Monday, June 30, 2008

Mid-Year Price Changes of Major Commodities

From Bespoke Investment Group:

Ytdcommodi



Go here for their commentary and here for

That Was Ugly
Today's close put the finishing touches on the worst first half to a year for the Dow since the index was down 14.60% from January through June of 1970. The 14.44% decline for the Dow makes it the tenth worst first half since 1900....

Ausra opens first manufacturing plant in Nevada

This is a big deal. From Reuters:
Solar thermal power developer Ausra on Monday officially opened its first U.S.-based manufacturing plant for reflectors and other components of utility-scale solar power plants.

Ausra says that once the plant gets to full production in a couple of years it will be the largest plant making solar thermal power components in the world....MORE

Floods: Costs and risks are escalating

Attention property/casualty insurers.
From the St. Louis Post-Dispatch:
If it seems to you that there has been more damage from environmental catastrophes recently — from hurricanes to wildfires to the current flooding — you're right. Direct costs from natural disasters (adjusted for inflation) have been increasing in this country for the last several decades.

Of all natural disasters, though, floods account for more lives lost and more property damage than any other. In the St. Louis region, the risks of flooding have been increasing, and they may get worse.

One reason is that as more land is developed, more soil is covered with pavement and buildings, leaving less ground to absorb rain water. Instead, it runs off into creeks and rivers, increasing flood heights. Also, as researchers in the region have shown, flood stages on the Missouri and Mississippi Rivers are higher than they have been in the past because of physical alterations to the river, such as channelization and the construction of engineering works, including levees. Finally, it is possible that climate change, too, will increase flood events in the Midwest....MORE


HT: Common Tragedies who headlined his post:

and continues:
I’ve been pretty frustrated with the media’s coverage of the recent wave of flooding in the midwest. There’s been plenty of empathy (which is nice) but far too little substance. Specifically, while it may sound coarse, we need to start asking tough questions about how damage from future floods can be contained and how the public burden of this damage can be mitigated. Carolyn Kousky, who will be joining RFF in the fall, has a great article on just that in today’s St. Louis Post Dispatch:

Energy Politics; Saskatchewan Style

I received this in an email. I opened it. Then I tipped over in my chair. I'll be okay, if I can just stop laughing.
From Small Dead Animals:
...So if you would, Mr. Dion - copy this down and post it to your caucus' Energy Star fridge door;

1. Saskatchewan floats upon lakes of oil.
2. The beaches of those lakes are comprised of endless glistening dunes of coal.
3. Wafting over the scene are massive cumulous clouds of natural gas.
4. We have a population density of well under 2 persons per square km.

You see, Saskatchewan doesn't need no stinking giant fans. We don't need no stinking giant mirrors. We don't need no stinking puny hybrids. (We don't need no stinking nuclear power, for that matter, though we're positively glowing with that, too.)...


They have a map of the lakes, I'm not familiar enough with Sask. to identify the beaches and dunes. Talk about power politics.

World Economy Would Collapse If Oil Hit $200, Deutsche Says

Three quickies, the first is from Bloomberg:
The global economy would collapse if oil hit $200 a barrel, said the top energy analyst at Germany's largest bank.

``Two-hundred dollar oil would break the back of the global economy,'' Deutsche Bank AG's Chief Energy Economist Adam Sieminski said in an interview today in Tokyo. ``Next step after $200 would be global recession and bad news for everybody.''>>>MORE

Next up, Mish's Global Economic Trend Analysis:

Deflationary Hurricanes to Hit U.S. and U.K.

Congratulations (of sorts) go to the UK as British household debt is highest in history.

British households are now more indebted than those of any other major country in recorded history, it has emerged....MORE


Finally, from Clusterstock:
BIS: Don't Worry, Inflation Not a Problem Because Global Economy Will Crash
The Bank of International Settlements (BIS), the international body responsible for coordinating action among central banks, says the global economy is at the "tipping point" of a downturn that could be so severe that inflation concerns could melt away in the face of a deflationary spiral (WSJ)....

Alrighty then.

Indian Wind-Turbine Firm Hits Turbulence

The Journal has been on top of this story for a couple months now.
From the Wall Street Journal:
The grand U.S. ambitions of Indian wind-turbine manufacturer Suzlon Energy Ltd. are facing mounting problems.

The Indian company -- the world's fifth-largest wind-turbine maker by sales -- earlier this year acknowledged that 65 giant blades on turbines it had sold in the U.S. Midwest were cracking because of the extreme gusts in the region. The company is reinforcing 1,251 blades, almost the total it has sold in the U.S....

..."The product issues notwithstanding, we don't expect any major impact upon our sales," said Vivek Kher, a spokesman for Suzlon. In its financial year ended March 31, Suzlon revenue jumped 71% from a year earlier to $3.19 billion....MORE

HT: Environmental Capital

President Obama’s First Term Looks Grim, says Gross

Well duh. If I could find my tinfoil hat*, I'd say that Karl Rove and George Soros got together after realizing how brutal this next presidential term is going to be and decided on a four year interregnum before resuming Bush/Clinton/Bush/Clinton (Hil)/Bush (Jeb)/Clinton (Chelsea).
Plus you've got the Mayan calendar and the asteroid.
From 1440 Wall Street:
Why in the world would anyone want to take on the mess the United States of America has become? Bill Gross of Pimco is wondering himself, and his crystal ball would seem to suggest that Barack's first term in likely to be a difficult one for the wunderkind from Chicago:

By January, home prices will be down another 10 percent or so and our Japanese-style property deflation will be in full stride. Congress will have had its summer recess though and spent September and October on the campaign trail. They had to get re-elected you know, so those homeowners just had to wait.

But you’ll have your tax bill and your healthcare bill and your housing fix, and somehow it’ll all be paid for by wealthy hedge fund managers, oil companies or, pray tell, a robust economy that’s creating good jobs at home instead of exporting them abroad. Uh, I don’t think so, Mr. President. That’s where the “yes we can” morphs into “no we can’t.” Not that you won’t accomplish most of that – the robust economy and the good jobs notwithstanding. It’s just that you won’t be able to pay for it and it’s better to admit it now as opposed to later

So let’s start out by dropping all of that “budget neutral” rhetoric and admit where we’re headed. Your administration will produce this nation’s first trillion dollar deficit!
Pimco...MORE, including the link to Pimco's " Investment Outlook" for July '08.


