Monday, December 31, 2007
"It's important when you in that hedge fund mode, is not do do anything that's remotely truthful."
"The fiction is developed, by almost anybody who's down like 2% to up 6% here. You can't take any chances, you can't have the market up any more than it is, if you're up 6%, because starting Jan 2 you'll have all your money come out; so what would you do in that situation and you feel like you're desperate?"
Sunday, December 30, 2007
Saturday, December 29, 2007
Friday, December 28, 2007
Martin Tobias out at Imperium
In an apparent bid to minimize pickup of the news, late in the afternoon Pacific time on Friday—the last business day before the Christmas holidays—high profile U.S. biodiesel maker Imperium Renewables announced CEO and Chairman Martin Tobias had been "transitioned" out of the company.
WOW! What's going on?
I'd been wondering what's been happening at Imperium, and this doesn't seem to answer the question.
Here's an interview with Tobias
Still no questions answered.
Here comes the speculation:
My imagination had been pointing me in the direction of algae oil supply. It has seemed to me that the key to Imperium would be their connections with algae-based feedstock. I thought that if they had an IPO, then it would be expected that they grow like gangbusters, get those other three refineries up toot-sweet, and get their product out en masse.
The IPO was delayed, and I wondered why.
I came to the conclusion that if they were having trouble scaling up algae-based feedstock, then it would make sense to delay the IPO. There's simply no way for them to really demonstrate growth while dependent on the same conventional feedstocks that were being used by every other biodiesel refiner in the world.
In the linked interview (above) Tobias says the following, "Soybeans only produce about 30 gallons of oil per acre. The most efficient palm oilseed crop on the planet is about 680 gallons per acre. The promise of algae is 7-10,000 gallons per acre over time. But it’s going to take longer than anyone thinks."
As a hopeful future investor in an IMPR IPO, this sounds quite ominous.
Is Imperium's support for algae-oil running into significant, long-term hurdles?
Is there disagreement about whether or not to hold off on going public even in the absense of a demonstrable algae-oil supply?
All I can say is that if they announce an IPO without some demonstration of an independent feedstock source, I'm going to have a hard time supporting the company until such a supply comes along. No, they don't have to demonstrate the technology at full scale, but they have to demonstrate potential.
200 design engineers involved in plant design.
4 separate world locations involved with plant design
2,130,100.00 cubic meters of soil moved for site preparation
1,234,100.00 cubic meters of soil used for filling of low lying areas
1.038,300.00 cubic meters of spoils removed from construction site
28,000 cubic meters of concrete estimated usage
5,200 tons of steel reinforcing bars estimated usage
6,000 ?is the labor force estimated at peak construction activity
4 tons of rice per week estimated to feed labor force
Tuesday, December 25, 2007
It seems to me that there are definite risks coming up in '08. Though I see no reason to think that Solar won't have a great year on its own, the overall market is going into the unknown, in terms of continued repercussions from Credit Crunch / Mortgage Meltdown / Recession. If the market falls apart, then Solar can't stand on its own.
Ok, but to assume that the Market is going to collapse, would be to stop investing completely. I'm of the belief that if any industry will continue to grow, it's alt-energy. There are simply too many positive factors in play, and the big fish are just starting to get on the bandwagon.
I'll be posting some forward looking thoughts in the next week or so about the various companies that I feel comfortable talking about. Feel free to counter any statements that you disagree with, but please say why. These are just guesses, of course, and include certain assumptions.
First, First Solar.
First Solar is my least favorite of the bunch for '08.
For one thing, they've been pumped beyond all reason, and have gone well into an overpriced range. Of course, we don't know how high alt-energy valuations will get in the next few years. It could be that today's valuation of FSLR is child's play compared to what will be considered to be a value in Solar in three years. On the other hand, the key to a valuation is ultimately tied to that company's ability to successfully compete and survive over the long term.
