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Run in Ethanol: Too Easy, Too Obvious?


We don't do politics here in the 'Ville but they're colliding with what we do so it bears examination especially by investors who believe in alternative energy as an investment.

Anticipating a run in ethanol related stocks because of the State of the Union feels exactly like picking the Saints over the Bears. Just a bit crowded on that bandwagon right before game-time for my blood. Too easy, too obvious, underestimating fundamentals, and overestimating "feel-good" stories.

I'll wear a Cornhusker hat to a Longhorn rally if we look back in 3-5 years and say ethanol was a tremendous investment opportunity. It's not even economically competitive and it consumes huge amounts of natural gas to produce. But…it's the perfect political football – we hate Middle East oil and we love Midwestern farmers, the only thing another Texan will say tonight we all can agree on.

Is subsidizing high cost producers in any business while placing outrageous tariffs on low cost efficient trading partners practicing global free trade and teaching the world about capitalism? We give our farmers about 50 cents to make corn ethanol and penalize Brazil by about 50 cents for (better) sugar ethanol. So we have about a $1.00 per gallon artificially supported business. And yet this will get the biggest claps tonight.

And then we try to go save the poor in South America and other places while we try to forcefully teach others how to open up markets? They wouldn't be poor if we hired them.

We don't do politics here in the 'Ville but they're colliding with what we do so it bears examination especially by investors who believe in alternative energy as an investment.

I shared several times here one of my answers to this debate. Most of these solutions are not solutions. Period. One of the better energy bets is on a woefully out of date infrastructure that is not debatable. While everybody looks to a speech and subsidies for answers to new problems, I'd suggest taking a peek at the engineers fixing our old problems. I've pointed out Jacobs Engineering (JEC) and others before. JEC is out with huge numbers today. Anytime you can find a company with a backlog of orders that exceeds its entire market cap you're on to something. Let everybody argue about the U.S.'s potholes; let's find out who wins the contracts to actually fix them.

Regardless of my disagreement with most of what I'll hear tonight, I have been bullish on corn for some time because I knew I wouldn't be asked for help on the speech. I think, however, we are closing in on a swap trade down on the farm. More to follow, from a farming family I know well...
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