The Swiss National Bank is once again at the center of the currency markets, with London-based traders at two banks saying the SNB has been dumping some of the euros it hoarded during this year’s aggressive but ill-fated intervention program.
The euro is generally climbing at the moment as other investors continue to close their negative bets on the currency and express their nerves over the U.S. economy instead.
However, London traders said the SNB has been a steady seller of euros against the dollar over the past 10 days, likely limiting the scale of the single currency’s ascent. The central bank declined to comment.
The SNB launched a heavy-duty program of euro buying earlier this year in an effort to hold down the soaring Swiss franc. The bank’s official reserves more than doubled from the end of last year to the end of last month, reaching 226.7 billion Swiss francs by June 30. In May alone, the SNB scooped up the equivalent of almost €60 billion, equal to around 15% of the country’s entire annual economic output.You will note that the two situations are completely different, in Britain's case it was "diversification" in Switzerland's an emergency attempt to prevent their currency from strengthening to the point that it destroyed the countries export and tourism businesses which account for something like 60% of Swiss GDP.
The bank’s efforts may have limited the franc’s ascent, but the currency still smashed through a series of record highs against the euro, which dipped under 1.31 Swiss francs in early July. It has since bounced back to around 1.38 Swiss francs....MORE
News CoverageCoincidentally (I hope):
Hmmmm, no news coverage found for this bill at this time. This means that this this bill has not yet been mentioned on a publicly-searchable news website by either its official number (for example, "H.R. 3200") or title (for example, "America's Affordable Health Choices Act of 2009"). As soon as that changes, our daily automated search across the Web will catch it and include it here....
Happy 30th Birthday, 'Caddyshack'! 30 Things You May Not Know About the Classic Comedy
Like so many investors in the spring of 2009, Gordon Wolf needed to dig out of a hole. A 68-year-old psychologist in Napa, Calif., Wolf was a buy-and-hold sort of guy, yet the nest egg he had entrusted to his broker at Merrill Lynch (MER) was suddenly down by more than 50 percent. The broker had invested much of it in a range of exchange-traded funds, or ETFs, a relatively new financial innovation that was replacing mutual funds in the hearts and portfolios of many investors.
An ETF, which can be bought or sold like a stock, attempts to track the price of a particular basket of assets—tech stocks, for instance, or high-yield bonds, or commodities ranging from wheat to gold to oil to natural gas. The commodity ETFs were supposed to offer a hedge against equity losses, but in the crash of 2008 everything fell in tandem. Now it was early 2009, and Wolf was watching oil fall to $34 a barrel. That had to be an opportunity, he figured, so he called his Merrill broker and asked about the U.S. Oil Fund (USO), an ETF designed to track the price of light, sweet crude. "This seems to be something good," Wolf told the broker, and had him buy about $10,000 of USO.
What happened next didn't make sense. Wolf watched oil go up as predicted, yet USO kept going down. In February 2009, for example, crude rose 7.4 percent while USO fell by 7.4 percent. What was going on? Wolf logged on to Seeking Alpha, a financial blog, and searched for USO. He found plenty of angry discussion about the fund—lots of people were losing lots of money, because thousands of American investors had seen the same sort of opportunity Wolf had. By the end of 2009, they had a record $277 billion invested in commodity ETFs and other securities linked to raw materials—a 50-fold jump from $5.5 billion a decade earlier, according to Barclays Capital. During that time, Wall Street had transformed the reputation of commodities from a hyper-volatile investment that can steal your shirt to a booster for battered portfolios, something that rose when stocks fell and hedged against inflation. People who would never think of buying a tanker of crude or a silo of wheat could now put both commodities in their 401(k)s. Suddenly everybody was a speculator.
And some were losing big. The commodity ETFs weren't living up to their hype, and the reason had to do with a word Wolf had never heard before. As he browsed the blogs, he says, "I'm seeing people talking about something called contango. Nobody would define it." Wolf called his broker and asked about contango. "I don't know what it is," he replied. He called his other broker, at Charles Schwab (SCHW). "He didn't know either," Wolf says. "He said he'd ask around." Weeks later, after Wolf educated himself, he fired his Merrill broker and pulled his money out. (Merrill and Schwab declined to comment.) By then he had lost $2,500 on USO. "If it wasn't a rigged game," he says, "I could figure it out. But it is a rigged game."
The Contango Trap
Contango is a word traders use to describe a specific market condition, when contracts for future delivery of a commodity are more expensive than near-term contracts for the same stuff. It is common in commodity markets, though as Wolf and other investors learned, it can spell doom for commodity ETFs. When the futures contracts that commodity funds own are about to expire, fund managers have to sell them and buy new ones; otherwise they would have to take delivery of billions of dollars' worth of raw materials. When they buy the more expensive contracts—more expensive thanks to contango—they lose money for their investors. Contango eats a fund's seed corn, chewing away its value....MUCH MORE (it was the cover story)
The chart for Agricultural Prices on the Goldman Sachs Commodity Index looks very healthy after emerging from a bottom. We aren’t quite sure which of the AG ETF’s is best yet (GRU, DBA or RJA), but we will have an answer for you soon:
SPRINGFIELD – Police charged a one-armed man with unarmed robbery early Wednesday afternoon following an incident that occurred about noon on Wednesday a block away from the police station.HT: Improbable Research who also had the paper I was actually going for:
The suspect, Manuel Hernandez, 28, of 52 Avon Place, goes by the street name of Lefty, Sgt. John M. Delaney said....
