The talk of a bailout has finally been realized (as if there was ever a doubt).  On Monday, the Federal Government will explicitly guarantee the debt of Freddie Mac and Fannie Mae by lending it money and by buying billions of dollars in mortgage debt held by the two giants.  Treasury Secretary Hank Paulson asked for Congress’ permission to take the unprecedented step to ensure the viability of the GSEs which have bought or financed roughly half of the country’s $12 trillion in mortgage debt.

Like you couldn’t see this coming.  In fact the $300 billion homeowner rescue plan will pale in comparison to what the government will have to do to shore up the ailing mortgage giants.  Now, no matter who you are, if you’re paying taxes you’re footing the bill for the greed and excess that was the housing bubble.  You’re welcome.

Paul Kedrosky said it best (with strong language):

Just because it’s really bugging me, I’ll just say this once to get it off my chest: What a fucking travesty that in the world’s most supposedly free capital market this toxic government-sponsored duopoly exists. I wish I felt like I would live enough to read history books where people laughed at the absurdity.

From Bloomberg:

Treasury Secretary Henry Paulson swung the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.

Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.

The announcement followed crisis talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week. Paulson and Fed Chairman Ben S. Bernanke are trying to prevent a collapse in the companies that would exacerbate the worst housing recession in 25 years and deepen the economic slowdown.

Paulson’s proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt. The two shareholder-owned companies are government-sponsored enterprises, giving investors the indication of an implicit federal backing.

And some more from the New York Times:

As part of the plan, the administration will also call on Congress to raise the national debt limit, people briefed on the plan said. And it will ask Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.

Treasury officials declined to comment on the plan but indicated that a statement would be issued later on Sunday. It was described by lawmakers and officials at other agencies that have been briefed on it.

They said that the Bush administration was hoping that Congress would adopt it quickly as part of a measure intended to help the housing markets and overhaul the regulation of Fannie and Freddie. Last Friday, the Senate approved the measure, and the House is hoping to take it up this week.

Announcement of the plan on Sunday evening was intended to send a sharp signal to both stock markets and debt markets that the government was standing behind the beleaguered companies.

You can read the text of the full statement from Hank Paulson here.

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Federal Reserve Chairman Ben Bernanke this week once again mentioned that the Federal Reserve was “strongly committed” to financial stability and is considering options like keeping the lending facilities open to primary dealers. In short, they are going to continue to bailout banks and Wall Street firms while Americans get the shaft. This […]
Related Posts:
■Bank Failure: IndyMac Bank. Lessons from the Great Depression Part XIV. Bank Failures.
■Bipolar Housing: Lessons from the Great Depression: Part XI. Understanding the Impact of Asset Deflation and Consumer Inflation.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.
■The Day Housing Faced the Plague of Locusts: Lessons from The Great Depression Part XIII. Facing our Own Economic Pilgrimage.
■DOW down Nearly 20 Percent from Peak: Lessons from the Great Depression: Part XII. Is the DOW now Tracking with the California Housing Market?

Federal Reserve Chairman Ben Bernanke this week once again mentioned that the Federal Reserve was “strongly committed” to financial stability and is considering options like keeping the lending facilities open to primary dealers. In short, they are going to continue to bailout banks and Wall Street firms while Americans get the shaft. This is an important statement and the futures markets are now tenuous of any rate rises this year. After all, we are now firmly in a bear market with the three big index players, the DOW, S&P 500, and NASDAQ down 20+% from their recent peaks.

It is crucial to understand the psychology of Ben Bernanke in order to understand his motives in the current economic crisis. Bernanke is a student of the Great Depression and much of his belief is that the Federal Reserve was a main (if not primary) cause of exacerbating the problems at that time. He feels they didn’t react quickly and strongly to stem the economic collapse that soon followed. Yet many Americans aside from pop culture and what is the hot item at Wal-Mart don’t really have a sense of history. For example, many think that the Great Depression was purely caused by one bad month in October. That is not true, the bottom didn’t hit until years after. Also, many forget that we had a massive real estate bubble that occurred in the early to mid-1920s with Florida real estate looking similar to what is occurring again in the coastal states in particular, California and Florida.

The Federal Reserve was initially envisioned as a lender of last resort. Economic busts and depressions were very common in the past. The idea was to have a central authority who would be able to step in during these moments of crisis to inject some liquidity to prime the pump and get the system going again. But make no mistake, it was designed to be used as a very last resort only when things got absolutely horrific.

