VOLUME 10, NO.

4 | APRIL 2011

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 CONTENTS
19 CAN ETHANOL 56 THE SUN IS RISING
WEATHER THE STORM? ON SOLAR STOCKS
By Timothy Hannagan By N. Duru Ahanotu PUBLISHER
Wasendorf & Associates Inc.

39 HONE YOUR 64 WADING THROUGH Russell R. Wasendorf Sr., Chairman and CEO
Karris Golden, President and COO
STOCK-PICKING SKILLS THE ETF JUNGLE P.O. Box 849 • Cedar Falls, IA 50613

IN CHINA By Rachel Koning Beals EDITORIAL

EXECUTIVE EDITOR: Michelle Gebhardt
By Jim Trippon MANAGING EDITOR: Kira McCaffrey Brecht
EDITORIAL ASSISTANT: Erin Holmes

48 TRADE THE GAS OF CONTRIBUTING WRITERS

THE FUTURE
DEPARTMENTS
PRODUCTION
By Quint Tatro CREATIVE DIRECTOR: Sara Kies
DESIGNER: Sarah Judisch
DESIGNER: Samantha Schmiesing
7 TRADE OF THE MONTH

GROWING
WEB DEVELOPER: Jeff Kennedy

10 TECHNICAL STRATEGY
28 CONTACT SFO

GREEN
12 TRADING TIPS Customer Service: 800.590.0919

14 ASK DR. DUKE SUBSCRIBE TO SFO

16 EYE ON FUTURES
BY MATT BLACKMAN
ADVERTISE WITH SFO
ads@sfomag.com
800.590.0919

Copyright 2011 by Wasendorf & Associates Inc. All rights reserved.

38
No part of this publication may be reproduced or transmitted in any
form by any means, electronic or mechanical including photocopying,
recording or by any informative storage and retrieval system without the
written permission of Wasendorf & Associates Inc.’s president.

This publication is strictly the opinion and conjecture of its writers
and is intended solely for informative and educational purposes and
is not to be construed, under any circumstances, by implication or
otherwise, as an offer to sell or a solicitation to buy or trade in any
commodities or securities herein named. This publication is not meant
to recommend, promote or in any way imply the effectiveness of any
trading system, strategy or approach. Information is obtained from
sources believed to be reliable, but is in no way guaranteed. Further,
there is no guarantee of any kind that is implied or possible
where projections of future conditions are attempted.
The publisher is not liable for typographical errors.

Commodity futures, securities, options and forex trading involve risk

and are not suitable investments for everyone. Any investment should
be carefully considered in light of an investor’s personal financial
objectives and risk tolerance.

Articles and/or advertisements contained herein may provide

hypothetical or simulated performance results. Hypothetical or
simulated performance results have certain inherent limitations. Unlike
an actual performance record, simulated results do not represent
actual trading. Also, because the trades have not actually been executed,
the results may have over- or undercompensated for the impact, if any,
of certain market factors such as the lack of liquidity. Simulated trading
programs are also subject to the fact that they are designed with the benefit
of hindsight. No representation is being made that any account
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Further, past performance does not guarantee future results.
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Past performance is not indicative of future results.
 TRADE OF THE MONTH
USING GANN What Is Gann Theory?
By James Hyerczyk In the early 1900s, William Delbert Gann
developed a new approach to analyz-
Nearby E-mini S&P futures ing markets based on mathematical
etched an important bottom on laws and specific time cycles. The ba-
the charts at 988 the week end- sis of Gann theory is the interlocking relationships be-
ing July 9, 2010. tween pattern, price and time. At certain times, a pat-
Minor consolidation ensued tern may be most influential to the market. A pattern
ahead of a secondary bottom may be a double top, triple top or a closing price re-
formation at 1022.25, seen on versal. At other times, price and time yield the biggest
the charts the week ending Sept. influence. These points may be a time cycle or a Gann
27, 2010. From there, E-mini angle. It is the balance of these three factors, however,
futures launched a spectacular
that create the best trading opportunities that can
run culminating in a top at 1338,
lead to more success in the market.
the week ending Feb. 18, 2011.
The strong rally followed an
uptrending Gann angle (seen before finally piercing support VALUE AREA
in red on Figure 1) moving 8 at 1276, indicating a develop- Based on the main range from
points per week for 36 weeks ing change in trend. 988 to 1338, a normal correc-

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7 MARCH
There is a substantial 2011commodity futures, options and off-exchange foreign currency products. Past performance is not indicative of future results.
risk of loss in trading
TRADE OF THE MONTH
FIGURE 1: Weekly E-Mini Chart

1,338.00 1,350

1,300

1,250

1,200
50.00% (1,163.00)
1,150
68.80% (1,121.70)
1,114.75 1,113.00
1,100

1,050
1,022.25
1,017.75
1,000
988.00

Apr May Jun Jul Aug Sep Oct Nov Dec 11 Feb Mar Apr May Jun Jul
Source: TradeStation

tion will take this market back
to a 50% retracement level at
1163 or a 62% retracement
level at 1121.75. A break back
into this area will be attractive
to value based buyers.
Using the uptrending Gann
angle (green) moving 4 points
per week as our guideline,
the June E-mini S&P 500 is
projected to cross the 50%
retracement level during the
43rd to 44th week from the
July 2010 bottom or the weeks
ending May 6 to May 13.
A break back into this re-
tracement zone is likely to
be a very attractive area for
longer-term value based buy-
ers. In other words, those who
didn’t buy at 988 or didn’t
want to buy at 1338, now
have a chance to buy a re-
tracement of this entire range.
Although the market could
linger inside this retracement
zone while it establishes a
new higher support base,
this strategy is banking on
the combination uptrending
Gann angle/50% level to at-
tract strong buying for a tech-
nical bounce back to 50% of
the break from the top. If this
trade works precisely, then
look for a retracement back to
1250.50.
THE TRADE
Buy the June E-mini S&P 500
at 1163 the weeks ending May
6-13.
Target: 1250.50
Stop-loss: 1160.00
James A. Hyerczyk is publisher
of The Pattern Price & Time
Report.

8 APRIL 2011
 TECHNICAL STRATEGY
THE GETTING IN • Short entry: one tick above the

SEAHAWK Trading the E-mini S&P 500, we

STRATEGY
By Mark Hodge
Markets can move up, down
or sideways, but many traders
struggle to find opportunities
when markets are in transition
from one direction to the next.
These periods can be tricky
to trade unless you have a
strategy that works well when
a market is not clearly trend-
ing. In these conditions, you
may want to consider the
seahawk strategy for day trad-
ing that we use at Rockwell
Trading.
The premise behind this
method is that markets will not
move in one direction without
exhibiting minor price fluctua-
tions and retracements.
We use these price fluctuations
to our advantage and to profit.
use an eight-tick range bar. On
such a chart, a new bar begins
whenever the market exceeds
an eight-tick range.
When trading the seahawk
strategy, we look to enter a
short position one tick above
the high of a bar, or a long
trade one tick below the low
of a bar. Put another way, we
look to enter a seahawk trade
at the open of a new bar.
The seahawk strategy is one
that many traders would refer
to as “scalping.” This means
that we want small, quick
and consistent profits with
it. When trading the E-mini
S&P 500, we look for a two
tick profit target of $25 (each
tick in the E-mini S&P 500 =
$12.50).
• Long entry: one tick below the
low of the previous bar (buy
limit order)
high of the previous bar (sell
limit order)
GETTING OUT
As with any strategy, we want
to manage risk. A stop equal to
the distance of the range bar
setting is appropriate for most
markets. Using an eight-tick
range bar trading the E-mini
S&P 500, our stop is eight ticks,
or $100.
• Profit target: two ticks, or $25
(limit order)
• Stop loss: eight ticks, or $100
(stop order)
At first, this strategy might ap-
pear to be counterintuitive. Why
would we risk $100 to only make
$25? Well keep in mind that we
are expecting small, consistent
profits. We hope to be profitable
most of the time, but the larger
stop-loss will protect us if for
some reason we are not able to
capture the profit objective.
In Figure 1, you see both

