Thursday, February 11, 2016

"U.S., Russia and other powers agree on ‘cessation of hostilities’ in Syria’s civil war"

Following up on the post immediately below, "Russia’s Prime Minister Medvedev Warns of New World War if US, Arab Troops Invade Syria".

From the Washington Post:
The United States, Russia and other powers have reached agreement on a “cessation of hostilities” in Syria’s civil war that allows for immediate humanitarian access to besieged areas, Secretary of State John F. Kerry announced here early Friday morning.

The end of hostilities, which Kerry avoided calling a cease-fire, is scheduled to go into effect “in one week’s time,” Kerry said. Humanitarian access to towns and cities in Syria where food and medical supplies have been blocked, sometimes for months, is to begin immediately.

“It was unanimous,” Kerry said. “Everybody today agreed on the urgency of humanitarian access. What we have here are words on paper. What we need to see in the next few days are actions on the ground.”

Agreement came after day-long consultations that lasted until early Friday here. Hours earlier, Russian Foreign Minister Sergei Lavrov huddled with his counterpart from Iran, Russia’s ally in backing the Syrian government of President Bashar al-Assad, and Secretary of State John F. Kerry sat down with allies backing the Syrian opposition, before all parties gathered for a joint meeting at which the deal was struck.

Lavrov called cessation of hostilities the “first step” toward a full cease-fire.

The effort has been considered a last chance to stop the carnage in Syria that has left hundreds of thousands dead and sent millions fleeing from the country. What was already a desperate situation in Syria has greatly worsened over the past few weeks, as massive Russian bombardment in and around the city of Aleppo has scattered opposition fighters and driven tens of thousands of civilians toward the barricaded Turkish border.

Participants said they had noted a new resolve in U.S. willingness to stand up to the Russians, who agreed in December to a U.N. resolution calling for a cease-fire in conjunction with peace negotiations...MORE

Russia’s Prime Minister Medvedev Warns of New World War if US, Arab Troops Invade Syria

And in other news...Kris Jenner Calls Kim Kardashian a ''Big Mouth'' After She Tells Caitlyn About Kendall's Victoria's Secret Fashion Show ...

Ah, that schtick never gets old.
Now back to threats of world war from Sputnik (all caveats apply):
As Turkey and Saudi Arabia edge closer to sending ground forces into Syria at the behest of the United States, Russian Prime Minister Dmitry Medvedev has warned that an escalation of the conflict could lead to world war. 
During an interview with German newspaper Handelsblatt, Medvedev warned of dire consequences if the United States and its allies abandon Syrian peace talks in favor of deploying ground forces. 
"All ground operations, as a rule, lead to permanent wars," he said. "Look at what is going on in Afghanistan and a number of other countries. I don’t even mention the ill-fated Libya....MORE
A few days ago Hezbollah was also warning the Saudis. From PressTV:
Ground incursion into Syria, Iraq opens gates of hell: Hezbollah Brigades
We last heard that turn-of-phrase from the Arab League in 2002.

You can probably tell I don't believe Saudi Arabia is going into Syria.

Seriously, the Saudis seem to have their hands full with just the Houthi tribesmen in Yeman, I can't imagine them going up against Russia's T-90 main battle tanks, Su-35 fighter planes and S-400 anti-aircraft missiles, each of which is the best of its kind in the world and all of which are in Syria right now.

So, I'm thinking it's just talk when we see this at al-Arabiya: "Saudi’s decision to send troops in Syria ‘final’"
Here's an Su-35 showing off that we first posted on in 2012. It caught the attention of U.S. Generals:

What Is Going To Happen When Chinese Markets Re-open This Weekend?

So I'm blowing the dust off the contingency plans, magnitude 9 Los Angeles earthquake, poison gas attack on a European capital, reality TV guy becomes U.S. President, and find we don't have one for 'world markets crack as Chinese celebrate New Year'.
Not good.

The Shanghai and Shenzhen markets showed small upticks (~1%) before putting on their party clothes but when Hong Kong reopened  earlier today it promptly dropped 4% and now I'm reading about how bad the Chinese banks could actually be. From Bloomberg:

