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6.28.2015 Financial Intelligence Report Bookmark


With all the incredible things that have happened this week, from the Supreme Court declaring same sex marriage as “the law”, to Obama running an end around concerning the TTP trade agreement, to the insanity of the “push” for removing Confederate flags and even statues of Southern leaders, I’m going to take a break from the madness for today and just visit something completely off topic for today. The madness can certainly wait for next week to discuss.

With all the incredible things that have happened this week, from the Supreme Court declaring same sex marriage as “the law”, to Obama running an end around concerning the TTP trade agreement, to the insanity of the “push” for removing Confederate flags and even statues of Southern leaders, I’m going to take a break from the madness for today and just visit something completely off topic for today. The madness can certainly wait for next week to discuss.

It has been quite a long time since I’ve written about my “love” for solar energy, and since we’ve got a ton of newer readers, I would like to talk about it for a bit and maybe even bring some folks up to speed on where it stands.

Even as a little kid, I realized that every form of life can ONLY exist because of the perfect relationship we have with the sun. It isn’t so close that we ignite into fireballs from its energy, and not too far away that it doesn’t keep us warm. When “God” set this up, he gave us the true key to life, as without the sun, everything on earth (including us) would die in just a couple days. ( if that).  So, long before I had ever heard the term “solar power”, I pondered why we didn’t just “use it?”  Kids can be simple like that.

Even today, I am still in awe of the incredible amount of “power” that beams down to us every single day, and how terribly slow we were to try and take advantage of it. With cheap oil and cheap coal, we just didn’t put the research into solar that we should have so many years ago.  Even now with big advancements in solar power ( and more to come) solar hasn’t been focused on as much as it should have been.  Consider this…

Every day the sun blankets the earth with enough solar energy to power every home on the entire planet for about 2,000 years. You did NOT read that wrong. We don’t have to drill for it, explore for it, or blast for it. It comes completely “free of charge.”  Let me quote some figures for you from Eco-world.

In full sun, you can safely assume about 100 watts of solar energy per square foot. If you assume 12 hours of sun per day, this equates to 438,000 watt-hours per square foot per year. Based on 27,878,400 square feet per square mile, sunlight bestows a whopping 12.2 trillion watt-hours per square mile per year.  The earth receives about 274 million gigawatt-years of solar energy, which translates to an astonishing 8.2 million “quads” of Btu energy per year.

In case you haven’t heard, a “quad Btu” refers to one quadrillion British Thermal Units of energy, a common term used by energy economists. The entire human race currently uses about 400 quads of energy (in all forms) per year. Put another way, the solar energy hitting the earth exceeds the total energy consumed by humanity by a factor of over 20,000 times.

This “energy” is readily apparent down here in Florida. By noon, the idea of touching anything metal outdoors is quickly found to be a mistake as your car hood, your driveway, your bicycle is scorching hot. Yet all that energy, given to us for free each and every day, goes largely wasted.  I look at the rooftops of Walmarts, shopping centers, malls, strip malls and think of the billions of watts of power that land on them every day, heating up the building, destroying the roofs…and yet I see no panels.

For those who have absolutely no idea how a solar system works, let’s just explain a “small” set up that anyone could use for say, running an electric fan. There’s only a few things needed to “make” electricity from the sun. First is the panel itself.  Simply put, a solar panel works by allowing photons, or particles of light, to knock electrons free from atoms, generating a flow of electricity. So a panel is a unit consisting of photovoltaic cells that do the “atom thing”  that make up the panel.

Out from the panel, the current goes through a “charge controller” to regulate the amount of energy you will be pushing into the storage batteries.  The current comes out of the solar panel, into the charge controller and into your batteries. Okay, now you’ve got some free energy from the sun, how do you use it? You connect the batteries to an “inverter” which simply takes your 12 Volt DC battery power and “inverts” it into 120 volt A/C current. Then you simply plug your fan into the inverter and “bingo” you’re running your fan on nothing but sunlight.

