% of the world's platinum and 35% of palladium so that's a lot of global supply reduction.
Curiously, the trade of platinum and palladium so far has not followed the way the fundamentals of supply shortage dictates. Instead they follow gold and silver. Gold up and PGM up. Gold down and PGM down. What does PGM's own industry supply/demand have anything to do with gold or inflation hedge? I guess the metal traders are just slow in digging out useful information.
If it takes the street almost two years to dig out something well documented in FSLR's IPO prospectus, it doesn't surprise me at all that the reality of South Africa's electricity crisis hasn't even sunk in yet even in the minds of some of the most well known metals analysts, let alone the average investors. But soon the PGM fundamentals have to kick in. Industry users must buy for their consumption. The price movement will wake up investors.
I know one hedge fund manager, a physics graduate and very successful in his career, manages billion dollars of assets and claims to be a good friend of a briliant trader, Brian Hunter, whose one single mistake killed Amaranth Hedge Fund. I tried to talk to him about palladium and he told me right away he knew palladium, and there were lots of palladium mines in Canada, and he knew many funds who bought the physical metal. He totally believed he knew it but he really didn't.
If a bright guy with such a good background could be so clueless, the average Wall Street investors must be in total darkness, and of course the computers they use to trade are even more clueless about fundamentals of the markets.
So be patient, spend your time doing your own due diligence. Dig out first hand information and do your own analysis. If you have done so you have beaten the Street already. If you furthermore have the determination of sticking to fundamentals and won't be swayed by the mindless computer trading of the big funds, then you will win big time at the end of the day.
I am sticking to my investment in PAL and Stillwater Mining (SWC) since I have done my homework, and checked them many times and could not find anything wrong with my analysis. And I will patiently wait for the market to wake up to the reality I have discovered long ago. Meanwhile I am taking pride in my legacy as the first individual tellurium investor in the whole world. I made the correct call at the lows of JRCC and ENER, so I know I have the sharp vision. I am not envious about the recent astonishing rally of JRCC and ENER, because I know in time, PAL and SWC will do much better.
P.S. The author is heavily invested in the stocks of PAL and SWC. I have hoarded physical to speculate on tellurium price appreciation.
This article has 95 comments:
Peak oil..is not about mathematics..it is about geology and depletion rates of reserves. Mathematics are simply one tool used for analyzing the rate of depletion. Nice hat, though. Am sure mommy is happy.
Pursley
Hydrocarbons are infinite: oilismastery.blogspot..../
Recently, I drilled a PVC pipe into my backyard and hit oil. I then pumped it out with my panasonic vacuum cleaner, then built a refinery from tinker toys.
I noticed my pool of oil depleted, then I waited 2 weeks and the pool was refilled. Yes. Yes.
The Earth's center is - in fact - comprised of a creamy nugget of crude oil. We're rich!!!
Cold Fusion as an area of research is barely a blip on the screen compared to Hot Fusion, and even Hot Fusion is discounted by thousands of physicists and engineers as being unworkable. Neither area has even left the lab, let alone shown anything close to break-even of energy input.
However photovoltaics DO work, and they do produce more energy than is necessary to manufacture and transport them. They're not common on houses yet, but they are common on sailboats and roadside hazard signs.
But that's not the whole story with photovoltaics. It doesn't take a condensed matter physicists to recognize that amorphic solar panels are essentially giant integrated circuits. It's silly to assume that the current state-of-the-art photovoltaic panel will not progress any further. To the contrary, I think of current photovoltaic panels the same way that I think of that old microprocessor in the Atari 400 computer I had when I was a kid. Back then, I couldn't dream how powerful computer chips would become, and that 4k memory card on my computer seemed pretty expansive. But last month, a friend sent an 8 Gb USB memory stick to me as a gift. Who could have imagined back in 1980 that so much memory would someday be squeezed into a devide the size of my pinkie?
That's where we are with photovoltaics, because unlike any other method of energy production before or since, photovoltatics are perfectly suited to take advantage of the economies of scale in chip manufacturing. We did it with computer chips and LCD screens, the next step to photovoltaic panels will yield equally impressive results. Future photovoltaic panels will be more efficient, cheaper, flexible, durable. They'll be built into common building materials like roofing panels, siding and windows.
