Wall Street Daily

How Could You Have Protected Yourself From Tesla’s Plunge?

With the right political intelligence, you can save yourself from making huge investment mistakes. Just look at Tesla Motors (TSLA), for example. Tesla has seen its shares plummet by 28% since October 1.

You see, the federal government is beginning to realize the costly side effects of overfunding certain green energy initiatives. As a result, the subsidies and tax breaks that have fueled Tesla’s meteoric rise are targeted for extinction in 2015.

But if you knew about these issues, you could’ve avoided the recent nosedive. In fact, since late summer, we’ve avoided Tesla shares because we understood what was coming. The marketplace, on the other hand, is only now discounting these problems with the electric-car industry. And this might not be the end of Tesla’s slide.

The U.S. government is having serious second thoughts about their overemphasis on all-electric vehicles. Science is showing that all-electric cars are actually worse for the environment than gasoline cars, once the energy needed to make and discard their goliath batteries is taken into account.

Meanwhile, the International Energy Agency predicts that all-electric vehicles will form a minuscule fraction of new vehicle sales in 2050, mostly because of the harmful environmental impact of the electric mega-batteries.

Perhaps the worst news for Tesla is that there are other technologies with much more potential to spark a transportation revolution, including clean diesel, compressed natural gas (CNG) and even hydrogen fuel-cell cars. Each of these technologies has fewer negative environmental impacts than an all-electric car.

The question, then, is how long will it be before the government completely turns its back on electric cars in favor of another technology? Tesla wouldn’t have been the investment darling of 2013 without mammoth subsidies from U.S. government green energy kickbacks.

A Broader Look at Government Subsidies

If the U.S. government can have such a huge impact on electric cars, it’s worth looking at other related industries. Remember, the most informed investor always wins.

Ethanol subsidies, for instance, are another green energy sacred cow that could soon face reductions. Everyone recognizes that ethanol subsidies have pushed food prices, and especially corn prices, to obscene levels. Similar circumstances led to the tortilla riots in Mexico, where spiking corn prices caused the price of tortillas – the staple food product in Mexico – to shoot through the roof.

In addition to high prices for food made with corn, ethanol policy has caused severe negative environmental impacts. As many as 1.2 million new acres of native habitat have been plowed and planted to supply more corn. And scientists have discovered that plowing into virgin grassland releases carbon dioxide once naturally locked away in the soil. In effect, a policy enacted to reduce global warming is instead promoting a farming practice that increases it.

Yet that’s far from the extent of the environmental impacts of ethanol policy. The newly producing farms cause much more topsoil erosion and pollution runoff than uncultivated prairie. At the same time, wildlife, especially birds, are finding they have less real estate to call home. This is causing a decline in pheasant and duck populations over time.

This, coupled with the destructive effects of the windmills and generators currently supplementing our energy needs, is literally stripping bird populations from sections of the Midwest. The windmills’ spinning blades are causing birds to be ground from the sky like airborne hamburger.

A Look to the Future

I’m predicting that, as we move forward, solar energy will be the surviving electric generation technology, winning the largest share of government subsidies. The unintended consequences of the other green subsidies make them easy targets for Congressional budget cutters. Additionally, the Obama administration wants to use its limited monies in areas that cause the fewest environmental problems.

I recommend being very cautious when investing in ethanol, electric cars and wind turbines. Look for the U.S. government to cut back the money spent on these once-favored energy alternatives. If it doesn’t, we’re going to have to find a new patriotic symbol to replace the unfortunate bald eagle.

To life, liberty, and prosperity,

Floyd Brown