The Business Insider Green Sheet

We've been sparse in our coverage of our favorite controversial oil exploration company InterOil (IOC) of late. (Apologies!)

We are confident without looking that Wall Street folks raved about IOC's recent quarterly results and outlook. So we figure there might be interest in a more skeptical take.

Fortunately, fund manager Whitney Tilson of T2 Partners, who is short the stock, has provided one. 

After some IOC fans misinterpreted a 13F filing to mean that Whitney had closed his short position in IOC and gone long, Whitney took to his keyboard to set the record straight:

It says a lot about who owns InterOil when folks on the company’s message boards are saying we’ve gone long the stock based on our 13-F.  HA!  This is a very large bearish bet for us.

A lot of people make this mistake when reading 13-Fs: managers often own puts (which are also disclosed in the 13-F) or are short a stock (which isn’t disclosed) and then own a small offsetting long position to make it easy to trade around it.

In our case, our 13-F (http://sec.gov/Archives/edgar/data/1327388/000139834410001071/fp0001970_13fhr.txt) shows that as of 6/30, we owned 1,623 put contracts (representing 162,300 shares of stock) on IOC and, in addition, were long a mere 10,400 shares.  Puts can be very hard to trade, so we just bought more puts than we wanted and offset the extra amount by buying some stock, resulting in the desired net exposure.  Then, if we want to increase or decrease our bearish bet, we can simply buy or sell the stock.

We added to our bearish bet today, as InterOil reported Q2 earnings yesterday (http://finance.yahoo.com/news/InterOil-Announces-Second-prnews-4121957030.html?x=0&.v=1) that reinforced our investment thesis.  The earnings and EBITDA (driven by the refinery operation) are irrelevant for a company that has a $2.9 BILLION (not a typo) market cap; what really matters if whether there is, in fact, the Sierra Madre of oil and gas in the areas being explored by InterOil and, if so, whether they have the cash to find it, develop it commercially, etc. 

Re. the former, there continues to be no proven or even probable reserves – just more hype and gibberish like this from the earnings release:

 

The Antelope 2 horizontal well confirmed a higher condensate-to-natural gas ratio of 20.4 barrels per million cubic feet of natural gas, 27% higher than observed at the top of the reservoir.  The horizontal well also demonstrated dolomitization and higher porosity deeper in the reservoir than previously modeled.

 

And re. the cash, this company is going to hit the wall soon.  Over the past four quarters, net income is -$1.3 million and free cash flow is -$181.9 million (cash from operating activities minus “expenditure on oil and gas properties” and “expenditure on plant and equipment, net of disposals”, broken down as follows:

 

Q3 09: -$48.6 million

Q4 09: -$40.7 million

Q1 10: -$28.5 million

Q2 10: -$64.1 million

TOTAL: $181.9 million)

 

So with no profits to fund such massively negative cash flows, how is InterOil doing it?  

Answer #1: Burning through cash (unrestricted cash has declined from $96.4 million a year ago to $31.7 million today)

Answer #2: Taking on debt (the working capital facility – short-term debt – is up from $4.0 million a year ago to $57.7 million today, partly offset by a $9 million decline in a secured loan)

Answer #3: Issuing stock and conversion of debt ($12.8 million over the past 12 months), resulting in the diluted share count rising 16.1%.

Answer #4: Misc. other stuff (“Proceeds from IPI cash calls” ($15.2M in the first two quarters of 2010), “Proceeds received on sale of exploration assets” ($13.9M in Q1), and “Proceeds from Petromin for Elk and Antelope field development” ($5M over the past 12 months).

To summarize, InterOil has only $31.7 million in unrestricted cash as of June 30th and they’re burning an average of $45.5 million of cash each quarter.  No wonder the company entered a short-term $25 million credit facility last week (http://finance.yahoo.com/news/InterOil-Enters-Short-Term-25-prnews-1473636862.html?x=0&.v=1) on distressed terms: 10% interest (in this environment!), secured by a 2.5% stake in InterOil’s Elk and Antelope fields.  Note that the provider of financing was a very dicey outfit, Clarion Finanz and known stock promoter Carlo Civelli – see http://whitecollarfraud.blogspot.com/2009/07/interoil-john-thomas-financial-and.html.

