California: "Our Fantasy Economy Doesn't Actually Work, So We Want the Other 49 States to Pay for It"

That was fast. On July 24, we wrote:

Folks, the Golden state ain't. The boom was a fantasy and the problems will not go away anytime soon. Building an economy on paper rather than activities that add value is not sustainable. I imagine the next step is going to be an attempt to pick the pockets of the rest of the country, those 53 members of the U.S. House, led by the Speaker, will try to nationalize the costs of Cali's profligacy and policies. It should be interesting....

On December 14, '07 it was: The California Miracle, Ain't:

This is just a peek behind the curtain. As the truth that California's economy was based on ever-escalating real estate prices becomes clear, the myths of supremacy will be shown to be just that.
Just one example: it's easy to be energy efficient if you make your living swapping paper.
But that activity should not be confused with wealth creation, it's more of a greater fool or musical chairs type of game....

Today Reuters says:
California may need emergency $7 billion loan: report

California may need an emergency loan of up to $7 billion from the federal government within weeks, the Los Angeles Times on Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury Secretary Henry Paulson.

In the letter dated October 2, Schwarzenegger called for the passage of the $700 billion financial industry bailout plan which the U.S. House of Representatives is expected to vote on Friday, the Times said.

"Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing," Schwarzenegger wrote in the letter, according to the paper....MORE

HT: DealBreaker, who comment:

I always knew California was a street beggar waiting to happen. It was that smug "I'm too good for fiscal responsibility" coupled with that "I make so much money might now, I don't have to worry, and people can always use a smart guy with a degree from Stanford," and topped off with a little bit of "anyhow, what could possibly happen with the economy that people don't need investment bankers anymore" naivete. So California has spent itself into a corner. Again.

True, it's been brewing for quite awhile. It's not just consumers that have been outliving their means. Municipalities have been spending like drunken sailors in a 1980s Hong Kong port for quite some time, but the timing of this credit crunch thing worked out perfectly. Now they can all blame it on financial acts of god and get in on some hot bailout action with Hank.

All we really need is a major financial shock every 5 years or so and we can get away with anything at all.

Some of our other Cali. posts:

Hedge Funds; Venture Capitalists; Public Employee Pensions Push for Lieberman-Warner

Californians leading the way to consumer bust

California: Here Comes the Next Mortgage Crisis

Subprime was just the beginning. Wait until California's prime borrowers start handing their keys to the bank.

Californians to pay $600 mln for green think tank. And Farm visits can ease mental illness

California's cap-and-trade won't work

Lahde Capital letter to investors: short California, and CMBS

Court rejects California limits on ship emissions

There goes another investment idea. When California first proposed limiting ship's emissions, I thought some smart Mexican billionaire, along with the Chinese, would be building a world class port to take all the business that wouldn't be going to Long Beach.

The resources bonanza is over but China prevails (and the Financial Times is in a Parallel Dimension on Gold)

From FT Alphaville:

Commodities are sliding and only gold shines on [?*], judging by this week’s gloomy figures. Bloomberg reports Friday that copper, corn and silver are leading commodities toward the biggest weekly drop in more than 50 years because of concern that demand will weaken as global economic growth slows, and as the dollar reached a one-year high against the euro.

That makes the contrast with the booming gold sector [?*] even more stark, following the rosy forecasts for gold prices and solid good cheer emanating from this week’s gathering in Japan of the London Bullion Market Association.

More broadly, commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 9.9 per cent this week, the largest drop since at least 1956. The index has tumbled 31 per cent from a record on July 2. The UBS Bloomberg CMCI Index of 26 raw materials is having its worst week since at least 1997, adds Bloomberg.

In the view of China-based commodities commentator Stephen Wyatt, this is far more than a rough patch. It’s more like a gloomy reconfiguration, still very much focused on China, but in a new, more subdued mood.

“The resources boom is over, dead, gone”, Wyatt wrote this week in the Australian Financial Review. Yet, he notes, even in their newly weakened state, commodities remain at historically lofty levels. “After rising four, five and six fold over the past seven years in one of the greatest resource booms global capitalism has ever witnessed, commodity markets have so far fallen just modestly”....MORE

*The December gold contract is down another $12.60 per ounce this morning at $831.70. On Monday September 29, gold traded as high as $932 (up $44) on the Nymex. Call me old-fashioned but I don't see how a $100.00 drop from its high five days ago qualifies as either booming or shining. The December contract traded as low as $822.50 today.

