Thursday, February 12, 2009

Washington plans to announce plans to form a plan and markets soar!!!

Well maybe soar isn't the right word, but the markets did bounce at the 3pm magic hour when news leaked of a new housing "plan".

"Like earlier efforts from the Federal Deposit Insurance Corp. and housing industry groups, the new plan will make use of interest-rate reductions, loan extensions and so-called principal forbearance, in which part of a mortgage’s principal is deferred to the end of the loan’s term."

Really? That's our grand plan save the housing market? Lower rates (further), EXTEND loans (what's next 60yr mortgages?) and deferring principal (more balloon payments?).

Color me skeptical. Full disclosure: I did buy some calls today on the expectation of a little bounce - I'll sell into any strength tomorrow.

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Amidst all the doom and gloom, I read a really interesting piece today on the solar industry over at Barron's. There appears to be substantial overcapacity in polisilicon industry. This oversupply could eventually lead to meaningfully lower prices for solar generating capacity.

"The silver lining here is that in the long run, much lower prices for polysilicon are the most direct way to bring down solar electricity production costs low enough to compete with conventional utility scale power generation. With poly in the $40-$60/kg range, he says, module prices would drop to the $1.70-$2/watt range, and utility scale projects could produce power for 11 cents/watt. At that rate, he says, solar would be “reasonably competitive” with combined cycle natural gas facilities and wind turbines. “A significant market would open and drive a wave of growth for the industry,” he says. “In the long-term, a collapse in polysilicon would be extremely positive for the industry,” but only after a “difficult adjustment period with falling prices and negative growth.”

Boy, there is a lot of wisdom in that thought - near-term pain and suffering for long-term growth. I'd like to see some of this logic applied in Washington.

Cheers!

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