Bass Says China Bank Losses May Top 400% of Subprime Crisis
  • Manager says 10% asset loss would cut equity by $3.5 trillion
  • China would have to print $10 trillion to recapitalize banks
Kyle Bass, the hedge fund manager who successfully bet against mortgages during the subprime crisis, said China’s banking system may see losses of more than four times those suffered by U.S. banks during the last crisis. 
Should the Chinese banking system lose 10 percent of its assets because of nonperforming loans, the nation’s banks will see about $3.5 trillion in equity vanish, Bass, the founder of Dallas-based Hayman Capital Management, wrote in a letter to investors obtained by Bloomberg. The world’s second-biggest economy may end up having to print more than $10 trillion of yuan to recapitalize banks, pressuring the currency to devalue in excess of 30 percent against the dollar, according to Bass. 
Bass, 46, scored big after betting against mortgages in 2007, racking up gains as the world’s largest banks wrote off more than $80 billion in subprime losses. All his calls haven’t been as prescient. He revealed wagering on a collapse in Japan’s government-bond market in 2010, a short position that Bass later acknowledged that other bond investors had nicknamed “the widow maker.” 
Largest Resetting
“What we are witnessing is the resetting of the largest macro imbalance the world has ever seen,” he wrote in the letter. “Credit in China has reached its near-term limit, and the Chinese banking system will experience a loss cycle that will have profound implications for the rest of the world.”...MORE
Psychologists tell us it's good to have something to look forward to.

PIMCO: "Negative Interest Rates May Be Part Of The Problem"

From Allianz's Pacific Investment Management Co:

Negative Interest Rate Policies May Be Part of the Problem
Investors may see these experimental policy moves as damaging to financial and economic stability
Central banks around the world are developing a newfound fondness for experimenting with negative interest rate policy (NIRP) despite unknown consequences and what appears to be a chilling effect on financial markets.

After initially rejecting the idea given the uncertainties and potential for collateral damage, the European Central Bank in 2014 and the Bank of Japan last month joined the central banks of Denmark, Sweden and Switzerland in negative territory. Now it seems the Fed may be warming to the idea, having gone beyond supportive innuendo to subtle preparation for potentially engaging in NIRP. (One example: The Fed’s 2016 scenarios for bank stress tests, released in late January, included as part of the “severely adverse scenario” the potential for short-term Treasury rates to fall to negative 50 basis points.)

While there is no longer any doubt about the ability or willingness of many central banks to manufacture negative interest rates, their efficacy on growth or inflation is far from certain. In fact, policymakers may have significantly underestimated the economic risks. 
The new abnormalCentral bank advocates of NIRP increasingly seem to portray it as nothing more than a natural extension of conventional monetary policy. In a “normal” interest rate cycle, central banks cut interest rates to reduce nominal and real (inflation-adjusted) interest rates; the goal is to ease the burden on debtors and lower hurdle rates for investment. The belief is that lower rates (even negative ones) are always stimulative, while higher rates are always restrictive. However, risks may increase exponentially the lower rates go and the longer they stay there.

Although it is difficult to know the counterfactual because this is such an unprecedented situation, it appears that NIRP has not been especially impactful in lifting growth or inflation, or in lifting expectations about future growth or inflation. Instead, it seems that financial markets increasingly view these experimental moves as desperate and consequently damaging to financial and economic stability. 
What are the potential negative externalities that could be upsetting financial markets?

At a minimum, NIRP is a contributing factor to the financial market volatility of the past few months. And contrary to current central bank dogma, NIRP is possibly one of the major catalysts behind the tightening in global financial conditions. While NIRP undoubtedly helps lower government bond yields, which in isolation represents a loosening of financial conditions, it may be causing the opposite effect on overall financial conditions: widening of credit and equity risk premiums, increased volatility and reduced credit availability from a more stressed bank system.

Moreover, NIRP may act to reduce inflation expectations embedded in financial assets rather than encourage anticipation of a return to targeted inflation. Nominal government bond yields can be decomposed into two yield components: a component that represents the expected “real” inflation-adjusted return, and a component that compensates for expected inflation. The exact decomposition is not scientifically determined; individual investors will make their own decisions. But policymakers hope that all of the downward adjustment in yield reflects a lowering of the real yield component and not the nominal yield piece that reflects inflation expectations.....MORE
HT: Barron's Focus on Funds, who has a couple other links worth a look.

Don't Never Ever Lend Money To A Duke

If you are a Baron-or-higher ranked aristo.

That at least is my takeaway from this piece in the Financial Times, Feb. 10:

City grandee Lord Turner warns on peer-to-peer lending risks
Lord Adair Turner, the former chairman of the UK financial regulator, has issued a grave warning on risks building up in the burgeoning peer-to-peer lending industry....MORE
Turner himself is a peer, a Baron, so he should know, although his title is only of the life variety.

This train of thought can be blamed on FT Alphaville's "The curious state of UK “peer-to-peer” lending".
And my dislike for busybody political infighters like Turner, who, if he hangs around long enough, will probably end up with a real title.

Hundreds of Former Sex Slaves Take Up Arms To Do What Obama, Cameron Won't: Kill ISIS Pigs

From the Daily Mail:
The former ISIS sex slaves waging war on their abusers: Hundreds of Yazidi women form an all-female battalion called the 'Sun Ladies' to launch massive assault on Mosul 
Hundreds of former ISIS sex slaves have joined an all-female battalion to launch a massive assault against their abusers in Iraq.

