by Ryan Cole, Investment U Research
Friday, March 11, 2011
It’s arrived – at least according to President Obama. We all heard him in the State of the Union – we’ve come to this generation’s Sputnik moment.
- Never mind, for now, that there’s no actual watershed event we can point to that shows China and others threatening to overtake America’s economic and technological lead.
- Never mind, again, that the steps Obama wants to take to avoid falling behind will be argued over for months, and are unlikely to ever go through the way he outlined them. Certainly not with the Republican House standing between Obama and his budget.
Let’s assume for the moment that Obama will get at least some of his wishlist in place… He’s the president, after all. That’s a pretty influential spot to occupy.
What will that mean for business?
Obama’s Golden Trio of Goals
To answer that, we’ve first got to be clear about Obama’s goals going forward. They come under three main umbrellas:
- Increase funding for science and math in schools.
- Increase opportunities for scientists and mathematicians throughout America’s economy.
- Present achievable, important goals that both modernize America’s infrastructure and further America’s scientific prowess.
The first goal is likely to be one of the more difficult to enact. Education spending is always a tough sell and in times of fiscal fat-trimming, it’s only harder. Obama’s analogy – saying that lightening the fiscal load by cutting education spending is like reducing an airplane’s weight by dropping the engines – may be apt, but it’s unlikely to persuade the Republican House.
As investors, however, the success or failure of education spending doesn’t really affect us. In a decade or two, it may make a difference, but for the moment – outside of a few technical and distance schools – there aren’t many ways to invest or profit in education.
Maybe that’s why it’s being left behind. But that’s a matter for another day.
Instead, we need to focus on the latter two goals – to up America’s R&D spending, its infrastructure and its scientific opportunities…
Amping Up the Energy Infrastructure
This is all going to happen, with or without government assistance – but an increase in government spending will help it happen much faster. For example…
- Health Breakthroughs: They will come, but it may take longer to hit the market with the FDA receiving a budget cut.
- Energy Breakthroughs: These are coming hard and fast. Indeed, one California company – Nanosolar – has already developed a new method of producing solar power. By focusing on cheaper production instead of greater efficiency, Nanosolar can produce solar power about 5% cheaper than coal. Nanosolar is making model plants in California and Germany right now. When they come online and produce the cheapest, cleanest power in the world, expect a huge surge in interest. Nanosolar is a private company right now – but rest assured, we’ll be following along, waiting for its IPO.
Another huge growth market – nuclear energy. Obama has given his support to the industry and he’s got a rare Nixon-in-China opportunity here. Many see the benefits of nuclear energy outweighing the risks at this point – and given Democratic leadership, nuclear could power ahead quickly. We’ll keep our ears to the ground for the best opportunities.
Wind, clean coal, natural gas will all move forward, too. But they don’t have the same investment potential that solar and nuclear could have, given a little nudge from the government, or a little clearing of red tape.
And all are better bets than high-speed rails, or high-speed Wi-Fi. The former is a very tough, expensive sell. It will likely be years before we see an extensive high-speed rail service in the United States, unless private industry takes the lead. And with Wi-Fi, private industry is pretty much taking care of it already, so it’s unlikely that government involvement will mean much.
Instead, keep your eye on solar and nuclear power – when the time to strike arrives, we’ll be ready.