Excess supply and lower than expected demand have taken their toll on natural gas and the exchange traded funds (ETFs) that track them pushing the spread between March futures contracts and April futures contracts to a record low.

The spread between these futures contracts has narrowed by 93 percent this year to 3.6 cents per million British thermal unit indicating that a supply and demand imbalance is likely to keep prices of natural gas depressed through the remainder of the year. 

On the supply side, natural gas production is at a 37 year high and shale gas rigs continue to increase which will further bolster supply.  In fact, according to Baker Hughes Inc (BHI), the number of horizontal rigs, which are mainly used in shale-gas drilling, was at a record in the past two weeks pushing overall production of natural gas up significantly.  Furthermore, relatively calm weather conditions during a hurricane season that was expected to be more severe than normal, have resulted in an increase in stockpiles. 

As for demand of natural gas, it is expected to be lower than that of last year during the winter months.  The forces of La Nina are resulting in warmer than usual temperatures which are expected to be felt all throughout the Midwest, the East and the Northeast- all key consumption regions of the country.

In a nutshell, increased stockpiles, elevated production and weakened demand are expected to push winter natural gas prices down influencing the following ETFs:

• United States Natural Gas Fund (UNG)
• United States 12 Month Natural Gas Fund (UNL)
• iPath DJ-UBS Natural Gas TR Sub-Idx ETN (GAZ)

To further mitigate the risks involved with investing in the previously mentioned securities, implementing an exit strategy which identifies specific price points at which further downward price pressure is likely to prevail is important.  Such a strategy can be found at www.SmartStops.net.

Disclosure: No Positions

Read more here:
3 ETFs Hit By Natural Gas’ Supply & Demand Imbalance

HERE IS YOUR FOOTER

ETF, Uncategorized

Meanwhile, zombies are on the march. Literally.

We got a news item from Europe. “Thousands of protestors took to the streets in dozens of European cities,” it told us.

What’s their problem? They don’t like cutbacks in government spending.

And now Bloomberg tells us that the feds want to keep track of all money transfers into and out of the US:

Financial institutions have long been required to report all cash transactions, whether domestic or overseas, exceeding $10,000 as well as transactions that they deem to be suspicious. The proposed regulations would expand the requirements so that banks would have to report all cross-border transfers of any size, whether or not cash is involved. (For money-transfer businesses, the threshold would be $1,000 as opposed to that at banks, which would report all amounts.)

If you send $500 to your daughter in London, what business is it of the feds?

Why do you ask, do you have something to hide?

The feds say they are preventing terrorism and money laundering. What they are really doing is gaining power. It can’t be too much longer before you need permission to send money overseas. And then, the “rich” will be fitted with the equivalent of an electronic ankle bracelet…to monitor their financial movements and prevent them from getting away with anything.

But wait. Are we becoming paranoid? Are we having a bad dream? Are we “losing it”?

Maybe. But soon, finances could be a matter of US national security. And transferring money out of the country, unauthorized, could be a crime.

The zombies are counting on your money. They won’t give it up without a fight.

Regards,

Bill Bonner
for The Daily Reckoning

Beware the Fed Money Monitoring System originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Beware the Fed Money Monitoring System

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Green Mountain Coffee Roasters Inc. (NYSE:GMCR), the Vermont-based specialty coffee and coffee maker company, is facing a new SEC inquiry on its revenue recognition and a particular vendor relationship. It’s already hurt the share price, and today Dan Amoss, Agora Financial’s editor of the Strategic Short Report, provides insight into how this brush with the law is likely to have come about for Green Mountain:

“Green Mountain Coffee Roasters (NYSE:GMCR), our ‘coffee bubble’ company, announced an SEC inquiry after the closing bell last night.

“‘Based on the [SEC's] request [for information],’ says Green Mountain’s 8-K filing, ‘the focus of the inquiry concerns certain revenue recognition practices and the Company’s relationship with one of its fulfillment vendors.’

“We can make a good guess at which fulfillment vendor this involves. According to the latest 10-K, Green Mountain relies on M. Block & Sons, ‘to process the majority of orders for our At-Home single-cup business sold through retailers. We sell a significant number of brewers and K-Cups® to this third party fulfillment company for re-sale to certain retailers. Receivables from this company were approximately 51% of our consolidated accounts receivable balance at September 26, 2009.’

“Management won’t give any detail beyond this 8-K disclosure until next quarter’s earnings report in November. There’s plenty of room for revenue recognition shenanigans in this relationship, since M. Block warehouses physical inventory of Keurig machines and K-Cups, takes orders from retail customers, ships the products, and collects receivables.

“Here is just one possible reason behind the SEC inquiry (only an educated guess): a series of ‘bill-and-hold’ transactions initiated by Green Mountain. In such a transaction, Green Mountain would book both revenue and accounts receivable for sales of Keurigs and K-Cups to M. Block, yet continue to store the merchandise in its own warehouses. Such a transaction is compliant with FASB rules if M. Block initiated it due to inadequate warehouse capacity. But it’s against FASB rules if it were initiated by GMCR solely for the purpose of accelerating revenue and ‘beating’ earnings in a given quarter.

“Again, this is just one possibility among many. I’m only describing one potential reason for the SEC inquiry. But the market isn’t waiting around for more detail, and many shareholders are selling this morning.

“In another development, on Monday JPMorgan published a note after meeting with Starbucks CEO Howard Schultz. It seems the rumors of a possible forthcoming Starbucks-branded single-cup brewer are accurate:

CEO Howard Schultz was vehement about the success of VIA in the US… More interesting was the willingness to accept the single-cup brewing platform – most obviously represented by Nespresso and Keurig machines – as a major growth opportunity long term. Schultz openly complimented the Keurig offering due to its low cost of hardware and open platform. However, Starbucks was clear to not “bless” the Keurig platform as the necessary platform for them. In fact, the company has argued that over 80% of Starbucks customer base does not have a single cup brewer at home, almost implying that a competing hardware format of which Starbucks may participate in (and hugely legitimize) may be forthcoming.

“Tougher competition is inevitable in the single-serving coffee market. Starbucks isn’t going to sit still and allow Green Mountain to dominate this growth market.”

Dan Amoss believes that many growth fund managers will decide to abandon this stock, and value investors are only likely to grow interested in GMCR at a fraction of today’s stock price. To receive Amoss’ exact trading recommendations you should subscribe to the Strategic Short Report. It’s available through the Agora Financial reports page, found here.

Best,

Rocky Vega,
The Daily Reckoning

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]

Green Mountain Coffee Roasters (NYSE:GMCR) — Faces New SEC Inquiry originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Green Mountain Coffee Roasters (NYSE:GMCR) — Faces New SEC Inquiry

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

I tend to get all obsessed with my own problems, mostly about how I never have enough money to do any of the things I want to do because my family is draining me dry with their incessant demands, and my boss won’t give me any more money because she says I am already making “a lot more than I am worth,” to which she acidly adds, “which is not much to start with,” which seemed kind of rudely gratuitous, if you ask me, especially when she said it with that nasty little sneer of hers, and then coming to the coda of the piece by yelling at me, “get out of my office before I have you thrown out!”

Then I think that maybe things aren’t so bad, and how things could be worse, such as how things must be getting crazy in the world of naked-short paper gold and naked-short paper silver on the commodity exchanges, as the recent rises in the prices of gold and silver must have caused every one of these slimy naked-short crooks to lose money.

