Archive for October, 2006

Tilting at Wind Turbines

I’ll be testifying for Ratepayers United Colorado in the upcoming hearing starting Thursday on the Settlement Agreement reached between Xcel, regulators, and consumer advocates (representing large commercial purchasers of electricity.) 

I’ve been told that hardly anyone fights settlement agreements in these cases, but environmentalists and clean energy advocates were left entirely out of this agreement, which actually contains an incentive, refered to as the BLEB, or Base Load Energy Benefit, for Xcel to burn as much coal as it possibly can, in preference to all other types of electricity generation.Coal dominates Xcel Energy’s power generating capacity - Xcel Energy is a major US electricity and natural gas energy company based in Minneapolis, Minnesota.

Ratepayers United asked me to help out because 1) I volunteered, 2) I understand economics, and 3) there wasn’t anyone else with the first two qualifications bull-headed enough to go ahead this late in the game.

Links:

Denver Post Article

Denver Business Journal article

What I had to say afterward

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Spam Stock Tip Experiment

As readers know, I get a little hot under the collar about spammers manipulating the price of stocks.  I’ve decided to try to take a little money from them for a change…  I’ve been monitoring my spam email for a couple weeks now.   On 10/16 I received a spam recommending GDKI, on 10/17 and 10/19 I received spams pushing TXHE, From 10/20 to 10/23 I received 4 spams pushing MXXR, then one pushing EQTD on 10/24, and since then five spams pushing AUNI.

 I’ve decided to take matters into my own hands.  According to studies I’ve read, spammers tend to hit the same stocks over and over again.  I’ve placed a limit order to pick up one of these stocks after it falls when the victims of this scam realize their mistake and sell.   Looking over the charts, I placed a limit order to buy TXHE at $.063 (It’s currently at $.095 due to the spamming.)  If my order goes through, I’ll immediately place a limit order to sell around $.09, which should rob the spammers of some of their gains. 

This is an experiment, so I’m only doing it with a few thousand dollars.  The plan is to rob them of a little of their potential profit the next time they try to spam TXHE.  If I’m right about them spamming this stock again in a few weeks, I’ll have struck a blow for fair markets and pocket a nice gain (my purchase and sale should moderate price moves due to spamming.)  If I’m wrong, I’m stuck with a couple thousand dollars of a penny stock I know nothing about.

I’ll keep you informed.  If it goes well, I may try AUNI (or the next spam-of-the-week.) 

By the way, don’t try this at home, unless you can afford to lose everything you put into it.   Also note that this is not the type of thing I’d do with client money (unless specifically asked.)  I have no way of knowing that the spammers will strike again on TXHE,  my only protection is the low-ball limit order price I put in.  I could easily get caught out if this tiny, profitless company declares bankruptcy… my limit order will be triggered on the way down, and there’s no reason to assume the stock price won’t go all the way to zero.  I’ve added to my risk by telling the world what I’m doing, but I doubt spammers read my blog… they’re too busy stealing gullible investors’ money.

One further note, even if this strategy of trading off spammers works for a while, it will eventually cease working as traders do the same thing I’m doing… which is exactly what I want, because having vigilant traders buying on the way down after a spam, and selling on the way up on the next spam is the best way to ensure the spammers get the smallest possible ill-gotten gains for their trouble.

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Take care with your brokerage account

Very worth-reading article on Martketwatch today.  As with all computer crime, as more people use the Internet regularly, more people are victims of crime on the Internet.  This article talks about hacking into online brokerage accounts.

The good news: online brokers promise to make clients whole if they are victims of hacking.  And if you’re looking for discounted antivirus software, this is a good place to look.

 Like a lot of things, caution is your best defense.

1) be wary of public computers, especially abroad.

2) be wary of using brokerages over unsecured wireless networks.

3) It’s worth using your borkerage’s alert service to send you an email confirmation whenever there is activity in your account.  Then, if you’re checking your email, you’re keeping an eye on your account. (At least in this way, the Internet makes you safer, by making it easier for you to know what’s going on.)

(I know I have not written much recently, but work has crested in a wave over my head.  I hope to be back writing more deeply about Renewables in a week or two.)