Master criminals and murder novelists, many of whom felt hemmed in by technical limitations, can feel relieved by the news of new DNA technology:
“Authentication of forensic DNA samples,” Dan Frumkin, Adam Wasserstrom, Ariane Davidson and Arnon Grafit, Forensic Science International Genetics, Volume 4, Issue 2, Pages 95-103 (February 2010). (Thanks to Ed Yong for bringing this to our attention.) The authors, at Nucleix Ltd., Tel Aviv, Israel, and at the Division of Identification & Forensic Science, Israel Police, explain:
“the disturbing possibility that DNA evidence can be faked has been overlooked. It turns out that standard molecular biology techniques such as PCR, molecular cloning, and recently developed whole genome amplification (WGA), enable anyone with basic equipment and know-how to produce practically unlimited amounts of in vitro synthesized (artificial) DNA with any desired genetic profile. This artificial DNA can then be applied to surfaces of objects or incorporated into genuine human tissues and planted in crime scenes. Here we show that the current forensic procedure fails to distinguish between such samples of blood, saliva, and touched surfaces with artificial DNA, and corresponding samples with in vivo generated (natural) DNA.”
During conference calls on Tuesday BP executives repeatedly made it clear they don't think the company will be found grossly negligent when it comes to the events leading up to the Deepwater Horizon accident and ensuing spill.
Incoming CEO Bob Dudley echoed remarks made by outgoing CEO Tony Hayward, insisting BP had not been negligent in its offshore operations:
"It's a very complicated industrial accident," Mr. Dudley said during a telephone interview with reporters. It resulted from "a series of individual misjudgments by very experienced people and a multiple series of failures of equipment and processes of using equipment that is going to involve multiple companies here."And in calculating a $10 billion tax break in its quarterly earnings due to cleanup costs, BP said it was assuming that would be based on spill fines that would assesed at $1,100 per barrel, not the $4,300 per barrel that federal laws allow if the spill was caused by gross negligence.
But maybe not everyone at BP is on the same page.
According to a letter sent earlier this month by Texas Gov. Rick Perry and Attorney General Greg Abbot to BP Chief Operating Officer Doug Settles (see it below), BP's general counsel believes the company will be found grossly negligent.
In the letter Perry and Abbott accept a $5 million grant BP offered to the state for oil clean-up along Texas coasts (even though it's been minimal so far) and asks for another $20 million on top of that to be more in line with grants that states like Louisiana, Mississippi, Alabama and Florida received.
In the letter, Perry and Abbott also mock BP and Suttles a bit for comments he must have made in his prior letter about the size of the funds being offered....MORE, including a Scribd copy of the letter.
Stone, along with Auriga's Mark Bachman are two of the better analysts covering the stock, with Bachman the slightly better timer.*From StreetInsider:
Auriga maintains a 'Buy' rating and raises the price target from $138 to $173 on First Solar (Nasdaq: FSLR) citing increased confidence with regard to 2011 estimates.
An Auriga analyst says, "Specifically, we believe that exposure to the Euro will be significantly less in 2011 given First Solar's pipeline of North American based projects. We continue to use a USD/EUR exchange rate of 1.25; thus our increased estimates are primarily derived from higher production levels coupled with less Euro exposure."...MORE
...Besides as they say around here, "Climateer, he's a man who goes where the action is".The point is, deleveraging notwithstanding, there are still huge pools of money sloshing across the globe in search of returns. That's why I posted "Surprising Corn Numbers" when the USDA put out the acreage numbers in late June. Corn was at $3.48/bushel. Today it's at $3.81.
(okay, I'm the only one who says it, and I've noticed a huge drop off in party invitations since the self-referential Tourette's [without the coprolalia] kicked in)...
Wheat rose for the first time in three sessions on speculation that the prolonged drought in Russia will slash output further, boosting demand for grain from the U.S., the world’s largest exporter.Here's Inside Futures with some discussion of the headline question:
The harvest of crops including wheat, barley, rye and corn may drop below 80 million metric tons, compared with the current estimate of 85 million, Deputy Economy Minister Andrei Klepach said today. Russian grain traders may halt new export agreements because the government may limit shipments, the Moscow-based researcher SovEcon said last week.
“People are concerned that Russia may ban exports,” said Brian Grete, the senior market analyst for Professional Farmers of America Newsletter in Cedar Falls, Iowa. Demand may increase for crops from the U.S., Grete said.
Wheat futures for September delivery rose 5.5 cents, or 0.9 percent, to $5.95 a bushel on the Chicago Board of Trade, after falling 1.2 percent the previous two sessions. The price has risen 39 percent since June 9 as drought damaged crops in parts of Europe and Russia, while too much rain in Canada reduced the area farmers planted this year.
Smaller Harvest
Russia’s grain harvest may fall below 70 million tons as yields drop amid the worst drought in at least a decade, SovEcon said today. The U.S. Department of Agriculture forecast Russian production of wheat and feed grains at 79.8 million tons earlier this month, down from 93.5 million last year...MORE
Has Wheat Peaked?
Wheat has had a phenomenal run over the past month. Since June 30, CBOT December wheat futures have rallied more than 30 percent, moving from $ 4.85 to $6.40 a bushel. A prolonged drought in Eastern Europe could create a bit more upside, but I think most of the bad news is already priced in, and traders should watch for a correction at any time.
The main factor driving the rally in wheat has been an unusually hot summer and drought spreading through Russia, part of the Ukraine and Kazakhstan. Wild fires are burning in several areas, and the heat wave is expected to continue. In Moscow, the temperature soared to 99.3 Fahrenheit on July 26, the hottest in 130-years of record keeping.
