Neil1236's Comments

Is A QE Exit Really Scary?

Tue, 21 May 2013 15:14:19 -0400

To JasonC

You seem to say that since the Debt payments and Interest payments are both transfer payments, then the Debt and interest will always be affordable because, after all, transfer payment are always debits and credits, and debits and credits are always equal.

I wouldn't hang your hat on an accounting identity.

Let me take the liberty of assuming that I've correctly interpreted your position, i.e., the Debt is always affordable because debits and credits are always equal. Then let me also assume your position is absolutely correct. The inescapable conclusion is this: We don't need to tax the citizens at all. Just sell bonds and watch the Debt balloon to the moon.

Is your fall-back position that the Debt can be paid off with simply the stroke of a pen which signs into law a mandate that the rich citizens pay-off the Debt (or some unaffordable portion therof)?

Is A QE Exit Really Scary?

Tue, 21 May 2013 12:27:33 -0400

To JasonC

What do you think about CalafiaBeachPundit's (the author's) statement:

<< It's not scary at all if you believe, like I do, that the primary goal of QE was not to "print money" or stimulate the economy, but rather to satisfy the world's apparently insatiable appetite for safe-haven, risk-free assets. >>

Seems to me Calafia has it backwards:
The Fed doesn't issue T-Bonds. The Fed buys T-bonds.

The Fed does facilitate the Treasury at issuing bonds with a low rate, but The Treasury does not need the Fed's help:
The Treasury is going to issue those Treasuries that it needs to issue: no more, no less; and will just offer higher and higher rates until all are sold.

If the Fed failed to keep rates low, the Treasury Dept would have to offer higher yields on T-bonds.
Higher yields on the benchmark T-Bond would affect all rates in the Bond Market.
The Stock Market would have to lower prices to compete with the Bond Market for investor's money.
A lower Stock Market would ruin the wealth-effect, which could easily create a contraction in the economy.
Such contraction in the economy would stall or reverse the economic recovery.
So, guaranteeing low rates might be pretty important to the economic recovery.

The primary goal of QE is to prevent the contraction of the money supply. Secondary is keeping interest rates low. Both are pretty important.

But we can't stay on QE forever. Now seems as good a time as any to get off the QE.

Is A QE Exit Really Scary?

Tue, 21 May 2013 11:22:19 -0400

To JasonC

<< The only "toxic" securities that were every on the Fed's sheet were the $80 billion in the Maiden Lanes of 2008, from the Bear, AIG, and Citigroup transactions. Those were not bought at face, but at steep discounts, around 50% of face value. They also had a structure in which a bank counterparty (in the AIG case, the US Treausry as effectively the receivor) stood ahead of the Fed for any losses on the portfolios, the Fed was senior. >>
---> Sounds like a good answer, after all, Congress requires the Fed to own high quality assets, and that means the Fed would have to buy toxic assets near market value. (Not exactly following the law, in my opinion, but there was that crisis distraction going on.) OK. So, how did the Fed fix the banks' balance sheets and "erase" the banks' losses which enabled the banks to start lending again? (which the banks have yet to do)

<< The reason for the impression otherwise, abroad in the world, is the following. During 2008 when the Maiden Lane transactions were occurring, those opposed to the Fed ideologically or to those transactions specifically, saw them as a dangerous precedent and predicted that the Fed would take losses for the banking system. It didn't, and by the spring of 2009 it was clear it wasn't going to lose on those transactions, but the opposition did not acknowledge that. The impressions left by the press campaign against the Fed actions in the crisis remained, ... >>
---> I didn't see things that way. I saw a lot of logical worry and concern that the unprecedented, aggressive and innovative strategies would have unintended consequences. Nothing wrong with that.

<< ... in 2009, as the Fed initiated the separate QE I purchase of agency MBS. The critics shifted to criticizing that, some on the grounds of its sheet size effect, others more cynically shifting their allegation of "toxic security" purchases to agency MBS that had never lost any of their owners a dime. >>
---> What's the issue with the balance sheet size? Seems more reasonable to be concerned that the printing presses would overheat, cause a conflagration and burn down half of Washington. Oh wait a minute, that would be seen as a good thing, right?
---> The worries about the MBS are logical. MBS are new instruments and packed with mortgages that probably run another 20 or 30 years. If the MBS have long maturities, and if they're are purchased when rates are low (as caused by the Fed), then if rates rise before these things become short maturities, they fall in value. Offsetting the fall in value as rates rise, is the gain in value as it's quality improves as the economy improves. However, that just admits that the Fed broke the law which says the Fed can only buy high quality stuff .... oh, yeah, just like you said ...

