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Thread: Positive Direction/Good Potential Investment

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    Default Positive Direction/Good Potential Investment

    A good example of how technology and innovation may help solve many of our current problems. Investing in firms getting involved in this type of technology may provide good returns as it is likely to evolve much further in the future.

    http://www.virgin.com/richard-branso...irgin-atlantic

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    Default Re: Positive Direction/Good Potential Investment

    ^^^ the basic question regarding any evaluation of the company's ability to provide 'good returns' to investors obviously involves a whole bunch of information that isn't publicly available. What price must this low carbon fuel be sold at in order for this company to earn a profit ? How much difference is there between the profitable price for this low carbon fuel and the price of standard jet fuel ? How much of this 'net' difference is the result of EU carbon taxes, EU green energy grant money, EU green energy tax credits, and other 'artificial' cost factors that are potentially subject to major changes after the next election cycle ?

    As Americans have seen from Solyndra, simply having a 'better idea' is no guarantee that a company can actually create a sustainable profitable business model. It is also probably much more than mere 'coincidence' that a court ruling was issued last week that requires both EU owned and non-EU owned airlines to pay EU carbon tax on jet fuel when one 'end' of their flights is at an EU airport.

    (snip)"US airlines have likely lost their court case against being included in Europe’s cap-and-trade carbon market next year. An advisor to Europe’s highest court has declared that European Union rules forcing foreign airlines to pay for their carbon emissions is within the law.

    “EU legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law, and is compatible with the relevant international agreements,” said the opinion from Advocate General Juliane Kokott.

    Although the opinion is not binding, judges at the European Court of Justice usually follow the guidance of the advocate general.

    The move will see airlines based outside of the EU forced to buy carbon permits or credits next year for flying in and out of the region’s 27 nation member states.

    Several American airlines and the Air Transport Association of America filed a suit in the UK against their inclusion into the carbon market after the country had adopted the EU directive for regulating aviation emissions

    The main objection was that the EU was effectively imposing a tax over other sovereign state’s air space and the high seas, as well as breaching conventions in the Chicago Convention, the Kyoto Protocol and the Open Skies Agreement."(snip) from

    Again the main economic point of the above is that the wider imposition of the EU carbon tax directly translates into a higher net cost for regular jet fuel ... which lowers the cost 'differential' versus this company's low carbon jet fuel ( that isn't subject to as much EU carbon tax ). If dependence on the future EU carbon tax level is the sole basis for profitability for this company ... and that carbon tax level is both subject to being overturned by world courts and/or devalued as the result of a general economic slowdown throughout the EU ( which reduces industrial demand for carbon thus reduces the value of carbon credits / price of carbon taxes ) ... then investing in this company is arguably a highly risky proposition.

    ~
    Last edited by Melonie; 10-11-2011 at 11:14 AM.

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    Default Re: Positive Direction/Good Potential Investment

    Doing good things for the world isn't the same as dividends and share price increases.
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: Positive Direction/Good Potential Investment

    Quote Originally Posted by Melonie View Post
    ^^^ the basic question regarding any evaluation of the company's ability to provide 'good returns' to investors obviously involves a whole bunch of information that isn't publicly available. What price must this low carbon fuel be sold at in order for this company to earn a profit ? How much difference is there between the profitable price for this low carbon fuel and the price of standard jet fuel ? How much of this 'net' difference is the result of EU carbon taxes, EU green energy grant money, EU green energy tax credits, and other 'artificial' cost factors that are potentially subject to major changes after the next election cycle ?

    As Americans have seen from Solyndra, simply having a 'better idea' is no guarantee that a company can actually create a sustainable profitable business model. It is also probably much more than mere 'coincidence' that a court ruling was issued last week that requires both EU owned and non-EU owned airlines to pay EU carbon tax on jet fuel when one 'end' of their flights is at an EU airport.

    (snip)"US airlines have likely lost their court case against being included in Europe’s cap-and-trade carbon market next year. An advisor to Europe’s highest court has declared that European Union rules forcing foreign airlines to pay for their carbon emissions is within the law.

    “EU legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law, and is compatible with the relevant international agreements,” said the opinion from Advocate General Juliane Kokott.

    Although the opinion is not binding, judges at the European Court of Justice usually follow the guidance of the advocate general.

    The move will see airlines based outside of the EU forced to buy carbon permits or credits next year for flying in and out of the region’s 27 nation member states.

