The U.S. aircraft carrier USS Forrestal was involved in the worst carrier accident since WWII. Operating in the Gulf of Tonkin during the Vietnam war in 1969, the USS Forrestal was engaged in bombing sorties over North Vietnam.
While switching from external to internal power, an electrical surge caused a Zuni rocket to fire from the under wing rocket launcher of an F-4 Phantom that was being prepared to take off. The rocket hit a nearby A-4, also being prepared to take off, rupturing its fuel tank and causing an instant conflagration. The A-4's two 1,000 pound bombs were dislodged and dropped into the flaming jet fuel on the flight deck.
Before it was all over, nine 1,000 pound bombs "cooked off", as more planes full of fuel were caught up in the disaster. Huge holes were blown in the armored flight deck, spreading the fire to the decks below. 131 servicemen were killed that day, and 161 were injured. Most of the fire crew was instantly killed when the first bomb went off about 1 1/2 minutes after the first fire was triggered.
Surrounded by flames, the pilot of the F-4 Phantom escaped death by walking out on the nose of his plane and leaping from the refueling nozzle. The name of that pilot? Lt. Commander John McCain - future POW, U.S. Senator, and candidate for President of the United States.
As a student of history, and a keen observer of politics, I was surprised I had never heard of McCain’s central involvement in this harrowing and deadly event until just recently. McCain makes no secret of his military service, and is rightly using it to his advantage in the campaign. But when pressed, he is quite reticent about his own experiences - instead commending all the brave men and women with whom he served.
Quite a contrast to John Kerry, who made up stories about his courage under fire in episodes his commanding officer and fellow officers say never happened and in places they say Kerry never was. Quite a contrast to John Kerry testifying before Congress about all sorts of “Winter Soldier” atrocities by American troops in Vietnam – atrocities that were later shown to almost all be fabrications.
Quite a contrast to Gore claiming to have invented the Internet and being the model for the protagonist in the novel “Love Story”. Quite a contrast to Hillary’s stories of daring landings under sniper fire and claiming credit for much of her husband’s presidency.
Quite a contrast to Obama claiming credit in his new TV commercial for a bill in the U.S. Senate that he never even voted on. Quite a contrast to Obama who maintained close, long term relationships with radical and unrepentant America haters and then claimed he didn’t know they were radical.
I guess when you've actually done it, you don’t have to brag about it.
Sunday, July 13, 2008
Saturday, July 12, 2008
Another Misguided Quick Fix Idea From Nancy Pelosi
Speaker Pelosi has now called on President Bush to release oil from the Strategic Petroleum Reserve (SPR). This is the latest Democrat's frantic search for political cover to "fix" a problem they have helped create.
Releasing oil from the SPR because gas costs $4 a gallon is a terrible idea. The SPR was created to avert a catastrophic economic collapse in the event of a major supply disruption. This week gasoline inventories in the U.S. rose by 1M barrels. Oil prices are going up because increases in demand, particularly in the emerging economies of China and India. gasoline consumption has actually dropped (demand destruction & substitution behavior) in the U.S. for the first time as a result of higher gas prices.
The Democrats have been arguing passionately against increasing domestic oil production. One of their arguments has been that this eventual production would have a negligible effect on gas prices at the pump. Whether this is true or not, releasing oil from the SPR would have a very small impact on gas prices, if at all. The price of gasoline has not risen nearly as much as oil input costs to the refiners. Releasing some oil from the SPR might lower the price of oil a bit, for a very short period of time, but would have a minimal effect on the price of gas. And oil released from the SPR now will not be available when we have a major supply disruption.
This blog supported suspending additional purchases to the SPR, which Congress enacted about 2 months ago. The SPR is over 95 percent full. Continuing to buy oil for the SPR at record high prices when the reserve is almost full doesn't make sense from a cost-benefit standpoint.
But we live in a world where the chance of a major supply disruption is real. As Iran presses forward with nuclear weapons and missile technology, Israel may have no choice at some point but to attack Iran. Iran has promised to shut down the Strait of Hormuz if they are attacked. If this happened, oil would go to at least $200/barrel and the economic shock to our country would make 1973 look like a holiday.
This is the reason for the SPR. Not political pandering in an election year.
