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Online Savings & Money Market Account Rates 2022

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2022 Is Signaling Wealth Preservation Mode

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I am old enough to remember October 1987.   I was a college freshman then and I remember my floormates calling their parents to inquire whether they would be able to stay enrolled in college.

I also have vivid memories of 2001 and 2008 and 2009.   In the 2000-01 period, I was working for a telecom venture capital firm in Europe where valuations on major carriers and CLECs were bananas.

What I am not old enough to remember is any time when the valuation of US stocks was so distorted from reality.   In fact, Charlie Munger recently said basically the same thing and he has several decades on me.

If I learned nothing in two years studying equity valuations during my MBA, it is that there are only two or three ways to ultimately value an equity issue.  One is its price to earnings (PE) and the other is its price to earnings to growth (PEG).  A reasonable PE multiple is 12 or 15 or maybe 18 and not 100.  And, a PEG multiple should be a lot closer to 1 than to 3 (or sometimes now 10).  You can also use price to revenue, but that metric really only works if there is some sort of plan for the company to ultimately become profitable (I’d note that it is absolutely the valuation metric that you would have wanted to use when analyzing Amazon, Netflix or Spotify one or two decades ago).

But, as a whole, this just isn’t that complicated.   Multiples on US stocks make no sense.   They have reached this point from bringing interest rates to zero and flooding the market with liquidity.   But, for a world where all of that is being withdrawn, they are just bonkers.   Most smaller tech stocks, including virtually all that have recently been taken public, have no basis in valuation.   Even many smaller companies that have been around for some time that have great and meaningful products, such as Exact Sciences or Box (where stock pundits have argued for Amazon, Netflix or Spotify-type valuations), may face market circumstances where they have no path to profitability.  

The market has been led to these levels because of extraordinary growth that we have seen in companies like Apple and Microsoft, and super extraordinary growth in stocks like Marvell and Nvidia.  Make no mistake, these are the companies that you want to own and that you probably should not sell (I am not selling them), but you need to have a very long term view because the valuations are now three times higher than where they were in 2015 or 2016.   Apple was a great investment at 10x earnings less cash in 2016; it may still be a good long-term investment at 28x earnings (less cash) in 2022, but it may not move up from here quite as easily as it has for the last 25 years.

And, then there are cryptocurrencies.  It is also difficult to predict the immediate trajectory of crypto.  But, in spite of losing half of their value, crypto remains the biggest and most widespread Ponzi scheme in the history of mankind.

Take it from someone who can remember the not too distant past.  I am not saying there is going to be a crash, and I am not saying that the stock market isn’t the best place to be for the long term.  I personally will remain very heavily exposed to large tech, major pharm and European wind stocks, but these aren’t positions that I would be selling for the next 10 years.  

I am just saying that everything is dramatically elevated.  If you absolutely need to protect your wealth here, there is only one safe way to do that in 2022 and that is cash.

Compare the best online savings and money market rates here.


Could the Climate Crisis Lead to A Banking Crisis?

I’ve previously espoused the belief that banks need to be given time to formulate a response to the current climate crisis.   After COP26 in Glasgow, it is clear that the costs of wind and solar are falling and production advances in both are happening so quickly, I no longer believe that banks need to be extended the benefit of an extended period to outline their climate practices.

But, this opens up a new reality.   A quick transition to an electric economy dependent primarily on wind and solar may result in the rapid abandonment of oil, gas and coal-based generation.   We may quickly reach a point where environmental events become so extreme that abandonment of these assets could be required by local or federal authorities.   Even without government action, these assets might well be rendered obsolete due to costs of operation, and closed due to adverse public relations of continued operations.

I have many friends in credit departments of the major banks on Wall Street who privately confide that their banks have not performed any sort of sensitivity analysis to reflect the possible implications of default of their fossil fuel creditors or projects.  Some of these banks have such extensive loan networks that they cannot even begin to analyze which creditors are fossil fuel creditors and which projects could be jeopardized by the climate crisis or when.

I had believed that while the Federal Reserve has lagged in requiring US banks to analyze this information, we should be able to get some insight and direction from Europe where the European Central Bank (ECB) is several years ahead of the US in analyzing and adjusting to climate exposure.   Unfortunately, the news from Europe is not good.   The ECB reported this week that of 112 European banks analyzed, not one is fully prepared for the possibility of stranded or abandoned assets. Even today, according to the report, only 28% of the banks surveyed are fully modeling environmental or climate change risks when evaluating a debtor’s credit profile.  