And how does this “naked-short paper gold” thing work? Perhaps best explained by example, imagine Apu, famously of the Kwik-E-Mart of The Simpsons TV show. The scene opens with the doors of the convenience mart opening, and in walks some nice, trusting guy, to whom Apu says, “Hello, sir! How may I be of service today, valued customer? A Double-Blast Raspberry Squishee, perhaps?”

The customer says, “I want to buy an ounce of gold.” Apu cheerfully replies, “Excellent! Here is a piece of paper that says it is worth one ounce of gold. That will be $1,000. Thank you! Come again!”

As the scene unfolds, The Mogambo Guru – appearing on The Simpsons in the role of Sgt. Joe Friday – is acting in a terrific scene that is a parody of the old Dragnet TV show. The script continues that Sgt. Friday enters and asks:

Sgt. Friday: Do you have an ounce of gold to back up that paper gold that you just sold that man?

Apu: No, sir, I do not.

Sgt Friday: So you are naked-short gold?

Apu: What is this naked-short gold of which you speak, inquisitive customer?

Sgt. Friday: It’s when you can’t back up your contractual promise of delivery-on-demand of a tangible item with the tangible item already in inventory.

Apu: In that case, yes, I am naked-short, sir! And I am naked under my apron, too!

Sgt Friday: Just the facts, sir.

Apu (brightly): That IS a fact, sir!

Well, the question is not about how the quality of comedic dialog found in Simpsons episodes has suddenly declined, but, “How much money has Apu potentially lost by having a liability of one ounce of gold, for which he “sold” for $1,000, now that gold is worth $1,300?”

Since this seems to be a matter of simple subtraction, I quickly ascertain that Apu has a bookkeeping loss of $300, and a real $300 loss if that guy wants to redeem his piece of paper for the ounce of gold it represents!

Things are different in real life, of course, in that the numbers are all bigger, and nobody refers to me as “valued customer” but as “That crazy old guy is back!” and who see me as, apparently, a goose to be plucked, like the gold and silver naked-shorts of the commodity exchanges are getting plucked, although they are more like vipers than geese.

I wonder aloud, “How much money has been plucked from them?”

Since I am alone here in the Mogambo Bunker Of Bunkers (MBOB), I get no answer, but I seem to remember that Ted Butler, silver futures guru, estimated that naked-short sellers/insiders on the commodity exchange gold and silver exchanges, whom I refer to as “slimy, manipulating crooks,” have lost $3 billion in the last month! Wow!

And the worse news for these treacherous lying vipers is that they are surely going to lose a lot more, and apparently very soon, as I infer from Ed Steer’s Gold & Silver Daily, where we read that James Turk of GoldMoney.com says that “In the next few weeks, as gold and silver rise, it will be from a short squeeze the likes of which hasn’t been seen since Cornelius Vanderbilt took on Daniel Drew in the legendary Erie Railroad short squeeze.”

Of course, none of this Vanderbilt stuff means anything to me because I am both ignorant and too lazy to look it up, but it sounds like some kind of humongous 19th century scandal, which is significant in that this new scandal will be the biggest short squeeze in over a hundred years? Wow! And in “the next few weeks,” too! Weeks! Wow!

And at MineSet.com, Jim Sinclair is sticking by his prediction that gold will hit $1,650 by the middle of January, 2011, too.

Now, you may be asking, “This is interesting as all get-out, but what does it mean to guys like me who are just in it for the money, and the sooner the better?”

Well, that is the age-old question of “When, and how much?” which I, the Fab-Tab-U-Lous Mogambo (FTULM) will now, for the first time in history, right before your very eyes, answer that question! Applause, applause!

Apparently, the “when” is Very, Very Soon (VVS), and as for “How much” as in the “How high will the prices go?” part of the question, a good place to begin would be John Williams at shadowstats.com, who says, “if you use real-world inflation numbers [rather than the ones provided by the U.S. government]… gold should be around $7,500/ounce.” Wow! It should be almost 600% higher than right now! What an investment!

On the other hand, the rise in the prices of gold and silver may be affected by other things, too, such as when Julian Phillips of GoldForecaster.com says, “It is the relentless Asian demand that is pushing the large institutional buyers, buying with ‘limit’ orders, to up their limits.” Limit up! Wow!

In short, with outrageous government inflationary fiscal idiocy, plus terrifying Federal Reserve inflationary monetary idiocy and growing world-wide demand for gold and silver, if you are not buying gold, silver and oil with a frantic, foolish frenzy, then I can safely say that you are some kind of ignoramus or congenital idiot who will, either way, get smart only after it is too late to make the kind of gains enjoyed by those who buy them so cheaply and easily now, causing them to absolutely titter with delight, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The Comedic Value of Naked-Short Paper Gold originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Comedic Value of Naked-Short Paper Gold

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

If you’ve been watching shares of leading stock Caterpillar (CAT) recently, you probably noticed something extraordinary unusual – at least from a price standpoint.

In a permanent reminder of why watching price levels on the higher timeframe is important to both investors and traders, Caterpillar shares again brushed up into an overhead brick wall of resistance at the $80 per share level, paused for a very long time intraday yesterday, breached the level for the first time ever this morning… and then subsequently collapsed in a painful sell-off for CAT bulls.

Let’s start with the monthly frame and then inch our way down to the lower frames to see this unique development… and lesson.

I don’t intend to do full-scale technical analysis on CAT, but mostly to point out the prior price rejections at the $80 per share overhead “Brick Wall” level in 2007 and 2008.

It’s really neat to see a level so clearly hold as resistance – you don’t need fancy chart indicators to clue you in that $80 is a very important level that investors find to be too expensive for shares of the company.

So, $80 is clearly key to whether this rally will continue (likely if above) or be stopped again dead in its tracks – as has been the case twice before.

I wanted to show these intraday charts more for education reference than “take action now” – this is a lesson in how to combine higher timeframe levels (resistance at $80, for example) with intraday behavior (a clear pause at the level… and breakdown this morning).

Let’s drop it to the 30-min level now:

It’s not that I’ve never seen anything like this, but it’s cool when it happens in real-time before your eyes.

Caterpillar buyers struggled against sellers at the $80 level, and this has been occurring since the price impulse to the $80 level on September 24th.

Like the stock market as a whole, Caterpillar struggled at the highs of the last few days and formed a similar rising trendline pattern into overhead resistance.

This is price purism at its finest – in terms of overhead resistance really mattering for intraday traders and investors.

And after shares of Caterpillar witnessed the “Thrill of Victory” this morning by pushing above $80.00 for the first time ever… the “Agony of Defeat” immediately set in:

Ouch.

Can’t say that the chart didn’t warn you that $80 was an important level – it was the case in 2007 and 2008 … and perhaps now we’ve locked in another annual high at $80 in 2010.

Keep monitoring the share price at this level – a rise back above $80 certainly is not impossible, but participants should be aware of the importance of $80 as a widely known level of overhead resistance.

It’s also a lesson in the importance of pulling back the perspective on shorter timeframes to make note of major price levels – simple price levels – on higher timeframe charts.

They often matter on lower frames, and if you don’t know those levels are there, you’ll likely be blindsided unnecessarily.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Strange New High Victory for Caterpillar CAT Turned into Agonizing Defeat

Uncategorized

What ho!

The price of gold just keeps going up. It rose $2 again yesterday, to close at $1,310. The Dow fell 22 points.