Join the conversation about this story »

See Also:

• SEC Has Launched Investigation Of InterOil (IOC) Skeptics And Wants Their Emails To The Media
• InterOil (IOC) Smashed Again After Lame Press Release Announces Pretty Much Nothing
• InterOil (IOC): "Major Momentum" Or Just A Castle In The Air? (A New Investigation)

If you're thinking about starting a green e-business, the first thing I'd ask is: Are you really passionate about this way of life? Because if you're just doing it for the hype, you won't get very far. I constantly see companies "greenwashing," saying they're "green" when they're pretty much "black." This catches up with them sooner than they think.

Now that we're clear about that, let's get to the fun part: starting your green e-business. I launched EcoBold.com about seven months ago, when I posted my first video review of a green product. But I had been working on it for at least a couple of years from idea to launch. I expect to be profitable by the end of the year, through selling the products I review at a small profit, and charging companies that want to reach green-oriented buyers.

My initial idea (accompanied by a full-blown business plan) was to be the Amazon.com of green products. But it wasn't so easy: I searched for a partner who could do the website coding, but I couldn't find anyone as driven, hard-working and passionate about the subject as I was. When I thought I had found someone, he ultimately chose a different path. I didn't give up: I just shifted my focus to what I could do on my own.

Here's what I've learned about starting a green e-business and how to make your dream become a reality.

Click here to see how to launch a green online business >

Join the conversation about this story »

See Also:

• 3 Social Marketing Movements Consumers Are Going Crazy For
• How To Highlight Your Company's Social Responsibility
• 11 Simple Ways To Go Green At Your Office (And Save Money, Too)

As I mentioned last Monday night in my Outside the Box, I did not make it to Turks and Caicos, but did end up in Baton Rouge for a special seminar on the Deepwater Horizon Gulf oil spill. I have both good news (or maybe more like less-bad news) and bad news. Today's letter is a report on what I learned.

The conference was sponsored by the Global Interdependence Center (GIC - http://www.interdependence.org/). David Kotok of Cumberland Advisors organized the event with help from people from Louisiana State University. The quality of the speakers was outstanding. They were extremely knowledgeable and well-connected. The meeting was conducted under the Chatham House Rule, which means all the speakers spoke off the record, unless they indicated otherwise. This allows for a more frank discussion. So, much of what you will read from me is my impressions of what I heard, which I cannot attribute to specific speakers. Indeed, some would be at some occupational risk if I did so.

Some of what I write today will be controversial to some readers. That is a risk I will take, as the large majority will find this interesting, or at least I hope so.

From Unmitigated Disaster to Merely Disaster

First, let's begin with the "good" news. The ecological destruction that was first feared is not going to be as bad as once thought, for a variety of reasons. It is not good, but it is not the unmitigated disaster it could have been.

Edward Overton, PhD, Professor Emeritus, Dept. of Environmental Sciences, LSU, is an expert on oil spills. He was at the Exxon Valdez. The Exxon Valdez (EV) was a big, black, thick tide of oil. The Deepwater Horizon is a much bigger spill: every ten days the amount of the EV spill spewed into the Gulf, from April 20 to July 15. Professor Overton spoke mostly for the record. He is very much a concerned environmentalist, and he is also a very serious scientist.

He reminded us that the Louisiana wetlands are a very important part of the ecological system of the Gulf of Mexico. Oversimplifying, they are the nutrient source for the small animal world which feeds the larger. Without the wetlands much of the Gulf ecosystem dies. If they were destroyed, they would not come back very easily, as without their very root system the land would erode away. Bluntly, oil kills wetlands if it gets into it.

There are only three ways to get rid of an oil spill. You can mechanically remove it, chemically remove it, or burn it. They used all three methods. But not fast enough. The Obama administration dithered while Rome burned. (This is not from Overton.)

