The Coming Disruption: Lead It or Lose It

I feel like our economy -- our very way of life -- is in a simultaneous state of suspended animation and free fall.  Like a cartoon character that has run off a cliff and hasn't yet realized there is no ground beneath it.

As I said in my talk at SXSW ECO a couple of weeks ago, I don't know whether we're going to go all the way down or we're going to catch ourselves and scramble back up top.

It seems clear we're headed for a major disruption. The question is, will we instigate that disruption or will we let it happen to us?

The Occupy Wall Street (OWS) protests are indicative of this coming disruption. In many ways, it's a welcome and refreshing sign that Americans are no longer complacent, apathetic, hedonists whose sole purpose is to consume.

My fear is that OWS gets co-opted and becomes a kind of anti-Tea Party movement for the left.  I fear that when I see folks like MoveOn.org, the unions, and extreme environmentalists jumping on board and trying to grab the reins.

Partisan ideology on both sides is getting in the way of facing the systemic problems of our way of life.

Our country is failing because we reward people who fail, cheat, and game the system.  We bail out institutions that fail to add value to the world.  And we let others create the world they want for us.

It's a perfect storm of deeply entrenched special interests, leadership incompetence, and redistribution of wealth. (Yes, that's right, I'm against redistributing wealth -- to either the one percent or the 99 percent. Wealth needs to be earned the old-fashioned way: by creating value and hard work.)

Some are calling for stronger regulation, which would inhibit financial institutions being innovative. Meanwhile, banks sit on their money and make big payouts to incompetent managers who are asked to leave and start charging fees for purchases made with debit cards to squeeze more revenue from customers.

How is that going to grow our economy?

Unfortunately, innovation in financial services is getting a bad name.  The innovations of the past decade or so -- much of what got us in the mess we're in -- were driven by regulatory or credit ratings arbitrage, and were increasingly complex, opaque, and focused on quarterly results or success for those who could manipulate the game.

Now it's time for financial innovation that is conducive to sustaining economies – to value creation rather than value destruction, and that drives a new kind of prosperity.

I've been thinking about financial services as an engine of change because we're not going to make real and lasting change – or build a new economy – if money can’t be made while doing it. Altruism is great, but it won't trump greed.

So what if financial services firms clearly demonstrated their community, social and environmental impacts?

What if banks told their customers what they did with their money?

What if customers were rewarded for making sustainable choices?

What if there was a greater connection between money and values, and management was compensated for maintaining or growing that connection?

What if profit and purpose were more equitably connected?

What if sustainability wasn't an add-on, but was part of the DNA of our enterprises?

What if, instead of a triple bottom line, we talked about a single, redefined bottom line that encompasses all three: profitability, environmental health, and social well-being?

Is it even possible for us to make this shift without regulation or with better regulation or, better yet, with self-regulation?

Whatever the answer to the above questions, it's clear a disruption is coming.  We need to decide whether we will lead it or lose it.

Wall Street's Irrational, Dangerous Hatred of Solar Stocks

Garvin Jabusch, cofounder of Green Alpha Advisors, LLC and manager of The Sierra Club Green Alpha Portfolio, has an intriguing, if disturbing post on AltEnergyStocks.com over the weekend. Disturbing for those of us who are investors in solar stocks and solar companies.

For most of 2011, the stocks of solar power companies of all kinds, from providers of raw polysilicon to developers of finished utility scale plants, have been taking a beating on world and U.S. stock markets, partly because solar has been the industry most singled out for attack by bearish short sellers. I can’t describe this phenomenon any better than did Roberto Pedone in a recent column for thestreet.com:

"Besides the banking sector post-2008 financial crisis, I can't think of a group that's as hated and despised as solar stocks…For whatever reason, this entire complex has become a favorite target of short-sellers. There are so many names in the solar sector that are heavily shorted that it's hard to find a name the bears aren't leaning all over. One famous and successful short-seller, Jim Chanos, has even made it publicly clear that he thinks the wind and solar stocks are a bunch of 'hot air.'"

"For whatever reason" indeed. Solar is hated in spite of being the fastest growing energy sector in the U.S. (67% 2010 growth; 66% growth just in the first quarter of 2011) and in the world (70% 2010 growth), and also despite its shares trading at very low valuations already.  Take for example Green Alpha ® Advisors' holding and China-based solar company LDK Solar (LDK).

The company's shares have fallen from US$14.49 per share in February to $6.94 as of this writing. I can find no good fundamental reason for the decline: LDK's latest quarterly earnings came in at $.95 per share where consensus analyst expectations were $.86; the company has year-on-year sales growth of 202%, has a price-to-earnings ratio of only 2.22, plenty of cash on the balance sheet, and a price-to-book ratio of just .91.

That's right, even if the company were closed and its assets liquidated, the cash generated at the yard sale would be greater than the current market cap, though the earnings should have value. LDK is the very definition of a "value" stock. Or, inversely, shorting any company this cheap, that's this fundamentally solid, and that's growing this fast is the very definition of "irrational." LDK happens to be one of our favorites, but it's easy to find similar valuation stories throughout the industry today. This trend would be odd enough on its own, but, simultaneously, other events in the story of global energy are unfolding.

Read the full post here: Wall Street's Irrational, Dangerous Hatred of Solar Stocks

Time to Bring on the New Green Economy and Retire the Old Dead One

Image via Wikipedia Perhaps it's time to sound the death knell on the old gray economy and create new institutions that can foster the new green economy. A phoenix rising new from the ashes of the collapsing old and exhausted.

The news this weekend is pretty grim. Bank of America (BAC) is buying Merrill Lynch (MER) for $29/share, American International Group (AIG) was one of the subjects of a special weekend session of Wall Street execs trying to save it from certain collapse. The other, Lehman Brothers (LEH) is being left out to swing on its own rope after Barclays broke off talks.

Lehman Brothers has an illustrious history, and was at the forefront of ever major economic development in the US since before the Civil War.

From its humble beginnings as a general store in 1840s Montgomery, Alabama, and as a cotton brokerage in New York City through the railroad bonds and early securities trading, Lehman Bros went on the ride (or push) the wave of boom after boom throughout the 20th Century.

Lehman financed most of the old major department stores, airlines, movie theaters and studios and was on the leading edge in developing technologies like radio and television, oil development, consumer products, the auto industry, electronics, computers and the Internet. Lehman was there, fueling and financing the economy.

As recently as last year, Fortune named Lehman Brothers the "Most Admired Securities Firm." And the formation that same year of their Council on Climate Change, run by Theodore Roosevelt IV, was set to keep them on top of the business implications of global warming and industry's reaction to it.

No doubt they would have figured out how to make green from Green.

But then came risky mortgages and real estate investments, the resulting financial crisis, collapse of their brethren, and concerns about Lehman's financial condition. Last week, the Fed said it wouldn't come to the rescue of the 158-year-old institution.

Lehman Brothers, once a great institution, is probably going to die.

I've been thinking about what made Lehman great over the past century and a half. Clearly it was an eye for what was next in terms of infrastructure and economic drivers. Who has that vision today?

Could it be that we need new financial institutions with similar vision and wherewithal to fund the major infrastructural needs of this young century?

Where are the new breed of investors financing alternative energy, efficiency, and rebuilding the electricity grid so that it can transport energy generated by industrial wind and solar?

Where are the new institutions that can catalyze a new green economy in much the way Lehman did the golden age of the railroad, the economic expansion of the 1950s, or the leading players of the high-tech revolution?

Some are calling for systemic solutions. Perhaps it's time to change the system entirely.

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