The Yazidi women – who call themselves the 'Force of the Sun Ladies' – have taken up arms in the quest for revenge but also to preserve the future of their race.

They are among around 2,000 captives who have escaped their jihadi tormentors who subjected them to horrific torture and rape and massacred thousands of their loved ones after storming their villages in the summer of 2014.

Now, driven by a collective desire for vengeance, the battalion is preparing for an offensive on the ISIS stronghold of Mosul where many were exchanged by militants to serve as their sex slaves....MORE

"Gravitational waves: discovery hailed as breakthrough of the century"

Following up on yesterday's "Einstein’s theory about gravitational waves could be confirmed tomorrow" which for some reason degenerated rather quickly into "Florida Man..." stories.
From the Guardian:

Scientists announce discovery of clear gravitational wave signal, ripples in spacetime first predicted by Albert Einstein
Physicists have announced the discovery of gravitational waves, ripples in spacetime first anticipated by Albert Einstein a century ago.

“We have detected gravitational waves. We did it,” said David Reitze, executive director of the Laser Interferometer Gravitational-Wave Observatory (Ligo), at a press conference in Washington.

The announcement is the climax of a century of speculation, 50 years of trial and error, and 25 years perfecting a set of instruments so sensitive they could identify a distortion in spacetime a thousandth the diameter of one atomic nucleus across a 4km strip of laserbeam and mirror.

The phenomenon was detected by the collision of two black holes. Using the world’s most sophisticated detector, the scientists listened for 20 thousandths of a second as the two giant black holes, one 35 times the mass of the sun, the other slightly smaller, circled around each other.

At the beginning of the signal, their calculations told them how stars perish: the two objects had begun by circling each other 30 times a second. By the end of the 20 millisecond snatch of data, the two had accelerated to 250 times a second before the final collision and dark merger.

The observation signals the opening of a new window on to the universe.

“This is transformational,” said ProfAlberto Vecchio, of the University of Birmingham, and one of the researchers at Ligo. “This observation is truly incredible science and marks three milestones for physics: the direct detection of gravitational waves, the first detection of a binary black hole, and the most convincing evidence to date that nature’s black holes are the objects predicted by Einstein’s theory.”...MORE

Morning Market Internals

From Between the Hedges:
NYSE Composite Index: 
  • Volume Running +30.0% Above 100-Day Average
  • 0 Sectors Rising, 10 Sectors Declining
  • 14.3% of Issues Advancing, 84.4% Declining
  • 25 New 52-Week Highs, 505 New Lows

Twitter and the Wall Street Stupidity Index (TWTR)

In light of headlines like this:
Twitter growth grinds to a halt

I thought we should dust off a December 2013 post:

The Wall Street Stupidity Index 
From Fortune:

A new tool to measure one of the great market forces.

The day Twitter went public not only was profitable in the fiscal sense, but also illuminated a metric that has heretofore been underappreciated by those attempting to comprehend and thereby profit from the laws that guide the market. We will call this potent new tool the Wall Street Stupidity Index. On Nov. 7, 2013, you may remember, the market went down more than 150 points. Yet Twitter hovered cheerfully above the bloodbath, darting about in the sunshine of a 73% increase from its opening price. There were many good reasons for this, of course. Twitter is terrific....
Here's the monthly chart, from the Nov. 7, 2013 IPO, via FinViz. Today the stock looks to open down 7%:
TWTR Twitter, Inc. monthly Stock Chart

CLSA's 2016 Lunar New Year Feng Shui Index

Kung Hei Fat Choy! 
Year of the  Fire Monkey 
Happy Lunar New Year
(we're a few days late to this, sorry)

From CLSA:
Monkey business
How will you and the Hang Seng Index fare with the primate in 2016? Our Feng Shui guide, now in its 22nd incarnation, offers an alternative look at what’s in store this year to help the luck flow in your direction.
Like astrologists summoned in the West by politicians and lesser mortals, Feng Shui masters are valued in the Orient by those looking to foretell the future. If you're running a hedge fund, no doubt you'll take our sorcerer’s view on the year ahead with a pinch of salt, but curiosity if not superstition may get the better of you.
So stop monkeying around and scroll down to see all manner of forecasts. Our longstanding health warning holds: don’t be a silly monkey and take it too seriously!
Some predictions - All the thrills and spills
New antibiotic brought to market - herbal source declared protected plant · Cloud bursts in massive internet security leak - nothing remains private · South China Sea shipwreck, submerged construction rubble blamed · Google announces new device to allow “reverse smell” searches - pop in your sample to locate the accursed source · “VR disease” explodes with record numbers refusing to remove their Virtual Reality goggles. New “strictly analog” wings planned for psych hospitals · Robot pet plague. Rogue Aibos on the loose, terrify Zoomer Kittys off the street · Major liberalisation in Vietnam as wealth effect prompts popular movement ·
First singing chimp hits top 40 with hip-hop screech track, Bape-attack! · Spate of power blackouts hit global bank data-servers - exposes downside of digital assets · La Nina blamed for record-low temperatures · Air-borne disease threatens Rio Games · Celebrity engagement hits a snag · Gold rallies in September · Mike Nesmith reforms Monkees · New star rises with Elvis Presley covers · Shabani the gorilla releases a line of fragrances · Google translate includes emojis · Plastics cure discovered - harmless chemical hastens decomposition of previously “longlife” pollutant · Oil pricing goes negative; Saudi starts paying people to take the stuff...