As The Christian Science Monitor reported in " The Top Five Bottlenecks":

"Three days after the accident, the Dutch government offered advanced skimming equipment capable of sucking up oiled water, separating out most of the oil, and returning the cleaner water to the Gulf. But citing discharge regulations that demand that 99.9985 percent of the returned water be oil-free, the EPA initially turned down the offer. A month into the crisis, the EPA backed off those regulations, and the Dutch equipment was airlifted to the Gulf."

Really? For 0.0015 percent clean water from badly contaminated, toxic water? It takes a month to get that decision? I can guarantee you that there were people arguing for such a decision early on, and some rookie environmentalist at the EPA who never had responsibility in the real world made things a lot worse. Moving on:

"A giant Taiwanese oil skimming ship, The A Whale, is only now working on the spill. It can process 500,000 barrels of oily seawater per day, but it also needed the same waiver from the EPA which, expressed in another way, limits discharged water to trace amounts of less than 15 parts-per-million of oil residue. It also needed a waiver from the Jones Act, which prevents the use of specialized foreign ships from the North Sea oil fields because they use non-American crews. Previously, the skimmers had to return to port to offload almost pure seawater each time they filled up with water." ( http://reason.com/archives/2010/07/09/the-governments-catastrophic-r)

Ok, Let's get this straight. The oil industry screwed up by not having enough disaster equipment and ships available. That's bad beyond words. But for the government to compound that by not allowing needed ships to do the work, just because they did not have US union workers is just as bad. You expect better from government in a disaster, or we should.

(Overton said we never really did learn whether The A Whale would have been as useful as advertised, as it did not get into the Gulf soon enough.)

What should have been a no-brainer decision to use the Dutch ships was delayed for whatever reason. What should have been a no-brainer decision to waive the water purity rules was delayed beyond reason. My personal opinion. Whoever participated in that decision should be allowed to return to the private sector. They only made the problem of the spill worse. They should not be allowed near the decision-making process again.

Please note, this is no defense of British Petroleum. As noted below, they were extremely negligent, and deserve the costs and more. We just don't need to compound stupid, incompetent, irresponsible (choose several more adjectives, some with color) corporate acts with dumb government ones.

The Corexit Decision

There is a chemical called Corexit that is a product line of solvents primarily used as dispersants for breaking up oil slicks. It is produced by Nalco Holding Company. Corexit was the most-used dispersant in the Deepwater Horizon oil spill in the Gulf of Mexico, with COREXIT 9527 having been replaced by COREXIT 9500 after the former was deemed too toxic. Oil that would normally rise to the surface of the water is broken up by the dispersant into small globules that can then remain suspended in the water.

In hindsight, Overton thinks the use of Corexit was the correct thing to do. It probably saved the wetlands. But it is not without its own bad effects.

When you put Corexit on an oil slick, the surface oil disperses but also drops into the ocean about 15 feet. While Corexit (basically a type of soap) itself is not toxic (an admittedly controversial claim), the resulting dispersed oil is quite toxic. Fish swimming through it can be and are harmed. Marine mammals like porpoises are seriously harmed when they rise to breathe through an oil slick.

But here is the good news. It turns out that there are about the equivalent of two Exxon Valdezes a year from natural oil seepage from the floor of the oceans. The Gulf has an ecosystem of bacteria that eat that oil, which are then eaten again by plankton. To those bacteria, dispersed oil is filet mignon. They thrive and grow rapidly, turning that toxic waste into nutrients, which are absorbed by the plankton. The bacteria keep on growing until they lose their source of nutrition (the toxic oil) and then die out over time. Note: once absorbed by the bacteria, the oil is no longer toxic. There are no toxic minerals like mercury introduced into the ecosystem.

Scientists are somewhat baffled. There are tens of millions of gallons of oil that seem to be missing. It seems that the Gulf is providing its own (albeit chemically assisted) defense mechanism. Overton thinks that within less than five years, and maybe only a few years, the ecosystem will largely be back. And fishing may even be better, since the fish and shrimp are not currently being harvested (he called it human predation). At least for a while.

