Psst: Do You Want to Know the Future of Renewable Energy Investing?

UPDATE: See *link below for our thoughts on where we are in the cycle.

On January 17, we put up this post:
As One Economic Bubble Bursts, Another Takes Hold

From the Wall Street Journal's Informed Reader blog:

The next bubble in the U.S. economy should be taking hold right about now, entrepreneur and investor Eric Janszen writes in Harper’s Magazine....

And got a chance to reprise

"Humble Pie" (The Day the Nasdaq Died)

A long, long week ago
I can still remember how the market used to make me smile
What I'd do when I had the chance
Is get myself a cash advance
And add another tech stock to the pile.

But Alan Greenspan made me shiver
With every speech that he delivered
Bad news on the rate front
Still I'd take one more punt

I can't remember if I cried
When I heard about the CPI
I lost my fortune and my pride
The day the NASDAQ died

So bye-bye to my piece of the pie
I poured my paycheck into Datek
Now my cash account's dry...

Today the Association for the Study of Peak Oil & Gas published a review of Mr. Janszen's Harper's piece that is much more coherent than our little heads-up. Read it, profit by it.

Clean Energy Redemption?

Industrial societies turn their citizens into image-junkies; it is the most irresistible form of mental pollution... Ultimately, having an experience becomes identical with taking a photograph of it.
—Susan Sontag

Eric Janszen, founder of iTulip, has caused quite a stir with his Harpers' article The Next Bubble: Priming the markets for tomorrow's big crash. Janszen's thesis is that the web and housing overvaluations were not an accident—the American economy must lurch from bubble to bubble to keep the "growth" party going, so another bout of irrational exuberance is required to make everything right now that the housing market has gone belly up.

What will the next economic bubble be? Janszen predicts alternative energy and infrastructure (Alt E&I) will be the next big thing, an explosion of economic activity and imaginary wealth that will make the tech and housing bubbles pale by comparison.

Alt E&I 1.0 — The Ultimate Bubble?

The U.S. is well into the formative stage¹ of Alt E&I asset-price inflation (graph left) according to Janzsen, who defines the main economic drivers of the new bubble as 1) the need to recover from recession; 2) weakness in the dollar; 3) loss of petrodollar liquidity; 4) energy security; and 5) peak cheap oil. This last item may sound strange to some, but on second thought, oil is still pretty cheap compared to its true value. The coming price rises will propel dreams of renewable, cost-competitive electricity and substitutes for liquid fuels—in the case of plug-in hybrids (PHEVs), this amounts to the same thing.

Alt E&I is also known as "cleantech". Janzsen does not mention anthropogenic climate change as a cleantech driver, but that goes without saying. Reducing carbon emissions trumps all the economic factors now that, after a 15 year struggle, the informed public is officially terrified by global warming. Janszen weighs in—

Improbably, [former Vice President Al] Gore threatens to become the poster boy for the new new new economy: he has joined the legendary venture-capital firm Kleiner Perkins Caufield & Byers, which assisted at the births of Amazon.com and Google, to oversee the “climate change solutions group,” thus providing a massive dose of Nobel Prize–winning credibility that will be most useful when its first alternative-energy investments are taken public before a credulous mob.

In the cleaner and greener world to come, you will recharge your PHEV/E-85 car or fill-up your hydrogen fuel cell car by drawing electricity (or making hydrogen) from a grid powered by solar photovoltaics, wind turbines, ocean waves and geothermal energy. Unfortunately, these alternatives will likely replace at most 15% of current electricity consumption by 2030, and won't meet peak demand spikes at all, so we will need clean coal (a.k.a. NeverGen) and more nuclear reactors to provide the juice when everybody turns their air conditioners and compact fluorescent light bulbs on at the same time during each summer's killer heat wave.

Reality aside, what could be better than the cleantech boom? Abundant renewable energy, no serious interruptions to shopping, saved from the perils of global warming, life goes on! This is the promise of Alt E&I 1.0, the cleantech revolution....MORE

*In April '07 we commented on the thinking of the Markets Editor of WSJ.com:
Indexes, ETF's and Global Warming

A few weeks ago Mark Gongloff had a post at the WSJ.com's EnergyRoundup with the cautionary title "Alternative Energy’s “Cover” Moment?". He ended the post with this humble line "And that could be one reason why the alternative-energy boom might continue for a while after all. Or at least, there’s a 50/50 chance of it."...

...So what does this all mean? I agree with Mr. Gongloff, I think we've got a ways to go before a top in clean-tech and alt-energy. Why isn't the "Cover Moment" or BTK experience operative this time, even though we have another half dozen indices and ETF's since Kang did his piece?

No, it's not because "It's different this time"! It's because the Wall Street marketers are faster to recognize a fad and can create product faster than ever before. The covers and funds and indices hit the market earlier in the cycle. So look for something like this: "INTERNET.COM'S ISDEX, THE INTERNET STOCK INDEX, BREAKS 1,000, A GAIN OF 1000% IN LESS THAN FOUR YEARS"

That tout was dated March 10, 2000. The Nasdaq closed that day at 5048.62, it's all-time closing high.

Wilbur Ross- Billionaire to billionaire: Warren, it won't work. (ABK; BRK.A; MBI)

From CNBC:

Turnaround specialist Wilbur Ross said Wednesday he does not expect Warren Buffett's offer to reinsure $800 billion of municipal bond debt to succeed.

"If it went through, it would be the best deal since the Dutch bought Manhattan Island from the Indians," Ross said, in an interview on CNBC's "Squawk Box."

"This is the best part of the business for those insurers. It's the safest part. It doesn't do anything to get rid of the toxic waste that they had in the portfolios, both the insurance portfolio and the physical securities.">>>MORE

First Solar; Gold and Climateer's Apology (FSLR)

Sorry about the late start, reality intruded on this little corner of the blogosphere.
First Solar came in with wonderful (BIG!) numbers:

First Solar Profit Soars on Rising Solar-Panel Sales

First Solar sees 2008 revenue of $900 mln-$950 mln

On the conference call they confirmed that 1st half '08 numbers would be a bit light, this was a known known. We'll have a roundup of reactions by the close.

A couple weeks ago we had a post:
Gold loses its shine as high price hits Indian demand

Today the WSJ's MarketBeat blog hammered the point home with some updated numbers:

All the Gold in India

Enthusiastic investors in exchange-traded funds have helped fuel the dramatic increase in gold prices over the last few years. Of late, the price of gold has stalled at near-record levels, as the primary source of demand — jewelry — has declined due to what some see are exorbitant costs.

This is particularly the case in India, which accounts about one-third of the world’s retail demand (either through investment in coins or bars, as well as jewelry). The World Gold Council said today that consumer demand in India rose just 7% in 2007, and fell off sharply in the fourth quarter, declining by 64%. Demand was also softer in the Middle East and U.S., two other regions where retail consumption is high....MORE

New Era Dawns for Rail Building

From the Wall Street Journal:

Lines Add Tracks,
Upgrade Tunnels
To Take On Trucks

America is back to working on the railroads.

For decades, stretches of track west of this town were so rough that trains couldn't run faster than 25 miles an hour. Lanie Keith, a locomotive engineer for Kansas City Southern, recalls waiting for hours when trains stalled on a steep curve on a stretch of single track between Meridian and Shreveport, La.

But over the past two years, at a cost of $300 million, track crews have transformed the 320-mile route. Installing 960,000 crossties and 80 miles of new rail, they've turned a railroad backwater into a key link in a resurging national transport network. Mr. Keith now skims parts of the improved track, called the Meridian Speedway, at nearly 60 miles an hour. "You went from moving like a turtle to a jack rabbit," he says.