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Fortune 500 Blog Project: Xcel, Kinder Morgan

I decided to contribute to the Fortune 500 Blog Project after reading Jetson Green’s blog review on Wells Fargo.  I’m concentrating on energy companies (natch.)   So far it’s been a breeze: I started with Xcel Energy and Kinder Morgan Energy, but neither one seem to have blogs.

I was especially interested in reading Xcel blogs, because of the PUC rate case hearing.

No luck.  Let me know if you find any blogs of these two companies.

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How to turn $100,000 into $1M in Ten Years.

There’s a new blog someone who got tired of hearing investment professionals saying a regular person could not consistently produce good results. So s/he’s out to prove them all wrong, but trying to do it, and documenting the progress.  The goal: to turn $100K into $1M in 10 years.

There does seem to be a bit of confusion here.  The blog intro says: “Got tired of all the investment gurus saying that a regular person like me can not be a good investor. They can not consistently produce good results.”   The 26% annualized returns we’re talking about here are not “good;” they’re “stellar” or “mind-boggling.”   It’s not that a regular person can not consistently produce these results, I don’t think anyone could produce these sort of results consistently… BUT: they might be able to do it inconsistently, and it’s not unreasonable to think it might happen enough years in a row to make the 10-year goal. 

For the record, I think that the goal is achievable, but only with a level of risk that most people would be unwilling to take on.  It would take a lot of luck.  But it’s an interesting thought experiment, so I’m just going to lay out how I would go about trying to achieve those type of returns if that were all I cared about (i.e. it didn’t matter if I went broke trying, and ending up with $200K was just as bad as ending up with nothing.)

  1. Only small and micro-cap stocks.  Small stocks get much less attention from analysts, and so are more likely to be mispriced.  They are also more likely to make big percentage moves.
  2. Only buy something if I think it has potential to double or more in a year.  I’d need that performance in order to make up for the bets that inevitably blew up in my face.
  3. Little diversification.  The more diversified a portfolio, the less likely it is to achieve extreme returns.  I’d probably try to keep my portfolio to about 3-4 positions: enough to give me another chance when one of my highly risky bets imploded in my face, but each position has to be big enough that when I got the 100% to 500% return I’d be shooting for, it would actually do some good for my portfolio.
  4. No bonds.   Bonds just don’t double in price (except for the occasional junk bond.)
  5. Concentrate stock picks in one or two industries.  I’d pick energy, because I know it, and I believe the long term outlook is good.  Most of the choices the blogger listed are too steady-eddie for the type of returns I’d be looking for:  travel related industries are at risk from rising oil prices, and are very capital intensive; retail typically has low margins, which means they are unlikely to double within a single year.  Financials also tend to be slow movers.  I do like metals and mining, and technology if you’re looking to take on a lot of risk to get excess returns.
  6. Pre-Earnings companies.  Companies which do not yet have earnings usually go up a lot before and as they transition to profits.  Clearly many never get there, but that’s where to look of companies that might double within a year.  Many renewable energy stocks are suitable for this sort of stock market gambling.
  7. I’d try not to do a lot of trading.  I’d make my picks, and hold on to them until I thought they were screamingly overvalued.    I’m talking about buying a pre-profitability company and holding on to it through the first couple years of profitability.  You have to wait for the company to stop bleeding money and start raking in the cash, and for other investors to catch on.  That takes years, not months.
  8. I wouldn’t bother much with options.  While it is true that you can get spectacular returns buying options, you can only buy options on larger stocks, which I would be avoiding.  The companies I’d concentrate on already have option-like returns.  In the real world, I’m a great fan of using cash secured puts and covered calls for income and market timing, but it simply would not be an option with the stocks I’d be buying, and that’s really a better strategy for boosting your overall returns by a fraction of a percent per annum and reducing risk.  Multiplying your money ten times is not about reducing risk; it’s about taking risks and crossing your fingers.

Please keep in mind that the strategy I outlined about is basically stock market gambling.  It breaks most of the rules of prudent investing, most importantly diversification.

If I were to follow this strategy, I might even be able to get that 10x return in less than 10 years, but the most likely result would be turning $100,000 into $10,000.  So I guess I’m like all the other investment professionals, and I don’t expect this experiment work, especially in the current climate of over-valuation.  But then, most investment professionals aren’t good at managing money, either.