Awhile ago, I wrote this item about comparisons between LDK and FLSR, in which I describe what I see as FSLR's niche, and their weakness.
"FSLR, however is all alone on its own path. FSLR has not only chosen a niche in direct competition with the entire Chinese Solar Behemoth for marketshare*, but its product has some distinct disadvantages over silicon-based panels. Right now they do have one distinct advantage, and that is price per Watt. The question is, how long will they keep that price advantage, and given that price comparisons with other technologies equalize, will FSLR's products succeed on their own merits? In addition, FSLR is not just in competition with Chinese Solar, but it's in competition with other thin film. Does FSLR have a natural marketshare advantage over these companies (like Nanosolar)? I don't know, but FSLR's valuation should be based on the answer. Will FSLR beat Nanosolar in the thin film market? Do they have particular advantages? They won't have a cost advantage. They'll have the advantage of having been out first, but Nanosolar will likely have the advantage of a larger IPO."
I see a great deal of institutional enthusiasm built into the price of First Solar, and I have no idea how much higher they'll be able to take it. On the other hand, there is one potential event in 2008 where I see First Solar as by far the weakest is the industry, and that's a Nanosolar IPO.
FSLR is going to have to demonstrate adaptation in the face of competition from Nanosolar. I don't believe that FSLR will win over the long term building solar farms from cadmium telluride. For one thing, Cadmium is toxic, which is demonstrated with its ban by the European Union's Restriction on Hazardous Substances (RoHS) directive. In addition, Tellurium is very rare, and competition for a very limited supply is increasing from other industries.
Of course, First Solar isn't going to just throw in the towel in the battle against Nanosolar, but you can bet that the first couple of months following a Nanosolar announcement and listing will be volatile, to say the least.
Ok, so this is all based on an "assumption" that Nanosolar will act in '08. I think it is safe to say, though, that the possibility of such an event can at least be considered to be a rational "risk" for FSLR stockholders.
Of course, it can't be denied that all Solar stockholders are in the same boat to some extent. There will be an industrywide sellfest in order to get in on such an exciting company as Nanosolar.
Here are a couple of points I'll make at this point.
ASTI. I think ASTI is in a better long-term niche than FSLR. Why? Because they've chosen niche that directly supports "green Building" potential. They are targeting contruction elements such as windows and shaders, as opposed to the solar "farming." Though Nanosolar may be able to enter this market, I think it unlikely that First Solar will. Poisonous components are a hard sell for high traffic installations. Now, ASTI does share a material weakness with Nanosolar, and that is due to their demand for Indium, which is not particularly common, but at least it's not toxic. The great challenge for ASTI will be to increase production capacity, and fast.
LDK. Well, at today's prices LDK is a steal, so lacking FSLR's overbought status, I think LDK gains some strength. There's no doubt that LDk will experience some selling, but they are in a bit of a different world from Nanosolar, and long term contracts demonstrate their customers faith that Silicon is here to stay. Polysilicon-based panels are currently more efficient than any thin film, and into '09 we'll see polysilicon prices decreasing dramatically. We'll have to see where the balance between thin film and silicon wind up in the end.
I'll leave it there for now. Note however, that I strongly advise that shorting Solar is unwise to suicidal, depending on the skill of the trader. I won't be doing it, that's for sure.
* Large scale farm-style installations. FSLR's panels are unsuitable for residential installations.
Saturday, December 22, 2007
Friday, December 21, 2007
To Whom it may Concern,
Recent experiences have demonstrated to me the realities of a crime.
The crime is that of the Naked Short Selling of Stocks for the purpose of Market Manipulation (yes, it is actually a crime).
Case in point: LDK Solar.
In brief, allegations were recently made against the company by a former Accounting Controller. In the first ten days of trading upon the release of this claim, approximately 152 Million shares changed hands. It should be noted that the company was still in IPO lock-in, and so the only shares on the market available for trade added up to around 17 Million shares. Now, perhaps in the chaos, shares were traded through an average of 9 times each in the first 10 days, but since the ticker appeared on the Naked Short Threshold list on October 16th, we do know that at least some of the shares were not being delivered due to Naked Short Selling. As of 12/21/07, LDK remains on the Naked Short Threshold List.
