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kirkydu (93.88)

A Once in a Generation X Opportunity

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November 14, 2011 – Comments (12) | RELATED TICKERS: SPY , TAN

Every so often there is what is often referred to years later as a "once in a generation" opportunity.  When we hear that phrase, we are usually hearing about how somebody should have done something or bought something years ago.  Wouldn't it be nice if we knew then that "once in a generation" opportunity was at the time, rather than look back at it years later?  Of course it would. 

Click to read complete article with excellent pix...

Or read on without pix...

 

Look Back to Look Ahead

Let's engage in a little exercise.  Let's pretend it is 2026.  Fifteen years from now you are looking back at the early part of this decade.  What would you wish you had done, or begun, or invested in looking back?  Would you wish you had started your own business?  Would you wish you had bought real estate?  Would you wish you had bought stock in companies with alternative energy assets?  What stopped you from doing those things?  Fear?  Inertia?  Somebody who never accomplished much talking you down?

I have a message to the person (remember, it's 2026 now) who wanted to start their own business but didn't do it because they did not want to give up the certainty of the paycheck they had at the time from the company they don't work for anymore.  You made a mistake.  That certainty you thought you had, well, who do you work for now in 2026?  Not the same company is it.  What certainty did you really have back then?

To the person who did not buy real estate because they were afraid prices might go a little lower, yeah, you screwed up too.  Real estate is going up in value again in the 2020s and interest rates are higher to boot.  Don't you wish that you had that land in northern Wisconsin, or the home on the five acre lot, or the commercial building near a good intersection.  Too bad.  You missed your chance to buy on the cheap when you decided to buy a few more toys and a new car rather than save a down payment.  

And to those of who did not invest in companies engaged in alternative energy when the industry was consolidating and while large companies were investing in alternative energy assets, seriously, what were you thinking?  "Oh, solar is years away and wind isn't as cheap as coal."  Well, in 2026, wind is cheaper than natural gas fired power plants because natural gas has doubled in price from the lows of the last decade.  And solar is as cheap as coal, which never became clean.  Incidentally, as sludge dumps started flooding towns and sliding into the Great Lakes, coal became more expensive when people decided that coal fired utilities ought to clean up their messes.  How could you not see that alternative energy was coming in a big way when General Electric, Total, BP, Google, Walmart, Kohl's, NRG and other big companies, and China, started committing hundreds of billions of dollars to alternative energy?  Wow.

If you had only known then what you know now in 2026. 

Well, fortunately, it is not 2026 yet and you still have a chance. 

Now I realize that if you are already retired, some of this doesn't affect you much.  But if you haven't retired yet, it does.  Even if you are 55 or 60, you need to realize you are probably going to live another 30 years or more and will need your investments to help you for a long time, not just the next 15 years.  And if you are a Generation Xer, well, you have some opportunities that you will never see again. 

The Generation X Paths to Riches

First off, if you are a Gen Xer and have thought about starting a business, do it.  Stop wasting money on buying toys and cars.  The baby boomers are retiring and that is opening up a lot of opportunities.  Take their spot in the market.  The generation behind you is large.  Lay down in front of them and you will get rich.  

I remember a piece of advice my grandpa Frank gave me when I was in college, he said, "Kirk, whatever you do, lay down in front of the baby boomers.  Do something they need.  They'll take care of you."  Well I have, and they have.  The same demographic story is playing out again.  The Echo Boom or Millennials, whatever you want to call the teens and twenty somethings is a big generation.  At some point they spend a lot of money.  They might as well spend it with you.

If you plan to manufacture or refurbish something, remember, there are a lot of Chinese and Indians who might drive a market for you as well.  The opportunities today are not just local.

So, go clear out some room in your basement, or your garage, and start your business.  If you don't have enough space, talk to a friend or relative who can rent you some space on the cheap.  If you need store frontage, it's cheap, go get it.  Or, sublet some space with a complimentary business, they're slow, they need the rent.  Probably you don't quit your other job (if you are lucky enough to have one) for awhile.  And maybe that means 65 hour weeks for a few years, but you're still young, you have the energy (and hopefully a supportive spouse if you are married), do it while you can.  Dreams only come true if you wake up and act.

I realize not everybody wants to own a business.  Some folks are just better off being skilled or professional and working for a company.  That's fine.  That doesn't mean there aren't opportunities for you though.  If you are making a good income, you should probably look at owning more than one piece of real estate.  Maybe buy a duplex or four family rental building if you are handy.  Maybe buy a second home on the edge of an expanding tourist area.  Maybe buy farm land and share crop it or start a hobby farm.  There are a lot of real estate opportunities out there right now.  Some sellers are so desperate, you can make a deal with only a pittance down and land contract- make sure you have a good attorney if you go that route.  Regardless, if you do your homework there is real estate worth buying for the next few years. 

