Christopher Mims has a great piece at Grist on the state of Germany’s photo voltaic(PV) system compared to Japan’s Fukushima nuclear complex. We can skip over the math arguments that the PV system in Germany is 20% more efficient than Fukushima at the height of the day. The point now is that Fukushima is producing ZERO watts of electricity. The design of future green energy systems should incorporate concepts from Information Security.
Information Security attempts to build the CIA triad. CIA is
Confidentiality – Is the data protected from unauthorized access?
Integrity – Has the data been tampered with?
Availability – Is the data available for people to use when they want it?
We will look at Availability. Information systems are typically protected by an Uninterruptable Power Supply (UPS) which has a battery backup. If electricity is lost the batteries continue to power the servers. In most cases the UPS is supplemented by a diesel or natural gas generator to recharge the batteries. In very scenarios where interruption of service is a high impact event, a company will deploy backup servers along with the resilient electrical resources in a geographically separate area. In some cases this can be cross continent or across the world. The objective is to prevent a total loss of your business from a geographically isolated event. The second objective is to provide the customers with a service that is available when they want to use it. For example, a business in Japan may have located servers in another country. If the datacenter were destroyed by the tsunami, the severs in the other country would take over automatically and the customers would not know the difference or know immediately that something was wrong.
Green energy needs the “A” principle of CIA in order to be useful. Pundits on both the green energy side and fossil fuels side have advocated for a one size fits all solution. Windmills, solar panels, and ocean power have not reached the efficiency levels to replace fossil fuels. Fossil fuels are reliable, but are subject to supply chain disruption and competition for the resources themselves which results in higher prices for everyone concerned.
Green energy sources should initially supplement fossil fuels and should be used much like a hedging strategy in a stock portfolio. If there is a disruption of the main power plant, the green alternatives can take up part of the slack while the main facility is being repaired. As more green capacity is brought online it can be built in a decentralized manner. This reduces the exposure that consumers face from the loss of a centralized power source. Green energy is great, but if it is unusable due to a natural disaster the effort is wasted.
The environmental remediation company RINO International Corporation has been delisted due to some questionable business practices. RINO had a recent peak of around $20 near the beginning of November and dropped like a rock since then. If you were an owner of RINO between May 28, 2008 and Nov 17, 2010 you have until January 14, 2011 to get in on the action. The class action alleges that :
That the Company did not enter into at least two customer contracts and 20-40% of the Company’s other contracts had problems for which it reported revenues during its 2008 and 2009 fiscal years
That the Company’s reported revenues for fiscal year 2009 to the SEC that were inflated by 94%
That the Company’s management was draining cash from the Company for its own business and personal uses
That the Company lacked adequate internal and financial controls
That, as a result of the foregoing, the Company’s financial results were materially false and misleading at all relevant times.
If you are a shareholder who purchased RINO securities during the Class Period, you have until January 14, 2011 to ask the Court to appoint you as lead plaintiff for the class. A copy of the complaint can be obtained at www.pomerantzlaw.com . To discuss this action, contact Rachelle R. Boyle at firstname.lastname@example.org or 888.476.6529 (or 888.4-POMLAW), toll free. Those who inquire by e-mail are encouraged to include their mailing address and telephone number.
This is a serious blow to the environmental movement since RINO was one of the companies that makes equipment to reduce pollution from industrial processes. If the first issue is true, then RINO was doing a lot less for the environment than they were leading shareholders to believe.
We were bullish on the stock earlier in the year and had identified several limited gain/risk strategies. We had used a 13/12 Bull Put Vertical in October cash in on an upward movement of the stock. Our max loss would have been limited $100 per contract had RINO gone against us. Imagine going from $20/share down to $2. Having an exit strategy using stop loss orders or put options is essential when bad news breaks. Using option credit spreads allows you to exit the stock each month while still collecting premium.
China Integrated Energy appears to be on a decline. The chart shows several technical reasons to be bearish.
The stock is making lower highs and lower lows.
Persons Proprietary Signal has given us a sell indicator along with an impending crossover
MACD is also showing lower highs and lower lows. It is about to crossover.
StochasticSlow has lower highs and lower lows. It is about to crossover.
