Wednesday, September 29, 2010

The current state of the mortgage mess

Since the very beginning of the mortgage foreclosure crisis two years ago there were rumblings of fraud by the lending institutions. A very few isolated cases of proven fraud made local newspaper headlines. More information has been available on-line at web sites and blogs specializing in consumer issues, mortgage/financial issues and real estate. Until the past few weeks this news stayed very much under the radar and out of the national network television/national newspaper headlines. That is beginning to change.

Mortgage fraud is a much more important to real estate investors. Many investors were holding rental and/or lease-option/owner financed properties which were financed by major lending institutions/banks. The investors were also hit hard by the bursting housing bubble and facing foreclosure on financed properties. This is a business for investors and they were much more inclined to fight back, researching the lenders’ legal requirements for foreclosure and hiring attorneys to protect their vested interests in financed properties. Most homeowners facing foreclosure, however, were broke(could not afford their mortgage payments), ignorant of the law, unaware of the rights as borrowers and not inclined to try to fight a big bank(no money for attorneys’ fees).

It makes a lot of sense to have rampant mortgage fraud in the current situation. The lenders were not any more prepared for the massive way of mortgage defaults that swept over the country than were the homeowners. The necessary procedures, personnel and knowledge were just not there. Many of the lenders relied on outside companies to handle the paperwork for foreclosures and those companies were not any more prepared than the banks themselves for the sudden tidal wave of defaults.

This situation resulted in many corners being cut and legal requirements being ignored in order to be able to keep up with the increased flow of foreclosure paperwork. County court systems were also not prepared and did not pay enough attention to the paperwork presented them during foreclosure proceedings. Now, even though there have been complaints from the very beginning, these issues are coming to light in the mainstream media because of federal investigations into the practices of the mortgage industry.

The big lenders want to shrug off these illegal practices(mortgage fraud) as merely “technical issues”. Court decisions on issues of legal procedure, however, tend to place a great deal of importance on “technical issues”. It will be very interesting to see if any of the lending companies, processing companies or individuals involved ever face criminal prosecution or if any of the affected former homeowners ever receive any recompense.

One widespread “technical issue” that has come to light is bank officers signing affidavits without personal knowledge of the truth of the information contained in the affidavits as required by law. Unauthorized bank and processing company personal forging the signatures of bank officers on foreclosure paperwork also appears to be common and accepted practice and is also illegal. Large volumes of foreclosure papers seem to have been signed without a notary present to witness the signatures as required by law. These are very serious issues. The presence of any of these issues in any given foreclosure procedure would be legal grounds for the dismissal of that foreclosure. Tens of thousands of foreclosures seem to have been pushed through the court system in this way. It is fraud on a massive scale and it happened because the lenders either were not aware of the proper procedures or did not feel they had the time to follow the proper procedures. Ignorance of the law and time issues are not normally well-received excuses for fraud in other areas of business and should not be considered adequate excuses for mortgage lenders.

Now we wait to see where things go from here. If the federal government does the right thing and decides to prosecute lenders and processing companies and individuals for fraud, it will get very messy and drawn out and clog the court systems for years. And what can possibly be done for the former homeowners, who have already been evicted from their homes and the houses sold at foreclosure auction or privately by the banks? Or will it all just get swept under the carpet as an unavoidable consequence of the housing bubble fall-out and the feeling that banks are already under too much pressure?

Sunday, September 26, 2010

Geothermal energy is "green" and out of the spotlight

“Green” renewable energy is a popular topic in the news and with environmentally-minded stock market investors. Solar and wind production get almost all of the headlines, though, especially from the mainstream media outlets of large-city newspapers and network television. Bio-fuels, liquid fuels that can replace diesel and gasoline, consistently run in third place. Another contender that is even more earth-friendly gets very little media attention and is also very much “under the radar” with investors is geothermal energy.

What media coverage has received concentrated on a selected few areas of the world with obvious surface geysers(have to have those spectacular photos!) such as Iceland and California. This is high-temperature geothermal, using water and/or steam directly out of the ground and operating above 300F. The average person or investor does not even know geothermal is a proven energy source even at much lower temperatures, shallower depths and areas with no near-surface activity at all.

Low-temperature geothermal energy production can provide heating, cooling and hot water for buildings as well as electricity production with no emissions and very little above-ground infrastructure. It is also practical with already existing and proven technology almost anywhere on the planet. Installing a system is more expensive than most solar equivalents but bring the same energy savings, require fewer toxic chemicals and carbon emissions to manufacture the components and less potential future maintenance.

