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Mark's Market Blog

6-8-14: Taxing Solar power, our salvation.

By Mark Lawrence

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While I was out riding the market broke decisively to the upside. At least this week there's no question, the bull remains unstopped and seemingly unstoppable. The VIX, the "fear index," spent several years with 12 as a minimum; we broke through the 11s in just a couple of weeks and now we're into the 10s. For several years you could make good money by buying the VIX when it dropped into the 12s and selling when it rose above 18 or so. No more. We're boldly going where no market has gone before. Except for 2007, 1999, 1987. . .


S&P 500 December 10 2013 to June 6 2014

Mark Mitchell of DeepCapture.com has filed a freedom of information lawsuit against the SEC. He's looking for evidence that the SEC knew full well about violations of the laws against naked shorts during the 2008 crash and did nothing. Shorting a stock is when you borrow a share from some owner and sell it, promising to buy it back later, presumably at a lower price, and return it. Naked shorts are when you sell a share you don't have - sales of stock can at times illegally exceed the number of shares. Mitchell claims UBS and Credit Swiss were using naked shorts against Goldman, Lehman, Bear Sterns, Merrill Lynch; that the SEC knew of these blatant violations; and that they did nothing.

Unemployment Is Over!!!! Well, sorta. We have now, 76 months into the Great Recession, recovered all the jobs we lost. Of course we also needed to make about 104,000 new jobs per month to keep up with population growth, which we have not done, so we're about 8 million jobs behind if you want to equate employment levels. The difference is in the "not in the labor force" statistics which the government conveniently ignores. Should they be ignored? The Bureau of Labor Statistics does a survey, how many of these people "not in the labor force" would like a job right now. Turns out, about 6.4 million. But they don't count 'cause it's been too long since they had a job, so Our Government Has Done It!! The Great Recession Is Over!! Don't forget to re-elect the lot of them.

It's well known that China is an export based economy. Well known but wrong. The biggest portion of their GDP is building things, using credit to fund the building. China used as much concrete in the last two years as the US used from 1900-1999.

Last week we discussed solar power and utilities. In Arizona there's a $5/month surcharge on electric bills and a proposed $150 property tax on people who have solar panels. Other state's utilities are envious and trying to get a similar solar tax. Now the Commerce Department has jumped in with a 18% - 35% tax on solar panels. That's 'cause if China ships us solar panels below their cost and subsidizes clean energy in the US, that's a bad thing. Right? Why are we doing it? To protect SolarWorld, a German panel manufacturer. "Today is a strong win for the US solar industry," said SolarWorld Industries America President Mukesh Dulani. The US international trade commission will make a final ruling on this tariff this fall, so get your solar panels now or pay a third more for German panels. Are the Chinese dumping? In an interesting way, yes. In China, 8 of the top 9 government officials are engineers, including the premier. Here in the US our officials are 41% lawyers, and out of 535 members of congress and the senate we have six engineers and six scientists. And engineers in the White House? Forget it. In the late 90s when China saw their economy had taken off, their plan was to make their economy grow by a factor of ten, they knew this meant growing their electric power generation by a factor of ten. They also knew if they did this with coal there would be massive pollution and dependence on foreign coal supplies. So the politburo asked the question, "what would it take to make solar power as cheap as coal?" They did a study and found that solar gets 20% cheaper every time the worldwide installed capacity doubles. They decided to test this and spent $10 billion in the 2000-2005 five year plan subsidizing solar production and causing the worldwide installed base to double a couple of times. The law held up. The calculations indicated that for a $500 billion investment spread over about ten years China could have the clean power they needed and dominate production in an important world market. So in the 2006-2010 plan they seriously ramped up production, causing a huge drop in prices and three more doublings in worldwide installed capacity, mostly installed in Europe. Although China has been the big producer for the last 15 years, their installed solar base is tiny - almost all of their panels have been exported. Today the estimates are that solar will reach parity with coal in two to three years in China, solving several problems for the Chinese and giving the rest of the world a subsidized ride on their investment. Not surprisingly, the biggest planned solar installations in the next few years are in China and Japan - now that prices are near parity with coal as they planned and paid for, it's time for them to move. Americans in Arizona are getting a big cut in their electric bill because of these Chinese investments, and so are lots of Europeans. But now our government is envious: where's their cut of this Chinese money? So Arizona is hugely taxing people for doing exactly what the government wants them to do, and now the US is about to hugely tax everyone for doing exactly what we all know we all must do. It makes perfect sense: the Chinese engineers see a problem and they look for a solution they can afford. The American lawyers see an issue and they pass some laws and raise some taxes. Everyone is just doing what they're trained to do.