*Here's a handy website if your hat is lost, ah found it:











EEEvil Conservative

Children of the Corn Selloff

Mr. Gaffen beat me to it (the story, not the headline, even I am not that corny).
From MarketBeat:
The latest report on the corn crop was better news for the farmers and bearish for the traders of the product, but in a season filled with unseasonably harsh weather, the price of corn may remain unpredictable for months to come.

In trading Monday, December corn futures fell by 30 cents, their daily limit, in trading on the Chicago Board of Trade, after the U.S. Department of Agriculture said that farmers planted more acreage than was originally anticipated in the USDA’s planting intentions report, released in March.

Farmers planted about 7% fewer acres than last year — about 87.3 million acres — but that’s still more than the 86 million acres anticipated in March. Still, intentions don’t add up to much more than a hill of beans (or a hill of corn, as it were) if the weather remains difficult and the harvest comes out worse than currently expected....MORE

Here are two of the headlines,
From Bloomberg:

Wheat Plunges as U.S. Report Shows Spring Acreage Increased

From the Guardian:
US corn falls daily limit on USDA; soy hits record

Ahem, I'll just leave that first line out there, like a high hanging curveball.

Busy U.S. rail network creaking under strain

From the AP via the Columbus Dispatch:

Demand for freight trains is expected to double in the next 25 years, and the nation's 140,000-mile network of rails -- which carries everything from grain to cars -- already is overloaded. That could mean future trouble for the economy.

Railway executive Matthew Rose stood before fellow industry leaders, pointing to a map meant to tell the future of the U.S. rail freight network. It was drenched in red -- east to west, north to south.

The blotches illustrated areas where, by 2035, traffic jams could be so severe trains would grind to a halt for days with nowhere to go.

"For those of you who've ever seen a good rail meltdown, this is what it looks like," Rose, chief executive of Burlington Northern Santa Fe Corp., said as people in the crowded hall shifted uncomfortably in their chairs. "It's literally chaos in the supply chain.">>>MORE

Trina Solar Signs $158 Million Deal with Greenergy (TSL)

A couple weeks ago we had "Trina Solar in Three-year $158 Million Pact (TSL)"* but it was in Italian and my translator was wrestling with a container-load of wine stuck in Marseille and then I forgot about it. It looks like Trina got around to putting out their release.
From SustainableBusiness.com:

Italian Company to Distribute Trina Solar Modules
Trina Solar Limited, an integrated manufacturer of photovoltaic (PV) products, today announced that it has entered into a sales agreement with ERGYCA Power Srl, a subsidiary of Italy-based GreenergyCapital SpA (GEC.MI).

Under this fixed-price, three-year agreement, Trina Solar will supply GreenergyCapital with PV modules at a total value of US$158 million dollars....MORE

*My Italian pretty much starts and ends at Leporello's aria from Don Giovanni, which scared me when I was much younger:
Sua passion predominante  His overiding passion
E' la giovin principiante. are the young beginners (adolescents).

Prince Charles starts $2 billion eco-friendly property fund

From TheDeal.com:
England's royal family is doing it part to save the environment while also jumping into private equity, as Prince Charles is starting a £1 billion ($2 billion) property fund, dubbed Tellesma, to invest in eco-friendly projects throughout Britain.

The Telegraph reports:

The Prince of Wales has appointed investment bank Credit Suisse to begin raising money for the fund from Middle Eastern investors....MORE

Cheap Chicken and Global Warming: Hotter than Hell

From CattleNetwork:

Kentucky Fried Chicken wants to know: Is it really hotter than Hell this summer?
In honor of the spicy, bold taste of the brand's signature KFC Hot Wings, the world's largest chicken chain announced today that Americans living in cities and towns that record temperatures hotter than those in Hell, Mich., have a chance to win free Hot Wings. The "Hotter than Hell" offer is for a five-day period beginning today and ending July 4. Hell, Mich., population 70, in the southeast corner of the Wolverine state, will be the finger-lickin' good focus of fried chicken fans from coast to coast this week. Residents nationwide in one of the 50 United States or District of Columbia are encouraged to visit KFC.com to check the temperature in Hell and see how their community's mercury matches up....

Ethanol Investing Decline

This almost made Climateer's quote of the day.
From Domestic Fuel:
The issue of investment and financing for ethanol plants and bio refineries in general was addressed today by Chris Groobey, Baker & McKenzie, LLP. He works on project financing with investors and lenders and mostly in renewable fuels. He painted a pretty bleak picture. In fact, he says the New York investment community is not interested in biofuels right now. He says they’re tapped out and that ethanol and biodiesel are not of interest to them at all....

USDA Forecasts More Corn Despite Floods

It's all in how you interpret it. Oh, and your level of sophistication. July corn is up a penny.
From the Illinois Farm Bureau:

Springtime floods wiped out 2 percent of U.S. corn plantings, the government said Monday, but farmers may reap the second-largest crop ever because they sowed far more land than expected.

Farmers planted 87.3 million acres of corn this spring, said the Agriculture Department, or 1.3 million acres more than projected in March....

USDA Acreage Report

USDA Grain Stocks Report

Here's commentary from AgWeb:


CalSTRs moves to diversify into roads, bridges, power lines

CalSTRs and CalPERS seem to be taking different approaches to long-term investing. Saturday we posted "Pension Funds Drive Growth Of Alternative Assets. And: CalPERS Up 68% on Commodities; Down 31% on Real Estate. Action, Baby, Action!". Today, from Pensions & Investments:
CalSTRS has made the first move in implementing a new infrastructure portfolio that could top $1 billion and help the pension fund reap excess returns while hedging against inflation.

The $169.2 billion California State Teachers’ Retirement System, Sacramento, is tiptoeing into infrastructure — potentially investing in power lines, bridges, ports and other assets — after mulling over the asset class for more than a year.

At the June 4 investment committee meeting, members approved the first draft of the policy for a fixed asset financing portfolio, or infrastructure portfolio, that will begin at $1 billion, but will grow if the initial investments prove successful, according to an agenda item from the meeting.

CalSTRS, like other investors who have recently carved a slot for infrastructure in their portfolios, sees the asset class as a hedge for long-term liabilities, a hedge against inflation and an avenue of diversification for the overall investment portfolio.

