The Market - A Bucketshop.

So, a fellow on Bloomberg was talking about Bucketshops this morning.

We modernised ourselves into this ice age.

Wikipedia on the Bucketshop.

Basically, they were businesses on the sidelines that would play bets with customers on the stock market, but were not actually connected to the stock market. It's as if I were to bet someone $50 on LDK to go up, and vice versa, but neither of us would actually ever trade a share of LDK, and certainly we wouldn't be regulated as if we were actually trading in the market. It's very close to what has happened with Derivatives in the last 10 years. A great many of them, Trillions of Dollars had no fundamental basis in any physical ownership of ANYTHING whatsoever. They're side bets, pure and simple, and many of those making the wagers had no ability to pay up in the case of losses. The idea of running bucketshops didn't stop when they were outlawed... it was expressed later by those that led the US Government to deregulate via the Gramm-Leach-Bliley Act, and it was implemented by the "Derivatives Desk."

Of course, the Bucketshop is illegal, but the insideous concept finds its way even into the regulated markets, by way of the DTCC. Is the DTCC just throwing your trades in a bucket in the back room? In some cases, at least, it certainly is; only, we the customers don't ever get to look behind the curtain to see for ourselves. Does the share that my brokerage claims on my account really represent a legitimate link to a physical asset? All I know is what my broker tells me. If my broker were a bucketshop, would it be obvious to me, the customer? Would they admit it?

The DTCC needs to get cracked open. Let's find out what's going on in there. The Investing Public has the RIGHT to know how the DTCC handles their PROPERTY.

Great Solar article from Triplepundit.

Solar Stocks: Wall Street Heavyweight or Punching Bag?

Kudos on the find to mgraffis of Yahoo.

A Note on Units of Energy and Insolation.

This post is in reference to my use of units like "Watt*1Year," or "Watt*25Years," etc, in posts such as This, This, and This, and might just be useful in laying out some of the basic math behind Solar Energy Output. Feel free to critique.


In Physics, Power is described in Watts. Energy is described by Power * Time. Typically when we think Electrical Energy, we think in terms of Kilowatt*Hours, but the actual units used for Time are arbitrary, it's just a matter of the increment of time over which you are considering the flow of Power.

The Quantity of Energy streaming down on the planet can be measured in terms of its Insolation. The problem that I'm seeing out there is that it's not firmly decided what units we should be using for Solar Insolation, and there is little way to translate at a glance quantities from one choice of Unit to the next. Now, maybe there's a reason that somebody would want to use "kW·h/(m²·day)" or "kWh/kWp•y" for practical applications to Solar Energy, but the rationale certainly escapes me. What I do know is that a Solar Module is rated in Watts Peak (W_p), which is the Power Generated when the Panel is exposed to an Insolation of 1000W/m². So, to match this, I want my units to be comparable to W/m².

Following is a map of US Annual Insolation in kW/m²*.



By taking the given values in terms of kWh/m²/day, converting from KiloWatts to Watts, and multiplying each by 1day/24h to cancel out the elements of time, we get the Annual Average Power, in W/m². Once we know this Annual Average Power, then by dividing it by the 1000W/m² rated Peak Power used by the Photovoltaic Industry, we get a very useful percentage.

Example: Looking at the map, let's take a spot on one of the bright yellow areas, like is found in most of Virginia. The legend shows an Insolation Value of 4.5-5kWh/m²/day. Converting to Watts, and taking the range's lowest value of 4500Wh/m²/day, multiplying by 1day/24h, and canceling out the hours and days, gives 187.5W/m².

So, now that we have the average Rated Insolation for the location, then we divide this number by 1000W/m² in order to get the Actual Insolation as a percentage of Rated Peak Insolation, in this case, for Virginia, at 18.75%.

I've run this calculation for the various brackets in the map legend, and have added these percentages to the graphic. The spreadsheet is here.

Lets say that you want to know roughly how much actual Energy some Solar Installation will produce over a year. You just take the Peak Power rating of the Installation, and multiply by the Percentage that was calculated above, and then multiply by 1Year in order to get the Energy produced on average over that Year.

Example: You want to know how much Energy is going to be produced over the year by a 5kW_p Installation in Virginia where the expected average Insolation is 18.75% as calculated, above. Simply take the Peak Rated Power of the Installation, and multiply by the Percentage and 1Year, in this case, 5kW*18.75%*1Year = 937W*1Year.