Shockingly, the Iran nuclear talks aren't going well. Iran holds fast to their demand that they maintain enough centrifuges to make fuel for their Bushehr reactor, which conveniently is enough centrifuges to make a bomb fast enough to evade international monitors. They also want to maintain their heavy water reactor at Arak which can make plutonium for a bomb quickly enough to evade monitors. Apparently they think Obama is a patsy. Evidence to the contrary is sadly lacking. In spite of the complete lack of progress in the talks, Obama just gave them a six month extension on the talks and relief on their oil export embargo.

Obama is coming under increasing pressure for his unilateral, and possibly illegal decision to swap 5 Guantanamo Bay taliban prisoners for Bowe Bergdahl. Bergdahl apparently went AWOL from his base and was recorded two villages away asking for a taliban who spoke english so he could negotiate his defection. Six actual US soldiers died in the subsequent search for Bergdahl. When he was returned, his father had a moving press conference at the White House attended by a smiling Obama where he gave a benediction from the Koran in Arabic, the same benediction to Allah that Arab conquerors gave to claim territory as they occupied the West 1,000 years ago. And it turns out Bergdahl may be in line for back pay including two raises, hazard duty pay, and POW pay, a total of $300,000. Pretty good since normally deserters in war time get shot. So, we swapped five muslim terrorists for a muslim defector. Soon apparently Bergdahl will go home to Idaho, where feelings about him are a bit mixed. . . The military says they're considering all options for dealing with Bergdahl, apparently including a court martial. I won't be a bit surprised if Obama pardons him and send him home with $300k..

Advanced melanoma (skin cancer) is a death sentence, with a one year survival rate of 10%. Until now, perhaps. A UK company has found a new drug, Pembrolizumab, that stimulates your immune system to fight the cancer. This increases one year survival rates to 75%. Many cancers secrete a hormone that shuts down your immune system near them, thus rendering the cancer invisible to your immune system. This drug stops that happening. It's being tested on 30 other forms of cancer.

The UK has approved a fertilization technique called mitochondria transfer. Mitochondria are little bacteria type objects in every one of your cells that process energy for you. You get them only from your mother. One infant in 6500 has a fatal disease of their mitochondria. This transfer involves removing the nucleus and DNA of a fertilized egg and transplanting it into a second donor egg which contains properly- functioning mitochondria. This means that baby has three genetic parents - two mothers. I like to tell people I have two mothers, one that gave birth to me and one in Sacramento that watches out for my health and welfare, but the Sacramento mother isn't imbedded into each and every one of my cells. Anyway, the question of parenthood is only getting more confusing. Put that transplant egg into a host mother and you have four potential parents. I can't wait until they find a way to have more than one sperm involved. Perhaps one day child support will be based on your fraction of genetic contribution. Nah, forget that, the men will continue to get screwed.

The Japanese luxury brands - Lexus, Infiniti and Acura - are not prospering. The original intent was to make German performance mixed with Japanese reliability. It hasn't been working lately. The luxury car segment is 12% of car sales but 50% of profits. After some initial big Japanese sales numbers in the US, the Germans - Mercedes, BMW and Audi - are fighting back. The Japanese now have 10% of this important market and the Germans have 70%. The future looks even more bleak for the Japanese: the Germans are coming out with more and more models while the Japanese seem stuck on their few, and the Germans are dominating this market segment in China, where selling Japanese cars is a bit more difficult.

What exactly is our culture? Frankly I feel out of touch much of the time. Here's the results of a Gallup poll:

Mark's Excellent Adventure, Part III: 1,950 miles in 4 days. Including Utah Rt 261. At the top of 261 I saw a biker parked at the highway intersection looking a bit confused. I pulled over to take a break. He was an Aussie on a Harley, lost. I told him he had two choices, one that took him a couple hours out of his way, or follow me down 261 which might require a change of underwear. He followed me - no true Aussie could pass that up. He was stunned - "You really have roads like this in the States? I had no idea." Rt 261 goes from Monument Valley and Medicine Hat to Natural Bridges National Monument. This was my second time on it, this time I road it north to south. South to north is more, um, fun. North to south is technically harder. Note: Don't even think of taking this road with a trailer or a motor home. Seriously.

I missed a little road sign in Nevada on the Extra Terrestrial Highway that said "Next Gas Beetlejuice." I stopped in a little "town" Rachel which had no gas station. I walked into the bar / restaurant / hotel / center of all life - the Ale'-Inn - and said to the waitress / concierge, "Honey, I'm in trouble. I missed the sign that said 'Next Gas 100 million miles.' Where's the next station?" "45 miles south or 110 miles north, your choice." I had about 14 miles of gas left. She then offered me some gas at $7 / gallon. I snapped that right up and thanked her profusely. Looking back over my life, this was not in the top 100 most expensive stupid mistakes I've made. My Harley remains stuck at 24 states, but I'm at 10,500 miles now. Not so bad for 5 days short of 2 months.

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