An unlikely legacy

ABERDEEN, SCOTLAND – A short note from me today -there’s a project I’m working on behind the scenes that demands much of my attention. We’re keeping it under wraps at the moment, but I’m looking forward to sharing it with you when I can. In the meantime, there’s a note my colleague Will Dahl penned recently which I think you should take a look at.

Will writes Southbank Investment Daily, a daily investing eletter which comes complimentary with our premium investment advisories. He’s an American, and keeps a close eye on how the political situation in his homeland affects the broader investing environment.

As you may recall, I believed Trump would be able to pull something out of the bag at the last minute and find a way of flipping the 2020 elections in his favour after the official results were released. As time has told, I was very much wrong – and Will, who disagreed and was in the opposite camp was proved right. But as he’ll tell you, “President 45” has cast a very long shadow – and Trump’s legacy is manifesting itself in ways you wouldn’t expect…

All the best,

Boaz Shoshan
Editor, Capital & Conflict

Trump’s trillion-dollar blank cheque to Biden

Will Dahl, Southbank Investment Daily

President Trump isn’t making much news these days. But his legacy is reverberating in the most unlikely of places.

Last December, Congress passed its $900 billion economic relief package, and with it, the promise to distribute $600 cheques to tens of millions.

President Trump slammed the measure, demanding larger checks and condemning giveaways in the bill that had nothing to do with Covid-19.

Interestingly, Trump never once threatened to veto the legislation, even as he condemned it in no uncertain terms.

Regardless, the bill passed with veto-proof majorities in both houses of Congress.

“It’s called the Covid relief bill, but it has almost nothing to do with Covid,” Trump said in a video posted online.

It’s true – the bill was filled with gummy bears to entice various lawmakers to sign on to it. My personal favourite was a tax break for racehorse owners.

On the other hand, there’s also a provision that makes illegal video streaming a felony in the US, punishable with up to ten years in prison. Clearly, the legislators drafting this had their fingers in all sorts of pies.

All told, the bill is 5,593 pages long. And members of Congress had just a few hours to assess the legislation before voting.

What kinds of things can slip through a 5,593-page bill that lawmakers have just hours to vet?

How about a massive stimulus to kick off a green energy renaissance in the US, for starters?

“Perhaps the most significant climate legislation Congress has ever passed”

Last December The Washington Post called it “one of the biggest victories for US climate action in a decade.” It’s true – after all, it’s not like the US has been able to pass any significant climate legislation since 2009.

In 2010, Barack Obama’s “cap and trade” bill was killed in the Senate. And of course, Presidents Bush and Trump never signed any pioneering climate legislation.

The closest thing possible to landmark climate legislation in the US this century was the Recovery and Reinvestment Act of 2009, the much-maligned “stimulus package” to combat the Great Recession.

That stimulus sent $80 billion towards emissions cuts, energy efficiency and technological innovation. And in the years that followed, the US solar industry rose by 2,500% while wind power tripled.

But the climate provisions in the Covid-19 relief bill may be even more significant.

The bill comes down hard on hydrofluorocarbons – greenhouse gases that can be hundreds of times worse for the climate than CO2 – in mandating their use be cut by 85% over the next 14 years. It extends tax credits to renewable energy measures, and funding for research and development into green energy programmes.

All told, the bill will send $35 billion towards the green energy sector.

That’s not as much as the $90 billion that Obama poured into it – but the most powerful stimulus measure in the bill may not be monetary at all.

The bill also mandates the Department of Energy to prioritise funding for research to transition the US towards “clean, renewable, or zero-emission energy sources.”

This is vital because the Department of Energy has tens of billions of dollars a year at its disposal. In 2019, for instance, President Trump requested a $31.7 billion budget for the Department of Energy, up $1.1 billion from the year before.

Imagine a government agency devoting the lion’s share, if not virtually all, of a $31.7 billion budget towards decarbonising the US economy – not once, but year after year – and you can see why Grant Carlisle, senior policy adviser at the natural Resources Defense Council, calls this “perhaps the most significant climate legislation Congress has ever passed.”

What will this do for renewables?

Yesterday I wrote about some success stories in the renewables sector – most famously Tesla, whose stock is up 1,400% in the last five years alone.

What you may not know is, Tesla didn’t get there entirely by itself. In 2010, the company applied for a low-interest $465 million loan from the US Department of Energy, $365 million of that loan was used for production and assembly of its Model S.

Or as Bloomberg put it, “Tesla wouldn’t be Tesla without stimulus spending.”

The tens of billions directed towards green energy are still being felt today. Even in a sector that’s grown exponentially since 2009, an extra $35 billion in assistance is nothing to sneeze at.

But the giveaway doesn’t stop there.

A trillion-dollar blank cheque for Biden to cash

As his administration geared up to fight Covid-19 last spring, Trump instructed his Treasury secretary, Steven Mnuchin, to build a rainy-day fund to help pay for further relief measures.

In accordance with his wishes, the Treasury built up a war chest of over $1 trillion. This wasn’t theoretical money. It’s already been created, having been kept on the sidelines for Trump’s team to deploy.

This money represents $1 trillion that Biden doesn’t have to borrow to make his agenda reality. We’ll see if he uses it… judging by the casual ruthlessness with which he’s rammed trillions of dollars through Washington over unanimous Republican objections, something tells me he won’t have a problem with accepting another trillion that’s been practically gift-wrapped for him.

Remember, he promised $2 trillion in green energy spending in the fall presidential campaign. This money could be a substantial down payment on that promise (though he may also get all the way there with a looming infrastructure bill Goldman Sachs says could direct $2 trillion to renewables).

I know it’s easy to grow numb to these kinds of numbers. In a way, a trillion here for the renewables sector, a trillion there, isn’t really news.

After all, Exponential Energy Fortunes editor James Allen has been warning readers for over a year that $2.7 trillion is heading towards green energy companies – not once but every single year.

This avalanche of money is one reason James is on, in the words of our publisher, “the hottest streak in the five-year history of our business.” But as far as James is concerned, his track record is old news.

Today, he’s tracking a “clean energy arms race” among the most famous names in the stock market – and he’s found a unique way for investors to play it.

This presentation reveals exactly what’s at stake.


William Dahl
Editor, Southbank Investment Daily

Category: Market updates

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