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BUY CHINESE SOLAR

RichardSchwartz — Tue, 14 Apr 2009 13:20:00 GMT

GLOBAL VIEW. China’s Growing SOLAR Niche. China’s domestic-investor only stock market, the Shanghai Stock Exchange Composite continues to rise. Looks like Chinese investors are setting themselves up for more trouble after the Shanghai exchange rose some 514% from mid 2005 to October 2007, then fell -73% through October 2008. But before that next collapse happens, I see Chinese solar stocks as good buys here. Let’s review the larger picture first, then I’ll talk China and renewable energy.

Asia Bottomed Five Months Back? Remember ASIA in general hit its last bear market lows back last year. China, Hong Kong, India, Japan, Korea, Indonesia, Malaysia and the Philippines all last hit lows last October, along with some Latin American developing markets like Brazil and Chile. That’s six months ago thus way past the normal three weeks to three months counterswing rally time frame. So is Asia in a new mini bull market? Other regions of the world, meaning the US and CANADA and most all of EUROPE continued lower until just last month. So by my Principle of Relative Strength, which recommends always (almost) focusing on those countries, markets, individual stocks showing relative strength or outperformance, Asia in general is the area for us to concentrate our attention on today. I previously wrote last Wednesday and Thursday how well known Bob Prechter, Jr. and his Elliott Wave International advisory service says parts of Asia are now in a big bear market RALLY phase in the cycle. Like an A wave back up which can be powerful, long lasting and sizable. And I also pointed out how “hot” and well known, Swiss investor Marc Faber is now saying buy Asia on any “setbacks” (there hasn’t really been any). And I ended last Wednesday’s report with a buy recommendation on India, offering up as one way to trade or invest, the India Fund (symbol IFN) which closed Wednesday at 18.25. IFN closed yesterday at 20.69. So in general Asia is where the best action is now. Plus regular readers will remember even before that, back on February 10^th, I recommended investing in Chinese agricultural and offered up a list of stocks which you could choose from (I bought one of the 13 stocks listed; did you buy any?). Plus a few days prior to that, I went to great effort and posted the whole 100 stocks separated by industry sector on the USX China Index for you to print out, keep and go shopping from.

China In A Sweet Spot. That’s because the Chinese government, with it’s unique, command-style quasi-free marketplace, blending capitalism and government management still has great and speedy influence. They can rapidly decide on a, any, direction for the country and quickly move down that path. Not like us here in America with our democracy. We take lots of time getting any bills passed (but when we do agree on a new law, we get better if not implementation). Of course, China still has to fight its widespread corruption and pay offs at every step forward so their implementation is harder. Still, perception is everything in the short term in the stock market so implementation problems aren’t a concern over the near term. And near term the Chinese government has just changed the laws to encourage solar (and other renewable energy like wind energy use). Back on March 26^th China “introduced a subsidy for solar projects of more than 50 kilowatts that could pave the way for increased sales of rooftop systems.” One analyst projected that this change could increase solar demand this year by 58 megawatts and 232 megawatts annually by 2012. This announcement moved Chinese solar stocks up the most ever in one day and the rally in Chinese solar is now in its third week and still looks solid. One London analyst said after the announcement that: “China has the potential to double the solar market, soak up the excess capacity that’s out there, and get manufacturers back on their expansion plans.” Another report said: “China is closing older coal-fired plants and implementing clean energy to fuel economic growth.” The government itself said its going to implement its “solar roofs program” to accelerate the application of solar energy. Schwartz View: Good for you China! Just lead by example, that’s the way to do it. Don’t worry about what other countries are doing. (What we should do here in America too regarding renewable energy.) A more recent announcement says China is writing a new renewable energy law and on that news solar and wind stocks jumped again. The essence is that China wants to increase renewable energy usage to 10% of total energy consumption by 2010 (from 7.5% in 2005). Go China Go!

BUY CHINESE SOLAR. Net, net, I recommend buying Chinese solar!

SOME CHINESE SOLAR STOCKS

Mkt Analyst Next

Symbol Company Name Price Cap Ratings EPS Business Line

STP Suntech Power Holdings 14.49 2170m 7-12-11 5/21/09 China’s largest solar manufacturer

YGE Yingli Green Energy 7.67 964m 7-6-2 5/15/09 PV modules and PV systems

LDK LDK Solar Company 8.04 928m 1-8-5 5/12/09 Multicrystalline solar wafers

JASO JA Solar Holdings 3.58 589m 6-7-4 5/11/09 Solar cells

TSL Trina Solar Ltd 13.21 388m 3-6-4 6/5/09 Solar-power products

SOLF Solarfun Power Holdings 4.73 252m 0-3-5 5/21/09 PV modules

Disclaimer! I own a small amount of Yingli Green Energy but can and do change positions without notice.