So, If The Japanese Yen Is So Important, What Happens Next?

Following up on the post immediately below, "Stocks Crater, Yen Soars".
From FT Alphaville:

JPY, it wasn’t meant to be this way
What must the BoJ be thinking as the yen keeps getting stronger post the Japanese central bank’s announcement of negative rates?
That’s an inverted JPY in blue and the falling Nikkei in yellow YTD. It shows the yen hitting 111 against the dollar as the world gets dangerous once again. According to Fast, the next big level is Y109.21, the level it was at before the additional easing by the Bank of Japan on October 31 2014.

Here’s the 5yr view:
Here’s HSBC’s David Bloom on the possibility of a coming intervention:
Japan’s surprise move to a negative interest rate policy at the end of January similarly had only a temporary weakening impact on the JPY....MORE

"Stocks Crater, Yen Soars"

That headline should probably be reversed as the folks who were into the yen carry trade are now getting out of whatever they bought with the yen carry trade.
They are getting cruched.
From Marc to Market:
The continued sell-off in global equities is the main driver of the capital markets.  It, along with the push lower in oil prices, are pushing core bond yields sharply lower.  
The US 10-year yield is nearing 160 bp having begun the year above 225 bp.    The 10-year gilt yield is at a new record low of 130 bp.  It began the year near 195 bp.  The yield on the 10-year bund is also at new record lows today near 17 bp.  It had begun the year above 60 bp.  The only thing that saves the 10-year JGB yields from going back into negative territory was the fact that Tokyo markets were closed today.  
China and Taiwanese markets were still closed for the New Year's celebration, but Hong Kong re-opened with almost a 4% drop.  The Hang Seng Enterprise Index, which tracks mainland shares, fell nearly 5%.     European bourses have fallen sharply, with most major indices off 2.5%-4.5%.    The Dow Jones Stoxx 600 is off 3.25% near midday in London.  Financials are leading the way with more than a 5% decline., with bank shares off 6.5%.   
Poor earnings at a large French bank and ongoing concerns at a large German bank.   There has been much talk of sovereign wealth funds liquidating investments, and some observers are linking this to the sharp decline in financials.    At the same time, the banks' exposure to the energy sector may also be weighing on sentiment.  In addition, just like the rout, last August tested the ETFs ( the ETFS would open even though all their components may not), the CoCo bonds are being tested now.  On top of this, there is concern about the protection of bondholders under the new Bank Recovery and Resolution Directive.   
The dollar-bloc currencies and sterling are under pressure.  Traditionally sterling moves in the euro's orbit, but in recent weeks, it appears to be closer related to the dollar-bloc currencies.   One explanation for this is that it was not used as a funding currency the way yen, euro and dollar were.  The euro is making new highs since the second-half of October near $1.1355.   Above here is $1.1400 and the mid-October high closer to $1.15.  
The combination of falling share prices and the sharp fall in US Treasury yields have continued to drive the yen higher.  The dollar briefly traded below JPY111.00.  Many observers expected stepped up resistance by Japanese officials, and many cited the JPY115.00 level.  We have been skeptical that there is any such line.  
We recognize intervention as an escalation ladder.  Comments by Ministry of Finance's Asakawa were fairly relaxed, suggesting officials are watching foreign exchange developments to see if it is a speculative run.    The fact that Japanese markets were closed today would not have prevented stronger verbal or material intervention if that is what officials wanted.   
Although we recognize that speculators in the CME futures market have been buying yen and are net long, we do not think that is the main driver.  We think the unwinding of short yen funding positions is playing a key role.  As s a subset of this, many foreign investors that had bought Japanese stocks (record corporate profits, easier BOJ policy where QQE also includes equity purchases)  also hedged out the currency risk.  As Japanese equities are liquidated, the hedge is bought back.....MORE

Oil: Buffet's Favorite Refiner Trying To Get Rid Of Excess Crude, Price Collapses (PSX; BRK.a)

For the last month or two each time Berkshire Hathaway bought more Phillips 66 you'd see headlines like "As Warren Buffett Buys More Phillips 66, Is He Calling a Bottom?" and the temptation would be to put up a post explaining that refiners were a bet on the crack spread and not on the price of oil.