You 'aint seen nothing yet.
Hyperbole? Are these the musings of an imaginative physicist? No. There is a reason why I'm bullish on photovoltaics, and that reason is nothing less than the Second Law of Thermodynamics.
Photovoltaic panels are the first electrical energy production method in history to have ZERO phase loss. Think about it ... when you make electricity with a wind generator, you have to first convert mechanical energy to electricity. With nuclear you have to convert atomic energy to heat energy (steam) which is then converted to mechanical energy (turbine) which is then converted to electricity (dynamo). Ditto with coal, gas, geothermal, etc.. All of these forms of electricity production are inherently limited by the Second Law of Thermodynamics because they require several phase conversions to make our electricity.
But photovoltaics? The photon hits the panel, knocks an electron loose, which makes instant electricity. Zero phase loss. Of course, for the physicist, that's where the fun starts, because we want to find ways of lowering the work function of the material. We want to limit phonon loss, increase collector efficiency. Engineers want to find ways to make panels cheaper, chemists want to find ways to lower the cost of the thin film coatings and improve efficiency. Metallurgists want to improve substrates.
But the thing to remember here, is that photovoltaics are in their infancy. There is still relatively little research in the area compared to research programs in magnetic and electronic materials. When the number of scientists in the field quadruple, I suspect the efficiency of solar panels will double.
So, still think photovoltaics can't manufacture all of the electricity that the world needs? That's like looking at a six-year-old Wayne Gretzky and saying that he can't play in the NHL.
Finally, how much sun is available for solar photovoltaics?
The average daily solar radiation falling on 1 acre of land in the U.S. is equivalent in total energy to about 11 barrels of oil.
The U.S. currently uses about 100 quads of energy each year. (A quad is 10^15 BTUs.) How much solar energy is available for use in the U.S.? About 500,000 quads.
I can't tell you much about the future, but I am quite sure I know what will make our electricity in the future.
I suggest you follow the link embedded in my article to a web site called "Order of Magnitude Morality".
Photo PV will likely return more energy than they consume. But the energy payback time is too long. If we had started to ramp up Photo PV application since Carter's time it might have worked. But we no longer have the time.
It's like you have $100K savings in a bank account. If you let the interest grow for a long enough time, it may provide enough interest to sustain your life spending. But you can not wait and you have to spend money every day so the money is depleted before it can grow to big enough size.
Massive ramp up of photo PV will consume massive amount of energy in the first place, energy that we can not afford at this time.
Cold fusion is our last and real hope to solver the energy crisis. Anything else requires massive power down and reduction of scale of everything, including population, which is very painful.
You have neither Peak oil..or Malthus' theory correct...in fact, your entire contribution is about as moronic as the Oil as an Infinite resource dude above.....
Based on the historical development of the Thin Film Industry, fifty years should be enough time to bring photovoltaics up to speed. Until then, we continue to use existing energy sources, but look at them as twilight-sources, the same way that steam power was still used in the late 1800s and early 1900s until diesel could take hold.
I think you need to separate the worst-case-scenario from our ability to adapt. Worst-case-scenario ist that the price of energy skyrockets more than it already has. But if that happens, you need to remember that 50% of the energy we use in this country is simply spent on heating and cooling air. 'Wartime' rationing of power will get us through the rough spots until we can adapt our infrastructure.
Do we really need houses cooled to 72 degrees in the summer and warmed to 78 degrees in the winter? Do we really need to eat bread that has been made from grain shipped all over the country? Do we really need to commute 50 miles to a job that barely pays for things we don't need?
You reason that we can't afford the energy necessary to ramp up production of PV. But PV unlike cold fusion, PV is tested, we know that it works, and we already have invested a lot of energy into making that happen. Your argument is akin to the person who is running out of money and instead of working harder, they take their nest egg to the casino.
