Wednesday, December 31, 2008

Happy New Year! Earth's Greatest Hits

For this last post of 2008 I'll link to one of the more optimistic stories I know:

The Mix Tape of the Gods

Published: September 5, 2007

THIRTY years ago today, the Voyager 1 space probe — a one-ton robotic craft whose long antennas make it look rather like a spider the size of a school bus — was launched from Cape Canaveral, Fla., on a mission to reconnoiter Jupiter and Saturn. To succeed, Voyager would have to survive five years in the vacuum of space, where it would encounter cosmic rays, solar flares, the hurtling rocks and sand of the asteroid belt, and Jupiter’s intense radiation bands.

The probe did all that, transmitting back reams of scientific data and memorable color photos: of the sputtering red and yellow volcanoes of Jupiter’s moon Io; of the shimmering blue ice that shrouds Io’s fellow satellite Europa, beneath which a liquid ocean is suspected to dwell; of Saturn’s myriad rings and the murky mysteries of its orange satellite, Titan, whose hazy atmosphere is thought to approximate that of the early Earth .

Having accomplished its mission, Voyager 1 might have quietly retired. Instead it remains active to this day, faithfully calling home from nearly 10 billion miles away — so great a distance that its radio signals, traveling at the speed of light, take more than 14 hours to reach Earth. From Voyager’s perch, the Sun is just another star, south of Rigel in the constellation Orion, and the Sun’s planets have faded to invisibility.

Like its twin, Voyager 2 — which dallied behind to examine the outer planets Uranus and Neptune and is departing the solar system on another trajectory — Voyager 1 is approaching the edge of the solar system. That limit is defined by a teardrop-shaped bubble called the heliosphere, where the solar wind (particles blown off the Sun’s outer atmosphere) comes to a halt.

If all continues to go well, Voyager should pierce the heliosphere’s outer skin by around 2015. It will then depart into the void of interstellar space, where it is destined to wander among the stars forever.

Mindful of this mind-boggling fact, the astronomers Carl Sagan and Frank Drake persuaded NASA to attach a gold-plated phonograph record to each of the Voyager spacecraft.

Containing photographs, natural sounds of Earth and 90 minutes of music from all over our world, the record was intended to preserve something of human culture beyond what an intelligent extraterrestrial, encountering the craft at some far-distant time and place, might infer from the spacecraft itself.

The information etched into the grooves of the Voyager record is expected to last at least one billion years. That’s a long time: A billion years ago, life on Earth was first venturing forth from the seas....MORE
Here's the cover of the disc (from NASA)-

Golden Record
Read more about the Golden Record Cover
(Click on the image for a larger view)

Here's a description of what the markings mean (you want your recipient to enjoy their extraterrestrial 'Howdy')

Hydrogen Transition This illustration on the lower right of the Voyager record cover could be considered the "Rosetta Stone" of the record, as it provides the key to interpreting the remaining cover illustrations. This illustrates the hyperfine transition of the hydrogen atom where it changes between its two lowest states. The time interval for this is a mathematical constant equal to 0.7 billionths of a second, or more precisely 7.04024183647E-10 seconds. The 1 between the two states indicates the length of the transition should be equal to a binary 1. The binary numbering system, with just two symbols, 0 and 1, is the simplest numbering system, and is more likely to be understood by other civilizations than our decimal system adopted simply because humans have 10 fingers. With hydrogen being the most abundant element in the galaxy, any advanced civilization likely to encounter the Voyager should be able to interpret the meaning of this diagram....MUCH MORE

Here's what's on the disc (NASA)-

Scenes From Earth

Greetings From Earth
Sounds Of Earth

Here are the first ten tunes on the musical playlist-

Music On Voyager Record

  • Bach, Brandenburg Concerto No. 2 in F. First Movement, Munich Bach Orchestra, Karl Richter, conductor. 4:40
  • Java, court gamelan, "Kinds of Flowers," recorded by Robert Brown. 4:43
  • Senegal, percussion, recorded by Charles Duvelle. 2:08
  • Zaire, Pygmy girls' initiation song, recorded by Colin Turnbull. 0:56
  • Australia, Aborigine songs, "Morning Star" and "Devil Bird," recorded by Sandra LeBrun Holmes. 1:26
  • Mexico, "El Cascabel," performed by Lorenzo Barcelata and the Mariachi México. 3:14
  • "Johnny B. Goode," written and performed by Chuck Berry. 2:38
  • New Guinea, men's house song, recorded by Robert MacLennan. 1:20
  • Japan, shakuhachi, "Tsuru No Sugomori" ("Crane's Nest,") performed by Goro Yamaguchi. 4:51
  • Bach, "Gavotte en rondeaux" from the Partita No. 3 in E major for Violin, performed by Arthur Grumiaux. 2:55...
You can listen at

On April 22, 1978 during an SNL segment, "Next Week in Review" it was announced that after capturing the Voyager spacecraft, the first alien message received by earth would be:

"Send more Chuck Berry."

Episode 18/Season 3 is considered the greatest SNL episode ever.
Sources: CollectSpace, The Hits Just Keep on Comin', Amazon.

2008: The End of the Beginning

When in doubt, lift a quote snippet from Churchill.
On Sunday, September 14, 2008 I put up the post below. It was the night before Lehman Brothers filed their chapter 11, two days before AIG became a 79.9% subsidiary of the U.S. Treasury and a week-and-a-half before Washington Mutual was seized by the OTS and put into receivership:

One Way or Another We Will Get Through This

I've got to get some rack time but before I head out I'll get a little more personal than I usually do. I have been at the market my entire adult life and have seen the best and worst of human nature. To augment personal experience I have studied and read tens of thousands of pages, everything from popular histories to incomprehensible academic works.

The one lesson worth knowing is: "There will always be opportunity". It may not be easy and it may not be fast but the opportunity is there every morning. The place to start is to PAY ATTENTION. That alone will get you into the second quartile.
Take a look at the first decade of the last century in the chart below:

A forty percent drop from 1901 to1903. A 120% up move in the next two years. Followed by a 50% crash in the next 23 months. Wrapping up with a 60% 13 month run to the upside.
Two Panics, a Presidential assassination and an earthquake.
The conditions are different but we'll get through this.
Chart from Dow Jones Indexes.

