Tuesday, May 31, 2011

Things that Make You Say Hmmm..."India faces problem of plentiful food"

From the Economic Times:

Is there food shortage in India? Bet you will say yes. After being rammed by inflation, it's natural. But not true. India has no food shortage. On the contrary, we are now faced with the huge problem of plenty.

There is a bumper wheat and rice crop. In Andhra Pradesh, India's rice bowl, production is up 30%. Millers are offering only Rs 8 for a kilo of paddy though the MSP is Rs 10.30. Angry farmers last week threw paddy into the Krishna river. The state government has borrowed Rs 550 crore from RBI for procurement. The FCI can do little. After buying 50 million tonne wheat and rice this season, added to 44 million tonnes left from last year, it is exhausted.

The oilseed crop is 20% larger. Import of palm oil from Malaysia and Indonesia is down for the sixth straight month till April, a three-year low. Sugar output is up 28%. Even exports can't prod the bulls into action....MORE
India's National Commodity and Derivatives Exchange (NCDEX) has an ag futures index called “Dhaanya”.
“Dhaanya” means "Bountiful Harvest" in Sanskrit.

Value Investing's Long Run

The folks at Ben Graham's alma mater (and where he hung his hat ) may know something about the subject.
From Columbia's Ideas@Work blog:

What the gradual turn away from modern portfolio theory holds for value investing. 
The finance discipline is in the process of a halting transition. The efficient markets/modern portfolio theory is giving way to broader perspectives that incorporate the realities of information asymmetry — the fact that all market participants do not have the same access to relevant information — and deeply ingrained behavioral biases that often dominate actual financial market outcomes. At the leading business schools these latter approaches are now firmly established even though in the finance profession at large they remain relatively unfamiliar.

One particular aspect of this change is the increasing importance of value investing, an approach to investment management pioneered by Benjamin Graham and David Dodd ’21 at Columbia. In part, this is due to the overwhelming success of the value approach in practice. Individual value investors like Warren Buffett and value-oriented institutions like Sanford Bernstein populate the ranks of outstanding investors out of all proportion to their numbers. However, it is also due to a detailed appreciation of the way value investing differs from more conventional approaches, how this is responsible for the historical success of value investors, and why it is likely to continue in the future.

Traditional characterizations of value investing have been overly simplistic. Value investing involves buying securities at one-third or greater discounts to their “true” values, effectively buying dollar bills for fifty cents. More recently we have begun to appreciate how a value approach is distinct in the particular areas of searching for investment opportunities and valuing companies.

In search, the value strategy is to look in areas that are obscure, boring, unattractive, and therefore cheap by common metrics like low market-to-book and PE ratios. Simple statistically constructed portfolios of such stocks produce above average returns in cross-sections of securities over all extended time periods in all global markets. (My colleague Tano Santos shows this in his take on the question.) In time-series, there are reliably predictive levels of positive serial correlation in short-term returns. Neither phenomenon should be observed if markets were perfectly efficient. (Attempts have been made to associate the higher cross-sectional returns of “cheap” stocks with higher levels of risk, but these risk factors never turn out to be empirically measurable independent of cheapness.)...MORE
HT: Simoleon Sense

For some reason I keep thinking I should have drunk more champers.
[his is a hopeless case. He sees the headline, cross-wires to the famous Keynes quote, barrels along to the last words attributed to J.M.K and wonders 'Where was I?' -ed]

Also at Ideas@Work:
Untangling Skill and Luck

Climateer Quote of the Day

12.60 +0.90 (7.68%)

We'll have the story tomorrow morning.

German Nuclear Decision: Phase One of First Solar Short Squeeze (FSLR; GS)

Following up on last Thursday's "First Solar: Short Squeeze Being Set Up (FSLR)", at the time I wrote the post the stock was "In light pre-market action the stock is down 7 cents at $120.55."
FSLR traded down to $114.40 that day before closing at $117.96, down $2.66 on the day but up $3.56 from the Chanos inspired bottom.

The next day the stock was up $3.41 to close at $121.37.

Today, in a burst of enthusiasm (and short covering) the stock hit $128.95 up $14.55 from the Thursday intermediate-term bottom. It is currently changing hands at $124.75, up 3.38 on the day.
Here's the nuke story from Reuters:

U.S.-listed solar stocks rally after German nuke decision
* JA Solar, LDK rise more than 8 pct
* First Solar, Suntech climb more than 4 pct
May 31 (Reuters) - Shares of U.S.-listed solar companies jumped in early Tuesday trade after news that Germany, the world's leading solar market, would shut down its nuclear reactors by 2022.
American Depositary Receipts of China-based JA Solar Holdings (JASO.O) led the gains, climbing 8.8 percent to $6.15, followed by LDK Solar Co (LDK.N), up 8.7 percent to 7.63, and Yingli Green Energy (YGE.N), up 6.3 percent to $9.29....MORE

The next phase should be further accumulation followed by Goldman Sachs' reiterating their "Conviction Buy" call.
If you missed it, be sure to read all of Friday's "Analyst Smackdown: Are the Bears Right on First Solar? (FSLR)"

Heinrich Campendonk in the News: "German Art Forgery Scandal Reaches Hollywood"

From Der Spiegel:
Steve Martin Swindled 
German Art Forgery Scandal Reaches Hollywood
The Heinrich Campendonk painting "Landscape With Horses" is believed to be a forgery.
The Heinrich Campendonk painting "Landscape With Horses" is believed to be a forgery.
The scope of what is believed to be Germany's biggest art forgery scandal since World War II has reached as far as Hollywood. American actor Steve Martin bought one of the fake paintings in 2004 and later sold it at a loss of some 200,000 euros.

