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The One Green Energy Sector That’s Truly
Profitable |
David Galland here. I returned from Argentina
yesterday raring to return to my duties, especially those related to
serving as your editor for the Daily Dispatch. Unfortunately, somewhere
during the return journey I appear to have taken on board an
unappreciative hitchhiker that made its presence known in the middle of
the night. While I think my immune system is holding its own, being host
to the battle has left me unfit for any more than writing you this quick
note.
I fully intend on being back at the desk for
tomorrow's edition, perhaps not as the picture of health, but at least
rested enough to do more than babble.
David
Chris here. Today’s Dispatch is probably going
to be particularly brief since I just got word of David’s illness… sorry
you are sick, David. But let’s get to it.
Record Treasury Auctions Next Week
The U.S. Treasury Department revealed it plans
to sell a record $81 billion in its quarterly auctions of long-term debt
next week and replace the inflation-protected 20-year bond with a
reintroduced 30-year security.
To quote the Bloomberg article:
The Treasury will auction $40 billion in
three-year notes on Nov. 9, $25 billion in 10-year notes Nov. 10 and
$16 billion in 30-year bonds Nov. 12. The amounts were in line with
the median forecast of $80 billion in a Bloomberg News survey of nine
analysts.
The U.S. is headed for a second straight
year of budget deficits exceeding $1 trillion, and the country’s legal
limit on debt may be reached next month. Treasury debt-management
director Karthik Ramanathan told bond market participants this week to
expect another year of government debt sales of $1.5 trillion to $2
trillion, minutes of the meeting showed today.
“Treasury debt managers will continue to
remain aggressive in managing financing needs while minimizing
potential market implications,” the Treasury said in a statement in
Washington.
The government is on course to reach the
debt limit, which currently stands at $12.1 trillion, by mid- to
late-December, the department said. If the Treasury is forced to take
evasive maneuvers to stay below the limit before Congress raises it,
existing tools won’t create much extra room, officials said at a press
conference.
To read the entire article, please
click here.
By replacing the 20-year Treasury
Inflation-Protected Securities (TIPS) with a 30-year fixed rate
security, the Treasury is practically yelling from the rooftops that
even it expects the U.S. is on the road to higher-than-normal inflation.
The One Green Energy Sector That’s
Truly Profitable
By Joe Hung
President Obama, as a staunch proponent of
green energies, has been pushing for their implementation since Day One
of his presidency. Whether you agree with him or not that renewable
energy is America’s future and that the U.S. will be the global center
of green technology, fact is that there is a lot of money to be made
here.
We of Casey’s Energy Division feel the best
opportunities lie in the sector that people talk the least about. Wind
farms and solar farms shoot up all over the United States like mushrooms
after a summer rain, and largely uneconomical biofuels are having their
day in the sun… but one type of energy sticks out as vastly
underappreciated, even though it has all the characteristics of
profitable energy production:
1. Base-load power, 365 days a year,
24 hours a day
Solar and wind power depend on the weather to
work efficiently. Solar panels don’t produce electricity during the
night, and even in the day, the angle of the sun to the solar panel can
alter the electricity output. Wind is even trickier: if it’s too weak,
it doesn’t turn the turbines enough to generate power; if it’s too
strong, it will damage the turbines. Any number of factors will affect
the rate of power production. For the profitable green energy I’m
talking about, however, the plant is running at more than 90% capacity
regardless of the weather (compared to less than 40% for wind and 20%
for solar). The utilities know exactly how much power is being produced
and are able to sign long-term Purchasing Power Agreements (PPA) with
the companies that produce it.
2. Obama is footing the bill for 30%
of the capital costs
In the American Recovery and Reinvestment Act
of 2009, President Obama has extended the production tax credit (PTC) –
up to 2.1 cents per kilowatt-hour of produced renewable energy – for
eligible “green technology” companies to 2013. New projects coming
online can instead opt for an investment tax credit (ITC) worth 10-30%
of the project’s value if construction is started before the
end of 2010 and completed before 2013. The ITC then qualifies to be
converted to a grant from the Department of Treasury.
3. Squeaky clean
This type of green energy produces no carbon
emissions, and its land use is much smaller than that of wind and solar.
