Shipping: How'd we do with "Shipping: Will the Run End Today?" (DRYS; DSX; EXM)

On Monday our first shipping post of the day was
"Shipping: Will the Run End Today? (DRYS; DSX; EXM)"

With Excel having reported this morning and Dryships reporting after the close I'm thinking the easy money is behind us.

Premarket EXM was up 3.07%, DSX 1.92%, DRYS 1.69%.
I'm wondering if DSX is setting up one of Mr O'Neill's cup-and-handle formations, which would mean we can go elsewhere for the next few weeks.

From Monday's open* to Fridays close Dryships went from $112.70 to $90.05, down 20.09%.
Here's the picture from BigCharts:



Excel Maritime opened the week at $59.75 and closing at $47.86, down 19.9%.
From BigCharts:



DSX was the best performer of the group at down 15.31% and is the one I like best for a rebound.

*We put the post up at 9:38 EDT, two hashmarks on the charts above. If you should see this post after the open on Tuesday the 27th the charts will have changed, they're dynamic.

Our second shipping post on May 19 was:
Shipping: Well that was Quick (DRYS; DSX; EXM)

Alternative energy execs dream of oil crunch

From Reuters:

While most companies are watching soaring oil prices with an eye on rising costs some renewable energy executives are licking their lips at the prospect of "spectacular" growth.

Oil sped above $135 to a new record for a third straight day on Thursday. That and new forecasts of a higher floor price has some alternative energy suppliers dreaming of an era of peak oil when global crude output starts to fall.

"Our time is very definitely coming," said Jeremy Leggett, chairman of solar power company Solar Century and former environmental campaigner. "The world is going to be beating a path to our doors ... The oil crunch is coming soon. The drivers are going to be spectacular."

Thursday's record oil price knocked world stocks to a one-month low as concerns grew that rising raw material costs would hit companies and consumers in an economic slowdown.

In their latest rally since May 1 oil prices have risen 20 percent. In that time the MSCI index of the world's biggest stocks is up 1.5 percent, while a ABN AMRO index of renewable energy stocks has climbed 9.5 percent.

But support for renewables has been jittery after months of hype helped fuel valuations at a time of tight credit.

In particular, solar power stocks dived as much as 50 percent in January as investors feared that a credit crunch would make "big ticket" solar panels unaffordable and that over-capacity in the sector could swamp demand.

"There's obviously been underlying concern in the renewable energy markets that valuations are inflated, (asking) are we in the middle of a green technology bubble," said Merrill's head of carbon emissions trading Abyd Karmali. Continued...

Oil Traders to Escape U.S. Scrutiny in Dubai

From MarketWatch:

Oil's tense trading scene may sway a move to Dubai.

Futures launch may help traders escape from U.S. regulators' watchful eye.

The Dubai Gold & Commodities Exchange will launch trading of crude-oil futures on Tuesday, a timely move given the astronomical prices for oil and talk of U.S. regulation of speculators in the commodity markets....

..."The regulatory environment is becoming so undesirable to foreign and domestic funds that they have no choice but to go offshore," said Kevin Kerr, president of Kerr Trading International and editor of MarketWatch's Global Resources Trader.

Speculative activity in commodity markets has grown "enormously" over the past several years, the Homeland Security and Governmental Affairs Committee said in a news release. It pointed out that in five years, from 2003 to 2008, investment in the index funds tied to commodities has grown by 20-fold -- to $260 billion from $13 billion....MUCH MORE

Obama's Secret War Profiteering Tax

From OurFuture:

I can’t make this up:

In a hotel room in Brussels, the chief executives of the world’s top oil companies unrolled a huge map of the Middle East, drew a fat, red line around Iraq and signed their names to it.

The map, the red line, the secret signatures. It explains this war. It explains this week’s rocketing of the price of oil to $134 a barrel.

It happened on July 31, 1928, but the bill came due now.

Barack Obama knows this. Or, just as important, those crafting his policies seem to know this. Same for Hillary Clinton’s team. There could be no more vital difference between the Republican and Democratic candidacies. And you won’t learn a thing about it on the news from the Fox-holes.

