David Fessler (Money Morning):

By the time 2009 is in the books, the record will show that solar energy stocks endured a tough year. That’s hardly a surprise, given that so many Wall Street analysts (yours truly not among them) lambasted the sector for much of the year.

Analysts also expect the carnage to continue into 2010, and are predicting losses for as many as half of the world’s solar companies.

The “thought process” of a Wall Street analyst – and I use that title loosely – goes something like this:

• Analysts first suggest that a “huge” oversupply of polysilicon (the raw material used to make silicon-based panel assemblies) exists. But this is only partially true, as increasing panel sales are rapidly eating into this oversupply.
• The analysts’ next miscue is over new thin-film panel technologies. They predict companies producing panels based on the new thin-film designs are doomed because the oversupply of polysilicon will keep poly-based panel prices too low for the thin-film guys to compete.

Talk about a myopic view if there ever was one. I suspect many of these analysts will be eating crow instead of turkey for Thanksgiving dinner next year.

In the meantime, allow me to outline the real story on the solar energy sector…

Click here for the rest of Mr. Fessler’s analysis at Money Morning.

David Fessler (Investment U):

By the time 2009 is in the books, the record will show that solar energy stocks endured a tough year. Hardly surprising, with many Wall Street analysts (yours truly not among them) lambasting the sector for much of the year.

What’s more, they also expect the carnage to continue into 2010, with losses predicted for as many as half the world’s solar companies.

The analysts’ “thought” process – and I use that term loosely – goes something like this:

• First, they suggest that a “huge” oversupply of polysilicon (the raw material used to make silicon-based panel assemblies) exists. But this is only partially true, as increasing panel sales are rapidly eating into this oversupply. 
• The analysts’ next miscue is over new thin-film panel technologies. They predict companies producing panels based on the new thin-film designs are doomed because the oversupply of polysilicon will keep poly-based panel prices too low for the thin-film guys to compete.

Talk about a myopic view if there ever was one. I suspect many of these analysts will be eating crow instead of turkey at Thanksgiving next year. Here’s the real story on the solar energy sector…

Note to Experts: Refill Your Glasses

Before I go any further, let me say that some solar energy companies will lose money in 2010. Others won’t make it at all. But that’s normal in any competitive environment.

But the experts need someone to refill their half-empty glasses, so I’ll play the role of bartender.

The truth is that the solar enery sector – particularly thin-film panels – is growing at a rapid pace. It’s one of the reasons why Trony Solar Holdings Company Ltd. (NYSE: TRO) is expected to go public in the next few weeks. Trony is China’s largest manufacturer of thin-film based solar modules.

Its IPO – underwritten by JP Morgan (NYSE: JPM) and Credit Suisse (NYSE: CS) – is expected to raise over $200 million. And it’s oversubscribed, too. That doesn’t sound like an industry in trouble to me.

And it certainly doesn’t sound like an industry that’s doomed to replicate the 1980s, when 400 solar panel manufacturers got whittled down to just five as the market collapsed.

The market for solar photovoltaic panels (those that produce electricity) is increasing rapidly. All the industry needs is a little change in perception…

Click here for the rest of Mr. Fessler’s analysis at Investment U.

I listened to various experts talk for over thirty minutes on Radio 5’s afternoon show last week about the high oil price. Not one mentioned Peak Oil. Not one mentioned out-of-control money supply. Not one mentioned increasing Asian demand..

Yes, oil is overbought; yes, oil is going to correct at some stage…but it’s not a bubble.

Then we had Anatole Kaletsky in The Times tell us the rising oil price ‘threatens to do far more damage to the world economy than the credit crunch.’ He’s right about that. Unless of course you’re long of oil in some form or other, in which case things are looking rather rosy.

Kalestsky goes on, ‘The present commodity and oil boom shows all the classic symptoms of a financial bubble, such as Japan in the 80s, tech stocks in the 90s and, most recently, housing’. Does it?

In a bubble supply overwhelms demand, yet prices continue to rise. In the 1990s tech companies with no earnings issued masses of stock; in the US housing boom-bust, builders built everywhere and there was an oversupply of inventory. Is there an oversupply of oil?

The chart below from IEA statistics shows oil supply and demand 2003-2007.

Since 2007, supply has remained constant at about 85 million barrels per day, while demand is now around 88 million barrels per day. No supply-glut there.

Kaletsky goes on to say that the Gulf is ‘crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell’. Hang on, are you sure?

A bit of research reveals there are in fact ten supertankers ‘cramming’ the Gulf, with about twenty million barrels between them – or less than 25% of one day’s global demand. They are carrying heavy Iranian crude, just at the peak of the refinery maintenance season in Asia and the Mediterranean, when refineries have seasonal shut downs for repairs. It’s just a temporary lack of refining capability for heavy oil, that’s all.

It’s worth noting that just a few weeks back, when oil was $100, George Blake, a geologist who studies hard data, rather than an info-spinning journalist, noted an imminent shortage of refinery capacity in Canada and Australia and said it was going to shortly lead to $160 oil. He was laughed at and dismissed. As we touch $135, it’s starting to look now like one of the calls of the decade.

What about other commodities? Are they in a bubble?

So is this commodities bull market a classic financial bubble as Kalestsky asserts? Below is a long-term chart of commodities prices since 1749:

Since 1792 there have been five major bull markets in commodities. These lasted 23 years, 21 years, 23 years, 18 years and 12 years – an average of 19.4 years. The current bull market began around 2000, so we are 8 years in. If history is any guide, this bull market is not even at the halfway stage. Unless, of course, ‘it’s different this time’ and this is the shortest commodities bull market ever.