Seeking Alpha

Robert Wagner's  Instablog

Robert Wagner
Send Message
Professional Credentials: The reports that I write are my personal research and opinions. They are not associated with any firm or organization, and are not intended to be taken as investment recommendations or advice. They combine my passions of economics, finance, writing and education, and... More
View Robert Wagner's Instablogs on:
  • Inflation Indexed Bitcoin Has Economic Nobel Prize Winner's Support

    Executive Summary:

    • Nobel Prize in Economics winner Dr Schiller correctly identifies that the Bitcoin's fatal flaw is its volatility.
    • An inflation adjusted stable value Bitcoin is infinitely better than the current Bitcoin.
    • The current Bitcoin has zero chance of ever becoming a functioning currency, and is simply a get rich scheme for currency speculators.
    • Once the thrill of making and losing huge returns gets tiresome, Bitcoin enthusiasts will move on to the next bubble.

    __________________________________

    I've written many articles on the Bitcoin highlighting how poorly designed it was to be a currency. I am very familiar with the libertarian politics from which this disaster arose, and while I may agree with the vast majority of the libertarian philosophy, when they go off the ranch, they really go off the ranch. The libertarian understanding of monetary policy is simply wrong, very very very wrong. Not only is it extremely wrong, it is highly dangerous. It is based upon a conspiratorial web of myths and misunderstandings about the Federal Reserve detailed in the book "The Creature from Jeckyll Island." These myths and misunderstandings have resulted in the "End the Fed," and "competing currency" movements that have given rise to the "Bitcoin."

    The reason a bitcoin isn't a viable currency is because of its volatility. A currency needs to be stable. The bitcoin has increased 360% over the last month. It recently has traded as high as $147, and just 2 years ago it traded under $1. The chart and data set linked above has it trading at $0.05 in late 2010.

    The Bitcoin is deliberately designed to be a deflationary inelastic currency, which are two characteristics every successful currency strives to avoid, not embrace. That is why I write about the Bitcoin so much. I don't mind if Bitcoin entheusiasts market it as a new way to manufacture a get rich quick financial bubble machine, a virtual Dutch Tulipmania maker, but the Bitcoin will never be a viable currency. Never. In fact now that Mt Gox has shut down inviting the regulators, I doubt that it will be in existence within the next two years. No matter how committed the die hard Bitcoin enthusiasts are. I doubt they are willing to lose all their savings trying to keep a very bad idea alive.

    Because of its design, the Bitcoin was created to intentionally fail as a currency. The designers didn't intentionally set out to design a certain to fail currency, they just did because the misguided ideology on which the Bitcoin is based is certain to make it fail. The designers followed the libertarian blueprint precisely, the problem is the Bitcoin blueprint is the currency equivalent of the Edsel and Hindenberg combined.

    What ensures the Bitcoin will fail is the same thing that has gotten so many people excited about it, its volatility. Volatility is great for speculative investments, it is a death sentence for a viable currency. The Bitcoin was intended to solve the "problem" of the mild inflation created by the Federal Reserve. The Bitcoin's solution was to create hyperdeflation, which is infinitely worse for an economy than hyperinflation. Problem is the Bitcoin didn't only create hyperdeflation, it created periods of hyperdeflation followed by periods of hyperinflation making the Bitcoin's volatility a deal breaker. Almost no one will consider accepting the Bitcoin for commerce once they undestand its flaws. Most merchants that accept the Bitcoin today immediately convert it to currency, which pretty much says everything you really need to know. Merchants don't want Bitcoins, they want dollars, and to get those dollars they are willing to undergo the hassle of converting a customer's Bitcoin to US dollars to get the sale.

    My belief in the Bitcoin's fatal flaw being its intentionally designed volatility is shared by Nobel Prize in Economics winner Robert Schiller. Dr Schiller has an article in the New York Times repeating may of the warnings that I've been writing about over the past year.

