UPDATED: Goldman Sachs Starts First Solar at Buy, SunPower at Neutral, MEMC at Sell (FSLR; SPWRA; WFR)

Premarket FSLR is up 1.9%, WFR is down 3.38%.
From StreetInsider:

Goldman Sachs initiated coverage on the following Solar stocks:

First Solar (Nasdaq: FSLR) with a Buy rating and $150 pricetarget. The firm believes that increased exposure to the US utility scale installations should strengthen visibility and create even more competitive space for First Solar....MORE

Some more detail via Tech Trader Daily:

Goldman Sachs analyst Mark Wienkes this morning launched coverage of the solar sector with a Neutral rating on the group; among U.S.-based companies, his best Buy idea is First Solar (FSLR), while he cites MEMC Electronic Materials (WFR) as his best Sell idea.

“We initiate coverage of the U.S. solar industry with a Neutral coverage view,” he writes. “We see benefits from large-scale projects ultimately overwhelming near-term challenges and accelerating the transition from subsidized markets towards parity.”
Wienkes contends that utility projects in the U.S. and China will drive the industry toward pricing parity with other forms of power generation int he 2012-2015 period, “sooner than the Street expects.”

The analyst writes that the firm’s global solar research team sees demand reaching 13 GW in 2010 and 17 GW in 2017, about 20% ahead of consensus, driven by stable project returns despite lower subsidies. “We believe higher-than-expected demand and price declines will accelerate the profit share shift from high-cost European manufacturers to First Solar and low-cost producers in China.”>>>MORE

Solar: "Spain Delays Decision on Solar Prices to Devise Energy Plan" (FSLR; STP; TSL)

Someone at Bloomberg is on top of the politics.
On June 16 Reuters reported "Spain 30% Subsidy Cuts for Existing Solar Plants" and Cowen's Stone Comments (FSLR)".
On the 17th Bloomberg/BusinessWeek came back with "Spain Will Back Down on Solar Cuts, Fotowatio Says" (FSLR).
Here's the latest, from Bloomberg:

The Spanish government postponed its plan to cut the price earned by renewable power plants after the main opposition party agreed to negotiate a broader accord on energy policy.

The government opted to delay the decision so subsidies for solar and wind energy can be included in talks aimed at securing an energy agreement with the People’s Party, an industry ministry spokesman said today in a telephone interview.

The negotiations will also address nuclear power and energy efficiency as well as introduce more market mechanisms into the power network, said the spokesman, who asked not to be named in line with local practice....MORE

"Bread and Derivatives: Goldman’s control of market structure might just starve us, strand us, and leave us in the dark. Literally." (GS)

Oh My Goodness.
For three years I was writing about Goldman's use of their designation as a "Commercial" trader to avoid and help their clients avoid the position limits that the CFTC applies to "Speculators".

I felt like the provebial [it's Matthew 3:2, not Proverbs -ed] voice crying in the wilderness,

A quick note on nomenclature. In commodity markets speculators provide a societal good.
Where things got interesting was GS being a "commercial" allowed them to take positions that they would put into index form and then swap with the true speculators. Or sometimes just straight swap the position.
These speculators included giants such as CalPERS and other public employee pension funds and University endowments. I'll have more after the jump.
From New Deal 2.0:

In 2008, before the financial system almost melted down and threatened an economic collapse of biblical proportions, some very odd events occurred in the market for commodities derivatives.  It is now clear that financial institutions and investors already understood that the mortgage market was teetering and that severe problems for the financial firms were on the horizon.  Stress was building, but how did this relate to the commodities markets?  We still do not know for certain, but we do know that it coincided with peak investment levels of $317 billion in several investment vehicles known as commodity index funds.
In 1991, Goldman Sachs invented the commodity index fund.  While several other firms have replicated the fund, Goldman has maintained a 60-75% market share.
A key factor in the success of commodity index funds was an exemption granted by the CFTC from limits on speculative positions. It allowed the fund holdings to grow enormously.  Whatever the rationale was at that time, the conditions have changed and history suggests that the decision was unwise.

Goldman would take in funds from clients and invest the proceeds in futures contracts, a portfolio of energy, agricultural, minerals and financial contracts. It would be a sponsor and manager of the structure, not a principal. Futures contracts fluctuate based on the price of a commodity at a specified date in the future. For example, a barrel of oil to be delivered in August might be worth $70 to both a buyer and a seller as of today. The futures contract between a notional buyer and seller is essentially a financial instrument which continuously tracks that price each day until August arrives and the final price is known. It is not about actual oil, but rather the price of actual oil on a future date.  A futures contract is the functional equivalent of a swap and is a derivative of the cash market for the given commodity.

The idea of the fund was not to trade short and long positions or hedge physical prices on delivery of the commodity. The fund ignored market views and only bought one side - the side on which value of the futures contract increased as the expected delivery price increased.  The fund sponsor rolled over each contract into a new contract before the notional delivery date occurred.  By rolling over the contracts, the fund became infinite, a rolling investment in an index of prices for commodities that never had an end date.

Goldman and other banks made plenty of money from fees and float (the cash paid by investors was mostly held by the banks as long as everything worked well).  A side benefit was the huge increase in the volatility of commodities markets.  By flooding the markets with one sided contracts (especially on roll over dates), price movements became more severe.  Absolute commodities prices trended relentlessly higher and higher.
Volatility is essential to profits for the trading operations of the banks. Traders make money from price movements; stable prices mean low potential for trading profit. The logic is that commodities index funds lead to volatility which leads to trading profits for the fund sponsors. Goldman and other banks discovered that the commodities index fund operation, originally designed as a product for clients interested in investing in commodities markets, changed the marketplace and allowed them to trade for their own accounts far more profitably.

