How Are Trump's Recent Decisions Affecting Energy Investors?

How Are Trump's Recent Decisions Affecting Energy Investors?

Surprising no one, President Donald Trump announced his decision to withdraw the U.S. from the Paris climate agreement last week, highlighting the depth of his commitment to keep “America First.”
 

Also surprising no one, the media is making much of the fact that the U.S. now joins only Nicaragua and Syria in refusing to participate in the accord.

Trump was under intense pressure from business leaders, politicians on both sides of the aisle, environmental activists, members of his Cabinet—even his own daughter Ivanka, reportedly—to stay in the agreement, but he made his decision with the American worker in mind. The Paris accord, Trump said, “is simply the latest example of Washington entering into an agreement that disadvantages the United States,” leaving American workers and taxpayers “to absorb the cost in terms of lost jobs, lower wages, shuttered factories and vastly demised economic production.”

This is the assessment of Secretary of Commerce Wilbur Ross, who went on Fox News to defend the decision. “Any time that people are taking money out of your pocket and you make them put it back in, they’re not going to be happy,” Ross said, making a similar argument to the one that prompted the Brexit referendum last year.

Just as many Brits were tired of following rules passed down from unelected officials in Brussels, many Americans have feared the encroachment of global environmentalists’ socialist agenda, which they believe threatens to usurp their freedom.

A thought-provoking article from FiveThirtyEight outlines how climate science became a partisan issue over the last 30 years in the U.S. It was the fall of the Soviet Union in the early 1990s, the article argues, that brought on a significant partisan shift in attitude, with conservative thinkers beginning to see the regulations that went along with environmentalism as the new scourge.

No, the Sky Isn’t Falling
 

Despite the withdrawal, I believe that the U.S. will not stop innovating and being a world leader in renewable energy—even while oil and natural gas production continues to surge. As the president himself said, we will still “be the cleanest and most environmentally friendly country on Earth.”

Recently I shared with you that we’re seeing record renewable capacity growth here in the U.S., with solar ranking as the number one source of net new electric generating capacity in 2016. In the first quarter of 2017, wind capacity grew at an impressive 385 percent over the same period last year. The “clean electricity” sector now employs more people in the U.S. than fossil fuel electricity generation, according to the 2017 Energy and Employment Report.

This was all accomplished not because of an international agreement but because independent communities, markets and corporations demanded it. Solar and wind turbine manufacturers will likely continue to perform well in the long term as renewable energy costs decline and battery technology improves.

Renewables Have Beaten Broader Energy Stocks
 

Clearly people’s attitudes toward climate change—and its impact on business operations—are changing. This week, Exxon Mobil shareholders voted to require the company to disclose more information about how climate change and environmental regulations might affect its global oil operations. The energy giant—along with its former CEO, Secretary of State Rex Tillerson—favored staying in the climate deal.

At the same time, markets reacted positively to the exit, with the S&P 500 Index, Dow Jones Industrial Average and NASDAQ Composite Index all closing at record highs on Thursday following Trump’s announcement.Major Indices Hit Record Highs Following US Withdrawl From Paris Agreement

So What Does This Mean?
 

The question now is what investment implications, if any, the withdrawal might trigger.

The short answer is no one knows exactly what happens now. There’s already speculation that some countries might act to raise “carbon tariffs” on U.S. exports, increasing the cost of American-made goods “to offset the fact that U.S. manufacturers could make products more cheaply because they would not have to abide by Paris climate goals,” according to Politico. German chancellor candidate Martin Schulz has said that, should he be elected in September, he would refuse to “engage with the U.S. in transatlantic trade talks.” Schulz’s comments are not that far removed from those of his political rival, incumbent Angela Merkel, who called Trump’s decision “extremely regrettable.”

This has the potential to widen the rift that’s been forming between the U.S. and Germany since Trump took office. Recall that Trump refused to shake Merkel’s hand during her Washington visit in March. More recently, the president reportedly called the Germans “bad, very bad,” adding that he would stop them from selling millions of cars in the U.S.

One of the biggest winners of the withdrawal could be China. Just as the Asian giant is poised to benefit from the U.S. distancing itself from multilateral free-trade agreements such as NAFTA and the Trans-Pacific Partnership (TPP), it’s also in a position to brand itself as the world’s leader in renewable energy. Last week, Chinese Premiere Li Keqiang met with European Union (EU) officials in Brussels to discuss trade between the two world superpowers, but they also took the time to condemn the U.S. president’s actions, with European Council president Donald Tusk saying that the Paris agreement’s mission would continue, “with or without the U.S.”

China might be the largest carbon emitter right now—it overtook the U.S. a decade ago—but it’s also the biggest investor in renewable energy generation, with $361 billion being spent between now and 2020. The country just fired up the world’s largest floating solar power plant in what used to be a coal mine, now flooded. The plant will provide as much as 40 megawatts (MW) of power to Huainan, China, home to more than 2.3 million people.    

European Manufacturers Have Strongest Jobs Growth in 20 Years
 

On the same day President Trump shared his decision, new purchasing manager’s index (PMI) data was released, and just like last month, European manufacturers were the big surprise. The EU manufacturing sector strengthened its expansion for the ninth straight month in May, reaching a 73-month high of 57, right in line with expectations. Jobs growth grew to an incredible 20-year high.

European Manufacturing Expands at Fastest Rate in 73 Months

Germany led the group with a PMI of 59.5. Of the eight EU countries that are monitored, only Greece fell short of expansion.

