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Investment Goals, Expectations, And Strategy

It is important for the successful long-term investor to have clear investment goals, honest investment expectations, and a consistent investment strategy. It can be too easy to be seduced by “ hot tips” which are usually old news to those with money and expertise. It can be too easy to try to invest in every promising stock and then get discouraged when it takes a downturn. A good investment strategy is to set clear and realistic investment goals consistent with realistic investment expectations.

Let’s look at a real life situation. You are a successful businessperson, doctor, lawyer, etc. You make a nice, steady income and you devote easily 60 hours a week to your full time job. What time is left you devote to your family and some community activity.

Now, you have been putting your savings into the bank where you are not very happy with the rate of return on your money. However, you do not have the time or expertise to take on other investments such as property development.

So, you decide to invest in the stock market. What are your investment goals? Your first investment goal is a better return on investment capital than a long-term certificate of deposit. Your second investment goal is the possibility of the substantial gains you hear about with growth stocks. Your third investment goal is something that does not require another 60 hours a week to monitor.

Now, what are realistic investment expectations? Over the seventy-five years from 1926 to 2001 the Standard and Poor’s 500 stock index gained ten and half percent a year on the average. Small cap stocks gained twelve and a half percent a year on the average. But what is a realistic expectation for the purchase of a few stocks? A realistic expectation is that you need ten big cap stocks to get the average and you need 40 small caps. That is if you throw darts at the stock page and pick where the darts hit.

A realistic expectation is that if you invest in what you know and not in what you hear about you will do better. In the 1970’s well to do physicians were buying a leasing railroad boxcars and not investing in Tagamet, the first anti-ulcer wonder drug. The drug maker’s stock did very well while many who prescribed the drug every day missed out on the stock run up.

A realistic investment expectation is that you will need to spend at least a couple of hours a week keeping up with your stocks. A realistic investment expectation is that you are not going to add twenty hours of work to your already busy life.

So, what is your investment strategy going to be so that you satisfy your investment goals and realistic investment expectations? A sound investment strategy is to pick five stocks in five different market sectors. A good investment strategy is to pick a least one stock and market sector that you know about from work, hobby, etc.

A banker may well want one bank stock and a pharmacist a pharmaceutical stock. A reasonable investment strategy for a sports enthusiast would be a sporting goods company.

Once your have picked stocks then there is more investment strategy. If you have a small cap winner an investment strategy is to take a little profit as you go. This investment strategy says that you have not made a profit until you take a profit. Another investment strategy says to let most or all of a winner ride. The best investment strategy in this regard is to keep up with the stock and have an appreciation why it has gone up and its fundamentals predict further gains.


Market Sector, Cash Reserve, and Consumer Spending Drill

Pick the five stocks that you believe will out perform the market in the one, two, and five years. Choose market sectors. Look for cash reserves. When will consumer spending pick up for your market sectors and companies? This is a drill that you should do periodically. Even though you are in the market for the long haul it does not mean than you need to stick with a dieing market sector, support a company with dwindling cash reserves, but rather look at anticipated consumer spending and be there with your stock purchase before the customers arrive at the door.

In the best of all possible worlds you already have your stocks in the best market sectors, in companies with the best cash reserves, and in companies for which consumer spending is a given. On the other hand, maybe that is not the case. The obvious, old, example is American Telephone and Telegraph, which was the “widow and orphan” stock that always paid dividends, always appreciated as the United States grew its telephone system over the early and middle 20th century. Then an antitrust ruling took the company apart and the remaining ATT arm has had continuing problems, takeovers, etc. Some of the “Baby Bells” have done well and some have not. Not to belabor the example you cannot assume that today’s great stock will last.

A good drill, whether you are going to add to your holding, divest, or stand pat, is to routinely evaluate market sectors for growth potential, companies for success and stability as evidenced by cash reserves, and consumer spending for the company’s products.

Sounds like homework again, doesn’t it? But the drill is homework. We are not suggesting that you go out and buy every hot new stock pick. For one thing once a stock hits the “news” it is, in fact, yesterday’s news and has already had its run.

A nice, conservative, approach to stocks is to look for cash reserves. Cash reserves tell you if the company is making money, as a rule, and if they have a buffer against a slide in their market sector.

A look at consumer spending and expected consumer spending tells you when to expect a jump in quarterly earnings. The typical example is retailers and the year-end holidays. Some, like Target and Walmart do well all year long and make more over the fourth quarter and some, niche, retailers depend very heavily on year end sales.

