Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

[WildspitzE]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

What is "EM" ?

Emerging Markets

[EJ]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

Please correct if I'm not understanding this. It seems as if a gigantic shift has occurred within the last few months. Two examples:

On January 3rd you wrote, "The only event of twelve noted that has not occurred since then: a currency dislocation. We do not know how it will unfold but expect to see a major currency event this year."

Today, it's "After a number of rise and fall cycles, we will run out of credit."

When a nation runs out of credit, its currency suffers. It is probably unfair of me to assume that readers automatically connect the two. See Headed for a Sudden Stop.

How recent a relevation is "I've learned to not under-estimate central banks?"

See the About section of the web site written when we re-opened iTulip March 2006:

Fast forward to March 2006. The NASDAQ has mostly stayed in the dumper, with various dot com stinkers sinking and disappearing into the history books, again, predictably. The DJIA, by a combination of a re-constitution of the easily manipulated 30 stock index -- throwing out some losers and adding in some winners -- and inflation has fought its way back to where it was six years ago – flat. Except that, adjusted for inflation, it is down at about 20%. But that hasn't kept Cramer from returning to CNBC to rant and throw chairs around while touting the latest "can't lose" stocks. Not coincidentally, gold has gone up, as we forecast in 2001 when gold was trading near 20 year lows and widely derided as a loser investment class. But what really kept the U.S. out of poorhouse, if only until now, was the housing bubble. But not only did we fail to predict the housing bubble in 2001 as the Fed's answer to the stock market bubble collapse, we argued that the Fed would never allow one to develop.

Wrong.

Our thinking was that in the past the Fed has been very quick to stop speculation in real estate, much more quickly than stock market speculation. Why? Real estate involves the banking system much more than the stock market bubble did and looking after the banking system is Job One for the Fed. Letting millions of homeowners buy real estate they can't afford with mortgages they can never pay back is a surefire road to mass defaults that can cripple the banking system. When a relatively normal housing cycle boom ended in the early 1990s, the U.S. banking system seized up. That response to the downside of that minor real estate cycle was a gran mal seizure compared to the massive stoke that the banking system is likely to suffer on the back end of this real estate freak show. More importantly, the political aftermath of a real estate bubble is the macro economic devastation of the host country's economy. Lots of unemployment and negative wealth effects that keep consumers home sulking and saving, not out at the mall buying goods from Asia that keep Asian central banks inspired to lend, and the virtuous circle of lending, borrowing, importing and exporting going, in our case leading to recessionary, inflationary and other re-election sensitive negative economic conditions. So why take the chance? Because it looked better, at the time, than the obvious alternative: a huge recession and unemployment before the 2008 elections – never good for anyone's re-election bid.

The assertion three years ago when we opened that the housing bubble was going to collapse and take down the economy, financial system, and banking system got us labeled doomer-mongers by NPR and others who covered our re-emergence at the time. Now they interview me about the economy and alternative energy bubble. Life is full of paradoxes.

Frankly hearing that sentence from either you or someone logged in as "FRED" is pretty shocking.

The statements are all consistent, but that are not linear. Beware linear thinking in a non-linear world. The greatest error being made now is an artifact of the attention deficit disorder of the American media. The Great Depression is remembered as a stock market crash on a Tuesday and soup lines on Thursday. I recommend a review of A Financial Market Crash is a Process, Not an Event.

The process is ongoing, but in a different way because the financial system, institutional responses, tools, international trade relationships, debtor-creditor relationships, are completely different. What never changes are the rules of trade, currencies, and debt that determine end results.

[EJ]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

Luke, as you know, I'm in the midst of this industry. Some days we've got our swords out awaiting a policy shift that wipes us out and the next we're celebrating our genius. This is not a time to invest unless one has a deep understanding of the industry and is willing to put a stake in the ground and defend it with clear resolution.

As I've said in several posts over the last 18 months, the only sure bet I knew about was FSLR. On their recent jump, I'm out. They have eco issues which may not be resolved in their favor.

