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      How Sustainable Is the Rally in Renewable Energy Stocks?

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      AdvertisementContinue reading the main storySupported byContinue reading the main storyHow Sustainable Is the Rally in Renewable Energy Stocks?Solar and wind power companies have soared in value. Are they in a bubble or in a virtuous upward cycle?Installing solar panels on a rooftop in Fort Greene, Brooklyn. Solar power is the cheapest source of electricity in many countries, according to the International Energy Agency.Credit…Karsten Moran for The New York TimesJan. 14, 2021Updated 1:50 p.m. ETThe overall stock market was fabulous last year, but as investors focused on climate change, renewable energy stocks did even better.Consider that while the SPDR S&P 500 Exchange-Traded Fund Trust, which tracks the benchmark S&P 500, returned 18.37 percent in 2020, the Invesco Solar E.T.F., which tracks an index of solar energy stocks, soared 233.95 percent, according to Morningstar Direct. The Invesco WilderHill E.T.F., which invests more broadly in alternative energy of various types, rose 204.83 percent.Returns like those are so strong that they are unlikely to be replicated: It is possible that the stocks of companies engaged in carbon-free energy production are already in a bubble. Jason Bloom, head of fixed income and alternative E.T.F.s for Invesco, describes the sector this way: “I would call it rational optimism in view of improving fundamentals.”The International Energy Agency recently called solar-generated energy the “cheapest” electricity source in many countries. In the United States, it accounts for just 3 percent of energy output, but it is increasing rapidly. Wind power, which now supplies roughly 8 percent of domestic energy, has also been growing. There is plenty of room for expansion for many renewable energy companies.The results of the presidential election have already bolstered the returns of these companies, too. While President Trump has promoted the use of fossil fuels like coal, President-elect Joseph R. Biden Jr. has advocated a $2 trillion climate plan to “achieve a carbon pollution-free power sector by 2035.” His plan, not yet fully detailed, includes a variety of investment inducements and tax breaks.That would be more ambitious than the once-trendsetting 2045 goal of carbon-free energy production set by California. Already, solar power accounts for 18 percent of electricity generation at the utility Southern California Edison, said Erica Bowman, the company’s director of resource and environmental planning and strategy.Garvin Jabusch, chief investment officer for Green Alpha Advisors, an alternative energy investor, notes that the cost of generating electricity from solar energy is 90 percent lower than 10 years ago. Mr. Jabusch expects alternative energy prices to decline further with expanded demand. Mr. Jabusch favors companies that are “growing production capacity,” like First Solar, which has opened a new plant in Lake Township, Ohio, to expand production of its solar panels.For all its promise, investment in solar and wind power is limited by the laws of nature: Solar units can produce electricity only when the sun is shining, and wind turbines need wind.For the most part, Southern California Edison backs up its solar power with electricity generated by natural gas. But the utility recently contracted for nearly 600 megawatts of lithium ion battery storage so it can store excess electricity produced under ideal weather conditions.“Battery prices are down 90 percent over the last five to eight years,” Ms. Bowman said. “As we transition to a cleaner grid, solar generation coupled with battery storage is the cost-effective solution for California,” she added.Hydrogen fuel cells, which produce electricity by combining hydrogen and oxygen, have emerged as a possible near-term solution for use in trucking and shipping, says Mr. Bloom. But such applications will require a costly expansion of the hydrogen gas filling station network, said Steve Capanna, director of U.S. climate policy and analysis for the Environmental Defense Fund. Right now, he said, beyond “a handful in California,” there aren’t many such stations.Buying shares of renewable energy stocks now requires a degree of faith, because they are so expensive, partly because of the low interest rates engineered by the Federal Reserve, which have helped to drive the overall stock market higher. Fed support may be the biggest reason the market has withstood all the grim economic news of the coronavirus to continue its seemingly unending valuation advance.Paul Coster, a JPMorgan analyst, said that the high prices in the renewables sector are based on solid achievement. “It’s not like the dot-com era,” he said. “These are real actors with real technology.” He added, “We’re living in this wonderful moment in time when virtue and self-interest coincide.”Perhaps, Mr. Coster mused, there are still good reasons to own some of these stocks. He cited FuelCell Energy, which has negative cash flow and has consistently reported quarterly earnings losses. Mr. Coster said investors may want to project out several years.By 2025, he said, it’s “feasible” that FuelCell Energy would have $60 million in earnings before interest, taxes, depreciation and amortization, justifying a rich, growth stock valuation. Even so, the company’s shares more than doubled in the last month, and on Jan. 14, Mr. Coster warned that at current prices, the stock was already “richly valued.”AdvertisementContinue reading the main story More