    Bitcoin, an experiment with a radically new kind of electronic money, has exhibited many of the characteristics of a speculative bubble. That was clear long before the collapse of the Bitcoin exchange Mt. Gox last week...The central problem with Bitcoin in its present form, though, is that it doesn't really solve any sensible economic problem. Nor should it substitute for banks and the governmental institutions that regulate them. They are reasonably effective institutions, despite their flaws, and should not just be scrapped and replaced by a novel electronic system...Unfortunately, the Bitcoin success story has been tied intrinsically with instability, with excitement and envy for those who have become rich through investing in it - rich for a while at least, because the value of the electronic currency has fluctuated wildly. The instability of Bitcoin's value in dollars is a measure of failure, not success. It means that any commerce using Bitcoin or its competitors would be buffeted by enormous inflation and deflation.

    I assure you Dr Schiller has studied monetary policy much much much more extensively than the libertarian computer scientists behind the Bitcoin, and he has read far more economics books than just those on Austrian Economics. Dr Schiller does a great job highlighting how the very foundation of the Bitcoin, the very basis on which is was created, is simply made of sand.

    But if we go back to the electronic-money drawing board, we may conclude that Bitcoin has been focused on the wrong classical functions of money, as a medium of exchange and a store of value.

    The purpose of a currency isn't to make and lose speculative fortunes overnight. A successful currency isn't a get rich scheme. A successful currency isn't about undermining the very banking system that is needed for any successul monetary system. A succesfull currency isn't based on misguided political idiology. A successful currency isn't about not having zero inflation, or in the Bitcoin's case extreme hyperdeflation. A successful currency is about reasonable stability and the facilitation of commerce. When someone earns a US dollar they want to know that by the time they spend that US dollar it is worth essentially what it was when it was earned. Considering that most Americans live paycheck to paycheck, that makes the relevant timeframe about two weeks. In two weeks a Bitcoin can lose 75% or more of its value. Clearly the Bitcoin suffers by comparison in its most elemental function to the US dollar, the currency the Bitcoin enthusiasts so naively thought it would replace.

    The #1 issue that determines the success of any virtual currency is whether or not it fulfills the needs of the vast majority of consumers and merchants that have a need for such a currency. Does the Bitcoin satisfy the needs that a virtual currency would fulfill in those eagerly looking to embrace a virtual currency? The answer is a resounding no. The Bitcoin got the world's attention, the Bitcoin started the conversation, the Bitcoin was a cold shower, the Bitcoin woke the world up, but the Bitcoin is by no means the answer, not even close.

    Dr Schiller's idea of going back the "electronic-money drawing board" and redesigning a new Bitcoin is exactly the exercise I've been doing when I wrote articles detailing new and improved Bitcoins. A Bitcon focused on the needs of the merchant, not the libertarian get rich quick currency speculator, is the Bitcoin that will eventually succeed.

    But if we go back to the electronic-money drawing board

    Dr Schiller's idea of an inflation adjustment mechanism is ideal a Bitcoin like the "BitChip" detailed in an earlier article.

    Building a better Bitcoin; The BitChip:

    A successful virtual currency will build upon the success of the Bitcoin and address its weaknesses. The main Bitcoin weakness is that it is designed to solve an imaginary political problem, it isn't designed to function as a currency that would facilitate commerce. To do that a successful virtual currency must be elastic. Its supply must expand and contract with demand, and it must maintain a fixed exchange rate with the local currency.

    The model for a successful virtual currency and Bitcoin killer already exists in non-virtual form. There already is an anonymous, stable, convertible, relatively widely-accepted, secure, cash-like alternative currency already, the casino chip. A virtual casino chip is the Bitcoin killer. Best yet, it would use the existing Bitcoin code as its backbone.

    Combining the "BitChip" with a Dr Schiller BitChip Inflation Index to create an inflation adjusted BitChip would be an infinitely improved Bitcoin. A Bitcoin that would function as a stable international currency instead of a high risk get rich scheme for currency speculators. A Bitcoin focused on the needs of the merchants and consumers, a Bitcoin focused on the most important functions of a currency.

    Disclaimer: This article is not an investment recommendation or solicitation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice. Past performance is no guarantee of future results. For my full disclaimer and disclosure, click here.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: forex
    Mar 03 5:22 AM | Link | Comment!
  • Climate "Science" Bombshell May Be Getting Ready To Burst

    Executive summary:

    • Pending lawsuits represent potential bombsells to the climate change investment thesis.
    • Climate scientist Michael Mann has invited unwanted scrutany to the "science" backing climate science.
    • Michael Mann, author of the notorious "Hockey Stick" graph has refused to release its "metafiles" to a judge raising red flags as to its credibility and the studies that it influenced.
    • Belief in CO2 driving global warming/climate change is the foundation of the EPA's ability to regulate parts of the economy.