Jim Cramer: Bailout's passage no longer matters

This is scary. I am thinking along the same lines as Cramer. Uh oh. From BloggingStocks:

TheStreet.com's Jim Cramer says too much time has passed, too many institutions are out of cash.

When we say "too big to fail," what we mean is an entity that has so many tentacles in so many parts of the economic superstructure that if it failed, the consequences would be too grave for the system itself.

With the demise of Lehman, we at last see what it is like to have something too big to fail, fail. That's why you can see every insurer go down in the beat of an eyelash, or every broker roll over with lightning speed. It is how you could see commercial paper lines frozen and how you could expect money funds to crater and break the buck.

Lehman was twice as big as Bear and much more far-reaching. It was the other side of the trade, we are discovering, for myriad financial players. Its paper pervaded the system and was seemingly owned like U.S. government paper was. It was levered against and it was priceless collateral that is, well, priceless collateral. It did things with your margin account to gain you a return that reduced your cash to unsecured status.

In short, Lehman may bring down the Western financial world....MORE

So What Happened To Solar Stocks This Time?

A twofer. First up Tech Trader Daily:

OK, now what’s wrong?

Just yesterday, the ever-volatile solar stocks staged a nice rally, as investors celebrated as the Senate tacked an 8-year extension of the solar investment tax credit onto the incredibly bloated financial bailout bill, which passed last night by a wide margin. The bill now goes over to the House. If approved in its current form, the bill would extend the current 30% tax credit for solar panel installations through 2016. That would be a relief for the domestic solar industry, which has been fretting for months about the possibility that the credit might not be renewed when the current credit expires at the end of this year.

Given the way the stock market sold off today, with the Dow Jones Industrial Average down 3.2% and the Nasdaq Composite down 4.4%, you can conclude either than a) the market isn’t so sure that the bill will actually win approval in the House in its current form, or b) that the bill is not going to be the cure-all that some investors hope.

Answer a) would mean disappointment for the solar industry....MUCH MORE

And from China Analyst a very stark look at today's action:
(in $millions except per share numbers):

Company (Ticker)	Mkt	Price	Daily	YTD	Rev	Rev	Chg	EPS	EPS	Chg
	Cap		Chg	Chg	08E	09E	%	08E	09E	%
First Solar (NASDAQ:FSLR)	14585	177.86	-9.8%	-33%	1218	2179	79%	3.71	6.98	88%
Suntech Power (NYSE:STP)	5657	30.54	-16.2%	-63%	2152	3225	50%	1.68	2.64	57%
SunPower (NASDAQ:SPWRA)	5994	71.33	-7.7%	-45%	1426	2065	45%	2.32	3.67	58%
MEMC (NYSE:WFR)	5724	24.81	-13.9%	-72%	2189	2808	28%	3.90	4.94	26%
LDK Solar (NYSE:LDK)	3398	29.31	-11.5%	-38%	1649	2560	55%	2.63	4.56	73%
Energy Conv. (NASDAQ:ENER)	2369	57.06	-7.6%	70%	471	682	45%	1.70	3.23	90%
JA Solar (NASDAQ:JASO)	1558	10.08	-14.9%	-57%	1048	1921	83%	1.00	1.64	64%
Yingli Green Energy (NYSE:YGE)	1317	10.16	-11.6%	-74%	1108	1716	55%	0.99	1.59	61%
ReneSola Ltd. (NYSE:SOL)	649	9.91	-11.8%	-24%	683	1256	84%	1.37	2.41	76%
Solarfun Power (NASDAQ:SOLF)	598	10.42	-9.9%	-68%	790	1080	37%	0.97	1.45	49%
Trina Solar (NYSE:TSL)	541	21.46	-11.0%	-60%	852	1298	52%	3.39	4.46	31%
Evergreen Solar (NASDAQ:ESLR)	598	5.05	-14.1%	-71%	114	422	270%	-0.26	0.42	N/M
Canadian Solar (NASDAQ:CSIQ)	483	16.44	-14.3%	-42%	961	1740	81%	2.78	3.72	34%
China Sunergy (NASDAQ:CSUN)	274	6.88	-8.8%	-58%	451	610	35%	0.30	1.00	236%
Akeena Solar (NASDAQ:AKNS)	114	4.06	-6.9%	-49%	40	56	38%	-0.62	-0.49	N/M
Hoku Scientific (NASDAQ:HOKU)	112	5.60	-7.1%	-51%	18	115	538%	-0.15	0.36	N/M
Ascent Solar (NASDAQ:ASTI)	103	6.31	-5.5%	-75%	3	3	6%	-0.66	-0.62	N/M
Spire Corporation (NASDAQ:SPIR)	121	14.50	-5.7%	-39%	78	129	65%	0.02	0.87	N/M
DayStar Tech. (NASDAQ:DSTI)	91	2.75	-7.4%	-56%	0	13	N/M	-0.77	-0.82	N/M
BTU Int'l (NASDAQ:BTUI)	94	9.86	-1.4%	-26%	77	97	26%	0.13	0.57	338%