German police believe that American actor, comedian and collector Steve Martin played a minor role as a victim in what may be Germany's biggest-ever art forgery scandal. According to investigators at Berlin's state criminal police office (LKA), the art lover purchased what he believed to be a 1915 work by the German-Dutch modernist painter Heinrich Campendonk. He bought the colorful "Landschaft mit Pferden," or "Landscape With Horses," from the Paris gallery Cazeau-Béraudière for what would have been considered the bargain price of an estimated €700,000 (around $850,000 at the time) in July 2004....MORE
 Mr. Martin was tired of the old "Would you like to see my Campendonk" schtick anyway.

President Obama Approves of Natural Gas Fracking (CVX; XOM; UNG)

in Poland.
From Bloomberg, May 28:
Obama Says U.S., Poland Will Cooperate on Economy, Energy
...Obama said he had an “extensive” discussion with Polish leaders about Poland’s shale gas reserves and that the U.S. would share its technology on energy extraction.

“We are also aiming to expand our bilateral economic relationship with Poland,” Obama said. “Poland’s economy was the only economy in the EU not to fall into recession during the economic crisis and has enormous potential for economic growth.”

Obama returns home today after a six-day European trip and will hit the road again tomorrow to visit the town of Joplin, Missouri, where tornadoes killed at least 116 people last week. He’ll also be occupied by negotiations, led by Vice President Joe Biden, with congressional Republicans to trim cumulative budget deficits and raise the nation’s $14.3 trillion debt limit before an Aug. 2 deadline.

Energy Development

Obama and Tusk pledged cooperation on energy development, including tapping Poland’s shale gas reserves and expanding nuclear power.

“This is a moment of breakthrough,” Tusk said at the news conference with Obama. “We’re talking about cooperation and investments between two partners of whom one is a leader regarding technology, and the other has turned out to be a leader in terms of resources.”...MORE

Zeitgeist: Russia, Japan and Canada Will Not Rejoin Kyoto Protocol in 2012

China, of course, remains willing to run their HFC-23 scam* on anyone foolish enough to give them the money.
From the Sydney Morning Herald:
 Russia, Japan and Canada told the G8 they would not join a second round of carbon cuts under the Kyoto Protocol at United Nations talks this year and the US reiterated it would remain outside the treaty, European diplomats have said.

The future of the Kyoto Protocol has become central to efforts to negotiate reductions of carbon emissions under the UN's Framework Convention on Climate Change, whose annual meeting will take place in Durban, South Africa, from November 28 to December 9.

Developed countries signed the Kyoto Protocol in 1997. They agreed to legally binding commitments on curbing greenhouse gas emissions blamed for global warming....MORE
*September 2007:
China's Kyoto Scam = $Billions

Friday, May 27, 2011

Memorial Day, 2011

bald eagle american flag 

America the Beautiful has been called the country's second National Anthem.
In this version Mr. Charles begins with the third verse:

O beautiful, for heroes proved
In liberating strife,
Who more than self their country loved
And mercy more than life!
America! America! May God thy gold refine,
‘Til all success be nobleness, and ev’ry gain divine!

Here's JibJab's take on The National Anthem:

Personalize funny videos and birthday eCards at JibJab!

Have a safe and wonderful holiday.
I'm going long hot dogs and hamburgers.

Real Estate: "Charlie Sheen Lists Warlock Lair"

From The Real Estalker:

SELLER: Charlie Sheen
LOCATION: Los Angeles, CA
PRICE: $7,200,000
SIZE: 7,924 square feet, 5 bedrooms, 7 bathrooms

YOUR MAMAS NOTES: Buckle up babies because we're about to take a short ride on the Charlie Sheen crazy train.

Last month the unhinged and newly unemployed actor paid $6,999,999 for a 9,020 square foot mansion with 6 bedrooms and 9 bathrooms. The house, oft reported to be where Mister Sheen planned to keep a harem of hoochies, sits right around the corner from his long-time crib in the guard-gated Mulholland Estates community high in the hills above and between Beverly Hills and Sherman Oaks, CA....MORE

Direxion Unveils +/- 3x Versions of Market Vectors Agribusiness ETF (MOO; COWL; COWS)

All you have to do is be right (or short both sides).
From Benzinga:
Direxion rolled out four new ETFs yesterday (5/25/11) providing +3x and -3x leveraged exposure to existing ETF offerings from Van Eck Market Vectors.  This is not the first time Direxion has taken this path, having added leverage to the Market Vectors Gold Miners ETF (GDX) last December.

Direxion Daily Agribusiness Bull 3x Shares (COWL) and Direxion Daily Agribusiness Bear 3x Shares (COWS) track the same DAXglobal Agribusiness Index as the unleveraged Market Vectors Agribusiness ETF (MOO) (MOO overview).  COWL provides +300% the daily return while COWS provides -300% (three times the inverse) the daily return.  The new ETFs hold swaps on the performance of MOO and have their expense ratios capped at 0.95%.

