Illiquid Assets

Well this year has seem some pretty amazing things happen, I thought a quick recap of events might help put the current state of the economy in focus.

1) Stimzilla Passed, Nearly 800 Billion in spending including expanded funding for Government Agencies, Pork, Healthcare, Unemployment Benefits and a tax cut. Remarkably only about 10% was for actually spending on Infrastructure and Direct Job Creation. Of that amount only 10% has been spent to date.

2) Federal Government now owns AIG, Freddie Mac, Fannie Mae, General Motors, Chrysler and Citi Group.

3) Cap and Trade Passes in the House, completely gutted in regards to climate, does nothing to increase energy independence and creates a system that is ripe for illegal manipulations and will lead to 100s of billions sent overseas to fund carbon offsets. The scariest parts are the massive Government intervention and regulation of consumers, their cars and their homes. Including a Federal Home Inspection in order to sell your home and value based on energy efficiency ratings decided by the Government. The best/worst part is the Smart Grid/PHEV/EV component that requires your car to have a unique charging ID and account with the electrical utility so that when you plug it in ANYWHERE you are billed for the energy, and that the utility can refuse to charge your car for lack of payment. Next is a regulation that you must have a plug installed in the right location for charging, by law. If that is not picking a winner in technologies I have no idea what is, even though the President says Government does not want to pick winners and losers.

4) Budget Passes that doubles the deficits that were reached under George Bush, you know the inherited problems that Obama has. So this Administration's reaction is to double down on the debt they inherited in order to reduce the deficit? I still cannot follow the logic on this one.

5) Market hits lows in on March 9th, then a long bull rally happen until June 15th when a sell-off started and is continuing. I saw both coming, the rally started early on me and the sell-off is running longer than I anticipated.

6) Madoff gets convicted and sentenced to 150 Years for a massive 2 decade long Ponzi Scheme.

7) Unemployment has hit 9.5% in June. Obama Administration had issued a chart that showed the unemployment rate with and without his Stimzilla. Remember we are at 9.5% when you look at the chart below...

Does anyone think that the Administration perhaps was wrong, or they mislead the public and congress? I will leave you to ponder this over the Independence Day weekend and will post part two early next week.

Paul Krugman the Nobel Laureate Economist (whose Nobel destroyed any credibility that once honoured award held in my eyes) wrote over the weekend that the Members of Congress that voted against the Waxman Markey Cap and Trade and everything else bill that passed (219-212) on Friday should be charged with "treason against the planet". He joins a long line of bloggers and columnists calling for punishments against those they call "deniers". (Vist Climate Depot for Examples)

I completely agree but would change it to "crimes against humanity".

I agree that all who voted should be held responsible in the future, and all like Krugman, Romm and Watts and Morano (yes even myself) who promote or oppose the theory of anthropogenic global warming should be held responsible for their actions in the future when the theory of global warming is or is not disproved. (I personally believe that it has already been falsified and that by simply adjusting models for recent data is not science at all, but since that seems to be overlooked by everyone involved I do not hold much hope for winning based on science, only empirical data will win the day). The penalties for being wrong should be the same for either side, both for crimes against humanity, just for different reasons.

If the proponents wish to call for retribution for opposition to their positions then as an act of civilized society the accusers should be held just as accountable as those they call for retaliation against. Do unto others as you would have them do unto you (this was my primary school motto and was written above the stage in the gymnasium).

The problem is how do you determine the guilt? That is easy the predictions are recorded in print and must be used as the baseline. Climate modellers re-run their projections every year, and revise earlier works based on them. So this practice can continue but the IPCC AR4 report that is treated as the bible of Global Warming should be the document that all is based on for the purposes of determining guilt. If the predictions and claims in this document do not track observations than the theory is WRONG, does not matter who supports it does not matter who believes it and especially does not matter who wrote it, it is only valid until proven wrong through observations.

So if Krugman et al seem to think they are justified in calling for punishments they had better be just as prepared to be judged themselves and receive the same penalties that they call for. I am willing to accept consequences for being wrong, are you?

Daryl Tremblay aka The Climate Heretic, Illiquid Assets

The Administration trumpeted the release of their guidelines for financial service regulations and a key part is a powerful new agency that will have the power to approve financial products, rates and underwriting standards. While on the Populist stage such a director is deemed essential, in capitalism it is the same as having a director that has a stage hand moving the props during the scene and the players then trip over things and cannot find their marks.