If you are among the 93% who have a job, count your blessings and figure out how you can add value to whatever you do to earn your daily bread.

If you are out of work, re-read the "one lesson worth knowing".
Depend on yourself but remember that human beings are social critters.
In dollars and cents terms this means that every check you've ever cashed was signed by someone else.
A customer, an employer, mom, Uncle Sam etc. Get out there, retreat is not an option.

New Energy Congress: Top 100 Technologies

We last visited the NEC list on Jan. 31, 2008. Here's the latest iteration:

Top 10

Since April, 2006, the New Energy Congress has been systematically voting on the following energy technologies, reviewing a new technology every few days, and weighing it against the criteria they established. Last update - Nov. 17, 2008.

  1. Validated | Available for Commercial Purchase | Directory:Solar >
    Stirling Energy Systems utility solar - 20-year purchase agreement between Southern California Edison and Stirling Energy Systems, Inc. will result in 20,000+ dish array covering 4,500 acres capable of generating 500 MW, at a cost competitive to grid power. (
  2. Engines >
    Cyclone Technologies Schoell Cycle Engine - The Cyclone Engine is designed around the principles of an external combustion engine, to efficiently use any liquid or gaseous fuel and create more power and significantly less emissions than current gasoline or diesel powered internal combustion engines. (
  3. Validated | Directory:Hydrogen from Water / Solar Hydrogen / Waste to Energy >
    Solar Hydrogen Energy Corporation (SHEC) - Has developed a process that will convert landfill and other waste methane into clean hydrogen, using the power of the Sun for the reformation, at a price comparable to traditional hydrogen production methods. ( (NEC Specialist: Tai Robinson)
  4. Geothermal >
    Raser is Rapidly Deploying Cost-Effective Geothermal Power - Instead of using electricity to turn a heat pump to cool a liquid, Raser runs a warmed liquid through a heat pump to generate electricity. With their rapid, low-cost deployment capability, they could maximize the U.S. geothermal capacity within ten years. (
  5. Directory:Nuclear >
    Colliding Plasma Toroid Fusion - Electron Power Systems Ltd. is developing a process that remains stable without magnetic confinement, by using background gas pressure for confinement instead, could provide clean, non-polluting energy technology at one-tenth the cost of present energy generation. (
  6. Directory:Batteries >
    Nanotube Super Capacitor Battery - MIT researchers are developing a battery based on capacitors that utilize nanotubes for high surface area, enabling near instantaneous charging and no degradation. Estimating ~5 years to commercialization.
  7. Nanotech / Thin Film Solar >
    Nanosolar a leader in the drive to make solar affordable - Nanosolar has developed proprietary technology that makes it possible to simply roll-print solar cells with performance and durability similar to silicon-wafer cells, while cutting the costs, making solar affordable. The long-term limitation will be the growing scarcity of Indium. (
  8. Directory:Nuclear >
    Focus Fusion - Purports to be a far more feasible and profoundly less expensive approach to hot fusion, in contrast to ITER. Lawrenceville Plasma Physics' is developing the Plasma Focus Device for hydrogen-boron nuclear fusion. 4-7 years to commercial. 1 cent / kWh anticipated energy generation cost. ( (NEC Specialists: Thomas Valone)
  9. Validated | Directory:Solar >
    Enviromission Solar Tower - Enviromission Solar Towers are like an inverted funnel, with a wide skirt to collect air to then turn a turbine in the tower. ( (
  10. Engines >
    Quasiturbine Engine - This four-chamber Wankel-like engine is capable of burning fuel using photo-detonation, an optimal combustion type. The design can also be used as an air motor, steam engine, gas compressor, hot air engine, or pump. (
Here's the site for the other ninety: -- Pure Energy Systems Wiki

Buffett Wins $224 Million Storm Bet With Florida

We have an abiding fascination with risk analysis, hurricanes and Warren. Bloomberg puts them all in one story:
Billionaire Warren Buffett’s Berkshire Hathaway Inc. won a $224 million bet that Florida would escape major damage from hurricanes this year.

Florida’s option agreement that would have compelled Buffett to buy $4 billion of bonds to finance storm recovery will expire Dec. 31, Dennis MacKee, a spokesman for the State Board of Administration, said in an interview today. The state earlier paid Buffett $224 million in return for his commitment to buy the debt if needed. The calm season meant Florida had no need to raise the money.

Florida turned to Omaha, Nebraska-based Berkshire to erase doubts about the state’s ability to raise money after a hurricane. The state sells coverage to homeowners and private companies at below-market rates, and plans to fund cash shortfalls in the bond market. Finding investors could be a “very challenging task,” Fitch Ratings said in March.

“It would’ve been difficult to issue bonds in this environment, so I do think it ended up working out well for everyone involved,” MacKee said. “We were fortunate to have a mild hurricane season.”

Under the terms of the deal disclosed in July, Berkshire agreed to buy the debt if the state’s fund incurred $25 billion in losses by yearend. Berkshire would have collected 6.5 percent annual interest over the 30-year life of the bond....MORE

President-elect Obama: The Agenda


President-elect Obama and Vice President-elect Biden have developed innovative approaches to challenge the status quo in Washington and to bring about the kind of change America needs.

The Obama Administration has a comprehensive and detailed policy agenda. Among many important domestic and foreign policy objectives, priorities of the Obama Administration include: a plan to revive the economy; provide affordable, accessible health care to all; strengthen our public education and social security systems; define a clear path to energy independence and tackle climate change; end the war in Iraq responsibly and finish our mission in Afghanistan; work with our allies to prevent Iran from developing a nuclear weapon.

Stimulus: How the Hell is the Treasury Going to Sell an Extra Trillion of Debt?

From Across The Curve:

Funding the Deficit

The incoming Obama Administration and its acolytes in Congress have floated various trial balloons regarding the size of the next stimulus package. Most of the press reports on the topic place the size of the package at something in the neighborhood of $750 billion. That is an enormous sum of money and will place significant stress on the capital markets.

I think that the Treasury will be hard pressed to raise that amount of money without some novel financing ideas. In my opinion, the amount to be financed is so massive that I think that they will raise the preponderance of the money in the coupon market rather than the bill market. This bill is so large that they will not relish the prospect of facing continuous roll overs for this new round of debt.