The upgrade is part of a railroad renaissance under way across much of the U.S. For the first time in nearly a century, railroads are making large investments in their networks -- adding sets of tracks, straightening curves that force engines to slow and expanding tunnels for bigger trains. Their campaign is altering the corridors of American commerce, more so than any other development since interstate highways spread to the interior.

For decades, railroads spent little on expansion, even tore up surplus track and shrank routes. But since 2000 they've spent $10 billion to expand tracks, build freight yards and buy locomotives, and they have $12 billion more in upgrades planned....MUCH MORE

Buffett calls bond insurers' bluff, short sellers say (BRK.A; ABK; MBI)

Two from MarketWatch and a teaser from CapitalStool.
From MW:

Bond insurers may reject $800 bln reinsurance offer, Ackman, Chanos say
...The offer excludes the bond insurers' structured finance businesses, which have billions of dollars of exposure to complex mortgage-related securities known as collateralized debt obligations (CDOs). The market is increasingly concerned that losses on this part of the business will threaten bond insurers' crucial AAA ratings. But some companies have argued that short-term, market-based losses on these guarantees won't turn into very large actual losses.

"He's calling the bond insurers' bluff," said Bill Ackman, head of Pershing Square Capital Management LP, a hedge fund firm that's been shorting, or betting against, shares of MBIA and Ambac....MORE

AND:
Warren Buffett's letter to bond insurers

Below is the text of the letter sent by Ajit Jain, president of Berkshire Hathaway Reinsurance, to MBIA's bankers at Lazard Ltd.

February 6, 2008

Mr. Gary Parr

Deputy Chairman, Lazard

Dear Gary:

As you know, many constituencies in the financial markets have been increasingly focused on the emerging issues in the financial guaranty industry for several weeks now. In fact, we ourselves have had several meetings with the New York Insurance Department to explore whether there is something we can do under the current circumstances that would be helpful in addressing the growing concerns in the financial marketplace. Unfortunately, the structured finance "side" of the business, with its many moving pieces and interdependent variables, has proven to be beyond our ability to adequately analyze.

Nonetheless, we are ready and willing to lend our reinsurance support to the municipal side of the house, and in fact had set out in a letter to the New York Superintendent of Insurance a concept that we believe would address the needs and concerns of main street America's municipalities. The Superintendent has no objection to our approaching you with this proposal. We would like to meet with you and your client, MBIA, to discuss whether MBIA would have any interest in the proposal .

The key elements of the proposal we described to the Superintendent were: (1) we would raise the capital level in our monoline insurer, Berkshire Hathaway Assurance Corporation (BHAC), to $5 billion; (2) we would assume by reinsurance the muni bond portfolio of several of the monoline companies for a premium of 150% of the existing unearned premium reserves of the companies...MORE

From CapitalStool:

Sheriff Calls Their Bluff
In another in our series The Best of Capitalstool.com, stoolie Jimi gives us the story behind the story of Warren Buffet’s offer for the muni bond business of the monoline insurers.

Interesting exchange on the Buffett offer on crapvision. I didn’t hear the original phone call, but Beckie Quick seemed to indicate that Buffett has only thrown a line to the munis, in part, because the monolines maintain that the non-muni market still retains value. Since Buffett can’t evaluate that claim, he won’t offer to reinsure those, too - he can only offer the reinsurance to that which he understands, and when the munis are trading n a manner that suggests that they no longer possess the AAA wrapper, then there’s an opportunity for someone like Buffett.

It seems clear that the monolines can’t jettison their low risk business to defend and support their high risk business. Which is why Buffett’s offer is likely DOA. But here’s the thing as I see it - Buffett is calling the monolines’ bluff on their claims of value for the non-muni portion...MORE

UPDATE 1-Applied Materials profit tops estimates, shares rise (AMAT)

From Reuters:

Applied Materials Inc. (AMAT) posted a quarterly profit on Tuesday that beat expectations, as the top supplier of equipment for producing microchips benefited from higher capital spending by makers of memory chips.

Applied Materials shares rose 2.1 percent in extended trading after the results were announced.

Applied Materials said its net profit for the second fiscal quarter was $411.4 million, or 29 cents per share, compared with $412.8 million, or 26 cents per share, a year earlier.

The company had been expected to earn a net profit of $386.3 million, or 28 cents per share, according to the average forecast of analysts on Reuters Estimates....MORE

Backing Off First Solar (FSLR)

From the WSJ's MarketBeat blog:

Strong results are expected when First Solar reports quarterly earnings tomorrow, but for the time being, investors may have had enough. The shares, which rose a ridiculous 795% in 2007, are down 29% in 2008, coming under a bit of pressure with the rest of the solar sector.

Today the stock has given up another 3.7% in advance of the report, and analysts at Minyanville.com note that the stock has been bouncing around its 100-day moving average for the last few weeks. Should it fall through that level, it could change the complexion of investors, as momentum types drove the stock to dizzying heights throughout 2007.

Analysts and traders are gearing up for a big reaction tomorrow; the consensus is for earnings of 53 cents a share, but some hope the company provides stronger-than-expected guidance for 2008....MORE

Markets Then and Now

What's changed in 195 years? As far as deep understanding, not much.
From Patrick O'Brian via Victor Niederhoffer:

[Sir Joseph:] I do not suppose there are many things that men think about with such deep, careful, zealous attention as money, and the Stock Exchange is an infallible index of their thoughts, the collective thoughts of a large number of intelligent, informed men who have a great deal to lose and win. Even this Heaven-sent victory of yours, and Wellington's at Vitoria, have scarcely moved the City to anything more than bonfires and illuminations and patriotic addresses. These gentlemen know that we cannot go on alone much longer, and at the first stroke of ill-fortune our allies will desert us, as they have so often deserted us before. No Sir: if I were half as sanguine about Napoleon's downfall as you, I should go down into the City tomorrow and make my fortune.

[Maturin:] How would you do that, for all love?

[Sir Joseph:] Why I should buy Government Stock, India Stock, and any sound commercial shares whose value depends on foreign trade: I should buy them at their present dirt-cheap rate...MORE

The Battle of Vitoria

War: Peninsular War

Date: 21st June 1813

Wellington directs his troops during the Battle of Vitoria

King Joseph's silver chamber pot "liberated" by the 14th Light Dragoons
From BritishBattles.com

India: Climate Comedy

Here are some of the links we collected last week, I don't know if I should read Dante* or Saroyan**:

U.N. urges India to look at clean development scope

India Rejects Binding Committment to Cut Greenhouse Gas Emissions

India now keener to tackle climate change: top UN official

India Seeks Climate Technology-Transfer Regime

India, China new African colonialists-Soros


*The Divine Comedy

**The Human Comedy

Carbon Trade: Selling the Blue Sky

From Forbes:

Andrew Ertel is a big player in the market for carbon credits--just in time to capitalize on the global warming crisis.

Environmental broker Andrew Ertel makes a living sniffing out ripe opportunities. "When you drive through New Delhi and breathe the air, you want to be part of making a difference," he says.

Ertel, 40, heads Evolution Markets, which sells chits that companies use to offset their emissions of air pollutants. Evolution, perhaps the world's largest vendor of credits for the suppression of carbon dioxide, sells them to polluters outside the U.S. that have agreed to help curtail carbon emissions. They do that by either reducing their CO ₂ output or buying credits from another outfit that has done so. The seller of a credit could be, say, a utility in China that has switched from coal to wind power. Each credit is the right to emit one metric ton of carbon dioxide or its equivalent in other greenhouse gases.

