My Reading List for the Week
Without Hot Air
I skimmed Sustainable Energy – Without The Hot Air. It the best take on sustainable energy I’ve read. You can download a free copy or buy a printed version.
Let’s hope scientists crack Deuterium-based fusion or our grandchildren are totally screwed.
A few points
- individuals consume 24 times more energy than their home use. i.e. whatever electricity you use is at home overall in your life you and others on your behalf consume 24 times more energy. Expressed another way, putting solar panels on your roof to power your home takes care of 4% of your energy needs.
- alternative energy is not capable of replacing fossil energy. Our demand is too great.
- traditional nuclear is also not a realistic long term solution and is very wasteful of uranium, which is not as plentiful as I thought.
- conservation of energy is often focused on trivial areas, like phone chargers. Focus on what can significantly reduce your own energy consumption.
- those in influence and power prefer centralised solutions as big players need big projects.
My Investment themes
- electrification of transport – Nissan-Renault are one of the leaders there and have strong battery research. John Petersen is knowledge on batteries, he writes at Seeking Alpha and Alternative Energy Stocks.
- solar and wind – while they’re only ever be a part of the solution, their growth will continue. Vestas Wind is well known and there is a small Canadian company that may be of some interest, Catch the Wind. GE along with Suntech continue to be my two plays in greening.
- avoid hydrogen and biofuels
Grantham’s quarterly letter
was once again a must read; entertaining and insightful. Read it!
Just Deserts and Markets Being Silly Again
On a longer horizon of 2 to 10 years, I believe that resource limitations will also have a negative effect (see 2Q 2009 Quarterly Letter). I argued that increasingly scarce resources will give us tougher times but that we are collectively in denial. The response to this startling revelation, for the first time since I started writing, was nil. It disappeared into an absolutely black hole. No one even bothered to say it was idiotic, which they quite often do. Given my thesis of a world in denial, though, I must say it’s a delicious irony.[Jeremy, it may have been a startling revelation to you, but many people are already signed up members of the Resources are Finite Club. Eastern philosophy is one of finite resources which should be used wisely. Though you are right, we should have applauded louder at your revelation.
It's good having someone as intelligent and thoughtful as Jeremy Grantham getting the message out to a wider influential audience.]So, back to timing. It is hard for me to see what will stop the charge to risk-taking this year. With the near universality of the feeling of being left behind in reinvesting, it is nerve-wracking for us prudent investors to contemplate the odds of the market rushing past my earlier prediction of 1100. It can certainly happen. Conversely, I have some modest hopes for a collective sensible resistance to the current Fed plot to have us all borrow and speculate again. I would still guess (a well-informed guess, I hope) that before next year is out, the market will drop painfully from current levels. “Painfully” is arbitrarily deemed by me to start at -15%. My guess, though, is that the U.S. market will drop below fair value, which is a 22% decline (from the S&P 500 level of 1098 on October 19).
…
In soccer terminology, for the last six months it is Voting Machine 10, Weighing Machine nil!
Price, however, does matter eventually, and what will stop this market (my blind guess is in the first few months of next year) is a combination of two factors. First, the disappointing economic and financial data that will begin to show the intractably long-term nature of some of our problems, particularly pressure on profit margins as the quick fix of short-term labor cuts fades away. Second, the slow gravitational pull of value as U.S. stocks reach +30-35% overpricing in the face of an extended difficult environment. via http://www.gmo.com/websitecontent/JGLetter_ALL_3Q09.pdf
Also see:
http://www.meti.go.jp/english/statistics/tyo/iip/index.html industrial production and http://www.meti.go.jp/english/statistics/tyo/iip/h2afdlde.html#data_ope
Security Analysis
It’s two months since I began my journey through Security Analysis. I’m not sure if I wish I had of read this book earlier or if I’m only now able to appreciate it. It’s a heavy book, full of wisdom. Graham and Dodd explain value and investing via an open minded appraisal of the options available. I’ve decided to read it through once, before re-reading and sharing my notes.
Right now, I’m enjoying Part IV, Theory of Common Stock Investment.
There are three general investment approaches; secular growth, individual growth and margin-of-safety. There are two techniques to achieve margin-of-safety, buy at times when the general market is low or discover undervalued individual common stocks.
Due to an obsession with growth the market discounts ” enterprises that are long established, well financed, important in their industries and presumably destined to stay in business and make profits indefinitely in the future, but have no speculative or growth appeal.”
Is it any wonder that low P/E stocks outperform? TMFRich at TMF has been doing some back testing and found a P/E range of 5-10 provides the best returns. Dreman and others have highlighted that point over the years.
Favourite thoughts for the Week
Two from among dozens of favourites in this weeks New Scientist.
- A cat has the ecological footprint of a VW Golf. A medium dog has a larger eco-footprint that an SUV. I wonder how many Prius drivers have pets? [They were talking post production ecological footprint.]
- Scientists made a black hole which sucked microwaves into the core of the ‘black hole’. The device could lead to a new and more efficient way to gather sunlight to generate solar electricity.
and a brilliant one from MDC via Decision Point.
- it often makes sense to look at particular technical signals as information signals, not action signals.
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