Nice summary on Nat Gas price plunge

March 25th, 2012 | Posted by perilun in Energy - (0 Comments)

Found a nice blog on resource pricing issues (Our Finite World) recently … balanced, informative and data backed.  The most recent post on US Natural Gas pricing is quite good and adds a few key points to my understanding of what is up:

Some items I did not see in the post I think are important:

  • We just had a very warm winter, so demand was way down
  • Industrial use seems to be picking up especially in the chemical and refining industries
  • Fracking leakages probably negates any CO2 release advantage over coal

I agree with the blog that there needs to be some long term price floor to help create a stable situation for more industrial re-activation and new uses (like LNG truck fleets) … although fracking seems faster to get on line so the old spike should not occur again as long as easy gas is available.  She calls for regulation (perhaps).  I hope that LNG exports might create a price floor that also can help with our balance of trade.  I also suggest that we keeps non-fracted area on hold for now … although this is mostly state vs federal policy.  One natural way is to create a high tax on new operations that can also pay for the impact on roads and water fracking can have.

US Banks “better” thanks to Fed-Treasury money mill

March 15th, 2012 | Posted by perilun in Econ / Finance - (0 Comments)

Looks like most of those problem big banks now pass the “stress test” (here is a Bloomburg write-up on this).   While some might think of this as a result of hard work I suggest something much different – basically these big banks are cutting back on being lending and savings banks for individuals, small and middle sized companies and are just becoming a money operation for the US Federal Debt with some side bets on big corporate international business.  Bloomburg again provides some backing for this ideas with “Banks Buy Treasuries at Seven Times Pace in 2011“. Since the Fed will lend these banks money at nearly 0% to buy Treasuries that pay 3% it looks great now and makes them easy and safe profits paid for by the taxpayer and savers of every sort.  I bet the “stress test” assumed that Treasury Bonds would be worth as much as they are today.  Of course if there was either high inflation or a world recovery in real businesses that attracted capital those holding could lose a lot of value – but we assume this won’t happen.  In any case we see these big banks rewarded for doing less banking that requires any hard work and might help the general economy.  These old school activities are more and more a front for club of about 20 people who can create dollars-debt at will which seems to be just fine for a US government that can’t even cut 1% of a budget that has doubled in a decade.  P.S. Expect more of the same.

Many enraged by mortgage “settlement” – no surprise here

March 13th, 2012 | Posted by perilun in Government - (0 Comments)

I guess folks don’t pay attention to how these settlements between industry and government usually go.  With big-tobacco the government took money now in exchange with not interfering with the marking and sales of what is the most deadly product out there.  It was money over principle.  Also they tossed in a percent or two to “do good” like education (i.e. money again for the ad guys).  Now folks are shocked that the big mortgage settlement won’t do anything for the average underwater homeowner yet they see that some (few, handful …)  homeowners will get $100K!  This $100K per homeowner is basically a charade to cover up that most of the money that will change hands will go from the banks to various state governments in exchange for immunity for past crimes.  But just like in any class-action-suit where the main winners are the lawyers there needs to be some symbolic crumbs to throw the public.  So someone dreamed up to this $100K number so the politicians could claim “substantial help” to “homeowners” (they never say 5% of underwater homeowners).  I expect there will be one homeowner that gets this $100K and does hang onto his home.  I bet in most cases there will be a thicket of rules and a long wait line that will even make the narrow class that is in theory eligible from ever getting close to this $100K mark. What I expect is that the banks will credit this accounts that will probably foreclose and fall by that much anyway.  So these billions to consumers is largely an accounting maneuver to take virtuous credit for write-downs that they would need to take anyway (due to their previous incompetence/corruptions). Perhaps the end game will end better but at the moment this looks like loser to me.

Ready for (Government) Sunshine week?

March 10th, 2012 | Posted by perilun in Government - (0 Comments)

If you can’t see it you can’t manage it.  The folks at the Sunshine Foundation have presses for more data access from the US Government as well as some APIs.  As much as politicians love to bury their special deals inside 5000 page documents a push for transparency is one of the few hopes to shame these folks into better taking care of the American people in general.  Here is an except from the announcement (http://www.sunshineweek.org/Proclamation.aspx):

Since Sunshine Week was launched in 2005, many city and state officials have recognized and committed to open government through official proclamations. Some have also held hearings on open government issues or scheduled special events such as open government training sessions for public employees and the launching of a special webpage.

