Are We Scared Yet?

Well, our commentary on June 22 in Is it really 2001 again? certainly proved timely. Big Ben stepped up to play the role of boogeyman again and the markets took a tumble last week. The Dow Jones Industrial Average (DJIA) found new lows while the S&P 500 (SPX) tested the lows from March. Everything was going exactly to plan, or was something missing?

Don’t blame the oil ‘speculators’

A campaign in Congress to punish traders for record oil prices reveals a fundamental misunderstanding of how futures markets work

By Jon Birger, senior writer
Last Updated: June 27, 2008: 9:11 AM EDT

NEW YORK (Fortune) — “Make no mistake about it,” U.S. Rep. Bart Stupak, D-Mich., said Monday while chairing a meeting of the House Energy and Commerce subcommittee on Oversight and Investigations. “Excessive speculation in commodity markets is having a devastating effect at the gas pump that is rippling through our entire economy.”

Here’s a suggestion: The next time a Congressional committee wants to hold a hearing on how “speculators” are driving up oil prices, each committee member should first be required to demonstrate – preferably in their opening remarks – a basic understanding of the mechanics of futures trading.

Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude – and thus never remove a drop of oil from the open market – are causing record high oil prices.

If there were such a requirement, I guarantee we’d never again see a circus like the one Stupak presided over Monday.

“Do I think [Washington politicans] understand the role of futures markets – how they facilitate price discovery and the transference of risk?” asks former U.S. Commodities Futures Trade Commission chief economist Gerald Gay. “No, they’re clueless – at least most of them.”

No end seen in reliance on oil, fossil fuels

Wednesday June 25, 3:05 pm ET
By H. Josef Hebert, Associated Press Writer

Powered by China and developing nations, world energy demand seen growing 50 percent by 2030

WASHINGTON (AP) — World energy demand will grow 50 percent over the next two decades, oil prices could rise to $186 a barrel and coal will remain the biggest source of electricity despite its effect on global warming, government experts predict.

The Energy Information Administration’s long-range forecast to 2030 said the world is not close to abandoning fossil fuels. They will continue to be at the core of energy production in transportation and electricity generation, according to the report released Wednesday.

It said the steepest increases in energy use will come in China and other developing economies, including some in the Middle East and Africa, where energy demand is expected to be 85 percent greater in 2030 than it is today.

“What jumps out is the very strong growth in the emerging economies,” said Guy Caruso, the head of the agency that serves as the government statistical and forecasting arm on energy.

The outlook largely assumes no mandatory international agreements on capping greenhouse gases, especially heat-trapping carbon dioxide, which comes from burning fossil fuels. Fossil fuel use “could be altered substantially” by such deals, the report said.

Without such limits, the annual amount of carbon dioxide flowing into the atmosphere would be 51 percent greater in 2030 than it was three years ago, the study said.

It said fossil fuels are expected to continue supplying much of the energy used worldwide despite the growth of renewable energy sources, including wind and biofuels.

On the path to a housing rebound

The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better

By Shawn Tully, editor at large
Last Updated: June 25, 2008: 9:08 AM EDT

NEW YORK (Fortune) — The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it’s an almost certain sign that the path to a housing recovery is finally in sight.

If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That’s the only way to tame the glut of “For Sale” signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.

Builders constructed far more homes from 2002 until 2006 – the peak bubble years – than could possibly be absorbed by the normal growth in households.

As a result, the market is now swamped with one million new and existing homes for sale that aren’t occupied, and hence need to sell quickly. That’s a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.

“For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes,” says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.

The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.

Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.

Is it really 2001 again?

I thought this would be a good time to revisit our 2001 vs 2008 Comparison of the S&P 500 from late April.

So far, the correlation is quite high both in timing and in respect to the technical indicators. We have seen the SPX fail at the 50% Retracement after only an intraday spike above the 200 day moving average. In 2001, the failure was short of the 200 day and never penetrated the 50% Retracement. Both failures occurred around May stock options expiration in late May.

