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8:30 AM EST Thursday, April 3, 2008: Silver and gold are rebounding. I bought some GLD and SLV yesterday and goodness gracious, the market is down 48 points, but I'm up a few shekels. I remain positive on both these ETFs. As the world talks about the "R" word (recession) and the dollar continues its collapse, money will continue rush to precious metals. A flight to safety, and all that. (Today's Wall Street Journal front-paged, "Bernanke raised the prospect of a U.S. recession as the economy staggers under a housing crisis and tightening credit.")

The next bubble will be alternative energy. It's already happening. The hottest is First Solar, a real company making real sales and real earnings and now rebounding from its recent low.

Goldman Sachs recently put out the first issue of its "Private Wealth Forum:" In it there was a really well done "Alternative Energy Roundtable." Excerpts:

According to the International Energy Agency, some $20 trillion will be invested toward the development of reliable energy alternatives over the next 25 years. Not all of those investments will be successful.

Nevertheless, energy renewables now comprise one of the global economy's most robust industries worldwide, with growth rates for some segments projected at 25% annually.

Goldman Sachs, for example, has made successful investments in wind and solar. Cellulosic ethanol also appears promising, in that it addresses the critical issue hurting the profitability of corn-based ethanol (the primary source of ethanol in the US) -- namely, competition with the food sector for feedstock. Fuel cells have yet to become profitable.

The fastest growth we're seeing is in wind and solar photovoltaics (PV) although solar is growing from a very small base. Geothermal and hydro are growing slowly. We see opportunities at different parts of the value chains for the various technologies. For example, with wind power in Europe, there are the forgers of metal for turbines, turbine assemblers, wind farm developers, and wind farm operators. Currently, the strongest growth appears to be in parts and components suppliers who can't keep up with the current demand. The same is true for solar.

The cost of solar, in particular, is likely to fall dramatically -- many estimate by as much as 50% by 2010.

Over the last several years, installed wind capacity has grown at a rate of 25% annually, and growth rates of between 15% and 25% are expected for the next 10 to 15 years, largely driven by government mandates for increased alternative energy. The EU, for example has mandated that 20% of its energy come from alternatives by 2020. That's a powerful driver. I can't think of any other industry projected to grow at 15% - 25% per year for 10 - 15 years.

In developing countries, alternatives are particularly attractive because in many instances, they don't require connection to a grid. Thus, the high costs of building a grid can be avoided.

It's true that some of the biofuels are at a disadvantage because of their exposure to high input costs. From the perspective of a commodity investor, it's a good time to buy inputs like corn and soybeans, because that's where a lot of the pressure comes from.

Cellulosic-based ethanol could be a viable technology over the long term. Right now it requires a lot of upfront capital investment, but the cost of inputs -- wood chips and waste -- are much lower than for corn based ethanol. Of course, breaking down cellulosic inputs for ethanol is a much more complicated technology than that for corn-based ethanol. There are pilot projects underway and once the technological hurdles are surpassed, funding costs will come down.

What are the greatest risks to consider when investing in alternative energy?

The two main risks are: (1) that companies are not well managed, you might call it executive risk, and (2) that government regulation supporting the industry does not occur as quickly as anticipated. The industry is very heavily driven by regulation, and if participants don't understand the direction of government policy, that's a risk.

The wind industry offers almost a textbook example of executive risk. The first entrants were small operations run by scientists with minimal or no business or managerial experience. The primary focus of many early entrants was making sales, and they ignored the implications of their industry's long supply chain -- the average wind turbine has about 8,000 components. Many of these businesses found they couldn't fulfill their contracts because of supply-chain bottlenecks; they were pushed into late payments and their businesses faltered. Since then, more sophisticated executives, knowledgeable about the management of working capital and supply chains, have come to lead many wind businesses. The sector has been performing very well over the past nine months.

Similarly, in some segments of the solar sector, margins now are unsustainable high. A surge in demand for solar led to a bottleneck in silicon supply. As a result, silicon prices multiplied as much as 10-fold, and silicon producers have been earning margins of 50-60%. But the projected increase in world capacity from 15,000 tons of silicon per year currently to 100,000 - 125,000 tons of silicon per year by 2010 will exceed demand, so it looks like the market will move from undersupply to dramatic oversupply.