But we didn't.
Sometimes it's best to just go about your business and let folks believe whatever they want to believe.
This is especially true if you can make a buck off of them and their advisers.

Anyhoo, the thing about the spread is, although it is a bet on cheaper input costs (crude) it is also a bet on being able to maintain your higher price for the end product (gasoline).
And now that's a problem.

March WTI $26.83 down 62 cents after trading as low as $26.52.

From ZeroHedge:
The canary in the coalmine of an increasingly desperate energy industry just croaked. With "unusual timing" and at "distressed prices," Reuters reports that Phillips 66 - the major US refiner owned by Warren Buffett - dumped crude oil for immediate delivery into Cushing storage tonight. This sparked heavy selling of the front-month WTI contract (to a $26 handle) and crashed the 1st-2nd month spread to 5 year lows.

It was just last week when we said that Cushing may be about to overflow in the face of an acute crude oil supply glut.
“Even the highly adaptive US storage system appears to be reaching its limits,” we wrote, before plotting Cushing capacity versus inventory levels. We also took a look at the EIA’s latest take on the subject and showed you the following chart which depicts how much higher inventory levels are today versus their five-year averages.

graph of difference in inventory levels as of January 22, 2016 to previous 5-year average, as explained in the article text

And now with Reuters reporting on major US refiners dumping crude, sparking speculation that the move reflected advance warning of looming output cuts amid sluggish winter demand and record inventories...MORE
Gasoline prices may have turned the corner for the immediate term but I don't have enough information to make that call. In the meantime we are still betting lower for crude.
Here the hourly gasoline chart from FinViz:

Wednesday, February 10, 2016

A Deeper Dive Into The SolarCity Debacle (SCTY)

"SolarCity Inferno Chars Sunrun, SunEdison, SunPower, First Solar"

From Barron's Tech Trader Daily (which is kinda funny as one of Chanos' arguments is "They aren't a tech stock"):
SolarCity Drops 25%: Raymond James Sees Present Value, Axiom Sees Unrealistic Outlook
Shares of of solar energy project contractor Solar City (SCTY) have recouped some ground from last night’s 33% sell-off, down merely a quarter of their value this morning, after the company yesterday afternoon reported Q4 revenue and profit that topped analysts’ expectations, but forecast a deeper-than-expected net loss for this quarter, citing a larger-than-normal decline in installations of systems this quarter.

The stock is at $20, down $6.35, at present.

The stock has, surprisingly perhaps, received one upgrade this morning, from Raymond James’s Pavel Molchanov, who raises his rating to Strong Buy from Outperform, writing that the stock is now below what he estimates for the “net present value” of the business — a level “which we never thought we’d see.”

Molchanov does, however, cut his price target to $60 from $75.

Molchanov insists the reported results show nothing fundamentally amiss with the business:

Similar to 3Q’s 2% shortfall, it’s obviously not a good headline, but the cause – purely operational delays at several (non-core) ground-mounted projects – is not a fundamental concern. Operating expenses rose 68% y/y, modestly faster than installation growth, though notably slowing from 3Q’s 2x increase. As always, GAAP EPS is not meaningful.
And the outlook shouldn’t be worth a 30% haircut, he writes:

Insofar as the market is unhappy with the guidance, the issue seems to be the 1Q outlook of 180 MW, a steeper-than-usual seasonal drop (including the loss of Nevada’s 24 MW). Again, not the ideal headline, but hardly worth a 30% sell-off, since the quarterly progression is always back-end-loaded. 
He writes that the stock has finally grown into its valuation, by shrinking:

Now, let’s look at NPV per watt. The current run-rate is near $1.65/watt, but what will it be in a year, or three years? […] While any forecast should be seen as nothing more than a guesstimate, we assume – mainly due to the aforementioned geographic diversification – that NPV per watt will decrease in 2017 and 2018. In the past, we used to ask the question: how long will it be before SolarCity grows into its current share price? Well, as of last night’s 30% after-hours sell-off in the stock, that question no longer applies. Put simply, for the first time in its three-plus years as a public company, SCTY shares are trading at a discount to the current NPV/share figure. That is to say, the stock is currently pricing in zero credit for any future expansion in NPV. In fact, the stock is not even fully pricing in the current NPV. As far as our target price, we readily admit – as we’ve done in the past – that any target is still somewhat arbitrary. 
Here’s Molchanov’s model of net present value:...

