Strategy

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...

Tom Konrad CFA Investing in green energy can be good for both the climate and your wallet.  How good depends on choosing the right investment vehicles (mutual funds, ETFs, or stocks) and sectors to invest in. This will get you started. More and more investors are investing in green energy.  According to the Cleantech Group, the Cleantech sector is now the largest sector for venture capital investment.   Green Energy is not just for venture capitalists.  Small investors have done well in 2009.  Since the market bottomed at the start of March, the average green energy mutual fund topped...

Investors who feel the market is overvalued have two options: move into other asset classes (cash, bonds), or hedge their market exposure.  Hedging your exposure does not have to be rocket science, but it does require diligent attention to the market and your portfolio.  I recently discussed how it makes sense to be out of the market if you expect that there is a good chance of a large decline, even if that means there is as much of a chance of missing a large upswing as there is a large decline. In my estimation, this is one of...

Tom Konrad CFA Storm Sailor (Photo credit: Abaconda) Sailing into a Storm Despite the unresolved European debt crisis and America’s fiscal cliff, stock markets remain buoyant.   With politicians bickering, that is mostly due to aggressive action from central banks.  Yet despite the Federal Reserve’s third (and largest) round of quantitative easing (QE3) and the European Central Bank‘s unlimited bond buying program, politicians still have the capacity to throw a monkey wrench in the world economy.  Worse, doing nothing is all they have to do to mess things up.  Doing nothing is what politicians...

A Worse-Case Scenario I believe that a large part of global warming denial is fear: fear that if we acknowledge that global warming is happening, we will be morally obligated to do something about it, and that the problem is too large for us to do anything effective.  I also believe that denying the problem is certain to render us all ineffective in dealing with it. But getting over our global warming denial is not the only obstacle in our way to dealing with it.  Global warming is already happening, and  future temperature rises are already inevitable given the...

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...

by Tom Konrad Lifestyle Risks from Peak Oil In the US, we all have a large exposure to the risk of rising energy prices.  In addition to the cost of gasoline, the whole US economy runs on oil, so a rise in the oil price is likely to affect our jobs, and the prices of all our assets, including our homes.  If other people have less money to spend and invest because of high oil prices, there will be a fall in demand for anything they were buying or investing in. House prices in exurbs and suburbs where the...

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...

Tom Konrad CFA Blood In the Streets Walter Rothschild, 2nd Baron Rothschild Image via Wikipedia Baron Rothschild was an 18th century British nobleman who supposedly originated the phrase "Buy when there's blood in the streets, even if the blood is your own."  Although accounts differ, Rothschild was a successful banker, and supposedly made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. True or not, the...

By Marc Gunther.  Last week, ExxonMobil added Susan Avery, a physicist, atmospheric scientist and former president of the Woods Hole Oceanographic Institutions, to its board of directors. Shareholder advocates, led by the Interfaith Center on Corporate Responsibility (ICCR), which has been organizing shareholder campaigns at ExxonMobil for nearly two decades yes, two decades welcomed the appointment. Tim Smith, the director of environmental, social and governance (ESG) shareowner engagement at Walden Asset Management, said in a news release: “This action by the board is encouraging for shareowners and we want to commend Exxon for this prudent and...

Tom Konrad CFA Jesus Saves, but where does he invest? Photo via Bigstock. This article is not about the Church, or abortion.  As far as I know, the former does not invest in the latter. This article is about investing, and morality. Since 350.org began its campaign to get endowments and pensions to divest from fossil fuels, I've heard two basic criticisms of the movement from my colleagues in the investment management profession. Endowments selling their fossil fuel investments won't stop us from using fossil...

Tom Konrad CFA Green energy experts accept that solar panels are one of the least cost effective ways to reduce your carbon footprint.  Nevertheless, many buy solar stocks.  They should rethink their investment strategies. I recently spoke on "Stock Selection in the Era of Peak Oil and Climate Change" at the ASPO 2009 International Peak Oil Conference.  Whenever green energy enthusiasts find out that I analyze green energy stocks professionally, they react in one of two ways.  Many want to know my top stock pick in general (New Flyer Industries NFI-UN.TO/NFYIF.PK) or in their favorite sector (see below.)   ...

Tom Konrad, CFA In stock portfolios, deciding how many stocks to own involves weighing a trade off.   A smaller portfolio can be built (and sold) with fewer commissions, and also requires less time to research.  On the other hand, a portfolio with fewer stocks will gain fewer benefits of diversification, and likely be both more volatile and harder to sell in a crisis.  These trade offs are also affected by the size of the portfolio, and the market capitalization and liquidity of the companies in the portfolio. Diversification is widely accepted as a nearly costless way to reduce...

Two months ago, Tom told us how he'd dipped a toe into the black stuff (i.e. bought the OIL etf) on grounds that current supply destruction related to the depressed price of crude oil would eventually lead to the same kind of supply-demand crunch that led oil to spike during the 2004 to mid-2008 period. If you need evidence that the current price of crude is wreaking havoc in the world of oil & gas exploration, look no further than Alberta and its oil sands. The oil sands contain the second largest oil reserves in the world after...

Tom Konrad, Ph.D., CFA My Quick Clean Energy Tracking Portfolio has produced unexpected out-performance.  Is it because of high beta (β) in a rising market? I recently asked why two portfolios which I had designed to track green energy mutual funds ended up out-performing them by a wide margin.   This is the first of a short series of articles looking into possible causes.  Could the portfolios be outperforming because the stocks they contain rise more when the market rises (and fall more when the market falls) than do the mutual funds they were designed to track?  In...