Author: bill

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How deep a recession?

In the Christian Monitor article, “How deep a recession? “, they said:

The housing-bubble collapse makes recovery hard to predict.

This is one of the few times I have read where our current “crisis” is described as a housing-bubble collapse. I happen to agree with this economist’s view of the source of “crisis”. Most of the government’s actions and reactions have been targeted at the short term problems which center around liquidity issues in the financial sector. The financial crisis is important and news worthy but it contributes little to solving the rest of the problems facing our economy. Relatively little has been spoken about the source of the housing-bubble and how we can avoid repeating this mistake. We cannot go back to the economy of 2005 because housing construction and real estate related services will be diminished industries for some time. Where does the job growth come from and why isn’t this a higher priority? In my day job a correct identification of the problem is essential to developing a solution. In this case we made a small step in the right direction.

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Passing the Laugh Test

Early in my college career I learned that I needed to check my work if I wanted to pass the courses. I am pretty sure it was one of my engineering professors who recommended that I develop a way to quickly estimate the answer as a way of confirming my answer. He said I was far more likely to receive partial credit if I could show an estimate that was close to the actual answer as part of my answer. From his viewpoint a correct estimate showed that I had a clue how to solve the problem even though my calculations may of come up with the wrong answer. I called this process,  “Passing the Laugh Test”.  On the other hand if my answer was way off and I could not demonstrate that I had a clue about what the answer should look like, I was out of luck. If I tried to go to the professor and ask for partial credit, I was going to get laughed at. It was cruel but it worked. Creating a “Laugh Test” estimate on a variety of problems has kept me out of a lot of embarrassing mistakes over the years.

That brings me to one of the great chuckles of the week. NASA screwed up the temperature graphs again. Despite anecdotal incidents of cold weather in the Northern hemisphere such as snow on the same day as the Parliament debate on global warming last month, NASA reported a 10 degree temperature jump in the October temperature data from Russia. I cannot imagine what the NASA folks were thinking. They had to know that the folks over at Climate Audit are going over their data with a fine tooth comb and NASA cannot implement a simple “Laugh Test” to avoid public humiliation. Any college sophomore could have created a simple year to year comparison test to avoid this problem. It did not take the folks at Climate Audit very long to come to the conclusion that NASA was using exactly the same temperature data for September and October. They knew that NASA’s answer was wrong and they had a pretty good idea how NASA made the mistake. If the folks at NASA making the mistake were college sophomores trying to scrounge up some partial credit on a missed answer, they would have been laughed at by their professor. They failed the “Laugh Test”. The only folks not laughing is the coal industry and the electrical utilities.

One of the best explanations of the blunder comes in this article from the Telegraph, The world has never seen such freezing heat.

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Video: Peter Schiff circa 2006-07

In these video clips I was amazed at how Peter Schiff stuck to his beliefs about the severity and breadth of the impending mortgage crisis despite the ridicule and criticism he was receiving. The clips are both funny and sad. It is funny because we know his predictions were right on target and his critics were wrong. It is sad because we ignored his predictions and have suffered much. It took a lot of courage and character to stand up for your beliefs. I showed the clips to my son since he fancies himself as a stock picker.

Video: Blogger stocking up on ammunition, canned goods for recession
Allahpundit
Sat, 15 Nov 2008 02:21:44 GMT

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President Obama’s first serious test is …

President Obama’s first serious test is whether he is going to require coal plants to include equipment to capture and sock away carbon emissions underground.

About 25 coal plants are under construction across the United States, more than in the past two decades. Another 20 projects have been permitted or are near construction and more than 60 have been announced or are in the early stages of development.

EPA ruling over climate jeopardizes coal plants | Environment | Reuters

The reason this question is so important is because:

  • Any postponement of capital projects at these plants will have a major ripple effect to both the economy and employment. Delaying major construction projects affects not only the local employment around the plants but the equipment manufacturers located throughout the country.
  • Many people believe the country’s electrical generating capacity is already in a precarious supply position. The lack of excess generating capacity is going to be especially difficult during the summer months when we see peak electrical demand.
  • If the final decision is to require plants to install the capture equipment, the electrical rates will sky rocket as plants recapture their costs. Although President Obama maintains that this will bankrupt the coal companies, it will probably have effects he did not anticipate. Companies dependent on reliable electrical power will spend the capital to protect themselves by installing their own generating equipment. This will provide an incentive to the green economy but the price will be steep. The rate increases caused by energy cost shifting will primarily borne primarily by the people who can least afford it.
  • Although the stimulus to the green economy may help in the long term, it will not overcome the direct effects of lower capital spending, lower employment, and higher electrical rates before the next election cycle.
  • This will be a difficult political decision. If President Obama allows the projects to proceed without carbon dioxide capture, he will probably disillusion many of the people who voted for him. If he requires carbon dioxide capture equipment he will fulfill his green economy promise but he could be looking at a potential worst case scenario like:
    1. The companies required to install the capture equipment significantly increase their project costs to compensate for regulatory confusion and the engineering uncertainty with capturing and storing carbon dioxide.
    2. A significant portion of the electrical companies decide to delay their projects as they question the project economics in a dismal economy. This contributes to higher unemployment and fuels the green economy versus the general economy debate.
    3. All of the utility companies with surpluses start extracting significantly higher rates selling their excess capacity on the open market. Since we are looking at a market with a shortage, everybody will see higher electrical rates. 
    4. Politicians try to reduce rate increases by increasing regulatory authority with disastrous effects. I remember that when our country tried to regulate natural gas prices many years ago, this caused more unintended problems than it solved.
    5. The agile consumers protect themselves by generating their own power. The less agile customers will bear the brunt of the rate increases. This was a situation I saw in Houston as chemical companies increasingly generated their own electrical power and residential customers were left to pay the bill for the new generating plant construction.
    6. We start to see an increasing number of power outages due to failures at the plants and with the transmission lines. The issues we saw this summer with oil refineries and gasoline distribution provide us with a market example.
    7. The average person finds out that they are bearing the brunt of the green economy policy and starts complaining about electrical rates and reliability. The economists start writing about the impact of higher costs and an unreliable power supply to a struggling economy. The benefits of the green economy come under serious questioning.
    8. A majority of the scientists start to believe that we are entering into a global cooling phase and that although capturing carbon dioxide is a worthy scientific effort, they wonder whether this is a waste of precious economic resources. The scientists pull the scientific justification rug out from underneath the politicians.