We’ve been waiting for a sell-off…for a downturn…for a resumption of the “risk off,” fear-driven markets of 2008-2009. It should be coming. People are still unemployed. Stocks still aren’t cheap. And houses are still getting cheaper.

The latest Case-Shiller reading signals renewed weakness in the housing market. Prices are falling again. How much farther will they go? Maybe 10% down. Maybe 20%. As we discovered on a recent trip to Florida, you can already get properties discounted 75% off their peaks. How much more is left?

Probably not much on that one. But most houses are down only about 20%. They’ve got a ways to go.

And stocks? We should see them selling at P/Es close to 5…not the 15-20 that they’re at today. So stocks have a long way to go too.

But Mr. Market always has his tricks. What if he’s preparing a run on the dollar…and a big blow-off in the gold market…BEFORE the sell-off in other assets? We expected stocks to go down…then, gold to go up. What if it happens the other way around?

What if the final stage of the bull market in gold has already begun? What if investors and speculators begin to panic out of the dollar now? What if they sell the rumor of quantitative easing…rather than wait for the real thing? What if they drive the price of gold up to the moon, without giving us another chance to buy more at a lower price?

Anything is possible. Mr. Market is a cagey, son of a gun. He could do anything. We wouldn’t put it past him.

Still, we wouldn’t bet the farm on it either.

Investment pros seem to be turning bullish on gold.

“Gold forecast to hit $1,450 an ounce,” says a headline in The Financial Times.

That’s the consensus view from the precious metals industry.

“It’s hard to be pessimistic about gold in the short term,” said Kevin Crisp, chairman of the London Bullion Market Association. “At worst, you’re neutral.”

We’re seeing more and more bullish forecasts for gold. But so far, actual gold holdings by institutional investors attending the aforementioned LBMA conference are still tiny…less than 5% of their portfolios.

As for individual investors, they’ve scarcely even heard of gold. Few own any at all. When they get on board – it will mean huge new demand for the metal.

And there are the central banks. They have been net sellers of gold for many years. Typically, bankers are the worst investors in the world. They buy high and sell low. Someone should tip them off; that’s not the way it’s done. But they dumped beaucoup gold just as it was hitting all-time lows in 1998-99. And now that it’s 5 times as expensive, they’re beginning to buy again.

When they really start buying, we’ll know the game is over; it’s time to get out of gold. But for the moment, they’ve barely begun.

The biggest buyers will probably be the emerging economies. Why? Because they don’t have much gold. China has only 1.6% of its reserves in gold, for example. And because they’ve got the paper cash to buy it.

China could be a major buyer for 10-20 years…and still have a relatively small percentage of its reserves in gold. So could India. And Brazil. And Russia.

So, maybe Crisp is right. Maybe it is hard to pessimistic. But so many people are so optimistic…we can’t help but wonder: what’s Mr. Market up to? What devious, devilish, infernal brew is he concocting?

We’re not pessimistic on gold. Far from it. We expect the price to go to $3,000…or $5,000 before this is over. But it bothers us that so many others think so too.

It would be just like Mr. Market. Get the Johnny-come-latelies into gold. Whack them hard. Then, take gold much higher.

Bill Bonner
for The Daily Reckoning

Investing in Gold With a Watchful Eye On Mr. Market originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Investing in Gold With a Watchful Eye On Mr. Market

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

What ho!

The price of gold just keeps going up. It rose $2 again yesterday, to close at $1,310. The Dow fell 22 points.

We’ve been waiting for a sell-off…for a downturn…for a resumption of the “risk off,” fear-driven markets of 2008-2009. It should be coming. People are still unemployed. Stocks still aren’t cheap. And houses are still getting cheaper.

The latest Case-Shiller reading signals renewed weakness in the housing market. Prices are falling again. How much farther will they go? Maybe 10% down. Maybe 20%. As we discovered on a recent trip to Florida, you can already get properties discounted 75% off their peaks. How much more is left?

Probably not much on that one. But most houses are down only about 20%. They’ve got a ways to go.

And stocks? We should see them selling at P/Es close to 5…not the 15-20 that they’re at today. So stocks have a long way to go too.

But Mr. Market always has his tricks. What if he’s preparing a run on the dollar…and a big blow-off in the gold market…BEFORE the sell-off in other assets? We expected stocks to go down…then, gold to go up. What if it happens the other way around?

What if the final stage of the bull market in gold has already begun? What if investors and speculators begin to panic out of the dollar now? What if they sell the rumor of quantitative easing…rather than wait for the real thing? What if they drive the price of gold up to the moon, without giving us another chance to buy more at a lower price?

Anything is possible. Mr. Market is a cagey, son of a gun. He could do anything. We wouldn’t put it past him.

Still, we wouldn’t bet the farm on it either.

Investment pros seem to be turning bullish on gold.

“Gold forecast to hit $1,450 an ounce,” says a headline in The Financial Times.

That’s the consensus view from the precious metals industry.

“It’s hard to be pessimistic about gold in the short term,” said Kevin Crisp, chairman of the London Bullion Market Association. “At worst, you’re neutral.”

We’re seeing more and more bullish forecasts for gold. But so far, actual gold holdings by institutional investors attending the aforementioned LBMA conference are still tiny…less than 5% of their portfolios.

As for individual investors, they’ve scarcely even heard of gold. Few own any at all. When they get on board – it will mean huge new demand for the metal.

And there are the central banks. They have been net sellers of gold for many years. Typically, bankers are the worst investors in the world. They buy high and sell low. Someone should tip them off; that’s not the way it’s done. But they dumped beaucoup gold just as it was hitting all-time lows in 1998-99. And now that it’s 5 times as expensive, they’re beginning to buy again.

When they really start buying, we’ll know the game is over; it’s time to get out of gold. But for the moment, they’ve barely begun.

The biggest buyers will probably be the emerging economies. Why? Because they don’t have much gold. China has only 1.6% of its reserves in gold, for example. And because they’ve got the paper cash to buy it.

China could be a major buyer for 10-20 years…and still have a relatively small percentage of its reserves in gold. So could India. And Brazil. And Russia.

So, maybe Crisp is right. Maybe it is hard to pessimistic. But so many people are so optimistic…we can’t help but wonder: what’s Mr. Market up to? What devious, devilish, infernal brew is he concocting?

We’re not pessimistic on gold. Far from it. We expect the price to go to $3,000…or $5,000 before this is over. But it bothers us that so many others think so too.

It would be just like Mr. Market. Get the Johnny-come-latelies into gold. Whack them hard. Then, take gold much higher.

Bill Bonner
for The Daily Reckoning

Investing in Gold With a Watchful Eye On Mr. Market originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Investing in Gold With a Watchful Eye On Mr. Market

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

On my way into work this morning the radio was playing one of my fave Pink Floyd songs, “Comfortably Numb,” which also happens to be a fave phrase of mine… Well, the song got me thinking about the currency performances this month, since this is the last day of September… And what a month it has been for the currencies and not so much for the dollar!

Leading the pack for the month of September, we have… Drum roll please…

Swedish krona +10.57%
Aussie dollar    + 8.72%
Euro                  + 7.88%
Norway             + 7.87%
Danish krone     + 7.80%

All of the 16 “major currencies” put in positive performances versus the dollar in September, making this a September to remember!

A readers sent me a story from Bill Gross, (the bond king from PIMCO), where he is quoted as saying, “the days of 10% returns are gone”…

Ahem… Bill… I know that you are the bond king, but there are other types of investment opportunities out there that can produce 10% returns, especially if the negativity toward the dollar continues to mount!

