E Another Day In The Market

There now is an abundance of theories about why the stock market fall occurred. My Swiss National Bank thesis has not been picked up by other analysts but many are blaming higher bond rates for having triggered the stock market fall. While the fall in bond prices as yield go up (because they move inversely to each other), the coordination of stock falls to bond market ones was slow getting going. It was more the likelihood of further rate hikes rather than their actual rises that started to stock selloff.

The impact on stock prices of the collapse in reverse-volatility plays (derivatives long on low volatility like XIV, the reverse of the VIX) is a technical factor being blamed for the continued share price weakness. It is probably being overstated. Whenever there is a crash in the stock market, pundits like to blame a technical factor. Among the culprits past are portfolio insurance; over-leveraged mortgage market losses; options strategies (put-buys or call-sells); and Wall Street bankruptcies ( in 2008-9's correction: IndyMacCIT; WaMu, Lehman Brothers, AIA, Merrill Lynch, etc.)

Blaming it on a technical factor absolves the market from having to blame itself for plummeting stocks. “It wasn't me”.

Or to blame the economic outlook for the bear market, which means it is a real danger.

Or for the US to blame the White House or Congress, for example for the looming rise in US government deficits and their pro-cyclical tax “reform”. Or the inexperienced new Fed Chair.

My own secret theory is that everyone knew it couldn't continue so they were trigger happy after the DJIA and the S&P 500 ran up the longer series of gains last year since the 1950's.

It is another day overladen with results, so enough chatter. We have results from Panama, Mauritius, Canada, and Japan, plus more news from other places. And a new stock pick in China which reported yesterday (our writer was waiting to be sure.)

Solar electric ute Azure Power of India (HQ'd in Mauritius), NYSE:AZRE, reported on its FY Q3 which ended Dec. 31. Operating revenue rose 83% to INR 1.7399 billion, $27.3 million thanks to new projects. However, costs rose faster, by 90% to INR 158.4 million or $2.5 million (for plant maintenance and new projects) and SG&A doubled to INR354.5 million and moreover a government reclassification of one of the new sites resulted in a one-time charge of INR 86.3 million ($1.3 million). Then depreciation and amortization also rose by a quarter to INR 474.9 million ($7.4 million) for financing new solar plants. Interest expense rose 130% to INR 639.4 million ($17.7 million) and the rupee moreover fell 2% against the greenback (currency of borrowing) in the quarter and it had to pay more taxes (despite being HQ's in an offshore haven).

You can see where this is going. Despite or indeed because it got more business AZRE lost lots of rupees. Its net loss for Q3 was up tenfold from the prior year Q3 at INR 136.1 million or $2.1 million despite higher cash flow.

Since AZRE is in business to earn profits, it expects to get the government to pay faster, stop fiddling the sites, and otherwise become less Indian. If all this occurs, AZRE expects to post revenues of $143-151 million in the current FY. It closed 2017 with a 57% increase in the number of megawatts of power it produces, at 805 MW. In the half year the rise in MW topped 100%. It is not like India can afford to zap Azure. Its stock is off 2%.

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