iTulip Calls It Right on Alternative Energy

[necron99]

For months, the iTulip staff have gone to lengths to explain that, although they expect the next economic bubble to be in Alternative Energy, /Renewables, /Clean Energy, the bull market is still many years away. Today's economic turmoil will bury Alternative Energy companies right alongside other companies.

Well when it's time to kiss up to the boss, then it's time to kiss up. Looks like Fred was right, months in advance, as he often is. I didn't really believe it, but now it's sinking in.

Here's two articles within 24 hours...

IHT: Downturn Ends Boom in Solar and Wind Power
http://www.iht.com/articles/2009/02/...r.4-423093.php

AP: Alternative Energy's Banner Year Ends with a Clang
http://hosted.ap.org/dynamic/stories...02-03-15-23-33

I am enamored with alternative energy and think it's critical to human survival, I hope we don't really have to wait 20 years for the bull market like Fred is predicting. But, facts are facts, and today a lot of bad stuff is goin' down.

This kinda relates to the Peak Oil argument. Most people dismiss Doomers by saying that mankind will invent and implement fantastic new technology to replace petroleum, just as soon as the all-knowing Market gives us the price signals which tell us that it's the optimum moment for us to switch. Problem is, what with an economy in a decades-deep Recession, with the Federal government manipulating monetary policy, plus the petroleum companies blatantly manipulating energy policy and foreign policy as well as manipulating the alleged 'Free Market' itself, we are simply not gonna see the price signals which theoretically would wean us off of fossil fuels and drive us into renewables. Not until it's too late. Where's this magical innovation going to come from if nobody can make a living off of inventing alternative energy?

Many Peak-Oil-ers take a moderate position, which says, we don't know for sure that oil is running out, but all our information is completely ¡%°!¿!&¿*#-ed, the gages are all broken off, and the consequences of a big sharp shortfall in the near-to-medium-term future are much too grave for us to just blindly stumble into it. Therefore we have to lay the groundwork for a switch away from fossil fuels long before the crisis hits us in the head with an anvil. That's what many Peak-Oilers are shouting and screaming about: we could invent our way out of this mess, if it was a national priority, but right now it's not. We need to make it a national priority.

Well, according to Fred's theory, that'll happen in another 20 years. Assuming the oil holds out. Assuming the Saudis and Kuwaitis aren't out-and-out lying about the size of their reserves. dorme bene.

[Chris Coles]

Well said Necron99, but the problem is far more profound than most imagine. The problem is, there is nowhere for the inventor to find the capital they need to compete in what is a feudal mercantile economy. So even though all the pointers show a classic need, the "market" cannot respond.

Why?

Because the provision of fresh capital into the process of inventing and research and development leading, inevitably into manufacture, production, marketing and selling the new technologies - is NOT a trading, mercantile function, it is classic capitalism.

Yes, that would not be any problem at all except that the feudal mercantile economy presently dominating the Western economies is not a capital based system, it is a short term credit based system.

Pouring new credit into the present feudal mercantile banking system is not doing ANYTHING to bring us back to a capital based economy and until that simple fact sinks in nothing will change and many opportunities for new technologies will lie fallow, un-researched and unexploited.

[labasta]

Re: iTulip Calls It Right on Alternative Energy

I'll know oil is running out when it's rationed. Until then, I'm sitting on the fence.

Price doesn't determine scarcity in such an inelastic product, unless the price is way off the chart.

[metalman]

Re: iTulip Calls It Right on Alternative Energy

actually, it looks like the article you link to was posted by fred but it's written/signed by ej.

there's this video, too...



then there's grg's Have we had enough of Peak Oil yet? that's damn good, too.

[FRED]

Re: iTulip Calls It Right on Alternative Energy

The oil will go far, what with American two-car families becoming families with a single car, a small one; specifically, the smaller of the two they already have.

[santafe2]

Re: iTulip Calls It Right on Alternative Energy

The oil will go far, what with American two-car families becoming families with a single car, a small one; specifically, the smaller of the two they already have.

Interesting Fred, I thought that might just be happening in little, liberal enclaves like ours. One of my business partners just did this. Sold two cars and bought one used car for the family to share. This was an environmental statement but the economics of it have been rewarding. What about the insurance companies? Won't they start raising rates to make up for the lost income?

