via Twisted Sifter, who commented "+1 for crazy, reckless insanity. Idiocy at it’s finest. Do not attempt."
Archive for the ‘Uncategorized’ Category.
Investors everywhere were shocked to see that MF Global seems to have lost over a billion dollars of their customers capital. In most cases, this capital was cash customers thought was sequestered as collateral for their trading accounts. MF Global took its customers money and used that money as collateral in making risky, leveraged bets on European sovereign debt, bets that fell apart as debt prices fell and MF Global faced margin calls on its bets that it did not have the liquidity to cover.
Certainly it strikes most folks as unethical to lose the assets in your customers' brokerage accounts making bets for the house. But it turns out, it may have been entirely legal. This article is quite good, and helps explain what was going on, what this "hypothecation" thing is (basically a fancy term for leveraging up assets by using them as collateral on loans), and why it may have been legal.
In short, the article discusses two regulatory changes that seemed to be important. The first was a 2000 (ie Clinton era, for those who still think these regulatory screwups are attributable to a single Party) relaxation in how brokerages could invest customers' collateral in their trading accounts. The second was a loophole where brokerages created subsidiaries in countries with no controls on how client money was re-used (in this case mostly the UK) and used those subsidiaries to reinvest money even in US brokerage accounts.
The increase in leverage was staggering. Already, cash in most commodities trading accounts is leveraged - customers might have only 30% of the value of their trading positions as collateral on their margin account. Then the brokerage houses took this collateral and used it as collateral on new loans. Those receiving the collateral on the other end often did the same.
MF Global would be bad if it were fraud. But it is even worse if MF Global is doing legally what every other brokerage house is still doing.
Here is the minimum one should do: Diversify brokerage accounts. We diversify between bonds and stocks and other investments, but many people have everything in one account with one company. I am not sure anyone can be trusted any more. My mutual funds are now spread across three firms and, if I grow my brokerage account for individual stocks and investments (right now it is tiny) I will split that as well.
This article at Kevin Drum's titled "The Death of Middle Class Neighborhoods" really had me scratching my head.
At first I thought this was about an end to self-segregation of the middle class. After all, if middle class neighborhoods are gone, but middle class people are still living somewhere, then they must be living mixed up with other groups.
But then Drum says the problem is the increasing self-segregation of the middle class. Huh? How can they be self-segregating more but we end up with fewer all middle class neighborhoods?
But then the problem appears to be that the middle class want to hang out with the rich people. Um, OK, I don't find this wildly surprising, though the evidence he cites for this is awful, the typical low standard of science practiced by sociologists everywhere. But Drum himself admits he self-segregates with more educated people, so there you have your proof.
Finally, as usually is the case with the Left, the problem turns out to be not with the middle class at all but with rich people
We've been fretting for a long time about the rise of gated communities, the abandonment of public schools by prosperous city residents, and the booming market in McMansions. And more and more, this kind of segregation doesn't apply only to the truly rich. Increasingly, even the merely well off hardly have any social interaction outside their own class: they live in different neighborhoods, eat in different restaurants, send their kids to different schools and different sports leagues, and vacation in different places.
Really? Like you had a much better chance as a poor person to be hanging out with Andrew Carnegie at the pub than you do today chilling with Bill Gates at a Starbucks? When was this magic past time when the affluent liked to mix more with the unwashed? I hate to just use my personal observations, but Drum does, so here is mine: I feel like many of our meeting places today are less rather than more exclusive. I know a lot of very rich folks, and they simply don't cloister themselves in exclusive clubs and stores like they used to -- I am not at all surprised to see them in the Costco or at the public golf course.
I can be persuaded to accept schools as an exception to this, but this hardly does much to help Drum's argument as the government school system has been run (and run into the ground) by his fellow progressives for decades. It says a lot about private vs. public solutions that Costco has found a way to appeal equally to rich and poor but the public schools have not.
Update: From the NYT article on the underlying study, note the problem on these maps- the urban boundary in the study is static, so as the city expands, more of the metro area is outside the bounds of the study area. What group likely is the predominent occupant of new suburbs on the leading edge of urban boundaries? Dare I say middle class?
