2009 was a record year for US wind installation, with 9.9GW of new wind farm capacity added to the grid compared to the previous peak of 8.4GW in 2008. On a global level, U$145 billion was invested in renewable energy infrastructure in 2009 which was in line with 2008. Interestingly, on a regional basis, Asia was the largest investor.

Despite the good news in this and other renewable themes, the alternative energy sector appears however, to be under siege short term. First, the UN Climate Change Conference in Copenhagen came and went without any formal agreements. Then the “Climate Gate” controversy gained broad media coverage, questioning the veracity of the conclusions of the scientific community relating to climate change after the exposure of two isolated instances where data was not reported accurately. In spite of the overwhelming evidence of the impact of industrialisation on climate, this has provided politicians and climate sceptics with an excuse for a period of longer inactivity in carbon abatement. In the US, there is also a growing disconnect between the expectations and confidence of developers and equipment manufacturers in wind. The US wind sector is also facing headwinds as access to project financing and the ability to secure purchase power agreements remains problematic. There has been a consecutive quarterly downward trend in 2009 for new projects entering construction. Only 1.6GW was registered as entering construction in 4Q 2009, a drop of 6% vs 3Q and 51% vs 2Q according to the American Wind Energy Association. These trends imply it will be tough for turbine manufacturers to meet guidance for 2010. We have shorted a European turbine maker, who is » Read more: John Payne & Steven Miller – January 2010

Renewed interest in Japanese equities continued as expectations for a weaker currency encouraged foreign investors to narrow significant underweight positions. Of some concern is the extent and speed with which such a consensus has emerged. Although we expect the BOJ to turn more accommodative over the course of the year, near term expectations have run ahead of reality whilst we continue to argue that the BOJ needs to be more concerned with formulating a plan, in conjunction with the government, to remedy the domestic economy on a longer term time horizon. Short term remedies from a weak yen and a global cyclical recovery have proved hopelessly ineffective over the last 20 years. Clearly the Chinese rate decision, the proposed Volcker plan and further turmoil in Euroland, markets continue to exhibit a fragile underbelly and in the absence of domestic policy developments, Japan appears likely to follow other world markets. Some optimists point to the likely strong forthcoming earnings season but there seems a major risk in extrapolating historic data for future share prices. The bigger issue facing markets globally is the direction and magnitude of economic growth especially in H2 2010 and we expect ongoing conflicting data in the coming months to subdue risk appetite.

From an investment perspective we are less concerned especially as many domestic companies, especially in the small/mid cap arena, continue to look very attractive. It goes without saying that the absence of liquidity and minimal investor interest are normally the classic hallmarks of » Read more: Rupert Kimber – January 2010

The most frightening thing we saw this month had nothing to do with Greece. Rather, it was two major investment banks simultaneously upgrading GDP growth forecasts for China. And these were not small upgrades either – generally by over 100 basis points for the year – with both highlighting upside risks from exports. Considering that net exports subtracted nearly 4% from China’s GDP growth in 2009, if exports merely stood still they would to provide a big boost to China’s 2010 growth numbers. So, of course, the upgrades make sense, though one cannot help but wonder why this was not baked into the numbers much earlier. Of course near term economic activity has been very strong and probably provided some of the impetus. In January bank lending increased 29% yoy, auto sales were up 126%, housing prices up were up 9.5%, exports were up 21%, and imports were up 85.5%. Many of these figures were boosted by base effects, but were still very strong. So strong that policymakers, who were already on full alert for the elusive bubble in Asian assets that some investors still expect, stepped up their activities.

