What’s Important in the Financial World (4/13/2012) Spain’s Tax Plan, Saudi Oil Promises

The faltering American solar industry suffered another setback. BrightSource Energy, a solar power-plant developer, killed its initial public offering at the last minute. The company was part of a project that got $1.6 billion in support from the federal government. Solar companies in general have fallen out of favor recently as the prices for panels, and therefore margins, have fallen apart. Many solar stocks trade near all-time lows. BrightSource blamed stock market conditions for its IPO problem, which makes no sense given the rapid rise of the overall stock market. BrightSource builds large solar plants, which should not be confused with troubled panel makers, but investors do not appear to know the difference.

Saudi Oil Promises

Saudi Arabia’s oil minister, Ali al-Naimi, said his country would act to move oil prices lower and keep them there. His comments caused a sell-off in crude. His case for lower oil is not just his nation’s production capacity. It is also the fact that he believes global oil supply is plentiful and that there is no supply and demand reason for crude’s recent price increase. The drop in prices many be short lived. The Saudis have made pledges before. The U.S. and allies have said they may release some of their strategic oil reserves. GDP growth has been tempered in the largest developing nations. But the threat that Iran will close the Strait of Hormuz, through which about 20% of crude supply is shipped, trumped all these things. And, hard evidence indicates that refinery capacity is down because plants are off line for upgrades or have been shut completely due to lack of profits.

Sony’s SmartWatch

The turnaround that Sony (NYSE: SNE) promised is already on track. The Japanese electronics company has released a Google (NASDAQ: GOOG) Android-powered watch. The SmartWatch can be connected to the Internet and to the users’ Android-based smartphone. “SmartWatch provides access to live content and entertainment on the go,” said Sony Mobile Communications customer unit president Paul Hamnett. It is difficult to see why this would replace the use of smartphones themselves. Many of these devices have high-resolution screens. They often have cameras. New smartphones have strong processors and many preloaded or downloadable apps. Who needs a watch with a tiny screen to do the same?

Spain vs. Tax Fraud

Bloomberg reports that Spain will increase its fight against tax fraud as it desperately tries to win back global capital markets investors who have abandoned its bonds. This abandonment has caused sharply higher and unsustainable borrowing costs. Bloomberg writes: “Limits on using cash and rules to make taxpayers declare foreign bank accounts will be approved in today’s Cabinet meeting.” Though tax collection has been a problem in most financially troubled southern European nations, the use of “get tough” plans as a way to sell deficit reduction is aggressive. Prime Minister Mariano Rajoy must see that his programs for austerity measures have not convinced investors who believe that his nation’s gross domestic product will continue to fall. So, he has combined that austerity with a tax crackdown. At least he has something new to peddle to financiers.

Douglas A. McIntyre