We traded onshore damage for offshore damage. But the calculation is that much of the ocean is empty of fish. Every go deep sea fishing? Did they just jump into the boat? Did you fish all day and catch little or nothing? There are large parts of the ocean and Gulf with very few fish. It is not good to create those toxic pools of oil, even if they eventually go away. Some fish will be harmed. But better than on the marshes.

For that we should all be grateful. It was a very difficult choice to make to use the dispersants. But it was the right choice. Somewhat like the choices we have to make in our current economic environment, concerning deficits and stimulus. There are no good or easy choices in these crucial situations. It was tragic that the choice had to be made, but I am glad it was. Losing the Louisiana wetlands would have been an ecological disaster of biblical proportions.

Again, we should never have had to make that choice. Better that BP management had observed the warning signals.

Some More Takeaways

It was clear talking from experienced oil professionals that the blowout was human error, and probably compounded human error, ignoring multiple warning signs and safety procedures. We went to Shell's Robert Training Center, where they train people to work on oil rigs. It is a very rigorous facility and the people running it are very professional. They take safety seriously. They train most of the oil rig workers in the Gulf, including British Petroleum's. They showed us the simulated control rooms. There are lots of safety features and redundancy; and it is *my* take that complacency had set in at BP, as things had gone just fine for so many years, and then some corners were cut. Over time, this will all come out.

There are two types of Corexit. The newer version is considered less toxic. But for whatever reason (ahem), they used supplies of the older version first. As it turns out, they needed just about everything they had, using over 1 million gallons. But it would seem that someone made an economic decision to empty the shelves of a less desirable dispersant.

Before we start to drill again (and we must!), we need to build two very large containment devices (to provide for redundancy). The process of building them from scratch this time was too time consuming and was trial and error.

There is a coalition of large oil companies building a response system at a cost of over a billion dollars. A little late for this disaster, but good for the future. There need to be enough booms to gather oil, skimming vessels, and other equipment at the ready, just as we assume there will be fire trucks if we need them. And that should not be at taxpayer expense, of course.

Time to Lift the Moratorium

The Obama administration imposed a moratorium on drilling, which in effect has shut down even shallow-water drilling, even though Obama himself said it would not affect such shallow wells. A judge has overturned that ruling. The administration then issued another moratorium, with indications it will issue yet another when this one is overturned.

Enough already.

On Thursday night, we had dinner in the Louisiana Governor's mansion, hosted by the Lt. Governor Scott Angelle. (I was privileged to sit at his table, and he is both gracious and quite sharp.) Before being appointed Lt. Governor, Angelle was Secretary for the Department of Natural Resources, overseeing the very large oil industry of Louisiana. He is very familiar with the issues.

Angelle, a Democrat, has agreed not to run for the Lieutenant Governor's office in the next election, which the Governor said was a requirement for anyone he nominated for the post. Angelle plans to return to the agency once his tenure as Lieutenant Governor has finished.

Angelle was very passionate about the need to begin safely drilling again. Over 30,000 wells have been drilled without major incident until now. He is clear about the need to address safety, but there are 300,000 well-paid jobs at risk, and Louisiana (and the US) are losing ship rigs to Africa and Brazil, which won't come back for a long time. And those 300,000 jobs have a large multiplier effect.

But it is more than that. If the US cannot become energy independent, we will not be able to balance our federal deficit without the private sector going into even greater debt. To deal with that somewhat rather startling statement, let's review a few paragraphs from a letter of mine from a few months ago.

Getting the Balance Just Right

Now, gentle reader, we are going to spare you a few pages of algebra and cut to the chase. Let's divide a country's economy into three sections: private, government, and exports. If you play with the variables a little bit you find that you get the following equation.

Domestic Private Sector Financial Balance + Governmental Fiscal Balance - Current Account Balance (or Trade Deficit/Surplus) = 0

We will review this briefly, as it is VERY important. As Rob Parenteau noted, "... keep in mind this is an accounting identity, not a theory. If it is wrong, then five centuries of double-entry bookkeeping must also be wrong."

By Domestic Private Sector Financial Balance we mean the net balance of business and consumers. Are they borrowing money or paying down debt? Government Fiscal Balance is the same: is the government borrowing or paying down debt? And the Current Account Balance is the trade deficit or surplus.

