Market Overview

Beware Of Alternative Energy ETFs As Oil Spill Plays


In the wake of the tragedy at BP's (NYSE: BP) Deepwater Horizon rig in the Gulf of Mexico, the green energy crowd might be licking their chops. Offshore oil drilling is once again viewed in a negative light as a dangerous endeavor that the U.S. should not be engaging in.

BP's shares have been hammered on the back of this news and the company could be facing $5 billion to $15 billion in cleanup and legal costs, if not more.

California has said it will not move forward to expand offshore drilling plans and there has been a vocal chorus of alternative energy supporters saying now is the time to invest in wind, solar, etc.

That means you might hear a few pundits say alternative energy ETFs are a good bet. Think again. ETFs like the iShares S&P Global Clean Energy Index (Nasdaq: ICLN), the Market Vectors Solar Energy ETF (NYSE: KWT) and the PowerShares Global Wind Energy ETF (Nasdaq: PWND) are all DOWN in the past five days.

The argument is simple: If these types of ETFs cannot go higher while one of the largest oil majors in the world is facing a PR disaster of epic proportions, when will they ever go higher?

Consider the problems that come along with wind and solar that advocates forget to mention. Wind farms are no environmental treat. Just take a look at efforts to build a wind farm off the coast of Cape Cod. Fishermen and local business owners have stood in the way of those plans.

Solar energy is clean, but the materials used for solar panels and converters have to be mined in fashion similar to the way coal is mined so getting to solar isn't without environmental consequences.

The bottom line is don't go betting on alternative energy ETFs because of the BP disaster. If anything, these ETFs are screaming to be shorted.

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Posted-In: Long Ideas Sector ETFs Short Ideas Trading Ideas ETFs


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