Also prompting interest is the expected low returns of the equitymarkets in coming years, said Alan Biller, president and founder of consulting firm Alan D. Biller & Associates Inc., Menlo Park, Calif....MORE

This isn't to say that CalPERS hasn't done some infrastructure stuff, and they did announce $640 mil. into Khosla but, with all the noise they make as a member of CERES on socially responsible investing they could do more, a lot more.

With just under a quarter-trillion in assets they've announced less in clean energy investments than a single individual, T. Boone Pickens. They could, for example, sell off the $2,500,000,000 worth of ExxonMobil they own and build a wind farm 1/4 the size of Mr. Pickens'. Or they could follow the CalSTRS example and simply go about their fiduciary business. Whatev.

Wind and Solar Will Spur Natural Gas

Last Monday we linked to the WSJ's story "Weather and Natural Gas". We could be looking at $20.00 natural gas this winter.
Here's Jim Kingsdale with another angle. From Energy Investment Strategies:

The price of natural gas in the U.S. has about doubled in a bit less than a year despite the fact that U.S. production has actually increased about 5% due in part to new horizontal drilling techniques being applied to recently developed vast “unconventional” gas fields in the U.S. and Canada like Haynesville. So it might seem like the price of gas has gotten ahead of fundamentals. But there are good reasons to be bullish about gas prices longer term.

Natural gas is inherently cheap on two scores. One is that the BTU equivalency of gas to oil would price gas around $23 per Mcf, nearly double its current price. Also, gas is the cleanest burning fossil fuel so it should be advantaged if and when carbon taxes are passed to deal with climate change.

Gas is a regional market and supplies in Europe and Japan are tighter than in the U.S. Thus prices are higher there, allowing them to outbid U.S. LNG terminals for imports which has virtually eliminated LNG supply coming to North America. Moreover, European and Asian gas supply prospects may be even tighter after 2009, as discussed here which would continue to preclude LNG supplies to the U.S. market absent much higher prices. ...MORE


New Wind ETF FAN Cools Off Sunburned Portfolios

From Tom Konrad at AltEnergyStocks:

Since I last covered clean energy mutual funds and ETFs, the sector has seen the launch of two solar ETFs (KWT the Market Vectors Solar Energy ETF from VanEck, and TAN, the Claymore/MAC Global Solar Energy ETF.) Continuing in the tradition of cute ticker symbols, First Trust's new global wind energy ETF is FAN.

I recommend that investors stay away from the (very expensive) green energy mutual funds, and invest either in one of the ETFs, or if they have a few tens of thousands of dollars to invest and are willing to roll up their sleeves a little, they buy a representative sample of the stocks (a "tracking portfolio") held by the mutual funds and ETFs, and save further on expenses.

The Problem with Tracking

The difficulty of tracking portfolios in clean energy for North American investors is that the wind sector is dominated by European companies, which can require considerable knowledge and cost to purchase....MORE

Energy storage coming to a power grid near you

From cnet's Green Tech blog:
Someday, the electricity grid will operate with the equivalent of a giant hard drive. But in the short term, grid storage will look more like a PC's cache or RAM, able to serve up small bursts of power to keep things from crashing.

A panel of experts, organized by the New England Clean Energy Council, earlier this week said that the utility storage field has enormous potential. But rapid deployment of storage devices is held back by concerns over technology risk and financial complexity.

Technology optimists say that wide-scale energy storage will change the face of the transmission grid and make wind and solar power more compelling economically.

In this scenario, utilities store electricity made from renewable sources or produced during off-peak times. Then, when demand for electricity peaks in the middle of the day, they could draw from the stored-up charge....MORE

Here's their slideshow:

What's in store for power grid storage

Saturday, June 28, 2008

U.S. Corn Consumption

Lifted from Fat Knowledge:


He has commentary, here.

Pension Funds Drive Growth Of Alternative Assets. And: CalPERS Up 68% on Commodities; Down 31% on Real Estate. Action, Baby, Action!

From FinAlternatives:

Last year, alternative assets managed on behalf of pension funds by the world’s largest 99 investment managers grew by 40% to US$822 billion from US$586 billion in 2006.

According to research by Watson Wyatt and Global Investor magazine, over half the top 99 managers are based in the U.S., while over a third are based in Europe. Real estate managers lead the ranking, occupying the top nine positions and accounting for 62% of the assets. Infrastructure and commodities remain smaller, but growing alternatives classes among pension funds with the top 10 managers in these areas being responsible for US$43bn and US$16bn of assets respectively....MORE

Sometimes I wonder about stories like this, from the Sacramento Bee:

Rising commodity prices bring a windfall to CalPERS

Runaway oil and food prices are angering consumers but yielding sweet profits for investors such as the California Public Employees' Retirement System.

CalPERS has racked up a 68 percent return playing the commodities market in the past 12 months....
And this from Bloomberg:

Calpers May Sell Some Land Holdings After 31% Decline
...One of the Calpers ventures under review is LandSource Communities Development LLC, a 15,000-acre tract north of Los Angeles known as Newhall Ranch, which filed for Chapter 11 bankruptcy protection June 8 after failing to restructure its debts with lenders. Calpers paid $970 million in cash and property to homebuilder Lennar Corp. through adviser MacFarlane Partners for 62 percent of the development in January 2007....

But then I think: "Come on seven, baby need a new pair of shoes!"

A Second Wind for Aging Wind Turbines

This trend was first pointed out to me by Maril Hazlett at the Climate and Energy Project. I've forgotten if it was in an email or a post on the CEP blog.
From BusinessWeek:

A two-year wait for new turbines is forcing some buyers into the secondhand market to meet the EU's carbon reduction targets

The 100 or so inhabitants of the Isle of Gigha, off the west coast of Scotland, aren't your typical trendsetters. Yet when this small island community spent $870,000 for three secondhand Vestas (VWS.CO) back in 2004, it became one of the first buyers to tap Europe's blossoming market for used wind turbines.

Now churning out enough power to meet almost all of Gigha's annual electricity needs, the 675-kilowatt wind farm has significantly cut the island's carbon dioxide footprint while generating an annual $150,000 profit for Gigha Renewable Energy, the locally owned company that operates the turbines. "To be honest, we bought them for financial reasons," says Jacqui MacLeod, manager of the Isle of Gigha Heritage Trust.

