Recession-Plagued Nation Demands New Bubble To Invest In

HT: The Big Picture:

A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution.">>>MORE

...Current bubbles being considered include the handheld electronics bubble, the undersea-mining-rights bubble, and the decorative office-plant bubble. Additional options include speculative trading in fairy dust—which lobbyists point out has the advantage of being an entirely imaginary commodity to begin with—and a bubble based around a hypothetical, to-be-determined product called "widgets."

The most support thus far has gone toward the so-called paper bubble. In this appealing scenario, various privately issued pieces of paper, backed by government tax incentives but entirely worthless, would temporarily be given grossly inflated artificial values and sold to unsuspecting stockholders by greedy and unscrupulous entrepreneurs....[Hmmm...-ed]

We've told you where to go bubble hunting (This is worth reading):

Psst: Do You Want to Know the Future of Renewable Energy Investing?

UPDATE: See *link below for our thoughts on where we are in the cycle.

On January 17, we put up this post:
As One Economic Bubble Bursts, Another Takes Hold

From the Wall Street Journal's Informed Reader blog:

The next bubble in the U.S. economy should be taking hold right about now, entrepreneur and investor Eric Janszen writes in Harper’s Magazine....

And got a chance to reprise

"Humble Pie" (The Day the Nasdaq Died)

A long, long week ago
I can still remember how the market used to make me smile
What I'd do when I had the chance
Is get myself a cash advance
And add another tech stock to the pile.

But Alan Greenspan made me shiver
With every speech that he delivered
Bad news on the rate front
Still I'd take one more punt

I can't remember if I cried
When I heard about the CPI
I lost my fortune and my pride
The day the NASDAQ died

MORE, including the rest of the song and actual analysis!

Bush Lifts Drilling Moratorium, Prodding Congress

From the New York Times:

President Bush lifted a presidential moratorium on drilling for oil and natural gas on the Outer Continental Shelf on Monday, hoping to prod Congress to act to clear the way for exploration along the country’s coastline in response to soaring energy prices....

...By itself, the move will have little impact, because Congress enacted a moratorium in 1982 that remains in place. But the step underscores the rising political pressure to address high oil and gasoline prices in the middle of an election year....MORE

Climateer's "Quote of the Day" (Horse, Barn Door Edition)

UPDATE below.
Today's quote comes to us via Bloomberg:

July 14 (Bloomberg) -- The Federal Reserve tightened its mortgage rules by requiring lenders to determine a borrower's ability to repay and barring other practices that led to the collapse of the U.S. housing market....

HT: Calculated RISK

UPDATE-There are many ways to distinguish between journalists and bloggers, here's the WSJ's MarketBeat blog take on the same story:

By this point it has become difficult to keep track of the number of horses running amok in the countryside while the barn door rests comfortably off its hinges. So add one more to the pasture. Today the Federal Reserve Board unanimously approved a final rule that will help protect consumers from deceptive mortgage practices. Just in time, too. The rule adds protections for those who have higher-priced loans, and it would require creditors to verify borrowers’ income and assets and to establish escrow accounts for all first-lien mortgages. Lenders are also now allowed to rely solely on a home’s value to assess a borrowers’ ability to repay loans. In addition, the rule is supposed to ban certain misleading or deceptive advertising practices. All of this is necessary. All of this is prudent. All of this would have been helpful a while ago.

Canadian Solar Ups Q2 Guidance; Stock Soars (CSIQ; TSL)

In the post below I said most of the solar's were up a bit, this one's up 17%.
From Barron's Tech Trader Daily:
Canadian Solar (CSIQ) shares are sharply higher this morning after the company said second quarter results blew past previous guidance. The company now says Q2 revenue was $210 million to $214 million, above its previous forecast range of $185 million to $190 million. Gross profit is expected to $33 million to $35 million....MORE

Yeah, I got your soaring. (There's gotta be a joke in here somewhere) From Reuters:

Trina to supply cells for solar-powered plane
For travelers weary of watching air fares tick upward due to soaring fuel prices, here's an encouraging piece of news -- a plane that can fly around the world on solar power.

On Monday, solar cell maker Trina Solar Ltd said it would supply nearly 300 photovoltaic cells to France's LISA Airplanes for its Hy-Bird solar and fuel cell powered airplane....MORE

Solar Stocks Posting Small Gains: "The Cat Lives..." (FSLR, TSL)

Looking at the market's desultory reaction to the Fannie/Freddie news and the fact that most of the solar's are up, I am reminded of the scene in "Basil the Rat" were Mr. Fawlty learns the cat has not been poisoned:

...Terry: Now...how's the cat?

Basil: How's the cat? We're about to take the life of a public health inspector and you want to know how's the cat? It's gone to London to see the Queen!

Polly: He's all right!

Terry: Great!

Basil: Hooray! Hooray! The cat lives! The cat lives! Long live the cat!...

SOURCE

It's at 4:28 on the video.

Recessions and Stock Market Bottoms

We've got too many feedreaders and terminals and I really need DARPA to get cracking on the mind-machine interface link/bookmark retrieval thing. All this whining is due to a misplaced link.
We've got 45,000 of the suckers in the link-vault so I can probably jury-rig a post without it,
First up, from Dividend Growth Investor, the length of bear markets:

Since 1956 however the average duration of bear markets has been about fourteen months. The average decline since 1929 has been 38.2% versus 31.8% since 1956.