You know what’s funny to me regarding the currencies? The fact that the three currencies that have had their central banks proclaim that they were going to intervene to stem their respective currency’s appreciation, have all posted gains year-to-date versus the dollar… So much for the best laid plans of mice and men, eh?

You know the roster… Japan, Swiss, and Brazil… All three central banks were adamant about keeping their currencies weaker, only to see yen (JPY) climb right back to where the Bank of Japan drew a line in the sand, the Swiss franc (CHF) add to its gains over parity to the dollar, and the Brazilian real (BRL) look like it could trade below 1.70 for the first time since last November!

Well… The other day, when I was gone, Chris did a good job explaining the problems with Ireland’s Anglo-Irish Bank… It’s sad to watch, but think about this for a minute, if the euro (EUR) didn’t have this Irish bank problem hanging over it like the Sword of Damocles, imagine just how much stronger the euro would be right now? Yes, it’s still in the red year-to-date versus the dollar, but that red is beginning to turn green…

OK… Well, it looks like the US is going to bite the hand that feeds them, as the House passed a measure that would let domestic companies petition for duties on imports from China to compensate for the weakness of the renminbi (CNY).

China responded by saying that this measure will not do anything to reduce the US Trade Deficit, and will risk growth. The Chinese Foreign Ministry spokeswoman Jiang Yu told reporters… “We urge the US Congressmen to be clearly aware of the importance of China-US trade and economic relations, resist protectionism so as to refrain from any damage to the interests of both peoples and people around the world.”

The Senate apparently won’t touch this bill until after the November election. I don’t blame them… This all looks like a time bomb, with awful consequences… OK, you’ve all got one month to let your Senator – at least the one that’s not up for election this time, because they will be gone after the election – know that you oppose this bill…

And why just Chinese imports? Why not Japanese imports, too? I mean they manipulate their currency just as much as China does, and have been doing it for a long time!

Speaking of the election next month… I’ll be out of town, so I have to make certain that I go vote absentee before I leave! It’s time to take out the trash…

OK… Enough of that! Gold is $1,312 this morning… I like it when it adds small chunks of change and not gap up $20 in one day… Those $20 leaps scare buyers, but if the shiny metal can add $2 on most days, that will keep buyers interested…

And just yesterday, I was talking about silver getting close to $22 and looky here! Silver is $22 this morning!

I saw a great headline this morning from one of my fave writers, William Pesek… The headline to his story went like this: “How I learned to Stop Worrying and Love yen”… And I think most investors are taking the yen in the same vein… Buying it again, running it higher versus the dollar, and taunting the Japanese Finance Ministry & Bank of Japan…  In football, you get “flagged” for taunting, but in currencies, there’s no penalty… HA!

Lessons learned are like bridges burned, you only need to cross them but once… And so it should have been with the FOMC… The Fed, I mean the Cartel, should have learned their lesson from March of 2009, when they first implemented quantitative easing (QE)… But, apparently, they didn’t… And the markets are turning on the Cartel right now, and taking their frustrations out on the dollar…

The Cartel now says that they are thinking that QE would be better utilized in small doses… Oh! That will be like death by a 1,000 knives for the dollar!  Memo to the Cartel… If you’re going to implement QE, and we all know you will, do it all in one big swoop and get it over with, don’t hang your currency out on a line for it to be beaten daily by small doses of your QE…

Well… The US data cupboard gets restocked today, and will have for us a veritable Whitman’s Sampler of data! Leading off will be the first revision to second quarter GDP, which, you may recall, originally printed at 1.6%… The “experts” don’t expect any move in that 1.6% figure, but, I say, if all the apples and oranges are counted correctly, it would be revised downward… But, that’s just me thinking logically again…

We’ll all see the color of second quarter Personal Consumption… I remember when the markets hung by a thread waiting for this data, and I would stomp and yell that consumption doesn’t create wealth… But no one listened… But, this data is second tier now… As it should be!

The Chicago Purchasing Managers Index (manufacturing) for September will, I think, show a drop in manufacturing during September. And then finally, because it’s a Thursday, we have the Weekly Initial Jobless Claims, which last week shot up to 465,000 after falling for two consecutive weeks…

And to top off our Thursday, Big Ben Bernanke will be testifying at the Senate Banking Committee… Hmmm… I wonder what the Senators will be asking Big Ben?

Then there was this, from CNN.com…

Congress has passed a resolution that would allow the US government to continue operating for the first two months of the next fiscal year, which begins Friday. The measure is necessary because Congress has not adopted a budget. Most programs and agencies are funded at the same rate as that of the expiring budget.

Not passed a budget? Why? Would passing a budget have gotten in the way of their Battleship games and other board games? It’s not like the fiscal year-end – which is today – snuck up on them! Just shows to go you that their work ethic is something less of what you and I want from them, right?

To recap… The currencies continue to climb higher versus the dollar overnight, with gold and silver also participating in the assault on the dollar. The US House passed a measure that amounts to protectionism, and the Chinese are not happy about it. And the data cupboard gets restocked today…

And this came across my desk, and I promised you that I would keep you up to date on any news regarding the rumor that the government would confiscate our IRAs… I’m told that the meeting to discuss this was held on September 13th and 14th. The agenda was called “Lifetime Income Options for Retirement Plans.” Now… I don’t know for a fact that IRA confiscation was discussed here… But the rumors are flying… And you know me… Where there’s smoke…

So, when you Senator comes home to campaign, you might want to ask him or her, just what the heck is going on here? And if the government is NOT going to confiscate IRAs, they might just want to make an announcement saying just that, to squash these rumors…

Remember, the rumor was that the government would require us to buy Treasuries only (talk about a stock market crash), which takes care of their need to have the deficit financed… And the fund would be run by the government, probably as well as they ran the Social Security fund!  But remember! This is just a rumor right now! But there’s smoke…

Chuck Butler
for The Daily Reckoning

House Passes Protectionism Measure originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
House Passes Protectionism Measure

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

On my way into work this morning the radio was playing one of my fave Pink Floyd songs, “Comfortably Numb,” which also happens to be a fave phrase of mine… Well, the song got me thinking about the currency performances this month, since this is the last day of September… And what a month it has been for the currencies and not so much for the dollar!

Leading the pack for the month of September, we have… Drum roll please…

Swedish krona +10.57%
Aussie dollar    + 8.72%
Euro                  + 7.88%
Norway             + 7.87%
Danish krone     + 7.80%

All of the 16 “major currencies” put in positive performances versus the dollar in September, making this a September to remember!

A readers sent me a story from Bill Gross, (the bond king from PIMCO), where he is quoted as saying, “the days of 10% returns are gone”…

Ahem… Bill… I know that you are the bond king, but there are other types of investment opportunities out there that can produce 10% returns, especially if the negativity toward the dollar continues to mount!

You know what’s funny to me regarding the currencies? The fact that the three currencies that have had their central banks proclaim that they were going to intervene to stem their respective currency’s appreciation, have all posted gains year-to-date versus the dollar… So much for the best laid plans of mice and men, eh?

You know the roster… Japan, Swiss, and Brazil… All three central banks were adamant about keeping their currencies weaker, only to see yen (JPY) climb right back to where the Bank of Japan drew a line in the sand, the Swiss franc (CHF) add to its gains over parity to the dollar, and the Brazilian real (BRL) look like it could trade below 1.70 for the first time since last November!