Releasing oil from the SPR because gas costs $4 a gallon is a terrible idea. The SPR was created to avert a catastrophic economic collapse in the event of a major supply disruption. This week gasoline inventories in the U.S. rose by 1M barrels. Oil prices are going up because increases in demand, particularly in the emerging economies of China and India. gasoline consumption has actually dropped (demand destruction & substitution behavior) in the U.S. for the first time as a result of higher gas prices.
The Democrats have been arguing passionately against increasing domestic oil production. One of their arguments has been that this eventual production would have a negligible effect on gas prices at the pump. Whether this is true or not, releasing oil from the SPR would have a very small impact on gas prices, if at all. The price of gasoline has not risen nearly as much as oil input costs to the refiners. Releasing some oil from the SPR might lower the price of oil a bit, for a very short period of time, but would have a minimal effect on the price of gas. And oil released from the SPR now will not be available when we have a major supply disruption.
This blog supported suspending additional purchases to the SPR, which Congress enacted about 2 months ago. The SPR is over 95 percent full. Continuing to buy oil for the SPR at record high prices when the reserve is almost full doesn't make sense from a cost-benefit standpoint.
But we live in a world where the chance of a major supply disruption is real. As Iran presses forward with nuclear weapons and missile technology, Israel may have no choice at some point but to attack Iran. Iran has promised to shut down the Strait of Hormuz if they are attacked. If this happened, oil would go to at least $200/barrel and the economic shock to our country would make 1973 look like a holiday.
This is the reason for the SPR. Not political pandering in an election year.
Friday, July 11, 2008
Poole Can't Keep His Mouth Shut
Recently retired ex-St. Louis Federal Reserve President William Poole said yesterday that Freddie Mac and Fannie Mae, the two U.S. mortgage government sponsored entities (GSE's)were "insolvent" and raised the prospect of a government bailout. Mr. Poole has a history of getting it wrong and opening his mouth at the worst possible times, and this statement was the height of irresponsibility.
The stock prices of both Freddie and Fannie had already been severely punished. Mr. Poole's irresponsible comments pushed the shares even further. Worse, it took away any chance of the two firms being able to raise private capital by issuing new common stock. The stock price is simply too low at this point to make this a viable alternative.
Fannie and Freddie, their regulator, and Treasury Secretary Paulson have all said over the last two days that the GSE's are adequately capitalized. But in this cynical market, where Bear Stearns CEO claims adequate capital 2 days before collapsing, these statements are viewed with suspicion. Who knows what the truth is.
This is not a question of whether Fannie and Freddie will cease to exist. In the end, the government can nationalize them, and longer term they will be fine. They are in a profitable business that in normal times generates strong cash flow. But the vintage 2005 to 2007 loans have a much higher level of toxicity than normal times and could quickly consume the GSE's capital.
The best alternative is for private capital to find its way to the GSE's. The next best solution would be for the government to provide capital in exchange for warrants. This is what happened during the bailout of Chrysler. The Chrysler turned out to be a very profitable transaction for the government. The least desirable solution is for the GSE's to be nationalized.
Maybe we can ring up the Saudis and say, "You know all those gizillions of dollars we've paid you for oil, and will continue to pay you? Could you take just $75B of the gizillions and recapitalize Freddie and Fannie for us?"
Again, Freddie and Fannie, or some recapitalized government agency, will continue to perform the function of providing liquidity to the mortgage industry. There was a brief rally this afternoon in the market when Reuters reported that Federal Reserve Chairman Bernake had told the GSE's that they could access the discount window. But this information has yet to be confirmed by the FMOC.
There is almost no scenario at this point that will save the holders of the common stock. Like a bankruptcy, the bondholders of the secured debt end up owning the assets - the shareholders of common stock get zero.
The stock prices of both Freddie and Fannie had already been severely punished. Mr. Poole's irresponsible comments pushed the shares even further. Worse, it took away any chance of the two firms being able to raise private capital by issuing new common stock. The stock price is simply too low at this point to make this a viable alternative.
Fannie and Freddie, their regulator, and Treasury Secretary Paulson have all said over the last two days that the GSE's are adequately capitalized. But in this cynical market, where Bear Stearns CEO claims adequate capital 2 days before collapsing, these statements are viewed with suspicion. Who knows what the truth is.