The underlying index has current sector exposures of Materials 48.0%, Consumer Staples 35.0%, and Industrials 17.0%.  Country weightings include U.S. 47.9%, Singapore 10.5%, Canada 10.0%, Switzerland 7.5%, and Germany 4.4%.  The COWL/COWS combined fact sheet (pdf) provides additional background on the funds, while the COWL overview and COWS overview contain links to other material....MORE
On the joys of shorting ETF pairs:

April '09 
Direxion 3x Financial ETFs Go Certifiably Crazy (FAS; FAZ etc.)
...One approach is to short both of them, in effect writing an option. Ooops, have I said too much?

June '09 
FAS and FAZ: A Short Seller's Dream?

Sept. '09 
Shorting Leveraged ETF Pairs (FAS, FAZ: SPXU, UPRO)

Oct. 2010 
UPDATED: "Shorting Leveraged ETF Pairs (FAS, FAZ: SPXU, UPRO)"
...Here are the results of the strategy since that first post, via BigCharts:

Cool huh? One short goes against you 60% while the other goes in your favor 90%. 
If only they had 6X leveraged ETF's! You'd get 4% per month (approximate, it depends on the implied volatility of the options) on a mirror image pair trade as the rebalancing scrapes off the time premium of the options in the ETF....
Feb. 2011 
"Shorting Leveraged ETF Pairs" (FAS; FAZ; QLD; QID)

Analyst Smackdown: Are the Bears Right on First Solar? (FSLR)

The stock is up 81 cents at $118.77.
Auriga's Mark Bachman is one of the best in the space.
From Reuters:

Shorts piling on First Solar

* Bears see competitive advantage fading
* Bulls see rebound, say stock price is attractive
By Nichola Groom and Matt Daily

LOS ANGELES/NEW YORK, May 26 (Reuters) - First Solar Inc (FSLR.O) became the world's most valuable solar company because its cadmium telluride panels are the cheapest in the industry.
Investor euphoria for green technology sent the Wall Street darling's shares to an all-time high of $317 in May of 2008, just 18 months after debuting on the market at $20 a share.

On Thursday, the stock closed down 2.2 percent at $117.96 on the NASDAQ.

Three years later, however, the stock has shed more than 60 percent of its value and it is among the most heavily shorted stocks in the Standard & Poor's 500 index. As of May 13, more than 30 percent of its free float was held in short positions.

Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares, then sell them, waiting for the stock to fall so they can buy the shares at the lower price, return them to the lender and pocket the difference.

On Wednesday, famed short seller James Chanos said he is betting that shares in First Solar will fall, in part because solar power is still too expensive to compete with traditional sources of electricity generation. He also said Chinese competitors are increasing capacity and cutting costs so rapidly that profits across the industry are suffering.
So is Chanos correct that First Solar is caught in an irreversible downward spiral? Or is recent weakness in the stock a prime opportunity to buy into one of the industry's market leaders?

Gordon Johnson, head of alternative energy research at Axiom Capital Management in New York, said the cost advantage of First Solar's thin film modules is deteriorating as prices for polysilicon, the material used by most panel makers, have declined sharply. He has a "sell" rating on First Solar.

"Crystalline silicon (modules) were $1.45 on a per watt basis ... and in the first quarter of this year, First Solar's prices on average were $1.33. First Solar has to be at a 25-cent discount to crystalline silicon to compete because thin film modules are less efficient than crystalline silicon. You could see crystalline silicon prices on par with First Solar by the end of the second quarter."

Increasing manufacturing capacity across the industry will boost global supplies of modules, while big solar markets such as Germany, Italy, France and the Czech Republic have cut their subsidies for solar.
"The market will actually decline this year at a time when you have supply more than doubling," Johnson said.
Investors should also be concerned about the expiration of a U.S. government cash-grant program for renewable energy plants. Four of First Solar's biggest U.S. projects are also relying on a U.S. loan guarantee program, but those funds may not get approved, and the program expires later this year....MORE

Real Estate: "What are the Risks in Today’s Farmland Market?"

From Big Picture Agriculture:

Two Impending Shocks to Current Farmland Prices: Falling Crop Prices or Rising Interest Rates
Note that this post is taken from a report by Jason Henderson and Brian Briggeman for the Federal Reserve Bank of Kansas City, "What are the Risks in Today’s Farmland Market?"

Capitalizing Future Revenues
If historical relationships hold true, Midwestern cropland values hinge on farm revenues, interest rates and their relationship with the capitalization rate. Assuming average Midwestern crop yields, various combinations of corn prices and capitalization rates can rationalize current cropland values. However, all of these combinations assume historically high crop prices or historically low capitalization rates, which raise the risk in land markets.

With economic models suggesting that today’s historically high farm revenues have been capitalized at historically low rates of return, agricultural real estate values could fall sharply if crop prices sag or future interest rates rise.

To illustrate the risk facing farmland values, a straight forward net present value model is used to determine the capitalized value of future crop revenues (Lamb and Henderson). Assuming constant revenues in the future and a constant capitalization rate, cropland values can be determined by:

Cropland values = Future revenues ÷ Capitalization rate. (1)

In this model, future revenues are limited to the returns that are reinvested into the land or the amount received by the landowner. While the returns to land vary with farm profitability, the portion of gross revenues allocated to land owners has remained fairly constant over time. Over the past three decades, USDA costs of production data indicate that land owners receive about 25 percent of all gross revenues generated from cropland.

