(With apologies to Jonathan Swift…)
The EPA and the Transportation Department have combined their intellectual firepower and proposed new rules that would require passenger cars to be labeled with a grade from A to D depending on the vehicle's fuel efficiency and emissions. (I imagine they wanted to have an “F” but figured they’d ease us into this before moving to the next iteration, a system where there is an “A” list and an “F” list, with A being whatever the political winds dictate are in favor that week and F being anything else.)
In their current proposal, only electric cars and plug-in hybrids could receive an A-plus, A or A-minus. Those of us who live in rural areas with long distances to town, like farmers and ranchers, and/or those in snow country who must own an SUV, no matter how small, how fuel-efficient, or how many times it has received Motor Trend’s Car of the Year award, would be allowed no higher than a C.
Given that SA readers reflect the world’s population at large – some brilliant, some less so; some well-read, some less so; some well-educated, some less so, etc. (unlike the group-think bureaucrats who came up with this idea and who all seem to hail from Lake Wobegon and consider themselves, by that standard, above average) – there was a lively discussion on SA’s “Wall Street Breakfast” on this topic.
Since those readers caught most of the concerns with such a scheme before I came into the office (anything posted before 10 a.m. EST means we sluggards on Pacific time are just finishing our coffee and breakfast and heading for work at that time) I didn’t comment there. But I think this issue transcends the manipulation of consumers’ buying decisions; it is indicative of the way our bureaucrats and politicians inside the Beltway seem to think of themselves and of us. First, to the issue of “grading” our cars:
All of those commenting on “Wall Street Breakfast” clearly understand more than the EPA and Transportation bureaucrats-for-life in terms of the value -- and price! -- of personal safety. We must all act to survive life's curves, like living to tell the tale after being T-boned by a texting or drunk driver, even if he is in an "A" rated car. There is an economic cost to neglecting safety, as well, that the dullards who came up with this apparently didn’t consider. How many renewable-energy-based power generation facilities could they fund if they didn’t choose instead to pay for the 20-year-olds rendered quadriplegics whose medical bills for life will be borne by his fellow citizens, who cannot work in his chosen career and is therefore less productive, and who must himself bear a far more difficult life because he listened to the bureaucrats and bought the “proper” car?
One reader, clearly too bright to get a job at EPA or Transportation, stated what those of us who actually study such things know to be true: it takes more energy to build a car than it does to run it. (And, if I may add, with the new cars being composed of more plastics and composites than ever before, more oil by-products, as well.) The awful irony is that buying a used Ford or Lexus SUV may actually bemore “green” than buying a new plastic-and-metal electric car powered by coal!
We cannot help but note the stupidity of lauding electric vehicles powered by coal -- and calling them "clean" just because the labelers are too dumb to understand that clean electricity in their backyard comes from the burning soot in someone else's backyard!
Electricity is not something that is generated by ordering fireflies to line up in a row, nor by capturing lightning in a bottle. For the conveniences we demand – irrigation for our crops, pumps to bring water from the mountains, lakes and rivers to our homes, air conditioning in summer, lighting year-round, and, yes, cars that don’t use as much oil refined into gasoline, we have to burn some of Mother Nature’s giant storage batteries known as oil, coal and gas fields. Yes, of course, we can harness the power of moving water via hydroelectric, but we’ve already done that nearly everywhere onshore that it makes economic and environmental sense to do so. That would give us 1/16th of what we need to meet our current needs.
Add all the other renewable resources like solar, wind, biomass, and geothermal and, together, they add another 3.1% -- call it 10% to update the latest figures from the DOE. That means that coal, at 48.2%, and natural gas, at 21.4%, comprise just under 70% of all electricity generation. Nuclear, the other bugaboo of those who hold fossil fuels in contempt, adds another nearly 20%. If these bureaucrats and the know-nothings who rail against nuclear and fossil fuels really want to do something, may I suggest they only use their air conditioner (if they live in a part of the country where they need it – residents of The Air Conditioned City need not boast they don't have air conditioning) 10% of the time, drive their car only 10% of what they normally would, and only turn their lights on 10% of the time. If they are not willing to do this, they should stop preaching to the rest of us! Oh, and one other thing – they can stop gloating that they drive an electric vehicle, since 90% of the electricity comes from nasty old fossil fuels and nuclear.