The weekly 13/34 exponential moving average indicator (a favorite of John Murphy at Stockcharts.com) has recently confirmed its first sell signal since 2003. Additional similarities are present in the monthly indicators like MACD, RSI and ROC which are also all on sell signals for the first time since 2003.

Finally, the SPX has completed a test of the 80 week moving average from below as resistance. This is a critical level as described in The Significance of the 400 day (80 week) moving average. Just this past week the SPX also closed back below the 160 week moving average for the first time since early April. The last major break of the 160 week moving average before this, was of course early 2001.

Those who traded or had investments in the market in 2001 have vivid memories of what came next I am sure. The SPX dropped almost vertically from late May to late September shaving off 28% from top to bottom. The markets were closed for a full week during that time following the tragedy in New York. They opened in panicked fashion with many professionals talking of patriotically buying; yet most were selling with a fear they had never known in their lifetimes. The fear was so great that in just 5 days it was over. The SPX had dropped a staggering 150 points.

But then it bounced hard, rising over 24% by the first week of the new year and completely erasing the 150 point drop with a 232 point advance. That is a severe example of a fear based washout buying opportunity.

Dearth of Ships Delays Drilling of Offshore Oil

By JAD MOUAWAD and MARTIN FACKLER
New York Times

As President Bush calls for repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply.

In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security. But even as oil trades at more than $135 a barrel — up from $68 a year ago — the world’s existing drill-ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

Demand is so high that shipbuilders, the biggest of whom are in Asia, have raised prices since last year by as much as $100 million a vessel to about half a billion dollars.

“The crunch on rigs is everywhere,” said Alberto Guimaraes, a senior executive at Petrobras, the Brazilian oil company that has discovered some of the most promising offshore oil but has been unable to get at it.

“Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available,” he said.

Wall Street’s credit crisis heads into second year

Wednesday June 18, 3:59 pm ET
By Joe Bel Bruno, AP Business Writer

More credit losses seen costing global banks $1 trillion as credit crisis hits second year

NEW YORK (AP) — There are new signs that the worst of the global credit crisis is yet to come, and that banks and brokerages caught up in the market turmoil may lose $1 trillion by the time it has passed.

Major U.S. investment banks this week announced yet another painful quarter amid the implosion of mortgage-backed securities and risky credit investments. Regional banks have scrambled to secure fresh capital to stay in business, and by Wednesday there was new talk that embattled investment bank Lehman Brothers might be forced into a sale.

With each passing quarter, Wall Street’s top bankers have indicated that the worst of the market turmoil was over — only to face more pain months later. The uncertainty has caused already battered investors to lose confidence in financial companies, and expectations have increased that more layoffs, asset sales and capital raising will be needed in the weeks ahead.

“We thought this was going to be the kitchen-sink quarter, and we’re finding out that CEOs and CFOs still don’t have a handle on the credit crisis,” said William Rutherford, a former state treasurer of Oregon who now runs Rutherford Investment Management. “We haven’t disinterred all the dead bodies. What else is out there?”

The deepening credit crisis could cost the global financial system some $945 billion by the time it is over, according to a report from the International Monetary Fund. So far, banks and brokerages have written down nearly $300 billion from bad bets on mortgage-backed securities and other risky investments.

World Crude Production Has Peaked – Pickens

WASHINGTON – World crude oil production has topped out at 85 million barrels per day even as demand keeps climbing, helping to drive a stunning surge in prices, billionaire oil investor T. Boone Pickens said on Tuesday.

“I do believe you have peaked out at 85 million barrels a day globally,” Pickens, who heads BP Capital hedge fund with more than US$4 billion under management, said during testimony to the Senate Energy and Natural Resources Committee.

The United States alone has been using “21 million barrels of the 85 million and producing about 7 of the 21, so if I could take just a minute on this point, the demand is about 86.4 million barrels a day, and when the demand is greater than the supply, the price has to go up until it kills demand,” Pickens told lawmakers.

US crude futures have risen by a third since the start of the year and more than six-fold since 2002 as surging demand from China and other developing nations outpaces new production.