The implications are simple. The three items have to add up to zero. That means you cannot have both surpluses in the private and government sectors and run a trade deficit. You have to have a trade surplus.

Let's make this simple. Let's say that the private sector runs a $100 surplus (they pay down debt), as does the government. Now, we subtract the trade balance. To make the equation come to zero means that there must be a $200 trade surplus.

$100 (private debt reduction) + $100 (government debt reduction) - $200 (trade surplus) = 0.

But what if the country wanted to run a $100 trade deficit? That means either private or public debt would have to increase by $100. The numbers have to add up to zero. One way for that to happen would be:

$50 (private debt reduction) + (-$150) (government deficit) - (-$100) (trade deficit) = 0. Remember that we are adding a negative number and subtracting a negative number.

Bottom line: you can run a trade deficit, reduce government debt, and reduce private debt, but not all three at the same time. Choose two. Choose carefully.

I know some of my friends say trade deficits don't matter (that would be you, Dennis!) But tell that to Greece. They are running large trade deficits. To get their government back into balance, they are going to have to go through very serious wage deflation and other pain. Accounting identities will extract their due. There is no getting around them.

Now, it would be better to rapidly build nuclear plants and turn our car fleet electric. But that will not happen for some time. Take our truck fleet and have it run natural gas. That takes time as well. In the meantime, we need to be drilling domestic oil or we will all be the poorer for it.

I consider myself an environmentalist. Not radical, but serious. I want clean air and water for myself as well as my kids. I would be willing to consider a gradual annual increase in gasoline taxes to encourage alternatives (with the taxes going directly to rebuilding our badly maintained roads and bridges). I know we need to make the shift to electric cars and nuclear power, as well as renewables. But I also want my kids to have an economic environment where they can find jobs and prosper. Just a thought.

Omaha, Carbondale, and San Francisco

This is my week for input overkill. Tuesday I had the pleasure of being part of a small group that was consulting for the Office of Net Assessment of the Defense Department. Our task was to come up with several different economic scenarios so that a later group could decide what type of Defense Department response would be needed. I have rarely been in such a group. Robert Shiller of Yale, Jim Chanos, David Smick, Avinash Dixit from Princeton, Rozlyn England from West Point, and a few other analysts were there. It was perhaps the most stimulating six hours I have ever had the privilege of participating in. Quite intense and a lot of give and take. I am still digesting what I learned, as your humble analyst gets invited to these things as comic relief. There were real minds in the room. (And to just sit in the same room with Andy Marshall, a true legend at 81 - wow!) I will try and figure out what happened and report back to you!.

Ok, I have not been on enough planes of late, so my youngest son Trey and I are going to go visit a few schools Monday and Tuesday in Nebraska and Indiana, and then Thursday I go to San Francisco where I will speaking for The Money Show at the Marriott Marquis. You'll have the opportunity to meet with 50+ leading experts, who will cover everything from the global economy and markets to biotech, greentech, nanotech, and much more. Register for free by calling 800/970-4355 and mentioning priority code 018914, or register online at The MoneyShow San Francisco!

Even for me, this schedule is brutal. But it must be done. In the meantime, all my kids are gathered for the weekend. It seems Amanda married a very nice young man with one considerable character flaw: he is a Red Sox fan, and is down to watch the Red Sox do battle with the Rangers. At least they are here, and the score is 9-9 in the top of the 9th, so I am going to hit the send button and go watch with them and some of the other kids downstairs.

Have a great week. This has been a fun August, but it is going by so fast. Tomorrow my mother is 93. She is on top of her game. We will celebrate tomorrow morning.

Your trying to absorb it all analyst,

John Mauldin
John@FrontLineThoughts.com

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See Also:

• And Now A Few Words On The Coming Pension Crisis That Will Screw Us All
• Are We There Yet?
• Here Comes Deflation

At last... a source of fuel that will NEVER run out.

Laura Roberts at the Telegraph:

The Bio-Bug has been converted by a team of British engineers to be powered by biogas, which is produced from human waste at sewage works across the country.

