I have been doing some more research on the LED (Light Emitting Diode) market and I have concluded that it could easily be a $20B+ market, which would represent enormous growth from here. It's an exciting market.

As described here in my post on EBN Online, the math is pretty simple. Right now, LEDs are estimated to have less than 5% penetration of the global lighting market, which is estimated to be near $80B. In Japan, LED penetration is already approaching 50%. If you assume that LEDs can get to 30%-40% penetration of the global lighting market in the next 10 years, you are talking about a $20B+ market.

The most common LED play is Cree (Nasdaq: CREE), a market leader with a strong patent position. Another good public-market play is VECO, which makes a variety of LED technologies as well as manufacturing and testing platforms.

(Disclosure: I have been in and out of CREE and VECO over. Currently long VECO, and looking for a better long-term entry point in CREE.)

The Tesla Motors IPO is the talk of the town today, but to me it is a bad flashback to the poor IPO practices of the 1990s. The electric car company priced 1 million shares yesterday at $17 per share and it is expected to start trading today.

Tesla doesn't make a dime, and it's still a cash-flow negative entity, bringing back fond memories of the late 1990s when hundreds of unprofitable venture-capital backed firms were floated on the public markets, making entrepreneurs and venture capitalists rich while draining the accounts of millions of unsuspecting investors. A very small percentage of these compeanies ended up doing well. It's a high-risk prospect. This is not an IPO for my taste. When investing in public companies, I prefer companies that actually make money.

But set aside these fiscal details for a moment and consider this: Tesla sells expensive electric cars -- each of which require complex battery packs made up of thousands of cells -- for close to $100,000 each. They are trying to market this product in the teeth of the worst recession in 100 years.

Here are some more facts about Tesla you may want to consider before you buy any of the stock:

• The company's loss in the first quarter rose to $29.5 million from $16 million a year ago
• Production of Tesla's sedan, which is years behind schedule and is consider the key to making the company money, has slipped again. The big guys, such as GM and Nissan, are catching up in electric vehicle production.
• The company will have a market cap around $1.3 billion after it floats.
• Venture Beat did some fine work in uncovering that founder and CEO Elon Musk has been having cash-flow issues. Might that have rushed the IPO along?

Good luck, Tesla.

It always shocks me when a big trader comes out and says they're shorting a stock. Mostly, because I'd prefer to keep it quiet (people generally hate short-sellers, whether that's illogical or not). A hedge fund manager and Greentech Media contributor is advocating shorting First Solar. I figure, he's looked carefully at the industry, he must know something. So I thought I'd check it out. John Hempton of Bronte Capital says First Solar became a great company by innovating efficiencies in the manufacturing of solar cells. But he thinks that these efficiencies are largely evaporating as the price of solar-cell silicon material drops and competition from the semiconductor industry closes in fast.

So far I've been pretty unimpressed by the "bubble" in GreenTech. It's been the bubble that popped before it even expanded. You would think that will all of the hype, slathering media coverage, and government subsidies, we'd have a roaring party going on in greentech markets. Or maybe even a roaring IPO market? Instead all we have are some pretty feeble success stories and at most, a couple of modest IPOs in 2010. There have been a handful of "greentech" companies slated for IPO in 2010, the most commonly discussed are Solyndra and Silver Spring Networks. I have no idea how they will do, nor I have I (yet) investigated these particularly companies thoroughly, but my initial feedback from reliable sources is an indifferent shrug. A Google-like outcome is not likely. More concerning is some feedback I have been getting from the sources in the venture-backed greentech market, where valuations are under pressure, it's extremely difficult to raise funding, and the general feeling is that of disappointment.