Now shift to today. Officials say we aren’t in a recession so how is it possible to have the Federal Reserve bailing out one specific investment bank in Bear Stearns, exchanging U.S. Treasuries for questionable mortgages, and lowering rates even though consumer inflation is running rampant? The futures market isn’t even sure whether Bernanke will lower rates given the malaise with our economy. Take a look at the current job losses this year:

This is not a sign of a healthy economy. If we are to parse the above employment data even further, we quickly will realize that we are losing better paying jobs in financials and construction while loading up with lower paying service and government jobs. The current Fed Chairman muFtst feel given the radical actions being taken that we are on the precipice of another major recession or Great Depression. After all, why intervene so extensively and aggressively if problems in the economy were only minor? We are standing on a house of cards that can no longer continue the obvious façade of being solvent. No time in our nation’s history have we been in so much debt. The way many of the banks and lenders book revenues is absolutely optimistic in thinking we are at the bottom. In fact, many are saying we will have a second half recovery yet they aren’t specific about where this will come from.

The fact that lenders are being inundated with REOs and foreclosures is only another form of wealth and money destruction. If a lender had a mortgage booked at $500,000 on their books that is now defaulted, they now have to go through the expenses of marketing and selling the home or note. What if they can only get $300,000 for the home in the current market? In that instance, $200,000 just evaporated in thin air. And we haven’t even started the commercial real estate burst. How are people going to spend now that credit is more restrictive and people are losing their jobs? Even the almighty Las Vegas is feeling the pinch:

“(Telegraph UK) Casino owners in Las Vegas have been warned that America’s economic slowdown had left the gambling mecca facing “its most severe downturn ever”.

Challenging the resort city’s traditional boast that it was virtually recession-proof, shares in companies that operate casinos have dipped to new lows this week.

With casino owners plunging into heavy debt and even bankruptcy, industry experts have warned that the world’s gambling capital faces the toughest economic challenge in its history.”

I imagine it would be hard to plunk down $500 on Roulette if you knew your family back home needed that money for fuel and food, which of course is rising just as quickly as the Las Vegas thermometer.

To understand Ben Bernanke it is also useful to examine the former chairman Alan Greenspan. The former chairman Alan Greenspan was known for his convoluted responses and ability to keep people guessing about his next move. He received much praise during the boomtime but now is on a mission trying to revise history to preserve what little is left of his legacy. Alan Greenspan was the champion of adjustable rate mortgages which are now the bane of the entire housing economy.

Yet understanding who Alan Greenspan grew up with also helps to frame the psychology of his monetary philosophy. During the 1950s Greenspan got to know Ayn Rand, the novelist and philosopher and this relationship would last until her death in 1982. Greenspan also wrote for Rand’s newsletter and wrote a few essays for her book on capitalism. This is important to understand because Rand’s ideals show up in much of her work including one of her most popular novels Atlas Shrugged. Rand advocated the following:

-Individualism

-Laissez-faire capitalism

She rejected socialism, altruism, and religion. In reading Atlas Shrugged, you can see her disdain towards politicians and respect for survival of the fittest in business through her characters. If the former Fed chairman did believe in objectivism and the philosophy that Ayn Rand advocated, Alan Greenspan lost his way in the last few years of his tenure. For one, lowering rates to prop up the economy is not survival of the fittest. Using the Fed as a promotional tool for politicians would have Rand turning in her grave. And this would lead us to Bernanke and his views and philosophy.

This is part 13 in our Great Depression series:

1. Personal Story by a Lawyer from a Previous Asset Bubble. Can we Learn from the Past and How will the Housing Decline Impact You?

2. Lessons From the Great Depression: A Letter from a former Banking President Discussing the Bubble.

3. Florida Housing 1920s Redux: History repeating in Florida and Lessons from the Roaring 20s.

4. The Menace of Mortgage Debts: Lessons from the Great Depression Series: Part IV: Where do we go After the Housing Crash?

5. Business Devours its Young: Lessons from the Great Depression: Part V: Destroying the Working Class.

6. Crash! The Housing Market Free Fall and Client #10 Contagion.

7. Winston Smith and the Bailouts in Oceania: Lessons from the Great Depression Part VII.

8. Sheep Back to the Slaughter: Lessons from the Great Depression Part VIII: All the Change and Bear

Market Rallies.

