Tuesday, June 30, 2009

California May Resort to IOU's, Opportunity for Secondary Market?

What the heck, Goldman Sachs got it's start with Marcus Goldman shrewdly discounting commercial paper.
It's all in the discount rate and turnover. Volume and spread. Don't get caught with a defaulting hot potato and you're minting money [and mixing metaphors -ed].
From BusinessWeek:

California May Resort to IOUs

What's an IOU worth from the nation's most financially troubled state? Thousands of California businesses, nonprofits, and local governments are about to find out.

The Golden State is supposed to finalize its 2009-10 fiscal budget by June 30, but the state's Democrat-controlled legislature and Republican governor are at odds over how to plug a $23 billion funding gap. A plan passed on June 28 in the State Assembly would result in sharp hikes in taxes and fees as well as cuts in government spending. Governor Arnold Schwarzenegger has said he's in favor of more structural changes, such as reducing the pension plans of future state employees.

The State Assembly's current budget plan calls for increases in vehicle registration fees, cigarette taxes, and a 10% tax on oil production in the state. "I will veto any bill that punishes taxpayers for Sacramento's failure to live within its means," the Governor declared on June 29. "It's time for the legislature to send me a budget that solves our entire deficit without raising taxes."

Absent a last-minute resolution of the budget stalemate, State Controller John Chiang says that starting on July 2 he'll begin issuing IOUs to thousands of recipients of state funding—everyone from college students to landscapers who work at government facilities. The so-called registered warrants will be promises that the state will pay the money back as soon as it has the cash. The state projects that will happen by October, even though Chiang says California faces a $3 billion cash shortfall in July that will jump to $6.5 billion by September. "Unfortunately, the state's inability to balance its checkbook will now mean shortchanging taxpayers, local governments, and small businesses," Chiang said....

...A secondary market in IOUs?

Jonathan Brown, executive director of the Association of Independent California Colleges & Universities, says his 75-member colleges will likely receive IOUs for tuition reimbursement under a state program called Cal Grants. He says the schools will keep students enrolled and hang on to the warrants until they can be redeemed. The cash crunch is likely to be severe at state universities that receive much more of their funding from Sacramento, he says. Many have already had to cut staff and eliminate programs because of the state's budget woes. "It's causing them some real heartburn," Brown says.

Merle Thompsen, a landscaping contractor in Reseda, Calif., says he now considers himself fortunate that he didn't win any bids recently to provide services at state facilities. Thompsen says he remembers the last time the state issued IOUs, contractors were given the option of continuing to work or halting projects. Stopping the work is usually more complicated, requiring contractors to stabilize the site before they leave. "That costs the state more money," he says. "It's almost easier to keep working."

Thompsen says he also remembers a secondary market developing where independent financial firms offered to cash in the IOUs for a fee of anywhere from 6% to 20% of the note's value. "It's expensive," he says....

Trina Solar Upgraded to Overweight at Morgan Stanley (TSL; YGE)

Better late than never. The stock was recently trading at $25.42, up 6% on the day.
From China Analyst:

Morgan Stanley upgrades Trina Solar (NYSE:TSL) from Underwight to
Overweight this morning, and raises price target from $7.30 to $37.00.

Firm believes the whole solar industry is at an inflection point - the recovery of
the global economy will likely lead to improved policy enviroment.
Moreover, the solar industry is moving closer to grid parity.

The analysts expect Trina Solar to pick up market share from European
and U.S. competitors because of its focus on reducing costs. They
expect the company's market share to rise from 3.2% to 5.5%....

China Analyst also reports:

Yingli Green Energy (NYSE:YGE): Upgraded to Equal-Weight at Morgan Stanley

China and India on Global Warming Economics and Negotiations

Remember these are two of the oldest civilizations on earth. They are pretty good negotiators.*
From Earth Times:

India vows cooperation on climate change but not at economic cost

India is prepared to cooperate on curbing global warming - but not at the expense of its own economic development, Indian Foreign Minister Somanahalli Mallaiah Krishna warned Monday. His comments came at a bilateral meeting with EU foreign ministers in Prague. "India is a developing country," he said, speaking after talks with EU diplomats.

"We have challenges and we will have to concentrate on development. And development takes precedence over everything else."He said that India "will continue to cooperate with the rest of the world" on climate change but must stick to its priority to improve the lives of its citizens. India has so far rejected calls for making a binding pledge on cutting emissions of greenhouse gases that are blamed for man-made temperature changes....MORE
From Peoples Daily:

China unhappy with US climate bill
The United States set the bar too low and offered the world a poor example when it passed its climate change bill on Friday, according to a senior Chinese climate change official.

Li Gao, a division director with the Climate Change Department of the National Development and Reform Commission, said the US did not live up to international expectations when it approved the document.

Li said the bill's mid-term carbon emission target would probably be seized upon as the new standard by developed countries in the battle against global warming....

...Li said he was also concerned about a clause in ACESA that calls for tariffs after 2020 on imports from countries without systems for pricing or limiting carbon dioxide emissions. He said mixing up climate change and trade will only "make the issue more complex" and "damage international cooperative efforts to combat global warming"....
From our July 2007 post "EU Emission Caps, Kyoto and Three Ancient Civilizations":

...There is no perfect answer but Kyoto wasn't even close.

The Europeans thought they were gaming the "Cap" by backdating the start date.
The Americans thought they were gaming the treaty by insisting on "Trade".

The Indians and Chinese said "Sure, send us the money".

The Westerners thought they would out-negotiate people who've been negotiating for 5000 years.

As a side note, in December 1979, as silver was making its historic run, an old Jewish trader told me he was lightening up on Ag.

When I asked why he said "I hear the Indian ladies are taking their bracelets off and they've been trading it longer than I have".

Consider the components of equity returns

As the summer rolls along we will be coming back to this subject a few times, for example, why companies with higher earnings retention tend to underperform as investments (think managerial wish lists, empire building etc.)
From Investment Postcards from Cape Town:
The raison d’être of investment or wealth management is to maintain, or hopefully improve, one’s standard of living, i.e. to earn a real return on the investment amount. This sounds easy enough if one considers that the S&P 500 Index (and its predecessors prior to 1957) delivered a nominal return of 8.7% per annum from January 1871 to June 2008. With an average inflation rate of 2.2% per annum over the period, this meant a real return of 6.5% per annum....MORE

Have a look at the following chart:


Monday, June 29, 2009

$70 Oil, but Where’s The Demand?

From the Wall Street Journal's Real Time Economics blog:

Rising oil prices — the great villain of 2008 — are back, but this time markets are cheering.

Oil futures jumped over $71 a barrel this morning, boosting shares of Exxon Mobil and Chevron – and the Dow overall — as investors looked towards the rally in recent months as a bullish sign that demand is returning to an ailing global economy.

Or is it?

Separately today, the Paris-based International Energy Agency slashed its forecast for world oil demand over the next five years, saying that by 2013 global demand will average 87.9 million barrels a day, 3.7% fewer than it expected in December and 7% fewer than it expected last July. The group predicts oil consumption will fall by 3% this year, the sharpest decline in a quarter-century, after averaging about 2% growth annually over the previous decade.