This is not a question of whether Fannie and Freddie will cease to exist. In the end, the government can nationalize them, and longer term they will be fine. They are in a profitable business that in normal times generates strong cash flow. But the vintage 2005 to 2007 loans have a much higher level of toxicity than normal times and could quickly consume the GSE's capital.
The best alternative is for private capital to find its way to the GSE's. The next best solution would be for the government to provide capital in exchange for warrants. This is what happened during the bailout of Chrysler. The Chrysler turned out to be a very profitable transaction for the government. The least desirable solution is for the GSE's to be nationalized.
Maybe we can ring up the Saudis and say, "You know all those gizillions of dollars we've paid you for oil, and will continue to pay you? Could you take just $75B of the gizillions and recapitalize Freddie and Fannie for us?"
Again, Freddie and Fannie, or some recapitalized government agency, will continue to perform the function of providing liquidity to the mortgage industry. There was a brief rally this afternoon in the market when Reuters reported that Federal Reserve Chairman Bernake had told the GSE's that they could access the discount window. But this information has yet to be confirmed by the FMOC.
There is almost no scenario at this point that will save the holders of the common stock. Like a bankruptcy, the bondholders of the secured debt end up owning the assets - the shareholders of common stock get zero.
Monday, July 7, 2008
Nitrogen Fertilizer Comes Full Circle
Sharp increases in prices typically result in substitution behavior or demand destruction. Prices for a ton of fertilizer, whether it be phosphate, potash or nitrogen have tripled or quadrupled over the last 18 months with no let-up in sight. Demand destruction has not occurred to date.
Prices for crops including wheat, corn, cotton and soybeans continue to be at all time highs due to global demand. Farmers are not happy about the price of fertilizer, but they can afford the higher prices. Plus, the alternative is much smaller yields for their efforts. This is one of the reasons that fertilizer stocks have been one of the safe havens of this difficult stock market.
But substitution behavior is another matter. Suddenly farmers are willing to consider alternatives to synthetic nitrogen. Here on the north side of Atlanta a new company, Organic Growing Systems, is producing nitrogen rich fertilizer from chicken manure. Disposing of manure from livestock, whether it be chickens, hogs or cows is a real problem. Turning this waste from a problem into a resource makes a lot of sense.
It was not too long ago when sustainable farming was the only option. Synthetic fertilizers had not been invented. Livestock produced manure which was composted and used to fertilize the crops and build up the soil. For hundreds of generations people practiced this type of low input, sustainable farming.
The addition of large amounts of synthetic fertilizers, much made from natural gas and petroleum, is a "high-input" model. Nutrients constantly has to be brought in to continue producing high yields. High input farming treats the soil as a sterile medium that must have artificial nutrients added for every crop for every year. Organic fertilizers feed the plants but also improve the soil.
Eliot Coleman is an icon in the field of modern organic farming. Back in the 1960's when he began growing crops for the commercial market, he didn't have enough money for synthetic fertilizers. Synthetic fertilizers were being touted as nutritionally identical to the traditional organic types. Since he could get organic nutrients on the cheap, he was happy to buy into the "nutritionally identical" story - although not in the way the fertilizer companies desired.
Today there is a growing realization that organics offer a viable substitute - while solving the waste problem at the same time. Nitrogen intensive crops such as corn and sod offer the chance for farmers to save money and not rely on fertizlers that use fossil fuel as feedstock.
Organic Growing Systems can currently produce 30 tons of nitrogen rich chicken fertilizer a day. They are expanding to produce 200 tons a day. It is an idea that is coming full circle.
Prices for crops including wheat, corn, cotton and soybeans continue to be at all time highs due to global demand. Farmers are not happy about the price of fertilizer, but they can afford the higher prices. Plus, the alternative is much smaller yields for their efforts. This is one of the reasons that fertilizer stocks have been one of the safe havens of this difficult stock market.
But substitution behavior is another matter. Suddenly farmers are willing to consider alternatives to synthetic nitrogen. Here on the north side of Atlanta a new company, Organic Growing Systems, is producing nitrogen rich fertilizer from chicken manure. Disposing of manure from livestock, whether it be chickens, hogs or cows is a real problem. Turning this waste from a problem into a resource makes a lot of sense.
It was not too long ago when sustainable farming was the only option. Synthetic fertilizers had not been invented. Livestock produced manure which was composted and used to fertilize the crops and build up the soil. For hundreds of generations people practiced this type of low input, sustainable farming.