Now, Naked Shorting of stocks "by market makers engaged in bona fide market making" is not illegal or unethical. However, "Selling stock short and failing to deliver shares at the time of settlement with the purpose of driving down the security's price" is indeed, illegal and unethical. ( See http://www.sec.gov/spotlight/keyregshoissues.htm )
It should be noted that in the process of Naked Shorting a stock, dilution of the shorted stock occurs due to the introduction of virtual shares (fails) into the system by the Naked Short Seller. According to the SEC, "The value of a stock is determined by the basic relationship between supply and demand. If many people want a stock (demand is high), then the price will rise. If a few people want a stock (demand is low), then the price will fall." Well, this seems pretty obvious, but it should be reiterated. Public companies are required to follow guidelines when altering the number of shares available for trade (dilution), because to do so alters the "supply" side of the equation. It is in the Investor's critical interest to have access to information regarding the "supply" of a stock that they would like to purchase. However, Information on the level of dilution of a stock due to Naked Short Activity is not available to the public. Thus, in the case of the purchase of a stock that is listed on the Naked Threshold List, the investor has no way of knowing how many shares of stock are outstanding, and thus has fundamentally no way of making an informed decision on an appropriate value for the stock.
The case of LDK is a convoluted one, and has not yet entirely concluded. However, it is a demonstration of the issues surrounding the Naked Shorting process, and it should be investigated, both from a Law Enforcement perspective, but from an ongoing Market Regulation perspective. As an investor in this company, do I not have reason to expect information on the number of shares of stock available for trade? I believe that I and other investors should very much be able to expect that this information is made public on some basis by the DTCC.
Thank you for your support,
For years now I've spent considerable amounts of time discussing, studying, and arguing about politics and economics and such. Very often I've heard of a thing called the free market. I've heard numerous arguments in support of it, and frankly, alot of them make alot of sense (in theory).
This LDK thing has been a great experience (though I will say that I am down a considerable amount of $$ - I will choose to call it the price of a good education, and it should pay itself back in time (I needed to have sold calls on Wednesday)). However, it has demonstrated to me a fundamental weakness of what people like to call the free market.
The free market depends on a wide range of economic decisions by a great number of participants. This is a kind of statistical way to determine an appropriate value for a thing.
The enemy of the free market is central control. Central control values all things based on the determination of a very few elite economic players. It loses its statistical credibility, and is bound to make grievous errors in value judgement*. Central control does not just happen in Communist countries, we increasingly see central control in our own economy as power and wealth are concentrated in the hands of fewer and fewer people. I could give all sorts of examples, but we've all been looking at an excellent one.
By all rights (in a free market), those who made the horrific error in judgement to short the hel out of LDK on unproven and factually wrong allegations, should have ended up paying for that mistake. There should be no "pity" in the free market. As we've seen, however, in the market that we have, concentrated power (central control) allows for errors by the well-connected to be covered up and dismissed. Out of this is bred contempt for truth, and the whole system suffers.
Anywhoo... just a rough thought, and not really complete...
An interesting read is Mises. See http://www.econlib.org/Library/Mises/msSContents.html
He's often cited by Anarchists and Libertarians as a rationale for doing away with Government, but I think that is an oversimplistic interpretation. The enemy isn't Government, it's central control (Of course, some central control is unavoidable, especially in Government, but that's one of the things that our Constitution specifically tries to address).
* Sometimes the central control will, in fact, make the right decisions. It depends on the quality of the leader, and the quality of that leader's information.
Thursday, December 20, 2007
Posted on Yahoo by Lazyinvestor
Here's a notable item:
"The lower-than-expected net profit was due to a US$2m foreign exchange loss as a
result of the weakening US dollar."