Okay, you like Cold Fusion. I think I'm a bit older than you though. I was in my General Physics class the day that Cold Fusion was announced. It was championed by the author of the physics textbook that we were using in class that day. You need to understand that the physics community did NOT label those Utah researchers as 'crackpots.' In fact, in my own department, we tried to replicate their results, as did physicists around the world. My current opinion on 'cold fusion' is that they are seeing some nonlinear effects from lattice features and phonon coupling at best, and experimental error at worst. And that is interesting as hell to a physicist, but it doesn't necessarily mean that we can plug our plasma televisions into the thing.
At some point in a physicist's career we have to make peace with reality, in much the same way that stock traders eventually learn that market conditions do influence the price of a stock, regardless of how interesting the company might be. So you claim that Cold Fusion is our last real hope to solve the energy crisis. But I don't have the luxury of flights of fancy, because I am expected to interpret what I see for people who don't necessarily understand the complexities of Thermodynamics, Fluid Mechanics and Statistical Physics.
Ideally, physicists are expected to contribute to the good of society. And my contribution is to use a lot of hard-gained knowledge to contribute to the direction of energy policy. And I can't throw out the Laws of Thermodynamics to put my faith in untested energy sources.
Maybe fusion (hot or cold) is our hope for the future. But so far, they are both nothing more than a hope. And hope doesn't power my laptop computer or turn my blender.
One area that I didn't know if you looked at in your research is the energy storage. Like computer chips and PV, capacitors can also take advantage of advances in thin-film manufacturing. Twenty years ago, a one farad capacitor would have been the size of a toaster oven, and it would have cost several thousand dollars. Today I can buy a one-farad capacitor that is the size of my thumbnail for about $2. Capacitors have a huge advantage over batteries in that energy is stored in its electronic state, rather than a chemical state. They have a long way to go to replace batteries, but I have no doubt that it will happen sooner rather than later.
One company that makes advanced capacitors is MXWL, although I don't currently own any of that stock.
I would be more than happy to discuss cold fusion with you, or any other form of exotic energy production. My mind is not closed to these, rather I am forced to be pragmatic.
One thing that you may not have known is that cold fusion was announced on the same day that the Exxon Valdez broke up in Alaska. While cold fusion conspiracists claim industry is trying to hide their results, I sometimes suspect the opposite ... that cold fusion was rushed to the public's attention as an emergency PR move, before it could be fully tested as a way of diverting attention away from the Valdez disaster which had happened just hours before the Cold Fusion announcement.
sion
Cold or hot fusion might eventually save the smaller world but it is not likely to help with oil depletion, only fisson can contribute to that. Solar energy in the form of thin film should have low production costs but central solar farms that use concentrated light for heat and generation may be cheaper to build.
Mark W makes some good point but I will disagree on a minor point. If you have almost unlimited heat from fission then it doesn't matter too much that you go thru energy state changes like described. This just part of the efficiency equation. PVs are not very efficient so who cares that they produce power directly. They still must go thru a conversion process to make AC, this is around 95% to 97% efficient at best.
I'm all for PVs and they will contribute to distributed power, we will need all forms of generation. Two major kinks will be power storage (for non base load sources) and distribution system which are not keeping up.
Without population control, we are shooting ourselves in the foot. Maybe China doesn't use as much as we do but they also live at a much lower standard.
I understand your point of the 'unlimited' heat from fission. You are correct.
But even with proper industry management and safeguards, fission is an untenable energy source. Nearly 50-year-old nuclear waste from the first fission reactors has still not been properly disposed of. There is no way (even with a Breeder reactor) of preventing rogue nations from using fission power to produce weapons. Even low-level alpha-particle waste can produce dirty-bombs capable of mass destruction.
Fission is both the most elegant, beautiful, yet paradoxically dirtiest, least practical energy source that has ever been invented, and no physicist can -- in good conscience -- recommend fission power given the dismal track record of the global nuclear power industry.
PV doesn't need to be used with alternating current, in fact the most efficient uses for PV are with local direct current networks. As for energy storage, Ithink capacitors will be the storage method of choice once we engineer ways to take advantage of their exponential charge and discharge characteristics, rather than try to work around this.
