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Twitter Aerospace giant Boeing (NYSE: BA) invested in a fantasy and is paying the price.
I'm not referring to its new commercial aircraft, the 787 Dreamliner. Here, Boeing appears to have succeeded in designing and manufacturing a passenger jet that consumes 20% less fuel than a jet of equal size.
But note that I say “appears.” I'm insufficiently versed to know the extent to which the untested lithium ion batteries contribute to the Dreamliner's fuel-efficiency objectives. I would hope the contribution is negligible, though, because unexplained lithium ion battery fires have grounded Boeing's fleet of Dreamliners.
I believe these batteries were Boeing's fantasy investment in its new endeavor. And it’s one I'm sure was subsidized by government largesse. The Obama Administration has poured billions of our tax dollars – through grants and subsidized loans – into lithium ion batteries.
Because Boeing is well-connected politically, I wouldn't be the least surprised if the federal government underwrote a portion of Boeing's battery investment. I also wouldn't be surprised to discover the batteries were included to appease government bureaucrats.
I have nothing against lithium ion batteries per se. They are great for powering laptops and iPads. They’re just much less so for powering transportation … and I'm not the only one with that sentiment.
"Lithium ion batteries just won't do the trick in the kind of mass vehicle applications that the environmental community is pushing for,” says Jon Entine, founder of ESG Media Metrics, a Cincinnati-based environmental consulting firm, to the Washington Examiner.
The reality is that battery-assisted transportation has been a fantasy for over a century. In 1911, the New York Times declared the electric car “has long been recognized as the ideal solution” because it “is cleaner and quieter” and “much more economical.” In 1915, the Washington Post opined that “prices on electric cars will continue to drop until they are within reach of the average family.”
Both mainstream media outlets were wrong (nothing new, even back then.) What I find ironic, though, is that batteries are considered “green” energy when the units themselves are cauldrons of toxic metals and chemicals.
Other alternative energy sources have also duped people to accept their “greenness.” Having these alternative “green” energy sources in action prompts me to question just how earth-friendly these sources are.
To see a farm of large wind turbines in action is to see an intimidating monstrosity; one that has earned a reputation as a “bird Cuisinart.” To see a vast field of solar panels on a large industrial level is to see a technology that hogs real estate that would have been put to higher-value use (and what about the flora and fauna that depends on that real estate?).
The costs simply can't outweigh the benefits, and that includes the benefit of lower CO2 emissions.
Nevertheless, many investors have been persuaded to invest in the “green” fantasy. Unfortunately, most of these investments have led to very real losses. Below is a sample of “green” equity investments that I believe are representative of the sector.
|
“Green” Energy Investment | All-Time High Share Price | Current Share Price |
| Broadwind Energy (NASDAQ: BWEN) | $109.80 | $2.48 |
| Sauer Energy (NASDAQ: SENY) | $1.30 | $0.16 |
| China Ming Yang Wind (NYSE: MY) | $13.60 | $1.48 |
| Vestas Wind (PINK: VWDRY) | $26.30 | $2.27 |
| SunPower Corp (NASDAQ: SPWR) | $133.60 | $8.07 |
| First Solar (NASDAQ: FSLR) | $311.50 | $31.26 |
| Canadian Solar (NASDAQ: CSIQ) | $45.90 | $4.62 |
I don't doubt that Boeing will recover from its foray into the fantasy world of “green” energy, much like General Motors (NYSE: GM) will recover from its “green” foray with its disastrous, unconscionably subsidized Chevy Volt.
Now, please don't misunderstand – I don't revel in “green” energy failures. We all want cleaner air and water, but benefits must always be weighed against costs. The cold, hard fact (the reality) is that when placed on equal footing, “green” sources cannot compete with so-called “dirty” sources – oil, coal, and natural gas.
This is an important consideration when you factor in the reality that the federal government runs annual trillion-dollar deficits and will likely become less able to provide “green” energy its many privileges.
Here's another consideration: Capital diverted from the economically efficient resources is capital that would make these resources more efficient and more green. When fantasy is subsidized, reality takes a hit.
I'm a reality investor. No matter how much I want to see a specific sector succeed, I'm still guided by the facts. This discipline is reflected in my High Yield Wealth portfolio. No investment is predicated on wishful thinking; economic reality trumps everything.
Fortunately, reality works, and reality is more remunerative, particularly in the energy sector. The High Yield Wealth portfolio's energy component is composed of high-yield traditional, economically viable investments. In less than nine months, one of the investments has already returned 30%, and another has returned 20%. Yields on these investment range between 5% and 10%.
The latest energy addition (added only a couple of weeks ago) has already returned 5%. What's more, this energy stock was unearthed in one of America's most despised industries, an industry whose demise many investors have fantasized about.
The point I want to emphasize is that economic reality must always be your guiding principal with investing, no matter how off-putting reality might be. Your portfolio will reap the benefits.
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