LDK suffered a $2 Million loss due to the depreciation of the US Dollar.
Wednesday, December 19, 2007
They had to make a fast move, and they did. They've stolen some more shares from frightened investors/followers, and they come up with stupid reasons to rationalize it. "SELL THE NEWS" they say. What the hell? You buy into a good company and sell your stock when they put out good news? What the h e l l is this all about? A company that puts out good news is one that you want to hold onto, because in the long term it's value is going to grow. I'm sure that as they've convinced people to sell on good news, they're perfectly happy to buy up all those shares at an artificially low price.
Here's a blogger that is full of it.
First and foremost, I found the analysts' perspectives and their ongoing Sell rating on the stock as a breath of fresh air. After all, who isn't tired of watching an analyst bearish on a stock at $20 turn bullish at $35.
Huh?? Kevin likes to hear analysts stick to their guns with a sell rating based on allegation of FRAUD after that allegation has been credibly dismissed. What a joke.
the company appears to be signing long term contracts at the current market rate. This is a lose-lose proposition. If the solar sector remains hot, the company will miss out on much of the prosperity because of these recent contracts. Contrary, if the solar sector turns around, the company is making more than competition; well, there goes the solar euphoria.
Sorry Kevin, signing long term contracts is not a lose-lose. In fact, you are factually incorrect about LDK signing long-term contracts at current rates. The Q-Cells deal adjusts to existing market rates in a couple of years. LDK did the right thing, and you lie to you readers.
Also, with more than 100 million shares outstanding, the 7-8 million shares short leave the short sellers outnumbered by a cool 12:1.
Once again, this is wrong. 70 Million shares are in the hands of Light Peng, and he can't even sell them until June of next year. I might be rounding here and there, but a 70% diversion from the truthful relevant number of shares does not demonstrate credibility in the author.
Feel free to stay away from LDK, but if you are going to slam it, you should do so with accurate data.
Tuesday, December 18, 2007
Posted to Yahoo, in response to:
"Pls dont compare them [FSLR vs. LDK].
FSLR - whole food chain
LDK - wafers, polysi recycle, later polysi production"
Sure you can compare them. Compare their niche's and take a look at which is stronger. Right? The stronger company or the stronger niche (or both) should determine the relative valuation, right?
Is LDK handicapped to FSLR because it doesn't actually turn its wafers into modules? I don't think so, in fact this might be a strength of LDK. Modulemaking from purchased wafers is lower margin and has a lower barrier to entry. There are potentially hundreds of companies that would be potential customers of LDK, and LDK doesn't have to worry about the details of, or pay for, their operations; all LDK has to do is produce a boatload of high quality wafers (from their own Polysilicon) and let those companies vie for contracts. LDK's business has a very high barrier to entry, so competition is somewhat weakened (glut notwithstanding).
FSLR, however is all alone on its own path. FSLR has not only chosen a niche in direct competition with the entire Chinese Solar Behemoth for marketshare*, but its product has some distinct disadvantages over silicon-based panels. Right now they do have one distinct advantage, and that is price per Watt. The question is, how long will they keep that price advantage, and given that price comparisons with other technologies equalize, will FSLR's products succeed on their own merits? In addition, FSLR is not just in competition with Chinese Solar, but it's in competition with other thin film. Does FSLR have a natural marketshare advantage over these companies (like Nanosolar)? I don't know, but FSLR's valuation should be based on the answer. Will FSLR beat Nanosolar in the thin film market? Do they have particular advantages? They won't have a cost advantage. They'll have the advantage of having been out first, but Nanosolar will likely have the advantage of a larger IPO.
The fact that FSLR performs all parts of the manufacturing process, as compared to LDK, is mostly irrelevant. The industry is Solar, and there are many combinations of roles that make up the various niches. The Business Plan is important. The leadership is important. The long term demand for the product is important. The margin is important. What's relevant is "whose products will be on the market in 15 years," because that is the company that you would pay a couple extra bucks for. All the players should be compared in terms of their unique characteristics, and the strength of those characteristics going into the future. Of course, your investing timeline would make a difference in how you would do these comparisons, I'm thinking long.
