Renewable Energy Base Increases in 2010

In 2010, there where some big increases in the usage of renewable energy to generate electricity. Between 2009 and 2010, solar base increased 70% while wind base increased 24%. Asia experienced the biggest increase in renewable energy projects.

Rising Production Costs of Oil

In the IEA's latest edition of their World Energy Outlook, global oil consumption is expected to rise from 88 million barrels of oil per day to 99 million barrels of oil per day in 2035 (an average annual growth of about 0.5% per year). Most of the increase in oil consumption will come from emerging economies while most of the increase in production will come from the Africa and the Middle East. The costs of oil production are expected to rise in most places in the world. Latin America is expected to experience the largest increase in breakeven costs due to their deep water oil projects. Breakeven costs in North America are not expected to increase that much which seems odd considering the high costs of producing from non-conventional sources like tar sands and shale deposits.

China's Foreign Exchange Reserves

Due to strong exports and foreign investment into China, China has been piling up an enormous amount of foreign exchange reserves (currency, gold and special drawing rights with the IMF). Approximately 2/3 of these reserves are in US dollar assets (US treasury bills, US treasury bonds). A linear regression model indicates that China is accumulating an average of $33 billion per month.At the end of September 2011, China held $3.2 trillion in foreign exchange reserves.

A High CARBS Diet for Economic Growth

Thanks to Richard Park for bringing this important new acronym to my attention. Citigroup analysts have defined a new group of countries Canada, Australia, Russia, Brazil, and South Africa (CARBS).

"

What are the CARBS? They are the countries that combine very large commodity assets with high stock market liquidity. In many ways, they have exhibited similar characteristics so far over the course of the commodity cycle.

What have they got. The five CARBS economies have some 29% of the global landmass, inhabited by only 6% of the world’s population, and are thus disproportionately important as exporters of commodities. They produce between a quarter and a half of most key commodities."

The CARBS have a large share of the world's resource assets and a large share of global production of these assets. The increasing importance of resource scarcity and population growth indicates that resource exporters like the CARBS should do well in terms of economic growth.

Here are how the CARBS compare on a number of different indicators.

Global House Prices for 2011 Q3

The Economist's global house prices indicator shows housing in Australia, Canada and France as  looking overvalued on several  measures (house prices, prices against income, prices compared to renting).

Euro North vs Euro South

The great divide between Euro countries in areas like unemployment, productivity, competitiveness, and investment makes it seem rather obvious why a common currency makes little sense.

Investing in 5 Year US Government Bonds

With so much uncertainty affecting global financial markets, it is difficult to find good investment opportunities. The response has been a flight to safety. If you cannot make money at least try to preserve what you have. In the recent 5 year government bond auction the yield fell below 1% for the first time ever. With these record low yields, negative returns are becoming the norm.