Evolution was a pioneer in this industry. The company made the world's first cross-border carbon trade in 2002 when it brokered the sale of credits for 200,000 tons of carbon dioxide from the government of Slovakia to a Japanese buyer. Since then Ertel has hired a roomful of brokers to develop the business. The talent is expensive; Evolution lost $1 million in its carbon business through 2006. "We kept saying, 'We got in too early, we got in too early,'" says Stephen Nesis, 36, an Evolution cofounder.

Being early gave it a jump on competitors. To drum up business, Evolution scouted for carbon-mitigation projects in developing markets that polluters could subsidize. Evolution has arranged financing for methane-capture equipment in Argentina and for a switch by a 120-megawatt power plant in Hungary from coal to biomass fuel. Patrick McCloskey, a former Lazard (nyse: LAZ) banker Ertel hired last year, is working on projects like these: helping a European wind-turbine manufacturer expand; converting Indian coal plants to natural gas. Evolution gets a fee (and credits of its own) for bringing in private investors. It is tricky: Each country has a say about which credits are acceptable. European Union nations accept industrial projects like those Ertel is arranging in India but reject reforestation credits, for instance....MORE

First Solar Comments (FSLR)

From Notable Calls:

- Broadpoint comments on First Solar (NASDAQ:FSLR) saying they recommend sitting out quarter due to excessively high investor expectations, but would be buyers on any weakness after results are announced

Firm expects strong results and guidance, but believe plans for an additional factory, a large 100MW+ system contract, or significantly higher 2008 guidance are necessary to move shares higher.

Why Isn’t There A Lot Of Geothermal Work?

From New Energy And Fuel:

Not enough people. The drilling for oil has sucked up every qualified drilling person worldwide.Most of the best and easy or shallow locations are working or spoken for leaving the great mass of the available locations deeper than the short depth guys and their equipment can go. As an example, Exxon Mobil has completed their latest directional drilling project off shore of Siberia into the Sea of Okhotsk.

The new Exxon Mobil well is only 8350 feet deep below the sea bottom, but 38,322 feet out from the wellhead at the surface, some 7 miles out to sea. It’s sort of a well plus pipeline. Keep in mind that Chevron has drilled straight down 34,189 so the ability to get to the oil and hot rocks is out there. One has to wonder how far the horizontal sections could get. It’s fair to say, plenty far enough....MUCH MORE

Earnings: Applied Materials, First Solar (AMAT; FSLR)

Just a reminder, AMAT today, FSLR tomorrow.

FSLR:
First Solar, Inc. to Announce 2007 Fourth Quarter and Year End Financial Results On Wednesday, February 13, 2008

PHOENIX, Feb 1, 2008 (PrimeNewswire via COMTEX News Network) -- First Solar, Inc. (Nasdaq:FSLR) will report financial results for the fourth quarter and year ended December 29, 2007, on Wednesday, February 13, 2008 at 6:00 a.m. MST (8:00 a.m. EST). To participate in the conference call, please dial 800-896-8445 if you are calling from within the United States or 785-830-1916 if you are calling from outside the United States. Investors may also access a live web cast of this conference call on the Investors section of the Company's website at www.firstsolar.com.

An audio replay of the conference call will also be available approximately two hours after the conclusion of the call. The audio replay will remain available until Saturday, February 16, 2008 at 8:00 a.m. MST (10:00 a.m. EST) and can be accessed by dialing (888) 203-1112 if you are calling from within the United States or (719) 457-0820 if you are calling from outside the United States and entering access ID number 9023734. A replay of the web cast will be available approximately two hours after the conclusion of the call and remain available for 90 calendar days.

AMAT:
Applied Materials to hold First Quarter FY 2008 Earnings Call on February 12 at 4:30 p.m. ET
The Earnings Highlights will be available at 1:00 p.m. (PT), followed by our Second Fiscal Quarter 2008 Financial Targets at 2:30 p.m.

SANTA CLARA, Calif.--Applied Materials, Inc. (NASDAQ:AMAT) will hold its quarterly earnings call to discuss its results for the first quarter of fiscal 2008 and its business outlook on Tuesday, February 12, 2008, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time).

A live webcast of the earnings call will be available on Applied Materials' website at: http://www.appliedmaterials.com/investors/index.html. Replays and an audio/MP3 will be available beginning Tuesday, February 12 at 8:00 p.m. ET (5:00 p.m. PT), and ending Tuesday, February 26 at 8:00 p.m. ET (5:00 p.m. PT).

Buffett Offers Monolines a Lifeline (BRK.A: ABK; MBI)

The WSJ's MarketBeat blog has a post showing just how sharp Warren is.
(and how a deep understanding of one's business can make the moves seem as pre-ordained as a chess Grandmaster's v. moi)

Warren Buffett is throwing the monoline insurers a lifeline — but that doesn’t mean the Berkshire Hathaway chair has decided to wade into the deep end of the pool when it comes to risky assets.

The bond insurers have gotten themselves in deep trouble by promising to cover payments to bondholders in the case of a default on esoteric forms of debt such as collateralized debt obligations backed by subprime mortgages, a far cry from what was regarded as a safer business — and for years, their bread-and-butter — insuring municipal bonds.

Mr. Buffett’s largesse, however, isn’t going in the direction of the riskier investments. He’s offered to provide reinsurance (a second level of insurance) on $800 billion in municipal bonds only. The offer was made to Ambac Financial Group, MBIA and FGIC. It’s notable in that it would help these entities recapitalize, but also puts the squeeze on them as they’re put in a situation similar to when markets freeze up and certain assets won’t trade — investors sell what they can, not what they want to.

“Quite frankly I think that is a net negative for these guys — take away the best business and most stable cashflows they have and leave them with toxic waste, much higher earnings volatility, and maybe even their business model falls apart,” says Tim Backshall, chief credit derivatives strategist at Credit Derivatives Research....MORE

Queen Elizabeth: Offshore wind farms to generate £100m windfall for Crown Estate

From the Times of London:

The Crown Estate will earn windfall profits of at least £100million a year from Britain's booming offshore renewable energy industry.

The estate, which owns the foreshore and seabed around the UK, has already signed contracts worth tens of millions of pounds with operators of offshore wind farms.

Rents from the siting of wind turbines are only the beginning of a vast new commercial opportunity for the Crown Estate. In addition to a huge expansion in offshore wind power and the development of tidal power, the estate will profit from the laying of subsea cables and an emerging industry in storing carbon captured from coal-fired power stations.

Rob Hastings, the Crown Estate's marine director, said that the group, which manages land and assets owned by the Queen but pays most of its revenues to the Treasury, charges offshore wind operators an annual “rent” of just under 1 per cent of the value of the electricity generated....MORE

Two Years at 2%? It Beats the Alternatives, Says a Bond Maven

From Barron's:

TREASURIES ARE TO ROBERT KESSLER what democracy was to Winston Churchill -- the worst possible choice, except all others.

What possible attraction could U.S. Treasury securities have to investors? In the upside-down, bad-news-is-good-news world of Treasuries, traders have bid up prices into the stratosphere, which has pushed their yields into the basement. Indeed, the two-year note's yielding a paltry 1.90% clearly shows that Treasuries are the new bubble.

Kessler has heard this many times as the peripatetic head of his eponymously named Denver-based firm that specializes in managing Treasury portfolios for the very rich and intently anonymous. That frequently takes him to the Middle East and Asia, with New York typically a stop-over coming or going to those places.