I see no RE bubble today. We're grinding it out against our competitors and without the clear favor we've received from the current administration, we'd be struggling like many others. Give it ten years, there are some amazing technologies working their way though the pipeline. When it explodes, RE will be huge but we're not there yet.

June 2008, I was in NYC presenting to a group of investment bankers and private equity managers on alternative energy. Firms with a big stake in solar were terrified that a critical tax credit that was due to expire at the end of 2008 was certain to be allowed to expire. I asked the audience for a show of hands: How many expect it to expire? Half the hands went up. How many expect it to be continued? No hands went up. To the half of the audience with an interest in solar I explained that the chance of the tax credit expiring in 2008 were close to zero. Since in fact the tax credit was indeed extended, I have developed good relationships with a couple of them since then, now that they understand my arguments.

Long term we will move to a distributed energy generation infrastructure, and solar will be part of it. Short and medium term, the picture is far more cloudy. Deep structural flaws in our economy created by the FIRE Economy remain, and trends that have been in place since the early 1980s will continue to reverse. Finance, Insurance, and Real Estate will revert to a subsidiary from a dominant role. The financial sector will continue to contract. The personal savings rate will rise. National savings will rise. The dollar will become part of a multilateral global monetary system rather than dominating it as it has since WWII. The dynamics of Peak Cheap Oil will subject the global economy to a series of price shocks, the first of which occurred between 2007 and 2008.

Stock markets broadly tend to perform poorly in periods of transition. That said, it is in these periods of transition that selective opportunities are best; companies like Standard Oil, RCA, Microsoft and Google come to be. Our focus is on identifying the most likely winners in a new economy, rather than timing entry into the broad markets themselves. Our primary interest in the short term movements of the stock markets, such as ducking the decline in 2008, is to make sure we money to invest in these opportunities once we identify them and do not allow bear markets to take it away.

[stockman]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

One, we don't have to. Since we dodged the collapse last year, we have all of our money still and are not motivated to try to recoup losses by trading the market today.

My perspective is clearly with a shorter term focus. While I do not have to trade... at least if that is defined by 'recouping losses'... I have not acquired sufficient wealth in my life to pass up opportunities when they present themselves. So trading in a strongly trending market appeals to me- in both directions and in different asset classes.

In farming you learn pretty quick that when the weather is right- get your work done. Often said as 'make hay while the sun is shining'.

I read (and appreciate) broadly research/economic commentary here at itulip; BCA; Elliott; Bridgewater; Mauldin; MER; etc... for back ground. But as one with a shorter term horizon looking to build wealth I am equally concerned with market activity and trends- especially alert to the fact that many who fail in trading markets are those with firm convictions. SBS- See Both Sides is something that the markets have taught me.

I think Paul Tudor Jones makes the point here-

Paul Tudor Jones II- What’s your take on the next generation of managers? http://www.iimagazine.com/Article.aspx?ArticleID=1964189
"I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you? These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation."

Paul Tudor Jones pic.jpg

[nero3]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

to the fact that many who fail in trading markets are those with firm convictions.

Excellent point. I have been surprised on how humble some of the best traders are.

[FRED]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

My perspective is clearly with a shorter term focus. While I do not have to trade... at least if that is defined by 'recouping losses'... I have not acquired sufficient wealth in my life to pass up opportunities when they present themselves. So trading in a strongly trending market appeals to me- in both directions and in different asset classes.

In farming you learn pretty quick that when the weather is right- get your work done. Often said as 'make hay while the sun is shining'.

I read (and appreciate) broadly research/economic commentary here at itulip; BCA; Elliott; Bridgewater; Mauldin; MER; etc... for back ground. But as one with a shorter term horizon looking to build wealth I am equally concerned with market activity and trends- especially alert to the fact that many who fail in trading markets are those with firm convictions. SBS- See Both Sides is something that the markets have taught me.

I think Paul Tudor Jones makes the point here-

Paul Tudor Jones II- What’s your take on the next generation of managers? http://www.iimagazine.com/Article.aspx?ArticleID=1964189
"I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you? These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation."