To mark Sunshine Week 2012, we urge citizens and civic organizations across the country to again press state and local officials to find meaningful ways to participate in Sunshine Week to demonstrate that they, too, are committed to true transparency in government.  

One way this can be done is by adopting a meaningful open government proclamation that pledges specific steps to enhance the public’s right to know.

Very fun 8 minute video on the European financial crisis

March 4th, 2012 | Posted by perilun in Econ / Finance | Europe - (0 Comments)

A very fun 8 minute video on the European financial crisis is available at youTube: (click here to go to right youTube page to play) Below is a graphical outtake:

It seems like the ECB has very recently (in a few weeks) tossed in 1,000,000,000,000 Euros to any bank to effectively grant 100% value (AAA+++) for whatever bad bets they have made.  The Fed has done this at a slightly smaller scale.  This will help keep the Dollar out of trouble as they water down the Euro. Unfortunately this bodes poorly for the “Single Mandate for the Fed“ argument making our Fed more responsible since the ECB already has a single mandate of money stability.

If the US is a now gasoline exporter why high prices?

March 3rd, 2012 | Posted by perilun in Energy - (0 Comments)

There has been a series of stories and projections showing how North America is quickly becoming oil independent thanks to oil fracking in the Montana and the growing production from Canadian Tar Sands.  But a related story has been developing that shows the US has become a gasoline and refined product exporter for the first time since 1949 (story here). The story titled “How the U.S. Became ‘The China of Refined’ Gasoline” explains how the combination of growing oil production from the midwest and the extreme fall in the price in natural gas (which powers refineries) has made it very cheap to refine crude to gasoline here.  But since we won’t build new refineries in the US (none since the 1970 – sort of like nuke plants) producers have been upping capacity in those existing facilities.  In addition crude pipelines don’t well connect the East or West coast refineries with this growing supply.  So this really concentates production of this lower cost crude to gasoline in the big facilities near the lower Missispi and Texas gulf cost, perfect for shipping overseas.

The results (which also factors in high CA and NY taxes and other additive requirements) for the American consumer shows the lowest prices in Montana (lots of oil and some refineries), low prices in the center of the nation and high prices in the more urban costs. See below (map from GasBuddy):

The story seems to be that although the US has become and gasoline exporter (Canada is a big buyer) gasoline is an international market so if there are ships to take our gasoline cheaply enough around the world (or the US east or west coast) then high prices there will make for higher prices here.  This effect will be damped down where local oil meets local refining capacity far from the gasoline ships (Montana) … but overall out new status as an gasoline exporter won’t help prices much if international oil prices (Brent) stay high due to global demand and global unrest.  The big winners are those who work, supply, support and invest in the US oil and natural gas industries as well as the US balance of trade.  We have some of the most technically advanced and cost effective refineries in the world.  Also, places like Mexico and Venezuela have so dis-invested in their refining capacity that even if they manage to keep producing a lot of oil they have little ability to refine.  We can look forward to hundreds of thousands of direct (and maybe a million or more indirect) jobs related to our new status as an exporter.  This will only be enhanced by the Keystone XL pipeline where the US can get the jobs and profits that go with this refining and exporting.

Discovery’s last flight and the new spacecraft reusability

March 1st, 2012 | Posted by perilun in Space/Astronomy - (0 Comments)

For the love of wings was the American manned space program lost?  We are now looking forward to the last “flight” of the space shuttle Discovery … but not to space.  Instead it will be taking a trip on the back of the 747 that ferried so many missions back from American West when weather prevented a nice glider like landing at Cape Kennedy to the Smithsonian Annex at Dulles airport west of Washington D.C. (click here for story).  When I was getting my Aerospace degree at MIT one of the projects was to propose a “future shuttle”.  In my  idea I (and everyone else) still clung onto some kind of wing.  I made a much smaller cargo bay that was more of container to switch out robots or docking ports … and thus had smaller wings … by this time many were realizing that mixing people and cargo was an expensive and risky way to go.  Later I would leave the notion of the wing behind since the capsule shape was so good at creating a stand off bow shock that helped disparate heat in reentry (vs the host spots that destroyed Columbia).  What also caught my eye recently was a story about the SpaceX guys proposing and almost completely reusable design for a multi-stage rocket with a capsule on top (click here for story).  Note how little cost the fuel is compared to the rocket.  There is also a discussion on those big were needed for crew safety contingencies… One wonders if instead of scrapping Apollo  we used that big Saturn 5 and made this recoverable and reusable.  The manned capsule … positioned on top, can be built to escape most rocked related failures, something that was not possible with the people on the side of rocket design of the shuttles. The now cancelled Ares concept (click here) when back to the capsule but stopped there … keeping the costs higher that needed.   Alas, so back to the future but this time with less politics (SpaceX is private) and far better computers and communications making a reusable and safer system a much more affordable possibility.  Hopefully the cost to recover, recondition and test will be low … but with a robust capsule with modern escape options we can tolerate a less than perfect launch record without losing anyone.  The shuttle is a monument to engineers that made a crazy set of conflicting requirements work 99% of the time, but at great expense and without pushing any useful technology forward.

