Sometimes I wonder whether the world is being run by smart people who are putting us on... or by imbeciles who really mean it."
— Mark Twain
A hoary old trader once told me to never buy something based on a government subsidy because sometimes those subsidies end.
In the case of Pacific Ethanol Inc. (PEIX), he would have been correct.
Something funny happened on the way to the annual feeding frenzy at the government trough...
Congress has quietly ended subsidies on ethanol fuel and dropped import tariffs on Brazilian ethanol. The subsidy had been paying companies 45 cents per gallon to make E10. The tariff added 54 cents a gallon to the Brazilian imports.
This program has been costing taxpayers $6 billion a year — and Congress let it expire by not acting to renew it.
But don't worry about the survival of the ethanol industry...
It will still benefit from Congressional mandates that call for 15 billion gallons of renewable fuels by 2015 and 36 billion gallons by 2022.
(Congress should cut that mandate as well, but we'll take what we can get.)
The argument for ethanol never made sense. It takes corn away from hungry people and puts it in gas tanks. Not only does it cost more energy to grow and convert corn into fuel than it does to simply burn hydrocarbons, but it also raises the price of food.
In Brazil, they use sugarcane, which does a much better job. In fact, it works eight times as well as corn.
It might be a good time to take a look at Brazilian ethanol producers like Cosan (NYSE: CZZ).
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Best of the Week
Below you will find the best articles from Wealth Daily and Energy and Capital this week, just in case you were too busy drinking eggnog to read them.
On behalf of Wealth Daily, I'd like to wish you and yours a happy and prosperous New Year.
Profit from Options in the New Year: How a Single Options Formula is Making People Rich
The real moneymakers on Wall Street have an ace up their sleeves when it comes to turning a profit in a chaotic market: options. Let Ian Cooper lead you to easy profits this year with his proven R-4 Trigger System... Invest this week and you could be laughing all the way to the bank as soon as January 25th!
"Biggest Gold Discovery in Decades": 13-Year Metals Veteran Greg McCoach Tells All
Discover what's being called "the biggest gold discovery in decades" in this groundbreaking FREE video investment conference.
2012 Energy Stock Predictions: Domestic Oil to Reign in 2012
Editor Jeff Siegel offers his energy predictions for 2012.
The One Answer Smith Really Wanted: Will Next Year Be Better?
Washington and Wall Street can't stop the rest of us from doing biz!
Dangerous Rare Earth Supply Risk: Urgent: U.S. Energy Department Issues Stark Warning
Analyst Ian Cooper takes a look at the latest warning out of the U.S. Department of Energy and offers a way to profit handsomely.
2011 Predictions Recap: What I Got Right, and a Few I Missed
The fall of Chinese housing has been a slow motion train wreck for about six months now. Newly-built Chinese ghost cities are a common topic on the web. Real estate prices are down in most major cities.
What's Really Behind the Solar Sell-off: And Why Did Warren Buffett Just Buy Them
Brian Hicks talks about what is really behind the solar stock sell-off and why Warren Buffett is buying them.
Another Date Which Will Live in Infamy?: This Could Be The Big One for the Middle East
There are people hard at work to make sure that we never need to depend on things like the Strait of Hormuz, Iran, or any Middle Eastern oil-peddling nation ever again... right here in the Midwest.
Tesla Electric Car Investing: Is It Time to Buy an Electric Car?
Editor Jeff Siegel discusses whether or not it makes economic sense to buy an electric car.
Taken for a Ride: Year-end Recap and 2012 Anticipation
I think next year will be a year of drastic transformation, of political awakening, of balance sheet resetting, of a return to real value over hyped illusions.
Bullish on America in 2012: Don't Worry, Be Happy
Brian Hicks reviews the year in commodities and comments on the bullish New Year ahead for investors.
Personal Responsibility: Taking Control and Moving Ahead
Instead of remaining oblivious to global markets and continuing to wallow in a sea of self-loathing while continuing to blame everyone and everything but yourself... Why don't you read up, get invested, exploit tax loopholes, pay down debt, save, and take control of your financial destiny?