[6 min read]

Greg Canavan

Dear Reader,

Hi, Greg Canavan here, Dan Denning is out of action this week. He’s preoccupied with raging fires in his home state of Colorado — Estes Park to be precise.

As Dan wrote to me overnight: ‘Mate it's still a bit chaos here. Standoff between the fire and snow.’

Fires in late autumn in the Rocky Mountains? Strange. Climate change or just a quirk of Mother Nature?

As I sit here in Wollongong, NSW, writing this early on Monday morning, I’m watching the rain come down, soaking the already lush countryside. A drive down the south coast yesterday — dairy farming country — revealed green fields everywhere. Last summer, they were brown. Bushfires ravaged the area. 

Is that due to climate change, or just the vagaries of the weather? History tells us these weather extremes are not new. But our reaction to them is. It’s why Australia, and developed nations around the world, are collectively investing trillions to transform their energy infrastructure to support renewables. 

Whether you agree with the ‘climate emergency’ types is irrelevant. This is an unstoppable trend. But as the system creator of Algo Trend Trader, Tom Meyer, points out in his brilliant essay below, we’ve been here plenty of times before. Investment booms don’t always mean easy money. Read on for a history lesson from Tom...

What the Great Railroads of
the 1800s Tell Us about the
Clean Energy Boom of 2020

By Tom Meyer
System Creator, Algo Trend Trader

The hottest segment of the stock market these days is clean energy. 

Alternatives, solar power, wind power, wave power, batteries, hydrogen, and even nuclear are all buzzwords in this segment. 

And it’s an exciting time. 

Not only are the technologies something out of the future, but there are a lot of companies that have sprung up in the last several years. 

With the excitement of the new technologies comes the excitement of new companies and the potential to make huge profits in the stock market if their technologies are adopted in the energy markets. 

There’s no doubt that new technologies will be adapted and become the mainstream over the next few decades. 

But before you decide to invest everything you have in these new companies, here’s a word of caution for you.

All technologies become commodities

Let me explain what this means so that your expectations are more realistic.

Here’s a chart for the past three years for the iShares Global Clean Energy ETF [NASDAQ:ICLN].

It’s pretty exciting with gains of almost 130%.

Anyone can easily see that this ETF has incredible momentum. 

Algo Trend Trader members, the service I run with publisher Woody, can also see that the volatility in ICLN has increased dramatically. 

The yellow channel has widened significantly in the past six months, which is an indication of the increased volatility. But these gains are incredible and exciting.

Owning ICLN for the past three years netted the investor a terrific return. The trend is higher in the ETF, and the technology is taking over on a global basis. 

So there shouldn’t be a problem owning ICLN, right?

Let’s take a look at another chart. This is still ICLN, but it’s a 10-year view of the ETF.

Not as exciting with the 10-year return for buy-and-hold at just over 20%. 

Over the last decade, the technology has been taking over around the world, but the returns of many of the ‘green’ companies haven’t followed.

To be honest, I’ve set you up with the above two charts. Here’s the reason… 

In the past 180 years, we’ve seen amazing life-changing technologies enter our worlds. And they have changed lives in ways that were unthinkable a couple of centuries ago. 

But the technologies themselves aren’t a guarantee of profitability for every company that enters these new technologies. 

In fact, most companies don’t survive! Case in point. The famous boom of two centuries past was the great railroads across the US. Rail companies sprang up everywhere. It too was an exciting new technology in its day. But still, there were hundreds, if not thousands, of rail companies in the 1800s that ultimately went out of business. 

Below is a photo of a bond that was issued in 1863 from the Elmira and Westport Railroad Company. 

This was a rail company that had a stretch of rail between Elmira, New York, and Williamsport, Pennsylvania. About 120 kilometres of rail. That’s it. This bond was $500 face value and it paid 5% interest. It was supposed to pay…for 999 years!

Of course, the company went out of business shortly after the bond was issued.

It’s easy for us in our modern lives to laugh at this. We have the advantage of hindsight to know this was a lousy investment. But, for the people who lived then, it was an exciting and life-changing technology.

In the 1800s, the railroads changed life for everyone. They opened new frontiers, they allowed for the delivery of crops and manufactured goods to new markets. They created tens of thousands of jobs. It was a technology that brought the industrial age to much of the world.

Today, nobody considers the railroads to be ‘technologically-advanced’. Yes, they have made advancements in their industry, but nobody would put them in the same category as the internet, social media, or green energy.

The same thing happened with the introduction
of the automobile in the early 1900s...

