Old Wizard

George Soros: The Guru Outlook

Soros is also smart enough to figure out how to pay only 15% marginal income tax rate on his earnings of well over a billion. Because he is such a contributor to the current political party in power, nobody in gov. is asking him to spread the wealth. Think of this: if he had to pay income taxes here at a marginal 35% rate, the difference would be 200m or more a year. I would like to understand the amount of money he spends annually funding liberal front organizations and liberal democratic candidates. My cut to reform the tremendous speculation and manipulation associated with oil and other commodities is to require at least 50 cents on the dollar for commodity purchases. Anyone with a large amount of capital can manipulate the commodity market by buying large amounts with relatively little cash on any rumor, real or made-up. Maybe he is a guru, but I am suspicious that he now can make his predictions come true and has learned how to play our system by controlling major media outlets, funding candidates,and front pressure groups. All this while using a loophole in our tax law to pay much less income tax. A run up in oil prices in the future is not hard to predict, when the administration refuses to back the use of natural gas-driven transportation, has no comprehensive energy policy, creates a forced march to electric cars and restricts oil and gas domestic gas and oil exploration, under the guise of global warming and environmental purity. The goals for alternate energy generation are trivial and the real impediments to these energy source insertions are environmental regulations and stalls that the gov. is doing nothing to remove. The story is much the same for nuclear power plants. How much Soros money is funding the groups who are impeding new energy sources from coming to fruition? In this environment, it's not hard to "predict" that oil and coal commodities will get more expensive. A tidbit in this vein is the Petrobras story, where Soros made a bundle, followed by our ex-im bank's 2.5 b investment which will help that state-owned company drill for oil off Brazil's coast. This somehow is ok environmentally and obviously was predictable by a guru.

6 Ways to Short the Obama Health Plan

All of you commenters that believe Obama is doing a good job ought to get more factual data. Do you really believe that Obama or anyone in Congress knows what is in the cap and trade bill that passed the house? 1500 pages, 300 added in the middle of the night before the vote. It is obvious that Obama has no comprehensive energy or economic plan. Our country has had an increasingly negative current account since 1991 which with oil moving toward 100/barrel and our negative trade balances with China and germany is approaching 1 trillion/year. This is operating cash flow and does not include the trillion plus we need to borrow to balance our domestic deficits. The remedy for these problems should provide a solution in 5 to 7 years where significant progress results. Providing 15% of our energy with wind and solar by 2020 is a non-starter. Electric cars will not fix the problem soon enough either. Converting half the cars to natural gas-powered in 5 to 7 years, while phasing in nuclear power plants, and electric cars powered by batteries that have sufficient voltage, recharge times and safety to satisfy the public's needs would begin to be reasonable. This plan might make our car companies solvent, reduce the negative cash flow significantly and put many americans to work in real, well-paying jobs. Other energy alternatives like wind and solar need to be acceleated into stretch goals not trivial ones. From an environmental view, natural gas produces 20% less carbon dipxide for the same energy as gasoline and no other pollutants. The US has plenty of natural gas and would not have to rely on foreign suppliers for at least 60 years. You have to listen to Obama closely. He states that he wants to double the electrical generation from wind and solar in 3 years. It stands at less than 1% now and according to the president his plan is to make it less than 2% in three years. This is the kind of rhetoric that sounds good but is meaningless. Then he signs an executive order mandating new mercury-based light bulbs that no doubt will save energy,but doesn't tell the public that these bulbs are made in China. This group in Washington are unable to define a problem, analyze the relationship of the affected variables and derive and implement a real program that solves the underlying problem. They seem more interested in political victories, glib speeches and satisfiying each of their single issue constituencies with programs that cannot converge to the solutions of our country's most pressing problems.