Let me explain.

In 1928, oil company chieftains (from Anglo-Persian Oil, now British Petroleum, from Standard Oil, now Exxon, and their Continental counterparts) were faced with a crisis: falling prices due to rising supplies of oil; the same crisis faced by their successors during the Clinton years, when oil traded at $22 a barrel.

The solution then, as now: stop the flow of oil, squeeze the market, raise the price. The method: put a red line around Iraq and declare that virtually all the oil under its sands would remain there, untapped. Their plan: choke supply, raise prices rise, boost profits. That was the program for 1928. For 2003. For 2008.

Again and again, year after year, the world price of oil has been boosted artificially by keeping a tight limit on Iraq’s oil output. Methods varied. The 1928 “Redline” agreement held, in various forms, for over three decades. It was replaced in 1959 by quotas imposed by President Eisenhower. Then Saudi Arabia and OPEC kept Iraq, capable of producing over 6 million barrels a day, capped at half that, given an export quota equal to Iran’s lower output.

In 1991, output was again limited, this time by a new red line: B-52 bombings by Bush Senior’s air force. Then came the Oil Embargo followed by the “Food for Oil” program. Not much food for them, not much oil for us.

In 2002, after Bush Junior took power, the top ten oil companies took in a nice $31 billion in profits. But then, a miracle fell from the sky. Or, more precisely, the 101st Airborne landed. Bush declared, “Bring’m on!” and, as the dogs of war chewed up the world’s second largest source of oil, crude doubled in two years to an astonishing $40 a barrel and those same oil companies saw their profits triple to $87 billion....MORE

HT to Big Gav at Peak Energy

Dynegy, a Dark Horse Again? (CPN; DYN; NRG)

From DealBook:

For people outside the power industry, Dynegy may be best remembered as the company that made a daring bid to buy Enron as that energy giant spiraled toward bankruptcy.

That offer got withdrawn, but at least one analyst sees a possibility that Dynegy could attempt another audacious takeover. Lasan Johong of RBC Capital Markets said in a research note Thursday that it would be “feasible” for Dynegy to step up as a rival suitor for Calpine, a major provider of electricity in Texas and California.

Calpine is significantly larger than Dynegy — and is already considering a roughly $11 billion takeover offer from NRG Energy....MORE

Our previous posts on Dynegy:

Sizing Up the Utilities, if Carbon Caps Take Hold (DYN; ETR; EXC; FPL; NRG; PGC)

They've Got Juice- Dynegy (DYN)

Blackout: Enron and the California Power Crisis (Transcript)

Dynegy: Carbon Risk Accompanies LS Power Merger

"Like A Gang of Clowns in a Pie Shop": S&P Puts Moody's on Credit Watch (Negative)

Gleefully purloining Tim Annett's magnificent description* of loser brokers downgrading loser brokers, we present, from Bloomberg:

Moody's Commercial Paper Rating May Be Cut, S&P

Moody's Corp., owner of the second- largest credit-rating company, may have its commercial paper ranking cut by its bigger competitor Standard & Poor's. S&P today placed Moody's A-1 short-term debt rating on CreditWatch negative, citing reports that a computer error may have caused Moody's to give Aaa ratings to debt that didn't deserve them....MORE

HT: DealBreaker

*Mr. Annett was an uncontested Climateer 'Line of the Day' winner 27Sep07:

Climateer "Line of the Day" and Day Trading Hot Chinese Alt-Energy
(What could possibly go wrong?)

Speaking of the WSJ's Blog Empire (see below), Tim Annett posting at MarketBeat was yesterday's winner with a walk-off home run*:

Like a gang of clowns in a pie shop, Wall Street brokerages had a merry old time slapping one another with various downgrades, earnings-estimate parings and price-target reductions in the lead-up to their recent earnings announcements....

