Stephen Streater

Oil As Money and the Decline of Energy Earnings

I agree energy is the key in the economic lock.

But let's not forget that gold takes a lot of energy to mine and refine. In an energy scarce world, the supply of gold will remain limited - and my gold has a good chance of retaining its value.

U.S. Dollar Decline: Just a Matter of Time

When my Grandparents were alive, 1 UK pound was 1 gold sovereign. This now sells for up to 200 UKP each. The old satirical headline 1 pound falls to 1 penny has actually come true in a single lifetime.

Just as the British Empire once ruled a quarter of the globe and the world reserve currency, the pound, seemed unassailable, the risk now for the USD is that in a lifetime it too will fall to 1 penny. With annual 5% inflation, this would take just under 90 years, and a few bad years would accelerate this.

If the US $ loses its reserve currency status, the US will have to go through the painful process that the UK had to do: "buy back" all those foreign held dollars by hard work or inflation.

Added Debt Won't Rescue the Great American Ponzi Scheme

The irony of the whole credit crisis is that the countries suffering most are not the importers but the exporters - China, Japan and Germany. It's true I may suffer notionally by delaying purchasing my new Prius for a year or two, but my current car is practically as good as new at four years old. It's the guys at Toyota who make them who will suffer the most from a collapse in sales.

These countries manufacture more than they consume, with their economies geared for full production for Western markets.

If the only solution is for the West to repay debt, then these exporting countries will have to balance their trade by buying US goods to give the US the money to pay them back. The alternative is that the Fed will just print the money - which is effectively what happened when the USD fell from 300JPY to 100JPY over a decade ago.

All credit (!) to the Americans for borrowing in their own currency.

Platinum: The Undiscovered Gold?

The best catalytic converters need platinum - these remove three noxious gases from exhaust (NOx, CO and CxH2x+2). Simple catalysts to remove just one or two noxious gas can work at lower temperatures and can use the cheaper Palladium instead.

Platinum works at higher temperatures, and is needed for diesel catalytic converters.

Anyone who saw the efforts of the Chinese to cut down on pollution before the Beijing Olympics last year (ie closing down industry for 6 months) will understand that they will have to move towards more and better catalysts for their vast car market. Similarly for that other Asian giant, India. On the other side, the first catalytic converters are now being recycled and new ones take less Pt - so this is providing a significant recycling supply.

But newly mined platinum supply is dropping. Luckily I got mine a few years back:
en.wikipedia.org/wiki/...

Having sold half last year in the platinum bubble (caused by power cuts in SA), I'm a long term holder. Platinum is so useful, it could rise many times more. And without central bank stockpiles to sell, there will be little to hold it back once the speculators start buying in.

Italy Joins the Nuclear Thaw

All the discussions about the greenhouse effect have obscured the pressing need for indigenous long term energy sources - ie not based on fossil fuels.

There are many cheap energy sources available - onshore wind in a windy location is one of the cheapest at around 2p/kWh - but like all solutions it has its limitations. In the UK, the superficially important issue of wind variability won't start to impact the Grid significantly until around 20% of electricity is wind generated. Once you start looking at less windy spots, and offshore wind generation, the price starts to rise - but still only to 4p/kWh.

But it would take a wind turbine the size of a twenty storey building on a windy day to power a single sports car at full throttle.

We have surely been spoiled by the presence of fossil fuels, which we are consuming at maybe 2,000,000 times their replenishment rate.

The biggest problems with nuclear may relate to Black Swans: en.wikipedia.org/wiki/...)

Only arrogance lets us imagine that we understand the risks of storing highly radioactive waste for thousands of years. How much energy will it take to keep it safe for 10,000 years? Hard to say when we didn't even have an Islamic extremists threat a mere 50 years ago. And 10,000 years ago we were in an ice age with "cave men" roaming Europe. Even 100 year ago, the cities were full of horses.

So a little humility and an open mind is in order.

There's an interesting book (downloadable free) for those interested in renewables: www.withouthotair.com/

Again UK based, in it a physicist analyses the viability (even in principle) of maintaining current energy consumption from wholly renewable resources. Basically, in the UK, we'll have to cut our energy consumption. You may be luckier in the US, as it is so much bigger, but at least the UK has many of the cheap renewable options such as wind and tidal. The government is going for these and also nuclear, but as usual, too little too late.

Big Media's Big Dilemma: Charging for Online Content

I've had a parallel experience to this author.

In the UK, the Financial Times has been developing their website. Their Chairman gave a fascinating talk recently about it and the FT's strategy. Even though most of the website content is free to view, lots of people, including me, still pay a subscription.

Why do I pay? Because it is a valuable independent good quality information resource, which I am happy to support. And it's annoying when the really juicy analyses pop up with error messages. Life is too short for that.

Why do other people pay? Being one step behind in the current high stakes financial game could leave you hugely out of pocket. The FT.com subscriptions jump on each major "financial collapse" story. Also, subscribers don't get ads - particularly important for mobile-connected readers like me.

On the subject of video sites, I also have one. As consumers don't expect to pay, we target the professional market with web-based video editing tools.

When I make videos, I typically keep only 5% of what I shoot, discarding 95%. A brief look at my website should be enough to convince you that 5% is enough.

Hosting video is expensive. If advertisers are to pay, they will certainly not pay for unedited content; but professional content is expensive to produce. Software tools for User Generated Video (UGV) square this circle.