At the same time, an article that I found on the ECB report suggests that banks’ credit is much more exposed to a fully functioning ecosystem and cites a French study showing that 42% of security in the French banking system is exposed to the ecosystem.

I think we can boil this down to some very unsettling facts regarding the banking system.   First, we are going to get very little information from banks on their exposure to fossil fuels companies; it may take years for the largest banks to begin to quantify their risk internally.   Second, the climate crisis poses a systemic risk to the banking system.   It is very clear that the entire banking system – and not just the largest banks -- is extremely exposed to the fossil fuels industry and corollary industries (as well as to the nuclear industry), all of which may be forced into obsolescence prior to maturity or even significant loan amortization.   Third, banks are equally exposed to disruption and dysfunction in the environment, and they cannot drag their feet in the funding of new solar and wind projects.   They should be leading the way on this transition as a failure of the ecosystem would be even more costly for them (and the Earth writ large) than writing off their fossil assets.


The Biden Administration Needs to Stop Appeasement of the Nuclear Lobby

I follow developments in renewable energy and work in the space.   2021 has been a remarkable year for the decline in the cost of offshore wind.   We are seeing something similar in the solar/PV space.   It is ending with Vestas’ surprise unveiling of an onshore wind turbine that can generate 7.2 MW, dramatically more output than anything we have seen to date.   It is almost reminiscent of Moore’s law.

We do not need any more advancements in wind and solar for them to be dramatically less expensive than any new facilities based on generation of electricity from fossil fuels.   The US Department of Energy under Trump had indicated in 2020 that the lowest cost of energy by the middle of the decade would be from offshore wind, solar/PV and then onshore wind.  It is now already here.   New energy projects should only be wind of some sort or solar.   (MIT is making advances in fusion, but they have also said that their next tests will be in 2025. Any full scale production remains several decades away; we cannot wait).

Against this backdrop, Twitter is now full of bots and maybe people on the payroll of the nuclear lobby who are advancing nuclear.   They reason that nuclear is more durable than wind and solar, both of which are intermittent.   They also say that nuclear is safe enough to prevent another Fukushima, Chernobyl or Three Mile Island now that it is dependent on small modular nuclear reactors (SMNR).

Unfortunately, after the entire situation where Emmanuel Macron got upset about the US and UK edging France out of an Australian nuclear submarine deal, we’ve started seeing US government officials try to appease France by bringing nuclear back into the mix in the US and other places where it has no business being.  Biden’s DOE officials who have spent their entire life researching wind and solar are releasing ridiculous videos on LinkedIn and Anthony Blinken got Romania to agreement to a nuclear deal that, if it were ever built, will make Romania the pariah of Europe for the next 5 centuries.   To boot, people who should know better, including Obama’s Secretary of Energy, are now advocating extending the life of existing nuclear facilities.

The pronuclear stuff is bought and paid for by an industry that has a lot to lose.  There are certainly also banks that have extended credit to the nuclear industry that have a hand in this.   But, the realities are clear.  Not only is nuclear 4x the cost of wind or solar, but SMNR requires about 7x the lead time.   Wind and solar have the durability of nuclear when paired with a long term storage solution and there are many that are now being brought to market that have a levelized cost of storage around 5 cents per kilowatt hour (those interested can check out Gridscale, Azelio’s TES.POD, ESS Tech or multiple lithium-based solutions).   Nuclear, including SMNR, simply should not be part of any discussions about new energy generation sources. 

As far as extending the life of nuclear and Diablo Canyon in particular, the plant now requires a $4.50 billion upgrade to be cooled more efficiently and to be less environmentally taxing (but, even after this upgrade it will still require an extraordinary amount of the area's fresh water supply to be properly cooled and it will still be environmentally taxing).   And dangerous (I’ve been in both Japan and the Ukraine and I don’t think California wants the risk of becoming either one).   Andrew Cuomo finally closed Indian Point that is only 35 miles from Times Square in New York earlier this year before he had to resign.   Even so, it is estimated to take another 60 years before it is fully decommissioned and safe.   With wind and solar being 100% safe and dramatically more cost-effective, we should continue along the course of removing all risks of a global catastrophe in our energy production system, not just those that release carbon into the atmosphere.  

We can solve the climate crisis with wind and solar and without putting (prolonging) the ridiculous burden of nuclear onto future generations.