The success of Gigha's reconditioned turbines—known locally as the Dancing Ladies—highlights a fast-growing new market created by the global boom in wind-generated power. The almost two-year waiting period (BusinessWeek.com, 2/27/08) for new turbines from the likes of General Electric (GE) and Siemens (SI) is forcing some buyers into the secondhand market to meet the European Union's CO2 reduction targets (BusinessWeek.com, 1/23/08). Moreover, used turbines cost 40% less than new turbines, and their typically smaller size makes it easier to get local approval for their installation....MORE

Solar: Spain May Cut Incentive Program, Lehman Says

From Barron's Tech Trader Daily:

Spain’s government is considering a proposal which would significantly cut the incentives built into the company’s solar subsidy program, Lehman’s Vishal Shah asserted in a research note this morning.

Shah says the latest proposal being discussed by the Spanish government would call for an annual cap of 300 MW in 2009 with a maximum of 2MW for ground-mounted installations. The proposal would cut incentives to 25 euro cents/kilowatt-hour for ground-mounted and 33 cents for roof-top installations, he writes. The current level is 42 cents....MORE

Friday, June 27, 2008

Citigroup sinks to 10-year low, Goldman urges short sale

There's a headline you don't see every day. From Reuters:
Citigroup Inc shares fell to their lowest level in nearly a decade after a Goldman Sachs & Co analyst said investors should sell the largest U.S. bank's stock short as losses mount from troubled debt....

Like the post below, this is from Thursday, we're playing catch-up.

Brokers no longer 'attractive,' says Goldman Sachs

That's a Thursday sub-head at MarketWatch (or Match.com).

Bear market narrowly averted, traders start weekend with stiff drinks

Lifted from FT Alphaville:

The Dow closed within a whisker of a bear market - the index is down 19.99 per cent from its all-time high - and is now off 10 per cent this month.

Meanwhile, the S&P 500 is down 3 per cent this week, for a fourth consecutive week of declines and the longest losing streak since January. The index has fallen 8.7 per cent this June, which is the worst monthly performance since its precipitous 11 per cent decline in September 2002.

The Nasdaq is down 3.8 per cent on the week.

And June’s not over yet.

How to Stop the Next Bubble

A roundtable from Prospect Magazine:
The financial crisis has shown that markets are bubble-prone and that laissez-faire regulation doesn’t work. The authorities need to get a grip if we are to avoid a mega-bubble. But we may need an even deeper crisis for that to happen


Mark Hannam
has worked for the Bank of England, Citibank and Barclays;
Jonathan Ford (chair)
is deputy editor of Prospect;
John Gieve
is deputy governor for financial stability of the Bank of England;
Martin Wolf
is chief economics commentator at the Financial Times;
Anatole Kaletsky
is an economic commentator and associate editor of the Times;
George Soros
is chairman of Soros Fund Management
JONATHAN FORD (CHAIR): I want to start by asking where we are in the crisis. Is it over? George Soros, you have said that this is the worst crisis we have been through for 60 years. Presumably you still believe that there is worse to come?
GEORGE SOROS: There is now a widespread belief that the crisis is over. I think, on the contrary, that the effect on the real economy is yet to be felt. The measures taken by the authorities will not bring recovery. There are four reasons for this. First, the fall in house prices in the US is only halfway over and in Britain it has hardly begun. Second, consumers have been slow to adjust their spending habits, but this is about to happen....MORE


U.S. biofuel plants go bankrupt on feedstock costs

From Reuters:
Soaring corn and soy prices on top of rising construction costs and tight credit markets have pushed about a dozen U.S. biofuel plants to file for bankruptcy protection, experts said.

Prices for corn, the feedstock for most U.S. ethanol plants, hit fresh records above $8 per bushel this week as floods this month in the Midwest have caused billions of dollars of crop damage.

"Corn prices are making the feasibility of ethanol plants every day more and more questionable," said Alex Moglia, president of Moglia Advisors in suburban Chicago, which helps biofuel companies restructure....[who knew-ed]

...Moglia said about 12 small to midsize biodiesel and ethanol plants have declared bankruptcy in recent months. Renova Energy LLC, a company that owns a partially built 20 million-gallons-per year ethanol plant in Idaho, was the latest to declare bankruptcy last week. Kansas-based Ethanex Energy Inc. declared bankruptcy in March.

"There will be more to follow," said Moglia. Some plants are restructuring their debt and taking steps to manage risks, but many others are not, he said....MORE


Amazing New Trade Data

From Freakonomics:

Wow. We really do live in the midst of a tidal wave of more detailed and interesting data.

The latest: importgenius.com, the brainchild of brothers Ryan and David Petersen, with Michael Kanko. They exploit customs reporting obligations and Freedom of Information requests to organize and publish — in real-time — the contents of every shipping container entering the United States....MORE

Worst June Since 1930

It's comforting to note that the DJIA then bottomed in July.
1932!
From Bespoke Investment Group:
Man, this is getting ugly. If the month were to end today, the Dow would be down 10.30% this June. That would mark the worst June for the Dow since 1930, and the worst month for the index since September 2002 (-12.37%). Unfortunately, the month still has one more day next Monday....MORE

After that July 8,1932 closing low of 41.22, the Dow put on a nifty little seven week sprint to an intraday high of 77.01 on August 29. That 87% move might be the largest ever for a major index.
Of course very few people called the bottom with the notable exception of Robert Rhea:

...The next great Dow theorist, Robert Rhea, initially stumbled upon the Dow Theory during his endeavor to find "a system" for helping him make money in the stock market. In his attempts to disprove the theory, he became a convert. Rhea was a very serious student, and he was able to utilize the Dow Theory as interpreted by Hamilton to his advantage, buying and holding stocks in 1921, and basically holding them until late 1928 (he reversed his short position when he realized Hamilton's advice was incorrect in early 1926), missing only the final blowoff phase. He also "played" the short side successfully during the subsequent deflation. In 1932, he began publishing his newsletter based on the Dow Theory, called the "Dow Theory Comment."

Rhea called the bottom of the stock market in July 1932 almost to the exact day and the subsequent top in 1937. On July 21, 1932, with the Industrials at 46.50 and the Rails at 16.76, Rhea instructed his broker to tell his friends "the Dow Theory implied heavy buying for the first time in over three years." Further, on July 25, 1932, Rhea sent a memo to 50 correspondents, part of which is reproduced below:...