About a third of the Russian grain harvest has been affected so far. This year’s harvest is expected to be less than 80 million metric tons, according to Russia’s Deputy Economy Minister. Some analysts said it could fall below 70 million tons. It looks like Russia will lose about 20 percent of its crop this year. At one point, the Russian government said it would start selling grain from its strategic reserves into its domestic market.
Other factors supporting gains in wheat include recent weakness in the U.S. dollar, and short covering activity. The most recent Commitments of Traders data from the Commodity Futures Trading Commission showed trend followers (managed funds) trimmed their short positions by 14,000 contracts. Three weeks ago, they were short 77,000 contracts. So that indicates to me much of the recent gain wasn’t due to new buying interest, but short covering of prior positions. Taking that out of the equation, volume hasn’t been robust.
The question is whether this rally can continue. Some analysts are predicting $7 wheat, and the market does look strong technically. However, I think it’s getting overbought and the market has already priced in adverse weather. If it spreads or intensifies, we might see a renewed bounce.
However, I think this market went up too far, too fast. It’s important to keep in mind that the U.S. crop is in much better shape. The USDA’s June 30 acreage and grain stocks report showed the largest carryover that we’ve seen in 20 years. The July report reflected a yield forecast for U.S. winter wheat of 46.9 bushels per acre, up 2.7 bushels from last year. It would tie the third-largest yield on record. Other spring wheat was up 4 percent from last year, and also on track for the third-largest yield on record.
The late winter and spring wheat harvests are coming in with good yields, and we also have slow exports, which will create a strain on storage. Farmers should have incentive to start to sell at these levels.
This market had a big run, supply is good and exports are slow. Bottom line, I feel that the December contract could fall back to $5.50 - $5, which is more in line with where I think is an appropriate price point. I am advising clients to consider buying inexpensive puts in anticipation of a corrective move, which could come at any time. If you are bullish wheat, you could consider buying on a pullback, but if you want to get in the market, I recommend conservative strategies.
FT AlphavilleAlbert Edwards.
Nothing to do here but quote as much of his latest Global Strategy Weekly Posts as we can without the SocGen strategist complaining…
We are at the most dangerous stage in the Ice Age – the ‘post-bubble cycle’. For although it is clear that leading indicators have turned downwards, the choir of sell-side sirens is singing its song of reassurance. The lesson from Japan was that once the cyclical rally is over, any downturn in the leading indicators should find you stuffing beeswax in your ears to block out that lilting melody so as to avoid the jagged rocks of recession.________________________________________________________________________________
My views on the outlook could not be clearer. They may be wrong, but at least they are clear. We still call for sub-2% 10y bond yields and equities below March 2009 lows._________________________________________________________________________________
I have for a very long time likened events now unfolding with what we saw in Japan a decade ago. Of course there are some major differences, but one can still draw clear parallels to see how extreme equity overvaluations unwind in a post-credit bubble world....MORE
Roger Murdock: We have clearance Clarence.Combined with Abraham Lincoln's PowerPoint presentation of the Gettysburg Address doing the bullet point thing:
Captain Oveur: Roger, Roger. What's our vector Victor?
Captain Oveur: That's Clarence Oveur. Over.
Roger Murdock: Huh?
Roger Murdock: Huh?
Captain Oveur: Huh?
-What Makes Nation Unique?And slide 6:
-Shared vision
- -Conceived in Liberty
- -Men are Equal
- -New Birth of Freedom
- -Gov't of/by/for the people
Summary
May 8, 2008
This Week’s Advice: Canned Food, Guns and a Ham Radio
June 26, 2008
Société Générale: “We see a y-shaped global recession. We are going down before looping backwards”
September 5, 2oo8
"Meltdown"-Société Générale
September, 2008
Société Générale: Prepare for the Great Unwind, part Deux
...Be careful. The company reports on the 29th and the stock has run up from $102ish. For the last four quarters there has been a pattern of mystery/history, buy on rumor, sell on news. The big positive is that FSLR announce last quarter that current production capacity was sold out for the year. They are trying to get a couple more lines up and running....I'll have an example* after the jump. From SmallCapPulse:
See also: "Barron's: "More Heat on First Solar" Tempest in a Teapot (FSLR)".Analyst Comments – Credit Suisse’s Satya Kumar updated his view on First Solar (Nasdaq:FSLR) this week, maintaining an OUTPERFORM rating on the stock and a $150 price target.Key Takeaways:· FSLR is reporting C2Q10 results after the close on July 29, and Kumar is modeling C2Q rev/EPS $554.1M/$1.65, noting that the stronger Euro rate in the quarter added only a penny to estimates...MORE
For what it's worth, the fact that I'm posting this probably indicates that FSLR is due for an uptick and CREE a down. Karma and all that.Haven't heard a lot out of Ramesh recently.
Plus First Solar has the largest percentage short interest of any stock in the S&P 500, so an up-move could be pretty dramatic.
On January 19 Mr. Mishra went bearish on CREE with earnings due after the close. The stock closed at $54.21. Cree reported, we posted "Cree Crushes Street Estimates; Stock Leaps (CREE)" (lots o'links) and the next day the stock closed at $63.59, up 17.30%.
Eric Savitz reported the call at Tech Trader Daily in "Cree: Brigantine Cuts To Sell Ahead Of Earnings Tonight" with the lead sentence:
Well, here’s a nervy call....
Although we saw the TTD post we chose not to link to it, it made no sense.
Two days later, we posted "Is Cree, Inc. (CREE) Likely to Burn Out?", linking to a piece by Tom Konrad at AltEnergyStocks, "Pioneering light-emitting diode (LED) maker Cree Inc. looks overvalued".