In recent years, most fund clients were not directly interested in the underlying commodities.  In a 2005 paper by Gary Gorton and Geert Rouwenhorst, it was demonstrated that returns on commodities are inversely related to stock market returns.  This relationship is especially strong in early stages of a recession and when share prices are lowest.  If you believed that equity prices were going to go down (or if you wanted to hedge exposure to the stock market), you could make money by buying the index. By 2007/2008, as investors became concerned about returns on their equities investments, the commodities index funds grew rapidly as a hedge against a falling stock market and futures prices rose....MORE

Wallace C. Turbeville is the former CEO of VMAC LLC and a former Vice President of Goldman, Sachs & Co.

HT: Clusterstock

Some of our posts:

July 2008 
Dear CFTC: About those Oil Markets. And: A Stock Tip

...The long-only index investors have created such a distortion in the market that very few speculators are willing to go short, which is one of the functions of speculators in the markets. Now, if you have program trading kicking in, only a fool would take the other side of a buy order. The CFTC has become the Nevada Gaming Commission....

October 2008 
Commodities: $50 bln in 'long-only funds' flees commods markets. And: Calpers says staying the course on commodities

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

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

October 2008 
Calpers fund down 25 percent for year

February, 2009
Danish Pension Fund Giant Investing 'up to $400 Million' in Hudson Clean Energy

...Instead, CalPERS' idea of alt investment is buying raw land top tick of the housing bubble ($1 Bil. write-off) or gunning commodity prices via long-only index investments and swaps*....
...*Goldman bagged 'em. I mean they took CalPERS deep! First they tout $200/bbl. oil, then after the collapse:
From Barron's, Nov. 20, 2008 via our post "It’s official, Goldman capitulates on oil"-...

February, 2009 
U.S. Oil Trust Investigated by CFTC (USO)

...The “speculator limits”, says Nymex are there to “effectively restrict the size of a position that market participants can carry at one time and are set at a level that greatly restricts the opportunity to engage in possible manipulative activity on NYMEX.”
The position limit during the last three days of the expiring delivery month on Nymex WTI is 3,000 contracts....MORE

June, 2009 
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...
... Here's a quick search of Climateer Investing for Calpers, long-only, index.

June, 2009 
Goldman Raises Year-End Crude Forecast by 31% to $85

Always, always be skeptical of anything Goldman says regarding commodities.*
J. Aron is one of the company's crown jewels and was the springboard for CEO Lloyd Blankfein.**...
...Goldman marketed the fact that CalPERS and other long-only index buying institutions could piggyback on GS's status as a 'commercial' to avoid position limits by entering into swaps with the bank. The institutions thought it was a sweet deal, until it wasn't. If it comes down to throwing customers under the bus or protecting the propritary trading, there's no decision.

**"When Blankfein asked about his title, a boss at J. Aron said, 'You can call yourself contessa if you want.'"
-Fortune, January, 2006 

July, 2009 
Goldman, Morgan Stanley Threatened by CFTC Review (GS; MS)

Spokesmen for both banks declined to comment, as did one from Barclays Plc. Spokesmen from JPMorgan Chase & Co. and Citigroup Inc. didn’t immediately return calls for comment....MORE

On the other hand we've never been shy about commenting, see:
June 16, 2008: Goldman, Morgan Stanley Profits Conceal Reliance on Commodities
June 25, 2008: Which Former Goldman Sachs Chairman Should We Listen to on Oil Market Speculators?
August 19, 2008: Goldman’s Oil Thesis: Timing is Everything
October 7, 2008: Goldman: We Got Our Shorts On, Oil not Going to $200.00
October 27, 2008: The Goldman Commodities U-turn, again
November 20, 2008: It’s official, Goldman capitulates on oil
December 2, 2008: Oil speculation: It's back
December 12, 2008: Goldman Cuts Oil Forecast to $45 (vs original $200) Sees Bottom
June 5, 2009: Are Goldman's Oil Swaps Clients Piling Back Into Oil? 

July, 2009 
Oil: the Market is the Manipulation

...Here's Chris Cook at TOD:
   ...When I joined the International Petroleum Exchange as Head of Compliance and Market Regulation in 1990, the growing market in oil derivative contracts (futures and options contracts the purpose of which is to manage oil price risk) took off dramatically with the first Gulf War, and the IPE never looked back....

...The manipulation in the oil market is taking place at a different “meta” level to the Leesons and Hamanakas. The Goldman Sachs and J P Morgan Chase's of this world do not break rules: if rules are inconvenient to their purpose they have them changed....

October, 2009  
CalPERS Playing with Fire

...In our July '09 post "CalPERS Clipped for $970 Mil. in Real Estate Fiasco" I said "It's called reaching for yield. And it's stupid, especially when a fiduciary does it."

We have dozens of posts on CalPERS. This outfit is going to cost the taxpayers of California billions over the next decade as markets refuse to accommodate the fund's requirement of 8.5% average annual returns. They have made promises to their public sector retirees that they won't be able to meet and are trying to make up the difference by engaging in behavior that no fiduciary should even contemplate, let alone execute.

If you recall, they were one of Goldman's* largest "long-only index investors" in oil and the GSCI, scaling back only after their commodity bets lost billions. They also engaged in loser hedge fund behavior, selling their most liquid investments at the bottom to prop up their non-trading investments....