It has taken S&P 500 about 5.2 years on average to recover from to above its bear market highs since 1929. If we check the same parameter starting in 1956 the average recovery time from a bear market comes out to 2.8 years on average.

If history could be of any guidance, S&P 500 could continues falling for five to nine more months by fourteen to twenty-two percent from current levels. This means that S&P 500 could fall to as low as 967 to 1068 until the end of 2008.

Next up, Daily Wealth gets into the timing issue:

...The 1990-91 recession was the last time we saw both real estate and stock prices take a hit at the same time. Officially, the recession was relatively short, only lasting about a half a year.

The chart tells the story of what happened to stocks:

As the chart shows, the stock market bottomed just about halfway into the recession... when things appeared darkest. The stock market then started to recover as things began to appear better.

In the 1990-1991 recession, stocks bottomed 71 trading days into the recession – or 42% into the recession – and had an 18% loss. The market's performance during the 1990-91 recession is fairly typical...

and from his friends at SentimenTrader a couple more of the charts:

...On average, the recessions lasted roughly 220 trading days, or nearly a full year. The S&P was able to find a meaningful bottom after 129 trading days, or roughly six months after recession began, and at about the half-way marker of the recessions' durations. The S&P gave up an average of 19% of its value from the recessions' starts to the six-month lows, with a range of -6% to -42% (ouch).

None of them showed the S&P bottoming earlier than 52 trading days, or later than 282 days, giving us a very rough approximation for a window on when we could expect a low this time around. That's assuming we're in recession, and know when it began.

Taking a best guess, it's likely that we are in recession, and it began last quarter - suggesting we should see a major stock market low by sometime this summer. But given the variability in the duration range of past recessions, and the unique difficulties in identifying a recession ahead of time, we have to take that kind of forecast with a big grain of salt....

Finally John Hussman wades in with some general points on markets and the economy:

...Markets

If we assume the economy recently entered recession, the stock market has performed as would be expected. On average, the market peaks about six months prior to the start of a contraction and begins to decline more aggressively as the contraction begins. Based on the 9 previous recessions since 1953, the market bottomed an average of 6 to 7 months into the recession (the average recession has lasted 11 months). But this average masks a lot of variability. There have been important bear markets that lasted longer. The market bottomed 18 months after the beginning of the 2001 recession and 10 months after the start of the 1973 recession.

Given the variable length of recessions, we can examine the data from a different perspective. Instead of asking how long it takes for stock prices to bottom once a recession starts, we can ask how many months prior to the end of a recession do stock prices begin to advance from their lows.

The last graph below changes the reference point. The vertical black line shows the end of each recession. The blue line is the change in the S&P 500 two years before and after that point. Although the common rule of thumb is that markets bottom six to nine months prior to the economy turning up, the S&P 500 has actually bottomed closer to four or five months prior to the end of recessions. The market is a discounting mechanism. It's not clairvoyant.

The time-frames backed out of this analysis are intended to provide general perspective, not to provide specific points to expect turns or make investment decisions. There is too much variance in the length of recessions and the behavior of stocks to count on their average performance. But it's important to keep in mind that stock market declines triggered by the onset of a recession tend to be longer and the losses more severe than the results for the “average” bear market.

This should give you some idea of what we're up against, I'm sticking with the general outline from "Markets: I Scream Triple Dip", since we're in dip #2 now, the question becomes the point of this post, "Where is the bottom?"
We'll have the third "lower low" (and it could be a drawn out doozy) should we go into the double recession I was looking for in MISTD. Which reminds me of a road-trip Dairy Queen some years back, gotta go...

Ahead of the Bell: Credit Suisse cuts airlines (AAI: ALK; CAL; UAUA)

Here's the story from the AP via Yahoo:

...Analyst Daniel McKenzie cut his ratings on Continental Airlines Inc., United Airlines' parent UAL Corp. and AirTran Holdings Inc. to "Neutral" from "Outperform." He lowered Alaska Air Group Inc. to "Underperform" from "Neutral."...

Let's see how timely this fellow's call is, charts via BigCharts:

CAL


UAUA


The other two have similar trajectories, I'll stick with Dear CFTC: About those Oil Markets. And: A Stock Tip.

Trina Solar Renews Contract in Italy, A Key Solar Market Now That Spain Is Sputtering (TSL)

From Clusterstock:

It's no secret that, as generous solar subsides in Germany and Spain become less bountiful, strength in other solar markets will have to pick up the slack. Italy, in particular, is a market that will need to take off for many solar companies to reach their lofty expecations. Today, Trina Solar (TSL) renewed a sales agreement with Enerpoint, a "leading" Italian PV distributor.

Release:

Trina Solar Limited NYSE: TSL ("Trina Solar" or the "Company"), a leading integrated PV manufacturer from the production of ingots, wafers and cells to the assembly of PV modules, founded in 1997, today announced that it has entered into a renewed sales agreement with Enerpoint, a leading Italian PV distributor.

Under terms of this agreement, Trina Solar will supply Enerpoint approximately 5 megawatts (MW) of PV solar modules in 2008 and between 22 and 30 MW of modules to be delivered in 2009 at agreed prices....MORE

U.S. Taxpayer Bailout of China Over Fannie Mae

Oh what a tangled web. From Mish's Global Economic Trend Analysis:

If the US bails out Fannie Mae bonds as suggested in We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable, inquiring mind just might be wondering "Who is the biggest beneficiary?".

It's a good question too. Please consider Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds.