*From Wikipedia:
In baseball, a walk-off home run is a home run which ends the game. It must be a home run that gives the home team the lead in the bottom of the final inning of the game...

and is a lock inductee into the Climateer 'Line of the Day' Hall of Fame.
(should we ever get around to creating it)

Who Else Could Bid For Calpine? And; "Carbon Call: Climate Underpins NRG’s Bid for Calpine" (CPN; NRG)

From the NYT's DealBook blog:

NRG Energy’s roughly $11 billion unsolicited bid for Calpine has generated a lot of excitement in the normally sleepy power M&A space. There hasn’t been a major power generation hook-up in the United States in eons — or it sure feels that way — because of myriad internal industry struggles and regulatory roadblocks.

This match-up may bypass obstacles that have ensnarled other attempted deals. Nevertheless, the question remains as to what would be a fair price for Calpine. Based on stock prices around midday Thursday, NRG’s offer of 0.534 shares for every Calpine share is now $1 below where Calpine’s shares were trading. So the market seems to believe that NRG will probably need to raise its offer, most likely because it suspects another bidder will try to make a move on Calpine.

But it’s hard to see many other suitors for Calpine....MORE

From the Wall Street Journal's Environmental Capital blog:

The Lieberman-Warner climate bill hasn’t even hit the floor of Congress, but its impacts may already be hitting the market.

That’s the first reading of NRG Energy’s unsolicited, $11 billion all-stock bid for troubled rival Calpine Corp., a move which would create the biggest independent power producer in the U.S. NRG and Calpine are roughly the same size today, and a combined company would have about 45 gigawatts of generation capacity.

What’s so attractive about Calpine, which just got out of bankruptcy–besides a $5 billion tax carryover? It’s the biggest electric utility in the U.S. that doesn’t burn any coal–it just operates natural gas-fired turbines and some geothermal plants. NRG, on the other hand, is still coal-heavy despite a recent push into cleaner technologies like wind and nuclear power. About two-thirds of the electricity it produced in 2006 came from coal....MORE

In the wind-power biz, beware giving some stocks a whirl (ZOLT, AMSC)

The headline story is below this one from CFO.com:

The Securities and Exchange Commission is investigating Zoltek Companies, an alternative energy company lacking a permanent CFO that disclosed problems with its financial reports earlier this month.

Zoltek, a supplier of carbon fibers used in wind turbine blades and other equipment, said in a Tuesday 8-K filing that on May 13, it received a letter from the SEC indicating the regulator's staff was conducting "a non-public, fact-finding investigation" and requested that the company hold on to certain records and to information and documents related to matters disclosed in a May 5 8-K....

From the Los Angeles Times Money & Co. blog:

Times staff writer Edward Silver filed this report on a sudden wave of activity in the wind-power business -- and two stocks in the sector that may be overblown:

Wind power is on a hot streak. First, the Department of Energy last week forecast that the industry might deliver 20% of the nation’s electricity by 2030. It generates less than 1% now. Then famed oilman T. Boone Pickens ordered 667 turbines to outfit the wind empire he envisions on the Texas Panhandle. Pickens may shell out $10 billion or more before all is said and done. Over the weekend, Spain-based Iberdrola Renewables said it planned to invest $8 billion in U.S. wind operations in the next two years.

All the while, oil has continued its ominous ascent, making the renewable-energy proposition all the more compelling....

...Zoltek Cos. sells more super-sturdy carbon fiber for turbine blades than anyone else. With clients like Vestas and Gamesa, it's enviably entrenched as a supplier. Yet it hasn't made the most of its opportunity, and that's largely the fallout of internal failures. This month, Zoltek’s chief financial officer made his exit amid accounting questions that Bush still finds worrisome. The firm also has run into roadblocks trying to get its U.S. plants up to speed, holding back output while demand swells.

Some investors were buoyed by the company's recent quarterly results. Others weren't. Revenue rose 35% year over year, but that fell short of forecasts. Bush, unimpressed, rates the shares "sector perform" with a $28 target, slightly below their current level.