Anywhoo... just a thought.
Feel free to tear it apart.
* Large scale farm-style installations. FSLR's panels are unsuitable for residential installations.
Monday, December 17, 2007
LDK Solar Announces Conclusion of Independent Audit Committee Investigation Into Alleged Inventory Discrepancies and Date for Reporting Third Quarter 2007 Financial Results
"The investigation found no material errors in the Company's stated silicon inventory quantities as of August 31st, 2007, and concluded that Mr. Situ's allegations of an inventory discrepancy were incorrect because he had not taken into account all locations in which the Company stored its silicon feedstock. The investigation further concluded that the Company is using each of its various types of silicon feedstock in the production of its multicrystalline solar wafers, and that a provision for obsolete or excess silicon feedstock is not required."
"In reaching its conclusion, the Audit Committee relied on various forensic procedures performed by its independent accountants, testing of the Company's feedstock by independent experts, review of company and third party documentation and interviews of certain present and former Company personnel and third parties. Commenting on the results of the investigation, Mr. Hsieh stated: "The Audit Committee and its highly qualified professionals have conducted an extremely detailed and thorough investigation into these matters. We are confident that we have reached a well-reasoned, objective and correct result.""
"LDK further announced today that it expects to release its financial results for its third fiscal quarter 2007 following the NYSE market close on Wednesday, December 19, 2007. The Company will host an earnings conference call and live webcast at 6:00 p.m. Eastern Time (ET) the same day. To listen to the live conference call, please dial 800-366-7449 (within U.S.) or 303-262-2193 (outside U.S.) at 5:50 p.m. ET on December 19, 2007. An audio replay of the call will be available to investors through December 24, 2007, by dialing 800-405-2236 (within U.S.) or 303-590-3000 (outside U.S.) and entering the passcode 11104747#."
Saturday, December 15, 2007
How the U.S. Caved at Bali
But the real drama was to come. After India reiterated its objection — and was essentially supported by the European Union — the lead American negotiator Paula Dobiansky turned to speak, and announced that the U.S. would not accept India's changes, which sought to lighten the expectations from developing countries. (The UN negotiating process requires total consensus.) Boos rained on the U.S. delegation from NGO observers and even the press gallery, breaking the last remaining appearance of diplomatic placidity.
It's hardly the first time the U.S. has been jeered at a UN event, but what happened next was unique. Nation after developing nation rose to criticize the U.S. in language more often reserved for a political debate than a UN conference. A representative from tiny Papua New Guinea — one of many small island states most immediately threatened by climate change — recalled the old Lee Iacocca line about leading, following or getting out of the way. "If the U.S. will not lead, get out of the way," he said, to gallery cheers. "Please get out of the way."
More importantly, with the exception of a confused statement from Japan, not one of the allies that had generally stood with the U.S. the past two weeks — Australia, Russia, Canada — rose in its defense. The near-total isolation of the U.S. on climate change — which had been building since its rejection of the Kyoto Protocol nearly a decade ago — was now obvious, apparently even to the U.S. Dobiansky turned to speak. "We've listened very closely to many of our colleagues here during these two weeks, but especially to what has been said in this hall today," she said. "We will go forward and join consensus." Boos turned to cheers, and the deal was essentially sealed.