This kind of silliness flourishes among those who have never driven through 4 months of winter, who have never lived where the heat is stifling, or who, like ostriches, choose not to see where and how electricity is actually generated. What’s next if this keeps up? Well, may I suggest a modest proposal that they also grade our mortgages. If they did, it would look something like this:
You get an “F” if you paid your mortgage on time every month, even in years when the value of your home dipped below what you paid for it, and your home is now fully paid for. After all, what can you contribute to keeping the economy moving forward? (Well, at least until you die, so hurry up, your government needs the money.)
You get a “D”” if you currently pay your mortgage on time every month, even in times when the value of your home has dipped below what you paid for it. What, are you going to just sit there and never buy another house? Don’t you know money needs velocity to be counted in the big economic numbers?
You get a “C” if you pay your mortgage late in order to play the ponies or the lottery. The feds may not get much benefit here, but the state gets a big windfall to fund all their excesses and that keeps them from wanting more money from the feds.
You get a “B” if you have walked away from your mortgage and now rent. You’re stimulating the economy by renting and the government guarantees all the old loans, anyway, so who’s harmed except the “rich” people who bought worthless government-backed mortgages.
And you get an “A” if you still live in your house as a squatter, but don’t pay your mortgage at all and skip the occasional utility bill to those ravenous utilities, as well . All of “B” above applies, but you actually have more discretionary cash left over each month than any other group to spend on lottery tickets, travel, buying new stuff, and generally keeping the economy rolling.
The point is: we can rail about this program or that, this idiocy or another, but the issue is much bigger than some harebrained scheme that presumes we are idiots and will feel bad if we don’t get an “A” to place on our car’s bumper. Are these bureaucrats and politicians truly this stupid OR are they trying to pull the wool over our eyes with Orwellian double-speak? Regrettably, after much consideration, I am forced to conclude... they are that stupid. Their knowledge is a mile wide and an inch deep. And they are incapable of drilling down two inches to see what they might find.
Opening the discussion – on cars or any other -- to a logical debate is what the Founding Fathers had in mind. Out of the thesis of one viewpoint and the antithesis of a different one, comes a Hegelian synthesis that considers all factors. But the current crop of bureaucrats and politicos have forgotten this -- if they ever cared or understood it in the first place. It's all about jumping to a conclusion: electric cars are good, SUVs are evil; wind and solar are good; oil and gas are not; etc. So they concern themselves solely with "do we have the votes to push this through? After all, we know what's best for all those unwashed who live Beyond the Beltway and therefore must be regularly re-taught how to walk upright."
This isn't about cars. Fighting the latest stupidity or cupidity is distracting us from the much bigger issue: our government seems to think they can sell us on trying to get an “A”. Until we change that, we may vote this particular scheme down with our laughter, but there will be a new and equally egregious one tomorrow, the next day, and the next. Why is it difficult to commit to US stock markets? Partly because US investors do not trust that our leadership will not act capriciously, we are wary of entrusting our future to US markets. As a citizen, first and foremost, and as an investor in my and my family’s future, I want to be able to give my government an “A” in something. Sadly, I must currently give them an "F" for governance as they try to sell us on their latest hastily-constructed sales job.
Author's Disclosure: There are no securities mentioned in this article. The issue is bigger than that – it is about the trust and faith investors can or cannot place in a capricious and agenda-driven environment. It is a worthy discussion item for all investors and for Seeking Alpha readers especially.
The Fine Print: As Registered Investment Advisors, we think it is our responsibility to advise the following: we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund only to watch it plummet next month!
We encourage you to do your own research on individual issues we recommend for your analysis to see if they might be of value in your own investing. We take our responsibility to proffer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.