This is the Average Energy Produced over a Year for this Installation, even though it's not in the usual units. To convert to kWh, just convert the Year to Hours using the factor of 8760Hours/Year and 1kW/1000W to get 8208kWh.


Now let's say that you want to make a comparison in Cost per Watt between a Solar Installation and a Coal Plant, or a Natural Gas Turbine, or any other conventional Electrical Generator running at a Constant Output over the year. Just remember that the total Energy Produced by a constant generator over a year, in W*1Year (or kW*1Year, or GW*1Year), is roughly it's Rated Output * 1Year, so a 100MW Coal Plant should produce in the area of 100MW*1Year in Energy over the year. We could convert this to kWh just like was done above for the Solar Installation, but there's no need to do so if we're just using it for comparisons-sake.


* This map measures Insolation assuming optimally angled panels, so for flat-roof installations, particularly at higher Latitudes, will over-estimate output. For a European Map and Insolation Values that assume flat placement of Panels, see Lightbucket.

Election Eve Thoughts - 11/3/08.

Obviously this election is critical in many ways, but the direction of Future Energy Policy is at the top of the list.

In the last few months we've seen Billions of Dollars come out of stock holdings of Exxon and other Big Oil Companies. We've seen literally Trillions of Dollars get pulled out of the markets as a whole, as fear of losses AND uncertainty in US policy direction has weighed on Investors' sense of security. This has been in addition to, and in part, caused by, massive losses and fear of losses in the Derivatives Markets, which will likely continue.

On the other hand, while Trillions of Dollars have been pulled out of the Stock Market, rather alot of it has been converted to various forms of Cash and Bonds. The money doesn't want to stay in these forms, it wants a place to grow. Without direction from the top, though, there has been no safe place to park this money; no safe place, at least, in which long term growth has appeared likely no matter who would take the Presidency.

Across the Globe, Governments and Central Banks have been dumping money on the immediate problems; to try to cover losses; and to try to stop the selling; but what is missing is an overall plan to stabilize housing prices, and get Americans (and Europeans, and Asians) back to productive and sustainable work. Obama has a plan in the US to do this through middle-class tax cuts, infrastructure / energy investment, and other common sense measures such as extension of unemployment insurance. The goal is to help keep as many people as possible in their homes while they find a way to adapt to the changing Economy, as well as to provide an overall stimulus for smart growth. In addition, an Obama Presidency will likely bring some confidence to Investors around the World that the US Markets will be regulated, open, and fair to all investors. The long term Naked Shorting of stocks is an example of a reason for Foreign Investors to be wary of investing in US Securities, or of offering their shares on US Exchanges. We've recently seen the shinking of the Naked Short Threshold List down to a very few companies, and in fact, LDK has fallen off. Now we just need a President who will assure that these regulations are enforced.


Overall market conditions aside, this election will mark a turningpoint in the direction taken in US Energy Policy. Though the immediate need for Fossil Energy will be unchanged no matter who wins, the future under Obama will be clear, and it will be green. The Markets must move to reflect this once the decision is made.

Under McCain, for instance, you'd want to be invested in Fossils and Nuclear. The fact that McCain has paid lip service to Renewables does not counter his history of inaction, nor his active opposition to these technologies. His prioirities as President have been quite clearly demonstrated by his Campaign Activities. A great symbol of the McCain Camp's Antipathy towards renewables is Sarah Palin's recent visit to a US Solar Manufacturer, and her entirely inappropriate and uninformed littany of sales pitches for Coal, Nuclear, and "Drill, Baby, Drill." The term "Solar" was used twice.

Obama represents a sharp departure from this position, and he's stressed over and over that Energy would be his TOP Priority, and at the top of this list will be investment in a "Smart Grid," which will modernize the US Power Grid. The modernized Grid will provide High Efficiency transport of Electricity across the Nation, irrespective of start and end points. This is critical to supporting a Decentralized Power Production Infrastructure, such as we will see with the implementation Green Energy Production. For instance, if T Boone Pickens wants to install a Billion Dollars worth of Wind Turbines, then Obama would let him do it, and would make sure that when Pickens sets up a farm, he'll have access to Electricity Markets all across the US, without the limits imposed by todays outdated grid. Simultaneously, Obama supports moves to get as many cars off of gas as soon as possible. The end result of this will be lower demand for gas and oil, and higher demand for electricity.