Five Reasons the Market Could Crash This Fall

Maybe this is too simple-minded, but isn't the country's problem a matter of cash flow. The conjecturing about what is happening and going to happen with the market seems never to address our underlying problem. The country's operating cash flow is increasingly negative and has been since 1991. We simply are not producing enough goods and sevices that either our population or the rest of the world wants to buy. All the regulation and financial trading tricks in the world don't address this issue. Borrowing by our Government to balance our domestic budget just keeps making the cash flow problem worse. Of course, there will always be some who can amass wealth in this circumstance by clever or deceptive short term actions but only production of the goods, commodities and services that drive the country's operating cash flow to 0 or higher will "fix" our economy .Every investment and regulatory action action the government takes should be subjected to the operating cash flow litmus test as a major measure of performance. I was surprised to read and very dismayed that the country's cash flow was only peripherally addressed in the macro economic model upon which our government relies which includes upwards of 150 variables. From my vantage point, this is a dramatic example of emphasis on the wrong sylAble.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

What a discussion! Thought I'd add some facts to the discussion before editorializing. 1] Administrative costs so far for the program are about $50M, 2] There are approximately 130M passenger cars on the road and this figure doesn't include trucks, buses and other motor vehicles, 3] The costs of clunker disposal to the public and dealers has not been estimated but since the program mandates not only that they be destroyed but also how the motor is disabled, it is an exercise still to be calculated. 4] The environmental impact of this disposal is not known, but the mandated destruction process makes items 3 and 4 bigger than normal, 5] It doesn't follow that the new car is safer than the one traded in.6] a vehicle that gets less than18m/gallon doesn't necessarily have a trade-in value of less than $1k; e.g.what if the car to be traded was a 1999 mercedes or 2004 lincoln or a corvette or any number of suv's. The benefit to the carbuyer is the 4500 less the real trade-in value of the the so called clunker. A family member just sold his old chevy with more than 95k miles on it for more than 4500 dollars. Now the editorial comment: The program is being sold as a job creator and another big step to clean up the environment, but no real quantitaive analysis has been done, as with most of the programs coming out of washington. It sounds good and it may ultimately be a net benefit, but the simple fact that people are jumping at the deal is not the ultimate measure of performance. The fact that the computer facility set up to handle inquires and the administration of the program has already crashed twice and is leading to a processing bottleneck is evidence of the lack of detailed planning that accompanies the" the stimulus actions" emanating from Washington. A program that would drive car sales and let people keep the cars they have like conversion to natural gas fuel would also help solve our negative current account problem, have a known and calcubale impact on the environment and create instant business for our domestic car companies, jobs for mechanics and parts suppliers that come from converting millions of cars per year. The postage stamp, let's try this gimmick approach to solving our fundamental problems is troubesome and increasingly disjointed and if it replaces substantive and well-planned programs, wastes time and diverts resources from real solutions to the country's economic and strategic problems, dangerous. Both time and resources are not commodities we should squander.

Global Warming Models: 'Out of Order'?

Oil dependency is a long standing problem for the USA and should have been seriously addressed way back in the 1970s when we got our first wake up call. The solutions offered currently seem contradictory and not focused with the sense of urgency that both our economic and strategic problem require. Doubling electric power generation capability from alternate sources[ presumably non-fossil fuel[ in 3 years is trivial. If we succeed and we do so every three years it will take 15 years to provide about 13% more than today. This surely can't be consistent with a massive conversion to phev's and an independence on oil. Further the manufacture of components for solar panels, windmills and lithium batteries is also moving off-shore, much of which is CHINA. How this effectively deals with job creation, the country's negative cash flow as measured by the current account and in the end deals with pollution is problematic at best and certainly doesn't look like a well thought out pan.