The central core of older American cities has always been where the richest and poorest live.You can see this on the Philadelphia maps. The pattern is not changing, just each area is getting larger. A full picture would show the middle class area expanding out as well, but the study cuts off the boundary at arbitrary country lines and never expands the boundary as the city's geographic size grows. The "trend" they are supposedly seeing are middle class continuing to move outwards from the city center, and their flawed study methodology loses visibility to them. This makes more sense than the study's finding, that somehow there is this weird lake Wobegon-type effect where no one is in the middle band of the percentile range.
Lost in the discussion of Dan Carol's criticism of Steven Chu and his conduct in the Energy Department was an amazing implicit assumption about the DOE's mission:
“Secretary Chu is a wonderful and brilliant man, but he is not perfect for the other critical DOE mission: deploying existing technologies at scale and creating jobs,”
Seriously, is this really their mission?
From: The Consumers and Small Businesses of China
To: The United States Senate
Thanks! For years, our government has pursued a currency and trade policy that has subsidized your American consumers at the expense of our own here in China, and while we are unsure exactly why you would want to end this arrangement (we presume due to powerful lobby by your large manufacturers), we are happy that you are doing so....
A low yuan makes Chinese products cheap for Americans but makes imports relatively dear for Chinese. So-called "dumping" represents an even clearer direct subsidy of American consumers over their Chinese counterparts. And limiting foreign exchange re-investments to low-yield government bonds has acted as a direct subsidy of American taxpayers and the American government, saddling China with extraordinarily low yields and creating inflationary pressures.
Every single step China takes to promote exports is in effect a transfer of wealth from Chinese citizens to Americans, and we are tired of it.
Read it all.
Ten years ago, for the first and only time in my life, I invited my wife to come along on a business trip from Seattle to New York.
On 9/11, I was sitting in the restaurant at the W hotel in Midtown Manhattan having breakfast with some bankers. I had recently been hired to see if I could make something out of a startup that was trying to manage aircraft parts sales and inventories over the web. My incredibly ill-timed pitch to the bankers was that the commercial aviation business, which had been somewhat in the doldrums, was on the verge of a turnaround. Oops.
My wife came down to breakfast to tell us something funny was going on in the news. We ended up going to one of the banker's hotel rooms -- he had a penthouse suite with a balcony from which we watched the now-famous and horrible events play out.
The rest of the day was odd to say the least. People on the street flinched whenever a plane flew over. The entire island emptied out, such that in the evening, we walked through Times Square and not a single care came through in 5 minutes. Someone was skateboarding in lazy circles, I suppose just because he could.
For us, 9/11 fortunately was only a hassle. We scrambled to find someone to watch our kids in Seattle, and found the last rent car in the city and ended up driving all the way back to Seattle from New York. We still made it back before air travel resumed.
Many of our friends were not so lucky. As both my wife and I were grads of the Harvard Business School, we knew scores of people who worked in the WTC. Over the coming weeks, word floated in of friends that had died that day, including our friend Steve who did not work there but got talked into going to a training session he really did not want to be at. I actually think of him many times, when I am asked to do tedious business trips I see not value in. I have learned to skip a lot of them. Life is too short.
This seems like good news -- there were over 30,000 essay submissions by high school juniors and seniors into the Ayn Rand essay contest, this year on the Fountainhead. My son entered an essay, pondering his college choices in the context of Howard Roark and the Dean. He has it online at his blog, follow the link.
I am not one for China-bashing (or Japan-bashing 20 years ago). But it is interesting to consider just how sane and peaceful a country will be if it is dominated by 100 million men who can't get laid.
Many of you may know that my business is engaged in private management of public recreation. We get a lot of pushback from certain sectors who believe access to government lands or services should be free -- ie already paid for by their income taxes.
I often argue that this notion of discretionary services (like parks and campgrounds) being run with high cost government labor and funded by general revenue taxes is a dead one - in fact it has been dead for at least 10 years. Just look around at public parks organizations. Odds are that your state is facing parks closures and is very likely not fully funding park maintenance. I wrote about this failed model here.
In the future, anything discretionary government program that can charge use fees or be privatized or both will do so. Or else it will be provided at terrible quality with long queues and frequent closures. Don't believe me? Lets look at the US government budget data from last year. This chart has been making the rounds -- I have not checked the data source but I presume it is correct (as usual click for larger version)
I have some interest in the science of chartmanship. McKinsey & Company did a great job teaching me how to make a presentation, a skill I have honed somewhat in way too many planning and strategy jobs that seemed to revolve around Powerpoint (one of the criteria for my current job is that it did not involve Powerpoint).
