Upbeat Jobs Reports

539,000 jobs lost in April is "upbeat" .... or so says CNN:

NEW YORK (CNNMoney.com) -- Wall Street was poised for a strong open Wednesday as investors focused on two upbeat jobs reports, shrugging off anxiety about the bank stress test results due out Thursday.

A couple more of these "upbeat" months and unemployment will be at 15%.

Luckily for us, the trillion dollar stimulus package will create (or merely save, can't figure tha one out yey) 750,000 jobs by August!

I was really worried there for a minute.

Obama armtwising on Chrysler backfires?

Its one thing to treat the press like your bitch (when they so clearly deserve it) but when you try and muscle a pack of well lawyered investors out of billions of dollars, don’t expect them to lie down and just take it:

If the Obama administration expected the senior creditors of Chrysler to fold their tents under political pressure, they may have gotten a rude shock today. Thomas Lauria, who accused the White House of threatening the creditors withn humiliation at the hands of the White House press corps, has filed a motion to halt the administration’s machinations on behalf of the UAW in the Chrysler bankruptcy. Lauria and his allies claim that the Obama administration has violated the Constitution in their bid to devalue the senior creditors’ holdings on behalf of junior creditors, and have some precedent to support the allegation.

Make you wonder where the folks form the ACLU are?

Oh sure if this case involved a two men suing so they could corn hole each other in a catholic church wile using the flag as an after sex rag and emailing Osama Bin Laden while a kindergarten class is made to watch, the ACLU would be all over it but when the government invents a power to unilaterally break business contracts there really isnt much to see.

The Stimulus

Will it pass or will it fail? I don’t know .... it looks like what’s currently in the pipeline seems to be too big a piece of shit for even Susan Collins to vote for.

It is cute to see the left in an all out meltdown throwing tantrum after tantrum because those nasty “obstructionists” are getting in the way of the Obamessiah’s master plan.

Oh well.

Its like I said before, nothing I have seen from either group addresses what’s really wrong with the US economy; namely we consume more than we produce and until that’s dealt with, any fix will be a short term fix. We are in a period that is more of a correction rather than a recession.

Mexico: Failed State

You think that Mexico has got stability problems with the rampant drug gangs that control several Mexican states, just you wait till PEMEX collapses.

Mexico's federal budget is about $250B. Without the money that PEMEX pays them $40B and the 115,000 jobs that PEMEX provides Mexico will be in some deep shit.

Welcome Back Stagflation, we hardly knew ye

Every year things happen faster than the year before. Wars are fought more quickly, technology progresses faster, communications are instantaneous and populations migrate en mass in no time. What once took centuries and decades can now be done in weeks. People have come to expect fast results in every aspect of their lives nowadays and economics is no exception.

The American public has short memories and expects things to happen fast. If Obama, Reid and Pelosi cannot deliver on tangibles by late summer of 2010, they will lose control of the house. Tangibles being private sector jobs, positive GDP growth, stabilization of housing prices and a stock market that increases.

The root problem of the US economy is that we consume more than we produce. Any attempt to “stimulate” the economy without attempting to fix our fundamental consumption/production deficit will fail. Unfortunately all the talk of stimulus that I read about involves the looting of the US treasury to pay for shiny new things and has little to do with the real bitter medicine we need to take.

The inflation that is surely going to come along with these newly promised multi year trillion dollar deficits will stalk Obama in 2012. With higher inflation comes higher interest rates. If people cannot afford their homes when they have 6% mortgages, how does anyone believe that they will afford them with 16% mortgages. Higher interest rates will also force the fed to increase the yield on its bonds and make financing the nations debt even more expensive. Last year alone we spent $450Bil financing our debt. Higher interest also makes financing a business expansion increasingly difficult.

The media will do its best to make sure that Obama doesn’t own the recession. Unfortunately for him they wont be able to do that for more than a year or two.

Build me this house.

Ever build a home or know how the home building process works? Imagine you and your happy family wants to build a home. It’s a pretty simple process, fairly straightforward to navigate

Well I would like to pose a thought experiment to illiterate another point.

Try building a home when the government has the right the change your design standards after they have been submitted, approved and then inspected. For example a 2X4 stud wall that was approved at 16” on center gets changed to 12” on center after your conduit plumbing and drywall work are done. Even though you followed all the relevant desgn guidelines and have included significantly large safety margins, the reason for this change can be as arbitrary as the inspector saying “do it because we say so”.