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My thoughts on Analysts: Jim Cramer

Jim Cramer 

He’s the bad boy of the investing world, making trading look like a frat party. 
But I agree with Rick Aristotle Munarriz when he writes on the Motley Fool today that “I think that he is housing one of the most brilliant investing minds inside that noggin of his.”  Well, maybe not “most brilliant.”  I have a feeling the most brilliant investing minds out there are probably hiding from the limelight, not seeking it, like my hero Warren Buffett did before he got too bloody rich to hide from the limelight anymore.  I think there’s another generation of Buffetts out there, quietly raking in the cash for themselves and a few lucky or perspicacious investors.

            Case in point for “lucky investors:” my wife was on the Board of a nonprofit in Tucson, the Tucson Centers for Women and Children for a short time while we lived there.  Another one of the directors, and the biggest benefactor of the Centers, owed his fortune to the fact that he was Buffett’s neighbor in Omaha when Buffett was just starting out.  My guess is that Buffett was simply the savviest financial guy he knew, and so he gave Buffett some money to invest for him.  Now he buys buildings for nonprofits.

            Back to Cramer.  He may be brilliant, but it’s no longer possible to make money on his stock tips because too many people follow his advice.  His antics also make my life a lot harder.  I taught a workshop on investing in alternative energy stocks earlier this week, and tried to focus it more on the basics of investing, rather than stock tips.  I talked about paying off your debt, diversification, and started in on how to pick your own stocks, with the crowd getting more and more restless: They wanted to know which stocks and renewable industries I thought were a good deal right now.  In short, they wanted Cramer.

            I wanted to teach the attendees how to fish, but the instant gratification TV culture that Cramer is an iconic part of for the investing community has trained them to look for handouts of fish. 

I’m sad to say: I gave in.  At least, I did list stocks to look at in various industries, staying away from saying anything was a “buy” or a “sell” right now.  I save that for my clients.  And I did tell them which industries I like better: Energy Efficiency, Wind, Geothermal, some biomass.  (Note: I bet most of my readers, and that means you, got a lot more interested when you read that last sentence.  Case in point.)

Knowing what to buy now will never make anyone the sort of money they could make by knowing how to decide when to buy and when to sell.  When are they going to sell the stocks they are going to buy just because I mentioned them?  For most of them, at the wrong time. 

Superior investing performance is all about knowing yourself, and making rational, not emotional decisions, a skill we all think we are better at than we actually are.  And that was the skill I was trying to teach in my workshop.

In the end, we all get what we deserve.  I only regret that the attendees who really were open to the skills I was trying to teach could have learned a lot more if I hadn’t pandered to the instant gratification crowd.

 

Okay, that wasn’t really about Jim Cramer, and he’s not responsible for the instant gratification culture we live in, but he does pander to it.  I think he is brilliant, but intelligence and wisdom never were the same thing.  You’re not going to make real money following his advice.  If you want to make real money, you have to have the luck and insight to find the right advisor before he becomes too successful to want your account, or you have to learn to do it yourself.

Maybe I’ll call my next workshop “Making Money the Hard Way in EE/RE Investing.”  I’ll probably have an attendance of two, but at least they’ll know what they are getting into.

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Off topic agian – back on Spinach and E-Coli

There’s an excellent article by Michael Pollan, author of the Botany of Desire and The Omnivore’s Dilemma in the NY Times Magazine from last weekend.   It ties in nicely to my thoughts on Spinach and E-Coli from a couple weeks ago. 

 Unfortunately, it does not have a lot to do with investing or alternative energy, so feel free to stop reading now, if that’s why you’re on my blog. 

If you’re worried about the industrialization of our food supply, and don’t want to get more worried, you probably should find another blog to read as well.   Here are the main points I got out of it:

1) Industrialized farming is the root cause of the health problems we’ve been having with our veggies.

2) But the likely proposed solution is not less industrialized farming, but more.

 3) The problem has to do with the industrial mindset of the regulators. 

4) Yikes!

Read the Veggetable-Industrial Complex article.  If you can figure out something to do about it, leave a comment.

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Green Diesel (and Gas) vs Biodiesel

When I wrote my post about green diesel last week, I neglected to mention one other very useful attribute of green diesel: it has a much lower pour point than biodiesel.   According to an articlein NREL’s 2005 research review,

“Green diesel consists of paraffin molecules produced by hydrogenating triglycerides by means of a conventional petroleum refining process. Green diesel has a very high cetane number, so it ignites fairly quickly after injection, and a low pour point—the lowest temperature at which a fuel will pour. Thus, it is a high-quality diesel fuel and is totally compatible with petroleum diesel.”