The good news, for those so inclined, is that this is already beginning to » Read more: Jeff Coggshall – January 2010

President Obama may have received a political bloody nose from the good people of Massachusett and will no doubt have to put his already grotesquely mutated healthcare reform bill on hold but he has come out swinging and this time he’s taking on a very popular target – the bankers. A re-imposition of Glass Steagall type legislation will be very unpopular with Wall Street and therefore very well received by the other 99% of the population. It will no doubt be enthusiastically followed in Europe. Unfortunately it will do nothing to sort out the fundamental issues of over-indebtedness of the West, but then it is probably rather over-optimistic to expect any politician to think beyond the next popularity poll. Northern Rock, RBS and Lehmans did not go bust because of their trading activities – they bit the dust by over-leveraging their balance sheet to poor credits and whether this is done by plain vanilla lending or the retention of securitised products is irrelevant. Nevertheless, separation of trading activities from banking now seems likely as few Republican politicians are likely to want to imperil their careers by standing up for the banks – and the banks only have themselves to blame. It also seems likely that capital ratios will have to take account of an increasing range of off-balance sheet assets and this (more sensible) measure will have implications well beyond the European banks at which it is primarily aimed. All financial institutions will be under pressure to » Read more: Mark Fleming – January 2010

An earlier than expected shift by the BOJ towards a looser monetary policy has been well received not only due to the resulting yen weakness but also as it appears this shift was induced by a close collaboration with the new DPJ administration, whom many sceptics had considered would not be able to develop a close understanding with the BOJ at such an early stage of their tenure. The immediate impact is that Japanese cyclicals and exporters have seen higher share prices which may well continue as investors become more convinced that earnings will now benefit more decisively from the global cyclical recovery. The stockmarket had become very oversold due to a confluence of » Read more: Rupert Kimber – December 2009

The Tiburon Terra Fund posted a gain of 0.23% for December and is up 1.11% since inception in late October 2007. We continued to maintain a cautious approach towards markets in December, finishing with a net exposure of 18% and a gross exposure of 82%. The Fund has 37 positions, with the top 10 accounting for nearly 40% of NAV. At the stock level, the biggest winners were positions in Suntech Power and Yingli Green Energy (solar); +11.2% respectively, Cameco; +11.5% (uranium) and Denbury Resources; +11.5% (oil).

The UN Climate Change Conference, came and went without any formal agreements. In the short term, expectations have been dashed after the negotiation process was hijacked by the smaller developing nations (G77) which insisted that developed nations continued with the Kyoto Protocol rather than moving forward to forge a new treaty as the developed nations have desired for sometime.

It has been easy to label the conference a disappointment, however a last minute Accord was agreed that states » Read more: John Payne & Steven Miller – December 2009

China’s lending growth has been hugely above trend. Infrastructure spending has grown rapidly. And finally, a V-shaped recovery in every other part of China’s economy has taken shape. With loose policy, a fixed exchange rate, and high growth, upside risks to asset prices have been so clear that more than just a few investors have been willing to jettison their normal caution about greater fool’s theories and bet on the Chinese asset bubble that is “coming soon”. So far this has appeared right. After all, despite clear warning signs of an asset bubble in-the-making, a slow pickup exports, low inflation, and concerns about aftershocks from the global financial crisis have kept the authorities on hold.

Recently, however, CPI has turned positive, export numbers have picked up sharply, and some recent “aftershocks” such as Dubai and Greece were digested without too much » Read more: Jeff Coggshall – December 2009

The likelihood of 15,000 self-aggrandising politicians and assorted hangers on in Copenhagen coming to any sort of substantive agreement on an action plan to try to ameliorate global warming when every required policy generates near-term economic pain was infinitesimally low – and they did not disappoint. Is this a setback for our investments in new energy sources? Luckily not. We have only ever been interested in those companies and industries which do not depend on artificial government subsidies and where their business models are robust and offer a solution with both better economics and a lower environmental (not just carbon) footprint. These businesses will prosper because they can provide cheaper energy. Everything else is a bonus. We would also subscribe to the thesis that China’s reluctance to agree to any measurement of its emissions has as much to do with ‘face’ as anything else. China’s leadership is acutely aware of » Read more: Mark Fleming – December 2009