The Outlook for Investing in Green Energy

You've probably seen this movie before. Deep-pocketed investors swarm research labs in Silicon Valley and fledgling companies in generic office parks, searching for world-changing technologies and the promise of untold profits. Before long, the great Wall Street hype machine starts to crank into gear as a few highly buzzed stock offerings explode onto the market. Business magazines pronounce the sector as the Next Big Thing. And off in the distance, a few curmudgeonly killjoys start talking about a bubble eventually going bust.
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Shades of the dot-com bubble-and-bust cycle are seen again on Wall Street, this time with a green tint. Over the past few years, the media blitz about the threat of global warming, combined with a superspike in oil prices, has enabled green-technology entrepreneurs to raise billions of dollars in venture capital. But stock investors, looking for opportunities in a down market, are pretty psyched up as well. A quick glance at the shares of First Solar, Wall Street's current favorite, is illustrative. The thin-film solar cell maker made headlines as the "Google of solar" with a share price to match. It hit $288 a share on July 16, up more than 900 percent since the start of 2007. Energy Conversion Devices, another thin-film player, has seen its shares jump more than 100 percent this year.

Fueling the fire. But whether companies are developing solar, wind, advanced biofuels, or any of a number of emerging clean-energy technologies, the combination of global economics, investor interest, and a forthcoming pro-green turn by Uncle Sam makes it hard to argue a long-run bear case against green stocks. Of course, that sort of superoptimism is itself a prerequisite for a bubble.

But, hey, plenty of money can be made before a bubble goes bust. And this one probably has a long way to go. "We're still in the very, very early stages of the game," says Brian Fan, senior research director at the Cleantech Group. "Is there a bubble? There isn't. If valuations in some publicly traded sectors are out of whack, I think it's a function of the fact there are too few opportunities for investors and there's too much demand and appetite for exposure to these technologies."

Just as investors in Chinese stocks like to point to market size as a compelling reason to snap up shares ("Hey, if XYZ Co. can capture just 1 percent of the market . . ."), so do green investors. Boosters tout most often the sheer magnitude of the energy market and the minimal penetration of any one green technology. Currently, a mere 1.5 percent of American electricity generation comes from renewable sources.

Over in Silicon Valley, stalwart venture capital funds like Kleiner Perkins Caufield & Byers and Khosla Ventures, headed by Sun Microsystems cofounder Vinod Khosla, are spreading huge bets around on a staggering variety of start-ups. In the second quarter alone, some $2 billion in venture cash flowed into the sector, according to the Cleantech Group, an all-time record, beating out a $1.8 billion influx in the third quarter of 2007. Watch the VC funds' spending for new investing ideas once markets improve and start-ups begin going public again in full force.

U.S. government support could soon be improving, too. Almost everyone agrees that the next administration will be kinder to green technology than the current one. John McCain has said he'd like to offer a $300 million prize to the inventor of a battery strong enough to power a car. Barack Obama has made investing in clean energy a core element of his economic plan. Both candidates also want to create a carbon emission cap-and-trade system, an almost seismic event for green-tech firms as companies would rush to meet new pollution regulations by adopting new technologies.

Make mine mini. So how should investors play the bubble? First, they need to understand that rather than one megabubble, a more likely scenario is that a bunch of minibubbles in various subsectors would constantly percolate, bubble, and pop.

That's certainly been the pattern so far. Ethanol makers, for instance, saw a huge jump after a massive round of venture funding in 2005. In 2006, Pacific Ethanol (backed by Microsoft's Bill Gates before his investment arm began selling last year) jumped from around $10 a share to $40 for a brief moment. It's trading under $2 today. Back in 2000, Ballard Power Systems, a fuel cell maker that embodies the first huge run-up in venture investing in the battery sector, surged to $120 a share on hopes it would win the race to power the auto sector. It trades at $4 today, having sold its automotive fuel cell business to Daimler and Ford earlier this year. Others, like VeraSun, have seen their shares slump for years.