That raises of the new and troubling question of how to raise that much money. Existing issue sizes are already large. The most recent 2 year and 5 year duet raised $38 billion and $28 billion, respectively.

The new monthly 3 year note raised $25 billion at its debut in November but was quickly bumped to $28 billion in December....MUCH MORE

And in the comments:

By Kevin Mackey on Dec 29, 2008

Is the more relevant question, “How much is the deficit funding going to cost?” compared to the question of “How are we going to fund the deficit?”

They both have ties to one another, but in the event that we are forced to turn to monetization, the peripheral effects on the dollar and the cost of inflation, in my opinion, outweigh all other concerns....

Journal of a Plague Year: Faith in Markets Cracks Under [$30 Trillion] Losses

In August 2007 subprime took over the headlines but the equities markets didn't seem to understand and moved higher, with the DJIA setting it's 14,164.53 all-time high on October 9.
On Thursday September 13, 2007 I realized something had changed. The BBC's Robert Peston reported that Northern Rock was seeking emergency funding, the Financial Times relayed the "All Chauffeur Alert" that the limos were pulling into the Bank of England for a 9:30 p.m. meeting.
Depositors started lining up outside of NRK branches and I started putting up linkposts. When
Bear Stearns collapsed in March '08, I said:
A quick word of explanation. During the run on Northern Rock we were thinking of the depositors and how awful the uncertainty must be. There were very few bloggers onto the situation and even the financial journalists didn't seem to grasp how anachronistic a bank run was in the 21st century, at least that first weekend.
So we went out and got what we considered to be reliable sources we could link to and a thousand people got pointed to sites that weren't talking rubbish....
Here's the headline story, from Bloomberg:
It has been a year of record misery: the largest bankruptcy, bank failure and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out....

...“We had what was for all intents and purposes a systemic bank run for the first time in 70 years,” said DeRosa, whose fund is up 25 percent this year. “This ended our belief that financial panics were a thing of the past. That’s why this is a transcendent event.”

The price tag has been transcendent, too. Global stock markets lost about half of their value in 2008, or $30.1 trillion dollars. In the U.S., $7.2 trillion of shareholder value was wiped off the books, as the Standard & Poor’s 500 Index fell 39 percent through Dec. 30 and the Nasdaq Composite Index dropped 42 percent...MORE

In September of this year, in the days leading up to the failure of Washington Mutual, I started quoting a line from "It's a Wonderful Life":

"Don't look now but there's something funny going on over there at the bank, George..."
Here's a clip:

Scenarios for 2009: Straight Lines, Moonshots, EKGs, etc.

From Infectious Greed:

Nothing is ever a lock in the world of capital markets, and nothing ever happens the way it feels like it should, so let's think about some scenarios for 2009. None of them are pure plays, so to speak, and people will likely find something appealing/unappealing in more than one. They are, however, ways to mull some directions things could go from here.

To explain my motivation in a different way, I generally think it's important to have in the back of your head what you're expecting, what you're worried may happen, and what you think is impossible. In my own case, I then try to insulate yourself to varying degrees from the latter two scenarios, while positioning for the former.

1) The Straight Line Lower
This one is the favorite of uber-bears and logicians and the Schiff-ian sorts, and it works out pretty much as described: The economy and markets sink deeper into depression as it becomes obvious to all sentient sorts (and most semi-sentients) how egregious credit market excesses have been. We see massive wipe-outs in retail, commercial real estate, tech (yes), insurance, etc., plus a give-up on GM later in the year. Bears are on TV non-stop, and at least one bear gets a column in a major magazine/newspaper/webthingie, assuming any sort of media industry still exists 12 months from now.

In terms of key bits and pieces of the financial machinery, the dollar tumbles, gold soars, Russia collapses, and global markets tank, with worldwide trade tumbling by something like what happened during the Great Depression, on the order of 30% or more. There are no signs of inflation, what with deflation everywhere we look. We maybe get out of the year without a new war though, and the Colorado snow pack looks decent, so we have that going for us.

Dow: 5,000. Nasdaq: 900. S&P 500: 500 Oil: $25 Gold: $1700

2) The Non-Boring Flat Line
No-one is talking about this, so it's at least worth throwing into the mix: The market races higher early in the year as Obama-nomics looks real and fun, and then tanks mid-year as the economy refuses to get off the floor despite lots of happy-talk, a few new bridges across things, and some state bailouts....MUCH MORE

California: Young Girls Aren't Coming to the Canyon

From Mr. Mortgage via Econompic:

"Scariest Housing-Related Chart Ever"

Mr. Mortgage, with data from DataQuick, posts the "Scariest Housing-Related Chart Ever" (though he only shows the data... below is the chart):

Down almost 50% from peak levels in less than 2 years! In the comments section, BertDilbert lays out what it all means to California very well:
This decline of housing values in CA is absolutely going to destroy seniors who had counted their house value in their net worth, and planned on that being there for retirement....MORE

Here's Twelve-Thirty on the Ed Sullivan Show:

I used to live in new york city
Every thing there was dark and dirty
Outside my window was a steeple
With a clock that always said 12:30

Young girls are coming to the canyon
And in the morning I can see them walking
I can no longer keep my blinds drawn
And I can't keep myself from talking....

Well, that last line is still true.

Tuesday, December 30, 2008

Sun, Stone and Stimulus

Yeah, yeah. I'll be posting on "Obama plays". For the next couple years.
In the meantime here's MarketBeat:
A number of strategists have put forth the theory that the beginning of a new presidential administration will spark a bit of a market rally, in part because it has happened in the past, and in part because of expectations for a stimulus package focused on infrastructure.

The charts are showing signs of this in sun and stone stocks. Giving a rough outline for his economic stimulus plan in late November, President-elect Barack Obama spoke of infrastructure improvements to bridges and schools, as well as talking up solar panels, wind farms, and fuel-efficient cars.

The details of that plan will likely be of great interest to investors in solar stocks and in stocks like Vulcan Materials and Granite Construction, stocks that have done well in the last two months.