October, 2009 
Short Interest Declines Again (and Why it Matters)
...*From our June 2 post "Markets: What Happened to the Bears?":

We are coming up on the anniversary of an event in the oil market that may bear [so to speak -ed] some resemblance to what has been happening in the equity markets.
On June 6, 2008 oil staged it's largest dollar gain in history....

...After talking to some folks who had been mauled [cute -ed] I decided that the short-sellers had just given up. It is no fun to be selling into the buying of Goldman and their long-only index clients, CalPERS, the universiy endowments et al.
So they said to hell with it. Oil continued to rise for another 33 days before peaking on July 9.
On July 29 I had this comment at Environmental Capital:

• 5:37 pm July 29, 2008
• Climateer wrote:

Mike @ 4:13,
Two separate thoughts in that first post.
As best as I’ve can tell approx. 40% of the move from $80 to $147 (25-28 bucks) came from “speculation”. I use quote marks because of the terminology problems most of the talking heads have when the subject is commodities. Speculators in commodity parlance take the other side of a hedgers trade, thus performing a societal good.
The problem was, until last week, the shorts had been beaten up so bad by the relentless flow of “investor” money that were out of the game. The $10.75 uptick on June 6 was their capitulation.
They covered and said screw it....

And many more.
We're no blogger come lately, no sirree.

If I were a betting man my money would say that one of the big reasons that gold has moved out of proportion to oil is that GS realized that continuing the same old game in consumables would result in such a hue and cry among the citizens that the politicians would be forced to shut down the game permanently.
Rather than risk that they went to something that people didn't get price quotes on every time they gassed up, or bought a loaf of bread.

"BP says Kevin Costner's water cleaning machine can 'make a real difference'" and " Technical Details of Kevin Costner's Ocean Therapy Solution Centrifuges for Oil Spill Mitigation" (BP)

First up NewsWatch: Energy:

BP has uploaded a new video to its YouTube channel of a press conference to introduce actor Kevin Costner's Ocean Therapy Solutions machine that will be used to help clean up the Gulf of Mexico.
Costner invested $26 million of his own money and more than a decade to build a filtering system that separates oil from water at a fast rate. BP approved the machines for testing last month.
BP's COO of Exploration and Production, Doug Suttles, said that within the first few hours of testing the machine, the company decided to order 32 of them.

"We tested it in some of the toughest environments we could find and actually what it's done -- it's quite robust," Suttle said. "This is real technology with real science behind it and it's passed all of those tests."
Suttles said BP has committed to building four deepwater systems. Two of the systems will be barges that have machines on them and two of the systems will be a new design using 280-foot offshore supply vessels.
In total, the systems BP is rigging up will have a processing capacity of 128,000 barrels a day....MORE

And from Next Big Future:

Kevin Costner spent $20 million over three years and hired a team of about 15 engineers and scientists to develop centrifuges to separate water from oil at up to 200 gallons per minute. In theory, twenty of the centrifuge devices could have cleaned up the Exxon Valdez spill in 5 days. BP has a contract for 32 of the centrifuges from Ocean Therapy Solutions (Kevin Costner's company) BP tested the devices for a week and they work.

Just one of the company's V20 machines can clean up to 210,000 gallons of oily water per day. There are 3 V20 centrifuge machines currently operational in the Gulf. Ten more should become operational within weeks. ”Once production at our factory in Nevada ramps up in July, OTS will be able to produce 10 machines a month,” said Pat Smith, Chief Operating Officer for OTS. ”We are currently ramping up production of new machines with a goal toward deploying the machines along the entire coast,” he said.

The Model V16 Centrifuge has a 5.00" (12.7 cm) diameter rotor. It has integrated Clean-In-Place and bearings on both the top and bottom of the rotor. It has maximum throughput of up to 90 GPM (gallons per minute)

The centrifuge machines are sophisticated centrifuge devices that can handle a huge volume of water and separate oil at unprecedented rates. Costner has been funding a team of scientists for the last 15 years to develop a technology which could be used for massive oil spills.

The machines are taken out into the spill area via barges, where they can separate the oil and water. The machines come in different sizes, the largest of which, the V20, can clean water at a rate of 200 gallons per minute. Depending on the oil to water ratio, the machine has the ability to extract 2,000 barrels of oil a day from the Gulf. Once separation has occurred, the oil is stored in tanks. The water is then more than 99% clean of crude....MORE

"Ackman Confirms Why Citigroup Could Still Double" (C)

This is an older piece but worth repeating. The stock closed yesterday at $3.78, down 11 cents.
From 24/7 Wall Street:

It was during the most recent meltdown that we gave a list of companies where the stocks could still double, and Citigroup Inc. ( C) was one of them.  Bill Ackman’s Pershing Square disclosed on  June 8. that it held 146.5 million Citi shares, equal to about 9% of Pershing’s capital.  While Ackman gives no formal price target, this continues to show why Citi could be worth far more down the road.

Ackman outlines Citi’s two faces, one of Citicorp and one of Citi Holdings.  The  woes affecting financial stocks is what Ackman believes is “a compelling opportunity to purchase Citi shares at a meaningful discount to their fair value.”

Citicorp is the core of the company going forward with $1.5 trillion of assets including regional consumer banking, securities and banking, and transaction services.  The core business has $21 billion in operating deferred tax assets AND $24 billion to $30 billion of excess capital supporting the wind down of Citi Holdings.  Citi Holdings is effectively liquidating the  portfolio of several operating businesses and legacy asset pools that will be wound down or sold in the coming years.