[FRED]

Re: iTulip Calls It Right on Alternative Energy

Interesting Fred, I thought that might just be happening in little, liberal enclaves like ours. One of my business partners just did this. Sold two cars and bought one used car for the family to share. This was an environmental statement but the economics of it have been rewarding. What about the insurance companies? Won't they start raising rates to make up for the lost income?

Auto Insurance Price Surge Pushes Some To Drive Uncovered
CNNMoney.com - Jan 21, 2009
Once the consumers decide to reinstate their coverage, they are likely to get an unpleasant surprise in the form of an even bigger price hike. ...


Allstate Asks New Jersey for 15.4% Rate Hike
Insurance Journal, CA - 4 hours ago
The request is the largest ever by AllState New Jersey, which covers nearly 700000 vehicles in the state. If approved, the increase would take effect when ...

State Farm Florida says it couldn't take monthly drain of $20M
SmartBrief, DC - 23 hours ago
... Allstate, Nationwide and USAA because of state controls on premiums. State Farm Florida requested a 47% hike, but was turned down by state regulators. ...

[Slimprofits]

Re: iTulip Calls It Right on Alternative Energy

JPM: Consumer sales of light vehicles rose in January

We have learned a bit more about the composition of January US light vehicle sales. As noted yesterday, the annualized sales pace eased from 10.3mn units in December to 9.6mn units in January. At first blush, this suggests a stepdown in consumer purchases. However, our equity analysts say the decline was caused by a sharp drop in fleet sales (mostly to auto rental companies), whereas the remainder (mostly consumer purchases) posted a solid increase (see opposite chart).

[FRED]

Re: iTulip Calls It Right on Alternative Energy

JPM: Consumer sales of light vehicles rose in January

We have learned a bit more about the composition of January US light vehicle sales. As noted yesterday, the annualized sales pace eased from 10.3mn units in December to 9.6mn units in January. At first blush, this suggests a stepdown in consumer purchases. However, our equity analysts say the decline was caused by a sharp drop in fleet sales (mostly to auto rental companies), whereas the remainder (mostly consumer purchases) posted a solid increase (see opposite chart).

Ran a quick graph of the latest.

Sales volumes lowest since July 1982 during an intentionally created by
the Fed recession, versus a depression that is happening in spite of
the Fed throwing everything and the kitchen sink at it

Year over year percentage decline is the largest on record, since Jan. 1976

[Mega]

Re: iTulip Calls It Right on Alternative Energy

Fred
Hi, "Autocar" was out yesterday & it said that with the crash in fuel prices Americans were once more jumping into F 150 pick up rather than Prius. I wonder what your thoughts are Ref oil prices over the next few years?

Mike

[FRED]

Re: iTulip Calls It Right on Alternative Energy

Fred
Hi, "Autocar" was out yesterday & it said that with the crash in fuel prices Americans were once more jumping into F 150 pick up rather than Prius. I wonder what your thoughts are Ref oil prices over the next few years?

Mike

I have no idea! Please post as an Ask EJ. The overall iTulip position is $30 - $40 until the US government executes whatever plan int has to devalue the dollar.

[Mega]

Re: iTulip Calls It Right on Alternative Energy

EJ is a bit busy right now................trying to understand my last question. As i see it WHAT ever the FED does to devalue....so does all the other CB's...........Thus we have a "Race" to see whom can debase their money the fastest?
Mike

[metalman]

Re: iTulip Calls It Right on Alternative Energy

EJ is a bit busy right now................trying to understand my last question. As i see it WHAT ever the FED does to devalue....so does all the other CB's...........Thus we have a "Race" to see whom can debase their money the fastest?
Mike

lesson of video... don't be among the first to crash (iceland).

[necron99]

Thanks everyone, for all the thoughtful commentary. This is fascinating to read, especially since I didn't actually log on to talk about oil... and then I stupidly rambled on about Peak Oil as sort of an afterthought to my original comment. But I'm always interested in the economics of oil, so I'm not regretting my ramble one bit.

(My original purpose was only to post a couple of articles confirming Fred & EJ's position, that Alt-Energy companies were just as vulnerable as everybody else right now. I also note that iTulip predicted the terrifying jobs report this month, but there were a few others, a very few, who expected well over a half-million jobs lost in the latest report. Still, more points for iTulip prescience.)