Charlie Gasparino: Another Crash 'Has to Happen Again'

The analysis by Gasparino is correct as far as it goes in identifying root causes, but doesn't go far enough. I also don't believe that regulations couldn't be adopted that would check the out of control " risk taking" which I would better label gambling and misrepresentation bordering on fraud. Today the banks are borrowing money from the taxpayers [ re; gov] at close to zero and then from the subset of taxpayers, those who are saving money in banks, at 1% and then lending it at 5% or greater. To make matters worse the Gov [ re: taxpayers] under the guise of getting credit flowing again buy 300b of securities from banks much of which banks had loaned to the Gov[re: taxpayers] at between 2and 3% to ensure a safe haven. In all this machination the handlers of all these transactions are profiting[ this includes the government officials as well as the "bank" officials, those in fannie may and freddie mac, past and present, and all the agents of the gov who handle the bond transactions for the Gov of which Goldman Sachs is a big player]. Then the treasury says the people should save more and wall street says that the economic recovery will occur when the consumer spends more. Anybody see any inconsistencies here. The one salient constant here is that the hardworking individual who pays one's bills saves a portion of one's income and generally keeps a positive cash flow is the loser. Now meaningful reform can occur with some simple laws1] No mortgage or loan can be sold in any form more than once 2] Commodity traders must pay at least 50 cents on the dollar on purchases. 3] hedge fund managers must pay at the individual tax rate for income tax 4] No mortgage shall be granted by any lending institution with a down payment of less than 10%. 5] Lines of credit for small businesses will not be greater than 10% of gross sales or for start ups be administered by a special officer of the bank and a pool established by the banks with .1 of 1% of their profits. 6] Credit card limits for any holder will be no more than 10% of an individual's annual income and interest rates will be no higher than 10% annually.7] Rating agencies can not be part of any other company. While these may not do it all , they would go a long way toward decreasing the gambling, exploitation and fraud we've experienced and maybe just maybe get capital to make long term investments borne of the conviction that new products and services will bring adequate returns. All the parties who are now profiting don't have enough skin in the game and until the system allows them to play[gamble] with other people's money with little skin in the game, it ain't goona get any better.

Grid Based Energy Storage: Notes, Questions and Heresies from Infocast Storage Week

Speculawyer. I think your argument of oil vs. batteries is like most arguments today, not based on logic but on pre-formed conclusions. The Chinese are creating deals for oil all over the world, while we take on the sanctamonious position that we must act unilaterally to save the world from global warming. Let's put some data on the table. We have the fourth largest natural gas reserves in the world and for very modest amounts of investment could convert our automobiles to natural gas-driven cars for much less than the difference between an existing car with a price tag of 25k and the 40k volt. Most of our electric power is generated by coal, oil and nuclear-powered plants{ between 80 and 90% with about 51% coal-fired]. Wind and solar account for less than1% of our electricity and the current plan is to double this amount in 3 years which will amount to slightly more than 1%. If this amount would double every 3 years, it would take 15 years to provide 16% of current capacity. This is why Obama says his goal is 15% by 2020. The premise is that our energy needs will be the same as today. Projections, however, are that the nations electrical energy needs will increase roughly the same amount by then and these projections do not factor in the increases needed to recharge a large amount of plug-in vehicles. Driving the country to electric vehicles without a comprehenive energy plan that provides the country with the energy to prosper, creates new and good paying jobs that have staying power, reduces our negative current account and reliance on foreign sources. keeps us out of oil wars and reduces carbon dioxide emissions as a function of the near and far term is complex. It is a solvable problem, I firmly believe, but not with simplistic and not well thought out plans that include realistic costs. specific meaningful milestones and detailed review by strong executive management who can deal with the multiple interelated programs to be implemented. Soaring rhethoric built on desireable outcomes with no coherent and detailed plans are less than worthless. Simplistic statements like smart grid, doubling alternate energy in 3 years or the world's worst problem is global warming so let's plant a tree in Africa and do what we have been doing or denigrating any realistic analysis that indicates there are real technical and cost problems with assumptions that drive our current direction don't add to the problem's solution.

Global Warming Models: 'Out of Order'?