<< There was always a new possible future fear to latch onto - most recently, it is that maybe interest rates will rise and cause mark to market portfolio losses. >>

<< But the Fed's actual profits in the entire period tell the tale. It was earning $30 billion a year before the crisis, and it earned $88 billion last year. Its profit increases alone since its emergency operations of late 2008 come to over $175 billion - more than enough to pay for all TARP costs. >>
---> Not surprising since they were printing alotta dollars and the exchanging those dollars for interest bearing instruments.

Is A QE Exit Really Scary?

Tue, 21 May 2013 01:53:55 -0400

To JasonC

Nonsense? Are you sure about that? All the Fed has to do is let their securities mature and watch the CPI? Sweet! Easy!

There's no more to it than that? Are you sure you don't need to think more carefully about your answers? Almost seems flippant, the way you answered.

Like um, you know, like when do we actually see this month's CPI and when is it revised -- is it 3 or 4 weeks in the future? How long does it take new-money to go through the system? What percent stays in the money supply and where does the rest go?

I thought the process of ramping up or ramping down QE involved a lot of forecasting, you know, because they don't want too much or too little reduction to the money supply, right? I thought the Fed would have to estimate the amount to be injected after considering the maturities in their portfolio which is small and the natural deleveraging that is going on in the rest of the economy which is huge, you know, 'cause the Banks arent lending. And then you got all those other pesky leakages from the money supply to worry about. Do you know what happens if the money supply gets reduced a bit too much? You also don't seem to think that the psychology of the stock market is anything to worry about. Do you think it is possible that there is no "good" solution?

I guess I just do things the hard way. May be I should take lessons from you.

What is it that the Fed is trynig to achieve or avoid with the winddown of QE anyway? Is it possible that there's some amount of QE can't be eliminated anytime soon ... and why?

Is A QE Exit Really Scary?

Tue, 21 May 2013 01:12:38 -0400

To JasonC

Please ignore my previous question.

WMARKW already asked you the same question, which you conveniently danced around without thinking about the implications of your answer. I clearly see from your answer to WMARKW that you don't have a clue.

You don't even know what a clue is. And why would I say that?
Well, WMARKW gave you a big clue.

No need to respond unless you can back up your drivel with a link.
Thanks anyway.

Is A QE Exit Really Scary?

Tue, 21 May 2013 01:01:12 -0400

To JasonC

<< "they had tons of almost worthless securities on their balance sheets " >> -- MILESCFA
<< Nope, wrong answer. The Fed has a profit on its purchases north of $200 billion; they were not worthless securities, but were in fact worth substantially more than the Fed paid for them. Buying them was not a gift to anyone. >> -- JasonC

JasonC - Are you sure about that?
I was under the impression that the Fed bought the toxic securities at near face value. That's because if the toxic securities had been bought at the distressed market value, the banks would have had to post huge losses. And if the banks were to report huge losses, then why bother selling the toxic assets and having a realized loss rather than an unrealized loss, you know, a 'paper' loss.

I thought the whole goal was to avoid recognizing the losses by whatever means was most expedient.

I'm dont think the Fed made a profit on the toxic stuff at all.
Are you sure about that?
Got a link?

The Attack Of The Fed Will Continue - Where To Invest?

Mon, 20 May 2013 18:53:28 -0400

I think there are two big questions

1.) What benefits will we see from more QE?
2.) What costs might we see from more QE?

Is The Trend Still Your Friend?

Sat, 18 May 2013 15:17:41 -0400

To WheelsComingOff

<< What makes you think the Fed is EVER going to taper? >>

Because Bernanke said he would if unemployment or inflation reached certain points, then mentioned the possiblity of winding it down early. Now why would he EVER do that?

I'll tell ya later after I check some things.

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 14:29:12 -0400

To Glenn Doty

You're right. If the flaring is known to be less than 1%, then the 1% would be included in the embedded energy, as JP would call it.

And in a very real and tangible sense, it's also in the price of N.Gas, regardless of whether it's true amount of flaring is 1% or 10% or 25%.

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 14:16:23 -0400

To Nathan Weiss

Less than 1%? What a disappointment.

OK, you win, I believe you. Seems logical that the oil companies would probably want to know the "forgone profits" of the N.Gas that they're flaring, and it'd probably be easy to measure the rate of flow of the natural gas before it gets burned.

But, I'm always suspicious, wondering if the oil companies would report low-estimates of the flaring, thus preempting criticism for wasting something that's already in excessive over-supply due to the excessive success of fracking ... as the current low price of N.Gas doesn't seem to do any good for the industry.