Solar companies like SunPower and Suntech Power Holdings have nosedived more than 40 percent this year on concerns about subsidy cuts and the high cost of polysilicon used to make traditional solar cells. (First Solar's rise happened in part because it doesn't use the stuff to make its cells.) "Advanced biofuels are starting to recover," says Ted Sullivan, senior research analyst at Lux Research. "Solar is on its way down. The companies are still trading at 100 to 200 times [earnings per share]." Sullivan says the next miniboom will be in batteries and other storage technologies as demand grows for ways to hold all the energy produced using greener means.

In short, green is set to see some peaks and valleys. Still, the industry's big gains since 2004 mean near-term noise isn't worrying analysts who are still smitten with the sector's long-term prospects, even with this year's dip. "I don't think people appreciate how solar will be over the next few years and the role products will have worldwide in the energy infrastructure," says Michael Carboy, an analyst with Signal Hill. "The pullback in prices is more a reflection of a failure to understand the opportunity that the solar industry presents to the investment community over the next two years. Step two or three years out, and people will regret not owning solar stocks."

Wind power, the most established corner of the green sector, looks less volatile with most of the market in the hands of big players like General Electric, Siemens, and Spain's Gamesa. Emerging Energy Research, a consultancy, sees the wind industry growing at a 15 percent annual rate between 2007 and 2020. The Cleantech Index, a broad group of green stocks, swooned early this year but, unlike the rest of the market, managed to rebound. It's up a bit compared with a year ago.

So what could derail all this green optimism? First is the uncertain price of crude. This year's recent run to nearly $150 a barrel has been only a mild tail wind for green companies' shares. While the industry will endure even if oil prices fall back, the same can't be said for green stocks. And remember that investing in the oil industry this year would have netted you far better gains than most green investments. The iShares oil and gas exploration exchange-traded fund is up about 5 percent this year. Most green ETF's are in the red for 2008.

A bigger worry is shifting commitments by governments, which ultimately pay for renewables today. Despite recent progress, new carbon-friendly technologies simply can't compete on price with burning coal or fossil fuels. Until they can, government subsidies—including national plans in Spain and Germany and the U.S. investment tax credit—remain another unpredictable determinant of the industry's fate. And eventually, of course, all the hype and investor enthusiasm will bid shares to crazy levels, and there will be a nasty shakeout. But we're not there yet. Not even close.

by, Kirk Shinkle

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Boost Your Social Security Benefits

There is no perfect time to apply for Social Security. You can claim early and take a smaller monthly payment for a longer period of time. Or you can claim later, collecting a larger benefit that is based on a shorter life expectancy. Your decision depends on many things beyond your need for the money: whether you're married, your spouse's earnings compared with yours, how much you have saved and your health.

Your goal is to maximize your Social Security benefits, but not all beneficiaries understand how to make the most of this guaranteed source of inflation-adjusted income. Over the years, Kiplinger's Retirement Report has written about little-known strategies to stretch government benefits. Those stories have been among our biggest source of reader inquiries, so we're returning to the topic.

Before we review the strategies, you need to know some Social Security basics. If you were born between 1943 and 1954, you can claim your full benefit, called the primary insurance amount, at age 66. The earliest you can claim Social Security is 62. But your benefit will be permanently reduced by a certain percentage for each month you claim before your 66th birthday. For instance, if you claim at age 62, you'll get 75% of your full benefit. If you claim at 64 and 9 months, you'll receive 90%. For each year you delay claiming benefits between 66 and 70, your benefit will increase by 8%. Hold off all four years, and you earn a 32% bonus, plus all accumulated cost-of-living adjustments.

A lower-earning spouse can claim a benefit based on his or her work record at age 62. Or the spouse can claim a "spousal" benefit, as long as the higher-earning spouse has started collecting benefits. If the lower earner is at full retirement age, he or she can collect a benefit that's 50% of the higher earner's primary insurance amount.

However, if the lower earner collects a spousal benefit before reaching full retirement age, the benefit will be reduced by a set percentage. For instance, if the spouse claims at 64 and 3 months, the spousal benefit will be 42.7% of the higher earner's benefit. And if the lower-earning spouse collects his or own benefit early and then "steps up" to the spousal benefit later, that spousal benefit will also be reduced.

Now let's turn to the strategies. At the risk of inviting accusations of sexism, we will refer to the lower-earning spouse as the wife. That's the way it usually is, and she tends to live longer than the husband, too.