Source



LCD Panel Glut? UBS Says Oversupply Could Hurt Corning (GLW)

From Barron's Tech Trader Daily:

The LCD panel industry is headed for an oversupply situation in 2009, UBS analyst Sean Kim warned today. He contends a 54% capital spending hike by the industry this year is going to lead to an over-abundance of capacity in 2009.

Kim’s colleague Nikos Theodosopoulos this mornings trimmed his estimates on Corning (GLW) over the supply concerns, which he notes logically will lead to pressure on LCD glass pricing. He now sees glass prices down 10.1% next year and 10.3% in 2010; he had previously expected reductions of 8.8% next year and 9.6% in 2010....MORE

S&P eyes 'political event risk' for ethanol

Loyal (and long-suffering) readers of Climateer Investing will probably be thinking "Simon Cameron!"
From MarketWatch:
The U.S. remains the largest ethanol producer in the world, even as spiking commodity and food prices kill profits for domestic biofuel names, an S&P study on the controversial fuel said Thursday.

The study zeroes in on a growing "political event risk" for the ethanol industry, if the food-verses-fuel debate sways public opinion and cuts into heavy government support in the form of tariffs and farm subsidies.

Globally, the U.S. leads ethanol production with 6.6 billion gallons in 2007, close to the government's 2012 target of 7.5 billion gallons, and ahead head of the Renewable Fuels Standard minimum requirement.

"With the exception of Brazilian sugar-cane based ethanol production, strong biofuel volume growth spells low profitability," said the study, which comes on the heels of rock-bottom stock prices for some ethanol makers....MORE

Magnus: Deleveraging and its two big deflationary forces

From FT Alphaville:

The latest offering from George “Minsky Moment” Magnus, senior adviser at UBS in London, focuses on that dismal word, “deleveraging”, which he describes as a “rare but significant influence over the course of the economic cycle”.
The deleveraging phenomenon tends to be self-reinforcing, and characterised by a protracted work-out of balance sheet repairs. Understood this way, it provides some conclusions about the deleveraging process, says Magnus:

First, it has to run its course, and time in this context is measured in years, not months or quarters.

Second, it may or may not induce a deep economic downturn, but it is most likely to be protracted, giving rise to 2-3 years (or more) of significantly below-trend growth in which unemployment will rise and capacity use decline. While it may be punctuated by quarters of positive GDP growth, “this does not mean recovery is at hand”....MORE

Bicycle Riding a Secular Trend To Profit

From Minyanville:
There are very few bike-specific companies out there and none that would make for a really liquid trading vehicle. Likewise, there's nothing of note in the retail or service spaces, as most bikes tend to be sold by large retailers for which they represent only a small piece of the business.

In keeping with my general preference for buying monopoly suppliers rather than the final producers -- think Intel (INTC) versus any PC maker -- my pick in the bicycle space would have to be Shimano Inc., which trades on the Toronto Stock Exchange (7309-TSE), as well as on the pink sheets (SHMDF) in the U.S. The stock made a big move February through April and has been marking time since then. A bit of a penant formation to my relatively untrained eye....MORE

Oil Is Rising, But Volume Is Low

From MarketBeat:
Carolyn Cui has this report on what’s happening in the oil market.

Oil continues to push higher, but there’s some doubt lingering in the trading pit: the volume is not great.

As of 11:55 a.m. ET, crude oil’s most active August delivery contracts traded about 140,000 lots, compared to the contract’s average daily volume so far this month of 298,984 lots, according to real-time market data. Although it’s still early in the day, “it is way off the normal level,” said Raymond Carbone, president of Paramount Options Inc....MORE

The August futures were up as much as $3.35 earlier. Last I saw they were up around a buck.


Breakout for BTU: Technician buys Peabody Energy

This may be a bit late to the party, see our posts below. In particular, we've been comparing the performance of the Wilderhill Clean Energy ETF vs. BTU for a year now. Coal is the number one performer among the Dow Jones industry groups.
From Blogging Stocks:

"Coal miner Peabody Energy Corp. (NYSE: BTU) looks hot," says Leo Fasciocco, who focuses on stocks that have broken out from technical basing patterns.

In his The Ticker Tape Digest, he explains, "The stock rose above its break points of $81.20, hitting a new high." He adds, "With net set to surge 70% this year, we see an upside target of $105 per share."

"Peabody, based in St. Louis, is a major producer of coal with annual revenues of $4.7 billion. BTU's coal fuels more than 10% of U.S. electricity generation and 2% worldwide....MORE

Climateer Investing on Peabody:

April 19, 2007
Moral Judgment On 'Sin Stocks' Means Higher Returns For Vice-Friendly Investors

Thursday, May 22, 2008

Big Coal vs. Wilderhill Clean Energy (BTU; PBW)

Peabody has out performed clean energy by 50 percentage points in the last six months.
Via BigCharts:



Note: the outperformance is now over 60 percentage points!

TheStreet.com Takes Down First Solar (FSLR)

I'm lifting this from Clusterstock:
What's currently taking First Solar (FSLR) down over 10 points (~4%) today? Possibly Jim Cramer's TheStreet.com analyst Larsen Kusick: First Solar, on the other hand, is trading at almost 50 times 2009 expectations. This multiple may seem attractive relative to the high rate of expected earnings growth of over 96%, but I'm more concerned with the sustainable five-year earnings growth rate....MORE

cramer.jpg

Barclays warns of a financial storm as Federal Reserve's credibility crumbles

Ambrose Evans-Pritchard grooves on this kind of story and because he looks for them, he finds them. It was he who brought us RBC's warning "Royal Bank of Scotland: Global Stock and Credit Crash Alert". He's useful for putting stuff on the radar, not so much for inflection/turning points.
From the Telegraph:

US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.">>>MORE

Thursday, June 26, 2008

Some Insight into the Markets and Economy as We End the Second Quarter

Cassandra gets all serious on us.
From Cassandra Does Tokyo:

Notes To Self - End Q2 2008

This one is not for you, but for me...for the internal dialogue I run with myself - the one that integrates and assimilates the masses of new information arrival and worldly observations in order to update my forecast of the future. Necessarily, such a dialogue must be honest and as much as possible free from flowery language, normal humourous observations and effect to insure its integrity. Here goes...

