Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21
Ultimate Gaming and Home Working PC System Build 2021 - 5950X, RTX 3080, Asus MB - Scan Computers UK - 7th Jan 21
Inflation the bug-bear looking forward through 2021 - 7th Jan 21
ESG ETF Investing Flows Drive Clean Energy to Fresh Highs - 7th Jan 21
5 Financial Market Surprises in 2021 - 7th Jan 21
Time to ‘Reset’ Your Investment Portfolio in 2021? - 7th Jan 21
Bitcoin Price Collapses almost 20% at the start 2021 - 7th Jan 21
Fed Taper Nervous Breakdown - 6th Jan 21
What Will the U.S. Dollar Ring in for 2021? - 6th Jan 21
Stock market frenzy- Ride the bandwagon but be sure to take along some gold coins - 6th Jan 21
Overclockers UK Custom Build Gaming System Review Heat Test and Final Conclusion - 6th Jan 21
Precious Metals Resuming Bull Market, Gold, Silver, GDX Trend Forecasts 2021 - 5th Jan 21
Trump’s Iran-COVID-Gate Anniversary  - 5th Jan 21
2021 May Be A Good Year For The Cannabis / Marijuana Sector - 5th Jan 21
Stock Market Approaching an Important Target - 5th Jan 21
Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB - 5th Jan 21
NEW UK Coronavirus PANIC FULL Lockdown Imminent, All Schools to Close! GCSE Exams Cancelled! - 4th Jan 21
The Year the World Fell Down the Rabbit Hole - 4th Jan 21
A Year Like No Other for Precious Metals… and Everything Else - 4th Jan 21
The Stocks Bull Market is Only Half Completed - 4th Jan 21
An In- Depth Look At Gold Price Trend - 4th Jan 21
Building America Back After a Dark Covid Winter - 4th Jan 21
America's Dark Covid Winter Ahead - 4th Jan 21
Buy a Landrover Discovery Sport in 2021? 3 Year Driving Review - 3rd Jan 21
Stock Market Major Peak in Early April 2021 - 3rd Jan 21
Travel and Holidays 2021 - Flight Knight Cabin Bag Review - 3rd Jan 21
�� Happy New Year 2021 Fireworks and Drone Light Show from London and Sheffied - BBC�� - 2nd Jan 2
The Next IMMINENT Global Catastrophe After Coronavirus - 1st Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Five Ways to Profit From Global Warming

Stock-Markets / Climate Change Jul 08, 2009 - 06:58 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleMartin Hutchinson writes: The Waxman-Markey Bill, the much-ballyhooed clean energy legislation passed recently by the U.S. House of Representatives, is an economic and political mess.


It introduces huge new distortions in markets, imposes onerous new regulations on a number of industries, requires a large addition to bureaucracy and risks a trade war.

And it does very little to fight global warming.

At this point, however, investors really only need to know two key things about this legislation in order to set themselves up for profit, while avoiding any losses from the bill’s fallout:

  • From a political standpoint, Waxman-Markey is likely to become law in something close to its current form, meaning investors can craft a plan of attack with a fairly high degree of confidence.
  • And, from an economic standpoint, it seems to define a pretty clear set of winners and losers, enabling us to flesh out that plan.

A “Good” Tax?

I’m not sure whether I believe in global warming. We clearly seem to be producing more carbon dioxide than we used to, but it’s not clear how much of an effect that’s having on global climate. Equally, the effects of extra carbon dioxide are long-term and largely irreversible, so even if the warming effect is limited in our lifetime, we probably owe it to our grandchildren not to leave them living in a steam bath.

To the economically minded who share my skeptical-but-cautious view, the optimal policy is pretty obvious: We should enact a carbon tax. Government operations have to be funded somehow, and there’s no obvious reason why a carbon tax should be any more economically damaging than any other kind of tax.

A carbon tax has two advantages over other alternatives:

  • First, it can be varied easily, as we get new information and become more worried or less worried about global warming.
  • Second, it allows investment and purchase decisions to be made by the market, just tweaking the price mechanism a bit to reflect our concerns about carbon emissions.

We’re not going to get a carbon tax, because it has the politically deadly word “tax” as part of its name. Still, during the presidential campaign, then-candidate Barack Obama showed off a pretty sensible “cap-and-trade” program. All the carbon emissions permits were sold, so the market was able to work properly, with no freebie giveaways to politically favored recipients. Further, there were no  “offsets” by which companies could satisfy domestic permits by persuading the Chinese not to build a dirty coal-fired station, for example (these have given rise to innumerable scams in the European Union cap-and-trade system).