RSI Wilder has lower highs and lower lows. The past two days are declining.
MoneyFlow has lower highs and lower lows. The past 3 days are declining. This means money is continuing to move out of this stock.
The Linear Regression Channel shows a mean price of 7.87 and a top/bottom of 11.20/4.54. The channel is also down trending. Prices should gravitate toward the mean of the channel. Close to the outer edges means the stock is very expensive or very cheap in relation to the mean.
CBEH doesn’t appear to be available for short selling. One approach is to use options. While it is possible to go buy a FEB 7.50 put the cost of the put can be lowered by selling a Feb 5.00 put against it. This may be a reasonable strategy since the lower regression line is at 4.54. The strategy allows flexibility for legging out of the trade by selling the long FEB 7.50 and holding the FEB 5.00. There is also an opportunity to sell the FEB 7.50 and accept assignment for 5.00/share with the short put if it is barely ITM. There does appear to be some support around the 6.05 low, so getting an options assignment may not be an issue.
Copy & Paste into Think or Swim: BUY +5 VERTICAL CBEH 100 FEB 11 7.5/5 PUT @.60 LMT Break Even Stock Price: 6.90 Max Profit: 950 Max Loss: 300
Long term CBEH might be a worthwhile stock to hold. The balance sheet shows increasing total assets and decreasing liabilities. The income statement also shows an increase in Total Net Income and EPS. The complete 2009 Annual Report will have even more information to research. At 4.54 this could be worth getting into for a few weeks or months.
Harry de Gorter and Jerry Taylor have written a nice piece on the need to let ethanol protectionism expire. There is a current subsidy of 45 cents per gallon and an import tariff of 54 cents per gallon. Even Al Gore admits that ethanol is not what we had hoped for.
The House passed HR 4853 on December 17 and it was signed by President Obama that day.
Section 701 extends $1 per gallon tax credit through 2011 and also add a credit for diesel fuel made from biomass.
Section 704 excludes black liquor ethanol from tax credits
Section 708 extends the subsidies and tariffs on ethanol until 1/1/2012.
Section 711 extends tax credits to alternative fuel vehicle refueling property placed into service after 12/31/2010
We know ethanol producers will be receiving special treatment from the government we can try to use that information for our own purposes. We know that some of these ethanol producers will not be going out of business immediately, but are they a good place to park your money? The ethanol industry has been lobbying for subsidies because they are not operating from a position of strength. On 12/20/2010 these might see a rise in price because of the news. Green Plains Renewable Energy bounced off its lower Bollinger Band has started to hove upwards to the upper band at around 11.50. Green Plains managed to post 19.79M in earnings in FY2009. Green Plains might be worth considering if it breaks out into an upward trend after being in a tight range since dropping off in early November.
Pacific Ethanol Inc on the other hand posted a net income around –300M. The chart also shows us a downward trend after the gap up continuing a downward trend. Pacific Ethanol and the other companies in this space look like good short sell opportunities since they are still in a downward trend.
China Integrated Energy is not in the US and not affected by the subsidies or tariffs. They have a nice balance sheet and a very nice PEG Ratio of 0.28. For some reason the Chinese manage to stay ahead of the US in terms of alternative fuel production.
In an ideal libertarian world there would be no subsidies or tariffs and the people would keep more of their money, rather than have it distributed to other parties. I am not questioning the wisdom behind extending the subsidies for ethanol producers. If we disagree with what the government does with our tax money, we have the option of taking action that makes us whole again.
The clever combatant imposes his will on the enemy, but does not allow the enemy’s will to be imposed on him. – Sun Tzu
Green Plains Renewable Energy Inc
BioFuel Energy Corp
Pacific Ethanol Inc
Earnings: -308.15 M
Rex American Resources Corp
Downward channel. Stay away until it turns up or go for a short sell at the top of the channel.
China Integrated Energy
Broken out of the downward trend. Potential entry point if it holds.
As always do your own research. These examples are educational tools used to teach chart reading. Other evaluations should seriously be considered before buying or selling any investment.