STRATEGY
long and short seahawk
One of our favorite times to

TIP
strategy trades. Example No. 1
trade the seahawk strategy
is in the first 20 minutes of shows a long entry one tick be-
the U.S. session before major low the low of the previous bar
announcements. Just make at 1,275.75. Our stop-loss is
sure to be flat before an
announcement is released.
 FIGURE 1: E-mini S&P 500
Profit Target @ 1276.25
(Example #1)
Long Entry 1275.75
(Example #1)
Stop Loss @ 1273.75
(Example #1)
eight ticks lower at 1,273.75.
This stop is just for protec-
tion as the market moves
higher and our profit target of
1,276.25 is likely filled.
In example No. 2, we have
a short entry at 1,276.75,
one tick above the high of the
previous bar. In similar fash-
ion, our eight-tick stop-loss at
1,278.75 is for protection, but
we see a move down to our
1279.0
Stop Loss @ 1278.75
1278.5
(Example #2)
1278.0
Short Entry 1276.75
(Example #2) 1277.5
1277.0
Profit Target @ 1276.25 1276.5
(Example #2)
1276.0
1275.5
1275.0
1274.5
1274.0
1273.5
1273.0
1272.5
Source: Rockwell Navigator
target at 1,276.25 before the hawk strategy is a great
stop-loss is an issue. way to spot trading opportu-
Although the strategy tech- nities when waiting for your
nically can be traded at the favorite trend-following setups
open of every new bar, we to develop.
usually avoid using it in trend-
ing markets and encourage
traders to use the seahawk in
conjunction with other strate- Mark Hodge is head coach at
gies and daily goals. Rockwell Trading.
With a little practice, you
might discover that the sea-
The Official Advocate for Personal Investing 11
NEW! TRADing TIPS
Banking
Profits
By Kira McCaffrey Brecht
No one likes to see a winner
turn into a loser. There are
many strategies for exiting prof-
itable trades. Developing and
refining a method is a critical
component to consistent profit-
ability in trading. Let’s take a
look at some simple strategies
to take your profits off the table
and put them in the bank!
HITTING SINGLES
Don’t go for the home runs.
You can make a good living
hitting singles.
“When the market offers you
a profit, be disciplined enough
to take it. Who cares where the
market goes after your exit? Take
the money and move on to your
next trade,” said Mike Daly, a gold
market specialist at PFGBEST.
After all,“taking profits is what
we are in business for. Very
rarely do you catch the exact
tops and bottoms for each trade
or each move in a particular
market,” said Sean Lusk, stock
index specialist at PFGBEST.
12 APRIL 2011
TRAIL A STOP
There are many strategies to
take profits. Some traders put on
multiple contracts and take off
half the trade at objective one,
leaving the second portion of the
position to “ride” with a trailing
stop or aiming for objective two.
“Follow the market with a
trailing stop.You do not have to
make a decision to take profits.
The market makes it for you,” said
Robin Rosenberg, futures and op-
tions strategist at PFGBEST.
STOP TO BREAKEVEN
Lusk offers up another angle.“I
can use a stop loss order at the
same price as my original entry
point or a few ticks above or
below the original entry point
to cover commissions and
fees. The stop order at entry
point will ensure that, at worst,
I break even on the trade in
most cases and gives me the
Don’t go for the
home runs. You
can make
a good living
hitting singles.
opportunity to capture a larger
profit,” said PFGBEST’s Lusk.
Daly explains his favorite exit
strategy:“I prefer to have a rest-
ing order in as my exit profit ob-
jective based off my support or
resistance swing numbers. As a
trader, you should enter both a
profit objective order as well as
a stop-loss order to develop a
good trading plan,” Daly said.
DON’T BE STUBBORN
Perhaps the most valuable take-
away to remember is “that the
market is always right. A trader
who becomes reluctant or stub-
born regarding profit taking will
not prosper,” Daly concluded.
Kira McCaffrey Brecht is manag-
ing editor at SFO. Visit the website
to read her weekly Market Spot-
light on a hot market to watch.
 something
Big is coming.
can you guess?

here’s a few hints:

1. this new trade expresses simple
yes/no propositions.

2. the contract size is always $100.

3. your maximum risk on a trade is always

known in advance.

4. you can never be called upon for extra

funds or margin.

think you know? tell us.

there is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products.Past performance
is not indicative of future results.
ASK DR. DUKE
DEAR DR. DUKE,
After reading your new book,
I found out how little I know
about managing the risk on
spreads. I have many ques-
tions, but I will ask only one.
When talking about having a
protective contingency stop
loss set on the downside,
what does that mean? Does
it mean setting a contingency
order to close the short leg
if the underlying asset pen-
etrates the strike price?
—Dan, Dayton, Ohio
DEAR DAN,
For vertical option spreads,
risk management commonly
takes one of two forms: Either
the underlying stock or index
price trips a predetermined
price or the overall loss on
the spread position exceeds
a predetermined value.
Traders often identify sup-
port and resistance levels
from reading the price chart
of the underlying stock or
index. Consider this hypotheti-
cal example: A trader sells the
140-150 put spread on XYZ
when the stock trades
14 APRIL 2011
at $171, and she has identi-
fied support at $161. She is
bullish on XYZ but believes
that her prediction will be
proven incorrect if XYZ trades
below $161.
So she enters a contingent
one-triggers-the-other (OTO)
order with her broker to buy
back the short $150 put op-
tion if the price of XYZ drops
below $161. Once that order
executes, a second order is
triggered to sell the $140 put.
This trader has triggered her
stop loss based on reading
the support and resistance
levels from the price chart.
The second approach to
risk management for the
vertical spread is to identify
a maximum percentage loss
for the position, e.g., a 25%
loss. Following the example
above, one could use option
price modeling software to
estimate the price of XYZ that
will result in a debit to close
the spread that results in a
25% loss.
Of course, predicting volatil-
ity changes is the tricky part
of that exercise. But once that
Q&A
price of XYZ is determined,
the trader can enter the con-
tingent OTO order using that
trigger price.
In either of these examples,
one could set the stop loss
trigger, whether it is a stock
price or a loss level, write it in
the trading journal, monitor
the trade and plan to enter the
order to close the spread if the
price or loss value is triggered.
The danger of this approach
is that when the price has
been hit or the loss level
exceeded, the trader may ra-
tionalize staying in the trade
another day and take an even
greater loss.
Contingent stop loss orders
entered with the broker enforce
trading discipline.
Kerry W. Given,
Ph.D. (a.k.a. Dr.
Duke), is the
founder and
managing direc-
tor of Parkwood Capital LLC and the
author of No Hype Options Trading.
 get tO the
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Past performance is not indicative of future results.
EYE ON FUTURES
TRADE YOUR
PLAN
By Curtis Wagaman
It’s of paramount importance
to develop, review, revise and
implement a trading plan.
However, it’s absolutely as-
tounding how many traders do
not have one.
Imagine this scenario: You’re
a budding entrepreneur who’s
looking to start a business. You
have great ideas and ambition
and have decided to explore
what’s available out there to get
your hands on startup capital.
Say I’m a banker, and you’ve
scheduled an appointment to
meet with me to discuss your
venture. You waltz into my of-
fice, present a compelling case,
but do not have a written busi-
ness plan. How do you suppose
this appointment turns out?
First, you can be pretty sure
no funding will be secured.
Second, you might be laughed
right out of my office.
IT IS A BUSINESS
Why should trading be any dif-
ferent? We need to treat it like
16 APRIL 2011
a business, because it is! Hav-
ing a written plan provides the
foundation for improved trad-
ing. It’s the blueprint to help
us navigate through the murky
and shark-infested waters we
know as futures trading. It’s
the road map telling us where
we are now and how to get
to where we want to be. There
are clear cut objectives, crite-
ria, rules and contingencies to
help us make good decisions
along the way.
WRITE IT DOWN
Many people tell me they
have a trading plan, but it’s in
their head. Except for the vast
minority, this will not work.
Writing it down cements a
firm foundation from which
you build out and execute
your plan. You can be pretty
sure your first trading plan
won’t be your last, but at least
you’ve put forth the effort to
get the ball rolling.
CHECK BACK!
In May, Wagaman will address the components and
considerations of a trading plan.
In June, he will detail the importance of keeping a
trade journal.
DEMO TRADING
Simulated trading can be your
best friend or your worst enemy
depending on how you use it.
However, once you have a work
in progress, it’s time to begin
testing with a demo program.
Document all happenings
and progress. Review your
journal frequently. This is the
key to making real progress.
How do you know what to
examine and improve if you’re
not keeping track? Flying by
the seat of your pants is a
recipe for disaster.
GOING LIVE
Once you’re satisfied with your
consistency and results, you
may decide to trade live. This
is a whole new ball game. You
may think you know, but you
really have no idea until you
pull the trigger.
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 RESEARCH

