Two areas need our investing attention:
+ Defense. The wars in the middle east are fueling a boom in sales.
+ Solar. Everybody and his uncle is buying solar for their home (especially in the “sun” states).
Here are 10 Best Aerospace & Defense Stocks for 2015, according to The Street. Click here.
I own Honeywell (HON) and Lockheed Martin (LMT). I should own Boeing (BA).
The best solar stocks are First Solar (FSLR) and Solar City (SCTY) and the ETF Guggenheim Global Solar Index (TAN). For the story, Solar stocks soar 32% as Chinese documentary goes viral, click here.
What got me started on solar and defense was two powerful articles in the New York Times. I reproduce both here because you should read them:
+ Sale of U.S. Arms Fuels the Wars of Arab States
Qatar is seeking to purchase Boeing F-15 fighters to replace its aging French Mirage jets, above. Credit Louisa Gouliamaki/Agence France-Presse – Getty Images
WASHINGTON – To wage war in Yemen, Saudi Arabia is using F-15 fighter jets bought from Boeing. Pilots from the United Arab Emirates are flying Lockheed Martin’s F-16 to bomb both Yemen and Syria. Soon, the Emirates are expected to complete a deal with General Atomics for a fleet of Predator drones to run spying missions in their neighborhood.
As the Middle East descends into proxy wars, sectarian conflicts and battles against terrorist networks, countries in the region that have stockpiled American military hardware are now actually using it and wanting more. The result is a boom for American defense contractors looking for foreign business in an era of shrinking Pentagon budgets – but also the prospect of a dangerous new arms race in a region where the map of alliances has been sharply redrawn.
Last week, defense industry officials told Congress that they were expecting within days a request from Arab allies fighting the Islamic State – Saudi Arabia, the Emirates, Qatar, Bahrain, Jordan and Egypt – to buy thousands of American-made missiles, bombs and other weapons, replenishing an arsenal that has been depleted over the past year.
The United States has long put restrictions on the types of weapons that American defense firms can sell to Arab nations, meant to ensure that Israel keeps a military advantage against its traditional adversaries in the region. But because Israel and the Arab states are now in a de facto alliance against Iran, the Obama administration has been far more willing to allow the sale of advanced weapons in the Persian Gulf, with few public objections from Israel.
“When you look at it, Israel’s strategic calculation is a simple one,” said Anthony H. Cordesman of the Center for Strategic and International Studies. The gulf countries “do not represent a meaningful threat” to Israel, he said. “They do represent a meaningful counterbalance to Iran.”
Industry analysts and Middle East experts say that the region’s turmoil, and the determination of the wealthy Sunni nations to battle Shiite Iran for regional supremacy, will lead to a surge in new orders for the defense industry’s latest, most high-tech hardware.
The militaries of gulf nations have been “a combination of something between symbols of deterrence and national flying clubs,” said Richard L. Aboulafia, a defense analyst at the Teal Group. “Now they’re suddenly being used.”
Saudi Arabia spent more than $80 billion on weaponry last year – the most ever, and more than either France or Britain – and has become the world’s fourth-largest defense market, according to figures released last week by the Stockholm International Peace Research Institute, which tracks global military spending. The Emirates spent nearly $23 billion last year, more than three times what they spent in 2006.
Qatar, another gulf country with bulging coffers and a desire to assert its influence around the Middle East, is on a shopping spree. Last year, Qatar signed an $11 billion deal with the Pentagon to purchase Apache attack helicopters and Patriot and Javelin air-defense systems. Now the tiny nation is hoping to make a large purchase of Boeing F-15 fighters to replace its aging fleet of French Mirage jets. Qatari officials are expected to present the Obama administration with a wish list of advanced weapons before they come to Washington next month for meetings with other gulf nations.