For a FREE week's sample of my complete daily letter, please email me at RichardStk@aol.com

Monday Weekly Strategy

RichardSchwartz — Mon, 22 Dec 2008 14:37:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

A learning, teaching, always evolving stock market letter and advisory service

Eighteenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

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Monday, December 22^nd, 2008: So here it is, last letter ‘till Monday, January 5^th, as Lucy & I fly off to the white sand, warm blue waters of the Caribbean, maybe on a last hurrah (if the economy keeps sliding). I’m taking Cycles of American History & Rethinking the Great Depression books. Our routine is: Go to the beach, play backgammon, read & go out to dinner. Day after day. Warm our bones & work on new tans.

THE BIG PICTURE

Friday I saw John Bogle, who has been on Wall Street for 50 years and who created the first index fund, the Vanguard 500 Index Fund back in 1975, say investment bankers and bankers generally owe the country a huge apology (which I doubt we ever get). Their imprudent speculations and greed for massive fees from too complex speculations led to today’s financial sector problems, problems which have now fed out to the real economy hurting innocent, hard working, everyday Americans. Mr. Bogle says greed has even spread out to our whole economy, that we’ve morphed into in a “me first” society and it’s something we have to seriously take a look at. Thus capitalism, allowing markets to work unfettered of regulation and based on trust and trusting, has now been “deeply discredited.” Even the underpinnings of capitalism have changed radically. We’re no longer an ownership society whereby individual stockholders used to select and then hold 92% of all common shares; institutions 8%. Now institutions control 75% of shares through huge sums entrusted to them by others and have not invested prudently. Again, because of the incredible fees they got for investing. Mr. Bogle says they sure wouldn’t manage their own monies so recklessly. These institutions were supposed to be wiser than individuals but, again, it’s not their money. Supporting Mr. Bogle’s view is the revelation that 29 of the 30 largest losers in the Bernie Madoff Ponzi scheme scandal were institutions whereby just one of these fund of fund companies was paid $160 million in 2007 alone for recommending the Madoff “hedge fund.” In other words, where was the fiduciary responsibility, the prudency, the probity expected when we entrust institutions to manage 75% of our investments? Schwartz View: Regular readers know I’ve been distressed and pounding the table about a number of these societal issues for years. About capitalism running amuck, culminating its 30-year trend toward widening the gap between it and its counterpart, democracy, with President Bush’s skewed one way Texas twang policy saying the be all and end all is that “bidness is bidness” and thus stifling regulation. And about society becoming so uncivilized, we ended up booing our own hometown, beloved sports teams! So while no one wants to live through what may come next in the economy, I have to say America has finally woken up, albeit after the nightmare it usually takes to precipitate major change, and that we are now started down a long and arduous path, but one finally pointed in the right direction again. As one example, we’ve even started to SAVE once again; amazing! So, for myself, I guess sort of a contrary indicator in recent years, I’m becoming more optimistic and bullish on our future. Finally! “Go America Go!”

