Green: The Secret to Resurrecting Your Nest Egg in 2009.
Date: January 27, 2009
Did you know that clean energy was the top performing industry in 2007, returning almost sixty cents on the dollar for investors? That was almost double the returns of the 2nd highest performing industry -- oil and gas -- at 32 cents for each dollar invested. And, thanks to President Obama’s American Reinvestment and Recovery Plan, clean energy is poised to be the top performer again in 2009.
In his first White House blog, dated January 24, 2009, President Obama wrote that his Recovery and Reinvestment Plan will “invest in our most important priorities like energy and education.” The details of the plan, which President Obama is currently lobbying with Congressional members, is available online at WhiteHouse.gov and includes the following target expenditures:
Recovery and Reinvestment Plan of 2009
Now, for those who are skeptical of Washington’s ability to get anything done before the next Ice Age, returns on green investing are not just dependent upon the President’s ability to win votes with Congress. There is a worldwide push for clean energy. In fact, Europe, Eastern Europe and China are far more proactive about greening their grid than the U.S.
Germany was one of the first countries to embrace solar energy with its “family program.” Solar panels were installed on many homes in that country over the last five years. Germany’s team, Technische Universität Darmstadt, even won the U.S. Department of Energy’s Solar Decathlon competition in 2007! The next Solar Decathlon will be held on the Washington Mall in Washington D.C. October 9 through 18, 2009, where 20 international teams will compete to design and build the most attractive, energy-efficient solar-powered house.
China launched a new clean energy initiative, “Electric Vehicles for Ten Cities,” on January 6, 2009, which will put 1000 electric cars per year for three years in each of ten target cities. (Now if those were Tesla Roadsters, I might just move to one of those cities myself!) On Monday, January 26, 2009, the Chinese Academy of Sciences announced a plan to achieve solar energy as China’s dominant energy source by 2050. Other European and Eastern European countries are modeling Germany’s incentives to jumpstart their own clean energy plan and are committed to powering their grid with renewable energy with large-scale solar harvesting projects.
Europe, Eastern Europe and China are the biggest clean energy customers to date, accounting for the strongest sales growth in any industry on Wall Street over the past three years. Solar giants, like Suntech Power Holdings, MEMC Electronics and LDK Solar are profitable, with a strong backlog of orders and high profit margins, at 12%, 20% and 24% respectively. MEMC Electronics (a silicon manufacturer) sales were $2 billion in 2008, up from $1.5 billion in 2006. Suntech’s 2008 sales were $1.8 billion, compared to $600 million in 2006. LDK Solar’s sales have exploded from $105 million in 2007 to a projected $750 million in 2008.
On January 5, 2009, Xiaofeng Peng, Chairman and CEO of LDK Solar, reported, “Our operations remain at full capacity, with contract backlog remaining strong for 2009." The LDK Solar sales expectations for 2009 are $2.3 to $2.5 billion.
So, while most industries worldwide are contracting, and many, like real estate and banks, are showing catastrophic losses, solar energy is profitable, growing – largely on worldwide government incentives and investment -- and healthy. Electric cars and component industries, like lithium mining and lithium ion battery makers, aren’t profitable yet, but the winds are favorable for growth and government incentives worldwide as well.
There is one trick to investing green, however. As I outline in my new book, Put Your Money Where Your Heart Is, the challenge of investing in an industry that is exploding with potential and new technology innovations, is that when innovation is occurring rapidly, it’s difficult to predict a clear winner because tomorrow’s invention could create a new breakout technology. Additionally, clean energy has been around since the 1970s and some legacy corporations are carrying too much debt to compete with the new stalwarts, many of which are based out of China. For these reasons, a clean energy Exchange Traded Fund (ETF), which owns a basket of clean energy companies, is a better policy for most investors than picking an individual stock.
4 Key Steps to Adding Green to your Nest Egg:
1. Include a Green ETF as one of 10 diversified Exchange Traded Funds in your nest egg.
Check out the below pie chart for an example.
Remember to “overweight” 20% safe in 2009, since we’re in a recession, keeping 70% safe if you are 50, and 50% safe if you are 30, etc.
For more nest egg strategies that work in bull and bear markets, buy and read my new book, Put Your Money Where Your Heart Is.
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