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Bill James
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Bill received a BS in 1972 from West Point with concentrations in math, physics, chemistry, and engineering. He was an NCAA All American Wrestler and captain of the wrestling team. He is an eight-year infantry veteran, Airborne, Ranger, Arctic Light and Mechanized Infantry in the United States... More
My company:
JPods, Inc.
My blog:
jpods.com
  • Trade in Oil, Invest in Solar 1 comment
    Aug 11, 2011 9:46 PM
    Life requires energy. Necessity, infrastructure, geology and chance makes trading in oil a sure bet and investing in solar the unavoidable opportunity.

    Necessity
    Life requires energy, people will pay whatever it takes for energy. For example, between 2002 and 2006 gasoline prices increased from $1.45 to $2.92. Families unable to pay for both their commute or their mortgage chose to pay for the energy to keep their jobs at the risk of being thrown out of their homes.

    Infrastructure
    Government control of the means of production built infrastructure mandating the use of oil, forcing people to buy oil. Since 1950, oil was made the lifeblood of our economy.

    As debt breaks down government monopolies over power and transport infrastructures, solar-powered alternatives will commercialize. Just as people jumped to Personal Computers, they will adopt Personal Energy Servers. Distributed solar-based power systems that can be networked; they can provide self-reliance and economic lifeboats (Disclosure: Author is founder of JPods, Inc., a solar-powered mobility company and Distributed Grid, Inc. a network company for Personal Energy Servers).

    GeologyDisposable Energy
    Net Energy from oil has been declining since about 1900. The United States hit Peak Oil Production in 1970. Globally Peak Oil per capita occurred in 1979. The world hit Peak Oil Production at 74 million barrels per day in 2005. As indicated by the this graph, economic growth and oil supply growth are highly correlated. As indicated by jobs, the oil-powered economy has stopped growing.
    Peak Oil
    Geology will force about a 90% drop in affordable oil energy over the next 20 years. Since it typically takes 50 to 200 years to shift infrastructure, accessible oil/gas assets (Net Energy > 10:1) will likely appreciate faster than any asset other than food. But oil is finite, so life based on oil is terminal.

    As Thomas Edison noted in 1910, nature provides a long term energy solution:
    "Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy.”

    “Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

    “There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."
    Chance
    There will be hurricanes that damage oil fields. There will be an earthquake in Los Angeles. Mexico is destabilizing. Oil exporters struggle with political stability. Policies created oil's Potato Famine's potential, a monolithic dependence on a source of energy that is 65% outside our control. Aspects of chance all favor leaps in energy prices.

    Investment
    Necessity demands energy. People must buy energy regardless of price. Investing in sources of energy may be lumpy but will provide returns as inelastic as the demand.

    Geology mandates higher oil prices. Chance favors oil and food speculators -- albeit oil with sharp but quickly fading downward spikes. The only long term energy  choice is between death or embracing solar power. Life developed within a solar budget. Until about 1950 the US economy was primarily solar powered. Once liberty to choose power and transport networks is returned to the people, people will again choose innovations they experienced in communications since 1984.

    I recommend investing in oil and natural gas assets that have Net Energy greater than 10:1 (accessible). Demand disclosure of Net Energy. Oil below $100 a barrel seems an obvious buy. Oil above $100 a barrel  seems to likely to fracture something else in the economy.

    Solar investments are much more difficult to guess. Alternate power and transport industries barely exist and, like the Internet and cell nets before 1984, have difficulty commercializing in a market dominated by government central planning. But in garages around the nation there are technologies as profound as those that came out of the garages/startups of HP, Apple and Microsoft. King Power, Knowledge Publications, Millienum Reign Energy, SkyTran, Taxi2000 and ET3 are some examples.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Author is founder of JPods, Inc. and Distributed Grid, Inc.
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    Electrification now!
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