I found it kind of bizarre that Tesla Motors has filed for an IPO and is looking to raise $100 million from public investors. This comes about four months after the company landed a $465 million taxpayer loan to build factories to churn out really expensive money-losing cars that help rich people boost their egos and make them feel more "green." Let me get this straight: After borrowing half-a-billion dollars from you and I as taxpayers, they want to sell $100 million of stock to the public, of which half will be reserved to pay off the money they borrowed from the taxpayers? Okay. The fact is the company has been bleeding money for years and says it doesn't have any designs on being profitable until 2012, according to the filing. Huh? I thought that the "new IPO market" was supposed to be for profitable companies, not for extremely high-risk speculative car companies that have no track record of making money. Remember, after the tech bubble we were supposed to dial back on venture capitalists, entrepreneurs, investment bankers, and other snake-oil salesman from robbing granny's retirement funds for speculative IPOs. What, is it 1999 again?

Cree (CREE) earnings were out after the market close, confirming that the LED (light emitting diode) market is white hot. The stock is up nearly 10% after hours. The semiconductor and LED company's  second-quarter profit tripled. It cited surging demand for LEDs as one of the drivers of its earnings.The companyprojected fiscal third-quarter earnings of 41 cents to 44 cents, excluding items, on revenue of $215 million to $225 million. Analysts surveyed by Thomson Reuters projected 28 cents and $190 million, respectively, according to the Wall Street Journal. The stock was trading up $5.54 to  $59.75, up 10%,  in after-hours trading. That's above the recent 52-week high, which it made last week. The advantage of LEDs, which are more akin to chips than light bulbs, is that they last much longer and consume less energy than traditional light bulbs. In November, the company said Wal-Mart Stores Inc. (WMT) would use LED lighting in 650 stores. I have just been delving into LEDs lately, but I think the demand for this technology will be huge over the next 5-10 years. Walmart is just a sign of things to come. Investors I spoke to in this market point out that commercial applications of the technology are only the beginning, as LEDs are making their way into the consumer market in the form of flashlights and house lightbulbs, which is huge. Imagine every light bulb on earth being replaced with LEDs. Cree benefits in several ways in the market. Not only is Cree a manufacturer of LED technology, but it holds key patents on the technology. The patents in LEDs are closely watched in the industry because they are held by a key group of companies and controlled by cross-licensing agreements. Read this article in LEDs magazine to learn more. This cool chart from LEDs magazine demonstrates the complexity of the LED patent world: (Disclosure: No position in Cree. Unfortunately)

Greetings for Tuesday, January 19th. That new year goes fast eh? It's almost February. In today's news, we have Massachusetts Politics, Matt Taibbi's slam, a Krafty deal, and a rising stock market. What more can you ask for? Here's a rundown of what's going on, through the eyes of the Rayno Report:

• Massachusetts politics -- what fun!  Republican Scott Brown is grabbing the headlines, with his possible come-from-behind victory over Democratic favorite Martha Coakley in a special election for a Massachusetts senate seat today (Politco). Not only would a Republican candidate taking the late senator Ted Kennedy's senate seat be a shock to the Democratic party, but it jeopardizes the Obama Adminstration's entire agenda (New York Times) Kind of a  big deal!
• The market rallied today. Folks who don't study statistics say it's because of the Massachusetts senate election. Even though we don't know who won. Okay. (Bloomberg)
• The disaster that is Haiti continues (CNN.com). Remember to help out, if you can.
• I'm still laughing at Matt Taibbi's rant on Thomas Friedman's greenish hype (NY Press). He even tells you what it has to do with what midgets think of Austrailia. It was so inspiring, I had to flatter him with my own derivative rant below.
• Interesting, Taibbi is onto something. Conflicts around "greeness" may be rising (New York Times).
• Did anybody notice that China is putting together a national strategic oil reserve? (Kuwait News Agency)
• Speaking of Kuwait, the Kuwait foreign minister has called Israeli Prime Minister Benjamin Netanyahu "stupid and insane." (Al-Manar TV)
• I guess it's time for another Middle East conflict (Xinhua).
• Avatar is now the most popular movie shown in China ever. That's enough for censors to start yanking it, apparently (Sphere).
• Speaking of battles in China, Google is yanking its Nexus One from China until it can sort out that pesky negotiation with a totalitarian regime.
• Microsoft wants to launch a Zune phone (All Things D). Go ahead, try to stifle your laughter.
• HarperCollins Publishers is negotiating with Apple for books to appear on a new Apple tablet device (Wall Street Journal).
• More men are marrying wealthier women. And women are rejecting rich men for poor men. (New York Times). No word on whether poor men can marry poor women.
• Speaking of wealth, a man masquerading as a fashion model has been bilking wealthy men (L.A. Times).
• The man was posing as fashion model Bree Condon. Here's what Bree Condon looks like, in case you were wondering:
• 
• The Cadbury board has accepted Kraft's improved $18.0B takeover bid (Associated Press)

