Green is In, But Why?

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May 30th, 2008 | By Charles Delvalle | Category: Politics & Economics

The green market is definitely seeing the second step. But how about the third?

Have you seen solar stocks lately? In the past two years, these companies have popped by 100% - 300%. And it seems like a new solar company pops up every other day touting a ‘breakthrough’ technology that allows amazing conversion of light to electricity. Many have no profits to speak of and don’t plan on entering production for years.

Ethanol stocks were moving higher for a while, but have gone down since the middle of last year (maybe investors are catching on to how ‘not green’ ethanol really is). Geothermal producers are shooting higher. And those who sell wind turbines are making great money on increasing orders.

By 2030, Morgan Stanley expects green sales across the globe to total over $1 trillion (that’s bigger than the Gross Domestic Product of 169 of the 181 member countries of the International Monetary Fund!).

Most people I speak to see green technology as the wave of the future. It’ll only be a matter of time until they think that investing in green companies is a no-brainer.

In the end, this whole green movement we see today could very well be the start of yet another massive bubble. And considering the riches that were made during the two previous bubbles, catching the green investment mania early on would be a great way to make a lot of coin in the next few years.

In that spirit, next week I’ll be covering one of the biggest near-term areas of growth in the green sector.

Until next time,

Charles

P.P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

[Ed Mention: Want to know how you could ‘buy’ an ounce of silver for less than $1.60? Click here to find out how…]Source: Green is in, but Why?

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About the Author

Charles Delvalle is a self-taught market-timing professional and value analyst who uses a combination of technical indicators and fundamental research to achieve consistent gains on stocks, commodities and options. Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering great companies on the cheap. He questions government reports and the status quo. In addition to swing trading options, Charles is also Co-Editor of the monthly advisory service - INCOME.

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Investor's Daily Edge is a free investment e-letter delivered every day before the market opens. In each issue you'll receive clear recommendations and practical strategies for protecting your portfolio and multiplying your money, whether the market is rising or falling.

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gsinvestor June 3rd, 2008 12:03 am :

Interesting post. I think its difficult to equate green to internet and housing yet… First I don’t even think housing and the internet have much in the way of similarity to make a triumverate. There were true game changing businesses created, and continue to be created to this day, during the internet revolution. I think that its much harder to say that the housing run up exposed new housing opportunities or concepts that didn’t exist before (even the “new” financial instruments used to fuel the housing b8bble weren’t new - they had been around since the 80’s.)

The housing bubble was primarily driven by two factors - a market that somehow found a way, in its deconstruction by financial firms, to avoid moral hazard at every step of the way (so money was invested without regard for return because that was someone elses problem) - and then really set in motion by government interest rate policy designed to stimulate housing prices as a mechanism for propping up consumer spending. The internet mania had very little gov’t help (aside from Darpa funding its initial technical invention…) - it came mostly out of investor ignorance (from pros and retail alike) that couldn’t tell between good game changing businesses that were capturing marketshare by changing it permanently - e.g., ebay - and me-too dreck that had no right to be considered similar - e.g., pets.com.

I am not certain the green market follows either path. Certainly the gov’t has its hand in green business on the demand side - e.g., tax subsidies make solar somewhat reasonable if you don’t plan to move for 7 years - but competing technologies - like oil - have tremendous subsidies and create large externalities that are currently borne by the commons and ignored by government as a de facto subsidy (e.g., pollution mitigation, military costs associated with oil access foreign policy, global warming impacts) -all of which combine to make them look economically attractive relative to greener alternatives (which don’t have the same kinds of externalities so remain expensive for the time being)…

So I suppose that aspect of the green bubble could be like the housing market in so much that the gov’t is involved from a policy standpoint - but the subsidies that we talk about mostly have been around forever, its only now that gov’t. has show its incompetence in managing traditional energy supplies, resulting in price spikes, that renewables have even been looked at seriously.

Also, while much of what happened on the internet either created new markets where they didn’t exist - or took old line businesses to school (e.g., craigslist killing the classifieds - and thereby the newspapers) - many green investments can’t do either because they are commodities. Lucky for the green industry there is just burgeoning demand - so much that there is likely a simultaneous bubbles on both sides of the energy equation going on…

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