The U.S. military and Department of Energy(DOE) are putting considerable resources into geothermal right now(though still less than solar or wind). The DOE recently announced $20-million of new funding for a variety of geothermal projects ranging from large-scale commercial electricity generation to reclaiming the energy absorbed by oil & gas drilling brines discharged as waste-water to small systems supplying heating and cooling to a few buildings combined with aquaculture operations(one of which is currently operating in New York City). The new funding covers seven geothermal technologies suitable for cities, small towns and remote areas. The National Renewable Energy Laboratory(NREL) is teaming with IKEA stores to bring geothermal energy to new big-box stores. The Environmental Protection Agency(EPA) is investing in geothermal to reclaim some heavily polluted areas and the military is also investing heavily to reduce petroleum dependence at its bases.

One type or another of geothermal energy production is practical nearly anywhere in North America. Norwegian researchers think current oil & gas drilling technology could make geothermal much more easily accessible and the supply is inexhaustible. The United States Geological Survey(USGS) says over 120,000 MW of low-temperature geothermal energy is easily available and Rocky Mountain Power utility company has found about 800 MW of geothermal potential within 100 miles of its transmission lines in California, Utah, Oregon and Idaho. Nevada is becoming a geothermal hot-spot and U.S. Geothermal is now building a 11.5 MW plant in the northwest corner of the state to replace an existing power plant.

Stock share prices for companies in the field of geothermal energy production have been mostly flat for the past year, ignored by investors the same way geothermal has been ignored by the press. My current watch list has only four companies: U.S. Geothermal(HTM), Ormat Technologies(ORA), Nevada Geothermal Power(NGLPF) and Sierra Geothermal Power(SRAGF). ORA and HTM are by far the largest of the geothermal companies in North America. ORA’s shares currently trade around $29.50. The others are all under $1.00 per share, making them quite cheap investments. They are all low volatility stocks. With the spate of recently interest and money from DOE and the military ORA and HTM are both showing some signs of life and increasing share prices. With increased interest in geothermal within Nevada, NGLPF and SRAGF should follow the same path. Larger companies, such as Siemens and General Electric, are also showing signs of more interest in geothermal as a power source.

Is geothermal energy production on the verge of a major move into the mainstream of renewable energy? Are share prices of companies involved with geothermal about to start a long, steep climb to the stratosphere? It is still too early to make that call with any accuracy. The current interest and money in geothermal from federal government agencies bodes well. Private-sector interest and money from the likes of IKEA is also a very promising signal. Watch these stocks closely as things seem about to get quite interesting and may move quickly.

Photo courtesy of

Friday, September 24, 2010

Higher US Savings Is Economic Game Changer

I am happy to present The Zen Estate's first guest post. Mr. Ron Robbins volunteered this very interesting article about U.S. savings rates and their effects on the American and world economies. I firmly believe that Americans need to save more and consume less. That has been a core issue of the "green" movement since the very beginning and seems like simple common sense(not so simple and not that common as it should be).

Thursday, 23 September 2010 at 12:07, By Ron Robbins, Founder & Analyst-Investing for the Soul

There is one prayer of governments and businesses around the world: that Americans forgo higher savings, banish their job and retirement income worries, and go on a spending spree. However, this is not to be. Were the prayer to be fulfilled the global trade and other economic imbalances of the past and present would be unresolved, even magnified. But fortunately, the early stages of their resolution are at hand.

To help resolve these global imbalances, US savings rates must go up while its consumption of goods and services relative to GDP goes down. And this will be a generational game-changer for the US and for the world, causing economic difficulties everywhere for the years ahead.

Depending on how fast its savings rates rise, the US economy will be mired in recessionary or depressionary conditions for some years. But America has faced many daunting economic challenges before and each time it rebirths to greater prosperity. This is likely to be true again.

America once had high savings rates with much lower levels of personal consumption than now. Between, 1950 and 1975, its savings rates were generally in the 8 to 12 per cent range of disposable income, and personal consumption relative to GDP averaged around 64 per cent. In the years between 1975 and 2000 savings rates declined significantly to under 5 per cent and then to 1 per cent by 2005 when personal consumption rose to a high of about 72 per cent of GDP.