Therefore, future revenues can be estimated as a quarter of expected farm revenues, based on expected crop prices and yields. As discussed earlier, capitalization rates can be proxied with historical cash rent-to land value ratios....MORE

Thursday, May 26, 2011

Le Perv, Le Prez & La Prima Donna

From New York Magazine's Daily Intel column:

Kahn and the Obamas at a dinner during the G-20 conference in September 2009.
 Some pictures say a thousand words. This one just says two: No Touching.
For more retrospectively awkward photos of DSK and world leaders check out our slideshow.

HT: Clusterstock

CJR: "Tornadoes and Climate Change" (ALL; BRK.B)

You may have noticed a distinct lack of tornado posts on Climateer Investing this spring. That has been deliberate.

I've been involved with some modeling of the hits that the insurers are taking during this tornado season but that's prop stuff and too risky for the average reader of a public blog. If I put something on the blog it is usually from publicly available sources and the advantage (if any) that readers gain is from my judgements of what is important and the likelihood of an event coming to pass.

One of the wonderful things about markets is the fact that you can make money with a far lower than 50% hit rate if you can get enough bets out to have the math work in your favor. And have risk management systems in place to correctly size your bets. And have the capital to weather the inevitable drawdowns. And understand the pros and cons of the various instruments available to gain exposure. And...

You get the picture, a lot of moving parts for a funky little blog in a spiral arm of the WWW. So I haven't posted much on tornadoes. On the other hand, hurricane season officially starts next Wednesday...

Here's the Columbia Journalism Review's The Observatory blog on AGW, cyclones and the reporting thereof:

On Monday, The Washington Post published an op-ed by Bill McKibben, a writer and environmental activist, under the sarcastic headline, “A link between climate change and Joplin tornadoes? Never!”
McKibben mockingly chastises… well, the world, apparently. He directs his accusatory screed at “you” (as in, not him) for taking a hear-no-evil-see-no-evil position when it comes to potential connections between extreme weather and manmade climate change:
Caution: It is vitally important not to make connections. When you see pictures of rubble like this week’s shots from Joplin, Mo., you should not wonder: Is this somehow related to the tornado outbreak three weeks ago in Tuscaloosa, Ala., or the enormous outbreak a couple of weeks before that (which, together, comprised the most active April for tornadoes in U.S. history). No, that doesn’t mean a thing…

It’s far smarter to repeat to yourself the comforting mantra that no single weather event can ever be directly tied to climate change.
When it comes to the media, at least, McKibben is off his rocker. Many journalists, at news outlets large and small, are asking questions about tornado-climate connections. They’re just not reporting the kind of overwrought assertions that he seems to expect. In fact, they’re doing a fairly good job explaining explaining the relationship between tornadoes and climate change, just as they did during the Russian heat wave and Pakistani flood last summer. Evidence abounds that journalists are getting better at covering the nuances involved in the relationships between climate change and various types of extreme weather.

Even Climate Progress’s Joseph Romm, a fierce critic who routinely flogs reporters for not explaining the threat of climate change more assertively, was fairly complimentary in a nice roundup; he even wrote that, “Today weatherman Al Roker appears to have gone beyond the data with his suggestion that “climate change” is bringing tornadoes to urban areas, although, admittedly, it is a brief clip and it’s not exactly clear what he is saying.” (Romm compliments McKibben’s op-ed, but they’re brothers-in-activism where climate is concerned, and well within their rights to express their opinions about the need to act.)

So what are the data and scientists saying? Let’s go back to coverage of the tornadoes that tore through the southeast and south in mid- to late April (see this 2011 tornado information fact sheet for details). Andrew Freedman quickly kicked out pieces for The Washington Post and Climate Central describing the immediate meteorological conditions (involving a southerly position of the of the jet stream and warm sea surface temperatures in the Gulf of Mexico, which abetted the convergence of a hot, humid air mass close to the ground and a cold, dry one higher up, which got all twisted up and formed funnel clouds—see this primer from the National Severe Storm Laboratory)—that created the tornadoes. He also dutifully explored the climate connection, explaining that, contrary to McKibben’s assertion in the Post:

Those of us who write about climate change are often accused of attempting to link every unusual weather event to climate change, as if increasing air and ocean temperatures can explain everything from hurricanes to snowstorms. In this case, with the second-deadliest tornado outbreak in US history, and with the most tornadoes for any April since records began in the early 1950s, it’s important to understand that the scientific evidence indicates that climate change probably played a very small role, if any, in stirring up this violent weather. This might disappoint some advocates who are already using this to highlight the risks of climate change-related extreme weather.
A few days later, Wonkroom’s Brad Johnson (a colleague of Romm’s at the Center for American Progress) shook things up when he published interviews with three eminent climatologists. The most assertive statements came from Kevin Trenberth, head of the Climate Analysis Section of the National Center for Atmospheric Research, and Michael Mann, director of the Earth System Science Center at Pennsylvania State University. They told him, respectively, that “It is irresponsible not to mention climate change. … The environment in which all of these storms and the tornadoes are occurring has changed from human influences (global warming),” and “Climate change is present in every single meteorological event, in that these events are occurring within a baseline atmospheric environment that has shifted in favor of more intense weather events.”...MUCH MORE
Because the AGW signal has such wide error bars  folks who care about this stuff tend to fall back on the Pacific Decadal Oscillation (more and stronger storms when the PDO is in the cool phase) and ENSO (more tornadoes when transitioning from La Nina to neutral).