Receive a FREE COPY of

the PFGBEST Research
OUTLOOK 2011
Outlook 2011

From some of the most experienced

analysts in the commodity futures
and forex industry:
Get it today
for FREE!
• The year-ahead overview on energy markets from
Phil Flynn
• Analysis from grains commentator Tim Hannagan
• Discussion on China
• Suggestions on where you may see speculative
bubbles in future prices
• Expectations for pricing of stock indices,
government securities, softs, livestock and more!

www.pfgbest.com/outlook

There is a substantial risk of loss in trading commodity futures, options and off-
exchange foreign currency products. Past performance is not indicative of future results.
Ethanol has been produced since the 1970s. In the early years,
refining was costly, and demand simply wasn’t there. However, as
crude oil prices began to move higher, the U.S. government grasped
the long-term implications of money of historical proportions leaving
our domestic economy and heading to foreign oil countries. Military
Timothy Hannagan is grains
leaders cautioned the government on the movement of U.S. oil expert at PFGBEST. Reach him at
thannagan@pfgbest.com.
dollars with potential to ultimately wind around to terrorist factions.
If the U.S. could become less financially oil-dependent, it could take
the excess profit out of oil and de-fund anti-U.S. groups.

To understand the record growth in GOING STRONG

grain prices into 2011, traders first need
to comprehend the roots of the rally that
go deep into the energy markets— with
the key player being ethanol.
DIVERSIFICATION AWAY FROM OIL
With the weak economy and a surge in
world terrorism, the goal of our govern-
ment to become less fossil fuel depen-
dant continues to progress. The beauty
of an ethanol plant is that you can build
it in six months and operate it with 20
people or fewer. Unlike fossil fuels, etha-
nol burns cleanly, causing less damage to
the environment.
In 2009, we saw poorly managed etha-
nol plants go bankrupt as they initially
went into ethanol production early for
environmental reasons and the govern-
ment subsidies. They lacked agricultural
purchasing and hedging skills, leaving
them to sell the plants to the stronger ag-
ricultural managing producers.
The ethanol refining industry has never
been stronger or larger, and it continues
to grow. Obama mandates now have 20
laws and incentives to boost corn-based
ethanol use with 49 states, offering addi-
tional subsidies and supports.
The government gives a huge tax
break for every gallon of ethanol blend-
ed with gasoline.
The Environmental Protection Agency
raised the minimum amount of etha-
nol blended into a gallon of gas to 15%
from 10%. The goal is 20% over the next
five years, as auto adjustments to higher
ethanol usage tolerance come to play.
THE GRAIN CONNECTION
This year, the government mandate
for ethanol production will require the
consumption of additional corn. Let’s get
a running start to this race to produce
enough corn to keep pace with the re-
newable fuels program.

20 APRIL 2011
 Over the years, more corn has been used
for ethanol:
• 2001: 600 million bushels (6% of
corn usage)
• 2006: 1.6 billion bushels (bb) (15%
of usage)
• 2008: 3 billion bushels (24% of usage)
• 2009: 3.8 billion bushels
• 2010: 4.6 billion bushels
• 2011 estimates: 4.9 to 5.1 billion bushels
(41% of usage)
THREE-PRONGED SUPPORT
This year alone sees an increase by
the government in subsidies to $6 bil-
lion. Corn-based ethanol may be the
only product that benefits from all three
forms of government support: subsidies,
tariffs to protect it from competition and
mandates that require its use. We’re also
seeing what appears to be an effort to
overproduce energy to build storage.
RECENT DATA
We started the year with monstrous etha-
nol production. Ethanol production in Jan-
uary was up 104,000 barrels per day or 13%
greater than a year ago. Stocks on hand as
of Jan. 31 were up 1.3 million barrels ver-
sus the year prior. Each month since has
seen similar levels of strong production
and inventory increases. At the end of Feb-
ruary, gasoline stockpiles had hit 24-year
highs. See Figure 1, which reveals ethanol

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 FIGURE 1: Weekly Ethanol Chart

2917 1.000 2900

Ethanol dropped 52% from 2008 peak 2800

2700

2600

2500

2400

0.618
2300

2200
0.500
2100

2000
0.382

1900

1800

1700

1600

1500

$44,080.00
1397 2009 2010 2011
1400
Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan

Source: CQG

prices are merely halfway back from its
2008 correction, while current fundamen-
tals are much stronger than 2008.
OTHER ANGLES
The government is building its biofuel
industry quietly, drawing on soy oil
production for biofuel. Though the bio-
fuel soy oil program is less complex than
the ethanol program, it remains part of
the food-for-fuel debate. Another sup-
port feature is the 2011 reinstatement of
the $1-per-gallon biodiesel blender’s tax
credit that is projected to add 800 mil-
lion gallons of U.S. biodiesel production.
KEY GROWING SEASON AHEAD
We already have seen ending stocks of
soybeans decline for the third consecu-
tive year to dangerously low levels, mak-

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 FIGURE 2: The SReuters/Jefferies CRB Index

47500
2917 1.000

45000

CRB Down 57% from 2008 peak 42500

40000

37500
0.618

35000

0.500
32500

0.382 30000

27500

25000

22500

20000
20228 2009 270.08 2010 2011
Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan

Source: CQG

ing this growing season one of the most
anticipated in history.
With ethanol productions’ fate largely
locked in and growing by government
mandate and ethanol estimated to con-
sume more than one-third of our entire
corn crop, it becomes essential to find more
acres to plant to ensure ending stocks of
corn and beans begin to climb again.
See Figure 2, a CRB chart, which is
indicative of a trend to buy commodities.
RUNNING OUT OF ACRES
The last three production years have
brought either the largest or third-larg-
est corn crop in history. Yet corn ending
stocks are now projected to possibly be
less than 500 million bushels (mb) at the
start of the new grain marketing year
Sept. 1. That would represent about a
25-day U.S. supply.
We in the U.S. are essentially one
moderately dry summer growing sea-
son away from running out in 2012.
But where do these acres come from?
There is talk of releasing acres from
the Conservation Reserve Program. This
is unlikely in 2011. Reasons are many.
First, the land is generally the worst
land the grower has. Second, these acres

24 APRIL 2011
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 tend to be low land that floods and land
void of adequate topsoil to produce yields
profitable enough to offset fertilizer
costs. Additionally, if you pull land out of
the program early, you have to pay back
what government money you received to
put it in.