This chart is a case where the author used the wrong chart type. The pie chart is not appropriate to show a changing total (as the author does with the size of the pie). The eye has trouble assessing volumes. I have taken the same data and put it in a slightly different form. I did not take time to make it pretty, but I think it works better in this format:
Now do you see my point about discretionary spending? Last year government taxes just about covered entitlements and interest on the debt. Had we not borrowed, there was no money left over for any discretionary spending, including all of the Defense budget! Now, even without action, the picture will improve in 2011 as taxes go up with a rising economy and some of the unemployment spending goes down. But this might just get us to still having a defense department. Either large swaths of discretionary spending is going to have to be zeroed out, or some sort of entitlement restructuring is necessary.
Of course, tax increases will likely be part of the mix as well, but look at the individual income tax bar. Even doubling it would not close the budget gap!
I have to second Glenn Reynolds recommendation of this Snap Circuits electronic kit. This is BY FAR the most user friendly electronic building toy we have found, and it works great. I don't see that many kids with these so its a great gift for nieces and nephews who you are not sure what they already own.
California Cap-and-trade plan may be put on hold because they failed to do an Environmental impact study. LOLOLOL
The California Air Resources Board violated state environmental law in 2008 when it adopted a comprehensive plan to reduce greenhouse gases and again last year when it passed cap-and-trade regulations, a San Francisco Superior Court judge has ruled in a tentative decision.
If the decision is made final, California would be barred from implementing its ambitious plan to combat global warming until it complies with portions of the California Environmental Quality Act, though it is not yet clear what the air board would have to do to be in compliance. The state’s plan, which implements AB32, the Global Warming Solutions Act of 2006, would reduce carbon emissions to 1990 levels by 2020.
Here is the next bit of news I bet we will hear: One of the victims or his/her families will sue Safeway, whose only involvement in the crime was that it had offered the parking lot as a location for Ms. Giffords constituent meeting. Increasingly, though, the tort system is not about justice, but about finding deep pockets somehow tangentially connected to a tragedy. I will bet that some lawyer right now is crafting a suit based on Safeway's inadequate security, poor judgement in allowing the meeting on their property, failure to warn customers of the potential dangers of attending such a political meeting, etc. etc.
For some reason, Phoenix is in the midst of frozen yogurt wars. A few years ago a store opened with a new concept - they set up about 12 self-serve frozen yogurt machines so you could fill your own bowl, and then gave the customer direct access to heaps and heaps of toppings (e.g sprinkles, chocolate sauce, m&m's, gummie bears, etc). At the end, you weigh your bowl and pay based on weight, exactly as one might do in one of those salad bar restaurants.
Over the last few years, the market has exploded with new stores in the same model. We must have at least 10 different chains. We have about 6 within a short drive of our house. Already, the price per ounce they charge has fallen by over half.
I have learned from my out-of-town visitors that this is not a concept that is common in other parts of the country. Which leads me to ask why so many restaurants with the same concept are piling into Phoenix. Is it just people in the local market thinking it is a great idea and deciding to copy the idea in their neighborhood? I can sort of see the appeal - these stores were (initially) popular, had low barriers to entry, and probably elicit dreams of creating a franchisable concept. Which leads me to two questions:
- Why is the tenth or twentieth incremental store being opened in Phoenix? I would find some place like Georgetown or Harvard Square that has not seen this concept yet and open it there. Or even better, open one on Sand Hill Road or wherever retail investors work.
- Seeing the low barriers to entry and the quick proliferation in this market, combined with sagging visitation as the novelty wears off and steeply falling prices, why is anyone attracted to this at all? One guy will probably get out ahead on this and establish a national brand, and everyone else will likely get slaughtered (and the first mover will probably go bankrupt anyway as many fast-growing franchise model from Jiffy Lube to Boston Chicken have). Is it the lottery value? Or am I too much like the joke about Milton Friedman, who refused to pick up a twenty dollar bill on the ground because he argued that the money couldn't be real since in a free market someone would have already picked it up.
Apparently, the folks in France are at it again, valiantly trying to retroactively create trademark rights that don't exist. I saw this link below:
Which leads to this site, which says in part:
When it comes to wine, there is no ingredient more important than location. The land, air, water and weather where grapes are grown are what make each wine unique. That is why we, as wine enthusiasts, demand that a wine's true origin be clearly identified on its label in order for us to make informed decisions when purchasing and consuming wine. This ensures we know where our wine comes from and protects wine growing regions worldwide.