Try building a home where the government’s regulation of your building material supplier has been so burdensome that you cannot go to Lowes or Home Depot for your lumber wire and roofing shingles (they have all been driven out of business); you now have to buy all of it from France and Japan.

Try getting a loan for this house when there is no guarantee that even if you jump through ever single hurdle presented above there is no guarantee that you will receive your occupancy permit.

During every step of the way your worst enemies petition the government to stop you, have courts grant injunctions against the building, and have the government change what your house looks like.

Now imagine that through all of this you having to pay for lawyers to fight your enemies and pay for all of the tradesmen when they either cant work or have to rework what they have done.

A home that would normally cost $250,000 and take 5 months to build would cost $2,000,000 and take 5 years to build.

How many houses would be built if the process was like this? Not too many.

Welcome to the state of the US nuclear industry,

The Bush administration gave nuclear a big boost early on, but lost the political capital to push ahead, although the US Indian Nuclear agreement was just the shot in the arm that the US nuclear industry needed.

When just another Illinois politician Obama was supportive of Exelon, if not necessarily of the nuclear industry as a whole. During the campaign, The Dear Leader played the good fence sitting politician by saying “we should explore nuclear power as part of the mix" but considering the opposition to nuclear power only a strong commitment on the part of the government will get things going again.

The next times some dickhead starts whining about the “republican war on science", ask him about nuclear power.

Global Warming

Back in the early part of my career and even to a limited extent today I utilized a tool known as computational fluid dynamics, or CFD. CFD and modeling software packages in general are great. You can use that fancy schmancy Sun workstation your boss plunked $50K down for (now it is an off the shelf PC, my how times change) to make a computer model of a physical system. Without ever having to step inside the shop, you can build a component or an entire engineered item and see how it performs. It’s like a having an army of mathematicians solving tens of thousands of simultaneous equations in three dimensions. Better yet, you can even overlay other interdependent models like a chemical kinetic models to map out changes in system chemistry or a finite element model to give you material stresses.

The biggest advantage of using CFD is that I don’t have to make a prototype in order to test a design and I can refine my design to a level that I just couldn’t with a pen and paper or statistical/empirical based calculations. I can make all the little tweaks and refinements I like, and then go make a prototype. Its not a magic bullet, to be sure, but it cuts the amount of time it takes to analyze and develop something.

After a model was constructed and everyone got the opportunity to shit all over it through a review process. As part of this review process, all of the assumptions I made were scrutinized. The software lets me “ignore” for lack of a better term phenomenon that doesn’t apply to my model, or should I say phenomenon that I think have a negligible impact on the results. The software also allows me to set the resolution of the model. I could, for example, include every physical, chemical, and thermal phenomenon into my model, but in my opinion the ones I chose to ignore are of tertiary importance and including them will waste manhours and make the model to complicate to run on my puny machine.

Couple this with the fact that I have years of experimental and empirical data to validate my initial methodology. For example, Dr Smith from the University of Complicadia figured out in 1967 that the exothermic reaction of a minor chemical intermediary in my process only contributes .001% to the overall energy balance and therefore I can safely say BFD.

In addition to all this, the one thing I don’t have to worry about is the soundness of the tool I am using. The makers of it have put it through a rigorous verification and validation procedure (like ISO/IEC 90003:2004 or something), and this procedure conforms to some recognized international standard.

At the end of my review process changes were made until everyone was happy and a prototype was built. That prototype was then tested and discrepancies between the real world results and the model were explained as either within the margin of error, poor assumption in the model or whatever. These real world results were then taken into consideration the next time a model was constructed, and were also good to give to management to waylay their fears as they are naturally skeptical of all that oogah-boogah black box magic, and don’t want to spend $40 million just to find out that the computer was wrong.

This CFD tool that I used on boilers, pumps, solid fuel injection and all that good stuff is being used to model the global climate. There are statistical based models as well, but I know very little about them and my comments will only touch on general circulation models which use a methodology similar to the CFD models I worked with.

A lot of big claims are being made about where the global climate is going. The IPCC (Intergovernmental Panel on Climate Change) says that they are 90% certain that global temperatures could rise from 1.8°C to 4.0°C. My goodness, 90% certainly sounds pretty freaking sure, and after all, they have all those global warming models to back these claims up, but now the question becomes how reliable are the models.