Business can operate in any environment and adjusts to the situation in which it finds itself as long as the stage is dressed and is the same as the one they rehearsed with before entering the play, a constantly changing stage precludes new players from joining the scene and removes the ability to upstage each other because the maze of obstacles restricts the options and movements so there is only one way to play out the scene. It means the death of improvisation or innovations in acting and puts the entire economic stage production under complete control of the Consumer Protections director.

I understand that banking and financial services are complicated, but on the personal and household level it really is not very complicated at all. There seems to be the attitude in America that financial products are purposely deceptive and have huge amounts of fine print for the consumer to read. All that fine print is there to meet the requirements of existing consumer protection laws regarding full disclosure and all of it must be approved by the FTC currently.

Consumer protections for real physical products like cars and paint are fine and need to be in place to protect people from dangerous items. Consumer protections for services are different and the best protection that can be given to consumers is education in personal responsibility for decisions and the ability to seek legal recourse, these exist in plenty in our current system. The argument is about predatory lending, which is illegal already, so if this was the problem where are all the cases being brought to court and the indictment of the mortgage brokers and lenders? That would deter any future bad behaviour much more effectively than any new agency.

Keep your eyes on the DJIA over the next 2 weeks, I am looking for a 10-20% drop from the current levels over that period. We are coming up on the 1/2 way mark for the year and nothing looks like it is halting the slide of the economy, even though I agree it is slowing down and a bottom is in sight. I called this re-tracing in early May and for once I think it is arriving on time. Now it is possible for some unheard data point to surprise the market and send it up, but as of today I do not see anything except some pent up consumer spending which will start in July on some luxuries and vacations, which will hit the markets as data around the first week of August.

The rise in consumer spending will cause everyone great joy and it will last until the end of September when all spending should drop precipitously again, but the markets will move higher on the news into the fourth quarter. If we can keep mortgage rates around 5-6% we will see an uptick in home sales, plus a bottoming of the home prices in August but it will be completely buried under the wave of re-foreclosures from the modifications done earlier in the year, if the rates rise higher then we will see even more weakness in home prices which will further restrict consumer spending.

The big unknown is the US Congress and the Health Care and Global warming Legislation. If either is passed look for a market drop in the healthcare or the utilities that could trigger a fear rush lower. Also watch for additional taxation beyond the scope of the bill being stuck into either legislation by the various factions on the hill. I would put my money on healthcare coming out, but I also think that it may have a hook into the revenue from the Cap and Trade legislation so that will be something to watch for.

Was watching energy and base metal commodity prices lately and was trying to calculate the impact on the proposed stimulus spending, then I remembered that the infrastructure stimulus is not going to have any effect that is tangible in the economy because of the contraction in state spending. Yet the negative on negative effect can be discussed.

With every 1% rise in commodity prices especially energy you will see a 1-2% problem starting to creep into infrastructure projects, which is the cost overrun potential, and how do we handle a cost overrun in public works? We have to issue bonds or transfer general revenue. If the costing is passed to the contractor then they respond by using less workers. Now most projects budget a 15% cushion for materials prices and larger jobs are usually negotiated up front for materials but fuel, transport and consumables are not,  at the rate of price increases over the past 90 days many started projects are potentially already over-budget.

The problem is this will impact State budgets that are already under pressure from low tax revenues. This will lead to California style shortfalls and tax increases to pay for these projects, pushed onto the books by the President's stimulus, one of those unintended consequences. Higher taxes will hurt the profits of the suppliers and contractors who will need to shed jobs to meet the burden because margins will have been low in an open bid process because of the number of contractors without projects.

While cost over-runs are normally not a problem in general as far as the State's ability to absorb them, with tight economic times they will be budget busters and I advance that many in trouble States would be better served to not start these projects under these conditions or at least be sure to budget cost over-runs on all infrastructure projects of at least 20%.

The end result will be more pressure on State budgets and cancellation of future projects as State resources are redirected to past project costs so when the stimulus ends spending may be retarded for a period of time and cause a double dip recession. This is not a prediction but it could be something to keep an eye on.