Since 2006, America’s savings rates have been moving up-and most especially after the 2008 financial crisis. Today, they average about 6 per cent.

Furthermore, it is probable that US savings rates will move even together to the 10 to 15 per cent range in the next few years as Americans worry about job security, home values, and retirement income. As this happens, US consumption rates will fall back to the 60 per cents region. This will have initially deleterious effects for the global economy and countries reliant on exports for income and jobs. Thus this is another game-changing situation.

No country or countries can presently replace the American consumer. For instance, the combined annual personal consumption of China and India is about $2 trillion, compared to America’s nearly $9 tln.

The big Asian exporters, as well as Germany, will have to find other markets for their products-or stimulate internal consumption to grow. Intra-regional Asian trade is growing rapidly but “is still mainly driven by supply-chain links involving intermediate goods rather than newly surging end-market demad in Asia,” says Stephen Roach, non-executive chairman for Asia at Morgan Stanley, in a Financial Times report.

So where will increased US savings go? As of now they are going mostly into bonds, especially US government bonds. Annual funding needs for the US government over the next few years will probably be close to $2 tln if economic growth stalls or declines. That sum is equal to about 13 per cent of US GDP. It will be increasingly financed from within the US by savers, banks and especially the Federal Reserve(the Fed).

The Fed will create new money to purchase US Treasury debt and probably other assets. This “money-printing” will generate huge amounts of “excess” dollars. The consequences of this action will produce a litany of global economic difficulties. These will include a slumping dollar, domestic inflation-and even possibly hyperinflation.

Upset at the dollar’s fall, other countries and regions from China to Japan to Europe, will attempt to devalue their currencies, leading to probable currency and trade wars. (I have written more on these subjects in previous columns.)

Of course a lower dollar and likely new US import restriction will mean higher US import prices, or even unavailability of some products. This will give some American manufacturers the opportunity to recoup previously lost domestic markets and the servicing of new ones as well. US industrial production could be re-ignited and even induce foreign companies and manufacturers to buy or invest in US domestic manufacturers as well.

With US imports from oil and computers to foodstuffs, as well as domestically manufactured goods costing more, Americans will find their standard of living declining.

“The need to overcome the effects of reduced[American] individual buying power will lead to the invention of a new class of product which will be a major trend of 2010 and into the future: Technology for The Poor…,” says Gerald Celente, the renowned American trends forecaster and president of the Trends Institute. Continuing, he says that, “growing with the same speed as the Internet Revolution, the trend will be recognized, explored and exploited by legions of skilled but jobless geeks, innovators and inventors who will design and launch a new class of products and services affordable by millions of newly downscaled Western consumers…”

Mr. Celente further forecasts, “a ‘not made in China’ consumer crusade that will spread among developed nations, leading to trade wars and protectionism.”

Americans have little choice but to increase personal savings rates. The Fed will “hyperventilate” to derail prolonged economic malaise and promulgate vast quantities of new dollars, causing the dollar to fall-or crash! A dollar fall will produce inflation; a crash could ignite hyperinflation in the US and elsewhere. Also unleashed could be ‘buy America’ strategies and policies within the US thus further inciting the risk of global currency and trade wars.

This sounds like dire news. However, a new, free America could be born as it rids itself of the shackles of debt. Americans, renowned for their outstanding drive, creativity and innovation, may create a new generation of ingenious products and services geared to the new economic reality. ‘Made in America’ products could again fill retail shelves. And Asia’s export-reliant countries will finally focus on enhancing domestic consumer demand to purchase their wares, thereby bringing much improved living standards to their populations.

Higher US savings will be an economic game-changer for the US and the world.

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Tuesday, September 21, 2010

Where does housing go from here?

The “housing crisis” in the U.S. has been a major blow to almost every homeowner, every real estate investor, every bank and financial institution writing mortgages and the financial system as a whole. Things are slightly more stable than six months ago. “Slightly” is the key word and the stabilization might well be only an illusion.

The federal government has done a lot to “help” through actions of the Federal Reserve, HUD, FHA, Fannie Mae and Freddie Mac, and direct bailouts to most of the mortgage lenders. Most of the changes seem to have allowed the pain to be less over a much longer time period. The bailouts let the financial institutions get back to profitability quickly without going bankrupt. All of the iterations of HAMP and other programs to help borrowers have instead also mostly helped the financial institutions. Changes to the way banks can report foreclosed and repossessed properties also benefitted the banks and not the homeowners.