Note: I've cut off three columns. For P/E '08, '09 and Net Margins, go to China Analyst.

Gloom, Doom and Boom: Nouriel Roubini and Barry Ritholtz Liveblogged at MarketBeat

Mark Gongloff, who liveblogged Mssrs. Ritholtz and Roubini, has a special place in our CI hearts. When we started Climateer Investing he was Markets Editor for the online WSJ and running the Energy Roundup blog. He blogrolled us in our first week and checked in enough that we were hattipped or linked to as often as any of the blogs they followed. This helped us see traffic and continue our amateur efforts.

Besides being a good guy [and an excellent talent spotter-ed.] he's a first-rate journalist. Here's an example of an ability I wish I had.
From MarketBeat:

Nouriel Roubini is the NYU economics professor known lovingly around Wall Street as “Dr. Doom” for his foresight in predicting the end of the financial system as we know it. Blogger/strategist Barry Ritholtz, who hasn’t been much more optimistic, is joining him this afternoon for a conference call to discuss the credit crunch. Should be fun! And by “fun,” we mean “a good time to stock up on canned goods.”

5:08: Roubini starts out saying there are six things to think about. The first question has about 10 parts. Could be a long call.

5:11: The U.S. economy risks a negative feedback loop: Economic woes hurt creditworthiness, hurting banks, hurting credit, hurting the economy. Wash, rinse, repeat, lose your house.

5:14: The Fed’s next move is likely a rate cut....MORE

Rate Cut

From Alea:

1 month OIS closed at 155 bp, next meeting oct 28-29, intermeeting rate cut of 50 bp fully priced in.

On bailouts of the banking industry c. 1908

The economists at Division of Labor seem to be as fun a bunch of econobloggers as you're likely to find (excluding Haab and Whitehead's Friday Beer Posts).
From time to time DoL trolls the archives at the New York Times. What they find is often entertaining and usually instructive. From Division of Labor:

The irony discovered reading the paper from 100 years ago is sometimes too much, even for me. The October 2, 1908 NYT reports on the banking industry's take on a "bail out" plan, of sorts, proffered by William Jennings Bryan (and others):

The American Bankers' Association to-day adopted the following resolutions opposing the policy of guaranteeing bank deposits now being advocated by Mr. Bryan:

Resolved. That the American Bankers' Association is unalterably opposed to any arbitrary plan looking at the mutual guarantee of deposits, either by a State or the Nation, for the following reasons:

1. It is a function outside of State or National Government.
2. Is is unsound in principle.
3. Is is impracticable and misleading.
4. It is revolutionary in character.
5. Is is subversive to sound economics.
6. It will lower the standard of our present banking system.
7. Productive of and encourages bad banking.
8. It unjustly weakens the strong and unfairly strengthens the weak banks.
9. It discredits honesty, ability, and conservatism.
10. A loss suffered by one bank jeopardizes all banks.
11. The public must eventually pay the tax.
12. It will cause and not avert panics.

Later in the story we hear from Nathan Straus, "Chairman of the Business Men's Committee of the Democratic National Committee:">>>MORE

Nowhere to Run, Nowhere to Hide: "Latin America Economic Boom Threatened as Credit Freeze Deepens"

In May MarketBeat had a post "Latin American Debt No Longer Scares Investors" which got a little back-and-forth going in the peanut gallery:

Comments

See:
Barings, 1890.

Comment by Climateer - May 12, 2008 at 12:25 pm

“Barings, 1890″? Is this the best you people can come up with?

Comment by Joaozinho - May 12, 2008 at 12:59 pm

See:
Chavez, 2008.

Comment by Climateer - May 12, 2008 at 1:26 pm

Oh please Climateer… it’s easy to tell crap about latinamerica if you own the casino, right?
US should look at how latinamerica has been stabilizing in the last 7 years, with stronger economies and models that differ a lot from what’s been suggested by the IMF and Washington for ages, that’s why now you see crisis in Argentina that are related to wealth distribution… Nice job latinamerica.