Use the form below to sign the petition to protect wine place and origin names:
I hereby sign the Wine Place & Origin Petition. In doing so, I join the signatories of the Joint Declaration to Protect Wine Place & Origin - Champagne, Chianti Classico, Jerez, Napa Valley, Oregon, Paso Robles, Porto, Sonoma County, Tokaj, Victoria, Walla Walla, Washington State and Western Australia - and a growing list of consumers in supporting clear and accurate labeling to better ensure consumers will not be misled by wine labels.
Some countries like Germany cannot use "champagne" or "Cognac" to describe similar products. Do you know why? These conditions were actually thrown in to the Treaty of Versailles at the end of WWI. Since the US never signed the treaty, it and its citizens and growers are not bound by this restriction.
In the same spirit I demand that: 1) Hamburgers only be made in Hamburg 2) Franfurters can only be made in Frankfort 3) Wiener Snitzel can only be made in Vienna 4) Hollandaise Sauce can only be made in the Netherlands 5) Boston baked beans can only be made in Boston. Obviously we consumers are all duped, thinking our hamburger was actually made in Germany. Had I only known!
A while back another entrepreneur/blogger wrote and asked me about investment choices for retirement. My philosophy on retirement seems to be a lot different than that of others, and I think owning one's own company changes some of the dynamics of retirement investing. Note that this advice is not right for everyone, and maybe no one, so read at your own risk. I publish it because the person I wrote suggested I do so, and after weeks of crazy intense work schedules I finally have the time.
A blogger wrote me about his despair at finding appropriate investment vehicles for his retirement savings. With relatively equal chances of 1) a long period of Japan-like slow growth or 2) a high inflationary period triggered by trying to avoid #1, both bonds and equities looked bad, and while real estate may have some value plays when things finally bottom out, neither of us has the time to pursue that. [since our emails, International equities are something I have moved money into, both as a diversification play as well as a way to short the dollar].
As I wrote him in one email
There is still a good chance of returning to normal growth in the middle somewhere, but both those bookends [inflation and stagnation] loom much larger than they might have, say, in my calculations five years ago. I have trouble figuring out what to invest in when both are possibilities. Equities? Great for hedging inflation but suck if there is a lost decade. Bonds would make sense in that case, but their interest will be low and they will be awful if inflation ramps up. If I really knew we would get inflation and devaluation, I would be leveraging like crazy because inflation transfers wealth from creditors to debtors.
As a result, I said that my main investment for my free capital was debt reduction and de-leveraging of my own business. Paying down debt has the advantage of having an absolutely predictable return and it reduces risk. This makes double sense for me as I have put new expansion investments in my business on hold until a variety of government issues from health care to tax rates become clearer. (For example, in health care, because my company is an oddity, with seasonal part time workers mostly on Medicare already, no one can yet tell me what my future costs will be. Estimates range from +0 to +20% of revenues!)
The key to my business, which may be very different from others, is that I make big investments to gain long-term contracts, but once captured, these contracts give my business a fair amount of stability and predictability. Further, in the latest recession, my business has proved to be either counter-cyclical or at least recession-proof to some extent, as 2009 was actually a blow-out record year for us. Given these facts, I am able to put a higher percentage of my net worth into my own business as an investment, without having to diversify as much in case of business trauma. And I prefer this. Given the choice of investing in a company I barely know on the NYSE or mine, which I understand and control, I prefer the latter. Also, returns on capital from buying or investing in private small businesses can be much higher (with higher risk of course) than in traditional equities -- see my whole series on buying a small business.
But here is where I really differ from most people: I take a very different view of retirement. When I worked in grinding corporate jobs (e.g. up until I was about 40) I was very focused on retirement. Now that I am doing something that is not brutally stressful, I hardly think about retirement. The whole concept of retirement now seems weird. I have, after a lot of hard work, gotten my business to the point where I can generally work as hard as I want to -- if I don't work hard, the business does not grow but I have good people such that it doesn't fall apart either. I compete with people who are running businesses in their late 70's who are still having a good time. I can take nice trips when I want to, take the day off if I need to, or whatever. My business actually has an off-season so I can be more relaxed part of the year.
My advice to this particular entrepreneur was to maybe reconsider the paradigm of "retirement." After all, the the long history of the world, retirement is a new concept that is barely 100 years old.
