Global Market Comments
September 9, 2022
Fiat Lux
Featured Trade:
(SEPTEMBER 7 BIWEEKLY STRATEGY WEBINAR Q&A),
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Global Market Comments
September 9, 2022
Fiat Lux
Featured Trade:
(SEPTEMBER 7 BIWEEKLY STRATEGY WEBINAR Q&A),
(MSFT), (NVDA), (RIVN), (AMZN), (POAHY), (SPWR), (FSLR), (CLSK), (FCX), (CCJ), (GOOG), (TLT), (TSLA)
Global Market Comments
June 9, 2022
Fiat Lux
Featured Trade:
(WHAT THE HECK IS ESG INVESTING?),
(TSLA), (FSLR), (TAN), (MO)
Global Market Comments
September 24, 2021
Fiat Lux
Featured Trade:
(TESTIMONIAL)
(SEPTEMBER 22 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (TBT), (V), (AXP), (MA), (FSLR), (SPWR), (USO), (UNG), (PFE), (JNJ), (MRNA), (MS), (JPM), (FCX), (X), (FDX), (GLD), (UPS), (SLV), (AAPL), (VIX), (VXX), (UAL), (DAL), (ALK), (BRK/B), (BABA), (BITCOIN), (ETHEREUM), (YELL)
Global Market Comments
September 10, 2021
Fiat Lux
Featured Trade:
(SEPTEMBER 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (PLTR), (TSLA), (FCX), (PYPL), (TAN), (FSLR), (SPWR), (GBTC),
(ETHE), (BRKB), (USO), (UNG), (HD), (IBM), (SQ), (AA), (UBER), (UROY)
Global Market Comments
July 19, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE DELTA CORRECTION IS HERE)
(AMZN), (AAPL), (FB), (MSFT), (TAN), (FSLR)
Global Market Comments
May 14, 2021
Fiat Lux
Featured Trade:
(MAY 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (QQQ), (JWN), (DAL), (MSFT), (PLTR), (V), (MA), (AXP), (UUP), (FXA), (SPWR), (FSLR), (TSLA), (ARKK), (CLX), (NIO), (EPEV), (SOX), (VIX), (USO), (XLE)
Global Market Comments
January 8, 2020
Fiat Lux
Featured Trade:
(WEDNESDAY FEBRUARY 4 SYDNEY STRATEGY LUNCHEON)
(CALIFORNIA GOES WHOLE HOG ON SOLAR),
(FSLR), (SPWR), (TAN)
As of January 1, 2020, it is illegal to build a home in California without solar panels.
Furthermore, dozens of cities have gone as far as banning natural gas appliances like ovens, heaters, and burners.
It is the most ambitious solar initiative anywhere in the world today. Those who invest in backup storage batteries like the Tesla Powerwall, will receive additional cash incentives.
It’s not like solar is new in the Golden State. It boasts over one million homes with installed panels out of a total housing stock of 16 million. It is all part of a grand plan for the state to obtain 100% of its electric power from alternative sources by 2030.
The new measures are expected to add $9,500 to the cost of new home construction. Builders are expected to eat most of it.
However, it will cut utility bills by $19,000 over the 30-year life of a solar system. And that is at today’s prices. California homeowners have already suffered two back-to-back 15% price increases over the past two years. With northern California’s utility PG&E (PGE) in bankruptcy, more stiff price hikes are expected.
You would think that the news would set the share prices of American solar companies, like First Solar (FSLR) and SunPower (SPWR), on fire.
They haven’t.
That's because solar prices are joined at the hip with conventional energy sources.
When oil is cheap, solar share prices die a horrible death. When oil is dear, everybody and his brother wants to pile into everything alternative, be it solar panels, storage batteries, windmills, electric cars, and high mileage hybrid cars like the Prius.
The sole exception has been the Invesco Solar ETF (TAN). It has a globally diversified portfolio that invests in countries with much higher electricity prices than hours, thanks to local regulation and taxes. Only 53% of its investments are in the US, with a hefty 19% in Hong Kong alone, of all places.
The last two years have produced a new reason to go off the grid. Ferocious wildfires in the Golden State that have killed hundreds have led to total statewide blackouts from PG&E whenever wind speeds exceed 40 miles an hour.
Unless you want to keep throwing out all your frozen food every few weeks, the only way to move forward is with a solar-powered battery backup system. It’s just a matter of time before high-end homes can only be sold with 48 hours of backup power. The same logic applies to the hurricane-ravaged east and Gulf coasts. It’s especially an issue today with up to 25% of Bay Area residents working from home.
No juice, no job.