This is in contrast to biodiesel, which is produced by trans-esterifying triglycerides with methanol, and has a much higher pour point… which is why I can only use B20 (20% biodiesel) most of the year here in Colorado. At temperatures below about 50F, biodiesel begins to “cloud” and will clog fuel filters, preventing the fuel from getting to the engine. Since I don’t like my car stalling on me, I only use B100 during the hottest summer months.

The closest source of biodiesel to me is a truck stop without a heated storage tank, and so in the winter they only have B5 available, while they have B20 in the summer (which means I make sure to fill up with B20 whenever I’m near one of the greater Denver areas 3 other biodiesel stationsI know about.)  The availability of green diesel would mean I could use 100% all the time, not just in the summer.

I did some more searching and found this presentationon the subject from Michael J. McCall, T.L. Marker, J. Petri, and D. Mackowiak at UOP, a division of Honeywell, in collaboration with D. Elliot at PNNL, SCzernik at NREL, and David Shonnardat Michigan Tech.  According to their lifecycle analysis, Green Gasoline and Green Diesel produced from oils in refineries would actually have lower lifecycle CO2 emissions.

In short, the economics, environmental characteristics, and physical properties of green diesel/gas/jet fuel blow biodiesel out of the water (just as biodiesel is much better than ethanol from corn.)  The downside: limited feedstocks.  Avialable oil and grease from conventional sources is could only supply a tiny fraction of our liqid fuels; we will need to turn to nonconventional sources of oils to make a real dent in our liquid fuel needs (as well as invest massively in the efficiency of our transportation fleet.)

Non-traditional sources of oil to look into: algae and pyrolysisoil.  I plan to write more about pyrolosys in another blog; it is a quick way of converting all sorts of biomass into useful syngas, and has some useful byproducts as well, and pyrolysis a a relatively omnivorous process, able to process everything from old tires to corn stover to forest trimmings, there is a lot of potential pyrolysis oil out there.

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Stock Picking and Dating

Stock picking is like trying to find Mr/Miss Right.heart money

We probably all known someone who says they want someone steady and reliable, who will be there in times of need, and cares about them as a person… and then keeps picking up dates in bars because they look good, dress right, or say things that make our friend feel special, if only for the moment.

Investments are a lot like that.  The ones that everyone is gaga over, that seem to have unlimited growth prospects, and always seem to be one step ahead of the competition, are the ones to avoid.  The seeming promise of eternal economic bliss is too good to be true, just like the stranger in the bar who says all the right things, making us feel like we’ve found our soul mate, but who can’t even remember our name in the morning.

            A good mate isn’t the person with all the right words; a good mate is the person with the dedication to stick with you when times get rough, who wants us for who we are, not for what we can do for them, be it buy them some drinks or add one more notch to the bedpost. 

            A good stock pick, likewise, is not the company everyone is sure will take over the world in the next couple years, with the snazziest technology and the rock-star CEO.  A good stock pick is the unrecognized company, that will be ready for whatever changes the economy throws it, and has an edge over the competition that no one but you see; a diamond in the rough.

            There will always be investors who chase today or yesterday’s hot story, and drive the price beyond all hope of returns based on future earnings.  Just as there will always be men chasing the beautiful girl who knows she’s beautiful, and plays men off against each other because it makes her feel special, and there will always be women who fall for the silver-tongued Don Juan, only to be surprised when they are instantly abandoned.

            Don’t be one of those investors.  Look for value where it has not yet been recognized, in companies that will faithfully pay dividends from strong cash flows for years to come.  In the stock market, there is no such thing as hooking up.  When you by, you’re making a commitment, so try to commit to something that won’t require a messy divorce. 

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Green Diesel and Jet Fuel

On a recent tour of NREL‘s Biomass reserch lab, I learned about a new (to me) way to make biofuel.  Plant and animal oils and fats can used in conventional petroleum refineries to make diesel and jet fuel.  This idea has actually been around since the 1990s, when it was first demonstrated on a pilot scale.