Well… The other day, when I was gone, Chris did a good job explaining the problems with Ireland’s Anglo-Irish Bank… It’s sad to watch, but think about this for a minute, if the euro (EUR) didn’t have this Irish bank problem hanging over it like the Sword of Damocles, imagine just how much stronger the euro would be right now? Yes, it’s still in the red year-to-date versus the dollar, but that red is beginning to turn green…

OK… Well, it looks like the US is going to bite the hand that feeds them, as the House passed a measure that would let domestic companies petition for duties on imports from China to compensate for the weakness of the renminbi (CNY).

China responded by saying that this measure will not do anything to reduce the US Trade Deficit, and will risk growth. The Chinese Foreign Ministry spokeswoman Jiang Yu told reporters… “We urge the US Congressmen to be clearly aware of the importance of China-US trade and economic relations, resist protectionism so as to refrain from any damage to the interests of both peoples and people around the world.”

The Senate apparently won’t touch this bill until after the November election. I don’t blame them… This all looks like a time bomb, with awful consequences… OK, you’ve all got one month to let your Senator – at least the one that’s not up for election this time, because they will be gone after the election – know that you oppose this bill…

And why just Chinese imports? Why not Japanese imports, too? I mean they manipulate their currency just as much as China does, and have been doing it for a long time!

Speaking of the election next month… I’ll be out of town, so I have to make certain that I go vote absentee before I leave! It’s time to take out the trash…

OK… Enough of that! Gold is $1,312 this morning… I like it when it adds small chunks of change and not gap up $20 in one day… Those $20 leaps scare buyers, but if the shiny metal can add $2 on most days, that will keep buyers interested…

And just yesterday, I was talking about silver getting close to $22 and looky here! Silver is $22 this morning!

I saw a great headline this morning from one of my fave writers, William Pesek… The headline to his story went like this: “How I learned to Stop Worrying and Love yen”… And I think most investors are taking the yen in the same vein… Buying it again, running it higher versus the dollar, and taunting the Japanese Finance Ministry & Bank of Japan…  In football, you get “flagged” for taunting, but in currencies, there’s no penalty… HA!

Lessons learned are like bridges burned, you only need to cross them but once… And so it should have been with the FOMC… The Fed, I mean the Cartel, should have learned their lesson from March of 2009, when they first implemented quantitative easing (QE)… But, apparently, they didn’t… And the markets are turning on the Cartel right now, and taking their frustrations out on the dollar…

The Cartel now says that they are thinking that QE would be better utilized in small doses… Oh! That will be like death by a 1,000 knives for the dollar!  Memo to the Cartel… If you’re going to implement QE, and we all know you will, do it all in one big swoop and get it over with, don’t hang your currency out on a line for it to be beaten daily by small doses of your QE…

Well… The US data cupboard gets restocked today, and will have for us a veritable Whitman’s Sampler of data! Leading off will be the first revision to second quarter GDP, which, you may recall, originally printed at 1.6%… The “experts” don’t expect any move in that 1.6% figure, but, I say, if all the apples and oranges are counted correctly, it would be revised downward… But, that’s just me thinking logically again…

We’ll all see the color of second quarter Personal Consumption… I remember when the markets hung by a thread waiting for this data, and I would stomp and yell that consumption doesn’t create wealth… But no one listened… But, this data is second tier now… As it should be!

The Chicago Purchasing Managers Index (manufacturing) for September will, I think, show a drop in manufacturing during September. And then finally, because it’s a Thursday, we have the Weekly Initial Jobless Claims, which last week shot up to 465,000 after falling for two consecutive weeks…

And to top off our Thursday, Big Ben Bernanke will be testifying at the Senate Banking Committee… Hmmm… I wonder what the Senators will be asking Big Ben?

Then there was this, from CNN.com…

Congress has passed a resolution that would allow the US government to continue operating for the first two months of the next fiscal year, which begins Friday. The measure is necessary because Congress has not adopted a budget. Most programs and agencies are funded at the same rate as that of the expiring budget.

Not passed a budget? Why? Would passing a budget have gotten in the way of their Battleship games and other board games? It’s not like the fiscal year-end – which is today – snuck up on them! Just shows to go you that their work ethic is something less of what you and I want from them, right?

To recap… The currencies continue to climb higher versus the dollar overnight, with gold and silver also participating in the assault on the dollar. The US House passed a measure that amounts to protectionism, and the Chinese are not happy about it. And the data cupboard gets restocked today…

And this came across my desk, and I promised you that I would keep you up to date on any news regarding the rumor that the government would confiscate our IRAs… I’m told that the meeting to discuss this was held on September 13th and 14th. The agenda was called “Lifetime Income Options for Retirement Plans.” Now… I don’t know for a fact that IRA confiscation was discussed here… But the rumors are flying… And you know me… Where there’s smoke…

So, when you Senator comes home to campaign, you might want to ask him or her, just what the heck is going on here? And if the government is NOT going to confiscate IRAs, they might just want to make an announcement saying just that, to squash these rumors…

Remember, the rumor was that the government would require us to buy Treasuries only (talk about a stock market crash), which takes care of their need to have the deficit financed… And the fund would be run by the government, probably as well as they ran the Social Security fund!  But remember! This is just a rumor right now! But there’s smoke…

Chuck Butler
for The Daily Reckoning

House Passes Protectionism Measure originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
House Passes Protectionism Measure

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

Canada has been an income investor's playscape for decades.

That reputation is mainly thanks to Canadian trusts, which aren't taxed at the corporate level as long as they pay out the bulk of earnings as dividends. That's allowed them to spit out double-digit yields like clockwork. So many businesses opted for the trust structure that lawmakers decided to start taxing them like corporations in 2011. [Read: Don't Buy a Canadian Trust Until You Read This]

Does that mean high yields from Canada are history?

Hardly! There's another group of Canadian securities shooting off tax-advantaged high yields — I've found some as high 11.5%. Best of all, conditions for this group look to be on an uptrend.

Canada was one of the first countries to recover from the global recession. GDP grew +6.1% in the first quarter, nearly all jobs lost during the recession have been recovered and Canada has even started raising interest rates thanks to its recovery.

These are good signs for investors in Canadian REITs (real estate investment trusts).

Yes, just like the United States, Canada has REITs too. But I doubt you've heard of them before. Canada has about three dozen REITs in total. Yields average about 8%, but I've seen them creep upwards of 10% — even nearly 12% in some cases. That's what you get when business is booming.

Unlike U.S. real estate, Canada's property market is thriving. Occupancies average 97.4%, according to a June report by credit rating agency DBRS. Moreover, Canadian REITs are taking full advantage of low interest rates (even though they are now rising slightly) to refinance existing debt at historically low rates. For example, Riocan (TSX: REI.UN), Canada's largest REIT, recently reduced a mortgage on one of its properties by about -1.8% when it secured a five-year mortgage at 4.2%, a record low for the trust. Management estimates the savings from refinancing its debt this year should equate to about $0.02 per share.

These factors have helped Canada's largest REITs return nearly +18% so far this year, according to the S&P/TSX Capped REIT Index. By contrast, the S&P 500 is up only +5%.

But most of us aren't investing in Canada's REITs. Why aren't we flooding the sector with cash?

The answer is twofold. First is the market's sheer size. Canada's property market is very small compared to the U.S. And as I told you before, only about three dozen REITS are publicly traded.