So, is a 1.90% two-year note expensive (meaning yielding too little, in bond-market parlance)? Surveying the latest wreckage in the credit market, Kessler counters, compared to what?>>>MORE

Look Out Below- ( Dow 7200?)

Nah.
Back on October 10, 2002 The DJIA traded as low as 7151, the day before it set its closing low for this cycle at 7215. I'd give it about a 5% chance of seeing that level again.
(knowing what we know today)

For comparison, in '73-'74 the DJIA dropped 45%, in '29-'32, 89%. In this cycle the intra-day high was 14,279.96 on Oct. 11, 2007. A 45% haircut only gets us to 7854 or so.
Take this commentary with a grain of road salt.
Mr. Roubini is one of the more bearish economists, but he's sharp. This piece caused some hubub when he put it out last week. Here's a shortened ungated version, worth a read.

From Forbes:
If you get depressed easily, don't read this story. Here's one sage's prediction of a long, deep recession.

It may be time to christen a new Dr. Doom. The candidate: Nouriel Roubini, an economist at New York University's business school. He makes the old Dr. Doom, bond pessimist Henry Kaufman, look like Dr. Phil. No mincer of words, Roubini thinks a full-blown panic will scorch the global economy. He recently laid out his scenario for central bankers in Davos and had them chewing it for hours.

He thinks the immediate spark will be the collapse of bond insurers (MBIA, Ambac, FGIC and others). These insurers have guaranteed $72 billion worth of collateralized debt obligations, now crumbling in value as housing prices fall.

Cheerier sages see an economy lifting off in the second half, fueled by the Fed's rate cuts, and a rebound in the shares of bond insurers. Roubini says lower rates won't help. There are significant risks of insolvency. Here's his prediction of how it'll play out:

Bond Insurers Lose the Triple-A

At press time New York State was trying to arrange a capital infusion for the bond insurers. Roubini doesn't think it'll work, and there's no Plan B--yet. Lacking that, insurers will lose their gilt-edged rating. Then the banks (Merrill, Citi and others) that paid them for protection against default of their collateralized debt obligations will face more writedowns--well beyond the $100 billion that's been written down already. Financial losses in subprime mortgages could be $400 billion and in the whole financial system more than $1 trillion. A big bank might go under.

Contagion Spreads

Writedowns will begin percolating up from subprime mortgages to near-prime and prime mortgages, commercial real estate, auto loans, credit cards, corporate buyout loans, corporate bonds and derivatives. If leveraged banks, brokers and hedge funds should suffer $200 billion in domestic credit losses, they would have to pull back on $2 trillion in lending, according to a Goldman Sachs (nyse: GS - news - people ) analysis. Roubini says the rest of the world will "recouple" rather than decouple, as financial losses spread to other world capital markets, especially Europe. Sovereign wealth funds will not be large enough to play savior. Credit spreads will keep widening. Equities, housing, commodities, emerging market assets and the dollar will get hurt. "Cash is king in 2008," says Roubini. ...MORE

Global Warming Investment: Winter Storms Squeeze Supplies of Road Salt

There aren't any publicly held pure plays.
From the New York Times:

Local governments in New England and in the Midwest are running critically low on road salt, the result of a stream of winter weather that has hit the regions in recent months.

“We are, for all practical purposes, out of salt,” said Bruce Hoar, director of public works in South Burlington, Vt., adding that other towns in the area face the same problem.

With so many municipalities in need of salt, suppliers cannot ship it out quickly enough. Public works departments are left waiting for days or weeks to receive their orders....MORE

Here's the Salt Institute Members list.
Here's a WSJ story from 1994:

Big Salt Producer
Says Winter Storms
Are Mixed Blessing
----
Special to The Wall Street Journal

02/22/1994
The Wall Street Journal
PAGE B5D
(Copyright (c) 1994, Dow Jones & Co., Inc.)

AMSTERDAM -- The winter storms that battered parts of the U.S. have proved a mixed blessing for Akzo NV, the big Dutch chemical company.

Akzo is the largest producer of salt products in the U.S., including road salts. And with all the snow and ice this winter, salt has been selling like mad. But at the same time the extreme weather has made it harder for Akzo to do business.

"Yes, we're going to be more profitable because of the storms, but costs have also gone up," says Catherine Bolton, a spokeswoman for Akzo Salt in the U.S.

Akzo doesn't break out division sales, but analysts say the U.S. salt operations are substantial. The U.S. accounts for about one-quarter of Akzo's annual worldwide sales of more than 16 billion guilders ($8.25 billion). Those sales totals exclude the company's recent acquisition of Nobel Industrier AB of Sweden....

Sunpower Could Double (SPWR)

From Barron's via Notable Calls:

SunPower's (SPWR) stock was cut in half after the solar bubble burst. Now it could double, with earnings growing 40-50%. The US Senate tried to attach an extension of the solar tax credit to the economic stimulus bill, but it failed to pass. While an extension could be reintroduced anytime, it most likely will be part of a package considered in the 4Q that would extend the wind and solar tax credit and the R&D tax credit, and apply a "patch" to the dreaded alternative minimum tax. "There's so much bipartisan support for the wind and solar package" that there's an 85-90% chance it gets passed by yr end, says Daniel Clifton, of Strategas Research Partners.

Wall Street has less appetite for risky green projects

This is why I paraphrase Chairman Mao, some think ad nauseum:

The markets are the sea that renewable energy investing swims in.

From Reuters:

Big-scale renewable energy projects demonstrating new technologies will have a harder time getting Wall Street funding due to shaky credit markets and plunging stock prices, a Morgan Stanley (MS) managing director said on Thursday.

"Right now with the stock market not being its healthiest, the sort of plain vanilla non-emerging technologies -- those are the projects that are going to get financed," Aaron Lubowitz, managing director in Morgan Stanley's global structured products group, said during a panel at the Clean-tech Investor Summit in Indian Wells, California....MORE

Dear SEC: Planktos February 11, 2008 (PLKT.PK)

Planktos' website:

Planktos

This site is down for maintenance.
Please check back again soon.

Where's the boat?

At U.N., Investors Try to Divine How Soon U.S. Will Go Green, AND Climateer's "Line of the Day"

'I'm thinking of changing the blog's descriptor from "Money matters" to "Realpolitik, real insight", he said modestly.'

From the Wall Street Journal:

Hundreds of big investors and top executives will descend on the United Nations headquarters next Thursday to grapple with Wall Street's latest fashionable worry: how global warming is affecting the climate -- for investing.

Investors are increasingly trying to come to grips with the uncertainty about how the U.S. government will address the issue of global warming, and what effects that will have on businesses from power companies to insurers.

...Executives from Lehman, Goldman Sachs Group Inc., UBS AG, Deutsche Bank, Bank of America Corp. and AIG Investments, as well as state pension funds, will attend the Valentine's Day summit, which features Al Gore as keynote speaker at a closed-door luncheon and discussions such as "Unleashing the Business Potential for Clean Energy.">>>MORE

The mantra will, of course, be something to the effect "What the markets hate is uncertainty".

This translates, of course, to "We want subsidies, mandated use of our products, tariffs and a ban on any competition".
They won't, of course, say this. The CERES volk are more sophisticated than the head of the German Solar Energy Association who said, referring to solar subsidies (From the BBC):

However, as Gerhard Stry-Hipp, managing director of the German Solar Industry Association says, this is not paid for by the government.