Most of my readers are probably well aware of efforts to cultivate microalgae as a source of oil for biodiesel.  This is to biodiesel production what cellulosic ethanol technology is to ethanol production: an up-and-coming technology that has the potential to increase the level of production to where it can actually provide a significant volume of fuel relative to our transportation needs (corn ethanol and biodiesel from conventional crops and waste oil both fall far short on this measure.)

Green diesel and jet fuel address two major problems for biofuels:

  1. Biofuels lack an existing distribution infrastructure (they must be moved around by train, and even if it were possible to use existing pipelines, they do not lead to where most biofuel is currently produced.)  Conventional refineries, naturally, are already integrated in the existing infrastructure.
  2. Ethanol has a lower energy density than gasoline (about 30% less), and I know of no way to convert biomass into a high enough energy density fuel to power jet aircraft.  This process produces jet fuel, neatly dealing with that problem, and holding out the hope eventually reaching a 100% transport (we’d still have to massively increase efficiency to reduce consumption to a sustainable level.)

Oil refiners are interested because bio-based oils contain little or no sulfur, and removing sulfur from diesel is an increasingly expensive process as more stringent standards go into effect.  In fact, regulation for ultra-low sulfur diesel is partly behind the recent price rise in diesel vs. conventional gasoline.  It used to always be cheaper than gas, but now it is more expensive. 

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Free trades at B of A

Bank of America has announced that it will start offering free online trades to customers who are self-Bank of America Higher Standards Homedirected and maintain balances of $25,000 or more in their bank accounts.  This offer is not available now; they will be rolling it out across the country, and it is expected to be available everywhere between now and spring 2007.

I’m very excited about this for my clients and readers, whom I expect will qualify as “self-directed” at most brokerages.    Even if my clients end up not qualifying for this, the online discount brokers I use will probably be forced to cut their commissions even further.  Thank you, B of A!

 Why is this important?  Because brokerage commissions are the one thing standing between small account holders and full diversification without mutual funds.  To gain the full benefits of diversification, an account needs at least different 20-30 positions, which translates into 20-30 commissions.  To be competitive with index funds, trading commissions should be less than 0.5% of account value, which, for a $25,000 account would mean about $5 each.  A typical discount broker usually charges three times this amount for an account this size.

30 free trades a month opens up a whole new strategy for the owner of a $25,000 account.  She could put together a portfolio of stocks that closely mimics most any market index, for free.   This would allow her tax-manage her account, by choosing when to take capital gains (an option which is not open to owners of mutual funds), and do so for less than the expenses of the cheapest index fund.

The downside is you have to maintain a balance of $25K in your bank account to get the free trades in your brokerage account, but there’s no reason you have to keep the $25K there after you have a portfolio you’re satisfied with. 

 I’ll definitely be mentioning this at my investing workshops.

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Large Scale Electricity Storage.

One of the biggest barriers to the adoption of wind and solar electricity generation is the lack of storage technology with the capacity to handle the hundreds or megawatt hours necessary.    

Large scale electricity storage technology also allows utilities to flatten their demand, and defer construction of expensive new generation. 

Here’s a quick rundown of some of the technologies vying to meet this need.  Most of this is information is drawn from the Electricity Storage Association website.

Technology

Description

Comments

$/kWh; efficiency

Investment opportunities?

Pumped Hydro: Reservoir to Reservoir

Energy is stored by pumping water from a low reservoir to a higher one, and recovered by running the water back out through a turbine.  This system can be easily retrofitted into existing reservoirs, but has limitations due to water regulations.  First used in 1890.

The cheapest and most developed technology, pumped hydro is nevertheless limited by the availability of suitable sites.

$3-$50 per kWh;

70% to 85%

The major supplier in the business is private.  Could look for opportunities in utilities that have good potential projects.

Compressed Air Storage (CAES)

Energy stored by compressing air into large underground caverns.  Air combined with natural gas on exit and burned in turbine.  The gas compensates for the cooling as air decompresses. 

Gas used is about 40% of the amount used in comparable peaking turbine.  First built in 1978.

70% to 80% efficient; $30-$100 per kWh

 

Underground Pumped Hydro

As above, but water is pumped between an aquifer and an above ground reservoir.

More sites available, developing application.  Might have some water quality issues.

Costs Low

75% to 85% expected efficiency.

Small turbine/pump makers.

Polysulfide Bromide battery

A regenerative fuel cell based battery technology (aka “Flow Battery.)  Seems have run into difficulties due to the toxicity of the chemicals involved.  