...On the other hand, noted solar bear Gordon Johnson with Axiom Capital this morning reiterates a Sell rating, writing that Solar City is no longer an MLP-like, YieldCo.-like cash generator:

In summary, SCTY was once considered a growth company with all the benefits of a solar YieldCo vendor (i.e., perpetually low access to debt and capital costs). Yet, with both its cost of capital and cost of debt higher, exacerbated by the fact that YieldCos have completely fallen out of favor with long-only funds, investors appear to be now evaluating SCTY on its present-day fundamentals, versus a set of expectations 20-to-30 years out into the future previously (the lion’s share of investors value SCTY using a 30 year discounted-cash-flow [DCF] model, which assumes share buy-backs, escalators, etc.)....MORE

"SolarCity Inferno Chars Sunrun, SunEdison, SunPower, First Solar"

One of these is not like the others.

SolarCity    Down  28.23%
SunRun       Down  12.22%
SunPower   Down   3.96%
SunEdison   Down   8.17%
SolarEdge    Down  7.92%
First Solar   Down   2.45%

For one thing, First Solar, the biggest of the bunch doesn't do rooftop. Also, they are the class of the field, see, for example: "Solar: The Quality Remains Long After The Price Is Forgotten"

From Investor's Business Daily:
SolarCity (SCTY) stock combusted Wednesday after the No. 1 residential installer guided to weak Q1 installations and failed to assuage investor concerns about the rising cost of capital. 
The resulting conflagration charred rivals Sunrun (RUN), SunEdison (SUNE), SunPower (SPWR) and First Solar (FSLR), shares of which were down 13%, 6.5%, 4% and 2.5%, respectively, in midday trading Wednesday. 
IBD’s 26-company Energy-Solar industry group was weaker by more than 10%..In early trading on the stock market today, SolarCity stock crashed as much as 38%, touching a 34-month low at 18.26. By midday, shares were down 17%, above 21. 
Wall Street was split on SolarCity’s prospects. While at least three analysts slashed their price targets on SolarCity stock, another boosted his price target, and two analysts upgraded the shares..For Q4, SolarCity reported a per-share loss ex items of $2.37, widening from $1.33 in the year-earlier quarter. 
Sales grew 61% to $115.5 million..Both measures beat analyst expectations and SolarCity’s earlier outlook..SolarCity losses are expected to widen in Q1. SolarCity guided to per-share losses ex items of $2.55 to $2.65, deepening from $2.36 in the year-earlier quarter. Analysts polled by Thomson Reuters had modeled a loss of $2.36 a share ex items. 
Nevada Withdrawal Snags 
Installations.Installations of 272 megawatts in Q4 and 870 MW for all of 2015 were each slightly short of SolarCity’s earlier guidance. 
The installer previously saw 280 MW to 300 MW for the quarter, and 878 MW to 898 MW for the year..Current-quarter views for 180 MW, up 18% year over year, don’t jibe with 2016 guidance for 1.25 gigawatts, up 44%, Needham analyst Y. Edwin Mok wrote in a research report. Mok retained his hold rating on SolarCity stock. 
CEO Lyndon Rive blamed SolarCity’s exit from Nevada and 15 MW in commercial project push-outs to Q1 for the December-quarter installation miss. Commercial installations of 51 MW in Q4 were below guidance for 80 MW to 90 MW. 
The commercial push-outs could snag guidance, Mok wrote..“We believe the Q1 and 2016 outlooks require SolarCity to complete a large amount of commercial projects, which clearly have timing risks,” Mok wrote. 
Solar, Wind Vie For Capital 
SolarCity’s 44% growth target for 2016 is predicated on the company’s access to capital, Credit Suisse analyst Patrick Jobin wrote in a report. At year’s end, SolarCity had $658 million in committed tax equity funding, providing about 510 MWs of runway. 
And the cost of capital is on the rise. In December, Congress extended key subsidies underpinning the solar and wind industries, and now more competitors are vying “for the same capital pool,” Jobin wrote..“Investors continue to fear cost-of-capital increases could jeopardize the positive spread (SolarCity) is earning,” he wrote. But SolarCity can raise $2.73/watt in financing, above its all-in $2.71/watt cost, Jobin wrote....MORE
The Chinese manufacturers aren't getting hit as bad, with the quality of that field, Trina, only down four pennies.
Musk's SolarCity Down 31% Pre-market, Chanos Scores Big (SCTY)

Oil: I May Be Having A Stroke

Following on yesterday's decline the Fed Chair's prepared remarks were released at 8:30 a.m. ET.
WTI seemed to dislike what she was going to say:
Then we see "WTI oil climbs after EIA reports an unexpected fall in crude supplies".
Finally, for reasons known only to the gnomes of NYMEX the exuberance fades, joy is replaced by gloom and oil drops a buck-and-a-half.
Now this is okay by us as we're betting lower but man-o-mandingo, getting there is not half the fun

Folks, these are 3% to 6% moves occurring on an hourly basis. The CBOE Crude Oil Volatility Index (OVX) is over 70-and climbing, compared to a piddly 25.50 on the VIX and I'm having difficulty smiling.
More to come, March WTI curently down 21 cents at $27.73 after trading as high as $29.22.
Which itself was a 6.6% bounce off the low. Oh great, now I'm having trouble typppppppppppppp

"Einstein’s theory about gravitational waves could be confirmed tomorrow"

In other news, Florida Man...