When AIG was purchased to prevent its failure I made some predictions regarding the ongoing support that they would need. I see the exactly same thing happening with Chrysler and GM, do not kid yourself that Fiat is going to be able to handle the Chrysler operating deficits without some form of assistance from the US Government.

If you have been keeping up with me on Twitter @DaryltT you would have seen that I called for an investment to get through the GM bankruptcy and start the new green product development cycle of 35-40 Billion dollars on top of the 19.5 Billion given to date. The pre-packaged bankruptcy deal included 39.5 Billion dollars from the US and Canadian taxpayers. That will get them through to the end of the year.

Starting in 2010 and continuing perpetually into the near future GM and Chrysler will bleed 10-20 Billion per fiscal quarter moving forward.  This will be costs incurred trying to meet the President's Cafe standards and lower profit margins across all product lines. On top of that additional rebates and financing will be advanced through GMAC who will become a TARP liquidity based bank, Treasury is working hard to be able to recycle the TARP money from the Big 12 banks who will be allowed to pay back about 50% of the money they received to get money back into Treasury to funnel to GM and GMAC, smaller banks will be able to pay out completely. The reason for this that if the Obama Administration can recycle the paid back TARP financing they have no need to go to Congress for approval to re-issue the funds into this black hole entity they created.

So now we have two money pits sucking funds out of the Treasury and selling unsecured assets to the Federal Reserve and in order to not impact deficits the Treasury will begin to operate like an Investment Bank using TARP money to purchase equity in any industry they choose. Also the Obama budget calls for a 250 Billion slush fund for Treasury to act as an emergency piggy bank to assist in these machinations.

So the entire "rescued" industry is poised to take about 150 Billion between the two automakers and GMAC over the next 18 months or so.

Energy prices for commodities are rising for really no good reason, right as the Cap and Trade Legislation is working its way through Capital Hill. Is this a coincident or is the prospect of energy taxes factoring in huge reductions in investment, exploration and production?

The funny part is if Gas Prices can get up higher it provides ammunition for the Cap and Trade Energy Security crusade, nothing motivates the public like the price at the pump. So if Oil Companies are evil and wanted to stop the save the planet crusade and control gas prices as the Environmentalists endlessly claim why would they let the prices run up? The answer is simple THEY DO NOT CONTROL PRICES.

What we have is a shift in Investing strategies into commodities, and with ETF plays the amount of speculation is back up and we are seeing how speculation can move prices not based on fundamentals. What is moving the market is the green agenda which promises to raise energy prices on top of the raises due to speculation based on the complete elimination of production and investment in future reserves because of taxation and regulatory burdens as a result of the green agenda.

So the prospect of Cap and Trade is increasing the prospect of Cap and Trade, and nobody is getting the correlation and explaining it to people, why is that?

This is the fine print to tell you that President Obama does not like fine print. In case he does allow fine print in the future any information that would be in fine print would be here.

This is an AD Parody and is for Entertainment Purposes Only.

The credit card bill of rights is a done deal. So no sense explaining why it is stupid legislation but instead lets take it apart and see what the Industry response is likely to be as that is the only thing left to do since nobody really got a chance to read it in this "hurry up before taxpayers catch on" congress.

The Bill of Rights simply will cause the following things to happen.

1) Higher Initial Interest Rates

2) Elimination of Credit Account on any Delinquency or serious Credit Problem

3) Higher fees for defaults and missed payments

4) Elimination of Low Balance or Inactive Accounts due to Servicing Costs

5) Much higher Underwriting Standards and Lower Credit Limits

While it will seems like the legislation is all good for the consumer I actually suspect that many smaller issuers may actually sell off their credit card divisions because of the regulatory compliance costs will be quite high, this will in turn reduce competition and allow for rates on everyone to be higher than a open market with many players would allow.

So once again the law of unintended consequences is alive and well in the Administration's "Hurry Up Offence" when ramming things through Congress.

This is my things that make you go hmmm post. It is become very apparent to me that preconception has finally won out against reality in much of the analysis of the state of the USA. Lets run through some statements of late that simply defy logic or explanation using the reality of the situation.

Oil, Sweet Crude, Where Have you Gone!