Why all the fuss over oil demand? Because it’s critical to know what’s behind rising oil prices. If it’s demand — if nations like the U.S., China and India are consuming more oil because they’re building infrastructure and powering factories — then indeed higher prices are a bullish sign for global economic growth, even if it means some grumbles at the pump....MORE

Commodity Inflation Versus Asset Deflation

From Market Folly:
This is a Guest Post from Phil at Phil's Stock World

...Gee, we can’t afford health care, we can’t afford rising energy costs but people are buying stocks as if both industries have nowhere to go but up, despite lower demand and rising unemployment. I guess we can keep borrowing and borrowing and borrowing and borrowing to pay the ever-increasing prices projected by commodity futures and biotech multiples but one would think there’s a theoretical limit…

There’s a major disconnect going on between the markets and reality - perhaps it is end of quarter window dressing by financials and funds so desperate for a good quarter they will do anything to maintain the market for another 7 days . Just this morning the Nikkei was up 84 points despite the Dollar falling back below 96 Yen. That wasn’t even the bad news for Japan though: Inside the country, consumer prices fell at a record pace in May adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession. Prices excluding fresh food slid 1.1 percent from a year earlier after dropping 0.1 percent in the preceding two months, the statistics bureau said today in Tokyo. It was the sharpest decrease since comparable figures were first compiled in 1971.

Defaltionary Spiral Profits fall, then wages come down, then consumers stop shopping,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “And because people aren’t shopping, companies lower prices. That’s the process that we’re starting to see. It isn’t easy to break out of.” Some 47 percent of 775 Japanese retailers surveyed by the Nikkei newspaper plan to lower prices in the year ending March 2010 to spur sales, up from 9 percent a year earlier. “With demand deteriorating, companies are finding it more difficult to sell goods and services and are turning to discounting,” said Azusa Kato, an economist at BNP Paribas in Tokyo.

I hope I didn’t give you the impression that THAT was Japan’s biggest problem though. Oh no, they’ve got much bigger fish to fry (or eat raw, as the case may be). While their CPI does the moon-walk, the London Times points out this morning:

Anaemic exports, a struggling domestic economy and a dramatic plunge in summer bonuses could cause Japan’s version of the sub-prime mortgage crisis to explode, a leading think-tank has warned....MORE

A Funding Roadblock Ahead for Clean Energy

From the New York Times' Green Inc. blog:
A landmark climate bill that narrowly passed the U.S. House of Representatives on Friday would cap greenhouse gas emissions across the United States for the first time and also create a national target for renewable energy production.

Environmentalists and advocates of clean energy hailed the news in a flurry of statements. Frances Beinecke, president of the Natural Resources Defense Council, called it a “dramatic breakthrough for America’s future.” Denise Bode, executive director of the American Wind Energy Association, described the renewable energy target as “a key first step in balancing our electric generation mix.”

The legislation, however, remains far from becoming law. The House passed the bill only narrowly — and it has been weakened since being introduced months ago — and the fight in the Senate may be even tougher.

In the meantime, there is also the pressing matter of financing renewable energy projects. Since the economic crisis began last autumn, the once red-hot activity by wind and solar developers has slowed sharply. The U.S. government’s stimulus package is supposed to help (although some portions of its aid for renewable energy have not yet been disbursed).

But many advocates of renewable energy are thinking longer term. What happens when the stimulus funding runs out, as it is scheduled to do for the industry’s projects in the next year or two?

“One of my big fears is that we will fall off a cliff,” the director of climate change and energy initiatives at Google, Dan W. Reicher, said in an interview in New York last week.

Lowell Ungar, the policy director for the Alliance to Save Energy, an efficiency advocacy group, echoed the sentiment. “The concern is that you spend billions of dollars building up this industry, training people and creating new jobs and new companies, and it all disappears,” he said.

Perhaps because of its relative newness and small size, the renewable energy industry has been hobbled by a history of uncertain funding.

In the United States, a tax credit to aid wind energy has threatened to expire about every year or two over the past decade, causing the industry to complain that long-term planning is impossible. Congress has repeatedly extended the credit on a short-term basis, but manufacturers of wind turbines have hesitated to establish plants in the United States for fear that the demand for their product might evaporate. (The three-year extension provided in the stimulus package has given a measure of stability, although it arrived — as per the definition of stimulus — just as private investors had pulled back.)

Solar energy in Spain is another classic example of roller-coaster funding. There, the government provided a strong feed-in tariff — a high payment to producers of renewable energy — and solar companies rushed into the country. Last autumn, however, the government decided that the explosive growth was costing too much and capped the amount of solar power that could qualify for theincentive....MORE

What Does Big Solar Want? What Doesn't It Want?

GreenBiz's Marc Gunther via Reuters:
Ordinarily, when an industry comes to Washington to seek special favors from the government, it hires a lobbyist or two, meets with members of Congress, perhaps quietly donates some money to the right committee chair -- but rarely does it hold a press conference to talk about why it wants to be given a leg up over the competition.
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That's what made a solar-industry breakfast, hosted this week by Dow Corning, so interesting. Dow Corning, a major supplier to the solar industry, and its allies, including Abengoa Solar, BP Solar, Kyocera, Sanyo and Schott, put forth a long list of federal policies that they would like to see enacted to give solar power a jump-start and bring it to scale.

What do they want? A permanent manufacturing tax credit. Renewable Electricity Standards, with set-asides for solar, which would require utilities to buy a fixed percentage of their electricity from solar plants. So-called feed-in tariffs, which require utility companies to buy "clean energy" at prices higher than average wholesale prices. Federal support for training workers and educating the public about solar. Loan guarantees. Requirements that federal agencies buy more renewable power for their own operations. Treasury grants of some sort. (See this press release for details.)

All this, of course, on top of either a carbon tax or a cap-and-trade system to regulate greenhouse gases and put a price on carbon emissions– -- a policy that makes good sense, because it will capture the external costs of burning fossil fuels. Of course, a cap-and-trade scheme would also benefit low-carbon energy sources like solar.

Well, at least the industry is transparent. Not to mention brazen.

"Solar energy is a clean, efficient and readily available technology that with the right support could help transform America's energy, environmental and economic future," says Stephanie Burns, the chairman, president and CEO of Dow Corning, a $5.5 billion (revenues) company based in Midland, Michigan, that's is jointly owned by Dow Chemical and Corning.

Please don't misunderstand me. I would love to see the solar industry thrive. And Dow Corning deserves enormous credit for investing about $5 billion in manufacturing plants in Michigan -- which sorely needs new jobs -- as well as Tennessee and South Korea. "We think solar is ready to go to scale," Burns says. "We're right at the cusp for that to happen."

The question is, at what cost? If solar is, indeed, a practical solution to the climate crisis, and if Dow Corning has already shown itself willing to put up $5 billion of its own money, why does solar need so many special favors?>>>MORE
In an update Marc mentions a link to AltEnergyStocks. I'm guessing this is the missing link.
[amazing. memory like an elephant -ed]

Solar: PrimeStar Preps for CdTe Panel Launch (GE, FSLR)

From Green Light:

The success of First Solar has given startup companies developing cadmium-telluride solar panels hope. Why, if First Solar could claim to be the lowest-cost producer in the industry while raking in good profits, then we could do it, too.