Although most consumers are not used to paying money for web-based tools, most "free" web systems take rights - one of the many hidden charges for web-based content. We don't do this - (and in return perhaps) some consumers pay to subscribe to our service even though there is a free version.

As the author might expect, almost all our income comes from B2B - either TV stations or websites with professional content. I was advised by a former CEO of Lucent that adult content was always early into new markets, but always ended up at around 10%. Succumbing to its lure was a one way street to excluding the remaining 90% long term market.

The key to newspaper websites is good engaging content - and this increasingly means video. The costs of producing it in enough variety and volume will inevitably increase the importance of freelancers and UGV.

People will pay for news with intrinsic value, such as financial news. For entertainment, if the web content is good, ultimately people will pay. After all, an evening out costs money. And as people learn to make good quality video efficiently, it will attract the advertisers it deserves.

VIX Suggests Changes in Selling Behavior

Vix of 50 isn't low. Blind panic has been replaced with a hasty move towards the exits.

The US may have led the UK into this, but banking is a bigger proportion of UK GDP and things are developing faster here. As the government policies are similar (ie bail out the people who lost the money at the expense of vast borrowing), it may be worthwhile to look to the UK to see how things go next in the US.

The UK story so far: the so called banks "liquidity gap" has been acknowledged at last to be a "solvency gap", and the government has taken on the vast and unknown liabilities of most of the banks in return for them restarting their lending. Quantitative Easy (QE) (ie monetising debt / printing money) has already started. Once the economy starts up again, we'll work out who pays.

It Seems Mobile Broadband Is Becoming a Fixed Line Replacement

In the UK, my phone gives around 1Mb/s. Great, until you realise my fixed broadband has been upgraded to "24" Mb/s ie 9Mb/s. And the uplink is similarly an order of magnitude faster on my fixed line.

When the fixed line goes wrong though (temporarily but regularly), the mobile is a handy backup - and enough at least to make videos over the web even if streaming is not always full frame rate.

Evidence of Google Stock 'Pinning'

If you think the option "should" have been worth something, then just go ahead and buy the underlying stock at the bargain option expiry price.

In other words, if the price moves to make a valuable call option expire worthless, just buy the stock at this price in the market instead. Similarly for selling, though obviously this is harder if you think a share you don't own is overvalued as no one asked you for an opinion.

These manipulations only "work" because people are just gambling on the prices without wanting to buy the underlying stock. This should create an arbitrage opportunity, BTW.

Cloud Computing: Its Evolution Depends on Economics

Netbooks are set to boom of course, but let's not forget that the typical internet device is now a mobile phone. Annual sales of around a billion dwarf PC sales.

This is one of the few areas where Europe is ahead of the US. The iPhone launch without 3G caused astonishment here - I was already on my 5th 3G phone [phone] N90, N93, N95).

Forex View: Last Man Standing

The last bubble will not be the USD - but gold.

It is common enough for anyone to be able to take part. And as soon as it gains real momentum, and becomes a dead cert for going up, every man woman and child in the world will want in. No single country or even group of countries will be able to stop it.

Of course, I'll jump off just before the bubble bursts ;-)

Looming Currency Devaluations

I expect China will get value for their USD when they are ready. Perhaps a takeover of Taiwan to go with their USD "dumping". Military spending has been going up with GDP at 10% pa - it soon adds up. Orbital "Space" missions and shooting satellites up in space. A massive army.

After all, China and the Chinese people believe they own huge swathes of territory that no one else thinks is theirs, and the mineral rights which go along with it (the South China Sea is another example). It's always interesting to see locally produced maps.

www.upiasia.com/Politi.../
"Although most of its land border disputes have been resolved [ie with 12 of its neighbours], China still has a number of unresolved sea border issues. The question is whether China will take the same approach to settling these disputes, which involve huge potential resources including fish, oil and gas."

Japan has long seen China as the sleeping giant.

And one last element of this exotic theory - the huge male/female population imbalance resulting from the one boy (I mean child) per family policy. What exactly are all these single men going to do? (Apart from fight a big war, perhaps with India where they still have a land border dispute, or the US/Japan where they have a sea border dispute.)

Japan's Industrial Slump

I made a chunk out of reverse carry trade against UKP - no interest but then no tax on interest (would have been 40%) and deflation means that it's tax free profit. Until I reversed out a chunk for nearly 100% profit, of course.

So safe stores of value: GBP gone, EUR gone, JPY gone. Only USD and gold left. When gold is the only one, I hope you have some already!

Japan's Industrial Slump

Japan has an ageing population - one reason for its high savings, which are in turn one reason for its trade surpluses. The government has nearly 100% national debt / GDP and a 47% year on year collapse in exports - so I think you'll find the market is setting their exchange rate.

Whose problem will it be when they all retire and try to spend their foreign currency denominated savings? I think we will turn out to have enjoyed an undeserved high standard of living off the backs of their hard work.

How Innovation Sustains Prosperity

k9s040k8 - Here in the UK we have a great NHS - but almost everyone with any money goes private, except for A&E. Free but rationed by waiting list, as you say.

If I spend my own money on myself, I'll make sure I get a good service, and it's good value. If I spend my own money on someone else (eg a present), I'll get good value for money, but won't be so good at spending it on what they want. If I spend your money on me (eg a grant), I'll get a great service, but I won't be too bothered about cost.

And if I'm spending your money on someone else (tax and spend), I'll probably not get the best service or the best price.

So, back to innovation - governments are not very good at picking winners or getting a good return. By its very nature, innovation is not something which can be directed from above.