Apply the same logic to your current holdings and, if you think a new stock is a good pick, apply the same logic over a number of time frames to that stock before you buy.

The one, two, and three year forecast is obvious in that you want a stock that is not just a flash in the pan. You want to be in a market sector that is stable and growing. You want continued income, dividends, and cash reserves so that your company has the wherewithal to respond to market opportunity no matter what the economic conditions.

Consumer spending issue is an issue today. If you are invested in mining stocks and your “consumer” is manufacturing you will see a jump in sales while long before employment figures rise. If you have consumer electronic stocks you can use the rise in sales of refined copper and steel to anticipate increased sales of high definition TV sets in the next year.

Do the drill. It will give you continuing perspective on the market and on your holdings.


Time Horizon In Investments

What is your time horizon for investments? Are you investing to fund your retirement or build a family fortune? Or, are you looking to increase your current income with stock dividends. What you invest in depends to a degree upon your time horizon.

In the late 1980’s when Japan’s economy was booming one of their power companies stated that it made its basic decisions based upon a three hundred year time horizon. Certainly if you are building nuclear power plants you would like to know that three hundred years from now your spent fuel is not polluting the environment.

Now, how about investing. Three hundred years? At the speed at which society and business change some of us are happy to make decisions that turn out well after three years or even three months!

On a practical basis the long term investor needs at least to do a weekly check of his or her holdings, general market conditions, outlook for the market sector you are invested in, and political and market psychology considerations that may require you to divest yourself of a stock or buy more shares. This time horizon has to do with maintenance and planning.

If you are investing in growth stocks you hope is to buy an emerging stock in an emerging market niche and hold it while the company grows, matures, and becomes a reliable stalwart in the economy. However, the tricky part is picking the right stock and buying at the right time. Buying call options on hot pharmaceutical startups takes a little bit of the guesswork out of things as you exercise the option and buy only after the stock has made its move. But, you still need to pay attention. This is a weeks or months time horizon.

If the same stock flourishes after the development of a successful cancer cure or “killer app” piece of software you will see spectacular growth in that stock. However, what happens when the stock matures? Microsoft is a case in point. Microsoft is very stable, pays dividends, and never seems to move much. This is a different stock than what people bought years ago. So, do you count your blessings that an initial $10,000 investment is now worth a million dollars and pays a yearly dividend larger than your initial investment or do your sell when stock growth disappears. This may be an investment time horizon of many years or it may be one of months.

Of course there are stocks that have spectacular growth and, when the second possible cancer cure does not pan out, experience a sell off despite steady growth and earnings. This goes back to your weekly time horizon and having a well thought out plan for each of your holdings. By the way, write down what you will do with each holding, in a given time horizon, and why. Not only does this exercise make you think but it helps keep you honest with yourself.

Standard advice is to diversify your stock portfolio and to diversity your portfolio as regards time horizons. If you have a busy, full time job you do not have the time to follow a dozen or more active growth stocks and do it well. You will make mistakes and either lose money or lose out on an opportunity.

You need to decide how much of your time and life you will devote to property watching your investments. A good plan is to write down on a piece of paper how much time you will invest in your stocks as well as how much money and go from there.


Staying in Touch with the Economy and Your Investments

“Stay on your toes,” my old baseball coach used to tell us. To win a nine-inning game even the seemingly inactive outfielders need to stay alert on every pitch, on every throw to check the runner. So it is with long term investing. You need to stay alert, stay awake, and stay in touch with your investments.

Please pardon the baseball example but it is instructive. Long term investing is a nine-inning game or maybe it is the entire season. In a baseball game the pitcher and catcher are constantly active and those outfielders just seem to stand around. However, a good outfield is awake, alert, and ready to move at a moment’s notice. That is what the long-term investor needs to emulate.

There are those who say that, for anyone who has another job besides being an investor, five stocks is the limit. The point is that your stock homework will take time. Reading quarterly reports, thoroughly, takes time. Doing the homework to maintain a perspective on the economy as it relates to your holdings takes time.

Like an inactive outfielder the long-term investor can let his or her stock homework slide, skip the quarterly reports, and ignore the indicators in the economy that will help anticipate a market move. The long term investor who does not stay up with the homework of following the economy, reading the quarterly reports, and staying in touch with the market will be the outfield who never makes the great play that wins the game.

Today, especially, the stock market is on the move. However, in this recovery there will be big winners and there will be the losers who will never come out of the damage that the recession did to the economy.