Matt Taibbi, who is making a pretty nice career out of skewering the Wall Street/Beltway establishment, has a ripping piece on New York Times columnist and author Thomas Friedman, called "Flat N All That," in the New York Press (props to Aaron Task for the link). Taibbi starts with Thomas Friedman's hypocrisy in the green movement, and then moves onto the rest of Friedman's flaws, including his poor writing syntax and painful metaphors, bad editors at the New York Times, and pathetic use of statistical randomness in an attempt to prove a  point. Not only is the column immensely entertaining -- Taibbi is emerging as one of the preeminent practictioners of modern Gonzo-financial journalism -- but it points out the central problem to the "green guilt" movement and why Friedman's pathetic attempt to lead us just doesn't make sense. Taibbi's central point is that Thomas Friedman is a raging hypocrite. Why is that? For starters, Friedman apparently  considers himself as a leader of  the environmentalist  movement, though he lives in a fuel-guzzling 12,000 sq. ft. mega-mansion and jets off to Damascus every five days. And he's right. The "green guilt" movement is mostly led by wealthy "limosine liberals" such as Friedman and Al Gore (another jet-setting and mega-mansion-compound-living hypocrite), who really have no interest in taking the steps that true enrvironmentalism would entail: A massive scale-back in lifestyle and consumerism so as to reduce consumption of fossil fuels and greenhouse gas emissions. The fact is that it's extremely difficult and slow process to do this, because the entire world econmomy is based on consuming stuff, and there are huge  economic challenges, psychological challenges, and political challenges to building a more green society. This is the point that Friedman ignores, as his own excessive lifestyle demonstrates. [caption id="attachment_598" align="aligncenter" width="549" caption="Thomas Friedman's "green" compound"][/caption] The main problem is that most people want more stuff in life. When's the last time you woke up in the morning and said, "You know, I want a smaller house, I want to give away my car, and become a Buddhist monk." It's a generous thought, but most people just don't think that way. They want to go to the office and get a promotion so that they can upgrade their kitchen. That is an economic fact that has driven humanity since the beginning of time, when we went out to kill our dinner with large stone clubs but didn't yet have a six-burner Viking stove. How many people have the discipline to scale back the psychological need for "more"? A very small percentage of people have the ability to do so -- mostly poets and monks. But it is not merely a measure of conscience, but also an economic choice. Most people -- especially the folks in the lower-income levels -- simply don't have the time or the money to "be green." They need to drive to work and earn a living for their family. And if you think about it, the people who consume the most energy and spew the most carbon are generally upper-middle class and and-upper-class Americans,  like Friedman and Gore, who live in gigantic houses, employ a flotilla of Suburban-driving assistants, and fly around the world stoking their egos by pontificating in front of flag-waving groupies (air travel has the largest carbon footprint of any one action a human can take). Let's be serious. Do we really think we'll get more green by lecturing the Chinese people that they can't live in a 4-bedroom suburban house and drive cars to work like us?  That won't hack it. The Chinese will march forward regardless. They know we are hypocrites to lecture them about how they should be different. Spend some time with the carbon calculators. Much of our environmental excesses are consumed by recreation and travel -- not daily working life. That is, getting on an airplane to Hawaii or taking the family truckster to Yellowstone Park. Take a look at the chart below and you will see what I mean. Holiday flights, recreation, and leisure account for 20% of the average person's carbon footprint. If you travel for business, forget about it, it means you are a veritable carbon machine. I live in a large house. I know it's bad. But I know that other things are worse. I once calcuated my carbon footprint based on 10 flights per year (which I used to do), and concluded that it more than tripled my carbon consumption and that air travel accounted for more than 50% of my footprint. I could ride my bicycle to work and live in a teepee, and that wouldn't offset the eight trips to the West Coast. Now imagine Al Gore in mobilizing his globe-trotting propaganda team. Source: Carbonfootprint.com It's really hard, even for many of us who are not living in poverty in India or have decent jobs, to reduce our fuel and carbon consumption. Yet, Friedman and Gore don't get it.  