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Michael Michaud is the founder of ( and the Invest2Success Blog ( He has been investing and trading in the financial markets since 1989. He founded to empower individual institutional... More
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  • The Success Of Solar And Wind Energy Now

    Solar Wind Energy

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    Solar and Wind Just Passed Another Big Turning Point By Bloomberg

    Wind power is now the cheapest electricity to produce in both Germany and the U.K., even without government subsidies, according to a new analysis by Bloomberg New Energy Finance (BNEF). It's the first time that threshold has been crossed by a G7 economy.

    But that's less interesting than what just happened in the U.S.

    To appreciate what's going on there, you need to understand the capacity factor. That's the percentage of a power plant's maximum potential that's actually achieved over time.

    Consider a solar project. The sun doesn't shine at night and, even during the day, varies in brightness with the weather and the seasons. So a project that can crank out 100 megawatt hours of electricity during the sunniest part of the day might produce just 20 percent of that when averaged out over a year. That gives it a 20 percent capacity factor.

    One of the major strengths of fossil fuel power plants is that they can command very high and predictable capacity factors. The average U.S. natural gas plant, for example, might produce about 70 percent of its potential (falling short of 100 percent because of seasonal demand and maintenance). But that's what's changing, and it's a big deal.

    For the first time, widespread adoption of renewables is effectively lowering the capacity factor for fossil fuels. That's because once a solar or wind project is built, the marginal cost of the electricity it produces is pretty much zero-free electricity-while coal and gas plants require more fuel for every new watt produced. If you're a power company with a choice, you choose the free stuff every time.

    It's a self-reinforcing cycle. As more renewables are installed, coal and natural gas plants are used less. As coal and gas are used less, the cost of using them to generate electricity goes up. As the cost of coal and gas power rises, more renewables will be installed.

    The Virtuous Cycle has Begun

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    Wind and solar have long made up a small fraction of U.S. electricity-about 5 percent in 2014. But production has been rising at an exponential rate, and those two energy sources are now big enough to influence when coal and natural gas plants are kept running, according to BNEF.

    There are two reasons this shift in capacity factors is important. First, it's yet another sign of the rising disruptive force of renewable energy in power markets. It's impossible to brush aside renewables in the U.S. in the same way it might have been just a few years ago. "Renewables are really becoming cost-competitive, and they're competing more directly with fossil fuels," said BNEF analyst Luke Mills. "We're seeing the utilization rate of fossil fuels wear away."

    Second, the shift illustrates a serious new risk for power companies planning to invest in coal or natural-gas plants. Historically, a high capacity factor has been a fixed input in the cost calculation. But now anyone contemplating a billion-dollar power plant with an anticipated lifespan of decades must consider the possibility that as time goes on, the plant will be used less than when its doors first open.

    Capacity Factors Take a Sharp Turn

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    Most of the decline in capacity factors is due to expensive "base-load plants that are being turned on less because of renewables," according to BNEF analyst Jacqueline Lilinshtein. Plants designed to come online only during the highest demand of the year, known as peaker plants, play a smaller role. In either case, the end result is that coal-fired and gas-fired electricity is becoming more expensive and the profits less predictable.

    The opposite is true of wind and solar, as well as new battery systems that can be paired with renewables to replace some peaker plants. Wind power, including U.S. subsidies, became the cheapest electricity in the U.S. for the first time last year, according to BNEF. Solar power is a bit further behind, but the costs are dropping rapidly, especially those associated with financing a new project.

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    The economic advantages of wind and solar over fossil fuels go beyond price. Still, it's remarkable that in every major region of the world, the lifetime cost of new coal and gas projects are rising considerably in the second half of 2015, according to BNEF. And in every major region the cost of renewables continues to fall.

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    Oct 08 9:19 AM | Link | Comment!
  • The Best Stocks To Trade Right Now
    Buy Sell

    Top Stocks to Trade for Fall/Winter 2015 By NetPicks Trade Systems

    With thousands of stocks and ETF's available to trade how do you know which ones to look at?

    Does it seem like there is a new hot name every day you turn on CNBC or Bloomberg?

    It drives me crazy when I see people chasing the big name in the news on a daily basis because it can often times lead to disaster. In almost any other business out there people specialize in one area.

    Does McDonalds serve Mexican food?

    Thank goodness the answer to that one is no! I love Mexican food and the thought of McDonalds ruining that for me gives me the chills.

    The point here is you need to know the products that you trade as it will give you an edge.

    I'm not talking about an edge from insider information or a secret indicator telling which direction it is going in. I'm talking about getting to know the characteristics of each product on your watch list.

    Like it or not, each stock or ETF has it's own unique personality. I find that by tracking volume and volatility numbers along with average holding time of a trade really increases my overall confidence level in trading those products.

    With that in mind, what do I feel are the best names to look at heading into the rest of 2015?

    Thoughts On The Best Markets To Trade

    I teach my students to evaluate their watch list of products once a month. This allows them to react to changing market conditions without reinventing the wheel on a daily basis.

