UltraPromises Fall Short

When I first came across ProShares' UltraShort ETFs, I thought they were a brilliant idea.  They seem to promise a multitude of advantages for investors: The ability to hedge market or sector exposure without having to go short.  (Going short requires a margin account, and US law prohibits the use of margin in most retirement accounts.) They should have a better risk profile than shorting.  With an UltraShort, you can't lose more than your initial investment.  With true shorting, the potential losses are unlimited.  As the underlying index rises, each percentage gain creates a smaller dollar fall, while...

With the Cleantech Hype Gone, the Real Investment Opportunity Begins

David Gold The bubble has burst. The hype and euphoria of 2008 and 2009 is a distant memory. Fueled in part by the externality of the handouts from the stimulus package, and the (now fleeting) spike of natural gas and oil prices, cleantech has experienced its own mini dotcom era now followed by a dot bomb phase.   The politicization of Solyndra, the fracking revolution (that has dramatically increased U.S. fossil fuel reserves) and the realities of what it takes to build successful cleantech companies have all brought the cleantech venture capital space crashing back to earth....
Weather Risk Managment: Solar Put

How Weather Risk Transfer Can Help Wind & Solar Development

by Daryl Roberts The Need To Accelerate Renewables Adoption Renewables are growing rapidly as a percentage of new electric generation, but are still being assimilated too slowly and still constitute too small of a fraction of total generation, to be able to transition quickly enough to scale into a low carbon economy in time to mitigate climate change. The issue of providing public support, with subsidies and other reallocation methods, is a politically charged subject. High carbon advocates, for example American Petroleum Institute, argues that support for renewables distorts the market. On the other hand, it has been argued, for example by...
active vs passive investing

Permaculture Design and Stock Market Investing

by Tom Konrad Ph.D., CFA Passive Investing And Modern Agriculture: Parallels Today's stock market is a dynamic and scary place. Once choosing stocks to invest in based on the fundamental value of the companies they represent (called fundamental or value investing) was the dominant paradigm for investors.  No longer.  In 2017, JP Morgan estimated that only 10 percent of trading came from fundamental investors. The vast majority of trading now comes from computer based algorithmic trading, and passive investors following pre-defined rules, such as index investors.  According to Morningstar, nearly 45 percent of all stocks are owned by passive investors.  These should...

State of the Union Address: Alt Energy Sectors and Stocks to Watch

So it came and went, the much anticipated State of the Union Address. While the pundits will inevitably focus the bulk of their attention and commentary on the Iraq question, there were undoubtedly some very interesting nuggets of alt energy info in that speech. Above all things, one crucial variable has changed from a year ago: Congress is now controlled by the Democrats and already the slew of alt energy and climate change proposals brought forth by various senators leads one to believe that, as far as the federal government is concerned, 07' should see more than just...

Green Energy Investing for Beginners: A Small Investor’s Perspective

This is a guest post by Brad Wright, who felt that my "Beginners" series was a too high level to really live up to the name.  He's probably right about that, so here is his effort to bring it down to basics for the small Canadian investor.  The links and section headers are mine.   Tom Konrad. Motivation The goal of this article is to assist with your future investments by explaining investment options, how they work and potential alternatives that may be of interest to you. The take away I’m looking for is with a little research you can...

Calling for a Marshall Plan, not a Manhattan Project

Electricity too cheap to meter.  For many renewable energy advocates, that is the holy grail… new technology which will not only solve the problem of carbon emissions, but be so transformative that we no longer have to worry about turning off the lights when we leave the room. We could argue for days about the viability of any such technology, be it cold fusion, hydrogen, or photovoltaic nanodots.  I personally have strong opinions about the likelihood of any technology to produce energy so cheaply that it would not make sense to use some mechanism...