But I think the biggest reason is that Canadian REITs trade mostly on the Toronto Stock Exchange (TSX) — and that scares off stateside investors. But here's the good news: It doesn't matter. Most U.S. brokers can fill orders on the TSX. Fidelity, E*Trade and Schwab all offer access.

Action to Take –> Buying Canadian shares can actually be as simple as buying on the U.S. exchanges. At worst, it might take an extra phone call to your broker.

One thing you do have to watch — currency rates. Canadian REITs trade and pay dividends in Canadian dollars. But remember that those amounts will be converted back to U.S. dollars if you're an American investor. This feature has actually been good news since about the start of 2009; the Canadian dollar has gained about +15% during that time. An appreciating Canadian dollar makes dividends and share prices worth more to U.S. investors, making Canadian REITs a solid way to play a weak U.S. dollar, too.

I mentioned above that Canadian REITs yield up to 11.5%. That comes courtesy of Scott's (TSX: SRQ.UN). As my High-Yield International readers know, this REIT isn't my favorite, but it certainly pays a mouth-watering monthly yield.

– Carla Pasternak

P.S. –

Uncategorized

Canada has been an income investor's playscape for decades.

That reputation is mainly thanks to Canadian trusts, which aren't taxed at the corporate level as long as they pay out the bulk of earnings as dividends. That's allowed them to spit out double-digit yields like clockwork. So many businesses opted for the trust structure that lawmakers decided to start taxing them like corporations in 2011. [Read: Don't Buy a Canadian Trust Until You Read This]

Does that mean high yields from Canada are history?

Hardly! There's another group of Canadian securities shooting off tax-advantaged high yields — I've found some as high 11.5%. Best of all, conditions for this group look to be on an uptrend.

Canada was one of the first countries to recover from the global recession. GDP grew +6.1% in the first quarter, nearly all jobs lost during the recession have been recovered and Canada has even started raising interest rates thanks to its recovery.

These are good signs for investors in Canadian REITs (real estate investment trusts).

Yes, just like the United States, Canada has REITs too. But I doubt you've heard of them before. Canada has about three dozen REITs in total. Yields average about 8%, but I've seen them creep upwards of 10% — even nearly 12% in some cases. That's what you get when business is booming.

Unlike U.S. real estate, Canada's property market is thriving. Occupancies average 97.4%, according to a June report by credit rating agency DBRS. Moreover, Canadian REITs are taking full advantage of low interest rates (even though they are now rising slightly) to refinance existing debt at historically low rates. For example, Riocan (TSX: REI.UN), Canada's largest REIT, recently reduced a mortgage on one of its properties by about -1.8% when it secured a five-year mortgage at 4.2%, a record low for the trust. Management estimates the savings from refinancing its debt this year should equate to about $0.02 per share.

These factors have helped Canada's largest REITs return nearly +18% so far this year, according to the S&P/TSX Capped REIT Index. By contrast, the S&P 500 is up only +5%.

But most of us aren't investing in Canada's REITs. Why aren't we flooding the sector with cash?

The answer is twofold. First is the market's sheer size. Canada's property market is very small compared to the U.S. And as I told you before, only about three dozen REITS are publicly traded.

But I think the biggest reason is that Canadian REITs trade mostly on the Toronto Stock Exchange (TSX) — and that scares off stateside investors. But here's the good news: It doesn't matter. Most U.S. brokers can fill orders on the TSX. Fidelity, E*Trade and Schwab all offer access.

Action to Take –> Buying Canadian shares can actually be as simple as buying on the U.S. exchanges. At worst, it might take an extra phone call to your broker.

One thing you do have to watch — currency rates. Canadian REITs trade and pay dividends in Canadian dollars. But remember that those amounts will be converted back to U.S. dollars if you're an American investor. This feature has actually been good news since about the start of 2009; the Canadian dollar has gained about +15% during that time. An appreciating Canadian dollar makes dividends and share prices worth more to U.S. investors, making Canadian REITs a solid way to play a weak U.S. dollar, too.

I mentioned above that Canadian REITs yield up to 11.5%. That comes courtesy of Scott's (TSX: SRQ.UN). As my High-Yield International readers know, this REIT isn't my favorite, but it certainly pays a mouth-watering monthly yield.

– Carla Pasternak

P.S. –

Uncategorized

During the course of 2010, investors have continually fretted that the solar power industry was headed for severe slump. They worried that too many new factories were set to produce far more solar panels than the industry could absorb. And that supply increase was coming right at a time when demand was set to fall. European governments had been the key behind robust global demand in previous years, but massive budget pressures would likely force them to throttle back incentives.

Despite those dire concerns, 2010 will likely turn out to be a banner year for the industry, with global solar spending set to more than double, according to UBS. Firm demand means that suppliers did not need to embark on profit-sapping price wars, as many had feared. As a result, the 10 largest publicly-traded solar plays exceeded sales forecasts in the June quarter, and all raised guidance for the second half of 2010.

One of the benefits of firm demand is that expected price cuts haven't materialized. Yet the industry had been preparing for the worst by enacting steady cost reductions. Lower costs and firm prices translates into stable or rising profit margins, which is just what we are seeing in recent industry quarterly reports. Sector share prices have rebounded from their spring lows, but they still have more room to run.

To be sure, the industry is in flux. Germany, which had been the biggest buyer of solar equipment, is likely to start spending less in coming years. And don't be surprised if a few new growth markets such as the Czech Republic start to disappoint on the heels of budget pressures. But elsewhere, especially in the United States, demand is really kicking into gear. As this table shows, the U.S. should emerge as the second-leading buyer of solar equipment by 2012 in terms of GigaWatts (GW) of power.

Industry bears will note that Germany is such a strong consumer of solar power than any change of heart could devastate industry demand. But Barclay's Vishal Shah predicts those concerns will eventually abate. In a recent report, he noted that a number of countries such as Canada, the U.K. and other countries across Europe, are likely to increase their solar power subsidies in 2011, adding that “we expect demand to exceed supply during this second growth-phase.”

The industry's brightening prospects come at a time when fossil fuel prices are well off their 2008 highs, when oil exceeded $140 a barrel, and natural gas prices surged in tandem. Many thought the solar industry would only thrive if energy prices were high or carbon emissions were heavily taxed. So if either of those factors comes into play, then demand for solar could well be sustained at high levels into the middle of the decade.

The picks
As noted earlier, sector shares have rebounded from their lows but remain below analyst target prices. Several analysts cite Yingli Green Energy (NYSE: YGE) as a favorite current pick. The China-based supplier of solar modules has established a low-cost manufacturing base that is leading to rising market share. Sales are expected to rise more than +50% this year to around $1.6 billion, and consensus forecasts of around +11% sales growth in 2011 looks too conservative now that industry prices are no longer falling. Shares trade for about 11 times next year's consensus profit forecast, and that profit outlook also looks understated.

For many investors, First Solar (Nasdaq: FSLR) represents the strongest business model in the sector. The company is the global leader in the production of thin-film solar, which captures less of the sun's energy than traditional silicon-based solar panels, but can be made far more cheaply and also can be deployed in a wider variety of applications. Over the years the company has managed to steadily cut production costs, pushing prices below levels where rivals could make money, even if those rivals' technological approach yielded more energy from each solar panel. In 2007, the company was able to build modules for roughly $1.40 per watt of power. That figure breached the $1 mark late in 2008, and recently hit $0.76. The company now spends roughly $100 million per year on research and development to achieve this kind of efficiency.