"It's not a subsidy in a formal way because it's not state money. The utilities are gathering that money and there is an additional bonus the rate payers [consumers] have to pay and with this money, the electricity from the renewables is paid."

Of course.

So I don't leave the wrong impression, let me put it plainly- I'm pro alternative energy.
I am also a pro investor.
Right now, alt-energy isn't economically viable. So you are dependent on politicians.
My problem is, years ago I got this fiduciary thing into my head and now I can't seem to shake it.
Investing in rent-seeking businesses takes on an added layer of risk.

It is more dangerous than other investments and you must:
a) be aware of when you are in one and
b) monitor the political landscape continuously and very closely.

I'll close with my standard quote, from Simon Cameron.
From our post on biofuels, March '07:

Finally for investors in rent-seeking organizations there is the real risk that the politicians will change the rules. Heed the words of Sen. Simon Cameron (R&D!-Pa.):

"The honest politician is one who when he is bought, will stay bought."

Our Hero

---

26th United States Secretary of War

Russia: What a Scam We Have in Carbon

"I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."

-From "The Bored Whore of Kyoto"

Regular readers know that I am a fan of low-I.Q. analysis,
here's an example that paid off.
(working backward from most recent to oldest)

Emission Permits Rise After Gazprom Threatens to Cut Gas Supply

European Union emission permits rose near their highest in eight days as natural gas advanced because OAO Gazprom said it may cut supplies to Ukraine on Feb. 11.

December-delivery carbon dioxide permits rose 47 cents, or 2.4 percent, to 20.44 euros ($29.63) a metric ton on the European Climate Exchange in London. They were earlier as high as 20.50 euros, having dropped 9 percent so far this year.

Russia, Ukraine next to trade Kyoto carbon credits

...Russia and Ukraine are expected to corner the ERU market through 2012 with a potential stockpile of some 400 million tons, more than 80 percent of the estimated total supply, Core Carbon Group's chief climate change officer Morten Prehn Sorensen told Reuters.

At an average ERU price of around 10 euros ($14.62) a ton, this could amount to revenues of some 4 billion euros ($5.85 billion).

Russia clears way for carbon profits

Gazprom's plan for control. And EU Gas Market Prices

RUSSIA: In Russia, Pollution Is Good for Business

Some Perversities of the Carbon Market, And the Developing Giants Score Big
Nov. 15, '07

...Again, Got that? Russia is in the CDM racket, in fact it is set to be one of the largest sellers of the paper. So by manipulating gas deliveries to Europe, they can move prices in the carbon market.

Interesting, no?

Fixing Leaky Gas Pipes Seen as Next CO2 Grab

Russia not Bound by Solemn Kyoto Promise?

Who'da thunk it?...

Belarus Pays Gazprom Bill For Russian Natural Gas In Full

If I were the EU I would be very concerned....

A Future Natural Gas Cartel


Gazprom bid to cut off China gas


And the story that caught my eye a year ago January:

Gazprom, Dresdner move to cash in on carbon trade

....Gazprombank and Dresdner Kleinwort plan to invest in projects generating carbon credits under the Kyoto Protocol, in a Russian and east European market worth up to 5 billion euros ($6.5 billion) through to 2012.

But Gazprombank, owned by the world's largest gas company Gazprom (GAZP.MM) admitted that no projects could actually be implemented until Russia passed laws to govern emissions trading -- something it has repeatedly promised but failed to deliver.

"There is huge potential in Russia for realising opportunities under the Kyoto Protocol," Gazprombank Deputy Chief Executive Alexei Obozintsev said in the statement.

Russian companies could earn carbon credits -- which they can then sell to western companies facing emissions targets -- for example by improving their energy efficiency or by plugging leaks in natural gas pipelines, cutting emissions of carbon dioxide and methane respectively, both greenhouse gases.

Well readers you decide, has Russia figured out how to stick it to the Europeans in both the gas biz and the carbon biz, simultaneously? Da/Nyet? Your vote counts.

DaDaDaDaDaDaDaDaDaDaDaDaDaDaDaDaNyetDaDaDaDaDaDaDa
DaDaDaDaNyetDaDaDaDaDaDaDaNyetDaDaDaDaDaDaDaDaDaDa
DaDaDaDaDaNyetDaDaDaDaDaDaDaDaDaDaDaNyetDaDaDaDaDa
DaDaDaNyetDaDaDaDaDaDaDaDaDaDaDaDaDaDaDaDaNyetDaDa
DaDaDaDaDaDaDaDaNyetDaDaDaDaDaDaDaDaDaDaDaDaDaNyet

Alright, the nyet's have it!

Europe's playing pattycake. With a stone cold killer.

On the other hand Russia's nuclear program intrigues me:

Miss Nuclear: Yelena Kamenskaya (fourth from left) poses with contestants – all nuclear employees or students – in the Miss-Atom 2007 beauty contest.

Here's the Nuclear.ru website.
(for all things Russian nuclear)

CO2 Wildcatters

Although this is a couple months old it is worth the read for a taste of the zeitgeist.
(and it's pretty well written)
From Bloomberg:

Blue Source, a Utah company run by two Evangelical Christians, is on a mission to save the planet from global warming and get rich doing it.

Bill Townsend, a one-time Texas oilman, gazes up at a dark-red smokestack jutting from the cracked clay of southern Colorado and shakes his head. The chimney is connected to a small plant that processes natural gas from the surrounding plains. About 25 percent of the gas is methane, which is separated out and sold to Colorado Interstate Gas Co. Most of the rest is carbon dioxide, which, on this August morning, climbs the stack and pours into the cobalt-blue sky.

This plant, the brainchild of Townsend and his partner, Greg Spencer, is ready to sell its CO2, a major cause of global warming. Yet $7 million in new equipment to ship the gas sits idle because oil company BP Plc has yet to open part of a 400-mile (644-kilometer) pipeline that will take it to West Texas. There, Townsend and Spencer's plan is to bury the CO2 in aging oil wells. "All our money now is going up that pipe," Townsend says.

Townsend and Spencer, who met in a Utah Bible study group in 1985, are wildcatters of the CO2 era. Like American oil prospectors of a century ago, they comb the country for environmental projects that, one day, may gush profit. The two Christian capitalists say they've found their mission: They help companies cut greenhouse gas emissions and then take a cut of the profit. They've signed contracts with more than a dozen companies giving them a share of earnings when captured emissions, mostly CO2, sell in the fledgling U.S. carbon trading market. In that market, greenhouse gases that have been diverted from the atmosphere are packaged as pollution credits, known in the U.S. as "offsets," and are bought or sold by the metric ton.

Since 2001, Townsend and Spencer's company, Salt Lake City-based Blue Source LLC, has quietly amassed the largest collection of offsets in the country, about 270 million metric tons....MORE

The secret to winning at rock, paper, scissors

From The Telegraph:

Scientists believe they have worked out the secret to winning at paper, scissors, stone.
While most people are aware that stone blunts scissors, scissors cut paper and paper covers stone, there is a psychological element to the game which many players may have missed.

According to New Scientist magazine, the way to win is to start with scissors.

Research shows that stone, also called rock, is the most popular of the three possible moves in the game.

That means that your opponent is likely to choose paper, because they will expect to you to start the game with stone.

By going with scissors, you achieve an early victory.The scissors strategy has proven very successful in the past - in 2005 it secured auction house Christie's a £10 million deal....MORE

Has the Market Hit Bottom? (Short Answer: No)

From Barrons:

Testing Time for the Market

The Market's Mood

THE RALLY FROM JANUARY'S LOW was certainly exciting. After all, from its worst levels through last week's high, the Dow Jones Industrial Average rallied 9.7% in just eight trading days. But with Tuesday's drubbing, (the DJIA fell 2.9%, the largest one-day drop in almost a year) it appears that the fun has ended and the bears are ready to resume control, Wednesday's recovery notwithstanding.