I commented on Tom's propensity to be early and mentioned Mishra:
...That said, he [Tom -ed] is a very good stock-picker and knows his stuff, the PhD notwithstanding. Here's what he wrote three days ago. We sat on it to get through the earnings report (just as we sat on the Tech Trader Daily post "Cree: Brigantine Cuts To Sell Ahead Of Earnings Tonight").Despite the gyrations in the market over the last five weeks CREE closed Thursday at $66.96, up 23.51% since Mr. Mishra said sell it.
In the case of the Brigantine analyst we figured he had flipped a coin in an attempt to get some publicity, something that is contrary to any reading of fiduciary law and philosophy that I've ever seen.
In Tom's case I just figured he was early. The stock was up almost 17% yesterday....
On February 18 First Solar was due to report their earnings after the close and, you guessed it, heeeeer's Mishra. I posted "First Solar: Brigantine Upgrades Ahead Of Earnings (FSLR) Options 'Max Pain' at $120" with this comment:
Remember, the company has a two year string of earnings beats that have fed into the "buy on mystery, sell on history" price pattern for the stock. With options expiring tomorrow the maximum pain is at the $120 strike price.*...The stock was at $125.66 as I wrote that. It closed at $126.29.
The company reported and I posted "First Solar Reports Utility-type Earnings Growth, Stock Drops (FSLR)". The next day the stock closed at $116.00 down 8.14%
Ya gotta ask yourself "Who is this guy?" Here's his Brigantine bio.
It's not like this stuff is rocket surgery. Your humble blogger managed to post "First Solar Earnings: "Trading the Main Event" (FSLR)" two days before the earnings release:
First solar will be reporting their fourth quarter and year end after the close on Thursday February 18.Followed by, "Solar Stocks Lift On Latest Twist In German Subsidy Saga" (FSLR)", a few hours later (and a couple points higher) :
The only surprises I can envision would be negative. The December 16th 2010 outlook conference call was the high water mark. No one was impressed. The stock had an intraday high of $142.66 the day before and made a double top on January 7, trading as high $142.46.
We actually know something about this name...
The Grassy Knoll Theory of Investing posits that "There is a They; and They Know".Here's a Climateer Investing headline post-mortem...
I sure felt like that this morning; put out a mildly negative piece on First Solar's upcoming earnings and watch the stock jump seven percent.
The stock has a pattern of running up into earnings and then trailing off.
The better to short you my dear....
As soon as you think you've found the key, they go and change the lock.The following is for entertainment purposes only.
The Dow Jones Industrial Average (DJIA) logged its third consecutive 100-point daily rally on Monday, bringing the blue-chip barometer's three- day tally to a gain of roughly 4%. You wouldn't think that consecutive 100-point rallies were all that rare, but according to data from Senior Quantitative Analyst Alan "Rocky" White, there have only been seven such occurrences since 1997. In fact, according to Rocky, yesterday marked "the first time we've seen three straight positive 100 point Dow days since the first day of 2009." He added, "These occurrences have been rarer than I imagined."
Before we break out the champagne and celebrate the Dow's victory, we should take a closer look at the rest of the data from Rocky's study. As you can see from the tables below, these signals are pretty bearish for the Dow, with negative average and median returns for all of the time frames tested. For instance, the most recent signal in January 2009 preceded a 27% decline in the DJIA during the next 42 days. The study even led Todd Salamone, Schaeffer's Senior Vice President of Research, to quip that "The prior performance seems to reflect mean reversion."
Last Thursday, July 27 [sic], Senate Majority Leader Harry Reid announced the abandonment of comprehensive climate legislation, shifting to a much more limited oil spill response-bill with minor energy efficiency provisions. Reid had been hard-pressed to rally sufficient support in the Senate for a market-wide cap on carbon, or even one imposed solely on electric utilities. “It’s easy to count to 60,” he said last week. “I could do it by the time I was in eighth grade. My point is this, we know where we are. We know we don’t have the votes…This is a step forward.”*Back in November 2007, in "Light Fixtures: We told you so (Watch the Politicians!)" we re-fef'd some of the posts that laid it out:
A roundup of the reactions to Reid’s announcement from various organizations and news outlets is below:
The New York Times, Dot Earth blog, “Next Steps on Climate and Energy”
“The 20th century ended on Friday, at least in relation to the discourse over what to do about global warming. The end came with the failure of a seven-year effort in the Senate to pass a climate bill centered on a
cap-and-trade system for reducing emissions of greenhouse gases.”
TIME, Ecocentric blog, “Why the Climate Bill Died”
“Ultimately the threat of global warming didn’t galvanize the public to the point where they would demand change. There are lots of reasons for this—disinformation campaigns by fossil fuel interests, the overblown controversy of “climategate,” a media corps that too rarely puts global warming in the right context. But until that changes—and the public demands change—ambitious climate legislation will remain dead.”
The Washington Post, Ezra Klein, “Why a Climate Bill Failed”
“It’s no surprise that Congress is collapsing beneath the weight of an energy bill. Climate change, a long-range problem that will primarily harm developing countries and require immediate and difficult policy changes on the part of rich countries that will impose huge costs on particular regions of the United States, is exactly the sort of problem our system can’t handle.”
The Breakthrough Institute, “Myths About the Death of Cap and Trade”
“By now it should be clear that if cap and trade can’t pass with 59 Democrats in the Senate and a Democratic President that came into office promising to make climate change a flagship issue, it is not going to pass. It’s clear that this is the end of cap and trade for a long time. Until clean energy technologies are made much cheaper than they are today, substantially reducing carbon emissions will remain expensive, and cap and trade will continue to fail.”