Comment by El Macho Porteño - May 12, 2008 at 3:54 pm

I did like De Soto’s
“El Otro Sendero”

Comment by Climateer - May 12, 2008 at 4:34 pm

Macho Porteño, you are mixing the trees with the forest in your argument and engaging in typical US bashing that is empty and fails to address properly the accomlishments and the the failures of the many covernments and people in the region. There are countries in the region that look to and plan for the future while others are stuck in the past and try to implement once again failed policies. Countries like Chile, Brazil, Peru and Colombia are looked at in the US as having adopted models from which other countries in the Americas can learn … even the US. Then, there are countries like Argentina, Venezuela and Bolivia that are going a different way. In Argentina the government and the peronistas choose to keep the economy close, scare away foreign investment, keep labor markets inflexible, and grow their political machine at the expense of the nation’s future. In Venezuela and Bolivia socialist policies that promise much and deliver little are emptying the promise and coffers of the countries, and are endangering their ability to exploit usefully their natural resources. Neither the US nor the IMF are to blame for the political choices of the countries that are not moving forward. The nations of Argentina, Venezuela and Bolivia condemn themselves to a dark future by living in the past and clinging on to failed policies from the 60s and 70s.

Comment by US Porteño - May 13, 2008 at 11:44 am

No Longer Scares Investors??

Are You referring to the 30000 M$ bonds argentina deleted from its balance sheet?
Ecuador now is flirting with default on its bonds so far, Venezuela will be the next!

Comment by B - May 13, 2008 at 12:52 pm

Today Bloomberg reports:

Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities.

``We're in a serious economic crisis,'' Colombian Vice President Francisco Santos said in an interview in his Bogota office. ``Financing is going to get scarcer and scarcer, and that means that investment is going to be difficult to attract.''

The region's growth in 2009 may be cut to less than 3.3 percent, from 4.6 percent this year, according to economists at Barclays Capital. The slowdown will make it harder to further reduce poverty that's fallen to its lowest levels since before the ``Lost Decade'' of the 1980s in which countries borrowed more than they could repay.

The crisis will test Latin America's decade-old commitment to debt reduction and open markets. Mexico this week shelved plans to privatize an airport, citing the U.S. crisis, while Costa Rican President Oscar Arias warned the country's growth rate may halve as investment drops. In Brazil, lending that has powered the country's fastest expansion in more than a decade is drying up, said Ricardo Espirito Santo, head of the Brazilian unit of Portugal's Banco Espirito Santo SA.

``The last four or five years were very good for Latin America, but that cycle is coming to an end,'' said Rodrigo Valdes, chief Latin America economist at Barclays Capital in New York. ``We expect a deceleration in practically all economies.''

Cutting Forecast...MORE

Commodities: $50 bln in 'long-only funds' flees commods markets. And: Calpers says staying the course on commodities

I am looking forward to CalPERS quarterly results. While the recent ugliness won't have an immediate impact on their ability to meet their promises to retirees, I'm guessing that it will end up being a good thing that they can make up any longer-term shortfall by taxing California residents. This could get serious.

Regarding the long only commodities "investors", look for a hit to Goldman's earnings. As proprietors of the GSCI they have at least half the "roll" business. Assuming 2% slippage (fees, spreads, commissions) on the $50 Bil. just removed from the markets and you have $500 mil. in gravy they won't get to put on their spuds. And that's not counting the swaps biz. Two from Reuters:

Investments betting that commodity futures prices will move higher have drastically diminished over the past two months due to the global credit crisis, according to data released on Monday.

The amount of so-called long-only money has shrunk by as much as $50 billion, with the sharpest drops in agricultural futures and oil markets.

Commodities seemed insulated from the slump in stocks and real estate through the first half of 2008, with oil racing to a historic high of nearly $150 a barrel by mid-July, fueling an inflation run-up in most other raw materials.

But as the dollar rebounded from record lows against the euro and the U.S. banking crisis reached epidemic levels over the last 10 weeks, some of the most bullish investors in energy and agricultural markets began to flee.

"The tidal wave of investment into commodities which occurred in the first quarter has collapsed," CitiGroup said in a research note on Monday. It said that since July, the net long position has collapsed from $58 billion to $8 billion....MORE

And:

Top U.S. pension fund Calpers said on Tuesday it was not making any drastic changes to its commodity investments after recent market upheaval and that returns from the sector largely reflect a commodities index it was invested in.

