Wednesday, January 11, 2006

Energy and Stocks - a paradigm shift

For years I have been interested in the stock market as well as energy. For the last 18 months I feel as if I have had some advance information on the energy sector. That information - fossil energy's days are limited.

I have been using that advanced information to decide where to invest. My investments have done much much better than my retirement investments where I do what retirement fund guy recommends.

Go ahead, read about Peak Oil or Global Warming or our Growing Trade Deficits... Declining American Natural Gas Discoveries.... what’s behind it all? Fossil fuels!

America will be seeing much higher prices. That means, sadly perhaps, that investing in companies with fossil energy reserves is fruitful, because their value is largely based on their reserves and the perceived market value of those reserves. And the perceived market value of those reserves has been way undervalued. (However less so today than one year ago).

Secondly most firms/technologies that replace or reduced the need for fossil energy will be growing and making money. That includes renewable energy, energy efficiency, (sadly) nuclear and more efficient transportation (such as railroads), among others.

So what have I invested in? Clean Energy: PBW. Fossil Energy: XLE. Geothermal heat pumps: WFI.TO. Peak Oil: GAGEX. Precious Metals: VGPMX. I have been in most of these for over 12 months.

GAGEX is the only mutual fund that mentions peak oil (that I know of). It was the best performing mutual fund in America for most of 2005. We shall see what 2006 brings. So far in the first few days of the year it has done well.

I am new to WFI.TO. They make geothermal heat pumps - a way to efficiently heat homes without natural gas but with electricity. PBW is the fund which I used to participate in the renewable energy companies and clean energy companies of America. There are few such companies - and most are very small so I feel comfortable investing in about 30 of them through this exchange traded fund.

It seems to me that at the same time we are running out of oil and gas, we are realizing that many precious metals are limited. Thus I have invested in the Vanguard Precious metal fund (VGPMX).

With the mix of clean energy, fossil energy and precious metals my investments also offer some diversity.

My investments have done well. I see no reason why they will not continue doing well for years. Yet most of my investments are in fossil energy. As a renewable energy advocate that fact is a bit hard for me. So I have used some of those gains to become a life member of two renewable energy groups, invested in a solar water and space heating system on my home and am considering purchasing a 2006 Honda Civic hybrid.

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