Now homeowners trying to sell are still slashing the asking price to find buyers so prices are still falling in most parts of the country. Borrowers that were in trouble are still in trouble whether they were some of the lucky few granted rewritten mortgages or refinancing or not. Homes are still being foreclosed upon in record numbers. The inventory of REO residential properties for sale is growing and the “shadow inventory” of REO properties held by banks but not on the market is growing even faster. Buyers are going away to wait for better times or sitting on the sidelines waiting for even better prices. Private real estate investors are caught in the middle of the mess along with everyone else, getting “great” deals on foreclosure auction properties and seeing profit margins shrivel up before they can get the house back on the market.

There are a few bright spots though many would not see anything very good about them. Lenders, finally pushed into a corner by ballooning foreclosure inventories, are starting to seriously consider more mortgage rewrites and refinance packages to make existing deals realistically affordable for homeowners and avoid further foreclosures. Real estate investors are finding a large pool of takers for houses they are unable to sell for a profit by offering to rent, rent-to-own or lease-option instead.

Real stabilization and reduction of the REO inventory will only come when buyers agree that asking prices are fair and are not likely get any lower. This is classic free-market economics. When that point is reached it will still take several years for inventories of homes to reach reasonable levels again as many people who want to sell now are waiting for that time before listing their home. There is still some market for new-construction homes but it is small and remain that way until the existing-home situation is solved.

So, to the question asked in the title: “Where does housing go from here?” The sensible answer would seem to be: “Not very far and not very quickly.” This problem is just going to have to work itself out, almost certainly over the course of the next several years. It just is not going to matter very much what else the federal government does or the banks do or real estate investors do or anyone else does. The “housing crisis” was created by nearly everyone involved trying to get rich quick and the fallout and pain is going to last for a long time. Those who were prudent and kept the risks in mind have not been hurt nearly as badly as those who let greed drive the risks right out of their minds. Hopefully the one thing we can all count on after going through this is that lenders and borrowers will both learn important lessons from it. Don’t try to take that to the bank!

Friday, September 17, 2010

"Green" mining investments?

Mining is one segment of my “green” investing strategy with which some might not agree. I would argue that mining is absolutely essential to most “green” technologies, including wind power, solar power, super-conductivity, advanced battery designs, highly efficient LED lighting and smart-grid just for a start. Without the metals and other diverse elements supplied by the mining companies of the world, modern electronics and “green” technologies would not exist. Silver and gold, copper and iron have always been important to the electronics industry. Just as important to modern semiconductors are the “rare earth” elements.

The rare earth elements are not really rare but are quite common and well distributed in the earth’s crust. They are, however, fairly difficult to purify into usable form. The rare earth group consists of 17 elements mostly in the lanthanide series of the periodic table. They most commonly occur in nature as oxides and are often intermixed at the same location. Highly-concentrated deposits suitable for mining operations are well distributed around the planet.

The problem today is China’s domination of rare earth mining and production. China now produces over 97% of commercially used rare earth elements. This situation came about because Chinese production was cheap and rare earth elements were an excellent export commodity. The rise of the native Chinese electronics industry increased domestic demand for rare earths. China is in the process of stopping export of these essential elements.

The need for more locally produced rare earth elements is putting a spotlight on mining and refining companies capable of replacing Chinese supply. There is no shortage of these companies and most of them are quite “cheap”. When the major electronics producers start feeling the pinch of reduced Chinese rare earth export policy these mining companies are in a position to see rapid, long term growth and share-price increases. A few of the companies I watch most closely are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF) and Sociedad Quimica Y Minera(SQM).

Let me reinforce the importance of the rare earth elements to “green” technology. These elements are used in almost all semiconductors including photovoltaic and PETE(photon enhanced thermal emission) cells. Rare earths are absolutely necessary for the strong magnets needed for efficient wind power and hydroelectric generation. Low-temperature superconductors require rare earth elements. LED lighting depends on rare earths. Many lasers, high-refractive-index glass formulations, colors for phosphors and LED’s and glass, fluorescent lamp bulbs, ceramic capacitors and portable x-ray machines all depend on rare earth elements.

My view is rare earth mining and production companies outside of China are a great short- and long-term investment. They should do nothing but continue to increase in value and share price(unless bought by a larger or wealthier competitor). Our part as “green” investors is to push them as hard as we can to make their mining and production operations as “green” as possible. It is also our responsibility to push the EPA and all other responsible government bodies with oversight authority to do their duty and ensure all rules and regulations are followed.

