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Thread: Article:The Biggest Economic Opportunity of This Century!

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    Default Article:The Biggest Economic Opportunity of This Century!

    "cleantech" is "the biggest economic opportunity of this century," my ears -- and yours -- should perk up.

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    Banned Melonie's Avatar
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    Default Re: Article:The Biggest Economic Opportunity of This Century!

    no argument from me ... the newly elected US gov't is preparing to throw billions of dollars worth of tax funded subsidies towards ethanol, biodiesel etc. If you want to 'reclaim' part of your tax money being used to fund these subsidies, buying some shares of VSE is probably the best way to do so !

    However, if you REALLY want to earn some nice dividends from a company that actually turns a profit in the ethanol business, you might consider USIN C PINTA on the Sao Paolo stock exchange. ( ) This Brazilian alcohol producer uses sugar cane and 'world priced unskilled labor' to produce alcohol at a cost that is more than $1 per gallon lower than VeraSun's cost of producing the same gallon from corn in the USA. USINA then exports a lot of their alcohol to the USA to supplement domestic supply. Even with the 50 cent per gallon tariff they must pay to the US Gov't to 'protect' the domestic alcohol producers, their profit margin is 3-4 times as high as VeraSun (even after the US gov't subsidies are factored into VeraSun's bottom line) because UNISA's production costs are so much lower.

    It is probable that, eventually, the US gov't will take further measures i.e. even higher tariffs and quotas, in order to prevent UNISA and other foreign sugar cane based ethanol producers from shipping product into the US market. However, for the next 2-3 years at least, the US gov't is over a barrel because they mandated that alcohol be used as the primary fuel additive to US gasoline and the US ethanol producers can't yet produce anywhere near the quantities of alcohol required to meet this demand. Once new US alcohol refineries (built with tax funded grant money) are completed and start producing, the need for imported supply will drop ... but until then ...
    ~
    Last edited by Melonie; 11-17-2006 at 03:36 PM.

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    Default Re: Article:The Biggest Economic Opportunity of This Century!

    However, if you REALLY want to earn some nice dividends from a company that actually turns a profit in the ethanol business, you might consider USIN C PINTA on the Sao Paolo stock exchange. ( ) This Brazilian alcohol producer uses sugar cane and 'world priced unskilled labor' to produce alcohol at a cost that is more than $1 per gallon lower than VeraSun's cost of producing the same gallon from corn in the USA. USINA then exports a lot of their alcohol to the USA to supplement domestic supply. Even with the 50 cent per gallon tariff they must pay to the US Gov't to 'protect' the domestic alcohol producers, their profit margin is 3-4 times as high as VeraSun (even after the US gov't subsidies are factored into VeraSun's bottom line) because UNISA's production costs are so much lower.
    Right on... now we're talking! Thanks for the tip

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    Banned Melonie's Avatar
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    Default Re: Article:The Biggest Economic Opportunity of This Century!

    ^^^ well, if you're seriously interested, in fairness you really need to understand a bit more about the world market for ethanol to understand the risks involved with USINA. First of all, they really don't make all that much money producing ethanol for the Brazilian market, because the Brazilian gov't (which like the USA today started out giving huge subsidies to Brazilian sugar companies to expand into ethanol in the 1980's) has since cut way back on these subsidies thus forcing the Brazilian ethanol companies to turn a profit on their own without help from Brazilian taxpayers. As a result, UNISA and other Brazilian ethanol companies are set up to switch production between ethanol and refined sugar on a daily basis if necessary based on changes in the price of oil vs. sugar. If oil prices go down, Brazilians won't buy pure ethanol or high percentage of ethanol gasoline, if oil prices go up they will - it's driven by economic choice of which fuel is cheapest on a given day not gov't mandate (in fact the Brazilian gov't recently LOWERED the required percentage of ethanol in gasoline blends from 25% to 20% to pass on lower blended gas prices to Brazilian citizens now that oil prices have dropped significantly).