The Alliance for Climate Protection, “Statement on Senate Comprehensive Climate Legislation”
“It is wrong that hundreds of millions of lobbying and advertising dollars from big oil and dirty coal, along with obstruction by the Republican leadership in the Senate, have blocked debate and action on comprehensive climate and energy legislation.”
Environmental Defense Fund, “The Consequences of Inaction on Climate Change”
“With a crowded Congressional calendar, and time running out, this announcement is discouraging. Will the Senate decide to take any meaningful steps? Right now it’s a long shot, but we’ll continue to work doggedly for a good Congressional outcome.”
League of Conservation Voters, “A Message to Our Members and Supporters”
“It’s deeply disappointing that Big Oil, Dirty Coal and their allies in the Senate, led by the Republican leadership, continue to stand in the way of creating a clean energy economy that creates jobs, makes America more energy independent and protects the planet. The twin challenges of building a clean energy economy and addressing global warming are too important to fail.”
National Resources Defense Council, “NRDC to Senate Climate Obstructionists: Stop Blocking Our Future”
“Over the recess we must deliver a message to senators: ‘Do your job! We face a triple threat of a stagnant economy, ballooning energy insecurity, and a climate that is coming apart. Don’t fail us. Don’t fail our children. Don’t come home again without having tackled these real and present dangers.”...MORE
One of the guiding principles of this blog is how important it is to know what the politicians are up to. You can make a lot of money with this simple idea.Here's the first of them, from May, 2007:
In "Cap-and-Trade Bill due Soon" we recapitulated some of our thinking:
That's the headline over at the WSJ Energy Roundup. I wish just once they'd screw up and put something like this on the blog:Today MarketWatch reports:
Polygamous lesbians flee Sharia
Ain't gonna happen though, they're pros.
I know this policy wonk stuff can get boring but there's a reason I put it in the blog; You can make a lot of money if you know what the rules are. I posted the story (pt. 1) about McCormick's reaper to show how a change in the law can make a fortune virtually overnight (after a decade of positioning yourself)
Deal to create North America's top lighting manufacturer...
Climateer Investing readers will be well served if they keep track of the various bills currently in Congress, or alternatively if they check in with CI from time to time (he said modestly).Part II had a couple more recent examples that were worth billions to folks who understood what they were seeing.
We have entered the political (money) phase of the climate change discourse. So of course I am going to write about wheat.
I first became aware of just how much money can be made by paying attention to what the politicians are up to when I re-read the story of Cyrus McCormick and his Reaper twenty years ago. Most of what I knew of the story turned out to be wrong. On Monday evening I dug out my 1961 edition of "Historical Statistics of the United States" for some backround.
First off the reaper was probably invented by Cyrus' dad: The great demonstration of 1831 was done just six weeks after Robert McCormick's failed demonstration. Second, McCormick's version was not the first patented. Third, the invention was a commercial failure (at first).
There have been many reasons put forth to account for the eventual success of the machine. At a 1931 ceremony marking the centennial of the first test a former governor of Virginia said:
Rather jocularly speaking, he was possessed of a combination of qualities which have at all times proved invincible. He was a Virginian, he was a Democrat, and he was a Presbyterian; and so God blessed him with success because he deserved it.
Invented in 1831 and patented in 1834, McCormick didn't sell a single machine until 1840. The sales figures for the early years are debatable but these are the best I could put together:
1840------- 2
1841--------0
1842--------7
1843------ 29
1844------ 50
1845------ 58
1846------ 75
1847-----800
External factors played a part: Florida, Texas and Iowa were admitted to the Union in '45, '45 and '46 respectively.
Miles of railroad trackage, 2818 miles in 1840 increased to 4633 in 1845 and 9021 in 1850.
The nation's asset base grew e.g. life insurance in force went from $4.7mm (face) in 1840 to $97.1mm in 1850. The country was growing pretty fast.
On the corporate level, McCormick was a pioneer of installment sales.
The company moved to Chicago in 1847. Contrary to what this wonderfully illustrated 12 page history says:It was not until 1847, when he built his own factory in Chicago, that he was able to sell a significant number of machines.the salesmen's order books were filling up prior to the move.
This is getting to be a long post. I think I will serialize and show the opportunity created by laws and politics in the next posting.
Part II (above)
As most people know, gold has been in a raging bull market for more than 10 years rallying from about $250 per ounce to more than$1,250 per ounce. Many people are now wondering if the world’s currencies have any value at all and are flocking to gold as the only hard asset that historically has always had value.
Gold coin purchases are at an all time high. There are people walking up and down city streets and in shopping mall, holding signs saying “We Buy Gold.” There are even vending machines where people can purchase gold bars. Of course, there are the ubiquitous commercials on TV about gold.
Does a contrarian look at all these factors and take the other side? Possibly, but the problem is most of these factors have been present for more than two years and gold has rallied more than $400. Why would gold be any different now?
I believe the psychology of the gold market is in a dangerous place, but manias can go on longer than people think. This happened in the real estate market in 2005 when everyone rushed in. Real estate TV commercials ran nonstop, many were buying second homes as an investment with no down payment, bankers were giving loans to anyone.
It took about three years for it to finally come apart. The gold and real estate markets are not related, but the mass psychology is eerily similar.
Are we finally at that tipping point? I believe we are.
Until two weeks ago, gold had been in a steady uptrend since February. It was going up because of inflation or deflation; it was going up because Euro weakness or Euro strength or it was going up because of stock market strength or stock market weakness. People on CNBC have even said gold will never go down.