RINO International Corporation is in the business of environmental remediation, or to more simply put it they make technologies to clean up the environment. If you have a green focus then this company might be a good bet. RINO is based in China and caters to the Chinese market. Their two main specialties include industrial water purification and industrial desulphurization focused on China’s steel industry. One good thing about this industry can be taken from one of their SEC filings:
“Our business is driven more by policy, environmental regulations which are mandating steel manufacturers to install these systems – THEY DON’T HAVE A CHOICE AND THE FINES FOR NOT COMPLYING ARE INCREASING
While this sounds nice several ratings agencies have labeled RINO a SELL. Before stepping in we need to look at what is going on. We can start by looking at past history to see if there is a pattern we can use for guidance. By bringing up the 1 yr chart we can look for support and resistance points. Over the past month we can see support at the $12 and $11 levels (the lower yellow lines). Previously in August it bounced off $11 support. Looking back to September 8 we can see that support at $12 held and there was a price bounce. In late September there was a large price move and the stock moved up at a rapid pace. Looking at today’s pattern we can see similar behavior and a bull triangle forming.
Bull Put Spread
Buy Aug 10 10.00 Put @.32
Sell Aug 10 11.00 Put @ .50
Credit (Mid): 0.18
Amount at Risk: 0.83
Potential Return: 0.18
Potential % Return: 21%
Break Even: 10.83
Or if you are feeling more aggressive you can go for a combo. The disadvantage is if the stock drops below $11 by August expiration you agree to buy it for $11 by selling the Put option, no matter how low it goes. But after looking at the charts it seems unlikely that the stock will break down through support at $12 and at $11.
Combo Risk Reversal
Buy Aug 10 14.00 Call @1.05
Sell Aug 10 11.00 Put @ .45
Debit : 0.65
Amount at Risk: 0.65
Potential % Return: Theoretically Unlimited. 85% (for $1 move up in underlying)
Or for something plain and boring you could buy the stock today for about $14 and ride it up to the next resistance point of $15.
RINO’s services are going to be in strong demand in China. Until we see where the economy is going, this is something to trade in and out of, or limit your exposure through the use of options.
We’re revisiting an old favorite today, LDK Solar Co. Ltd (NYSE:LDK). This is a Chinese Green Energy play that we like to throw on occasionally. As much as we love green energy it isn’t something you can put your money into and forget it. Last month the solar sector was among the bottom on Tickerspy. This is one area where you need entry and exit strategies.
We’re seeing some positive technical signs:
Higher highs and higher lows have been happening for four days.
Person’s Proprietary System (PPS) is showing a buy
PPS shows a positive cross over after the buy signal
MACD Histogram progresses back to and above zero
Stochastics have crossed over into positive and have not gone negative
Stock did not break down below pivot point of $6.93
Our short term strategy was to do a covered call. In simple terms you buy some stock and then sell a contract to sell the stock to someone else at a later date. We managed to get in at $6.94 per share and sold a March 7.5 CALL for $.40. We get paid $.40 per share for agreeing to sell the stock to someone else if it reaches $7.50 by March 19. If the stock keeps going up we miss out because we will have to sell it at $7.50.
There’s a 63% chance that it will not get to $7.50 so we can put on another covered call next month if things go our way.
If it stays under $7.50 we get to keep the $.40 which reduces our risk to $6.54 per share. We won’t lose any money unless the stock drops below $6.54. There appears to be some resistance around $7.12, but if that breaks it should be a relatively smooth ride up to $7.50. We have a Sell Stop in place at 6.74 which still nets us $.20 per share if the trade moves against us.
Without the covered call this trade might not be worth the risk. Using covered calls can be a good strategy to reduce your risk if you know that you want out of a stock by a certain date or price.
Over the past few days Green Energy has taken a beating on the market. There are some signs of a turnaround though it is not certain. Using the PPS, MACD Histogram, and Slow Stochastic it appears a few stocks have started to turn around.
Yingli Green Energy is showing a positive crossover on the Stochastic, the MACD is improving day after day, and the PPS is also having a positive crossover.
Ocean Power Technologies is showing a positive crossover on the Stochastic, the MACD is improving day after day, and the PPS is leaning towards a positive crossover.