In fact, its footprint is so small that it can be installed inside a
national park with virtually no repercussions.
4. Vast unexplored resources right
here in the United States
There is enough energy locked within this type
of resource to provide the United States with 30,000 years of power…
though it currently supplies less than 1% of America’s energy. This
means the growth potential in this sector is outstanding, and the United
States could become a world leader in both energy generation and
technology of this resource.
So, what is this technology?
The answer: geothermal energy, a time-tested
technology that has heated homes, baths, and spas since Roman times.
“Geothermal” literally means “Earth’s heat,” which is about 9,900
degrees Fahrenheit at the Earth’s core – about as hot as the surface of
the sun. Geothermal energy can be harnessed from underground reservoirs,
containing hot rocks saturated with water and/or steam. Drilling down
1.2 miles or more into the reservoirs, producers can draw up the hot
water and steam to a geothermal power plant, where they are used to
drive electric generators. The water, once used and cooled, is then
piped back to the reservoir.
Though geothermal energy has all the
advantages listed above, it is still largely ignored in the mainstream
media, which has chosen to focus on solar and wind. The truth is that
geothermal’s efficiency is competitive with that of fossil fuels like
coal and natural gas, even without government incentives, which
are really just icing on the cake.
That’s why many of the top resource players in
Vancouver are putting their chips on this renewable energy… and you
would be wise to do the same. You can find a much more in-depth analysis
in
Casey’s Energy Opportunities as well as
Casey’s Energy Report -- how exactly geothermal works, how it
compares to other forms of energy, and the best ways to profit from it.
Our subscribers have already made handsome
returns on several of our geothermal picks (one stock, recommended in
our premium alert service,
Casey’s Energy Confidential, gained 27% in less than a month;
another that we just our closed position on nearly doubled). But we
believe the best is still to come – so don’t miss out on this
opportunity of a lifetime.
No Bubble Here
With the recent run-up in gold, I’ve come
across more and more stories claiming that, like housing and tech before
it, the gold market has reached bubble status. In my view, nothing could
be further from the truth.
Apparently James West agrees. To quote his
recent article “Gold Price is No Bubble”:
Declaring that gold is in a “bubble”
demonstrates complete ignorance of or disregard for the fundamental
drivers of the almost ten year ascent of gold. And saying that the
price is forming a bubble implies that, like the real estate bubble,
the tech bubble, and the tulip bubble, the price must necessarily
“pop” and return to a sustainable long term average.
During each of the bubbles of recent and
distant history, the cause of the meteoric price ascents of these
various asset classes were all predicated by the same string of
events.
Supply was far outstripped by demand because
the public perception emerged that the asset class in question was the
ultimate asset class at that point in time. Disproportionately high
levels of capital were directed to them, and upon the eventual
discovery that supply could easily meet and exceed demand, the bubble
pops, the price declines, and the herd mentality resumes its frantic
search for the next ‘ultimate’ asset class.
Homes, technology and tulips are all a
product of effort. With increased effort, more of each of these can be
created. Supply can easily be ramped up to meet demand.
Not so much, in the case of gold. The
availability of economic concentrations of gold in deposits near to
the surface of terra firma is finite. Increased effort might guarantee
the temporary increase in supply from known deposits, but each deposit
is eventually exhausted, and no amount of increased effort can bring
back the gold.
Gold, for the most part, is not used up. It
is fabricated into jewelry or bullion or coins, and hoarded and
preserved.
Technology, real estate, and tulips, on the
other hand, are consumed and replaced. Technology becomes obsolete,
homes wear out, tulips die and are reborn each spring.
Gold? Gold goes nowhere. Gold stays put.
Gold is passed from generation to generation in last wills and as
heirloom collectors items. Gold is recognized as a store of value that
is not temporary.
To read the entire article, please
click here.
Remember, gold is money. It’s the
only financial asset you can own that is not also someone else’s
liability. And while we are super-bullish on gold in the medium and
longer term, we do think there could be a setback in the short run;
i.e., in the next few months.
And that, dear reader, is that for today.
David will be back with you (for sure) tomorrow.
Chris Wood
Casey Research, LLC