Also, you should disconnect from the idea of power distribution. Existing PV systems, if not used for air-conditioning and heating, have enough capacity to power an average home. If the home is built without adhering to the ideals of French Aristocracy (i.e. big heat-absorbing/emittin... boxes stuck on the ground) and instead are built into the ground and with passive solar heating and cooling, then there is no reason why people in the future will even need power distribution. Their energy needs can all be generated directly.
Of course this is probably not the case with industry, which tends to consume much more power.
As for population control, the world is not overpopulated. We have what looks like overpopulation since the distribution of the world's resources is so lopsided, with billions of people living on starvation diets, and a relative handful of people living far beyond what they need. In fact, from the perspective of space colonization, the Earth is UNDERpopulated, since we would need a global economy at least an order-of-magnitude large to support this.
Of course, I wouldn't necessarily want to live in space, but I suspect many people would prefer it to their current lives!
www.reuters.com/articl...
Palladium also shots up big time:
www.kitco.com/charts/l...
Both accounts are very bullish for PAL at this $5 price level. Remember PAL reported 16 cents per share earnings in Q1, 2008. Where can you find such cheap stock that looks forward to make more than a dollar earning this year and much more later on?
Also consider buying some SWC on the dip. There is no good reason for the dip except for there may be a trapped short with too big a short position in SWC, 8M shares worth. SWC produces 4000 ounces of rhodium each year. That alone is worth $38M.
Photovoltaics have been improving in efficiency and cost at a rapic clip for 20 years and the improvements continue.
And you do not mention solar thermal power plants which can already produce electricity at 8-12 cents a KWH.--competitive with gas and coal. They are so low tech we could have built them 100 years ago. It you can build a parabolic reflector or fresnel reflector and steam powered generators you can build solar thermal power plants.
In addition to that, anything we build uses energy to make. Where does the argument end?
What we need for the time being is plug in hybrid cars to cut down on gasoline usage. The average American driver would get 100 miles per gallon overall, doing almost all their commuting on battery power. They cost more to build, but even at $1.75 gasoline, the fuel savings would pay for the difference over the life of the car. At $4-5 gasoline you are saving wads of money. And they would cost less to make when economies of scale reduce their cost. You recharge the battery at night for $1 of electricity, during off peak demand. The grid can already handle that according to people in the power industry.
And the rationale that we shouldn't undertake what will eventually pay off(solar and wind), because it uses energy now, is just more shortsightedness. We've had enough of that to last a lifetie or two.
www.motherjones.com/ne...
Both SWC and PAL are the only primary palladium and platinum producers in North America, and only ones outside South Africa and Russia. So these two are extremely valuable.
On the other hand, Aluminum is a good long term buy, and Titanium is an excellent long-term buy, but for now, the latter requires knowledge of the intricacies of the Russian exchanges.
When you consider that, and the fact that they are noiseless, safe and can be incorporated into building materials, there is no other serious contender for the at-home power plant.
And that is the holy grail of the power industry, regardless of the power that the power distribution industry now holds. In the early 1960s, the U.S. Nuclear Industry projected twenty years before low-level nuclear waste would be able to be incorporated into home heat-exchangers as a power source.
For obvious reasons I'm glad that didn't work out, but I have no problem with living grid-free, even if it means giving up on some of the luxuries of power like A.C. and a clothing dryer. (My wife, on the other hand, might not share my enthusiasm.)
You are wrong on Aluminum, Nickel and PGM metals. Aluminum resource on earth is virtually unlimited, so aluminum production is just a matter of consuming electricity to refine the metal. Attracted by higher prices of aluminum, production will ramp up, bring in competition, and the higher cost of electricity will diminish profit margin. So aluminum producers are NOT good long term players.
What do you mean catalyst converters and hybrid batteries will "phase out"? They can't phase out, you can not sell a new vehicle without a catalyst converter that is up to the environmental standard, nor can you deliver a hybrid vehicle without the big battery pack. Catalyst converters reduced so much air pollution which indirectly saved so many lifes who would otherwise die from air pollution. My calculation says each half ounce PGM metals used in catalyst converters saves an average of one human life. As long as you burn oil, or even ethanol, in vehicles, you need to have catalyst converters.