But close inspection of the gold market at this time show many technical difficulties that may bring it down. Below is a candlestick weekly chart of the gold market.To my mind an even more important call was Kitco's John Nadler on May 3:
Source: Barcharts.comGold set the all time high of $1,264.80 per ounce during the week of 6/21/10, but that week also formed a candle stick called a “hang man”. This is when a market breaks off the highs but then runs all the way back up to the previous daily or weekly close. The next bar is critical because it must run back down and close under that previous low. As you can see, this is exactly what happened.
The chart below also shows some import reversal patterns. This is a daily candlestick of gold. On June 21, gold made an all time high but closed below the previous day’s low. This previous day was the all time high. This can bea very bearish sign. Also notice it happened again just five days later....MORE
$800 Gold Prediction. No, A Zero Is NOT Missing.
John Nadler idiotYa gotta love the gold-bug crowd, and Nadler. We've had Kitco on the blogroll since we started the blog.
John Nadler is wrong
John Nadler is an idiot
John Nadler stupid
John Nadler wrong
Spot gold prices continued their recent sell-off on Tuesday – chart via Kitco:
And in case there was any doubt, last week’s rumours of significant speculative liquidations appear to have been confirmed by CFTC futures data.
The figures out last Friday showed that money managers cut their long gold futures positions by 18 per cent last week.
Barclays Capital offered a little more context on Monday:
Indeed, the weekly drop in exposure was the second-largest weekly drop since February while non-commercial positions as a percentage of open interest has dropped to 32%, its lowest level since December 2008. In contrast, physical gold ETP holdings remained unchanged at 2087.9 tonnes, less than 15 tonnes of the peak reached in mid-July. However, platinum ETP holdings dropped by 11koz from its peak.As too did Société Générale’s analysts...MORE
On reality: My views are not all that negative. I think they're just realistic. I want to face reality. You have people like Paul Krugman who thinks we should have another bubble to pull us out of this. He actually said that. But he said the same thing in 2001. And you know how that turned out.
On unintended consequences: The Fed doesn't seem to have learned anything at all from its mistakes. Their current policy of cutting rates to zero is designed to create sustainable growth, but they've created larger and larger volatility in markets. There are many unintended consequences of their actions.
The oil bubble of 2008 is a good example. In 2008, the price of oil went ballistic, but the U.S. was already in a recession [it began in Dec. 2007]. There was no rational reason oil should have gone ballistic. The Fed's easy money just fueled a bubble. It was like a $500 billion tax on consumers courtesy of the Fed. That's the added amount that it cost you, and it helped push consumers over a cliff in late 2008.
On the Fed: The Fed doesn't pay any attention to asset bubbles when they grow. That's their official policy. But they flood the system with cash when bubbles burst. They only care about bubbles when they crash. It's a very asymmetric response and it has many unintended consequences.
Letting bubbles inflate and then fighting them when they burst actually worked for a while. That's what makes it dangerous. It worked in the '90s. But you shouldn't read too much into this: This period was assisted by unusually favorable conditions. From 1981 until early last decade, commodities were in a bear market after a bubble in the '70s and early '80s. And interest rates were falling throughout the '80s and '90s, too. They almost never stopped falling. That made Fed policy look like it was working.
Bubbles can still happen without expansionary monetary policy. In the 19th century, you had bubbles in railroads, for example. But today, the Fed has created a bubble in everything -- in every single asset class. This is an achievement even for a central bank. Stocks. Commodities. Bonds. Real estate. Gold. Everything goes up when the Fed prints. The only asset that goes down is the U.S. dollar.HT: ZeroHedge
On deflation: I'm a believer that the stock market lows of March 2009 will not be revisited. You have people like Robert Prechter who think the Dow will collapse to 700 because of debt deleveraging. Debt deleveraging could happen, but the Dow will not fall because of monetary policy. The Fed will keep everything inflated in nominal terms. And if the Dow does go to 700, you'll have more to worry about than your investments. All the banks will be bust. The government will be bust. You don't want cash if massive deflation happens. On the contrary: It will be worthless. You have to think very carefully about hardcore deflation.
On credit addiction: In a credit-addicted economy, you don't need credit to actually fall for there to be problems. All you need is a slowdown in the growth rate, and you get big problems. Now, the government and the Fed are aware of this, so they are creating debt through fiscal deficits and monetization. That creates a hugely volatile environment. In 2008, government credit creation was inferior to private credit contraction, and asset markets tanked. In 2009, government credit creation was higher than private contraction, and asset markets went ballistic. Lately, government credit creation has slowed, and asset markets have gone down. Now, the Fed is aware of this, and it's only a matter of time before it throws more money into the system. I guarantee this....MORE
Marc Faber June 16: "Short the Australian Dollar" (AUD/USD)
Marc Faber: Hyperinflation coming to the USA
Marc Faber: "'Buy farmland and gold,' advises Dr Doom"
In his gloomiest prediction yet, Marc Faber sees big financial bust leading to war
March 18, 2009 Marc Faber: More Boom, Less Gloom and Doom
March 3, 2009 Marc Faber: Stocks Poised to Rally
Barclays is upgrading MEMC Electronic (NYSE:WFR) to Overweight from Equal-Weight with a $16 price target (prev. $14).
Shares have not participated in the recent solar rally, primarily due to concerns over Q2 earnings miss and low upside risk to 2010 guide. Although we do not anticipate any upside to Q2 results, checks indicate 2H upside from solar/SunEd segments exists. Positive '11 earnings impact (~$0.55-$0.60) from in-house wafering is also not completely baked into street estimates in Barcap's view. Shares are trading at a discount to poly peers (OCI, GCL). With ~$3/share cash on hand, solid progress on SunEd/solar segments and robust outlook for semis segment, risk reward now appears attractive (pot'l upside to $16, downside to $10, representing risk-reward of 3:1), in firm's view.