Now these climate modelers are smart guys to be sure, they know their shit and I would never accuse them of intentionally passing off what they knew to be bad date. This said, they seem to be a rather insular group of people who are a little to thin skinned, clannish and not open to criticisms of their work. Many of them have never had to work in the private sector where good verifiable results are a must and poor performance is severely punished. If they want to satisfy people like me, they should allow their work to be checked by people with no connection or conflict of interests.

They claim that they have validated their models using historic data, but there are some gaping holes in that explanation.

The explanation goes like this: we have validated the models by setting them up to reflect the conditions of the year 1900 and when advanced to 2008, they show a good match between what happened with the climate, or at least they did after we tweaked them.

And by tweaking they mean that they modified the code and all those constants whose values they came through via assumptions, to get the models results to match the historical data. And that’s OK, isn’t it? Isn’t that what I do when performing my modeling work?

Not exactly. As I mentioned before, I actually get to build what I modeled and see if it works as I predicted it would, they don’t have that luxury so they should be extra specially careful, that and there are significant problems with the methodology they use for their fancy curve fit.

First, how reliable are temperature readings that are 150 or even 100 years old? Was the instrumentation properly calibrated? How accurate were these instruments? It might sound like a trivial point, but instrumentation reliability has killed more than one experiment. Remember we are talking about differences of a just a couple of degrees C, was instrumentation resolution and accuracy in 1905 at a high enough level to make the data gathered useful?

Secondly, what happens when the models appear to work fine at describing some phenomenon like the global average mean temperature from 1850 to 2000, but work very poorly at describing related phenomenon:

global weather models predict that as carbon dioxide increases, it should affect the temperatures of higher elevations more than it does at ground level. Douglass’s analysis suggests that while the models do roughly match ground temperatures as carbon dioxide increased over the last 20 years, the mid- to high-tropospheric levels of the atmosphere actually cooled.

“The models are relatively accurate at predicting the temperatures at the Earth’s surface, “says Douglass, “but when you go a few miles up, they diverge dramatically. The models are really challenged to explain these results.”

The standard response to this is that the modelers will incorporate this data into their next revision, and that will make the models even more accurate, except the climate models continually predict the same warming trend regardless of how many revision have been made to them:

A detailed analysis of black carbon -- the residue of burned organic matter -- in computer climate models suggests that those models may be overestimating global warming predictions.

I have had conversation with people about this issue in the past and they have responded to me with two answers: you can’t predict the future and there is no cost in being wrong about this, it’s a win win.

Its not about predicting the future here, its about verifying that the methodology you used to construct your climate model is sound and has been rigorously examined by people who have no personal or professional interest in its failure or success.

There is a cost for being wrong. If legislation to halt global warming is enacted it could very well result in the greatest transfer of wealth from the first to the third world and could also result in the greatest voluntary surrender of individual freedom.

Don’t believe me? The developing world will be written out of any treaty on CO2 emissions. Industry will move there and make them wealthy. Legislation here will determine in no small part what we eat, where we live, how large our homes are, how we go places, how many children we can have, where we work, what temperature the thermostat is set for, where we vacation etcetera.

I don’t know they are wrong, but they have yet to demonstrate that they are right. I know, sounds like a cop out, but its not. They have not demonstrated to any accepted global standard that they tools they use are reliable and they have not demonstrated to any accepted global standard that their methodology is reliable.

Make your case before you legislate way my freedom in the name of saving the Earth. If the science is truly settled, conform to the same burden of proof I would have to.

Show me the money.

The Pickens’ Plan

I am sure that most of you have read or at least heard about the Pickens’ plan. Oil tycoon T Boone Pickens has a plan in which the United States uses wind energy to generate electricity which will replace natural gas derived electricity which will allow all that natural gas to be used to fuel vehicles, thereby displacing oil.

Sounds good, but will it work? The short answer is no, there are a lot of holes in the fundamentals (not just the details) of the plan that have not been addressed.

The long(ish) answer is that there are many reasons why both the Pickens’ plan is impractical.

There are two types of electrical generating sources in the US: baseload and peak.

Baseload plants, just like the name would imply, provide for the base electrical demand on the grid. These are big units like nuclear and coal plants. They are baseloading units because they have the lowest $/kW operating costs (fuel prices) and the highest reliabilities and capacity factors.

