Barclays warns of a financial storm as Federal Reserve's credibility crumbles

Ambrose Evans-Pritchard grooves on this kind of story and because he looks for them, he finds them. It was he who brought us RBC's warning "Royal Bank of Scotland: Global Stock and Credit Crash Alert". He's useful for putting stuff on the radar, not so much for inflection/turning points.
From the Telegraph:

US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.">>>MORE

Some Insight into the Markets and Economy as We End the Second Quarter

Cassandra gets all serious on us.
From Cassandra Does Tokyo:

Notes To Self - End Q2 2008

This one is not for you, but for me...for the internal dialogue I run with myself - the one that integrates and assimilates the masses of new information arrival and worldly observations in order to update my forecast of the future. Necessarily, such a dialogue must be honest and as much as possible free from flowery language, normal humourous observations and effect to insure its integrity. Here goes...

Markets are pushing the commodity and the inflation meme to an extreme. And this swing of the pendulum from deflation in 2002 to the present was forecasted from the moment US authorities decided to rescue markets and the economy from cyclical recession by overly loose fiscal AND monetary policies , and in earnest from 2004 when Asian mercantilists joined the fracas by (i) continuing ZIRP and nearZIRP (ii) by not liquidating previously accumulated USDs (iii) and by unprecedented reserve accumulation by China, (iv) and other partially or unsterilized USD interventions and accumulations. Expectations in modernity are for the pendulum to swing with great speed - the speed with which epiphanies conjure themselves in market participants heads. But since these are policy-driven consequences reinforced by market feedback loops, the price and economic trends that emerge are strong and persistent....MORE

First Eagle manager Eveillard takes dim view of U.S. stocks; favors Japan

The RGE Monitor story (below) hinted at Japan, here Jean-Marie says it out loud. He don't much care for Greenspan either.
From MarketWatch:

Mutual-fund manager Jean-Marie Eveillard is a veteran buyer of value stocks, and when he surveys the global investment landscape nowadays, years of experience make him a cautious shopper.

..."When financial history is written five or 10 years down the road," he added, "Greenspan will be seen as the worst Fed chairman since the Fed was created in 1913."...

...Still, North American firms in general don't really attract Eveillard, who is a native of France and is based in New York. Nowadays he's more interested in putting money into Japanese stocks, which make up 30% of his fund, and Western Europe, where another 30% of assets are committed.

He's also looking closely at the emerging markets of Asia. "The future lies in Asia," he said. "We have to adjust to the fact that that's where the action is going to be."

So later this summer, Eveillard will hear from one of the fund's analysts about potential investments in India.

"We'll get our heads together and try to figure out whether we like some of those businesses and whether the securities are available at reasonable prices....MORE

Navigating Through Stagflation

From RGE Monitor:

Today we will focus on how currencies are faring while central banks around the world are caught between a rock and a hard place with growth slowing and inflation ticking dangerously higher.

Given the moderate core inflation trends, recent hawkish Fed rhetoric seems aimed more at assuaging inflation expectations than signaling a series of aggressive rate hikes this year. At most, the Fed's accommodative policy stance may turn neutral this year but it seems still too soon for it to turn restrictive, considering the unresolved financial crisis and housing market distress. Across the Atlantic however, restrictive policy by the ECB looks more likely: The euro area's balance of risks is tilting towards inflation as the bigger threat to the economy than slowing growth, at least in the short-term. A wider interest rate gap between the Fed and the ECB raises the risk of a re-test of the EUR/USD's all-time high before the year is out. A weaker dollar could mean high commodity prices will stick around for the balance of the year, offsetting some of the anti-inflationary effect of ECB rate hike(s).

Meanwhile in emerging markets, attempts at fighting inflation have been limited by their pegged currencies and, as a result, haven't sufficed to turn real interest rates positive and dampen commodity demand. With emerging markets reluctant to make a large revaluation against their currency pegs, some are calling for a coordinated revaluation of developed country currencies to stem the rise of global inflation....MORE

So, When do We Rally?