1) Robust Fundamentals: Demand from both semis and solar segments remains very strong. Checks indicate that MEMC is completely sold out for the rest of the year and is currently trying to procure poly in the spot market to meet excess demand. One poly competitor told Barcap that "demand is limitless for MEMC" - obviously, most poly suppliers are focused on meeting excess demand from existing customers and as such they do not see significant upside to Q2 results (from extra poly purchases in the spot market).
That said, they believe poly/wafer pricing is looking good and despite higher tolling costs, MEMC is likely able to maintain margins. Checks with several solar customers, for instance, indicate that wafer prices were up sequentially in Q2 and could likely remain flat or even increase sequentially in Q3/Q4. Fundamentals within semis segment also appear to be relatively robust and they expect pricing to be up mid-high single digit percentage points sequentially in Q3/Q4.
None of the major semis competitors are adding capacity and as such they expect pricing outlook to remain relatively stable, even into 2011. Finally, fundamentals for SunEd business appear relatively strong in markets such as Italy and the US. Barcap's current model assumes $5.50/W system ASP for SunEd in 2H10. Greater mix of Italian systems business could lead to pricing/volume upside, in their view....MORE
Notablecalls: I looks like WFR may be setting up for a bit of a short squeeze. Analysts are downplaying the potential impact of the Q2 miss while short interest stands at 5-year highs.
I also like Barcap's comments regarding 'In-house Wafering' which could add ~$0.50-0.60 EPS. Put a modest 10x multiple on that and you have $5-6 bucks of upside. Not bad for a $10-11 stock, eh.
One to watch. Could trade over $12.00 level today.
Veeco (VECO), which sells equipment used in the LED, solar, data storage and metrology sectors, posted Q2 results that were well above Street expectations.
For the quarter, VECO reported revenue of $253 million and non-GAAP profits of $1.01 a share; the Street had been expecting $232 million and 83 cents. Bookings were $347 million, up 250% from a year ago, and up 30% sequentially....MORE
BP plc (BP) has once again dominated headlines today, amid reports that the beleaguered oil concern is negotiating the departure of Chief Executive Tony Hayward. More specifically, Sky News reported that Hayward will be nominated for a board position at BP's Russian venture TNK-BP, with American executive Bob Dudley expected to take the reins as CEO.
Investors seem to be embracing the potential management shake-up, with the shares of BP up nearly 5% at last check. However, not everyone is betting on upward momentum for the stock in the near term, as it appears one options speculator is rolling the dice on a short-term pullback for the stock.
Earlier today, the investor sold several hundred August 35 calls for the bid price of $4.25 each. Then, to hedge his bets against unfavorable price action, the trader simultaneously bought an equal amount of August 36 calls for the ask price of $3.55 per contract. In other words, it appears the strategist constructed a bear call spread on BP for a net credit of $0.70 per pair of calls.
By employing this strategy, the investor is hoping the shares of BP retreat south of the $35 level by August options expiration, in which case all of the calls will expire worthless, allowing the trader to pocket the $0.70 received at initiation. However, since the trader hedged his bearish bets by buying August 36 calls, his maximum risk is limited to $0.30 (difference between strikes minus net credit) per pair of calls, should BP remain atop the $36 level through front-month expiration....Schaeffer's BP CHARTS
Before we answer the question posed in the title of this piece, let's paint in some of the background of the smart grid business.
Last month on our blog, we posed the question: will smart grid outperform its cleantech cousins and become the jewel in the industry's crown? We concluded that for a number of reasons, smart grid offers a less risky investment to both financers and players, and that there is a growing trend among investors to move away from the highly capitalized sectors of the renewable market in favor of smart grid.
Not all sectors of the smart grid are as capital intensive, and as we showed in the April report "Smart Grid is Just Too Big for the Utility Companies to Finance and Manage," the industry will require some nurturing to overcome some of its growing pains. We concluded that the electrical utility industry will likely be required to invest massive sums of money, and while they may be able to justify this based on long-term projections, it remains to be seen whether they will be able to find the money to fund such an effort. It cannot be generated from cash flow alone and government subsidies are unlikely to continue at their present level of generosity.
However, in the case of smart grid, there is another solution in the shape of the IT and communications companies. They will be more than willing to invest their capital and expertise in the smart grid information and communications infrastructure, generating revenues from a plethora of value-added services. This would relieve the utility companies of the major responsibility of finding the funds and toiling in an area in which they have little expertise. In our March issue, in an article contributed by Microsoft entitled "Smart Grid Revolution Becomes Disruptive for Utilities," the IT giant kindly shared some of the findings of a study they had commissioned. Expect regular promptings from the IT and communications industry about the major contributions they can make to the future of smart grid. This industry offers enormous potential and a robust business case that will continue to attract well-managed, innovative companies, financing and some government support all over the world.
On this occasion, we shall judge performance based on business growth and by how well players are developing the business opportunities available to them....
...Finally, we come to assessing the financial performance of players in the business. The financial reports from Itron, Landis & Gyr, Sensus and EnerNoc show increased revenues and profitability. Smaller specialist suppliers such as Comverge, Acorn and Tollgrade have increased their revenues, but not particularly profitably. Major electrical manufacturers such as 3W Power Holdings / AEG Power Solutions are much more a bellwether for the fortunes of the electrical transmission and distribution industry, which turned in a poor performance in 2009. The former had Q1 revenue and profits down year on year by 50% and 90%, respectively, reflecting the late cyclicality of business operations.