Oil slipped on Tuesday, a day after touching a record high near US$140 a barrel, but remained above US$133 a barrel.

Pickens, who announced a US$2 billion investment in wind energy earlier this year, told lawmakers during a hearing on renewable electricity that he expected “the price of oil will go up further.” Without alternatives, the cost of foreign oil will drain the United States of more resources, he said.

“In 10 years, we will have exported close to US$10 trillion out of the country if we continue on the same basis we’re going now. It is the greatest transfer of wealth in the history of mankind,” he said.

Pickens downplayed the role that speculative trading and institutional investors — forces some see behind the high oil prices — have had in the price trend.

Is Electricity From Wind Just A Lot Of Hot Air?

Tuesday June 17, 5:47 pm ET
Joanne Von Alroth

You could think of it as “energy sailing.”

Hoping to catch the financial breeze powering alternative energy, First Trust Advisors will launch the world’s first wind energy exchange traded fund on Wednesday. The First Trust ISE Global Wind Energy Index Fund will trade on NYSE Arca under the ticker FAN.

The new fund will track a three-week-old index with 53 companies that are active in the wind energy industry. Nearly 67% of the listed companies must provide products and services exclusively to the wind energy industry. The other 33% must have a “significant” part of their business devoted to wind energy, said First Trust Chief Investment Officer Robert Carey.

All the companies must actively provide or develop wind energy and have market caps of at least $100 million. The index, owned and developed by the International Securities Exchange, is calculated in real time and maintained by Standard & Poor’s. It will be rebalanced semi-annually.

Soaring Oil

It’s no coincidence that the fund sets sail just as oil hit a record high Monday of $139.89, Carey said. “This has been a matter of some urgency. We’ve been working very hard on it for about six months” as oil prices skyrocketed, he said.

“In addition to rising oil and natural gas prices, there’s supply security and mitigation efforts related to environmental problems and climate change,” he said. Global warming issues aside, wind energy proponents point out that its use reduces acid rain and oil spills.

Industry Growth

Ten years ago, the U.S. had less than 2,000 megawatts of wind capacity. Last year, wind energy generation companies saw 27% growth as they boosted their capacity to 94,000 megawatts. A megawatt — 1 million watts of electric power — provides power for about 380 U.S. residents, according to the American Wind Energy Association.

Rotation, Rotation, Rotation

Since Bernanke’s bungle (See Wrong Again Ben) in early December, rotation has been everything if you intended to not lose your shirt (possibly even your mind) in this crazy market.

Financials were absolutely the worst sector to be long despite having started to fall as early as April of 2007. Put options on stocks like BSC and LEH and GS proved to be big winners. The XLF Financial Select SPDR ETF fell faster from December to March than it had in all of 2007.

The S&P 500 was not spared, dropping as far as 13.5% from the December Fed meeting to the March bottom.

So where do you hide? Bonds did pretty well relatively.

But commodities really made your money grow!

Here is a comparison of two widely held mutual funds, the Dodge & Cox Stock Fund (DODGX) and the Pimco Total Return Fund (PTRAX). Even though DODGX is a waning fund, crushed by the weight of its own success, the difference here is quite remarkable. By making the switch, a passive buy and hold 401k investor could have saved two years worth of gains (at an average of 8% per year) in only six months. Not to mention the lower stress level that comes with a shallower drawdown in equity.

Update:

What goes around comes around July 17, 2008

Lehman Brothers removes finance, operating chiefs

Thursday June 12, 5:03 pm ET

By Joe Bel Bruno, AP Business Writer

Lehman Brothers shakes up top management as firm takes nearly $3 billion quarterly loss

NEW YORK (AP) — The hope at Lehman Brothers is that a management shakeup Thursday will contain the damage of a stunning quarterly loss — yet some on Wall Street fear this is one more step toward a more dramatic outcome for the embattled investment bank.

The ouster of Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory was an attempt to quell investor anger that Lehman’s leadership has failed them. But, with a four-day stock plunge that wiped $4.5 billion from the investment bank’s market value, it was unclear if the upheaval will be enough to satisfy critics.