Even here, because the historic record is so short, you might not get enough of an edge to prove that your judgement is better than chance.
We are not recommending the property/casualty insurers or the reinsurers at this time but they will be worth a look.

I'm just not sure when.
See also April 17ths "La Nina and Tornadoes"

"Barney Frank Admits Getting His Former-Lover a Fannie Position"

From Economic Policy Journal:
Rep. Barney Frank has admitted that he helped his ex-lover, Herb Moses, land a lucrative post with Fannie Mae in the early 1990s. Frank was, and still is, on a committee that regulated Fannie — but he called questions of a potential ethical conflict “nonsense, ” reports the Boston Herald.

If it is [a conflict of interest], then much of Washington is involved [in conflicts],” Frank told the Herald last night. “It is a common thing in Washington for members of Congress to have spouses work for the federal government. There is no rule against it at all.”

According to Frank, Moses "was hired to an entry-level position.”...MORE

Global X Debuts Fertilizer ETF (SOIL) POT; MOS; MOO

Sure, why not. They should have gone with FERT as the symbol though.
From ETF Database:
Global X notched another ETF industry first on Thursday, debuting a fund that focuses on companies globally that are engaged in some aspect of the fertilizer industry. The Global X Fertilizers/Potash ETF (SOIL) seeks to replicate the Solactive Global Fertilizers/Potash Index, a benchmark that includes about 29 companies from both developed and emerging markets.

U.S. stocks account for about 22% of the index underlying SOIL, followed by Israel (14%), Canada (12%), and Australia (9%). The largest individual allocations in the underlying benchmark go to Illinois-based fertilizer manufacturer CF Industries (5.3%), Norwegian fertilizer producer Yara International (5%), and Australian chemicals and explosives manufacturer Incitec Pivot Ltd. (4.9%)....MORE
HT: Notable Calls

Climateer Does Solar (FSLR; SPWRA; STP';TSL)

Okay, it's actually Dilbert does solar but since we've had more solar posts (2) in the last 16 hours than in the preceding month here goes:


So there you have it, the answer to why we've been focusing on agriculture lately.
[those are from 2008, here are the new strips -ed]

First Solar: Short Squeeze Being Set Up (FSLR)

In light pre-market action the stock is down 7 cents at $120.55.
I've got no dog in this fight.
As of the last report there were 17,496,566 shares sold short, up from the prior fortnight's 15,635,466. That's the highest I can remember.
These little factoids came up because of Jim Chanos' comments on FSLR yesterday:
"Jim Chanos Trashes Solar Energy as ‘Hot Air’" (FSLR)
This is the third time Chanos has gone public with his opinion, the prior two being:
May 4, 2011 
First Solar Analyst Roundup: Auriga, Brigantine, Cowen, Chanos (FSLR)
April 14, 2011
"Jim Chanos (!) Spanks First Solar (!) FSLR)"
The interesting thing, to me anyway, is that there is nothing new in his observations, and one possible error.
He brought up the sales by insiders, this has been going on since the stock was over $300 three years ago and has actually decreased since Ahearn left as CEO to lobby as Chairman.

We addressed departure of Bruce Sohn in the April 14 post and brought up a possibility worse than Chanos'.

Regarding the technology, FSLR can squeeze some more efficiencies out of the current CdTe, enough they say to reach grid parity, at least in the American Southwest, within 2 1/2 years.
For more on where they might be headed we had a bunch of posts from last year:
UPDATED: First Solar Looks to CIGS Technology (FSLR)
UPDATED: "First Solar News, Rumors: CIGS, Mercury, Tellurium" (FSLR; ASOE; TSL; STP; JASO )

A Pivotal Year For Thin-Film Solar Companies (FSLR; GE)
Solar: Get on Board the CIGS Love Train (FSLR; ASTI; DSTI) Miasole; Nanosolar 

"Metrics for Thin Film Solar CIGS Company Comparisons" (FSLR; ASTI; DSTI) Miasole; Nanosolar
Watch Out First Solar: "GE outlines R&D efforts with CdTe thin-film technology" (FSLR; GE)
Was Solyndra the Reason Goldman Sachs Threw First Solar Under the Bus? (FSLR; GS; SPWRA) Goldman Sachs and the Solar Land Rush (FSLR; GS)

and more recently:
First Solar Shopping for a Private CIGS Company? (FSLR)

We've been following this stuff for a while.
The biggest negative is the fact that FSLR will have no free cash flow this year, they are plowing everything and more back into expansion.

So what might be a catalyst for a squeeze?
Watch for accumulation, volume increases on up days.
That will be Goldman or their clients.
And then look for a reiteration of the Goldman buy rec.
January 24
UPDATED: Aha! "Goldman Sachs added First Solar to its Conviction Buy List" (FSLR)
February 2 
First Solar: Goldman Sachs Suggests Selling Covered Strangles (FSLR)
May 4 
UPDATED--First Solar: Goldman Sachs Maintains Buy, $190 Target, Morgan Stanley 'More Constructuve' (FSLR)

"Vestas Drops Most in Three Weeks After Chanos Says Stock is ‘Best Avoided’"

We'll have some more on Mr. Chanos in a bit.
From Bloomberg:
Vestas Wind Systems A/S, the largest wind-turbine manufacturer, fell the most in three weeks in Copenhagen after investor Jim Chanos recommended betting against the stock.

Vestas declined as much as 6.2 percent to its lowest in almost five years and pared its loss to 4.3 percent at 2:37 p.m. local time.

