Sunday, October 5, 2008

Where do we go from Here? "Climate change stocks fall more than wider markets"

In the charts following this Reuters story I'm going show you how selection of endpoints can result in a bit of statistical slight of hand. It won't change the overall conclusion but does matter to where we go from here. For the record I believe we're setting the stage for an upward run in both the overall market and the renewable energy groups that will be followed by a third leg down in the broader market. I'll flesh out this thinking over the next week or so. Let's start with where we are. From Reuters:
Shares in companies specializing in curbing greenhouse gas emissions, including energy efficiency and renewable energy technologies, have tumbled faster than wider markets this year, indices showed.

"It would be easy to blame the credit crunch, which certainly has made it more difficult for project developers in wind and solar to raise debt finance," said Michael Liebreich, chairman and CEO of research firm New Energy Finance on Friday.

Another contributory factor was a correction in high valuations for some renewable energy companies, said Liebreich....MORE

The first chart is the PowerShares Wilderhill Clean Energy ETF vs the Russell 2000 (gold line), twelve month comparison. RUT down ~26%, PBW down ~43% From BigCharts:

The next chart moves the first endpoint closer to the present, it's the comparison year-to-date, RUT down ~20%, PBW down ~52% again from BigCharts:

By starting at New Years Day the RUT's performance improves a bit while the disaster of the clean energy stocks is highlighted. Finally, to hammer the point home, here's the comparison of the Russell with the Claymore/MAC Global Solar Index ETF (symbol TAN). What we've done here is strip out the wind and other non-solar components and changed the first end-point to mid April, when the ETF began trading. From BigCharts:

RUT down 10%, TAN down ~39%. That's about as ugly a relative performance as you will see, short of an index of bankruptcies*. This relationship is very close to reversing. More to come.

*I've never done one but an informed guess would have the chart look like a cross between a ski slope and this, from "Bailout: Climateer Sure was Wrong on his Congressional Bet":
...The chart below of the bailout odds looks very similar to a bank stock crashing -- something Congress is getting very used to these days.