I just heard that the DJIA is back to 2006 levels and that GM is back to 1955 levels.
From MarketBeat:

Days like this are the type that cause market mavens to break out the word “capitulation,” and attempt to divine the myriad signals that suggest that yes, we have indeed reached bottom, and can only go up from here....READ IT ALL

Wind: Duke Energy buys Catamount Energy for $240 million and assumed debt

From the Triangle Business Journal:

Duke Energy Corp. has acquired Catamount Energy Corp. from Diamond Castle Holdings, a transaction that will significantly increase Duke's wind-energy operations.

The deal is valued at $240 million.

Catamount Energy, based in Vermont, was formed in 1992. Since 2001, the company has developed wind projects in the United States and the United Kingdom. Catamount has 300 megawatts of renewable energy in operation, including the Sweetwater project in Texas, one of the largest wind-powered facilities in the world....MORE

TradingMarkets adds (from DUK's press release):

...Today's acquisition, valued at approximately $240 million plus assumed debt, is a continuation of Duke Energy's strategy to develop renewable energy. In May 2007, Duke purchased Tierra Energy, a leading wind developer in Austin, Texas. The combined entity will have more than 5,000 megawatts of wind energy under development in 12 states and approximately 500 megawatts of operating assets by the end of 2008.

Today's announcement follows several other recent renewable initiatives announced by Duke Energy, including a $100 million plan to install electricity generating solar panels at up to 850 North Carolina sites; a plan to purchase electricity output from the nation's largest photovoltaic solar farm to be built in Davidson County, N.C.; a 20-year contract to purchase 100 megawatts from a wind farm in Indiana; and a request for proposals to purchase significant amounts of electricity from renewable energy providers in Ohio....

Europe: 'No exceptions' for member states on auctioning: Dimas

A snippet from PointCarbon:

All EU member states must auction 100 per cent of their allowances to power companies and any exceptions made for coal-dependent countries risks undermining the 27-nation bloc's target on cutting emissions of climate-changing gases, Europe's environment commissioner Stavros Dimas said in a speech in Poland on Thursday.

Société Générale: “We see a y-shaped global recession. We are going down before looping backwards”

From FT Alphaville:

"We had promised more on the latest missive from Societe Generale’s Albert Edwards - so here it is.

This is evidence, we think, that only Edwards can out-Edwards when it comes to alarmist market strategy report. It’s just marvellous".

First, some context:

The entrenched bias towards bullishness infects virtually all parts of our business and means investing on the basis of forecasts is a waste of time…

Yet there is no big conspiracy about this. It is simply that an equity/economic bear standing out from the crowd runs the risk of being very wrong (so too obviously do the bulls, but funnily enough no-one seems to mind that). Being bearish and being wrong attracts the derision of the salesforce (though not necessarily the clients) which pressurises management to remove the offender....MORE

Invesco PowerShares to List Global Wind Energy ETF (PWND)

This follows on the heels of the First Trust Wind ETF (FAN).
From CNN Money:

Invesco PowerShares Capital Management LLC, a leading provider of exchange-traded funds (ETFs), announced today the anticipated listing of a global wind energy portfolio. The new ETF is expected to list on The Nasdaq Stock Market.

The anticipated ticker symbol and ETF portfolio name follows:

--  PWND - PowerShares Global Wind Energy Portfolio

Index Country Weightings as of 6/23/2008

Index Country Weight
Belgium 5.67%
Canada 3.14%
Denmark 14.00%
France 8.00%
Germany 16.52%
Greece 1.24%
Hong Kong 5.03%
Japan 2.29%
Spain 22.69%
Switzerland 3.75%
United Kingdom 6.13%
United States 11.55%

Trina Solar Ltd. Added to Goldman's Conviction Sell List (TSL)

I've only seen this at Trade the News. True or not, the September calls are looking very attractive.
From TtN:

Yesterday 08:47pm

Trina Solar Ltd. Added to Goldman's Conviction Sell List; Price Target cut to $23 from $38

- Shares cut to sell from neutral

Last trade $35.36 down $2.73 (7.17%)
The stock qualifies for inclusion in the Russell Global Index, which is rebalancing after the close June 27, and is on Russell's addition list.
The next earnings release is scheduled for Aug. 21, the Aug. options expire 8-15 which is why I say September (exp. 9-19) calls. Via Yahoo:

