In The Headlines

Despite Cheap Oil, World Energy Markets Shift to Renewables

According to the International Energy Agency and independent researchers such as Bloomberg New Energy Finance (BENF), power plant developers will be selling renewables in a developing nation in the decades ahead—even with fossil fuel prices hovering at historic lows. A recent report from the United Nations Environment Program (UNEP), using BNEF data gives more statistical backing for the trends.

For the first time in 2015, more investment went into renewables than fossil fuels, and most of the money went to emerging markets. The UNEP report demonstrates a number of reasons why cheap oil and natural gas are not going to slow the rise of wind and solar as primary energy sources.

According to the UNEP report, renewables, excluding hydro power projects, investment hit a record last year of $286 billion. That meant more than half of new power under development came from renewables. Of the total, $156 billion was invested by developing countries and $130 billion by developed countries.

Overall, renewables, excluding large hydro, made up 53.6% of the gigawatt capacity of all technologies installed in 2015, the first time it has represented a majority. That shows that the structural change is underway. However, the huge weight of conventional generation capacity already built meant that new, clean technologies only accounted for just over 10% of world electricity last year. Significantly, developing world investments in renewables (up 19% in 2015) topped those of developed nations for the first time in 2015. Much of these record-breaking developing world investments took place in China (up 17% to $102.9 billion). Other developing countries showing increased investment included India, South Africa, Mexico, and Chile.

The report also shows that clean energy has moved beyond research and demonstration projects funded by governments and venture capital specialists. The big banks that provide utility project finance loans are now providing most of the capital for wind and solar farms. That has opened the way for more large-scale developments in far-flung places as diverse as Egypt, Morocco, and Norway.

The UNEP report concludes that the billions of dollars flowing to renewables in both developing and developed economies indicates the industry has shifted from a plaything of rich industrial nations into a growing power source for emerging economies—especially places that must import fossil fuels. Government programs to cut pollution in Beijing and New Delhi are one driver. Another is the need for electricity in rural areas that are far away from a reliable power grid.

The data also illustrate that Clean Energy does not compete with oil in the power market. In fact, 80% of the world’s oil now goes to transportation, chemicals, and heating rather than the production of electricity. In decades past, fossil fuel use and emissions closely tracked the growth in the world economy. That link is breaking down, due to the spread of renewables and a push toward efficiency in power consumption—for example, all those LEDs replacing light bulbs are starting to add up.

Citations

1. http://bloom.bg/1Mph4e3 – Bloomberg
2. http://bit.ly/1WLnaWI – FS-UENP Collaboration Center

Dollar General Wins by Tapping into the Deep Discount Psyche

Who says brick-and-mortar retail is dead? It may be the age of e-commerce, and countless chains like Macy’s, Staples, and Kohl’s may be closing stores. But some retailers, like deep discounter Dollar General, are actually expanding.

Dollar General announced at its annual Investor Day recently that it would open 900 new stores this year, and then another 1,000 in 2017. That would bring the discounter’s already staggering store count to nearly 15,000 locations.

Not only does it affirm that Goodlettsville, TN-based Dollar General feels more confident about its cash position, it also means that the company has found a winning formula. The retailer’s plans to increase its store count by 7% annually in the next two years imply plenty of room for growth.

It is an aggressive growth strategy, one that is likely to impact rival Dollar Tree, which outbid Dollar General to buy Family Dollar. And while Dollar General may not be able to fight Wal-Mart on price, it can potentially hurt the world’s largest retailer by adding more Dollar General store locations, which in turn offers customers more convenience.

Now, Dollar General stores are typically small, on average only 7,400 square-feet in size and located in strip malls, a far cry from the typical 130,000 square-foot Macy’s. But still, Dollar General recently completed its 26th straight year of same-store sales increases, a metric that strips out the effect of newly opened stores. In other words, the retailer’s new stores are not cannibalizing the more established ones. And Dollar General shares are trading near all-time highs.

Coming out of the recession, chains like Dollar General and its competitors exploded in popularity as consumers sought deeply discounted items at no-frills stores nearby (so they could save on gas). That hurt larger stores, Walmart in particular, which have only emerged from those doldrums in the last year-and-a-half.

It turns out that shoppers have held on to those frugal habits. And Dollar General expects that to continue. The company is targeting annual sales growth of 7% to 10%, with earnings per share growing 10% to 15%. It may have been disappointing to lose out to Dollar Tree in the battle to buy Family Dollar, but Dollar General continues to maintain its growth momentum.

Citations

1. http://for.tn/1pC2VzR – Fortune
2. http://bit.ly/1VNEyvJ – TheStreet.com

The Good News Is . . .

• Consumer spending, which accounts for more than two thirds of U.S. economic activity, rose at a revised 2.4% pace rather than the 2.0% rate reported last month. That reflected more consumption of services than previously estimated. The solid pace of consumer spending appears to verify the economy’s underlying strength and should further allay fears of a recession. Spending is being supported by a tightening labor market, which is steadily lifting wages.