9. A Bubble That Broke the World

10. The Sham of our Current Unemployment Numbers

11. Understanding the Impact of Asset Deflation and Consumer Inflation.

12. Is the DOW now Tracking with the California Housing Market?

Destiny Sometimes Finds You - The Coming Economic Collapse

For a person who has studied the Great Depression in great deal, it must appear as a weird sense of destiny for Ben Bernanke to confront the current economic climate. Here he is, this is our 1929 and Bernanke is going to have the chance to put his theory into practice. One of Bernanke’s great heroes is the famous economist Milton Friedman. Bernanke in November 8 of 2002 at a conference honoring the 90^th birthday of Friedman had a chance to say a few words:

“I can think of no greater honor than being invited to speak on the occasion of Milton Friedman’s ninetieth birthday. Among economic scholars, Friedman has no peer. …

Today I’d like to honor Milton Friedman by talking about one of his greatest contributions to economics, made in close collaboration with his distinguished coauthor, Anna J. Schwartz. This achievement is nothing less than to provide what has become the leading and most persuasive explanation of the worst economic disaster in American history, the onset of the Great Depression - or, as Friedman and Schwartz dubbed it, the Great Contraction of 1929-33.

… As everyone here knows, in their “Monetary History” Friedman and Schwartz made the case that the economic collapse of 1929-33 was the product of the nation’s monetary mechanism gone wrong. Contradicting the received wisdom at the time that they wrote, which held that money was a passive player in the events of the 1930s, Friedman and Schwartz argued that “the contraction is in fact a tragic testimonial to the importance of monetary forces.”

Ironically somewhere from the 1913 inception of the Federal Reserve the idea started to emerge that the Fed was not simply a lender of last resort, but also a method of controlling markets. It is without a doubt that the Fed has now morphed into an agency beyond its initial scope. And recently with comments from Hank Paulson, it would appear that they want to increase powers even further. The irony of the current situation is a large part of blame falls on the shoulders of the Federal Reserve. They are the culprit here and not the solution. This bubble could have been stymied long ago by raising rates and ensuring that lenders had adequate capitalization to make the ridiculous loans they were making.

Bernanke is now allowing the Fed to exchange horrific mortgage paper for liquid Treasuries and has also slashed rates once again to historical lows. He is finally putting that Friedman theory to work. But this is beyond monetary policy here folks. To think that an economy as global as we currently are, as heavily in debt as we are, and as irresponsible financially as we have been would be solved by a few rate cuts is Fed hubris. Look where we now stand. Bernanke must be thinking, “okay, we’ve bailed out an investment bank, we’ve lowered rates at a historically unprecedented level, we’re exchanging good paper for junk which is new, and why isn’t the economy moving like I had predicted?” Let us see what else Bernanke had to say:

“… Before the creation of the Federal Reserve, Friedman and Schwartz noted, bank panics were typically handled by banks themselves - for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution - the suspension of payments for several weeks was a significant hardship for the public - the system of suspension of payments usually prevented local banking panics from spreading or persisting. Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits.

It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. The problem within the Fed was largely doctrinal: Fed officials appeared to subscribe to Treasury Secretary Andrew Mellon’s infamous ‘liquidationist’ thesis, that weeding out “weak” banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were small banks (as opposed to what we would now call money-center banks) and not members of the Federal Reserve System. Thus the Fed saw no particular need to try to stem the panics. At the same time, the large banks - which would have intervened before the founding of the Fed - felt that protecting their smaller brethren was no longer their responsibility. Indeed, since the large banks felt confident that the Fed would protect them if necessary, the weeding out of small competitors was a positive good, from their point of view.”

It is the case that during the Great Depression there were many smaller banks that failed. This was partly due to the fact that we had a much more localized economy back then. That is, if you wanted a mortgage you went to your local bank. Your business normally catered to your small niche. That is now not the case. We are a mega serviced oriented society. One of my loans for a home was completely done without a face to face meeting. The loan originated in one state and was for a property in another. That lender is now out of business. Doesn’t impact the local economy here in Southern California but I bet it impacts the economy in their neck of the woods. This is the new reality. We have mega banks that consume a large portion of the market so the idea that measuring the coming bank collapses in sheer number is a poor indicator of distress. Many of these mega banks are the equivalent of 1,000 small banks.

So the Fed right now is fighting the 21^st century banking problem with theories suited for a market in the 1930s. This is why the Fed is now being exposed as a paper tiger. They can do nothing in such a large global marketplace aside from helping a few select friends. To think they can convince everyone that they somehow have the Midas touch is absurd. The mystique that once reigned at the Fed with Greenspan is completely shattered. Bernanke thinks the Fed has the ability to stop any panic or in today’s case, any recession:

“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. …

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

Best wishes for your next ninety years.”