Reading quarterly reports, doing your stock homework is drudgery. But, it is your money. As the economy improves you can prosper.

We have talked about which parts of the market, which parts of the economy will benefit from stimulus money, a preference for green energy. Following through, weekly, on your homework will help you capitalize on these opportunities.

Anticipating whose quarterly report will look worse as the economy changes will allow you to leave a stock before it dies a lingering death.

A long-term game plan is necessary for long term investing. However, the long-term game plan needs short-term action. The minimum is reading and studying quarterly and year-end reports. Then you need to read what experts say about your stock. Then you need to reread the reports and make up your own mind. Sounds like homework right? It is staying on your toes.

As anticipated companies selling consumer goods are weathering the recession. Look at their quarterly reports and things look great. Look at the economy as it starts to recover and realize that in a year or so other stocks will outperform the stalwarts. Look at your long-term game plan and do a little homework now. What other options do you have with that money in short-term treasuries or one of the old consumer goods stalwarts? And, if you are going to move you money, when will you do it?

Keep up with the economy as it changes. Do you homework every week. Read the quarterly reports.

Sorting Through the Influenza News and More

The influenza news never stops. It has temporarily nudged the recession news aside. And when the recovery is complete there will be other news to nudge that aside. The electronic press swoops down upon a story and disseminates it at the speed of light and the public focus shifts nearly as fast. For the short term trader a little sorting out is necessary to keep making a profit and to keep from letting the news disseminators drive you crazy.

The thing about computers is that they are very fast and not very smart. That sort of applies to our electronic world too. The trader needs to keep up with the news and keep a file on various trading opportunities. The recession, looming recovery, and now the possibility of the current influenza strain causing a global crisis offer a multitude of trading opportunities.

There are recession damaged industries, recovery promising companies, influenza, anti flu drugs, vaccines on the horizon, companies whose stocks have been damaged by the influenza news, and companies whose stars are shining bright because of recovery stimulus money pouring into green projects to mention a few trading opportunities. The question we pose is when is enough, enough?

The point comes down to this. If you try to follow too many influenza related events you will not be there to execute when an opportunity presents itself on the first economic stimulus green stock you have been following.

Bob Woodward, in his book, “The Commanders,” tells how Collin Powell as Chairman of the Joint Chiefs of Staff, and in charge of the Pentagon’s super computers, started his day by writing out long hand on a note pad what his five or so main responsibilities were for the day.

When the news dissemination machine inundates you with influenza, recession, recovery news and more it may be time to get out the note pad, ignore the computer screen and make a very short list of what parts of the news are important. Old timers will tell you that being an expert in one, two, or maybe three areas will serve you well and trying to know everything about everything will lead to your downfall.

There is the matter of cross coverage though. Knowing the biotech stocks will help you deal with treatments for influenza when the next plague scare comes along. Knowing about influenza treatments will help you understand medical supply companies in the current market. The point here is to learn about interconnected companies, sectors, and events so that you can anticipate how a news event in one corner of the world, or the market, will have its effect elsewhere.

Whether it is influenza related, recession related, or a set of green stocks likely to benefit from the recovery stimulus money it is a good idea to develop a game plan and work within a market sector or related sectors to optimize your research and your trading results.

Then, when the news machine inundates you with too much information you can have two files, “This is something that is useful.” and “I do not care.”

Growth Stocks for the Really Long Term

Some economies and some companies will emerge from the current financial mess stronger. Some will fade away. For the long term investor prediction and an appreciation of the very long term for growth stocks will be key. . What will be the growth stocks for the really long term? The money behind the infrastructure that preceded the voyage of Columbus is a distant but useful example of disaster followed by technology transfer and world changing success.

Columbus and Stocks?

Some economies and some companies will emerge from the current financial mess stronger. Some will fade away. For the long term investor prediction and an appreciation of the very long term for growth stocks will be key. What will be the growth stocks for the really long term? The money behind the infrastructure that preceded the voyage of Columbus is a distant but useful example of disaster followed by technology transfer and world changing success.

A hundred years before Columbus sailed Christian Constantinople fell to the Muslim Turks and became Istanbul. Venice and other Italian city states lost their trade routes out of the Orient but still had large navies and merchant fleets that policed and traded across the Mediterranean. So what did they do? They sent sons and nephews, expertise, and money to the far end of the Mediterranean and established trade routes along the African coast culminating in the voyage of Vasgo de Gama around Africa to India from 1497 to 1499 and the voyages of Columbus and the conquering of the “New World” from 1492 on.