However, they are more optimistic about the future, with an order backlog at the end of Q1 2010 standing at €188 million, 37% higher than the end of Q1 2009. Similarly, ABB reported a decline in orders in 2009 of 19 percent (13 percent in local currencies) compared to 2008, due to (1) the global economic downturn, which has significantly weakened demand, particularly in the industrial and construction-related markets, and (2) price erosion in both utilities and industrial sectors in many geographical markets....MORE, including the big 'ol chunk on mergers.
With an estimated 9.2 billion mouths to feed by 2050, up from 6.8 billion now, and growing demand from wealthier emerging-market consumers for a high-protein diet, the challenge of feeding the world looks daunting. In theory, that should provide a huge secular boost to agribusiness stocks over the coming years. But it will still require investors to have an appetite for risk.His thinking is similar to that expressed in an FT piece of about the same vintage:
Growing demand for food isn't in doubt. In 2008, there were already 915 million undernourished people around the globe, according to the United Nations' Food and Agriculture Organization. Prices for basic crops like maize, rice and wheat soared between 2006 and 2008, reaching their highest levels in 30 years and triggering riots in some countries. Prices have since fallen back as a result of the financial crisis, but the focus is firmly on food security.
Changes in diet in the developing world also will put pressure on agricultural production. If Chinese consumers were to match the diet of their Korean counterparts, global meat consumption would rise 9%, according to BlackRock, which is launching a new world agriculture fund.
The fund manager believes once such shifts in diet start, they prove irreversible, implying greater grain production to feed livestock, and greater use of technology to boost crop yields. At the same time, planned increases in biofuel production will reduce the amount of land available for food.
Output is set to rise in emerging-market countries most, but will require investment to increase crop yields. That should favor companies that supply agricultural equipment and inputs such as fertilizer as well as farming businesses themselves. True, some stocks already look expensive; fertilizer producer Potash Corp. of Saskatchewan, for instance, trades at 18.5 times estimated 2010 earnings, according to Factset. But the company's control of 20% of global potash capacity—a key source of potassium with no known substitutes—makes it vital to achieving the growth in grain production needed in the coming years....MORE![[FOODHERD]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uGBTzVkd__5vSOUxApL7GmYJl348yZ1Sbqxz1DqVvN66rhWiJFTLvjW5EZMp46z6i6XaY1RPA7-RLRuQxGwNTl4_gFfPt5AQCnQsW6O94v5D0CevFpg2EtK62MEzO76HsB4yfUhVJqGRd9jUy_CYx8sqg=s0-d)
Forecasts of higher prices for wheat, corn and soyabeans over the long term are encouraging more investment managers to roll out agricultural funds in the UK.
So far this year, in spite of volatile market conditions, two funds with a focus on agricultural companies have debuted on the London Stock Exchange: BlackRock World Agriculture and First State Agribusiness, which is an onshore version of an Irish fund of the same name.
Both of these funds – which buy into palm oil and soyabean plantations, fertiliser, tractor and pesticide makers – are based on a simple assumption: food prices will continue to rise, as the tastes of the world’s growing population evolve, and the supply of arable land falls.
A change in diet among the new Asian middle class, and a need to develop more biofuels, are expected to push up the prices of corn, soyabeans, sugar and oilseed.
As Desmond Cheung, co-manager of BlackRock World Agriculture, says: “Demand for agricultural commodities is strong and it’s going to get much stronger. It has been outstripping supply for the last decade or so.”
These trends suggest that direct exposure to indices of wheat, corn and other soft commodity prices is a sound long-term strategy for private investors. But some managers advise inexperienced traders not to buy into exchange-traded funds, which track forward commodity prices, or commodities futures themselves.
“The problem with investing in commodities prices is you have no bloody idea where they are going,” said Ben Yearsley, investment adviser with UK stockbrokers Hargreaves Lansdown. Even skilled traders have found it difficult to turn a profit in the past 18 months because soft commodity prices have moved “sideways”, according to Jonathan Blake, manager of Baring Asset Management’s Global Agriculture.
Instead, the active fund managers’ approach is to buy into a mix of companies poised to benefit indirectly from rising food demand, as well as a pick-up in investment in the sector.
“Companies operating in the agricultural space should benefit from the increased investment in the agricultural asset class and also see profits rise if commodities’ prices rise,” concludes Baring’s Blake.
BlackRock’s fund holds shares in Potash, the Canadian fertiliser company (currently trading on 18 times forward earnings), Wilmar, the Singaporean palm oil plantation (15.8), and Deere, the US tractor maker (14.7). CF Eclectica Agriculture, which has been running for three years, has some overlapping holdings, and its top picks are Yara, a Norwegian fertiliser maker (11.9), Kubota, Deere’s Japanese rival (16), and Monsanto, the world’s largest producer of genetically engineered seed (22.5).
Many of these agricultural equities are also set to benefit from positive news in coming months. Demand for fertilisers is expected to rebound through the year and into 2011 as farmers’ financial positions have recovered in line with the wider economy. This improvement in their fortunes is also expected to boost sales of farm machinery such as tractors.
Better weather is helping, as well. George Lee, manager of Eclectica's Agriculture fund, describes atmospheric conditions in the past two years as “near perfect” in most regions. Indeed, the improvement in the weather has allowed farmers to restock inventory following the global food shortage scare of 2007. But Lee says stocks of agricultural commodities are still 10 to 15 per cent lower than they should be. “Higher prices will incentivise supply, which is not as abundant as people thought it was,” he argues....MORE
