During a recent work meeting with the western renewable energy zones group, it became clear the recent push for renewable energy in the western US has major wildlife and environmental implications.

The main issues of public land managers and wildlife stakeholders are the new roads and infrastructure placed on previously undisturbed public lands. The western US has huge potential for renewables such as solar, wind, and geothermal. Just like the fossil fuel energy booms of the past, the rush to build these renewable power plants on public lands would adversely affect wildlife corridors and ecosystems.

It is a shame China beat the US in announcing a major infrastructure investment plan:

The spending announced today, of which 100 billion yuan is earmarked for this quarter, will cover low-rent housing, infrastructure in the rural areas, as well as roads, railways and airports, the State Council said. The government will also allow tax deductions for purchases of fixed assets such as machinery to stimulate investment, a move that will reduce companies' costs by an estimated 120 billion yuan.

About a year ago the US market starting seeing large asset write downs in the housing and financial markets. Since then, this crisis has spread to almost every asset class in the US. Auction Rate Securities [ARS], like student loans back fully by the US government that can't be sold. The Auctions for these cash equivalent assets have no bids. The same is true for all types of structured investment vehicles [SIV], like packaged mortgage securities [CMOs] and debt securities [CDOs]. Homes prices have falling over 10% on a national basis, the most since the great depression. Equities all over the world have fallen 20% or more.

Money is not rotating in and out of different asset classes. We are seeing a global Capital Asset Death Spiral [CADS]. As the FASB rules require firms to mark to market assets in markets that have no bids or liquidity such as ARSs, CDOs, and CMOs, these firms must write down their asset bases. Many of these financial firms will now be forced to sell assets - good and bad, for whatever price they can get - 20, 30, 40% of book value. So now good and bad assets have very low prices set on them forcing other firms with similar assets to also write down their asset bases, on and on and on...

About a year ago the US market started seeing large asset write downs in the housing and financial markets. Since then, this crisis has spread to almost every asset class in the US. Auction Rate Securities [ARS], like student loans backed fully by the US government, can't be sold. The Auctions for these cash equivalent assets have no bids. The same is true for all types of structured investment vehicles [SIV], like packaged mortgage securities [CMOs] and debt securities [CDOs]. Homes prices have fallen over 10% on a national basis, the most since the great depression. Equities all over the world have fallen 20% or more.

Money is not rotating in and out of different asset classes. We are seeing a global Capital Asset Death Spiral [CADS]. As the FASB rules require firms to mark to market assets in markets that have no bids or liquidity such as ARSs, CDOs, and CMOs, these firms must write down their asset bases. Many of these financial firms will now be forced to sell assets - good and bad, for whatever price they can get - 20, 30, 40% of book value. So now good and bad assets have very low prices set on them, forcing other firms with similar assets to also write down their asset bases, on and on and on...

First, let me applaud T. Boone Pickens for putting all this energy, time and money into a very important issue. His plan is to use wind power to replace 20% of the US electric grid, freeing up natural gas to be used in the US transportation fleet. First lets recap a few points of Pickens' to ponder:

• US oil production peaked in the 1960s and 1970s.

• US oil production is now at 5 million barrels a day, the lowest output in over 50 years despite record real prices - the US consumes over 20 million barrels per day.

• The US consumes 25% of the world's oil, with only 4% of its population.

• The US will send $700 billion dollars out of the country per year to buy oil.

• Projected over the next 10 years, the cost for oil imports will be $10 trillion — the greatest transfer of wealth in the history of mankind.

• World oil production peaked in 2005 at about 85 million barrels per day.

Much of the $700 billion the US spends to buy foreign oil does not go to unstable countries. Canada and Mexico are two of our largest suppliers. But billions of dollars do go to countries that may fund anti-US activities. Bottom line: $700 billion is leaving the US economy.

Last month I wrote about the pricing power that many US based steel firms had. I also posted how the weak US dollar and low inventory levels would lead to above average returns for my steel focus list. Here are those steel firms and their price increases since May 2:

• Gerdau Ameristeel (GNA): 23%
• Steel Dynamics (STLD): 20%
• Reliance Steel (RS): 23%
• Commercial Metals (CMC): 28%
• Insteel Industries (IIIN):  43%
• Universal Stainless (USAP): 9%

That's an average return of over 24%, while the S&P is down over 5% over the same time period. With an annualized return of 144%, one would be a pig not to some take profits; I have sold my position in GNA, but have added to my USAP position.

Oil prices, US oil independence and basic economics

I just listened to the another politician screaming about opening up ANWR for oil development. These politicians claim our recent sky high oil prices are due to lack of new supply here in the US. As an economist, and an energy user, this view really annoys me You can't dig yourself out of this scarce resource pricing issue. One needs to let economics work: prices need to continue to rise, until demand falls and alternatives are properly funded.

As the US economy continues to slow, the domestic steel industry continues to accelerate. My article on March 9th, gave investors a quick industry overview, and my steel stock focus list. After listening to the steel firms conference calls, and reading their earnings reports, I have changed my focus list, The two foreign companies: PKX and GGB, have been replaced with two domestics: GNA and STLD. My new focus list is:

Gerdau Ameristeel (GNA): Infrastructure, mining, commercial, rail
Steel Dynamics (STLD): Recycle, Infrastructure, fabrication
Reliance Steel (RS): Aerospace, fabrication, farm, wind power
Commercial Metals (CMC): Recycle, infrastructure, Europe
Insteel Industries (IIIN): Concrete, Infrastructure, bridges
Universal Stainless (USAP): Power generation, aerospace, oil/gas, tools

Over the past 10 years, the eagle has soared into the stratosphere. From about $1 a share in 1997, American Eagle's (AEO) stock price rose to over $30 in 2007. Like poor Icarus, who flew too close to the sun and ended up in the Icarian Sea, American Eagle's wings are now damaged, and its new flight pattern is unfortunately down.

American Eagle's new same-stores sales were just released. Down 12% from last March. Total sales were down 2%. Ouch! But wait, the numbers get even worse. AEO is now lowering its earnings guidance to .18 -.20 a share for the first quarter of 2008. This is about 50% less than last year. Also since last March, AEO has bought back about 8% of its outstanding shares, so actual net earnings will be down about 55% from last year's Q1. Margins are obviously getting squeezed big-time.

A tidal wave is coming to the US and Chesapeake Energy (CHK) will be surfing like a pro. This change I am talking about is the use of natural gas in the US. Many economic experts agree that pollution taxes, or a cap and trade pollution system will become reality in the next few years. I wrote in February about my vision of the future of natural gas.

I like companies that produce tangible products, something that if you drop it on your foot, it hurts, For example, re-bars, structural pipes, flat rolled, tubular products, I-beams, stainless steel, tool steel, ingots, blooms, billets, bars, structural beams, etc. All of these products could put a dent in your foot, but might also put some cash in your pocket.

Steel is basically iron ore with carbon used as a hardening agent. Other alloying agents are also used. Steel is incredibly versatile, depending on the elements added to the alloying process, one can control hardness, tensile strength, and ductility.

Now is the time to invest in natural gas. As an economist, I have been involved in alternative energy issues for the past 4 years. Long term, the US, and ROW (rest of world) need to move away from DITD (digging in the dirt) to produce energy. These non-DITD alternatives would be:

1) Wind power