“These people deserve to be fired,” said Dick Bove, an analyst with Ladenburg, Thalmann & Co. “Their mistakes cost their shareholders billions of dollars in wealth.” Lehman shares fell 4.4 percent Thursday to $22.70 and are down 30 percent this week. The decline is a blow to investors who bought into a stock offering at $28 earlier this week — including BlackRock Inc. and former AIG chief Hank Greenberg.

Richard Fuld, who took the company public in 1994, has kept a low profile in recent days by refusing interviews and commenting only through a statement about the dismissals. There is growing speculation that Fuld — the Street’s longest serving CEO — might scramble to find a major outside investor or negotiate a sale to avoid his own demise by Lehman’s board.

Names from private-equity firm Blackstone Group Inc. to global bank HSBC Holdings PLC have been bandied about as possible suitors should Fuld want to arrange a buyer, though none are commenting on the possibility. Most analysts are confident that Lehman can survive on its own without a suitor, given the underlying strength of its business.

And while Lehman might have bought itself some more time by shaking up its top ranks, the question remains how much it has left.

“I think they have a few options, but they are becoming more and more limited as the stock is pressured,” said Matthew Albrecht, financials analyst for Standard & Poor’s. “It is hard to rule anything out at this point. Confidence in the firm is the paramount issue, and if your counterparties and clients don’t have confidence then you can’t do business in this market.”

Hot commodities

The big question about resources: Is it too late to invest? Short answer: Nope. And it’s easier than ever to get into the game.

By Brian O’Keefe, senior editor

(Fortune) — Back in 2001, the executives running Australian mining giant BHP Billiton sensed that China’s economic growth was gaining critical mass. So they commissioned a study on how the country’s rapid industrialization might affect the global markets for copper, coal, iron ore, oil – all the stuff that the company pulls out of the earth and sells.

“The results were quite – well, ‘outrageous’ is probably the right word,” CFO Alex Vanselow told me when I visited BHP’s headquarters in Melbourne a few months back. “Because we didn’t believe it. We thought something must be wrong. If our models were right, the pressure China would put on the world would be tremendous.”

But the more they tinkered with their models, the more unbelievable the results became. The fast-growing per-capita income of China’s billion-plus people pointed toward a massive thirst for raw materials. When the researchers added India’s potential for growth – and its own billion-plus population – the numbers got even more extraordinary. And when they factored in the industry’s inadequate investment in new production capacity, they concluded that over the next two decades there would be a historic demand-driven boom in the resources world.

Today, of course, the commodities boom that the BHP (BHP) study anticipated is in full swing – and impossible to ignore. You see it every day in the $100-plus it now costs to fill up your SUV. Or the 39% increase in the cost of electricity over the past eight years. Or the fact that you’re paying 20% more for that box of pasta than you were a year ago.

As painful as all those rising prices can be for consumers, the bull market in raw materials has proved to be an awesome investment opportunity. Over the past five years the S&P 500 has had a total return of 59%. But over the same period, the diversified Dow Jones-AIG Commodity index has risen some 110%, and the S&P GSCI Commodity index, another broad measure, has jumped 141%. The price of gold has more than doubled, and crude oil and copper have soared more than fourfold. If you were prescient enough to go long on rice on New Year’s Day, you’ve already seen a return of 33% this year.

No wonder, then, that money is flooding into resource markets. According to Gresham Investment Management, institutional investors like pension funds and endowments had $175 billion in commodities at the end of 2007, up from $18 billion in 2003. Just as predictably, Wall Street has rushed out a flurry of new products geared toward individual investors.

Investing: Playing the Brazil Boom

New wealth from commodities is fueling growth and expanding the consumer economy. And that presents great opportunities for investors

by David Bogoslaw
businessweek.com

The Brazilian economy is barely recognizable to those who knew it more than five years ago. In those days it was plagued by mountains of debt and boom-and-bust cycles. Now everything is different. Indeed, 2008 is quickly shaping up to be the Year of Brazil.