Are you the shuffleboard and golf type? What do you imagine yourself doing after retirement? I think you need some protection against becoming infirm or senile, but if you are healthy and vigorous, are you the type to get bored fast? As an example, nearly all of my 400 employees are retired, but they all got bored and wanted something to do.
Here is an alternative, entrepreneur's way to think about planning for retirement: How do I work really hard building a business that in 10 years will have a position such that it spits out some level of cash without effort on my part and can still grow if I want to spend time on it. I am surrounded in Scottsdale by people who have done exactly this after giving up a corporate job. At some point they took their savings from their 30s and 40s and dumped it into a business where they could still have the lifestyle they wanted. Buying or building the right company is sort of like buying a bond with an attached warrant whose value is related to how hard you want to work.
As I implied earlier, this is not an appropriate approach for every small business. The problem with technology businesses, for example, is that they never seem to mature into that latter predictable-cash-flow-stable-market-share phase. One is always running in place. One lesson I never forgot from my corporate years: In the industrial sector, I often saw people making loads of money selling bushings or some such whose design hadn't changed since 1920. It led me to this strategy: Find a market with barriers to entry, which may well not be very sexy, and spend ten years battering you way in, and then relax behind those walls. (As to sexy, the very first two classes of the first year Harvard Business School strategy course were a sexy cool software business and a boring stable industrial product business. Of course,the boring stable water meters made a fortune, while the software business never made a good return on capital. Beware of sexy businesses -- see: Airlines).
One other paradigm I would challenge is the notion everything you do as an entrepeneur has to be started from scratch. Many entrepreneurs have fun doing this but the prospect of doing a bootstrap startup when you are 70 years old is exhausting. Such entrepreneurs who have had a life of serial startups might consider a new phase in their business career as they get older, when they have saved enough assets to perhaps buy into an existing business rather than starting from scratch. I cannot tell you how many interesting small businesses there are that come up for sale with a guy who has an interesting product and has made some progress but can't manage his way out of a paper bag and thus hits some growth ceiling. I bought just such a core to my current business 8 years ago. These businesses require a lot of due diligence, because they are a real mixed bag, but I bought mine in an asset sale for 3.5 times EBITDA (which is an entirely typical price). Try buying Wall Street equities for 3.5 times EBITDA! If you pick the right business, and you are a good manager, there is not a better investment out there. Again, see my whole series on buying a small business.
Of course this investing-for-retirement is higher risk, because one bets a substantial portion of his net worth on his own business. But for those with confidence in their own ability, I find it a lot more compelling to bet my capital on myself rather than on guys I don't know running the Fortune 500.
From the National Industrial Recovery Act of 1933, eventually struck down by the Supreme Court:
Whenever the President shall find that destructive wage or price cutting or other activities contrary to the policy of this title are being practiced in any trade or industry or any subdivision thereof, and, after such public notice and hearing as he shall specify, shall find it essential to license business enterprises in order to make effective a code of fair competition or an agreement under this title or otherwise to effectuate the policy of this title, and shall publicly so announce, no person shall, after a date fixed in such announcement, engage in or carry on any business, in or affecting interstate or foreign commerce, specified in such announcement, unless he shall have first obtained a license issued pursuant to such regulations as the President shall prescribe. The President may suspend or revoke any such license, after due notice and opportunity for hear ing, for violations of the terms or conditions thereof. Any order of the President suspending or revoking any such license shall be final if in accordance with law.
With this law, all commerce was to be conducted only at the President's pleasure. The law also instituted code authorities, modeled on Mussolini's economic system, that would set prices, wages, production quotas and nearly every other business practice in an industry. To some extent, I would argue that the recent health care bill is the first modern American code authority.
In this week's episode, your tax money goes to subsidizing low cost, low down payment loans for New York luxury condo buyers.
I am testing blogging from my droid. My parent's ranch is actually out of signal range, so I hopped in a atv to drive down the dirt road until I got a signal.
Like most who have read Asimovs Nightfall, I read the part about everyone being so afraid of the dark with some smugness. But most of us city-bred folks don't know what real darkness is. I went outside last night, after the moon went down, at a ranch 30 miles by dirt road from a town of 2000, and it was dark-dark. So dark that the darkness seemed to have material substance. Dark enough to not be able to see my hand in front of my face. I kindof understood how those guys in the novel felt.