"Generally, whatever returns we've had would pretty much mirror the S&P GSCI index," Clark McKinley, spokesman for Calpers, or the California Public Employees Retirement System, as it is known in full, said in an e-mail to Reuters.

McKinley said Calpers currently had about $1.3 billion invested in commodity futures that track the S&P GSCI.

The pension fund was estimated to be worth about $240 billion by asset size as of February.

The S&P GSCI's Total Returns Index .SPGSCITR -- adjusted for the cost of rolling futures contracts forward as the front month contract in the commodity market it tracks expires -- was up 7.3 percent year-to-date at 2:45 p.m. (1645 GMT).

If compared to its peak in July, the index is down 27.4 percent, largely reflecting a near 30 percent slump in the price of oil, its main component....MORE

Let the Bloodbath Begin: Hedge Fund Redemptions

Remember the word 'deleveraging'?
From MarketFolly:

September 30th was the final day (end of the quarter) that investors in most hedge funds could request to redeem their money in December. If you've been following my posts on this matter, you know we're in for a rough ride. There have already been reports of massive redemption requests by investors. As of right now, redemption estimates are in the hundreds of billions. Nouriel Roubini, respected Professor of Economics at NYU, recently predicted this and said the run on hedge funds could last up to 2 years.

Why are investors running to redeem their money you might ask? Well, maybe it's because Hedge Funds have had a rough year just like everyone else. While there are some standout performers, the majority of funds have been on the losing side of things. Overall, the performance of hedge funds and fund of funds this year has been the most widely dispersed in six years. And, such dispersion is bound to cause redemptions. These redemptions cause hedge funds to sell out of their positions and raise cash....
...FT Alphaville captures the possible severity of the situation,

"The bottom line, according to industry outfit hedge fund research, is that up to 2000 hedge funds can be expected to be liquidated in the coming months. Given the complexity of the market - the way hedge funds and their holdings so interlace the financial system, this is a potential massive shock. It almost makes the failure of Lehman pale into insignificance. The Lehman collapse will be worked out over years. Hedge fund redemptions and liquidations will take days or weeks."

Simply put, hedge funds are deleveraging. Not to mention, you've got the added threat of hedge funds straight up liquidating and closing up shop....MORE

Credit Crisis May Affect 2009 Harvests, Schafer Says

From Bloomberg:

The credit crisis roiling financial markets may affect next year's corn, wheat and soybean output should farmers find themselves unable to get loans to buy seeds and fertilizer, U.S. Agriculture Secretary Ed Schafer said.

``We certainly could see tight credit having an effect on agricultural production'' in the U.S., Schafer told reporters today after speaking to Department of Agriculture workers in Washington. ``The costs of farming operations today are huge, and that backs up to the banks that have balance sheets that are tight, it backs up to elevators that have credit stretched out.''

Schafer said he has yet to see signs of the credit crunch affecting agricultural operations. The USDA says farmers will reap record profits of $95.7 billion this year while experiencing their highest costs ever. Farm debt levels are also at the lowest since at least 1960, according to government data.

Expenses are projected to rise 16 percent to $294.8 billion, with higher fertilizer, fuel and seed prices biting into profits, the department said in an August report. Adjusted for inflation, costs will be the highest since 1980, before falling crop prices pushed farmers into the biggest agricultural crisis since the Great Depression...MORE

Nowhere to Run, Nowhere to Hide: "Stubborn Ag Bulls Emerge Covered in Fertilizer" (MOO; MON; MOS; POT)

From MarketBeat:

The bubble has burst for fertilizer and agricultural chemical stocks, with former stock-market star Mosaic off by a third Thursday and others hard on their heels, like Monsanto and Potash Corp. of Saskatchewan as excess supply and reduced demand slow the pattern of price increases on farm chemicals.

Mosaic, one of the two largest fertilizer makers by sales, recently fell 32% to $45.89 — and has fallen by more than $117, or over two-thirds, since June 18, even after reporting robust fiscal first-quarter earnings growth after the bell Wednesday. Mosaic’s warning that phosphate, a particular grade of fertilizer, was leveling off in price sent hedge funds and Wall Street brokers fleeing from the sector, where consistent price increases had resulted in great expectations.