First Solar, a maker of solar panels and builder of solar power plants, is trading around $136, up 59% from its low in November, cutting its losses for the year to less than 50%. First Solar, a stock-market star in late 2007 and early 2008, is set to have another run in early 2009 because of gathering momentum, technicians say....MORE

I posted a comment on cement and CO2. Another angle is the Polar Bear's "threatened" status. Should it be up- (down?) graded to endangered, I'd assume the U.S. cement industry is done for.

(Uh Oh) Gold timers more bullish than they've been in five months

As a follow-op to yesterday's "Hot War in Gaza, Cold War in Pakistan and Gold is Only $880 an Ounce? Sounds Like a Short to Me.", MarketWatch reports:

The editor of the average gold-timing newsletter is more bullish today than he has been in nearly six months.

That is not encouraging from a contrarian point of view.

In fact, the last time the average gold-timing newsletter was more bullish was July, when gold
bullion was trading for nearly $1,000 an ounce. Gold or less promptly commenced a two-month correction in which it lost about $200 per ounce.
Consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold market exposure among a subset of short-term gold-timing newsletters tracked by the Hulbert Financial Digest. As of Monday night, the HGNSI stood at 60.9%.
When gold bullion approached the $1,000 level in mid July, in contrast, the HGNSI was barely higher, at 64.3%.
To be sure, a contrarian analysis of gold sentiment over the past year wasn't always as successful as it was this past July. But it's been right more often than wrong, not only in 2008 but over the last two decades that I have been carefully tracking gold market sentiment....MORE

Gold was recently trading at $874.30.

Bumpy Crop: Farming's Sudden Feasts and Famines

From the Wall Street Journal:

As Grain Prices Rise and Fall and Perhaps Rise Again, Growers Struggle to Navigate a New Age of Volatility and High Costs

Jesup, Iowa

Benjamin Riensche has just come off two of his best years in farming. But like growers all over the globe, he is in the midst of a more turbulent era of sharply rising and then suddenly falling prices.

Now the 47-year-old, who grows corn and soybeans across 10,000 acres in Iowa, fears he will incur losses in 2009 that would be his first red ink in 16 years. His revenue is falling, but the costs of seed, fertilizer and machinery have remained high. Mr. Riensche bought most of his supplies months ago, when grain prices were still high. Many of his suppliers are still trying to pass along the higher costs they absorbed in recent years for everything from metal and chemicals to natural gas. To lower his costs, he could idle land, but figures raising a crop at least gives him a chance to benefit if prices move back up, as some predict.

"I never thought the stakes could get so big," Mr. Riensche says. "We've gone from the nickel slots to world-class poker."

All this is happening even though the world has been producing more grain than ever. Demand has grown faster than farmers could increase their production most years of this decade, helping to drain grain reserves. Unusually good weather in most of the world this year is refilling grains stocks once again. But the situation could easily change. Some economists worry that the world will consume more grain than it produces by 2010, particularly if oil prices recover enough to make the production of ethanol from corn more profitable again....MORE

Monday, December 29, 2008

South Korea Sets Sights on Efficiency (and 12 New Nukes, 11 LNG, 7 Coal and 1 Oil Fired Power Plants)

I didn't know that anyone was building oil-fired power plants. The first part of the headline is from earth2tech:

...South Korea Sets Sights on Efficiency: The South Korean government announced a goal of improving energy efficiency by 11.3 percent by 2012, and allocated $14.2 billion for efforts to reach it.Green Car Congress
The second part is from EnergyDaily's Nuclear Power Daily:

SKorea announces 28.5 bln dollar energy plan

...The ministry said 12 new nuclear power plants -- including eight under construction -- will be completed by 2012.

Eleven of the thermoelectric power plants to be built by 2022 would be fuelled by liquefied natural gas, seven by coal and one by fuel oil, it said.

South Korea, which relies heavily on oil imports, has tried to reduce its dependence on crude, diversify energy sources and cut down on the emission of greenhouse gases amid increasing power demand at home.

The country now has 20 commercial nuclear reactors and 85 thermoelectric power plants fuelled by either coal, gas or oil.

Nuclear power plants meet 34 percent of the country's total electricity demand this year, and they will cover 48 percent by 2022, the ministry said.

The Year in Smart Grid

From greentechmedia:
Smart grid technologies got a lot more VC interest in 2008, and major players like IBM are upping their efforts as well. Maybe that's because of the utility-scale size of the potential spoils.
There's something a little sci-fi like about the idea of a "smart grid" – an electricity transmission system that can monitor and control the flow of power between utilities and their customers to avoid blackouts, smoothly incorporate distributed power generation and even use plug-in electric vehicles as grid storage batteries....MUCH MORE
Many names and stories.

Agriculture: Turning carbon into cash

From the Federal Reserve Bank of Minneapolis' fedgazette :

Offsetting greenhouse-gas emissions is a burgeoning district industry with an uncertain future.

The grass is greener on Lisa Schmidt's ranch. Last March she and her husband enrolled their 3,500 acres of rangeland near Conrad, Mont., in a program that pays them for every ton of carbon dioxide (CO2) the prairie grasses suck out of the air. Under a contract with a Montana aggregator of carbon credits, the couple has agreed to practice rotational grazing on their land for three years. Moving their cattle and sheep on a regular basis from pasture to pasture will promote healthy root growth and increase the amount of carbon stored in the soil. Schmidt expects to receive a $1,200 check for those rangeland credits by the end of the year.

Together with a similar amount earned for growing grass for hay, the money produces extra income from ranching practices that Schmidt and her husband were committed to before they had even heard of carbon credits. "We're trying to do it right, and take care of the land," she said. "The credits are just a bonus; they'll cover our property taxes."

Schmidt is one of hundreds of landowners in the Ninth District who participate in a small but rapidly growing U.S. market for carbon offsets, credits generated by projects that—at least in theory—counterbalance greenhouse-gas emissions produced by industry and other human activity elsewhere. "No-till" farmers, timber operators and owners of recreational woodland are also making money by sequestering carbon on their land....MORE

Hot War in Gaza, Cold War in Pakistan and Gold is Only $880 an Ounce? Sounds Like a Short to Me.

On Friday David Gaffen put up a post at MarketBeat, "Gold, Not so Golden in 2008" that may have set a record at MarketBeat for number of comments:
It’s been a terrible year for most major asset classes — stocks, real estate, hedge funds, and commodities. One of the assets that investors might have expected to do a bit better in such an environment, when the vast majority fled to higher ground, was gold. But gold’s performance this year has been a disappointment.