THE ECONOMY

It became apparent that the US economy was suddenly falling-off-a-cliff right after Lehman Brothers became the one firm chosen NOT to be bailed out by the Federal Reserve and US Treasury Department. (Looked back upon as a colossal mistake in strategy I’ve read.) Lehman’s bankruptcy rippled out far and wide and led directly to losses in some money market funds, a “breaking of the buck,” and thus then to a total loss of confidence. Now, by all accounts, the economy is in total free fall. This sudden screeching halt in US business activity has caused the same in our global trading partners and most everywhere I look is now in corresponding economic free fall. You extrapolate it for yourselves from here. One view I’m pondering is that many times sharp declines lead to the second leg of a V-move, back up, and we’re overdue. Maybe stocks, with their recent unwillingness to keep going lower on bad news, means Mr. Market (the consensus of large investors) sees some end out there to the economic free fall. Still, we’d have to see some economic revival to expect a sustained V snapback in stocks. For now, I see 2009 providing a steady stream of bad news every time we look up. Just like in the second year of the last Papa Bear bear market, back in 1974, a continuing stream of bad news back then ultimately overwhelmed all attempts to rally until the final months of that year. Schwartz View: The consensus I’m hearing is that this sudden, fall-off-the-cliff global economic contraction is NOT going to lead to a repeat of the depression-spawned 1930s starting with its four-year long period of contraction followed by its anemic recovery, a.k.a. the Great Depression. I hate to follow any consensus especially when this one’s been so wrong for so long. But my own history look backs and studies by Federal Reserve Bank Chairman Ben Bernanke, an expert on what went wrong in the 1930s, turning a recession into a depression, show that we raised taxes, cut spending and blocked global trade, just the wrong policies. So I sure don’t expect any exact repeat of those failed policies. Leading me to think out of the box and that maybe today’s Fed policy of battling a deflationary depression is also implementing incorrect strategy. How about worrying against runaway inflation spawning from all the money the US and now the world has and is still throwing at this economic slump? Just the problems we worried about in the early 1930s but didn’t occur. You know the old saying, people fight the wrong war, the old war, because that’s what’s still fresh in their minds. Thus, summing up, maybe we can’t expect much creativeness from the Fed pointing in the less obvious direction of battling inflation since they are entrusted with getting us through hard times. They will naturally, after learning certain lessons from the 1930s well, not break much new ground. One reason being that if their policies didn’t work, they would be heavily criticized for experimenting. Thus while everyone pooh-poohs an inflation problem, I still worry about one. Seems like the consensus, which may be correct, among the minority expecting and talking about an inflation problem, doesn’t expect one until 2010 at the earliest. Keeps me thinking about that quote I printed here back on Friday, December 5^th, from Sir John Templeton: “It’s impossible to produce a superior performance unless you do something different from the majority.”

THE STOCK MARKET

Maybe we’ve started off on a new, lasting stock market rally as many now say. Maybe the November 20^th closing low and November 21^st intraday low did end this bear market or at least this phase of it and start us up and on a new mini bull market. But I don’t think we can determine that from these final days of stock market trading this year. This jig jag, saw-tooth modest rally we’ve had in December – the Dow remains down -2.8% this month, but up +13.6% from its closing low on November 20^th – still looks like just a time killer rally to me after stocks fell -6% in September, -14% in October and another -5% in November. So while I’m off on my annual winter beach vacation, I’m leaving my managed portfolios hedged with a slight long bias, still with my modest overall about 20% or less market exposure which I’ve carried since late last year. You remember late last year? At least as a lesson learned for the future, if for no other reason. After the stock market rallied back from its original car wreck in July, in what amounted to a head fake, false move, dead cat bounce and pretty obvious sucker’s rally, and a failed break out to new highs by the Dow and S&P (while the rest of the stock market refused to confirm).

Anyway, last week I ended the letter by noting that psychologically we should rally since bad news couldn’t drive prices down in recent days. Technically we had what could prove to be two months of base building everywhere I looked on the charts (but bases which could easily prove false). Fundamentally we even finally had low enough market valuations, like P/E ratios, to support a rally as well. But how about a catalyst? Well, let me offer up: (1) much lower gasoline prices which keeps our wallets and purses fuller and healthier, and (2) the good feelings anyone watching our president-elect making non-partisan, non-political, non-ideological selections for his cabinet, should feel. There may be a wellspring of good feeling, a sort of honeymoon psychological effect on investors, business, consumers and most all of us as we hope our new president can perform miracles. Schwartz View: Unfortunately no one man is going to remake America overnight. So, while keeping an open mind and watching all unfolding developments, for now I’ll back history which says this “worst financial crisis since the Great Depression” has to lead to an extended Papa Bear market, one which lasts at least a couple of years. Not just for one year, where we stand today.

PORTFOLIO STRATEGY

I hate to follow or even agree with some of what I’m hearing about going forward strategy, especially if such is espoused by those who were so wrong all this year. I’m speaking specifically about Bob Doll, now at BlackRock as their “Trillion Dollar” fund manager. I don’t want to pick on anyone but since he’s been leading the charge forward as stock markets collapse and getting all the face time doing such, I guess I have to. I start off very skeptical because my belief is that these big money managers are not going to get on TV and recommend anything before they and their clients get first crack at their thinking, ideas and recommendations and position themselves accordingly. I already wrote awhile back many old stock market books talk extensively about how big money always used to try to sucker the little investors. The age old technical Wall Street term “distribution” implied big guys needed little guys to unload their big positions on to when they foresaw a bear market ahead and thus put on a bullish face. It took much time to unload huge positions these large investors stockpiled so much frenzied excitement about the stock market had to be built up as big money sold. What better way today than Bob Doll coming on CNBC ubiquitously and always saying we are now in a bottoming process. He said that back in March and those who followed him are much the worst after the October panic crash. Anyway, that’s all secondary, although supporting, my main point. My main point is that Mr. Doll now says next year is going to be a good one for those taking on risk, not for those playing it safe. Again sounds good to me, at least at first blush. We all know what goes down the most generally can bounce tremendously when psychology changes. But do we really want to buy really risky investments in just the early part of the second year of a big, bad bear market? I say no. Bear markets of this size and scope historically have taken a lot longer than one year to work through.

