This from Investment U:

Under the Obama administration, I expect there to be many profitable energy investment opportunities under what will likely be a very “green-friendly” four- or possibly eight-year timeframe. Many of the opportunities will arise from his focus on energy independence and corresponding energy infrastructure.

Reducing energy bills means ultimately reducing demand and controlling its costs. Weaning the country off fossil fuels won’t happen overnight. After all, it took us over 100 years to get to where we are.

But Obama recognizes we need to get started now. His plan has several strategies that help reduce our need for fossil fuels while alternative solutions are developed. And we’ve found three companies that are perfectly positioned to help the United States “bridge” the gap.

The United States’ Energy Investment Opportunities

A quick, cheap and easy strategy to increase efficiency is simply to save energy. And one of the best solutions is to weatherize older homes. While homes built in the last few years are far more efficient than those built even 10 years ago, many older residences are huge energy thieves.

Since 1976, the U.S. Department of Energy’s Weatherization Assistance Program (WAP) has provided help to 5.6 million low-income families – enabling them to permanently reduce their energy bills. But help doesn’t come in the form of a check, which might be misused. It contracts for weatherization services on the homeowner’s residence.

Upgrading or replacing a home’s old furnace, sealing leaky heating ducts, fixing or replacing leaky windows and adding insulation reduces the average home’s heating bill by anywhere from 20% to 40%, and results in an overall annual savings of $358 at today’s energy prices. Replace old appliances and change out incandescent bulbs for florescent ones – and the savings get even more impressive.

Obama plans to expand this program, as nearly 28 million U.S. homes remain eligible for assistance. His goal under the Energy for America plan is to weatherize an additional one million homes every year.

Of course, the largest energy user in the country is – you guessed it – the good old Federal Government, which spent a whopping $14.5 billion on energy use in fiscal 2008.

Obama plans to lead by example: All new Fed buildings will have a 40% increase in energy-efficiency within five years. The new administration wants all federal buildings carbon-neutral by 2025 and he ultimately expects to achieve a 15% overall reduction in government energy use in just six years (2015).

Weatherize your Portfolio: 3 Energy Investment Opportunities

When looking for ways to play the energy efficiency/savings angle, the field narrows, but below are three energy investment opportunities. Adversely affected by the general housing downturn, many companies that would be a consideration under Obama’s plan are off the table.

There are a few we can consider, however:

• Apogee Enterprises, Inc. (Nasdaq:APOG) designs, services, installs and sells glass walls and window systems that make up the outside skins and entrance areas of large commercial and institutional buildings. Through its subsidiaries, it’s engaged in the design and development of numerous glass products, services and systems. Apogee’s glass will be in high demand for weatherizing the nation’s windows.Earnings have held up remarkably well, particularly in the face of the housing slowdown. It’s had little real effect on the company since its exposed more to the commercial side of the building business. At current levels, the stock has a yield of around 6%.CEO Ron Huffer had these forward-looking observations in a recent press release: “We believe that our markets offer significant longer-term opportunities, due to the increasing importance of green building, a sector demanding energy-efficient products that we supply and the overall growth in the use of value-added products in commercial construction projects.”
• A good blue-chip play that stands to benefit as well is 3M Company (NYSE:MMM). 3M is a diversified technology company engaged in industrial products, transportation, and numerous other sectors. Its industrial products division makes hundreds of items for the construction industry like window and door materials, including adhesives, tapes, films and abrasives.
• And let’s not forget General Electric (NYSE:GE), perhaps the best, safest energy and infrastructure play in the world. It has exposure to nearly every area of engineering and manufacturing that we use to build and power our country. Infrastructure and green energy continue to be focal points as spending in these sectors could jump-start the global economy back to life. GE is better positioned than perhaps any other firm to profit from this spending influx. And at prices of around $13 a share, it’s a steal – especially when you consider its nearly 10% dividend yield.

As Obama’s New Energy for America plan comes up to speed, investors could see a huge slug of cash – perhaps as much as $1 trillion – being thrown at the energy and infrastructure sectors.