In your securities portfolios, you know, those the things you keep hearing are supposed to be long term investments, you should add some alternative energy assets (click linked text to read my recent Market Watch article).  Right now, some of the biggest companies in the world are investing in alternative energy assets.  The pure play alternative energy company stocks are dirt cheap as the young industry goes through a consolidation on the path to maturity.  GE is expanding its alternative energy operations.  There is a nice exchange traded fund that can give you broad exposure to the sector as well.  

Look, we all know that fossil fuels are finite and getting more expensive as we have to dig and drill deeper.  What a lot of people do not realize is how efficient solar is becoming or how in certain areas wind is highly adaptable.  As you read, next generation battery technology is being worked on right here in Wisconsin with big company Johnson Controls and little company ZBB Energy.  There is a reason why.  

The Big Picture

I was talking to local entrepreneur Jason Vance who also works with other business owners in making their enterprises more efficient and he had an interesting take on diversifying one's personal portfolio .  His take is that a portfolio isn't just a 401k account.  It is everything you earn from and get use from.  It is your home, your job(s) and all of your investments, including, non-security assets, like rental properties or a second home.  He's right. 

So, Generation Xers, you have a decision to make.  Do you stick with the status quo and bob along whichever way the waves take you, or do you add an engine and rudder in order to take control of your journey?   Remember, in fifteen years you will be looking back.  What do you want to see?

Your Generation X Advisor

Kirk

12 Comments – Post Your Own

#1) On November 14, 2011 at 1:01 PM, ikkyu2 (99.37) wrote:

This post made me feel good, because I started a business and bought a house.

Of course, I may not survive 'til 2026.  Running your own business is stressful.

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#2) On November 14, 2011 at 1:21 PM, kirkydu (93.88) wrote:

You'll make it just fine if you do what you need to do.  You'll even get more vacation time eventually. 

If you need a retirement plan track me down.  I'm going national soon.

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#3) On November 14, 2011 at 2:24 PM, buffalonate (95.98) wrote:

The problem with alternative energy companies is they don't make money and aren't competitive with current energy providers.  None of the start-up battery companies are successful.  The small solar and wind companies will never survive.  They will either get bought out or die because they just don't have enough capital to invest in their businesses.  Even if you do find a small alternative energy company that makes money what are the chance that in the long term it can out compete the General Electric's and Siemens of the world.  Fossil fuel companies are a much better investment.  The more scarce the supply the more profitable the company will be going forward.

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#4) On November 14, 2011 at 2:27 PM, amassafortune (29.68) wrote:

If Dustin Hoffman were at a party today, after a little small talk, I'd put my arm around him and tell him the two words that would secure his future, ..."molecular genetics."

The first person or company who can replicate usable vital organs will tap into a significant portion of total boomer wealth. 

If the breakthrough discovery happens in another country, the international transfer of wealth could be large enough to alter the worldwide political balance of power. 

Meantime, for the rest of us who struggled with O-chem, owning a more conventional business is a great way to take ownership of one's future. 

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#5) On November 14, 2011 at 3:28 PM, dudemonkey (40.78) wrote:

What awesome timing for this post.  I'm a GenXer who is leaving his job on Wednesday and founding a tech company on Thursday.

 

Thanks for the unexpected, but very needed, cheerleading!!!

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#6) On November 14, 2011 at 3:42 PM, Option1307 (29.93) wrote:

Good thoughts per usual. +1.

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#7) On November 14, 2011 at 5:14 PM, malcolmcochran (52.48) wrote:

On the list of Green Tech companies, generally it's solar panels. Trouble there is, they suffer from the C word now. Commodities.

But Germany and the UK are seeing use in that low power but ultra clean fuel, hydrogen.

I was very sceptical about H2, but am changing my mind. (We accept gasoline, and it looks simple: you go to a pump, and there it is. But think of the stages involved in getting there. H2 is actually easier and more flexible to set up).

The Sheffield company ITM has a lot of patents on its superior Fuel Cell (take my word for a moment). It's able to convert H2 or elecricity in either direction. One point about their product is that H2 can act as a buffer for electricity over-production which happens with wind power.

As an immediate fuel, it works for cars/small trucks. The Edinburgh police use their H2 system for their cars (made from mains electricity, however). The Isle of Man is doing a nice contained experiment, trying to go entirely wind/solar, using H2 as a fuel or as stored energy.

Its patent fuel cell membrane is easy to make and is tough.

I enclose a note about cost effectiveness of H2. It's more impressive than I'd imagined.