    Several American airlines and the Air Transport Association of America filed a suit in the UK against their inclusion into the carbon market after the country had adopted the EU directive for regulating aviation emissions

    The main objection was that the EU was effectively imposing a tax over other sovereign state’s air space and the high seas, as well as breaching conventions in the Chicago Convention, the Kyoto Protocol and the Open Skies Agreement."(snip) from http://cleanjet.opisnet.com/archives/445

    Again the main economic point of the above is that the wider imposition of the EU carbon tax directly translates into a higher net cost for regular jet fuel ... which lowers the cost 'differential' versus this company's low carbon jet fuel ( that isn't subject to as much EU carbon tax ). If dependence on the future EU carbon tax level is the sole basis for profitability for this company ... and that carbon tax level is both subject to being overturned by world courts and/or devalued as the result of a general economic slowdown throughout the EU ( which reduces industrial demand for carbon thus reduces the value of carbon credits / price of carbon taxes ) ... then investing in this company is arguably a highly risky proposition.~
    Be that as it may, much of investing is emotional, and in the short-term, companies and indexes involved with this type of technology will very likely perform well- purely on speculation and emotional reaction. Definitely nothing to bet the family farm on but IMHO a decent place to put some discretionary investing dollars. Upside could be very high if you get in early, which you can now.

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    Default Re: Positive Direction/Good Potential Investment

    ^^^ agreed. History from 'green' companies like Pacific Ethanol and Tesla Motors and GT Solar indeed showed an 'emotional' buying spree rapidly pushing up stock valuations when their IPO's first hit the markets. However, once the initial bout of 'emotion' had passed, and economic reality took hold, all dropped in value. So yes there is potential for purely 'speculative' short term gains by betting on the same trend occurring yet again, getting in very early and getting out quickly before the 'emotional' buying phase dies down. But I would definitely categorize such a strategy as a 'speculation' rather than an 'investment'. And being successful at this sort of speculation will definitely involve some very precise 'market timing' ... providing of course that the same trend does in fact repeat itself to make such speculative gains possible at all.

    A safer bet might be to buy put options against the US airlines who were involved in the (so far) unsuccessful lawsuit ... based on the rationale that rising net fuel costs for European flights in 2012 ( due to the added cost of the EU carbon tax ) will cut into their profit margins and cause their stock valuations to decline.

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    Default Re: Positive Direction/Good Potential Investment

    Nah, I like this technology and I like Richard Branson. I prefer to put my money towards things I believe in and that I think encourage sustainability and may benefit people, as opposed to pure profit, that's just me though. Either way, as you noted the common investor would likely see at least a short term bump.

    It seems you are trying to include this as a "green" company and I'm not so sure that's the case. While it does help the environment, it is also producing jet fuel, which is much in demand. We'll have to see how the production costs are compared to oil. Depending on that ratio, this may be better termed an energy company. Also, given Branson's track record, I'm more than happy to bet on him.

    In an effort to be accurate, you've named several green companies that have failed, there are also thousands of green firms (even in the US) that are performing very well and are employing lots of people in high paying jobs. Likewise, there are plenty of non "green" companies that have gone out of business. It seems to me, you have a relatively simplistic "green"= bad, "non-green"= good mentality, I don't think the reality is quite that simple.

    Here is a good story on two green firms that are doing well:
    http://www.startribune.com/business/131369388.html

    Some highlights:

    EarthClean Corp. of South St. Paul has signed a three-year, $4.3 million contract with South Korea's SAM JOO S.M.C. Co., an industrial coatings and clean-technology firm based in Seoul. The deal was inked during Gov. Mark Dayton's recent trade mission.

    At EarthClean, which makes nontoxic fire-suppressant foam, CEO Doug Ruth said the company has raised a total of $3 million in equity from 11 Minnesota individual investors. It also signed a five-year, $8 million contract with Atira Systems, which will be the California and Oregon distributor.

    EarthClean, which uses local contract manufacturers, has had a tough time cracking U.S. markets that are dominated by huge chemical companies. Ruth said Korea and Japan are promising markets because their national governments tend to centralize their firefighting procurement business.

    Two years ago, McNeff's family-owned Anoka company inaugurated a $9 million plant in Isanti, Minn., that produces 3 million gallons annually of biodiesel made from used cooking oil.

    McNeff said last week that he also has a letter of intent with a customer to build two 3 million-gallon Mcgyan biodiesel plants next year at ethanol facilities



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    Default Re: Positive Direction/Good Potential Investment

    again, putting politics totally aside, my grouping of such companies actually has nothing to do with the arguable fact that they are environmentally beneficial. Instead it has to do with the inarguable fact that their business models depend ... in whole or in part ... on economic distortions created by a gov't mandate, a targeted tax, targeted tax credits, gov't protected markets etc. Thus you are correct that my use of the term 'green' was a bit of a misnomer ... albeit that a disproportionately high number of startup companies whose business models are heavily dependent on said gov't mandates are also 'green' in the literal sense.