Net, net, probably Mr. Doll will be proven correct about taking on risk, if one doesn’t factor in any time period. I’d guess risky asset classes will move fast when this bear market ultimately does end but do I really believe its going to end soon? No. And if we do have a 2009 mini bull market, say because stocks have fallen so much, then I’m not going to count on Bob and other institutional investors to tell me and us exactly when to get back out. No, starting off next year next week, I’d suggest still playing our cards close to the vest. Yes, play modestly for a continuing rally but look at it for now as just a bear market rally.

Happy Holidays & Happy New Year!

Richard

Re-Regulation Begins a Multi-Decade Road

RichardSchwartz — Mon, 06 Oct 2008 14:39:00 GMT

THE BIG PICTURE

Today’s Big Picture view revolves around the probable coming re-regulation of the financial markets. History shows regulation of markets is similar to a grandfather’s clock pendulum swinging back and forth although not as regular. A brief look back to the start of the 20^th century, shows free markets and a first age of globalization, with the introduction of the telegraph and telephone, steamships and railways, at a peak. Millions even migrated without passports while trade flourished meaning free markets were in charge.

· Governments Take Charge. Then, in August 1914, with World War I, that age ended abruptly. WWI left people disillusioned and looking for something better and many turned to socialism and communism. The Russian Revolution in 1917 drew followers and essentially sought to end capitalism for good, making private property illegal. Socialists and other government controlled economic systems were winning the battle of ideas, governments were in charge, free markets were in retreat. In less than 30 years, one third of humanity, including Eastern Europe, China and the Soviet Union, would be living under socialism or communism. Capitalism looked to be doomed except for in America. The 1920s in America was still a boom time, Americans buying cars, buying illegal gin, buying stock. Radio was the Internet of the 1920s. It was a classic bubble. Finally the 1929 stock market crash started Americans on the way to despair, a complete economic collapse "with no ability to earn, repay, spend, consume." Everything spiraled downward while about half the banks in the US closed. America turned toward government for help and thus re-regulation with President Roosevelt’s numerous new government regulatory agencies. Around the globe, governments gained power … over free markets. In Italy, Spain and Germany fascism took charge. World War II then arrived and even afterwards people all around the globe still blamed capitalism for causing the depression. The whole world kept moving towards more regulated economies. England even went socialistic as Winston Churchill, the great war leader, was beaten by the socialists! Most of the world operated under this sort of government planning process for the next 30 years.

· Free Markets Regain Control. But in the 1970s free markets began a resurgence. Margaret Thatcher came to power in England with free market thoughts as did Ronald Regan here in the US. with his Reganomics. Both cut back on government regulations, giving markets more ascendancy and free markets again starting coming to the forefront. England started privatizing its economy while President Regan cut taxes and let free markets regain control as epitomized by breaking the air controllers strike. Thus capitalism got a free hand which lasted for aboutt 30 years, even through the dot.com boom and bust. But after last year’s incredible debacle with investment banks, money center banks, insurance companies, etc. losing billions after irresponsibly leveraging up their investments 20 or 30 times, it’s apparent to most everyone that, just like in the 1930s, we can’t afford to have any similar financial market collapse spawning from totally free markets to happen again any time soon.

Schwartz View: So after reviewing the history of the 20th century and seeing how over long periods, market regulation swings back and forth, I have to figure we’ve just started a long term swing back on the way to re-regulation. For more on this topic, I recommend you watch Commanding Heights, the Battle for the World Economy, by Daniel Yergin and Joseph Stanislaw which was turned into a DVD and a PBS prouction, a wonderful esplanation of the battle for economic minds in the 20th century. Filled in some missing pieces for me and should for you all as well.

Where Now Inflation?

RichardSchwartz — Fri, 12 Sep 2008 13:39:00 GMT

THE FIRST INFLATION SURGE IN 25 YEARS IS OVER. So, what now?

