Liberty

http://awealthofcommonsense.com/2017/11/introducing-my-new-podcast-animal-spirits-with-michael-ben/ Two guys that I've been following on Twitter for a while, Ben Carlson and Michael Batnick, have started a new podcast. So far, it's mostly them talking about their investing histories and such. It's not a current events/news podcast, or a very specific investing ideas podcast, so if that's what you're looking for, this might not be for you. It falls more into the "two dudes talking" genre. Don't know what it'll evolve into over time, but so far I'm enjoying it. https://itunes.apple.com/us/podcast/animal-spirits-podcast/id1310192007?mt=2

Here's an example of what I was saying here: "The U.S. Energy Information Administration (EIA), in 2006, predicted that 0.8 gigawatts (GW) of solar power would be installed in the USA by the end of 2016. The actual number was closer to 40GW – 4,813% greater." And that's just for a 10 year forecast... https://electrek.co/2017/11/14/solar-power-underestimated-4813-percent/

Cobalt isn't destroyed by use, unlike fossil fuels, so over time a large part of the supply will come from recycling. And if demand for things like cobalt goes up a lot, then a lot of mines that weren't viable previously might become viable, and a lot of those are probably in places where conditions are a lot better (hence the higher costs of production). Of course bad cobalt mines should be fixed (environmentally, socially, etc), but the problems are not usually specifically with one mine, it's usually about a whole country that is failing, so blaming the mineral is kind of silly. And even that is still a relatively tiny problem compared to all the coal mines and oil wells in the world, including some operations in similar African and ME countries where fossil fuel extraction props up horrible regimes (they get all the wealth they need from resource extraction, so don't have to build up a normal functioning society that creates wealth). Nobody said there isn't problems with the new, better ways to do things. Nothing's perfect in this world. But they're still smaller problems than what we're dealing with now, and they are fixable.

Don't forget the trillions spent on the military to protect oil routes and prop up terrible regimes that keep the oil flowing... And often crumble into costly civil wars and fund terrorist groups that then cost money, suffering and liberties to everyone..

I think it is not that evident to say a precise technology is now affordable because the incentives played their role or not to accelerate its development. Defenders of the free market will say that if it is good, it would have arrived at the good price at the good time. Others will say that to kick start some technologies or to accelerate their development, government help is necessary. I think that if there are some externalities like benefit for the society as a whole, govrnement is right to give a push. Of course, some won't agree and pretend that a total free market will work. I don't! It's also hypocritical to heavily subsidize (directly and indirectly) and favor certain techs for decades (fossil fuels) and then when a real competitor is starting to emerge, to say "subsidies are bad, we shouldn't support clean energy sources and just let the market figure it out". The least we could do it remove current subsidies for fossil fuels, which would make alternatives more competitive, but without being retroactive, it's hard to talk about a free market... "A 2016 study estimated that global fossil fuel subsidies were $5.3 trillion in 2015, which represents 6.5% of global GDP.[3] The study found that "China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion)." https://en.wikipedia.org/wiki/Energy_subsidies#Impact_of_fossil_fuel_subsidies

John, personally I'm just interested by the tech and by the field, which I've been following for almost 20 years. I haven't seen anything that makes me want to invest in energy, clean or otherwise. Seems like a hard business to invest in. Thanks for sharing your view here, Liberty. Yes, it's from a tech angle so fascinating what's going on. Making money on it as an investor is - at least to me - another matter. I think the Berkshire approach of just buying utilities and having them reinvest a lot in things like wind and solar projects rather than pay dividends is smart. But that works if you have more money to put to work (including no-cost float) than opportunities and don't mind regulated-type returns. For an individual investor, this approach doesn't make as much sense, IMO.

John, personally I'm just interested by the tech and by the field, which I've been following for almost 20 years. I haven't seen anything that makes me want to invest in energy, clean or otherwise. Seems like a hard business to invest in.

What's most impressive to me is if you go back and look at forecasts of installed capacity and forecasts for price/watt done at various times over the past 20-30 years, they all undershoot by quite a bit. Makes me think there's a good chance we'll keep seeing these tech surprise us to the upside and that the transition will take place faster than most expect.

https://www.vanityfair.com/news/2017/11/usda-food-stamps-school-lunch-trump-administration

You bought some PCLN?

See, you immediately resort to ad hominem again, proving my point. Yes I write a lot, and most people interact with me in a civilized manner and everything goes well. Somehow it's different with you, how is that my fault? As for hydrogen, I don't ignore the scientific work done in the field, I understand it, rather than just hand-wave it as something it's not. Even if we develop fusion, the nuclear reaction is the source of energy. Then using that energy to generate hydrogen from water would just be a way to store that electricity, just like in a battery, because you get less energy than you put in. It wouldn't make hydrogen a source of energy. It would just mean you're storing your nuclear energy in hydrogen (at lower efficiencies than batteries, since we were talking about transportation). Same if you develop a way to do artificial photosynthesis to create hydrogen using solar power. All the numbers I've seen so far are in low single digit percents of efficiency vs now around 20% for commercial available solar panels, with much higher costs and complexity levels (since we already have electricity grid but not hydrogen infrastructure), and that's not even counting further losses from compressing the hydrogen, distributing it, and further losses from either combustion (really bad) or fuel cells (decent, but still very expensive and complex..). I post a paper on energy and you come in and say that hydrogen is a "substitute" for fossil fuels and a "source" of energy. Am I supposed to say nothing? I agree with this, it describes you well. Most people would have just said "Oh, I didn't know these things about hydrogen, interesting", but you had to double and triple down and keep arguing with an appeal to authority ("scientists are working on it and they're smart, hence I'm right") and then attack me personally to try to valorize yourself.