BTW, I looked for the figures you quoted from the Tesla website forums, but could not find them:

"0.367 kWh per mile driven ... over 175,629 total miles", and
"622g of CO2 per kWh generated"

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 11:02:40 -0400

To Nathan Weiss
Fr a conservative

<< look at the lifestyles of the Green Leaders - Obama, Gore, Musk. Look at the 'data' they put out and how they mislead people. Go to the Tesla website, which is nicely vetted by lawyers, and try to find anything about the Model S being green and saving the environment. >>

Are you saying that you're conservative? Because if you are, I think you should stop worrying about the enviornmental issues for a moment and start thinking about the value of diversifying our energy sources VS the cost of being highly dependant on oil.

If the Tesla website makes no green claim, then what's your gripe?

CO2 is not the only issue. For instance, although I drive a Prius, I didn't buy it because of its low CO2 ... I bought it because it was the most economical tansportation. When I buy an electric car, it will be for low price, diversification of energy sources and low CO2.

The Model S is too expensive for me, I'm waiting for the Gen III.

You are going to have a field day with the Model X, because it will have to be less energy efficient than the Model S because it sure looks a lot less aerodynamic, and that's more important than weight.

So, it disappoints you that Tesla's website makes no green claims?
Seems to me you should be very happy about that.

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 10:41:56 -0400

To JRP3

I prefer to believe that I am a decendant of Adam and Eve.

However, I have no problem believing that you and many others evolved from the Great Apes. Or, perhaps the slime mold which grew on the trash jetisoned by aliens as they passed-by Earth millions of years ago.

Truthfully though, should my beliefs matter to anyone here? Prob'ly not.

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 10:29:15 -0400

To weaponzero

C'mon, the gas mileage of a car includes the wasted gas while idling.

Next time you see a photo of an oil-rig, you may notice a huge orange fireball. That's natual gas being burned off because it cannot be economically captured and brought to market.

It's also CO2. (It is better to burn it, creating CO2, than to allow it into the atmosphere as methane.) I do not think it is being measured or counted in the total CO2 produced by oil, but I'm not an expert.

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 10:22:46 -0400

To AStubkjaer

<< The hybrids produce less CO2 because the engines are mostly running at an optimal rpm for charging the battery >>

I'm not sure which hybrid you're talking about.
My Prius gas-engine runs at a wide range of rpm, not an "optimal"

So, are you talking about the Volt? If you are, then why does the Volt have such a mediocre gas-only mileage of about 35mpg?

In Summary, The Tesla Model S Is A Dirty Car

Wed, 15 May 2013 10:09:25 -0400

To Interleaf

" ... the CO2 emitted at the oil well ... "

Someone should point-out that a lot of natural gas is simply "flared" at an oil-rig because they don't have the technology to capture it economically. Half the time I see a photo of an oil rig at sea, there's a huge 20 or 30 foot fireball burning.

I understand that turning the natural gas into CO2 is better than letting it escape as methane (and other gases) ... but I dont' think the CO2 is being measured or counted in anyone's figures.

Now, if I culd just find a way to blame Nathan for that, then my day would be complete.

In Summary, The Tesla Model S Is A Dirty Car

Tue, 14 May 2013 09:41:50 -0400

To Nathan Weiss

<< Even if you install another solar panel for your Model S, you can brick the Model S, buy an efficient ICE vehicle and sell the power from the new panel to the grid, reducing total CO2 emissions. Lets do some numbers... >>

Nathan, you really shouldn't hang your hat on the idea that every market has stupid laws that allow solar panel owners to extract high payments from utilities.

Such laws will be reversed sooner or later.
Not every electrical market has laws like that.
And it is arguable that selling solar energy back to the grid does not reduce pollution on a 1:1 basis. Ask Glenn Doty.

If you don't agree with me, then you should become a solar panel salesman. If you sold enough solar panel kits, the grid would be cleaner because it would cease to exist, as no one would be buying electricity from the grid anymore.

In other words, you know, put your mouth where the money is.

In Summary, The Tesla Model S Is A Dirty Car

Tue, 14 May 2013 02:33:00 -0400

To Glenn Doty

<< When you buy "green" power from the power company, what you are actually doing is spending a few extra cents/kWh to offset the carbon of your electric bill. This doesn't mean that you are using all renewable or nuclear power - that's a fully utilized portion of the power infrastructure. There's no magic gate that can differentiate whether the electron impulses were generated with "green" or "fossil" power. So by paying more, you are paying for the electric company to build more green power infrastructure - offsetting your current emissions by building more carbon neutral power. >>

Glenn, you really need to stop promulgating your opinions as if they were facts. If suegie pays for the green electrons, then she is entitled to "claim" them. No one else has a right to claim them except those who pay for them.