As of Wednesday, gold closed at $847.10 per troy ounce, up 1.5% on the year. Compared with a 40% decline in the Standard & Poor’s 500-stock index and a 60% drop in crude oil, that’s just fine — it is, after all, a return of capital. But analysts say gold failed to capitalize during market turmoil because for much of the year, gold was as much a part of the craze as any other asset.

“We weren’t necessarily seeing the rush to safety of this safe-haven market that gold has been in the past,” says Darin Newsom, DTN senior commodities analyst. “We were seeing a get-me-out effect in all commodities, and there was no belief that the gold market was any more sustainable than any other commodity.”>>>MORE

Not that they were intelligent comments:

Jon Nadler is a f—- idiot aand you denigrate your newspapers’reputation by publishing his views.

Comment by John Embry - December 26, 2008 at 12:54 pm

Yet another example of how Rupert Murdoch is doing whatever he can to discourage people from investing in gold so he can pump up the US economy and the equities markets.

Comment by Numis - December 26, 2008 at 1:36 pm

David Gaffen is a filthy criminal accomplice.

Comment by Heard Junk - December 26, 2008 at 2:04 pm

I have read a good number of puerile, idiotic stories about gold this year, but this one takes the prize. Mr. Gaffen clearly struggled to string together 455 words to meet a deadline and turned in a stinker replete with shrill tone and bolding a down-on-his-luck mattress salesman would find excessive and cheesy.

And then there is dear Jon Nadler. He has been evangelizing deflation fervently for months and his smug writing easily betrays his very irrational need to have gold stay in a range between $500 and $700. Why? Has his boss figured out he made wrong-way bets that risked the business?

Comment by DailyGrind - December 26, 2008 at 2:27 pm

I’m just amazed that the WSJ would publish such a poorly edited article:

“For now, investors will have to contend with the fact that it was one of the few assets that did not lose anyone money.”

I have to believe that David Gaffen (gaffe is the French word for “mistake”) meant to write that “Investers will have to be content with the …”; as it is written, that closing sentence does not make much sense.

Comment by The Pikaia Group - December 26, 2008 at 2:53 pm
And 196 more. On November 20 we wrote:
...Chartmeisters have a general rule "The longer the base, the bigger the move". I have to be careful here, I am predisposed to be short but I've gotta say, this chart is looking more and more like a pop to the upside....

The next day gold was up $42.00 and we posted "Climateer Investing on Gold: Sometimes You Get Lucky". Today gold is trading hands at $880.40, up $9.20 and I am thinking of going short.
Looking at Kitco's 1-year chart you see the series of lower highs and lower lows that defines a downtrending market. The test will be in the $910 area. If the shiny stuff can't get there and hold, it confirms the downtrend (for me) and may go all the way back to its November $680 spike bottom:
click to enlarge
An India/Pakistan nuclear war would be bad for the climate too.
From Reuters:
SCENARIOS: Assessing risks of India, Pakistan confrontation

From EurekAlert:
Regional nuclear conflict would create near-global ozone hole, says CU-Boulder study

A limited nuclear weapons exchange between Pakistan and India using their current arsenals could create a near-global ozone hole, triggering human health problems and wreaking environmental havoc for at least a decade, according to a study led by the University of Colorado at Boulder.

The computer-modeling study showed a nuclear war between the two countries involving 50 Hiroshima-sized nuclear devices on each side would cause massive urban fires and loft as much as 5 million metric tons of soot about 50 miles into the stratosphere, said CU-Boulder Research Associate Michael Mills, chief study author. The soot would absorb enough solar radiation to heat surrounding gases, setting in motion a series of chemical reactions that would break down the stratospheric ozone layer protecting Earth from harmful ultraviolet radiation, said Mills....MORE

Sunday, December 28, 2008

So You Want to Be a Carbon Trader...? (ASO; GRN)

UPDATE below.
Original post:
And you're not on a carbon desk? Never fear! The Wall Street marketing machine is geared up to supply anything you could ever desire.

First though, a word of explanation.
I once estimated that I had read 100,000 pages of climate science, economics, policy and politics.
This has helped form my personal belief that carbon trading is not going to lower world temperature by even a half-a-degree.

For example, in an October 1998 article in Nature, Martin Parry (Co-chair of the IPCC's Working Group II) said the effect of the Kyoto Protocol (and it's associated carbon trading, CDM etc. [articles 6,12 and 17 of the protocol]) would be a reduction of –0.05°C by the year 2050.
Tom Wigley of the National Center for Atmospheric Research estimated that Kyoto would result in a reduction from baseline of 0.06°C to 0.21°C . (under one Kyoto scenario 0.06 to 0.11°C, under another 0.11 to 0.21).
As Warren Buffett said (in a slightly different context):
"Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move."
My personal preference, if we are going to go this route, is a carbon tax with a 100% return of the proceeds to the taxpayers. But who cares what I think.
To quote Edmund Burke*:
"All which a man without authority can give--His unbiased opinion, his honest advice, and his best reasons."
-Edmund Burke (1791)
*Described by Edward Gibbon (he of The...Decline and Fall...) "The most eloquent and rational madman that I ever knew".

As a kid I was pretty good at "Let's pretend" and if we go with carbon trading in the U.S, I am fully prepared to make money off it. So let's take a look at a couple new tools.

One of the perverse effects of the European Emissions Trading Scheme is that the colder it gets, the higher the price of carbon. This is because more fossil fuels are used, and carbon emitted. Let's say you think Europe will experience some of it's coldest weather in thirty years by mid-January 2009 and you're not a big enough player to buy European EUA's directly,
24 Dec 08
DEC 2009

Last 30 days

Point Carbon EUA OTC prices last 30 days
chart via PointCarbon
In October, IndexUniverse told us "ETF Securities Lists Europe's First Carbon ETC":

ETF Securities Limited is about to list the world’s first Carbon ETC on the London Stock Exchange (LSE) in the dedicated ETC segment. ETFS Carbon offers investors the opportunity to gain direct exposure to the carbon emissions allowance futures market. It is expected that the first day of trading will be Thursday 30th October.