As politicians call for taxpayer bailouts and a government takeover of troubled mortgage lenders Freddie Mac and Fannie Mae, FreedomWorks would like to point out that a bailout is a transfer of possibly hundreds of billions of U.S. tax dollars to sophisticated investors and governments overseas.

The top five foreign holders of Freddie and Fannie long-term debt are China, Japan, the Cayman Islands, Luxembourg, and Belgium. In total foreign investors hold over $1.3 trillion in these agency bonds, according to the U.S. Treasury's most recent "Report on Foreign Portfolio Holdings of U.S. Securities.">>>MORE

China's forex stockpile hits record $1.8 trillion

That's the China datapoint of the day, here's the story at MarketWatch:

China's foreign-exchange reserves climbed $126.6 billion in the April-to-June quarter, lifting total reserves to $1.81 trillion, according to data released by the People's Bank of China Monday....

Cramer: Stocks are Doomed, Buy Wine Instead

From 1440 Wall Street:

Many professionals on the Street follow Jim Cramer. But not his recommendations; they fade those, and trade 'em the other way. And for those people, a buy signal has been issued:

Jim Cramer, the often loud and always bullish host of a popular CNBC show, is now bearish.

Cramer frequently tells his audience that he believes there is always a bull market somewhere, and it's his goal to help them find it.But this time is different; it's doom itself, Cramer recently wrote in New York magazine. "In 25 years on Wall Street, I have never seen things this bad."

His investment advice is always very specific, and he is also clear about what he sees over the short term."Sell everything. Nothing's working", he writes MoneyNews

Of course, fading Cramer is not a foolproof strategy. But for the oenophiles on the Street, whose day jobs include flipping stocks and bonds around, Cramer's advice on the wine market might give them pause.

Personally I am buying a few stocks in spite of Cramer's advice, but I have some wine for sale, now that he is collecting. If anyone is looking for a deal on 1994 Bryant Family Cabernet, drop me a line. Although I might want to wait and sell it into strength, assuming he pumps it in this edition of WineLibrary TV, where he digs into a bottle of Chateau Latour with Gary, among other goodies:...MORE including Cramer video.

This is a subject we have an interest in. Some of our earlier posts:

5 whiskeys worth collecting. Or: Make Ethanol in Your Backyard
‘Klimakatastrophe’ picked as Germany’s word of year. AND: 5 Drinking Stories That Put Yours To Shame
September sun to save Bordeaux 07?
The '05's have gotten spendy. Here's Berry Bros. & Rudd on the 2005's.
Climate change effects on wine
Wine into Biofuel: Reverse Transmutation-EU practices Backward Alchemy
Cold summer forces earliest French wine harvest on record
Climate change and the world wine map
CLIMATE CHANGE AND GLOBAL WINE QUALITY
Climate Change and Wine
Thieves steal solar panels; Wine Fine
Global Warming Investments

Oil speculation: Why we don't have answers

From Fortune:

There's a lot we don't know about how the oil futures markets now work. Congress should find out.
The debate over whether oil prices are being driven by speculators in the futures market or by the fundamentals of supply and demand for the physical product slides right on by a central point. The question Congress and regulators should be focusing on isn't who is driving prices, but how prices are being driven.

And the truth is, there's an awful lot we don't know.

Futures prices are supposed to bear a relationship to the present, or "spot," prices of various commodities. Exchanges were created with this in mind. Historically, roughly 70% of market participants used exchanges for commercial purposes. So a farmer could "hedge," or protect against, a higher future cost of seed or a lower price for his wheat by buying or selling a futures contract.

Speculators were always welcome, to some degree, to provide liquidity to the market by taking "the other side of the trade." Heating, airline, and trucking companies used the oil futures market to protect themselves against rising fuel costs. Investment banks facilitated trades. Futures contract prices were based on spot prices. Speculators were outnumbered almost three to one. Transactions were largely transparent.

That's not our present world, though....

Nomi Prins is a senior fellow at the public policy group, Demos, and a former managing director at Goldman Sachs. She is author of the bestselling book, Other People's Money: The Corporate Mugging of America....MORE

It's alive: The urgent need to upgrade the grid

Continuing last week's "Power firms grasp new tech for aging grid (AMSC; ENOC)" here's the rest of the special report from MarketWatch:

Flip on the lights, zap the coffee, check the charge on the cell phone -- all part of an increasingly energized morning routine in millions of homes.

Electricity demand is growing at about 1% a year, according to the U.S. Energy Department, and is likely to hold that pace despite a sluggish economy. That's because of demographic growth -- more people -- and the explosion in the numbers and types of electronic devices now considered essential.

Meeting that demand focuses inevitably on power generation. But power is useless without the vast transmission networks that carry it to end-users. Those networks draw on 100-year-old technology and high-voltage lines, most of which were installed in the 1950s and '60s....MORE

New tech for old wires
Faced with the threat of a major crisis from handling increased loads with 100-year-old equipment, electric power providers are planning to spend $17 billion for new technology to shore up the nation's aging power grid.
• Buy less of our product? Industry pushes customers to conserve

INVESTING STRATEGY
Power plays
Utility stocks may be down but are less beaten than others in this bear market. Several tech infrastructure firms are in a position to benefit as utilities get ready to spend $17 billion to fix the nation's aging electrical grid in the coming years.

How the grid works From generating stations and the transmission process to delivery to customers, see how electricity is distributed throughout the grid.

Superconductor
solution
The $60 million Holbrook Superconductor project in Long Island is the world's firsttransmission power cable moving waves of electricity from the grid to a substation that feeds U.S. homes.