The upside was that the stars wered amazing -- not quite 30,000 suns but the milky way was amazing. Watched a number of satellites come by using a web site that give time and where to look.
I couldn't care less what happens to my body after I die and I am done using it. So the following, which I suppose is intended to freak me out, simply leaves me amazed yet again at green thinking
Undertakers in Belgium plan to eschew traditional burials and cremations and start dissolving corpses instead.
The move is intended to tackle a lack of burial space and environmental concerns as 573lbs of carbon dioxide are released by each cremated corpse.
Under the process, known as resomation, bodies are treated in a steel chamber with potassium hydroxide at high pressure and a temperature of 180c (350f).
The raised pressure and temperature means the body reaches a similar end point as in standard cremation "” just bones left to be crushed up "” in two to three hours.
My first thought on reading this was "Soylent Green is People!"
My second is to wonder how a torched body creates 573 pounds of CO2. 12 pounds of carbon combusts to 44 pounds (approx) of Co2. This means that to combust to 573 pounds of Co2, the human body must have 156 pounds of carbon. WTF? But carbon in 18% of human body weight, which means that to produce 573 pounds of CO2, the human body would have to weigh 867 pounds. One might be able to get this number by including the cremation fuel in the equation (though this is a generous interpretation since this is not how the article is written), but since it is usually gas used for cremation it would take a hell of a lot of gas given its low carbon content.
My third thought is what does any of this have to do with CO2 reduction
- The process occurs at 350F. You mean no fossil fuels are used to get the chamber up to 350F. What, are they using solar mirrors?
- The process occurs at high pressure. This takes energy
- The end product is a carb0n rich soup that they pour down the drain or pour on their garden. I have a clue for you, all oxidation is not combustion. That carbon dumped in your garden or in your compost heap will still become CO2 even without seeing aflame.
As y'all know, I am not a member of either the Coke or Pepsi party, so I find all the partisan mudslinging on the political blogs to be just kind of funny. Particularly when both sides are piously accusing the other of exactly the same behavior, while maintaining that they are immune from said behavior (or only engaging in it because the other guy started it).
I really don't understand political strategy. I admit this. Take global warming. I really thought the CRU email thing was a minor distraction. After all, the there were so many fundamental flaws in the science and scientific process that a lot of the CRU stuff was old news to those who have paid attention. But I was wrong. There was something about the scandal that was more compact and easy to tell, it fit into a box or storyline familiar to both the media that had to report it and the public that had to consume it. I understood the whole scandal and its impact so poorly that I have done little blogging at my climate site lately, as I still can't get excited blogging about commissions and investigations into the scandal that seem to obsess the skeptic community currently.
So I won't say that this strategy by Kevin Drum is wrong, I will just say I don't understand it:
On Twitter, here was my insta-reaction to Obama's oil spill address from the Oval Office:
What a terrible speech.
Unfair? Maybe! I mean, compared to Sarah Palin's (literally) incomprehensible burbling on Bill O'Reilly's show afterward it was a model of straight talk and reassurance. But that's a pretty low bar.
What's the deal with Sarah Palin? I swear she gets more pub from her enemies than her supporters. How does it somehow help a sitting President -- who was supposedly elected because he was the most competent person of all time -- to be compared, however favorably, to a woman with limited political experience who holds no office? Granted the Republicans really have no one of distinction leading them right now, and Palin is about the only Republican in years with any modicum of charisma. But since when have losing VP candidates been the standard against which Presidents are measured?
Progressive green web site the Thin Green Line takes on subsidies for petroleum products, saying that reducing such subsidies could immediately have a major impact on CO2 production. Fine with me, I am no fan of subsidies by governments of any private activities, though I don't live in fear of CO2.
However, the author, trying I guess to buff his progressive credentials in a sort of typical knee-jerk for green writers, tries to imply all this largess is somehow flowing to large oil companies, and the implication is that western nations like the US are subsidizing folks like Exxon and BP:
The timing couldn't be better: With BP's oil continuing to pollute the Gulf Coast, the question of how much our alliance with the oil industry really costs us is at the front of the everybody's mind.
The International Energy Agency released an early draft of a report documenting, for the first time ever, how much the fossil fuel industries get in subsidies each year (H/T Grist). The timing is, of course, coincidental: The IEA's work stems from an agreement made at this years G20 conference that subsidies of fossil fuel industries should be phased out as part of international efforts to reduce carbon emissions.