Is it any wonder that big money has left the market, and stayed on the sidelines? Who's going to bet Billions of Dollars that a black man would become President of the United States? And then again, who's going to bet their Billions on a 72 year old man backed up by an(other) Incompetent Dominionist? I think we know the answer. Nobody is making either bet, but they've got to be getting edgy.


The big decision is tomorrow, and the markets will respond appropriately to whatever certainty follows. I can't wait!

A cartoon by my Dad.

Somewhat depressing article behind the link.

www.ChrisMartenson.com

"The way I see it, our markets are now largely out of the hands of “investors” and are mainly controlled by large trading funds, which use “black box” computers to trade the markets in a very highly-aggressive and rapid fashion. I have it on pretty good authority that there is a single hedge fund (just one) that constitutes 10% of all shares traded on any given day."

Christopher Cox on Naked Shorting and Regulation.

What the SEC Really Did on Short Selling


Excerpts:


"Who profits from intentionally false information in the marketplace? Those who are in on the scam and positioned to benefit from the predictable response of people who believe the fraudulent information to be true.

The classic "pump and dump" scheme, in which a stock is inflated through false information and then dumped on unsuspecting investors when the perpetrators flee, is one example of how this works. "Distort and short" is the same thing in reverse.

"Naked" short selling can turbocharge these "distort and short" schemes. In an ordinary short sale, one borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market (hopefully at a lower price). But in an abusive naked short transaction, the seller doesn't actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions."



"Although the Commission's order was issued under emergency authority in unusual market conditions, it is based on several years of experience and analysis. In 2004, the SEC adopted Regulation SHO to attack the problem of naked shorting. It requires broker-dealers, before they accept short sale orders or effectuate short sales in their own accounts, to first borrow the security to be shorted, or enter into a contract to borrow it.

But Regulation SHO also offers an alternative to these requirements if the broker has "reasonable grounds" to believe that the security can be borrowed. This could create opportunities for evasion of the rule's purpose.

That has led the commission to consider simply eliminating the "reasonable grounds" alternative altogether. This is essentially what the SEC did for the financial firms for which the American taxpayer is now on the line. It is also what the commission is even now considering for the broader market."


---------------


Good stuff. Very hopeful, and Right On in philosophy.

Key Phrase: "Although the Commission's order was issued under emergency authority in unusual market conditions, it is based on several years of experience and analysis."

New Nasdaq China Index!

Includes LDK, STP, YGE.

This will help to draw invesment over the long term.

See Components on Yahoo

Related Businessweek Article

This is great! LDK is now bundled up with some great Chinese US Listed Companies like BIDU and PTR.

Excellent News. Chinese Banks to invest in US Securities.

China Permits U.S. Investments

Chinese banks will be allowed to invest their clients' money in U.S.-traded stocks and mutual funds, China's banking regulator said after signing an agreement with SEC regulators. While China has been a major buyer of U.S. Treasuries, Beijing has had strict limits on foreign investing. Analysts expect Chinese investors will slowly, but steadily, begin trading in U.S. stocks.


Here's another link that describes this process.

Community Reinvestment Act

This is the original law that brought us Securitized Sub-Prime Mortgages.

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

The original law was passed in 1977, and it was modified in 1995 under Bill Clinton. The first Subprimes were Securitized in 1997, and the law was revisited in 2002 with changes occuring in 2005.

I remember Bill Clinton talking about how he was going to stimulate investment in Urban areas, particularly poor ones. He was somewhat successful in this, and I'm now thinking that this law might have had something to do with it.

So, is it to blame for today's problems? Was it a bad law, or bad idea? It would be tempting to throw Bill under the bus on this, considering that he's a political opponent at this point in time, but no, I think it was a sensible idea, and probably benefitted alot of very legit sub-prime borrowers since '97. On the other hand, it definately appears to have been taken too far, whether this was because the Government Incentive was so powerful that Banks would continue to fall all over themselves to rack up more Mortgage debt? Or did Banks take on this tremendous mountain of debt because they discovered that there wwere incredible profits in it... as long as the number of defaults remained very low.

Personally, I suspect that it was the profit motive for Banks, along with the convenience in distributing the Mortgages through Securitization, that caused the excess.