They believe the car is a viable alternative to electric vehicles.

Excrement flushed down the lavatories of just 70 homes is enough to power the car for 10,000 miles - the equivalent of one average motoring year.

This conversion technology has been used in the past but the Bio-Bug is Britain's first car to run on methane gas without its performance being reduced.

It can power a conventional two litre VW Beetle convertible to 114mph.

Keep reading at The Telegraph >

(via @fmanjoo)

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See Also:

• CAPE WIND: Wine-Sipping Hypocrites Preach Gospel Of Renewable Energy...As Long As It Doesn't Wreck The View
• Renewable Energy Goes Bankrupt Down South
• Schwarzenegger Will Create His Own Renewable Energy Bill

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• Because Geeks Like Money Too  - submitted by hitchcott  (SAI)
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• I am a [business] model - submitted by blackstone  (War Room)
• Stream this shirt - submitted by pierreburgot (The Wire)
  
• Here's What You Need To Know - submitted by The Obvious Choice (Business Insider)
  

To claim the prize, winners must be registered with Business Insider.  If you submitted without registering (and a few winners did!), you need to send me an email in the next three days and we can verify your identity, or you are out of luck.   Winners will receive a portion of the net sales for the first year. 

For our other finalists, good news for you: Your slogans will also be immortalized in the new Business Insider Zazzle Store.  

Now check out the designs, let us know what you think, and buy a couple. Birthdays, Bar Mitzvahs, Labor Day parties: any occasion is a good occasion for a clever T-shirt.

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Sharp inflation for a variety of Chinese commodities is leading many in China to suspect investment speculation as the underlying cause, rather than simple consumption demand.

When commodity prices are volatile, farmers become traders:

Caixin:

This harvest season, Cao decided to wait for higher prices. And thanks to a wave of speculation and farm commodity-flipping in China's agricultural market, his waiting game was likely to pay off.

"The price of new wheat this year has risen to 1.04 yuan per half kilogram," said Cao, who plows the land in Hebei Province's Zhengding County. "It was only a little more than 0.8 yuan last year, and it will likely go higher in coming days."

One cause could be surplus investment capital, which is looking for places to make money. Oddly, new environmental regulations could be a major driver:

Wang Yuanhong, a senior economist at the State Information Center, said market demand is rigid for non-staples such as mung beans as well as staples such as wheat. That makes these goods vulnerable to short-term stockpiling and speculation.

Wang also thinks investment liquidity is driving up prices for bulk products such as wheat and cotton. Government controls aimed at discouraging investment in polluting, energy-intensive industries has encouraged investors to shift money to new arenas, such as farm product speculation.

Read more here >

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T. Boone Pickens' newest version of the Pickens Plan to reduce oil imports depends almost entirely on natural gas. Wind power, which played a key role in the original Pickens Plan, isn't even mentioned.

Which is clearly a bearish sign for US wind.

Forrest Wilder at Texas Observer has more on the Pickens turnaround:

Recall that the original Pickens Plan had two main, interlocking components: First, thousands of new wind turbines would be installed in the Great Plains along with the infrastructure needed to move the electricity to cities. Second, the wind turbines would free up natural gas – currently burned to make electricity – for use in vehicles instead of instead of foreign oil.

It could have to do with a recent Pickens investment:

... Pickens was (and is) muscling his new BFFs in the Democratic-controlled Congress to subsidize Clean Energy Fuels Corp., a Pickens business that builds natural gas fueling stations.

Pickens may be lots of things but he's always been a shrewd businessman and a ruthless opportunist. It's interesting to note that on the same day he dropped wind from the Pickens Plan and beefed up his support for natural gas, word came down from on high that a Pickens-backed provision had made its way into the Senate energy bill.

Don't miss: Everything You Need To Know About The Future Of Oil & Gas

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With Business Insider's new customized email alerts, you can create instant, daily, or weekly alerts on any topic or by any Business Insider writer. Here's a quick tutorial:

Step 1: On the right side of the homepage, click the round, orange icon that says "NEW! ALERTS"

 

Step 2: You will now see an expanded menu with multiple checkboxes.  The Alerts checkbox will be pre-checked. Just enter your email address and zip code and click "SIGN-UP"

 

 

Step 3: Build and customize your alerts. 