The action in fertilizer stocks in particular is comparable to the technology bust of 2000 to 2001, when profitable companies like Microsoft and Intel suffered from speculators’ realization that the sky was not the limit. Farmers could not bear the weight of ever-increasing costs forever, especially as grain prices fell by half and credit tightened....MORE

Suntech aims to triple U.S. 2009 sales (STP)

They obviously were going to do this whether the subsidies were renewed or not. As Environmental Capital asked on Monday, "Clean Breaks: Are Tax Credits Do-or-Die for Renewable Energy?":

...Monday’s shootdown of the bailout plan means Congress can’t pack up for vacation just yet—which might even give legislators more time to hammer out an agreement on tax policy and provide eleventh-hour salvation to the renewable-energy industry, which has been hollering all year for an extension of the tax credits.

And if Congress doesn’t act? The sky may not fall, after all.

America’s renewable-energy industry has historically depended on the tax credits, because they help make things like wind and solar power cost-competitive with traditional sources of power generation. But the renewables industry is growing up quickly—despite (or because of) the threat the tax credits would expire at the end of this year, both the wind- and solar-power industries have chalked up record levels of power installations in 2008.

The electricity projects in the pipeline right now don’t paint clean energy as the industry’s poor cousin, either....MORE

Here's the headline story from Reuters:

Solar products maker Suntech Power Holdings Co (STP.N: Quote) said it aims to triple sales to the U.S. in 2009 after announcing expansion initiatives.

The company, based in the eastern Chinese city of Wuxi near Shanghai, said it formed a joint venture with MMA Renewable Ventures, forming Gemini Solar Development Company LLC.

Gemini Solar will seek to develop, finance, own and operate large-scale photovoltaic (PV) projects greater than 10 megawatts, the company said.

Suntech said it acquired EI Solutions, a California-based commercial solar system integration company, to target commercial, utility and government customers in the U.S.

The company also announced an expansion of its U.S. dealer network to increase penetration into the residential roof-top and small commercial system solar market and build brand recognition with downstream solar integrators....MORE

"Retail investors seek haven in gold coins amid crisis"- They're Early (or Late)

Just to be clear, this is not a precious metals site. On the other hand, everything is connected and the PM's are an area you have to be aware of.
The macro situation is: We are in the early stages of an historic unwinding of credit. The leverage in the financial system has built up over the last 25-30 years and will not be wrung out in a month or even a year. With that backround there is no current investment rationale for gold other than an end of the world scenario (and just who will be bidding up your holdings in that case?).

On Tuesday we posted "The Financial Times Sings Praise of Gold. They're wrong.". Yesterday commenting on the third FT story of that day in "Wealthy investors hoard bullion" we said flatly

"we disagree with the macro thesis."

The first part of today's headline is from MarketWatch. Don't take the simplistically contrary approach that "if it's retail investors, it must be wrong". Retail investors are usually late to the party but they can be right for years at a time. It just happens that in this case they aren't (currently)
From MarketWatch:

As the crisis on Wall Street deepens, retail investors, who can't afford the high cost of trading in the futures markets, have been increasing their holdings of gold coins as a safe haven.

The U.S. Mint said last week it was temporarily suspending sales of American Buffalo gold 1-ounce bullion coins after soaring demand depleted inventories. The Mint had previously halted sales of American Eagle 1-ounce gold coin in August.

"Tightness in the gold market is fairly normal in a time of financial stresses," said Dan Ferris, writer for DailyWealth, an investment newsletter. "We've seen high demand for gold coins because the news about banks is all bad."

Investors tend to snap up gold as the final tangible asset when the economy falls into turmoil. Some gold dealers said they have seen unprecedented demand for coins and bars as the financial crisis on Wall Street and Europe intensified worries about a global slowdown...MORE

Gold is trading hands at $859.30 down $28.00. Here's an odd headline and rationalization, again from MarketWatch:

Gold falls after Senate approves bailout plan

Gold fell more than 3% Thursday as the U.S. Senate's approval of a revised $700 billion bailout plan boosted the dollar, reducing dollar-denominated prices of the precious metal.

Gold for December delivery lost $27.80, or 3.1%, to $859.50 an ounce on the Comex division of the New York Mercantile Exchange.

"In short term gold is likely to remain in a softer mood as approval of the U.S. rescue package will no doubt boost the dollar and investor risk appetite," said James Moore, an analyst at TheBullionDesk.com...MORE

If you recall, last week the story was, "This bailout is so inflationary that gold is going back to $1000 this year". Here's a Reuters story from Monday:

Private banks rethinking gold, seen next big buyers
Private banks could be the next big buyers in the global gold market, helping drive prices higher as they consider restocking bullion bars that were sold off in calmer times, the top HSBC gold trader said on Monday.

