dsmWealth: May 18, 2023

BY STEVE DINNEN

Iowa overflows with wind power. Enough is produced here to power the entire state. Iowa is building its solar generating capacity, too, thanks in part to a Storm Lake company that recently launched a $50 million fund to build renewable energy plants that harnass the power of the sun.

Trusted Energy, a family-owned firm, plans, designs, engineers, installs and maintains facilities that generate renewable electricity, including power from the sun and wind. Its list of clients includes colleges, manufacturers, municipalities, retailers, schools and even a Minnesota brewery.

One of Trusted’s bigger recent projects was an $8 million solar farm for Grinnell College, which aims to be carbon-neutral by 2040 and has leaned heavily into renewable energy in recent years. It hired Trusted to build the solar farm next to the campus, on school-owned property that now provides 30% of the college’s power. Grinnell agreed to a 20-year purchase of the power, which will save it $3 million in energy expenses over that term.

The deal worked for Trusted because it’s selling power to Grinnell at a price that is slightly below retail but significantly higher than the wholesale rate it would fetch if it sold that energy into the national electric grid. Trusted has used that single-customer concept elsewhere, including the schools in Albert City and a marina on Lake Okoboji that didn’t have much land for solar panels but instead offered up its rooftop.

Financing the Grinnell project inspired Trusted President and CEO Rob Hach to create a fund to bring investors into other projects and tap into the renewable energy boom. So he launched Buffalo Ridge Capital LLC, an alternative investment for accredited investors that is raising $50 million to bankroll both solar and wind energy projects. Investment banks estimate that an astounding $16 trillion will be plowed into renewable energy between 2020 and 2030.

“All we want is 1/16,000th of it,” Hach mused.

Funds raised will be assigned to both wind and solar projects. Trusted has already participated in both, either on its own or with other investors, in projects across Iowa, Minnesota, Oklahoma and other states.
The fund’s details are spelled out at buffaloridgecapital.com. Its leaders project a cash return of $119,172 over 10 years on a minimum investment of $50,000.

Want to invest in renewable energy? Stock up on stocks.
BY STEVE DINNEN

If you want to jump into the renewable energy sector, you can always buy your way in with a stock. They’re easy in, easy out.

NextEra Energy Partners LP (ticker: NEP; current price: $59.06) is a $12 billion company in Florida that operates 6.5 gigawatts of wind power and 1.4 gigawatts of solar power. It pays a healthy 5.2% dividend. (NextEra Partners is controlled by utility giant NextEra Energy Inc., whose Florida Power & Light unit was a pioneer in developing wind farms in Northwest Iowa.)

Another player in this sector is Atlantica Sustainable Infrastructure PLC (AY; $25.70), a British firm with both wind and solar farms spread across the United States, Canada, Algeria and Spain. Additionally, Northland Power Inc. (NPIFF; $22.23) of Toronto specializes in generating wind power both on and off shore in Canada and Europe, and ReNew Energy (RNW; $5.385) operates in India.

A number of other exchange-traded funds, or ETFs, also support renewable energy. Among them are the iShares Global Clean Energy ETF (ICLN; $18.875), Invesco Global Clean Energy ETF (PBD; $18.44), and Global X Renewable Energy Producers (RNRG; $12.17).

Most of these investments pay dividends, but the ETFs also have ongoing expenses. All offer liquidity that is unavailable with a direct investment. And of course, all are at risk.

What the looming debt ceiling crisis means for your portfolio
BY KATE DORE FOR CNBC

Many investors are bracing for the economic fallout of the deadline for the United States to raise the debt ceiling or default on its obligations.

Treasury Secretary Janet Yellen said earlier this month that failing to raise the debt ceiling will cause a “steep economic downturn,” reiterating the country’s early June deadline.

Experts say the current crisis could differ from the 2011 debt standoff, which ultimately led to a U.S. credit downgrade and significant market turmoil.

“Congress was willing to play the game of chicken, but there were fewer members of Congress actually willing to crash the car,” said Betsey Stevenson, professor of public policy and economics at the University of Michigan.

One of the big concerns is how the Treasury may prioritize principal and interest payments for assets like bills or bonds in an unprecedented default.

Under the 2011 contingency plan, there wouldn’t have been a default on Treasury bills, according to an August 2011 Federal Open Market Committee conference call transcript. While some experts point to the 2011 plan for clues on how the Treasury may prioritize payments now, Stevenson said it’s unclear what could happen more than a decade later under different leadership.

Steve Sosnick, chief strategist at Interactive Brokers, noted that while certain shorter-term Treasury bills have modest hesitation priced into yields, longer-term Treasury yields show expectations that any debt issues will get resolved quickly. As of May 8, the one-month Treasury was paying 5.411%, which is above the 5% to 5.25% federal funds rate, whereas the two-month Treasury was offering 5.134%.

What’s more, the CBOE Volatility Index, which measures expected market volatility over the next 30 days, doesn’t show the markets are particularly worried yet. “We’ve seen this movie before,” Sosnick said. “And it always gets right up to the cliff, but we never go over it.”

“I think most market participants are going to wait until this becomes even more imminent,” and as the deadline approaches, things may change, he said.

In the meantime, don’t do anything rash, Sosnick suggested. It’s a good idea to put your antenna up and consider how you might hedge or become "a bit more defensive," he said. If you’re investing on margin, which involves borrowing money to buy more assets, you may want to dial that back.

Matthew McKay, a certified financial planner, portfolio manager and partner at Briaud Financial Advisors in College Station, Texas, said during the last debt ceiling crossroads, the stock market “basically ignored” the deadline until about two weeks before.

“The next few weeks will be huge for news and signaling for equity markets,” he said. “If we don’t get an agreement, the probability of decline of substance rises tremendously.”

In luxury market, Gen Z redefines what's in and out

BY SOPHIE MAXWELL FOR FORTUNE

The luxury market is undergoing a radical transformation as it adapts to the growing spending power of Gen Z. Along with millennials, these consumers accounted “for the entire growth of the luxury market in 2022,” according to Bain and Co., which expects them to represent 70% of luxury spending by 2025.

Gen Z has increasingly divergent value systems from previous generations of consumers. To attract them and keep them engaged, luxury brands are moving beyond the traditional notions of luxury, such as status, legacy, prestige and heritage, and instead toward a new set of values like inclusivity, sustainability, transparency, technology and circular innovation.

This is prompting luxury brands to build connections with other, often unexpected, parts of culture and commerce. For example:

Tiffany & Co. teamed up with Nike on a limited edition pair of Air Force Ones. But it prompted a social media backlash among sneaker connoisseurs, notorious for their discernment, who claimed that “you can’t buy cred.”
EBay installed a pop-up Luxury Exchange in New York, where shoppers could have their luxury goods appraised and then use them to purchase items from the platform’s top luxury sellers, including Bottega Veneta and Cartier.
Rolex recently launched a certified pre-owned program, and the LVMH-owned watchmaker Zenith now authenticates, restores, and certifies models from its archives to sell to consumers shopping for pre-owned luxury goods.
Prada’s first foray into fine jewelry is a collection made from 100% recycled gold. It was launched with a campaign that featured poet and activist Amanda Gorman to signal that the new figureheads of luxury are those that represent diversity, inclusivity, community and equality.
LVMH, Prada and Mercedes-Benz have started using blockchain technology to show that each one has been responsibly made and sourced, and is 100% authentic. De Beers is already exploring how every single diamond they use can be traced to its source.

Five or 10 years ago, all of these developments would have felt jarring for the luxury sector. Today they seem culturally relevant, a clear indication of just how widely and rapidly young people are redefining the values of the luxury market.