If you have not noticed oil futures are not tied to fundamentals of supply and demand but rather are moving based on the equity markets we are 6% over supplied and have built inventories worldwide 10 of the last 11 weeks the last draw down due to the fact somebody at the energy department realized we should fill the SPR while prices are down (now who do you think said that might be a plan..see my previous post here). The theory here is that if equity markets rise and are a barometer of economic health then demand should increase in the traded commodity. The problem is that the market is trading off of technical levels and not fundamentals, so what we have is two markets trading based on something other than the actual market forces of profits, supply and demand. More exactly traders are controlling the entire investment complex by playing fearonomics, first we had a fear that we would lose everything so people ran from investing, now we have a fear that they missed the recovery so people rush back, traders use fearonomics to trade in a technical range because the bulk of trading misses the range bound moves.

Here are Couple More Examples of Preconception beating out Reality

"We expect that we enter into an agreement that agreement is reasonable and transparent...We expect to pay what's fair and not just what fattens growing profits for some credit card company."

- President Barack Obama on credit card reform at the Rio Rancho town hall meeting, Thursday, May 14,2009

Reality says... Most Credit Card Issuers are your Bank, you know the same banks who are trying to earn their way to paying back the taxpayers for the TARP which I think is a good thing for American Taxpayers, the President conjures images of fat credit card companies outside the banking system rolling in money and does this simply to fan the flames of class warfare rather then out of a sense of moral outrage. Here is a factoid for you..as consumers default on Credit Cards their losses mount and decreases the likelihood we are going to be paid back, so in order to make any profit issuers raise rates to be profitable to be able to repay the TARP. 

Now here is something interesting my Credit Card Issuer JPMorgan Chase has reduced my rates substantially over the last 18 months, the last APR reduction in April 2009, I am sure I am not alone and this does not jive with the narrative but I assure you is reality.

Here is the another thing that President Obama neglects in all his lecturing ( see below) about the evil Credit Card Issuers and is the one thing he does not understand because of his statement above and that is how revolving debt works. You are not signing a loan with terms attached for each purchase, you are simply promising to pay it back, revolving debt is not like a fixed term loan and is designed for short term lending, the way it works is that the loan is re-financed each billing cycle, a new 30 day loan each time if you will, if the conditions and credit risk change then so does the terms of the loan. That means a credit card issuer can modify your terms each billing cycle, you can refuse this new terms, lose the credit available and negotiate a longer term fixed interest rate is you choose.You can also refinance this debt with a credit card issued from another institution with more favourable terms to help manage your revolving debt. So you have, just as card issuers, the ability to demand changes during each billing cycle by contacting the issue directly, the better your history the better the terms you can ask for. All it takes is some personal responsibility in managing your finances.

"There's no doubt that people need to accept responsibility," Obama said at a town hall-style appearance at a high school in Rio Rancho, N.M. "This is not free money. It's debt, and you should not take on more than you can handle."

This one kills me because how does he reconcile this statement with the Bailout "Hope for Homeowners" and the deficit he plans to run his entire term in office. Once again his preconception of the naivety of the American people gives him the hubris to lecture about debt when he has broken contract law, inverted the debt structure and is now seeking to regulate profits as well as compensation. I found it amazing he had the brazen courage to say this in public after the recent grass roots tea parties and the underlying tenant of capitalism which is personal responsibility, a form of economics he soundly rejects at every possible opportunity and proves his disdain for through his attempted manipulations of market forces.

In the end reality always moves to bring people back into awareness of it. See the reversal on the tribunals for Guantanamo prisoners for an example of what happens when reality hits preconception, it is rather unforgiving.

Your bank goes out of business and FDIC covers your deposits. You cannot access funds for 2 days. Companies are forced into courts to settle debts.

OR

Your Electrical Utility Provider goes out of business due to excessive tax burdens or EPA fines and they are forced to shut down to be in compliance, as a result the power goes off for 2-3 months while the court mediates for creditors and investors. This effectively shuts down all regional businesses and government services including banks and ATMs. Government cannot operate the business because of EPA Clean Air Act legislation leaves them open to environmental lawsuits.

Just to put it into perspective.

Which do you think poses more "Systemic Risk" to You?

Update: In my haste to put up something new I think I kind of missed the point I was trying to make; that when essential services run up against new regulations we could see the real effect of something that poses a systemic risk to the economy.