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Corn and beans cannot steal from each
other, as both need to expand. The land
looks to come from hay, alfalfa and oat
fields that are far less profitable to the
grower. The acres are just not there to
ensure a surge to safer ending stock
levels occurring in 2012.
This sets up the planting and grow-
ing season between April and August to
be one of the most weather sensitive to
pricing in history.

BIG SWINGS IN GRAINS AHEAD

In conclusion, with wild and uncontrol-
lable price swings and trends in crude
oil, we expect a stronger government
program for ethanol and biofuel produc-
tion, setting the stage for historic price
swings in grains.

Timothy Hannagan is senior grains analyst on the

PFGBEST research team. Click here to see his cur-
rent grain market commentary.

26 APRIL 2011
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28 APRIL 2011
Recent riots in Egypt and Tunisia highlight the growing dis-
content with rapidly rising food prices. As this map shows,
riots have been widespread. The major motivator, seen in Fig-
ure 1, is that food prices have more than doubled since 2002.
With each major uptick in prices, the rioting has spread.
If crisis creates opportunity as the Chinese believe, what op-
portunities does this rising demand for reliable food present to
the proactive investor?

By Matt Blackman
The Official Advocate for Personal Investing 29
Become a
Published
Author!
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GREEN REVOLUTION 1.0
According to the movie Food Inc. a reveal-
ing documentary about how our food is
now grown, “the way we eat has changed
more in the last 50 years than in the last
10,000 [years].” These changes were the
direct result of the Green Revolution.
Beginning in Mexico in the 1940s, the
goal of the Green Revolution was to re-
duce poverty by spreading U.S. mass ag-
riculture economies of scale through the
industrialization of food production. By
the 1960s, Mexico had been transformed
from importing nearly half of its wheat
into a net exporter of the grain. New ag-
ricultural methods increased global grain
production 164% in just three decades,
according to Norman Myers, author of
The Next Green Revolution: Its Envi-
ronmental Underpinnings. These meth-
ods quickly spread around the globe.
However, the world’s population con-
tinues to climb. See Figure 2. Global
population went parabolic in the 20th
century as the world population hit 6
billion in 1999. According to estimates,
population is projected to grow 50% by
2050 to 9 billion, which will require a
70% increase in food production and
additional farmland equaling an area
the size of Brazil, according to the UN’s
Food and Agriculture Organization.
THE DARK SIDE
But the Green Revolution had a dark
side. First and foremost, every aspect
 FIGURE 1: FAO Real Food Price Composite

210
190
170
150
130
110
90
70
1/1990
1/1991
1/1992
1/1993
1/1994
1/1995
1/1996
1/1997
1/1998
1/1999
1/2000
1/2001
1/2002
1/2003
1/2004
1/2005
1/2006
1/2007
1/2008
1/2009
1/2010
This chart from the Food and Agriculture Organization reveals the composite of 55 food raw materials tracked by the index
between 1990 and year-end 2010. Source: www.fao.org/worldfoodsituation/FoodPricesIndex/en

of traditional crop production from species. Four crops – rice, corn, wheat and
tilling and harvesting to the dramatic potatoes provide half of the calories now
rise in fertilizers and pesticides greatly consumed around the globe.
increased our reliance on petroleum.
University of Colorado professor Albert INDUSTRIAL AGRICULTURE
Bartlett summed it up succinctly in 1978. In three decades, farming methods that
“Modern agriculture is the use of land had evolved over centuries from grow-
to convert petroleum into food.” This is ing diverse disease temperature-resistant
a huge problem since the U.S. must now plants using crop rotation on smaller,
import more than 70 percent of its oil. family-run farms gave way to few crops
Second, production increases were ac- grown on large industrial agricultural
complished by a major shift away from complexes relying heavily on fertilizers
growing many crops to very few in the and pesticides. The chemicals that mod-
trend toward monocultures. According to ern farming has become so dependent on
the UN’s Food and Agriculture Organi- kill the essential microorganisms neces-
zation, 75% of crop varieties have disap- sary for breaking down essential min-
peared since 1900 with 90% of calories erals in the soil absorbed by plants and
consumed today coming from just 20 crop required in the human diet.

The Official Advocate for Personal Investing 31

 FIGURE 2: World Population

10
9
8
7
6
5
4
3
2
1
0
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
Source: http://people.oregonstate.edu/~muirp/agtrends.htm

IMPACT OF IRRIGATION 16% of children were obese and a total of

A reliance on irrigation has led to in-
creased erosion and water pollution.
Now foods must be transported over
increasingly greater distances, further
contributing to CO2 and other toxic gas
emissions. Intensive land use and ir-
rigation has contributed to the leaching
and depletion of essential minerals and
natural soil nutrients.
HEALTH IMPACT
Perhaps the darkest side of all has been
the way modern processed foods and
greater reliance on meat, dairy and sugar
in our diets has impacted our health. More
than one-third of American adults and
81 million Americans either had diabetes
or were pre-diabetic by 2007.
According to a report by the United
Health Group, of the 57 million pre-dia-
betics, “about 85% of them are unaware of
their condition.” In 2009, 33 states report-
ed obesity rates of 25% of the population
or better. These are just two of a long list
of health challenges we now face, thanks
to our modern diets.
COMING CLEAN
Clearly, something must change in or-
der to address these challenges. In an
effort to meet our growing need for
safe, healthy and affordable food grown

32 APRIL 2011
closer to markets, there is a new Green
Revolution afoot —the Clean Green
Revolution. How does it work?
It is taking the process of growing pro-
duce inside.

THE UPSIDE
One of the biggest benefits of the emerg-
ing Clean Green Revolution is the poten-
tial to dramatically increase yields.
New technologies combined with
the ability to grow year-round make it
possible to grow 20 to 50 times more
fruits and vegetables than a compara-
ble-sized farm field.
Not only can plant nutrients be con-
trolled carefully, pollution can be re-
duced greatly or eliminated, according
to Stuart Brazier, president of Ren-
ergy Foods, Canada Inc., a company
that specializes in building and op-
erating aeroponic fruit and vegetable
biodomes.

THE BENEFITS
Since soil is not needed, and weather is
less important in hydroponic and aero-
ponic operations, they can be located
in urban areas close to consumers on
less-expensive land previously used
for manufacturing or industry ­— called
brown land. Renergy’s biodomes also
allow for the capture of carbon diox-
ide, which enhances plant growth and
therefore produces valuable carbon
credits, according to Brazier.