    __________________________________

    Countless article are written about investment strategies based upon "climate change," but I doubt any of those analysts have ever analyzed the "science" supporting the "consensus" used to justify those investment recommendations. Most people think that climate "science" is just like every other field of science, where ridged rules of best scientific practices are followed, key among those are releasing data and information to the world so that other scientists can validate or reject the conclusions. Years back claims of discovering a method of "cold fusion" were quickly debunked once scientists were unable to replicate the results of the published research. The reason that fraud was quickly discovered and soundly rebuked was because the researcher making the claims released his data and process to be tested. That is how real science works. That isn't how climate "science" works.

    With a real science people do the research and publish the results and subject themselves to a gauntlet of public scrutiny. I did that on Seeking Alpha when I outlined the flaws in the "climate change" theories and "triple dog dared" anyone to refute my claims. People with the truth on their sides don't run from debating the subject, they seek it out. Scientists are usually proud of their work and want to share their insight with everyone interested, and would almost never run from a debate.

    This article is an opportunity for people that truly believe in the "science" supporting the "consensus" conclusions to prove to the world that they understand and can defend the science, and that skeptics like myself are wrong. Please, people that write articles and recommend investments based upon the "science" of global warming, prove me wrong, I triple dog dare you. You owe it to the investment community to prove you know what you are talking about.

    In climate "science" there is a tight knit cabal of "peers" that review each other's work to ensure that the results meet the predetermined conclusion. I know that sounds absurd, paranoid and conspiratorial. I know you are thinking my tin foil hat is too tight and that I shouldn't be taken seriously, but keep reading, I've been doing this for years and you won't be disappointed. What follows is going to sound like a bad soap opera, so I will include as many links as possible to support my claims. Trust me, I know what I am about to write sounds absurd, but that is the basis of climate "science."

    Every once in awhile, the Secret Brotherhood of the Protectors of the Climate Scientist Realm make the mistake of telling their dirty little secret to some one they shouldn't, a whistle blower. That happened a few years back when outsider Dr David Deming recieved an e-mail from an insider regarding some of his research. Thinking that Dr Deming was one of them, the e-mail requested that Dr Deming "get rid of the Medieval warming period."

    With the publication of the article in Science [in 1995], I gained significant credibility in the community of scientists working on climate change. They thought I was one of them, someone who would pervert science in the service of social and political causes. So one of them let his guard down. A major person working in the area of climate change and global warming sent me an astonishing email that said "We have to get rid of the Medieval Warm Period."

    It turns out that above quote was a paraphrase, and didn't exactly represent the wording of the e-mail. I will let the reader decide if the difference is material. What is material is that the Hockey Stick did in fact remove the Medieval warming period. That is the material point I am making.

    I get the sense that I'm not the only one who would like to deal a mortal blow to the misuse of supposed warm period terms and myths in the literature

    The university rewarded Dr Deming for his honesty by putting him in a closet like office and cancelling his classes.

    I am associate professor of geology and geophysics at the University of Oklahoma in Norman. I receive teaching evaluations that run from average to outstanding. I have more scholarly publications than half the full professors in my department. But as I sit here writing, three of my four classes have been cancelled. I am scheduled to be moved out of the office I have occupied for the last twelve years into a dank hole in the basement that was never intended to be used as office space. Recent events are the culmination of four years of retaliation, intimidation, and harassment. You see, I don't have the right politics. What's worse is that I'm not submissive and I refuse to be bullied and intimidated.

    Believe it or not all of the "global warming" and now "climate change" theory promoted by the "consensus scientists" relies on the Roman Warming, Medieval Warming and Little Ice Age never actually having happened, at least not on a global basis. The problem has its roots in the very first InterGovernmental Panel on Climate Change or IPCC report. The first assesment report or AR1 contained this chart (see page 8).