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      What Is 13-3? Why a Debate Over the Fed Is Holding Up Stimulus Talks

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      AdvertisementContinue reading the main storySupported byContinue reading the main storyWhat Is 13-3? Why a Debate Over the Fed Is Holding Up Stimulus TalksThe Fed’s emergency lending authorities are a key part of its job. Republicans want to curb them. Democrats are pushing back.Senate Republicans are trying to make sure that emergency programs backed by the Federal Reserve cannot be restarted after they expire on December 31.Credit…Anna Moneymaker for The New York TimesDec. 18, 2020Updated 7:49 p.m. ETAs markets melted down in March, the Federal Reserve unveiled novel programs meant to keep credit flowing to states, medium-sized businesses and big companies — and Congress handed Treasury Secretary Steven Mnuchin $454 billion to back up the effort.Nine months later, Senate Republicans are trying to make sure that those same programs cannot be restarted after Mr. Mnuchin lets them end on Dec. 31. Beyond preventing their reincarnation under the Biden administration, Republicans are seeking to insert language into a pandemic stimulus package that would limit the Fed’s powers going forward, potentially keeping it from lending to businesses and municipalities in future crises.The last-minute move has drawn Democratic ire, and it has imperiled the fate of relief legislation that economists say is sorely needed as households and businesses stare down a dark pandemic winter. Here is a rundown of how the Fed’s lending powers work and how Republicans are seeking to change them.The Fed can keep credit flowing when conditions are really bad.The Fed’s main and best-known job is setting interest rates to guide the economy. But the central bank was set up in 1913 in large part to stave off bank problems and financial panics — when people become nervous about the future and rush to withdraw their money from bank accounts and sell off stocks, bonds and other investments. Congress dramatically expanded the Fed’s powers to fight panics during the Great Depression, adding Section 13-3 to the Federal Reserve Act.The section allows the Fed to act as a lender of last resort during “unusual and exigent” circumstances — in short, when markets are not working normally because investors are exceptionally worried. The central bank used those powers extensively during the 2008 crisis, including to support politically unpopular bailouts of financial firms. Congress subsequently amended the Fed’s powers so that it would need Treasury’s blessing to roll out new emergency loan programs or to materially change existing ones.The programs provide confidence as much as credit.During the 2008 crisis, the Fed served primarily as a true lender of last resort — it mostly backed up the various financial markets by offering to step in if conditions got really bad. The 2020 emergency loan programs have been way more expansive. Last time, the Fed concentrated on parts of Wall Street most Americans know little about like the commercial paper market and primary dealers. This time, it reintroduced those measures, but it also unveiled new programs that have kept credit available in virtually every part of the economy. It has offered to buy municipal bonds, supported bank lending to small and medium-sized businesses, and bought up corporate debt.The sweeping package was a response to a real problem: Many markets were crashing in March. And the new programs generally worked. While the terms weren’t super generous and relatively few companies and state and local borrowers have taken advantage of these new programs, their existence gave investors confidence that the central bank would prevent a financial collapse.But things started getting messy in mid-November.Most lawmakers agreed that the Fed and Treasury had done a good job reopening credit markets and protecting the economy. But Senator Patrick J. Toomey, a Pennsylvania Republican, started to ask questions this summer about when the programs would end. He said he was worried that the Fed might overstep its boundaries and replace private lenders.After the election, other Republicans joined Mr. Toomey’s push to end the programs. Mr. Mnuchin announced on Nov. 19 that he believed Congress had intended for the five programs backed by the $454 billion Congress authorized to stop lending and buying bonds on Dec. 31. He closed them — while leaving a handful of mostly older programs open — and asked the Fed to return the money he had lent to the central bank.Business & EconomyLatest UpdatesUpdated Dec. 18, 2020, 12:25 p.m. ETLee Raymond, a former Exxon chief, will step down from JPMorgan Chase’s board.U.S. adds chip maker S.M.I.C. and drone maker DJI to its entity list.Volkswagen says semiconductor shortages will cause production delays.The Fed issued a statement saying it was dissatisfied with his choice, but agreed to give the money back.Democrats criticized the move as designed to limit the incoming Biden administration’s options. They began to discuss whether they could reclaim the funds and restart the programs once Mr. Biden took office and his Treasury secretary was confirmed, since Mr. Mnuchin’s decision to close them and claw back the funds rested on dubious legal ground.The new Republican move would cut off that option. Legislative language circulating early Friday suggested that it would prevent “any program or facility that is similar to any program or facility established” using the 2020 appropriation. While that would still allow the Fed to provide liquidity to Wall Street during a crisis, it could seriously limit the central bank’s freedom to lend to businesses, states and localities well into the future.In a statement, Senator Elizabeth Warren, Democrat of Massachusetts, called it an attempt to “to sabotage President Biden and our nation’s economy.”Mr. Toomey has defended his proposal as an effort to protect the Fed from politicization. For example, he said Democrats might try to make the Fed’s programs much more generous to states and local governments.The Treasury secretary would need to have the Fed’s approval to improve the terms to help favored borrowers. But the central bank might not readily agree, as it has generally approached its powers cautiously to avoid attracting political scrutiny and to maintain its status as a nonpartisan institution.Fed officials have avoided weighing in on the congressional showdown underway.“I won’t have anything to say on that beyond what we have already said — that Secretary Mnuchin, as Treasury secretary, would like for the programs to end as of Dec. 31” and that the Fed will give back the money as asked, Richard H. Clarida, the vice chairman of the Fed, said Friday on CNBC.More generally, he added that “we do believe that the 13-3 facilities” have been “very valuable.”Emily Cochrane More

