For today's column on Auction Rate Preferreds.
Previous Columns
8:30 AM EST Monday, April 7, 2008: Last week The stockmarket had its best week in eons -- up 3.6%. The economy had its worst week in eons, with 80,000 jobs lost. Though there are stocks rising, I can't say "Pile in." We are about to enter earnings season for the first quarter. It won't be pretty.

The alternative energy bubble continues to inflate, with big recent gains by many (especially First Solar, Suntech, Canadian Solar and Evergreen Energy) and China companies (China Energy and Solarfun Power), and the inevitable continuing media hype (see below).

At some point, the bubble will burst, since there are so few with actual earnings. But, for now, the "good story" and desperation with lagging traditional industrials should drive these things higher.

Here is my latest list. Be wary. You need to pick your positions carefully -- based on your risk tolerance and your own research. Most of these things are outright gambles and some will disappear completely (some already have), for lack of funding, because their technology simply doesn't work or because their inventor is lousy businessman.

Deutsche Bank's analysts put out something this morning called "Solar Monitor," in which they summarize their (largely positive) feelings and report recent news. Here's Solar Monitor -10.

The Mother Lode. The Mother of All Markets. John Doerr is one of Silicon Valley's most famous and most successful venture capitalists. Fast Company magazine interviewed him for their latest issue. Here are excerpts from the piece by Fred Krupp:

If you ask venture capitalist John Doerr how the boom in green tech compares with the infotech boom -- and bust -- ... he'll grab pen and paper and draw this chart:

In other words, green-tech companies won't be built in garages. Silicon Valley has long been a world apart, with its free-flowing capital, huge appetite for risk, and quick ability to turn a thought into the thing. Now the Valley is applying its gifts to green technology. "We're talking about nothing less than the reindustrialization of the whole planet," Doerr says. So the biggest mistake any investor or company could make would be to remain inside the Valley's rarefied air, ignoring the incumbent energy companies that control distribution, have near-total market share, and shape regulations to their benefit.

The new green-tech bunch has already stubbed some toes in its first dealings with the real world. First Solar Inc. stumbled in European markets because it uses toxic cadmium, which triggered a regulatory avalanche (it has since recovered). Tesla's electric car missed its ship date by a year because it couldn't orchestrate the complexities of its supply chain.

Those that make it in green tech will need to abandon the idea that Silicon Valley already knows everything it needs to know to remake the world. They'll need to understand transmission grids and enter the battles over where they're located. They'll need to confront the massive water requirements for biofuels. They'll need to grapple with the infrastructure required for carbon sequestration. Most important, they'll need to work hard to shape the federal policies and carbon-market structures that will make or break their businesses.

That's why Doerr has taken several of his entrepreneurs to Sacramento in the last couple of years to persuade California legislators to pass mandatory carbon reductions. And it's why he funds companies run by people who have not only two or three advanced degrees but also an understanding of such arcana as fuel-supply chains and congressional politics. "They're going to be more nimble as we get more change," Doerr says. And it is why a company must prove itself before it's ready for an IPO. "Companies ideally will be in production, at scale, with contracts and guaranteed revenue."

The most promising companies are already deftly working within the establishment. For instance, Chena Power, a little geothermal-energy firm in Alaska, partnered with United Technologies to take advantage of its political and marketplace clout. Verenium, a cellulosic-ethanol company, imported its top executive from conventional power production for his connections and wisdom. Green tech isn't a bubble destined to burst. Energy is as necessary as water and food. In fact, it's the biggest business in the world, with $5 trillion in annual revenues. Demand for alternative energy is exploding, and it will not only create fortunes but also save the planet. Anyone who doesn't get the differences between the last new thing and the next one will watch this "mother of all markets," as Doerr calls it, pass them by.

Fred Krupp is president of Environmental Defense Fund, a nonprofit that develops market solutions to environmental problems, and coauthor of Earth: The Sequel -- the Race to Reinvent Energy and Stop Global Warming, with Miriam Horn.

The lawyers and Failed Auctions. Also called saving executives from themselves. Everyone who owns failed auction securities is pissed at their brokers and the issuers. The story is standard: The brokers dumped their money into (typically) auction rate preferreds without asking and in contravention of client instructions for safe money market, liquid securities. And the issuers/marketers (i.e. Nuveen, BlackRock, Van Kampen, etc.) are being excessively cagey about their intentions (or not) to get the cash money back to the stuck ARPS holders.

I can't justify the issuers' caginess: How they hold "touchy feely" conference calls, but don't say anything concrete -- like when investors are likely to get their money back. That caginess sends me right up a wall with anger.

On Friday, a dear friend who spent his life on Wall Street explained to me that the whole mess is now being managed by lawyers, who are advising their clients, the issuers/marketers,

+ Don't say anything, because whatever you say will come back to haunt you. Think law suits. Many have already been filed.

+ Don't say anything until it's a done deal. Capital markets are locked. Hence, finding a solution -- either refinancing or reclassification -- is likely to take time. And all predictions of timing are likely to be wrong.

I believe all of us will get our cash money back out of this at par. I believe it will take as long as 12-24 months. If you need to get at your money before then, you'll probably have to borrow against your ARPS. But don't take a term loan. Try to take a loan that comes due the day you get your cash money back. I believe it's too early to participate in law suits. But it's not too early to keep up the pressure of letter writing, and pressure on local regulators and down at the SEC. Meantime, make sure your brokerage firm is keeping issuer salespeople out of his office. Make sure the issuers understand that they're not welcome until they solve this mess and get everyone their money back.

For more on this whole mess, see my other site: http://www.auctionratepreferreds.org

How the new marketing works:
A new supermarket opened near my house. It has an automatic water mister to keep the produce fresh. Just before it goes on, you hear the sound of distant thunder and the smell of fresh rain.

When you pass the milk cases, you hear cows mooing and you experience the scent of fresh mown hay.

In the meat department there is the aroma of charcoal grilled steaks with onions.

When you a approach the egg case, you hear hens cluck and cackle, and the air is filled with the pleasing aroma of bacon and eggs frying.

The bread department features the tantalizing smell of fresh baked bread and cookies.

I don't buy toilet paper there any more....

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.
Go back.