    The problem is, if you are going to make the case for man made global warming, AR1 was before the re-branding to climate change, the evidence provided disproved the entire theory. You can't claim man made CO2 is causing global warming when the temperature chart provided as evidence does just the opposite. If the claim is going to be that man made CO2 has driven temperatures to the highest level since the beginning of civilization, that graph simply wasn't going to cut it. By the way, not only does archeological evidence support the above chart and the existence of a Roman Warming period as well, other recent studies do as well.

    A new study measuring temperatures over the past two millennia has concluded that in fact the temperatures seen in the last decade are far from being the hottest in history.

    A large team of scientists making a comprehensive study of data from tree rings say that in fact global temperatures have been on a falling trend for the past 2,000 years and they have often been noticeably higher than they are today - despite the absence of any significant amounts of human-released carbon dioxide in the atmosphere back then.

    In any real science, the scientists would have looked at the IPCC chart, looked at the archeological evidence and concluded that this CO2 theory was nonsense, packed up their bags and went on to develop another theory on what drives temperatures. That is how real science works, you make an observation, create a theory, gather data, test the theory to determine validity, lather rinse repeat. Problem is with climate "science" the objective isn't to explain what drives global temperatures, the objective is to prove CO2 is the main driver behind global warming and that record levels of CO2 have driven temperatures to the highest level in modern history. There is nothing objective about this science. In climate "science" you don't let the data determine the conclusion, you start with a conclusion and then go and find data to support the conclusion. It is the scientific method in reverse. It is anti-science. That is why people that disagree with the climate orthodoxy are called "Heritics" that should be prosecuted, censored and even put to death. By the way, the woman in that video calling for prosecutions is Naomi Oreskes the Science Historian that published the original article establishing the then concensus on global warming. It is kind of easy to reach a consensus if you threaten those who disagree with prosecution, and the one making the threats is the one doing the counting.

    Well, after the IPCC's AR1 was published in 1990, the climate cabal went out to re-write history and get rid of that nasty medieval warming period that threatened all their future funding. The solution was to replace the 1990 chart with a new chart that mysteriously had no Medieval warming period, no little ice age, and an off the charts, heart stopping, bubble like spike in temperatures starting right at the beginning of the 20th Century when man was just starting to fill the atmosphere with CO2. That chart in now known as Michael Mann's "Hockey Stick" chart, and as part of the IPCC's 3rd assessment report.

    The row had been going on for months. Most of the correspondence is missing. But in April 1999, Ray Bradley, a co-author with Mann on the hockey stick study, was apologising for Mann's stance. "I would like to dissociate myself from Mike Mann's view [expressed in a complaint Mann had made the previous summer to the journal Science]… I find this notion quite absurd... As for thinking that is it 'better that nothing appear, than something unacceptable to us'… as though we are the gatekeepers of all that is acceptable in the world of paleoclimatology seems amazingly arrogant."

    Mann and Briffa eventually settled their differences. And the hockey stick was given pride of place in the IPCC report, alongside the claim that "it is likely that the 1990s have been the warmest decade and 1998 the warmest year of the millennium". Most researchers, including Briffa, now believe that statement was correct. But the emails reveal how deeply controversial it was at the time.

    Pay special attention as to how it was constructed. There are continual thermometer records going back to 1659, and yet thermometer data isn't added until 1902. Why would anyone avoid available thermometer temperature data when constructing a historic temperature chart?

    Well, some in the press jumped all over this dramatic change, and ran stories highlighting the Orwellin re-writing of 1,000 years of climate history.

    The real mistake the climate cabal made however wasn't in publishing the chart in the IPCC's AR3, it was letting another outsider access to the data. Steve McIntyre and Ross McKitrick weren't interested in proving CO2 was causing global warming, they were interested in the truth. The two absolutely destroyed the "Hockey Stick," and systematically, scientifically, methodically and relentlessly melted any credibility it had.

    To make matters worse, Michael Mann was implicated in the "Climategate" emails. Mike's "nature trick" and "hide the decline" all proved to pour fuel on an already blazing fire.