Strike Symbol Last Chg Bid Ask Vol Open Int 10.00 TSLIU.X 38.60 0.00 24.90 25.70 1 19 12.50 TSLIV.X 29.00 0.00 22.40 22.90 0 18 15.00 TSLIY.X 18.60 0.00 19.90 20.60 0 9 17.50 TSLIW.X 29.90 0.00 17.50 18.10 7 52 20.00 TSLID.X 17.90 0.00 15.40 15.80 1 36 22.50 TSLIX.X 15.80 0.00 13.30 13.70 10 138 25.00 TSLIE.X 11.60 2.10 11.30 11.70 32 217 30.00 TSLIF.X 8.40 1.70 8.00 8.40 33 403 35.00 TSLIG.X 5.70 1.20 5.30 5.70 15 679 40.00 TSLIH.X 5.00 0.00 3.50 3.80 66 640 45.00 TSLII.X 2.40 1.00 2.25 2.45 28 1,235 50.00 TSLIJ.X 2.15 0.00 1.50 1.55 26 930 55.00 TSLIK.X 1.40 0.00 0.95 1.05 3 458 60.00 TSLIL.X 0.85 0.00 0.55 0.65 10 1,318 65.00 TSLIM.X 0.60 0.00 0.30 0.45 7 361 70.00 TSLIN.X 0.75 0.00 0.15 0.30 60 317 75.00 TSLIO.X 0.80 0.00 0.10 0.20 10 135 80.00 TSLIP.X 0.20 0.00 N/A 0.15 2 182

Five Inconvenient Truths…Of Environmental Journalism

The Columbia Journalism Review's Observatory column (blog?) has had a couple interesting stories on coverage of the environment (we link to last week's below).
From the CJR:

...Whether or not Wired’s analysis is correct, it goes to show that reporting on climate-related issues is constantly frustrated by inconsistencies such as emissions balance sheets. What is green one day is gross the next, corn ethanol being the perfect example. So as much as The Observatory loathes the abuse of this phrase, we had to ask ourselves this: What are the “inconvenient truths” about environmental journalism? We came up with a five-point list, then fact checked it with Tim Wheeler, the president of the Society of Environmental Journalists and a reporter at the Baltimore Sun. Here’s what we compiled.

1) It Ain’t Sports Writing: A reporter covering, say, baseball doesn’t have to define a home run in every article, but a reporter covering climate almost always has to remind readers what greenhouse gases are. That chews up space—especially in traditional print publications where physical restrictions can chop a nuanced, thirty-six-inch piece into an oversimplified, ten-inch disservice to readers....MORE

From June 20:

“Green Fatigue” and “Eco Anxiety”

It’s not just the palpable frustration with Greenpeace solicitors on Broadway this summer — according to an article in the most recent New York Times Sunday Styles section, people are too overwhelmed by the command to be “green” to do much about it anymore....

10 Questions for eSolar’s CEO Asif Ansari

One of the things earth2tech does best is their "10 Questions". This one's good but it reminded me of their Nanosolar interview which was a knockout (link below)

From earth2tech:

eSolar is one of a dozen startups that are looking to build solar thermal plants in the deserts of California. While the company says it’s using the lessons of infotech — computing and algorithms — to make low cost modular solar, we were wondering what really makes eSolar stand out? The company has certainly gotten a lot of attention — receiving at least $130 million from Google.org, Bill Gross’ Idealab, and other investors, and inking a deal with California utility Southern California Edison for a 245 MW solar thermal power plant. We thought we’d check in with eSolar’s CEO Asif Ansari and see what all the fuss is about.

1). There’s about a dozen other companies building solar thermal plants in the desert, why will eSolar be a leader in this area?

eSolar is producing easily scalable and rapidly deployed concentrating solar power plants and we’ve brought the minimum economic size of our power plants down to just 33 MW. We build power plants in these 33 MW modules, and replicate the number of modules depending on the size of plant a utility needs, so it’s just as easy for us to build a 33 MW plant for a smaller utility as it is to build a 245 MW or larger plant for a huge utility like Southern California Edison.