15 MW demonstration project in 2003; more recent projects canceled.

75%, unknown cost;

Regenysis, the owner of this technology, was a subsidiary of
Germany’s RWE.  No recent activity; the program may have been wound down.

Molten Sodium-Sulfur (NaS) Battery

Molten battery technology.  “Safety concerns addressed in

30 sites in
Japan, mostly for peak shaving.  Largest is 6 MW for
Tokyo electric

Cost “High” compares to BrS and hydro/ CAES.

NGK, Japanese power equipment supplier focused.  Can be bought by US investors on the Pink Sheets NGKIF.PK

Regenerative Fuel Cell (Hydrogen)

Fuel cells can be run in reverse for electrolysis, with the hydrogen stored in large tanks.

First pilot project 2004

“much less” than 80%

Fuel cell manufactures: Ballard, FCEL, and others.

All these technologies except hydrogen are dealt with very well on the Electricity Storage Association site.  They have some great technology comparison graphs which deal with a lot more variables than I have here in their technology comparison section.

Cost Comparisions

Click to enlargeClick to enlarge

Efficiency/Quality Comparisons:

Click to enlargeClick to enlarge

Of these technologies, Pumped Hydro and CAES are the only ones ready for near term, large scale deployment (with NaS and Flow Batteries applicable in some markets highly constrained markets.)

The major downside for pumped hydro is siting, part of which problem can be solved with the smaller scale reservoir to aquifer option.   For CAES, the downside is the need to use gas to run the turbine, albeit a very efficient one.  One option might be to substitute for the natural gas used in CAES with hydrogen from electrolysis, allowing the system to work at locations remote from natural gas supply, and, for wind energy storage systems, be 100% renewable.

 10/20/06- Article about a flow battery from VRB power systems for an Irish wind farm.

8/5/07: Here’s an article I just wrote about two potential investments in utility scale electricity storage.

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Pay off debt first.

I recently talked to a small, progressive business owner, call her Susan, in Eugene Oregon.  Business was going well, and she felt she and her partner could start saving for retirement.  She wanted advice on how to set up an SEP, and wanted to be sure that the money was invested in a socially responsible way.

I told her to forget about the SEP and start paying off the home equity loan she’d used to fund her business, despite the fact that she would be giving up the tax advantages of the retirement account, and the mortgage tax deduction on the interest she was paying. 

Let’s run the numbers.  Suppose she has $10,000 of pre-tax income she and her partner can invest in an SEP or use to pay down her home equity loan, and she’s in a 22.5% tax bracket.  The interest rate on the loan is 9%.  If she puts the money in the SEP, she won’t owe any tax on it, but she will have to pay tax on the money and any earnings when it comes out.  She puts the money in a socially responsible mutual fund with an expense ratio of 2.66%.  For those of us used to index funds and ETFs (expense ratios often around 0.5%) this seems extreme, but this is a real, socially responsible mutual fund.  I could have also chosen the Class A (load) version of the same fund, but the comparison I’m about to do would make the class A shares look even worse. Her other option is to take the $10,000 and pay down her home equity loan, after paying taxes of $2,250.  Suppose there are 3 possible scenarios for the assets the fund is invested in: down 10%, up 10%, or up 30% over a period of two years. 

Here is where Susan would be after two years in each of these scenarios:

  Pay back loan SEP, -10% SEP, +10% SEP, +30%
Amount invested $7,750 $10,000 $10,000 $10,000
Gain over 2 years $1,458 -$1,000 $1,000 $3,000
Loss of tax deduction -$328      
Fund Expenses   -$505 -$559 -$612
Taxes owed when money will be withdrawn   -$1,911 -$2,349 -$2,787
Net value to Susan $8,880 $6,584 $8,092 $9,601

If Susan opens the SEP, it will look like she has more money in all but the worst scenario above, when the stock market loses 10% over two years.  As we know, a 10% loss over two years is very possible; many mutual funds lost 30% to 70% between 2000 and 2002.  Even the moderate gain of +10% over two years is wiped out if you consider the fact that money in a retirement account is taxable when withdrawn, not even considering the penalty if it is withdrawn early.  

Paying back loans is the best investment most of us can make.  Only if the interest rate on the loan is very low (how low depends on how much risk tolerance you have) does it make sense to invest in the stock market before you pay back debt. 