Markets are pushing the commodity and the inflation meme to an extreme. And this swing of the pendulum from deflation in 2002 to the present was forecasted from the moment US authorities decided to rescue markets and the economy from cyclical recession by overly loose fiscal AND monetary policies , and in earnest from 2004 when Asian mercantilists joined the fracas by (i) continuing ZIRP and nearZIRP (ii) by not liquidating previously accumulated USDs (iii) and by unprecedented reserve accumulation by China, (iv) and other partially or unsterilized USD interventions and accumulations. Expectations in modernity are for the pendulum to swing with great speed - the speed with which epiphanies conjure themselves in market participants heads. But since these are policy-driven consequences reinforced by market feedback loops, the price and economic trends that emerge are strong and persistent....MORE

First Eagle manager Eveillard takes dim view of U.S. stocks; favors Japan

The RGE Monitor story (below) hinted at Japan, here Jean-Marie says it out loud. He don't much care for Greenspan either.
From MarketWatch:
Mutual-fund manager Jean-Marie Eveillard is a veteran buyer of value stocks, and when he surveys the global investment landscape nowadays, years of experience make him a cautious shopper.

..."When financial history is written five or 10 years down the road," he added, "Greenspan will be seen as the worst Fed chairman since the Fed was created in 1913."...

...Still, North American firms in general don't really attract Eveillard, who is a native of France and is based in New York. Nowadays he's more interested in putting money into Japanese stocks, which make up 30% of his fund, and Western Europe, where another 30% of assets are committed.

He's also looking closely at the emerging markets of Asia. "The future lies in Asia," he said. "We have to adjust to the fact that that's where the action is going to be."
So later this summer, Eveillard will hear from one of the fund's analysts about potential investments in India.
"We'll get our heads together and try to figure out whether we like some of those businesses and whether the securities are available at reasonable prices....MORE

Navigating Through Stagflation

From RGE Monitor:

Today we will focus on how currencies are faring while central banks around the world are caught between a rock and a hard place with growth slowing and inflation ticking dangerously higher.

Given the moderate core inflation trends, recent hawkish Fed rhetoric seems aimed more at assuaging inflation expectations than signaling a series of aggressive rate hikes this year. At most, the Fed's accommodative policy stance may turn neutral this year but it seems still too soon for it to turn restrictive, considering the unresolved financial crisis and housing market distress. Across the Atlantic however, restrictive policy by the ECB looks more likely: The euro area's balance of risks is tilting towards inflation as the bigger threat to the economy than slowing growth, at least in the short-term. A wider interest rate gap between the Fed and the ECB raises the risk of a re-test of the EUR/USD's all-time high before the year is out. A weaker dollar could mean high commodity prices will stick around for the balance of the year, offsetting some of the anti-inflationary effect of ECB rate hike(s).

Meanwhile in emerging markets, attempts at fighting inflation have been limited by their pegged currencies and, as a result, haven't sufficed to turn real interest rates positive and dampen commodity demand. With emerging markets reluctant to make a large revaluation against their currency pegs, some are calling for a coordinated revaluation of developed country currencies to stem the rise of global inflation....MORE

So, When do We Rally?

I just heard that the DJIA is back to 2006 levels and that GM is back to 1955 levels.
From MarketBeat:
Days like this are the type that cause market mavens to break out the word “capitulation,” and attempt to divine the myriad signals that suggest that yes, we have indeed reached bottom, and can only go up from here....READ IT ALL

Wind: Duke Energy buys Catamount Energy for $240 million and assumed debt

From the Triangle Business Journal:

Duke Energy Corp. has acquired Catamount Energy Corp. from Diamond Castle Holdings, a transaction that will significantly increase Duke's wind-energy operations.

The deal is valued at $240 million.

Catamount Energy, based in Vermont, was formed in 1992. Since 2001, the company has developed wind projects in the United States and the United Kingdom. Catamount has 300 megawatts of renewable energy in operation, including the Sweetwater project in Texas, one of the largest wind-powered facilities in the world....MORE

TradingMarkets adds (from DUK's press release):

...Today's acquisition, valued at approximately $240 million plus assumed debt, is a continuation of Duke Energy's strategy to develop renewable energy. In May 2007, Duke purchased Tierra Energy, a leading wind developer in Austin, Texas. The combined entity will have more than 5,000 megawatts of wind energy under development in 12 states and approximately 500 megawatts of operating assets by the end of 2008.

Today's announcement follows several other recent renewable initiatives announced by Duke Energy, including a $100 million plan to install electricity generating solar panels at up to 850 North Carolina sites; a plan to purchase electricity output from the nation's largest photovoltaic solar farm to be built in Davidson County, N.C.; a 20-year contract to purchase 100 megawatts from a wind farm in Indiana; and a request for proposals to purchase significant amounts of electricity from renewable energy providers in Ohio....

Europe: 'No exceptions' for member states on auctioning: Dimas

A snippet from PointCarbon:
All EU member states must auction 100 per cent of their allowances to power companies and any exceptions made for coal-dependent countries risks undermining the 27-nation bloc's target on cutting emissions of climate-changing gases, Europe's environment commissioner Stavros Dimas said in a speech in Poland on Thursday.

Société Générale: “We see a y-shaped global recession. We are going down before looping backwards”

From FT Alphaville:

"We had promised more on the latest missive from Societe Generale’s Albert Edwards - so here it is.

This is evidence, we think, that only Edwards can out-Edwards when it comes to alarmist market strategy report. It’s just marvellous".

First, some context:

The entrenched bias towards bullishness infects virtually all parts of our business and means investing on the basis of forecasts is a waste of time…

Yet there is no big conspiracy about this. It is simply that an equity/economic bear standing out from the crowd runs the risk of being very wrong (so too obviously do the bulls, but funnily enough no-one seems to mind that). Being bearish and being wrong attracts the derision of the salesforce (though not necessarily the clients) which pressurises management to remove the offender....MORE

Invesco PowerShares to List Global Wind Energy ETF (PWND)

This follows on the heels of the First Trust Wind ETF (FAN).
From CNN Money:

Invesco PowerShares Capital Management LLC, a leading provider of exchange-traded funds (ETFs), announced today the anticipated listing of a global wind energy portfolio. The new ETF is expected to list on The Nasdaq Stock Market.