“The market is very sensitive to bad news at the moment,” said Eduardo Tabbush, an analyst at Bloomberg New Energy Finance in London. “The sentiment about wind and about Vestas especially is very bad.”
Chanos, the short seller known for predicting Enron Corp.’s collapse, yesterday said the Randers, Denmark-based company will be “under financial strain and best avoided,” while Nordea Bank AB forecast that the U.S. wind market will remain depressed for the next three years.

Michael Holm, a spokesman for Vestas said the company never comments on movements in its shares.

“People make money out of shorting stocks,” he said....MORE

Wednesday, May 25, 2011

"WikiLeaks: Saudis often warned U.S. about oil speculators"

A first-rate piece of reporting.
Being as skeptical of Saudi pronouncements as of Goldman Sachs' $200/Bbl buy recs is probably a reasonable frame of mind to find the truth of the matter.

At the time, something that stood out to me (and about which we posted ad nauseum) was how many market participants were saying oil was in a manipulated bubble while tenured academics with no skin in the game argued the opposite.
From McClatchy:
When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

"Saudi Arabia can't just put crude out on the market," the cable quotes Naimi as saying. Instead, Naimi suggested, "speculators bore significant responsibility for the sharp increase in oil prices in the last few years," according to the cable.

What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

The Obama administration, the Bush administration before it and Congress have been slow to take steps to rein in speculators. On Tuesday, the Commodity Futures Trading Commission, a U.S. regulatory agency, charged a group of financial firms with manipulating the price of oil in 2008. But the commission hasn't enacted a proposal to limit the percentage of oil contracts a financial company can hold, while Congress remains focused primarily on big oil companies, threatening in hearings last week to eliminate their tax breaks because of the $38 billion in first-quarter profits the top six U.S. companies earned.

The Saudis, however, have struck a steady theme for years that something should be done to curb the influence of banks and hedge funds that are speculating on the price of oil, according to diplomatic cables made available to McClatchy by the WikiLeaks website....MUCH MORE
HT: MarketBeat

"Fadel Gheit on Goldman Sachs and Morgan Stanley Manipulating the Oil Market" (GS; MS)

Of course they do.
They'll do anything they think they can get away with.
We have so many posts on Goldman and the oil markets it is easiest to do a Google search of the site:
site:climateerinvest.blogspot.com goldman sachs oil
From Bloomberg via Wall Street Pit:
Oppenheimer’s Fadel Gheit appeared on Bloomberg Television with Margaret Brennan today to discuss the oil and gas market.

Gheit talks about Goldman Sachs (GS) and Morgan Stanley (MS) manipulating the oil market and that it is “a shame on the government that allows them to get away with that.” Excerpts from the interview can be found below, courtesy of Bloomberg Television.

Gheit on Morgan Stanley and Goldman Sachs changing their positions on oil yesterday:
“Unfortunately, without repeating the names of the brokers, everybody knows who the usual suspects are. These are the people in 2008 that were making a bet on $200 oil.”
“This is another form of market manipulation in my view. It is in another form of basically pushing the envelope. What you are saying or doing is not illegal, but they are allowed to do it. The government has a responsibility to slap them hard.”

Gheit on whether he thinks the notes out of Morgan Stanley and Goldman Sachs are market manipulation:
“The interpretation will be left to the market. It is a self-fulfilling prophecy. They can invent reasons why oil prices go to $130 or $150, but history has shown that these people are able to move markets. It is not Exxon or BP or Shell that moves the oil markets. It is the financial players. It is the Goldman Sachs, the Morgan Stanley, all of the other guys. It is a shame on the government that allows them to get away with that.”...MORE
Here's Bloomberg TV:

"Jim Chanos Trashes Solar Energy as ‘Hot Air’" (FSLR)

First Solar is trading at $121.10, down $2.79.
On April 14th it was "Jim Chanos (!) Spanks First Solar (!) FSLR)"

Maybe Jim is just crabby about his China short.
Regardless, he is not someone you want trashing your stock. FSLR is trading down $3.23 at $141.50 after trading as low as $137.18.
From Tech Trader Daily:
FSLR Down On Chanos Comments, Exec Resignation

Shares of First Solar (FSLR) are down 4% at $139.15 after short-seller Jim Chanos made negative comments about the company during an interview on CNBC this morning....
So he's been right to the tune of 13% since he went public with his short. Here's the latest via Deal Journal:
Jim Chanos of Kynikos Associates (FYI — that’s Greek for “cynic”) and famed for shorting Enron took to the stage to talk about why he’s short green energy.

In a presentation called “Alternative Energy: Does Solar + Wind = Hot Air?” Chanos joked he would “upset the greenies,” by arguing that while there’s a lot of enthusiasm about green energy, the companies in the sector today don’t yet solve those problems.

Wind and solar are “not capable” of real cost-effective ways of meeting energy demands, he says. “Wind and solar are not efficient.”

As for job growth, he says that the boom of green jobs could be overblown, as most of the jobs generated are construction jobs, not in technology. “Put your hand on your wallet,” he says, as many of the green jobs are merely putting people back to work who were employed in housing....MORE
See also:

May 4, 2011 
First Solar Analyst Roundup: Auriga, Brigantine, Cowen, Chanos (FSLR)

Feb. 22, 2010 
Jim Chanos' "China is Dubai Times 1000" May be a Losing Bet

I have a lot of respect for Chanos. His work on Enron was exactly right and very brave, especially when you consider the political, media and investment giants who backed the company. Hell, folks as diverse as Paul Krugman, NASA's Jim Hansen, Lawrence Lindsey and Bill Kristol took the Crooked E's payola. Fortune magazine called ENE "The most innovative company in America" for six years running. Chanos stood up and said the emporer has no clothes, and put his money where his mouth was.