Jeremy Charles, chairman of the London Bullion Market Association and global head of precious metals trade at HSBC Bank, also said he expected central banks around the world to put the brakes on their plans to sell down gold reserves as they see other assets deteriorate, lending further support to prices.

"I think the institutional investors and private banks in particular will all be reconsidering their strategy. My belief is they are likely to want to own some gold again,"he told Reuters on the sidelines of the LBMA's annual conference. The current generation of private bankers destocked their gold holdings in the 1980s and 1990s to pursue higher-return investments in recent years, but are now seeing the wisdom of the previous generation's gold holdings, he said....MORE

Just two last thoughts. Where were these bankers in 2001 when gold bottomed at $252? The price quadrupled in seven years before pulling back 26%. I'm not buying it. (right now. that will change and I'll try to give you a heads up)

We're Tardy: "Solar Shrs Jump; Senate Adds Solar ITC To Bailout Bill"

We have a (nearly) foolproof system. When something comes through the feedreaders from one of the Dow Jones heavy-hitters, Savitz at Tech Trader Daily, Johnson at Environmental Capital or Gaffen at MarketBeat, the siren goes off and strobe lights start flashing. A recording of teletype clatter kicks in and ticker tape drops from the ceiling.
And yet...
We missed this from Mr. Savitz this morning (last evening the WSJ reported the addition of the ITC and PTC to the bailout bill). Sorry.
From Tech Trader Daily:

Solar industry shares are off to a rousing start this morning on news that the Senate plans to add the stalled “tax extender” legislation that includes an 8-year extension to the solar investment tax credit to the pending bailout bill for the financial sector.

In a research note this morning, Cowen’s Robert Stone notes that the Senate will add the tax extenders to the bill, which the Senate is expected to vote on later today. Vishal Shah, solar analyst at Barclays, asserts in a note this morning that Senate approval of the bill could be followed by a House vote on the measure as soon as tomorrow....MORE

Among Bailout Supporters, Wall St. Donations Ran High

From DealBook:

...Though there was much talk about ideals and principles on the House floor, there’s another factor to consider as well.

The Center for Responsive Politics, a Washington nonprofit group that studies money and politics, reports that on average, lawmakers who voted in favor of the bailout bill have received 51 percent more in campaign contributions from sources in the finance, insurance and real estate industries — or FIRE industries, for short — over their congressional careers than those who opposed the emergency legislation.

The legislation is of vital interest to Wall Street firms and banks, many of which would like to use the program to offload noxious mortgage-related assets.

The FIRE industries — or, more specifically, individuals and political action committees associated with them — have been the top source of campaign contributions in federal politics, the group said, giving more than $2 billion to federal candidates and political parties since 1989.

This year, sources from the FIRE industries have been particularly busy, doling out millions to candidates that are facing tough reelections.

In this election cycle, the 140 House Democrats who voted for the bailout bill collected 78 percent more from the FIRE industries than the Democrats who opposed it. Over their careers, they collected 88 percent more, the data show.

On the Republican side, the gap was smaller. Republicans in the House that voted yes on the bailout bill got an average of 23 percent more in contributions from the FIRE industries in this election cycle than House Republicans who voted against it. In the long run, they got 53 percent more....MORE

Power, Power, Power: Alcoa is closing a high-cost Texas smelter

From Purchasing.com:
Power costs, competitive issues cited for shutdown

Citing power-supply problems, lower sales prices and decreasing demand for aluminum, Alcoa will continue the staged shutdown of its Rockdale, Texas, smelter. A portion of the ingot-making smelter was shut in June and more will shut in December. Alcoa says the move is an effort to reduce production and power costs to remain competitive against bigger rivals Rio Tinto and United Co. Rusal....
...Aluminum plants are heavy users of power, which accounts for nearly 30% of production costs. To mitigate expenses, aluminum companies have been moving operations from high-cost power countries such as the U.S. to relatively cheaper locations like Canada, Iceland, the Middle East and Russia.

And that boys and girls is similar to what the EU is experiencing under cap-and-trade where it is called 'carbon leakage' (not to be confused another leakage that I've seen mentioned as a 'side-effect' of some drugs, technically known as steatorrhea and the butt of low comedy)

Two economists, an editor, and a boring town

Regret the Error is a blog about newspaper corrections, retractions etc. Here's an example my English friends might enjoy. From The West Australian via RtE:

Deep depression: Our economics editor has officially gone from recession to depression.