Sunday, December 9, 2007
Ad hoc: Q-Cells AG: Q-Cells AG concludes a supply agreement with LDK for silicon wafers with a total output of more than 6 GWp
5 minutes ago - Market Wire
Bitterfeld-Wolfen, 10 December 2007 - Q-Cells AG (QCE; WKN 555866) has concluded a supply agreement for silicon wafers with the Chinese solar company LDK Solar Co., Ltd. The agreement is a ten year "take or pay" contract covering the period from 2009 to 2018. The total volume will enable Q-Cells to manufacture cells with an overall output of more than 6 gigawatt peak (GWp) additional to current expansion plans. The agreement is based upon the conversion of silicon (43,000 tonnes) into wafers. Deliveries will start with 1,000 tonnes in 2009 and will rise to 5,000 tonnes p.a. by 2013. LDK shall supply the silicon from their current polysilicon plant being constructed or from volumes which will be covered by LDK's other supply sources. The pricing of the wafers has some fixed and market related elements for 2009 and 2010, and thereafter the fixed pricing element can be adjusted to market conditions. Furthermore, Q-Cells has the option to purchase 30% of LDK's additional silicon production if LDK expands its production capacity. In addition, a processing option for the conversion of silicon supplied by Q-Cells has been incorporated into the agreement. Q-Cells shall make prepayments in the order of 10% of the silicon value to assist LDK with financing the expansion required to supply these volumes. This agreement which is based on US$ will allow Q-Cells to grow more rapidly from 2009 than previously planned.
Additional information: ISIN: DE0005558662 Official market / Prime Standard; Frankfurt stock exchange Registered office: Federal Republic of Germany Q-Cells AG Stefan Lissner Head of Investor Relations Guardianstrasse 16 06766 Bitterfeld-Wolfen email@example.com Tel.: +49 - (0)3494 - 6699 10101
--- End of Message ---
Copyright Copyright Hugin ASA 2007. All rights reserved.
SOURCE: Q-Cells AG
Tuesday, December 4, 2007
Monday, December 3, 2007
My wife is in mortgages (still employed, thank goodness). I've had plenty of time to delve into what's going on in housing over the last few years, and saw the current crisis coming a mile away (I didn't know the effects of the outcome, but I sure as heck saw that the prices weren't sustainable).
So, in envisioning the future of energy in America, I've come to the following conclusions.
Adding Solar Panels to existing and new homes adds value to the home, plain and simple. Having a home that generates its own power has benefits ranging from plain financial (payoff over time from metering), to home security and confidence (living in the county, our power has gone down for multi-day periods several times each of the last couple winters). There is also a "fad" effect going on in places where Solar is becoming the thing to do, or a status symbol.
The infrastructure to support solar installation of all types is developing, and great efficiencies will be found in this area as workforces and contractors are trained in the specific specific tools and techniques (these efficiencies are separate from efficiencies gained at, say, LDK, in the production of the panels themselves).
There is money to be made in Solar. As housing prices are collapsing, opportunities will exist for developers to buy common property cheap, and convert it to something special that is in special demand (green).
The financials need to get on board, and they will. Akeena Solar has already teamed up with a bank to provide financing for their solar installation customers.
As it is, I can go to the bank and get a loan on a car, boat, or home. Well, in lending for these things, the bank is counting on getting their money back plus interest. Well, a car, boat, or home, don't necessarily pay themselves off in the end, but energy sources do. There is a measure of safety in investing in Energy, though the system is not yet in place to realize it.
Consider the appraisal of a home. One, the appraiser needs comparisons. At this time, the rarity of solar installations make comparisons difficult or impossible. California may be different from where I live, but where I live, appraisers don't give added value to a property for Solar Panels. You could put a deck on the house and add thousands of dollars in value, but if you put in panels, you gain nothing.
The lending system simply hasn't yet crunched the numbers. They haven't written the rules that will allow underwriters to sign off on a loan that assigns value to Residential Solar Energy Generation while defending the long-term financial interest of the lender. They will do so, because it's in their best interest to provide services to the growing number of potential green-conscious borrowers.
Prices will come down. We see bashers talking about an impending polysilicon glut, but they never mention the other side of the coin, which is that with lower prices, demand increases. In fact, some of the same people that say there will be a glut, also say that prices will never come down to the point at which people would buy the products.
So, anyway... just some thoughts...