• Adobe Systems, Inc., a leading provider of software and content platforms, reported earnings of $0.66 per share, an increase of 50.0% over year-earlier earnings of $0.44 per share. The firm’s earnings topped the consensus estimate of analysts by $0.05. The company reported revenues of $1.4 billion, an increase of 24.7%. Management attributed the company’s results to strong growth in the adoption of its Creative Cloud software platform.

• Sherwin-Williams has announced it will buy rival company, Valspar, for $9.3 billion. If completed, the deal would create a new paint giant whose lines of paints are sold in North America, Europe, and Asia. Under the terms of the deal, Sherwin-Williams would pay $113 a share in cash. Combining with Valspar would bolster Sherwin-Williams’s presence outside the United States and Canada. And it would add new product lines for Sherwin-Williams, such as coatings for food and industrial coils.

Citations

1. http://reut.rs/22KnkBn – Reuters
2. http://cnb.cx/1gct3xa – CNBC
3. http://adobe.ly/1RkHhe6 – Adobe Systems Inc..
4. http://nyti.ms/1RqK81B – NY Times Dealbook

Planning Tips

Questions to Ask When Considering the Purchase of Life Insurance

Once you have decided to purchase life insurance, you need to think about what kind of insurance to buy and how the coverage should be designed to best meet your needs. Everybody has a different financial situation, so it is a good idea to consult your financial advisor before making any purchase. Below are some essential issues to consider when buying life insurance.

How long do you need the coverage to last? – If you have a defined period of time during which you want to have coverage, then either term or permanent life insurance could be appropriate. Term policies can be purchased with guaranteed level premiums for 10, 15, 20 or 30 years. But once the guarantee period ends, the premium can become very expensive. If you anticipate needing coverage for more than 30 years or for your entire life, then you should consider permanent insurance. For many people, the need for coverage decreases over time, for example as debts are paid off and children graduate college. One strategy is buying a combination of policies. For example, you need $1 million in total coverage and buy a $250,000 10-year, a $250,000 20-year and a $500,000 of 30-year term policies. If you find you need less coverage than expected, you can decrease the face amount on the 30-year policy or allow it to lapse. But if things do not work out as planned, having purchased a term policy with a conversion option guarantees you will always have affordable coverage for as long as necessary.

Should you buy a disability waiver of premium? – Adding a disability waiver of premium rider to a life insurance policy is an expensive way to get limited coverage. Before buying a disability waiver:

•  If you do not have long-term disability insurance, you should look into buying an individual policy, if available.
•  If you do have group and/or individual coverage, first evaluate how much after-tax income you will receive. If it is not enough income to meet your needs, then check to see if you are eligible to purchase any additional individual coverage. Also, consider what could happen if you change or lose your job and the disability benefit.
  Disability riders vary by insurer and policy, so it is important to understand exactly what benefit you will receive and how it will affect the coverage. Some waivers cover only the cost of insurance, while others replace the entire premium allowing the cash value in a permanent policy to keep growing.

What to do if you have health issues or are rated? – If you apply for insurance, and the insurer offers a policy with a rating, you should work with an insurance broker to shop the coverage among several companies. Insurers rate medical issues differently. Also, if you applied for term, consider instead buying a permanent life insurance policy. Many companies, especially towards the end of calendar year when they are trying to meet goals, offer a table shaving program in which they will, for example, move you up from a Table 3 to Table 1 rating. This can significantly reduce the cost of insurance.

How should the policy be owned? – If you own or your revocable trust owns a life insurance policy, the death benefit will be included in your gross taxable estate. You may not owe federal estate taxes if your estate is less than $5,450,000 in 2016. However, some states levy taxes on estates valued at $1 million dollars or less. If you reside in a state where your estate could be taxed, you should consider having the policy owned by a spouse or an irrevocable life insurance trust (ILIT). Also, be aware that policies you own that are transferred to an ILIT are subject to a three-year lookback rule.

Should You Buy a Policy That Builds Cash Value? – Most people buy life insurance for the leverage. They want to pay a small premium to get a large death benefit. Unless you have a specific need for permanent coverage, such as estate planning or funding a special needs trust, it makes sense to first buy a term policy with a conversion rider and fully fund all your qualified retirement plan and IRA options. Then, if you have the cash flow and are ready to commit the funds for a long period of time, it could make sense to buy a permanent life insurance policy.

Citations

1. http://bit.ly/ZGt2IR – Bankrate.com
2. http://bit.ly/1m2q5fl – GetRichSlowly.com
3. http://bit.ly/22AN4Dq – Investopedia
4. http://bit.ly/1MHnAru – Business News Express
5. http://bit.ly/1jH3QGL – US News & World Report