Ackman noted that at $3.64 Citi trades below tangible book value and trades at five (or so) times management’s earnings guidance.  After scraping out the rest, Ackman believes an investor today is paying on 3X or 4X times real earnings for the core Citicorp.   With a current tier 1 common ratio of 9.1%, Ackman believes that Citi is better insulated from potential late-cycle credit issues along with substantially less home equity and commercial real estate exposure than its domestic peers.

Ackman concludes, “In our view, there is a much greater degree of uncertainty associated with our investment in Citigroup than for Kraft, or for a number of our other holdings. That said, we believe the current stock price, capital structure, and hidden assets provide a sufficient margin of safety, in light of the large potential for reward from this investment.”

As far as our own screening back on May 19, 2010...MORE

We covered some of Mr. Ackman's thinking May 27 and June 10:

Pershing Square's Ackman Buys 150 Million Shares Of Citigroup and a "Big Options Bet" (C) 
Why Pershing Square's Bill Ackman Bought 146.5 Million Citigroup Shares (C)

"New Look General Electric Aims to Double its China Business by the Decade's End" (GE)

From Money Morning (Australia):

General Electric Co. (GE) expects its business in China to double to $10 billion a year by 2010, as the U.S. industrial giant aims to overcome a sputtering U.S. economy by ramping up its emerging-markets focus.
 ”We’ve seen great growth in China,” GE Chief Executive Officer

Jeffrey R. Immelt told journalists at a recent press conference in Beijing. “The whole focus on water and the environment – well, that’s going to offer, we think, big opportunities for us as time goes on.”
At a time when the U.S. economy has been hamstrung by a severe credit crisis, a burst housing bubble, and energy and commodity prices that remain high in spite of recent declines, the Fairfield, Conn.-based conglomerate expects China to boost sales of the company’s clean-energy technology by 15% to 20% a year, Immelt says. GE should also benefit from heavy spending on other types of infrastructure in China’s fast-growing urban centers.

The growth initiatives are needed. Back in April, GE cut its financial forecast for the year ahead after blaming the U.S. credit crisis for disappointing first-quarter results. Immelt said that the company’s massive GE Capital financial-services unit – which provides 45% of the firm’s overall earnings – would be down as much as 10% this year.
For the entire year, GE has projected overall profit growth of between zero and 5%  – hardly the double-digit advance in annual earnings that was once a GE hallmark. Immelt has promised to resurrect that consistency.
“It impacts us, but I think we’ve kind of managed our way through it pretty well,” Immelt told The Associated Press. “We haven’t had any big write-offs.”

Remember the Titan

General Electric is one of the world’s largest diversified technology manufacturers, with revenue of more than $172 billion, and more than 320,000 employees. Its product portfolio includes fuel-sipping jet-aircraft engines, home appliances, security systems and nuclear reactors. The company, with a market value of $290 billion, was the focus of a recent “Buy, Sell or Hold” feature by Money Morning Contributing Editor Horacio Marquez.

GE isn’t just America’s biggest industrial company; it’s also the prototypical “Global Titan,” a role that it actually pioneered. Under former GE CEO John F. “Jack” Welch, General Electric made lots of little bets in different industry sectors and in different geographic markets throughout the world. None of the bets were big enough to bankrupt the company – indeed, some of them were as small as $10 million – but some had the potential to pay off big, or at least to help cement relationships that would lead to business deals in related product areas, or in related markets.
At the same time, GE maintained a strict corporate credo: It would be No. 1 or No. 2 in every business it was in. In a case where that wasn’t true, the business unit would either be fixed until it was – or the operation would be sold, spun off or shut down.

Under Welch, the formula worked – superbly. During his two decades at the helm, Welch transformed GE from a $13 billion (in market value) producer of light bulbs and home appliances into a corporate heavyweight with a market value of half a trillion dollars. Welch shed billions of dollars worth of businesses, and assembled a new lineup – even guiding the $6.4 billion buyout of RCA, which brought GE the NBC television network.
GE soared to top global positions in aircraft engines, lighting, plastics, power generation, railroad locomotives, consumer electronics, home appliances, consumer and commercial financial services, broadcast TV, water treatment and medical imaging.

And that wasn’t just in such developed markets as the United States and Europe. Welch realized early on that China would be a key to GE’s long-term health, and made many of those small bets in such areas as medical imaging and water-treatment – not to mention the big bets GE made there in power-generation, where it was already a big player.

Immelt – Welch’s handpicked successor – has struggled to find the same magic since his mentor retired in 2001. Under Immelt, unfortunately, growth has slowed as GE wrestled with the credit crisis, the U.S. economy’s slowdown, and changes to some of its businesses. The GE capital unit was hit hard, and the home-appliance business has also felt the squeeze. Indeed, despite a century of ownership, GE is now working to divest the appliance unit.

In a particularly embarrassing moment, when GE missed its earnings target back in April – just weeks after Immelt had vowed to “step on the gas” to restore growth – Welch publicly slammed his protégé during an interview on CNBC, a popular cable-TV channel that is actually owned by GE.

“I’d be shocked beyond belief, and I’d get a gun out and shoot him if he doesn’t make what he promised now,” Welch said. “Just deliver the earnings. Tell them you’re going to grow 12% and deliver 12%.”
Among the many moves Immelt has made, one particular decision substantially improves GE’s potential for long-term success: He opted to create an overall corporate focus on global infrastructure needs.
That’s key for several reasons. It enables GE to focus on a market – infrastructure – where there will be trillions of dollars worth of projects undertaken worldwide over the next few decades.
And that focus directly positions the company to capitalize on China’s explosive growth.

