Overnight Chevron has made a bid for Atlas Energy which to my way of thinking confirms that natural gas has real potential to be a bridge fuel, a transition away from gasoline for the nations trucks and autos. While it has been believed by many that our President was loathe to get behind natural gas and is a supporter of the fuel of Dickens, coal. This purchase of Atlas may indicate that natural gas and not coal could come to the forefront if the US intends to wean itself off gasoline.
Green Investors should understand that the weaning process away from petro based gasoline fuels will be a piecemeal process, sometimes moving glacially slow and very dependent upon political support. The purchase of Atlas by Chevron marks the second major purchase in recent years followed by Exxon’s purchase of XTO Energy. Do we see a trend emerging?
RMHI has had a substantial position in Atlas subsidiary Atlas Pipeline Holdings for several months. While the search for more glamorous alternative energy investments can be enticing for green investors, we’ve preferred a more conservative position with investing the eventual transition from gasoline fuels to natural gas to ??.
The the recent attention of the Tesla IPO attention has been also drawn to the manufacturers of electric car components, especially to the Holy Grail for the electric car…the battery.
Lithium is a major ingredient in the creation of batteries for electric cars but the extraction from the Lithium mines will be at odds with most SRI funds and advisers. For example in our screening process we eliminate the extraction industries which includes mining. Hence would this not eliminate Lithium mining from consideration?
Recently we received an update on an upcoming ETF IPO that will focus on the chain of Lithium production: the Global X Lithium ETF which will trade under the symbol LIT.
The top holding in the LIT ETF which will comprise a 20% weighting will be Chemical and Mining Company of Chile symbol SQM, a company we ordinarily would avoid for purchase.
The second holding is industrial giant FMC which is a major manufacturer of insecticides, crop production and pest control products and will represent just over 17% of the portfolio composition.
For a report on the state of the battery industry and its relative position in lieu of forthcoming developments and consumer adoption of electric vehicles we suggest the recently published report from Goldman Sachs: Americas: Clean Energy, Energy Storage
Bond markets can be a great barometer of whether we’re recession bound or not. While its impossible to defend the argument that the economy has softened rapidly over the last two months, the bond markets with the exception of the Treasury market do not indicate a recession. However, if you’re unemployed or significantly underemployed this is merely a matter of semantics.
We’ve noted the appearance with deference to the Gloom and Doomers, Bob Prechter and Nouriel Roubini. I’m afraid the days of economists in tweed hunkered down in their academic offices are long past, not when the bright lights of media attention beckon. But Roubini is back and without a conscience just as he was in the Spring of 2009 predicting doom. Does he acknowledge being wrong in 2009? Hardly not, not when he can milk the media for his call in 2008.
But if Mr. Roubini is correct in his depiction of doom in the economy then why are Baa and High Yield corporate bond yields not rising sharply? Corporate bond yields are a great barometer of impending economic turns. Yields have risen before almost every recession. Baa yields have risen less than 20 basis points recently and High Yield which can get downright whippy have risen only about 100 basis points from 9% to 10%. Clearly the message of the bond markets is much smoother than the message of the equity markets.
Well, that was quick……………TSLA breaks thru the offer price!
There may come a day when we’ll consider Tesla as a candidate for investment but in order for this to happen we’d need to see significant balance sheet improvement along with real revenue and profits. In the meantime it remains a developmental stage company.
If Rush and Sarah can extrapolate the conclusion that Conservationists are to blame for the BP disaster (by forcing rigs to go farther out to sea which induces a higher potential for hazard). Then, couldn’t the Left state that the austerity measures being promoted by World governments including the Obama administration based on pressures imposed by the Tea Party Movement and similar organizations could impose a severe Double Dip recession as theorized by Paul Krugman?
Be careful out there
Both the US stock market and Treasury market are seeing non-confirmations in the most recent moves lower.
US stock market:
Advance / Decline line is not confirming the move lower as the average stock is not falling with the market indices.
New Lows: The number of new lows continues to shrink when compared to the two other times we’ve been this low in the past month.
VIX: The VIX which is a measure of volatility which peaked in this cycle at 45 in May closed yesterday at 34.
Sentimentrader.com’s Intermediate Term model has moved to excessive pessimism once again. Generally a good time to increase long exposure.
In the Treasury market:
Investor Sentiment is at the highest since December 2008, not one of the better times to be buying bonds. Plus we have to be concerned with the thought of worldwide investment managers buying US Treasuries to look good for their clients in light of the decline in Euro bonds, otherwise known as “Window Dressing”.
Lastly, the decline in US Treasury yields is not confirmed by the bonds of other G-7 nations.
The Tesla IPO has gained a great deal of attention but it has to be time to ring the register. There will be other times to buy this if it can deliver something other than losses. I just read the battery for the car costs $30,000 and does not work in cold weather. Well, that pretty much kills the potential for a Tesla at 8000 feet in Colorado.
3% Treasury Bond yields aside calls for a double dip recession seem premature as personal incomes and expenditures continue to post progress in May and supportive of modest economic growth. Inflation remains in check as well.
A few of our new holdings are moving well this morning on little or no news.
Telecom service company IDT Corp. is up 7% on potentially being added to the Russell index.
For green car advocates Tesla Motors is due to stage its IPO tomorrow and markets the biggest auto IPO since Ford Motors over 50 years ago. At minimum the Tesla IPO and subsequent stock performance will be an intriguing barometer of investors interest and belief in the future of Green autos and could bode well for future green auto starts ups: Fisker and Smith Electric Vehicles.
The Tesla story is intriguing but intriguing is not enough of a reason to devote capital to at this point. The Tesla battery operated sports car is very beautiful. If you haven’t seen the car you should. It reminds me of a Porsche in shape with a targa convertible top. Price is in the $50K range and they’ve sold just over 1000 vehicles. But the company is bleeding cash with a loss of $29 million in the 1Q.
Toyota has invested $50 million into Tesla but at this point in time the company is supported by a $465 million staged loan from the Department of Energy.
If that’s no enough Tesla CEO Elon Musk will be selling $20 million dollars of his own shares in the company. Lack of revenue and earnings would eliminate it from our consideration but it will be fascinating to watch nonetheless.