The Official Advocate for Personal Investing 33


Source: www.renergyfoods.com
DOUBLE EDGED SWORD
This new agricultural revolution is new
and is a double-edged sword. Like all
new industries, numerous players will
be competing, and many won’t survive.
However, the rewards for those that do
survive make it all worthwhile. Win-
ners that do prevail potentially could
make their founders and investors very
wealthy indeed.
COMPANIES TO WATCH
Here are three companies, each with a
unique approach to growing produce in
urban areas, to provide healthy food while
reducing petroleum demand as well as
the need to transport produce over long
distances. The first company trades on
the over-the-counter bulletin board. The
other two are currently private.
VALCENT PRODUCTS INC.
A December 2010 Economist article
titled Vertical Farming – Does It Stack
Up?, discussed vertical farming (high-
rise greenhouses in urban areas) and
concluded that such operations would be
34 APRIL 2011
Architectural rendering of the two-story,
10,000-square-foot Renergy Biodome.
Plants will be aeroponically grown in verti-
cal cabinets on the upper floor. This allows
the maximum densities in the minimum
area. It ensures all plants receive the opti-
mal amount of light, thanks to their diffuse
plasma lighting system.
cost-effective if they were able to uti-
lize natural light. Electric lighting is too
expensive. This concept would not be
effective in structures more than two or
three stories high.
One concept featured was the single-
story VerticCrop hydroponic system
developed by Valcent Products Inc.
Valcent is operating a 1,000-square-
foot prototype facility at Paignton
Zoo in Devon, England. The growing
system looks like a large lazy-susan
shelving system consisting of a number
of hydroponic growing trays stacked
vertically that move on rails to capture
even amounts of sunlight. According to
Valcent’s Dan Caiger-Smith, the facil-
ity should be able to produce 500,000
heads of lettuce per year and up to 20
times more produce than a similar-
sized area required using traditional
field-growth methods.
BRIGHTFARMS SYSTEMS
Also featured in the Economist article,
Brightfarms Systems is a designer of
hydroponic rooftop natural-light green-
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houses “designed to grow premium-
grade vegetables and fruit in the heart of
your community” 365 days a year, ac-
cording to its website.
The company, which recently merged
with Better Food Solutions, lists three
completed projects on its website: the
Manhattan School for Children in
New York City, a Whole Foods Markets
greenhouse in Millburn, N.J., and The
Science Barge located in the harbor in
midtown Manhattan scheduled to open
this year.
RENERGY FOODS INC.
Unlike the two technologies discussed
above, Renergy Foods, Canada Inc. is
a development stage company that will
build and operate biodomes to house
vertical growing tables using state-
of-the art efficient lighting systems to
enhance natural light.
Produce is grown aeroponically and
nourished by a set of rotating nozzles to
spray the roots with a mixture of water
and nutrients.
According to Brazier of Renergy
Foods, the system of vertical grow-
ing cabinets allows much higher plant
densities, thanks to the combination of
natural lighting and an energy-efficient
light system.
The big upside is the higher growth
rates, due to longer hours of light and
virtual elimination of weather interfer-
ence. It allows more than 40 times the
36 APRIL 2011
plant growth per area versus traditional
field farms.
Another difference is that Renergy’s
biodomes will be made from nonpetro-
leum plastic ETFE (ethylene tetrafluo-
roethylene), which has high corrosion
resistance, tensile strength and is highly
elastic over a wide temperature range.
Its similar to the material used to build
the Eden Project in the UK. Supported
by steel or aluminum supports, biodomes
are also more cost-effective and faster to
build than standard greenhouse or ware-
house construction, according to Brazier.
BOTTOM LINE
Like any new industry, the Clean Green
Revolution has a long way to go before it
will be able to provide a significant per-
centage of fresh produce to market.
However, there is a rising demand for
nutritious and affordable food that de-
creases our dependence on petroleum.
With the rising concern about the fail-
ures of the Green Revolution 1.0 meth-
ods and environment issues, it is an
industry whose time has come. It is up to
us as, proactive investors and traders, to
search for new companies that will meet
this demand most successfully.
Matt Blackman is a full-time technical and financial
writer and trader.
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 Your Stock-picking

in China
Riding a taxi to downtown Shanghai, I am
engulfed by the sights, sounds and smells of
a once-in-a-century boom. Legendary traffic
jams bring to mind China’s second year as the

By Jim Trippon

The Official Advocate for Personal Investing 39

world’s biggest automobile carrying a dual message: STOCK PERFORMANCE
market, with a record- The Chinese have more Pulling up at the gleaming
breaking 18 million cars buying power than ever, Shanghai Stock Exchange,
sold last year. Chronic but those at the bottom it is natural to reflect on
air pollution hangs over of the income ladder are the puzzle that haunts
the city like a veil, as struggling with inflation. investors everywhere.
the world’s biggest en- Taking a bullet train Why have Chinese
ergy consumer gasps instead of a taxi from the stocks indexes been the
for a breath of air and a sparkling new airport worst performers in the
glimpse of sunlight. reminds me of China’s world when the nation is
All around, new build- technical prowess and entering the fourth de-
ings and construction its ambition to create a cade of a world-shaking
cranes advertise a build- super-modern infrastruc- economic explosion?
ing boom that has be- ture. Rocketing above the Shouldn’t they be set-
come a bubble. Chinese city’s traffic jams at more ting the investing world
people throng in the than 200 kph leaves an on fire? After all, three
streets, bags in hand, indelible impression. years ago, that is exactly

40 APRIL 2011
what Chinese stocks were
doing (see Figure 1).
The global financial
crisis gave Chinese stock
markets the same bruis-
ing as exchanges all over
the world. But a massive
government stimulus
program and a torrent
of bank lending offered
China a head start out of
the financial depths.
This multitrillion dollar
flood of liquidity that en-
gulfed the Chinese econ-
omy also reoriented it.
Export-related industries,
suffering from devastated
global markets and razor-
thin margins recovered
slowly, if at all.
But China’s domestic
companies bounced back
with surprising speed.
The Shanghai Composite
Index shot again above
3,000, rebounding faster
than most other global
indexes, only to enter a
lengthy slump.
DÉJÀ VU
So what went wrong? The
same tide of money that
saved China from the ago-
nies endured by the Amer-
FIGURE 1: Shanghai Composite Index 3-year
Performance
Apr Jul Oct 2009 Apr
Volume
ican economy transformed
the Chinese economy:
• Vast amounts of cash
poured into so-called
fixed asset investment.
• Home building and
buying drew an im-
mense amount of li-
quidity away from
stocks markets.
• Investors who had been
spooked by the market’s
plunge turned to a more
traditional form of Chi-
nese investment—buy-
ing real estate, lots of it.
Prices skyrocketed, and
investors borrowed more
and more freely avail-
able cash to buy multiple
properties. As the dan-
ger of a bubble grew, the
The Official Advocate for Personal Investing
5,000
4,000
3,000
2,000
Jul Oct 2010 Apr Jul Oct 2011
Vol 10892916736
50B
25B
Source: Bloomberg
government tightened
lending regulations re-
peatedly, but real estate
prices went stratospheric
anyway.
Fears of a U.S.-style
property implosion grew,
but developers continued
to build, and new money
continued to pour into
real estate. Stocks lagged
badly by comparison.
OPENING DOORS
Beijing has said more
than once that it wants
the nation’s stock mar-
kets to rebound. While it
struggles to protect Chi-
na’s banking system and
cool lending by raising
bank reserve ratios, it has
41
 FIGURE 2: PetroChina and Huaneng Power 3-year Kong and Taiwan, show-
Performance
ered more than $118 bil-
lion worth of new offer-
0 ings upon global financial
markets last year.
-25 China’s total IPO volume
shot up by more than 46%
-50 from the year before.

WATCH AND WAIT

Apr Jul Oct 2009 Apr Jul Oct 2010 Apr Jul Oct 2011
In 2011, the biggest
5M
2M event of the financial
world probably will hap-
Source: Bloomberg
pen in Shanghai. That is
where the long-awaited
FIGURE 3: Aluminum Corporation of China 5-year international board fi-
Performance
nally will be launched
by the Shanghai Stock
100 Exchange.
China’s hundreds of
75
millions of A-share in-
50
vestors will be able to
buy a stake in the big-
25 gest foreign firms. For-
tune 500 companies with
Sep 2007 May Sep 2008 May Sep 2009 May Sep 2010 May Sep 2011
large-scale operations in
20M China are set to be the
10M
first batch listed on the
Source: Bloomberg
international board. More
than 400 are expected to
thrown open the welcome ial and innovative com- list this year, according to
mat to investors. panies to flourish. Ping An Securities.
The ChiNext exchange China led the world in The new international
was created as a Chi- initial public offerings board also could help
nese-style Nasdaq, to (IPOs) in 2010. Greater sharply boost IPO activities
encourage entrepreneur- China, including Hong in Shanghai during 2011.