If your panels produce more watts of power than your fan uses, you could even go straight from the charge controller into the inverter, with no battery. But as soon as a cloud came by, your solar output would stop. That’s what the battery is for, to “suck up” all the energy, and then mete it out as you need it smoothly. With the right sized set up you could run your fan for hours after the sun went down.

Now there’s NO question that solar has one gigantic drawback, and that has always been “storage”.  While you can now create huge amounts of solar energy with just a few panels now, you have to do something with all that power, because once it gets dark..the power stops. So the most common way of dealing with that is that homes and businesses that do implement some solar, “sell” it back to the grid while it’s producing energy, or they run portions of their homes/businesses directly from the panels when they can, and then sell the excess they can’t back to the power company. Then when the panels don’t get enough light, they switch back to buying the power company for electricity.

So obviously the drawback is “storage”, because in most areas of the country, on Most days you could capture enough solar energy to run your house 24/7, if you had an ECONOMICAL way to store it for the nighttime. For the most part that’s been attempted via battery, and it has been woefully slow at getting better. What’s the problem? Well for one, cost. Batteries are darned expensive for really good ones, and then you have problem number 2. Batteries are heavy. Problem 3 is that they “wear out”. I’m sure all of you have replaced a battery in your car, motorcycle, boat, golf cart etc.

Consider this for a second. The supposedly “average” house in the US uses about 35KW of electricity per day. Well to set up the batteries that would carry that much juice for just 24 hours, would cost about 10 grand, weigh several tons and take up an entire bedroom worth of space. Ain’t happening.

So the issue isn’t that panels are too expensive any more, they’re really not. The issue is that you need a darn big battery bank to store up all that sunlight energy, and after several years, you’re going to need new one’s. This is EXACTLY why electric cars haven’t been accepted as well as they would have been. See you take a car like the Tesla, and the fact is a few years down the road that battery has to be replaced. Right this second, a battery pack for a Model S is about 45K. Tesla says that by the time everyone needs a new battery it will be under 25K.  Well that’s still some hefty price to pay, no? Yes.

I’m a huge believer in both solar AND electric cars. If I can get free energy from the sun, and use that to power my vehicle and run my house, what part of that wouldn’t I like?  But because battery technology has still not been perfected, there’s a problem in the whole scheme. The batteries  are the weak link. This is exactly why there was so much buzz recently about Tesla coming out with their new “home” battery. Yes it is a tremendous leap forward in technology, but again the price is ridiculous.

So batteries are a Very important part of the solar situation especially if you’re trying to do something like go “off grid”. If you build a cabin “up on the lake”, you can now get all the parts to do that “relatively” inexpensively. But again it is going to be the batteries that end up being the part that offsets the “free” energy.  

Right now it is not economically feasible to run a full sized home on pure solar and battery storage. The size and cost of the batteries needed to run a 2000 square foot house running air conditioning and water heaters, and washing machines simply requires too much space and money. But that’s not to say you shouldn’t explore a small system for your home.

Being a “solar nut” I have been using solar “trickle chargers” to keep my boat batteries charged and in tip top shape for years. No matter how long I leave the boat unused, the batteries are always ready to go. I also use solar for other situations where getting “free power” is simply a “hoot” to me. For instance I have an electric trolling motor I use on my little jon boat. I use a solar panel to charge the trolling motor battery. Once you look around a bit, you find all sorts of uses for solar. Do you have a shed you’d like to have light in? Or how about a power strip for running a drill/saw/etc, but don’t’ want to run a power line to it?  One small kit for about 300 bucks and a 12 volt battery and you’re in.

For relatively little money, you can have a system that will charge your laptop, run your weather radio, and keep your freezer running during a power outage. In upcoming articles I’m going to discuss the use of solar in emergency situations where charging a cell phone, running a computer and modem, having some lights, etc, is very very valuable.  There are now very durable “fold up” panels that you can put in your glove box, or backpack and have power even if you’re out in the woods camping.  

Let me wrap this up today by saying this…I have to “know” that the technology to store solar energy will come available. The power companies don’t want it that’s for sure and I can bet you that’s just one of the reasons the standard lead battery hasn’t’ changed in 125 years. But as companies like Tesla continue to come up with new lithium ion technology, there will be other entrants into the space.  One that comes to mind is a newcomer to the battery space, Biosolar.

Biosolar says they have new technology that would run a Tesla car 2 times further, for ¼ the price, and recharge faster. Whether this “new” technology actually works and translates into a true marketable battery is yet to be seen, but it just shows that indeed, people are paying attention to the battery/storage problem and it’s just a matter of time before some whiz kid comes up with the solution. I can’t wait.

While I’m totally into the idea of solar, until this last hurdle is solved, it’s hard to recommend solar stocks, because they have indeed been throttled to some extent by the big energy producers pushing back, and the problem with storage. But my guess is that when storage is solved, the solar manufacturers will indeed be great investments again.

The Market…

Gretigue.  That’s the buzz word on Wall Street that they coined over the endless fatigue of “Geece is saved/Greece is doomed” we experience every day. Believe me I’ve had enough of it myself, as each and every day is a roller coast of Greek deal on-Greek deal off.

The last situation we were left with was that talks would be extended through the weekend, but then there was news that the Greeks have decided to push a referendum and let the people decide which way they want to go. This thing just never ends.

On Friday the market was mixed. The DOW managed to keep a 50 point gain on the heels of good earnings out of  Nike, but the S&P failed to hold into the green, closing slightly red. Does it mean anything? I think so.

This week Carl Icahn came out and told CNBC that this market is very overpriced. I guess it isn’t official until some big named Wall Street honcho says so. We’ve been saying it for months on end. At least he agrees.

So what’s it all mean? Well, when you get the big guys starting to say things that go against the main stream “all is fine and dandy” routine, it means that they are covering their butts. They don’t want to catch hell from the public if the market rolls over and these guys were still screaming about “buy stocks!”  This way, they can still play their games and if indeed there’s a serious correction, they can say “See, I told ya!”

The market is overpriced. The market has been pushed relentlessly by QE money and corporate buy backs. We saw it again this week,  as companies missed earnings estimates, forecasting lower sales for next quarter….but then announcing a new buy back program to keep their stock price up. As long as they continue to have access to cheap credit, they’re going to keep playing this game. It’s good to be a company insider and benefit from rigging your stock higher.

But the one thing you have to totally understand about all this is the fact that they aren’t doing all these buy backs with cash. Oh no…they are borrowing the money, selling Corportate bonds, etc, to do it. The big fallacy that makes me laugh every time I hear it is when some breathless blonde on TV says “there’s so much cash on the sidelines”.  Well just how healthy are these companies if they have 50 million in cash on hand, but debts of 500 million??

In any event we’re still stuck with the Greek thing, and yes, the day they say some sort of deal has actually been reached the market will soar on the news. But for how long? Not long I’m afraid. This market is tired, it feels heavy, and I just don’t think they have the “oomph” any more. Soon enough we’re going to be in earnings season, and it will be interesting to see just what companies have to say. Earnings estimates have been lowered over and over to make it easier for them to beat, but what I want to hear is the “outlook”. I don’t suppose they’re going to be terribly healthy.

Being held hostage to the Greek insanity is really wearing on everyone, and coupling that with the upcoming earnings season is going to add even more headaches. We’ve been keeping position sizes low, and taking our profits  when they appear. For instance we had bought GILD at 116 last week, and it ran to over 122.50, before it started backpedaling. So, we sold it out, not willing to let all our profits vanish in such a hectic market. Until this market breaks out, or breaks down, that’s all we can do. Hit for singles, not home runs.

One that’s starting to look like it might try and make a run into its earnings release is RMBS. The trade for me would be on a move up and over 15.50 that holds a close over that level.  Just remember that if the overall market is falling, it is very hard for a stock to try and swim upstream on its own. So keep that in mind. I’ll catch up with you all on Wednesday and see where things stand.

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