Part 2- Other stocks in 2025
International stocks
I haven’t had a meaningful allocation to international stocks in 25 years. And it has paid off. 35-40 years ago, the mutual fund companies came out with International funds. They had “Global funds” before. Global funds mean US plus some foreign. Most global funds then were 30-40% US and the rest global. Now these global funds are more like 80% US and 20 international.
Are International Stocks Worth the Bother? Morningstar https://www.morningstar.com/portfolios/are-international-stocks-worth-bother Christine Benz June 7, 2023.
Excerpt: Vanguard founder Jack Bogle famously argued that international stocks didn’t merit inclusion in investors’ portfolios… The past few decades have borne out Bogle’s aversion to non-U.S. equities, as U.S. stocks have handily outperformed non-U.S. stocks.
Actually we are almost 5 decades with no improvement in international returns. I don’t see that trend stopping. I am not averse to buying into one country, like India when you could see it was growing rapidly.
In the late 80’s advisors were getting carpet bombed by international fund salesmen who swore that their charts would prove to be true. The reasoning of this wave of international fund salesmen was that by going overseas you could be more diversified. This was supposed to help you make more and decrease your risk. And they concluded by having them, you would eventually overperform. They haven’t. Ever.
There has been single countries that have a big year, but that doesn’t help the funds. I do own and purchase for clients a few international stocks. You have to pick them one at a time. Having a huge index of foreign companies just doesn’t work to add return or reduce risk. Included in this group is the title of “Emerging Market funds.” They are worse. That’s exactly what you don’t need… a basket full of third world stocks. Many of us have called them “Submerging markets,” for decades. This is still a heated debate. But it shouldn’t be. I believe there are people who think they are sophisticated and it gives them a “good feeling.” These are our friends with re-usable hemp grocery bags.
Energy- Green Energy
Above:Opening scene from Blade Runner 2049. The future solar projects of California.
If a government was to sit down and decide which energy they would use for their region, and they want to save money and lower utility bills, green energy would be out of the conversation. Now, “they” say it’s cheaper than natural gas. When you hear that solar and wind are now cheaper, stop and think: The normal land based wind turbine uses about 3.8 million pounds (900 tons) of concrete. It would take 90 cement trucks to fill that big of a hole. The concrete is placed around metal structures that weighs 400 tons or 800,000 lbs. That concrete is poured over 200 tons of metal structure. The hole is dug-130 feet. Design, logistics, drilling the hole 130 feet down in saltwater. Cranes are needed to put the structures in the right spots.
Even with the new enormous bases we have about 5 a year that just topple over.
Then we haul in the parts of the base, the upright tower that holds the turbine. This takes great amounts of diesel trucks and gas pilot cars. Now, you must do the electrical parts and electronic technology. I have left out steps for sure but lets say you now have the thing upright and it could function. Now, we must get it to the grid! How? Well you may have a mile or more of underground cable. Channels must be dug underneath the behemoth structure. The cables must be dug underground and underwater to the nearest beach. Then under the railroad, roads, any civilization, a 7-11 store and aunt Millie’s house to a power statiton which now has to be built to get power to the grid. That shouldn’t cost too much.
Germany has lead the way in green energy expansion. They have been going full steam since 2015 and their plans have not worked. Germany has the highest electricity cost in Europe and higher than California. Germany is 40 cents per KWH. California is 34 cents. Idaho is 12 cents.
We would all like cleaner air and water. The problem with green energy is that it doesn’t work and we have been sold a bill of goods by promoters who want to play on the urge of the elites to go all in for unicorns and fantasy power. You have to understand that the people who put fortunes into it have totally lost their ability to choose the greatest good.
Did you know? Greens tout renewable energy as providing 20% of our energy today. That is to give the impression that solar and wind are successful. They don’t tell you that hydroelectric power, Geothermal and “other,” is half of that total. It is not mentioned that solar makes up about the same percentage of our elecricity, 4% as is did 25-30 years ago.
Renewable Energy’s Incurable Scale Problem-Robert Bryce tells us why it won’t work.
https://robertbryce.com/renewable-energys-incurable-scale-problem/
According to Bloomberg, analysis in conjunction with Princeton University, if wind and solar grows 10% a year until 2030, we would need a land mass larger than South Dakota. 77,116 square miles of land. The cost of land for wind and solar is enormous. The media cheers it on. To make “renewables” 100% of our energy we would need 5 South Dakotas. In 2022 Wind and solar were subsidized by $11 billion in subsidies. The cost of land is enormous and not mentioned when calculating price.
Subsidies
64% of all US government subsidies for electricity are given to Solar and Wind, which make up 13.9% of our energy. 14% of subsidies go to Natural Gas, Nuclear and hydropower, which make up 68.4% of our power. The government is picking winners that are losers. What is the motivation? Why haven’t we stopped it?
In 2000 we got about 4% of our energy through solar. Today after all the improvements it provides 3.9%. At least it’s consistent! In reality it has grown a bit, but not faster than the demand for oil. We know Data Centers will take up a lot of juice. Not too much information on where to put the wind and solar.