PrimeStar Solar is no exception. Brian Murphy, CEO of PrimeStar in Golden, Colo., said at a recent conference that "cadmium-telluride is the only technology proven to move below $1 per watt in manufacturing cost."

The company is moving toward the launch of its commercial product, set to take place by the end of this year, Murphy said. Murphy was rather mum about his company's product specs and production plans, however.

He said the commercial factory would have a production capacity in the "tens of megawatts." PrimeStar produced its first thin-film panel in April 2007 and began pilot production last October, he added.

Murphy declined to disclose the manufacturing cost of PrimeStar. And neither would he say how well PrimeStar's solar panels could convert sunlight into electricity.

Tempe, Ariz.-based First Solar's panels could convert nearly 11 percent of sunlight into power.

PrimeStar has licensed its technology from nearby National Renewable Energy Laboratory. Back in 2007, the company was awarded $3 million from the Solar American Initiative, administered by the U.S. Department of Energy, for commercializing its technology....MORE

See also:
GE's PrimeStar Reveals Secret Strategy to Kill First Solar (FSLR)
First Solar, PrimeStar Solar and Cadmium Risks (FSLR; GE)
GE Bets on Solar with Majority Primestar Stake

Transcript: Jeffrey Immelt of GE

US Interior Secretary To Outline Solar Energy Zones In US West

From Dow Jones:
The Interior Department officials later Monday will announce measures they say should ultimately expedite solar energy projects on federal lands.

Although nearly 200 solar plant projects have applied for leases, none have been processed. Secretary Ken Salazar, however, has made expanding renewable energy leasing both on federal property a top priority and the announcement should help to clear the bottlenecked permitting program....

...Companies such as First Solar (FSLR), Stirling Energy Systems, Brightsource Energy, Solel, Solar Millennium (S2M.XE), FPL Group (FPL) and PG&E (PCG) are awaiting project permit approvals....MORE
See also:
Goldman Sachs and the Solar Land Rush (FSLR; GS)
First Solar May Not Have Optisolar's Desert "Land Rights" (FSLR)
More on the First Solar/OptiSolar Land Deal (FSLR)
Solar's Red Hot Real Estate Market

Here Come the IPO's: "Magma Energy Raises $87 Million" (MXY.TO)

From Reuters:

* Sells 66.667 mln shares at C$1.50 each

* International book three times oversubscribed

* Shares to trade under symbol MXY.TO (Adds analyst comments, IPO details)

Canada's Magma Energy Corp, a geothermal power company active in the western United States and South America, has raised C$100 million ($87 million) in an initial public offering taken up by investors around the world, sources close to the deal told Reuters.

The deal, spearheaded by Magma chairman and mining guru Ross Beaty, is the largest of its kind in Canada so far this year and will supply Vancouver, British Columbia-based Magma with the funds it needs for expansion and exploration programs at late- and early-stage projects in the United States, Argentina, Chile and Peru.

Under the terms of the IPO, Magma sold 66.667 million shares at C$1.50 each.

Magma shares will start to trade under the symbol MXY.TO on the Toronto Stock Exchange on July 7....MORE

Climate Bill Bans Naked Credit Default Swaps

Or, as Dealscape put it, "Do CDSs cause global warming?":
Add climate change as another villainous use for credit default swaps. Up until now it had been thought that the derivatives' primary contribution to global warming was the heated debate that the swaps frequently engender.

However, the House of Representatives saw enough danger to include a ban on "naked" credit default swaps and a requirement that over-the-counter derivatives go through central clearinghouses in the environmental bill that it passed last Friday, according to Reuters. The swaps found their way into the climate change bill as Congress added provisions to set position limits on energy traders and bring energy swaps under the oversight of the Commodity Futures Trading Commission....

Crash Equities, Spur Flight to Quality, Offload $2 Trillion in Treasuries

For months the question has been "Who is going to buy enough U.S. paper to fund the nearly $2 Tril. 2009 deficit?" Well, Ma and Pa Investor are cranking up the savings rate...
From Economic Policy Journal:

Does Ben Bernanke Have a Diabolical Plan to Help Treasury Finance $2 Trillion?

...Now, I'm wondering if the too clever by half Bernanke may have a diabolical plot to finance the record $2 trillion debt the Treasury is starting to raise. While China and pretty much everyone else are watching to see how much money the Fed is going to print to absorb the record debt, maybe Bernanke is going to fake out everyone and go in the opposite direction.

In the summer of '08, he nearly crashed the entire economy when he stopped printing money. A byproduct of the crisis he created was a flight to quality, i.e., Treasury securities. Has the over perfumed Bernanke decided to squirt one more fragrance on top of the mad mixture he currently employs? Is he working toward another September panic that will frighten everyone into a flight to quality, i.e., Treasury securities, that will provide the cover the Treasury will need to unload the $2 trillion in debt that they need to unload? Is this what is going on? I don't know, heavy perfume gives me a headache, and it is hard to think straight. But just like last summer, Bernanke is slowing the money supply.

Climate Bill Helps Utilities More Than Oil Companies /Big Oil’s Answer to Carbon Law May Be Fuel Imports

The bill is basically just a very roundabout gas tax.
Oh, and a system to redistribute consumers' wealth to Wall Street. Cool.
Two from Bloomberg:
The climate-change bill that passed the U.S. House on June 26 would set up a “cap-and-trade” market for greenhouse gases that cushions the cost for power producers, manufacturers and farmers while limiting aid to oil companies.

Among those getting help were utilities American Electric Power Co. and Exelon Corp. Washington representatives for ConocoPhillips and Exxon Mobil Corp. said the oil companies were shortchanged.

The bill, which creates a market for carbon dioxide permits potentially worth more than $100 billion a year by 2020, regulates the way the allowances could be traded to guard against speculation with derivatives that lawmakers say might drive up the prices of electricity and gasoline.

The legislation, passed 219 to 212, largely rejected President Barack Obama’s plan to raise revenue for the federal government by selling the permits at auction and instead doled out free credits to win the support of Democrats from coal, manufacturing and farm states. Oil companies got many fewer free permits. The proposal now faces action in the Senate.

“This bill tries to help utilities and manufacturers move to a low-carbon economy without harming consumers, draw farmers into the carbon market and keep that market transparent to prevent improper profit-taking,” Tim Profeta, director of the Durham, North Carolina-based Nicholas Institute of Environmental Policy Solutions at Duke University, said in a telephone interview. “The oil industry got fewer free permits because lawmakers believe these firms can pass the relatively low cost to their consumers without affecting their bottom line.”...

...The power sector received 35.5 percent of the allowances, a move “designed to give utilities about 85 percent of the allowances they require” until the program phases out most free credits between 2025 and 2030, said Hugh Wynne, a New York-based senior research analyst at Sanford C. Bernstein & Co....