American defense firms are following the money. Boeing opened an office in Doha, Qatar, in 2011, and Lockheed Martin set up an office there this year. Lockheed created a division in 2013 devoted solely to foreign military sales, and the company’s chief executive, Marillyn Hewson, has said that Lockheed needs to increase foreign business – with a goal of global arms sales’ becoming 25 percent to 30 percent of its revenue – in part to offset the shrinking of the Pentagon budget after the post-Sept. 11 boom.
American intelligence agencies believe that the proxy wars in the Middle East could last for years, which will make countries in the region even more eager for the F-35 fighter jet, considered to be the jewel of America’s future arsenal of weapons. The plane, the world’s most expensive weapons project, has stealth capabilities and has been marketed heavily to European and Asian allies. It has not yet been peddled to Arab allies because of concerns about preserving Israel’s military edge.
But with the balance of power in the Middle East in flux, several defense analysts said that could change. Russia is a major arms supplier to Iran, and a decision by President Vladimir V. Putin to sell an advanced air defense system to Iran could increase demand for the F-35, which is likely to have the ability to penetrate Russian-made defenses.
“This could be the precipitating event: the emerging Sunni-Shia civil war coupled with the sale of advanced Russian air defense systems to Iran,” Mr. Aboulafia said. “If anything is going to result in F-35 clearance to the gulf states, this is the combination of events.”
At the same time, giving the gulf states the ability to strike Iran at a time of their choosing might be the last thing the United States wants. There are already questions about how judicious Washington’s allies are in using American weaponry.
“A good number of the American arms that have been used in Yemen by the Saudis have been used against civilian populations,” said Daryl Kimball, executive director of the Arms Control Association, an assertion that Saudi Arabia denies.
Mr. Kimball said he viewed the increase in arms sales to the region “with a great deal of trepidation, as it is leading to an escalation in the type and number and sophistication in the weaponry in these countries.”
Congress enacted a law in 2008 requiring that arms sales allow Israel to maintain a “qualitative military edge” in the region. All sales to the Middle East are evaluated based on how they will affect Israeli military superiority. But the Obama administration has also viewed improving the militaries of select Arab nations – those that see Iran as a threat in the region – as critical to Israeli security.
“It is also important to note that our close relationships with countries in the region are critical to regional stability and Israel’s security,” Andrew J. Shapiro said in a speech in 2011, when he was an assistant secretary of state for political-military affairs. “Our relationships with Egypt, Jordan, Lebanon and many Gulf countries allow the United States to strongly advocate for peace and stability in the region.”
There is an unquestionably sectarian character to the current conflicts in the Middle East, nowhere more so than in the Saudi-led air campaign in Yemen. The Saudis have assembled a group of Sunni nations to attack Houthi militia fighters who have taken over Yemen’s capital, Sana, and ousted a government backed by Saudi Arabia and the United States. Saudi officials have said that the Houthis, a Shiite group, are being covertly backed by Iran. Other nations that have joined the coalition against the Houthis, like Morocco, have characterized their participation in blunt sectarian terms.
“It’s a question of protecting the Sunnis,” Mbarka Bouaida, Morocco’s deputy foreign minister, said in an interview.
But Sunni nations have also shown a new determination to use military force against radical Sunni groups like the Islamic State. A number of Arab countries are using an air base in Jordan to launch attacks against Islamic State fighters in Syria. Separately, the Emirates and Egypt have carried out airstrikes in Libya against Sunni militias there.
Meanwhile, the deal to sell Predator drones to the Emirates is nearing final approval. The drones will be unarmed, but they will be equipped with lasers to allow them to better identify targets on the ground.
If the sale goes through, it will be the first time that the drones will go to an American ally outside of NATO.
+ Solar Power Battle Puts Hawaii at Forefront of Worldwide Changes
In Hawaii, where 12 percent of the homes have solar panels, handling the surplus power is putting pressure on the state’s biggest utility, which is fighting to reduce what it pays for the energy.
