2011 Will Be Better

Think of this as Volume 14, Number 52 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

Every year I use my last Clue to peer into the future and see what the next year may hold in store.

From here it holds almost nothing but good news. (Explore The World of Escher, from which this crystal ball was borrowed. Still under-estimated among the great 20th century artists.)

The economy has bottomed up, and it has been growing (albeit slowly) for six quarters. Employers have been squeezing employees for productivity, getting P/E ratios down toward a rational level, and looking around the corner for the next boom. When they see it they will start hiring again.

Recessions have causes. Since field computing ended the problem of "inventory recessions" in the early 1980s, recessions have been financial events. The leveraged buy-outs of the 1980s, the Internet stocks of the 1990s, and the housing bubble of the 2000s all created irrational exuberance that had to be unwound for growth to resume.

This last has been a harder fall than the others, and unless regulators around the world are watchful the next fall will be harder still, because financial interests control many governments including (it turned out) our own.

But that fall is now behind us. The markets have been recapitalized. What people are looking for is the Next Big Thing.

(I first used this image, from Worldmapper, in 2007, when I relaunched this blog as The War Against Oil. Each country is sized according to how much energy it exports.)

I believe the War Against Oil is the Next Big Thing. Not just because we need one, for environmental and national security reasons. But because the technology is now ripe. We can now harvest the Sun in such a way that leases on solar panels for homes make financial sense.

So politically, change is now baked-in. Republicans are locked-into supporting resource energy, the oil and coal interests that own them. Obama doesn't have to embrace new energy to be accepted, those businesses are being pushed into his camp from the other side.

Politically he has clear sailing. (This will surprise the nattering classes in Washington.) Republicans either embrace the crazy they've elected, antagonizing everyone else, or they moderate it, angering their base. This is just what happened to Democratic majorities in the 1970s, and no one can hold it together against those kinds of conflicts.

As the economy starts to grow the President's popularity will improve, just as with Reagan and Clinton. He's smart enough to capitalize on this more effectively than Nixon did — Republicans made no congressional gains in 1972 despite Nixon's landslide because he kept all the party's assets for himself. Obama is not a paranoid. (Let me be the first to suggest this. Obama-McCaskill, with Biden moving over to State. He's not a viable successor. She is.)

My problem with the President until now is that he has acted like a super-legislator rather than a President. Having a non-cooperative Congress is going to change that. He's going to be exploring the real limits of executive power in the next two years, and I think he will do it skillfully. It's always easier to work when the economic winds are at your back rather than in your face.

Residential panels that make economic sense are just the first of many price and payback values we're going to cross over the next few years. Solar energy can follow Moore's Law, with savings on every dimension — durability, cost, efficiency, and the harvesting of heat and infrared as well as visible light. Breakthroughs in all these areas are now being tested in labs around the world. There is every reason for them to come to market. Which means that by 2015 solar energy will be the cheap energy.

Changes are being made, albeit slowly, to our electrical grid that will make it more flexible, more like the Internet than the current dumb terminals called "smart meters" suggest. Storage facilities of various types are about to be added, so wind farms and solar facilities with variable loads become wise investments. Geothermal harvesting is going to become increasingly profitable, as breakthroughs in materials science let us harvest energy closer to its source, which is magma.

At each step of this journey you can see pressure building on fossil fuels, until their stranglehold on the economy (and politics) is broken once and for all. We will first see renewables increase enough on an annual basis to handle the growth of electricity demand. Then we'll start to see it making serious impacts on the amount of electricity available through the grid. And we'll start using the excess for transportation.

As the trend becomes clear the value of fossil fuel reserves in the ground will start to fall, and their owners will become increasingly desperate. The biggest financial event of this decade will be the sudden crash of the house of Saud. It will not happen when their oil runs out or when the grid no longer needs them. It will happen a few years before that, when these trends become apparent. Some in the Emirates are trying to prepare for that day, but the revolution across their borders will make those plans meaningless.

All that is for the future. For now we're entering the good times, where companies across the renewable energy space start hiring in earnest and where Wall Street just starts to take notice. This will be followed by growth in both consumer and business media aimed at the space, increased M&A activity, speculation, and rises in the stock market.

What analysts always fail to understand is that people buy tomorrow. Once a trend becomes evident, money moves to follow it. Trends are going to become evident in 2011. They will be new and exciting. Public policy will follow the trend in 2012, after the trend becomes obvious, and the stranglehold of the resource industries over our politics will be broken once-and-for-all.

Good times are coming. I pray for good health, to you and to me, so we can see it all take place.