The U.S., meanwhile, slipped from 52.8 in April to 52.7 in May, posting the weakest improvement in business conditions in eight months, before the election. China fared even worse, falling from 50.3 to 49.6, signaling a slight deterioration in its manufacturing sector for the first time in almost a year.

Frank Holmes
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Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm ... Click for full bio

Rosie the Robot, Amazon, and the Future of RAAI

Rosie the Robot, Amazon, and the Future of RAAI

Written by: Travis Briggs, CEO at ROBO Global US

It’s tough to find a kid out there who hasn’t dreamed about robots. Long before artificial intelligence existed in the real world, the idea of a non-human entity that could act and think like a human has been rooted in our imaginations. According to Greek legends, Cadmus turned dragon teeth into soldiers, Hephaestus fabricated tables that could “walk” on their own three legs, and Talos, perhaps the original “Tin Man,” defended Crete. Of course, in our own times, modern storytellers have added hundreds of new examples to the mix. Many of us grew up watching Rosie the Robot on The Jetsons. As we got older, the stories got more sophisticated. “Hal” in 2001: A Space Odyssey was soon followed by R2-D2 and C-3PO in the original Star Wars trilogy. RoboCop, Interstellar, and Ex Machina are just a few of the recent additions to the list.

Maybe it’s because these stories are such a part of our culture that few people realize just how far robotics has advanced today—and that artificial intelligence is anything but a futuristic fantasy. Ask anyone outside the industry how modern-day robots and artificial intelligence (AI) are used in the real world, and the answers are usually pretty generic. Surgical robots. Self-driving cars. Amazon’s Alexa. What remains a mystery to most is the immense and fast-growing role the combination of robotics automation and artificial intelligence, or RAAI (pronounced “ray”), plays in nearly every aspect of our everyday lives.

Today, shopping online is something most of us take for granted, and yet eCommerce is still in its relative infancy. Despite double-digit growth in the past four years, only 8% of total retail spending is currently done online. That number is growing every day. Business headlines in July announced that Amazon was on a hiring spree to add another 50K fulfillment employees to its already massive workforce. While that certainly reflects the shift from brick-and-mortar to web-based retail, it doesn’t even begin to tell the story of what this growth means for the technology and application firms that deliver the RAAI tools required to support the momentum of eCommerce. In 2017, only 5% of the warehouses that fuel eCommerce are even partially automated. This means that to keep up with demand, the application of RAAI will have to accelerate—and fast. In fact, RAAI is a key driver of success for top e-retailers like Amazon, Apple, and Wal-Mart as they strive to meet the explosion in online sales.

From an investor’s perspective, this fast-growing demand for robotics, automation and artificial intelligence is a promising opportunity—especially in logistics automation that includes the tools and technologies that drive efficiencies across complex retail supply chains. Considering the fact that four of the top ten supply chain automation players were acquired in the past three years, it’s clear that the industry is transforming rapidly. Amazon’s introduction of Prime delivery (which itself requires incredibly sophisticated logistics operations) was only made possible by its 2012 acquisition of Kiva Systems, the pioneer of autonomous mobile robots for warehouses and supply chains. Amazon recently upped the ante yet again with its recent acquisition of Whole Foods Market, which not only adds 450 warehouses to its immense logistics network, but is also expected to be a game-changer for the online grocery retail industry.

Clearly Amazon isn’t the only major driver of innovation in logistics automation. It’s just the largest, at least for the moment. It’s no wonder that many RAAI companies have outperformed the S&P500 in the past three years. And while some investors have worried that the RAAI movement is at risk of creating its own tech bubble, the growth of eCommerce is showing no signs of reaching a peak. In fact, if the online retail industry comes even close to achieving the growth predicted—of doubling to an amazing $4 trillion by 2020—it’s likely that logistics automation is still in the early stages of adoption. For best-of-breed players in every area of logistics automation, from equipment, software, and services to supply chain automation technology providers, the potential for growth is tremendous.

How can investors take advantage of the growth in robotics, automation, and artificial intelligence?


One simple way to track the performance of these markets is through the ROBO Global Robotics & Automation Index. The logistics subsector currently accounts for around 9% of the index and is the best performing subsector since its inception. The index includes leading players in every area of RAAI, including material handling systems, automated storage and retrieval systems, enterprise asset intelligence, and supply chain management software across a wide range of geographies and market capitalizations. Our index is research based and we apply quality filters to identify the best high growth companies that enable this infrastructure and technology that is driving the revolution in the retail and distribution world.

When I was a kid, I may have dreamed of having a Rosie the Robot of my own to help do my chores, but I certainly had no idea how her 21st century successors would revolutionize how we shop, where we shop, and even how we receive what we buy - often via delivery to our doorstep on the very same day. Of course, the use of RAAI is by no means limited to eCommerce. It’s driving transformative change in nearly every industry. But when it comes to enabling the logistics automation required to support a level of growth rarely seen in any industry, RAAI has a lot of legs to stand on—even if those “legs” are anything but human.

To learn more, download A Look Into Logistics Automation, our July 2017 whitepaper on the evolution and opportunity of logistics automation.


The ROBO Global® Robotics and Automation Index and the ROBO Global® Robotics and Automation UCITS Index (the “Indices”) are the property of ROBO who have contracted with Solactive AG to calculate and maintain the Indices. Past performance of an index is not a guarantee of future results. It is not intended that anything stated above should be construed as an offer or invitation to buy or sell any investment in any Investment Fund or other investment vehicle referred to in this website, or for potential investors to engage in any investment activity.
ROBO Global
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ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio