After a brief spell of (unwarranted) upward bounce, last week saw the market erase most of its gains and swing back down to 12,600 levels. Though this is still significantly above the low touched on March 10, during the Fed-JPMorgan (JPM)-Bear Stearns (BSC) drama.
Oil continued it's nonchalant upward climb, touching as high as USD 133/barrel. It's difficult not to say that OPEC and the other supply side players are stretching their luck. Though there is no refuting the fact that industrial/consumer growth results in increased demand for several gas-guzzling 'instruments' across both the developed and developing worlds, an unreasonable spurt in prices raise red alarms. It's like a forewarning of future danger due to over-reliance on oil; this in turn shifts tremendous amount of attention on alternative energy - solar being the flavor of the day.
The spike in interest in solar shares has been over an year old (at least) by now, but this is probably the turning point for co-ordinated industry-led investments in solar. An example of the latest news on JPM and Wells Fargo (WFC) funding large banks of solar thermal fields in the west coast and large players like Google (GOOG) and Chevron (CVX) funding research for the same. If anything positive is to come by the recent spike in oil prices (apart from bloated treasuries in the Middle East!), it's this increased attention and serious focus on alternative energy.
Apart from the above trend, continued upward pressure will feed inflationary pressures which has already shown from the US to Europe to Asia. Inflationary pressures amidst a cooling global economy causes unwanted strain and would further slow growth, especially consumer growth. As has been pointed by almost every one from now, this will eventually create a drop in demand for oil and downward pressure in prices.
So, while the oil economies reap immediate gains, this spike is in a sense the worst thing they could have done to themselves longer term. Prices are bound to come back to saner sub-100 levels, at least in the next 6-9 months, and the longer term focus on alternative energy gets a tremendous boost - to everyone's benefit, reducing over-dependence on one single source of energy.
As for the stock picks to cash in on this wave, I frankly haven't done enough research. My brother's (he does private equity research for an India-based shop) favorite pick has been First Solar (FSLR). I ignored the pick way back in its 180s! Now that its up in high 200s, I am still wary due to my P/E-driven view of this stock world. He's probably correct, since everyone from Citi to Jm Cramer has upped their targets on FSLR. And we have another star on the horizon with Evergreen Solar (ESLR) - last week saw news of this player winning wo contracts (from Germany & US) worth almost USD 1 billion - and the shares spiking over 20%!
The next 5-10 years is definitely the time for GREEN - thanks to OPEC and their greed for helping everyone realize that, without doubt!
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This article has 16 comments:
- richjoy
- 126 Comments
May 25 08:43 AMInvestors should not make the mistake of concentrating on only one answer--one size (solution) does not fit all (needs).
- jlounsbury59
- 295 Comments
My Website
May 25 09:20 AMIn the longer run, when we have cheap electricity from the above sources, hydrogen fuel cell technology will provide a future transportation revolution. This is probably 15-20 years away from any significant implementation.
- User 13033
- 3 Comments
May 25 10:07 AMGoldman Sachs my go and think south for themselves!
- ship shape and bristol fashion
- 59 Comments
May 25 11:10 AM1. Emerging markets have huge economic growth. Right or wrong?
Right.
2. Anyone think, that growth of that magnitude can be achieved without
substantial growth in demand for oil and other commodities?
Not really.
3. Is it true, that when there is one pie, and suddenly twice as many
people want a piece of that pie, that the price for a piece is going to
double? Yes!
4. Is it true, that every 'super giant field' (which made cheap oil possible)
on the planet is in decline?
Yes.
5. Do oil companies around the world scramble to bring new production
online? Yes, otherwise oil service companies wouldn't make as much
money as the do.
6. Is it true, that this new production is mostly absorbed by the decline
of existing production? Yes, obviously.
7. Now the important question: Is new production coming online ONLY
because of the seemingly high price of oil? Yes, definitely!
8. Is any oil company going to develop projects with per barrel costs
north of 65$, when the price of oil is 65$ or less? Hardly.
To sum up:
NEW OIL FIELDS ARE BEING DEVELOPED, BECAUSE OIL IS UP,
OIL IS NOT UP IN SPITE OF NEW PRODUCTION!
- aquakid
- 5 Comments
My Website
May 25 11:26 AM- aquakid
- 5 Comments
My Website
May 25 11:26 AM- paultaut
- 1073 Comments
May 25 11:44 AMThe juniors in this industry will probably all die on the vine. Only deep pockets will fund Geothermal because the juniors will not get the funding that they need. Not in this climate anyway, this is not new tech., no propriety tech., Geothermal is one reason Calpine is being taken over. 1/3rd geothermal.
- nashiva
- 1 Comment
May 25 12:28 PM- bill d
- 190 Comments
May 25 01:48 PM"In the longer run, when we have cheap electricity from the above sources, hydrogen fuel cell technology will provide a future transportation revolution. This is probably 15-20 years away from any significant implementation."