Know why rhodium proce went from $300 to almost $10000 in just 4 years? Catalyst converter demand. You need just a little bit of rhodium for a particular characteristics that nothing else can replace, on top of platinum and palladium used. If auto makers have to choose between producing a vehicle that can be sold legally, or stop using rhodium, guess they have to pay to play no matter how high rhidium price goes up.
Higher gasoline price forces many people to rush to retire their oil guzzlers well ahead of their useful lifespan. But they still need to drive and so they need to buy fuel efficient small cars. So here you have a booming new car demand which boosts the PGM demand. Auto makers just couldn't respond to the paradigm change fast enough and did not switch enough production capacity to small cars. But they will switch and they will see auto sales boost once they do.
The big problem with solar industry is the long payback period of solar panels. If we had decades of lead time it would have worked out. But we lost that already. We no longer have time to ramp up the solar industry to make a significant difference in the structure of our energy supply.
There has been some discussion of cold fusion here. I don't have time to respond to your comments but you have made some technical errors. I suggest you review the scientific literature. Our website includes a bibliography of 3,000 papers and the full text of 500 or so. Please have a look:
lenr-canr.org/
Regarding the recent Arata experiment, I speak Japanese and I happened to be in Japan that day, so I attended the lecture. I uploaded a few details in the News section:
lenr-canr.org/News.htm
I know Arata's work pretty well. He and his co-authors have written 53 papers, and I have read several in English and Japanese. I have his paper for this experiment, which is:
Arata, Y. and Y. Zhang, The Establishment of Solid Nuclear Fusion Reactor. J. High Temp. Soc., 2008. 34(2): p. 85.
(In Japanese, with an English title and abstract.)
I am writing a report on it, which I will upload sometime in the next few days, maybe next week.
The experiment was not very well performed, but worth looking at. His previous results with with the DS Cathode were replicated by SRI and the Italian Nat. Nuc. Lab. This experiment is similar so it is probably working as well, but I will not be sure until someone replicate it with a better calorimeter and more material.
Regarding the future potential of cold fusion, here is an on-line book I wrote on that subject, which was recommend by Arthur C. Clarke and many distinguished scientists:
lenr-canr.org/BookBlur...
Enjoy! As you see in chapter 3, it is probably not such a hot idea to invest in palladium, if investment is your game. I don't have much other advice to offer investors.
- Jed Rothwell
Librarian, LENR-CANR.org
Also, regarding specific subsidies provided to various energy generation, I refer you to the Table 300 (Chapter 5, page 100) of the Federal Financial Interventions and Subsidies report that can be downloaded at: www.eia.doe.gov/oiaf/s...
Finally, please cite your sources...
Just the facts, please.
www.kitco.com/charts/p...
Reason for the spike? Read this:
www.bloomberg.com/apps...
I quote: "The metal rallied after Russia's OAO GMK Norilsk Nickel, the world's biggest producer, said its stockpiles of the metal may be ``depleted'' in one to five years as the government reduces its holdings."
Why the fuzzy math of "one to five years"? By using such a large margin of uncertainty, probably they are telling us, the stockpile actually has already depleted. This confirms what I infered from an earlier piece:
www.bloomberg.com/apps...
Quote: "Most of the company's stockpile is ``not necessarily in Russia,'' though an unspecified portion is being kept at Russia's State Fund of Precious Metals and Precious Stones, Berlin said. ``It's better when the exact locations of the stocks aren't known'' by the public, he said."
So there is nothing left inside Russia?
This is a huge huge event in palladium. Time to load up PAL and SWC tomorrow if you see what's unusual in the palladium lease rate spike!!!
Please see:
solarbuzz.com/SolarInd...
This shows a range of costs from 37.63c per kWh for a residential installation in a sunny climate (we live in a sunny climate) to 21.32c for an industrial system.
Solarbuzz home page gives links to more information and explanations.
As has been observed before, the holy grail for solar is grid parity. Based on this very limited observation, unless I have made an obvious error I would guess this will occur before 50 years is up.