This uniform modularity makes it easier for any sized utility to incorporate concentrating solar thermal power into the grid. It also substantially increases the addressable market in developing countries. Most other companies in the United States right now are only building huge power plants, even though companies such as Acciona and Abengoa are also following the trend toward the smaller, mid-sized utility-scale plant in projects in Spain.

2). eSolar has said its replacing “expensive steel, concrete and brute force with inexpensive computing power and elegant algorithms.” Can you elaborate on lessons learned from the Internet and IT worlds?>>>MORE

From last December:

Very Deep Insight on Solar Energy Investments: "10 Questions for Nanosolar CEO Martin Roscheisen"

GE's PrimeStar Reveals Secret Strategy to Kill First Solar (FSLR)

That's Clusterstock's headline, here's the story:

General Electric (GE) bought a majority stake in Cadmium-Telluride (CdTe) thin film PV solar module producer PrimeStar earlier in the year. This acquisition was a warning shot at market-leader First Solar (FSLR) and signaled that GE was serious about its pledge to have a $1 billion solar buiness within 3 years.

No one knows much about the stealthy PrimeStar. However, Fred Seymour, PrimeStar's VP of technology, spoke last week in San Diego on a variety of issues at IntertechPira's Photovoltaic Summit. FabTech.org has the details:

PrimeStar believes the five key areas for thin-film process development are:

• efficiency
• uniformity
• repeatability
• stability
• cost
  

On Competition, Consolidation and Safety:

Noting the growing number of CdTe players, he said "there is a lot of froth in the market" and expects to see significant consolidation as well as the establishment of strong(er) supply and sales channels. As for the challenges and opportunities facing the sector, he cited the perceived toxicity risks with cadmium, then discounted it, noting among other things how the Cd is inherently "sequestered" safely within the modules....

Modules will be produced "when we're ready," Seymour said coyly, "it's important not to put out product too early."

Tellurium is not scarce:

He also mentioned the perceived scarcity of tellurium, but the old mining guy (OK, he's not old, so "former mining guy") disputed such claims, saying there's a 300-500 metric ton supply of Te available. While some price disruptions are likely, there's plenty of the element available in the seabed and elsewhere, "if," as he told me, "you know where to look."

We'd expect PrimeStar to say that they can beat the competition, Cadmium is safe, and their Tellurium supply is fine. What else are they going to say?

First Solar bulls shouldn't panic, though, at least not yet.

Here's Clusterstock's main page.

Sir Nicholas Stern: Cost of Carbon Biz Has Doubled to 2% of World Economy

No it hasn't.
Sir Nick was low balling the cost of his proposals last year.
On May 31, 2007 we wrote:

...we're starting to get to the real number and we should be able to keep it all under a third-of-a-trillion dollars per year for the U.S. contribution (before adding in direct costs like putting vodka in your tank but that's okay, the Stern number of 1% of World Gross Product should be 2% minimum so we've got incorrect estimates piling on incorrect estimates anyway).

I don't know why he was having fun with numbers but he was. If a humble blogger can work the abacus I'm pretty sure Stern knew.
If he didn't, here's a headline from the Times of India, September 25, 2007:

Cost of dealing with climate change: 2% of GDP

...This was disclosed on Thursday by Jayant M Mau-skar, joint secretary in the environment ministry, at a conference on climate change organised at the Vatavaran Film Festival here. Mauskar said, "In 2000-01, India was spending 0.63% of its GDP on climate change adaptation and mitigation which has now risen to 2.17%. So we can say that Nicholas Stern's argument (that climate change action does not hurt economy much) is perhaps not true."

The actual dollar amount for the U.S. now looks to be $400-500 Billion per year.
From The Guardian:

The author of an influential British government report arguing the world needed to spend just 1% of its wealth tackling climate change has warned that the cost of averting disaster has now doubled.

Lord Stern of Brentford made headlines in 2006 with a report that said countries needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels. Failure to do this would lead to damage costing much more, the report warned - at least 5% and perhaps more than 20% of global GDP.

But speaking yesterday in London, Stern said evidence that climate change was happening faster than had been previously thought meant that emissions needed to be reduced even more sharply....MORE

Sir Nicholas Stern: Carbon Cowboy

Yee haw!
Sir Nick is vice-chairman of IDEAcarbon's parent, IDEAglobal*.
From Research Recap:

IDEA Carbon today launches The Carbon Ratings Agency, “the world’s first independent carbon credit ratings service.”