And stakes in the above mentioned companies will make sure you get in on the action.

Source: Energy Investment Opportunities: Why 28 Million Customers Need These Upgrades

As Mark Gongloff noted in a column for the Wall Street Journal, “…what the U.S. really needs, if it seeks a real fix to its energy consumption problem, is less demand, not more. Mr. Market says there’s a simple way to do that. Jack up the gas tax. Don’t lower it. Economists call it a ‘Pigovian Tax’, in honor of the English economist Arthur Pigou, who early in the 20th century examined economic activity that hurts innocent bystanders. To stop behavior that’s not in the public good, you tax it more, not less.

“Of course, a higher tax would hurt working-class Americans who rely on their cars, though other taxes, like the federal payroll taxes or state sales taxes on food, could be lowered to offset it.”

Gongloff then explained that Harvard economist Gregory Mankiw, President Bush’s former chief economic adviser, has proposed increasing the “gas tax” by ten cents a year for ten years in order to give the economy time to adjust. According to Professor Mankiw, who belongs to the Pigou Club, a pro-”gas tax” group, higher gasoline taxes “should lower world oil prices”, as higher prices would curtail demand considerably.

Despite my usual serious reservations about increasing taxes in order to curb demand, I would support higher gasoline taxes in the US (or tax incentives for energysaving engines and heavy penalties for gas-guzzling vehicles) because its implementation would be simple and the revenues obtained from higher gas taxes could be used to improve the entire transportation infrastructure. In particular, a better public transportation system would improve the energy efficiency of the country and lessen its addiction to imported oil. It should also be noted that the US has one of the lowest gasoline taxes in the world

In addition, opinion leaders are increasingly skeptical about the lies dished out by the government. Thomas Friedman opines that Americans “need a president who is tough enough to tell the truth to the American people. Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV – at 8 p.m. – from the White House East Room.” And Gongloff concludes that, although higher gas taxes would have all sorts of desirable effects, unfortunately, increasing them “doesn’t win elections. And the only market that matters now is the one for votes.”

At the same time, investors and strategists are becoming more and more skeptical about the economic statistics published by the various agencies. The employment, inflation, and GDP growth figures are highly suspect. According to Martin Feldstein, a former chief economic adviser to President Reagan and now a Harvard economist, “misleading growth statistics give false comfort” because “monthly data since January indicate that economic activity and GDP have been declining since the start of the year” (Financial Times, May 7, 2008).

Feldstein opines that “…although the tax rebates now underway may provide some temporary help, the combination of falling real incomes, declining household wealth and a dramatic drop in consumer confidence suggests further falls in consumer spending and GDP. But the most serious risk is that the rapid fall in house prices – down 12% in the past year and falling at a 25% rate in the past three months – will raise the number of negative equity mortgages, leading to widespread defaults and foreclosures. Because US mortgages are “no-recourse” loans (lenders have no recourse to the house’s owner beyond the value of the house) individuals with negative equity have an incentive to default. There are now an estimated 8 million negative equity mortgages – more than 15% of all outstanding mortgages. Defaults are rising and foreclosures are now at twice the rate of a year ago. A downward spiral in house prices would cause a fall in household wealth and in the capital of financial institutions, potentially resulting in a deeper and longer recession than any seen in the past several decades.”

According to Feldstein, the government should intervene to “prevent positive-equity mortgages from becoming negative-equity mortgages”. In other words, Feldstein proposes that the government should support the real estate market “by providing low interest loans with full recourse that would allow any homeowner to pay down a significant fraction of his mortgage. Homeowners would be in effect giving up the potential to default on their mortgage loans in exchange for lower interest costs.”

