How can METARs tap the government’s large investments in green energy industries into our investment opportunities? The linked article describes the large amount of money but also the weaknesses of turning the government’s expenditures into profitable businesses.
(As always, please avoid political partisanship – difficult because the article is permeated with partisanship. Remember that METAR"s focus is investing.)
A Huge, Uncharted Experiment on the U.S. Economy Is About to Begin
By Robinson Meyer, The New York Times, Feb. 12, 2023
…
Thanks to three laws Congress passed over the past two years — the Bipartisan Infrastructure Law, the CHIPS and Science Act and the climate-focused Inflation Reduction Act — the industry will be very well taken care of. … Over the next decade, up to $25.8 billion before you get to the bazooka: an uncapped tax credit for hydrogen that could pay out perhaps $100 billion or more over the next decades…
Can the government use policy to make sure that innovative ideas don’t get lost in the research lab or patent office, but instead make their way to the factory floor and corporate showroom, generating jobs and economic value along the way?..
Some kind of climate boom is now all but assured. The investment bank Credit Suisse predicted last year that the I.R.A. would put more than $800 billion into the economy by the end of the decade, galvanizing more than $1.7 trillion in climate-friendly public and private spending overall. The law will transform the United States into the “world’s leading energy provider,” the bank said. The American renewable industry alone could attract 78 percent more investment per year by 2031, according to the energy-research firm Wood Mackenzie… [end quote]
That’s a lot of money. Someone should be able to use this as seed money to create new industries. But the rest of the article describes the potential problems in creating the laws, managing the process and making adjustments. It sounds like an exercise in inefficiency.
Experience shows that many investors in start-up industries get burned. (Think WorldCom.) Can small investors like METARs find good, safe investments or would it be better to just stay away from this sector?
Keep in mind, “regime change” can turn the environment on it’s head overnight. We recently had an administration that was trying to force electric utilities to burn more coal. Too much risk for this old phart.
Yes, Tesla peaked a year ago in the days of high PEs at about $400/sh. Tesla clearly is expanding production capacity. No one knows if they can sell all they can make.
Clearly their earnings have not peaked. Strong growth is still expected.
This is a story of margins. We do not know how they will hold up. Remember many of the innovations Tesla has made show up on the bottom line now. Meaning unless there are major new innovations the margins will get squeeze a bit…perhaps…there are still other dynamics in play. This is a complex dance that Musk can pull off but might not. He is planning on new tech ideas. He has some sort of schedule in his mind.
The government has subsidized many industries over history: from building canals and railroads, to putting thousands of miles of paved roads between cities (a massive subsidy for the automobile industry); NASA paid (in part) for the development of computer chips and later microprocessors, and one we live with today, the internet.
Yet it was Texas Instruments that got most of the chip subsidies, and they’re an also ran. Knowing that DARPA helped develop “search” didn’t help you if you thought Alta Vista or Yahoo was going to win over Google. The aerospace industry has gotten billions over the years, yet it was Boeing, not Lockheed Martin that ended on top of the pile.
I suspect the only “assured” play is a Gorilla Game variant: invest in a basket, or if a basket isn’t available, spread widely and watch the sector, and (sell the losers) and focus investments over time as the winners present themselves. You won’t get in on the ground floor with a gigantic home run, but neither will you put all your chips on Solyndra or the Long Island Railroad, and over time your focus will improve and you will do well.
Tesla just reported earnings two weeks ago (Jan 25). Clearly their cars are still selling. They have cut prices. Competition is heating up. They are way ahead of traditional auto companies in terms of EV capacity and modern up to date factories.
But that is not to discount the risk of future growth, margins, and profits. We shall see. So far betting that Elon can deliver his promises has been the right choice.
We have all heard the pushback to that idea “big gummit picking winners and losers”. It is part of the pantheon of pre-programmed sound bites that people have been trained to respond to.