The question now for investors is whether current market weakness is part of a bottoming process or the start of something more ominous.

Personally, I'll go with the latter. But holding any view without actively investigating the alternative can be a recipe for investment disaster.

Let's assume for a moment that the market has seen its worst levels and is indeed in the repair process. Within that framework, the Standard & Poor's 500, for example, can fall to near its January low of 1270, give or take perhaps 1% or 2% (see Chart 1)....MORE

CNBC: Buffett Didn't Say the Dollar Would be "Worthless", Said it Would be "Worth Less"

From CNBC:

There is a Dow Jones Newswires story, that originally moved on Wednesday (2/7), quoting billionaire investor Warren Buffett as saying the dollar will be "worthless" if the current account deficit continues. Warren Buffett called CNBC's Becky Quick, co-anchor of "Squawk Box" (6-9 AM ET) this morning on her office phone (which also rings on the set) to correct the Dow Jones Newswires story. Becky literally interrupted Jim Cramer and CNBC Chief Economics Correspondent Steve Liesman to repeat what Buffett was telling her -- he said the dollar would be "worth less." That's a very important distinction.

Below is the original Dow Jones Newswires story:...MORE

Bond Guru Bill Gross on the Housing Crisis

From U.S. News & World Report:

Bill Gross, founder and chief investment officer of PIMCO, the world's largest family of bond funds with $746 billion in assets under management, believes that without government intervention, home prices could drop as much as 20 percent over the next two years. U.S. News spoke with Gross about what he thinks the government should do to prevent such losses. Excerpts:

Why do you think housing prices are declining?
The simplest explanation is because they went up too much.... It's hard for a home to go down in price significantly unless there's been a bubble. The reason for a significant bubble is not only low interest rates back in the 2003-2004 time period but a significant amount of near-fraudulent behavior in the mortgage market with no-documentation loans and—[as] I call them—"funny money" mortgages. Not all of them are fraudulent, but there certainly was an egregious overreach in terms of the private marketplace that made it possible for anyone and everyone to buy a home.

So now, as the easy lending is not only being pulled back but eliminated, then [the climbing prices], almost by necessity, come to an end. Those are some of the primary reasons, but down the list would also be slow employment. People are getting laid off, and the American wage earner who is the homeowner basically can't afford a home as easily as they could before.

What would stop those declines?
Two things would stop it: One is monetary policy in terms of lower interest rates. Obviously the Fed has lowered interest rates and will probably do more, and that helps out existing homeowners to some extent. For those with [adjustable-rate mortgages] it does, if they don't have to adjust upwards and can begin to adjust downwards.

But the housing decline is really a function of people not buying homes as well as people trying to get out. The old ARM is basically being shunned, so affordability rests on the 30-year mortgage. So what [Fed Chairman Ben] Bernanke is doing is helping, but the fact is, the 30-year mortgage hasn't come down like the fed funds rate. So the Fed has a problem. They can lower short-term rates, but they don't have any control over the 30-year mortgage. That's controlled by us, the Chinese, and anybody else that wants to buy them.

That's a problem and will continue to be a problem. Then it's up to the fiscal side, to Congress, to make changes in terms of regulations and additional programs. They need to use a government agency that's been around since the 1930s, the Federal Housing Administration. We need the FHA to provide mortgages with, at least in my opinion, a subsidized interest rate. Instead of 5.5 or 6 percent, they could put 4 or 5 percent and minimize, if not eliminate, the down payments, so people can afford to buy not only a new home but an existing home....MORE

Wheat Goes Parabolic: "Highest Price in U.S. History"

From the St. Paul Pioneer Press:

The highest wheat price in U.S. history - more than $15 a bushel - was reached Thursday in Minneapolis as a trading frenzy inflames the grain markets, fans fears of spiking food costs and revives worries about food shortages.

With wheat stockpiles dwindling, a worldwide scramble is under way for bushels of high-protein spring wheat, the variety grown in Minnesota and the Dakotas and traded at the Minneapolis Grain Exchange. Already, spring wheat prices have tripled in the past year and are poised to move even higher....MORE

Here are some of our posts on wheat:
Making Ethanol from Wheat is Stupid
Market slices,Crisis in Prices: Wheat
Cash In On Rising Food Prices
Ensus Wheat Ethanol Plant Construction On Plan, Despite Odds
Food Riots in Indonesia. And "Thieves Target Kansas Grain Elevators"
Japan to Increase Emergency Stockpiles of Grains, Yomiuri Says
The End of Cheap Food- What was Old is New Again AND: Profiting from Politics
The Dynasties that Own Manhatten
Get ready to ante up more for beer

Al Gore's Generation Investment Management 13F Filing 23Jan.08

These are the publicly traded names. GIM has other dealings that they are not required to disclose, so they don't. I'll have some analysis in a few days.
Via Edgar, CIK 0001375534

NAME OF ISSUER                 
- ------------------------------ ---------------- --------- -------- -------- --- ---- ------- ------------ -------- -------- --------
AFLAC INC                      COM              001055102    62252   993961 SH       SOLE                   839605    30500   123856
AMDOCS LTD                     ORD              G02602103    53882  1563167 SH       SOLE                  1322154    47587   193426
AUTODESK INC                   COM              052769106    32993   663041 SH       SOLE                   557556    20504    84981
BECTON DICKINSON & CO          COM              075887109    51381   614754 SH       SOLE                   519584    18300    76870
BLACKBAUD INC                  COM              09227Q100    26444   943073 SH       SOLE                   795845    29090   118138
CISCO SYS INC                  COM              17275R102    50783  1876000 SH       SOLE                  1585000    57550   233450
DONALDSON INC                  COM              257651109    17781   383385 SH       SOLE                   318721    12977    51687
GENERAL ELECTRIC CO            COM              369604103    43357  1169609 SH       SOLE                   987577    35706   146326
GREENHILL & CO INC             COM              395259104    33327   501305 SH       SOLE                   423729    15370    62206
HDFC BANK LTD                  ADR REPS 3 SHS   40415F101     8623    66100 SH       SOLE                    55900     2000     8200
ITRON INC                      COM              465741106    10960   114200 SH       SOLE                    96450     3500    14250
JOHNSON CTLS INC               COM              478366107    74761  2074379 SH       SOLE                  1750032    63550   260797
LABORATORY CORP AMER HLDGS     COM NEW          50540R409    24015   317947 SH       SOLE                   269949     9600    38398
METABOLIX INC                  COM              591018809     6545   275000 SH       SOLE                   275000        0        0
MILLIPORE CORP                 COM              601073109    31808   434651 SH       SOLE                   366989    13341    54321
MUELLER WTR PRODS INC          COM SER B        624758207    17802  1785600 SH       SOLE                  1510001    54474   221125
NORTHERN TR CORP               COM              665859104    33817   441597 SH       SOLE                   373254    13527    54816
PROCTER & GAMBLE CO            COM              742718109    35367   481712 SH       SOLE                   406818    14800    60094
SPDR TR                        UNIT SER 1       78462F103     1389     9500 SH       SOLE                        0     9500        0
STAPLES INC                    COM              855030102    36399  1577771 SH       SOLE                  1333254    48310   196207
TECHNE CORP                                     878377100    33696   510160 SH       SOLE                   426603    16500    67057
UBS AG                                           89231338    40775   880971 SH       SOLE                   744985    26837   109149
VARIAN MED SYS INC                              92220P105    27659   530265 SH       SOLE                   447763    16300    66202
WATERS CORP                                  

Climateer "Quote of the Day"

“The signal is on the mountain. The trumpet has blown. The scientists are screaming from the rooftops. The ice is melting. The land is parched. The seas are rising. The storms are getting stronger. Why do we not judge what is right?”
-Al Gore, New Baptist Covenant Celebration, January 31, 2008

Source

Hallelujah.