The service will provide detailed credit ratings for carbon offset assets in the CDM, JI and voluntary markets. Each asset studied will be given a rating based on a detailed analysis of the underlying project, leading to an assessment of the likelihood of it delivering its stated emissions reductions in the stated time period.

The Carbon Ratings Agency also considers the economic and social development benefits that the project does, or does not bring.

The Carbon Ratings Agency says it will provide ratings to market participants both on a mandated basis (where project owners or investors commission the agency to rate their carbon assets) and through the Agency’s Market Initiated Ratings Service, which will give subscribers access to a representative range of carbon asset ratings on an ongoing basis....MORE

Just as the "verifiers"** have a position equivalent to that held by the appraisers in the housing bubble, the "raters" will be the Moody's, S&P's etc.

*From an April comment at Environmental Capital:

...It gives a bit of perspective on Mr. Stern’s comments in Bali:
“Bali will set in motion a process that will define the structure
of the carbon markets for decades to come”
“By 2020 the global carbon market could be worth EUR 240-
450 billion”

**From our earlier post "Will carbon-trading happen? Goldman hopes so, backs APX":

The verifiers hold exactly the same position in the carbon world as appraisers do in the mortgage biz.

As we get into structured carbon finance (carbon notes, carbon backed securities) really slicing and dicing the cash flows, there will be room for all kinds of shenanigans. The key difference is that whereas Mortgage Backed Securities had real estate (even if overvalued) backing them, CBS's will be built on the absence of an invisible gas. Is it any wonder that GS is interested?

Corn futures climb higher on weather concerns

Get used to this headline, we'll be seeing it for a while.
From MarketWatch:

Corn futures rose Wednesday on concerns that cooler weather in the Midwest could slow the growth of corn crops, which have already been damaged by massive flooding.

Other agriculture commodities futures also moved higher as the dollar edged lower after the Federal Reserve hold the key interest rates unchanged at 2%.

Temperatures in the Corn Belt, where Iowa, Illinois and other top corn producers are located, have averaged two to four degrees below normal in the past week, according to AccuWeather.com.

"If it continues, it will push back the corn's maturation date," said Dale Mohler, senior meteorologist at AccuWeather. Cooler temperatures can potentially translate into a delayed harvest, he said....MORE

Which Former Goldman Sachs Chairman Should We Listen to on Oil Market Speculators?

Jon Corzine via Bloomberg:

New Jersey's Corzine Calls for Oil Trading Oversight

New Jersey Governor Jon Corzine called for increased oversight of oil commodity trading, saying ``some of the speculative elements'' may be driving oil prices ``beyond what seems reasonable.''...

Henry Paulson via Forbes:

US Treasury's Paulson does not see evidence speculators driving oil price UPDATE

High oil prices are a burden on the U.S. and world economies but there is no evidence that speculators are to blame for the run-up in oil prices to near record highs, U.S. Treasury Secretary Henry Paulson said today.

Regional Nuclear War Could Have Drastic Climate Impact, Experts Say at AAAS

From the American Association for the Advancement of Science.

Masters Capital Management Having a Good Day

With oil down $4.50, Michael Masters (he of senate testimony on speculation in the oil markets fame) is making up for recent losses. As we pointed out June 3, some of the public names in his hedge fund would react positively to a drop in oil prices:

AMR- up 7.1%
DAL- up 6.6%
LCC- up 14.7%
UAUA- up 4.5%
GM- up1.1%

Here's Mr. Masters May 20 testimony.

Peak Phosphorus: Scientists warn of lack of vital phosphorus as biofuels raise demand

From the Times of London:

Battered by soaring fertiliser prices and rioting rice farmers, the global food industry may also have to deal with a potentially catastrophic future shortage of phosphorus, scientists say.

Researchers in Australia, Europe and the United States have given warning that the element, which is essential to all living things, is at the heart of modern farming and has no synthetic alternative, is being mined, used and wasted as never before....

...In the past 14 months, the price of the raw material - phosphate rock - has surged by more than 700 per cent to more than $367 (£185) per tonne....MORE

HT: naked capitalism