What's with the lecture on green vs fossil electrons being commingled?

If you really wanted help suegie, you'd mention other alternatives like waiting for Tesla's Gen III which will be a smaller car (the size of a BMW 3-series, right?) and therefore more efficient, you know, greener. Or look at Nissan's, or Toyota's electric offerings in the near future. You could mention that the grid is getting greener, and grid-based electric cars will be greener too.

And that ever-present anger about the taxpayer money, please remember that the wealthy taxpayers pay 80% of the taxes, so yes the rich-guy's getting the benefit, but he's also paying for it. This creates anger?

And what about those people buying the vanity that they want to buy? Do you call cadillacs vanities? Mercedes? Priuses? Isn't your own car a vanity? C'mon 'fess up.

Anyone who wants to buy a Tesla Vanity is forced to pay the subsidy, it's not like anyone volunteered to pick Uncle Sams pocket and give the money to Tesla. If you don't like the subsidy idea, you should clearly direct your indignation and anger where it belongs --> your elected representatives.

A vehement environmentalist would be promoting more home wind-turbines and solar panels, living off the grid with clean energy, charging up your Leaf with clean energy. Oh, wait, is the Leaf a vanity thing too?? Thnak goodness you're around to let me know your opinion.

And you're still running the "EVs are dirtier than ICE" argument based on the same ole woefully faulty logic n your instablog? Or do you have some new proof up your sleeve? I'm calling your bluff.

In Summary, The Tesla Model S Is A Dirty Car

Tue, 14 May 2013 01:15:36 -0400

to Nathan Weiss

<< First: Yes, I did prove these things >>
---> Nathan, I must have missed that "good" proof. Is that "good" proof in the article or the comment? May be you left it between two lines somewhere, you know I usually don't comprehend the subtle stuff. C'mon Nathan, point me to it.

<< Second: Due to subsidies, most home owners get A LOT higher rate selling electricity to the grid from their solar panels than they pay utilities to purchase electricity from utilities. Check your facts on this one. >>
---> Nathan, I covered that fact in my comment. Can't you read long sentences?
---> and you're still going to hang your hat on a hand-out from gov't?
---> WAIT A MINUTE!! If "most" people can sell clean energy to the grid for more than they pay to buy dirty energy, why the hell aren't you and I out there selling these solar panels like hotcakes? Screw Tesla and SeekingAlphalpha, you and I should be in business together. We could make milions! C'mon Dude, lets' get with the plan !!

<< Three: I am using whole-grid CO2. Marginal CO2 is almost entirely from natural gas-fired generation, which results in 517g of CO2 emissions per kWh. The numbers are actually pretty close to each other (average versus marginal). The 'marginal power' argument is usually used by green advocates trying to prove something that isn't supported by data. >>
---> sounds like you have huge deficiency of fibre in your diet, I mean, c'mon, "whole-grid"? That much fibre can kill you. Or you'd inflation yourself with CO2 and float to the moon.
---> Seriously, Nathan, I am happy to hear for the first time that marginal CO2 is almost entirely from natural gas. I guess that means that coal is not being used hardly at all for marginal loads.
Are you going to notify the Union of Concerned Citizens? I'm sure they'd be happy to hear about this.

The Good News, The Bad News And What's Very Ugly

Mon, 13 May 2013 17:05:39 -0400

To Tony Pow

<< Great comments. So, we can learn from each other and it is the purpose of my comments. May I include your comments in the Afterthoughts section of my new book Debunk the Myths in Investing? >>

If you be talking to me the answer is yes.
However, I'd appreciate it if you spell-check and grammar check anything of mine you decide to include. And if I made a mistake, please be sure to correct it ASAP so that it is not repeated.

In Summary, The Tesla Model S Is A Dirty Car

Mon, 13 May 2013 16:29:55 -0400

To Julian Cox

Are you sure it's dishonesty?
That requires intent to deceive.
Might just be a mistake, or might have been misled by someoen else.

please see my comment to him below

In Summary, The Tesla Model S Is A Dirty Car

Mon, 13 May 2013 16:08:44 -0400

To Nathan Weiss

<< Guys, its easy. If the Model S pollutes more than other ICE vehicles and you are charging it with a solar panel, if you stop using your Model S and buy a more efficient ICE, allowing your solar power to be sold to the grid - offsetting electricity production elsewhere, you cut your total CO2 emissions. I can run through the math if you need... >>

FIRST: FAULTY LOGIC
Your logic is clearly circular. You have assumed that which you think you have proven. You start with the assumption that Model S is a high-polluter, then you conclude that by buying a Prius you've cut your CO2. Well, umm, that's because of your assumption. You have proved nothing.