A smarter,
faster grid
Andy Tang, director of PG&E's Smart Grid, tells Stacey Delo about innovations planned for the power grid in the region and how new technology will affect the grid's improvement and stability.

Feds cite Schumer in collapse of IndyMac

Chuck's a sharp guy. This was really dumb.
From the Los Angeles Times LA Land blog:

An important angle in the IndyMac failure that may get lost in ominous headlines tonight and tomorrow: federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank's failure. In simple language, federal regulators blamed Schumer for a run on the bank.

Here's from the press release issued by IndyMac's regulator, the Office of Thrift Supervision: "The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors’ demands in the normal course of business and is therefore in an unsafe and unsound condition. The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts....MORE

Google Trends, July 12, 2008

From the Google:

Jul 12, 2008 - change date Updated 45 minutes ago
1. tony snow 2. than merrill 3. world class driving 4. fdic 5. jill ellen walker 6. colon cancer 7. katrin fehlhaber 8. karen dalton 9. tempest storm 10. debakey 11. chicago bears tickets 12. michael debakey 13. thunderbirds movie 14. taste of buffalo 15. schoolcraft college 16. under siege 2 17. fdic insurance 18. bon jovi concert central park 19. revolution march 20. what is ctfmon

Climate Zeitgeist

A comparison of traffic at two climate sites, Watts Up With That and Real Climate.

Here's the current comp., from Alexa.

Electric Bills for Con Ed Customers Will Soar

From the New York Times City Room:

Consolidated Edison is expecting to bill its residential customers in New York City and Westchester County 22 percent more for electricity this summer than last because of rising fuel costs, officials at the utility said Friday. A customer who uses 350 kilowatt hours of power per month, a typical amount, would pay about $105, $19 more than a year ago and $8 more than an earlier estimate. Business customers will likely see their bills rise by 25 percent, to an average of $2,893.08 a month.

The expected increase for June through September, detailed in an internal monthly memo and reported in The Daily News on Friday, is nearly twice the 13 percent increase that Con Edison had forecast at the start of the summer.

“It’s all due to rising fuel costs,” said Chris Olert, a spokesman for Con Edison. “We make no money on power generation. If we pay X cents per kilowatt hour, our customers pay X cents per kilowatt hour as well.”>>>MORE

Sell those SO2 allowances, sell them now

A funny take on the intersection of legislation risk and markets from Environmental Economics:

The market for SO2 allowances is about to crash. The DC Circuit court just vacated the Clean Air Interstate Rule.

First step: Sell those SO2 allowances you have put your kid's college funds in.
Second step: Think about research questions to explore the market reaction to this ruling.

Oil: Apparently There's Even More to the Iran Missile Story

I may have been premature in posting "Oil: Iran has Photoshop, not afraid to use it"
From a genius, cowicide, via flickr:

More Cowbell

	yes we did it.... - robinn.

Thats alot of rockets

yes we did it....

It is can be apoccalipse tiem nao?

Mahmoud Search and Destroy, I Must!

Oh Noes!!!

Nonconformist

Ha ha!

Definitely photoshopped, right there.

Gollum's Head- courtesy Kamel on Digg.

d' oh!

Don't fear the reaper.

Arcelor Mittal launches €100 million carbon fund

Big money in the carbon biz. Two from Point Carbon:

Global steel company Arcelor Mittal has launched a carbon fund with an initial investment commitment of €100 million ($157 million) to generate carbon credits for compliance in the EU emissions trading scheme, the company announced on its website on Friday.

And:

Natsource expands carbon asset fund to $133 million

Playboy wants top blogger to pose topless

Well, if Playboy is ready for me, I'm ready for Playboy.
From Valleywag:

The whole Xeni Jardin / Violet Blue thing continues to backfire on us. A female editor at Playboy.com alerted us to a "Who's the Web's hottest blogger"? contest they thought up after ogling last week's photos of the two cozied-up lady bloggers. The prize? Playboy will offer the winner a "topless or nude" photo shoot for their site....MORE

Oil: Financial Firms, Airlines Face Off in Oil Speculation Debate

As a followup to "Dear CFTC: About those Oil Markets. And: A Stock Tip".
The folks at MarketWatch have really homed in on the oil/airline tango (contango?)/Danse Macabre:

Two of the industries with the most at stake from efforts to curb financial speculation in oil ratcheted up their marketing campaigns this week, with an eye on influencing a raft of new bills in Congress.

The public pressure dovetails with another round of new records reached for crude-oil futures and a growing exasperation among many lawmakers that they must act to reverse climbing prices before leaving for their August recess.

On Friday, a bipartisan group of senators including Sen. Joseph Lieberman, an independent from Connecticut, said they introduced the Commodity Speculation Reform Act of 2008. The bill would increase regulation of commodities futures markets by restricting actions of financial investors....

...But there's a worse danger lurking if lawmakers act too hastily, warned one company whose success handling electronic energy contracts has placed it at the center of the oil-speculation controversy....MORE

Also at MarketWatch today:

Airlines in tailspin on new record-high oil

Oil to put a damper on mood at Farnborough

T. Boone Pickens dedicating $58 million to alternative energy marketing

From Blogging Stocks:

T. Boone Pickens has been in the national media quite a bit lately. The Texas oil billionaire, who now commands a hedge fund in Dallas, has given hundreds of millions to his alma mater -- Oklahoma State -- and now is spending nearly $58 million of his own money to convince the U.S. to get off foreign oil and into alternative energy....MORE

I've been wondering what the tab would be. YouTube and MySpace come cheap but not full page ads in the Journal and Times.

