Paul Krugman got a bad case today, in writing about the horrid state of the economy:
The Onion, as usual, hit the nail on the head with its recent
headline: “Recession-plagued nation demands new bubble to invest in.”
But we probably won’t find another bubble — at least not one big enough to fuel a quick recovery.
Paul Krugman doesn’t know a bubble when it’s being blown up in front of his face. (That’s Tom Noddy doing his bubble magic thing above.)
The next bubble is already here. It’s called alternative energy. It’s called The War Against Oil. Why do you think Boone Pickens is blowing so much hot air? What is turning Al Gore into an important venture capitalist?
Just as with the Internet 13 years ago, no one is sure in what direction this will go. It was just obvious back then the money was out there. That’s why companies like Netscape and Yahoo had ginormous valuations before they got a dollar in revenue. Netscape failed, and Yahoo is failing, but that doesn’t mean there wasn’t a there there.
Ask the Google guys.
The same is happening now. STP no longer refers to an oil treatment, it’s the symbol for a Chinese solar ADR. Companies like Cypress Semiconductor and Applied Materials are staying afloat in large part because of their solar power plays. The hottest of the lot, First Solar, already sports a P/E ratio of 110, plenty to take profits on. There are a ton of geothermal stocks waiting to be discovered, and as Pickens proves wind energy is gaining significant investment.
But this is just the start. Demand can be virtually unlimited. Right
now it is limited only by the threat of oil prices falling or public
policy tilting toward nonsense like "clean coal" and ethanol. Has
everyone forgotten last week’s post about ITM Power already?
These are early days. There remains some political work to do, cuts in
subsidies for oil and gas, new incentives for utilities to gain
efficiency and intelligence, the beginnings of a hydrogen energy cycle
where water is recouped and recycled rather than vented. A price floor would be very helpful. There is an
awful long way to run here.
The first step along that road, of course, will be a bubble. There are some, looking at the early profit-taking, who might claim that bubble has already popped.
The air has barely begun to flow in. There are going to be many breakthroughs, many false starts, many fake hopes. There will be blood as well as gold.
But the adventure has now thoroughly begun.