...Oil refiners would receive just 2.25 percent of the allowances for free, while having to acquire nearly 40 percent of the available permits each year to cover the emissions at refineries and the carbon dioxide produced when fuels like gasoline are burned by cars and trucks, according to data from the Environmental Protection Agency...MORE
America’s biggest oil companies will probably cope with U.S. carbon legislation by closing fuel plants, cutting capital spending and increasing imports.

Under the Waxman-Markey climate bill that may be voted on today by the U.S. House, refiners would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists burn their fuel. Imports would need permits only for the latter, which ConocoPhillips Chief Executive Officer Jim Mulva said would create a competitive imbalance.

“It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment,” Mulva said in a June 16 interview in Detroit. Houston-based ConocoPhillips has the second-largest U.S. refining capacity.

The same amount of gasoline that would have $1 in carbon costs imposed if it were domestic would have 10 cents less added if it were imported, according to energy consulting firm Wood Mackenzie in Houston. Contrary to President Barack Obama’s goal of reducing dependence on overseas energy suppliers, the bill would incent U.S. refiners to import more fuel, said Clayton Mahaffey, an analyst at RedChip Cos. in Maitland, Florida.

“They’ll be searching the globe for refined products that don’t carry the same level of carbon costs,” said Mahaffey, a former Exxon Corp. refinery manager.

Prices Seen Rising

The equivalent of one in six U.S. refineries probably would close by 2020 as the cost of carbon allowances erases profits, according to the American Petroleum Institute, a Washington trade group known as API. Carbon permits would add 77 cents a gallon to the price of gasoline, said Russell Jones, the API’s senior economic adviser....MORE

Unconventional Wind-Energy Plays (WGOV, FDML, AMSC, FAN, GE, SI, OTC:VWDRY.)

From Investopedia:
...In 2007, wind power became the first $30 billion clean energy industry. According to a 2008 Earth Policy Institute report, one in three nations now receives a portion of electricity from wind and 13 countries use turbines to generate at least 1000 MW of power. Both Spain and Germany now generate 10% of their total energy used for consumption through wind power. The cost of wind energy has declined nearly 90% since the 1980s and the Department of Energy estimates that current wind projects will actually produce cheaper electricity than conventional power plants by 2010. With this in mind, the future market for wind power seems robust and warrants further investigation. (For more, see Top 10 Green Industries.)

Thinking Small
While most investors wanting to participate in the wind sector often focus on conglomerates such as General Electric (NYSE: GE) and Siemens (NYSE: SI), or wind-based utilities such as Vestas Wind (OTC: VWDRY.PK), there are other ways to profit from this important expanding industry. A cursory glance at the First Trust Global Wind Energy ETF (NYSE: FAN), the leading ETF in this category, shows a varied mix of companies. Some of the more interesting are those that provide the equipment necessary to build and erect these structures. By placing bets on these companies, investors can profit regardless of the end user.

A Few Picks from the ETF
With nearly 3500 MW of installed power using its CONCYCLE converters, Woodward Governor (NASDAQ: WGOV) is becoming the go-to company for utilities to adapt wind systems to their power grids. By making the equipment that's needed to turn the turbine's kinetic energy into electrical energy, Woodward is providing an absolutely essential part of the wind energy chain. The company also provides various other power generation and power transmission equipment and could be a big winner from the recent stimulus package. The company reported a 38% decrease in second-quarter profit due to restructuring charges, but did raise its guidance for full year 2009. The stock trades at a measly 13 times earnings and pays a 1.1% dividend.....MORE

Roundtable Interview With Obama on Climate Bill

From the Wall Street Journal's Washington Wire:

A transcript, provided by the White House, from Sunday’s roundtable interview with President Barack Obama, Energy Secretary Steven Shu and Carol Browner, assistant to the president on energy and climate change.

PRESIDENT OBAMA: Well, we wanted to have you guys in because the vote on the energy bill came in on Friday, and although I made a statement, I didn’t have a chance to talk to the press about it.

I think this was an extraordinary first step. You know, if you had asked people six months ago — or six weeks ago, for that matter — whether we could get a energy bill with the scope of the one that we saw on Friday through the House, people would have told you, no way. You look at the constituent parts of this bill — not only a framework for cap and trade, but huge significant steps on energy efficiency, a renewable energy standard, huge incentives for research and development in new technologies, incentives for electric cars, incentives for nuclear energy, clean coal technology. This really is an unprecedented step and a comprehensive approach.

And if you tie it together with what we’ve done earlier, both in the stimulus on R&D and weatherization programs and a whole host of other steps, you take a look at the national fuel efficiency standard that we put into place — I think it’s fair to say that over the first six months we’ve seen more action on shifting ourselves away from our dependence on foreign oil and fossil fuels than at any time in several decades.

The other thing I wanted to emphasize is the fact that as we transition into this clean energy economy we are going to see, I think, an enormous amount of economic activity and job production emerging. I know that opponents of this bill kept on suggesting this was a jobs-killer, but everybody I talk to, when we think about how are we going to drive this economy forward post-bubble, keep on pointing to the opportunities for us to transition to a clean energy economy as a driver of economic growth....MUCH MORE

‘Output Gap’ Indicates There Won’t be any Inflation

From Money Morning Australia:

What’s an ‘Output gap’?

Well, it’s the latest phrase being used by ‘Born-again Keynesians’ to argue there won’t be any inflation.

We say ‘latest,’ but the idea has been around for years. It’s just that now is the time that mainstream economists need to use it to back up their anti-inflationary case.

Your editor was kindly supplied with the following chart over the weekend by a Money Morning reader…

Evidently it is from an email sent out by Macquarie Group interest rate strategist Rory Robertson. According to Robertson, because the green line is so far below the zero line, inflation won’t be a problem until it rises above the green line.

The argument seems to be that because there is so much ’slack’ in the economy, price pressures will be downward rather than up.

Or, to put it another way, supply exceeds demand, so prices must surely fall.

But rather than rely on your editor for a real definition of the ‘output gap’, why don’t we hand it over to the ‘experts.’ In this case, the Reserve Bank of New Zealand (RBNZ)...MORE

The Black Liquor War

We last visited Black Liquor in "International Paper first-quarter profit grew 93% (Sweet Liquor Eases the Pain*)". Two weeks prior to that, "The Wonder of Regulation: "Black Liquor Tax Boondoggle May Net Billions for Papermakers".
Today's story is from the Wall Street Journal:

Congress's unrelenting efforts to rid the world of fossil fuel have now produced a North American trade war over an obscure substance called "black liquor." Let us explain.

This story begins with Congress's 2005 highway bill. It included a subsidy to encourage businesses to power their motor vehicles with "alternative fuels" such as ethanol, rather than fossil fuels such as diesel. Congress said businesses could receive a 50-cent tax credit for every gallon of gasoline if they used a blend of a traditional fossil fuel and an alternative fuel.

Then in 2007, Congress extended this largesse beyond highway vehicles to a wider range of alternative fuel users. Enter "black liquor," a carbon-rich substance the paper industry has used for decades to power its mills. It also qualifies as an alternative fuel. All the paper industry had to do was blend some fossil fuel in with their alternative fuel and -- voila! -- billions of dollars in federal subsidies were within reach. So they did.

Adding diesel to the paper production process might not be in the anti-fossil fuel spirit of Congress's tax credit, but it was legal, and lucrative. The American paper industry is on pace to pocket some $6 billion in tax credits this year, enough to cut production costs by 60% and reduce the price of some U.S. paper goods by 25%.

Not surprisingly, Canadian paper companies are miffed at this subsidized windfall to their competition. Now they've gotten their Parliament to do something about it. Following the two-wrongs-make-a-right logic of trade wars, Canadian lawmakers recently passed a subsidy worth $882 million for their domestic paper industry....MORE

Of con men, spivs and ‘gangreenous’ stocks

From FT Alphaville:

The headline on a recent Bloomberg stock market report out of Japan said it all: “Japan Stocks Rise on Green Technology Optimism”.

We’re seeing a growing number of headlines in that vein. Indeed, the rising wave of investor optimism on everything and anything related to so-called “green technology” has seen some lucrative deals and surging stock prices in sectors ranging from alternative energy sources to hybrid cars, anti-air pollution systems and environmental technology of every description.

Even China - once the scourge of environmentally-conscious investors - has gotten in on the act, with a $3.4bn deal last week by Hong Kong-traded power plant operator GCL-Poly to buy a mainland solar-cell parts maker.

In another trend, western asset managers are eyeing new “green investing” opportunities further afield, in Asia and elsewhere. JPMorgan Asset Management for example, recently decided to become the first foreign company to participate in South Korea’s ‘g0-green’ initiative.

As Bloomberg reported, the US bank signed a letter of intent with the South Korean government for its plans to set up “Korea Green Funds” of more than $1bn to invest in the country’s alternative energy industry. Seoul, meanwhile, plans to invest 4,200bn won ($3.4bn) by 2013 to make products including PCs and television sets that use less power and emit less carbon dioxide.

All this - err, greenery - is proving a bit much for CLSA’s ever-ascerbic Asia strategist Christopher Wood, who takes a swipe at “green investing” in the latest issue of his weekly client newsletter Greed & Fear, and grumbles about how “global warming” has become the “developed world’s new religion”.

The arbitrary nature of “green” investment mandates is “obviously irrational from an investment perspective”, says Wood:

From a longer term perspective it is almost inevitable that the frenzy for green will attract to the area the usual mob of con men and spivs who jump on every bandwagon. There is also a more fundamental risk that government sponsorship of alternative energy leads to massive over investment in the area.

At a recent meeting in Beijing, he recounts, a local economist expressed concern about a future investment bubble in alternative energy in the mainland as a result of policies designed to encourage production in this area....MORE

China's banks are an accident waiting to happen to every one of us

From the Telegraph's Ambrose Evans-Pritchard:

China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.

Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump....

...Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.

"With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.

"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."

Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".

The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".

Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.

Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of lending instead. Over half the new debt is short-term. Roll-over risk is rocketing. China's monetary stimulus since November is arguably more extreme than the post-Lehman printing of the US Federal Reserve, though less obvious to the untrained eye....MORE

Winners and losers emerge in climate bill

From the AP via Yahoo Finance:
Climate bill would create new financial system; winners and losers emerge in carbon economy
In addition to raising energy prices, the climate legislation that's winding through Congress would create a parallel financial system with a carbon-based currency.

Everyone from small farmers to nuclear energy companies would be forced to re-evaluate their place in the new order. Power plants, factories and refineries would feel the first impact if the federal government moves ahead with plans to cut greenhouse gas emissions by 17 percent from 2005 levels by 2020 and by about 80 percent near the end of the century.

The sharply debated bill's fate is unclear in the Senate. A major struggle is expected with 60 votes needed to overcome a certain Republican filibuster.

How much it will affect other industries is still a matter of intense debate, though the primary winners and losers are already emerging.

The Winners:

Solar, wind, geothermal and other renewable energy companies, including nuclear, are some of the obvious winners in a carbon economy.

In addition to the billions of federal stimulus dollars they expect to receive, those industries can expect to see a huge boost in investment as utilities and power companies are forced to cut their carbon emissions. Companies like Florida Power & Light Co., Arizona Public Service, Southern California Edison and others are already investing in solar farms and other renewable energy projects, and they'll likely spend even more to increase the mix of carbon-neutral energy sources.

Farmers also will find new ways to make money in a carbon economy. Carbon consultants like the International Carbon Bank & Exchange in Florida see huge potential in agriculture for managing carbon emissions. Farmers that till their soil differently or apply new environmental techniques can get money by cooperating with a polluter as a carbon "offset.">>>MORE

Sunday, June 28, 2009

ICE Buys 4.8% Stake In Climate Exchange/Share Jump 17% (CLE.L)

From Reuters:
Shares in carbon emissions exchange operator Climate Exchange plc jumped nearly 17 percent on Tuesday after IntercontinentalExchange said it had taken a 4.8 percent stake in the company on Monday.

The shares, trading on the London Stock Exchange, closed up 107 pence or 16.6 percent at 751 pence.

Climate Exchange operates the London-based European Climate Exchange (ECX), the world's largest marketplace for greenhouse gas permits, as well as emissions exchanges in the United States, Canada, India and China....MORE

We last visited Climate Exchange on June 16:
Richard Sandor, Barack Obama and the Founding of the Chicago Climate Exchange (CLE.L)
Climateer Investing on Carbon Trading and Traders

Gazprom seals $2.5bn Nigeria deal

The perils of translation/transliteration. From the BBC:

Russia's energy giant Gazprom has signed a $2.5bn (£1.53bn) deal with Nigeria's state operated NNPC, to invest in a new joint venture.

The new firm, to be called Nigaz, is set to build refineries, pipelines and gas power stations in Nigeria....MORE

Thursday, June 25, 2009

Goldman Sachs and Big Time Market Manipulation (GS)

I owe someone a hat-tip for this post and the one immediately below but the tipper's identity escapes me. If it's you, please email and we'll do the right thing. From ZeroHedge:

Goldman Sachs: "Engineering Every Major Market Manipulation Since The Great Depression"
With a subtitle like "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again" run, don't walk, to your nearest kiosk and buy Matt Taibbi's latest piece in Rolling Stone magazine. One of the best comprehensive profiles of Government Sachs done to date. Speaking of GS, they sure must be busy today, now that Bernanke is about to be impeached and take the fall for all their machinations....MORE

How commodity indices broke the wheat futures market

I've been beating the drum on the index investors in the commodities markets (especially oil) for over a year now, see link below the headline story. From Felix Salmon at Reuters:

Back in March 2008, Diana Henriques noted something very odd: a large number of futures contracts traded in Chicago were expiring at levels much higher than the spot cash price. She said at the time that “economists who have been studying this phenomenon say they are at a loss to explain it”.

This very odd phenomenon — which caused farmers a lot of harm — has now been explained in a 247-page report from the Senate investigations subcommittee, entitled Excessive Speculation in the Wheat Market. The main PDF is here; there are exhibits and addenda here. The culprit, it turns out, is index traders.