    This assault on the credibility of Michael Mann set off a chain of events, that are just now coming to a head. Michael Mann did what any other real scientist would do when the credibility of his studies were questioned, he filed lawsuits against various conservative media, conservative media personalities and a fellow climate scientist Dr Tim Ball. It appears Filing "SLAPP" lawsuits is a best practice in the field of climate "science."

    I've been studying this "science" for years and have always been hoping that it would finally get brought into the court. I've always thought that if a jury or impartial judge was ever able to get to look behind the curtain they would find the field of climate "science" guilty of scientific malpractice and gross incompetence at best, or outright fraud and conspiracy with the intent to deceive at worse. Al Gore's movie "An Inconvenient Truth" was taken to court over in the UK and it failed miserably to defend its claims. I assume Al Gore only chose the most "settled" aspects of this "science" and a UK Judge poured cold water all over that "consensus." There was nothing "settled" as far as the Judge could see.

    It is because I am so aware of how truly laughable the science and statistics are backing the claims of the climate "scientists" that I was shocked to discover that Michael Mann would open the door to such an event. Climate "science" succeeds because it relies on a "consensus" of "scientists" to essentially argue by authority. The "consensus" deems it so, so it is true. The climate change enthusiasts simply put their blind faith in the opinions of the "experts." The entire key to the Wizard of Oz maintaining power was his ability to prevent society from looking behind the curtain. Michael Mann, with his lawsuits, has pulled the curtain wide open for all to see.

    I repeat: I'm not a global warming believer. I'm not a global warming denier. I've long believed that it cannot be good for humanity to be spewing tons of carbon dioxide into the atmosphere. I also believe that those scientists who pretend to know exactly what this will cause in 20, 30 or 50 years are white-coated propagandists. "The debate is settled," asserted propagandist in chief Barack Obama in his latest State of the Union address. "Climate change is a fact." Really? There is nothing more anti-scientific than the very idea that science is settled, static, impervious to challenge.

    Michael Mann must never have learned to play chess because he apparently believed that lawsuits are a one way street. He must have thought that he would be able to sue everyone else, but they would never think of punching back. He also failed to realize that if you are trying to hide something, and someone calls you out on it, and you sue them, you most likely are going to have to present the thing you are hiding to the court. Michael Mann's mistakes have opened the door to possibly catastrophic consequences to the field of climate "science."

    I always told you that Mann was walking into the trap of putting his scientific charlatanism on trial if he sued.

    The Defense for defamation or libel is the truth.

    The discovery of those files Mann and UVA kept out of the hands of Cuccinelli will be a game changer.

    Unfortunately the mainstream media doesn't cover the important aspects of the climate change field so you have to rely on bloggers and non-mainstream media sources to follow important developments. One posting that caught my eye is that Michael Mann has done what no other climate scientist has done so far, that being turning the liberal media against them. The current lawsuit against Mann is being supported by the AP, Reuters, NPR and the Washington Post. Funny I couldn't find the New York Times on that list

    The key issue in the pending case over the quest for Mann's e-mails involves the extent of Virginia's state freedom of information laws, which ATI is using to request Mann's documents. That issue has galvanized a coalition of 18 heavyweight press groups - including the Reporter's Committee for Freedom of the Press, the Associated Press, Reuters, NPR, Dow Jones, Politico, The Washington Post and others - who somewhat quietly penned a friend-of-the-court or "amicus" brief favoring disclosure of this type of e-mail.

    Fellow climate scientists are also beginning to turn on Michael Mann.

    So three cheers for Judith Curry, who writes today:

    For the past decade, scientists have come to the defense of Michael Mann, somehow thinking that defending Michael Mann is fighting against the 'war on science' and is standing up for academic freedom. Its time to let Michael Mann sink or swim on his own. Michael Mann is having all these problems because he chooses to try to muzzle people that are critical of Mann's science, critical of Mann's professional and personal behavior, and critical of Mann's behavior as revealed in the climategate emails. All this has nothing to do with defending climate science or academic freedom. [bold added]

    Another interesting post involved another lawsuit that Michael Mann effectively lost. In his lawsuit against Dr Tim Ball what is important isn't that Michael Mann effectively lost, it is why he effectively lost. Michael Mann had accused Dr Tim Ball of defamation for claims he had made about Michael Mann's research. When asked by the judge to produce the "metafiles," Michael Mann refused effectively giving Dr Tim Ball the victory. I can't think for the life of me why an honest man with nothing to hide would ever do that. Why sue someone if you aren't going to defend your claims? By the way, protecting data isn't unique to Michael Mann, other "top" climate "scientists" also have a bad reputation of not sharing.

