Letters of the Week

Fuel cells, exchange-traded funds liquidity, and no signs of recession in Europe.

Fuel Cell Opportunity

The comments from B Rumpf (Letters of the Week, June 20) raise a number of pertinent issues. The comments are correct but there is far more behind what has been written. It is true, and a real shame for the nation, that feed-in-tariffs (FITs) do not extend to fuel cells, because they are basically not a renewable source. However, what is being seriously overlooked by governments of all persuasions is the tremendous value of embedded generation provided by fuel cells that will actually claw back the galloping costs of electricity in Australia. In fact, a well-timed FIT for fuel cells would have easily negated the impact of the carbon tax on electricity prices by now through that claw back, whereas the FIT to PV Cells (without storage) simply changes the habits for the discretionary use of electricity, increases demand at the high-end times, and thereby adds to the increases of electricity costs through the requirement for increased demand-driven distribution investment. Governments across Australia have known this for some years, but, apart from the recent decision from Victoria, have chosen to take a short-term view with the resultant cost problems now imposed on us all. One needs to look no further than the recent decision taken by the Netherlands to set up a virtual power plant by the use of Ceramic’s Fuel Cells in clusters of embedded generation. This could never be done with un-stored PV generation.

J Dempsey

ETF liquidity

I run my own SMSF and I have been subscribing for some years because I need the help and education, and I think Eureka Report is still worth paying for. I’m interested in the new fixed interest ETFs available from ishares amongst others. But CommSec shows that the trading volumes are extremely low, sometimes no trades at all over a day. I’m concerned about liquidity and whether I will be able to sell the units quickly at a reasonable price if I need to. This seems to be an issue for many ETFs, not just the fixed interest ones from ishares. I have read that that “market-makers” provide the necessary liquidity, but I don’t really know how it works. My question: is ETF liquidity an issue that I need to be concerned about, and if not why not? Perhaps one of your contributors could enlighten me, or even write an article about the matter that could be shared with others.

M Hayter

Editor’s response: Regular Eureka contributor Tony Rumble wrote a very useful study of ETFs, published in August last year. As well as addressing your question on liquidity and market makers, the article covers counterparty risk, pricing differences and some of the different types of ETFs available. Also worth a read is Michael Feller’s article from October last year, which takes a closer look at the range of Australian ETFs on offer, and how these differ from the US.

What recession?

I am currently touring Europe (I been away two months so far) and it is very difficult to see the impact of their recession. In Australia we have strong employment and little government debit etc. Yet just about every retail outlet is having sales and the press is all doom and gloom. In France there are very few retail sales and there are few outward signs that the economy is crook. Maybe their press is full of it like ours, but since I don’t read French I don’t know. In Spain residential building has shut down with a significant number of part-finished housing developments. But government spending on major road works and the like is very active with kilometres of freeway works being carried out. The retail sector like France doesn’t have sales on and there are very few shops closed. (except for the mandatory three hours during the day). I am not sure what our problem is in Australia, other than that the press only seem to like negative stories and the Opposition is beating it up just to hammer the government. Maybe if we cleared the air with an election things might improve. I will be interested in what things look like in Italy when we get there next week – although maybe my observations are coloured by mainly visiting the tourist areas that are full of German tourists!

M Clugston

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