If you are considering putting money in a CD or bond fund, the comparison looks even worse, because the relatively stable returns of these types of investments usually look like the second scenario above, where the market went up a moderate amount. 

An added bonus for Susan: She knows her money is socially responsible, because it is helping a small, progressive business owner who makes eco-friendly products.   Social responsibility starts at home.

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Should there be a tariff on foreign biofuel?

Apparently, the consensus of the 25x’25 biofuels working goup I spoke of over the weekend was an illusion based on the fact that the opponents had not spoken up and we had moved on to other subjects.  We’re currently discussing the subject over email, and I thought my rationale for opposing a tariff was worth posting here:

1. Why a tariff on foreign biofuel would not be effective at raising the price for domestic biofuel:
The primary competition for domestic biofuels is not foreign biofuels: it is petroleum.  Petroleum will remain the primary competitor in a 25x’25 world (after all, it will have around a 75% market share.)  The price of both foreign and domestic biofuels will be set in competition with gas and diesel, the most commonly available substitutes.  To raise the price of domestic biofuels, a tariff would have to be placed on foreign oil, not just foreign biofuels.

2. Why a tariff on foreign biofuel would be counter to the 25x’25 goal:
Potential builders of distribution infrastructure for biofuels (pipelines, retail pumps, Flex Fuel Vehicles, etc) want to know that there will be a reliable supply before they build distribution.  While some might argue that a tariff would not impact supply (an argument which, if true, would re-enforce point #1), it is very difficult to argue that it would not negatively impact the perception of the availability of reliable supply.  It is the perception of reliable supply that will help get the distribution infrastructure we need built.

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25x’25

I spent much of the last week at the 25x’25 “Twenty-Five by Twenty-Five” second implementation planning meeting.  25x’25 is a coalition advocating the vision that “By 2025,
America’s farms, forests and ranches will provide 25 percent of the total energy consumed in the
United States, while continuing to produce safe, abundant, and affordable food, feed and fiber.”   That’s at least 25% of our energy from renewable sources.

            25x’25 is an open alliance; the participants are the organizations who have endorsedthe 25x’25 vision outlined above.  These include 18
US Senators, 91 Congressmen, 18 state governors, 4 state Legislatures (including
Colorado).  I attended the conference as the representative of the
Colorado Renewable Energy Society. 

            I highly encourage my readers to endorse 25x’25 (you can endorse as an individual, or as an organization, or both.)  Your endorsement helps them demonstrate that a broad swath of Americans support the 25x’25 vision, and will help convince the US House and Senate to pass the concurrent resolutions for 25% of the nation’s energy supply to come from renewable sources.

We are currently in the process of coming up with our vision of how
America can achieve 25x’25.  Any endorsing individual or organization can participate.  The goal is agree on a series of recommendations (the Implementation Plan) as to how we can achieve the 25x’25 vision.  When the Implementation Plan is complete, which we plan to achieve by January, in time for the next congressional session, all partners will have a chance to endorse the plan.

Since the whole process is by consensus, and the 25x’25 goal is an ambitious one, it would be easy to believe that the Implementation Plan will turn out to either be watered down to the point where it does not say anything, or end up endorsing so many points of view that it would be ludicrous to call it a plan at all.

Having now participated in two conference calls and two days of face-to-face meetings, I’m happy (and somewhat surprised) to report that we’re actually managing to form a consensus among a large group of people and organizations you would not expect to get along under ordinary circumstances.  For this, I can only shake my head in wonder at the diplomacy and perseverance of the Steering Committee.  They managed, though two days of what could have turned into a verbal free-for-all, to keep us all focused on the need to work together to reach the very ambitious goal we’ve all agreed upon.  (In that same spirit, and understanding that many of the participants have been willing to voice their true opinions and step away from the party line, I will not name any names here.  This also has the advantage of covering for my lousy memory for names.)

How do they do it?  By keeping us focused on the fact that we all agree on the goal: 25% of our nation’s energy from renewable sources by 2025, and reminding us that we’re never going to get there by half measures.   The second thing they did was keeping the discussion focused on “Yes, if…”: continually reminding people to stay in the mode of working together, and instead of thinking about all the reasons that something was impossible to accept, to instead say “I could accept that if it were this were also to happen.”

So my kudos to the people I met on the steering committee.  I was impressed.

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