The economy is ready to burst at the seams—but this time the growth looks sustainable. And foreign investors are taking notice in a big way. Should you join them?

First, it’s worth looking at some telling figures. Brazil’s gross domestic product increased 4.5%, to $1.3 trillion, in 2007, and grew by 5.8% in the first quarter of 2008. The country’s benchmark stock index, the Bovespa, is up 5.9% thus far in 2008.

Brazil is on the right side of the global commodities boom. It has enjoyed a 65% price hike for the high-grade iron ore it sells to steelmakers around the world. In the midst of a staggering increase in world energy prices, Brazil stands ready to capitalize on newly discovered offshore oil deposits that may be part of one of the biggest oil fields in the world. Major credit-rating agencies have given their stamp of approval on its government debt by upgrading the country’s sovereign rating from junk.

What makes the story even more compelling is how Latin America’s biggest economy has largely kept a lid on inflation, even as central banks around the globe continue to battle it. The reason: Brazil’s self-sufficiency in many of the commodities whose price run-ups are causing consumer prices to soar worldwide.

Lehman Bros. is Losing More than Money

By STEVEN M. SEARS
barrons.com

The investment bank’s credibility is shot and its put options have gotten red-hot.

ON A DAY WHEN MOST stocks are rising simply because some 90% declined in the previous trading session on Friday, Lehman Brothers (LEH) is an exception.

The stock of the nation’s fourth-largest investment bank fell about 11% in midday trading Monday after the company warned investors that next Monday’s second-quarter financial report will reveal a big loss.

Ineffective hedges, and apparently a breakdown with the bank’s decision making, caused Lehman to unexpectedly announce that it thinks it lost $2.6 billion, and that it will now rebuild its finances by issuing $4 billion of common stock priced at $28 per share and $2 billion of mandatory convertible preferred stock.

Of course, this is just a pre-announcement, and the final results could be different when announced next Monday, said Lehman’s chief financial officer, Erin Callan, in a morning conference call with investors and analysts.

The options and debt markets had expected earnings troubles, though arguably not even the legion of traders aligned against Lehman anticipated a loss of this magnitude. Lehman’s expected second-quarter equals $5.41 per share, markedly higher than the analyst consensus of a loss of 20 cents.

Put options on Lehman, which increase in value when the stock price declines, were obscenely expensive last week in anticipation of Lehman’s weakened position. Today, they are still richly priced, and though they have declined somewhat from last week’s doomsday scenario level, anyone interested in hedging against further weakness in Lehman’s stock will pay a princely risk premium.

Banks Say Auction-Rate Investors Can’t Have Money

By Darrell Preston June 6 (Bloomberg) — Franklin Biddar wants his money, and says Bank of America Corp. won’t let him have it. The 65-year-old real estate investor from Toms River, New Jersey, said he hasn’t had access to cash the bank invested for him in auction-rate preferred shares ever since the market seized up in mid-February. Even when Biddar agreed to sell $100,000 worth of the securities to Fieldstone Capital Group, Charlotte, North Carolina-based Bank of America wouldn’t release the bonds, saying the transaction wasn’t in his interest, he said.

“I can’t do anything,” said Biddar, who was so eager to unlock his money that he was willing to accept 11 percent less than what he paid for the securities. “Bank of America got me into these securities that are supposed to be as safe as a money market, and now they won’t get me out.”

Bank of America, UBS AG, Wachovia Corp. and at least four dozen other firms that sold $330 billion of securities with rates set through periodic bidding are thwarting attempts to create a secondary market that would allow investors to access their cash, according to investors. Dealers claim they are saving customers from needless losses on securities they marketed as similar to cash-like instruments.

“By allowing customers to sell at a discount, the banks allow customers to establish damages,” said Bryan Lantagne, the securities division director for Massachusetts Secretary of State William Galvin. Lantagne is head of a task force for nine states looking at whether brokers misrepresented the debt as an alternative to money-market investments.

