Saturday, 1 May 2010

Get rich quick, the green way

An interesting blog here at the FT on recent comparative returns from Climate Change related stocks relative to the general market. The general thesis is that businesses that operate in climate change related areas, like wind, solar or nuclear energy companies have produced lower relative returns to investors over a period during which the market has been slightly rattled by questions over the integrity of those producing the "science". They go on to say that everything will be hunky dory once the final whitewashes, sorry, I mean independent expert inquiries report and a full and completely clean bill of health is awarded to this shower of chancers and charlatons that call themselves a scientific discipline.

Here is the supporting chart with all the relevant dates and events as exhibit A.

Well, guess what. I think this is spurious anlaysis, that HSBC are producing this"research" to convince punters to buy into their index now and Kate Mackenzie at the FT has fallen for it hook line and sinker.

Here are the salient points this HSBC report fails to mention and Ms Mackenzie fails to spot. The majority of constituents of this index are companies who will only produce a return to shareholders if they get lots of taxpayers money. That i how the wind energy industry has got to where it is today. Taken from our pockets by politicians and placed into those who own and run these companies. People like Al Gore.

And what has been happening recently in Europe? Well, there has been a collective realisation that the finances of governments across Europe are in such a parlous state that bankruptcy is a very realistic possibility for places like Greece, Portugal, Italy, Spain and Ireland. Money for businesses that add no economic value like wind energy or solar energy companies just isn't there and investors awakening to the fact that the "Pig at the Taxpayer Filled Trough" business model has no immediate future until we get ourselves out of hock.

This is the type of event that was occurring in January, just at the time the HSBC CC Index started to hit trouble. Kate should have spotted a report on it. This one came from her newspaper:

There will be no bail-out of Greece by other European Union countries, a top European Central Bank official has said. “The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece,” J├╝rgen Stark, an executive board member, told Italian newspaper Il Sole 24 Ore.
Put that event on the chart above and it starts to take on a different meaning. In fact 7 January has a much better coincidence with the actual decline in relative performance than the "Himalayan Blunder" used on the chart, which clearly comes after the gap between the red and black lines closes.

Let's face it, markets really couldn't give a lambs whatsit for CRU whitewashes or an other irrelevant political shenanigans (they see through it as being completely political shenanigans).

And that is what the markets really think of this game - a pork barrel free for all. And that is why returns have been under-performing the wider equity market. And that is why would be mad to put money into these companies now.

No comments: