First to Emerge from the stocks Carnage

"It begins with energy."

That's how Obama introduced his budget last night in an address to a joint session of Congress. And where the Federal dollars go, so should your portfolio.

The hour-long address was rife with references to energy, each of which could have profitable investment implications.

As he trumpeted during the campaign, renewable energy seems to be a large part of his plan. "We know the country that harnesses the power of clean, renewable energy will lead the 21st century," he said.

In fact, the only two times he mentioned oil was to tell us our future as a nation depends on using less of it:

We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before.

The only way this century will be another American century is if we confront at last the price of our dependence on oil. . .

That confrontation could prove very profitable for energy investors.

But it's not just his planned battle against oil dependence that will spur profits, he's also declared war on rising carbon emissions. And we all know that wars are profitable.

Calling for Carbon Caps

Other than mandating its use, capping carbon emissions is the next best thing to spur wide scale adoption of renewable energy. A cap-and-trade program instantly makes carbon a liability, thereby driving up the cost of burning fossil fuels to generate electricity or using carbon-intensive boilers to power energy-hungry industrial processes.

What that means is renewable energy instantly become more competitive, if not advantageous.

A utility is much more likely to build a wind or solar farm than construct a new coal plant if they know the coal plant comes with exorbitant lifetime carbon costs.

Remember this Obama quote from January a year ago? "So, if somebody wants to build a coal plant, they can - it's just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that's being emitted."

The industrial sector, too, would be more apt to cover their roofs with solar rather than use soon-to-be costly boilers and generators.

The idea here is to make renewables cost-competitive with traditional resources in an attempt to spur demand for clean energy and set us on a sustainable trajectory both economically and ecologically.

For investors, it means having to switch investment strategies to adapt to the changing dynamic of the energy market as we know it. It's a transition that, if understood and acted on, can make smart investors a lot of money.

Here's what the president asked for last night:

But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market- based cap on carbon pollution and drives the production of more renewable energy in America. And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.

He's telling you the industries that are about to receive direct federal investment, and a de facto competitive advantage. Long-term winners are being created, all you have to do is place your bet and wait. Recently sagging stock prices should present the perfect opportunity to do that. 

Cap-and-Trade with All the Fixin's

Calling for cap-and-trade comes with many profitable side dishes for those on the right side of the play. It's another story for those about to receive a ladle full of liability.

For starters, it means immediately expanding the use of renewable energy, which means lucrative investments in solar and wind and in the infrastructure companies that support those industries.

It also means major improvements to our aging grid―higher capacity, two-way communication intelligence, and increased transmission to move remotely-generated renewable electricity to populated areas.

The recently-passed stimulus had many provisions to that end, and Obama addressed them both last night:

Thanks to our recovery plan, we will double this nation's supply of renewable energy in the next three years.

We will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country. And we will put Americans to work making our homes and buildings more efficient so that we can save billions of dollars on our energy bills.

Even the Republican response by Bobby Jindal touched on the issue positively, saying, " we need to increase conservation, increase energy efficiency, increase the use of alternative and renewable fuels. . ."

Even Obama's campaign rival and well known Republican John McCain supports a cap-and-trade program. And according to house minority leader John Boehner, about a dozen republicans support the measure, which is more than enough to ensure passage in the Senate. The house, as we saw with the stimulus, doesn't even need a Republican vote to ram through legislation.

These things are happening in a very real way, and at a very rapid pace. And it's not just the government leading the charge, private capital is doing its fair share as well, and will continue to do so now that billions worth of renewable energy tax incentives have been included in the stimulus.

Venture activity in renewables, for example, has climbed by 1,500% since 2003, from $271 million to $4.1 billion. And new tax provisions are aimed at keeping that flow coming.

This transition is happening. Just as utilities are busy mitigating their carbon risk, you should be diligently doing to same, as well as increasing or establishing positions in cleantech growth top stocks.

Of course you should own First Solar (NASDAQ: FSLR), especially after their slip today.

And holding a broad cleantech ETF like the Market Vectors Global Alternative Energy (NYSE: GEX) is also a no-brainer given its exceptional exposure to global wind, solar, and efficiency companies.

I know the current market climate is bad, to say the least. But we have to place our bets now on the sectors and companies that will be the first to emerge from the carnage.

With billions of federal dollars now at their back, and a very favorable regulatory regime to follow, it's pretty obvious who those winners will be.

Yet there's plenty of remaining turmoil. And from turmoil comes large profits.

Buying and holding the big boys of cleantech on current dips is a great long-term strategy. But knowing the nuances of the industry―the small companies about to make a big impact―can earn you even higher returns.

That's what the Alternative Energy Speculator does every week. Thousands of readers enjoy best stock recommendations, buy and sell prices, and full analysis on each play.

Our most recent opportunity stems from the stimulus, and the billions it will pour into cleantech. Take a moment to read about it. It could be a very profitable 10 minutes for you given the current direction of the domestic energy market.