Carbon Trade: Speculators behind jump in options trading

You ain't seen nothin' yet. The CDM futures are coming. Buy, Sell. Hold. Short, Flat, Long. Strip, Strap, Straddle and Spread.
(okay, I just dated myself)

First, from Carbon Finance:

Options trading jumped dramatically last month on the back of growing speculative trading, according to market participants. Options on 44.5 million tonnes (Mt) of carbon dioxide were traded last month on the European Climate Exchange (ECX) – 300% higher than its previous record month, last September, when 10.9 Mt of options changed hands.

Brokers and traders said that US hedge funds – notably environmental investment fund RNK Capital – were behind a big part of the jump in volumes, while proprietary bank and utility trading is also increasing....MORE

And from Mondo Visione:
EEX And Eurex Launch CER Futures

European Energy Exchange AG (EEX) and the derivatives exchange Eurex are expanding their cooperation in CO2 trading. As of 26 March 2008, it will be possible to trade in futures on CERs (Certified Emission Reductions), global emission credits in accordance with the Kyoto Protocol, on the EEX. To incentivise trading, trading fees (exchange trading and OTC-registry) will be waived for the entire year 2008.

Certified Emission Reductions (CERs) are issued under the Kyoto Protocol for climate protection projects that industrialized nations carry out in developing countries. One CER is equivalent to one tonne of CO2 reduction. Since 2008,

CERs can be used in part for emissions reduction compliance under the EU Emissions Trading System. As a result, CERs – unlike the EU Allowances – are already a globally available “currency” to be transferred via the regional emissions trading systems in the future....MORE

More Solar Capacity: Spire to Engineer One of South Korea´s Most Advanced Turnkey Solar Manufacturing Lines

Via EuroInvestor:

Spire Corporation (Nasdaq: SPIR), a global solar company providing turnkey solar factories and capital equipment to manufacture photovoltaic modules, cells, and wafers worldwide, today announced that it has received a contract from Dongyang Creditech Co. Ltd. located in South Korea to provide a photovoltaic module assembly line. Spire will provide Dongyang with a semi-automated crystalline cell module manufacturing line capable of producing up to 12 megawatts (MW) of solar modules per year.

Spire will supply the process technology and training to operate the factory. The line is designed to be easily doubled at a later date and will integrate Spire´s key assembly, lamination, and testing machines along with intermediate tooling stations. According to a recent report from the South Korean Ministry of Commerce, Industry and Energy, South Korea is poised to enter the global solar market with domestically produced modules.

Exports of solar-power related equipment have recently begun and have already risen from $45 million in 2006 to more than $180 million in 2007. This is projected to increase to $1.5 billion by 2020 and to more than $6.3 billion by 2030. Government projections also indicate that South Korea will generate some 4 gigawatts (GW) of electricity through solar power by 2020. "The South Korean solar market is in the early stages of a capacity boom...MORE

Doom and Gloom: What Can the Federal Reserve Do? Part II

We left part I at the "Money Rain" section of the Fed paper Monetary Policy When the Nominal Short-Term Interest Rate is Zero.

The paper's conclusions are worth an extended exerpt.

9 Conclusion
...When the nominal Treasury bill rate is at zero, the Federal Reserve could attempt to provide a stimulus to aggregate demand through effects in addition to those from increases in the monetary base. The Federal Reserve could purchase assets other than Treasury bills, such as U.S. Treasury bonds or foreign government debt. Even if these assets are perfect substitutes for U.S. Treasury bills, purchases of them could have a stronger stimulative impact than purchases of Treasury bills because of signalling effects."

...A similar effect is present if the Federal Reserve were to write options in an attempt to communicate its desired path for the Treasury bill rate.

But with discount window loans whether in the form of advances or discounts the Federal Reserve can accept as collateral (and therefore make liquid" for a depository) a wide variety of assets that the Federal Reserve cannot purchase. A potentially serious limitation on such loans is that it has apparently been the intent of Congress that the Federal Reserve not take onto its balance sheet the credit-risk of the collateral: The Federal Reserve could turn to the depository for full payment of the loan.

The Federal Reserve can bypass depositories and lend directly to individuals, partnerships, and corporations (IPCs). However, the Federal Reserve must and there to be "unusual and exigent" conditions and the IPC receiving the loan must be unable to secure credit from other banking institutions. It seems the intent of Congress was that the Federal Reserve should make such loans only to credit-worthy IPCs. With the Federal Reserve not taking credit risk onto its balance sheet, private- sector loan markets would still incorporate all credit risk into any new loans to households and businesses|preventing any decline in credit-spreads, which may be elevated should the economy be at the zero bound and should the economy be weak. Nonetheless, loans by the Federal Reserve to depositories and to IPCs could provide some liquidity for the credit instruments used as collateral and thereby could lower liquidity premiums. Even if these restrictions on accepting private-sector credit risk were surmounted, or relaxed by an act of Congress, direct involvement by the Federal Reserve in the credit allocation process would raise a number of difficult issues...

To which we can only say Amen.
Another paper, this one from the Dallas Fed, addresses the same issues with a distinctly different tone, e.g.

Image from Monetary Policy in a Zero-Interest-Rate Economy.

...Bold, but impractical–eliminating the bound altogether
The most daring suggestion for escaping the zero-interest-rate trap is one that eliminates the zero lower bound altogether. How can this be done? As noted in the first part of the presentation, the zero bound on interest rates exists because money pays a sure nominal interest rate of zero. No one would be willing to hold any asset that pays a negative nominal rate, as long as zero-interest money is available as a store of value. The strategy for eliminating the zero bound, therefore, is to make money pay a negative nominal interest rate, by imposing some type of ‘carry tax’ on currency and deposits....

More workable modifications to standard policy
...We will consider three possible candidates:

1. Foreign exchange
2. Real goods and services
3. Other domestic securities-such as longer-term Treasuries.

Strategies which target the first two candidates, as we’ll see, can only succeed if the Fed coordinates its policy actions with those of other actors–namely, foreign central banks or domestic fiscal policy-makers. A strategy targeting the third is something the Fed can do today, unilaterally, within the constraints imposed by the Federal Reserve Act.

...The goods & services solution
Why not have the Fed just conduct an open market purchase of real goods and services? Even more so than exchange rate intervention, this strategy would represent a direct stimulus to aggregate demand. As posed, though, the strategy has a major drawback: it violates the Federal Reserve Act. The Fed isn’t authorized to purchase goods and services, apart from those needed for the operation of the Federal Reserve System. The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.

...What if the assets in the “not allowed” column were “allowed”, though? This point is not moot, since aggressive use of the discount window–under certain emergency provisions in the Federal Reserve Act–can allow the Fed to sidestep, to some extent, the restrictions which apply to open market operations.

Even if the legal constraints were not present, however, it’s not necessarily desirable to have the Fed acting in markets for corporate debt or mortgages. Whatever benefits there might be from such actions would have to be weighed against the cost of putting the Fed in the business of allocating private sector credit–a task for which the Fed has no particular expertise, and which would likely subject the Fed to unwelcome political pressures.