Fed Says No Talks With Fannie, Freddie About Loans

From Bloomberg:
The Federal Reserve has not had any discussions with Fannie Mae and Freddie Mac about access to direct loans from the central bank, Fed spokeswoman Michelle Smith said.

``Federal Reserve officials are following the situation closely,'' Smith said in a telephone interview today. ``However, there have been no discussions'' with the companies ``about access to the discount window,'' she said....MORE

Oh well, there's another use for this bad boy,

Snooping on the Rich via Helicopter

A couple of years ago, Forbes magazine came out with a list of top billionaire homes.

What was remarkable was the aerial photos of mansions owned by super-private billionaires such as Bill Gates, Michael Dell, George Lucas and Abigail Johnson of Fidelity. Many appear to have been shot from a helicopter or plane — making the lack of cooperation from the owners meaningless.

Vanity Fair followed up in July 2006 with an article about hedge-funder wealth in Greenwich, Conn. To illustrated Nina Munk’s highly entertaining story, the magazine ran crystal-clear photos of homes owned by Steven Cohen, Paul Tudor Jones II and others. The photo of the Cohens’ home was especially awe-inspiring, showing 32,000 square feet of house with various outbuildings, a tennis court, English gardens, ice rink and a little gabled house for the Zamboni. It also showed several cars in the driveway, with two people standing near the front entrance.

This month, Vanity Fair re-enters the air war with photos of several mansions in the Hamptons. The article, about the local real-estate market, features a shot of a home bought by hedge-fund billionaire John Paulson. The article also has a photo of Steve Schwarzman’s monster compound, still under construction. (You can even see the vans and construction workers.)...MORE from the WSJ's Wealth Report blog.

Federal Reserve: Send in the Helecopters, No GSE Left Behind (FNM; FRE)

UPDATE: The Fed says there have been no discussions. Link
From Reuters:

Bernanke tells GSE discount window open

Federal Reserve Chairman Ben Bernanke told Freddie Mac chief Richard Syron that his company and Fannie Mae could take advantage of the emergency discount window, said a source familiar with a conversation between Bernanke and Freddie Mac chief Richard Syron.

Bernanke and Syron spoke by telephone Thursday afternoon and in that call the central bank chief said he intended the discount window to be open to the two companies, said a source familiar with the phone conversation.

The Fed declined comment on whether its discount window might be opened to GSEs. Freddie Mac spokesman Douglas Duvall declined to comment when asked about the phone call

.

We have previously posted these insightful commentaries:

From Depression risk might force U.S. to buy assets:

From Central Banks to "Flood" Markets with Liquidity:

From Climateer "Quote of the Day" Federal Reserve Edition:

I have two problems but only one tool.

-Ben Bernanke
Testimony to the House Budget Committee
Jan. 16, 2008

From Bernanke-New Sheriff in Town?:

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

Yesterday's move in oil, adding nearly $4.00 in the last half-hour has me thinking that maybe supply and demand aren't such a big factor. As Bloomberg said in their story "Crude Oil Jumps More Than $5 as Trading Programs Trigger Buying ":

Crude oil rose more than $5 a barrel in the last hour of New York floor trading as prices breached a level that triggered computer-generated buying programs....
...``The market is very volatile,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``There was no big headline at the end of the day.''...

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.

On June 6, I heard that the shorters had their heads handed to them and decided they weren't going to play the game anymore. June 6 was the day the NYMEX had its largest dollar move ever, $10.75 on the expiring contract. A lot of the move was shorts scrambling to cover and get the hell out of the market.

And the stock tip? Buy some airlines for a one week trade. The strongest stocks seem to be NWA and DAL, although LCC and CAL might give you a bigger pop.
Remember though it's a trade. There's a real risk they could go out of business.

Fannie and Freddie: Wild Week For GSE Shares, No Change in Fundamentals, Just Sentiment - Piper (FNM; FRE)

From Notable Calls:

Piper Jaffray is out with defending comments on Fannie (NYSE:FNM) and Freddie (NYSE:FRE) this morning noting GSE shares have gotten pummeled this week with FNM shares -30% and FRE -45%...

...Notablecalls: We have NYT reporting the U.S. government is considering taking over mortgage finance companies Fannie Mae and Freddie Mac if their funding problems worsen, in a plan that could leave shareholders nothing, citing people briefed on the matter.

These are pretty harsh statements that will likely send the shares down some more this morning. Yet, as Piper Jaffray notes, things are not as ugly as the media indicates.

Solar: Citi Cuts Applied Materials' Rating To Hold, Sees Samsung Cutbacks (AMAT)

AMAT is one of the class acts in solar. Unfortunately (for today anyway) they are also in chip equipment. From Barron's Tech Trader Daily:

Applied Materials (AMAT) shares are trading off sharply this morning after Citigroup’s Timothy Arcuri cut his his rating on the stock to Hold from Buy. He also cut estimates on KLA-Tencor (KLAC), Novellus (NVLS), Lam Research (LRCX) and Advanced Energy Industries (AEIS).

Arcuri reports in a research note that he sees AMAT’s Q3 semi equipment orders tracking down 5%-10% in sequentially off a Q2 that was at the low-end of guidance due to push-outs from Hynix that now also includes Samsung and Taiwan Semiconductor (TSM)....MORE

Oil: Iran has Photoshop, not afraid to use it

Update: "Oil: Apparently There's Even More to the Iran Missile Story".