ETFS Carbon (LSE Code: CARB) is designed to track the ICE ECX EUA Futures Contract, which is currently the most liquid exchange traded contract within the EU Emissions Trading Scheme (“EU ETS”). Each ETFS Carbon is initially equivalent to one emissions allowance; the holder of an emissions allowance owns the right to emit one tonne of carbon dioxide equivalent gas. On the LSE, ETFS Carbon will trade in both Euros (CARB) and also in British pence (CARP) on the London Stock Exchange. Each ETFS Carbon will begin trading at approximately EUR 18.37 (£14.74)....MORE

On December 15 they came back with "Second Carbon ETC Launches In U.S.":

The second exchange-traded product providing access to global carbon emissions markets is set to launch Monday in the U.S., bringing an alternative to a much-discussed new asset class that's also spreading through Europe.

The AirShares EU Carbon Allowances Fund (NYSE Arca: ASO) is actually a commodity pool that tracks a basket of exchange-traded futures contracts for European Union Allowances (EUAs). Each contract provides for delivery of 1,000 EUAs at a specified price.

The new ETF-like product, as AirShares refers to ASO, invests in futures contracts that expire each December beginning in 2009 and extending through 2012. As contracts approach their December expiration, the fund sells expiring contracts and replaces them with contracts of later expirations, according to XShares Advisors, which is sponsoring the new exchange-traded products.

ASO will start with nearly $5 million in seed money as an asset base. It's expected to come with an expense ratio of 0.85% annually. The fund opens with some 238 different contracts. More detailed information can be found on the new AirShares site here.

Since the commodities involved aren't physically deliverable, ASO can't be considered an ETF. But it acts like many exchange-traded commodities products that are popular in Europe. It's also important to note ASO represents a pool of futures contracts rather than notes.

That's significant since another type of fund, referred to as an exchange-traded note, is already on the market. In late June, Barclays Capital gained first-mover status into the U.S. exchange-traded products market for carbon emissions with its iPath Global Carbon ETN (NYSE Arca: GRN)...MUCH MORE, read it all.

Speaking of GRN, it's performance since introduction may be a cautionary tale:

intraday 6 month 12 month 24 month
chart via etfguide

Be aware of what you're getting into (Investors Business Daily via Yahoo Finance):

...Given the low interest in GRN, Ron Rowland, founder of All Star Investor and chief investment officer of Capital Cities Asset Management, with $80 million in assets under management, believes ASO will shut down within a year.

"I don't think the typical investor understands what European Union Allowances are or what the European Union Emissions Trading Scheme is all about," Rowland said. "ASO also has the problem of being a commodity pool, which is another hurdle to gaining acceptability and comfort from consumers."

Just as you own your gains, you also own your losses. (unless you accept this position, via OilVoice):

Senior Trader
The Function:

Trading Team (Front Office). The Trading Team is responsible for managing the company’s power, gas and carbon positions in the relevant wholesale trading markets. The Trading Team manages the company’s longer term positions, both in regard to proprietary trading and customer initiated transactions, and provides a point of contact for some of the company’s largest clients. The Trading Team is tasked with delivering against an annual profit target, while operating in accordance with the relevant defined risk parameters.


2-3 years trading experience in the UK power, gas and carbon markets, gained in a similar role within an energy trading company. Experience of leading the development and implementation of speculative trading strategies and tactics with accountability for delivery against an annual profit target. A detailed understanding of the fundamental drivers of the UK power, gas and carbon markets....
UPDATE: When I typed "Let's say you think Europe will experience some of it's coldest weather in thirty years by mid-January 2009..." it wasn't a hypothetical scenario, we were looking at the weather forecasts last week. A couple hours ago a reader emailed this London Times story:

Wrap up - Met Office warns of Siberian blast and freezing weather

It’s time to get out the thermal underwear and thickest pullovers – Britain is set for shockingly cold weather for at least the next couple of weeks.

After a glorious Christmas, with not a hint of a snowflake, temperatures have been slipping steadily downwards, with minus 11C (12F) recorded in Aviemore, in the Highlands, on Saturday night.

The plunge into a Siberian blast of cold will worsen in the coming week as raw easterlies freeze the country. “This coming week, maximum daytime temperatures will be between 2C (36F) and 4C (39F) but temperatures at night could be well below zero for many places,” said Stephen Holman, forecaster at the Met Office....

...In winter, low pressure tends to dominate over Iceland and high pressure to the south, over the Azores. These two pressure systems dance in tune with each other and drive our winter weather, in what is known as the North Atlantic Oscillation (NAO). When the Icelandic low and Azores high are strong, they steer wet and mild weather over the UK; but when they slacken off in a negative phase, that turns the UK bitterly cold. At present the NAO is turning negative, sending a powerful signal that the weather is set to continue cold.

How bad could this winter sink? The weather maps are a chilling reminder of some our most savage winters, such as the notorious 1962-63 winter, the coldest for 180 years. This was when the sea froze around the coast of southeast England and crops were dug out of frozen ground with pneumatic drills and blizzards paralysed the nation.

Even if next month is freezing, the Met’s long-range forecast predicts that the winter will melt away into warmer conditions in February....MORE

Friday, December 26, 2008

Dear China: We Don't Plan on Ever Paying You Back

That thought came to mind a couple days ago when I saw that "Retailers Want In on Stimulus Plan"in the WSJ.
Now we see that one of the richest communities in the world is nuzzling the teat in "Greenwich seeks a piece of the stimulus pie":

It didn't exactly amount to the three wise men bearing gifts of gold, frankincense and myrrh, but a trio of Greenwich politicians held formal talks on Christmas Eve to discuss the town's strategy for getting a piece of an anticipated $700 billion economic stimulus package for infrastructure projects.

First Selectman Peter Tesei hosted U.S. Rep.-elect Jim Himes, D-Conn., and state Rep.-elect Alfred Camillo, R-151st District, Wednesday morning in his office at Town Hall to go over a list of preliminary projects that might qualify for federal funding under the stimulus package proposed by President-elect Barack Obama.

The three were joined by a contingent of municipal department heads as well as Selectman Lin Lavery and Frank Farricker of the Planning and Zoning Commission.

On the table was the list of $38.4 million in "shovel-ready" projects that officials said includes everything from road repaving and drainage improvements to bridge repairs and the construction of a new town animal shelter.