As for me, I am in the process of doubling up my own solar system, taking it up to a gargantuan 23,114 kWh, with three Tesla Powerwalls thrown in for good measure.
But then I have a Tesla P110D Model X that eats up 1,000 kWh a month. All of my appliances are electric except the gas burner because my traditional chef can’t cook without it and the water heater, because I want to have 200 gallons of water at all times in case an earthquake hits. I am turning into my own mini electric power utility, and I am not alone.
I have been encouraged by my experience with my first solar system, which I installed five years ago. It has worked flawlessly, since it has no moving parts. The installer promised me a six-year breakeven against my $500 a month power bill. I covered my cost in four years, thanks to soaring power prices.
And who has the highest electricity prices in the United States? That would be Hawaii, where all fuels have to be imported from great distances. Hawaiians have to pay a massive 66 cents a kilowatt. California only has to pay a peak rate of 55 cents a kilowatt, also among the highest in the country. Drive along Honolulu Interstate H1 today and all you see are solar panels.
Aloha!
What we are seeing now is nothing less than the complete remaking of the American energy supply.
It is a metamorphosis, just as, if not more, dramatic than the initial electrification of the United States launched by Thomas Edison in 1876.
Think of it as a disruptive technology with a turbocharger.
Eventually, the cost of energy will drop to near zero in today?s terms, possibly as soon as 2035. The consequences for your trading and investment portfolio will be tectonic.
This is what people don?t get about solar.
Traditional forms of energy production and consumption, such as for oil, coal, natural gas, and hydroelectric, are subject to only linear improvements. Solar ones benefit from exponential growth.
There is, in effect, a solar Moore?s Law that sees efficiencies per dollar spent doubling every four years, such as we have already seen with the faster growth of microprocessor efficiencies since the 1960?s. Exponential growth of efficiencies will bring exponential growth of profits.
I am old enough to have lived through several solar booms in the past, only to see them crash and burn.
In 1979, President Jimmy Carter installed panels on the White House roof to provide leadership during the Iran oil crisis, only to see them torn down by President Ronald Reagan three years later.
Solar is now growing far faster than any other power source in the US, some 50% a year for the past six years.
Annual installations of photovoltaic panels have soared from a token 0.3 gigawatts in 2000 to an impressive 7.286 gigawatts in 2015, more than enough to fuel 8.5 million American homes.
California alone now has 500,000 homes running on solar, about 4% of the total. Installation trucks from a myriad of different local companies are seen everywhere.
This is all happening because of the simultaneous maturing and cross-pollination of technology, regulation, financing, and venture capital.
A key development was Chinese entry into mass production of solar panels, which led to a near immediate 80% collapse in prices. They now control 70% of the global market.
But this also led to the bankruptcy of a large number of US producers, including the ill-fated Solyndra, which I drive by every time I visit Tesla.
Chinese exports of panels to the US are now subject to anti dumping duties. This was all a windfall for the installation business.
Also helping has been the 90% collapse in the price of polysilicon, a key manufacturing component. Silicone (Si) is, in fact, one of the most common elements on the planet.
Still, the soft costs of sales, design, permitting, and labor, account for two thirds of a new installation today. By the way, solar has also proven a prolific new job creator. I can assure you, the cost of labor is never going to zero.
Some 15 years ago, I tried to install solar on my home and sell peak power to the grid. PG&E told me this was ?illegal? because I would crash the grid, something I knew was patently false.
This time around, my city permits sailed through effortlessly, and I received a polite email from PG&E instructing me how to read my new ?net metering bill?. I wish renewing my driver?s license was so easy (that damn vision test).
For the first time in history, solar power is now cheaper than grid power on a non-subsidized basis. Costs are set to still fall dramatically from here. Fossil fuels are about to become, well, fossils.
The Paris based International Energy Agency, no slouch when it comes to analyzing power data, predicts that solar will account for 27% of the global power supply by 2050, and will become the biggest single source.
But futurologist friends of mine, like Tesla?s (TSLA) Elon Musk, Google?s head of engineering, Ray Kurzweil, and cosmologist Dr. Stephen Hawking, believe there is no reason why it shouldn?t be at 100% by 2030-35. To quote Kurzweil, ?we are only six more doublings away.?
Google (GOOG), by the way, is already one of the world?s largest generators and distributors of solar power, while Musk is the preeminent installer through his participation in Solar City (SCTY).
Governments have been pouring fuel on the solar fire. Germany took an early lead, installing a massive 35 gigawatts over the past decade. It has since decided to shutter its entire nuclear industry, and offset its production with alternatives. But many of its subsidy programs were deep sixed by the crash.