42 APRIL 2011
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Past performance is not indicative of future results.
 State-owned large caps
dominated IPOs last year.
This year, smaller com-
panies will hit Shenzhen
Stock Exchange. Start-
ups will be offered on
ChiNext. The main in-
dustries to be listed this
year are expected to be
manufacturing, retail,
information technology,
e-commerce and finan-
cial services.
SIGNS OF THINGS
TO COME
The year’s listings reflect
the new direction that
Beijing wants the econo-
my to take. China’s “pil-
lar industries” will be the
targets of immense stim-
ulus as Beijing strives to
change the direction of
the economy. The govern-
ment’s new five-year plan
set the goals for China’s
industrial thrust.
Instead of concentrating
on heavy industry and au-
tomobile production, Bei-
jing will throw its support
behind new-generation
information technology,
energy-saving and envi-
ronmental protection, new
44 APRIL 2011
energy, biology, high-end majority owned by the
equipment manufactur- government, which can
ing, new materials and sometimes hurt their
new-energy cars. performance.
China says it will “boost State-owned oil compa-
policy support and plan- nies and refiners such as
ning guidance to promote PetroChina and Sinopec
and develop these seven find their profit margins
strategic sectors.” hit by price controls as
Beijing tries to wrestle
OUT-OF-FAVOR SECTORS consumer inflation. The
Many of China’s large- same problem affects
cap stocks are so-called other huge energy compa-
state-owned enterprises. nies like Huaneng Power
SOEs trade like stocks (see Figure 2).
and American deposi- Resource and heavy
tary receipts but are manufacturing firms
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products.
Past performance is not indicative of future results.
 FIGURE 4: Solactive China Internet Total Return Index
Jan ’10 Mar May Jul
such as Aluminum Cor-
poration of China, better
known as Chalco, have
found themselves in a
squeeze as the costs of
resources rose while the
companies struggled with
conflicting mandates (see
Figure 3).
Although barely eking
out a profit and cancel-
ing dividends, Chalco has
been instructed to diver-
sify into assets related to
coal, rare earth materials,
copper and iron ore. That
is a great deal for even a
large-cap SOE to take on.
Shares prices reflect the
results on the bottom line.
46 APRIL 2011
190
180
170
160
150
140
130
120
Sep Nov Jan 11
Source: Solactive
E-COMMERCE
In the coming year,
Beijing will struggle to
stimulate domestic con-
sumption while fighting
inflation. That is one rea-
son I like e-commerce as
an up-and-coming sector.
Online retail sales in
China soared to $48.8
billion last year. Total
e-commerce in China is
now projected to qua-
druple by 2015, reaching
$311 billion.
Stocks in the sector have
performed right along
with rising revenues.
The China Internet index
shown in Figure 4 con-
tains the 10 largest Chi-
nese Internet companies.
NIMBLE TRADERS ONLY
Volatility will be the
watchword for 2011 as
the Chinese government
struggles to maintain
growth, while fight-
ing inflation, preventing
real estate bubbles and
managing the value of
the yuan. Expect many
bumps in the road, espe-
cially when Beijing raises
interest rates.
In the coming year, Chi-
na will be a market for
stock pickers, not index
or exchange-traded fund
(ETF) buyers. This is no
place for buy-and-hold
investors in large caps.
Despite having a high-
growth command econo-
my, China is proving to be
a place for nimble buyers
and sellers, not a venue
for passive investors.
Jim Trippon is editor of Global-
ProfitsAlert.com, rated No. 1 for
research on Chinese companies
traded in U.S. markets.
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products.
Past performance is not indicative of future results.
 I knew some gas men growing up and vividly recall
a few mentioning to me as a child how compressed
natural gas would be the wave of the future.

48 APRIL 2011
 ogy back into the realm
Experiences are what shape of possibilities. I learned

us as a trader. Honda had manufactured

a natural gas vehicle and
also had begun market-
This was the mid- diately started an Inter- ing an at-home refueling
1980s, when the technol- net search to learn what station. I learned many
ogy was being used in had transpired with the municipalities were im-
various foreign cars. Fast technology over the last plementing the solution
forward 20 years and a 20 years. in various forms of trans-
not-so-soft spoken Texan portation, and finally, I
by the name of T. Boone HIGH OIL PRICES started to learn who the
Pickens was on a nation- Despite my limited public players were in
al campaign to promote knowledge, it looked as if the game.
compressed natural gas. not much had changed,
After hearing T. Boone’s but that rising oil prices DUE DILIGENCE
new campaign, I imme- had brought the technol- In a few short days, I
had gone from an in-
trigued bystander to a
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Cummins Engines (CMI)
and a small Canadian
There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. company, Westport In-
Past performance is not indicative of future results.
novations (WPRT).

50 APRIL 2011
 I also found through
my research that there STOCKS TO WATCH
were many up-and-com- After near death experiences earlier this year, the
ing companies poised to purest play, Clean Energy (CLNE) and WestPort
participate in this robust Innovations (WPRT), seen in Figures 1 and 2, look to
growth that had yet to be once again offering a decent risk/reward from a
become public. One such technical prospective. With a basic understanding
company, who for the of the technology and a plan to trade based on
purposes of anonymity technicals, the opportunities seem ripe.
we’ll simply call company
X, was located in Denver FIGURE 1: WPRT Weekly Chart
and had contracted with
the Denver airport to 18.1
supply and service all its 15.4
compressed natural gas 13.0
Support break
vehicles. I gave a call to
11.1
management and within
9.4
a few days I found myself Challenging highs
8.0
on a plane headed toward
6.8
the Rockies to check out
5.7
this company and learn
more about the technol- Source: TeleChart

ogy in question. That was

in early 2008.
FIGURE 2: CLNE Weekly Chart
DIVING IN
20.0
The trip was incred-
Recapture 17.0
ibly enlightening. Once support
14.4
my due diligence was
complete, it was time to 12.2

start investing. I catego- False 10.3

breakdown
rized the public invest- 8.7

ment players: CLNE, 7.4

FSYS, CMI and WPRT. 6.2

Of the four, I was most
Source: TeleChart
intrigued with Westport.
With a Cummins part- asking me what my one of the last. I didn’t
nership, it was respon- technical read was on need to know anything
sible for production of the company, which of other than the stock
the modifications to the course I brushed off. “I price, which told me my
engines that large trucks don’t need a technical timing had been dead
would need in order to read here. I understand wrong. The irony of it
use compressed natural the fundamentals. There all was that at the same
gas. I liked the fact that is no technical read; the time the market was
the company was a new stock is going higher.” melting down, and I was
U.S. initial public offer- I bought shares for primarily all in cash for
ing (IPO) and began clients. I bought shares myself and clients. I held
to buy. for family, and I bought onto this one dog the en-
shares for myself. tire time.
WHAT ABOUT It was one of the first
THE CHARTS? times I completely CUTTING LOSSES
As I bought shares, I brushed off a technical Finally somewhere
remember a dear friend approach and definitely around November 2008,