The rise in the basis between the futures price and the cash price is a function of the rise of commodity indices, and investors buying a basket of commodities. This affected the wheat market particularly badly, as explained in footnote 213 of the report, partly because of the ease of storing wheat:

Aside from wheat, the other commodity markets in which index traders hold a substantial share of the long open interest are the futures markets for two livestock commodities, lean hogs and live cattle. Lean hog futures contracts are financially settled, meaning that the price of the expiring futures contract is set at the price of the commodity in the cash market at contract expiration. By definition, therefore, lean hog futures and cash prices will be equal at settlement, so there is no problem with convergence. Live cattle, unlike grain, cannot be placed in storage from one contract expiration to another. That constraint means there is always an active cash market for live cattle at contract expiration that helps to force convergence.

The Senate subcommittee recommends that the futures exchanges should curb speculation in the futures market in order to bring the basis between futures and cash back down to a reasonable level. It’s coming down already, but it’s still extremely high, at over a dollar a bushel...MORE, including some sharp reader comments.

Here's a quick search of Climateer Investing for Calpers, long-only, index.

California weighs global warming fees on producers

From the Silicon Valley Mercury-News:
California air regulators on Thursday will consider leveling the nation's first statewide carbon fee on utilities, oil refineries and other industries as a way to pay for the state's landmark greenhouse gas emissions law.

The move comes at a time of rising unemployment and great economic uncertainty in the nation's most populous state, prompting concerns that the regulatory fee will impose yet another burden on California's struggling business climate.

If approved, the fee would raise $51.2 million annually for the next three years to fund the bureaucracy needed to implement California's 2006 global warming law. The total would drop to $36.2 million by the fifth year.

The fee would cost the average cement plant, for example, about $200,000 a year.

Industry groups say the proposal by the California Air Resources Board unfairly singles them out to pay for the law, which was a Democratic proposal but has generated worldwide publicity for Republican Gov. Arnold Schwarzenegger, its main cheerleader.

"This small group is paying for the whole program. It's really not economy-wide. We need something more broad-based," said Michaeleen Mason, director of regulatory issues at the Western States Petroleum Association.

She said the fee comes at a time when many companies say they can least afford to pay it. California's unemployment rate for May was 11.5 percent, the highest in modern record-keeping.

Beginning in 2010, about 250 businesses in California that make, sell or import gasoline, diesel, natural gas and coal would be charged roughly 12 cents per ton of carbon dioxide that both they and their customers emit into the atmosphere.

Cement plants also would be subject to the fee because the chemical process they use to make cement produces greenhouse gases. The charge would drop to 9 cents per ton of carbon dioxide in 2014 because loans approved in past years by the Legislature to run the $36.2 million program would be paid.

Air regulators say they need the fee to carry out the California Global Warming Solutions Act, which seeks to reduce emissions in the state to 1990 levels by 2020. It is intended to cover the salaries of 174 people hired since Schwarzenegger signed the law, which authorized the board to charge an administrative fee....MORE

Utilities Could Cash In On Climate Bill (AEP; AYG; BRK.A)

From Forbes:
Legislation requiring heavy investment in clean technologies should actually boost utilities' profits, AEP CEO Mike Morris says.

Common sense might lead one to believe that climate change legislation will be bad news for one group of big polluters: power utilities, which generate half of the country's electricity with coal. The carbon cap-and-trade scheme that California Democrat Henry Waxman will likely succeed in shepherding through the House of Representatives this month would force big utilities to invest millions of dollars in often unproven emissions-reduction technologies and replace some dirty, coal-fired power plants with clean, expensive wind and solar power.

But common sense can mislead, especially when attempting to decipher the finances of government-regulated electric utilities. The huge, mandatory investments in clean energy technologies could create new opportunities to boost earnings for utilities like American Electric Power ( AEP) of Columbus, Ohio.

Utilities make narrow margins on the sale of electricity to ratepayers and grow earnings by investing in capital projects. AEP, like other big utilities, earns modest, single-digit returns on projects like a new coal-fired generator. But regulators granted AEP a 14% return to build a 290-mile-long high-voltage power line in West Virginia and Maryland, where existing lines have become dangerously overloaded. Ratepayers pick up the cost of the project via "rate relief," or government-approved utility bill increases, with added margins benefiting utility investors.

The federal government will likely prod utilities to prioritize clean energy projects with guarantees of similarly rich returns, according to AEP Chief Executive Mike Morris. Morris met with Forbes to discuss the impact of green legislation on utilities. AEP, which earned $1.4 billion on $14 billion of revenue in 2008, provides electricity in 11 Midwestern states, while its transmission business is building networks of high-voltage transmission lines with partners including Berkshire Hathaway ( BRK ), subsidiary MidAmerican Energy and Allegheny Energy ( AYE). Its high-voltage transmission projects are the first pieces in what could become a nationwide backbone grid to carry renewable energy from western wind farms cross-country to population centers along the eastern seaboard....MORE, including interview.

Gore, Buffett Take Sides in Tug-of-War Over Climate Change Bill (BRK.A)

From Bloomberg:
Al Gore and Warren Buffett joined the fray over a bill that would limit greenhouse gas emissions, with each taking opposite sides as a legislative battle over the measure entered its final hours.

Gore, the former vice president who now focuses on environmental issues, is set to appear today on Capitol Hill to endorse the bill. Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., took to the airwaves yesterday to call the legislation “regressive.”

The measure got a boost earlier this week as its backers reached an agreement with agricultural and rural lawmakers to give farmers and coal-fired electric utilities added benefits. Democratic House leaders plan a floor vote on the bill tomorrow.

About 100 environmentalists and labor leaders rallied on Capitol Hill yesterday in support of the legislation. They were joined by venture capitalist Sunil Paul of Spring Ventures in San Francisco and Bill Keith, founder of St. John, Indiana-based SunRise Solar, who praised the measure....

...Some investor-owned utility companies, including MidAmerican Energy Holdings Co., a company controlled by Buffett’s Berkshire Hathaway, have objected to the bill’s formula for distributing carbon dioxide permits.

Even with changes that would give more free allowances to coal-fired utilities, the bill is “unworkable, and we continue to urge a no vote,” MidAmerican spokeswoman Ann Thelen said in a phone interview....MORE

We've previously posted on Warren's (and Charlie's) thinking in:

Warren Buffett on Cap-and-Trade (BRK.A)

Berkshire Hathaway's Munger on Cap-and-Trade ("Monstrously Stupid Right Now...Almost Demented"); Warren and Charlie on Wind and Solar (BRK.A)

We linked to David Sokol's 'cap-and-(no) trade' opinion piece in the Washington Post a few weeks ago:
Berkshire Hathaway's MidAmerican Energy on Waxman-Markey: "We Don't Much Care For It" (BRK.A)
and the hubbub around his testimony before Mr. Markey's committee in:
UPDATE-- "Sokol: Markey seeks to intimidate" (BRK.A)

"Buy Zinc" (Not Really)

From an April '08 post, "Buy Tin":
That was the cryptic message from a reformed metals trader this afternoon. No rationale, no investment thesis, just "buy tin".

