The window of danger has passed: Europe did not suffer an epic blackout today.
You didn’t hear about that one? Well, maybe you did hear there’s a solar eclipse today. For Europe, it’s the first significant one since 2003.
In the 12 years since, solar power has grown by leaps and bounds. Solar now makes up 6% of power consumption in Germany, the continent’s biggest economy.
So a 2½-hour eclipse in the middle of the day threatened to have the same effect as 20 nuclear power reactors suddenly being knocked offline.
Ancient man feared an eclipse meant the end of the world.
Now modern man has reason to worry too…
In the end, though, the grid held up. “The initial 13 gigawatts (GW) drop in Germany was less than operators had feared,” reports Reuters, “and they were able to draw on alternative power sources including coal, gas, biogas and hydroelectric energy pumped from storage.”
“I think this year could be solar’s biggest yet,” says our Byron King, turning to the investment possibilities.
“The U.S. government has given solar energy developers a 30% investment tax credit since 2006. But until late 2013, big customers didn’t bite.
“Recent technological improvements and market forces have made solar technology attractive to many businesses and markets for the first time. I’m not talking about the die-hard environmentalists, nor even the convinced conservationists. I’m talking about hard-nosed businesses that need energy and don’t want to spend a lot of money on it.”
Byron points to Google — which has taken a $300 million stake in the residential solar space. And Apple just committed $850 million to run all of the company’s real estate off solar. “Thanks to businesses like these and more,” he says, “the U.S. solar industry grew by 30% in 2014.
“Experts expect the U.S. to use 29% more solar by 2020. That doesn’t even touch on overseas demand, which should gain 28% in Asia and 7% in the rest of the world over the same period.”
There’s a solar ETF, the Guggenheim Solar ETF — whose managers had the foresight to grab the ticker symbol TAN. Greg Guenthner of our trading desk has had his readers jump in and out of it the last couple of years.
Now it might be something worth holding longer term. It has a total of 30 stocks. About 40% of the portfolio is in the United States, another 40% in China and Hong Kong, with the remaining 20% in Europe and Canada.
“Where in the Constitution does it say that the people of California have the right to pay 0.5 cents per gallon of water?” asks UCLA economist Matthew Kahn.
Kahn is beside himself. The New York Times did a big article this week on the Golden State’s severe and seemingly endless drought: “Reservoirs are low. Landscapes are parched and blighted with fields of dead or dormant orange trees.”
There wasn’t one word about the cost of water. “Raise water prices,” says Kahn, “and allow the magic of the market to play out.”
But in California, water is much more about political pull than about “the market.” Always has been, as you’ll recall if you ever saw Chinatown with Jack Nicholson and Faye Dunaway.
“California has plenty of water,” says George Mason University economist Alex Tabarrok, “just not enough to satisfy every possible use of water that people can imagine when the price is close to zero.
“People in San Diego County use around 150 gallons of water a day,” he explains — at a cost of 78 cents a day. “Meanwhile, in Sydney Australia, with a roughly comparable climate and standard of living, people use about half that amount. Trust me, no one in Sydney is going thirsty.”
But if California residents get water cheap, California farmers get it even cheaper. So cheap that even today, 43% of California farmland still uses old-fashioned and wasteful flood irrigation.
“The simplest commodity in the world has the most Byzantine pricing,” says our own Jim Rickards.
“Water does not trade like a global commodity. Water pricing is local, political, regulated, opaque and inefficient.
“It can be close to free if your farm has 19th-century property rights on a small river in Colorado. It can be extremely expensive if you want golf courses in the desert, as they do in Dubai, and you produce the needed water with desalinization plants that run on expensive crude oil.
“Extreme drought conditions everywhere from Beijing to Bakersfield, and the resulting loss of crops and economic growth, are forcing politicians to come up with better solutions. New risk-management tools are emerging to finance multibillion-dollar projects.
“The entire water sector is poised for explosive growth,” he concludes. Jim’s on the lookout for suitable investment opportunities you can buy in a plain-vanilla brokerage account. Alas, the big water ETF — PowerShares Water Resources Portfolio (PHO) — doesn’t make the cut. It’s underperformed the S&P 500 for most of its nine-year existence.