The anticipated ticker symbol and ETF portfolio name follows:

--  PWND - PowerShares Global Wind Energy Portfolio

Index Country Weightings as of 6/23/2008

Index Country Weight
Belgium 5.67%
Canada 3.14%
Denmark 14.00%
France 8.00%
Germany 16.52%
Greece 1.24%
Hong Kong 5.03%
Japan 2.29%
Spain 22.69%
Switzerland 3.75%
United Kingdom 6.13%
United States 11.55%

Trina Solar Ltd. Added to Goldman's Conviction Sell List (TSL)

I've only seen this at Trade the News. True or not, the September calls are looking very attractive.
From TtN:
Yesterday 08:47pm
Trina Solar Ltd. Added to Goldman's Conviction Sell List; Price Target cut to $23 from $38

- Shares cut to sell from neutral

Last trade $35.36 down $2.73 (7.17%)
The stock qualifies for inclusion in the Russell Global Index, which is rebalancing after the close June 27, and is on Russell's addition list.
The next earnings release is scheduled for Aug. 21, the Aug. options expire 8-15 which is why I say September (exp. 9-19) calls. Via Yahoo:


StrikeSymbolLastChgBidAskVolOpen Int
10.00TSLIU.X38.60 0.0024.9025.70119
12.50TSLIV.X29.00 0.0022.4022.90018
15.00TSLIY.X18.60 0.0019.9020.6009
17.50TSLIW.X29.90 0.0017.5018.10752
20.00TSLID.X17.90 0.0015.4015.80136
22.50TSLIX.X15.80 0.0013.3013.7010138
25.00TSLIE.X11.60Down 2.1011.3011.7032217
30.00TSLIF.X8.40Down 1.708.008.4033403
35.00TSLIG.X5.70Down 1.205.305.7015679
40.00TSLIH.X5.00 0.003.503.8066640
45.00TSLII.X2.40Down 1.002.252.45281,235
50.00TSLIJ.X2.15 0.001.501.5526930
55.00TSLIK.X1.40 0.000.951.053458
60.00TSLIL.X0.85 0.000.550.65101,318
65.00TSLIM.X0.60 0.000.300.457361
70.00TSLIN.X0.75 0.000.150.3060317
75.00TSLIO.X0.80 0.000.100.2010135
80.00TSLIP.X0.20 0.00N/A0.152182

Five Inconvenient Truths…Of Environmental Journalism

The Columbia Journalism Review's Observatory column (blog?) has had a couple interesting stories on coverage of the environment (we link to last week's below).
From the CJR:

...Whether or not Wired’s analysis is correct, it goes to show that reporting on climate-related issues is constantly frustrated by inconsistencies such as emissions balance sheets. What is green one day is gross the next, corn ethanol being the perfect example. So as much as The Observatory loathes the abuse of this phrase, we had to ask ourselves this: What are the “inconvenient truths” about environmental journalism? We came up with a five-point list, then fact checked it with Tim Wheeler, the president of the Society of Environmental Journalists and a reporter at the Baltimore Sun. Here’s what we compiled.

1) It Ain’t Sports Writing: A reporter covering, say, baseball doesn’t have to define a home run in every article, but a reporter covering climate almost always has to remind readers what greenhouse gases are. That chews up space—especially in traditional print publications where physical restrictions can chop a nuanced, thirty-six-inch piece into an oversimplified, ten-inch disservice to readers....MORE

From June 20:
“Green Fatigue” and “Eco Anxiety”

It’s not just the palpable frustration with Greenpeace solicitors on Broadway this summer — according to an article in the most recent New York Times Sunday Styles section, people are too overwhelmed by the command to be “green” to do much about it anymore....

10 Questions for eSolar’s CEO Asif Ansari

One of the things earth2tech does best is their "10 Questions". This one's good but it reminded me of their Nanosolar interview which was a knockout (link below)

From earth2tech:
eSolar is one of a dozen startups that are looking to build solar thermal plants in the deserts of California. While the company says it’s using the lessons of infotech — computing and algorithms — to make low cost modular solar, we were wondering what really makes eSolar stand out? The company has certainly gotten a lot of attention — receiving at least $130 million from Google.org, Bill Gross’ Idealab, and other investors, and inking a deal with California utility Southern California Edison for a 245 MW solar thermal power plant. We thought we’d check in with eSolar’s CEO Asif Ansari and see what all the fuss is about.

1). There’s about a dozen other companies building solar thermal plants in the desert, why will eSolar be a leader in this area?

eSolar is producing easily scalable and rapidly deployed concentrating solar power plants and we’ve brought the minimum economic size of our power plants down to just 33 MW. We build power plants in these 33 MW modules, and replicate the number of modules depending on the size of plant a utility needs, so it’s just as easy for us to build a 33 MW plant for a smaller utility as it is to build a 245 MW or larger plant for a huge utility like Southern California Edison.

This uniform modularity makes it easier for any sized utility to incorporate concentrating solar thermal power into the grid. It also substantially increases the addressable market in developing countries. Most other companies in the United States right now are only building huge power plants, even though companies such as Acciona and Abengoa are also following the trend toward the smaller, mid-sized utility-scale plant in projects in Spain.

2). eSolar has said its replacing “expensive steel, concrete and brute force with inexpensive computing power and elegant algorithms.” Can you elaborate on lessons learned from the Internet and IT worlds?>>>MORE


From last December:

Very Deep Insight on Solar Energy Investments: "10 Questions for Nanosolar CEO Martin Roscheisen"

GE's PrimeStar Reveals Secret Strategy to Kill First Solar (FSLR)

That's Clusterstock's headline, here's the story:
General Electric (GE) bought a majority stake in Cadmium-Telluride (CdTe) thin film PV solar module producer PrimeStar earlier in the year. This acquisition was a warning shot at market-leader First Solar (FSLR) and signaled that GE was serious about its pledge to have a $1 billion solar buiness within 3 years.

No one knows much about the stealthy PrimeStar. However, Fred Seymour, PrimeStar's VP of technology, spoke last week in San Diego on a variety of issues at IntertechPira's Photovoltaic Summit. FabTech.org has the details:

PrimeStar believes the five key areas for thin-film process development are:

  • efficiency
  • uniformity
  • repeatability
  • stability
  • cost

On Competition, Consolidation and Safety:

Noting the growing number of CdTe players, he said "there is a lot of froth in the market" and expects to see significant consolidation as well as the establishment of strong(er) supply and sales channels. As for the challenges and opportunities facing the sector, he cited the perceived toxicity risks with cadmium, then discounted it, noting among other things how the Cd is inherently "sequestered" safely within the modules....