He also advises investors to beware American Superconductor Corp. -- which may be the message of the CEO's avid personal stock sales as well. AMSC hasn't turned a profit since its IPO in the early '90s. Despite that, it boasts a market cap well past $1 billion...MUCH MORE

UPDATE: Playing the Solar Game (STP; ENER; CSIQ; SOLF)

Let's see how the low I.Q. approach to analyzing the solar stocks did today.
Three out of four of the companies that have reported recently were down.
The ones we looked at this morning*:

STP- down 2.83%
CSIQ- down 13.45%
SOLF- down 22.08%
ENER- UP 0.35% (although it's getting spanked [-2%] after-hours)

Granted we were assisted by a timely downgrade of SOLF by Goldman and by a piece Mark Gongloff did for the WSJ's Ahead of the Tape column:

Solar Stocks:
Hot Enough
To Get Burned

...Solar's pricing power has held steady, but could be at risk next year, given the vast and growing number of people making solar panels.

China's Suntech Power Holdings, which reports earnings Thursday, may be on track to be the world's biggest PV-module maker this year. But at the end of 2006, the latest data available, it had at least 180 competitors, according to Friedman, Billings, Ramsey analyst Mehdi Hosseini. That number has almost certainly grown and threatens to drag PV-module prices lower.

Of course, there are plenty of reasons why the lights won't go out on solar the way they've gone out on ethanol. Both industries depend heavily on government subsidies. But solar seems less likely to fall out of public favor than corn ethanol, which has contributed to soaring food costs.

Solar is cleaner and getting cheaper. Corn ethanol will likely never be economically or environmentally viable without government handouts.

Still, solar stocks are speculative and volatile. While the industry's prospects look far brighter than ethanol's, that doesn't mean they can defy gravity.

As with everything in life, timing is everything.
And sometimes you get lucky.

*Suntech Power net income doubles, beats target. And: Playing the Solar Game (STP; ENER; CSIQ; SOLF)

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

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

Big Bird Deboning (SAFM)

From MarketBeat:

Sanderson’s Surprise Profit

...How did the company manage it? Corn prices rose 28% while soybean meal rose 47%, according to the company. Chicken prices did not show the same kind of appreciation — boneless breast and jumbo wing prices fell during the quarter, while whole chicken prices rose 6%. Analysts at BMO Capital Markets say the company has been successful in the “big-bird deboning” segment of the chicken industry (the most profitable segment), and it has gained market share as well, helping offset costs....

After gaffe, Democrats planning to redo farm bill

From the AP via Yahoo:

Democrats are picking up the pieces after an embarrassing technical gaffe that delayed a triumphant rejection of President Bush's veto of a massive farm bill.

The House voted overwhelmingly, 316-108, on Wednesday to override Bush's veto of the legislation earlier in the day.

The Senate then was expected to follow suit quickly, but action stalled after the discovery that a 34-page section of the bill had been omitted from the printed bill sent to the White House. That means Bush vetoed a different bill from the one Congress passed, raising questions that the eventual law would be unconstitutional....

No comment.

Khosla Rebuts the WSJ's Rebuttal

As a follow-up to "Ethanol: "Khosla's Conspiracy" (AVR; PEIX) " on Tuesday.

From VentureBeat:

Biofuel battle: WSJ hits Khosla, Khosla hits back

Here’s the danger in becoming a well-known venture capitalist: You may well become the locus for heated debates over cleantech and environmentalism, even when you’re not expecting it. That’s what happened to Vinod Khosla yesterday, when the Wall Street Journal lashed out with a short hit piece on his policies titled “Khosla’s Conspiracy”....

...But is the WSJ right in its own implied assertion that food-based biofuels are a villain? Not really. Essentially, Khosla is right: Food often moves hundreds or thousands of miles from where it’s grown to its target market, so quadrupling the price of transportation fuels over a few years’ time would have driven up prices without the help of biofuels. For its own reasons, the WSJ doesn’t deign to address that argument. Khosla, for his own part, has been bright enough to avoid investing in first-gen biofuels like corn ethanol.