Thanks for visiting here and leave your comment. Your link is broken. Here is the correct link to the book you wrote. I encourage people to have a look:
lenr-canr.org/acrobat/...
I admire and appreciate the courage you and your scientist colleagues have in continuing the cold fusion research for 19 years, against adverse social and peer pressures. That's the kind of courage required for science to progress.
I understand that you as a scientist, not an investor, would hesitate to give people investment advices. Nor should you give such advices. We the investors look at things from our prospect of supply and demand of commodities, cold fusion is just one of the things we look at, among others.
In your book on page 39 you do express worry that the world may not produce enough palladium for cold fusion. But I think free economy will work here. The application demand will drive up price and hence make low grade ores economical to produce to satisfy demand. Please read this government report on PGM availability:
www1.eere.energy.gov/h...
I guess that makes the case for palladium investment even stronger. And the stocks of PAL and SWC are even better leverage than the physical palladium metal as investments.
Once again thank you for coming by. Please keep us informed of the latest cold fusion developments. You probably should talk to a venture capitalist for research funding support for cold fusion.
youtube.com/watch?v=e-...
Somebody get this guy a copy of Black Swan.
Draffen
I favor an "I'm All In" energy strategy that includes solar, wind, nukes, limited domestic drilling, clean coal, and the elimination of sugar tariffs and oil subsidies. Subsidies should be for solar, wind, microturbines, etc. But we should still drill in limited areas to take the pressure off. For instance I live in Florida, to I want drilling off shore no, but China plans to drill off the coast of Cuba. I would allow US oil companies to drill in a similar location (close as possible) but they would have to agree to clean up any mess they or the Chinese made. I would let them drill in ANWR, but only if they agree to the end of the oil subsidies and they would have to agree to sell the oil domestically.
People are more open to alternative ideas in good times not bad, when the stuff hits the fan people don't want to talk cold fusion.
There are other ways to play platinum such as PTD the ultra short ETN.
>> Aluminum resource on earth is virtually unlimited,
Titanium is pretty common too. But the value of refined titanium and aluminum is not based on the rarity of the element, it's based on the value of the manufacturing process. We've only scratched the surface of what industry is capable of doing with Al and Ti. The future will see many metals replaced by these. Silicone is one of the most common elements on Earth, yet that doesn't seem to lower the value of the semiconductor industry does it Mark?
>> So aluminum producers are NOT good long term players.
Any aluminum producer that ties itself to Titanium production as well cannot be ignored and they are potentially good long term players.
>> What do you mean catalyst converters and hybrid batteries will "phase
>> out"? They can't phase out, you can not sell a new vehicle without a
>> catalyst converter that is up to the environmental standard
Industry and the EPA are eager to get rid of the catalytic converter. In the space of just 20 years, the world is now polluted with platinum, which like any heavy metal, have no place in our food chain. One Australian study found that street sweepers were picking up more ppm of platinum than commercial platinum mining operations. Catalytic converters are a stop-gap solution that is no replacement for proper, stoichiometric combustion. Once hybrids become commonplace gas engines will be able to be restricted to a narrow, and ideal performance band, stoichiometry will become the order of the day, and several pollution control devices (including the catalytic converter) will create enough back pressure on the exhaust that they will actually increase pollution though efficiency loss, rather than decrease it.
>> nor can you deliver a hybrid vehicle without the big battery pack.
That's another stopgap technology. Battery packs have the problem of overheating due to the fact that they are being driven to charge faster than the chemistry can handle the lattice shifts. And of course the biggest problem with batteries are the phase conversions. You pump electrons in which convert to chemical energy and then to get electricity out again you need to convert from chemical energy. The current solution for advanced hybrids is to couple the batteries with ultracapacitors. But the capacitor industry is increasing efficiency and price roughly corresponding to Moore's Law, so how long will it be before capacitors can simply replace batteries? Answer: It can already happen, but we don't yet have motors that can properly exploit capacitor's exponential discharge characteristics. That's a separate engineering problem. But have no doubt, future hybrids will not have batteries, because of the economic realities of batteries ... specifically that they require the expensive mined metals that you love so much. Ultracapacitors on the other hand, are potentially more profitable because they can take advantage of advances in nanoscale physics and they can be built with common materials on an industrial scale. From an environmental perspective, batteries are a good technology to phase out as well, and in the future they will be as anachronistic as vacuum tubes are today.