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52 APRIL 2011
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There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products.
 Through all this, have I
abandoned my love affair with
compressed natural gas?
Heavens no.
it was time to bail. The
stock looked to have
found a temporary bot-
tom, but by this time, I
had started to remem-
ber just what made
me successful in the
first place, recounting
that rarely will a stock
bottom on one touch.
I thought that if this
was the bottom for the
stock, it would have to
spend a lot of time at
these levels, and I could
always buy it back.
The shares were sold;
the loss was taken, and
the lesson was learned.
BASE FORMATION
It wasn’t until several
months later, after a long
hiatus from all things
alternative energy that a
pattern surfaced.
It actually looked rather
promising.
54 APRIL 2011
with our edge and ulti-
mately our profits.
This experience so-
lidified for me beyond a
shadow of a doubt that
while I may at times
become interested in an
industry or particular
Low and behold, it was theme, I will not begin
my old friend WPRT. to move forward until
After months of slosh- a technical edge is vis-
ing around the lows, the ibly seen.
stock actually had put Through all this, have I
in a solid base and was abandoned my love affair
looking like it was about with compressed natural
to move out. I recalled gas? Heavens no.
my earlier thoughts I still hold firm that what
about one day buying I saw in Denver could in
back the stock, and as it fact be the future. With
started to move back out the Middle East conflict
above $5, I did in fact driving oil to more than
add shares publicly. $100 per barrel and gas
After several months, prices sky rocketing, it has
many congratulated me never been more impor-
on my 100% gain in West- tant to implement a viable
port, but most did not solution to foreign oil.
know that I was merely
getting back to even in Quint Tatro is president and
this once terrible trade. owner of Tatro Capital LLC, a
fee-based investment advisory
LEARNING CURVE firm. Check out Tatro’s latest
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[Editor’s note: Discussion of solar power includes many
science and technical terms. Our author highlights key
factors in the solar supply chain and companies that are
producing those critical components.]
The solar industry represents an electric
convergence of technology, advanced
research, energy, environment, credit
markets, speculation and politics. This
volatile mix represents the opportunity
and challenge in trading solar stocks.
The collection of solar companies
traded on major stock exchanges spans
the planet but represents a small part of
an over $85 billion industry. More than
7,500 companies compete across the
solar value chain. Even industrial gi-
ants, from General Electric and Siemens
to Sharp and oil companies like BP and
Shell, run solar businesses.
THE SUPPLY CHAIN
Solar companies employ many tech-
niques to derive power from the sun, but
the publicly traded companies of interest
here derive a significant portion of over-
all sales from solar and use photovoltaic
(PV) technology. PVs convert sunlight
directly into electricity. Multiple materi-
als exist for making PV systems.
To identify key companies in the solar
space, let’s get technical. The two materi-
als of interest here are crystalline silicon
and thin film.
Equipment makers GT Solar (SOLR),
Applied Materials (AMAT), Spire
(SPIR) and Amtech Systems (ASYS)
supply machines for making solar
products from these materials. Compa-
nies like MEMC Electronic Materials
(WFR) use blocks of silicon (ingots)
to produce wafers. These wafers are
cut and fabricated into solar cells that
are assembled into solar panels (or
modules). STR Holdings (STRI) makes
materials for packaging and holding
panels together.
HOW IT WORKS
PV installations require inverters for con-
verting the direct current (DC) electricity
of solar into the alternating current (AC)
power usable in homes. Advanced Energy
Industries (AEIS), Power One (PWER)
and Satcon (SATC) make these inverters
and related systems.
One company is conspicuously absent
from this list: Astropower. See below to
read about its demise amid a cloud of
scandal.
Figure 1 shows a timeline and includes
the annualized performance of each stock
at its peak and at the end of 2010. This
chart excludes companies that preceded
Astropower because solar was not a signif-
icant part of their businesses at the time.
ETF OPTIONS
Claymore/MAC Global Solar index (TAN)
and Market Vectors Solar Energy (KWT)
are exchange-traded funds (ETFs) that
provide broad, global exposure to the
industry, but their poor records demon-
strate that diversification is not an ef-
fective strategy for solar stocks. Traders
must be extremely nimble, and investors
must be extremely selective.
The extreme price volatility means
tremendous upside opportunity exists
throughout boom periods, especially
after buying well into a bust period or
during the inevitable sharp declines in
the boom, when fears explode over the
potential for the next bust.
A LOOK BACK
The boom period featured soaring prices
for silicon and a very favorable pricing
and margin environment for FSLR. Its
thin film modules do not use silicon. TSL
perhaps provided the clearest signal of the
peak for this phase when it announced in
April 2008 the cancellation of plans for a
$1 billion silicon plant, citing “recent and
favorable long-term polysilicon market and
supply condition developments.”
IMPACT FROM GLOBAL CRISIS
The financial panic and collapse in
2008-09 helped bring the solar industry
to its knees, given its heavy reliance on
financing. Many stocks, especially the
Chinese plays, lost more than 75% of
their peak values during this time.
The length of the current recovery and
renaissance period will depend heav-
 FIGURE 1: The S&P 500 SPDR (SPY) Daily Chart

Year First Solar stocks with compound annual growth rate (CAGR) at maximum price and at the end of
Traded 2010, measured from first close of trading. Format: (max CAGR, CAGR as of 2010)

1998 Astropower (defunct 2004)

1999

2000 Evergreen Solar (0%, -29%)

Early Days

2001
2002
2003
Daystar
2004
(621%, -13%)
SunPower Suntech Power
2005
(146%, -13%) (102%, -18%)
Ascent Solar Canadian Solar First Solar Trina Solar Solarfun
Boom

2006
(242%, 4%) (109%, -5%) (443%, 50%) (131%, 23%) (259%, -5%)
Ja Solar China Sunergy LDK Solar Yingli Akeena Solar
2007
(242%, 4%) (13%, -32%) (2,165%, -24%) (1,108%, 23%) (906%, -58%)
ReneSola TAN (ETF) KWT (ETF) Read Goods Solar GT Solar
2008
Bust

(1,121%, -13%) (347%, -37%) (165%, -39%) (424%, -37%) (0%, -18%)
Str Holdings
2009
Renaissance
Recovery &

(110%, 44%)
Jinko Solar
2010
(1,336%, 159%)

TOP PICKS TO WATCH

When it comes to investing and trading, profit returns are a key element to consider.
Let’s take a look. Only five of these 22 stocks and ETFs have produced positive annual
returns since their first day of trading (shown in green). First Solar (FSLR) and Trina Solar
(TSL) stand out as low-cost leaders with healthy margins and superior, brand name
products. The companies highlighted yellow are ETFs, not to be mistaken for stocks.

ily on if manufacturers overreact to plans are, of course, great news for the
2010’s surprisingly robust demand by equipment makers.
over-building capacity. Almost all the
major manufacturers are planning mas- LOOKING AHEAD
sive expansions worth billions in capital Despite the persistent risks, the steady
spending over the next few years. These march toward competitiveness with

