Cleantech and Alternate Energy Investor Outlook '09
Source: Andrew McKillop (1/27/09)
Asset allocation must. . .incorporate and include a defensive component."
Extreme high, and increasing public borrowing needs in the USA, most EU countries, and elsewhere will create a context of massive currency volatility and speculative movement.
Even the promising ARE (alternate & renewable energy, sustainable development, carbon credits and carbon finance) sector is exposed to radical reduction in finance inflows and loan availability, and large increase of risk.
Financial partners from oil, gas, coal, uranium, metals, and agro-commodity exporter countries have constituted 'cash hoard' through 2007 and the first six months of 2008. Currently, they are subjected to 'cash burn' because of depressed prices and revenues, in national economic contexts of increasing national budget spending and currency instability.
Placing capital wisely is critical to medium-term and long-term investment strategies of the target countries, and especially important for 'After Oil Investing', that is post-2010 investment strategy of capital surplus oil exporter countries. In the short-term (12 month period) fund managers in the ARE sector, and elsewhere, must respond to the challenges of global crisis, acquire assets with good 'rebound potential', and master the emerging risks and challenges of the rapidly maturing ARE sector.
Asset allocation must, therefore, incorporate and include a defensive component. This component can be divided into short-term oriented, and mid-term oriented, that is immediate and first 12 months; and mid-term or longer-term, over 12 months and up to 36 months.
The Obama administration will surely be forced to 'defend U.S. interests' in the economic and national debt domains, but the extent to which this can quickly increase existing tension, or create new tensions, may be very large if the depth of the U.S. economic crisis is proven by events.
Many different scenarios can be sketched, notably including a 'U.S. dollar crisis' and potential for oil shock when the 'Iran nuclear dossier' returns to prominence, and is not resolved without further diplomatic confrontation and economic sanctions - or worse - with Iran. In the context of the next 12 months, in 2009, either of these scenarios (which as noted are two amongst many possible) will have extreme destabilizing impacts on the global economy and investor potentials, as well as expectations.