The addition of large amounts of synthetic fertilizers, much made from natural gas and petroleum, is a "high-input" model. Nutrients constantly has to be brought in to continue producing high yields. High input farming treats the soil as a sterile medium that must have artificial nutrients added for every crop for every year. Organic fertilizers feed the plants but also improve the soil.
Eliot Coleman is an icon in the field of modern organic farming. Back in the 1960's when he began growing crops for the commercial market, he didn't have enough money for synthetic fertilizers. Synthetic fertilizers were being touted as nutritionally identical to the traditional organic types. Since he could get organic nutrients on the cheap, he was happy to buy into the "nutritionally identical" story - although not in the way the fertilizer companies desired.
Today there is a growing realization that organics offer a viable substitute - while solving the waste problem at the same time. Nitrogen intensive crops such as corn and sod offer the chance for farmers to save money and not rely on fertizlers that use fossil fuel as feedstock.
Organic Growing Systems can currently produce 30 tons of nitrogen rich chicken fertilizer a day. They are expanding to produce 200 tons a day. It is an idea that is coming full circle.
Sunday, July 6, 2008
Robert F. Kennedy, Jr.'s Energy Manifesto - A Critique
http://www.vanityfair.com/politics/features/2008/05/rfk_manifesto200805?currentPage=1
In this recent op-ed in Vanity Fair, Robert F. Kennedy, Jr. has some interesting ideas, but his "manifesto" also has much that is dubious. In addition, the concluding paragraph is not supported by the balance of the article.
His opening analysis that England banning slavery launched the industrial revolution seems unlikely to me. It assumes that there would be no disruptive technological innovation while slavery existed in England. But in America, where slavery was entrenched more than anywhere in the world, the cotton gin was invented, negating much of the economic argument for slavery in the agrarian south. Would the steam engine, which was the driving force of the industrial revolution, not have been invented, or been significantly delayed? Doubtful.
His statement of causation that California’s status as the “most energy efficient state” has resulted in it having the largest economy is disingenuous. In truth, California only has enough electricity because it outsources the generation to other western states that produce it using coal. Their claim of being a green state is a sham. The Wall Street Journal called it energy colonialism.
California, a state with barely enough baseline electricity, shut down a 650 MW nuclear plant due to protests and replaced it with a 3 MW solar facility. Companies will not locate in California because the electricity is not reliable. California based and very environmentally attuned Google, which is building out vast data centers, has cited this a principle reason for not locating them in California. Green mandates that cannot be justified economically drive up California’s taxes, also causing business to leave or not locate there. There are lots of reasons that California has the largest economy, but energy efficiently is not one of them.
Cap and trade is a very bad idea when it comes to the economy. It would be less harmful to just put a straight carbon tax on everything to offset the real or imagined externalized cost (still a large tax on the economy, but perhaps not as catastrophic). Creating a cap and trade system where the government controls both the supply and demand can only end badly, and could very likely result in a deep and prolonged recession.
His assertion that the power grid system is hopelessly Balkanized is almost certainly true. I’m all for eliminating barriers to connect and transmit electricity, and empower new sources to connect to the grid. I wish the Democrats would do the same for health care, which is the most Balkanized industry in the country - through government mismanagement.
His example of Iceland is interesting, but not particularly relevant to the needs of the United States. Iceland is a small country with a small population that sits atop one of the most active volcanic regions on the planet. Heating the homes in this cold country with geothermal energy is a natural practice. But Iceland cannot be extrapolated to the United States, with it's diverse climate, and more diverse energy needs. Geothermal efforts in the U.S. have had mixed results.
A direct current backbone to move wind and solar generated power to where it is needed seems like a smart and necessary proposal. It is essential that we can bring this power on-line in a manner that can be broadly distributed.
The following idea is similar to proposals I’ve seen advocated on some of the liberal blogs like the Daily Kos and the Huffington Post:
“Businesses and homes will become power plants as individuals cash in by installing solar panels and wind turbines on their buildings, and by selling the stored energy in their plug-in hybrids back to the grid at peak hours.”