[ATTACH]1516[/ATTACH]

Our update of Debt Deflation Bear Market takes the view that $2.2 trillion in stimulus injected into the world economy between Q4 2008 and Q1 2009 can't fail to produce a bounce. But then what? The debt hangover legacy of the FIRE Economy has not been addressed, the financial oligarchs are still not allowing the broken banking system to clear, foreign official and private lenders continue to pull back, and with service and government jobs account for more than half the employment in the U.S., the U.S. labor force is geared toward a continuation of an unsustainable economy not the kind of economy that the U.S. needs to turn into to be competitive post-FIRE Economy.

The theme of the article: Re-inflation without restructuring. We use the term "decoupling" as a verb.

Stimulated markets or simulated markets?

[cjppjc]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

Wow. Great chart Fred. Thanks. Covering 20 years. Is this our future? Or will a currency debasement result in a different looking chart in the U.S.?

[Slimprofits]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

When a nation runs out of credit, its currency suffers. It is probably unfair of me to assume that readers automatically connect the two. See Headed for a Sudden Stop.

My post wasn't clear, but it seems you still answered the question which really was, "are you changing the projection of a currency event taking place in 2009?"

[FRED]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

Excellent point. I have been surprised on how humble some of the best traders are.

Our record reflects our expertise in long term economic and market dynamics. Although we occasionally offer short term market opinions, such as the call in OCt. 2008 that the last major gold correction was likely to be $780--in the event it declined to $712--we have no expertise in short term trades. Then again, neither does anyone else. Some may appear to in bull markets when everyone benefits from rising prices. In bear markets the apparent genius of most short term market timers quickly dissipates. If there are deep underlying structural weaknesses in the economy causing the bear market, such is the case today, a few timers stand out and appear brilliant at timing bear market rallies, at least until the next correction.

No doubt is money to be picked up on short term trades, but more difficultly in bear than in bull markets and at the opportunity cost of missing the larger trends where the real money is. The real money is in taking your time to identify long term trends, placing your bets, and sticking with them.

The attention deficit disorder financial media will die quickly, however, if everyone invests this way. Who will turn on the TV to see how his latest hit pick is doing? How will the masses be inspired to churn their portfolios to maintain the fee-based business models of online brokerages who are the primary sponsors of these shows?

To eliminate confusion and reduce distraction, to allow us to remain focused on important matters, in iTulip V3.0 we rigoursly separate discussions of short trades that we believe are of minor importance and long term trades that are our core value proposition.

[metalman]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

that will help. feels like we get side tracked with these 'rally' and 'bull market' arguments. what's the next gold 2001 - 20??? trade?

[stockman]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

"No doubt is money to be picked up on short term trades, but more difficultly in bear than in bull markets and at the opportunity cost of missing the larger trends where the real money is."

I would argue that understanding and keeping the longer term trends in mind should give an edge to a trader making short term trades. That's why I do as much reading as possible of those who did 'get it right'.

It has been my observation that the percentage of long term forecasters who 1) get it right over multiple cycles and 2) maximize returns over a long period are extremely rare. About as rare as good (long term, bull/bear) traders in percentage terms I'd guess.

"The real money is in taking your time to identify long term trends, placing your bets, and sticking with them."

Most following this suggestion have had miserable results. It's success is dependent on the accuracy of the reading of the trends- not necessarilly on the stuck bet. itulip stands out as an example of getting it right, (unforunately another 99% failed) and whether one chose a buy and hold approach or a trading approach getting that trend right was the key.

But it sounds like discussion of short term oppotunities are not desirable here- perhaps distracting to those struggling to maintain their conviction on long term positions.

No offense has been intended- different style than itulips in how to best take advantage of current environment, but I appreciate the fundamental take here greatly. My thanks to you and EJ!

[ThePythonicCow]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

When a nation runs out of credit, its currency suffers. It is probably unfair of me to assume that readers automatically connect the two. See Headed for a Sudden Stop.

I wonder if it is misleading to anticipate something like a Sudden Stop currency crisis for America. Rather I expect it will be perceived, at least by Americans, as a Sudden Stop Oil crisis.