Investor Lawsuits

At least 24 proposed class action suits have been filed since mid-March against brokerages over claims investors were told the securities were almost as liquid as cash.

Investors ranging from retirees to Google Inc. in Mountain View, California, have been trapped in auction-rate bonds for more than three months after dealers that ran the bidding suddenly stopped supporting the market as their losses mounted on debt linked to subprime mortgages. Before February, dealers routinely bought securities that went unsold, reassuring investors that they could get their money back on a moment’s notice.

About 99 percent of public auctions for auction-rate securities sold by student-loan agencies and closed-end funds fail, as do 48 percent of those for municipals, according to data compiled by Bloomberg. UBS, which cut the value of auction-rate securities held for its customers by 5 percent in March, said yesterday it plans to close its municipal bond business.

Subtle Shades of Green

Erika Brown
06.02.08
It’s not too late to find cheap “green” stocks. Look beyond the obvious to companies quietly boosting the sector’s growth

Say what you will about global warming, there’s no denying that “green” stocks–the ones promising to help the world burn less fossil fuel–are hotter than a July day. SunPower, a maker of solar cells and panels, is trading at $84, or 371 times trailing earnings. That makes First Solar, at $285 a share but only 121 times earnings, a relative bargain.

If you’d like some exposure to green stocks but fear getting scorched by such multiples, look around–beyond the billboard players. “When your average investor thinks of renewable energy, he thinks of solar, wind and biofuels,” says Shez K. Bandukwala, “but there is so much more opportunity hidden in the green tech sector.”

Bandukwala, 42, worked on public offerings at William Blair & Co. before moving in 2005 to what is now the San Francisco investment bank ThinkPanmure. As the Chicago partner in charge of alternative energy, he has done offerings for First Solar, SunPower, Evergreen Solar and Real Goods Solar.

You have to be a true believer to find stocks like these appealing; companies available at low multiples of their sales or earnings are pretty scarce (see table). One Bandukwala favorite is New Age carbon fiber maker Zoltek. Headquartered in Bridgeton, Missouri, and a ThinkPanmure client, it originally designed carbon fiber for car brakes. These days it sells the lightweight material to wind-power generators like Gamesa to make huge windmill blades. Despite Zoltek’s stratospheric price/earnings multiple (120), Bandukwala says it can’t make its product fast enough to meet demand.

Xantrex Technology makes components that help convert–or, more specifically, invert–power from direct to alternating current. That process is necessary to turn dc power collected in solar panels into ac power usable inside homes. The Toronto-listed shares trade at $9.49, giving a $292 million market value to a firm that had but $234 million in revenue last year.

Metalico is a Cranford, New Jersey company that recycles copper, aluminum and other metals. With commodity prices rising, its sales rose 61% in 2007 to $334 million. This one is cheap, after a fashion; its shares go for 17 times the earnings that analysts expect this year.

Fuel Tech, a firm in Batavia, Illinois, produces a chemical spray that cuts down the acid-rain-producing nitric oxide spewed by power plants. Fuel Tech is one of the few firms addressing this problem, says Bandukwala.

Sanghvi Movers, which trades on the Bombay exchange, rents out heavy equipment, including 300 cranes. Most of its growth is coming from Indian wind farms and other alternative energy projects. It also leases gear to chemical plants and refineries.

Westport Innovations, listed in Toronto, has partnered with enginemaker Cummins to develop technology to shoot clean natural gas into diesel truck engines. This could be a reasonable business if states and cities mandate or subsidize natural gas engines. Itron, of Liberty Lake, Washington, sells meters to utilities to monitor (and to prevent wasting) water, gas, electricity and heat. “From the substations, where energy is created, to the premises, where it’s used, there are a lot of opportunities to minimize waste,” says Bandukwala. “Meter readings are a key component in that process.”

American Superconductor sells power converters and superconductor wires to energy companies, including wind-energy producer Sinovel Wind. Its parts help connect wind turbines to power grids. The company, whose sales are expected to rise 52% this fiscal year to $170 million, also designs wind turbines.