Interesting, no?

Finally. from a speech to the National Economists Club by Ben S. Bernanke, Nov. 21, 2002

Deflation: Making Sure "It" Doesn't Happen Here
...Second, the Fed should take most seriously--as of course it does--its responsibility to ensure financial stability in the economy. Irving Fisher (1933) was perhaps the first economist to emphasize the potential connections between violent financial crises, which lead to "fire sales" of assets and falling asset prices, with general declines in aggregate demand and the price level.

Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost....

Some of the footnotes to the speech:

8. Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public

12. The Fed is allowed to buy certain short-term private instruments, such as bankers' acceptances, that are not much used today. It is also permitted to make IPC (individual, partnership, and corporation) loans directly to the private sector, but only under stringent criteria. This latter power has not been used since the Great Depression but could be invoked in an emergency deemed sufficiently serious by the Board of Governors.

15. In carrying out normal discount window operations, the Fed absorbs virtually no credit risk because the borrowing bank remains responsible for repaying the discount window loan even if the issuer of the asset used as collateral defaults. Hence both the private issuer of the asset and the bank itself would have to fail nearly simultaneously for the Fed to take a loss. The fact that the Fed bears no credit risk places a limit on how far down the Fed can drive the cost of capital to private nonbank borrowers. For various reasons the Fed might well be reluctant to incur credit risk, as would happen if it bought assets directly from the private nonbank sector. However, should this additional measure become necessary, the Fed could of course always go to the Congress to ask for the requisite powers to buy private assets. The Fed also has emergency powers to make loans to the private sector (see footnote 12), which could be brought to bear if necessary.

18)...Some have argued (on theoretical rather than empirical grounds) that a money-financed tax cut might not stimulate people to spend more because the public might fear that future tax increases will just "take back" the money they have received.

Prescient.

Doom and Gloom: What Can the Federal Reserve Do?

UPDATE: Part II.
The short answers- Quite a bit. Not enough.
This line of thought was triggered by a MarketWatch story from a couple days ago:

Bernanke committed to use all tools: Sen. Dodd
Federal Reserve chief Ben Bernanke reaffirmed his willingness to use all tools available to aid the economy, according to Sen. Chris Dodd, chairman of the Senate Banking Committee.

I was reminded of a Financial Times story from March 25, 2002:
Fed Considered Emergency Measures To Save Economy

Minutes which summarized the meeting were released last week. A full transcript will not be available for five years but a senior Fed official who attended the meeting said the reference to "unconventional means" was "commonly understood by academics."

The official, who asked not to be named, would not elaborate but mentioned "buying US equities" as an example of such possible measures, and later said the Fed "could theoretically buy anything to pump money into the system" including "state and local debt, real estate and gold mines – any asset"

I don't have the link but the the quote via my notebook is accurate, it struck me as important enough to jot down.
We now have the transcript,
Minutes of the Federal Open Market Committee
January 29-30, 2002

...At this meeting, members discussed staff background analyses of the implications for the conduct of policy if the economy were to deteriorate substantially in a period when nominal short-term interest rates were already at very low levels. Under such conditions, while unconventional policy measures might be available, their efficacy was uncertain, and it might be impossible to ease monetary policy sufficiently through the usual interest rate process to achieve System objectives. The members agreed that the potential for such an economic and policy scenario seemed highly remote, but it could not be dismissed altogether. If in the future such circumstances appeared to be in the process of materializing, a case could be made at that point for taking preemptive easing actions to help guard against the potential development of economic weakness and price declines that could be associated with the so-called "zero bound" policy constraint....

The question arises "Can the fed intervene in the Equities Markets?"
Again, two answers. 1) It's definitely something Central Bankers have thought about. 2) The Fed may need some enabling legislation which they would probably get if they requested it.
The FT reported February 21, 2002 "Japan Suspected of Stock Market Intervention".
A Google search finds 700 references to the "Stock Buying Body".
Here's a pungent one:

"We must halt this fall in shares. It's like diarrhea, we must stop it. The stock-buying body was set up precisely to absorb such selling (offloading of cross-shareholdings by banks). If February is such a month, there is no excuse for not functioning at that crucial time."
Finance Minister Masajuro Shiokaw – Feb 7

More relevant to the American markets are a couple Fed papers, the first of which is astounding for its frankness:

Monetary Policy When the Nominal Short-Term Interest Rate is Zero.
...This paper also examines the alternative policy tools that are available to the Federal Reserve in theory, and notes the practical limitations imposed by the Federal Reserve Act. The tools the Federal Reserve has at its disposal include open market purchases of Treasury bonds and private-sector credit instruments (at least those that may be purchased by the Federal Reserve); unsterilized and sterilized intervention in foreign exchange; lending through the discount window; and, in some circumstances, may include the use of options.

...8.1 Money Rains
Money rains are a clean way to study theoretically the effects of increases in the supply of money. In practice, it seems a bit difficult to envision how the Federal Reserve could literally implement a money rain that is give money away either through directly disbursing currency to the public or by disbursing it through the banking system. The political difficulties that are likely to arise from the Federal Reserve determining the distribution of this new wealth would be daunting. Even if the Federal Reserve were to and a way to physically conduct a money rain, the Federal Reserve Act does not appear to provide authorization for such activities. Under section 7 of the Federal Reserve Act, After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital. That portion of net earnings of each Federal reserve bank which remains after dividend claims ... have been fully met shall be deposited in the surplus fund of the bank. Thus, any transfers to the public must either be claimed to be "expenses" or be transfers from the surplus fund.

But Section 7 of the Federal Reserve Act only provides for disposition of surplus in the event of dissolution or liquidation of the Federal Reserve Banks. A direct transfer of funds from the surplus account for any other reason and to the public in particular would appear to be beyond the authority of the Reserve Banks. Apparently, then, a money rain would have to be declared an expense" of the Federal Reserve. The legal foundation for doing so seems highly questionable.

A second way to distribute newly created money would be to use it to finance a federal tax cut. A money-financed tax cut could be brought about by the Treasury financing a tax cut by issuing debt, and the Federal Reserve purchasing that debt. If the stimulative effects of such open market purchases have already been exhausted by the Federal Reserve in its attempts to stimulate the economy, the total effect would come from the fiscal stimulus. Of course, if the fiscal stimulus were large enough to raise the nominal interest rate above zero, then standard open market operations would regain their stimulative impact. These are only two of many possible ways a central bank could attempt to increase private-sector wealth and thereby stimulate aggregate demand. Putting possible legal limitations aside, wealth could also be created by purchasing assets at above market prices or by extending loans at subsidized interest rates....

The market opens in two minutes, I'll have to continue this in a second post.

U.S. bank woes are "poetic justice": Buffett (BRK.A)

From Reuters:

The woes in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said on Wednesday.

The head of the Berkshire Hathaway Inc (BRKa.N: Quote) (BRKb.N: Quote) group of companies also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.

But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the "biggest factor" behind the decline. Still, he said, the U.S. economy will "do very well over time."

Buffett, one of the world's wealthiest people, appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.

"It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said....MORE

Climateer "Line of the Day"

From the MarketWatch story

Is the Goldman touch a con?
Commentary: Why Wall Street's dominant bank is losing credibility

David Viniar, the closely watched chief financial officer at Goldman Sachs Group Inc. on Wednesday said the markets are full of liquidity and capital....

I haven't looked, is Mr. Viniar buying GS in the open market?