President Obama has a plan, U-S-S-A,
In in his plan there is huge spending, U-S-S-A,

With Carbon Tax Here,A Carbon Tax There, Here a Tax, There a Tax, Everywhere a Tax Tax,
President Obama has a plan, U-S-S-A!

And in His Plan there is huge spending, U-S-S-A,
With a Cigarette Tax Here, A Cigarette Tax There, Here a Tax, There a Tax, Everywhere a Tax Tax,
President Obama has a plan, U-S-S-A!

And in His Plan there is huge spending, U-S-S-A,
With a Soda Tax Here, A Soda Tax There, Here a Tax, There a Tax, Everywhere a Tax Tax,
President Obama has a plan, U-S-S-A!

And in His Plan there is huge spending, U-S-S-A,
With an Overseas Profits Tax Here, An Overseas Profits Tax There, Here a Tax, There a Tax, Everywhere a Tax Tax,
President Obama has a plan, U-S-S-A!

--------->

Time to wake up and smell the tax burden my friends. This Government is a horror show and they are not slowing down. Thankfully we are getting some resistance from the Senate (the House is a lost cause) where they voted down the Credit Card Rate Cap Legislation. A small victory not reported because the legislation and the BIG MEETING at the WHITEHOUSE was simply a show put on by the Administration to prop up the President's populist credentials.

Today's Government Headlines

Regulating All Financial Services Compensation, Even Non-Tarp Entities.(CNBC)
- My view is the plan is to create this legislation so broadly as so to bleed over into all Public Large Cap Corporations which will lead to private equity operating outside the markets via private company investment, Barney Frank has clearly stated his desire to limit all Publicly Traded Corporate CEO compensation.

Regulating Compensation for Firms Managing or Investing in the PPIP(CNBC)
- This should effectively sink this program from being operated at any meaningful scale that could make a difference, Banks will not sell because of the burns they received via TARP.

Cap and Trade behind closed Doors for a Rewrite( or some Payola?)(LINK)
-Waxman and Markey are in the back rooms offering free allowances to Moderate Democrats to get the Bill through and are buying off the Environuts by explaining that once implemented it can be accelerated in the future. The WWF, Greenpeace and The Sierra Club you know those titans of capitalism and great providers of economic growth were in the room because they matter more than the economic backbone of America that energy represents.

OMB backs off of Comments on the EPA Regulation of CO2 (VIDEO,DISCLAIMER)
Some dissent in the ranks of the faithful forces the OMB to post a disclaimer that views expressed in their reports are not necessarily theirs? Curious.

George Carlin - "when fascism comes to America, it will not be in brown and black shirts. It will not be with jackboots. It will be Nike sneakers and smiley shirts."

I have been working on an energy policy for the USA that can compete and meet some of the arguments being advanced based on the President's unfounded acceptance of the rapidly unravelling theory of Anthropogenic Global Warming or as the lexicon on re-branding of environmental platforms now calls Climate Change. I will address the Climate Change issue first because it is the basis of the entire energy policy being advanced and is also a pet peeve and issue that I actively follow and advocate on and an understanding of the limitations that it places on solving the issues is important and must be defined before continuing. Then I will try and create a compromise that satisfies the economic needs of America as well as the Energy and Environmental ones as well based on the reality of the situation and not the fantasy portrayed in the media.

What is in a Name? Well Actually Quite a Lot

The "adjustment" in terminology needs to be addressed before any sort of reasonable conversation about the scientific theories can even be attempted, this term Climate Change is so broad it can mean any change in a chaotic system which is akin to the claims of the Administration of "creating and SAVING 3.5 Million jobs" because it becomes an unfalsifible claim and thus renders the statement or position useless as a starting point for debate. Ironically it also invalidates it as a Scientific Theory(1) as well as excluding it from examination by Scientific Method(2) which is the foundation of the Democratic Party's push to restore science to its rightful place. So in fact this science based theory has been usurped and re-branded as a completely unscientific and irrationally supported belief separate from the supporting scientific theory.