First, choose Alert Type.  Pick a specific news topic (News by Topic), or from your favorite Business Insider author (News by Author).  If you choose News by Topic, you can select from a list of the most popular topics or manually type in any topic that interests you.

Once you are done choosing Alert Type, decide when you would like to receive that alert.  The three options are: (1) Instant, (2) Daily or (3) Weekly. 

• Instant: receive an alert as soon as an article is posted about your topic or by your author. 
• Daily: receive an alert once a day on your topic or author of choice. You choose the time of day that you would like to receive this alert. 
• Weekly: receive an alert once a week on your topics or author of choice. You set the day and time to receive it.

Once you are satisfied with your alert settings, click "ADD ALERT" to add this to the "Your Alerts"  hub.  If you want to build more than one alert, just repeat the steps above.

Finally, when done building all of your alerts, be sure to click "CONTINUE".

 

 

 

Note: For users that are not registered, you will need to create an account to start receiving your alerts. You will be taken to this screen when you hit CONTINUE, or you can click here to register first.

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Los Angeles is now challenging northern California as the pot-growing capital of the country.  Cops have seized 734,000 plants in LA this year (and what happened to them then?)

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Google officially enters the energy business, buying 20 years worth of wind power from a company in North Dakota. Google will sell the power but keep the carbon offsets.

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Google just announced that it will be selling energy on the spot market, through a deal to purchase 114 megawatts of wind power from NextEra Energy Resources for the next 20 years.

Google is presenting the deal -- from its energy arm Google Energy -- as part of its drive to become carbon neutral, rather than an investment, but this move puts Google solidly in the energy business.

Google says that 114 megawatts "is enough to supply several data centers." Too bad Google doesn't have any data centers located close enough to the Iowa wind farm to use the energy. Instead, Google will sell the power on the spot market.

Since Google is purchasing 20 years worth of power "at a predetermined rate", this amounts to speculation in the energy market.

A google spokesman tells us: "We think this is a structure that makes long term financial sense for Google. Through the long term purchase of renewable energy at a predetermined price, we’re partially protecting ourselves against future increases in power prices. This is a case where buying green is simply the right business decision."

Of course, this is not such a large deal that it will affect Google's bottom line. But it is the second major wind power deal Google has struck in the past two months. If this keeps up, Google could turn into a major player in energy trading before you know it.

See Also: Hey Google, Here Is Where To Blow $40 Million (Not On Windmills!)

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See Also:

• (Silly, Undisciplined) Google Invests In Two Wind Farms
• Google Promises To Invest In Clean Energy, Again
• Hey Google, Here Is Where To Blow $40 Million (Not On Windmills!)

The rich are getting richer and the poor are getting poorer. Cliché, sure, but it's also more true than at any time since the Gilded Age.

While politicians gloat about our "recovery," our poor are getting poorer, our average wages are still falling behind inflation, and social mobility is at an all-time low. 

But, yes, if you're in that top 1%, life in America is grand.

Here's 15 Mind-Blowing Charts About Wealth And Inequality In America >

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Sponsored by:  

You can’t enter any sort of conversation about sustainability these days without hearing about grid technologies. These energy grid processes make clean energy real, create power through renewables, and allow for the development of eco homes and eco buildings. In fact, statistics show that grid efficiency could save consumers 10 percent on power bills annually – the equivalent of $36 billion.

With benefits like these, it’s no wonder that eco-conscious thinkers and tinkerers alike have ideas about modern grid methods that could make a significant societal impact. It’s bringing these inventions to life that often presents the challenge.

Enter the GE ecomagination Challenge: Powering the Grid, a new campaign that supports innovative grid improvements and solutions – in the sum of $200 million, to be exact. General Electric and their partners are offering creative thinkers an opportunity to present their grid technology solution and potentially see it come to fruition through cash grants, a GE research center fellowship, a cooperative agreement to develop a product or technology, and/or an equity investment.