You got that right Ben. You did it alright. Forget the Great Contraction absurdity. It was the Great Depression. They’d probably like to call what is happening today as a “market reshuffling” but we are in a recession. This softening of the language is pure propaganda and setup to downplay the magnitude of our current problem. The housing crisis is the worst even dwarfing the speed of drops from the Great Depression. Personal debt is at the highest ever. Job losses are mounting. Yet they want you to believe that this is a minor correction. Those that believe in the 2^nd half recovery might as well believe that monetary policy alone will get us out of this mess. $500 billion in pay option loans are set to recast and foreclosures are at record highs, the destruction of wealth will continue. That is what faces us in the 2nd half.

Chairman Bernanke, what do you call a theory that doesn’t work?

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The Psychology of Ben Bernanke: The Great Depression was caused by the Federal Reserve. Was he Talking About the current Great Depression that is Sprouting Under his Watch? Lessons From the Great Depression: Part XIII. The Federal Reserve.

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Related Posts:
■Bank Failure: IndyMac Bank. Lessons from the Great Depression Part XIV. Bank Failures.
■Bipolar Housing: Lessons from the Great Depression: Part XI. Understanding the Impact of Asset Deflation and Consumer Inflation.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.
■The Day Housing Faced the Plague of Locusts: Lessons from The Great Depression Part XIII. Facing our Own Economic Pilgrimage.
■DOW down Nearly 20 Percent from Peak: Lessons from the Great Depression: Part XII. Is the DOW now Tracking with the California Housing Market?

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Filed under: Home Depot (HD), Options, Technical Analysis, Economic data

The Home Depot (NYSE: HD) shares are trying to find their way today as investors digest Federal Reserve Chair Ben Bernanke’s testimony on the state of the economy before the Senate Banking Committee. Investors are worried that inflation and weakness in credit markets will continue to drag down the economy and were less than impressed by this morning’s PPI numbers. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on HD.

After hitting a one-year high of $40.75 last July, the stock has hit a new one-year low today. This morning, HD opened at $21.39. So far today the stock has hit a low of $20.76 and a high of $21.69. As of 12:10, HD is trading at $21.47, down $0.06 (-0.3%). The chart for HD looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in four months as long as HD is below $27.50 at November expiration. Home Depot would have to rise by more than 26% before we would start to lose money. Learn more about this type of trade here.

Continue reading Home Depot (HD) fluctuates on economy concerns

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As I’m sure you all already know by now, IndyMac bank was seized by the FDIC yesterday as a run on deposits caused by panic over the failure of the mortgage arm of the company and comments released to the media by Senator Schumer about the bank’s ability to survive.

IndyMac is the largest bank failure to date amidst the subprime induced (but hardly contained) credit crisis.  While many will blame Senator Schumer for the bank’s failure, I submit that he was merely the straw.  Poor underwriting guidelines, reckless loan programs, and the inability of the bank to make money and securitize mortgages as investor appetite changed quickly were the real culprits.  To put the blame on one letter is to minimize the poor decisions and governance of the bank itself.

From Inman News on the collapse:

The FDIC said it will transfer insured deposits and “substantially all the assets” of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.

IndyMac was one of the nation’s largest independent mortgage lenders, and had been hard hit by delinquencies and foreclosures. Parent company IndyMac Bancorp Inc. announced Monday that it was no longer considered “well capitalized” by regulators and had stopped making most mortgage loans (see story).

In a statement, OTS Director John Reich said the immediate cause of the closing of IndyMac Bank FSB was a run on deposits that began when a June 26 letter Sen. Charles Schumer, D-N.Y., sent to federal bank regulators voicing concerns about the thrift’s “financial deterioration” was made public. Schumer said IndyMac posed “significant risks to both taxpayers and borrowers” (see story).

In the 11 business days following the public release the letter, Reich said depositors withdrew more than $1.3 billion from their accounts.

“This institution failed today due to a liquidity crisis,” Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

More IndyMac coverage here, here, here. My original IndyMac article.

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Filed under: Products and services, Consumer experience, Google (GOOG), Marketing and advertising, Viacom (VIA)

From the people I talk to who buy online advertising it looks like Google (NASDAQ: GOOG)’s YouTube has been a bust: the video ads are expensive and the results are iffy. Such things are the opposite of what Google is best known for (isn’t it about brutally scientific performance?)

Well, in today’s Wall Street Journal, there’s an excellent piece on the topic. Even though the video site may attract one billion views per day, the monetization has been lackluster — it looks like annual revenues will be about $200 million or so.

There are a variety of reasons for all this. First of all, major advertisers want to protect their brands from being associated with racy content. Also, Google must deal with a copyright infringement suit from Viacom (NYSE: VIA) and so it is focusing on approved content, which in turn limits the number of advertising opportunities.

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In addition, the video revolution is in the early stages. Remember, when internet ads started to emerge during the 1990s, the main buyers were upstart — not traditional — companies.