HONOLULU – Allan Akamine has looked all around the winding, palm tree-lined cul-de-sacs of his suburban neighborhood in Mililani here on Oahu and, with an equal mix of frustration and bemusement, seen roof after roof bearing solar panels.
Mr. Akamine, 61, a manager for a cable company, has wanted nothing more than to lower his $600 to $700 monthly electric bill with a solar system of his own. But for 18 months or so, the state’s biggest utility barred him and thousands of other customers from getting one, citing concerns that power generated by rooftop systems was overwhelming its ability to handle it.
Only under strict orders from state energy officials did the utility, the Hawaiian Electric Company, recently rush to approve the lengthy backlog of solar applications, including Mr. Akamine’s.
It is the latest chapter in a closely watched battle that has put this state at the forefront of a global upheaval in the power business. Rooftop systems now sit atop roughly 12 percent of Hawaii’s homes, according to the federal Energy Information Administration, by far the highest proportion in the nation.
Household panels for solar power and hot water in Kapolei, Hawaii. Installing new electrical panels was blocked there until recently. Credit Kent Nishimura for The New York Times
“Hawaii is a postcard from the future,” said Adam Browning, executive director of Vote Solar, a policy and advocacy group based in California.
Other states and countries, including California, Arizona, Japan and Germany, are struggling to adapt to the growing popularity of making electricity at home, which puts new pressures on old infrastructure like circuits and power lines and cuts into electric company revenue.
As a result, many utilities are trying desperately to stem the rise of solar, either by reducing incentives, adding steep fees or effectively pushing home solar companies out of the market. In response, those solar companies are fighting back through regulators, lawmakers and the courts.
The shift in the electric business is no less profound than those that upended the telecommunications and cable industries in recent decades. It is already remaking the relationship between power companies and the public while raising questions about how to pay for maintaining and operating the nation’s grid.
The issue is not merely academic, electrical engineers say.
In solar-rich areas of California and Arizona, as well as in Hawaii, all that solar-generated electricity flowing out of houses and into a power grid designed to carry it in the other direction has caused unanticipated voltage fluctuations that can overload circuits, burn lines and lead to brownouts or blackouts.
Load dispatchers monitor the electrical grid at the Hawaiian Electric Company’s operations center in Honolulu. The utility says power from household solar panels can destabilize the system. Credit Kent Nishimura for The New York Times
“Hawaii’s case is not isolated,” said Massoud Amin, a professor of electrical and computer engineering at the University of Minnesota and chairman of the smart grid program at the Institute of Electrical and Electronics Engineers, a technical association. “When we push year-on-year 30 to 40 percent growth in this market, with the number of installations doubling, quickly – every two years or so – there’s going to be problems.”
The economic threat also has electric companies on edge. Over all, demand for electricity is softening while home solar is rapidly spreading across the country. There are now about 600,000 installed systems, and the number is expected to reach 3.3 million by 2020, according to the Solar Energy Industries Association.
The Edison Electric Institute, the main utility trade group, has been warning its members of the economic perils of high levels of rooftop solar since at least 2012, and the companies are responding. In February, the Salt River Project, a large utility in Arizona, approved charges that could add about $50 to a typical monthly bill for new solar customers, while last year in Wisconsin, where rooftop solar is still relatively rare, regulators approved fees that would add $182 a year for the average solar customer.
In Hawaii, the current battle began in 2013, when Hawaiian Electric started barring installations of residential solar systems in certain areas. It was an abrupt move – a panicked one, critics say – made after the utility became alarmed by the technical and financial challenges of all those homes suddenly making their own electricity.
The utility wants to cut roughly in half the amount it pays customers for solar electricity they send back to the grid. But after a study showed that with some upgrades the system could handle much more solar than the company had assumed, the state’s public utilities commission ordered the utility to begin installations or prove why it could not.
It was but one sign of the agency’s growing impatience with what it considers the utility’s failure to adapt its business model to the changing market.