Take Home Points

Those who do not accept defeat often win in the end. A secure investment may well fade away and the correct “growth stock” may be the best bet ever.

In times like these, watch where those who have money are putting it and watch where they are putting their “growth stock expertise.” As US Homeland Security has effectively closed US borders to a lot of foreign born scientific talent that talent and money will go elsewhere. Already we are seeing many foreign companies with more US patents per year than any US company except IBM. The secure investment in “safe frontiers” may well deny the US the ability to develop the best growth stocks for the long term.

The investments you make in the goals you can imagine often result in unforeseen riches. Engineering and production cycles for new products have become shorter and shorter but when a new concept shows up it changes the world. Think of personal computers and genetic engineering. The point here is not to try to outguess the scientists but to watch who has the talent and where the money is going. Although Europe continued to fight the Turkish advance for a couple of hundred years as its secure investment it invested in the growth stock of American exploration and conquest which changed the world.

Thoughts about Today and Secure Investment versus Long Term Growth Stocks

We have made the argument on these pages that buying US treasuries, especially short term ones, is a secure investment for the coming months. We are seeing advice in the press that the best long term secure investment is to sit on your money. I read that as Venice letting its fleets rot and sending its sailors home to farm.

Where is the money going for R&D? Where are the best and brightest scientists going? Where is the culture conducive to independent thinking and the discovery of world changing ideas? I read this as Venice sending its expertise and money to the other end of the Mediterranean and jump starting the exploration that gave the Americas to the European culture. I read this as Korea, Taiwan, Japan, Great Britain, most of Western Europe as well as India, China, and the rest keeping their scientists at home and developing the ideas for growth stocks for the future.

The promised investment in US infrastructure is a good sign for growth stocks at home.

Federal Deficits, Treasury Notes, and Investments; The Shape of Things to Come

It was Illinois Senator Everett Dirksen who in the 1960’s said in regard to the federal budget, “A billion here, a billion there and pretty soon you are talking real money.” It would seem that the saying is still true, but only if you substitute “trillion” for “billion”. Another prophetic Dirksen quote is, “I have said, with respect to authorization bills, that I do not want the Congress or the country to commit fiscal suicide on the installment plan.”

Borrowing, Inflation, and Investment

One of the many reasons why long term, buy and hold investments have worked is that a slow steady inflation increases the size of the numbers attached to your wealth even if you buying power does not go up. Needless to say the invention of new products and materials and improvements in efficiency make companies more productive and more valuable in real terms so it is never all about inflation. But, in recent years a lot of our presumed success has been based upon inflated values and well as the phantom value of derivatives.

Over time governments tend to allow and even encourage inflation, usually by borrowing against the future. A simple, one line explanation for the current economic crisis might just be that time just ran out on the inflation gimmick.

To the extent that the current government rethinks the issue of inflation in governing we could see a new world of investment based upon company value minus the steady inflation imposed by a progressively less valuable currency. On the other hand the need for a huge cash injection into the economy will, by itself, serve to continue the “inflation game.” The US treasury just announced the reissue of 7 year notes. It would seem that folks are wary about holding US dollar instruments for 30 years.

What Constitutes a Stimulus Package?

There is the usual complaining in congress about where the “benefits” of the “bailout” are going. It would seem that the government is going to do its best to keep credit markets open so bank bailouts will go forward and the US Treasury will issue seven year treasury notes in addition to 30 year treasury notes.

However, much of the “stimulus” is going to go into things that have a lasting measurable value. A prime example was given by President Obama recent in an interview. He noted that putting people to work winterizing homes across the Northern United States provides jobs both in on site work as well as manufacture of appropriate products. In addition the President noted home winterization saves on heating bills and reduces the need for foreign oil.

The Shape of Things to Come

There is already evidence that putting tax breaks in people’s pockets helped raise spending last year. Putting people back to work will be better. The cost of the bailout is going to drive up the deficit so there will be a price to pay down the road.

The question for those with investment capital is where to invest and what to stay away from. A less consumer driven, inflation driven economy would require buy and hold investors to look more carefully at company fundamentals and rely less on overall market growth. In a world that is cash poor, cash is king. In an inflationary world you want gold. In a world where oil is cheap and bound to come back you want to buy big oil when it bottoms. In a world on the verge of curing diabetes, Alzheimer’s disease, and Parkinson’s disease through stem cell research you want an investment or two in the right up-and-coming biotech stocks.