On the other hand going up against the Chinese government could make you broke before you're proven right....
Dec. 27, 2010
Outlook 2011 & the Next Decade: Is The Smart Money Right About China?
...The thing is, you have to be correct about both the doom and the timing. If you are predicting the end of the world it is usually best to make the occurence far enough into the future that your audience is either dead or demented on the appointed date.

If you insist on a call that even your clients with alzheimers can remember you have to do serious analysis and consider the millions of moving parts that go into a dynamic system.

In the case of China the government can delay the day of reckoning long enough to really hurt the time adjusted returns of the shorts.

If you have a situation that will fall 30% and it happens in a year you've put up some professional level numbers.

If it takes two years, your annualized gain is down to 14.5% and your 2 and 20 are at risk....

Société Générale's Albert Edwards: "Many Think I am Mad..." (sub 2% Treasuries, S&P at 400 etc.) May 25, 2011

From our last (May 4) post on Albert:
Albert does not wear the devil-may-care look well:

Our Hero

In fact he appears a bit deranged when he tries to smile.
Regardless, we are fans. and so is FT Alphaville* Here's the latest...
Here's today's installment, via ZeroHedge:
We knew it was only a matter of time before Albert Edwards would follow up to Russell Napier's call for S&P 400 with his own rejoinder. Sure enough, the SocGen strategist (who previously called for an S&P target in the same neighborhood) has just released the following:
"Let me re-emphasise our 400 S&P forecast with sub-2% US bond yields" in which he says: 
"Amid the equity market enjoying yet another Fed induced mega-rally, many commentators have been left grasping (gasping?) for explanations for the continued low level of global bond yields despite the ruination of the public sector balance sheet. Most have latched onto QE2 as the explanation and hence expect a sharp rise in yields from June onwards as the Fed’s buying programme ends. We expect new lows in bond yields."
The reason for that per Edwards, is an imminent bout of deflation, which is precisely what the Fed is hoping to create, in order to get the green light for the Jim Grant defined "QE 3 - QE N". Edwards, naturally recognizes this too: "Despite fully acknowledging the ruination of the government balance sheets as years of excess private sector debt are transferred to the public sector, we still expect to suffer another deflationary bust that will take government bond yields to new lows BEFORE government profligacy and the Fed's printing presses take us back to both double-digit inflation and bond yields. For now, we remain heavily overweight government bonds." In other words, just as we have been claiming for a long time courtesy of the Fed's so predictable Pavlovian reaction to always print more in response to deflation, enjoy 2% bond yields... just before they hit 20%.
More from Edwards:
Many think I am mad. But I am not the only commentator expecting a deflationary bust - the sort of bust that will take the S&P down to 400 from the current 1300. I recently watched John Authers of the FT Lex and Long View columns interview Russell Napier, formally of CSLA and a leading stockmarket historian. Russell's views are as interesting as ever and well worth 11 minutes of watching time. His views are similar to mine, although he articulates his thoughts far more clearly than I - Long View: Historian sees S&P fall to 400 - ft.com 16 May....MUCH MORE
Here's FT Alphaville's take on things:

Albert Edwards and an afternoon tea-party with the Vestal Virgins
Albert Edwards is bullish.

Bullish on US Treasuries that is, which the SocGen strategist expects to hit record levels before before government profligacy and the Fed’’s printing presses take the world back to both double-digit inflation and bond yields....MORE
We have many many posts on Mr. Edwards, use the search blog box, keywords Albert, despair etc.

From May 17ths Take That Albert Edwards: "The Bear Market Bottom Will Be S&P 400"--Russell Napier:

Albert's reaction to being bested (worsted?):


8K: Molycorp Restates Year End Financials Downward by $1.69 Mil. (MCP)

Playing a bit fast and loose with the numbers eh?
This may end up being one of those "pssst buy the stock" wink and a nudge set-ups but at the moment I'm more troubled by the inventory revision than I am by the share sale.
From the May 25 8K:

In connection with the filing of a registration statement on Form S-1 on May 24, 2011, Molycorp, Inc. (the “Company”) revised its consolidated financial statements (i) as of and for the year ended December 31, 2010, and cumulatively for the period from June 12, 2008 (Inception) through December 31, 2010, and (ii) as of and for the three months ended March 31, 2011, and cumulatively for the period from June 12, 2008 (Inception) through March 31, 2011, in each case for an overstatement of Work in Process (“WIP”) inventory.
     The Company determined that its work in process inventory of ceric hydrate was overstated by approximately $1.7 million as of December 31, 2010 and by approximately $3.0 million as of March 31, 2011, $1.3 million of which related to the three months ended March 31, 2011 and $1.7 million related to the fourth quarter of 2010, which was also revised. The Company has assessed the materiality of this misstatement in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and concluded that this error is not material to its previously issued consolidated financial statements. Accordingly, by reference to SAB No. 108, the Company’s previously issued consolidated financial statements have been revised in the registration statement as follows:
    Year Ended and as of
    December 31, 2010  
    Reported     Revision     As Revised  
    (In thousands, except per share amounts)  
Cost of goods sold
  $ (35,902 )   $ (1,689 )   $ (37,591 )
Net loss
    (49,085 )     (1,689 )     (50,774 )
Loss per basic/diluted common share
    (0.79 )     (0.02 )     (0.81 )
Current inventory
    20,511       (1,689 )     18,822  
Current assets
    355,121       (1,689 )     353,432  
Total assets
    481,249       (1,689 )     479,560  
Total stockholders’ equity
    448,202       (1,689 )     446,513  