Let me try again, just to be clear: You assumed the Model S is the high polluter, and then (wow) concluded that the Prius is the lower-polluter. gee, that was easy, just like you said ... and you didn't even need to meniton the clean solar power that you've given to the grid. Wait aminute, shouldn't that be to the EV owner's benefit?

Now let's talk more about that solar-power issue

SECOND: PROFIT FORGONE
If you sell your solar power to the grid, you should only get the wholesale price. (You might get more if local laws so specify, but that's not true in every market, and is surely just a temporary feature.) And of course, you'll lose a bit in transmission.

If you use the solar power to charge your Tesla, there's less transmission loss, and you can pay (or save) yourself the retail price of the electricity by putting it into your car (or a cheap & efficient storage battery made by Axion).

So, the solar panel produces power which is absolutely clean, right? And you advise what? To sell at wholesale (to the grid) rather than sell at retail (to yourself)? Ae you saying that the grid has a better use for the clean power than the EV owner does?

THIRD: MORE FAULTY LOGIC
The CO2 issue begs the question "What assumptions you are starting with?" If you are basing "the math" on the marginal grid CO2 per kWh, then you're making a mistake -- probably because you have been mislead.

If you care to read the analysis published by the Union of Concerned Scientists, you will find they disagree with you, probably due to the fact that they (correctly) based their math on the averge grid pollutants rather than the marginal.

Can you refute their analysis yourself, or do you rely on a link to an instablog of the half-truths and faulty logic promulgated by someone here at SA who has ignored many who pointed out his shortsightedness? If it is the latter, then I would say this:

His logic is faulty as it suffers from a violation of ceteris paribus, the most common mistake made in any economic analysis ... a rookie mistake.

If it is the former, then please forgive my insolence and educate this fool.

Is The Tesla Model S Green?

Mon, 13 May 2013 07:50:48 -0400

To tomfrompv

<< ... I'm sure you think a $72,000 car that only a few weathy people can afford is great use of precious tax money. And you defend this theft by claiming big oil ALSO steals, as if that makes it ok. Or that the Chinese will kill us all if we don't give money to billionaires who make big donations to their political friends. Or that anyone who points out that free-er markets ALWAYS benefit the middle class is an Ayn Rand idiot, etc. >>

I think you're forgetting a few things:
1.) the rich guy who buys the expensive Tesla has to pay the subsidy up front. He can either NOT buy the car, or buy the car and pay the subsidy. Are you saying he should not buy the car he wants because you think it's a bad choice? Who are you make his decision? Mr Car Czar?
2.) The subsidy was set up by our elected representatives. If you don't like it, write your congressman or go to Washington and orgainize a sit in. Put the blame where it belongs.
3.) The rich guy doesn't actually benefit from the subsidy because he's buying the $65k car for $65k net-of-subsidy. Are you saying the car really is worth $72k an he's buying it for $65k ?
4.) Tesla Motors's shareholders benefit from the subisdy, not the rich buyer. It'sthe rich shareholder you should rail at.
5.) The rich guy who buys the Tesla ought to be either pitied for buyig an expensive car of unproven technology, unproven reliablity, unproven manufacturing, unproven service ... or he should be hailed as a hero for putting his neck out to beta-test a new technolgy.
6.) 80% of the taxes are paid by the top 20% of taxpayers, you know, the rich guys. So 80% of the subsidy is paid by rich guys. So, who are you gonna rail at? The rich shareholders who benefit, or the rich taxpayer who may 80% of the subsidy?
7.) Big Oil recieved a subsidy of what, $10 billion, in 2010 which is when Exxon declared the largest profit evver recorded by any company in all time. Why the subsidy to a rich oil commpany?
Randy's point is that in this world, subsidies are everywhere and a small car company doesn't have a chance without the subsidiy. It aint a pretty world we live in, but if you don;t like it, go to Washington.
8.)What's with teh chinese?
9.) Ayn Rand is an IDIOT. You got that one right.