I hope your belief that the greenies are going to influence the market is correct.
When oil starts back down watch how fast your alternative solutions follow the decline. We heard the same stuff in the 70's & 80's (and that was 30 - 40 years ago ) should have resulted in giant wind machines with propellers made of solar cells. Follow the money. And keep your FSLR shorts. The price of oil will be based on how competitive your alternative forms become - It costs even more to develop them than in the past and it is a longer term investment than most investors want to make. You/they are making money on the investments themselves right now - not the long term profits (if any). Why else would you be short FSLR ?
You sound too smart for this:
"I am overweighting investments in all areas of alternative energy. While solar is the spectacular performer right now, processed coal, advanced batteries and wind/wave turbines are also going to be profitable investments."
Unless you are very wealthy and young enough and can afford to wait. Your heirs may appreciate it.
Good luck - afraid we will all need it.
- dicki31785
- 73 Comments
May 26 12:33 PMI would actually write something longer concerning your comment but since you compared renewables in the 70's to today really shows your ignorance of the subject...and really is not worth my time for a lengthy response....please do some research before you post this BS next time...With kind regards from Germany CW
Long: ABX, CSIQ, STP, TSL
- ArtfulDodger
- 94 Comments
May 26 03:12 PMYou have to be a child and not have lived through the oodles of pump and dump acts that the NY crowd scams the public with to go for this one.
How can so many people believe that, all of a sudden, China and India are grabbing up all the oil in the world, causing prices per barrel to rise 50% over a few months?
China doesn't even report how much oil it buys, uses, or stores. The best we can guesstimate is that over the last five years China has gone from 4.9 million bpd to a little over 6.8 million bpd. The US uses about 20 million bpd.
How can so many people believe that, all of a sudden, there is a shortage of oil? That refiners can't refine enough oil? That there are break downs in the infrastructure lines?
Does no one remember the 1970s?
It's the same old slop warmed over, and the investing public is going for it again—big time!
Known reserves (fairly easily retrievable oil) in 1970 were about 560 billion barrels. By 2000 they were over 1 trillion. Eight years later they are about 1.6 trillion. (see PS below)
The world uses somewhere between 75 million bpd and 86 million bpd. (Nobody is exactly sure, though; these are estimates.)
What's the problem? Where's the shortage?
The telling sign that the first major downturn is about to come is that after Goldman Sachs and T. Boone and nearly everyone else you can imagine came on the tube pumping the ppb at $150 & $200, the price has not moved even 5% since then (from $127).
Pickens has been an oil bull since the 70s, and GS always piles on late to get the public in after the momentum players are fully invested.
If the ppb continues to stall in the low to mid-130s, the momentum players will know the public is finally fully invested. There will then be no more money to go in.
So when they've depleted the public's pockets, they'll start dumping and the public (suckers that WSt. uses them as), which is now buying oil and energy stocks as never before, will get killed—per usual.
That's a view from someone who bought his first stock in 1967 and has been watching the NY crowd run these scams on the public for the last 35 years. They use the same method of operation over and over. And why shouldn't they? The Congress doesn't understand what they're doing, and quite frankly, few other people do.
Jim Cramer has admitted to doing this back when he ran a hedge fund; the people running these operations aren't smarter than the average bear. They're simply more crooked and devious.
They're greedy and heartless, too. They won't stop. Soon after the "we're running out of oil" and "China and India are using up all the world's oil" and "refineries can't refine enough oil" scam is over, they'll move to another sector and within a few months the financial media and the Big NY Houses will begin pumping it. And, guess what? The public will go for it again.
Rebeldog
PS: Iraq has just announced that its latest survey shows that they have another 225 billion barrels in reserve. Thus, add another 225 billion barrels to the World's reserves.
- jcrash
- 255 Comments
May 26 05:55 PM- ship shape and bristol fashion
- 59 Comments
May 27 06:25 AM- nerfer
- 26 Comments
May 27 11:51 AMIraq's reserves don't mean squat if they can't keep pipelines to the ports open. OPECs reserves in general are suspect since they were used to determine nation's quotas and were artificially generated. There's oil still out there, but it's not the easy, safe oil anymore in the volumes we need. We're more and more dependent on unstable leaders and inhospitable drilling environments as the best sources are being depleted.
Oil prices might decline to the $90 level before resuming their upward march, but we will never ever see $35-$50 oil again in our lifetime.
- nerfer
- 26 Comments
May 27 11:55 AMBut don't confuse solar and wind (or geothermal) as an immediate replacement for oil - transportation sector will first need electric vehicles, since most alternative energies don't produce gasoline or gas replacements. (And fuel cells are off in the distant future with nuclear fusion).
- gebby
- 174 Comments
My Website
May 28 10:25 AM