My eyes lit up when I saw the latest ad from Paul Mampilly for his Profits Unlimited newsletter — more geothermal! Woohoo! Even the ad looked familiar — we saw quite a few of those ‘heat map’ images of the US five or ten years ago when geothermal stocks “heated up,” so it gave me a nice moment of flashback to the early days of Stock Gumshoe.
(Today, incidentally, is Stock Gumshoe’s 10th birthday… I quietly launched this site on March 7, 2007 with a teaser solution about one of the many “next Berkshire Hathaway” ideas that come along every year… and perhaps it’s appropriate that that particular stock, Brookfield Asset Management, has pretty much tracked with the S&P 500 over the past decade despite the ribald and rapturous promises made on its behalf. I guess it’s appropriate that our 10th birthday has been equally quiet so far, despite the fact that probably 100 times as many people will read this article as read that one in 2007. And yes, mostly it’s quiet because I haven’t come up with a good way to celebrate. Any ideas?)
So anyway, geothermal teasing got revved up early on in Stock Gumshoe’s first year. I have some fond memories of what was in many ways a “bubble” in a small number of heavily touted geothermal stocks, which were benefitting from super-high oil and gas prices that drove interest in “renewables”.
Back in 2007 we were on the verge of a couple years of teaser pitches using terms like “Sonoma Grizzly Power” and “Slow Volcano Power” and “Thermogenic Oil,” all phrases invented to help pitch little junior geothermal stocks… most of which are no longer with us and some of which were downright scammy operations. Raser Technologies, US Geothermal, Sierra Geothermal, Polaris Geothermal, Ram Power, Western GeoPower… there were quite a few little guys active seven or eight years ago, some of them very well-connected with big-name resource investors, and they all collapsed quite dramatically.
Some of them have come back to life in recent years, and there are a few real geothermal businesses in the US and elsewhere around the world that do make money, so what sort of pick is Paul Mampilly making now as he tries to reinvigorate investor enthusiasm in the geothermal space?
Now, the big picture from Mampilly that gets the ad going, referring to a simplified copy of that map (the map is from 2008-2009, incidentally, not a lot of study has gone into updating it since):
“You see, the colors of this map reveal a huge untapped energy reserve that spans across the entire United States.
“A relatively unknown energy that is under the Empire State Building in New York City … beneath the roller coaster rides at Disney World in Orlando … below the Sears Tower in Chicago … and under the shiny lights of the Las Vegas Strip.
“And this energy is so expansive and untouched, the Earth Policy Institute recently reported that there’s ‘50,000 times more [of this] energy contained in the first six miles of the Earth’s crust than in all the planet’s oil and natural gas resources.’
“That’s enough energy to power the United States for the next 30,000 years.”
That’s true as a scientific notion, though not necessarily as an economic one — in mining parlance, I suspect most of that geothermal potential would be classified as “inferred resources”, not as “proven and probable reserves” … we know the heat is there, but it’s not so easy to produce it economically except in a few places, like the Geysers in California, or in Iceland, where there’s good infrastructure and access to geothermal resources fairly close to the surface… and geothermal plants are not cheap, so they have to compete with the price of electricity generated from solar panels, or natural gas plants, or nuclear power.
New technologies continue to advance for geothermal production, making it feasible to generate electricity in slightly less perfect spots than the Geysers, and at lower cost, but that doesn’t mean you can make money by just plunking a drill bit into the ground anywhere that shows orange or red on that map.
Geothermal power has been a hot topic more than once in the last 50 years, and it may be that we’re at an inflection point where more money goes into geothermal — past inflection points for geothermal have come because of rising oil and gas prices, or because of strong tax incentives for renewable energy. Or, perhaps, we could also be at such an inflection point for utility-scale solar or wind farms that geothermal will have trouble competing… I don’t know, I just want to raise the possibility for you to make sure you’ve got enough skepticism on hand to counter the hype of “power the world for 30,000 years.”
And then the meat of the tease:
“And here’s the really exciting news … I’ve discovered a little-known company that is at the forefront of it all. They have the game-changing technology that harnesses this energy and converts it into electricity.
“Make no mistake, this relatively unknown Midwestern company is positioned to disrupt the entire energy industry … it could be bigger than ExxonMobil, Chevron and Shell Oil combined … and make investors John D. Rockefeller-type fortunes.
“Those who invest in this company now will have the chance to mint millions … and all it takes is an initial stake of just $50 if you would like.”
You should NEVER go into an investment looking for John D. Rockefeller-type fortunes, of course — and that kind of thinking, touted so breezily in an investment newsletter ad, is corrosive to rational thought.
They do not, of course, guarantee that their small company will be bigger than ExxonMobil, Chevron and Shell combined, but just the mentioning of it makes us stop worrying about whether we’re paying 50 times earnings or 10 times earnings for a stock — it doesn’t matter if it’s a little expensive if it’s going to be the next global monopoly, right?
And yes, as the teases note, Warren Buffett has invested millions in geothermal energy — though he did so quite indirectly almost 20 years ago, through the fact that Berkshire’s large utility operation owns ten geothermal power plants in the other substantial operating geothermal site in the US, the Salton Sea in Southern California (there have sometimes been plans for possible expansion at that site, but they haven’t actually built a new generation project there since 2000).
More from Mampilly on the specific company being hinted at: