Solar Energy Companies Worldwide Threatened by Cuts in Government Subsidies - Guest Post

Photovoltaic power plant near Po river
Photovoltaic Power Plant (Italy) - NightFlier on Flickr
Guest post by OilPrice.com

In any country, at the end of the proverbial day, both energy utilities and consumers are finally interested in the technologies that generate a kilowatt of electricity most inexpensively, all other considerations aside.

Accordingly, all countries involved in solar energy are optimists, but nascent industrial efforts to generate power on a commercial scale from the sun are without exception dependent upon current government subsidies to enter the market, which is littered with optimism, the failure of U.S. federally subsidized company Solyndra being Exhibit A.

But countries worldwide are seeking government support to shield their embryonic solar industries from market realities until conditions improve, and few countries are more caught between the realities of the "free market" and national priorities in developing energy alternatives than Israel, whose energy imports remain a major topic of concern to the government. Subsidies are viewed as critical worldwide by solar producers, especially in a recession market, but fiscal realities are asserting themselves, which alternative energy companies warn could kill their efforts.

America Going Green: U.S. to Provide 71% of World's Biofuels by 2021? - Guest Post

2008-09-28 - Liberty Corn Maze - 0020
Source: Flickr (Smitme)
Guest post by OilPrice.com

A recent study, released on 11 October, "Biofuel Markets and Technologies" released by Pike Research states that the global biofuel market will double within the next decade to $183.3 billion from its current level of $82.7 billion, with ethanol production accounting for $78 billion of future worldwide biofuel production, while predicting that biodiesel production will reach $25.5 billion. Perhaps not surprisingly, Pike Research predicts that the US will become the world's leading biofuel producer, accounting for 71 percent of alternative fuel by 2021.

Colorado-based Pike Research on its website defines itself as "a market research and consulting firm that provides in-depth analysis of global clean technology markets."

How realistic a prediction is this? Many in the media are utilizing the company's press release on the gist of the report, as one has to be a user to login even to find out the price of the report, which the website helpfully notes, contains 144 "Tables, Charts, Figures."

So, is America about to go ever more green to raise ethanol?

Distressed MF Global Is Trying To Sell Its Futures Brokerage, Goldman Buying MF Assets?

MF Global Holdings (MF) Stockcharts.com
MF Global (MF), a world leading broker-dealer for "futures and options, commodities, fixed income, equities and foreign exchange" run by John Corzine, closed at $1.20 today, down from $4 at the beginning of October. MF Global's bonds maturing on 8/8/2016 (MF.AD, 6.25% 6.25% fixed coupon, FINRA has variable not sure why) last traded at 49 cents on the dollar with a 25.20% yield (source: TRACE at finra.org). Are there credit default swaps? MF Global is also "one of the 22 primary dealers authorized to trade U.S. government securities with the New York Fed". It looks like MF is on the wrong side of a few trades in european sovereign debt, or actually repurchase agreements collateralized by euro government bonds.

Bloomberg on their exposure:
"The firm, which has a market value of $198 million, holds $6.3 billion of sovereign debt from Italy, Spain, Belgium, Portugal and Ireland that it’s using in repurchase agreement trades with customers." (Bloomberg)

MF was just downgraded to junk by Moody's and Fitch, and, according to Reuters, some MF Global clients are pulling their money from the brokerage. As a result, MF Global tapped two credit lines and is now trying to sell-off its futures brokerage unit to raise capital ($765 million?).

Dick Bove, analyst at Rochdale Securities, thinks Goldman Sachs is scooping up MF Global assets at distressed prices, and believes they will make a "huge windfall profit" (watch after jump). This reminds me of Dick Bove talking about Lehman on Bloomberg in August 2008 during the financial crisis! The Wall Street Journal, via Fox Business, mentioned there were other firms interested as well. Watch Charlie Gasparino, of Fox Business, explain what's going on after the jump.
"According to The Wall Street Journal, Goldman, State Street and Australia’s Macquarie are all either eyeing New York-based MF Global or its parts. Other firms may also be looking at the company, but any deal would be expected to happen quickly as its stock plunged below $1 on Friday." (Fox Business)

Update: J.C. Flowers, MF Global in Talks (DealJournal). J.C. Flowers already owns 6% of MF Global's preferred stock and is on the board. J.C. Flowers injected $300 million into MF in 2008 after the firm suffered $141 million in trading losses from rogue trades in wheat futures. According to DealJournal, "they cautioned a deal may not happen". Seems like principal trading activities have worked out quite well for financial institutions recently (wtf?).

Links: Euro Deal, Greek Banks, Dalio, Chanos, Birinyi, S&P's Biggest Monthly Gain Since 1974

Greek Bank Investors Facing Wipeout (Bloomberg)

China on ‘Bigger, Faster Treadmill’: Jim Chanos of Kynikos Associates (Bloomberg, Video)

Italy 10-Year Auction Yields Hit New Euro Lifetime High (Reuters)

Goldman Economist Says Chinese Inflation ‘Basically Controlled’ (Bloomberg)

S&P 500 Extends Best Month Since ’74, Euro Rises (Bloomberg, Carpe Diem) *see monthly candlestick chart below

There's A 30% Chance Of Another Global Downturn - Bridgewater Founder Ray Dalio (WSJ, sub)

Video of Ray Dalio on Charlie Rose (CharlieRose.com)

Risk on the rise as political leaders give in to mob rule (Financial Times)

The Great American False Dilemma: Austerity vs. Stimulus (Gregor.us)

Birinyi Associates: Market at Extreme Overbought Levels (CNBC)

Albert Edwards: "The Eurozone Crisis Will Get Much, Much Worse" And "The ECB Will Print" (Zero Hedge)


All about the euro plan, Greek bond haircut and Greek CDS

EURO SUMMIT STATEMENT - 10/16/2011 (consilium.europa.edu PDF)

The euro deal: No big bazooka (Economist)

Chart: EUR/USD Sitting On Uptrend Waiting On EFSF Decision

EUR/USD at uptrend + ceiling intersection (freestockcharts.com)
EUR/USD, up 0.03% at 1.39280, is sitting on a steep uptrend line from the October low (as is the S&P), and waiting on the EFSF catalyst to make its next move. As noted on my charts, if EUR/USD reverses sharply and breaks through that steep trend line and the recent highs, it could see a decent retracement to the downside (imo). Overhead resistance is around 1.40, which took five long months to break if you remember, so EUR/USD is at a critical intersection.

Today, the EU summit meetings in Brussels and the German parliament vote will decide the fate of the proposed leveraged EFSF plan (European Financial Stability Facility), and will probably be the catalysts that directionalize the euro and equities. It's a pretty complex plan, and I'm still trying to figure it all out, so I'll refer you to a bunch of articles below for more information. The plan essentially involves the EU, IMF, other countries, sovereign wealth funds and private financial institutions (via Special Purpose Investment Vehicles) throwing money at distressed (toxic) sovereign debt and banks in the eurozone to prevent a major financial crisis. The EFSF, which is funded by EU member states (the majority by Aaa rated France and Germany), would backstop a portion of the losses. That's why the 10-year French-German yield spread hit a 20 year high last week and Moody's put France's "stable outlook" on review. But to make it all worse, should Greece or another country default, there are credit default swaps written on Greek debt with counterparty risk, similar to 2008.