Wednesday, September 15, 2010

Tampa Bay area real estate update

Homes in the Tampa Bay area are now selling for the same prices as ten years ago. August continued the slow downward price slide to $89 per square foot. That is 7% lower than last August and 4% lower than July. An average home lost $13,000 of its sale price. The number of homes sold increased by 2% but the total number of listings decreased by 1.5%.

The price decline in the greater Tampa area has been relentless. July home prices were down 3.6% from a year ago. June saw a 2.52% decline. Prices for May were 4.74% lower. The statistics remain very similar whether distressed property sales are included or excluded. Nearly 50% of all existing home sales in the area are now distressed properties. The Tampa area has seen slightly smaller price declines than Florida as a whole and prices have leveled off when averaged nationally.

Pinellas County was hardest hit in the Tampa Bay area for August. Sales of single family homes decreased by 8.1% for the month. Sales price lost almost 5% compared to the previous year. Average home price for Pinellas dropped to $135,000. While condominium sales in Pinellas were up 8.1% for August the median sale price of a condo lost 17.2% compared to a year ago.

Budget and staffing cuts within the Pinellas County, Florida government are affecting real estate and real estate investors. Starting October 4, the Pinellas County foreclosure auction will go on-line, replacing the current live daily auctions at the Clearwater and Saint Petersburg courthouses. The monthly tax deed sales will follow on October 20. Moving these auctions on-line will ease pressure on staff in the Clerk of the Court’s office. Pressure has not let up this year as foreclosures in Pinellas County continue to roll in at the rate of 1,000 per month, only very slightly below the rate for 2009.

In Clearwater, the City Council members have voted to purchase an entire city block in the East Gateway neighborhood. The decision was unanimous. The $1.675-million purchase will be funded by a $1.9-million loan from Clearwater’s Central Insurance Fund. Immediate plans are to put the purchase in a land bank. The city will decide what to do with the property at a later time. Involved is 2.2 acres of land with buildings including two motels, a restaurant, two duplexes and a single family home. This is a high crime area bordered by Cleveland Street, Grove Street, Betty Lane and Lincoln Avenue.

Monday, September 13, 2010

Why invest in "green" companies?

I feel quite strongly that we all need to be conscious of how we treat the planet we call home. Pollution is making breathing the air and drinking the water dangerous to our health. Modern “big agriculture”, using antibiotics and hormones as staple ingredients of animal feed, has made eating a pork chop or a chicken breast the equivalent of taking a prescription drug(no prescription needed). The systematic use of chemical fertilizers and pesticides in the fields has done the same for commercial vegetable and grain crops. All of these chemicals, along with all of the OTC and prescription drugs and vitamins that pass through everyone’s toilets, go on to become part of our drinking water supply.

This is why I think it is important for everyone who invests in the stock market to take a long, hard look at “green” investing. Companies that are trying to minimize the damage done to the earth deserve to be supported. It is not a hardship: there are thousands of publicly trades companies on the U.S. stock exchanges involved in the “green” movement. Plenty of diversity can found and more companies are turning up every day.

I take a fairly wide-angle view of what is “green”. My current watch list of companies that I will invest in numbers slightly over 200 and grows daily as I discover new opportunities. Industries on my list include: batteries, solar energy, wind energy, geothermal energy, water power, wave power, electric vehicles, fuel cells, kinetic energy storage(flywheels), smart grid, LED lighting, rare earth mineral mining(necessary for semiconductors), wireless network & storage(necessary to smart grid), water treatment/recovery/efficiency, ocean transport(more efficient than flying), organic/sustainable agriculture, green packaging and a few more. There are also many tech companies that supply needed components to solar, wind, water and other industries. I also list cleaner, more efficient current technologies such as internal combustion engines designed to run on natural gas or natural gas turbine engines designed for vehicle use.

Many of these “green” technologies have been lagging the general stock market. This is not because the companies involved have bad management, or lack sales revenues or solid profits, or do not have ample opportunity for future expansion. The reason their stock prices are lagging is because people do not yet believe in them enough to put their money into company stock. This needs to change. If we believe in the products we need to believe in the companies making the products.