    Steyn's legal team, aware of the latest developments from Vancouver, have correctly adduced that Ball has effectively defeated Mann after the Penn. State pretender's preposterous and inactive lawsuit against Ball was rendered dormant for failure to prosecute. Under law, Mann's prevarications, all his countless fudging and evasiveness in the matter, establishes compelling evidence that his motive was not to prove Ball had defamed him, but more likely a cynical attempt to silence fair and honest public criticism on a pressing and contentious government policy issue.

    The fact Mann refused to disclose his 'hockey stick' graph metadata in the British Columbia Supreme Court, as he is required to do under Canadian civil rules of procedure, constituted a fatal omission to comply, rendering his lawsuit unwinnable. As such, Dr Ball, by default, has substantiated his now famous assertion that Mann belongs "in the state pen, not Penn. State." In short, Mann failed to show he did not fake his tree ring proxy data for the past 1,000 years, so Ball's assessment stands as fair comment. Moreover, many hundreds of papers in the field of paleoclimate temperature reconstructions that cite Mann's work are likewise tainted, heaping more misery on the discredited UN's Intergovernmental Panel for Climate Change (NASDAQ:IPCC) which has a knack of relying on such sub prime science.

    The last part of the above quote is what is important to investors. The reason the EPA can regulate carbon in the US is because of a supreme court ruling. The entire Renewable Fuels Standard 2 or RFS2 is dependent upon the EPA's ability to regulate carbon as a pollutant.

    The EPA relied almost completely on the "expert" "opinions" of climate "scientists." Michael Mann is the expert's expert in the field of climate "science." If he is proven to be a fraud, all research that relied on his work, or other works that relied on his work, would be thrown into question.

    The brief notes that EPA conducted no scientific analysis of its own but relied almost entirely on Inter-governmental Panel on Climate Change findings. It summarizes many of the questionable to fraudulent methods the EPA and IPCC used to justify their conclusion that CO2 is causing "dangerous" climate change, contrary to a growing body of mainstream science that shows any changes are natural in origin.

    If Michael Mann is proven to be a fraud, the entire climate change house of cards could come tumbling down, and with it the EPA's RFS2 and entire "climate change economy" that is dependent upon it that includes biodiesel, wind, solar and ethanol.

    By the way, Michael Mann isn't the only "top" climate "scientist" that doesn't share with others. It looks like Al Gore's "good friend" also doesn't play well with others.

    From the Ohio State University , taken with a grain of salt since Dr. Thompson and his wife Ellen are serial non archivers of ice core data (even when asked for it), which prevents other scientists from checking their work.

    Pending lawsuits aren't expected to address the EPA's ability to regulate carbon, but if Michael Mann ever does have to release the "metafiles," anything can happen. Facts are we have policy makers depending on graphs, charts and conclusions produced by the IPCC, and the person most associated with the most important chart of all isn't willing to release the "metafiles."

    The ruling is unlikely to have a broad impact on the administration's climate strategy, including plans to introduce greenhouse gas standards for new power plants under a separate provision of the Clean Air Act. The standards were announced in September but have yet to be formally issued.

    Questions posed by the justices made it clear the court is highly unlike to revisit a landmark 2007 case, Massachusetts v. EPA, when it held on a 5-4 vote that carbon was a pollutant that could potentially be regulated under the air pollution law.

    A decision is expected by the end of June.

    June is a long way away, and from the current hearings, the EPA's ability to regulate carbon dioxide or CO2 may be in jeopardy. People seem to forget that CO2 is the element of life, it is the essential and defining element of the carbon cycle of life. CO2 is necessary for life, CO2 is airborne fertilizer. I exhale CO2, plants absorb CO2, Plants turn CO2 into food, animals eat the plants, I eat the animals, my body converts the energy from the food into CO2, I exhale CO2 and the cycle starts all over again. The entire concept of labeling a compound that is essential for life a "pollutant" is absurd, life ends without CO2. Current CO2 levels are 400 parts per million or PPMs, and submarines have 8,000 PPM and we trust them with nuclear missiles, and crowded smoky bars have 2,500 PPMs. CO2 levels are nowhere near dangerous levels, and they won't be for hundreds, if not thousands of years at the current rate of increase.