The GE-China Connection

In a market such as China, where even many basic human needs aren’t yet being met, infrastructure improvements figure to be first-focus initiatives for the central government. And that will benefit GE, Immelt has said.

For instance, water and power are two basic societal needs. Once those capabilities are available, basic development can begin. But development can’t happen without transportation of products and people. That creates demand for rail service. And once folks start to populate a region, all sorts of new jobs will be created, generating income and savings that consumers can spend on household appliances, on improved healthcare, on consumer electronics – and even on financial services, so that consumers will know how to save and invest the money left over from their newfound ability to spend.

This vibrant new economy will facilitate travel to other areas for the first time ever – but it will also attract new foreign investors and first-time foreign workers. Both the tourists and the financiers will require the same service – airplane travel.

As airline travel in Asia expands, the demand for commercial jets will grow in lockstep. And that will stoke the need for aircraft engines. Indeed, The Boeing Co. (BA) has estimated that China’s development will create demand for $340 billion worth of new jetliners during the next two decades.
This infrastructure-centric strategy sounds simple – and it is. But GE has products or services that meet all those needs – and many others, as well.

Immelt said that a corporate reorganization announced in July was aimed at simplifying GE’s structure and focusing on its finance and infrastructure businesses.
“It’s another natural evolution for the company,” he told journalists. “It’s another way to simplify the company and run it better.”

That’s why GE has long viewed China as such a key long-term market.
On Aug. 25, GE announced it was starting to move into its new China headquarters, a massive office campus situated in the East Coast city of Shanghai. Located in that city’s Zhangjiang Hi-Tech Park, GE’s China Technology Park complex of offices is an expansion of its former China research center. It covers more than 650,000 square feet and – when completed – will house more than 3,000 employees from GE’s China business groups....MUCH MORE

Siemens: Bernstein Downgrades; Sees Good News Priced In (SI)

If SI is downgraded its American doppelgänger (GE) should be too.
SI is down $2.44 at $92.92.
From Tech Trader Daily:

Siemens (SI) shares are trading lower today after Bernstein Research analyst Martin Prozesky downgraded the electronics giant’s stock to Market Perform from Outperform. He notes that the stock over the last 12 months has outperformed the market by 28% and the industrial sector by 10%....MORE

Previously:

"Siemens aims for 1/5 of world smart grids business" (SI)
 Dear GE: "Siemens Predicts 15 Billion Euros in Stimulus Orders "
Dear General Electric, Siemens: American Superconductor to Begin Licensing 10 MW Wind Turbine this Year (AMSC; GE; SI) 
Dear GE, The Europeans are Coming: Siemens Energy picks Boulder for wind R&D center; Vestas Chooses Houston (SI; VWS.CO)

 

True or Not, the Allegations against Al Gore are Damn Funny

I debated posting on the subject all morning.
Here's a snippet from The Oregonian's story via OregonLive:

...She tried to use an acupressure technique to relax Gore and thought she may have nearly put him to sleep. She went into the bathroom to wash up and came out to pack up.

That's when, she says, Gore wrapped her in an "inescapable embrace" and fondled her back, buttocks and breasts as she was trying to break down her massage table.

She called him a "crazed sex poodle" and tried to distract him, pointing out a box of Moonstruck chocolates on a nearby table. He went for the chocolates and then offered her some, cornering her, fondling her and shoving his tongue in her mouth to french kiss as he pressed against her.

She said he tried to pull her camisole strap down.

She said she told him to stop it. "I was distressed, shocked and terrified."

She said she was intimidated by his physical size, calling him "rotund," described his "violent temper, dictatorial, commanding attitude" -- what she termed a contrast from his "Mr. Smiley global-warming concern persona."

Later, she said, he tried to lure her into the bedroom to hear pop star Pink's "Dear Mr. President" on his iPod dock. She said Gore sat on one end of the bed and motioned for her to join him.

Suddenly, she said, he "flipped me on my back, threw his whole body face down over a top me, pinning me down."

She said she loudly protested, "Get off me, you big lummox!"

The therapist said she injured her left leg and knee and sought medical care for several months....

"Senators Reject Proposal For Banks to Bail Out Fannie, Freddie" (FNM; FRE; C; BAC; JPM)

Bloomberg has the scoopage:

Senate negotiators working on the financial-regulatory bill today rejected a proposal from House Republicans that would make big banks liable for the costs of winding down Fannie Mae and Freddie Mac.

The proposal would have made the government-controlled home loan companies, which own or guarantee more than half of the $11 trillion U.S. mortgage market, part of a Wall Street-financed “rainy day” fund that would be used to pay for the liquidation of large failed companies.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat who has led the Senate side of final negotiations on the bill, called the Fannie-Freddie proposal a “stall tactic.”

In a letter to lawmakers today, American Bankers Association Chief Executive Officer Edward Yingling said the provision “could impose a tremendous additional liability on the banking industry of hundreds of billions of dollars.”>>>MORE

Sen. Judd Gregg: Financial Overhaul Bill, as Written, 'Will Cause a Massive Contraction of Credit'"

From CNBC:

Financial Reform Will Cause Credit Crunch: Sen. Judd Gregg

The US will face a severe credit crunch if the financial regulation bill passes in its current form, Sen. Judd Gregg (R-NH) told CNBC Thursday.

"This bill as it's presently written is going to create a massive contraction in credit, I believe, in the financial markets and on Main Street over the next year to year and a half as people try to adjust to the new standards that are put in this bill," said Judd.