"Time is of the essence here. Our economy is getting no better. We all need to be prepared to act responsibly, but quickly," Himes said in an interview after the meeting....

From Greenwich Time, HT: I've forgotten, I'll link later

World Crops Threatened by Strengthening La Nina Weather Pattern

Last April, a couple days after NASA's Jet Propulsion Laboratory confirmed that the Pacific Decadal Oscillation had entered it's cool phase (after 29 years in the warm phase) we posted "Um, folks, um, maybe we should start thinking about rebuilding our grain reserves." Today Bloomberg reports:
Grain and oilseed crops may be threatened next year by a weather pattern known as La Nina, according to a private forecaster.

La Nina conditions have developed rapidly across the equatorial Pacific Ocean during the past few weeks, said Drew Lerner, president of World Weather Inc. in Overland Park, Kansas. He said that may indicate more dry weather in parts of South America in the next three months and a wet, cold start to the U.S. planting season in March.

La Nina, which means “the little girl” in Spanish, is caused by lower-than-normal surface-water temperatures in the Pacific. It can trigger widespread changes in weather around the world, including a higher-than-normal number of hurricanes in the Atlantic Ocean, Lerner said.

“The impact of La Nina conditions has already been noted in many areas, with more frequent rain in eastern Australia, wet weather in Indonesia, Malaysia and the Philippines as well as a drier bias in southeastern parts of South America,” Lerner said in a Dec. 24 interview. “Confidence is quite strong that a full blown La Nina event is evolving.”

The current weather patterns are more similar to a mature La Nina instead of a developing event because the last episode faded in May, leaving behind residual atmospheric conditions, Lerner said. The pocket of unusually cool Pacific water has quickly expanded west and extends to a greater depth than usual, signaling a stronger impact on next year’s weather, he said...MORE

Although the PDO and La Nina are different events, the cool phase of the PDO exhibits a tendency toward more La Nina's and fewer El Nino's. We are not currently experiencing a La Nina (defined as three consecutive months of -0.5 degree Sea Surface Temperature anomaly).

A couple weeks ago NASA came out with a statement (here relayed by ScienceDaily):

Oscillation Rules As The Pacific Cools

The latest image of sea-surface height measurements from the U.S./French Jason-1 oceanography satellite shows the Pacific Ocean remains locked in a strong, cool phase of the Pacific Decadal Oscillation, a large, long-lived pattern of climate variability in the Pacific associated with a general cooling of Pacific waters. The image also confirms that El Niño and La Niña remain absent from the tropical Pacific....

A cool wedge of lower-than-normal sea-surface heights continues to dominate the tropical Pacific, ringed by a horseshoe of warmer waters. The continuation of this long-term cool phase of the Pacific Decadal Oscillation stacks the odds against a wetter-than-average winter/spring in the southwestern United States. (Credit: NASA/JPL)

"This multi-year Pacific Decadal Oscillation 'cool' trend can cause La Niña-like impacts around the Pacific basin," said Bill Patzert, an oceanographer and climatologist at NASA's Jet Propulsion Laboratory, Pasadena, Calif. "The present cool phase of the Pacific Decadal Oscillation will have significant implications for shifts in marine ecosystems, and for land temperature and rainfall patterns around the Pacific basin."

According to Nathan Mantua of the Climate Impacts Group at the University of Washington, Seattle, whose research contributed to the early understanding of the Pacific Decadal Oscillation, "Even with the strong La Niña event fading in the tropics last spring, the North Pacific's sea surface temperature anomaly pattern has remained strongly negative since last fall. This cool phase will likely persist this winter and, perhaps, beyond. Historically, this situation has been associated with favorable ocean conditions for the return of U.S. west coast Coho and Chinook salmon, but it translates to low odds for abundant winter/spring precipitation in the southwest (including Southern California)."...MORE

Some of our posts on the PDO:

Climate Change and the Pacific Decadal Oscillation

A Black Swan in Food

Ocean changes may trigger US megadrought

Monthly Pacific Decadal Oscillation Anomalies

Your Climateer Early Warning System: Insurance (AIG; ALL; CB; HIG; TRV)

Cold water rings dinner bell for West Coast salmon

Insurance method for hurricane rates draws skepticism

On Wednesday we had "Active 2009 Atlantic hurricane season predicted. And a Couple ACE Links". After posting it I threatened a friend with a Cat. bond tutorial and was a bit blindsided by the response:
"Actually I'm fascinated by catastrophe finance...".
I won't follow through on my threat but will link to the Houston Chronicle's SciGuy's take on one aspect of the intersection of climate and (big) money:

Some scientists who predicted number of storms for risk firm now question validity

Just weeks after monster storms Katrina and Rita devastated the Gulf Coast, a risk management firm flew a handful of the world's top hurricane scientists to Bermuda and its famous pink sandy beaches.

There, the scientists were asked to predict Atlantic hurricane activity for 2006 to 2010.

They estimated hurricane activity would be significantly higher than the long-term, historical average, calling for 40 percent more landfalls of major U.S. hurricanes than normal during the period.

Shortly thereafter, the firm, Risk Management Solutions, or RMS, increased its "modeled insurance losses," which help establish rates for insurers and re-insurers, by 40 percent.

Outside insurance circles, this expert elicitation process isn't well known. But it has at least indirectly affected homeowner insurance rates for many coastal customers.

Now, in addition to some insurance regulators, scientists who have participated in the process have begun questioning the method.

Some participants in the latest meeting, held in October in Miami, say there's not enough evidence available to produce a skillful forecast of five-year hurricane activity. And at least one is worried that the exercise might be used to justify increased insurance rates.

"For all I know, they believe that they can predict activity five years into the future, but the science does not support this belief," said Roger Pielke Jr., a professor of environmental studies at the University of Colorado who participated in this year's meeting. "How can this be anything other than putting a scientific imprimatur on a question that science has yet to be able to answer?"

Whether the elicitation process has the power to influence the lowering of rates, in addition to raising them, will soon be tested.

Prediction revised

During the October gathering, the scientists lowered expectations. Their revised estimate called for just 20 percent more landfalls of major hurricanes — defined as a Category 3, 4 or 5 — during the next five years than the long-term average.

Historically, about two major hurricanes strike the United States every three years.