First, let me give credit when credit is due. Federal Reserve Chairman Ben Bernanke and the Fed finally got one right. They’ve been promising us moderating inflation for a year or more and now with -30% lower crude oil prices and a big general commodity collapse we’re finally we’re seeing it happen. Or, at least, starting to (most things economic happen with a lag). And with the US dollar now surging, that’s going to reverse/diminish rising, problematic imported inflation as well. So now the deflationists out there, those who say deflation is our real problem facing us for some time – Gary Shilling, Robert Prechter, Ron Insana to name just three -- can really have their time in the sun.

Still, there remains some debate whether problematic rising inflation is going quiescent. Mac Courtenay of Seeking Alpha, I guess a boutique research firm, offers up seven reasons why inflation isn’t going away:

1. Inflation is already firmly entrenched. Schwartz View: I agree. I’ve been observing the Fed’s incessant jawboning that inflation expectations remain low is wrong and we all know that the government’s inflation data is terrible skewed to the downside from what inflation really is.

2. Inflation is already here. Schwartz View: The Producer Price Index (PPI) is up +9.8% over last year, and that’s only what the government grudgingly admits to.

3. Inflation is now moving its way through the “food chain” showing up in consumer prices as well. After some hope that because of global competition (globalization) producers would eat the higher inflation. Schwartz View: This rippling through is evidenced by the Consumer Price Index (CPI) rising too, again up the fastest in 17 years.

4. Average weekly earnings fell in July the largest since 1990. Schwartz View: I’d guess Mr. Courtenay’s point is that when earnings drop, we can’t buy as much. ???

5. More and more Federal Reserve governors are talking about raising interest rates next, not lowering them. Especially if we see energy prices stabilize above $100 and bounce. Schwartz View: Of course, these Fed officials, meeting again next Tuesday, can change their views.

6. Global (food?) consumption patterns are heading higher. Schwartz View: I don’t know if author Courtenay is talking about food, metals or just what. But I agree with him on food. As people get a little money, one of the first things they spend it on is more and better food. Thus global food consumption patterns should keep heading higher even if the global economy recesses.

7. The markets will take charge. If the Fed doesn’t raise rates, the marketplace will raise them. Schwartz View: Not sure about this reason he positing for inflation staying problematic. Right now the markets, the long US Treasury market, is still forecasting a slowdown by yields going lower and lower, which to me means more disinflation ahead, not rising inflation.

Schwartz View: He goes on to say part of oil’s recent comeuppance, coming down, is forced hedge fund liquidation because of Congressional pressure (I agree). And that it’s a great time to buy TIPs (Treasury Inflation Protected Securities) and the easiest way is to buy the symbol TIP. And to buy commodities on this correction, recommending also symbols DBC (a basket of commodities) and GDX (gold). Myself, while I believe this commodity pullback is indeed a correction, I think it’s too early to buy them back.

Schwartz BIG PICTURE Inflation View. My belief, garnered from studying stock market history and looking at thousands of charts over the last 20+ years, is that when any new trend begins, many times it begin with a surge in the new direction, then a pullback or at least a pause, sort of to regroup, consolidate gains, make believers out of disbelievers, open the eyes of others who are slow to see and just basically kill enough time to see if the new trend has legs. Then after this pullback correction, which more often than not can be large and long lasting, runs its course, the new trend reasserts itself.

Basically that’s where I see us today with rising inflation, in a pause to refresh. I’ve theorized over the last year than oil and other commodities would stay stronger, longer than most thought this year. I’d say that proved correct with oil going up all the way to about $147 and related sectors like natural gas, energy services, solar, wind and other alternative clean green leading the stock market for the whole first half of 2008. Similar to what happened during the first year of the last severe Papa Bear stock market back in 1973-1874 (oil stayed high the first year). But now, with commodities reversing downward and in major correction, it’s obvious change has occurred, that a pause to refresh is underway. And we can expect this new trend to last longer and correct deeper than many would think I’d venture. Sure, first because commodities are inherently extremely volatile, much more so than stocks and bonds. But also because of the emerging new, macroeconomic backdrop. We seem to be in line for a major, global economic slowdown which will throw a big detour on the road to a new long term trend to rising global inflation. If the global economy really goes blah for the next few years, commodities will take a longer than expected breather. Schwartz View: Still I’m in agreement with former Federal Reserve Chairman Alan Greenspan who predicted in his 2007 book The Age of Turbulence that we live in an inflationary world and that the disinflation trend dominating all during his tenure as Fed chief is coming to an end. And I’m in agreement also with famed, global investor Jim Rogers who says commodities normally correct 50% or more and that’s what we’re seeing now, a correction not the end, to this so far about 9-year commodity bull market.