ITM Power (AIM: ITM), the energy storage and clean fuel company, is pleased to announce the cost structure of hydrogen generated by the Company’s HFuel electrolysis platform. Combining the capital cost along with operating efficiency gained from completed HOST trials enables a representative hydrogen price to be derived.

The hydrogen costs are best expressed in £/kg and reflect both capital cost amortisation and electricity cost. HFuel can be switched on/off in a second and can be demand side managed as a smart load which could potentially result in electricity costs of less than 4p/kWh and potentially as low as 0p/kWh or negative electricity prices in some parts of Europe utilising a high percentage of intermittent renewable power.

Based on a 100kg/day HFuel system, hydrogen cost ranges from £3.88/kg (based on 4p/kWh and a 20yr Capex amortisation) to £10.71/kg (based on 8p/kWh and a 5yr amortisation). This compares to €9.90/kg (£8.49/kg) which is the European target (McKinsey) for 2015 coinciding with the major roll out of fuel cell vehicles across Europe.

Key HFuel information:
• The HFuel product is modular in size from 5kg/day to 100kg/day unit size, which can be stacked together.
• The HOST experience has shown an electricity cost of 6.5p/kWh provides the same cost per mile as diesel in an internal combustion engine vehicle, based on input electricity costs. Moving to a fuel cell platform would improve the economics very significantly.
• The European cost target for hydrogen generation starts at €16.60/kg in 2010, reducing to €9.90/kg in 2015 and €5.50/kg in 2025.
• A 100kg/day HFuel generation system with a 5 year amortisation and 4p/kWh electricity price produces hydrogen at a cost of £8.31/kg, which is lower than the European target for 2015.
• After the 5 year amortization period, the hydrogen cost from the same system is £2.40/kg, which is lower than the European target for 2025.

The above analysis assumes 100% up time. The energy storage component (hydrogen storage unit) is quoted separately and is typically tailored to the user’s specific requirements. The maintenance scheme is developed to match the installation site and usage profile. The costs associated with shipping the unit to site are not included as they are location specific. Targets are quoted from the McKinsey analysis ‘A portfolio of power-trains for Europe: a fact-based analysis.’

ITM Power CEO, Graham Cooley, commented: “Hydrogen from HFuel costs less than EU targets and is competitive with fuel on the high street today. What could be more compelling than an economic fuel made from renewable power that has zero emissions?” 

 

.

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#8) On November 15, 2011 at 12:47 AM, BillyTG (29.74) wrote:

Most uplifting post I've read this month.

+1

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#9) On November 15, 2011 at 9:42 AM, outoffocus (23.61) wrote:

I hate to be picky, but shouldn't you be addressing this post to Gen Y, as Gen X is already starting to hit their 40s?  I'm Gen Y and I'm about to turn 30 I would think its at my age we should be thinking about starting the business and buying real estate (as many of my friends and associates are already doing).

Otherwise I think its really good advise.  

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#10) On November 15, 2011 at 9:47 AM, outoffocus (23.61) wrote:

I'm sharing this article on Facebook and Twitter

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#11) On November 15, 2011 at 5:53 PM, turdburglar (47.72) wrote:

The same argument could be made for investing in nuclear power plants back in the 70's or 80's.  I'm not saying we as a nation should not have invested in nuclear power plants, but I am saying that you as an individual did well not to sink you life savings into investing in one that was permanently delayed.

The median 10-year return on a new business is -100%. 

This stat is brought to you by the James News Channel - Unfair.  Unbalanced.  And Unashamed.

 

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#12) On November 15, 2011 at 6:44 PM, kirkydu (93.88) wrote:

Thanks for the compliments.  I was genuinely surprised when I logged on and saw all the recs. 

A few comments and a few answers.

First, I'll stand by what I'm saying about alternative energy.  It will be volatile of course, but in the long run there will be a lot of money made there.  I brought up GE and big companies investing in solar as an alternative to buying pure plays.  It might be the companies that use solar, i.e. Kohls and Walmart that do the best because of solar as opposed to produce it that do the best.   Regardless, the growth rate is huge and getting huger, and beginning from a very small number (1.6% I believe).  Over time there is big money to be made there somehow, start looking, prices are pretty dang low.

Yes, if Gen Y can buy real estate go for it, most can't.  Also, most don't have the experience or knowledge to start a business and do it well, but for those who do, absolutely, do it if that is your dream.  Gen X generally has the advantage of more money, experience and is a small generation following a big one, hence why the title and admonition.

My next article, on Market Watch in their Next Great Columnist competition, will be about the one thing everybody really better know about the America of the next few decades.  Here's a hint, it's more uplifting than this post.

Looking forward to more posting soon.

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