Pardon the sarcasm of the last sentence. It seems particulary ironic that the two entities that shared the nobel prize should promulgate the "settled science'' conclusion. Clearly one would not expect Al Gore to comprehend the scientific disciplines required, but since one of his exhibits shows a hurricane rotating in a clockwise direction in the northern hemisphere, he clearly doesn't know even the basics of meteorology. Those scientists that prolong a questionable conclusion when counterevidence appears deserve to give their nobel prize back and Al Gore and the award committee need to have an examination of conscience.

GE to Close Its Only U.S. Solar Panel Factory

This is more evidence that we don't have a comprehensive energy plan and that our administration is not capable of creating one. The loss of production to China and Asia in the field of renewable energy is helped by the environmental, tax and actual stimulus grant policies our Government is pursuing. We refuse to back natural gas-driven transportation and instead force electric cars as a solution. Our cash for clunkers benefitted foreign cars more than ours. Our battery grant money went more to asian suppliers than our own in the final analysis. With over 400 Chinese companies involved in alternate energy activities and with the environmental constraints and wage disadvantages our domestic companies have the result is inevitable. Multi nationals make money no matter where production occurs as long as the selling price is higher than costs and if the dollar declines they make more equivalent dollars selling abroad. GE stock can easily go up as the dollar declines, but those US citizens whose savings are in the bank will have increasingly less purchasing power with those dollars. A kind conclusion one can draw from our government policies is that it is incapable of analyzing the multivariable problems we face in energy, job creation and economic viability. A more critical conclusion might be more accusatory.

The U.S. Dollar and Oil: Is an Endgame Near?

Hi Fitz, I agree with T Boone, we are stupid. Our energy policy was muddled before and with this group it's not only muddled, it's even more dangerous. Look at the contradictions, we are borrowing vast amounts of money from the very people who would move away from our currency, while they use our dollars to lock up basic commodity sources around the world. Instead of investing in the generation of our own new sources, we invest large amounts in things like new batteries, electric cars which depend on lithium supply most of which will come from China and south america. On top of that, more than half of our battery investments are going overseas to places like china, korea and japan who 1] currently lead in lithium battery technology and manufacture and 2] generally have much less labor cost and environmental regulation. We talk eloquently about going to alternate energy, like wind and solar but set up trivial goals with no sense of urgency, while the chinese, indians and europeans move in these directions on a large scale and we do nothing to remove the kind of destructive environmental and legal constraints that restrict a more significant progress. We watch places like france and even sweden move to increase nuclear power while we drag our feet and then we are agnostic about natural gas to drive our vehicles, a resource we have now and China doesn't. On top of not drilling for oil here on the grounds of environmental purity the ex-im bank makes a 2.5b investment in Petrobras in Brazil to drill for oil, the very country that is part of this discussion to replace the dollar as the oil currency. Not having a comprehensive energy policy is bad enough, but borrowing money from your potential adversaries to invest in activities that make them stronger, while you do things that have negligible effect on your own economy and rely increasingly on war fighting power to stay afloat is really dangerous. Falling apart economically will lead to our demise quicker than losses on the battlefield.

Grid Based Energy Storage: Notes, Questions and Heresies from Infocast Storage Week