Then, there are also technical and execution problems. Google’s ad system is quirky and somewhat of a hodgepodge — not surprising given Google’s quick growth and entrance into many new markets.

Still, despite all the problems, it’s critical that Google demonstrates success with YouTube. By and large, the company has had a tough time going beyond its highly successful text-based advertising platform. However, in order to continue the growth, Google needs to show its prowess in other critical areas, such as radio, TV, display ads and … video.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Management, Citigroup Inc. (C)

Xerox Corporation (NYSE: XRX) announced yesterday that it had elected Chuck Prince to its board of directors.

Yes, that Chuck Prince: the one who presided over a rapid decline in Citigroup Inc (NYSE: C)’s financial position and was forced to step down in November — with $94 million in stock, a $1.74 million pension, and other assorted goodies. Then he was hauled before Congress to explain himself.

Why exactly would you want this guy on your board of directors? If you’re a shareholder, I can’t even imagine. But if you’re the CEO, he’d be a great “watchdog.” And the company’s CEO, Anne Mulcahy, is also the chairman of the board. In the press release announcing his appointment, she said that “Chuck is a visionary leader whose unique talent and exceptional business experience will be a tremendous asset to our board.”

Visionary? I’m actually inclined to agree. To lead the destruction of value at America’s largest financial institution and then leave with 9-figures requires tremendous vision. If I were a Xerox shareholder, I’d be insulted.

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Filed under: Conventions and conferences, Genentech Inc (DNA), Earnings transcripts

Genentech, Inc. (NYSE: DNA)
Q2 2008 Earnings Conference Call
July 14, 2008 4:45 PM ET

Management Summary

Operator

I would like to welcome everyone to the Genentech second quarter 2008 earnings conference. (Operator Instructions) It is now my pleasure to introduce your host, Ms. Katherine Littrell, Vice President of Investor Relations. Ms. Littrell, you may begin.

Katherine Littrell, Vice President of Investor Relations

Thank you, Gerald. Good afternoon everyone and thank you for joining our Q2 2008 earnings call. We have posted an earnings call slide set on our website, as per our usual, on www.gene.com.

This call is being electronically recorded and is copyrighted by Genentech. No reproductions, retransmissions, or copies of this conference call can be made without the written permission of Genentech.

Continue reading Genentech’s Q2 2008 earnings transcript

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Filed under: Newspapers, Magazines, Google (GOOG), Yahoo! (YHOO), General Motors (GM), Anheuser-Busch Cos (BUD), Federal Natl Mtge (FNM)

MAJOR PAPERS:

• Rick Wagoner, the CEO of General Motors Corporation (NYSE: GM), hit out against allegations that the auto maker may soon file for bankruptcy and said he believes the company’s financial position will “remain robust” for the rest of the year. Wagoner also said, the Wall Street Journal reported, that the company has no plans to sell or reduce more of its brands.
• An independent Yahoo! Inc (NASDAQ: YHOO) would be better for the world, Google Inc (NASDAQ: GOOG) CEO Eric Schmidt said and the Financial Times reported. Yahoo! will be able to create more competition in the search market and other advertising markets if it stays independent, Schmidt contended.

OTHER PAPERS:

• According to people briefed on the plan, the New York Times reported that senior Bush administration officials are weighing a plan to have the government take over either Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, or Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac — or both — and place them in a conservatorship if their problems continue or worsen.
• The New York Times also reported that people briefed on the matter said Anheuser-Busch Companies Inc (NYSE: BUD) is in active talks to sell itself to InBev in a friendly deal, despite previous hostility to the idea. One person said InBev indicated it may be willing to pay more than the $65 per share originally offered.

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Filed under: Newsletters, Commodities, Oil, Stocks to Buy, Green Stocks

“Renewable fuels and clean energy, a sector beaten down hard since last fall, are now primed for a major comeback,” says Eric Roseman, editor of The Commodity Trend Alert. Here’s his top ETF play on the sector.

“With every passing day the price of crude oil rises, the secular trend to alternative energy becomes even more powerful. Consumers, companies and governments are now sick and tired of soaring energy prices.

“The long-term solution is to obviously reduce our dependence on oil and increase our consumption of renewable fuels like wind, solar, and nuclear energy.

“The bull market in alternative energy began in 2005 when a host of companies in this thriving sector went public, supported by government subsidies, especially in Germany and Spain. Interestingly, Germany and Spain have just reduced solar energy subsidies this spring.

“In my view, those subsidy cuts don’t matter at this stage. When companies in the solar sector are making money, why should governments continue subsidizing them?

Continue reading Claymore/MAC Global Solar Energy: Time for a TAN

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