    WASHINGTON, Feb 24 (Reuters) - The U.S. Supreme Court appeared closely divided on Monday over whether the administration of President Barack Obama exceeded its authority in trying to regulate greenhouse gas emissions.

    Justice Anthony Kennedy would seem to hold the swing vote on the nine-member high court, with conservative justices skeptical of the U.S. Environmental Protection Agency's approach and liberal justices generally supportive.

    Kennedy offered some criticism of the government's position but did not indicate which way he would vote.

    In his most outspoken question, Kennedy clashed with the Obama administration's lawyer, Solicitor General Donald Verrilli, over some of the government's legal arguments.

    "I can't find a single precedent that strongly supports your position," Kennedy said.

    The justices are weighing just one aspect of the administration's first wave of climate change regulations, focusing on whether the agency has authority under the Clean Air Act to regulate greenhouse gases under a program for stationary sources of pollution, such as power plants and oil refineries.

    The court has various options if it finds fault with the government's conclusion that greenhouse gases should be regulated under the "prevention of serious deterioration," or PSD, program, which requires any new or modified major polluting facility to obtain a permit before any new construction is done if it emits "any air pollutant." The program requires facilities to install the best available technology to control emissions of specific pollutants.

    One option discussed by the justices would require facilities already subject to the permit program for other air pollutants to be regulated for greenhouse gases but would exempt other facilities. Alternatively, the court could exempt all facilities from the program in relation to greenhouse gases.

    It is that last sentence, "alternatively, the court could exempt all facilities from the program in relation to greenhouse gases," that highlights the risk that all investors in the "climate change economy" must be aware of. A single court ruling can make an entire industry essentially vanish overnight. People interested in investments based upon "climate change" should pay special attention to how the Michael Mann and EPA hearings proceed. They could be bombshells just waiting to go off.

    Lastly, just in case you are afraid that we are losing ice in the Arctic, here are some Navy photos proving that losing Arctic ice isn't anything new.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Disclaimer: This article is not an investment recommendation or solicitation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice. Past performance is no guarantee of future results. For my full disclaimer and disclosure, click here.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Feb 26 11:29 AM | Link | 13 Comments
  • Bitcoin Exchanges Offer Arbitrage Opportunities

    Executive Summary:

    • Bitcoin ecosystem inefficiencies create investment opportunities.
    • A cross exchange trading brokerage and clearing house would be a huge step forward for the Bitcoin ecosystem.
    • People trapped on the Mt Gox exchange are proving the "intrinsic" value of the US dollar over the Bitcoin.
    • Rare lower risk arbitrage opportunities exist between the current Bitcoin exchanges.

    While I am absolutely no fan of the Bitcoin, and personally think it is one of the most misguided and ill conceived concepts I've seen, that facts are that it exists, and offers some opportunities for financial gain. The one thing I do like about the Bitcoin is that it is a real world economic experiment. Rarely do you get to see an example where $7 billion dollars is created out of thin air, and monetary, financial, market and banking concepts are taken from the classroom and unleashed on the free market. It is like taking the stock market bubble experiment every Finance 101 class does and setting it loose on the the real world. While the Bitcoin is unlikely to last much longer, its case study will be written in text books for years to come...right next to Dutch Tulipmania.

    Recent events on the Bitcoin exchanges have really threatened the Bitcoin, and have invited ridicule from the press. I especially appreciate the "Its a Wonderful Life" reference in the video. People that support the Bitcoin don't seem to understand we've already been through the Bitcoin experiment already and the result was the Great Depression. Many of the rule and regulations the Bitcoin is designed to avoid are the direct result of the Great Depression and banking panics and financial collapse of the past. The Bitcoin is a $7 billion bet that there were zero lessons to be learned from the past, and that libertarian computer scientists should be trusted more than economists and market historians.