First, if you're single. It usually makes sense to wait until full retirement age to start claiming benefits, unless you expect to die early or need the money sooner. This is especially true for women, who are more likely to reach the "break-even age," when the total value of full benefits equals what you would have received by claiming reduced benefits earlier.

Unless you have significant savings, it generally pays for singles to claim at 66, says Henry Hebeler, creator of the Web site AnalyzeNow.com. Many singles will not have enough savings to support a delay until age 70, Hebeler says. But a single person who collects at 62 is more likely to run out of money at an earlier age than someone with the same amount of savings who waits until 66, he says. "It usually works out that a single person should take benefits at full retirement age," he says.

You can use a free program on Hebeler's site to make your own calculations. Plug in your savings, tax bracket, annual spending and assumptions on investment growth. You can see how long your money will last based on when you start taking your benefits.

Married men should delay. Married couples can maximize total benefits by coordinating their start dates. The top goal is to increase the benefit for the surviving spouse, who gets 100% of the higher-earning spouse's benefit when he dies. If the higher-earning husband delays until 70, his survivor will get an extra 32% plus cost-of-living adjustments.

There are two ways that the surviving spouse would get less than 100% of her husband's primary insurance amount. If he collects Social Security before age 66, his benefit -- and his wife's survivor benefit -- will be lower. Also, the survivor benefit will be reduced if the husband dies and the wife collects the survivor benefit before turning 66. If she waits until her full retirement age, she'll get 100% of the survivor benefit. The size of her survivor benefit, however, will not be affected if she collects her own benefit or a spousal benefit early.

For many couples, a husband should claim at 70 while the lower-earning wife should start collecting at 62, according to a study by Boston College's Center for Retirement Research. Because the husband is likely to die earlier, the study says, he will increase the value of the survivor benefit by delaying. As for the wife, even though her benefit will be reduced by 25%, the authors figured that her reduced benefit is only temporary. After her husband dies, she will step up to the higher survivor benefit. In the meantime, the household is bringing in extra income.

Found money. Let's say you're at full retirement age. You'd like to delay collecting benefits until 70. If your wife is 62 or older, she could collect benefits based on her own work record, but she'd get more money with a spousal benefit. One problem: She can't apply for the spousal benefit until you file for your own benefit.

Here's what you do. You file for your own benefit, and your wife applies for the spousal benefit (which will be less than 50% of your benefit if she applies before her full retirement age). You immediately request a voluntary suspension for your own benefits. Your wife would then get spousal checks, and you can earn a bigger benefit when you reapply later.

James Mahaney, vice-president of Prudential Financial, recalls one couple who didn't realize they could "file and suspend." The husband didn't want to collect until 70. "They were leaving money on the table," he says. Once they learned of this strategy, the wife applied for a monthly spousal benefit of $1,000 -- a nice pot of "found money" over four years. If the husband dies first, she'll collect a higher survivor benefit.

Claim a spousal benefit. Like the man above, you're at full retirement age and you want to delay until 70. But you can still get benefits now -- a spousal benefit. If your lower-earning spouse is at least 62, she could claim her own benefit. You can then apply for a spousal benefit. At 70, you switch to your own higher benefit. This strategy offers you and your spouse several advantages: Your wife's survivor benefit will be higher if you die first, and you'll be bringing extra income into the household until you reach 70. At that point, your wife can switch to a spousal benefit based on what you would have received at 66.

Raymond Lekowski, 67, of Fort Lauderdale, Fla., had planned to wait until 70 to claim benefits. But when he read in Kiplinger's Retirement Report about claiming a spousal benefit, he decided to go for it.

His wife, Carol, a retired nurse, started collecting her own benefit just short of full retirement age. Her monthly benefit is about $1,000. Raymond, a retired executive for a communications company, gets a spousal benefit of about $500. If Raymond had claimed at 66, he would have collected more than $1,925 a month. By waiting until 70, his benefit will be 32% higher, plus inflation adjustments. "By not taking the benefit, it's like investing the money and seeing it grow," Raymond says. And if he dies first, Carol will be left with the bigger survivor benefit.

Note that the higher-earning spouse cannot use this tactic -- known as "restricting an application" to spousal benefits -- if he's younger than full retirement age.