[Ed. note: We won’t belabor the point — seeing as we’ve done so for a week and a half — but demand is still off the charts for Jim Rickards’ newest book, The Big Drop: How to Grow Your Wealth During the Coming Collapse.
If you haven’t gotten your copy yet, we’ll remind you it’s available only through Agora Financial… and it’s free as long as you can spot us shipping and handling. Just follow this link and we’ll have it out to you in a few days.]
The dollar is selling off hard today, and that’s affecting nearly all asset classes.
The euro is up more than 1%, to $1.079, sending the dollar index down nearly 1%, to 98.2. As a result…
- The Dow has zoomed past 18,100, the S&P past 2,100
- Gold is adding to its gains from earlier this week, the bid now $1,181
- Crude is up nearly 3.5%, at $45.47.
Bonds are the only thing where there’s little movement. The yield on a 10-year Treasury sits about where it did 24 hours earlier, 1.94%.
What a depression looks like: Demand for meat in Greece fell 2.1% last year, according to an annual report from a consumer data firm called Euromonitor.
From the Financial Times: “Meat consumption is closely linked to disposable income, according to Anastasia Aleva, head of fresh food research at Euromonitor.” Thus, the drop in Greece was the biggest anywhere in the world.
Contrast Greece with a booming — and increasingly less vegetarian — India. Meat demand there grew 10.3% last year.
The United States, you wonder? With disposable income still weak — and beef prices at record highs — meat consumption fell 1% here last year.
But U.S. egg demand is up 3%. Not only are eggs a cheap source of protein, the Euromonitor report notes that eggs are losing their high-cholesterol stigma.
Which is to say science and the media are finally coming around to the realization cholesterol isn’t the boogeyman the government’s been claiming for the last 35 years…
“I accept your offer!” a reader writes cheekily of the new Jim Rickards’ book.
“Just advise me of the shipping and handling charges, and provide a format for me to charge that to my credit card, and I will do so, so that you may then mail to me a copy of The Big Drop.
“What’s that, you say? I must also subscribe to something, for a hundred dollars or so?
“Oh.
“Here is a question: Why do you degrade yourself, and disgrace yourself, and insult the intelligence of your readers by repeatedly making these blatantly dishonest offers?
“Do you think you are improving your status or your credibility in the eyes of your readers?”
The 5: Careful with the word “must.”
The subscription to Rickards’ Strategic Intelligence? “It’s a trial… so try it,” says our friend and colleague Peter Coyne, who serves ably as that newsletter’s managing editor and who shepherded the book into production in record time.
“There’s a reason we want to package the two. They complement each other. The subscription is an ongoing update to the themes in the book.”
Indeed. And you can always cancel after the risk-free trial is over. But we firmly believe the loss will be yours more than ours…
“You need to present a much more in-depth analysis of this,” writes a reader after we mused a few days ago about the Federal Reserve’s dilemma.
We said on the one hand the Fed can’t raise rates, because it would jack up the interest expense on the $18 trillion national debt. But it has to raise rates, because pension funds are hosed as long as interest rates are so low.
All we can say is give us time. It’s a big theme, and we don’t want to do it half-baked.
“A little whining is coming,” writes one of our regulars. “There! I got the ‘but’ out of the way on the front side.”
[Clever, you are…]
“I find the increasing use of ‘animated inserts’ to be distracting, juvenile and unnecessary in the presence of well-written topics. It’s like writing in all-caps, or all bold or all underlined or colored typefaces. It just seems so below The 5. You should ask why all those things are needed if the story is compelling. If it needs all this stuff, maybe it isn’t worth telling.
“I unsubscribed from Laissez Faire Today for this reason, although they use it much more than you do, so far. I, for one, hope the trend doesn’t continue. I’d miss reading The 5.”
The 5: Fear not. That’s a Chris Campbell innovation over at Laissez Faire Today, and we’re content to let it be his signature. (We’re sorry you bailed on his e-letter as a consequence.) Here at The 5, we’ll “borrow” it only occasionally as inspiration strikes…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. In case you missed my note on Monday… It takes the average American about 20 hours of solid work to make about $500.
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