I swiped that headline from the Waco Tribune. The Guardian asks "Has Iran joined the axis of Photoshop?" As the New York Times put it:

...In a sentiment no doubt echoed by news organizations everywhere, an MSNBC editor acknowledged that the four-missile picture was initially welcomed with open arms. “As the media editor working the msnbc.com home page yesterday, I was frustrated with the quality of a fuzzy video image we published of the Iranian missile launch,” said Rich Shulman, the network’s associate multimedia editor. “So I was thrilled when the top image crossed the news wires.”

Mark Mazzetti contributed reporting from Washington.

Top, the image that Agence France-Presse obtained from Sepah News on Wednesday. Below, another image that The Associated Press received from the same source on Thursday, which appeared to be taken from the same vantage point at almost the same time.

Gizmodo is having a contest:

Use Photoshop to Give Iran Even More Fake Technological Advancements

So I told you this morning about how Iran made its missile test photos look more impressive by adding another missile using the magic of Photoshop. Whatever, we can do better than that. You want to impress us, Iran? Let's see some serious tech power. We'll help. Your challege, Gizmodians, is to use Photoshop to create some sweet Iranian propaganda, showing their technological advancements that are heretofore unseen.

Create images of Iran showing off its new tech, then send your brilliant results to contests@gizmodo.com with "Iran Tech" in the subject line. I'll take the best submissions, choose some winners and show off the results in our Gallery of Champions next Tuesday. Get propagandizing!

As Fortold by the Prophecy: Oil Rockets to New High; Stock Market Crumbles

Okay, it wasn't prophecy but it was timely:

Market Commentary, July 9, 2008

Lifted from JibJab:

THAT MOMENT JUST BEFORE THE PAIN BEGINS

Al Gore should have mentioned the chocolate thing

From Elastic Waist, which Reuters describes as "A blog for women focused on size acceptance and self-esteem, featuring a video, The Daily Special, with celeb news and gossip, as well as weight and body image issues with a comedic twist":

...I cannot even believe that this hasn't made bigger news, but our chocolate crop is at risk! Why has no one stopped the presses? Industry insiders are predicting that in 20 years, the simple joy of chocolate will become so expensive that the average consumer won't be able to afford it regularly. Like, "a tank of gas" expensive! From CNN:

The problem is that cocoa is naturally a rainforest plant that grows in shady conditions surrounded by a high biodiversity, but recently hybrid varieties have been grown on cleared land as mono-cultures and in full sun.
While this will give higher short term yields, the soil quickly becomes degraded and the lifespan of plants can be cut from 75 or 100 years, to 30 or less. When the trees die and the land is exhausted the farmers must move on and clear more rainforest to plant cocoa.

Think of the implications, my darlings! No more warm gooey chocolate chip cookies, fresh from the oven. No brownies or cakes or Starbucks mochas. No baskets full of Easter goodies, no red and green Hershey's Kisses in December. No chocolate coins. No frozen ice cream treats. Gone. Kaput. All because we can't figure out how to manage our natural resources without killing the planet.

This inspires me to increase my 401(k) contribution, because seriously, my retirement years are clearly going to be spendy.

This raises two questions:
1) Does this explain the former future's weight gain? He is BFF with Kofi Annan. Kofi Annan is from Ghana. Ghana is the world's second largest cocoa producer. We know these things. See:

Food-riot watch; and: The world wants chocolate! (HSY; NSRGY)
Solar Shines for Applied Materials AND Cocoa at 23 Year High (AMAT; BRK.A)
Chocolate and bonbon prices to skyrocket
How Buffett Made a Killing in Chocolate, And Warren's Letters to Shareholders
Warren Buffett and the Chocolate Wars

2) What the hell is Climateer doing hanging out at Elastic Waist and using BFF on the blog?

Hangin' @ EW? No comment.
The BFF I can explain. I learned of the term from "Melissa Moody’s Ratings Alternative (MBI)":

...My ratings will be simple:

• BFFAE (Best Friends Forever and Ever)
• BFF
• BFFLAF (Best Friends For Like Almost Forever)
• BFFBAS (Best Friends Forever But Also a Slut)
• BFFBIHH (Best Friends Forever But I Hate Her)
• Whore

MBIA (NYSE: MBI)

Previous Rating: BFFAE
New Rating: BFFBAS

Ratings Rationale: MBIA used to have a good little thing going. Yeah, like not everyone thought she was totally hot, but everyone was like “Wow she has a good little thing going”, she was funny and nice, and who doesn’t like funny and nice? Not Melissa, I’ll tell you that. And she was a go-to girl anytime a friend was jammed up with boy problems and needed ice cream.

But then she changed, and we all saw it happening. She wanted to be totally hot and started hanging out with guys out of her league. Yeah she looked great, but the diet and the clothes and the whole lifestyle changed her. Rumors started about what she was doing behind the scenes at muni parties and at CDS keggers....MORE

China Fact of the Day

From Marginal Revolution:

China is the world's largest importer of chicken feet and the United States is the world's largest exporter. Tyson Foods alone send some 2.8 billion chicken feet to China every year. The chicken feet are sold at Chinese Wal-Marts (among other places) which in China are upscale and appreciated for their high quality American goods.