Anthropogenic Global Warming due to Greenhouse Gases is the Theory in Question

Lets look at the Scientific Method first to find out how we got so far off the reservation on the whole global warming caused by human activities issue. The Intergovernmental Panel on Climate Change was created with one purpose and that was to gather evidence that human activity was contributing to global warming in the 20th century, this actually was their charter(3), they took in research from all over the globe to lay the foundation of their pre-determined theory using the hypotheses advanced by honest scientific research. The IPCC by virtue of having a predetermined theory instantly invalidated the Scientific Method(2) as defined below rendering their findings as merely opinions of the authors, many of whom did not participate in any research, nor did the IPCC ever attempt to reproduce the findings of any research. The IPCC TAR was simply a reporting of the various hypotheses deemed acceptable by the authors to advance their predetermined results. Note the IPCC was created in 1988 after the theory of Global Warming was advanced and the WMO and UN used the term Climate Change because they wanted to avoid anyone thinking that they lacked objectivity regarding Global Warming, Climate Change was broad enough to deflect criticism and left them room to broaden their assessments as needed. Anyone reading the reports will know that the primary focus of the panel is on Global Warming and not all Changes in Climate as some would now wish you to believe.

The theory being advanced is Anthropogenic Global Warming due to Accumulation of Greenhouse Gases in the Atmosphere and that should be the framing of the policy debate. Some argue that the debate is over on the science and that a consensus exists, while others advance the precautionary principle as a valid position. Neither are scientific positions nor can be used to support or disprove the validity of the theory in question. Here is the one thing that you need to know and it is taken directly from the definition of scientific theory "A theory is valid as long as there is no evidence to dispute it. Therefore, all theories can be disproven.". The debate should be is there evidence that can dispute the theory, and if there is not, then it is still valid, if it can it is no longer be an accepted scientific theory. I do not want to have this debate here, but someone in the Government should be hosting this debate much more publicly than in a Committee Hearing due to its potential impact on the policies of the USA.

Energy is Complicated

Energy is a very complicated issue because of the different forms of energy and the parallel and branching nature of some of the energy resource's utilization in niche and non-energy products. You hardly ever hear this being discussed by anyone in the debate because the people involved are either looking too broadly or too narrowly at the issue. I will not get too far into it but the basic point to take away is that numerous products which may seem unrelated to the energy issue actually rely on distillates and extractions from the raw energy resource and this complicates the whole energy complex. ex) Rubbers and Plastics.

Energy Policy via Cap and Trade

If we take AGW as a concern and something that needs to be addressed on a massive scale as the President suggests in his plans of an 80% reduction below 1990 level by 2050 and set the goals by capping the emissions we are in for a much harder time than if we did not set emission limits. The reason is that rushing the changes needed on an artificial timeline is a recipe for failure in the future and can lead to huge unintended consequences such as the blow back against the bio-fuel industry in early 2008 as many had predicted this industry contributed to rising world food costs. That is on top of the amazing financial burden that Cap and Trade represents when simply looked at as a transfer of capital into the hands of basically Government Sponsored Private Enterprise, the PTC or production tax credit is a payment to these companies that without it would not exist, does this sound familiar taken in the the context of GM and Chrysler and the Financial Industry? It will place on all Americans yet another government program that will grow in size and scope, as Alternative Energy companies expand capacity so too will the demand for subsidy and could quickly outpace the budgeted amounts when it reaches 4-6% of the electrical generation capacity. Yet the PTC is small potatoes when compared to the total taxation burden making up just 23% of the revenue collected. If the energy issue is high priority and AGW is real should not 80% of the revenue generated to combat these problems actually be targeted at the problems? If 23% or 150 Billion is enough resources than why not only raise that amount via the Cap and Trade policy, why design  it four times larger and hence have it be four times the burden on the broader economy unless the real reason is to leverage a "crisis" and use it to raise tax revenue for the Government?

An Energy Solution for North America

So here are some steps towards a solution in point form because I am as tired of writing this as you are tired of reading it by this point...

1) Enact a Sensible CAFE fuel standard that increases every 5 years at 2.5 MPG per increment. Do not mandate technology such as PHEV, EV or other,  let innovation work.

2) Expand the Natural Gas distribution network and replace all heating oil fired furnaces and boilers to ease Oil Demand.

3) Leverage LRT and other Electrical Mass Transit System Infrastructure to Allow for Freight Handling and Distribution ( such as overhead electric bus and trolley routes )

4) Increase production of coal to liquids refining for Freight and Heavy Industry Use

5) Increase domestic production of Oil and Gas to help increase Oil Supply.