So far, RMS hasn't acted to lower its modeled losses based upon the most recent elicitation. "It is too early to conclude what impact" the new estimate will have on the 2009 models, the company said.

Several firms provide models to insurers to help them understand their financial risk from hurricanes. Traditionally, these models have estimated risk based upon the long-term average of hurricane activity.

But after the disastrous 2004 and 2005 hurricane seasons, RMS and others sought to develop what they termed "medium-term," or five-year models that reflected the greater-than-normal activity since 1995.

Because there was no consensus on how best to model hurricane activity over five years, RMS turned to scientists, said Christine Ziehmann, director of model management at RMS. "The expert elicitation approach avoids the danger of picking just one forecast model by building multiple models using historical data as well as predictions of future conditions, and gathering external expert judgment on which models are more suitable than others," she said.

By early 2006, three risk-modeling companies — RMS, AIR Worldwide and EQECAT — had released ""medium-term" models. Some of these were used by reinsurers — companies that provide insurance to insurance companies — to raise rates.

However, companies such as Allstate and State Farm, which sell homeowner policies, must go through state regulatory processes to receive higher rates....MORE

HT: SciGuy's blog, where his pull-quote is from one of the big names in hurricane research:

...Perhaps not, RMS says.

Interestingly, the news release also says this about the scientific understanding of hurricane activity in a warming world:

There is now much greater consensus among hurricane scientists on the impact of increased global sea surface temperatures (SSTs) on Atlantic hurricane activity.

Let me tell you the scientists who participated in the "expert elicitation" were shocked by that statement. Here's what Judith Curry, a Georgia Tech atmospheric scientist who believes climate change is making Atlantic hurricanes stronger, told me about that statement:

"Absolutely not. The understanding of sea surface temperature influence on hurricane activity is maturing quite a bit. But how could they conclude that from the diverse group of people at their gathering? It's just an unwarranted conclusion from their elicitation process."

See also our July '08 post "HURRICANE WATCH: Insurers Criticized For New Rate Models":

We have links to some of our global warming/insurance posts below. Also, a 'search blog' for Warren Buffett will pull up some posts on the topic....
...May 9, '08-"Shop for Property/Casualty Insurance Savings NOW! Then Short Their Stocks With the Savings"

Lloyd's warns of a lack of natural disasters

Allstate blames global warming for rate hike

The Climate Change Peril That Insurers See
lots of links

Katrina devastation not unrivaled, analysis finds

Galveston poised to defy geologists
Stupid, stupid, stupid

Wednesday, December 24, 2008

Santa's Carbon Footprint

First posted Christmas Eve, 2007:

Ho Ho Ho!
Santa may have one of the biggest carbon footprints of an individual, anywhere in the world, even greater than that of Al Gore.

Santa in recent years has seen his workload increase as Christmas is seen as holiday by not just Christians but by people of all faiths around the world. Whilst no exact figures are available, and Santa has not published any to date, according to UNICEF there are 2.2 billion children in the world. For this we will assume Santa will deliver to all children, since none have made it on to the naughty list this year.

Using UK National Statistics, the average household in the UK has 1.8 children, unfortunately we do not have an international average. So Santa would need to visit roughly 1.22 billion homes. Assuming Santa travels east to west, which would be the most logical route thanks to the different time zones and the rotation of the Earth, he has 48 hours to work with. Anders Larsson of the engineering consultancy Sweco, estimated that the average people per sq km on Earth is 48, and 20m between each home. Using these figures, Santa would need to travel a total distance of 24.4m km, or 141.46km per second, not including the fact he has stop the sleigh, get out, go down the chimney and deliver the presents, avoiding fires and chimney balloons, that may obstruct his path, then return to the sleigh and continue delivering presents. And visit 7073 homes a second, or 1.4 millisecond per visit.

In terms of Co2 emissions these will be greatly increased by the continued starting and stopping of the sleigh in addition to that with the extraordinary speeds at which the sleigh will be travelling. If we were to consider that the sleigh was being powered by a jet engine as touted in the film "Elf", namely a cringle 3000, whilst no vehicle can travel at that speed we will try to calculate the equivalent jet engine requirements. Before we do this we need to calculate the weight of Santa's sleigh load, all those toys in the sleigh. If each child was given only a Sony PS3 for Christmas, since not even Santa can get hold of Nintendo Wii's, at 7kg each, Santa would be pulling an average load during the journey of 4.3m tonnes. This is of course assuming that people all live evenly around the world with 20m between homes, and of course Santa hasn't died from exertion, or even slowed down, even a little.

Assuming Santa's sleigh fuel consumption was similar to that of a 747-400, taking the payload into consideration (9772 times more than a 747), the fuel consumption per km would be 116 000 litres per km. Note we have not taken into account that Santa is carrying the fuel in these assumptions, adding further weight to the sleigh, unless of course he stops off at some mega huge filling station, which he would need to do, or else he would need to carry over 2.8 billion litres of fuel, just for the presents alone, adding to his payload. So Santa now stops off at a filling station each km. To ensure he makes each km, he would need at least 60% extra fuel due to the starting and stopping which would increase his fuel consumption, or 185 600 litres per km.

Since Santa's sleigh is using a 747-400 engine technology, he is using kerosene, which emits 2.58kg of CO2 per litre. Meaning Santa's sleigh emits at least 478t of CO2 per km, or over the entire journey 11.683 billion tonnes of CO2 (42.88% of global CO2 emissions).
Lifted from EnergySaving blog.
Here's an alternate (and much lower) count.

Another Anniversary Already? And How Much is it Going to Cost?

This is a reprint of a post we put up last December:

It was 120 years ago that Sherlock Holmes came to the world's attention in Beetons Christmas Annual of 1887.
Here's the most expensive magazine in the world:

"Sotheby's held the sale in New York City on 21 June 2007.
The owner, a lady, put up two Sherlockian lots for sale."

Lot 105, Beeton's Christmas Annual for 1887, set a new auction record for that magazine and sold for $156,000. The hammer price was $130,000 and the 20% buyer's premium brought the total to $156,000. That beat the previous record of $153,600 set in an auction at Sotheby's in December 2004. The 2004 record was said to make Beeton's the most expensive magazine in the world, and this new sale reinforces that position.