Again, we don’t think of the business of automobile manufacturing as a leading-edge technology, but that’s exactly what it was. Life-changing, lifestyle changing, and it coincided with the rise of the middle class.

Did you know that there were about 2,000 automobile manufacturers that went out of business in the first 20–30 years of the automobile’s existence? If you care to look, you can find a list here on Wikipedia.

Airlines have suffered the same fate. Again, nobody can argue that air travel hasn’t changed billions of lives. Mankind had been dreaming of flight since we could look to the skies themselves. But that didn’t make investing in the airlines a good investment.

Warren Buffett said this in his 2007 letter to investors:

‘The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers.’

Computer manufacturers fall in the same category as well. Nobody can argue that the introduction of the personal computer hasn’t changed the world in a dramatic fashion. But that doesn’t mean that all computer manufacturers made their investors a lot of money.

I live outside of Austin, Texas. About 30 years ago, Dell Computer was one of the fastest growing technology companies, and the stock rose and split several times. 

Many people who lived here became ‘Dellionaires’ from the meteoric rise of the stock price. But once people realised that putting computers together was not much different from farming, the P/E ratio that people were willing to pay dropped dramatically. The split-adjusted price for Dell was above $57 at the end of March 2000. In October 2013, when Dell became a private company again, the stock was down to $13.73. For more than 13 years, Dell was a great company, but a terrible investment.

Does that mean you shouldn’t put any money into the
new green energy technologies? Not at all…

There is money to be made in this space. A lot of money!

But understand that most of the companies that are in business today and most that will come onto the scene over the next several years will probably go out of business. 

That’s what history shows us.

Do you want to know who is investing heavily in green technology? 

Yes, the ‘dinosaur’ energy companies! 

Here’s what’s happening with the Big Six oil and gas companies.

‘BP has 2200 megawatts of wind capacity in the US and has started to reinvest in other renewables over the past few years. They also have an investment in Europe’s largest solar project.

‘Shell has spent a reported $2 billion on setting up low-carbon energy and electricity generation. They also acquired UK-based electricity and gas provider First Utility as well as Europe’s largest electric vehicle charging company New Motion.

‘Total is investing $500 million a year in clean energy technologies and planning to increase that over the coming years. They have 1.6 gigawatts worth of solar capacity. The company is also one of the largest utility providers in France.

‘Eni is behind the other majors, but they are targeting to deliver 1 gigawatt of renewable power capacity.

‘Chevron has mostly avoided the field after early poor investments. They are creating a Future Energy Fund that will invest in reducing carbon emissions and providing cleaner energy.

‘ExxonMobil is looking to reduce greenhouse emissions, advancing biofuels, and carbon capture and storage (CCS). Exxon holds interests in about 1/3 of the world’s CCS capacity.’

These numbers are from NSEnergy.com in an article dated 16 January 2020.

One of the biggest players in the US is a ‘boring’ utility company called NextEra Energy Inc [NYSE:NEE]. They have interests in wind energy, nuclear energy, and other clean and renewable technologies. They are also the top constituent of XLU, the ETF for the S&P Utilities.

The price of NEE five years ago was close to $100/share. Friday’s closing price above $300/share shows that they’re doing something right and it probably has to do with their investments in green energy.

In closing, it’s natural to be excited about these new technologies and new advancements in how we’re going to generate and consume power over the coming decades. 

As investors, we need to understand that many companies, perhaps most companies, will probably be poor investments. 

But there will also be some incredible opportunities in this field to nicely profit in the coming years. 

You can’t just guess or invest in every new company that comes along.

It’s going to take experts who have studied the science and understand the evolution of the technology and which companies are going to be the leaders going forward.

And that’s exactly what you’ll find at the keynote speech hosted by Woody and featuring our energy expert, James Allen.

Check it out here.

Regards,
Tom Meyer

Down in a Blaze of Glory
By Bill Bonner

[5 min read]

The river that was so wide and deep (the one we couldn’t cross when we got here in March) is down to a small stream…as if a fire hydrant had been opened upstream.

And every drop of it needs to be shunted off to water the onions or the alfalfa.

The alfalfa is ready to cut and bale. We begin at the northern field…and keep going…day and (sometimes) night — leaving round bales in the fields, spaced out as if they were practicing some kind of social distancing of their own.

Then, we start at the top again. This continues, almost without interruption, for about six months — cutting, raking, baling…until we have picked up some 3,000 bales.

Or until the water gives out.