Under this worst case scenario the average person will likely blame their local politician for their plight and extract revenge the only way they know how by voting them out. This political decision has the potential of becoming as unpopular as a gas tax hike and will shorten the political careers of several incumbents.

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By far my biggest disappointment with Obama’s election is…

By far my biggest disappointment with Obama’s election is that there is no discernable bump to the economy or the attitude of the stock market. While the press gushed over the new President-elect, we laid a few more people off. There seems to be a real disconnect in the media between the excitement of the electing our first black president and the reality of our economic outlook. The press eerily reminds me of the band on the deck of the Titanic. Our company’s sales are on life support and we have run out of people to lay off. I am amazed I have not been laid off but each day I have a job I am grateful. I was hoping that after the election we would have at least a little pickup in sales. Unfortunately our sales mimicked the dismal performance of the stock market. So my boss did what a lot of bosses are being forced to do, preserve the firm for another day. Laying people off is always a tough decision but at least there is still some hope that sales might pick up before Christmas. At this time of year our sales typically start to climb as we get closer to Christmas. So far we have not seen any increase in sales. If this trend continues, it looks like it is going to be a miserable Christmas for a lot of people. So far the only group that seems to be benefitting from the election are gun shop owners. Instapundit references a local news story but I heard a similar news story in this area.

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El Chiguire Bipolar strikes again: Obama fourth US black President

From a blog that “focuses on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large”, we get a little political humor.

Humor webpage El Chiguire Bipolar had one of its funniest posts this week when it posted that Barack Obama would become the fourth black President of the US, as shown in the picture:

The text said:
Barack Obama turned into the fourth black US President, when he obtained more than the required 270 electoral votes. Many analysts coincide that Obama will have to maneuver around a number of assassination attempts, metorite impacts and extraterrestrial invasions in the first few days of his mandate: "I only hope he does better than my brother David said former President Wayne Palmer.
For US political analysts, it is quite common that black Presidents face extraordinary situations such as the imminent destruction of the world a few days after assuming the Presidency and this will be no exception. "I don’t know if it is a matter of racism on the part of nature or the terrorists, I don’t think so, but black Presidents seem to have more things happening to them than white ones, said Carl Rove, a Republican collaborator…"

El Chiguire Bipolar strikes again: Obama fourth US black President
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Sat, 08 Nov 2008 03:53:54 GMT

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Presidential Election Results 2008 for Ohio

I looked at the The New York Times map of the 2008 election results and saw something interesting for Ohio. President-Elect Obama won the four of the most populous counties by a significantly large percentage when compared to the rest of the state. Whereas the voting percentages for most of the counties hovered around 50%, Obama won the most populous county, Cuyahoga with 68.5% of the vote. When you look at the number of voters, the margin of victory in this one county was about equal to the Obama margin of victory for the entire state. Despite Obama’s dominance in the most populous counties, the state favored Obama by a more modest 51.2%. Like California there is a strong difference of opinion between the large cities and the rest of the state.

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A Prayer for the Nation

"We have been the recipients of the choicest bounties of Heaven. We have been preserved, these many years, in peace and prosperity. We have grown in numbers, wealth and power, as no other nation has ever grown. But we have forgotten God. We have forgotten the gracious hand which preserved us in peace, and multiplied and enriched and strengthened us; and we have vainly imagined, in the deceitfulness of our hearts, that all these blessings were produced by some superior wisdom and virtue of our own. Intoxicated with unbroken success, we have become too self-sufficient to feel the necessity of redeeming and preserving grace, too proud to pray to the God that made us!"

Recently I got an email with this quote attributed to Abraham Lincoln. Since it arrived in an email I did a little research on it. I quickly found it at Quoteworld. The most amazing place that I found it was in a book scanned by Google, The Rebellion Record by Frank Moore.

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HEH: Black Man Given Nation’s Worst Job. “African-American man Barack Obama, 47, was given the least-desirable job in the entire country Tuesday…”

Way too funny!

HEH: Black Man Given Nation’s Worst Job. "African-American man Barack Obama, 47, was given the least-desirable job in the entire country Tuesday when he was elected president of the United States of America. In his new high-stress, low-reward position, Obama will be charged with such tasks as completely overhauling the nation’s broken-down economy, repairing the crumbling infrastructure, and generally having to please more than 300 million Americans and cater to their every whim on a daily basis. . . . The job comes with such intense scrutiny and so certain a guarantee of failure that only one other person even bothered applying for it. Said scholar and activist Mark L. Denton, ‘It just goes to show you that, in this country, a black man still can’t catch a break.’"

HEH: Black Man Given Nation’s Worst Job. "African-American man Barack Obama, 47, was given the lea…
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Thu, 06 Nov 2008 07:03:24 GMT