Greenspan: Why European Union Is Doomed to Fail (CNBC Video)
Euro Investment Vehicle 'Giant Sub-Prime CDO' (CNBC)
Satyajit Das: Euro-Zone’s Leveraged Solution to Leverage (Naked Capitalism)
Merkel Puts Rescue Fund to Vote Before EU Crisis Summit (SF Gate)
Europe Struggles for Crisis Cure Ahead of Summit (Bloomberg)
Ferguson Says ECB to `Print Its Way Out of the Crisis' (Bloomberg Video)
Rescue plan could take weeks to fund, draft warns (Irish Times)
Brussels summit: the main issues to be resolved (Telegraph)
German Lawmakers Set To Back EFSF (WSJ)
Hard line adopted on Greek debt loss (FT)
Merkel Gambles on Parliamentary Support for Euro Backstop (Spiegel)
Europe Readies Its Rescue Bazooka (Naked Capitalism)
Annotated European Union Document On EFSF Status (Zero Hedge)
Italy steps closer to meeting EU demands with pension compromise (Deutsche-Welle)
Euro Backstop to Be Leveraged to One Trillion Euros (Spiegel)

S&P ETF Pulling Back At 61.8% Retracement, Has Crazy Monthly Candle - Chart

The S&P 500 Index ETF (SPY) is up 16% from the October 4 low and pulling back after hitting the 61.8% retracement level (May 2 high and October 4 low) and ceiling resistance. The 200 day moving average is at 127.61 and sloping downward (SPY hit a high of 125.78 yesterday and is now at 123.20, -1.82%, testing the uptrend). See charts below.

The market is pricing in all of these bailouts/stimulus plans in Europe and the U.S., as well as the potential for QE3 and a soft landing in China. Or, the market is pricing in the rally in credit spreads (Tom Lee of JPM), its own move creating economic growth via reflexivity, or perhaps the move is related to the huge spike in sunspots in October. But, many technical analysts (Katie Stockton, Tom DeMark) and portfolio managers (Jeffrey Gundlach) believe this is just a short squeeze in a bear market. Also, ECRI (Economic Research Institute) provided this reminder: "Flashback to an April 2008 interview discussing how ECRI's recession call remained intact despite a rise in stock prices and other data." See ECRI's recession call here. If the S&P manages to break through the steep uptrend line, it could pullback and retest some support levels (simple as that), then we'll see what happens.

There is a big EU meeting tomorrow and a German vote on the new EFSF (European Financial Stability Facility), which will be used to backstop losses from the Eurozone sovereign debt and banking crisis ("The EU paper, obtained by Reuters, shows two options for increasing the fund's firepower -- an insurance model and a special purpose investment vehicle (SPIV)"). See the linkfest below. This Seeking Alpha article said October could post the largest monthly gain in 54 years. That explains the massive green candle on chart 2. MACD on the monthly saw a downward crossover, just like it did in 2007. Also, if the 50 month moving average crosses the 200 month, that would not be good, imo. The market was able to stay above the 200MMA in August and barely in October.

What Next for Libya? - Guest Post

Colorful Old Oil Barrels
Source: L.C.N√łttaasen on Flickr
Guest post by John C.K. Daly of OilPrice.com

What Next for Libya?

Libyan Colonel Gaddafi's 42 year brutal reign is over, but the future looks murky ahead for a country primarily known for exporting oil and terrorism.

One thing is for certain - international oil companies will be packing out flights to Tripoli to cut deals for a piece of the action.

Libya remains the wild card, with only 25 percent of the country's oil potential territory explored. Whatever the demerits of the Gaddafi regime, it kept tight rein over its oil industry, and that, combined with international sanctions for its terrorist proclivities, largely stymied development of the country's resources, much in the way that the development of Iran's petrochemical sector has been largely devoid of foreign capital. After all, they did not call the 1996 U.S. legislation "the Iran-Libya Sanctions Act" (ILSA) for nothing. In September 2006 ILSA was renamed the Iran Sanctions Act (ISA), as Gaddafi was behaving himself more, but the damage to the country's energy infrastructure was by then deep and systemic.

The Libyan economy depends primarily upon revenues from the oil sector, which contribute about 95 percent of export earnings, 25 percent of GDP, and 80 percent of government revenue. All of this is up for grabs now.