President Obama made a 30% investment tax credit a central plank of his 2009 supplementary budget, which led to the current American solar renaissance.
That incentive expires in 2021, after getting a five year extension in a rare bipartisan deal in congress.
President Obama also upped the ante by using the Environmental Protection Agency to force power utilities to cut carbon emissions by 32% from 2005 levels. That involves setting a target of 28% alternative energy power generation by 2030.
The whole idea of using natural gas as a low carbon stepping stone has been abandoned.
Hillary Clinton has recently weighed in with her own plans to shift the country from a carbon to a solar energy based economy, if elected president.
She wants nothing less than to eliminate all oil and gas subsidies worth $100?s of billions, and shift the money to alternatives.
That is a radical move. Her goal is to increase the solar share of American power generation to 33% by 2027.
Individual states have weighed in with their own measures. California has mandated that its residents obtain 30% of their power from alternatives by 2020.
More than two dozen other states have followed with similar measures, including several red ones. Solar is starting to transcend the political spectrum; the numbers are so compelling.
This isn?t just a US phenomenon, but a global one. Saudi Arabia has two of the world?s largest solar plants on the drawing board, to produce some 2 megawatts.
After all, why burn $5 oil when you can sell it to foreigners (mostly the Chinese) at an extravagant $50 a barrel. They are also major investors in the San Francisco alternative energy scene.
China is building far and away the biggest solar infrastructure, and wants to build 70 gigawatts over the next two years.
Japan has a 20% solar target, thanks to the Fukushima nuclear disaster. India plans to provide cheap electricity via solar to 100,000 villages for the first time.
Improving solar cell efficiencies promises to take us further and faster into this brave new world.
My own SunPower (SPWR) X-335 panels, with their patented Maxeon solar cells, convert 20.3% of the sunlight they receive into electricity, the highest in the industry. Cheap imported Chinese panels offer efficiencies as low as 16% and don't last nearly as long.
University labs have perfected cells with 45% efficiencies using advanced silicon compounds. I happen to know that the military has a 65% efficient cell. All that remains are the economies of mass production to bring them to the public market.
This is crucial for the solarization of the global economy. Every 1% improvement in efficiencies cuts that total cost of a new installed system by 5%.
With the trends already in place, it is safe to assume that solar energy costs will fall by at least 10% a year for the foreseeable future. First Solar (FSLR), which specializes in large scale, thin film, industrial facilities, expects solar costs to plunge from 63 cents per kilowatt in 2014 to only 40 cents by 2017.
Storage is another key part of the equation, as panels alone can only produce electricity during daylight. The cost of home storage batteries, which are charged by day and can run a home at night, have dropped by 70% over the
past five years.
They could drop another 70%, once Solar City completes its Nevada Gigafactory in 2017. That will double the planet?s lithium ion battery capacity in one shot. A second plant is planned.
For a more detailed explanation of that technology and the investment opportunities therein, please click here for Solar Energy?s Missing Link.
What are the investment implications of all this? Clearly all of the companies mentioned in this piece are about to see their market size increase 30 fold.
But, what about everyone else?
The elimination of energy as a cost has enormous consequences for all companies. You can start with the energy intensive ones in transportation, steel, and aluminum, and work your way down the list.
The profitability and efficiency of the entire economy will take a great leap forward, much like we saw with the mass industrialization that was first made possible by electricity during the 1920?s. Share prices of all kinds will go ballistic.
Dow 200,000 anyone?
Since energy costs will eventually fall effectively to zero, that wipes out the present business model of the entire electric power industry. It will be the same as trying to sell something that is free, like air.
That will force them to morph from energy producers to power distributors. Watch this space for a future piece on this issue.
So when readers ask me for the names of shares of companies that have the potential to rise tenfold in ten years, this is one industry I always steer them towards.
To save yourself months of research on how to install your own solar system, please click here for How to Buy a Solar System.
I have seen the future, and it works.
In my never-ending search for my readers for ?ten-baggers,? or investments that will rise in value tenfold over the foreseeable future, I keep circling back to the solar industry.
Tesla founder Elon Musk never does anything small.
Last year he announced the first ever, economical home battery electrical storage system, which he calls the Powerwall.
The device will enable your roof-mounted solar panels to supply power to your home 24 hours a day, not just when the sun is shining.
It is an innovation on the scale of Thomas Edison?s invention of the light bulb in 1879, or the launch of the Internet in 1969, in terms of the long-term impact on our economy.
Shifting the source of a third of our power supply is a big deal.
You may recall that the early investors in these earlier transitions made fortunes, General Electric (GE) in Edison?s case, and Netscape that spun out of the early Internet days.