(Fred and others raise a great point that America can do an awful lot of conservation, and demand reduction, if Peak Oil ever really starts to loom. That's an excellent point, which I didn't incorporate into my comments. I'm a little worried that most of us, anecdotes notwithstanding, aren't going to want to do that until the shortage really becomes critical. Contrast "Labasta"s comment versus "SantaFe2". Nevertheless, conservation is a vast untapped energy resource and it's domestic.)

Anyway now that I've waded into the mire of peak oil, I wonder what other iTulipers think about the difference between what I was rambling about earlier -- (Price Signals are purposefully muddied by numerous parties when it comes to energy) -- versus EJ's "Next Bubble" theory.

I could write this as an "Ask EJ" but for now I wonder what the rest of you think.

As I understand it, EJ predicts the next bubble in Alt-Energy simply because the government needs to create a speculative bubble SOMEwhere, in order to keep our corrupt economy from seizing up even worse than it's already done -- and Alt-Energy is a hot topic, at home and around the world, for environmental and public opinion reasons. So it seems like Fred & EJ don't particularly buy into the Peak Oil thing, except inasmuch as public concerns about Peak Oil (valid or invalid) may help drive the government into bubble-ize-ing Alternative Energy.

But, as I noted in my original post, monetary policy and disproportionate corporate power & influence on our government, distort the energy market in many ways, unique to that market, some controllable by the parties involved, some not.

Does anyone see any difficulties, 20 years out, when the government tries to turn to the Alt-Energy industry in a major way in order to base the U.S. economy around it... and the petroleum companies react adversely? "We bought and paid for those politicians, we ain't gonna let them subsidize alternative energy in any manner, overt or covert, until we have truly strangled that last golden egg out of the petroleum goose!"

If petroleum does indeed start to run out someday, then for awhile as the crisis progresses, petroleum companies will swell even more in riches and political influence, because scarcity will drive up price and profit. And what are they gonna do with that money and power? What they've always done, of course, which is to bribe the government into staying out of the alternative energy biz.

I don't have the figures right in front of me, so please don't quote me, but a couple years ago I recall researching that "Mature Technologies" like petroleum and coal had received something like $350 Billion in Federal subsidies, total up to the present day, where these subsidies still continue. Meanwhile (leaving Nuclear power and its distinct problems out of the equation for the moment) all other forms of Renewable Energy, from solar to wind to geothermal and everything else, had only received $50 Billion in Fed subsidies to date. That's the power of lobbying, folks.

(Of course the third alternative is for major petroleum companies to try and corner the market in this or that form of alternative energy. And then suck at the government teat again; right teat is dry, shift position to the left teat. I vaguely recall reading that BP was moving in this route. What will the energy market look like if that happens? Will American ingenuity in the field of Alternative Energy be rendered impotent if the American alt-energy market comes to be dominated by gigantic unresponsive corporations and cushy inefficient government contracts? Alternative energy, pretty much by definition, needs to be nimble in a way that the fossil fuel companies are probably not accustomed to. My gut feeling is, if things played out that way, the rest of the world would run circles around the U.S. in this field.)

It's the usual twin dilemma when talking about this subject: if fossil-fuel prices are low, nobody wants to switch. If fossil-fuel prices are high, alt-energy prices will still be high because they don't have the national infrastructure and culture in place like the fossil guys do, so nobody can afford to switch.

Can the government break that cycle by fiat even if it wants to? How, exactly?

(This is kinda taking Chris Cole's question, at the top of the page, and running in a slightly different direction with it.)

[xtronics]

Re: iTulip Calls It Right on Alternative Energy

Thus we have a "Race" to see whom can debase their money the fastest?
Mike

You sure have that one right! We are still the big economy (not for ever, but for today) and all the EM countries have no choice but to debase as fast as everyone else or lose export market share.

This is the same thing that Peter Schiff missed - but now it seems to me that we have the recipe for GLOBAL hyperinflation. How will it plays out?

I'm betting gold or other commodities are the best to be in with danger that physical PM will be outlawed (here or other countries).

Looking at the latest government hysterical actions, they seem to be doing their best to not let the market work. I'm also thinking that the likelihood of a major war as a result of this mess is growing day by day. A good little war might help distract the public from the looting.. but good little wars sometimes grow on their own..

,.,.
The one thing that I disagree with Itulip is on Alternative Energy - the major sectors don't have science and engineering on their side. The best stuff would be the methane ice or celulose => sugar => non ethanol fuel, but the breakthroughs have to happen FIRST - not after the desicions to develop a technology. There could be some money in investing in government susdized boondoggles, but that would require special timming.