Floridians vote to conserve - what's next in the Obama Administration

I am now happy to state that the conservation initiative on the ballot in Florida was passed, with 68.4% of the vote. If I in any way helped voters come to this conclusion I am especially pleased.

Looking forward I would add that I hope that actions of Florida residents leads to similar actions in other states as well. There is no negative in setting aside some land for conservation. Trees are a good thing for everyone. And the bonus of a tax incentive never hurts in a bad economy either.

Looking further forward, we can expect that the Obama administration will seek to further conservation efforts. These will be efforts that will be mixed in the public’s eyes. That is because the plans as stated will be painful to the average American as opposed to plans like that in Florida.

I am speaking directly to 2 things President Obama has been quoted on. The first is his desire to see the cost of energy, specifically electricity, to go higher. The reason for this is to force conservation through lack of funds. The reasoning is that by forcing prices higher, less energy will be used and thus conserve more. The initial step is expected to hurt the economy slightly, in President Obama’s view, and will take a short while for the public to adjust to. Thereafter the benefit will continue and Americans will be comfortable in that environment.

The other item is the recently released tapes of President Obama, before the election, stating that his goal is to effectively cause the creation of coal powered plants to be fiscal suicide. His plans will cause coal power plants to become bankrupt.

This would have several effects. the first is to increase the cost of electricity – explained above. Another would be to limit the amount of power available at any time. Again this would force consumers to use less power to ensure that blackouts and brownouts do not occur. Additionally this would significantly improve the air quality from the U.S.

I am no fan of forced conservation, as you may gather. I believe in education and incentives to mold behavior. Obviously not everyone agrees with that plan.

If President Obama enacts his conservation plans as previously stated, America will consume fewer fossil fuels and help worldwide conservation efforts. And like most types of change some pain will be felt. But such efforts are not enough, even if they are effective.

The world is far more than just America. And while America contributes greatly to the use of fossil fuels, poor air quality, land usage, and waste creation we are not the only cause of these negatives. China and India are increasing their output and consumption of these negatives annually. Even with a drop in U.S. rates, without worldwide attention and conservation efforts China and India alone will soon make up for any decreases in America. That scenario is counter-productive and troubling.

I expect and anticipate the efforts of President Obama and his Administration in speaking with these and other nations. And if I can suggest anything it would be to provide a carrot and not a stick in persuading other nations to curtail their usage rates. Like in Florida, when people are given an alternative and a bit of sugar they take the medicine without complaint.

If you agree with my view, tell your elected officials. Because they will listen even if they don’t have to fear elections for a year.

But if you disagree, or have a better solution, please do share it.

Mining stocks in the 2nd half of 2008

Oil is in the middle of the summer breather, gold has backed off the stellar highs reached in the 1st quarter. Inflation is in the background, and the mortgage housing crisis continues to hinder the financial markets. Well back on July 2nd I mentioned that

“Energy shortages, most notably in South Africa but also in North America and Chile, forced supply down artificially helping to boost prices. But that is a problem that has been in the works of being fixed since the 1st quarter. Once it is done supply will rise to meet the growing demand and be a signal for profit taking.”

It seems I was right. So what might an investor do and look forward to?

Mining stocks continue to hold one of the better risk reward scenarios for a long term outlook, I think. While many sectors of the markets are slowing there is huge potential in the mining sector for reasons most are not discussing now.

Because of the huge run on gold and precious metal prices early in the year, many of the mining companies took the opportunity to horde cash and survey the landscape. Several of these companies are taking the current indecision in the markets to use that cash to acquire some of the competition. Lonmin was recently offered a takeover valued at roughly $2.5 billion. Vale of Brazil is looking for a potential match with $12 billion in its coffers, while BHP Billiton and Rio Tinto are doing merger dances.

But a merger is only one reason why the current lull in metal demands is a buying opportunity in mining stocks. China and India are far from peak of their demand for metals. Both of their economies are in growth phases and require more raw resources.

China is not only using more metal, they require much more energy. Already China has grabbed the excess crude oil that has become available from the slowdown in the United States. Soon they will have increased their need enough to be driving up crude oil prices even if America lessens its demand via domestic drilling or increases alternative fuel sources.

And of course there is the aspect of fuel sources outside of crude oil. The world is looking for options and needs energy until a renewable alternative becomes viable. That means an increase in mining and processing of oil shale, coal, and uranium. While nuclear has its detractors it provides too much energy to be ignored, and is relatively clean. A new process for coal is in talks in America, making its use cleaner and a readily available domestic stopgap for crude oil. And oil shale has a potential that still remains unknown on the large scale.

Each and every one of the reasons above is likely to show their influence before the end of the year. With the political situation in America poised to change energy consumption trends after the Presidential election, mergers creating more efficient (and profitable) mining companies, demand pressure from China and India even a slight increase in crude oil prices (as winter approaches) or a rush to gold and other precious metals as a hedge for inflation and/or weak markets means that mining stocks are well poised to outperform virtually all other sectors by the end of 2008.