60 APRIL 2011
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There is a substantial risk of loss in trading commodity
futures, options and off-exchange foreign currency products.
Past performance is not indicative of future results.
62 APRIL 2011
more conventional sources of electricity
compels continued speculation in solar.
The Solar Energy Technologies Pro-
gram forecasts parity in the U.S. elec-
tric utility power grid in approximately
2015. As this parity approaches, solar
stocks could experience tremendous
gains broadly distributed throughout
the industry.
INDUSTRY VIEW
In a company promotional video, Fred
Seymour, a vice president of technology
for Primestar, recites a common refrain of
solar proponents: “If you take one hour’s
supply of sunlight reaching the earth, it
supplies a year’s worth of society’s energy
needs. What this means is that if you cover
1% of the land mass with 10% efficient
solar panels, you can meet 150% of today’s
total energy needs. And really all we need
to do to make this work is to make this
technology cost competitive.”
With a focus on solar companies that
produce low-cost, technically superior
products, patient traders and investors in
solar can reap some of the rewards of the
industry’s continuing progress to becom-
ing a more important part of the world’s
energy mix.
N. Duru Ahanotu, Ph.D., Ahan Analytics
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64 APRIL 2011
The Official Advocate for Personal Investing 65
 Analysts are expecting nomics of some green China, India and other
brighter times for solar technologies remain in emerging economies has
shares and the broader question. The overhang eclipsed U.S.-based ef-
alternative energy cat- after overbuilding in the forts. In fact, China last
egory. This includes the solar and wind sectors, year topped the rest of
green exchange-traded plus the threat of lost the world in cumulative
funds (ETFs) that offer government solar sub- installed wind capacity
individual investors per- sidies in leading market for the first time. U.S.
haps their best exposure Germany, in Italy and pledges to greatly cut
to this space, with many elsewhere, have de- reliance on energy im-
of these funds now old pressed share and ports, particularly fos-
enough to offer a three- fund prices. sil fuels, is a common
to five-year snapshot of refrain, including in
their performance. EMERGING President Obama’s lat-
For sure, there have ECONOMIES LEAD est State of the Union
been a few clouds in At the same time, alter- address, but there has
recent years. The eco- native energy growth in been little significant

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66 APRIL 2011
 IT’S TIME TO GO
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Precious metals markets are highly volatile and have wide swings on a daily basis and should be considered a high risk investment.
 follow-through from ei-
The U.S. has not abandoned its long-term view. Presi- ther party. The recession
dent Obama, who dropped his national carbon emis- aggravated budget defi-
sions cap-and-trade program in favor of pursuing a cit concerns, while the
renewable-energy focused path, dedicated a portion White House gave prior-
of his 2011 State of the Union address to the topic. ity to its health care bill.
The White House has set a goal of 80% of total Still, some stock ana-
U.S. power to be generated from clean energy lysts maintain that 2011
sources by 2035. It’s a goal that continues to push already is shaping up
both political parties to be the first to craft new to be an improved year
and perhaps more palatable legislation than the for this growth sector,
failed efforts of the last Congress. whether that growth
Obama is throwing some proposed funding be- is generated, at home
hind renewables in his latest budget proposal. While
or abroad.
many agencies are seeing cuts, the Department
of Energy would receive a 12% increase over 2010
HIGH CRUDE OIL PRICES
levels. Some $5.4 billion is earmarked for clean
“Concerns about high fossil
energy research, including a 70% rise in renew-
fuel prices [with oil over
able energy research. That includes $457 mil-
lion for solar energy, $341 million for biofuels $100], global warming and
and biomass and $102 million for geother- a questionable ability to
mal research. The budget also provides meet growing long-term
$853 million for nuclear energy pro- electricity demand have
grams, like modular reactors. That galvanized widespread in-
might be one of the few things terest in the renewable en-
that Republicans and Demo- ergy industry,” says Abra-
crats agree on. ham Bailin, an alternative
energy analyst at fund
tracker Morningstar Inc.
More than 250 institutional
investors with a collective
$15 trillion in assets
signed an official
statement last
year call-
ing

68 APRIL 2011
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for government action on
climate change.
SOLID GAINS
In the ETF space, funds
combining alternative
energy sources and the
technology behind those
developments are faring
well. PowerShares Clean-
tech (PZD) hit a 52-week
high of $28.35 in mid-Feb-
ruary and is up 14.5% since
70 APRIL 2011
its October 2006 launch.
The popular broad-market
SPDR S&P 500 ETF is up
9.5% in the same period.
Some peers are still
trading at a discount,
and may provide even
more value over a long-
term horizon given their
depressed price. Market
Vectors Global Alterna-
tive Energy fund (GEX)
is down 46% since its
Long-term investors should
be mindful of the narrow
focus of many green ETFs.
They tend to mostly include
alternative energy stocks
that are sensitive to volatile
share swings because of
their relatively modest vol-
ume and, in some cases,
limited liquidity. Swings are
often due to short-term
factors like news cover-
age of subsidy concerns,
earnings uncertainty and
contract and product de-
velopment releases. These
ETFs can be more volatile
than broader-based funds
and should be considered
early May 2007 inception
and is down 4.5% over
the past year through
mid-February. It is trad-
ing at about the mid-
way point of its 52-week
range, near $21.48.
INVESTORS WARMING
TO SOLAR
Solar ETFs as a group
are up around 12% since
the start of 2011 through
as a compliment to index-
based ETFs in any portfolio.
For investors operating
on a shorter-term horizon,
this group’s volatility can
be an easy way to gain
access to momentum
plays in the sector that will
be less risky than trying
to buy and sell individual
alternative energy shares.
Some investors might in-
clude straight mutual funds
as a compliment to their
green portfolio. Two of the
bigger funds are the Guin-
ness Atkinson Alternative
Energy (GAAEX) and Ga-
belli SRI Green (SRICX).
mid-February. Nimble al-
ternative energy compa-
nies have survived some
economic lumps where
others have not. Earlier
this year, Goldman Sachs
added First Solar (FSLR)
to its buy list based on
cost cutting and reduced
exposure to debt-strapped
European markets. Yingli
Green Energy (YGE),
SunPower (SPWRA) and
Investors should con-
sider the varied tax treat-
ment of ETFs and mutual
funds, as well as fees.
Fund trackers identify
around 30 green-sector
ETFs, with combined net
assets near $3 billion, in
a universe of more than
1,200 funds worth $900
billion. Many clean energy
ETFs are in the mid- to up-
per end of their 52-week
trading range. Here’s a
look at some of those
funds and their year-to-
date (YTD) (as calculated
from Oct. 6 to Feb. 18) and
multiyear track record:
Evergreen Solar (ESLR)
all beat Wall Street ex-
pectations with their
quarterly results released
in February.
As for wind, global
turbine order intake was
up 57% in the second
half of 2010 compared
to the first part of that
year and up 75% over the
second half of 2009, says
renewable energy advis-
• Guggenheim Solar
Energy (TAN): +12.3%
YTD; -65% since April
2008 launch
• Market Vectors Solar
Energy (KWT): +25.5%
YTD; -65% since April
2008 launch
• PowerShares Clean-
tech Portfolio (PZD):
-1.4% YTD; +14.5% since
October 2006 launch
• PowerShares Global
Clean Energy (PBD):
-21.8% YTD; -40.6% since
June 2007 launch
• PowerShares Global
Nuclear Energy Portfolio
(PKN): +8.1% YTD; -9.6%
The Official Advocate for Personal Investing
ers MAKE Consulting.
And there is something
to be said for niche mar-
ket growth. In especially
breezy places like Scot-
land, Ireland and Brazil,
wind-derived energy
already is competitive
with coal.
“Despite the favorable
trend, a full recovery
to 2008 highs in sec-
tor order intake contin-
since April 2008 launch
• PowerShares Nasdaq
OMX Clean Edge Global
Wind Energy (PWND):
-40.8% YTD; -42.6% since
July 2008 launch
• PowerShares WilderHill
Clean Energy Portfolio
(PBW): -12.6% YTD; -28.2%
since March 2005 launch
• PowerShares WilderHill
Progressive Energy Port-
folio (PUW): +12% YTD;
+23.2% since October
2006 launch
• PowerShares Water Re-
sources Portfolio (PHO):
+5.2% YTD; +36% since
December 2005 launch
71
ues to be hindered by brought on by the Eu- DIVERSIFY
low prices in the U.S. ropean sovereign debt Some analysts believe
as well as uncertainty crisis,” MAKE says in a that taking a broader
around economic growth research note. cross-industry, cross-
sector and cross-market
capitalization approach
in an individual investor

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