What I’m Selling (and will be Buying) in the Market Turmoil

The market is in turmoil, and it seems like everyone I talk to wants my take on what's happening this week.  So here's my take: I really don't know if the various bailouts and decisions not to bail out made by Paulson et al will turn out to be good decisions or not.  I do know that the mess we're in is due to hard decisions which have been put off for years at the highest levels, and I do know that the American taxpayer is going to be feeling the pain for a generation, if not...
DSI vs AVCI top holdings

Are ESG Funds All That Different?

by Jan Schalkwijk, CFA ESG investing is all the rage these days. That is, investing that includes the non-traditional  environmental, social, and governance factors in the investment process.  Its appeal to the broader investment industry is twofold: 1) The writing is on the wall: as wealth is passed down to younger generations who in the aggregate care more about values alignment, the asset management industry does not want to lose the assets and the fees they generate. 2) Thematic investing is popular and ESG is one of the hottest themes. Wall Street is not going to miss out. Much like crypto...

The Black Swan and My Hedging Strategy

Tom Konrad, Ph.D., CFA Nassim Nicholas Taleb's The Black Swan: The Impact of the Highly Improbable changed the way I trade; I can't give a book higher praise.  This isn't a book review; since the book is over two years old, and I did not get around to reading it until this Spring, I direct readers to this Foolish Book Review, which agrees with my viewpoint quite well, and to the New York Times for a detailed critique.  The latter seemed overly nit-picky to me, but then I'm a fan. Human Biases Recently,...

Pop Goes the Clean Energy Stock Bubble

by Tom Konrad, Ph.D., CFA 2020 ended with a massive spike in clean energy stock prices.  From the end of October, election euphoria drove Invesco WilderHill Clean Energy ETF (PBW) from $63.32 to $136 at the close on February 9th, a 114% gain in 100 days.   Joe Biden is as strong a supporter of clean energy as Donald Trump was a supporter of big fossil fuel companies, but even with control of the presidency and both chambers of congress, there is a limit to what a president can do in a short time.  This is especially true when their top priority...

This Isn’t What Green Money Management Looks Like

Tom Konrad, Ph.D., CFA I don’t spend much time reading investment company ESG reports, but a friend asked me to take a look at a copy of the TIAA’s 2021 Climate Report.  I was deeply unimpressed.  Here are a few things in the report that triggered my greenwashing radar: TIAA wants to work with companies to improve their behavior.  They call this company engagement.  “e do not expect to account for the majority of our emissions reduction — we are primarily focused on company engagements” page 9. Much of TIAA’s emphasis is on reducing emissions from their own operations,...

Correction, or Bear Market?

by Tom Konrad, Ph.D., CFA On February 21st, I was helping an investment advisor I consult with pick stocks for a new client's portfolio.  He lamented that there were not enough stocks at good valuations. This is one of the hardest parts of being an investment advisor: a client expects the advisor to build a portfolio of stocks which should do well, but sometimes, especially in late stage bull markets, most stocks are overvalued.  I reminded him, "The Constitution does not guarantee anyone the right to good stock picks."  He agreed, but he still had to tell his client that...

Stocks We Love to Hate

Investing in clean energy is both an economic and a moral decision.  From an economic perspective, I believe that constrained supplies of fossil fuels (not just Peak Oil, but also Peak Coal and Natural Gas) are leading to a permanent rise in the value of all forms of energy.  From a moral perspective, I know that we and the vast majority of our children are limited to this one planet for generations to come, so we should abuse it as little as possible, so, of all the possible forms of energy to invest in, clean energy (Renewable and...

Down and Out in 2011: Headlines from Possible Futures

Tom Konrad, CFA If you don't know what could go wrong in 2010, it could still hurt your portfolio. In Nassim Taleb's Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, he describes an exercise at one of his early jobs.  In order to become aware of risks they otherwise might have overlooked, they were to assume that they would lose all the money under their management in the coming year, and they work backwards to figure out how that might have happened. This struck me as an excellent idea, which investors...

Why I Sold My Utility Stocks

In times like these of financial uncertainty, regulated utilities have traditionally been considered a safe haven.  But that is changing.  The Dow Jones Utilities Average was down 30% in 2008, vs. a 34% drop in the Dow Industrials.  Not much of a safe haven. In a recent interview, utilities analyst Daniel Scotto noted, that the utility industry offers "a lot less security" than it used to.  His reasoning is based mainly on the fact that the regulated portion of utility company's business is smaller than it has been in previous recessions, making them vulnerable to lower growth (or even...
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