Modules will be produced "when we're ready," Seymour said coyly, "it's important not to put out product too early."

Tellurium is not scarce:

He also mentioned the perceived scarcity of tellurium, but the old mining guy (OK, he's not old, so "former mining guy") disputed such claims, saying there's a 300-500 metric ton supply of Te available. While some price disruptions are likely, there's plenty of the element available in the seabed and elsewhere, "if," as he told me, "you know where to look."

We'd expect PrimeStar to say that they can beat the competition, Cadmium is safe, and their Tellurium supply is fine. What else are they going to say?

First Solar bulls shouldn't panic, though, at least not yet.

Here's Clusterstock's main page.

Sir Nicholas Stern: Cost of Carbon Biz Has Doubled to 2% of World Economy

No it hasn't.
Sir Nick was low balling the cost of his proposals last year.
On May 31, 2007 we wrote:
...we're starting to get to the real number and we should be able to keep it all under a third-of-a-trillion dollars per year for the U.S. contribution (before adding in direct costs like putting vodka in your tank but that's okay, the Stern number of 1% of World Gross Product should be 2% minimum so we've got incorrect estimates piling on incorrect estimates anyway).

I don't know why he was having fun with numbers but he was. If a humble blogger can work the abacus I'm pretty sure Stern knew.
If he didn't, here's a headline from the Times of India, September 25, 2007:
Cost of dealing with climate change: 2% of GDP

...This was disclosed on Thursday by Jayant M Mau-skar, joint secretary in the environment ministry, at a conference on climate change organised at the Vatavaran Film Festival here. Mauskar said, "In 2000-01, India was spending 0.63% of its GDP on climate change adaptation and mitigation which has now risen to 2.17%. So we can say that Nicholas Stern's argument (that climate change action does not hurt economy much) is perhaps not true."

The actual dollar amount for the U.S. now looks to be $400-500 Billion per year.
From The Guardian:

The author of an influential British government report arguing the world needed to spend just 1% of its wealth tackling climate change has warned that the cost of averting disaster has now doubled.

Lord Stern of Brentford made headlines in 2006 with a report that said countries needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels. Failure to do this would lead to damage costing much more, the report warned - at least 5% and perhaps more than 20% of global GDP.

But speaking yesterday in London, Stern said evidence that climate change was happening faster than had been previously thought meant that emissions needed to be reduced even more sharply....MORE

Wednesday, June 25, 2008

Sir Nicholas Stern: Carbon Cowboy

Yee haw!
Sir Nick is vice-chairman of IDEAcarbon's parent, IDEAglobal*.
From Research Recap:
IDEA Carbon today launches The Carbon Ratings Agency, “the world’s first independent carbon credit ratings service.”

The service will provide detailed credit ratings for carbon offset assets in the CDM, JI and voluntary markets. Each asset studied will be given a rating based on a detailed analysis of the underlying project, leading to an assessment of the likelihood of it delivering its stated emissions reductions in the stated time period.

The Carbon Ratings Agency also considers the economic and social development benefits that the project does, or does not bring.

The Carbon Ratings Agency says it will provide ratings to market participants both on a mandated basis (where project owners or investors commission the agency to rate their carbon assets) and through the Agency’s Market Initiated Ratings Service, which will give subscribers access to a representative range of carbon asset ratings on an ongoing basis....MORE


Just as the "verifiers"** have a position equivalent to that held by the appraisers in the housing bubble, the "raters" will be the Moody's, S&P's etc.

*From an April comment at Environmental Capital:

...It gives a bit of perspective on Mr. Stern’s comments in Bali:
“Bali will set in motion a process that will define the structure
of the carbon markets for decades to come”
“By 2020 the global carbon market could be worth EUR 240-
450 billion”

**From our earlier post "Will carbon-trading happen? Goldman hopes so, backs APX":

The verifiers hold exactly the same position in the carbon world as appraisers do in the mortgage biz.

As we get into structured carbon finance (carbon notes, carbon backed securities) really slicing and dicing the cash flows, there will be room for all kinds of shenanigans. The key difference is that whereas Mortgage Backed Securities had real estate (even if overvalued) backing them, CBS's will be built on the absence of an invisible gas. Is it any wonder that GS is interested?

Corn futures climb higher on weather concerns

Get used to this headline, we'll be seeing it for a while.
From MarketWatch:
Corn futures rose Wednesday on concerns that cooler weather in the Midwest could slow the growth of corn crops, which have already been damaged by massive flooding.

Other agriculture commodities futures also moved higher as the dollar edged lower after the Federal Reserve hold the key interest rates unchanged at 2%.

Temperatures in the Corn Belt, where Iowa, Illinois and other top corn producers are located, have averaged two to four degrees below normal in the past week, according to AccuWeather.com.

"If it continues, it will push back the corn's maturation date," said Dale Mohler, senior meteorologist at AccuWeather. Cooler temperatures can potentially translate into a delayed harvest, he said....MORE

Which Former Goldman Sachs Chairman Should We Listen to on Oil Market Speculators?

Jon Corzine via Bloomberg:

New Jersey's Corzine Calls for Oil Trading Oversight
New Jersey Governor Jon Corzine called for increased oversight of oil commodity trading, saying ``some of the speculative elements'' may be driving oil prices ``beyond what seems reasonable.''...

Henry Paulson via Forbes:

US Treasury's Paulson does not see evidence speculators driving oil price UPDATE
High oil prices are a burden on the U.S. and world economies but there is no evidence that speculators are to blame for the run-up in oil prices to near record highs, U.S. Treasury Secretary Henry Paulson said today.

Regional Nuclear War Could Have Drastic Climate Impact, Experts Say at AAAS

From the American Association for the Advancement of Science.

Masters Capital Management Having a Good Day

With oil down $4.50, Michael Masters (he of senate testimony on speculation in the oil markets fame) is making up for recent losses. As we pointed out June 3, some of the public names in his hedge fund would react positively to a drop in oil prices:

AMR- up 7.1%
DAL- up 6.6%
LCC- up 14.7%
UAUA- up 4.5%
GM- up1.1%

Here's Mr. Masters May 20 testimony.