Off the Subject: Recession, Bailout, Bush's Sweeping Plan.

This is breaking news tonight. The Bush Administration has a plan out, to be unveiled Monday.

Bush seeks financial regulation overhaul


Like any plan supported by Bush, this makes me nervous. It's tough to squeeze an Honest plan out of a Corrupt Administration.


The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank's ability to examine not just commercial banks but all segments of the financial services industry.


Congress needs to look very carefully at how the bolded statement is defined.


In the case that "market stability" is at risk, what resources does the Independent Fed have at its disposal to stabilize it? Does the Plunge Protection Team, in concept at least, become a truly legitimate part of the Market?

We've already seen the Fed giving Billions of Dollars in Emergency Loans to Bear Stearns and other struggling Financials, which, for collateral "will essentially allow the government to hold as collateral a wide variety of investments that include hard-to-sell securities backed by mortgages." This seems to be saying that in the case that Securities crash in value and put at risk the Financials that own them, the Fed is authorized to lend unlimited amounts of real money in exchange for control of those possibly valueless securities. If the value of the securities goes to zero, then the Fed, and somewhere down the line, the taxpayer, loses. It would then be the equivalent of a "bailout" to the institutions that loaded up on bad investments in the first place. The possibility that it could potentially be a bailout of unlimited scope is worrisome. Even in the best case, the Fed is saddled with the administrative costs of managing a large number of diverse investments.


Another potentially disturbing quote that I've seen, was included in the above-linked Yahoo article when I originally read it, but now is gone. I've found it in another source: http://seattlepi.nwsource.com/business/356976_fedbush29.html

"The blueprint also suggests several areas where the SEC should take a lighter approach to its oversight. Among them are allowing stock exchanges greater leeway to regulate themselves and streamlining the approval of new products, even allowing automatic approval of securities products that are being traded in foreign markets."

I'd like to know what the hell this entails, because it sounds sketchy to me. Isn't one of the reasons that US Echanges are considered to be among the safest in the world is because there are safeguards in place to assure (at least to some extent) that Securites on those exchanges are vetted according to consistant standards? I don't know. I'd like to know more.

For good Recession-related info:

The_Recession

Also, Robert Reich has a Blog.

A premise... The Recession

I think we're in a Recession, and I think it's going to be a long and ugly one.

Now, maybe it doesn't make sense to suggest investing in stocks while believing that we're at the beginning of a Recession.

Well, here's a premise.

I believe that we are entering at least one or two very hard years, but I can't help but believe that the best bet is on the likelihood that the international system of trade will survive.

I don't believe that all of those Asians out there are just going to lay down and starve if the US stops buying their goods. In fact, I believe that the entire World has been preparing, at least in part, for possible or partial "decoupling" from the US since around 2000.

Gore speaks before a collective $20 Trillion.

Gore warns on 'subprime carbon' industry

From the article:

"You need to really scrub your investment portfolios, because I guarantee you — as my longtime good redneck friends in Tennessee say, I guarandamntee you — that if you really take a fine-tooth comb and go through your portfolios, many of you are going to find them chock-full of subprime carbon assets," the former vice president said.

Thriftville and Squanderville

If you haven't read it before, check out an essay by Warren Buffett on the dangers of the trade deficit.

America's Growing Trade Deficit Is Selling the Nation Out From Under Us. Here's a Way to Fix the Problem — And We Need to Do It Now.

The Mega-list of Alternative Energy Companies.

www.renewableenergystocks.com


This list is hard to read, and includes foreign stocks, but it seems to be close to complete.

Cramer on Manipulation - If you haven't seen it.

Video Here

Selected Quotes:

"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?"

No Comment.

Canada.com article on Investing

Gore gets the green, so can you

The article contains some good bits of info.

One particular point from the article:

"He (Robert Wilder, cofounder of the WilderHill Clean Energy Index) has few positive things to say about the prospects for fuel cells and hydrogen power, which he says have been grossly over-hyped over the years. He's also skeptical about the environmental benefits of ethanol."

I'd just point out that I agree here, thus my focus on solar investing for the time being).

On the other hand, in a Live Earth Interview (linked on a previous post), Gore states that he believes that cellulosic ethanol techniques are on the way within three years, and that the current infrastructure that's being built is welcome (paraphrased). So, it will definately be worth watching for biotech IPO's that will be providing these technologies.