The situation seems to just be reaching a tipping point. As word of China’s stranglehold on rare-earth mineral production reaches a greater audience, previously little-known companies like Avalon Rare Metal Inc. and Great Western Minerals Group are seeing more interest and slow, steady share price increases. A123 Systems Inc., a maker of lithium-ion rechargeable batteries, announced the opening of a new production plant in Livonia, Michigan dedicated to batteries for electric vehicles and the $7.36/share stock shot up $0.65/share in one day. When Westport Innovations, designers of natural gas conversions for commercial diesel engines, signed a partnership agreement with Cummins to build heavy truck and equipment engines their shares saw a substantial and maintained price increase.

“Green” companies are the wave of the future. The writing is on the wall and there is really no choice. Companies like Walmart are using hydrogen and fuel cell fork lifts and more-efficient semi’s and Frito Lay is using an electric truck delivery fleet in New York City and the U.S. military is installing solar and wind power on its bases. The only real question is: how long will you wait before investing in these companies? Why not get in now while there is maximum upside and the support will make a real difference to the company? I invest every dollar with the intention of that dollar making me more money and it is certainly possible to do that within the “green” sphere of companies.

Monday, September 6, 2010

Solar power innovations

New developments are really starting to pop in the solar power arena. Most businesses and individuals will readily admit that solar power is one of the waves of the future. They have been slightly hesitant to jump on the bandwagon themselves, however. The numbers of businesses installing solar power or heating and its adoption by government agencies in the U.S. has been disappointing. So has the performance of publicly traded solar stocks.

I think we have reached a collective turning point. Whether or not global warming is real has been mostly decided in most minds, regardless if because of natural or man-made causes. European and Chinese adoption of the technology is leading the world and making the U.S. seem like a dimwitted laggard. Large global companies and the military have seen the writing on the wall concerning petroleum-based power production and are making the move to renewable sources of energy. New solar research is revealing many ways to make this energy source both cheaper and much more efficient.

Global Solar of Tucson, Arizona specializes in thin, flexible solar panels that do not need mounting racks like traditional rigid polycrystalline panels. This allows them to be glued to roof surfaces with no penetration. They perform well in areas receiving no direct sunlight. The panels are currently produced in 19-foot-long by 1 ½-foot wide strips. They are now seeking certification for the panels.

A few companies are experimenting with selling small solar panels having built-in micro-inverters. This allows plug&play installation of as many or as few as wanted at the time. More panels for greater power output can be added later. This should be a growing trend allowing companies and individuals to “get their toes wet” before diving in to a full(and still expensive) solar array installation. Green Ray Solar in Westford, MA has received UL certifications for its solar panels containing inverters.

Research at University of California will lead to much more energy-efficient smart-phones and other hand-held devices. This extra efficiency would allow these devices to run on solar power rather than high-powered batteries alone. Think about the extra freedom having solar powered phones, mp3 players, portable GPS units and laptops allows the user. No more worrying about running out of battery power or down-time while recharging the battery.

The National Renewable Energy Lab has discovered a new technique to greatly improve the efficiency of existing solar-panel technology by allowing the absorption and conversion of all wavelengths of light. Acid etching the silicon photovoltaic wafer producing millions of tiny holes in its surface and turns it black. The process is fast and easy to produce. The new process could reduce production costs of solar panels as well as increase their efficiency.

Solar power will continue to evolve rapidly during the coming years. New discoveries in the field will make this energy source continually cheaper and easier to access. This is the reason I actively invest in a number of solar energy stocks and will continue to do so. This industry has not yet lived up to its potential concerning share prices but that day is coming soon and smart investors will be ready when it arrives.

photo courtesy of:

Saturday, September 4, 2010

More efficient lighting with LEDs

The future of lighting, all kinds of lighting, is LED’s. Only a major and totally unanticipated discovery would prevent LED’s taking the place of incandescent and fluorescent lighting during the next five years. LED’s will soon dominate the lighting industry because they are much more energy-efficient, they stay cool, they are small and light-weight, and they are more earth-friendly to manufacture and dispose.

Energy-efficiency and operating temperature are closely linked. Incandescent light bulbs waste approximately 90% of the electricity used producing heat instead of light. Fluorescent bulbs waste nearly half of their power as heat. LED’s produce light with more than 90% of their electrical draw. This enormously reduces the amount of energy needed to light an area while also reducing the energy needed the keep that same area cool. The lights themselves are now quite expensive but the energy savings will make up for the price difference. Prices will rapidly decline as demand and production increase(remember how “expensive” compact fluorescent bulbs were when first introduced?).