I couldn't help thinking of the Barney Miller episode "Child Stealers".
Time traveler "Adam Boyer" comes back from 2057 and is hounded by Harris for stock tips:
[Harris, acting on a tip from a "twinkie" claiming to be a Sociology Professor from Columbia University who's traveled back in time from the year 2057 (played by the great character actor Richard Libertini), calls his broker to transfer his assets from gold bullion to the financial standard of the future--Zinc!!]:

"...no, no blue chips, either...I was thinking about Zinc! (pause) Yeah, Zinc! What's it goin for these days? (writing the figure on a notepad)...Thirty seven and a half cents---a POUND?? (The "Professor" gives Harris an encouraging nod)...Yeah, well, I might be willin' to spring for a coupla TONS!
Today, Money Morning Australia's headline is "Look for Zinc to Bounce":
...The breakout in April of an oblique resistance level gave some momentum to the price action after a period of consolidation. This oblique resistance cleared is actually the slope that goes through lower high points posted since the historical high of November 2006 (point A on the chart).

As expected, the price action reached the following resistance level identified around $1,630. This level corresponds to the previous low posted in last August. The price action peaked even higher, at $1,672.5 on June 12. Two weeks later, a correction has driven the price to $1,508 (10% lower)....MORE

With the exception of copper I have not been following the base metals preferring instead the relative tranquility of the lard/grease/tallow complex*.

Any losses suffered as a result of this post should be blamed on Adam Boyer and/or Money Morning Australia.

*See "Volatility Getting You Down, Bunky?":

Maybe it's time you looked into the tallow market.
The tallow/grease/lard complex has been traded for five thousand years:

2992 B.C.
Honey I'm home!
Hi dear, anything new in tallow?
Nope. Same ol', same ol'.

2008 A.D.

Here's a long term forecast for tallow:

Figure 1: Tallow and Crude Oil Prices: New Zealand Dollars per Litre...

Canaccord Adams Downgrades First Solar (FSLR)

The stock is down $5.69 at $165.50 in early pre-market trading.
From 24/7 Wall Street:
First Solar, Inc. (NASDAQ: FSLR) is going to be down early this morning after Canaccord Adams decided to grade the stock. The brokerage firm decided to cut the rating to Hold from Buy, and the price target is $180.00. This could have implications for the solar ETF, Claymore/MAC Global Solar Energy (TAN).

The downgrade is based upon targets being maintained at higher than industry levels at a time when others have been having trouble securing a solid business trend....MORE

Tuesday, June 23, 2009

Battery Manufacturer A123 Files S-1/A, Amended Initial Prospecus with the SEC June 22, 2009

UPDATE below.
Original post:
Back in August '08 we posted "A123 Systems Going Public, S-1 Filed Today (AONE)".
Since then Lehman went bankrupt, Washington Mutual was seized, Wachovia merged with Wells Fargo, Bank of America and Merrill became MERdeBAC, the U.S. auto industry became a subsidiary of the U.S. Treasury.

You know the usual stuff.

Yesterday A123 filed their amended prospectus.
From the SEC, first up the filings page for A123 SYSTEMS, INC. (0001167178):
Form Formats Description Filing Date File/Film No
S-1/A [html][text] 4 MB [Amend]General form for registration of securities under the Securities Act of 1933
Acc-no: 0001047469-09-006463 (33 Act)
2009-06-23 333-152871
D/A [html][text] 12 KB [Amend]Notice of Exempt Offering of Securities, item 06
Acc-no: 0001167178-09-000003 (33 Act)
2009-06-11 021-39833
D [html][text] 12 KB Notice of Exempt Offering of Securities, item 06
Acc-no: 0001167178-09-000002 (33 Act)
2009-04-17 021-39833
S-1/A [html][text] 3 MB [Amend]General form for registration of securities under the Securities Act of 1933
Acc-no: 0001047469-08-012552 (33 Act)
2008-11-25 333-152871
S-1/A [html][text] 3 MB [Amend]General form for registration of securities under the Securities Act of 1933
Acc-no: 0001047469-08-011486 (33 Act)
2008-10-31 333-152871
S-1/A [html][text] 3 MB [Amend]General form for registration of securities under the Securities Act of 1933
Acc-no: 0001047469-08-010779 (33 Act)
2008-10-09 333-152871
S-1 [html][text] 10 MB General form for registration of securities under the Securities Act of 1933
Acc-no: 0001047469-08-008964 (33 Act)
2008-08-08 333-152871

That gets us back to Aug. '08. Here's the amended S-1: Form S-1/A
Personally I'm going to start with the 506 offering (D/A)
Have at it, I'll have more later.
A123's Q1 revenue rises, loss widens

A123 Systems Inc.’s first quarter revenue more than doubled year over year, but a spike in research and administrative costs helped widen its net loss, according to a recent Securities and Exchange Commission filing....MORE from the Boston Business Journal
See also:
Climateer Investing: Better Batteries: General Electric, A123 and ...

NASA's James Hansen Arrested for Trespass on Massey Coal Property; Will Debate Massey President Tomorrow (MEE)

From the NYT's DotEarth blog:
James E. Hansen, the NASA climate scientist who has become an outspoken campaigner against coal burning, was among 29 protesters arrested as they intentionally crossed onto the property of Massey Energy, the biggest company conducting mountaintop mining in West Virginia. Dr. Hansen and the others, including Ken Hechler, 94, a former congressman, and the actress Darryl Hannah, were cited for trespassing and released, said Nell Greenberg, a spokeswoman for the Rain Forest Action Network, whose executive director was also arrested....MORE
The Charleston Gazette's headline for the above story is:
Daryl Hannah, scientist arrested at W.Va. mine protest
And, while looking for another version of the story, I saw this, from the Charleston Gazette's WestVirginiaGazette.com (it's also at DailyKos):

Climate scientist Hansen agrees to debate Massey's Blankenship

CHARLESTON, W.Va. -- NASA climate scientist James Hansen has agreed to debate global warming, the coal industry and mountaintop removal mining with Massey Energy President Don Blankenship later this week.

Officials from Massey and from environmental groups who are working with Hansen on a major protest today in the Coal River Valley were busy late Monday trying to work out details, including a time and location, for the event.

Both sides, along with West Virginia Public Broadcasting, were trying to work out arrangements for the event to take place Wednesday at Mountain State University in Beckley. A time had not yet been set.

Blankenship challenged Hansen to debate the issues after it was announced that Hansen would be among the opponents of mountaintop removal who planned to risk arrest by trespassing on Massey property during today's protest near Marsh Fork Elementary School at Sundial.

Hansen later changed his schedule, to stay in West Virginia another day to take part in the debate. Hansen proposed that the debate take place at a school, with both men getting time for extensive opening statements, followed by a question-and-answer period.

"Thanks for your offer to publicly discuss climate change, human-made global warming and its implications for the coal industry in general and mountaintop removal in particular," Hansen wrote in an e-mail to Blankenship. "That is an excellent suggestion. I would be glad to participate in a format that allows the public to become better acquainted with the science and its implications."