Prior to the outbreak of conflict in February, Libya was exporting about 1.3-1.4 million barrels per day from production estimated at roughly 1.79 million barrels per day of high-quality, light crude, of which approximately a mere 280,000 barrels per day were indigenously consumed. But current production is the proverbial mere drop in the bucket. Libya has the largest proven oil reserves in Africa with 42 billion barrels of oil and over 1.3 trillion cubic meters of natural gas, according to conservative estimates.

Now that the fighting is apparently over, the issue of Libya's oil production will swiftly move front and center in international interests.

Tom DeMark: S&P Is Operating Against The Trend; Weekly, Monthly 13s Still In Down Mode (10/20/2011)

Source: Bloomberg
Tom DeMark, founder of Market Studies and creator of the DeMark Indicators, was on Bloomberg Television on 10/20/2011 sharing his views on the market. In bold letters below is his overall view that the market is still in a downtrend. His immediate-term outlook was more confusing though, at least in words. He said he sees downside risk in the near-term after this monster rally off of the October low, which generated a daily 13 signal. However, he said there's a possibility that the market could thrust to 1,250 on a positive catalyst out of Europe, but that would be "indicative of a market top" on good news. That is for the immediate term only. He thinks if the S&P hits 1246-1254 and sells off, the market would see an "extended period of sideways movement and then be resolved to the downside." Watch the video for more info.
"On May 2, we had a coincidence of what we call the combo and sequential indicators. They all spoke on a monthly, weekly and daily basis; they all produced 13s exactly the day and the week of May 2 (also in February). And at the August 9 low, combo and sequential only spoke of one voice, and that was a daily 13. The weekly and monthly are still in a down mode. So we're really operating against the trend."

Steve Jobs' Biographer William Isaacson On 60 Minutes (Video)

Last night, Steve Jobs' biographer, William Isaacson, was interviewed on 60 Minutes about his new book on Jobs' life story. Watch part 1 and 2 below. I also added the extra clip where Jobs talks about Bill Gates, Larry Page and Mark Zuckerberg. Interesting story.

JP Morgan's Tom Lee Still Expects S&P to Hit 1,475 By Year-End (Videos - 10/17/2011)

Source: Breakout on Yahoo Finance
Tom Lee, JP Morgan's Chief Equity Strategist (who's been bullish on the stock market since June 2009), was interviewed by Matt Nesto on Breakout (Yahoo Finance) on October 14 and 17, and told viewers that he expects a 20% rally in the S&P into year-end (1,475 target), which is a new bull market high.

"I think that this rally that we've seen since October is much more credible than the ones we've seen since July. The reason being, I think a very important market to watch when you're looking at equities is the high yield market. And the high yield market had been selling off on almost every rally, so you really had a big divergence. Since October 4, we've seen the biggest rally in high yield in 2 years. So I think you're basically getting a confirmation that investors are embracing risk again, which means the stock rally I think has a lot more legs to it." (video #1).

"And then as I look at Q4. We have to think about the fact that Brent Crude is down $25 from its high, that's almost a $3 tailwind to S&P earnings. And then these economic momentum indicators, like the Citigroup Surprise Index, have actually moved up. Historically that's been associated with an upward revision in S&P earnings." (video #1)

"I think it's going to be very possible to see something like a 20%+ rally from current levels in the S&P." (video #2)

S&P at 1,475 is in the 2007-2008 channel, around the peak (stockcharts.com)

Reasons why:

1) "Europe is moving towards the endgame" (finding a solution).

2) Macro risk of a hard landing in China is off the table.

3) Hedge funds have been net short the market, and historically get positive (bullish) when credit spreads rally and economic surprise turns up.

4) "High yield bond prices, which are 91% correlated with S&P price/book, are telling us the S&P should be fairly valued close to 1,400" (interesting).

He provides individual stock picks in the video clips below. Let's see if he can time the top of the bull market, or at least get close (in the media).