The retirement do-over. If you claimed your benefits early, perhaps at age 62, you may decide that taking a permanent cut was a mistake. Believe it or not, you can repay the benefits, free of interest, and reapply for a bigger benefit later. Your wife must return any accumulated spousal benefits as well. Dan Cowles, a retired systems analyst for IBM and Wachovia, decided a do-over was a smart move. He had claimed his benefits at age 62. But he says: "I had regrets as the years went by. I was in good health, and my mother lived until she was 94."

Last year at age 67, Cowles, who lives with his wife, Sharon, 65, in Cumming, Ga., decided to repay his benefits. After mailing in a Request for Withdrawal of Application (SSA Form 521), the government told him that the tab was about $84,000. He took the cash from a money-market fund paying 3% interest. Because each year of delay boosts a benefit by more than twice that rate (not including the COLA), he figured he was getting a nice return on his investment.

At the time he repaid his benefits, he was receiving $1,580 a month. He reapplied soon after and now receives $2,196 a month -- $616 more. By repaying $84,000 in past benefits, Dan "bought" an additional $616 a month in inflation-adjusted income. That's less than what it would cost to buy an inflation-protected immediate annuity with a 100% survivor benefit from a low-cost annuity provider.

If Dan dies first, Sharon would receive his full benefit. Dan's higher benefit also means that Sharon's spousal benefit will be bigger. And he will be able to recoup the income taxes he paid on the benefits he gave back. Cowles says that he's owed a credit of about $8,200, reducing his repayment cost even further. (Check IRS Publication 915 for instructions.)

One word of caution: Although this do-over strategy works well if you were already collecting benefits, it's riskier to plan to collect reduced benefits now with the intention of repaying them later. You might not live long enough to take advantage of the repayment strategy. In that case, your spouse would be left with a reduced survivor benefit.

Remember, Medicare premiums are deducted from Social Security checks. When you withdraw an application, you must pay back all the benefits, including the benefits that paid your Medicare premiums. But if you don't intend to reapply for Social Security for several years, be clear that you are withdrawing from Social Security but not Medicare. You will pay your Medicare premium separately. You can test out the payback strategy on Hebeler's Web site, AnalyzeNow.com

by. Susan B. Garland, Yahoo Finance

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Commuting in Five Seconds

Amid the economy's many ailments, some good news has remained mostly off the radar: The at-home work force is growing, and it is encompassing new occupations ranging from radiology and nursing to auditing and teaching.

The bad news: Fierce competition means your odds of landing one of these jobs are poor. And if you succeed, you will probably take a pay cut.

For companies, home-based employees, independent contractors and freelancers are helping cut costs and improve customer service. Full-time, home-based freelancers and independent contractors in the U.S. are expected to increase by 200,000 workers to 11 million by the end of 2009, says Ray Boggs, a vice president of IDC, Framingham, Mass., a market-research firm; he sees another 200,000-worker increase in 2010.

While that is a mere blip on the radar in an economy that has been losing nearly that many jobs in a month, the trend means a lot to the individuals who are benefiting from it. They are avoiding dreaded commutes, doing volunteer work, pursuing college degrees or caring for family. And they are performing increasingly complex tasks from home, from reading MRIs to helping clients search for Bigfoot, the mythic wilderness creature.

"We are seeing a general broadening of the work-at-home landscape," says Christine Durst, chief executive of a work-at-home Web site and co-author of a new guidebook on the topic.

Applicants are stacking up by the hundreds of thousands, however. Based on my survey of a dozen companies that use home workers, your odds of actually landing one of these positions range from about 25-to-1 to 300-to-1.

ARO Contact Center, Kansas City, Mo., which employs just 200 home auditors and sales and customer-service workers, gets 1,000 resume's a week, says Michael Amigoni, chief operating officer. West Corp., Omaha, with 14,000 active agents handling customer-service and other calls, hires only 0.5% to 1% of its 4,500 weekly applicants. And Alpine Access, Denver, with 2,800 home customer-service, sales and tech-support agents, hires about only 2% of the 100,000 people who apply each year.