Considering that other economies are not doing especially well right now those seven year treasury notes are probably not a bad place to park a few bucks while you mull over the shape of things to come.

Where Does the Money Come From in Latin America?

Looking outside of the United States for long-term investment opportunities may involve more than “regional funds” or multinational companies. Successful investing in other parts of the world will require the long-term investor to become much more familiar with the economies and credit sources in various parts of the world. For example the Inter-American Development Bank had its annual meeting in Medellin, Colombia last week.

Does the Inter-American Development Bank need to increase its lending base?

Press reports and TV out of Colombia this last week noted that a major point of discussion at the Inter-American Development Bank meeting in Medellin, Colombia is whether or not the Inter-American Development Bank 48 nation membership needs to fund the Inter-American Development Bank with more capital.

As anyone watching the news is aware nations throughout the world are pumping money into their banks and economies in general in order to keep businesses going and their people employed. However, poorer countries and regional economies are not able to do this and run the risk in these difficult economic times of severe unemployment and loss of the infrastructure provided by successful businesses.

The Inter-American Development Bank is a primary and last resort source of funding and credit in Latin America. The Inter-American Development Bank was founded after the Second World War at the request of the Organization of American States. Its roll has been to provide funding and credit for infrastructure improvements and social needs for individual nations and regional economies. In these difficult times the Inter-American Development Bank and others often provide the only source of substantial outside revenue for some Latin American companies.

The answer to the question is that the Inter-American Development Bank probably needs to ask its wealthier members to pay more so that commerce and social stability will continue until the recession starts to wane.

Long Term Investment and Inter-American Development Bank Issues

We have talked before about the fact that those with cash reserves, those selling basic necessities, and those with high cost of entry businesses are likely to do reasonable well during the recession. Those with sufficient credit to weather the storm should be included in this group. In parts of each economy only a few businesses may survive in their current form and with their current ownership. Here is where knowledge of the businesses throughout Latin America, for example, comes into play. Here is where familiarity of the sources of credit such as the Inter-American Development Bank comes into play.

Whether it is mining in the Andes or natural gas extraction in Ecuador these companies need funding which often is through local banks backed up with credit by international lending institutions in these times. A little research into who has funding for development projects and whose banks are getting reserve collateral from the likes of the Inter-American Development Bank will allow the long term investor to put his or her money in companies or regional economies that will likely survive the recession. Those who survive will then have the opportunity to expand into economic niches left by those companies that failed.

It is a temptation to only look at local and national news these days but there is and will be action elsewhere. The Internet may be a better source than the national news. Take a look at the Inter-American Development Bank web site, click the English option unless you speak Spanish, French (French Guiana), or Portuguese (Brazil) and do a little reading.

Economic Recovery, Regional Growth, Foreign Stocks and Multinationals in Latin America

In recent years diversification into foreign stocks has paid well for many US investors. Now that the recession has hit home throughout the world it seems almost everyone who did not sell early has taken a loss. What factors will influence regional economic growth and recovery and where?

Whether you are interested in foreign stocks or US multinationals knowing a bit about prospective growth in regional economies will help you target your investments. Here we take a brief look at Latin America.

Economic Perspective

No matter how bad the economic times there will always be a recovery. So, looking at Latin America, which regional economies are ready for growth? Who has money? Where are there free trade areas? Where are things going to get better?

Who Will Have Cash or Access to Credit for Regional Growth?

Not every bank in the world got into sub prime mortgages. In the little country of Panama at the bottom of Central America, for example, the local banks are solvent. The local banks are still just as conservative as before so the government is sponsoring an economic stimulus package to make sure that loans get to the local business community. In 2008 Panama added jobs and its economy grew by about 9%. A composite of economic projections puts Panama’s growth for 2009 a little above 5%, ahead of the regional growth for the rest of Central America.

Where is Regional Growth Less Dependent upon Trade with North America and Europe?

As North America and Europe deal with their own economic problems they import less. Regional growth in parts of Latin America is protected to a degree by three free trade areas.

There are three free trade areas in Latin America. These are the Andean Community, the G-3, and the Mercosur.

The Andean Community has 120 million people (Colombia, Ecuador, Peru, and Bolivia).

The G-3 is now only Colombia and Mexico as Hugo Chavez withdrew Venezuela.

