FSLR disclaimers and other Caveats

Since Poly Silicone is still low on supply and this problem probably won't be fixed until next year- when WFR and others ramp up the production. FSLR will still have a competitive advantage. Wall Street saw this advantage and exploited it.

This stock on that basis alone still has some room to run. The company on the other hand will have hefty expectations to live up to. 20 billion in one year- is quite a bold statement- especially when the CEO will make almost as much money(from shareholders) than the company will make from their business. Thank you pre-planned stock options- allowed on the basis of material non-public information.

So here is my DISCLAIMER to all:

*Due to the momentum, in the near future this might have a better shot of running to 350 then 100.

But we know either way it's going to be volatile so some vertical credit spreads and maybe some longer term OTM puts, or selling some OTM calls might be the BEST way to play this on the short side. The premiums for in the money are rather lofty.

Best of luck.


Also if the technicals give away to S&P and we end up in a full blown recession. These momentum plays will be hit the hardest: MOS, DRYS, any solar stock (FSLR). Also some good shorts IMO AZO, AKAM, lastly CAH.

First Solar to Mars? or The Junk Yard?

Almost all the analysts covering the stock have an indirect hidden agenda. Many big investment banks were involved with the underwriting of the IPO and FSLR is a client to their investment bank. It feels as though, the big banks have thrown millions upon billions into the stock (and they are holding firm), while these short term fluctuations are just the day/swing traders exchanging each others money.

Since they don't use Poly Silicone (there is an apparent shortage) and instead use other materials such as cadmium Telluride- this has been a play on this niche market. FSLR can produce materials much cheaper, although you rarely see discussion about how much less efficient it is. So realistically from a business 101 perspective, if you can purchase a solar panel for 100 dollars that has an efficiency of 10%, or purchase a solar panel for 200 dollars that has an efficiency of 25%, you would opt for the more expensive panel.

Most of these Analysts seem to be very generous and do not like to compare these facts with other Solar Companies- but just compare on a COST basis. But of course all of this is just rhetorical, it's obvious that FSLR (due to massive funding) has the clear advantage over any Thin Film solar company. However, their margins should be on the decline as large players like Sharp are in the process of building similar Thin Film factories as we speak.

And on one more note, FSLR uses natural resources instead of the Poly Silicon. I've read rumors that the Cadium Telluride they use in their panels is a very rare element found on earth, so in the relatively long term they could be in trouble.

Summary:

07' They turned a profit and raised guidance EPS. Mainly due to a 37 million dollar differed tax and the effective currency effects. It was a great play in a niche market, investment banks and hedge funds had a field day. However, with the the ability to declare Capital Gains in 2008, perhaps some of these banks will be selling. Especially since FSLR will actually be faced with new competition.

With all this said, I opened a short position yesterday at 248. I will remain vigilent as shorting a momentum play is quite dangerous, but I feel at these price levels the risk to reward, especially with prevailing economic conditions will be in favor.

Cheers.

The Sky is Always Darkest Before Dawn

The stochastics turned down at 50 on the DOW (see the 1yr chart).

Could this indicate that the bears are back in town? But from a contrarian standpoint, there is so much bad news out there that perhaps a near term bottom could arise.


On a sidenote: I'm having trouble converting my charts to the proper HTML format, but hopefully i'll get them up and running soon. If anyone has any suggestions on free charting software, i'm all ears.

Another Volatile Week on Wall Street

All that "great" news from last months post finally abruptly ended with all the indexes giving away to a dismal technical outlook. But most technicians would agree that there are some crooks out there who pump in some billions and save the institutions from there horrible risk management skills. But thats another argument for another day.

The market probably will have some bounce from here on out. Will we have a thanksgiving rally? its very possible, but as far as our longer term outlook goes, I believe the bears have finally stuck it to the bulls.

A few notes, I sold SOHU with a 48 percent profit, oh how I love momentum. CAH has been behaving horrible. I've been shorting AZO from 120 down (although wouldn't be surprised if this gains some momentum as that markets turn back up). It did however, break a fairly important technical area, confirming there will (hopefully, pending some MMs or some random news event) be some more downhill skiing.

Speaking of random (but amazing) news:

Our fund picked up COLY a few weeks ago and COLY was strong armed into a buyout by the evil Pfizer corporation (just kidding..not 100% evil..just brilliant capitalists).

But we gained 160 percent off of that trade and dumped it to buy some Berkshire Hathaway purely so we can attend the conference.

New Highs- Elation Everywhere

As I am currently writing this the Global marketplace is exploding, there are fireworks everywhere.

Fireworks usually end with a big rally and then an abrupt ending and silence. With even the marginal hope that the fed will once again cut rates, the markets will keep rising.

Few Notes:

*Institutions have been plopping their money in defensive stocks.

*On Dave Barrys blog is an interesting dynamic- that durable good could be a leading indicator!

*Warren Buffett announcements actually make for better shorts, perhaps his style of investing is much too archaic and will not work in this upcoming century.

*All over the retail news there are articles about the fed saving our economy from the credit crunch. What does this really mean?

*Asset prices are currently inflated, the inflated dollar is actually benefiting the huge institutions operating in terms of the global marketplace.

I took a position in SOHU prior to the fed announcement. I was 30 percent long and 70 percent short in CAH. I'm still shorting CAH, it's a dog with fleas.

Volatile Times

All the market indexes are in the process retracing back toward the previous highs, in hopes that the fed rate will follow suit with the discount rate. The dollar has been getting demolished in the FX markets, by lowering the fed rate-- our economy could be facing grave consequences in the next year. Increased inflation, lower valuation of our dollar in our already stumbling economy. Since the market essentially is "forward-looking" my take is that the speculative bulls have already priced in a cut in the fed rate, if we don't see a cut...look out below. Next year, when the democrats take over the political helm, look for higher taxes. Higher taxes will reduce spending and our GDP (see the Laffer Curve). On top of all this there has been an obvious bonanza in China, the markets have been going parabolic as of late. (take in mind the retail investors compare the price of stocks to pork). When this market comes crashing down, there is a definite possibility it will spill into all of the global marketplaces.

The bottom line is major institutions (the bullish guys) are not pricing any of these factors into their risk. The next few years will bring some choppy waters. Longs be careful and shorts be patient.

On another note, I'm still short CAH. I like it's lagging performance relative to the DOW. Although some big player has been manipulating the price of the stock upon opening bell and closing. We'll see how this works out.

Cheers.

Turbalent markets- Increasing Volitility

For the past couple of months I've been short, ever since the drop feb. 28th. I've been shorting REITs all the way to the bank. Since the entire market finally turned down my gains in PSB were magnified. I've now liquidated my assets and am waiting to re-enter my short position.

A few simple things i've noted:

*Fear in the market as presented by our VIX. New highs in the VIX correlate to downward markets.

*ECB and the FED stepping in with an infusion of capital to the markets.

*President Bush starts talking about "how great our economy is", very similar to the late 1920's Hoover, "things are sound".

The bulls (Bush, the fed, in Goldman Sachs we trust) enjoy creating a twilight of illusion when things become overpriced. In short, we are due for a correction.