A LESSON ON “RETURN-FREE RISK”
Today’s chart is a reminder of why we often heap abuse on the idea of investing in “clean energy.”
Over the years, we’ve highlighted many times that knowing WHAT NOT TO invest in is even more important than knowing WHAT TO invest in.
They are able to lose money in both good and bad economic times. Their stocks are able to stink in both bull and bear markets.
One of the highest profile plays here is the PowerShares Clean Energy Fund (PBW).
As an easy, “one click” way to go long solar, wind, and various other clean energy companies, this fund has drawn in hundreds of millions of investor dollars over the years. Many of these dollars have gone up to “money heaven,” however…
Today’s chart plots the performance of the PBW (black line) versus the performance of the benchmark S&P 500 index (blue line) over the past two years. You may recall how 2010 through early 2011 was a period of rising stock prices. During this period, the PBW lagged the broad index (A).
You may also recall that mid-to-late 2011 was a period of falling stock prices. During this period, the PBW suffered an enormous decline… one much worse than the overall market suffered (B). Want to stay “perfectly hedged?” Want something that offers “return-free risk?” Buy clean energy!
– Brian Hunt
Source: Brian Hunt’s Market Notes