    But when it comes to the export market, and specifically to the US export market, because of the US ethanol process being based on corn, every gallon of Brazilian sugar cane ethanol that can be sold in the USA results in huge profits for UNISA. If the USA were a 'free market', UNISA would be selling every gallon they could possibly produce in the USA because the US price of ethanol is well above the domestic Brazilian price or the export price they can get from many other countries. But because of US tariffs and quotas, imports of (by comparison) low cost Brazilian ethanol are strictly limited and a 50 cent per gallon tariff duty must be paid - translation, this tariff keeps the US price of ethanol at least 50 cents per gallon above the 'world price', and this quota guarantees that US ethanol producers will be allowed to sell 100% of their ethanol before imported ethanol is allowed in to make up for the gap in current US ethanol supply vs new ethanol demand (resulting from last February's new federal law mandating ethanol use and banning MBTE as a gasoline additive). So the amount of ethanol that UNISA can sell in the USA at a huge profit really boils down to total US gasoline consumption / 5 or 10 minus total US ethanol production capacity OR the 7% of total US production import quota limit. As I said earlier, this looks pretty rosey for the next couple of years, because it's going to take some time for VeraSun and other new companies to actually finish building their new refineries and get them working.

    However, there is now a new joker in the deck ... Cargill and some private concerns have figured out that Caribbean ethanol refineries are (at least partially) exempt from the tariff and quota due to something called the Caribbean Basin Initiative, which was originally enacted to help out poor Caribbean countries. So Cargill and others have been building Caribbean ethanol refineries ... that IMPORT cheap Brazilian ethanol, remove a little bit of extra water via a half-assed refining process, relabel the Brazilian ethanol as Caribbean ethanol, and ship it to the USA WITHOUT having to pay the 50 cent per gallon tariff !!! This basically guarantees Cargill a 50 cent per gallon profit strictly based on avoiding the tariff !!! But it also provides UNISA with a huge new customer i.e. Cargill, which means huge export earnings for UNISA. HOWEVER, the joker is that this Caribbean relabeling scheme is totally dependent on the whim of the US gov't for continued economic viability.

    The reason that I personally am so leery of investing heavily in ethanol companies is simply this (and I make these comments on purely economic terms). The US ethanol market requirement for ethanol, and the 'domestic sale price' of ethanol within the US, have very little to do with supply and demand, profit and loss etc. In essence the US ethanol market and 'domestic' US ethanol prices are the product of gov't policy and regulation, pure and simple. Thus there is a huge risk that gov't policy and regulations could be changed at any time. A change in gov't policy and regulations re ethanol would help some companies and hurt other companies based solely on the effects of those changing regulations, having little or nothing to do with how efficiently a particular ethanol company is run, how well they control their production costs, or any other 'free market' variable.

    Thus investing in ethanol companies is a calculated risk on future US gov't ethanol policy - which at the moment appears to be growing ever more supportive of domestic ethanol producers. But one possible gov't move to further support US ethanol producers could be to slam the door on the Caribbean scheme by reinstituting tariffs and quotas - and this would put a big crimp in the profits of UNISA and Cargill overnight !

    There's an interesting read on the subject at , although it is now 18 months out of date.

    ~
    Last edited by Melonie; 11-17-2006 at 09:23 PM.

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    Default Re: Article:The Biggest Economic Opportunity of This Century!

    i have family in the stockbroker biz, i am going to inquire on these two aforementioned stocks. as of now, all of my money is split in different funds, incl. a bunch of vanguard mutuals such as strategic equity, fortune 500, and so on. ill let you know what i get back from them.

    Love it!

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    Default Re: Article:The Biggest Economic Opportunity of This Century!

    Quote Originally Posted by Chrissy68
    i have family in the stockbroker biz, i am going to inquire on these two aforementioned stocks. as of now, all of my money is split in different funds, incl. a bunch of vanguard mutuals such as strategic equity, fortune 500, and so on. ill let you know what i get back from them.
    Don't forget to ask your family member about ADM. It's my pick for the safest buy.

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