    In many cases, we don't make many changes from month to month.

    On my personal watch list, I trade some of the same names now that I did years ago. What I'm looking for when making adjustments to my watch list? I'm trying to evaluate the market to see where the movement is at.

    Is one specific sector starting to heat up or cool down?

    Are we seeing big moves in certain names or really choppy movement in others?

    These are questions that can help guide you along the way.

    Some of the criteria that I look for when picking the best names to watch are very simple. I have outlined some of the criteria below.

    Watch List Stock Criteria

    With that in mind let's walk through some of the names that I really like heading into the end of the year.

    Names to watch for Fall/Winter 2015:

    SPY - The S&P 500 ETF remains one of the most liquid products in the world. The massive volume in the stock and the options make this an easy one to trade. The Implied Volatility has also increased in the past few months which really opens up our options playbook giving us endless trade opportunities to consider.

    QQQ - While not as liquid as SPY, the Nasdaq ETF has plenty of volume for us to work with. It's an easy way to diversify as many of the big tech names are reflected in this product. I like this one for pure directional plays as well as for short premium plays (selling spreads).

    TLT - With everyone's focus on the Fed these days, I want to have exposure in names that will be active with anything the Fed throws our way. The bond market is an area that can make big moves with anything a Fed speaker says. As a result, having access to a bond ETF like TLT is a great option. TLT is liquid enough for us to do anything that we want with either basic or advanced options strategies. Implied Volatility has also increased in the past few months giving us more flexibility.

    AAPL - Apple is still one of the most popular stocks to trade for day traders and swing traders alike. It is a very liquid product, with both the shares of stock and the options very active on a daily basis. I like trading it because it doesn't like to stay quiet for long. It is also an easy name to see defined ranges in. While I love the products that Apple produces I like it as a trading product even more.

    NFLX - Netflix has been a really fun stock to trade the last 6 months. It did have a stock split early in the year which I was worried would ruin the way it traded. However, it continues to make really great swings back and forth. When it's not moving, the Implied Volatility is high enough to sell premium making it one of my favorite products to look at these days. The stock split has also made it more accessible for retail traders to look at. The options are reasonably priced and have decent liquidity, making it a top candidate for the rest of 2015.

    C and GS - The financial sector is another area that can be very sensitive to Fed speak. Regardless of experience or account size you will want to have some exposure with this sector. I like Citigroup and Goldman Sachs for my personal account. They are names that tend to lead the sector both higher and lower and have reasonably priced options as well. The options have decent liquidity, which means we can trade many different strategies with both of these and get filled at good prices. As long as interest rates remain the center of attention, make sure you have a handful of financial names on your list. Others to consider: XLF, BAC, JPM, FAS.

    XLE and USO - The price of oil has been all over the place for most of this year and I don't see that changing anytime soon. Both XLE and USO are energy ETF's that we have had nice success with in the Options Mastery program. I like the liquidity in the options and I like how each one does something different for us. XLE is the slower one of the two and it typically does a better job of getting through the volatile moves back and forth better. USO is directly correlated with the price of the Crude Oil futures market, which means it's a more aggressive way to play directional moves. Both products are liquid enough to do just about any options strategy that you can think of.

    EWZ, EEM, FXI - All three of these are global ETF's which we have had nice success with. EWZ is the ETF tracking the Brazil markets. EEM is the ETF that tracks the emerging markets. FXI is the ETF that tracks the Chinese markets. Much of the volatility that we have seen in the U.S. this year can also be tracked to the movement in the global markets. I like having products that allow us to participate in that movement without being overly exposed to one individual stock. You have to be careful with these names as they do tend to see overnight gaps for us in the U.S. A good number of the moves happen during the overnight hours so you have to be disciplined to not chase trades that have moved without you. The liquidity in these names also tends the be streaky. Over the last few months it hasn't been an issue, but if markets start to settle down in the coming months you will want to watch volumes closely. If they start to go down we will want to potentially reconsider some of these names.

    AMZN - Amazon has been a streaky product for us the last few years. When it's on there aren't many products out there that will outperform AMZN. However, when this stock settles into a range it can get ugly quickly. The liquidity in the AMZN options also needs to be watched closely. I haven't had an issue getting filled on my trades at good prices the last few months but if volume does dry up in the coming months we are willing to put this one back on the sidelines. It is a $500 stock so the options aren't cheap, but I have had really nice success trading vertical spreads on AMZN which is a good way to lower the cost.

    GOOGL - I know Google is another expensive stock, but I have found that it likes to make really nice tradeable moves back and forth on a regular basis. This is another product that I like to use vertical spreads on to lower the cost of the trades. However, it is also another one that you have to be picky where you get in and out of trades at. The bid/ask spread can widen out quickly on the GOOGL options, so make sure you do your best to get filled at or near the mid price.