6) Increase Electrical Generation to 20% ahead of projected growth to make sure we have a Secure, Reliable, Cheap supply of Electrical Energy. Advance the Grid Technology but keep overall Grid Security

7) Build Nuclear Power stations at least in the quantity to Replace the ones reaching the end of their lifecycle that are currently operating to avoid a rapid generation fall-off.

8) Construct Step Dam Generators on all Current Hydro Electric Facilities in North America to double Hydro Generation Capacity.

9) Construct Coal and Gas Power Stations using the cleanest Technology available at planning in an attrition cycle for retiring plants.

10) Eliminate the PTC for renewable and alternative energy, force the producers to innovate or scale up to compete.

11) Eliminate all electrical generation subsidies for coal and gas, let forced over capacity work to mediate pricing.

12) Eliminate the forced purchasing of micro-site on-grid generation, micro solar and wind producers must use it or lose it just like all industries.

13) Develop pumped storage/ heat storage or mechanical storage systems to assist in reclaiming lost generation.

14) Clear the red tape for all Energy Projects and streamline the Environmental assessment process to cut 3-5 Years off of development cycles and reduce costs by 20%.

If we do all of these plus as many others we can think of that do not require MASSIVE Government Investment but only changes to regulations and policy we can get ahead of energy requirements without burdening the economy, plus reduce Greenhouse Gases through orderly replacement of old technology and arrive at a place where the best technologies are working to provide us with the safest, cleanest, cheapest and most reliable sources of energy. Some of the Government Programs I agree with, such as the modernization of vehicle fleets and updating of Government Buildings, if coordinated and spread out over time to insure the best solutions are used as they become available this program can become a near perpetual source of private sector employment and will achieve cost savings long term, this should be built into the operating budgets of each agency or department and not subject to special funding.

I will post more in the future on these ideas but this is a good start and since I have gone far beyond the accepted length for a blog post I will leave it here.

Footnotes:

(1) A scientific theory summarizes a hypothesis or group of hypotheses that have been supported with repeated testing. A theory is valid as long as there is no evidence to dispute it. Therefore, all theories can be disproven.

(2) Rigorous, systematic approach, designed to eliminate bias and other subjective influences in the search, identification, and measurement or validation of facts and cause-effect relationships, and from which scientific hypotheses may be deduced.

(3) to assess on a comprehensive, objective, open and transparent basis the scientific, technical and socio-economic information relevant to understanding the scientific basis of risk of human-induced climate change, its potential impacts and options for adaptation and mitigation. IPCC reports should be neutral with respect to policy

Just looked at my Credit Card Statement and for the third time they have dropped my rates over the last 18 months, this one was huge a 2.5% drop. I will not give what the rates were/are because that is personal information but the point is this the Congress has stated repeatedly that Credit Card issuers were raising rates on even good credit risk customers for no reason. Even the President was on the bandwagon slapping them down.

So if they are reducing my rates, and I am nobody special, how can Democrats on the Hill make these claims when it obviously is not true because if they are doing this for me then I am sure I am not alone in receiving these lower rates. Yet they are using this as a catalyst to reach the hand of Government into the Financial System even farther and calling for price controls and new regulations.

This is just another product from Obama Central Planning to add to the Poor-Away line of fine social programs to make sure the least responsible among us get the best advantages. This is "Poor-Away Plus with the Credit Card Option". If you look at the actions of this Administration they are completely attempting to invert the financial system that is based on Credit Worthiness and provides discounts and advantages for those who are lower risk.

Another Fine Product from Obama Central Planning

Poor-Away for Homeowners - Rates as low as 2% subsidized by the taxpayer for people with bad credit who bought a house they cannot afford. While good credit risks, with down-payments get around 5% APR on a refinance with no subsidies available. This is the New World Order where political correctness and equality is achieved at the sacrifice of self-determined worth and reward for good behaviour and incentives to promote responsibility for ones choices.

The same is happening now with credit cards the advantages of being a lower risk borrower are being stripped from the system in some strange sense of fair play and equality that is a slap in the face of hard working people with strong sense of responsibility and accountability for their actions.