Here are some.

And here are some more, Esquire's Best of 2015:

March 20: Florida Man Tries to Sell 3 Iguanas Taped to His Bike to Passersby as Dinner
April 13: Florida Man Impersonating a Police Officer Pulls Over Real Cops
May 29: 82-Year-Old Florida Man Slashes 88-Year-Old Florida Woman's Tires with an Ice Pick for Taking His Seat at Bingo
July 2: Florida Man Dressed as Pirate Arrested for Firing Musket at Passing Cars
October 2: Florida Man Drinks Goat Blood in Ritual Sacrifice, Runs for Senate
December 8: Florida Man Arrested After Driving 110 MPH While Naked with 3 Women in a Cadillac  
December 23: Florida Man Crashes Car into Business While Trying to Time Travel

That's all, folks. The list of honorable mentions is too long—and too dishonorable—to mention.

Here's the Einstein thing at the Verge.

And Janet Yellen is talking and oil is tanking again.

Musk's SolarCity Down 31% Pre-market, Chanos Scores Big (SCTY)

With a half-hour to the open the stock is at $18.15 Down $8.20 (31.12%) in frenetic pre-market action.
Investor's Business Daily, 6:03 p.m. ET, Feb. 9:

SolarCity Torched On Q1 Guidance As Losses Expected To Deepen 
SolarCity (SCTY) stock was torched after hours Tuesday, after the No. 1 residential installer guided to deepening Q1 losses and slower installation growth in 2016, despite CEO Lyndon Rive’s earlier pledge to curb losses by 2017.

SolarCity stock was down more than 30% after the close, after the company released its Q4 earnings and gave guidance, and after falling 5.7% in Tuesday’s regular session. Shares of rival installer Sunrun (RUN) also wrapped Tuesday’s regular session down 7% and were down another 6% after hours. Big solar companies SunPower (SPWR) and First Solar (FSLR) were down 6% and more than 2%, respectively, after hours.

For Q4, SolarCity reported $115.5 million in sales, up 61% year over year, and a per-share loss ex items of $2.37, widening from a $1.33 per-share loss in the year-earlier quarter.

Both measures beat Wall Street expectations for $105.6 million and $2.59, as well as SolarCity’s three-months-ago outlook for $100 million to $108 million and $2.60 to $2.75 losses.

During Q4, SolarCity installed 272 megawatts, which was up 54% vs. the year-earlier quarter but missed the company’s earlier guidance for 280 MW to 300 MW....MORE
We'll have more later tody.

On the big short:
Dec. 18, 2015
Chanos Says He's Still Shorting SolarCity ‘Not a Technology Company’ (SCTY)
Aug. 21, 2015
SolarCity's CEO When Told Jim Chanos Is Shorting His Stock: "First I've ever heard of the guy" (SCTY)
Aug. 22, 2015
SolarCity: Jim Chanos On Elon Who? (SCTY)

We've been following this one for a while:
More Elon Musk: "5 things to know about SolarCity’s IPO (and it’s not all good)"
"SolarCity postpones initial public offering, according to report" (SCTY)
After Price Cut Elon Musk's SolarCity Trades, Soars (SCTY)
The stock was priced at $8.00, down from the $13-15 range the underwriters were throwing out earlier this week.
It is currently trading at $11.60, up 45%.
And many, many more.

Like most of the old pros we pine for a return of the speculative glory days.
The  2005-2008 mania was probably best exemplified by First Solar:

  $20 IPO Nov. '06, $317.00 top tick in May 2008, $11.43 by June 2012. 
Yeah baby!

SCTY SolarCity Corporation daily Stock Chart  FinViz

"Charlie Munger on the Medical System"

We've been fans for longer than some of our readers have been alive.
And no, I'm not as old as Charlie.
From Farnam Street:
Long a fount of wisdom, Charlie Munger provided us fascinating insight on everything from energy policy and mental models to how good gamblers think and making effective decisions.

At the Daily Journal Meeting (held March 25th 2015), Munger answered a question on Obamacare:
Of course the system of medical care, as evolved under the United States, has much wrong with it.
On the other hand, it has much that’s good about it. All the new drugs and devices, and new operations, medicine has taken more territory in my lifetime than it took in the whole previous history of mankind. It’s just amazing what’s been done.

A lot of it is obvious and simple, like inoculating the children against infantile paralysis, scraping the tartar off your teeth so you don’t wear plates when you’re 55 years old, and so on. People now take those benefits for granted, but I lived in a world where a lot of children died. Every city had a tuberculosis sanitarium, and half the people who got tuberculosis died. It’s amazing how well medicine has worked.