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      2,596 Trades in One Term: Inside Senator Perdue’s Stock Portfolio

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      #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesWho Gets the Vaccine First?Vaccine TrackerFAQAdvertisementContinue reading the main storySupported byContinue reading the main story2,596 Trades in One Term: Inside Senator Perdue’s Stock PortfolioThe Georgia Republican’s stock trades have far outpaced those of his Senate colleagues and have included a range of companies within his Senate committees’ oversight, an analysis shows.Senator David Perdue’s stock trading accounts for nearly a third of all Senate trades reported in the past six years.Credit…Caroline Brehman/CQ Roll Call/Bloomberg, via Getty ImagesBy More

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      Markets Throw a Welcome Party of Sorts for Biden

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      A day after the Trump administration effectively acknowledged the election of Joseph R. Biden Jr., investors showed their relief by pushing the two major stock market indexes to all-time records on Tuesday.It was a welcome party of sorts for Mr. Biden, but what investors were really embracing was the end of uncertainty. President-elect Biden has vowed to push for more stimulus to bolster the economy. His selection for Treasury secretary, Janet L. Yellen, is well known from her days as Federal Reserve chair. And several new coronavirus vaccine candidates mean that the pandemic could be under control in the months ahead.President Trump, who on the campaign trail had warned that Mr. Biden’s election would lead to stock market armageddon, on Tuesday implied that the day’s highs were his own doing, making an unscheduled stop at a White House briefing to play up the latest gains in the Dow Jones industrial average.“The stock market’s just broken 30,000 — never been broken, that number,” said Mr. Trump, who has often used the markets as a barometer of his presidency. “That’s a sacred number, 30,000; nobody thought they’d ever see it.” He added: “I just want to congratulate all the people within the administration that worked so hard. And most importantly, I want to congratulate the people of our country, because there are no people like you.”Mr. Trump, who spoke for about 65 seconds, ignored questions from reporters about whether he would concede to Mr. Biden.On Wall Street, the S&P 500 stock index rose 1.6 percent to a new high of 3,635.41, while the Dow rose 1.5 percent, closing above 30,000 for the first time.“We have an enormous amount of certainty that we didn’t have just a few months ago,” said Kristina Hooper, chief global market strategist at Invesco, an investment management firm.The last few months have been a volatile stretch for investors. After hitting a peak on Sept. 2, the S&P 500 began to fall, and — except for a brief uptick the following month — remained roughly 9 percent below the peak until the end of October.One sign of investor anxiety was the volatility displayed in the VIX, an index widely known as Wall Street’s “fear gauge.” The VIX spiked by more than 50 percent in late October as the virus picked up again and the election approached. A meltdown of technology stocks added to the uncertainty. In the last week in October, stocks fell 5.6 percent, the biggest weekly drop since March. Still, stocks were up for the year at the end of last month.And in the weeks since the election stocks have climbed steadily, primarily because of encouraging vaccine news. Pfizer, Moderna and AstraZeneca have all announced that their vaccine candidates showed favorable results in trials. The S&P 500 has risen roughly 8 percent since the election. Some investors believe that with Mr. Biden in the White House, and Republicans likely to retain control of the Senate, they could count on political gridlock to block tax increases that could roil the markets.