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The disruption with forever consequences

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The disruption with forever consequences

By now, we’re all well versed on the subject of Amazon disrupting retail, Aldi disrupting supermarkets and fintechs disrupting banking (admittedly to a significantly lesser extent). However, the most significant disruption is occurring right under our noses without us really noticing.

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Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

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This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking advice from a financial advisor if necessary.

13 Comments

  1. I must be missing something, Roger. Japan is building 42 coal fired power plants and India and China hundreds. The U.S. is continuing to build coal fired powered plants and even Germany is building them. Further, if renewable energy is cheaper, why is there any need for RETs? Surely the market will opt for the cheapest form of supply. I have friends in South Australia who definitely don’t think clean energy is the cheapest form of power, and of course, the massive government subsidized Tesla battery is akin to applying a band-aid to a severed limb.
    I don’t know whether your read Terry McCrann’s articles on this subject, but like yours, they are well researched and well argued, the only difference being that they draw the exact opposite conclusion.

    • No, you’re not missing anything – There were people still using stones while the use of bronze was just taking off. One of the points I was making was NOT that Australia can do this right now. The point is that a tipping point has now been reached elsewhere in the world where the price of renewables is falling to such an extent that new markets will open up, making it even cheaper to produce, the technology will improve further and the price will continue to fall, opening new markets again. A virtuous circle has begun that will put fossil fuel suppliers out of business eventually. And yes, eventually here in Oz too. That advancement which has begun in the poorer and cheaper labour markets will eventually spread, forcing for example car manufacturers to supply appropriate vehicles and ditch older production styles and methods, and will eventually will hit hit our shores. Meanwhile no amount of discussion about baseload power will be relevant.

      SA’s problems had far less to do with the renewable technology and much more to do with policy settings.

      People talking about baseload power NEVER being supplied by renewables reminds me of those energy agencies a few years ago who thought there might be 20,000 electric cars on the road by 2040. Elon Musk sold 300,000 cars in his first week of marketing the model 3.

      here’s what is happening not far away.

      https://www.sciencealert.com/solar-power-is-now-the-cheapest-energy-in-the-world

      https://youtu.be/6eOFokM3lUI

      https://www.theguardian.com/environment/2016/may/18/portugal-runs-for-four-days-straight-on-renewable-energy-alone

      https://qz.com/576437/which-places-have-achieved-100-renewable-power/

      • Going to have to disagree on this one, Roger, and with respect, the left-wing tanks are no less biased than The Australian. As far as Musk goes, I know of no one who’s ever managed to obtain more government subsidies. I’m old enough to remember Sarich and the orbital engine….a clear case of stone being far more effective than bronze :-).

  2. Dennis Bergmans
    :

    Disruption yes, but trying to pick the winners is no easy feat. There is so much breakthrough renewable tech around but which ones will make money? Probably easier to short the businesses we know are going to be losers. Short the horse shoe makers.

  3. A brilliant summary of what is now and what the future will or could bring Roger. I also have solar panels on my roof and they have helped enormously defray my electricity cost, but the initial asset cost still has to covered, I think it will take 6 – 7 years! A bit like holding shares that long!

  4. shambhu sharma
    :

    Thanks for very nice article. Given the not so good performance of Montgomery fund in the last year or so (at the time when general market has performed really well), I was wondering if you could write something ( either via email to investor or an article here) outlining on how Montgomery is trying to capitalize this disruption for the benefit of its investor. Recently I noted that as the quality of articles are getting better, the performance of the fund is going down…

    • Yes we did indeed underperform the market with the bulk attributed to not owning resources and holding cash. We’ll be recording a video that will help in understanding the contxt of the underperformance.

  5. Roger, power in Adelaide is the HIGHEST cost in the world (and they had a huge push towards wind and solar)…see last Weekend’s AFR for details.

    99% of Tasmania’s power comes from hydro-electric (so much so that it feeds into Victoria), but our power costs compared to “like” places such as the USA are MUCH more.

    We have 30% of the world’s known uranium resources at Olympic Dam but we can’t / don’t / won’t build a nuclear reactor in the vast expanse of (tectonically stable) ‘unusable land’ we have (just in case it undergoes a meltdown).

    It is crazy.

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