Did you know a huge Meta (Facebook) data center is going up in Kuna Idaho? It’s huge and needs a lot of electricity.They Chose Boise due to low energy costs. The other thing that is not priced into green energy is maintenance. There are 500 gallons of oil inside the large turbines. They have to change it about every 10-12 months. 100 turbines x 500 gallons = 50,000 gallons of oil being lost per year on each project. Wind needs fossil fuels to work. Solar needs fossil fuels to work. The work of “repowering” solar plants is enormous. The 4,200 wind turbines just outside Palm Springs, Ca. are now down to about 660 turbines. All are obsolete and can’t make a profit. Re-powering is an euphemism for replacing old turbines with new. The existing ones are obsolete. These turbines need repowering every 20 years.
We cannot get straight answers on the actual cost of wind or solar power. It is buried in layers of beuracratic statistics. With all the upfront costs it would take a decade or more for one to become profitable. The wind industry doesn’t have any idea of the cost of maintenance. It costs and average of $50 per KWH. A 3 Megawatt tower would be 3,000 KWH so would be charged about $150,000 per year for maintenance.
Oil and Gas
The all time winner of electricity generation. If not for fossil fuels, we would still be in the dark ages. Exxon has been providing power for 154 years. Chevron has been there for 146 years. Without these two corporations we would still be in the Pioneer days. Nothing really started until we had electricity.
The US has had 36 years of constantly improving air quality. (the new inconvenient truth.) That is due to the clean air act of 1989. The main reason for that steady improvment has been the steady and rapid change from coal to natural gas.
Oil and gas is our base fuel and always will be. Even in 200 years there will be gas and oil. It will be here as our base forever. Almost 40% of oil production is not used for fuels. It is used for plastics, chemicals, fertilizer and lubricants. That is not going away.
We have the infrastructure in place to keep our country prosperous and successful. We already know the routine of how to own and drive gasoline autos and trucks. Fossil fuels are plentiful and inexpensive. Right now, gasoline is a very good deal. In 2014 we were paying $3.69 around Boise and Phoenix. I paid $2.85 yesterday.
The fact is, that if we replace 50% of our current power generation and use nuclear, our skies would be even cleaner. The U.S. vehicle pollution control under the Clean Air Act is a major success story by many measures: New passenger vehicles are 98-99% cleaner for most tailpipe pollutants compared to the 1960s. (EPA.gov) That is amazing. Gasoline cars are not a problem if they are modern. This also makes switching to EV’s unnecessary.
The Biden administration was openly hostile to fossil fuels. You don’t kill the source of all wealth and force us to be broke trying to mess with solar and wind. We are learning. I am a fan of oil and gas stocks. They pay higher dividends than most other industries. This includes utilities stock. There is also ongoing technology enhancements that can make a company take off. For the foreseeable future, oil and gas will be a solid investment. Liquified Natural Gas (LNG) is part of that.
The real solution: Nuclear
Nuclear is such an obvious solution for cleaner energy. Now, many are beginning to see that. SMRs or small modular reactors are in operation in China, India and Russia. SMR’s are buried in red tape. Another project for the new administration.
The main reason most people are leery of Nuclear is the vast effort put forth to scare people. The anti-nuke crowd suddenly sees no benefit from the incredible amount of clean energy and much cleaner air nuclear would bring. No one has died from Nuclear power plants in the US. So, in our great wisdom, we have shut down 41 nuclear power plants right when we need them most! Then, the same people who shut them down cry about wanting clean air. These are the people who watched The China Syndrome 6 times and have not thrown out their Tie-Dyed shirts. I swear! I have pictures!
From 1965 to 2021, approximately 176,000 people died in hydropower accidents.
No nuclear deaths in US. 31 people died at Chernobyl, 51 people died in the Fukushima explosions
Wind turbines cause over 100 deaths per year and growing. Wind also has killed millions of birds. The 2021 American Bird Conservancy estimate: Estimated 681,000 birds killed annually and growing.
Wind turbines kill hundreds of people a year, mostly from accidents. It is hard to find the numbers for the US. But Scotland keeps accurate records. There were over 800 incidents last year in wind energy with 40 of them being fatal. https://scotlandagainstspin.org/turbine-accident-statistics/.
This is investable and I am exctited about the future of Nuclear.
Finally, it is never good to have the government try to pick winners and losers in energy. We will be out trillions in subsidies trying to jump start programs that are not supported by science or results. The money is still flowing to the green machine. Before he left office Biden gave 9.8 billion in loan guarantees to two failing companies PLUG (hydrogen) and to RIVN- Rivian the EV maker who is losing over $70,000 on each car. They are two infamous cash burners in the business today. Just days ago he made another 23 billion in guranteed loans to promote green energy to 10 utility companies to promote “renewable power.” All the while, they seem to think Lithium and a host of other hard to find metals are renewable.
See you soon,
Craig Verdi
“Diversification is a protection against ignorance,” according to Buffett. “It makes very little sense for those who know what they're doing.
Very thoughtful, thank you.
I think there may be one mistake in your numbers - for wind energy, average maintenance cost is $50 per MWH (not KWH), so this is one thousand times less and weakens the argument against wind. That said, I agree that the only feasible long-term solution is nuclear energy, and contrary to what some people think, it remains the cleanest form of energy. With fossil fuels, we have to remember that we are burning the resource that accumulated for millions of years, and possibly paving the way for an Armageddon for the future generations who won't have that resource. This is just not responsible. Nuclear is the way to go.