    As I said in my earlier post, when such economic distortions upon which the arguable profitability of their business model is dependent are at risk of disappearing ... in whole or in part ... with the next election cycle, that automatically makes long term investing in such companies a risky bet. Also, if it becomes apparent that those gov't mandated economic distortions are going to be a more or less 'permanent fixture', serious competition will then typically arise from larger more efficient more mainstream manufacturers with which the 'startup' companies have difficulty competing. Of course there's also the possibility that the larger more mainstream company will decide to 'acquire' the startup company in order to absorb it's technology and key personnel. But history shows that's a low probability event compared to the 'startup' company sliding toward bankruptcy.

    I also have a fair amount of respect for Richard Branson. However, in this case, I must speculate that his primary interest lies in avoiding as much profit margin compression for Virgin Air as his mainstream international airline competitors will experience due to the 2012 EU carbon tax on jet fuel. I would also speculate that some 'green' investment tax credits are involved somewhere along the line, which will allow Mr. Branson to reduce the amount of taxes due on his very sizeable income from conventional sources. However, none of these special case 'bonus' situations apply to the average 'small time' investor.

    ~
    Last edited by Melonie; 10-12-2011 at 03:34 AM.

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    Default Re: Positive Direction/Good Potential Investment

    ^^^Nah, there are thousands of "green" companies operating in the U.S., most of them don't receive the tax credits or other incentives that you mention. Many of them are making components and technology enhancements that get exported and/or purchased by private industry and government inside and outside the US, like Earthclean, which is sellling almost exclusively outside the US. There are $billions being raised by private sources to fund these ventures.

    Irregardless of what happens to US domestic policiy the demand for these products and the technology is going to continue growing worldwide. We could be in a position where we are the leaders in developing and selling/exporting the technology end of it. With a head in the sand mentality someone else will grab that opportunity and create those jobs and make that profit.

    As far as Richard Branson, I can only speculate but given his track record and his list of worthy causes that he donates vast sums and a majority of his time to, I'd say this move is partially for his Airline to make more profit but tha the majority of his motivation is the betterment of humanity.

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    Default Re: Positive Direction/Good Potential Investment

    ^^^ Nah ! The major motivator for EarthClean's business model is a US federal court ruling ...



    ... which potentially leaves gov't entities and private corporations liable for future groundwater contamination cleanup costs if they DON'T start using 'green' fire retardants !!!

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    Default Re: Positive Direction/Good Potential Investment

    Quote Originally Posted by Melonie View Post
    ^^^ Nah ! The major motivator for EarthClean's business model is a US federal court ruling ...

    http://www.nytimes.com/2010/07/29/us/29wildfires.html

    ... which potentially leaves gov't entities and private corporations liable for future groundwater contamination cleanup costs if they DON'T start using 'green' fire retardants !!!
    ^^^I'm not exactly sure what your point is here. The company is having a hard time selling in the US and is instead exporting to Japan and Korea. I don't see what's wrong with that, if I missed something please explain it to me.

    I also don't understand why you have to go so far out of your way to criticize or find fault with every single thing that is not negative.

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    Default Re: Positive Direction/Good Potential Investment

    ^^^ again, politics aside, as a 'purely financial' investor I want to know that the basic business model of any company I choose to invest in is robust enough to survive the next election cycle or the next court ruling that could change the status quo re gov't mandates, tax credits etc.

    On your particular example of EarthClean, signing up distributors in Korea and Japan isn't the same thing as actually making major sales in Korea and Japan. Also forgive me for being a bit skeptical about - for example - Japan's TEPCO being motivated to pay a premium price to use EarthClean bio-degradable fire retardant for use on their meltdown mode nuclear reactor fires. At the moment, EarthClean has a dozen PRIVATE investors ... private investor 'partners' who would be eligible to share in tax credits ... and no public shareholders.

    Please don't misunderstand my position. Undoubtedly there are some 'green' startup companies with a promising and profitable future. But the 'devil is in the details' !

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    Default Re: Positive Direction/Good Potential Investment

    Quote Originally Posted by Melonie View Post
    Please don't misunderstand my position. Undoubtedly there are some 'green' startup companies with a promising and profitable future. But the 'devil is in the details' !
    Not bad, that was very close to being a positive statement lol.

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