Judd, who is a member of House-Senate conference committee hammering out the final version of the bill, said the derivative language in the bill is one of the main reasons there could be a major credit squeeze....MORE

Credit Suisse’s Kumar Maintains MEMC at OUTPERFORM (WFR)

 The stock is down 36 cents at $10.78. As I said* yesterday:

If you look at the bearishness expressed by the short interest and option positioning WFR might be worth a bet.
Big caveat though, I've never understood the trading in this one....

From SmallCapPulse:

Analyst Comments – Credit Suisse’s Satya Kumar weighed in on MEMC (NYSE:WFR) this morning, maintaining an OUTPERFORM rating and a target price of $15.90.

Key Takeaways

·         MEMC’s 72MW project in Rovigno, Italy, is a key factor to Q4EPS – financing for the project has not yet closed (expected to close in September). Expect project valuation north of €3.50/watt....MORE

*See also:
"Yuan move to help solar cos that export to China" and "Huantai Silicon drops out of an alliance with Suntech to join MEMC" (WFR; STP)

General Electric Scales Back Cleantech Goals; Spent $7.14 million on Lobbying in 1Q (GE)

Where's the ecoimagination?
From Reuters:

General Electric Co (GE.N) abandoned its $25 billion sales target for its energy-saving products, but said it would double its investment in cleantech research and development.

The largest U.S. conglomerate said on Thursday that it now aims to grow sales of green products, which last year hit $18 billion, at twice the rate of overall corporate sales. In its annual "Ecomagination" report, the company backed off from an ambitious goal of $25 billion in annual revenue by 2010 that it had set last year.

"Going forward, we're looking at a more sustainable, continuous commitment on revenue growth as opposed to a one point in time out into the future when so many things can change," said Steve Fludder, vice president of the Ecomagination push, which encompasses a range of GE products, from wind turbines to fuel-efficient jet engines.

GE has stopped giving investors specific profit and revenue targets, instead providing a "framework" of how it expects its various businesses to perform. Analysts, on average, expect GE's 2010 revenue to be roughly flat with 2009 level and to decline about 1 percent in 2011, according to Thomson Reuters I/B/E/S.

Ecomagination revenues, which stood at about $6 billion in 2004, rose 6 percent last year. The company last year adopted the $25 billion by 2010 goal, which it described as a "stretch" goal and replaced an earlier $20 billion by 2010 target....MORE

One of the problems with political capitalism, ya gotta have the politicians. Not that they aren't trying.
From the AP:

General Electric Co. spent $7.14 million during the first quarter lobbying the federal government on issues ranging from defense spending to health care legislation.

The conglomerate, which operates businesses in most of the economy's major sectors, spent well more than the $4.54 million it devoted to lobbying in the year-ago quarter and the $6.8 million it spent during the fourth quarter of 2009.

That's likely due to the fact that several major bills and spending proposals in Washington earlier this year affected GE's operations....

...Among the other issues that GE lobbied on were water-related legislation and funding for research of wind power, solar power and electric vehicles. The company, which also owns the NBC network that it is selling to Comcast Corp., also lobbied on matters related to broadcasting....MORE

"Tesla CEO to investors: We're like Google or Apple" (TSLA; AAPL; GOOG)

Oh really?
The IPO is scheduled for June 29.
From cnet:

Tesla's Motors' prospects for becoming a 21st-century auto powerhouse have as much to do with its Silicon Valley culture as with its technology, CEO Elon Musk told investors.
During a video recording prepared in advance of Tesla's initial public offering, which could come as early as next week, Musk touted the combination of the company's auto industry and Silicon Valley roots as a key competitive advantage.

"We're closer to an Apple or a Google than we are to a GM or a Ford," Musk said, adding that Tesla doesn't suffer from a slow, bureaucratic culture. "There will not be anybody that will bring technology to market faster than Tesla."

The forthcoming Model S electric sedans will be as high-tech as they come, equipped with a 17-inch touch-screen computer and a design inspired by slick consumer electronics, he said. "The best way to add value to a product is to make it really good-looking and appealing."...MORE

God help the investors. Oh wait:

...electric vehicles have real cachet with consumers, which positions Tesla well for an enthusiastic reception with retail investors....

UPDATED:Bank execs panic: On the Hook for $400 Billion ($1TRIL.?) Fannie, Freddie Wind-down? (FNM; FRE)

 UPDATE: "Senators Reject Proposal For Banks to Bail Out Fannie, Freddie" (FNM; FRE; C; BAC; JPM)
Original post:
I'm not sure what to think of this, more later.
From Politico:

DOUBLE SIREN EXCLUSIVE – Bank executives were panicking last night over a proposed fix to Title II of financial reform literally penciled in at the last minute. The fear is that that the proposed change to the orderly liquidation authority could leave banks on the hook for a possible wind-down of Fannie Mae and Freddie Mac that could cost as much as $400 billion. In the House counter-offer below, Fannie and Freddie are penciled in as falling under the definition of 'financial company,' meaning they could be resolved by the orderly liquidation process. This process is paid for by the sale of the failing company's assets and/or through assessments on other financial companies, possibly putting the Street in line to pay for the liquidation of the troubled housing giants.

That would be an enormous added liability to the banks and could expose them to ratings agency downgrades and a big stock market sell-off. 'It's not clear to us how the markets and ratings agencies will react to this,' one senior executive at a large Wall Street bank said last night. 'But because this is a known quantity of potential liability there is a very real possibility that ratings agency's will determine it is an immediate hit.' Fannie Mae and Freddie Mac are much more likely to fail than any of the systemically important banks already a part of the liquidation authority, dramatically changing the equation for ratings agencies assessing the possible impact of financial reform. The exasperated executive added last night: 'This is what happens when you have really important decisions made by the scribble of a pen.' House counteroffer document....