I now know for sure that the Bull Move in a Bear Market Rally is running out of steam because analysts are starting to turn bullish and usually miss the move in these situations. There are many smart people talking up the markets right now, and since the market is moving on technicals and not fundamentals, we are looking at a sideways move for a little bit, I am not sure of the exact date when it will retrace the lows but before the 3rd quarter is my guess. Now I called this rally, just it happened much faster taking days not weeks after I said it was coming to emerge, and since my timing was off I am apprehensive of making a more accurate call.

There is a logic behind my position and it is in two parts, first many people are turning bullish which is a good sign the rally is fading, also the market is a traders market and moving in ranges not due to earnings and fundamentals but based on technical range settings. The second is that the signs of the economy turning as Jim Cramer announced on his show Mad Money on Thursday April 30th, 2009 are being misread by nearly everyone, that Jim is the Big Bull in the Bears Den even symbolically killing off the bear's arguments with his interpretations of minor changes in the data is indicative of him missing the point. He can be as Bullish as he wants and as a stock analyst he is beyond reproach, he sometimes misses the forest for the trees, or the Sloth (a group of bears) for the Bears.

The Explanation is JIT What the Economy Needs

You have heard the data points, dry shipping is up, cardboard boxes orders are up, Inventories are down, new orders are rising and consumer spending is up. Sounds like a turn in the economy does it not? IT does when you look at each separately and re-enforcing to each other, I agree. However (you knew that was coming) when you look at it as a chain of events you can see what is happening and why it means a bottoming but not a turn. First thing is Inventories require CREDIT to create, which is the one thing business is struggling with in this higher lending standards world, reducing Inventories reduces the need for credit or frees credit to be used for other purposes such as payrolls. So declining inventories are a sign of financial weakness.

I will explain the rest of the turn signals using a modern business concept called JIT (Just in Time) manufacturing which simply means you only build for existing orders and not to have Inventory. First clue is shipping, during the upside shipping utilization is very high and manufacturers are forced to produce Inventory that sits in Ports, Terminals and Rail yards for months, this backlog has all cleared out of the system along with the inventories. The upturn in shipping means there is capacity to utilize in a JIT supply chain and there is no need to build up inventories so as new orders come they are being flowed through faster, hence the uptick. Next is new orders, the economy is impaired not destroyed, there is still consumption, so retailers have burnt through their Inventories and pre-orders and are now selectively restocking after holding orders back. Consumer spending, that one is easy, pent up consumer demand coupled with tax refunds are hitting the malls, we had Spring Break typically a time of increased spending and people who are in the 90% of people still working are re-stocking the pantry, the real indication of a turn is when spending increases at the more expensive retailers and stops increasing at the Dollar Stores and Wal-marts. Note the increase in the individual tickets among new customers which averages 40% more, this is the trade-down effect for upper income households. Finally boxes, new orders plus low inventories means new boxes regardless of the supply chain model used.

The end take away is that the manufacturers are going to a much leaner less credit dependent distribution and manufacturing model in response to the new financial realities, this is a sign of bottoming not recovery and points to a much different economic model moving forward. Think of it this way, it is like bungie jumping, the indicators will go up and down until the weight of the jumper ( in this case the real economy) finally reaches a point of balance against the elastic or markets, with each move being smaller and smaller.

In my opinion if we can keep transportation infrastructure on pace to handle a recovery and maintain the JIT model, this model collapses when transports cannot keep up with orders, it will be far better overall. The downside (always is one) is of course it is harder to fix input costs so price volatility may be a problem, which can be solved by maintaining a better margin cushion. Energy is key here though, if we can reduce energy costs by 20%-30% through efficiency and supply, Cap and Trade simply will trade efficiency gains for higher energy costs and will result in a Zero-Sum game for manufacturers, we need to reduce the overall cost for energy by increasing the supply dramatically, especially in electricity generation. That is the economic advantage that can be leveraged to compete in the global markets, wages and taxes will never be adjusted enough to match other countries so the advantage has to be the one thing we are good at, producing massive amounts of energy.

Just saw this on Small Dead Animals and it spawned a rant that I posted in the comments section, then like all innovators I am now taking it one step farther....

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This is a parody and is for entertainment purposes only, so do not get your knickers in a knot!

Background: Barack Obama' s web site places testimonials from people helped by his stimulus plan or with positive remarks, just like cheesy print ads for things like male enhancement pills...