To address these points, and some others of his own, Khosla issued a rebuttal, sending it to us and some other news outlets. We’re reprinting it, with editing to take out some less substantive portions, after the jump....MORE

HT: earth2tech

Suntech Power net income doubles, beats target. And: Playing the Solar Game (STP; ENER; CSIQ; SOLF)

Update here.

Another of the Chinese solars that we don't have a lot of interest in.

Here's the game: The fast money is rolling from one solar to the next as each reports earnings.
As a group the business is good so the earnings are coming in above analyst's estimates. Three weeks ago you could wait until the day before the release as there was still uncertainty. ENER was an example (closing prices):

May 7- $34.81
May 8- $49.91

A couple weeks ago, Canadian Solar (Chinese despite the name):

May 12- $34.10
May 13- $40.78

Yesterday, SOLF reported:

May 20- $25.24
May 21- $26.50

As you can see the day of release pop is decreasing. SOLF had moved up from $14.94 on the 12th as the gamblers started buying earlier and earlier. It's down pre-market this morning.
We said yesterday:

The stock is up 19% pre-market.
The gamblers will be moving on, Mystery/History.

It closed up only 4.99%, having given back 14 of those percentage points. This isn't rocket surgery, all you have to do is care enough to watch and then understand what you're seeing. Here's a comment on the MarketBeat post "Rice, Beer and UPS":

It also used to be that you could buy ABUD (as it was then quoted) in February and sell in August for a nice predictable move.
The buy dates got earlier and earlier each year until the whole seasonal thing was shot to hell.
Once you think you’ve found the key, they go and change the lock.
Comment by Climateer - April 23, 2008 at 5:25 pm

Some things never change.
From MarketWatch:

Suntech Power Holdings Co. shares rose in pre-market trades Thursday after it issued a bright 2008 forecast for its silicon solar panel manufacturing business and said its first-quarter net income doubled....MORE

San Francisco Bay area air regulators to charge businesses fees for greenhouse gas emissions

When we first saw this proposal our response was "This is worse than useless"*. It still is.
From MSNBC:

Air pollution regulators in the San Francisco Bay area voted overwhelmingly Wednesday to approve new rules that impose fees on businesses for emitting greenhouse gasses.

The Bay Area Air Quality Management District's board of directors voted 15-1 to charge companies 4.4 cents (euro.03) per ton of carbon dioxide they emit, an agency spokeswoman said.

Experts say the fees, which cover nine counties in the Bay Area, are the first of their kind in America. The new rules are set to take effect July 1....MORE

*This is worse than useless. A review of the literature shows that a price of $100 to $200 per ton is required to change behavior. This is just a targeted fund raiser, gussied up in green. As such it could have the effect of reinforcing cynicism toward politician's venality.
(disclosure: I am not a cynic, I am jaded*)...MORE

Cassandra on Speculators: Raise Margin Requirements NOW!

From Cassandra Does Tokyo:

• When you're driving too fast for safety, you slow down.
• When deficits rise, you cut spending and/or raise taxes.
• When someone is kind to you, you express your appreciation.
• When an investment is no longer attractive, you sell it.
• When inflation rises, you raise interest rates or tighten fiscal policy.
• When bread is cooked you take it out of the oven.
• When you cannot afford a discretionary purchase, you don't buy it.
• When representatives govern poorly, you don't re-elect them, or their party.
• When your political system ceases to function properly, carefully consider what is broken, and fix it.
• When you have reasonable evidence that leveraged commodity speculation and physical hoarding by financial and policy investors is materially impacting prices and adversely affecting the Public Interest you should begin to react by RAISING INITIAL AND MARGIN REQUIREMENTS!! (oh and you might consider closing the loopholes that allow specs to obtain hedge margins and slap a "Tobin" tax upon transactions.It also might be worth exploring some cross-border harmonization too)

NRG proposes to pay $9.56 bln stock for Calpine (CPN, NRG)

If I were CPN I'd make NRG pay up (see links below).
From MarketWatch:

NRG Energy Inc. proposed to acquire Calpine Corp. for $9.56 billion of stock, a move that NRG said would create a powerful nationwide force in wholesale electricity generation.

