It’s the best way to make a fortune…
Since we created The Daily Cut as a source of big ideas for all paid-up Legacy Research readers, we’ve hammered on one point above others…
If you don’t already have a fortune to invest, the best way to make a fortune is to invest in a market megatrend early on… and stick with it for the long haul.
And Uncle Sam just gave a $369 billion boost to one of the most powerful megatrends we track – the energy transition.
That’s thanks to the Inflation Reduction Act President Biden signed into law yesterday.
Despite the name, it’s not all about reducing inflation.
It’s the largest clean energy bill the U.S. government has ever passed.
And colleague Nomi Prins says it’ll light a fire under clean energy stocks.
Today, we’ll dive into why this bill is so bullish for the energy transition megatrend. I’ll also pass along a “one-click” way to play it that Nomi shared with her readers.
First, an important point…
This is a massive profit opportunity regardless of your politics…
Sometimes our readers accuse us of playing politics when we highlight opportunities like this.
I get that. A lot of you are uncomfortable with big government spending programs. Especially when the folks doing the spending aren’t the folks you voted for.
But our beat at Legacy Research is money – how you get it and how you hold on to it.
And when lawmakers on Capitol Hill greenlight this kind of spending, we take note, regardless of who’s in charge.
The prospect of all that government stimulus gets the attention of some of the world’s largest investors. Then everyday investors rush in. And the sector booms.
It’s a lesson Nomi learned from her 15 years on Wall Street…
Before joining us here at Legacy, Nomi worked at some of the country’s elite financial institutions.
She held senior positions at Lehman Brothers, Bear Stearns London, and Goldman Sachs (GS).
And along the way, she learned that money doesn’t care about politics. Nomi…
My former colleagues on Wall Street don’t care the Inflation Reduction Act vote went down partisan lines. It allocates hundreds of billions of dollars to a specific sector of the economy. That’s what matters.
I saw this play out in 1996, when the Clinton administration voted to deregulate the energy markets. Money flooded into the energy sector. And Wall Street traders – Republican and Democrat – focused on how to profit.
That still happens today. Where government money goes, private money follows.
The new bill is a bonanza for the clean energy sector…
Some of it has nothing to do with the energy transition. For example, it slaps price caps on medicines, a 15% minimum tax on large corporations, and a 1% tax on stock buybacks.
But the new law’s focus on the energy transition is vast. This is spread across two main goals…
First, to cut the amount of carbon dioxide and other heat-trapping gases we release into the atmosphere.
It does this by subsidizing investment in clean technologies – such as solar panels, nuclear power, and home heat pumps. These warm and cool your home using less energy than gas boilers and traditional air conditioners.
Second, to make the U.S. a manufacturing hub for the clean energy revolution by making these subsidies available only for products made in America.
All in all, the bill sets aside $369 billion for the energy transition. It includes the following initiatives…
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Tax credits for installing renewable energy projects. These projects include wind turbines, solar panels, and grid-scale batteries that help store and feed wind and solar power onto the grid
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Helping existing nuclear power plants stay open to remain part of the energy mix
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Investing in advanced nuclear, geothermal, and biofuel-sourced power
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Helping people upgrade energy appliances in their homes – think water heaters, furnaces, and stoves
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Helping people insulate their homes to make them more energy efficient
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Extending the tax credit program for American-made electric vehicles (EVs)
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Investing in decarbonizing airplane fuel
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Electrifying city buses and garbage trucks
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Electrifying the Postal Service fleet
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Tax incentives for power plants to capture their emissions
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Electrifying port infrastructure
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Building charging stations for EVs
And this isn’t the first bill to send billions of dollars into clean energy.
Last November’s $1 trillion Bipartisan Infrastructure Law sent another $88 billion flowing from Washington to EV production, power grid upgrades, and U.S.-made wind, solar, and nuclear technologies.
You can expect more bills like these in the U.S. and around the world…
This year has been a wake-up call on energy security.
Broken supply chains and Russia’s war in Ukraine have thrown international energy markets into turmoil.
U.S. gasoline prices hit record levels. The price of natural gas – which about half of U.S. households use for heating – has more than doubled over the past 12 months.
And that’s mild compared to Europe, where natural gas prices are up 423% over the same time.
This has helped push the inflation rate to its highest in 40 years. It’s also threatened to push economies into a recession.
Broadening our energy mix to rely more on wind, solar, and nuclear power is one way to make our economies more resilient.
That’s why “New Energy” is one of Nomi’s top investment themes…
Over at her Distortion Report advisory, she tracks five big-picture investment themes.
And the top of the list right now is what she calls New Energy – solar, wind, and nuclear power, plus battery technology. As she explained it…
Throughout history, investment opportunities have emerged when we use less of one resource and more of another. People made fortunes from electrification in the late 19th and early 20th centuries… and from the growth of the oil and gas industry that followed. They’ll do it again as we transition away from fossil fuels.
For the first time in a century, lots of new energy technologies are becoming possible on a large scale. These include wind, solar, geothermal, and next-generation nuclear.
Solar power, for instance, is now cheaper than coal and natural gas in most countries.
In fact, according to the International Energy Agency, solar now offers the “cheapest electricity in history.”
How can you profit from this energy shift?
Nomi recommends several energy transition plays at the Distortion Report.
These include a lithium mining stock.
That’s because lithium is critical for the rechargeable batteries that power EVs. We also need stationary versions of these batteries to store the intermittent power from wind and solar before sending it onto the grid.
Nomi has also recommended a utility company that’s a huge developer of wind and solar in the U.S.
And she recommends short-term trades on her top themes – including New Energy – at her Distortion Money Matrix advisory.
But if you’re not already a Nomi subscriber, don’t worry. There’s an easy way for you to capture broad upside right now.
The iShares Global Clean Energy ETF (ICLN) is an exchange-traded fund (“ETF”) that holds close to 100 clean energy companies.
It’s up 18% since Nomi first put this ETF on her readers’ radars at the start of June.
But if you didn’t buy in then, Nomi says now is an excellent time.
The U.S.’ two big clean energy bills that passed since November are major milestones for the energy transition. But we’re still at the very start of this multi-decade megatrend.
Until tomorrow,
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Chris Lowe
August 17, 2022