>> Catalyst converters reduced so much air pollution which indirectly saved
>> so many lifes who would otherwise die from air pollution.
You're wrong. Proof: Honda's 1972 CVCC was so efficient that it didn't even require California exhaust modifications. Every piece of hardware that is attached to the internal combustion engine lowers the relative efficiency of a perfectly stoichiometric combustion process. The catalytic converter, along with a variety of other pollution control devices have largely displaced pollution. They have controlled particulate pollution but increased NOx pollution. The air looks cleaner, but that is because particle size distributions are now largely in the Accumulation Mode, rather than in the Course Mode, and aggregation is actually decreased. Pollution-induced lung disorders are now the number one cause of emergency room visits in the United States. In the late 1960s, ground-level ozone pollution was barely a problem, today it is a problem all over the world.
>> My calculation says each half ounce PGM metals used in catalyst
>> converters saves an average of one human life.
What calculation? How could you calculate something completely qualitative like this? What were your inputs and parameters? How do you reconcile this calculation with the fact that air pollution induced COPD and asthma are increasing, rather than decreasing?
>> As long as you burn oil, or even ethanol, in vehicles, you need to have
>> catalyst converters.
First, ethanol is a worse polluter than oil since it reacts with the oil on the cylinder walls and introduces more of the lubricant into the burn process. It is a far worse source of ground level ozone pollution than gasoline. www.relocalize.net/eth...
Second, catalytic converters will need to be phased out within twenty years, they are unsustainable.
>> The big problem with solar industry is the long payback period of solar
>> panels. If we had decades of lead time it would have worked out. But we
>> lost that already. We no longer have time to ramp up the solar industry
>> to make a significant difference in the structure of our energy supply.
That's silly. You're saying we should go with inferior technology since -- supposedly -- our 'biological clock' is ticking. Solar works today. It just works, and you can claim that it doesn't but it is being deployed throughout Developing Nations as the most cost-effective way of bringing electricity for lights, laptops, water purifiers and radios. The reason why solar is still fairly non-viable in the U.S. is not because of the technology itself, but because of our high electricity demands. If we suddenly decided that we would live with ambient temperatures in the summer, and that we would insulate, wear sweaters and heat to only about 65 degrees in the winter -- as they do in Developing Nations, then solar would be viable today.
Also, you're confusing me. You claim there isn't time to ramp up production of a technology that already works, yet you claim there is enough time to develop a brand new technology (cold fusion) which probably doesn't even work.
Same for solar. Sooner the better, as much as possible. And wind. AND, How can we ignore FREE MONEY (power or energy, the difference is time)??? My goodness.................
Marks World Energy Argument would leave France without 83% nuclear, Brazil without 45% biofuel, Germany without 40% solar, etc. And, on the average, he and I are both not here.
As for cold fusion (v/s hot fusion like goes on at the Sun right now and of which we can reap many free benefits, eg. solar - get it??)), you can start installing as much of it right now as you wish; I'll push solar (with it's low, but free, conversion efficiencies, and wind, even tho it has conversion inefficiencies. And the tortise wins!!!!!!!!!!!!!!!!!
Mark, I am pleased that you finally admitted (further on in your article) that China's population control method is painful; of course it's only painful for those that are terminated, and somewhat less (maybe) for those with a conscience: for now, that is. You have no clue how painful it is really going to be.
No then, if the US stopped wasting 70% of it's current oil and gas consumption on moving goods and people around this country, but instead electrifed the rails and interstates to do so using solar and wind, in at least 33 years according to Mark, there would be a lot more oil and gas available for others (assuming any's left - which we do assume, and also hope); and what's best, WE WON'T BE DEPENDENT UPON IT IN THE US. NOW THAT'S A REAL BENEFIT; A REAL PAYOFF; A WORTHWHILE INVESTMENT. And, as validly mentioned many times by others various times herein and elsewhere, if solar were subsidized instead of oil, etc., WE'D LOVE THE RESULT. As for investors, they'd have to bet on solar/wind instead of buggywhips (oil/gas/coal).