There are, however, some problems with Feldstein’s proposal. For one, it is likely that the majority of homeowners who are burdened with the estimated 8 million negative-equity mortgages (I have seen figures which suggest that there are 15 million negative-equity mortgages outstanding) also have negative-equity car loans and large credit card debts – in short, they have no equity to start with. So, in these cases, “full recourse” loans wouldn’t serve their purpose and would instead amount to a marketdistorting direct government subsidy of imprudent borrowers at the expense of taxpayers. Second, I wonder how Mr. Feldstein would propose supporting the market for unsold condos. In buildings with five to nine units – like a large number of garden apartment buildings – the condominium vacancy rate is at an unprecedented 15.2%. That is up from 12.2% at the end of 2007; whereas prior to 2006, it never exceeded 10%. (For rental units, the vacancy rate is even higher.

According to Floyd Norris, chief financial correspondent with the New York Times, 25.2% – one in four – of the housing units built since 2000 are vacant.) Finally, I very much side with Mrs. Moneypenny who, in a witty Financial Times column dated May 3, 2008, argued that the UK government should not intervene in the housing market, because falling home prices “might be painful for some but what about the benefit for many others? What nurses and teachers and first-time buyers need is for prices to come down.” According to Mrs. Moneypenny, it is not an acceptable excuse from investors that they had not read the disclaimers. “I suspect that borrowers of 110% mortgages are in many cases young and naïve and, in their enthusiasm to buy property, had not read the disclaimers. That’s not an acceptable excuse either. Husbands should carry disclaimers. Your marriage may be at risk if you insist on rationing golf, or some such incomprehensible activity.”

Shares in leading German solar stocks rose substantially on expectations that other big players, including oil groups, are on the prowl in a market that grew to €6.6bn last year and is forecast to top €18bn by 2020.

Germany is by far the world’s biggest solar energy market thanks to its “feed-in” tariffs, which pay a government-guaranteed premium of up to €0.47 a kilowatt hour for power produced by photovoltaic panels. It is expected to continue to grow despite government plans to cut subsidies by 8% or 9% in 2009 and 2010.

“The richest investment opportunities can be found in the fast-emerging alternative energy sector,” says Mike Burnick in The Offshore A-Letter.

“That’s where oilman T. Boone Pickens is putting his money – his company Mesa Power just placed an order for US$2 billion in wind turbines. And there’s much more profit potential in other parts of the alternative energy sector too – especially alternative fuel.

“The market for ALL alternative energy sources grew 40% last year alone to US$77.3 billion and will explode into a US$250 billion industry within 10 years.

“Bio-fuel grew to a US$25.4 billion market last with more than 15 billion gallons of ethanol and biodiesel produced globally – more than double the output of just four years ago. The worldwide Bio-fuel industry will continue to enjoy explosive growth for years to come – expanding into a US$81 billion business within the next 10-years!”

“The days of meeting an unchecked demand for energy through monolithic carbon intensive power stations are coming to an end. Increasingly the emphasis will be on energy efficiency, renewables, cleaned up fossil fuel plant and micro generation,” the company said in a statement accompanying its full-year results, according to Britain’s The Guardian newspaper.

SSE, which currently gets 15% of its energy from nuclear suppliers, said it believed “one more tranche of nuclear power stations will be necessary, but that the deployment of such power stations should be minimised through the maximum exploitation of renewable energy sources.”

“The richest investment opportunities can be found in the fast-emerging alternative energy sector,” says Mike Burnick in The Offshore A-Letter.

“That’s where oilman T. Boone Pickens is putting his money – his company Mesa Power just placed an order for US$2 billion in wind turbines. And there’s much more profit potential in other parts of the alternative energy sector too – especially alternative fuel.

“The market for ALL alternative energy sources grew 40% last year alone to US$77.3 billion and will explode into a US$250 billion industry within 10 years.

“Bio-fuel grew to a US$25.4 billion market last with more than 15 billion gallons of ethanol and biodiesel produced globally – more than double the output of just four years ago. The worldwide Bio-fuel industry will continue to enjoy explosive growth for years to come – expanding into a US$81 billion business within the next 10-years!”

Floyd Brown in Investment U looks at another alternative energy source: the Fischer-Tropsch process, used to create synthetic fuels.