Speculawyer. I am not pessemistic about the solution to our long and short range energy problems, but I am tired of the one or two variable solution rhethoric about the solution. Your statements have no time constraints therefore statements like with time natural gas prices will also go up can't be analyzed. With our country's operating cash flow approaching a negative trillion a year and our borrowing to fuel our domestic deficit that is now of the same amount, I believe we must have an energy plan that reduces our importation of oil by 5 million barrels/day in 5 years and 10 million barrels/day in ten years. I also believe that the near term solution must include as the main near term element. natural gas-driven automobiles. This plan would also include 50 new nuclear plants to be established by year 8 through 10 and for solar, wind, tidal and geothermal to provide 30% of today's electrical power by 15 years from now. Smart grid. which includes the interconnected grid control function and feasible long term intermediate energy storage capability. lithium batteries, all electric cars et al should be encouraged with gov. incentives and brought on-line when they are ready. but should not be counted on for a large impact before the ten year point. If we can't reduce our economic dependency and energy dependency on a time frame before 2020, I believe we are in for some bad times. Unfortunately, I believe that our political process can't converge on a realistic comprehensive plan without it being absolutely forced upon it by a crisis bigger than the one we are in today. The fundamental question for the future is what goods and services will we sell to ourselves and the rest of the world to keep our economy viable and can it be done if we don't quickly become energy independent. Simplistic solutions that have neither cost.nor time constraints or require R&D breakthroughs should not be what we rely on solely to address the problem. What is now in view as our so called energy program is not coherent and anyone who tries to analyze the problem might be guilty of blah.blah,blah. At least I've tried to develop a comprehensive plan and sent it to the president. If you have one, I would certainly be interested in hearing it.

Is There Enough Natural Gas?

Fitz, I applaud your attempt to quantify the supply vs usage of natural gas. I haven't done a check of your numbers, as you suggest with my first read, but some questions did arise at first glance. First the 25m/gal average assumption seems too high if you take, trucks and buses into account. Second, there are oil fired electrical generation facilities in use and they didn't make your table. Third, I missed the yearly amount of natural gas that is used for home heating in the US in your article, did you account for that usage. Other than that, I think we should make the case for natural gas driven vehicles the primary focus for a whole host of reasons of which the following are paramount: we have enough natural gas to power our transportation system for many decades,natural gas is our commodity and could replace the oil we currently import from our potential enemies and reduce our operating cash flow with the world by approximately 33% and it would reduce air pollutants and greenhouse gases considerably. As the comments above indicate taking on the coal-fired existing facilities brings on another set of opposition arguments that we don't need to address now. The reason being that the energy policy the administration is pursuing is essentially aimed at replacing gas driven transportation with electric/ battery powered vehicles. The increase in wind and solar being pursued won't dent the current coal fired capacity in ten years and if battery powered vehicles increase as they hope, it will be hardpressed to match the increased electrical demand. The last figures I saw for electrical power generated from wind and solar was less than 1%. How many years would it take to get to even 20%? The president's stated goal is to double this figure in 3 years. At that rate, it will take almost 20 years and that assumes an exponential growth. Maybe this administration is pro science but I for one don't understand their logic and have yet to see their energy plan quantified in anything close to what you have done in this article.I think if they had done so,they would not be agnostic about natural gas fueled transportation.

H.R. 1835: Legislation for Natural Gas Transportation

Fitz, I am glad there are finally some members of Congress that realize that natural gas for vehicle fuel is an important part of the energy delivery system future for the US. I also applaud your persistance in getting the message out. I have to say that I told you so about Obama. His energy plan is employing a pea shooter to solve the alternate energy problem when the problem requires a 16 inch cannon. Further, he seems to prefer to cater to the single issue pressure groups, rather than solve the nation's problem. He rightly states that the nation has a structural problem that demands a large investment to solve. He then puts forth a goal of doubling the energy from alternative wind and solar in 3 years. This amounts to increasing that source from.9 of 1% to 1.8%, a trivial amount. His economic advisors don't seem to realize that the structural problem in the economy is ultimately related to the negative current account which has been increasingly negative since1991 and is approaching 1 trillion/yr. One can replace the current account verbage with operating negative cash flow. Although I like John Peterson's objective articles on energy storage, I disagree with the idea that we have multiple decades to solve the problem and as I keep repeating myself, a goal of 5 million barrels of imported oil reduction/day in five years and 10 million/day in 10 years needs to be set. Having articulated this goal, energy investment and near and long term new domestic source development would be focused and natural gas would be an obvious and leading solution.