That leading-edge approach led to fast-rising market share. Sales doubled or tripled every year from 2003 to 2008, and are still rising in excess of +20% every year. Moreover, a shift in the business model toward the development of massive solar power farms is leading to an apparent reduction in gross margins — so per share profits are likely to be flat this year. It's also a result of accounting methods, but the company's current major projects should yield robust cash flow in a year or two.

Action to Take –> Shares of First Solar don't likely possess massive upside, but they should see steady, moderate gains as the solar industry progresses in coming years. Any major pullback in the stock would represent a compelling buying opportunity. Shares have had a habit of bouncing between $100 and $150 during the past year. Right now, they are at the upper end of that range, so you may want to wait for a pullback before pouncing.

The bottom line is that this industry's obituary has been prematurely written. Many of these stocks have moved back toward their 52-week range, but the next move could be a break-out through that 52-week range. The key catalyst for this group in 2011 is either a spike in fossil fuel prices or further progress on carbon tax legislation.

– David Sterman

P.S. — Each month, Government-Driven Investing editor Andy Obermueller goes on the hunt , scouting out where government action is going to create soaring stock prices. Whether it's in alternative energy… healthcare… infrastructure… or anywhere else, Andy brings it to light for investors. Learn more — click here now.

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

This article originally appeared on StreetAuthority
Author: David Sterman
Don't Miss the Comeback in Solar Stocks

Read more here:
Don’t Miss the Comeback in Solar Stocks

Uncategorized

During the course of 2010, investors have continually fretted that the solar power industry was headed for severe slump. They worried that too many new factories were set to produce far more solar panels than the industry could absorb. And that supply increase was coming right at a time when demand was set to fall. European governments had been the key behind robust global demand in previous years, but massive budget pressures would likely force them to throttle back incentives.

Despite those dire concerns, 2010 will likely turn out to be a banner year for the industry, with global solar spending set to more than double, according to UBS. Firm demand means that suppliers did not need to embark on profit-sapping price wars, as many had feared. As a result, the 10 largest publicly-traded solar plays exceeded sales forecasts in the June quarter, and all raised guidance for the second half of 2010.

One of the benefits of firm demand is that expected price cuts haven't materialized. Yet the industry had been preparing for the worst by enacting steady cost reductions. Lower costs and firm prices translates into stable or rising profit margins, which is just what we are seeing in recent industry quarterly reports. Sector share prices have rebounded from their spring lows, but they still have more room to run.

To be sure, the industry is in flux. Germany, which had been the biggest buyer of solar equipment, is likely to start spending less in coming years. And don't be surprised if a few new growth markets such as the Czech Republic start to disappoint on the heels of budget pressures. But elsewhere, especially in the United States, demand is really kicking into gear. As this table shows, the U.S. should emerge as the second-leading buyer of solar equipment by 2012 in terms of GigaWatts (GW) of power.

Industry bears will note that Germany is such a strong consumer of solar power than any change of heart could devastate industry demand. But Barclay's Vishal Shah predicts those concerns will eventually abate. In a recent report, he noted that a number of countries such as Canada, the U.K. and other countries across Europe, are likely to increase their solar power subsidies in 2011, adding that “we expect demand to exceed supply during this second growth-phase.”

The industry's brightening prospects come at a time when fossil fuel prices are well off their 2008 highs, when oil exceeded $140 a barrel, and natural gas prices surged in tandem. Many thought the solar industry would only thrive if energy prices were high or carbon emissions were heavily taxed. So if either of those factors comes into play, then demand for solar could well be sustained at high levels into the middle of the decade.

The picks
As noted earlier, sector shares have rebounded from their lows but remain below analyst target prices. Several analysts cite Yingli Green Energy (NYSE: YGE) as a favorite current pick. The China-based supplier of solar modules has established a low-cost manufacturing base that is leading to rising market share. Sales are expected to rise more than +50% this year to around $1.6 billion, and consensus forecasts of around +11% sales growth in 2011 looks too conservative now that industry prices are no longer falling. Shares trade for about 11 times next year's consensus profit forecast, and that profit outlook also looks understated.

For many investors, First Solar (Nasdaq: FSLR) represents the strongest business model in the sector. The company is the global leader in the production of thin-film solar, which captures less of the sun's energy than traditional silicon-based solar panels, but can be made far more cheaply and also can be deployed in a wider variety of applications. Over the years the company has managed to steadily cut production costs, pushing prices below levels where rivals could make money, even if those rivals' technological approach yielded more energy from each solar panel. In 2007, the company was able to build modules for roughly $1.40 per watt of power. That figure breached the $1 mark late in 2008, and recently hit $0.76. The company now spends roughly $100 million per year on research and development to achieve this kind of efficiency.

That leading-edge approach led to fast-rising market share. Sales doubled or tripled every year from 2003 to 2008, and are still rising in excess of +20% every year. Moreover, a shift in the business model toward the development of massive solar power farms is leading to an apparent reduction in gross margins — so per share profits are likely to be flat this year. It's also a result of accounting methods, but the company's current major projects should yield robust cash flow in a year or two.

Action to Take –> Shares of First Solar don't likely possess massive upside, but they should see steady, moderate gains as the solar industry progresses in coming years. Any major pullback in the stock would represent a compelling buying opportunity. Shares have had a habit of bouncing between $100 and $150 during the past year. Right now, they are at the upper end of that range, so you may want to wait for a pullback before pouncing.

The bottom line is that this industry's obituary has been prematurely written. Many of these stocks have moved back toward their 52-week range, but the next move could be a break-out through that 52-week range. The key catalyst for this group in 2011 is either a spike in fossil fuel prices or further progress on carbon tax legislation.

– David Sterman

P.S. — Each month, Government-Driven Investing editor Andy Obermueller goes on the hunt , scouting out where government action is going to create soaring stock prices. Whether it's in alternative energy… healthcare… infrastructure… or anywhere else, Andy brings it to light for investors. Learn more — click here now.

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

This article originally appeared on StreetAuthority
Author: David Sterman
Don't Miss the Comeback in Solar Stocks

Read more here:
Don’t Miss the Comeback in Solar Stocks

Uncategorized

Although the energy sector has underperformed in the wake of the Gulf oil spill disaster, it will likely be a plentiful source of profitable stocks as the economic recovery grinds ahead. While investors ought to do nicely during the next few years with household names like Chevron (NYSE: CVX), ConocoPhilips (NYSE: COP) and Exxon (NYSE: XOM), I'm anticipating much larger returns from some of the sector's small- and mid-caps.

One mid-cap oil and gas producer I've found could more than quadruple your money by 2015 or even sooner.

Projections call for a share price of $45 to $70 in three to five years from the current price of about $15. Assuming five years, the annual return would be +25% to +35%. At three years, you'd be looking at something more in the +45% to +65% range annually. All told, the stock could jump roughly +200% to +365% from current levels.

The company I'm referring to is called Petrohawk (NYSE: HK).

Such ambitious return projections for the stock are feasible, mainly because of its plans to keep ramping up production at its profitable Haynesville Shale and other natural gas fields. The company churned out an average of 625 million cubic feet of natural gas per day in the second quarter of this year, for example, and is expected to produce 650 to 660 million cubic feet daily in the third quarter. That's more than twice the 283 million cubic feet per day it was putting out in the second quarter of 2008. The company anticipates production growth of +30% to +40% in 2011 and +15 to +25% in 2012.