In the countries that you analyze (Korea, ...) which had various such crises, they produced some commodities or manufactured goods in great quantity and exported them in exchange for the currency (dollars) to purchase the other vitals they required. When their currency or economy or banking system collapsed, they could no longer get the dollars they had been counting on.

The United States and its aging parent Great Britain are the worlds bankers. We export dollars. We no longer depend on major manufacturing, mining or drilling to fund our world trade. We won't experience the Sudden Stop as a currency crisis. We will experience it as an energy import crisis. The price of critical imports, Oil being numero uno, will spike upward. This might happen after other nations such as those in Europe, BRIC and OPEC develop enough trade between themselves that is denominated in anything other than dollars that they can tolerate telling the United States to go stuff itself.

The constant in each case is the dramatic loss of whatever is the nations most critical external resource. For other nations over the last half century, the most critical such resource was dollars. For the United States the most critical external resource is Oil.

When that happens, the United States will fall into a serious Depression or it will start (er, eh - expand) a war for oil, or both. Sooner or later, energy that can be produced domestically within America will become a major investment opportunity. We might have to blow a few things up first, however.

[metalman]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

But it sounds like discussion of short term oppotunities are not desirable here- perhaps distracting to those struggling to maintain their conviction on long term positions.

as a long time reader, i don't see it as a 'struggle to maintain conviction on long term positions.'

isn't that a contradiction of terms?

if you don't maintain them, they are not long term.

if you don't have a long term investment thesis, then if you forget/ignore/lost site of the thesis, you are going to drop your long term positions to chase something else, only to look back and find you were better off doing nothing at all.

how many people even here bought gold in 2001 and never sold it? only those who kept referring back to the original thesis. premise still true? then stick to it.

no struggle required. ignore the noisy traders... but that's easy, too.

but... now that the economy is under the spell of gov't spending, what's 'long term'? maybe nothing?

[santafe2]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

I'm sure most have bumped into this.
Curious if you would comment.
http://www.nytimes.com/2009/05/03/bu...r.html?_r=1&em

I saw nothing inaccurate in this article. There were a few important points covered. 1) The world market is not growing currently, 2) The US is the next major market for solar, 3) The strong, well positioned companies will do well.

In the meantime, the competition among manufacturers is likely to intensify. Even as some of the weaker solar companies resort to layoffs, a number of big names — including Schott, First Solar, SunPower and Sharp — are building, expanding or looking to build manufacturing plants in the United States. Sanyo, the Japanese electronics company, is building a solar wafer factory in Salem, Oregon’s capital, that is to begin production this fall.

[santafe2]

Re: Janszen Interview on NPR on 05/01/2009 - Power Hungry...Energy Green Bubble?

Actually the part of "alt-energy" I was referring to was not conventional alt-energy such as wind, solar, geothermal, tide and so forth, but rather the nuclear end - fuel, plants, service, utilities, construction of, etc.

I agree with that Luke. In no particular order, here's a tentative to-do list to begin immediately:

• Plan strategies to mitigate the next oil shock. Those would include conservation, additional storage and control of speculation.
• Require all utilities to bill using both time-of-use and tiered tariff strategies for billing their customers.
• Allow all current coal plants to stay on-line in the near term with a plan to decommission over time.
• Increase dependence on NG in the near term
• Streamline the build-out of nuclear power plants with a plan to begin decommissioning at a future date
• Move toward a world that uses electrical energy
• Enforce Architecture 2030 building practices. Also, subsidize the insulation of older homes while minimizing thermal transfer issues.
• Pass cap and trade legislation to support the build out of nuclear energy infrastructure and support all viable renewable energy projects. Here's a metric that may help: Renewable energy projects should pay back in 10 years at 25 cents per kWh without subsidy.
• Fast track battery research and off load this responsibility from the auto companies.
• Create incentives for people to move to low energy use transportation be it public or high mileage vehicles

There's obviously a lot more but this is a plan to get us to 2050 where we might have the technology to generate most of our energy in real time.