Some 50 countries have renewable energy policy targets in place. The EU has set a goal of deriving 20% of its energy from renewables by 2010. At present, renewables account for about 7% of the EU energy mix and a fraction of the power sources worldwide.

The US has no nation renewable energy standard, but 24 states have adopted their own RPS mandates. And 15 states have adopted emissions reduction programs.

If you're running your business, you must plan for declining sales: Strategies:

1. Arrange bank credit lines if you can.

2. Keep inventories low.

3. Promote via low-cost tools like the Internet. Beef up your web presence.

4. Cuddle and coddle your best customers. Visit them. Take them to dinner. Ask how they're going. Listen.

5. Keep an eye for local "bargains." For the first time in eons, you can actually buy residential real estate and rent it out for a reasonable rate of return -- without assuming any land or building capital appreciation in your ROI calculations.

6. Spend a little more time getting in shape and getting your people in shape. I used to bribe my employees $500 to give up smoking.

Today's Nuveen Conference Call
Nuveen Investments will host a conference call at 10:00 a.m. central time to discuss the refinancing of the funds’ ARS. Nuveen anticipates high call volume and encourages attendees to access the call via the live streaming audio link to facilitate the registration process. Online participants will be able to submit questions. Attendees can access the teleconference on Nuveen’s Web site,, or at
Attendees who prefer to participate by phone can access the call by dialing (866) 311-5247 or (212) 729-5043 and referencing conference ID number 41908989.

Can you believe anything you read? The simple answer is probably not. The better answer is "Check, Check, Check." On April 1, my friend, Mike Marcus, who runs a successful telecom equipment supply operation, called AbleComm, sent out a press release saying Panasonic will use plasma displays in its cell phones. The release was a spoof. But it got widely picked up by the legitimate media, e.g. InfoSync.

Some useful health tips. From the latest issue of Men's Health magazine:

1. Men with the highest fitness levels are three times less likely to die of cancer, according to a University of Buffalo study.

2. National Cancer Institute researchers found that eating fruit may prevent colorectal polys, growths that often precede cancer. In the study of 32,000 people, scientists determined that men who consume five servings of fruit daily were 38% less likely to have polyps.

3. Close the lid before you flush. "With the flush of a toilet fecal pathogens can splash out of the bowl and settle on nearby surfaces, including you. Unfortunately ingesting as few as 10 particles of various viruses or bacteria can cause a slew of nasty symptoms, such as diarrhea, fever and vomiting. Your best defense? Always close the lid before you flush, and of course, wash your hands, please."

4. Forgive and forget. University of Miami researchers discovered that people who forgace a close friend or family who treated them badly reported fewer aches and pains, compared with those who kept sulking.

Two recent favorite New Yorker cartoons:

They're willing to throw in their kidneys.

You have to shake it if you want to see it snow again.
(A Kanin cartoon.)

The Murphy twins, again
Two men were sitting next to each other at a bar.

After a while, one guy looks at the other and says, "I can't help but think, from listening to you, that you're from Ireland "

The other guy responds proudly, "Yes, that I am"

The first guy says, "So am I."

"And where about from Ireland might you be?"

The other guy answers, "I'm from Dublin, I am."

The first guy responds, and so am I "Sure and begora, And what street did you live on in Dublin ?"

The other guy says, "A lovely little area it was, I lived on McCleary Street in the old central part of town."

The first guy says, "Faith and it's a small world, so did I.! So did I."

"And to what school would you have been going?"

The other guy answers, "Well now, I went to St. Mary's of course."

The first guy gets really excited and says, "And so did I. Tell me, what year did you graduate?"

The other guy answers, "Well, now, let's see, I graduated in 1964."

The first guy exclaims, "The Good Lord must be smiling down upon us! I can hardly believe our good luck at winding up in the same bar tonight. Can you believe it, I graduated from St. Mary's in 1964 my own self."

About this time, Vicky walks into the bar, sits down, and orders a beer.

Brian, the bartender, walks over to Vicky, shaking his head and mutters, "It's going to be a long night tonight"

Vicky asks, "Why do you say that?"

"The Murphy twins are drunk again."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.

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