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...
My #1 Rule of Investing
Tom Konrad CFA Rules of Investing Warren Buffett says "The first rule of Investing is don't lose money; the second rule is don't forget rule #1." Jim Hansen at Ravenna Capital Management and publisher of the Master Resource Report about oil and other energy news has a "prime directive" (a la Star Trek) about oil prognostication which is "never predict prices." These rules have to be taken metaphorically, not literally. Buffett's rule is too general to be useful. I take his message to mean that care to avoid losses is more effective than...
Short Demand for Cree High and Rising
I got a call from my broker this morning asking me if I'd be willing to loan out my shares of Cree, Inc. (NASD:CREE) to a short seller. Since the only cost to me is that I will not be able to vote my shares, and I will earn 2.5% per annum on the value, I said "yes." Normally, brokerages get the shares they lend out to shorts from margin accounts with a margin balance. Since I never carry a balance (although I do have a margin account in order to trade options) they must ask my permission...
Preparing for Catastrophe: Is your global warming portfolio ready for rising sea levels?
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...
Voting and GameStop
Only a couple weeks ago, I quoted the market aphorism, “In the short-run, the market is a voting machine, but in the long-run, it is a weighing machine.”
It comes to mind again now that Robinhood types are short squeezing hedge funds with GameStop (GME) and other nostalgia stocks.
It's another example that any strategy that relies on valuation affecting prices in the short run (like stonks betting that GME would go down because it lacks a viable business) is incredibly risky. It's also incredibly risky to bet that any trend driven by popularity will last. Eventually, there are going...
How to Buy Losers: Tricking Yourself with Cash-Covered Puts
It's that time of year again. I've started studying for the third (and final) CFA® exam, and my readers are "treated" to my theories of the market and trading. No stock picks today; put your thinking caps on! CAPM: Nice Theory, Too Bad About the Market In Level II of the exam, we studied efficient-market theories, such as CAPM and APT. I actually like an elegant theory (I spent nearly decade of my life studying mathematics), but as a market practitioner, I know the market doesn't work that way. I learned this lesson the hard way. Early in my...
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...
Green Energy Investing For Beginners, Part II: How Much To Invest
Tom Konrad, CFA In Green Energy Investing for Beginners, Part I, gave information to guide the choice of green investment vehicles (mutual funds, ETFs, or stocks.) This article is intended to help investors decide how much of their money to put into those vehicles. An informed decision of how much to invest in green energy is at least as important as how you make the investment. The choice between green Exhange Traded Funds (ETFs) and green Mutual funds rests on a difference of about one percent per year, caused by differences in fees. Yet in the first three quarters...
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...
Should I Sell My Mutual Fund To Go Solar?
by Tom Konrad Ph.D., CFA An enthusiastic solar volunteer recently asked me: “What can I invest in to prepare for the next financial crisis?” The situation made the question deeply ironic. The woman asking me was trying to help people invest in solar systems through Solarize, a nonprofit, community-sponsored group buying and discount program. Our town of Marbletown, New York and the neighboring towns of Rochester and Olive have just launched Solarize Rondout Valley, a campaign open to residential and commercial building owners in Ulster County. Solarize campaigns are designed to make it easier and cheaper...
Navigating the Clean and Bloody Streets of Europe
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...
Better, or Beta?
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...
Twelve Green Investment Themes From Putin’s War on Ukraine
By Tom Konrad, Ph.D., CFA
Horrific, Tragic, Unprovoked, Heartbreaking. There is no lack of adjectives to describe Putin’s war on Ukraine. And while there probably can’t be too much coverage of the tragedies and war crimes, many others can write those far better than I.
As an economic and stock market commentator, the adjective I will focus on is world-changing. There is no doubt that the first land war in Europe since World War II, piled on top of a global pandemic, is already reshaping the economy in dramatic ways.
Some of those changes, like Europe switching away from Russian gas and...
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,...
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...
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...