On the other hand, compared to the best it can possibly be, the American system is pretty peculiar. It’s very hard to fix. One kind of insanity is to say, “We’ll pay you so much a month for taking care of the people, and everything you save is yours.”

That is the system the government uses in dealing with the convalescent homes. That’s a great name, a convalescent home. You convalesce in heaven. You don’t convalesce them at home. [laughs] It’s attempting to have a euphemistic name.

That creates huge incentives to delay care and keep the money....MORE
Some of our previous posts on Mr. Munger: 
May 2009 
Here's the Story on Berkshire's Munger (BRK.A)
Sept. 2010
Munger Says `Thank God' U.S. Opted for Bailouts Over Handouts (But What About General Electric, Charlie?) BRK.B; GE
July 2015 
"Charlie Munger on “Loading Up,” Tracking Error, and Value Investing"
May 2009 
Berkshire Hathaway's Munger on Cap-and-Trade ("Monstrously Stupid Right Now...Almost Demented"); Warren and Charlie on Wind and Solar (BRK.A)
Aug. 2013 
The SEC and Charlie Munger's Stock Pickery (DJCO)
May 2010 
Climateer Line of the Day: Berkshire Hathaway's Charlie Munger on Age, Inflation and Solar Energy Edition (BRK.B; BRK.A)
Nov. 2015 
"Why and how do Munger and Buffett “discount the future cash flows” at the 30-year U.S. Treasury Rate?"
May 2009
An Interview with Berkshire Hathaway's Charlie Munger (BRK. A)
Aug. 2015 
Berkshire Hathaway's Charlie Munger On Mental Models

And dozens, if not hundreds, more. Use the search blog box if interested.
"Think about it a little more and you will agree with me because you're smart and I'm right."
-Charlie Munger, Vice-Chairman, Berkshire Hathaway
The best senior management 'all purpose turn-around' I've ever seen.

Reading the Trans-Atlantic Free Trade Agreement

And the Transatlantic Trade and Investment Partnership.
From techdirt:

First Report From Inside Germany's New TAFTA/TTIP Reading Room Reveals Text's Dirty Secret
from the 24-seconds-a-page dept
Last week we wrote about the only place that German politicians are currently allowed to view the latest texts of TAFTA/TTIP: a tiny room, guarded at all times, and involving all kinds of humiliating restrictions for visitors. Katja Kipping was one of the first to enter, and she has written up her experiences for lesser mortals like you and me, who are not permitted to besmirch this sacred place with our unworthy presence. Even though she is -- of course -- forbidden from speaking about what she read there, a translation of her account, made by War on Want, nonetheless contains some interesting new details:
Once I'd registered, I was sent the instructions on how to use the room. The first thing that I noticed was that the terms and conditions had already been the subject of negotiations between the European Commission and the USA. Get your head round that: TTIP isn't even signed yet, and already individual countries have lost the right to decide who gets to read the texts, and on what terms.
Here's how the actual visit went:
A guard took me in through security and asked me to lock away my jacket and my bag. He checked that I wasn't taking any camera or mobile phone into the reading room, and then knocked on a door. The heightened level of secrecy made me all the more excited as to what I was going to find, but the room itself was nothing special. There were eight computer work stations, and I was only allowed to sit at the one designated for me. A friendly woman sat in the room. She got me to sign the visitor rules -- if you don't sign, you don’t get in, so I signed. There was a thermos of coffee and a plate of biscuits in the corner. Yet no amount of caffeine or blood sugar would have made it possible to get through the 300 or so pages of text in the two hours I had available to me.
Even though this reading room for German politicians has finally been opened -- two and a half years after the TAFTA/TTIP negotiations began -- numerous obstacles are placed in their way to make that opportunity as inconvenient as possible. First, the texts are only available in English -- imagine if US politicians were only allowed to read the French version of the negotiating texts. Moreover, the German visitors to the room are completely on their own: they cannot take even security-cleared specialists with them in order to decode the highly-abstruse wording of the documents. Finally, as Kipping notes above, she had just two hours to get through 300 pages -- roughly 24 seconds per page. Even racing through the pages made available to her, Kipping says that she was unable to find anything that allayed her concerns about the proposed agreement. And despite the blanket prohibition on giving things away, she does reveal one dirty secret about the TAFTA/TTIP texts:
the documents are simply crawling with typos. The word 'and' is regularly written 'andd' and 'the' often appears as 'teh'. Either the negotiators are really shoddy workers or this is one of those famous security measures we've heard about.
She is doubtless right that these errors are fairly unsubtle attempts to create unique copies so that any leaks can be traced back to their source, since visitors to the reading room are directed to a particular computer when reading the text. And she is also correct in her conclusion:...MORE 
Also at techdirt:
Top German Judges Tear To Shreds EU's Proposed TAFTA/TTIP Investment Court System