HT: Clusterstock who headlines:

Here's The Penciled In Scribble That Could Cost The Banks BILLIONS Over Fannie And Freddie

People's Bank Of China adviser sees yuan rising 3% vs dollar

Nice to have a number.
From The Economic Times (India):

BEIJING: The yuan is likely to rise about 3 per cent against the dollar by the end of this year, assuming the euro holds its ground against the US currency, Li Daokui, a central bank adviser, said on Thursday.

"If the euro stabilises at the current level, there will be modest yuan appreciation against the dollar. It's reasonable to see appreciation of about 3 per cent, or less, by the end of this year," Li, one of three academic members of the People's Bank of China's monetary policy advisory committee, told Reuters.

But Li played down the extent of the yuan's possible rise, which he said would depend in part on the health of the international economy. The fact that China had restored exchange rate flexibility was of greater significance, he said. "I want to stress that the degree of appreciation is not important....MORE

Climateer Line of the Day: Niederhoffer on Soros Edition

From Slate's The Wrong Stuff interview:

Well, Soros would be the first to tell you that his predictions are completely random. He never says anything that doesn't jibe with his current position or his hoped-for outcome. And he's chronically bearish. He's chronically thinking that the world needs a central planner to put it to rights and that the market itself is too prone to disaster.

You have my word as a hedge fund manager....

Reuters

"Everyone Wants A Piece Of the Electric Vehicle Market " and "The Coming Bull Market In Lead-Acid Batteries, Part II" (ABB; XIDE, HEV, ENS, GE, CHP, AONE,)

When we posted "The Lead Acid Battery Sector Is Starting A Bull Run" (CHP; ENS; XIDE)" my comment was:

Words I never thought I'd post.

Here's more. First up, Tickerspy, yesterday:

As the world prepares for what many believe to be the inevitable proliferation of electric vehicles, battery investors have been on a rollercoaster ride. A number of small-cap pure-plays have seen shares soar by double-digits on new contracts and speculation, only to fall sharply when broad market turbulence weighs on investors’ risk appetite. While it seems likely that at least some of the small-cap players could be big winners as more and more plug-ins hit the roadways, they will be contending with a number of large-caps who want their piece of the pie.

As a whole, Energy Storage and Battery Technology Stocks Index is outperforming the S&P 500 by 3.8% over the past month. Top performers Exide Technologies (XIDE), Ener1 (HEV), and Polypore International (PPO) have all gained more than 10% for the period, and only four of the Index’s eighteen components are in negative territory. However, a look at the stocks’ three-month performance shows an entirely different story, where more than half of the Index is off by -10% or more, and many are off by over -20%....MORE

And from John Petersen at AltEnergyStocks:

The Coming Bull Market In Lead-Acid Batteries, Part II

On June 8th Switzerland's ABB Group Ltd. (ABB) announced an agreement to buy UK-based Chloride Group PLC (CHLD.L) for £860 million in cash, or approximately $1.26 billion. This stunning purchase provides the best evidence yet that lead-acid battery manufacturers including Enersys (ENS), Exide Technologies (XIDE) and C&D Technologies (CHP) are woefully undervalued and offer outstanding opportunity for patient and risk tolerant investors.

ABB is the gold standard in the secure and efficient generation, transmission, distribution and use of electricity in utility, industrial and commercial applications. Its portfolio ranges from light switches to robots, and from huge electrical transformers to control systems that manage entire power networks and factories. With 2009 revenues of $31.8 billion and income of $2.9 billion, you'd have to look long and hard to find a better infrastructure investment in the electric power industry.

Chloride is a highly regarded vendor of uninterruptible power solutions for commercial and industrial customers in Europe (78%), the Americas (10%) and Asia (12%). Chloride's solutions and services protect business critical systems and processes from the effects of poor power quality and power interruptions prevalent in most world economies, both in developed and developing countries. Its products range from battery back-up systems to diesel generators, flywheels and fuel cells, but at the end of the day Chloride's business is buying manufactured energy storage devices and integrating them into power systems that assure "Secure Power Always through leading technology and exceptional customer support." Chloride buys all its batteries from well-recognized manufacturers including Enersys, Yuasa, C&D, Hoppecke, Fiamm, Exide and others. It should be a fine acquisition for ABB and significantly extend that company's reach and depth.

The thing I found fascinating about ABB's purchase of Chloride is the fact that a systems integrator with a fraction of the assets, equity and annual revenue was sold for cash at a far higher value than the market attributes to the original equipment manufacturers. The following table provides summary financial metrics for Chloride, Enersys, Exide and C&D for the trailing 12 months.

	Chloride	Enersys	Exide	C&D
Service revenue	$182.1
Product sales	$308.2	$1,579.4	$2,685.8	$346.7
Gross profit	$208.8	$360.9	$538.1	$42.2
Net income (loss)	$28.6	$87.3	($31.6)	($21.3)
Current assets	$189.3	$895.3	$1,042.8	$138.6
Total assts	$451.7	$1,652.0	$1,956.2	$303.0
Current liabilities	$154.0	$419.5	$613.8	$61.0
Total debt	$271.4	$867.8	$1,608.2	$265.1
Stockholders equity	$177.9	$779.9	$348.0	$38.0
Cash purchase price	$1,264.5
Market capitalization		$1,154.6	$407.5	$23.7

When I study the table, I can't help but conclude that either ABB is overpaying for Chloride, or the market is seriously undervaluing Enersys, Exide and C&D. The best explanation comes from the work of Benjamin Graham who observed, "in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine." For the last couple years, the market has been showing its voting machine side. Over the next couple years I expect the weighing machine to emerge with a vengeance....MUCH MORE

"Chinese oil rivals smell blood in BP disaster" (BP; CEO; SNP)

From MarketWatch:

While a blowout well continues spewing crude oil into the Gulf of Mexico, BP's global rivals are circling like vultures, ready to devour any assets that the disaster-strained company might reluctantly shake off.