By mangling the names of two of history’s most highly decorated economists, John Maynard Keynes and Milton Friedman, we not only created an economy of truth but blamed poor Milton Keynes for having “crazy” ideas (We can all learn from Depression, Opinion, page 21, September 29).

Milton Keynes is an English town famous not only for its grid system of roads and its herd of concrete cows but because in 1998 it was deemed so boring that even chartered accountants refused to move there. The “crazy” ideas comment was intended for John Maynard Keynes, who was voted one of Time Magazine’s most important people of the 20th century - and who was not boring.

Goretex is NOT the new Al G. & T. Boone Tag-Team

This story at MarketBeat yesterday, "Detroit Slowdown Drives Platinum, Palladium Lower" reminded me of something I stuffed in the link-vault last week. From the R-Squared Energy blog:

Goretex in Fuel Cells?

In the category of "You aren't going to believe this" is a story that was just sent to me by a reader. In a breakthrough being hailed as one of the biggest in 20 years of fuel cell technology, researchers at Monash University have replaced platinum in fuel cells with Goretex:

Monash fuels the next generation of hybrid cars

Monash University scientists have revolutionised the design of fuel cells used in the latest generation of hybrid cars which could make the vehicles more reliable and cheaper to build. The breakthrough, published today in the journal Science, revolves around the design of a fuel cell in which a specially-coated form of popular hi tech outdoor and sporting clothing material Goretex® is the key component....MORE

Rentseeking Cubed: "Obama's $150 Billion `Cleantech' Pledge Lures Deal-Hungry VCs"

From Bloomberg:

Dan Reicher isn't a politician. Far from it. He's the director of climate and energy initiatives at Google.org, the search giant's philanthropic arm.

Yet as he addresses 250 Silicon Valley venture capitalists and entrepreneurs at Denver's Curtis Hotel during the Democratic National Convention, Reicher sounds like a seasoned pol stumping for his cause: fighting global warming and dependence on fossil fuels.

``Washington is not ready for action, it does not have the policies in place to move renewable energy forward,'' says Reicher, who was there on his own behalf and not as a Google Inc. representative. ``So let's get out the vote and let's get Barack Obama elected in November!''

His audience bursts into cheers.

It was Aug. 26, and as partisans in the Pepsi Center a mile away were ripping Republicans, Reicher and clean-energy proponents were rallying supporters at a reception co-hosted by Cleantech & Green Business Leaders for Obama. The Silicon Valley advocacy group has raised more than $600,000 for Barack Obama's presidential campaign...MUCH MORE

Wealthy investors hoard bullion

This was the third story on gold that the Financial Times had yesterday. As we said in "The Financial Times Sings Praise of Gold. They're wrong.", we disagree with the macro thesis.

Over the years I've wondered about the role of financial journalism in promoting various investment themes. I've known writers who thought nothing of front-running a story. I've known others who wrote puff-pieces to maintain access (or in one case, a pathetic attempt to seduce a corporate officer). I've heard investment types who were convinced that the media were willing participants in a product-pushing Wall Street cabal.

For the most part financial journalists are reasonably intelligent, underpaid folks, susceptible to the herd mentality that all of us are. Being a bit more gregarious than average, they tend to talk about what people are talking about, which in the investment world is often (though not always) tardy. The pros resist this temptation and tend to be a bit more lone-wolfish.

This long intro was precipitated by a conversation last weekend about the lack of coverage of gold when it bottomed at $252 in 2001, ending a twenty-one year bear market. So I took note yesterday when one of the best organizations in the business has three stories in one day. From the Financial Times:

Investors in gold are demanding “unprecedented” amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.”

The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds....MORE

Analyst slams LED maker Cree

The stock closed yesterday at $22.78.
From Cleantech:

Report warns of ‘red flag’ for market leader because of $10 million in excess inventory at one Asian distributor.

Even with the Nasdaq as a whole down 9 percent, Durham, N.C.-based Cree (Nasdaq:CREE) saw its shares fall 14.6 percent today to $22 on an analyst report warning of problems at the light-emitting diode market leader.

Canaccord Adams released a report today reiterating a ‘sell’ rating and target price for Cree of $16, which is 20 times the estimated 2009 earnings-per-share of 68 cents...MORE