Gutless and Desperate for Power

Stocks are set to have another decent day today as some much needed balance returns to the market. But don’t get too carried away. The bear is just luring some punters back in before it strikes again.

Be wary, dear reader…

I was going to give you a run down on the Clinton Foundation investigation today, and what the implications for markets might be.

But I think it might be more fun to do it tomorrow when we’ll know some more public details, as revealed by US attorney investigating the matter, John Huber.

There is also another investigation going on right now. Its focus is a large international bank, whose share price has been falling like a stone. Could the two investigations be related?

Think laundromat…

This is all part of what will become known as the biggest political scandal in US history. I wouldn’t want you to miss it. That the establishment media isn’t reporting on this just points to their complicity. They only want you to know what they want you to know…

More on this tomorrow…

For today, let’s turn our attention to Australia and its disastrous energy policy. It’s a vitally important issue for our economic security and productivity.

Energy is the foundation of economic growth. High energy costs make us internationally uncompetitive. That risks us having a structurally weak dollar, and rising inflation and interest rates. When you have net debt of $1 trillion, that’s not a good place to be.

Yesterday’s Australian Financial Review (AFR) reported:

Australia’s inadequate domestic gas supply means households on the east coast are paying two to three times more for gas than the average US household while businesses are becoming uncompetitive, threatening investment and jobs, according to a Dow Chemical-sponsored report.

The analysis from the United States Studies Centre at the University of Sydney, to be released on Wednesday, found that Australia and the US have experienced starkly different fortunes since 2008 due to huge discrepancies in their energy costs.

It found that while a Melbourne-based manufacturer is now paying 177 per cent more for gas than it was 10 years ago, a competitor based in New York, which has benefited from a boom in shale gas, is paying 41 per cent less. The US has seen a revival in manufacturing and economic growth, while Australia is facing an “energy crisis”, putting households and businesses under stress and threatening the existence of some large industrial users of energy.’

But don’t worry, everyone. Renewable energy will rescue us. Look! Also from the AFR:

Renewable energy commitments have topped $20 billion, the Clean Energy Council reports, even as national energy policy goes onto the backburner for the summer. 

Projects under construction cover 14,600 megawatts of wind, large-scale solar and battery and pumped hydro storage — four times the combined capacity of the doomed Hazelwood and Liddell coal power stations — and are creating 13,000 direct jobs.’

I’m not against renewable energy. But I am against pie-in-the-sky thinking that huge infusions of renewable energy are good for the economy.

Without large scale energy storage technology, increasing the supply of renewable energy to the grid increases overall costs. So while the price of wind and solar might be coming down, it doesn’t bring costs down across the board.

Why?

Well, take the growing number of solar rooftop panels. They provide energy during the day when the sun shines. Which means there is less need for traditional baseload energy coming from coal and gas.

This impacts the economics of these generators. They were built before renewable energy came into the mix, and were designed to operate more or less consistently. Now, they are underutilised.

Either their costs must rise (pushing up overall costs), or they lose money and no one will invest in more stable forms of baseload power.

If we had large scale storage solutions this might not be an issue, but we don’t. Not yet anyway. And so the grid needs stable energy to support the growing supply of renewable energy.

For example, renewable generators can’t sell their energy via longer term supply contracts because it’s not always available. But new contracts are emerging where this energy is ‘firmed’ with traditional supply.

In other words, the two energy sources, new and old, must coexist. Yet as the economics of renewables increases and we install more capacity, the economics of traditional energy sources deteriorates.

And Labor will institute a 50% renewables target when they get in next year, because everyone thinks Australia is not doing enough to combat climate change!

The madness continues. The Libs are too gutless to design an energy policy that is both pragmatic and acknowledges the concerns of the electorate. And Labor is so desperate for office that it lurches in the other direction with no consideration for how it’s all going to work, and at what cost.

2019 is certainly going to be an interesting year. We’ve got a deflating housing bubble, a slowing global economy driven by a US/China trade war, and an energy policy in disarray.

I can’t wait!

Regards,

Greg Canavan,
Editor, The Rum Rebellion


Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

At The Rum Rebellion, fake news and unethical political persuasion are not in the least bit tolerated. It denounces the heavy amount of government influence which the public accommodates.

Greg will help The Rum Rebellion readers block out all the nonsense and encourage personal responsibility…both in the financial and political world.

Learn more about Greg Canavan's Investment Advisory Service.


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