ETF Update: Health Care Enters the Home Stretch

The idea that we need reform in our health care system is not as controversial as the proposed health care meassures that are before congress. I am on medicare and buy a supplemental insurance policy. My medicare payments for my wife and myself last year were $8400 and this year they are estimated to be more. The supplemental was over 6k and these costs did not count deductables, co-pays and the amount charged by doctors. Additioally, 85% of my medicare payments were taxed and since our income was over125k, the tax amounted to about 30% for a whopping gov. payment of close to 11k. The reform package that is so called revenue neutral woud add somewhere between 20 and 30million people to the public option. Let's grant that revenue neutrality is a fact for the moment and also agree that medicare is going bankrupt in 8 years, what prevents medicare from going bankrupt. In elementary school all of us learned that adding 0 to a term which is going negative won't change the result. A true reform could be written in 100 pages or less and would include the following: a] A clinic system for the poor[25kyr or less income] to which they would pay $100/yr. The Gov. would initialize this system with $10b.
b] A risk pool for catastrophic illness to which all could belong for $250/yr/family and to which insurance companies would contribute .5 % of gross profit/ yr. The government would budget $5b/ yr to this pool and it would be independently held by a coop. that woud make investments that were risk constrained, but not gov. bonds.
c] Bussinesses would unerwrite tax free amounts up to $ 6k/ yr to each employee for health insurance which would be a business expense. Any amount above this would be taxable both to the employee and the company.
d] The small business association would be allowed to purchase insurance across state lines similar to AARP..
e] Mal- practise awards would be limited to $250k plus medical expenses. Any doctor found to be guilty of mal-practise 2x in 3 years would have to go back to school for a year and be recertified before continuing to practise. Lawyers' fees bringing such suites would be limited to 20% of award and if the suite was judged to be frivilous would have to pay the legal fees and court costs for both parties. These suites would be ejudicated by a three person panel consisting of a judge, a lawyer appointed by the ABA and a doctor appointed by the AMA or the association to which the doctor being sued belongs. All decisions would be final.
There are several other tenets of real refom should that I have included on my blog, Keeperofthefaith.wordp... My plan has 9 bullets, costs the Gov.$60b over ten years. If the fraud and abuse savings the congress and the president claim possible in medicare in the revenue neutral assertion really materialize, then the cost curve will truly bend by $340b over ten years. If not, then by definition the costs will be known and can at least be budgeted. This plan in the end would address most of that which concerns us, makes the reform understandable to our citizens and removes it from the political agenda that furthers either party's power. Approaching this proplem with a real desire to solve it rather than both logic that doesn't compute and legislation that even the most diligent among us either can't or won't understand should be an absolute requirement of our elected officials. If it turns out not to be, I say we should replace them all regardless of party, the training they had before they got elected.,sex,race, religion or sexual orientation.

Economic Recovery? Commodity Charts Don't Think So

The thought advanced daily by many pundits is that we will not have a recovery until the consumer comes back. This article and some of the comments illustrate that this prescription is very simplistic. The first question to be asked is if the consumer comes back will it create american jobs that are decent paying. The idea that giving money to the folks on the low end of the wage scale who spend more of their money on goods will create more economic activity has large negative unintended consequences. The great majority of what they buy other than food is made overseas like China and job creation will be at the extremes of the wage continuum, further weakening the middle class and making China stronger. Of course the agile speculator will exploit the commodity market and the trader that is adept enough to understand will make money, but if the bubble breaks or if we don't understand the negative implications of the unintended consequences of a buck shot give away of money not focused on real job creation, will the USA be better off. I'm for making money by employing capital to generate new products and services that keeps this country healthy and stable. For this reason, I believe that commodity purhasers should have to put up at least 50 cents on the dollar and maybe even 80 cents on the dollar. The crash of 1929 occured when stock purchases required only 10 cents on the dollar. We should learn from the lesson of the past. Those of us who believe that as long as we understand the rules of the gamble and profit by it, even if the country's economy goes down the drain, must believe that there is a better place to live than the USA.