The Good News, The Bad News And What's Very Ugly

Sun, 12 May 2013 22:16:14 -0400

To Tony Pow

<< I have not taken any class in economy, so you can ignore my ignorance. >>
---> Tony, don't worry about not having taken any classes in economics:
1.) Lots of "real" economists say truly stupid things, and you haven't said anything regretful at all.
2.) Not having taken a course in economics might actually be an advantage. Most colleges and universities teach "liberal economics" where they "teach" you things like "the huge U.S. National Debt is 'safe' because, um, we owe it to ourselves."

<< * There is a good chance that USD and the US economy would be rescued by the shale energy. Will be more clear in 2 to 3 years. Last year I believe USD is doing quite good despite all the printing of easy money. USA is relatively good compared to other countries.>>
---> Agreed on all points.

<< * The current loan to China will be paid in USD. If I were China, I will make sure future loans will be paid back in gold, oil, real estate..., not the depreciating USD.>>
---> Your intutition is correct. But rather than aske to be paid in gold, China has asked for the next best thing , TIPS, which Uncle Sam could hardly deny them. Uncle Sam increased the sale of TIPS but not by much, TIPS still comprise about 10% of the Treasury bond market.

<< When I loan you $1 and that dollar can buy a loaf of bread, you pay me back $1 and that dollar can buy me half a loaf of bread. That's how the US manipulates currency. >>
---> Yeah but when inflation hits, Uncle Sam won't get a huge benefit at all because 66% of our Treasuries come due in 5 years, 85% in 10 years. No investor in their right mind would buy a long Treasury when rates are seen as rock-bottom, and consequently, very few did. In other words the debt gets rolled over quickly and the new interest rate wil be higher (due to inflation).

<< * Are our dollars truly decoupled with gold? The true value of the USD should be measured against a bucket of commodities including gold, silver, copper, oil... >>
---> Yes, Tony, I think dollars have been decoupled from gold since Nixon.
---> Though it might actually be a good idea to add commodities into the marketbasket that is used to measure inflation (maybe they are already included), I don't think the value of the dollar should be measured against commodities alone. Prices of commoditiies vary with changes in supply and demand. Supply of copper (example) is affected by price (higher price means less productive mines are now economically viable.) Demand is affected the vibrancy of the economy, and inflation. Just like every other product.

<< If S&P 500 is doubled, but the purchase power of the dollar is about half, then I believe we have a flat market except Uncle Sam asks you to pay the capital gain tax as your stocks have been doubled. Another currency manipulation! >>
---> Yes, but this problem is already well known. So why hasn't it been resolved? I guess no politiicans really care about the wealthy folk who own 80% of the stocks.

The Good News, The Bad News And What's Very Ugly

Fri, 10 May 2013 12:28:30 -0400

To Tony Pow

<< If Chinese ask their loans to be replaced in gold instead of USD, it is for inflation and a wake-up call for the reserve currency status. >>

Sorry, I don't understand the humor.

Hasn't the US dollar been decoupled from gold since 1971 (i.e., Nixon)? So, if the Chinese really do want to paid in gold, that's tough luck. They'll have to accept dollars paid by Treasury (fiat money, but still legal tender) and then head to the gold market. That'd result in inflating the price of gold, temporarily.

A reserve currency needs stability, and that's not what you going to see in gold when confidence replaces fear in the world economy, and the price of gold drops slowly back to near its pre-Crisis level. Of course, on the other hand, we may never see the day that confidence returns.

If you think the Chinese have a right to be paid in gold, I think you're mistaken. Am I taking you too seriously?

Why CEOs Should Be Rewarded For Stock Buybacks

Thu, 09 May 2013 19:35:04 -0400

I'm no lawyer, but this is what I think I know,
and failing that, it is what I know I think:

If a company is dying, and a share buyback is intended to increase the return to remaining shareholders in a planned liquidation, then that would be unethical. Management has a fiduciary duty to all shareholders, regardless of whether they actively stay abreast of the company's plans and valuations, or they're lazy and luxuriate in retirement or simple ignorant bliss. Management ought to be required to take the self-defeating action of contacting all shareholders and warning them that the Board of Directors does not recommend selling, as such a sale of shares in the buyback is not in their interest, as the price is expected to be higher as a result of any such selling. Finally, it's virtually impossible to contact all shareholders on a timely basis, and once contacted, the message can be quite confusing. Seems impossible to justify in my uninformed opinion, but luckily for buybacks, lots of shareholders will sell today even if they think the price might be higher tomorrow, because youknow, youneverknow whats really gonna happen. A bird in hand is worth two in the bush.