Hawaiian Electric is scrambling to accede to that demand, approving thousands of applications in recent weeks. But it is under pressure on other fronts as well. NextEra Energy, based in Florida, is awaiting approval to buy it, while other islands it serves are exploring defecting to form their own cooperative power companies.
It is also upgrading its circuits and meters to better regulate the flow of electricity. Rooftop solar makes far more power than any other single source, said Colton Ching, vice president for energy delivery at Hawaiian Electric, but the utility can neither control nor predict the output.
“At every different moment, we have to make sure that the amount of power we generate is equal to the amount of energy being used, and if we don’t keep that balance things go unstable,” he said, pointing to the illuminated graphs and diagrams tracking energy production from wind and solar farms, as well as coal-fueled generators in the utility’s main control room. But the rooftop systems are “essentially invisible to us,” he said, “because they sit behind a customer’s meter and we don’t have a means to directly measure them.”
For customers, such explanations offer little comfort as they continue to pay among the highest electric rates in the country and still face an uncertain solar future.
“I went through all this trouble to get my electric bill down, and I am still waiting,” said Joyce Villegas, 88, who signed her contract for a system in August 2013 but was only recently approved and is waiting for the installation to be completed.
Mr. Akamine expressed resignation over the roughly $12,000 he could have saved, but wondered about the delay. “Why did it take forceful urging from the local public utility commission to open up more permits?” he asked.
Installers – who saw their fast-growing businesses slow to a trickle – are also frustrated with the pace. For those who can afford it, said James Whitcomb, chief executive of Haleakala Solar, which he started in 1977, the answer may lie in a more radical solution: Avoid the utility and its grid altogether.
Customers are increasingly asking about the batteries that he often puts in along with the solar panels, allowing them to store the power they generate during the day for use at night. It is more expensive, but it breaks consumer reliance on the utility’s network of power lines.
“I’ve actually taken people right off the grid,” he said, including a couple who got tired of waiting for Hawaiian Electric to approve their solar system and expressed no interest in returning to utility service. “The lumbering big utilities that are so used to taking three months to study this and then six months to do that – what they don’t understand is that things are moving at the speed of business. Like with digital photography – this is inevitable.”
Read the article, look at the pictures and watch the video. Click here.
Good stuff to watch:
+ Excellent movie, The Woman in Gold. All about the long, legal quest to retrieve this stolen painting:
Now safely on public view in Manhattan’s Neue Gallerie.
+ We need to talk about an injustice.
TED’s most popular talk. Over 2.2 million views. Click here.
Thoughts for as we age
+ The biggest lie I tell myself is …”I don’t need to write that down, I’ll remember it.”
+ Wouldn’t it be great if we could put ourselves in the dryer for ten minutes and come out wrinkle-free and three sizes smaller!
+ Last year I joined a support group for procrastinators. We haven’t met yet!
+ If God wanted me to touch my toes, he would’ve put them on my knees.
+ Even duct tape can’t fix stupid …….. but it can muffle the sound!
+ At my age “Getting lucky” means walking into a room and remembering what I came in for.
+ I’m going to retire and live off of my savings. Not sure what I’ll do that second week.
Harry Newton who marvels at marketing brilliances. Have you heard about the $5,000 bicycle that you can’t see, feel, touch or ride and is only available on Amazon? The bike is the Ultra X from Allen Sports? Have you heard about a refrigerator company called Sub-Zero that’s stopped making parts for its most popular refrigerators — like the ones we, sadly, own. No competition ever hurt you as much as you shoot yourself in the foot. Still true today, as it was 50 years ago, when I first got into business.
I really believe the iPhone 6 is a better phone — i.e. for making and receiving phone calls. It seems to work a lot better than my previous iPhone 5. Worth the upgrade for this alone.
ga('create', 'UA-45200733-1', 'technologyinvestor.com');
ga('send', 'pageview');
// ]]>