I do think, for the average person, that indexing is probably the way to go if one understands its purpose and limitations (which, admittedly, few do). To paraphrase Churchill, for the man on the street, buy-and-hold indexing is probably the worst form of investing - except for all the other forms that have been tried. Indexing is brilliant. It would be a huge waste for society if everybody had to spend as much time and energy as we spend on investing. Just like not everybody should have to learn to perform surgery on themselves, know how to design sewer-systems in CAD software, file appeals at the supreme court or maximize crop yield on a multi-acre field. Specialization is a great win for humanity. And if the alternative to cheap indexing is expensive mutual funds that don't generally outperform the indexes or to not own pieces of busineses at all, then indexing is even better.

I think it's always very difficult to forecast the future... If you go back in the archives of this forum, you'll see people say similar things pretty much every year since 2011. "The new normal" used to be mentioned a lot, with the permanent stagnation and such... Even Fairfax stayed hedged for many years expecting low or negative returns. And since then the SP500 has more than doubled, so it's definitely not easy to know. It'll depend on what interest rates and the economy do (and not just the US economy, since so many of the SP500 companies get a meaningful amount of their sales globally--another change to take into account when comparing with historical numbers), and it's also hard to compare historical metrics for the SP500 since it's not a static thing. Decades ago a lot of it might have been industrial/manufacturing companies with low margins and low ROE/ROIC, and today more of it might be composed of asset-light, high-margin, high ROIC/ROE companies (more software, more services, more medical, more branded CPG, etc). Does the index always deserve a static multiple or does that change over time too? ¯\_(ツ)_/¯

Thanks Daniel, that's very kind of you. Cheers!

Very nice, but I don't think it applies here. If someone tells you that hydrogen is a "substitute" for fossil fuels as a "source" of energy here on Earth, the laws of mathematics and physics say that they're wrong. It's not about differing opinions or about being used to doing things a certain way. It's about energy in vs energy out.

Is this because I said he had a "superficial understanding of the field"? I didn't think that crossed a line, and I'm not seeing anything else. I have a superficial understanding of many fields, I don't see that as an insult at all. And I never "target" Cardboard, he just follows me around with his off-topic personal attacks. Not much I can do about that ¯\_(ツ)_/¯ Cheers!

You're not saying/linking anything that contradicts what I said. Thanks for the ad hominem attacks. I rent a house, what a novel thing!

Cardboard, clearly have a superficial understand of the field. When you extract fossil fuels, you get more energy out than you put in. When you extract hydrogen from water, you get less energy out than you put in. This is analogous to storage in a battery. Fossil fuels are technically stored solar energy because millions of years ago plants performed photosynthesis to bind these atoms together (carbon, hydrogen, etc), a solar-powered chemical process. Hydrogen distribution is very different from propane or natural gas distribution. Very different. Solar-powered electrolysis or chemical separation is not a free lunch. These processes are way less efficient than even current general solar panels, and they're more expensive, and you end up with hydrogen which then is harder to distribute and lossier to use than if you had had just a solar panel giving you useful DC electricity. And if you burn hydrogen in ICE engines, you get WAY lower efficiency than fuel cells and are basically making the whole process even worse than it already is compared to battery EVs. And it's not like making ICEs is a free lunch either, there's a lot of embedded energy in them. The hydrogen dream has been around for a long time, and a superficial understanding of it makes it seem really great (I've been there years ago), but once you actually look at the details, it doesn't make any sense when there are much better alternatives.

Ok, let me spell it out: Where are you getting your hydrogen? You can't find pure hydrogen on earth since it's very reactive and binds to other things. Out in the void of space you might be able to find a decent concentration of H somewhere and use it to power a ship or whatever, but not here. If you're getting it from fossil fuels (like natural gas), you are still just using fossil fuels (which are themselves technically a form of stored solar energy, the problem is that all that nice H is bound to a lot of carbon that gets released) and have a lot of the same problems. If you are getting the H from water electrolysis, you are using energy to separate the hydrogen from the oxygen molecules. When you burn or use the H in a fuel cell, you're getting less power out than what you put in with the electrolysis. And if the energy for electrolysis comes from a dirty power grid, that hydrogen is worse than just using that electricity directly because of the losses... So in this scenario, the hydrogen acts as a kind of battery: You dump power in, and later get less of it out than you put in. Might as well charge a Li-ion battery with that electricity, that'd be more efficient and would save all kinds of trouble with storing very leaky hydrogen at high pressures or cryogenic temps and using expensive fuel cells rather than cheaper batteries. Not to mention that we already have a distribution system for electricity, but we don't have one for hydrogen.

Hydrogen is a way to store energy. It's not a source of energy (at least not on earth). Fossil fuels were great to get us here. But now that we know their downsides and have alternatives, we should transition as fast as possible.

More on Ross: https://www.apmreports.org/story/2017/11/08/wilbur-ross-owns-more-ships Easy to see why Trump felt a kinship...

http://www.rationalwalk.com/?p=16299

Kind of funny how the best practices in this digital world are to print something on paper... :D

I thought it might interest some here: https://www.lazard.com/media/450337/lazard-levelized-cost-of-energy-version-110.pdf