If a company is not dying, then the CEO certainly has a duty to invest the excess-cash wisely, and if the best investment is buying the company's stock, then that would seem to be the ethical and smart thing to do. But management still has the duty to warn shareholders that the stock price is expected to go up and therefore it's not in shareholders' interest to sell until after the buyback, but some shareholders will simply not read the notice. There're other things to consider:
1.) Management shouldn't justify the buyback just because it's more tax efficient than receiving a large special dividend.
2.) Shareholders should decide the "buyback vs dividend" question according to whatever method the Bylaws say.
3.) All shareholders ought to be warned not to sell, regardless of what the Bylaws say
4.) Skip the buyback, fire the CEO, and get a better CEO.
5.) Consider the possiblity that an investment is found next year that compells the company to make a public offering of stock which might be very expensive. Might want to do nothing.

The CEO should still be able to claim his bonus if the buyback "successfully" takes advantage of unwary or nervous stockholders. It's up to the Board to decide if he's truly earned it according to the consideratiosn above, and they ought to be able to admit a mistake and deny him the bonus.

The Train Has Already Left The Station: A Reply To Paul Krugman

Thu, 02 May 2013 23:00:35 -0400

To LinkDonald

Ayn Rand knows nothing about economics or physics. Read the book and have a good laugh. "Alice in Wonderland" is more realistic than "Atlas Shrugged."

How could you even mumble the name of Ayn Rand in the same paragraph as Adam Smith, Arthur Laffer, and/or Milton Friedman ?

uh oh, so did I.

The Train Has Already Left The Station: A Reply To Paul Krugman

Thu, 02 May 2013 19:51:50 -0400

To Logical Thought
Fr a conservative

I guess I was as surprised as you were by Beckworth's suggestion to increase QE3 by 20% or so ... but I assumed that there was an implicit assumption that the 20% increase would be reduced or curtailed if inflation roared. Come on.

Your criticism about increasng the Debt when Joe Average is up to his neck in debt, or stealing from him with inflation is nearly irrefutable. But there are 3 issues you missed:

(1) Increasing QE3 by 20% does not result in increasing the Debt at all. The Fed prints $100 billion and buys bonds that already exist. The Debt has not increased, it has changed hands. The Fed is certainly accomodating the Treasury's issue of roughly $70 billion in bonds each month. But if the Fed were to quit QE3 completely, the Treasury would simply offer a higher yield to attract the necessary number of buyers each month.

(2) The Debt is not "paid-for" by Joe Average. A large fraction of workers don't even make enough money to pay taxes. Second, the top 20% pay someting like 80% of taxes. So most of the Debt actually falls on the top and uber-upper-middle. That's why their tax rate went up.

(3) Inflation doesn't occur until the economy's growth rate increases and we get better unemployment numbers, and that's gonna take a while. The Fed can rein-in M1 very quickly, if need be. (All they need to do is sell the bonds that they purchased). The Fed is good at is killing inflation, if you can excuse the somewhat unpredictable lag and somewhat unpredictable effect. The Fed says their target is "2%-inflation" for good reason, and most of us know that managing inflation and/or interest rates is like driving a car forward with your eyes glued on the rearview mirror. It can be done, but it's never pretty. Protecting Joe against inflation might result in hurting his income (ie GDP). (But the austerity plan hurts Joe too.)

The Debt is increasing for two reasons: (1) Obama's economic plan and (2) the lack of a robust recovery.

But you are right about criticising the Debt, as it is rather oxymoronic for a conservative to support Keynesian solutions when even Keynes himself would have to pause upon seeing the Debt level. He would obviously have to ask, Did I miss World War 3, and if so, are we the loser who has to pay War Reparations?

Deficit spending might get us out of this (deeper) hole, or it might simply make the hole deeper. I know that's your main point and I know that's irrefutable.

Chart Of The Day, Reverse-Causality Edition

Mon, 29 Apr 2013 19:11:52 -0400

To Michael Nau

I guess you didn't see my question:

Are you're saying R&R "decided not to" because R&R figured it (i.e., a pooled time series analysis in which debt is first differenced and there are adequate controls for political conditions) would be useless?

I guess you didn't take seriously my qualms about "the data", which was my answer to your criticism for not using "the data" to test my hypothesis that "debt affects gdp-growth which affects debt"

I can only suppose I was perfectly clear in my response to you, since you asked no questions. I guess my qualms are trivial compared to the power of Sociology's mathematical methodologies.

(By the way, in college, I majored in mathermatics and minored in economics. In grad school, it was finance and quant.)

Then you provide a vague solution (that can interpreted multiple ways), but you don't actually use your solution to do what you criticised me for failing to do.

Well, OK, I guess you've proved your point and tooted your discipline's horn.