    AAL, BA, DAL - The airlines have been a new area to my watch list this year. I like any of these 3 names but I personally trade AAL and BA. I don't always trade these names directionally though. For newer options traders, what I'm talking about here is that I like to sell premium on these 3 whenever possible. Selling spreads is a great way to get exposure to some of these names without placing a big directional bet. With energy prices all over the place, along with the health of the consumer in doubt, I think the airlines could be a good play for the coming months.

    GLD - Gold and silver tend to be names that get more active as more doubt starts to creep back into the market. When fear jumps, there are many traders that start looking at the metals for safety. I like GLD over SLV in my own trading as GLD tends to be more liquid and easier to trade. If we continue to see volatility at elevated levels, look for Gold and Silver to remain active.

    FXE - With global currencies in focus these days I also want to have some exposure there. FXE is an ETF that tracks the Euro. It's not the most liquid product that I have ever traded, but as long as we see the global currency wars front and center I want to be able to profit from some of these moves. The implied volatility on the options of FXE has also been at levels where we have had good success selling premium by using strategies like Iron Condors. I hope to continue that trend over the coming months.

    Best Money Making Opportunity

    I'm not saying these are the only names to look at or that you should trade every one of these. However, taking what the market is giving us right now, these are the areas I feel give us the best opportunities to make money.

    If you want some other areas to look at the argument could be made to have exposure to more retail/consumer related names or even the social media names. Just remember what we have talked about in earlier posts. A bigger watch list doesn't mean bigger trading profits.

    Create a list of names that is diversified, but is also small enough where you can get in and out each day without spending hours looking at the charts. All of the names listed above are active enough to where we can have multiple types of trades on for each name if we wanted to.

    The markets are highly active right now and it is a prime time to make money. We have to make sure we are ready to take advantage of the movement and now you have some of my favorite names to look at. We trade these every day in the Options Master program and will continue to do so in the coming months.

    Now that the watch list is in place it's time to start getting active in these markets.

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    Oct 07 9:48 AM | Link | Comment!
  • U.S. Equities To Enter 'Bear Market' In Next 12 Months?
    SP500 Charts

    Gross, Seeing Stocks Plunging Another 10%, Urges Flight to Cash By Bloomberg

    Manager: 'Investors need cold water splashed on their face'.

    Bill Gross, who in January predicted that many asset classes would end the year lower, said U.S. equities have another 10 percent to fall and investors should sit out the current volatility in cash.

    The whipsaw market reaction to the lackluster U.S. jobs report last week shows that markets, especially stocks, high-yield bonds and some emerging market debt, are trading like a casino, Gross said in an interview on Friday. He was speaking from a cruise ship which had taken shelter near New York City amid stormy weather over the Atlantic.

    Gross, who earlier made prescient calls on German bunds and Chinese equities, said U.S. stocks will drop another 10 percent because economic conditions don't support a rally like in 2013, when corporate profits were going up. Today they are flat-lining and low commodity prices are hurting energy companies, said the manager of the $1.4 billion Janus Global Unconstrained Bond Fund.

    "More negative numbers lie ahead and if you define a bear market by a 20 percent correction, at some point -- that's six to 12 months -- we'll have a classic definition of a bear market, meaning another 10 percent downside," he said.

    Just as New York City was the safe harbor for Hurricane Joaquin, Gross said, cash is the best bet until investors get a better view at what the Federal Reserve and the economy are going to do.

    "Cash doesn't yield anything but it doesn't lose anything,'' so sitting it out and making 25 to 50 basis points in commercial paper compared to 4 percent to 5 percent in risk assets is not that much of a penalty, he said. "Investors need cold water splashed on their face and sit out the dance."

    Fed Liftoff

    The odds of a Fed liftoff this month fell to about 10 percent, according to futures traders, after U.S. reports showed the pace of hiring slowed in September and wage growth stalled. Low wages and slowing employment puts a drag on retail sales and the economy, said Gross. While the Fed needs to lift rates from zero to fix distortions in the market that policy has created, it is now constrained from doing so, he said.

    Gross has been betting that Treasuries will trade within a certain range, capped by deflationary forces, such as debt, demographics or commodities, and supported on the lower side by central banks and money creation, he said. He's recommended this strategy before, and now he's widening the outer bounds of his targeted range. Additionally, he recommends buying a chunk of volatility within that range.

    "The execution, like we saw with the China trade and the bund trade, is the critical component, and when you buy those straddles obviously you've got to know when to take them off too," he said. "It gets tricky. And there's no doubt the market is very illiquid.''

    China, Germany

    Gross recommended shorting the Shenzhen Composite Index in June, right before it plunged, but he didn't directly do the trade. Instead he put on Standard & Poor's 500 Index shorts and other indirect bets.

    In April, he recommended the "short of a lifetime" against the German bund; he later said his forecast was "well-timed but not necessarily well-executed," as he'd bet on a trading range and volatility pushed prices outside of those levels.

    Now, Gross said, stocks may rally despite his read of the market.

    "That's not to say that stock markets don't defy logic -- they do," he said. "But I wouldn't be on that train, put it that way. "

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    Oct 06 9:41 AM | Link | Comment!
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