As for nuclear, it will remain. However, fission is not unlimited, as stated. I'll give you a pound of fissionalble uranium and guarantee you it will provide a limited amount of energy; not so with the sun. It's truly unlimited. And consistent (you just have to broaden your perspective). Think WORLD, like Mark does. Only do so properly.
Mark should be pleased with these response. It's does sharpen his thinking. Maybe even others. Hopefully, some of it get's to DC LEADERSHIP AND THOSE THAT PUT THEM THERE.
"I understand that you as a scientist . . ."
Actually I am programmer and the technical writer, and sometimes translator.
". . . and would hesitate to give people investment advices."
I wouldn’t THINK of giving advice!
"In your book on page 39 you do express worry that the world may not produce enough palladium for cold fusion. But I think free economy will work here."
I do not think a free economy is capable of doing this, because the demand for palladium is already high, and every effort that can be made to recover it is being made. However, my main point was that the cold fusion effect can probably be produced with other, cheaper and more abundant materials such as titanium, so I do not think that palladium will be needed.
- Jed
And at the same time, the author gives further investment advice to avoid solar energy, based on speculation that is far more dubious than even the field of cold fusion ... essentially that it will be too expensive to move to one of the least expensive forms of energy production.
Has reality fled the scientific and financial establishments to the point where a weblog that touts the benefits of an untested theory over practical devices deserves a top-billed spot with the news section of a technology stock?
But then again, perhaps nothing is really new. Perhaps people have been following fantasy for their investment advice for generations, thus the reason so few people actually do well in the market over the long-term.
There are two undeniable facts here:
a) In over 15 years of modern development of the field, cold fusion researchers have yet to harness their supposed fusion source to make a practical generator, even one that would power a nightlight. Nor have they found a way to explain away the nagging violations of conservation of momentum and Relativity.
b) Across the world are millions of people that are getting affordable, practical power from photovoltaic panels, and passive solar heating/cooling.
Mark, I hate to be the bearer of bad tidings, but the horse is already out of the gate on this one. Perhaps you could have convinced a readership that solar energy was unfeasible twenty years ago. Perhaps you could have used pathological mathematics to convince us to invest in a pretend power source rather than something real and useable. But those days are gone, and now we all know that solar energy works, and does so beautifully.
Be careful with your convictions Mark. There is no point in holding onto faulty data to your deathbed, raising a palladium-cathode in the air, proclaiming the imminent future of cold fusion, as the solar-powered robot nurse comes into your room to empty your bedpan.
I find your comments about gold and silver particularly boneheaded. The investment value of gold is that it is mispriced as money, not that it is money itself. To the extent there is recognition of the negative social consequences to most of the commodity "investing" that is currently taking place, this will invite a major popular backlash. Simply put, the commodity market is broken when higher prices resulting from long speculation (hoarding) cannot encourage additional production as a result of NATURAL CONSTRAINTS IN SUPPLY. The direct beneficiary is gold (and silver) because bullion hoarding is more socially acceptable and may represent one of the few outlets for commodity exposure in a coming investment crackdown. Those hedging dollar exposure with oil or allocating to a broad commodity index for portfolio optimization would be forced into gold and silver, which is where they should be in the first place. In fact, the main historic role of gold and silver are to protest fiscal policy, and only the greed and hubris of Wall Street have permitted a substitution of food and energy for that purpose.
". . . essentially based on the premise that cold fusion is not only real, but also on the verge of commercialization, and thus will demand massive amounts of platinum and palladium for the cat/anode system."
I agree that it is absurd to suggest that cold fusion is on the verge of commercialization. It is on the verge of extinction: most of the professors in the field are retired or dead.
It would take hundreds of millions of dollars to commercialize cold fusion and at present there is no chance such amounts will be made available.
"And at the same time, the author gives further investment advice to avoid solar energy, based on speculation that is far more dubious than even the f