I hear about these types of "solutions" all the time. But the people advocating them are looking at the energy problem with rose colored glasses. Battery technology to make plug-in hybrids broadly viable is not within sight. If it takes 6 hours to charge my plug-in car, which gives it a range of 40 miles, then how am I going to have enough “juice” to sell back to the grid? Maybe these folks are big Keanu Reeves biggest fan and have watched “The Matrix” a few too many times.
Neither do I see anyone but the idle rich being able to afford to install solar panels on their home and sell surplus electricity to the grid. I recently researched what it would cost to install a home solar panel system. The cost was about $20,000, plus installation, for a 2,000 watt system. That is enough power to light 20 100 watt light bulbs at the same time. A vacuum cleaner uses almost that much power. No surplus here, and the capital investment makes no economic sense. $20,000 to light a couple of rooms? Forget air conditioning or an oven. But the greenies stubbornly cling to this as the answer.
It is telling that 10% of all venture capital dollars are already flowing into alternative energy. This is consistent with my belief that with oil over $100/barrel, and coal at a similarly priced on a relative basis , private capital will go “all in” to solve the problem – without government bungling.
The last paragraph is not supported by the rest of the article.
“We will cut annual trade and budget deficits by hundreds of billions, improve public health and farm production, diminish global warming, and create millions of good jobs. And for the first time in half a century we will live free from Middle Eastern wars and entanglements with petty tyrants who despise democracy and are hated by their own people.”
The entire article centers on the generation of electricity by non-fossil fuel means. That is a result that is achievable, probably only the addition of nuclear to his proposals, but achievable nevertheless. But for his conclusion to be true, electricity will have to become the primary fuel for transportation. This seems to be an underlying hopeful hypothesis with many on the left. But the facts say that it is not in the foreseeable future.
A recent Politics & Prosperity article separated the current and future uses of various sources of fuel. The discussion is usually a confusing mish-mash that does not differentiate between electricity generation and transportation. There is currently no technology to economically and practically eliminate oil distillates as the primary fuel for transportation. We need to aggressively pursue realistic solutions, like using the “Prius model”, verses the “pure plug-in model” for much higher MPG to make a real difference in the near term.
In this recent op-ed in Vanity Fair, Robert F. Kennedy, Jr. has some interesting ideas, but his "manifesto" also has much that is dubious. In addition, the concluding paragraph is not supported by the balance of the article.
His opening analysis that England banning slavery launched the industrial revolution seems unlikely to me. It assumes that there would be no disruptive technological innovation while slavery existed in England. But in America, where slavery was entrenched more than anywhere in the world, the cotton gin was invented, negating much of the economic argument for slavery in the agrarian south. Would the steam engine, which was the driving force of the industrial revolution, not have been invented, or been significantly delayed? Doubtful.
His statement of causation that California’s status as the “most energy efficient state” has resulted in it having the largest economy is disingenuous. In truth, California only has enough electricity because it outsources the generation to other western states that produce it using coal. Their claim of being a green state is a sham. The Wall Street Journal called it energy colonialism.
California, a state with barely enough baseline electricity, shut down a 650 MW nuclear plant due to protests and replaced it with a 3 MW solar facility. Companies will not locate in California because the electricity is not reliable. California based and very environmentally attuned Google, which is building out vast data centers, has cited this a principle reason for not locating them in California. Green mandates that cannot be justified economically drive up California’s taxes, also causing business to leave or not locate there. There are lots of reasons that California has the largest economy, but energy efficiently is not one of them.
Cap and trade is a very bad idea when it comes to the economy. It would be less harmful to just put a straight carbon tax on everything to offset the real or imagined externalized cost (still a large tax on the economy, but perhaps not as catastrophic). Creating a cap and trade system where the government controls both the supply and demand can only end badly, and could very likely result in a deep and prolonged recession.
His assertion that the power grid system is hopelessly Balkanized is almost certainly true. I’m all for eliminating barriers to connect and transmit electricity, and empower new sources to connect to the grid. I wish the Democrats would do the same for health care, which is the most Balkanized industry in the country - through government mismanagement.
His example of Iceland is interesting, but not particularly relevant to the needs of the United States. Iceland is a small country with a small population that sits atop one of the most active volcanic regions on the planet. Heating the homes in this cold country with geothermal energy is a natural practice. But Iceland cannot be extrapolated to the United States, with it's diverse climate, and more diverse energy needs. Geothermal efforts in the U.S. have had mixed results.