UPDATED: May 24: Molycorp Files Registration to Sell 11.5 Million Shares at $$57.58 max (MCP)

Update I (there will be more): "8K: Molycorp Restates Year End Financials Downward by $1.69 Mil. (MCP)"
Original post:
After bucking a down market and trading up $2.86 during yesterday's regular session the stock is down $1.67 in premarket trade at $59.00.
And here I was saying such nice things about the stock grinding off of an intermediate low.
It's the insiders bailing, no proceeds to the company:

                        Number of Shares
  Owned After
  to be Sold
  Offering if
    Shares Beneficially
  if Underwriters
    Owned Prior
  Owned After
  Option is
  Option is
Name and Address of
  to Offering   of Shares
  Offering   Exercised in Full   Exercised in Full
Beneficial Owner
  Number   Percentage   Offered   Number   Percentage   Number   Number   Percentage
Resource Capital Funds(1)
    19,591,746       23.4 %                                                
Pegasus Entities(2)
    11,279,199       13.4 %                                                
TNA Moly Group LLC(3)
    6,152,774       7.3 %                                                
    217,389       *                       *                       *
Baron Capital Group, Inc.(4)
    4,576,594       5.5 %                                                
Russell D. Ball
    9,500       *                       *                       *
Ross R. Bhappu(5)
    19,592,346       23.4 %                                                
Brian T. Dolan(5)
    19,591,746       23.4 %                                                
Charles R. Henry
    134,401       *                       *                       *
Mark S. Kristoff(6)
    6,339,890       7.6 %                                                
Alec Machiels
          *                       *                       *
Mark A. Smith(7)
    1,102,666       1.3 %                                                
Jack E. Thompson
    97,018       *                       *                       *
James S. Allen
    19,234       *                       *                       *
Ksenia A. Adams
    528       *                       *                       *
John F. Ashburn, Jr.(8)
    252,956       *                       *                       *
John L. Burba
    309,262       *                       *                       *
Alan Docter(9)
    6,341,890       7.6 %                                                
All executive officers and directors as a group (14 individuals)
    27,857,988       33.2 %                                                

As reported on Schedule 13D/A filed on March 21, 2011, includes (a) 15,627,423 shares of our common stock held by Resource Capital Fund IV L.P., of which Resource Capital Associates IV L.P. is the general partner (RCA IV GP L.L.C. is the general partner of Resource Capital Associates IV L.P.) and (b) 3,964,323 shares of our common stock held by Resource Capital Fund V L.P., of which Resource Capital Associates V L.P. is the general partner (RCA V GP Ltd. is the general partner of Resource Capital Associates V L.P.). The manner in which the investments of Resource Capital Fund IV L.P. and Resource Capital Fund V L.P. are held, and any decisions concerning their ultimate disposition, are subject to the control of an investment committee consisting of certain partners of Resource Capital Funds: Hank Tuten, James McClements, Ryan Bennett, Russ Cranswick, Mr. Bhappu and Mr. Dolan. The investment committee is appointed by each of RCA IV GP L.L.C. and RCA V GP Ltd. The investment committee has voting and investment power with respect to the shares of our common stock owned by Resource Capital Fund IV L.P. and Resource Capital Fund V L.P. The address of Resource Capital Fund IV L.P. and Resource Capital Fund V L.P. is 1400 Sixteenth Street, Suite 200, Denver, Colorado 80202.
As reported on Schedule 13D/A filed on March 29, 2011, includes (a) 6,135,886 shares of our common stock held by PP IV Mountain Pass II, LLC, (b) 2,972,111 shares of our common stock held by PP IV MP AIV 1, LLC, (c) 1,085,601 shares of our common stock held by PP IV MP AIV 2, LLC and (d) 1,085,601 shares of our common stock held by PP IV MP AIV 3, LLC. Pegasus Partners IV, L.P. controls PP IV Mountain Pass II, LLC and the general partner of Pegasus Partners IV, L.P. is Pegasus Investors IV, L.P. Pegasus Partners IV (AIV), L.P. controls PP IV MP AIV 1, LLC and the general partner of Pegasus Partners IV (AIV), L.P. is Pegasus Investors IV, L.P. The general partner of Pegasus Investors IV, L.P. is Pegasus Investors IV GP, LLC, of which Pegasus Capital LLC is the managing member. Craig Cogut is the managing member of Pegasus Capital LLC. MP IH Holdings 1 LLC controls PP IV MP AIV 2, LLC. MP IH Holdings 2 LLC controls 96.4% of PP IV MP AIV 3, LLC. The non-member manager of each of MP IH Holdings 1 LLC and MP IH Holdings 2 LLC is Pegasus Capital Advisors IV, L.P., the general partner of which is Pegasus Capital Advisors IV GP, LLC, and the sole member of...

Here's the S-1, I'll be back with more.