The merger, NRG said in a statement late Wednesday, would create a power provider with four regional businesses spanning all major U.S. power-generation markets and each currently generating at least 8 gigawatts of power.

The combined company's market capitalization would be around $20 billion, and the deal would in short order provide $100 million of annual savings on general and administrative expense, NRG said....MORE

Some of our previous posts on CPN:

Predatory Borrowers

Calpine seen well positioned after bankruptcy

PG&E Seeks OK For 175MW Geothermal Pact With Calpine (CPN; PCG)

Blame Wall Street for $135 Oil on Wrong-Way Betting

From Bloomberg:

Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.

The number of outstanding futures contracts, known as open interest, fell 8.1 percent in a week to 1.36 million at the same time that prices rose 2.6 percent, the data show. Falling open interest and rising prices are signs that traders are buying to exit so-called short positions that would profit if oil fell, and lose money as they rose.

``In a market like today, which is trending higher while open interest is falling, it's a sign that money is moving out of the market,'' said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. Open interest in Nymex crude futures peaked this year at 1.5 million on March 13....

...``It is not a growing market, it is a shrinking market in terms of open interest,'' said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Swizterland. ``It is also facilitating the move upward.''...MORE

May 22, 2008 - Oil Price Shocks and the Stock Market: The Good, the Bad and the Indifferent

From CXO Advisory:

Does the U.S. stock market reliably decline in response to a positive crude oil price shock? In their March 2007 paper entitled "The Impact of Oil Price Shocks on the U.S. Stock Market", Lutz Kilian and Cheolbeom Park investigate complexities in the relationship between U.S. stock returns and crude oil prices according to the causes of oil price shocks. Using data for crude oil prices, aggregate (value-weighted) stock returns and inflation over the period January 1975 through September 2005, they conclude that:

• On average, crude oil price shocks explain 13% of the variation in aggregate stock returns over the sample period, with most of this explanatory power driven by oil demand shocks.
• The conventional wisdom that higher oil prices depress stock returns applies only to demand shocks specific to the crude oil market, such as increases in the precautionary demand for crude oil that reflect fear about the availability of future oil supplies. Precautionary crude oil demand shocks explain the negative relationship between stock returns and inflation over the sample period.
• In contrast, positive crude oil price shocks driven by wider global demand for industrial commodities (real global economic expansion) lead to higher real oil prices and higher stock prices.
• Shocks to crude oil production have no significant effect on cumulative stock returns.
• Regarding specific industries:
  • Oil and natural gas industry stocks, and gold and silver mining stocks, respond positively to oil demand shocks specific to the crude oil market, while the automobile industry and the retail sector respond negatively.
  • However, the stocks of all four industries respond positively to oil demand shocks driven by real global economic expansion.

The following charts, taken from the paper, depict the average cumulative responses (with one and two standard error bands) of real aggregate U.S. stock returns to three types of oil price shocks:>>>MORE

Oil and Equities: "A Festering Stew of Glop"

That's David Gaffen's line at MarketBeat:

...It isn’t so much the rise in oil that has people frightened; it’s the rapid, volatile nature of this surge. Oil closed at $133.17 a barrel today, gaining more than $4 in trading, and has added 7% in a four-day span. Investors wrapped the rising price of crude, falling inventories, and the bad news from AMR Corp. (which fell 24%) into a festering stew of glop that easily justified unloading holdings.

“It may not be the price itself — is $133 substantively different from $128? — but that it can move that quickly, by that much is almost by definition the meaning of uncertainty,” says Stephen Wood, senior portfolio strategist at Russell Investments. “If you’re an airline or business how do you plan for those costs? From an input or commodity perspective it creates uncertainty, and in the face of uncertainty investors tend to panic and move out.”

Way back, investors scoffed at various forecasters who suggested oil would hit $100 a barrel; now $200-a-barrel oil is not considered all that silly an idea. But at this point, very little would surprise anyone, even if the crude contract somehow became self-aware and opened the oil market itself....