We make sure no water is wasted by carefully shovelling out the canal — by hand. A crew of 13 paleadores starts at one end…and keeps going for the next four days — digging a total of about two miles’ worth of trench.

Then, the river is blocked off, forcing the water into our two major irrigation ditches, one on each side.

The water flows for a week at a time. After seven days, we break up our dike so people downriver will get some of the precious liquid.

Argentina lockdown

It’s mid-spring. And we’re still here — in Northwest Argentina — with a quarantine tighter than ever. The Argentines have used the toughest ‘lockdown’ approach in the world.

We are in an extremely rural area, much like Nevada or Montana. But even on our dirt road, there are police roadblocks every 20 miles or so.

The lockdown approach seems to be able to delay the disease, but not stop it. Every time the door is opened, in it comes. Then, a ‘spike’ in cases causes the authorities to slam the door shut again.

How long this can go on is anyone’s guess. Thanks to government policies over the last 70 years, the gauchos are far from rich. Many are sinking into extreme poverty.

Back in the early part of the 20^th century, the Argentines were about even with Western Europeans, in terms of income per capita. Now, the country is number 68 on the list, below Russia and Romania.

And now, Argentina’s economy is in a depression, with the peso falling like a stone in a well. It was on par with the US dollar when we first came to the country 20 years ago. Yesterday, on the black market — which is where most of the money gets exchanged — it was at 181 pesos to one single dollar.

It would be a marvellous time to go out to a fine restaurant. A thick, delicious Argentine steak…a bottle of the best wine on the menu — the meal would cost barely more than a visit to McDonald’s in Baltimore.

That is a curious and surprising consequence of an economic catastrophe; it has its advantages.

Alas…the restaurants nearby are all closed…

What a marvellous place to be quarantined! Always beautiful…always interesting…and always on edge.

And we feel as though we are getting a preview of things to come in the US, too.

But back to our US election preview…

Two poor candidates

The two surest ways to wreck a great nation are war and inflation. Donald Trump failed to stop the former (though he had promised to do so and, as Commander in Chief, had the power to do so). Instead, he actually increased funding for the warmakers.

In domestic matters, too, Trump did nothing to bring spending under control (he didn’t veto a single spending bill).

Au contraire, he brought spending, deficits, and ‘inflation’ — the money printing necessary to cover budget shortfalls — to a level never before seen in the US. In 2020, the budget deficit hit a sh*thole country record — at 18% of GDP.

Trump did one other calamitous thing worth mentioning. In response to a health challenge — the coronavirus — he allowed his bureaucrats to put the country on a war footing…taking on extraordinary powers that are normally limited to matters of national survival.

But as unsuccessful as he was, we’ve also seen that his opponent is unlikely to be any better.

As far as we can tell, Joe Biden never met a boondoggle that he didn’t like. He is likely to back scams and bamboozles — green programs, universal basic income, expanded free medical care — far beyond those of Mr Trump.

If Biden has his way, the feds’ printing presses will probably run hotter than ever.

So what will happen?

Trump fatigue

First, who will win?

Most likely, Biden will win. But not because his policies are better. Nor even because he is the overwhelming favourite of the deep staters.

Both candidates are socialists. Both are committed to a large role for the government in the economy. Both will continue in the Bush/Obama/Trump tradition…less freedom, more control, less prosperity, more inequality, more fake money.

But our guess — and it is only a guess — is that the marginal voter is a little tired of the Big Man. Trump has dominated the news cycle for the last five years, beginning even before he was elected.

He captured the headlines largely because he was willing to say ‘outrageous’ things — many of which were true.

Back in 2016, for example, he said ‘all lives matter.’ And of course, they do. But now, you’re not allowed to say so without being branded a ‘racist’.

Then, hardly a month ago, he urged Americans not to let the coronavirus ‘dominate your life.’ The core of the message was little different from the advice of the Harvard Medical School in March — ‘Don’t let coronavirus anxiety take over.’

But coming from Trump’s mouth, it was deemed too dangerous for public consumption. The press went wild with indignation. Health ‘experts’ branded it ‘irresponsible’.

A few months earlier, an interviewer, hoping to lure the Big Man into another sensational headline, touched on the California forest fires. The Donald was invited to opine on whether or not the fires were caused by man-made climate change.

‘I don’t think science knows,’ the president responded.

This, too, was right on the money. Of course, ‘science’ doesn’t know. It has hypotheses that, in the fullness of time, are sure to be amended and updated.

As of today, nobody knows for certain which way it will go…nor what really is the cause.