The dramatic upward productivity trend should profoundly increase Petrohawk's earnings. Excluding a nonrecurring loss of -$0.39 per share, the company is expected to earn $0.65 a share this year. That's +67% more than in 2009, when earnings were $0.39 a share, excluding a nonrecurring loss of -$4.05. The 2011 projection of $1.20 a share is an +85% spike from 2010's forecasted earnings.

Obviously, a growing enterprise needs cash and Petrohawk has been raising plenty through divestiture and cost cutting. The company recently collected a total of $1.4 billion when it sold its WEHLU and Terryville fields and some other smaller properties and entered into a joint venture allowing Kinder Morgan (NYSE: KMP) access to some of its Haynesville acreage. To reduce expenditures, Petrohawk is testing a new wellbore design that could shave up to a million dollars off drilling costs per well starting in 2011.

A recent debt refinance should also help shore up Petrohawk's cash position by reducing interest expense. In early August, the company issued $825 million in 7.25% senior notes due in 2018. The proceeds will be used mainly to pay off $769 million in 9.125% notes due in 2013.

High P/E isn't an issue
With an industry average P/E ratio of about 15, Petrohawk's P/E of 28 may seem too pricey. However, the stock is only trading at about 14 times forecasted 2010 earnings. And the stock is more than -46% off its one-year high, about -72% below its five-year high and almost -50% shy of Morningstar's current fair value estimate of $30 a share.

Although I'm not worried about Petrohawk's P/E, its total debt-to-equity ratio of nearly 70 reflects a large debt burden, and there's no sign of that load lightening in the near future. While heavy leverage is common for young, equipment-intensive companies like Petrohawk, it greatly increases your risk as an investor.

For one thing, as its beta of 1.35 suggests, this stock comes with added volatility. And if revenue shrank enough for some reason (like a drop in energy demand or worse-than-expected well output), there is a real risk of the company defaulting on its bonds. That certainly wouldn't help its stock price any.

Such a scenario seems a bit less likely, however, since Moody's recently upgraded Petrohawk's credit status from “negative” to “stable.” The company's debt is still considered junk, though, as indicated by Moody's ratings, which are in the B2 to B3 range.

Action to Take –> See Petrohawk for what it is: a volatile mid-cap stock with potential for serious outperformance — but also a considerable amount of risk. Don't buy it if you're risk averse. If you do buy the stock, keep the amount reasonable — no more than, say, 2% to 4% of your total portfolio. That way, you'll get a benefit if it performs as projected, but you won't suffer terribly if it doesn't meet expectations or the worst case materializes.

A final note on one of the intangibles at play here: Petrohawk is the third major oil and gas startup of founder and CEO Floyd C. Wilson. His plan for Petrohawk is to accomplish what he did with the prior two — sell when the time is right at a nice profit for shareholders.

– Tim Begany

Tim Begany has worked at several financial planning and investment advisory firms. He also holds a Series 65 investment consultant license. Read more…

This article originally appeared on StreetAuthority
Author: Tim Begany
An Unknown Energy Play That Could Deliver +365%

Read more here:
An Unknown Energy Play That Could Deliver +365%

Uncategorized

Although the energy sector has underperformed in the wake of the Gulf oil spill disaster, it will likely be a plentiful source of profitable stocks as the economic recovery grinds ahead. While investors ought to do nicely during the next few years with household names like Chevron (NYSE: CVX), ConocoPhilips (NYSE: COP) and Exxon (NYSE: XOM), I'm anticipating much larger returns from some of the sector's small- and mid-caps.

One mid-cap oil and gas producer I've found could more than quadruple your money by 2015 or even sooner.

Projections call for a share price of $45 to $70 in three to five years from the current price of about $15. Assuming five years, the annual return would be +25% to +35%. At three years, you'd be looking at something more in the +45% to +65% range annually. All told, the stock could jump roughly +200% to +365% from current levels.

The company I'm referring to is called Petrohawk (NYSE: HK).

Such ambitious return projections for the stock are feasible, mainly because of its plans to keep ramping up production at its profitable Haynesville Shale and other natural gas fields. The company churned out an average of 625 million cubic feet of natural gas per day in the second quarter of this year, for example, and is expected to produce 650 to 660 million cubic feet daily in the third quarter. That's more than twice the 283 million cubic feet per day it was putting out in the second quarter of 2008. The company anticipates production growth of +30% to +40% in 2011 and +15 to +25% in 2012.

The dramatic upward productivity trend should profoundly increase Petrohawk's earnings. Excluding a nonrecurring loss of -$0.39 per share, the company is expected to earn $0.65 a share this year. That's +67% more than in 2009, when earnings were $0.39 a share, excluding a nonrecurring loss of -$4.05. The 2011 projection of $1.20 a share is an +85% spike from 2010's forecasted earnings.

Obviously, a growing enterprise needs cash and Petrohawk has been raising plenty through divestiture and cost cutting. The company recently collected a total of $1.4 billion when it sold its WEHLU and Terryville fields and some other smaller properties and entered into a joint venture allowing Kinder Morgan (NYSE: KMP) access to some of its Haynesville acreage. To reduce expenditures, Petrohawk is testing a new wellbore design that could shave up to a million dollars off drilling costs per well starting in 2011.

A recent debt refinance should also help shore up Petrohawk's cash position by reducing interest expense. In early August, the company issued $825 million in 7.25% senior notes due in 2018. The proceeds will be used mainly to pay off $769 million in 9.125% notes due in 2013.

High P/E isn't an issue
With an industry average P/E ratio of about 15, Petrohawk's P/E of 28 may seem too pricey. However, the stock is only trading at about 14 times forecasted 2010 earnings. And the stock is more than -46% off its one-year high, about -72% below its five-year high and almost -50% shy of Morningstar's current fair value estimate of $30 a share.

Although I'm not worried about Petrohawk's P/E, its total debt-to-equity ratio of nearly 70 reflects a large debt burden, and there's no sign of that load lightening in the near future. While heavy leverage is common for young, equipment-intensive companies like Petrohawk, it greatly increases your risk as an investor.

For one thing, as its beta of 1.35 suggests, this stock comes with added volatility. And if revenue shrank enough for some reason (like a drop in energy demand or worse-than-expected well output), there is a real risk of the company defaulting on its bonds. That certainly wouldn't help its stock price any.

Such a scenario seems a bit less likely, however, since Moody's recently upgraded Petrohawk's credit status from “negative” to “stable.” The company's debt is still considered junk, though, as indicated by Moody's ratings, which are in the B2 to B3 range.

Action to Take –> See Petrohawk for what it is: a volatile mid-cap stock with potential for serious outperformance — but also a considerable amount of risk. Don't buy it if you're risk averse. If you do buy the stock, keep the amount reasonable — no more than, say, 2% to 4% of your total portfolio. That way, you'll get a benefit if it performs as projected, but you won't suffer terribly if it doesn't meet expectations or the worst case materializes.

A final note on one of the intangibles at play here: Petrohawk is the third major oil and gas startup of founder and CEO Floyd C. Wilson. His plan for Petrohawk is to accomplish what he did with the prior two — sell when the time is right at a nice profit for shareholders.

– Tim Begany

Tim Begany has worked at several financial planning and investment advisory firms. He also holds a Series 65 investment consultant license. Read more…

This article originally appeared on StreetAuthority
Author: Tim Begany
An Unknown Energy Play That Could Deliver +365%

Read more here:
An Unknown Energy Play That Could Deliver +365%

Uncategorized