Archive for March, 2010

Why I hate solar as an investment

March 9, 2010

1.  Too many solar companies competing for the same dollars with similar technologies.

2. Too many competing technologies, it’s hard to know what will work the best and what will attract government subsidies. Remember 10 years ago when everybody talked about fuel cells and hydrogen. Remember in the 70ies when solar started out as the next big thing. Or nuclear before that. Yes, solar has huge potential, but so does algea, second generation biofuel, nuclear, natural gas, wind, waves, fuel cells, geothermal, hydro power etc.

3. Who knows who will enter this business? GE, Siemens and Suzlon were late to enter the wind power market and now are some of the dominant players. Do you really think that Sunpower, Suntech and First Solar will dominate this industry ten years from now if it grows to the moon?

4. It’s really hard to forecast the long-term profitability of a new industry. Charlie Munger says is best:

“Here’s a model that we’ve had trouble with. Maybe you’ll be able to figure it out better. Many markets get down to two or three big competitors or five or six. And in some of those markets, nobody makes any money to speak of. But in others, everybody does very well.

Over the years, we’ve tried to figure out why the competition in some markets gets sort of rational from the investor’s point of view so that the shareholders do well, and in other markets, there’s destructive competition that destroys shareholder wealth.

If it’s a pure commodity like airline seats, you can understand why no o­ne makes any money. As we sit here, just think of what airlines have given to the world safe travel, greater experience, time with your loved o­nes, you name it. Yet, the net amount of money that’s been made by the shareholders of airlines since Kitty Hawk, is now a negative figure ‑ a substantial negative figure. Competition was so intense that, o­nce it was unleashed by deregulation, it ravaged shareholder wealth in the airline business.

Yet, in other fields like cereals, for example almost all the big boys make out. If you’re some kind of a medium grade cereal maker, you might make 15% o­n your capital. And if you’re really good, you might make 40%.But why are cereals so profitable despite the fact that it looks to me like they’re competing like crazy with promotions, coupons and everything else? I don’t fully understand it.”

That said, solar may be great for a trade.

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It’s all about investments

March 9, 2010

Global growth in the coming year will have to come from investments.

Net exports is a zero sum game, not all countries can grow their net exports at the same time.

Governments from Japan to the US will have a hard time beefing up spending any further. That’s just not going to happen.

Consumers in Europe and the US have too much debt, too little equity and while employement may improve somewhat, it is unlikely to provide a major boost.

Meanwhile Japan is turning from being a nation of savers to a nation of spenders, but that is due to having the worst demographic profile in the world. The Japanese are simply spending more of their income because they are getting older and now drawing more on their retirement savings. But their income is not growing much. Spending of retirement savings have the potential to lead to higher interest rates in Japan, which will be a drag on spending. Japan is simply not in a position to boost private spending much.

And for those who have high hopes for the Chinese to lower their savings rate, I think you have to be patient. The Chinsese have a high savings rate because they save for retirement, housing, education of their children and future medical expenses. That will not change any time soon. For the Chinese to spend more they need higher real wages. While higher nominal wages are likely, there is also mounting inflation pressure in China. Clearly there could be some upside to Chinese private consumption, but in the short term i.e. the next 2-3 years I think it’s hard to envision a major boost to the global economy based on Chinese private consumption.

Which leaves us with Investments as the only possible source substantial global growth in the next few years. But we already have too much capacity in many industries. So I think you have to look towards industry where over-capacity is not a problem: mining, biotech, certain information and communication technologies, agriculture, clean/green technologies and infrastructure.

Deadline Management

March 9, 2010

At work and in our daily lives we give and receive tons of deadlines. Any good software out there for managing all those deadlines – for taking out the anxiety of not knowing if people will deliver on time, having to check up on them, reschedule deadlines when they don’t deliver, having to answer to text messages and phone calls to assure others that you will deliver on time and so on.

Someone needs to come up with an app – maybe something that’s voice mail/robocall/robomail-based.

Portfolio update

March 9, 2010

it’s been a while. Here’s my current portfolio:

Andean American Mining (AAG.V) – large position
HQ Sustainable Maritime (HQS) – large position
Arctic Glacier (AG.UN) – mid size position
TZA – mid size position
FXP – mid size position
XS Cargo (XSC-UN.V)