Warren Buffett's Sun Valley Thoughts

From CNBC:

...Buffett told us the data he's seeing from Berkshire Hathaway companies reveals the economy's decline has accelerated over the past six weeks, more so than the preceding few months. He noted that while the economic situation must be weighing on the minds of many of the CEOs here, they aren't talking about it much....

As Mr. Buffett says in the 2007 annual report, regarding just the non-insurance, non-utility businesses:

Our activities in this part of Berkshire cover the waterfront.

Their 'Manufacturing, Service and Retailing Operations' comprise some seventy* businesses. Warren has access to really good market and economic intelligence.

*I lose track of the acquisitions but that number is close enough for this purpose. At least I don't have to follow divestitures.

Commodity boom sends thatch prices through the roof

I liked the headline. From MarketWatch:

Surveyor Martin Wilde is running five months behind schedule in restoring an 18th century thatched cottage in Somerset County, in Southwest England. The costly delays are due to the last thing Wilde expected -- a shortage of wheat straw....

GE Beats The Street, NBCU Still A Dog

We had six links on GE yesterday and may have six today, by your leave. The behemoth fascinates. From 24/7 Wall Street:

GE (GE) hit Wall St.'s EPS forecast at $.54 and beat revenue estimates coming in at $46.9 billion above the $45.3 billion concensus.

The revenue increase was 11% over the same quarter last year. GE also reaffirmed its EPS forecast for the year at $2.20 to $2.30.

The company's powerful infrastructure group had a 24% increase in segement profit. The number was amazing give the unit's size. Its revenue for the quarter was $17.6 billion....MORE

A Tough Market: "Uninterrupted Declines"

From Bespoke Investment Group:

If you've forgotten what a rally feels like, you're probably not alone. The S&P 500 hasn't had a 2% gain (in one day or over multiple days) since early June. In the top chart below, we show all periods where the S&P 500 went more than thirty days without a 2% rally. As shown in the chart, these uninterrupted declines are not too uncommon, as there have been 41 other periods since 1940. What makes this period more painful, however, is the magnitude of the declines during this stretch....MORE, including chart.

A Better Solar Collector

A wildcard in renewable energy investing that scares me almost as much as political risk is technology risk. You don't want to be the last investor to get the memo that one of your portfolio names' technology just became obsolete. Yesterday we had "Nano-Etching Breakthrough Could Deliver Cheaper Solar". Today MIT's Technology Review brings us this news:

A more efficient way to concentrate sunlight could reduce the cost of producing solar power.

Looking to make solar panels cheaper, MIT researchers have created sheets of glass coated with advanced organic dyes that more efficiently concentrate sunlight. The researchers, whose results appear in this week's issue of Science, say that the coated glass sheets could eventually make solar power as cheap as electricity from fossil fuels.

The researchers show that the glass sheets can reduce the amount of expensive semiconducting material needed in solar panels and provide a cheap way to extract more energy from high-energy photons, such as those at the blue end of the spectrum. "This could be the cheapest solar technology," says Marc Baldo, a professor of electrical engineering at MIT. "And I think one day, it could be competitive with coal."

The simple, flat sheets of glass have a number of advantages over previous solar concentrators, devices that gather sunlight over a large area and focus it onto a small solar cell that converts the light into electricity. Solar concentrators in use now employ mirrors or lenses to focus the light. Because the new glass sheets are lighter and flat, they can easily be incorporated into solar panels on roofs or building facades. They could also be used as windows, which, connected to solar cells, could generate electricity. What's more, mirrors and lenses require mechanical systems for tracking the sun to keep the light focused on a small solar cell. These tracking systems add cost and can break down over the decades that solar panels are made to be in service. The flat glass concentrators don't require a tracking system....MORE, including video.

Jim Rogers Creates Commodities Index for ETF; Sounds Off on Economy

From ETF Trends:

Investing legend Jim Rogers has put together a new index targeting commodity producers, which will soon underly an exchange traded fund (ETF).

The Rogers Van Eck Hard Assets Producers Index (RVEI) gives investors a chance to ride the commodities bull by accessing a universe of producers from all over the world. Most of the index’s components are producers of raw materials for agriculture, alternative energy, base and industrial metals, energy, forest products and precious metals.

“From what I can see, there is not another index like it,” he told us. “There are no indexes that are specifically targeted at stocks that are major producers of commodities.” The others, he says, are primarily made up of American and Australian companies....MUCH MORE

Royal Bank of Scotland: Short U.S. Government Debt, Buy Fannie Mae

This is the same RBS that put out the "Global Crash Alert". From Bloomberg:

Investors should buy default protection on U.S. Treasuries as the odds increase that the government will have to bail out Fannie Mae and Freddie Mac, analysts at RBS Greenwich Capital Markets told clients today.

The possibility that the Treasury could lose its top AAA credit rating if it's forced to bail out the two government- sponsored enterprises will likely cause credit-default swaps on government debt to widen while contracts tied to the senior debt of Fannie and Freddie narrow, Kenneth Hackel, the managing director of fixed-income strategy at RBS Greenwich in Greenwich, Connecticut, said in an e-mailed note to clients today.

``It was only a couple of months ago that Standard & Poor's came out and said that if they had to do a full-blown bailout, they could see taking down the rating on the U.S. Treasury,'' Hackel said in an interview today. ``And then how wide would it get? A lot wider than it is now.''>>>MORE

Will GE get out of hot water by selling NBC to Time Warner? And: The Deindustrialization of America

Immelt says no but that's the answer whether they plan to or not. Maybe the Weather Channel was the lipstick to pretty up NBC?
From Blogging Stocks:

General Electric (NYSE:GE), which reports earnings tomorrow, has indicated that it may spin-off its weakest divisions -- the firm's consumer and industrial units. No one cared, and the stock did not move. The action would not be enough, nearly enough to pull GE away from its multi-year lows.