Among them are China's cash-rich, Big Three oil companies. They are particularly interested in BP's upstream assets in Central Asia and Africa, and are certain to join a list of potential buyers if BP (BP 29.58, -0.10, -0.33%) (UK:BP. 334.40, +0.20, +0.06%) is forced to sell the family silver. 
BP's costs connected to the runaway oil spill -- America's worst environmental disaster -- could include compensation for at least the estimated 30,000 plaintiffs currently suing the company for damage inflicted on fisheries, tourism and marine transport along the Gulf Coast. More individuals and companies were expected to sue in the future....

...And in addition to CNPC, the Chinese giants Sinopec (HK:386 6.52, +0.06, +0.93%) (SNP 82.84, +1.22, +1.50%) and China National Offshore Oil Corp. (Cnooc) (HK:883 13.78, -0.02, -0.15%) (CEO 176.41, +2.02, +1.16%) are closely watching developments in the Gulf.

Cnooc has a special reason for interest in BP's Gulf assets. As early as 1997, the Chinese company began low-key cooperation with the U.S. oil company Kerr-McGee (APC 39.85, -1.85, -4.44%) to explore in the Gulf. And in 2005, Cnooc tried but failed to buy America's Unocal  (CVX 72.27, -1.73, -2.34%) .

Last November, Cnooc found a new way into the Gulf by acquiring, through a subsidiary, partial interest in four exploration blocks in U.S. waters owned by Norway's Statoil.
But Cnooc is not as advanced in deep-sea technologies as other companies. And a proposed acquisition could be blocked by the U.S. Foreign Investment Review Board.

Moreover, sources close to CNPC and Sinopec officials say these companies are more interested in BP assets in parts of the world where they already do business, such as Central Asia, Africa and Latin America. See this report on Caixin Online.

In a gadda da vida: "Citigroup Inc. Iron Butterfly takes Advantage of a Range (C)

Sometimes I feel old.
When I was learning options, life was simple: strip, strap, straddle and spread.
The stock's up a penny at $3.95, here's Options News Network:

Citigroup Inc. (NYSE:C) has been stuck in a range for some time, with the most recent closing low of $3.64 in May. Earnings season doesn’t really get going until mid-July, with C’s earnings due on July 16 (options expiration day). The $4 level seems “sticky” and based on options pricing, there isn’t much of an expectation for C to move sharply higher dollar wise, but realize that percentage changes in the stock can be large. If you believe that C will stay within the $4 range plus or minus 20 cents for the next couple weeks, you can examine an iron butterfly in July. You can buy back the short call or put if you develop a directional bias and the spread can be removed ahead of earnings to mitigate risk.

Iron Butterfly Trade Details:
C shares have dropped three cents to $3.99 during morning trading.
Below are the elements for this iron butterfly. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.
Credit Spread/iron butterfly:

• Sell to open the July 4 straddle
• Buy to open the July 3-5 strangle

Overall credit for the spread: $0.25 ($25 per lot) or better ...

...Profit/Loss Details:
Maximum profit: $0.25 (the net credit collected) minus commissions
Maximum risk: $0.75 (the difference between the strangle strikes minus the premium collected). Return on risk for this strategy is roughly 33%.
Upper breakeven price: $4.25 (the straddle strike plus the premium received)
Lower breakeven price: $3.75 (the straddle strike minus the premium received)

Hilarious! "NY pension fund to sue BP for investment loss"

There is deep, deep irony here.
The NY Common Retirement Fund is a member of CERES, a group of Public Employee Pension Funds that champion (in their communications anyway) alternative energy. They are very vocal in telling other people what to do.

A couple years ago the NYCRF made headlines when they announced they were going to commit $500mil. to green investing. The fund has $132 Bil. under management. If my slide rule is right that is less than 4/10ths of 1% of the money they've been entrusted with.

Now it turns out they had 17.5 million shares of BP. *
On the day of the explosion the stock closed at $60.48 valuing the stake at $1.06 Billion. Double their commitment to altenergy.

Even funnier, the fund's largest equity position is ExxonMobil, 18.12 million shares worth a cool $1,234,348,865 i.e. 2 1/2 times their "green" investments in one oil company.
From Reuters via Yahoo:

New York state's pension fund plans to sue BP Plc to recover losses from the drop in the company's stock price following the worst oil spill in U.S. history, Comptroller Thomas DiNapoli said on Wednesday.

New York's Common Retirement Fund has a long history of serving as the lead plaintiff in shareholder lawsuits. DiNapoli said the fund owned more than 19 million shares when the Deepwater Horizon rig exploded in the Gulf of Mexico in April.
DiNapoli, the sole trustee of the $132.6 billion state pension fund, has hired law firm Cohen Milstein Sellers & Toll to represent the fund.

"BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we're going to hold it accountable," said the comptroller, a Democrat, who stands for election in November...MORE

*All figures as of the latest annual report for the fiscal year ended March 31, 2009. We have to wait until September for the finalized March 31, 2010 numbers. Here's the latest annual asset listing:

Retirement System’s Comprehensive Annual Financial Report (CAFR)

• 2009 CAFR