But while this maverick approach was welcomed…and captivated the media and the public for 60 months…now, the lumpen electorate seems to have gotten weary of it. The voters yearn for a return to normal.

Trump’s unkind epithet for ‘Sleepy Joe’ Biden, may have backfired. Sleepy is what the public wants. People want an anaesthetic president…a dreamtime leader…who will put the bitter conflicts and sour dramas behind us.

Reality is now tough enough. The recovery is stalling. The rich are getting much richer; the poor much poorer. And the coronavirus shows no sign of going away, suggesting that we have gotten ourselves into another unending, unwinnable war.

Many people blame the president — even for things that aren’t his fault.

But if they pull the lever for Mr Biden, what difference will it make? Can they nod off…and make yesterday’s mistakes and today’s challenges…disappear?

The deficits? The jackass programs? The deepening swamp? The growing debt? The widening gap between rich and poor? The 76 million baby boomers in need of pensions and medical care? The crisp new bills — albeit in electronic form — flying off the printing presses?

Nope. Things — at least the things that matter most, war and inflation — will go on, much as they have for the last 20 years.

Appreciate what we lost

But let us, uncharacteristically, depart from our usual doom and gloom. Yes, of course, the American empire is on the downslide. And no…there’s nothing we can do to stop it.

But between the dimming light of today and the crack of doom tomorrow is at least a little time…

Like the once-rich families on the pampas, there will be time to light candles…time to enjoy the dusky scenes…to reach into our once-bulging liquor cabinet and pour out the last drops from a bottle of Highland Malt that we bought when we were flush…

…and time to sit at an ancient table…as the last rays of the southern sun steal through the cracked windowpanes…the old wallpaper peeling down…

And finally, at peace after so many guerras inutiles…so many battles fought trying to hold the line against waste and foolishness…so many fights lost against lunatic enemies…

…there, finally, there will be time to appreciate the fruits of a civilization that is no more.

Sordid spectacle

Yes, enantiodromia works both ways. It casts down…but it raises up, too. Sleepy Joe might win…but the ‘conservatives’ might reawaken.

When in power, people become proud and practical, eager to take advantage of their opportunity to punish their enemies, reward their friends, and steal whatever they can. It is usually a sordid spectacle.

That is why winning a war…or an election…is often one of the worst things that can happen to a people.

The Romans had won so many battles for so many years that they began to believe their armies — although composed largely of barbarians — were invincible.

In the 5^th century, rather than protect the homeland…their armies remained deployed at the fringes of the empire — often fighting each other…

…until the Barbarians marched into Rome…raped the women…slaughtered the men…burned down the city…and carried off anything of value.

The Germans handily defeated the French in 1870…and took away the idea that they could so again. (The French learned nothing.)

In the next war, Germany — following essentially the same strategy — was ruined…bankrupted…with two million of her young men dead.

And wouldn’t the US have been better off if it had had its butt kicked a little harder by the Vietnamese?

Instead, its military considered that the withdrawal was a ‘political’ decision. And then, eager to regain its pride, led by Stormin’ Norman Schwarzkopf, it attacked Iraq in 1991.

Wouldn’t it have been better if it had lost there, too?

Most likely. Then, it never would have thought it could pull off a Second Gulf War.

Our point is that you learn more from failure than from success…you think more clearly, too, when the boot is at your neck.

Failure, especially if it is indisputable, excites the brain. And the first thing you realize is that war is not always a paying proposition. Minding your own business becomes a virtue, not a sign of cowardice. Conservatism — learning from the past, sticking with the traditional rules of an honest, open society — pays.

As for the warmongers…the world improvers…the activists and empire builders — you begin to see them in a different light…as the clowns and numbskulls they really are.

And you realise that these morons who are ruining the empire are actually doing us all a favour.

Bright side

And so, dear reader, looking on the bright side, as usual, we see a blaze of glory at the end of the tunnel…

Defeated, we will be a smarter, nicer race.

Humbled, we will be less inclined to try to boss others around.

Broke, we will spend our money more carefully.

And out of power, following a Biden win, our erstwhile ‘conservatives’ might suddenly come to their senses and eschew war, deficit spending, grandiose scams, fake money, giveaways, tariffs, phony interest rates, meddling in the economy, restricting, confining, controlling…and all the flimflams and swindles of both parties over the last 50 years.

The born-again conservatives might even regain the clarity and courage to prevent the Biden administration from doing more harm!

Yes, we see much better things ahead.

After the crack up…of course.

Regards,

Bill Bonner,
For The Rum Rebellion