Tesla Patent Applications Reveal Next Generation EV Technology

Tue, 23 Apr 2013 14:39:28 -0400

To FreeYourChains

I agree that there are a lot of benefits to having electric motors in the wheels, whether there's 2 wheels powered, or all 4.

But I have to wonder about the weight of the motors in the wheels compared to one motor powering 2 wheels. Is there a weight savings?

And, what's the weight of those wheels in which motors are embedded? I'm concerned that if the weight of the wheels is increased significantly, there could be big problems:
1. the electric motors (in the wheels) might fail due to harsh road conditions (pot-holes, speed bumps) that a single motor is cushioned from by the suspension of the chasis.
2. the ride of the car will suffer because of the increase in unsprung weight in the motored-wheels.

Tesla S-85 Performance - A Test Drive

Fri, 19 Apr 2013 18:12:02 -0400

To 481086

<< ... the material constraints to true scalability, the various performance and utility compromises, the high embodied energy , the inevitable calendar and cycle-life degradations and thus depreciation, the strains on the grid, the problematic recycling issues... consuming much scarcer metals [rather than abundant oil]. >>

481086 - I must admit all these (except perhaps the "embedded" and the "scarcer metals") are all valid and important issues confronting, I mean, confounding the L-ion battery and possibly every battery chemistry we are likly to encounter in our, I mean, *my* lifetime. However, no one should have expected EVs and ICEs to have the same set of strengths and weaknesses. So, a lot of the EV weaknesses are forgiveable, especially because it is important to explore alternatives to oil.

I'm thinking that the 20,000 Model S's to be produced in 2013-14 are literally just a beta-test or "shake-down" cruise of EV fleet reliablity and consumers' acceptance. (All of the 2200 Roadsters were just a proof of concept required by intial investors.) In other words, EVs are still in the testing phase.

If consumers are well informed about all the issues you've identified, and they still buy Lith-BEVs, it would only bring more research dollars to find solutions to all those issues ... and I say that only because that's what capitalism tends to do, i.e., compete on price and/or quality.

China and India are huge and are only now beginning to flex their market-muscles. I believe we would have already seen seen a doubling or tripling of gasoline prices had it not been for the 2007-8 Financial Crisis. Thank goodness for a crisis when you need one.

Electric cars, taking 25 % of the market, could help keep the price of gasoline from skyrocketing. (Only Americans drive big monsterous cars and trucks.) Over a few years, the EVs would be expected to drive down the price of gasoline until gasoline was so cheap that ICE cars would be competitive. Right now I'm guessing that as the world population grows and oil becomes more scarce, the EV might reach 90% within 20 years. And yes, that scares the heck out of me. Oil would have to be pretty scarce adn that's scary. By the way, it is well known that the OPEC countries ALL overstate their reserves, and the overstatement is probably significant but no one knows for sure.

A lot of liberals like subsidies because of the market-distortions subsidies are intended to make, and I have little to say against the intent, other than it'd be better to have no subsidies. I disaprove of all subsidies, but from where we are now, eliminating 'em across the board is impossible and dangerous. Uncle Sam's subsidies for L-ion cars won't last forever, and if better battery comes along, I'm sure more subsidies will be allowed. (Did I just endorse subsidies? Oh, Lord.)

<< I'll also admit to an ideological component... suffice it to say that I'm an anti-leftist... and when EV's become in some sense part of the left's popular religion (hatred of oil, worship of N.Tesla, etc), with seemingly blind acceptance and without sufficient examination, it irritates...

Being conservative is supposed to mean keeping your powder dry and being able to take extraordinary measures when extraordinary measures are your only viable alternative. That means diversification of energy sources, like EVs would diversify automobile fuel to coal and NG and renewables, has a lot value, even if EVs actually cost more than other alternatives, like, you know, sticking with oil until the EV clearly dominate ICE in all measures (highly unlikely). If a few consumers aren't willing to risk a little capital on EVs now, then what battery manufacturer or car manufacturer is going to risk fielding a new EV with better batteries? Nissan is the only one that might in my uninformed opinion. And I only say that because the "Esflow" is reportedly to appear in the Tokyo Auto Show in November(?) 2013. I wouldn't mind risking some money on that, if the amount were reasonable.

The big gripe I have with Tesla is that they're making a very expensive car, and I can't stomach the risks (tech, service, financial health, etc) of a small start-up auto company. If I spend that much money, I need more security. But I understand that if there is a problem in manufacturing or something inherently wrong with battery technology (beyond what is warrantied) then its better for Tesla Motors to have only 20,000 angry birds, than 100,000.