Such a system would have raised lots of revenue, helping to close the budget deficit and pay for healthcare reform, which ought to be one of its major objectives, given the United States’ now-dire fiscal position.

The Lowdown on Waxman-Markey

That’s not what we’re getting with Waxman-Markey, under which 85% of the emissions permits will be given away for free. That depresses the amount of carbon emissions saved, because with so many free permits available, the price of permits will be low.

Also, Waxman-Markey forces new buildings to use 30% less energy by 2012, intruding the U.S. federal government into yet another business previously regulated at the state level. It allows “offsets” for 2 billion tons of carbon emissions a year - 50% domestic and 50% international.

Finally, it doesn’t even raise any net revenue, because the giveaways and administration costs match the fairly paltry revenue raised through selling permits; according to the Congressional Budget Office (CBO) it’s just barely “revenue neutral” in the 2010-2019 time frame. That’s a major problem for President Barack Obama’s budget, which had assumed $624 billion in revenue from cap-and-trade in that same period.

The Winners and Losers

Needless to say, with the government rearranging deckchairs and giving out goodies in such a big way, there will be winners and losers. Clearly that’s what investors most need to understand.

One winning category will be distribution-oriented public utilities - the guys who actually send out electricity bills, including Consolidated Edison Inc. (NYSE: ED), Pepco Holdings Inc. (NYSE: POM) and Northeast Utilities System (NYSE: NU).

These companies will be given permits for 35% of the total “cap” amount in the early years, with instructions to provide rebates on electricity prices. Some of the value of those free permits is bound to flow through to shareholders. In fact, the bill was passed on a Friday, and it was notable that on the following Monday that the distribution-oriented utilities showed a nice bounce. If you can get a 7% dividend yield from the company that sends you electricity bills, it’s probably a buy!

Clean-coal technologies (primarily carbon capture and storage) are due to get 5% of the emission permits over a lengthy period. Most of the companies experimenting in this area are privately held, but Duke Energy Corp. (NYSE: DUK) is planning a carbon-sequestering power station in Indiana, so may be a beneficiary here - as well as through its operation as a major power distributor.

Another group of winners will the sharper (most-creative) operators in the financial-services arena. Since emissions permits will trade, somebody will have to trade them. What’s more, there will quickly arise the whole paraphernalia of futures, options, swaptions, and default swaps. Bear Stearns and Lehman Brothers are, alas, no longer with us, but Goldman Sachs Group Inc. (NYSE: GS), as always, will be prominent at the front of the queue!

Losers? Well, all of us who will pay more for power, but also the Canadian oil sands companies, such as Suncor Energy Inc. (NYSE: SU), who seem fated to pay a hefty premium for their carbon-expensive operations. Probably, the major petrochemical companies such as The Dow Chemical Co. (NYSE: DOW) will be losers, too, as will other carbon-intensive industries. Housing companies will be losers - they use quite a lot of carbon-emitting materials, and will be forced to adopt expensive energy-saving technologies, making their products less affordable.

Of course, all this analysis depends on whatever changes the U.S. Senate may make to the legislation. And that chapter has yet to be written.

[Editor's Note: When it comes to global investing, longtime market guru Martin Hutchinson is one of the very best because he knows the markets firsthand. After years of advising government finance ministers, crafting deals with global investment banks, and analyzing the world's financial markets, Hutchinson has used his creative insights to create a trading service for savvy investors.

Longtime global investing expert Martin Hutchinson has made a specialty of evaluating banking profit plays, and in recent reports has warned investors away from "Zombie Banks" and devised his own "stress test" to highlight the best profit plays in the troubled U.S. financial-services sector. Hutchinson brings that same creative analysis to his The Permanent Wealth Investortrading service, which uses a combination of high-yielding dividend stocks, profit plays on gold and specially designated "Alpha Dog" stocks to create high-income portfolios for his subscribers. Hutchinson's strategy is tailor-made for uncertain periods such as this one, in which too many investors just sit on the sidelines and watch opportunity pass them by. Just click here to find out about this strategy - or Hutchinson's new service, The Permanent Wealth Investor.]

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Mr. reality
10 Jul 09, 16:30
this is pathetic

this is pathetic

the whole charade disquised as "oh we are doing this for the enviornement ...now do your part"

you can fool all of the people some of the time..... and some of the people all of the time....but you can't fool all the people all the time

but since people believe they are helpless to stop the politics of everything they try to make money off of it and end of aiding it.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules