Presidential Policies Pave Path to Profits
We’re not two weeks into the presidency of Joe Biden, and already he has issued a record number of executive orders that will change life in America.
President Biden has issued so many orders, in fact, that even the New York Times recently urged him to, “Ease up in the executive actions, Joe.”1
We’ll see about that…
Because clearly, Mr. Biden is undeterred. He’s a man on a mission. And right now, he’s sprinting out of the gates. There’s a nation to transform!
Along these lines, Biden just made another big policy splash that impacts several of the country’s largest industrial sectors, and will touch your life in a big way.
This week, Biden ordered the federal government to replace its entire fleet of gasoline and diesel cars and trucks with electric vehicles (EVs).2
Predictably, the already overpriced shares in EV maker Tesla surged on the news along with bids-up for shares in many other EV-related companies.
And no doubt, Biden’s presidential proclamation will drive significant change — literally and figuratively — within the U.S. auto and energy sectors and other related supply chains.
From assembly plants and parts factories, down to power plants, mills and mines, things are going to be vastly different.
Biden’s new EV policy is a good setup for investors, of course, if you can identify even a few sweet spots where new money will flow. I’ll give you some hints further along here.
First, let’s follow some facts and see where they lead…
According to the Washington Post, “There are some 645,000 vehicles in the federal fleet. They include roughly 200,000 passenger vehicles, 78,517 heavy duty trucks, 47,369 vans, 847 ambulances and three limousines.”3 (Hmm… Only three?)
At first glance, that seems like a lot of federal vehicles to replace. It will require significant new spending with lots of cash likely moving to EV automakers.
Biden wants to harness federal buying power and channel big money toward expanding the relatively small domestic EV industry.
It’s not quite a Soviet-style Five Year Plan, but it’s certainly a form of industrial policy.
Let’s add some context though.
Right now, according to Argonne National Laboratory, plug-in EVs represent just under 6% of all vehicles sold every year in the U.S.
Car and light truck plugin EV sales. Argonne.4
Also according to Argonne, about 300,000 EV units are sold into the overall U.S. auto fleet every year. This seems like a lot of vehicles.
But keep it in context of the overall auto sector. Compare 300,000 annual EV sales to total U.S. vehicle sales over the past 25 years.
The chart below shows total annual vehicle sales in the range of about 17 million units annually, allowing for downswing episodes like the Crash of 2008 and the COVID lockdown of 2020.
Total U.S. vehicle sales, 25 years. Trading Economics.5
And consider that only about 4.5 million of those new vehicle sales are units actually made in the U.S. The rest come from plants in Mexico, Canada, Japan, Europe and increasingly from China.
When you look at it this way, replacing even the entire federal fleet of 645,000 units is kind of a drop in the bucket.
While we’re looking at little drops in a great big bucket, consider that according to the U.S. Department of Transportation, the total number of registered highway vehicles in the U.S. is in excess of 276 million.6 (No typo… 276 million!)
In other words, if you replaced, say, 10 million American combustion vehicles per year with EVs, it would be 2047 before the entire fleet turned over.
Still, the idea behind Biden’s new mandate is to kick-start immense change within the domestic auto sector and pulse that change throughout the entire industrial supply chain.
Meanwhile, Biden wants these new EVs to be built in U.S. plants, using over 50% U.S. components, and with unionized labor.
No sweat, right? Because it’s so easy to build new plants in the U.S., or retool old ones, and replace entire supply chains and retrain a large element of the automaking workforce.
The energy industry will feel Biden’s burn too, so to speak. Every EV is one less demand point for fuel sales at the pump. And it’s one more demand point at the wall socket in the garage. More electrons coursing through the aging, run-down U.S. power grid.
Broadly speaking, by ordering a slew of new EVs, Biden is signaling fundamental change to the motive mix of U.S. transport, as well as to the supply chain that builds cars and trucks.
The other side of that coin is that Biden wants to eliminate fossil fuels from the U.S. energy complex. Specifically, Biden wants U.S. automakers to phase out internal combustion vehicles and move the energy demand to the electric side of the universe.
This was all part of Biden’s campaign platform. It’s a national-scale version of California’s plan to phase out internal combustion vehicles in the Golden State, aka the “Brownout State.” I discussed it last fall, here.
Will this work? C’mon, man… Who knows?
Perhaps by 2035, the U.S. auto fleet will be well on the way to electrification, while gas stations across the landscape will have closed and faded into the mystic chords of memory.
Then again, there’s a problem with this new approach. It’s based on something called… facts.
Right now, U.S. industry absolutely cannot meet Biden’s EV mandate. No way. Not today, tomorrow, next month, or next year.
Right now, the U.S. automotive manufacturing chain is not prepared to crank up and deliver. Not ore from the mines, metal from the mills, parts from the factories, nor even plants in which to assemble vehicles — let alone the labor required.