A direct current backbone to move wind and solar generated power to where it is needed seems like a smart and necessary proposal. It is essential that we can bring this power on-line in a manner that can be broadly distributed.
The following idea is similar to proposals I’ve seen advocated on some of the liberal blogs like the Daily Kos and the Huffington Post:
“Businesses and homes will become power plants as individuals cash in by installing solar panels and wind turbines on their buildings, and by selling the stored energy in their plug-in hybrids back to the grid at peak hours.”
I hear about these types of "solutions" all the time. But the people advocating them are looking at the energy problem with rose colored glasses. Battery technology to make plug-in hybrids broadly viable is not within sight. If it takes 6 hours to charge my plug-in car, which gives it a range of 40 miles, then how am I going to have enough “juice” to sell back to the grid? Maybe these folks are big Keanu Reeves biggest fan and have watched “The Matrix” a few too many times.
Neither do I see anyone but the idle rich being able to afford to install solar panels on their home and sell surplus electricity to the grid. I recently researched what it would cost to install a home solar panel system. The cost was about $20,000, plus installation, for a 2,000 watt system. That is enough power to light 20 100 watt light bulbs at the same time. A vacuum cleaner uses almost that much power. No surplus here, and the capital investment makes no economic sense. $20,000 to light a couple of rooms? Forget air conditioning or an oven. But the greenies stubbornly cling to this as the answer.
It is telling that 10% of all venture capital dollars are already flowing into alternative energy. This is consistent with my belief that with oil over $100/barrel, and coal at a similarly priced on a relative basis , private capital will go “all in” to solve the problem – without government bungling.
The last paragraph is not supported by the rest of the article.
“We will cut annual trade and budget deficits by hundreds of billions, improve public health and farm production, diminish global warming, and create millions of good jobs. And for the first time in half a century we will live free from Middle Eastern wars and entanglements with petty tyrants who despise democracy and are hated by their own people.”
The entire article centers on the generation of electricity by non-fossil fuel means. That is a result that is achievable, probably only the addition of nuclear to his proposals, but achievable nevertheless. But for his conclusion to be true, electricity will have to become the primary fuel for transportation. This seems to be an underlying hopeful hypothesis with many on the left. But the facts say that it is not in the foreseeable future.
A recent Politics & Prosperity article separated the current and future uses of various sources of fuel. The discussion is usually a confusing mish-mash that does not differentiate between electricity generation and transportation. There is currently no technology to economically and practically eliminate oil distillates as the primary fuel for transportation. We need to aggressively pursue realistic solutions, like using the “Prius model”, verses the “pure plug-in model” for much higher MPG to make a real difference in the near term.
Thursday, July 3, 2008
Are Plug-in Electric Cars the Answer?
With gas prices surging, and global demand unlikely to abate, GM is pushing hard to get it's Volt plug-in out the door. Still several years away, there are R&D challenges to overcome, like the fact that traditional headlights and taillights draw too much power.
The Volt will be able to travel 40 miles after a 6 hour charge. That means it can only be used by a homeowner with access to electricity where the car is parked overnight. If you have an apartment or park in a city deck it will not be an option. In Atlanta, where I live, the distances are sprawling, and the traffic an abomination. Drivers are careful not to let their gas tanks get very low as a lengthy traffic delay is always possible. After the Volt battery system is exhausted, a small gasoline engine engages to run the car and recharge the batteries.
The rumored price of the Volt has risen to $45,000 - and GM will probably still lose money with every unit. There is already an all electric plug-in car available on a limited basis in California. It has greater range than the Volt but costs more than $100,000.
Are electric plug-in cars green? It all depends on where you get the electricity. 51% of the electricity in this country comes from coal-fired plants. These plants are being retrofitted to be cleaner, but there currently is no available technology to reduce carbon emissions.
With today's highly advanced automotive emission systems cars are amazingly clean. It is difficult, perhaps impossible, to argue that running cars on coal generated electricity is cleaner than running cars on gasoline given the state of technology for both fuels. There is a technology with the ability to provide baseline electric power to the grid with zero emissions: nuclear. If we aggressively build out our nuclear power capabilities we can dramatically lower greenhouse gas emissions.