So "” drum roll, please! "” how much money are the energy giants taking in? $550 billion a year.
But the author is, I believe, misunderstanding the study and the underlying economics (no surprise there from a green progressive writer). This is from a study of 37 developing, not rich, nations. There is no way these guys are paying $550 billion in cash into private oil company pockets. In fact, most of these countries barely let the private oil companies even play, or force them into some marginal operator role subservient to their state oil company.
If these countries are subsidizing producers at all, the vast majority who are getting such largesse are large state-run companies, not western private oil companies.
However, my guess (and I have not seen the report yet) is that what they mean by most of these subsidies is actually selling fossil fuels to their citizens at below-market prices. These subsidies are not transfers of state dollars to oil companies at all, but below-market pricing of oil products to consumers by state-run oil monopolies. The people getting subsidized here are poorer consumers, not private oil companies. Countries like China, Iran, Iraq and even Venezuela (run by progressive heart throb Hugo Chavez) sell petroleum products way below market prices to their citizens. I am fairly certain this is the half trillion dollar subsidy the report refers to.
So we have the ultimate irony of a "progressive" lamenting government-subsidized energy for poorer people in developing nations. Wow, I never thought I would say this, but if this is the progressive position, I agree with it. The whole situation does highlight the difficult tension between development and CO2 reduction programs, and reinforces my argument that aggressive worldwide CO2 abatement will mainly hurt the poor.
How to be a Retronaut has prequel trailers by Ivan Guerro. I thought they were pretty clever. Here are two examples but he has more:
An audit of solar-power generation from November 2009 to January 2010 found that some panel operators were paid for doing the "impossible" -- producing electricity from sunlight during the night, El Mundo reported today, citing a letter from Secretary of State for Energy Pedro Marin....
Preliminary evidence shows some solar stations may have run diesel-burning generators and sold the output as solar power, which earns several times more than electricity from fossil fuels, El Mundo said, citing unidentified people from the energy industry. The power grid received 4,500 megawatt-hours of power from midnight to 7 a.m. in the months audited, El Mundo said.
Electric current is electric current. However, in a country like Germany, the price that utilities are required to pay for electric current varies based on its source. While electricity from, say, a diesel generator gets 4-5 Euro cents per KwH, ground-based solar gets about 48 Euro cents per KwH. This is a 10x greater price paid solely for absolutely identical power manufactured in a different way. So of course there is going to be fraud as to the current's source.
This post at Houston Clear Thinkers is just a devastating analysis of Houston light rail. In it, we see the age-old story -- rail is enormously expensive, and starves the rest of the system for money, ultimately leading to fewer people riding at much higher costs. He quotes from Bill King:
Decline in Ridership. Since 2004, Houston population has grown by over 10% from just over 2 million to 2.25 million. At the same time gas prices rose 47% from $1.81 per gallon to $2.67 per gallon. These two factors should have virtually guaranteed an increase in transit. However, exactly the opposite has occurred as bus boardings dropped almost 24% from 88 million in 2004 to 67 million in 2009. Instead of increasing bus service by 50% as it promised the voters in the 2003 referendum, Metro has slashed bus routes and increased fares by over 50%. Today Metro actually operates 225 fewer buses than it did in 2003. An outside performance audit in 2008 found that on-time performance fell by 29% from 2004 to 2008.
Financial Disaster. Since 2003, Metro's sales tax revenues have increased by 43%, rising from $357 million to $512 million. At the same time, its fare revenue increased by 41% from $42 million to $60 million by charging an ever dwindling ridership more. Yet, Metro is in the worst financial shape in recent history. At year end 2003 Metro's current assets exceeded its current liabilities by $125 million. The budget just adopted by the Metro board projects that it will have current accounts deficit of $165 million by the end of this fiscal year, a stunning loss of nearly $300 million in just five years. Over the same period, Metro's debt has swelled by nearly 50% from $546 million to $816 million. [. . .]
In the meantime, the cost of the [Metro's Light Rail Transit lines] has risen from the $1.2 billion originally estimated to something well in excess of $3 billion. Metro is seeking to borrow $2.6 billion to build the LRT, over four times what it promised the voters would be the limit in the 2003 referendum. Originally, Metro assured voters that it could build the LRT without tapping the mobility payments that are so critical to the Houston and the other member cities. Metro's projections now show that it can only afford the LRT if those payments are terminated in 2014. [. . .]