“You have a Biden administration likely governed by a split Congress and a conservative Supreme Court so it eliminates some of the most extreme policies either on the right or left,” said Michael Arone, chief investment strategist at State Street Global Advisors. “So markets are celebrating that.”The good news about vaccines has bolstered stocks that had been hit hard by the outbreak. Stocks of airlines and oil companies have soared this month. United Airlines, American Airlines and Delta Air Lines have all climbed by more than 30 percent. The oil giant Chevron is up nearly 38 percent. The Russell 2000 — an index of smaller capitalization companies heavily influenced by the shorter-term outlook for the U.S. economy — is up more than 20 percent this month alone.But many analysts believe that the market could have done even better without the political uncertainty about the outcome of the election. The president’s baseless claims that there was fraud in the election and that he would ultimately win a second term helped keep a lid on gains by injecting uncertainty into the markets.The decision on Monday by Emily W. Murphy, the administrator of the General Services Administration, to allow the presidential transition process to move forward made investors feel confident that the election was finally over, Ms. Hooper said. “I think that was creating a significant overhang and raised questions about how long this would drag on,” she said.Markets also appeared to welcome the return of politics as usual under a future Biden administration, and were reassured by the news that Ms. Yellen will be Mr. Biden’s nominee to head the Treasury Department. She is a known quantity on Wall Street, well respected for her steady leadership at the head of the central bank, from 2014 to 2018.“There had been some fear that Mr. Biden would pick a Treasury secretary with a strong anti-Wall Street bias,” wrote analysts with High Frequency Economics in a client note on Tuesday. “Janet Yellen isn’t that.”The markets performed well under Mr. Trump for the most part. Since his election in 2016, the S&P 500 has returned more than 80 percent — including dividend payments. Most analysts credit the administration’s tax cuts — signed into law in 2017 — for a significant part of the gains.But the last four years have also been a volatile period for markets, with multiple sharp, sudden downturns often linked to policies pushed by Mr. Trump, such as his trade war with China, which helped push stocks to a 6 percent loss in 2018.This year, the more than 11-year-old bull market collapsed in March, as the S&P 500 dove nearly 34 percent in a matter of weeks as the virus raged around the globe, before eventually climbing to new highs.Mr. Trump’s style was often at odds with Wall Street’s preferences.He broke with the tradition of virtually all other recent presidents in using the power of the bully pulpit to browbeat individual companies — including Boeing, Amazon, Ford and General Motors — for decisions he disliked, often sending their shares reeling in real time.Even those on Wall Street who might have supported some of the president’s policies often said they could do without his constant Twitter missives weighing in on the markets. (Since his election in 2016 the president has tweeted or retweeted roughly 200 messages on the markets.)“It always bothered me that the president tweeted about the markets,” said Paul Schatz, who manages roughly $90 million in assets for clients largely in New York, Connecticut and Florida. “As an investment adviser in charge of taking care of people’s money, I would rather the president would not wade into those waters.”Michael Crowley contributed reporting. More