Later, Hansen indicated he would appear and give a presentation on global warming and the coal industry, regardless of whether Blankenship agreed to specific debate logistics....MORE

Update: The Charleston Gazette's blog, "Coal Tattoo" has more details of the debate:

Coal and climate: Hansen agrees to debate Blankenship

...I received this note from Dr. Hansen, who asked that I forward the information on to Blankenship … I’ve done that, and I’m sharing it with Coal Tattoo readers as well:

Dear Don,

Thanks for your offer to publicly discuss climate change, human-made global warming, and its implications for the coal industry in general and mountaintop removal in particular. That is an excellent suggestion. I would be glad to participate in a format that allows the public to become better acquainted with the science and its implications.

I had planned to return to a meeting in Washington immediately after the activities at your place on Tuesday, but to accommodate a public discussion, I will stay another day. I expect that we will be able to find a school auditorium that would be well-suited for presentations and discussion. I am scouting that out now and will get back to you with specific information.

Usually I spend close to an hour on a climate science discussion for the public, but I can shorten that to about 40 minutes, so that you can have a similar time to present your views, if you would like that much time. You are welcome to speak either before or after me. After we have both spoken, we can open it up for discussion with the public.

If for any reason you are unable to find time for this discussion on Wednesday, I will give my talk anyhow. Hopefully the public will then be able to get back to you with information and questions about how your practices relate to climate, the environment, and the future that will be faced by young people and future generations.

Thanks again for your helpful suggestion. I very much agree on the importance of reaching out to the public and increasing public understanding of scientific matters.

Jim Hansen


Interesting stuff.

Thursday's Must Watch Release: H.3-"Aggregate Reserves of Depository Institutions and the Monetary Base"

I've got to get out more. Fed Funds trading near the 0.25% target.
From EconomicPolicyJournal:

Intriguing Climb in Fed Funds Rate

...What has gone on since last week? Are banks starting to lend more? Is there a big bank in trouble? Is the Fed draining reserves? Do banks just want to be paid more? Suddenly, Thursday's H.3 report, the report on Aggregate Reserves of Depository Institutions and the Monetary Base has become a must watch release. It hits at 4:30 PM ET...."

German pensioners ‘kidnap and torture their investment adviser’

In a July '07 post "FBI: Goldman Sachs threat not of 'high credibility' (Off-topic)" I asked:
...2) Does anyone remember the story of the dentist who put on a Santa Claus suit, kidnapped his stockbroker and tortured him for three days with a cattle-prod, all the while screaming the names of the lousy deals the broker had put him in?

When I ask this question at parties I get funny looks and solitude.
If you have any details please email....
I received some confirmations from folks who recognized the story but no citations. If you've got the cite, drop us a line. Here's the headline story from the Times of London:

A group of well-to-do pensioners who lost their savings in the credit crunch staged an arthritic revenge attack and held their terrified financial adviser to ransom, prosecutors said yesterday.

The alleged kidnapping is the latest example of what is being dubbed “silver crime” — the violent backlash of pensioners who feel cheated by the world.

“As I was letting myself into my front door I was assaulted from behind and hit hard,” the financial adviser James Amburn, a 56-year-old German-American, said. “Then they bound me with masking tape until I looked like a mummy. I thought I was a dead man.”

He was freed by 40 heavily armed policemen from the counter-terrorist unit last Saturday. The frightened consultant was in his underwear, his body lacerated by wounds allegedly inflicted by angry pensioners.

It appears that two couples had entrusted Mr Amburn’s investment company with €2.4 million (£2 million), which he ploughed into Florida’s boom-and-bust property market. The properties became forfeit during the sub-prime mortgage crisis but the couples wanted their money back.

After being bundled into the boot of an Audi in the west German town of Speyer, Mr Amburn was driven southwards to Chieming, close to the Austrian border, where one of the couples Roland K, and his wife, Sieglinde, 79, had a holiday home.

The financial adviser claims he was held there in a cellar for four days almost naked, fed soup twice a day and beaten. Another couple, Gerhard F, 63, and his wife, Iris, 66, both retired doctors, allegedly helped to torture the prisoner....MORE

See also:

Pensioner pelts Allied Irish Bank chief with eggs

Herschel and Me (Sunspots and Wheat)

This story at Accu-weather reminded me of William Herschel:

Herschel Takes A Picture; Endeavour Tank


As you may know, the Herschel and Planck spacecraft were launched back in May. The first images captured by Herschel have come back to Earth, and as luck would have it, they are of one of my favorite Messier Objects; M51, the Whirlpool Galaxy, in constellation Canes Venatici. Herschel took the first images using its Photodetector Array Camera and Spectrometer (PACS) instrument. Charles Messier first observed the object around 1773 and it lies about 35 million light-years away; it was the first galaxy discovered with a spiral structure. The image was taken at 70, 100 and 160 microns after Herschel's cryocover (essentially its lens cap) was opened. Herschel is the first space-based observatory to cover the entire wavelength spectrum from the far Infrared to the sub-millimeter band (60-670 micrometers)....MORE
Okay, maybe you had to be there.
Last year, at the peak of the wheat market I wrote "Wheat Market Gone Wild and "Do We All Die in 2027?":
See important note.*
During a misspent youth one of my follies was following in William Herschel's footsteps.
First, this report on prices at the Minneapolis Grain Exchange for Hard Red Spring Wheat (the good stuff)....

...And Herschel? In 1801 he announced** he had spotted a correlation between sunspots and wheat prices. Here's a mention in the Edinburgh Philosophical Journal, 1823.

The question has been argued for 200 years and Herschel has, off and on, been the subject of ridicule***. Here's a headline from the New York Times in 1903:

SUN SPOTS NO PROPHETS; Science Destroys Theories That Disasters Follow Their Appearance. Interesting as Solar Curiosities with Possible Relation to Electrical Conditions of Earth....Source
Here's the cached version

A while later I came on the scene, couldn't figure out how to make money out of Herschel's idea and having the attention span of a gnat, moved on. So why bring it up? Since I first looked at the matter there's been a lot of research and it appears the correlation may not be as spurious as I thought. The wheat price series is one of the longest we have, it extends back to 1250, I've got a paper chart that starts in 1300 (although some of the prices are dubious).
The CBOT has a wheat chart that starts in 1477.

Google Scholar has 285 ref's to Herschel and wheat prices. Gregory Yom Din of the Israel Cosmic Ray Center, Tel Aviv University and Israel Space Agency, seems particularly interested, here, here, here, and note below.

*I am not saying current wheat prices are trading off the solar cycle. La Niña, the very low carry-over and corn planting in former wheat fields is enough to account for today's prices. But looking ahead....

We seem to be in an unusual solar cycle. The start of cycle 24 has been delayed longer than usual, so we're stuck at the quiet end of 23. From NASA:

Many forecasters believe Solar Cycle 24 will be big and intense. Peaking in 2011 or 2012

Here's NOAA's cycle 24 forecast; MUCH More interesting is NASA's cycle 25 forecast: "Solar Cycle 25 peaking around 2022 could be one of the weakest in centuries."

If there's anything to Herschel's idea and if NASA is right, we've got BIG problems.

If you want to track this stuff, here's Solarcycle 24.com "All of your Solar and Aurora needs in one place"...
And here's Sunspot Baby: