Have the e-believers finally gone and done it? Put their money where their mouth is?
According to Eoin Treacy’s daily Exponential Investor Premium video, which you can get access to here, green tech is breaking out.
No, not breaking down. We’re talking stock prices going up. And fast.
The wind energy exchange-traded fund (ETF) has surged, after a six-year trading range. As has the solar ETF. Geothermal stocks are rising too.
The Green Bubble is go!
What makes the story especially interesting is the timing. The boom has kicked off when you’d least expect it. Which should mean it’s even more legitimate.
But what is this surprising context? I’ll have to set the scene for you to understand the significance of what’s going on.
Oil and renewable energy might seem like substitutes, competitors and arch enemies. But the prices of their corresponding energy stocks tend to move together regardless. Although the future of oil and green tech seems mutually exclusive, the fate of their stocks is entwined for now.
That might sound odd, but it makes intuitive sense. When oil is expensive, renewables get more popular amongst even the toughest sceptic. Renewables first became viable when oil prices were much higher. And when the oil price falls, renewables can’t compete as well.
So the oil price and the fate of renewables are joined at the hip. Which makes things confusing for the future too.
The less oil we use, the lower the price, the more viable it gets relative to renewables again. The free market is constantly doing a balancing act. A balancing act that optimises which resources are used. If only it was a truly free market…
But the relationship is what has changed. It’s not just that renewable stocks are up. As Eoin pointed out in his video, renewables are rallying while oil is falling. Wind specifically is rising at about the same pace as oil is falling. That is seriously weird. Unless, of course, the Green Bubble is finally taking off, oi’ll be damned!
A few days ago we looked into how gas, not clean energy, is behind much of the reduction in emissions around the world. Well, the gas price is closely tied to oil too. So renewables aren’t just decoupling from oil, they’re decoupling from “green” gas too.
This is a new development that signals something special is going on in renewables. They’re not rising because oil is putting upward pressure on them. They’re not becoming more viable because the alternative is getting more expensive.
Renewables are booming off their own back. Or even despite Brexit oil falling. They’re moving on their own momentum and viability. At least, that’s how investors see it.
But why? What’s behind the breakout and divergence?
E-believers will be happy to tell you. And anyone else who will listen.
It’s because the renewables boom is the real deal. Green energy can compete with the dirty stuff. On cost, efficiency, reliability and so on and so forth.
Now I’m far from convinced, yet. Diesel, ethanol and Solyndra all had a boom too. For a while. Now even hybrids are getting demonised for their pollution.
But there is one little glimmer of hope in the renewables sector which even I can’t deny. Technically it isn’t even a renewable, but it’s closely related. I’m calling it…
Churchill’s Greatest Mistake
More on that in coming days. Unless you don’t want to wait. Because Eoin’s video on Thursday is about the same topic. As he sees it, “This has the potential to revolutionise the UK economy”.
It’s all about something that should’ve happened almost 100 years ago, if you ask me. And yet, a simple decision by Winston Churchill undermined the boom. The boom that may now be back to Britain, for good.
Sticking with it to begin with could’ve solved our problems in the Middle East and climate change in one fell swoop. Imagine that!
And if you thought putting the Royal Navy on oil had an impact on the fate of our nation, you ain’t seen nothing yet.
Uncovering this sort of thing is Eoin’s daily task in his Exponential Investor Premium video series. Like I said, it’s open to new subscribers now.
But what of oil? Is it doomed?
Well, I was being a good boy and completing some CPD learning requirements last week. I discovered a presentation about ESG investing. Environmental, social and corporate governance is the acronym. It’s all about how to be an ethical investor. (How to convince your clients that they are ethical investors.)
During the presentation, it became clear that the oil industry would be the new tobacco. Investors would abandon oil, just as they had once abandoned tobacco. After all, who still smokes?
The trouble is, tobacco stocks are still some of the best performing ever… Even after their demonisation, the stocks have done well for owners.
And even our energy analyst and e-believer James Allen agrees that oil stocks will outperform in much the same way as tobacco stocks did. The latest Power & Profits headline reads “Our Big Oil strategy is just about paying off – let’s sit tight and collect the dividends”.
So the Green Bubble may be go. But oi’ll be damned if I invest in any of it, but for Churchill’s Greatest Mistake…
Until next time,
Editor, Southbank Investment Research