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Alternative Energy Sources Are Growing Fast

Alternative Energy Sources Are Growing Fast

Smart Profits Report #555 –
by Martin Denholm, Managing Editor, Smart Profits Report

What color shall I wear today?

A striking red? A classy blue? A summery yellow?

If you’re the Federal Reserve, you slap on a lovely shade of beige – the perfect complement to the gloomy news you’re releasing.

The bankers’ latest Beige Book Report paints a dim picture of the U.S. economy, with “weak, soft, or subdued” growth across most of the 12 regions that the Fed covers.

Against that, costs are rising (”stagflation” anyone? Former Fed economist John Ryding thinks so), with many businesses bemoaning high raw materials prices. Car sales at General Motors (NYSE: GM), Ford (NYSE: F)and Chrysler all slumped by double-digits.

Overall, while fears about a full-blown recession have eased (according to Fed Chairman Ben Bernanke anyway), the next two quarters could see “anemic growth,” according to Dallas Fed President Richard Fisher – especially with consumer costs rising 5.6% in the year to July, home prices dropping at a 15% annual rate, and half a million job losses this year.

But there is growth in one area…

Windy Picks Up As Oil Prices Go Down

He’s not just an oilman any more. Renowned oil investor T. Boone Pickens has shifted his attention to a renewable energy resource – and is pumping a ton of money into it.

You may have seen the old fella championing the cause in television commercials recently, and across America, some ordinary citizens are jumping on board, too.

I’m talking about wind power. With oil prices still in triple-digit territory and many renewable resources (including wind power) still in their infancy, power generation isn’t coming cheap these days.

Those Americans willing to shell out $5,000 for a 300-pound, home-based wind turbine shouldn’t expect much return on their investment anytime soon. Because they’re so small, they don’t generate that much electricity. But if energy prices continue to rise (as seems likely), it could pay off over time, as technology advances.

The trend is catching on, too. New York mayor Michael Bloomberg has thrown his weight behind home and office-based wind power with a bold proposal to spread turbines across the city. Other cities like Boston (with 20 turbines at Logan Airport) and San Francisco have also shown their support for the efforts and San Francisco’s government is pondering whether to offer wind power incentives.

In addition, Pickens has placed a $2 billion order with General Electric (NYSE: GE) for 667 of its wind turbines that can produce 1.5 megawatts of electricity – part of the $10 billion “Pickens Plan” for alternative energy and for wind power to make up 20% of U.S. energy needs. Eventually, that will rise to 1,000 megawatts – enough to power 300,000 homes. And Pickens plans to pump another $6 billion into GE’s coffers for turbines that will power the 4,000-megawatt Pampa Project.

As he recently stated: “We’re paying $700 billion a year for foreign oil. It’s breaking us as a nation, and I want to elevate that question to the presidential debate, to make it the No. 1 issue of the campaign this year.”

He continues… “Neither presidential candidate is talking about solving the oil problem. So we’re going to make ‘em talk about it. Where do you think we’re going to be in 10 years when our economy is busted and we’re importing 80% of our oil?”

He’s got a point. Previous presidents have boldly declared their intent to free America from the shackles of foreign oil, but it’s never happened. Pickens believes that wind power can compete favorably with electricity produced from natural gas.

And General Electric is on the case…

Alternative Energy Source is Boosted by General Electric

In addition to providing alternative energy sources like wind turbines, GE is also a major player in boosting America’s wind power capabilities. The company will invest in 76 wind farms, which should pump out more than 4,000 megawatts of power.

Its GE Financial Services unit also recently announced that it will splash out $100 million on three wind farms in upstate New York. The farms are due to be completed during the fourth quarter and will take the state’s wind-producing capacity to 47% and generate enough power (330 megawatts) for 110,000 homes.

But in terms of home and office-based wind power generation, it’s a movement that is steadily gathering support – support that could grow further as technology improves and prices come down. Having a big dog like Pickens on board can only help.

Tiny Turbines From The “Aero” Guys

One company leading the way in this area is AeroVironment (Nasdaq: AVAV), which sells its turbines for $6,500. Demand is high and the firm is already responsible for the turbines at the Brooklyn Navy Yard and Logan Airport in Boston. It says that areas where electricity prices are high could benefit from these turbines, which could pay for themselves in 4-8 years, according to an article in the New York Times.

But if you want to go with a safer, more diversified pick in this still young industry, consider GE and Siemens AG (NYSE: SI). The latter is supplying the turbines for a 500-megawatt wind farm in my British homeland.

Xcelerated Profits Report readers are already familiar with GE. A few months ago, Investment Director Karim Rahemtulla suggested four different ways to play the firm, which is enough to capture both short-term and long-term upside, while also minimizing risk.

If you’re not a member, you should be. The market might be getting killed, but my colleagues are thriving anyway – whether it’s Marc Lichtenfeld’s small-cap healthcare stocks, Lee Lowell’s correct commodities calls, or Jim Stanton’s recommendations. For more information, take a look here.

Best regards,

Martin Denholm

P.S. While we were dangling 20 feet in the air from a trapeze at our annual group outing on Tuesday, Karim nonchalantly reminded me that in six months, he’ll be much higher in the sky. About 35,000 feet, actually, as he jets off on another investment research trip to India. And he wants me to remind you about it, too. After all, this is a super time to invest in one of the world’s fastest-growing markets – just as it undergoes a correction and prices head lower. You’ll want to position yourself for the recovery when it happens – and this is a rare opportunity to do so.

Remember, this is a country whose GDP growth is rattling along at an 8.6% clip – three times higher than the U.S. and second only to China.

You’ll enjoy five-star hotels and access to some of the world’s finest spas and restaurants. You’ll interact with the most knowledgeable insiders – from local merchants to CEOs – who can give a better understanding of how the country is poised to be one of the world’s most influential.

But space is limited to just 35 readers. And due to the time-sensitive information, that space is likely to fill very quickly. It takes place from February 3-20, 2009. For more information, including a day-by-day schedule, just go to:

* * * * * * *

Today’s Smart Profits Notes

  • A just-released report from BCC Research predicts that with interest growing fast, the U.S. market for wind turbine components and systems is expected to reach $11.2 billion by the end of this year – a 41% surge from the $7.9 billion market at the end of 2007. By 2013, the figure is likely to hit $60.9 billion by 2013. Right now, Texas, California, Iowa, Minnesota, Washington, Oregon, Colorado, New York, Kansas and Illinois make up the top ten list of states investing the most in wind energy ventures.
  • Green Star Alternative Energy Inc. (Other OTC: GSAE.PK) is taking a step nobody has yet by becoming the Republic of Serbia’s first wind power developer. Invited by the government’s energy department, it discussed various strategies and possibilities to change the Serbian energy status quo. Green Star has the opportunity to influence over 50 other countries, including the U.K. and the Czech Republic. Among others that attended the conference were an impressive list of high-level representatives from Mitsubishi Heavy Industries, Columbia University and the World Renewable Council.

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