"It takes a lot of luck to get these positions," says Tammie Deweever, Fort Lauderdale, Fla., a home customer-service agent for LiveOps, Santa Clara, Calif. "You have to be good at what you do." Ms. Deweever has a college degree in marketing and worked as a mortgage broker before joining LiveOps last January. For her, job flexibility means being able to be home for her children, 17, 15 and 8; she often works split shifts around their needs, answering calls from TV viewers wanting to buy products from juicers to jeans.

Many skilled at-home professionals and managers earn less than a corporate salary. Less-skilled customer-service or sales work usually pays about $8 to $15 an hour, ranging as high as $25 or more with incentives or premiums. Some companies pay by the minute or hour spent on the phone, while others pay by the shift. The jobs vary by company from full-time employee positions with benefits to part-time independent contractor positions.

And applicants must be wary of scam artists. Ms. Durst, Woodstock, Conn., who screens work-at-home pitches for her Web site, RatRaceRebellion.com, says she is finding only one legitimate job among every 60 pitches she examines. In 2006, the odds weren't quite as bad: She was finding one legitimate job for every 31 pitches vetted.

Many victims of work-at-home fraud have sent money, only to receive worthless products or leads, or nothing at all, in return; others who disclose too much personal information have fallen victim to theft from credit-card or checking accounts.

But those who win the work-at-home lottery reap diverse benefits. Intent on avoiding a long commute, Heather Hedden, a Raleigh, N.C., marketing specialist, spent a year looking for her current spot, as a home-based concierge for VIPdesk, Alexandria, Va. The position was worth the wait, she says. She enjoys using her research skills to help clients find theater or sports tickets, vintage wines or travel services. When a client asked for help looking for Bigfoot, she found an outfitter with a track record of taking like-minded customers on hikes through areas of reported sightings, she says.

After 19 years in private practice, radiologist Steven Brick, Potomac, Md., began working from home for Virtual Radiologic, Eden Prairie, Minn. The setup confers both the freedom to focus on his work, without distractions, and the flexibility to serve as a volunteer at the National Zoo answering visitors' questions, he says. Virtual Radiologic's radiologists, who work as independent contractors reading X-rays and other images for hospitals and other medical clients, have increased to 140 from 34 in 2004, a spokeswoman says.

Home-based work enables newlywed Stacey Anderson, 30, Ballston Spa, N.Y., to tackle numerous roles. Since landing a customer-service post last summer as a contractor for VIPdesk, Ms. Anderson has been able to bend her work hours around her husband's rotating shifts on his job. In addition, she squeezes in a full-time course load as a college student.

Such intangible incentives are drawing skilled, experienced people. Mark Frei, a senior vice president of West, says 80% of West's home agents have some college education, compared with 30% of those who work in office-based call centers.

Vanessa Torres, 35, San Antonio, Texas, had a bachelor's degree in business and 16 years' management experience before signing on last January as a home agent for West. She likes controlling her hours, and works only when her two young children are in school, she says.

Expansion of home-based work is likely to continue. Among the 12 companies I contacted, all were planning to recruit more home workers. Lionbridge Technologies, Waltham, Mass., a provider of multilingual services including translation and product testing, is taking on new freelancers to assess "search relevance"—that is, to ensure Internet searches yield items suitable to particular locales, a spokeswoman says.

Alpine Access, Denver, is recruiting 500 more home agents and expects to add 2,000 in 2010, says Chief Executive Christopher Carrington. Live Ops, with 20,000 home agents for retailing, insurance and other companies, added about 4,000 agents in the past two months. Arise Virtual Solutions, Miramar, Fla., with a home-agent pool of 9,800, is seeking 3,000 agents for the peak holiday and cruise seasons, a spokeswoman says. Michael DeSalles, an analyst with Frost & Sullivan, a research and consulting firm, sees home agents growing by at least 30% a year.

Sites which link clients with skilled freelancers also are seeing a surge in demand for virtual workers with a widening range of professional and technical skills; oDesk.com's monthly postings, including graphic design, software, administrative and other projects, rose to 28,000 in the past 30 days, three times year-earlier levels. Monthly hiring on Elance.com is up more than 40% from a year ago.

As more companies allow people to work from anywhere via the Internet, says a spokeswoman for Lionbridge, "we are convinced that this is the new model of work."

by. Sue Sellenbarger, yahoo finance

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