Think you have an idea that can transform the way we power our lives?  Visit ecomagination.com/challenge by September 30, 2010, for additional details and to enter.

For the forward-thinkers out there, here’s the chance to present those big ideas and make your mark!

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After various reports of dead and mutated animals, scientists have concluded damage will infiltrate the entire food chain.

Here's a rundown of the early ecological impact of all that oil, from the AP:

• Researches have documented a massive die-off of pyrosomes -- cucumber-shaped, gelatinous organisms fed on by endangered sea turtles.
• droplets of oil are being found inside the shells of young crabs that are a mainstay in the diet of fish, turtles and shorebirds.
• And at the base of the food web, tiny organisms that consume oil and gas are proliferating.

These events could permanently alter the regional ecosystem. Unfortunately, the Gulf states depend on fishing and tourism.

Read more: How The Oil Spill Could Devastate The $2.2 Trillion Gulf Economy

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The Economist has helpfully published a chart that should help resolve two age-old arguments:

1) whether gold is good inflation hedge, and

2) whether gold is a good investment.

Based on this chart of inflation-adjusted prices since 1800, the answer to the first question is "yes--gold's a good inflation hedge."

Of course, being a good inflation hedge is not the same thing as being a good investment. 

Yes, gold has been a better investment than currency over the past 200 years, but that's not saying much.  For most of this period, gold has done vastly worse than the stock market and worse than most bonds and real-estate.  Basically, it has done about as well as T-bills, which generally offset inflation but provide little return beyond that.

Specifically, on an inflation-adjusted basis, gold has generally traded between $300 and $600 an ounce for the past 200 years.

And so how does gold look now, relative to that level?

Less than the peak in the 1980s.  But still about 2.5X overvalued.

In other words, if you're buying gold today, you believe the following (whether you know it or not):

1) Gold is going to trade to a much higher level than it has traded for most of the past 200 years and stay there because the world has changed ("This time it's different")

OR

2) Gold is in the early stages of a crazy bubble that is going to briefly drive prices into the stratosphere before they collapse back to normal $300-$600 levels ("Yes, it's a bubble, but I'm going to be smart enough to sell before it bursts.")

Those, by the way, are the two beliefs that are common in every investment bubble.  Some people think the world has changed and that it's "different this time." (It usually isn't.) Other people think that it's just a bubble but they'll be smart enough to get out ahead of the crowd. (Most don't).

So now you know!

(By the way, if you buy gold now thinking it will be a good inflation hedge and gold prices collapse to their normal levels, gold will not have been a good inflation hedge--unless the currency collapse is even worse. Your entry price matters...)

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This bit of multimedia art showing nuclear explosions around the world from 1945-1998 is like something from the Farm Film Report on SCTV, with things blowing up “real good”. Incredible and unnerving, especially in years like 1958 and 1962.

 

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GE's new lobbying strategy: Trash talk.

The FT's Guy Dinmore and Geoff Dyer relay some unscripted remarks Jeff Immelt  reportedly made at a dinner for Italian executives. GE says they were misreported and taken out of context.

Jeffrey Immelt, General Electric’s chief executive, has launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals.

He warned that the world’s largest manufacturing company was exploring better prospects elsewhere in resource-rich countries, which did not want to be “colonised” by Chinese investors. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.”

Mr Immelt also had harsh words for Barack Obama, US president, lamenting what he called a “terrible” national mood and expressing concern that over-regulation in response to the global financial crisis would damp a “tepid” US economic recovery. Business did not like the US president, and the president did not like business, he said, making a point of praising Angela Merkel, Germany’s chancellor, for her defence of German industry.

Read the whole thing >

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Tesla's shares closed at $23.89 in their first day of trading, a 40% lift from where they were initially priced.

This is great news for Tesla CEO Elon Musk who started the day flat broke (cash-wise).

Elon owns 28 million shares, which means he is now worth $672 million on this stake alone.

See Also: Tesla Takes Manhattan!

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See Also:

• ELON MUSK IS SAVED!
• Tesla Hits The Public Markets, Stock Opens Up 9%
• Are These The Next Tesla Cars? We Hope Not!