Longevity is the LED’s forte. Most currently being sold will last at least five years if never turned off. For most businesses, changing dead light bulbs is a daily or weekly(at least monthly) necessity. Switching to LED lights could allow a maintenance department to forget how to change a light bulb. How many saved labor hours, reduced storage space and inventory could this be worth to the average business? How much aggravation and space could be saved in the average home?

These are the reasons for the “LED Section” of my investing watch-list. I now monitor: Cree, Inc.(CREE) of Durham, NC; Veeco Instruments, Inc.(VECO) of New York, NY; Carmanah Tech Corp.(CMHXF) of Victoria, BC, Canada; XODTEC LED, Inc.(XODG) of Taiwan; Obelux of Helsinki, Finland and Bridgelux of Sunnyvale, CA. My not-so-secret wish is that Obelux and Bridgelux go public in the near future. These companies should all have a very bright future in the lighting industry.

Veeco Instruments makes the equipment other companies need to produce LED lights. Cree is one of the oldest and best established LED lighting manufacturers. Carmanah specializes in self-contained solar-powered outdoor LED lighting units. Obelux specializes in aviation and architectural lighting and has just announced a 200,000 candela white LED aviation marker light that is Federal Aviation Administration approved and uses just 350 Watts. Bridgelux is lead by ex-Seagate Technology CEO Bill Watkins and has already applied for over 250 patents covering various aspects of LED light production.

Stock market performance of these companies has been less than stellar so far. This is expected in with just-emerging technologies. As a greater variety of products becomes available, product prices drop and the importance of energy-efficiency increases, share prices of these companies should soar. I continue to wait and watch and monitor new developments within the industry.

Large private-sector companies and governments, led by the military, will undoubtedly be the early-adopters of large-scale LED lighting, followed by smaller companies and then individuals. Starbucks has already committed to making the switch in all of its stores. The U.S. Navy has committed to LED lighting on its combat ships. Many more forward-thinking organizations will soon figure out the many advantages of LED lights even at present prices. By the time they have to change the first dead light, replacement prices will probably have dropped by 60% or more and the initial investment will have been repaid several times over in energy savings.

Wednesday, September 1, 2010

These are exciting times in the world of batteries

Batteries play a major and very under-rated role in our everyday lives. With many “green” technologies dependent on battery power storage(think electric cars and reliable, on-demand supply to the grid from wind and solar power installations) the importance of batteries will only grow. These are the reasons I am bullish on battery stocks even though the general market seems to be taking a much more wait-and-see approach.

Some of the companies that I invest in on my current watch list involved in battery production include Advanced Battery Technology(ABAT), Braskem SA(BAK), Valence Technology(VLNC), Ener1(HEV) and A123 Systems(AONE). I usually own shares in at least one of these companies. These companies cover a range from traditional lead-acid batteries to ever-more-common lithium-ion batteries to cutting-edge research on totally new power storage solutions. All of these technologies will play a big role in the coming years.

One exciting recent discovery took place at MIT. A common virus was used as a bio-template for preparing lithium ion battery anodes and cathodes in plain water at room temperature. Batteries produced this way could be made into any shape, including woven into fabrics. Imagine wearing a rechargeable vest that could power a laptop and smart-phone. This technology would also allow the outer casing of a camera or phone to double as the battery. The process eliminates the need for high temperatures and noxious chemicals during the battery manufacturing contest and the batteries stay much cooler during use, reducing the chances of fires(remember those laptops bursting into flames?).

Philadelphia is about to start a project with a novel use of batteries – subway stops will be equipped with high-capacity batteries(1-1.5MW) to capture electrical power produced by the brakes of the trains approaching the stations. The power stored in the batteries will then be reused to accelerate the trains as they leave. The new system is expected to save the city a considerable amount on its power bill and might even be able to feed some power back into the grid. The Pennsylvania Energy Development Authority has awarded a $900,000 grant to Viridity Energy to construct the system. It is expected to be in use by next spring.

Xcel Energy is already using a bank of sulfur/sodium batteries from NGK Insulators of Japan to smooth out the supply of electricity from an 11MW Minnesota wind farm. The batteries can store 7.2MW-hours of power. They are the size of two semi trailers and weigh 80 tons. Price of the batteries was $4-million. Xcel is planning to test a similar battery bank with a large solar array near the Denver airport.