The good news is that with a whole lot of investment (and all manner of fortuitous occurrences in arenas ranging from labor relations to environmental regulation) U.S. industry might be able to gear up over a period of many years.
All along, the energy industry is similarly hamstrung by many of the same issues.
Currently, a large fraction of the U.S. economy runs on oil and natural gas. The country is crisscrossed with pipelines, from wellheads to refineries and burner tips. I discussed it here earlier this week.
But now, in essence, Biden wants to take a large fraction of the U.S. energy supply offline. He wants to deconstruct the hydrocarbon side.
Biden’s idea is to replace it all with energy systems that don’t currently exist and, in many respects, have yet to be developed.
Let alone, he wants to do this with equipment built in plants that have not even been designed or constructed. And with a labor force that’s simply not there.
Windmills and solar? Really? It’s a Green New Disaster, as I discussed here.
All of this gives a whole new meaning to the term “crash program.”
Indeed, Biden’s presidential policy approach takes me back to a point I discussed in 2019, here, regarding “unrenewable” energy.
I based that article on a talk by Scott Tinker, former State Geologist of Texas and now a professor at the University of Texas. In 2019, he spoke at the annual conference of the Geological Society of America. The room was filled with people who hold PhDs in geology, chemistry, physics and math.
Prof. Tinker graphed out the current mix of global energy consumption; coal, oil, natural gas, nuclear, hydro and solar/wind (aka “renewables”).
If you follow energy, this is familiar. The graph is what world energy looks like right now. The mix is all about coal, oil, gas, nuke… and a small — very small — bit of renewable.
The energy mix above pertains to all seven billion (and more) people on the earth. And it’s fairly reflective of the energy mix here in the U.S.
This energy mix has evolved over the past 250 years or so. Nobody really designed it; it evolved as part of the march of mankind across the plains of history.
Perhaps if people knew then (250 years ago) what we know now…? Well, then of course the world wouldn’t be the way it is. More than likely, neither you nor I would be here either. Nor Joe Biden, nor his policy cabal.
If people back then did things differently, then absolutely the historical arc would’ve bent a different direction. The world might have access to far less energy today, and there would be fewer people.
But let’s play a game… If you don’t like the current energy mix, then change it.
Imagine going all-in for renewables like solar power and wind. Indeed, let’s remake the global energy dynamic. Presto-chango!
Here’s what 98% renewable looks like by 2040, which is a date that we’re hearing from people in the Biden administration. This is the world of energy over the next 20 years, according to them…
Hmm… This is a very strange graph.
Starting soon, the fossil fuel curve begins to plunge. And if you have an intuitive sense that the precipitous downswing reflects massive disruption, you are correct.
To make these energy curves come true requires a disorderly transformation from the way things are to a dramatically different state.
In fact, this transformation to renewable energy is not just difficult, but catastrophic.
The graph represents immense, rapid — indeed, precipitous and/or disastrous — changes in how energy is produced, sold, distributed and used across the world.
Indeed, people fight wars over things like this.
Apocalypse aside, is there a way to make some money here?
Well of course, we’re about to see immense changes in the U.S. industrial landscape. Just Biden’s EV automotive mandate alone will move markets.
In this case, you ought to begin to get smart on what are called “technology metals.”
There’s wealth to preserve (and money to make) in technology metals because they enable the world to run.
For example, technology metals make your smart phone work. They make your light bulbs work.
These metals are already inside your internal combustion car, in things like electric motors and electronics. And EVs of the future absolutely will not run without these tech metals.
Meanwhile, technology metals are scarce. Looking ahead, they’ll be harder to obtain.
Consider rare earth elements (REEs), which are irreplaceable in much of what we call modern tech; smart phones, computers, other electronics, lighting and much more.
Most of the world’s REEs currently come out of China, which has long restricted access and availability. Indeed, China has openly politicized access to supplies, which I discussed here.
Or consider other metals that are critical to an electric future, whether in EVs or renewable systems.
Copper is in short supply already, as we see in spot shortages and rising process.
Or nickel for batteries, which is rising in price.
Other so-called “battery metals” are constantly in the news, such as lithium, cobalt, vanadium and even an exotic substance called niobium.
And even humble silver is a tech metal. Indeed, over 50% of global demand is for industrial use, increasingly in solar panels, as we see in this chart of supply and demand.
Diminishing supply, rising demand. Courtesy Metallic Minerals.7
The takeaway here is that President Biden has just formally, policy-wise, top-down-commanded and ensured a long, strong run for a slew of technology metal ideas.
Maybe the New York Times wants Biden to ease up, but for now his new industrial and energy policies pave your path to profits ahead.
On that note, I rest my case.
That’s all for now… Thank you for subscribing and reading.
Managing Editor, Whiskey & Gunpowder
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7 Forward Looking Statements and Technical Disclosure, Metallic Minerals