Today, General Electric is the only company that has remained in the Dow Average for the past 100 years. So, investors take note.
During the day, the panels will charge up the battery mounted on your garage wall, which is about the size of a big screen TV. At night, you can then run your home off battery power.
Alternatively, you can engage in what is known in the industry as ?load shifting.? Charge your battery at night when you can buy electricity for as little as 4 cents a kilowatt hour, and sell it back to your local utility during a power demand surge the next afternoon for as much as 50 cents a kWh.
Buy low, sell high, it works for me!
And what is the cost of the miracle technology?
Only $3,000 for a 7 kWh battery or $3,500 for the 10 kWh version for energy hogs, like me, who has to charge a Tesla Model S-1 every day, soon to be two.
You can also include as immediate customers for this new product sports addicts, who watch multiple games on ESPN 24/7, paranoids who keep the lights on all night and indoor pot farmers, whose energy needs are said to be prodigious. Of course, the military will be another big consumer.
I ran some numbers on the possibilities for the Powerwall and they are mind-boggling.
The average home in the US has 2,500 square feet, which uses 7,000 kWh per year, or 19 kWh per day. The current cost for this power will be around $2,000 a year, depending where you live, more in California, and less in Texas, Oklahoma, and North Carolina.
A solar/ battery combination for such a home should cost about $14,000, including installation, the panels, the inverter, and all the gizmos. Net out the alternative energy investment tax credit of 30% (IRS Form 5695 http://www.irs.gov/pub/irs-pdf/f5695.pdf ), and your cost falls to only $10,500.
That means your power savings will cover the cost of your solar investment in a mere 5 years, compared to the present 7 or 8 years. After that, your home will have free electricity for another 20 years, as the life of these systems is usually 25 years.
Make the investment, and the value of your home rises, by $2 for every dollar spent, or so local real estate agents tell me.
You also will be guaranteed against any future power rate increases, an absolute certainty. America?s power grid is currently in a woeful state of disrepair, with much of the hardware 50 years old, or more.
The demands on the power industry are also about to take a quantum leap forward, as millions of consumers buy electric cars. Tesla plans to ramp up production of vehicles from 40,000 units last year to 500,000 by 2020, when the $35,000, 300 mile range Tesla 3 achieves mass production.
Some of my over-the-horizon-thinking hedge fund friends believe that figure could hit 15 million by 2030.
Add to that new, competing electric models produced by every other major carmaker, and that?s a lot of juice that will be needed. As a result, electric power utilities will probably have to endure more structural changes to their business model than any other industry.
Trillions of dollars are needed to modernize it, and all of that is going to come out of your pocket, but only if you remain an existing power customer.
Indeed, I have already been notified by my own utility, Pacific Gas and Electric Company (PGE), that I am due for two consecutive 7% price increases over the next two years.
The battery will also provide a backup power supply for home for when the grid crashes. Twice in the last two decades I have lost a freezer full of venison, pheasants, quail, trout, and salmon that I hunted and fished when storms knocked out power, for a week each time.
The Powerwall prices are so low that they beat the cost of a conventional backup diesel or gasoline generator.
They will also wipe out most of the existing back up battery industry, as Tesla?s advantages gained through massive economies of scale are enormous. Musk is talking about producing billions of batteries.
The Powerwall is a game changer for the solar industry, which has long been hobbled by the limitation that it could only supply power for 12 hours a day, and less in the winter, depending on your latitude.
It certainly gives a shot in the arm for the solar industry, which I have been banging the table about for years. My favorite is Solar City (SCTY). Other names to look at are First Solar (FSLR) and SunPower (SPWR), which manufactures my own solar panels.
It also casts Musk?s own Tesla (TSLA) in a new light. It is no longer just a car company, but a comprehensive energy solution. Musk has already made one of the largest capital investments in history to build a $5 billion ?Giga? factory near Reno, Nevada.
Much of that plant?s production has already been pre sold, and I understand that the decision has already been made to build a second one. Wow!
Consumers are able to purchase the new batteries from the Texas based retailer, TreeHouse, (their link https://treehouse.co/treehouse-is-first-retailer-to-sell-tesla-home-battery/ ).
Musk explains that the world consumes 20 trillion kWh per year of electricity.
In the US, 1/3 of our fossil fuel consumption goes to transportation, and another 1/3 generates electric power, which is the equivalent to consuming 225 billion gallons of gasoline per year (or 8 billion barrels of oil per year, or 22 million barrels a day).
His goal is nothing less than to largely substitute those fossil fuel uses with solar energy, cutting our fossil fuel consumption by 2/3.
I guess there is no point in setting the bar low.
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