What investors would really like to see is GE broken into little pieces, the smaller the better. The only growing and hardy business that GE has now is its huge infrastructure operation. It would make a nice stand-alone company.

The unit that investors most want to see GE kick out the door is NBC Universal, a mismatch with all of GE's other businesses....MORE

From Deal Journal:

GE’s Big Sale: The End of The End of Industrial America

2008, the year of capitulation.

It has been decades in the making. One need only look back at The Wall Street Journal of 1984, when a feature article on Cleveland’s troubles illustrated the broader “decline of smokestack America.”

Companies like General Electric and General Motors behaved accordingly, pushing deeper into the financial sector, making loans and writing mortgages. The GE of 2008 is a far different animal than the GE of 1984, as it well should be.

But some things were hard to let go. GE’s refrigerators. GM’s Pontiac. Or even Motorola’s telephone-network equipment. These were the family heirlooms, the vaunted picture of great-grandma and grandpa above the mantle.

This year shows, though, that this is the moment for finally letting go. All these companies are trying to, or are likely to, dispose of these businesses in some way....MORE

Airtricity founder funds new wind company

From one success to the next? We had a mention of NTR's investment (after selling off their 51% piece of Airtricity) into Sterling (a cool $100 mil.). Now via The Guardian we catch up with Airtricity's founder:

The founder of wind energy company Airtricity, sold early this year for 1.9 billion euros ($2.98 billion), wants to raise 300 million euros to fund a new company Mainstream Renewable Power, he said on Tuesday.

The new Dublin-based company will develop wind, concentrated solar power and marine power projects, and aims to sell some resulting income to investment funds looking for annual 7 percent returns and keep expected profits above that for itself.

Chief Executive Eddie O'Connor has ploughed most of his fortune from the recent sale into the new company and rejected criticism that renewable energy is too costly or that capacity bottlenecks made ambitious targets unachievable.

"It is realistic," O'Connor said of UK targets announced two weeks ago to get about one third of its electricity from renewable sources by 2020, compared to less than 5 percent now....MORE

Climate Change Economics

From the Washington Post ( The writer is director of the Congressional Budget Office.):

President Bush and other leaders of the Group of Eight pledged yesterday to try to reduce greenhouse gas emissions 50 percent by 2050. A key consideration in evaluating climate policies is the economic cost of cutting emissions. That cost could be reduced, perhaps by a lot, depending on two key questions about domestic climate policies: whether flexibility is provided when emissions are reduced and whether allowances to emit carbon are sold or given away.

The most common proposal for reducing carbon emissions involves a cap-and-trade program. Such programs provide flexibility regarding where and how firms reduce emissions. That's a good start, but research suggests that businesses also need flexibility about when they reduce emissions if they are to minimize economic costs. Changes in climate reflect the accumulation of greenhouse gases in the atmosphere over long periods; the impact depends little on year-to-year fluctuations in emissions. By contrast, the economic cost of reducing emissions can vary a lot from year to year -- because of factors such as weather, economic activity or the state of technology....MORE

HT: Professor Mankiw who says:

"In today's Washington Post, CBO director Peter Orszag says that if a cap-and-trade system for carbon is to be maximimally effective, the allowances should be sold rather than handed out, and fluctuations in the price of an allowance over time should be limited. In other words, the cap-and-trade system should be designed to resemble a carbon tax.

Makes sense, but it seems like lawmakers are going through a lot of needless work just to avoid the word "tax."'

The Wall Streeter’s Guide to Going to Prison

From cityfileNY:

...A word of caution, though, to high-finance criminals facing the prospect of time behind bars. You do not want to show up to prison totally unprepared a la Sherman McCoy in Bonfire of the Vanities. Certain matters should be taken into account before you head off to the clink. There are even ways to parlay your riches and master-of-the-universe shtick into preferential treatment! Tips for disgraced Wall Streeters on how to survive behind bars after the jump.

First off, you'll need to hire a "post-conviction specialist." This is an absolute must, and should be done long before you show up at the prison gates. For a high five-figure sum, a prison consultant will help minimize the time you spend behind bars, divert you to the cushiest facility possible, and prepare you psychologically for the shocking realization that for however long you're locked up, you will be forced to make do without your Blackberry and Starbucks frappucinos.

Like to play tennis? Your consultant might just be able to arrange a spot at one of the federal prison camps in California that has tennis courts on the premises. If, on the other hand, you're an alcoholic, your consultant may be able to help you get admitted to a rehab program in prison, which could even knock a few months off your sentence....MORE

HT: 1440 Wall Street who point out:

...Conjugal visits are an issue, although truth be told, a little down time, away from the wife, is one of the few upsides to white collar crime. But there is really only one guy to hire; and if the Feds are circling, you might want to put him on retainer:

For the absolute crème-de-la-crème in prison consultants, the man you probably want to talk to is Herbert J. Hoelter. His illustrious client list includes Michael Milken, Ivan Boesky, Adelphia founder John Rigas, Alfred Taubman, and Martha Stewart. Do keep in mind, though, that unless you’re headed to a state prison—and given what you’ve done, that’s very unlikely—even a top-of-the-line prison consultant won’t be able to arrange for conjugal visits....