The Mercosur comprises 263 million people and includes Argentina, Brazil, Paraguay, and Uruguay. However Bolivia, Chile, Colombia, Ecuador, and Peru have associate status and Venezuela wants to join.

There is periodic talk of a South American free trade association on the model of the European Community.

One might expect to see South America emerge from the recession stronger and less dependent upon the Northern economies. Whether one does the homework to invest in local stocks, invests in multinationals doing business in South America, or invests in small cap funds taking advantage of regional growth Latin America will like do well coming out of the recession.

Things Are Getting Better in Colombia

A unique situation is Colombia. Colombia is slowly emerging from a forty year nightmare of civil war. Try to find a guide for a visit to Colombia. You cannot. It has been a dangerous place for over a generation. Now note that Colombia is part of each of the free trade groups mentioned above. Also read the news about how Colombia is gradually resolving its civil war.

The demonstrations for peace throughout Colombia last year were reminiscent of the scenes in Czechoslovakia during its “velvet revolution.”

Perhaps the best foreign stock, regional growth bet in Latin America might just be hiding in Colombia which has free trade agreements with countries from Mexico to Argentina.

Regarding US multinationals, investing in regional growth one might look at 3M as well as Proctor and Gamble which are everywhere and Caterpillar which is everywhere there is construction – like the Panama Canal Expansion project. Bechtel, by the way, is in the bidding for building the locks for the “third lane” of the $5.25 Billion Panama Canal Expansion.

Some Homework References for Investment in Green Energy

The government’s stimulus plan has a huge investment in green energy. The standard argument against green energy is that green energy requires subsidies to be competitive with coal and oil. The recent bankruptcy of numerous ethanol plants with the drop in oil prices is a case in point. The counter argument is that the secondary costs related to foreign oil dependency and burning of coal are never counted into the equation when comparing with green energy. Here an expensive war in Iraq is cited as well as the societal costs of pollution. As the country seems to be heading in a green direction we thought we would provide a couple of green references for the long term investor’s consideration.

New Rules May Make Traditional Fuels More Expensive and Green Energy More Competitive

According to press reports the EPA is drafting new rules that make it more costly to build fossil fuel power plants and large, fuel inefficient cars. One is reminded that the Europeans have taxed gasoline heavily for years in order to subsidize mass transit. It would appear that the new administration is taking the issue of a conversion of the country to more green energy very seriously.

A Green Energy Homework Reference

As with all long term investing it is important to do your homework. Here we reference three web sites with green energy information. In Western Minnesota, the University of Minnesota, Morris campus derives half of its electricity and much of its winter heating from green energy sources. A single wind turbine is expected to be paid for in about ten years with the subsequent profits to be sent on scholarships. This green energy project is doing so well that two more turbines are in the planning stage.

Wind Turbine

The wind turbine at the Morris campus of the University of Minnesota generates 5.6 million kilowatt-hours of power each year providing half of the electricity needs for campus buildings. The turbine stands 230 feet high with three blades each 135 feet long on a ridge where average yearly wind speed is 16 miles an hour at 230 feet. According to campus sources the cost savings of total turbine cost, versus local electric costs, will allow for repayment of bonds issued for this project in about ten more years (fifteen total since the start of power generation in 2005). After that the “savings” each year will go toward scholarships. For more green information about their wind turbine visit the Minnesota, Morris green energy website which is morris.umn.edu/green campus.

Biomass Energy Production

The West Central Research and Outreach Center (WCRC) is a part of the University of Minnesota system. This facility runs a “biomass’ facility where the fibrous parts of corn are burned without greenhouse gas production. The facility produces up to 80% of heating and cooling requirements for the University of Minnesota, Morris campus.

The biomass plant is largely a research facility but WCRC (wcroc.cfans.umn.edu/) and Biomass Magazine (biomassmagazine.com/) are excellent basic references for this green energy source.

From the investor’s viewpoint a project has to make money year in and year out in order to be viable. We offer the wind turbine as an example of a project that appears to be paying for itself year in and year out. According to campus sources the “profits” will go to scholarships in a decade but there are anticipated to be profits.

The biomass project appears to rely upon agricultural by-products. As such it will work, as it does, in an agricultural setting. The biomass project, for the investor, primarily has research value. However, if the Obama administration puts money into low cost loans, government guaranteed bonds, etc. more green energy projects such the WCRC biomass project could become profitable for the public sector.

We suggest that when you see the government pumping money into green energy you will see companies racing to put up “green” projects. The websites cited here will be good independent reference points when you are checking the numbers.


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