Beyond the issue that their data, science, and economic theories aren't based on fact, they don't understand that they themselves are the true carbon hogs and that the average working stiff (the person they allegedly represent) can't pay an extra $8,000 for a hybrid. Or that Ethanol subsidies eventually result in higher food prices and a generally dysfunctional economic system.  Throwing government subsidies on the Ethanol market was one of the most stupid things we've done in the last 10 years. Maybe people like Friedman should spend more time on real bread-and-butter problems of true economic change for climate, which would include the careful analysis of business cases for alternative energy, the elimination of our Congressmen using taxpayer money to go on airplane junkets to Cophenhagen, and examining how to promote more private investment in the alternative fuel markets. The earth does need our help, and we as humans should reconsider how we live in order to stop the obvious destruction of major quandrants of the planet. But inevitably we're going to have to solve the problems through econmomic and technological innovation. It's the only way. Think about it: 150 years ago we were using whale blubber to fuel our homes. Now, that's progress. The innovations and economics changes will come when oil and gas will become more scarce, and  more expensive, and more investment is driven into new technologies. Meanwhile, solar and other alternative technologies will become cheaper through growth of private investment; scientists will discover new technolgies to drive down the cost of alternative energy technology; more investment will create even more economies of scale in this market. You can't force it to happen. It's going to be driven by economics. If you're feeling guilty about that, stop lecturing us and cancel that trip to Hawaii for your next family vacation -- take the volunteer gig on the local organic hemp farm, instead. Hopefully, we'll be living greener lives in 20 years because the economics of energy and technology guide us there, not because some arrogant jerk in a limosine with a 12,000 square foot house in suburban Maryland tells us to.

Venture capital (VC) funding in the greentech market is humming along, if at a smaller size, says research and analysis firm Greentech Media. VCs did 356 deals totaling $4.85 billion in 2010, according to research released by Greentech Media today. That's down from $7.6 billion in 2008. Eric Wesoff, a senior analyst at Greentech Media, attributes the shrinking deal size as a move to capital efficiency -- and less factories. "VCs are as active as they were, they're just not spending $100M to build a factory. They're just as enthusiastic, but they don't have that pie-in-the-sky mentality." In fact, it looks as if this is a developing trend mimicking what happened in the semiconductor industry with the move to fabless. If you can design and market chips, why take on manufacturing risk? Outsource. Wesoff says other companies have reconfigured their business models altogether, avoiding capital intensive prospects like factory building. Even the big guys like SunPower are increasing outsourcing manufacturing activities. The hottest sector was solar, with biofuels coming in second place. But Wesoff points out that water investments are an emerging "dark horse" candidate, drawing $130 million in investment. The mood in the VC market is even picking up, says Wesoff, with the prospects for more IPOs in 2010. "It looks like 2010 is going to be a lot better for IPOs and M&A," he says. "There will be a lot more activity, and maybe even some successes."