    I've been warming of the bubble nature of the Bitcoin and the likely panics that would ensure for almost a year. I've even use the same "Its a Wonderful Life" analogy countless times. The problems the Bitcoin is and is going to face have already occurred countless times in the past, and anytime something repeats itself, those that have studied history can foresee the future.

    A "bank run" on a Bitcoin exchange was a given, it was only a matter of time. Right now account holders at Mt Gox are learning the importance of and the reason for FDIC insurance. Mt Gox is experiencing a Bitcoin "run." Because Mt Gox isn't a bank, and the Bitcoin isn't the product on the dreaded "fractional reserve" system, bank runs and panics shouldn't be possible, but the Bitcoin has proven the theories wrong. Unlike "Its a Wonderful Life" Mt Gox and other Bitcoin exchanges don't make loans, they are essential Bitcoin vaults, not banks. Every Bitcoin should be held in reserve at all times. There should never be a problem accessing Bitcoins from a vault system...unless it has been robbed.

    Thieves have found a flaw in the Bitcoin and used it like a key to the vault at Mt Gox, forcing Mt Gox to restrict withdrawals from its accounts. You of course can continue to make deposits. What this has done is create a test tube for a Bitcoin experiment. Mt Gox is essentially a controlled experiment on what happens when the hull is breached on a Bitcoin exchange, and the ship is ordered into lock-down. Current Mt Gox account holders can trade among themselves, but can not trade with the outside world. It is kind of like a Bitcoin community is quarantined. Mt Gox is like the leper colony of the Bitcoin ecosystem.

    What this has done is forced Mt Gox account holders to handicap their odds of ever getting their money back, and develop contingency plans for a Mt Gox bankruptcy. The result is that people on the Mt Gox exchange have been liquidating their Bitcoin holdings and converting them for ironically the US dollar, or some other legal currency that courts will recognize. Turns out that "full faith and credit" means a whole lot when facing a bankruptcy judge. A judge that is sworn to uphold the law, not reward those who attempt to skirt it. Right now the value of holding the US dollar over the Bitcoin is worth a whopping $393.33, or basically 2/3rds the value of the Bitcoin. As In write this the average Bitcoin costs $593.92 and a Bitcoin trades for $200.59 on the Mt Gox exchange. People are literally paying $393.33 for the right to hold US dollars instead of the Bitcoin. How is that for "intrinsic" value?

    (click to enlarge)

    The new Winkdex that is displayed in the graphic above identifies what to me are the true investment opportunities with the Bitcoin. While I would never recommend that anyone ever deal with the Bitcoin, for those who choose to, there is a fantastic arbitrage opportunity existing on the Bitcoin exchanges. If Marc Andreessen is looking for venture capital opportunities, this is one of them. If the Winklevoss Twins want face reality and abandon their efforts to create a Bitcoin ETF, the Bitcoin product of the century is right in front of their faces.

    Just look at the Winkdex, the index created by the Winklevoss Twins, it has Bitcoins trading from $631.22 to $584.00 at the very same instant in time. If a product existed that allowed me to simultaneously trade Bitcoins on simultaneous markets instantaneously, arbitrage fortunes could be made. The Bitcoin market needs an "Interactive Brokers" type of product.

    If a cross exchange trading platform existed (hint hint Marc and Winks) people would be able to buy Bitcoins for $584.00 on exchange btce and sell it for $631.22 on exchange localbtc, for a $47.22 nearly risk free profit. I say "nearly" because the problem of an exchange lock-down still exists. Settlement policies would need to be established, so maybe Marc and the Winklevoss Twins can establish a Bitcoin clearing house as well.

    Facts are, with the spreads as large as they are between the Bitcoin exchanges, the biggest opportunity in the Bitcoin ecosystem isn't an ATM or ETF, it is a cross exchange brokerage and clearing house. The Bitcoin offers arbitrage opportunities rarely seen, and never seen in efficient markets. The Bitcoins inefficiency presents opportunities for arbitrage. It also offers one of the only low...er risk plays on the Bitcoin.

    Disclaimer: This article is not an investment recommendation or solicitation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice. Past performance is no guarantee of future results. For my full disclaimer and disclosure, click here.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: forex
    Feb 24 3:44 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.