First Solar is is showing a positive crossover on the Stochastic. The MACD is improving day after day. The PPS is also having a positive crossover and is signaling a buy indicator.
Battery Maker A123 Systems is showing a positive crossover on the Stochastic. The MACD is improving day after day after a flat decline. The PPS is almost having a positive crossover and the buy indicator has triggered.
Today on Hardball with Chris Matthews, Jim Cramer and Robert Reich discussed unemployment and getting the economy back on track. Matthews eventually brought up the idea that America should make a large capital investment and amortize it over a very long time. He then proceeded to pitch high speed commuter rail as the solution because they’re state of the art. Cramer on the other hand said we should build new roads using US made steel and Caterpillar equipment. Cramer touts US Steel and Caterpillar stock all the time so it isn’t surprising. Matthews speaks of a north east corridor where a maglev train system could ferry people to DC, NYC, Boston, Philadelphia, etc. instead of being tied up by airplanes and terrorists.
Business and recreational travelers do not want to be stuck on a 300mph train when a Boeing 717 can go 600mph. Most tickets on Airtran and Delta start at $49 each way. To make the train reasonably priced, it would have to be in the $5-15 range each way. Matthews also forgets that terrorists can blow up trains just as easily as planes. This would mean putting the TSA in every train station, which would be expensive and inconvenient for the traveler.
A much better investment than high speed rail would be to invest in slow rail for cargo. Freight train is more efficient than moving goods by 18 wheeler to distribution hubs where the 18 wheelers can then pick up the cargo and deliver it to the final destination. Trains are 2-4x more fuel efficient than trucks per ton-mile and emit 1/3 the NOx of trucks per ton-mile. Cramer’s picks of US Steel and Caterpillar are right on target with slow trains, high speed trains, or roads for trucks, but we need something sustainable after the construction is over.
Another reason high speed commuter rail is not the solution is the use of technology to eliminate the need to commute. GenX and GenY are more comfortable with running a virtual office. Whether these groups are business owners or executives at established businesses, they will influence the workforce to become more decentralized. Instead of meeting in person in a conference room, you can use GoToMeeting, WebEx, or the open source tool DimDim. The last time we ordered a nifty IT appliance a Sales Engineer didn’t come out to set it up. We placed the device in the server room with an IP address. Then the Sales Engineer took control of our PCs through WebEx Remote Support and did all of the configuration from California. They could have sent a real person, but why do that when it’s more efficient and green to do work over the internet? Skype and SIP based calling allow workers, vendors, and customers to communicate across the world for the same price as it would cost to call across town. In the near future there will be no reason to go to the office which is good for workers, good for the environment, and bad for high speed commuter rail.
Biodiesel manufacturers will have to make serious cut backs in 2010. A $1/Gallon tax credit for manufacturers of biodiesel expired January 1. The House of Representatives voted to extend the tax credit, but the US Senate was not able to come to consensus on extending the tax breaks for American business. There are approximately 180 biodiesel producers in the US that could benefit from extending the tax breaks. In addition the European Union has implemented a high tariff on imported biodiesel which has hurt US exports. The largest refinery in Houston sits idle and many producers will likely shut down as a result of the higher costs.
Unfortunately it was the Democrats that indirectly torpedoed the extension. According to Charles Grassley (R-Iowa), the Democrats tried to bring back the estate tax along with the tax credit for biodiesel producers. They also decided to put it into a defense bill for some strange reason. Something as divisive as the death tax was sure to not win support from the Republicans. By taking this approach the Democrats have shown that they are not committed to green energy reform. Since this would be a tax break for small business any Republican would be behind the bill if that were the only topic. Democrats can show their commitment to renewable energy by creating a bill that brings back a minimum of $1/Gallon tax credit for biodiesel manufacturers. This bill should carry out no other actions than the tax cut.
Republicans want to see lower taxes and less dependence on foreign oil. Democrats want to protect the environment and bring manufacturing jobs back to the US. Passing the tax cut will benefit Democrats and Republicans. It’s time to drop the red state/blue state partisan bickering and get to a green state. Write your Democrat Congressman and Senators and tell them to support renewable energy in a way that brings the Republicans to the cause.