“The process works like this: Coal is broken into its components by subjecting it to high temperature and pressure, using steam and measured amounts of oxygen. This leads to the production of synthetic gas.

“In the United States, a small firm provides technology to produce ultra-clean synthetic fuels and chemicals. It licenses its proprietary derivative process from the Fischer-Tropsch method.

“It converts synthesis gas derived from coal, petroleum coke, biomass, natural gas, or municipal solid waste into liquid hydrocarbon products. This includes ultra clean diesel fuel, jet fuel, naphtha, specialty chemicals and other fuel products. It also manufactures anhydrous ammonia, UAN, nitric acid, carbon dioxide and granular and liquid urea.”

Read on here to find out Floyd’s cashing in on this conventional energy alternative.

Which is bad news for the American people… but great news for our food investments… here’s why…

We should not burn food – it’s that simple…

Whilst Europe has come to the realisation that ethanol is a big fat waste of time… the US are pressing on regardless.

The Department of Energy confirmed this last night… and it’s all down to “Homeland Security”.

The US government has revealed that ethanol usage and energy efficiency had cut the country’s total share of its oil imports for the first time since 1977. (Note that’s not total imports by volume, it is the proportion of oil used that is imported).

It also said that the US’s foreign oil dependency was expected to fall from 60% today to 50% in 2015, before rising again slightly to 54% in 2030.

US oil imports made up 57.9% of demand in the first quarter, compared with 58.2% in the equivalent period last year. The Department of Energy said:

“The 1970s is the last time we saw any significant decline in net import dependency in the US. It shows that markets do work, policy changes do work, technology does work.” Energy security is a big theme in the US – and I reckon that this data will make it much more difficult to reduce biofuels subsidies. In fact, it is now easier to argue in the US that those seeking a cut in ethanol subsidies are acting in an unpatriotic manner.

This is bad news for food prices… but good for our investment in food.

Food price will stay high…

Whilst not specifically mentioning biofuels, the World Bank warned today that prices of food will stay high in the next two to three years.

“This is not a short-term phenomenon. We need to work on a new deal for food policy in order to address the short-term need while keeping in mind that it is going to take longer to alleviate the situation,” according to World Bank managing director Juan Jose Daboub.

The US remains in denial about its biofuels policy. Agriculture Secretary Ed Schafer said yesterday that the increased use of biofuels may have some small, short-term costs, but those do not outweigh the ultimate benefits of reducing the country’s dependence on oil.

The problem with this is that poorer people pay a higher proportion of their income on food and are therefore hurt more by rising food costs. These “small, short-term costs” mentioned by Schafer are significant and long-term in other parts of the world.

Subsidy is supposed to be a short-term solution to a problem. Its aim is to prevent any jarring of the economy. However, it’s going to take the US a very long-time to wean itself off imported oil – and the cost will be paid in rising food prices.

That’s why we’re in on an agricultural play that will take full advantage of this situation. This short term solution won’t be changing any time soon (now there’s an oxymoron for you) – and now is the perfect time to get in on this wave. Discover what this stock is right now…

Regards,

Garry White
Editor
Smart Commodities UK

Source: USA Prefers Driving To Eating

According to information collected by Chevron, worldwide investments in renewable and alternate fuels have increased nearly fourfold since 2004. In the past 12 months investors have poured nearly $150 billion into the biofuel sector. Biofuel volume will increase by about 45% by 2030 to meet future demand, but still will represent only about 10% of the total energy mix. This 10% is about equal to the current share. Relative quantities might not change much because overall global demand is growing so quickly.

Robertson added, “Energy efficiency is the most immediate and important action that each of us can take to start to reduce energy prices. The United States must become a nation of energy savers. In short, we need a ‘Made in America’ solution enabled by everything from human ingenuity to ’smart’ buildings to advanced vehicles and transportation systems. Markets are indicating that consumers are already taking action. You and your committee have a critical role to play to engage the US public and put the United States at the forefront of responsible energy use.”

Until Next Time…

Byron

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!