What we need, for now, is not the Volt. We need the next generation of Prius. Toyota has it right. Combine a much smaller gasoline engine with supplemental electric power for much greater gas mileage, range, and no coal (instead of an all electric car with a small backup gasoline engine). This is technology that can be maximized for today with great effect. The Prius gets ~48 MPG highway and a little less, but not dramatically less, for city driving. In contrast a BMW 530, with a 3.0 liter engine, gets about 29 MPG highway.
There have been a flurry of recent announcements about companies gearing up to use lithium-ion batteries for electric plug-in cars. These batteries get quite hot. They sometimes catch on fire. In my Dell PC, the battery no longer holds a useful charge after about 1 year. The replacement cost to power my small laptop: $110 (plus shipping). Now scale that up for an automobile.
We are a long way from a pure plug-in. But if we follow Toyota’s example we can make real measurable progress right now.
The Volt will be able to travel 40 miles after a 6 hour charge. That means it can only be used by a homeowner with access to electricity where the car is parked overnight. If you have an apartment or park in a city deck it will not be an option. In Atlanta, where I live, the distances are sprawling, and the traffic an abomination. Drivers are careful not to let their gas tanks get very low as a lengthy traffic delay is always possible. After the Volt battery system is exhausted, a small gasoline engine engages to run the car and recharge the batteries.
The rumored price of the Volt has risen to $45,000 - and GM will probably still lose money with every unit. There is already an all electric plug-in car available on a limited basis in California. It has greater range than the Volt but costs more than $100,000.
Are electric plug-in cars green? It all depends on where you get the electricity. 51% of the electricity in this country comes from coal-fired plants. These plants are being retrofitted to be cleaner, but there currently is no available technology to reduce carbon emissions.
With today's highly advanced automotive emission systems cars are amazingly clean. It is difficult, perhaps impossible, to argue that running cars on coal generated electricity is cleaner than running cars on gasoline given the state of technology for both fuels. There is a technology with the ability to provide baseline electric power to the grid with zero emissions: nuclear. If we aggressively build out our nuclear power capabilities we can dramatically lower greenhouse gas emissions.
What we need, for now, is not the Volt. We need the next generation of Prius. Toyota has it right. Combine a much smaller gasoline engine with supplemental electric power for much greater gas mileage, range, and no coal (instead of an all electric car with a small backup gasoline engine). This is technology that can be maximized for today with great effect. The Prius gets ~48 MPG highway and a little less, but not dramatically less, for city driving. In contrast a BMW 530, with a 3.0 liter engine, gets about 29 MPG highway.
There have been a flurry of recent announcements about companies gearing up to use lithium-ion batteries for electric plug-in cars. These batteries get quite hot. They sometimes catch on fire. In my Dell PC, the battery no longer holds a useful charge after about 1 year. The replacement cost to power my small laptop: $110 (plus shipping). Now scale that up for an automobile.
We are a long way from a pure plug-in. But if we follow Toyota’s example we can make real measurable progress right now.
Wednesday, July 2, 2008
Do GM Stockholders Actually Own Anything?
GM, which I can’t believe could on anyone’s buy list, was down hard again today after Merrill Lynch issued a note that bankruptcy is not out of the question. I would be very nervous holding GM common stock.
The situation has gotten so serious there that it is questionable whether holders of the common stock really even own something. At some point the holders of the senior debt will effectively control the company. If you want to be “in” GM, I would strongly recommend selling the common and buying senior preferred instead.
Bethlehem Steel used to be one of the largest and most admired companies in the world. But they ended up like GM in a declining market where they had the wrong products and very high fixed costs. One day, Bethlehem Steel just canceled the common stock and the bondholders owned the company.
I hear chatter about how at some point GM will be a great trade. Thanks, but no thanks. I don't need that kind of risk in my book.
The situation has gotten so serious there that it is questionable whether holders of the common stock really even own something. At some point the holders of the senior debt will effectively control the company. If you want to be “in” GM, I would strongly recommend selling the common and buying senior preferred instead.
Bethlehem Steel used to be one of the largest and most admired companies in the world. But they ended up like GM in a declining market where they had the wrong products and very high fixed costs. One day, Bethlehem Steel just canceled the common stock and the bondholders owned the company.
I hear chatter about how at some point GM will be a great trade. Thanks, but no thanks. I don't need that kind of risk in my book.
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