Great podcast on small but global manufacturing

February 29th, 2012 | Posted by perilun in Education / Job Paths - (0 Comments)

We often talk about the Chinese taking our manufacturing base … but reality is more complex.  There was another good podcast/mp3 at EconTalk (click her for the correct download page) featured an author who wrote an article that took a close look at a family run mid-sized manufacturer of auto parts.  The family run aspect is important since management tries to hire and hold American workers whenever possible … even risking bankruptcy and takeover in the process.  What is remains are decisions to buy from China (or elsewhere) or automate additional tasks.  The interview is great at comparing the skilled and unskilled workers and the challenges of training vs hiring from the outside.  As with many manufacturing businesses margins are quite low, with a 5% profit representing a “great” year.  It also interesting to hear about the high skills the machinists have despite not having college degree and how China can’t really perform lost cost high quality work due to the lack of these kinds of people.

German Rentenmark model for new Greek currency

February 27th, 2012 | Posted by perilun in Econ / Finance | Europe - (0 Comments)

The Greek (second) bailout is the big thing that never quite gets done.  Two-thirds of people in Greece and Germany still think there will be a default at some point even with this plan.  Bad blood continues to deepen as German flags are burned on side and insults build up from the other (click here).  One of the ironies of the Greek debt crisis is how much the Germans now sound toward Greece like the US and Britain sounded to Germany after WWI.  Even though I don’t understand how Greece would be exactly “kicked out” of the Euro (I might suggest all Euro private and public debt might be voted void by an angry new Greek government) if they could no longer use the Euro and they did not want to make a deal with China (see my earlier post on this) they could create a currency backed by land and public property.  This is partly how the German’s escaped hyperinflation by creating the Rentenmark (click here for Wikipedia article).  At least Greece has a number of islands that could easily be credibly ceded so a currency backed by land (that could ultimately be handed over to a foreign entity) is more credible than many places … and the Med is pretty place for tourist and retirement colonies, just bring your desalination plant.

Greek Rentenmark

Money stability single mandate for Fed bill – great!

February 25th, 2012 | Posted by perilun in Econ / Finance | Government - (0 Comments)

Representative Kevin Brady’s “Sound Dollar Act” aims to “maintain the purchasing power of the dollar in order to foster long-term economic growth and stability.”  Click here for news item at CNBC.  Basically it gets rid of the “dual mandate” to promote jobs/economy and money stability and just go with money stability.  The “dual mandate” has really just been a jobs first and money stability second as shown but loss of about 95% of the value of the dollar since the Fed was created shows that it can’t or won’t maintain its value with the current set of mandates/incentives/excuses (you pick).  From a systems point of view the dual mandate is madness as it constantly pulls then pushes a complex system with a lagging force and promotes instability.  Its a bit like a trying to control a huge ship with just forward and reverse.

With worries about potential inflation from all the unprecedented Fed money printing since 2008 something is needed to get dollar value back on track (and curb the rise in commodity and oil prices in dollar terms).  This proposed bill could not have been better timed to restore international confidence in the dollar as the reserve currency and a number of positives for the American citizen that goes with this.  It is a net benefit to us to prevent the Chinese currency or the Euro from becoming an alternate reserve currency.  It also encourages more investment in the USA … which is a better long term promoter of jobs then fiddling ineffectively with consumer interest rates.  This should also help return consumer bank CD and Bond rates to beating core CPI again since the Fed can’t underbid banks in the credit markets as we have seen with QE1, QE2 Operations Twist …

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