Peaker capacity is almost entirely comprised of stationary natural gas powered turbines and supplemental natural gas firing into boilers. This is because natural gas is expensive but cheap to build.

As a commodity, electricity is special in that it cannot be easily stored in large quantities and it has to be generated as needed: to much of it and you crash your grid, too little of it and you crash your grid. Determining how much electricity needs to be put up on the grid at any given moment is a very complex process. Any shortcomings in your baseload capability has to be made up for with your peaker capacity. Natural gas turbines make for good peaker sources because if you need X number of MW of additional electricity, you know with a high level of certainty that you can generate what you need, and gas fired sources can come on line within minutes, which is nice if you lose a baseload generating source for some reason (happens all the time).

How much generating capability a utility builds and keeps on line is determined by how much electricity they need divided by the capacity factor of the source they are installing. A coal fired plant has an average maximum capacity factor of about 85%, so in order to meet 100MW of electricity demand with coal you would have to build a plant that had a nameplate capacity of 117MW (100/.85).

So what does this have to do with the Pickens’ plan and why it won’t work?

The crux of Picken’s plan is that we replace natural gas derived electricity and replace it with wind powered electricity. Wind power is variable, just like the wind, so you cannot rely on it to provide exactly as much power at the precise time you need it to. To compensate for this you either have to use a backup power supply to compensate for all those times that the wind isn’t blowing right, like natural gas. Since wind only has a capacity factor of around 33% you have to install 3 times as much. In reality a combination of both would be needed, but the Pickens’ plan does not take any of this into account. He prices the replacement of natural gas with wind on a watt per watt replacement cost.

In addition to the cost of the implementing the plan to provide a reasonable degree of reliability to avoid rolling blackouts, controlling a system that would be prone to such wild and dramatic swings in load would be a significant engineering challenge (lots more money).

There is also the question of whether or not this even provides us all that much energy security.

The US uses about 39.8QBTU’s of oil, imports 58% of that and uses 70% for transportation meaning we import 16.2QBTU’s of oil for transportation alone. Out of that 16.2QBTU, we use about 55% for cars or 8.91QBTU, the res is for commercial trucks, planes, trains and boats. The US uses about 23.5QBTU’s of natural gas, imports 20% of that and uses 30%, or 7.1QBTU’s for power production. This means that we will still have to nearly 2.0 QBTU’s of natural gas to make up for this differential. Doesn’t sound like a lot, true, but our production of natural gas in the US has been nearly flat for the past decade. So instead of importing oil from volatile areas of the world whose inhabitants and governments despise us, we now have to import natural gas from volatile areas of the word whose inhabitants and governments despise us.

In short, the Pickens’ plan will cost more that is estimated, by an order of magnitude once everything is factored in and will not significantly reduce our reliance on foreign energy.

Unfortunately when the press and pundits weigh in on this, they do a terrible job of addressing any of these issues. An example of the 4th estate’s failure to clarify these issues is Obamabot Anthony Cefali’s ill-informed and gushing piece about Obama’s willingness to implement the Pickens’ plan:

Why is Pickens’ Plan important? Simply because it’s main goal is to divert all of our oil and natural gas to the transportation sector. Factories will no longer use natural gas because they will be powered either on site or through an electric grid powered by wind and solar. The plan stresses efficiency and centrality. It could also potentially save the US $300 billion in oil expenditures. Citing Obama’s plan to end dependency on foreign oil in the next ten years, Pickens expects that the first step will be implementing major parts of his plan.

The major parts of the plan involve the US specially equipping larger vehicles (buses, trucks, etc.) to run on natural gas. This would take a huge load off of our dependence on oil, in turn causing prices to drop because factories and businesses will have no need for it. Demand for oil would come solely from consumers, as would carbon dioxide emissions (the nitrogen oxide emissions will come from the natural gas burning buses).

The author’s lack of even the most fundamental understanding of how the nations electrical grid works (he is a biology and English lit major at UW Madison) is only compounded by the certainty he has that this plan, under the ever watchful eyes of the Dear Leader naturally, will work. Industry uses natural gas primarily for process heating applications, and electricity makes a poor and very expensive substitute for this (trust me, I recently priced out a 10MMBTU electrical heater and it was about $850,000 dollars, the 10MMBTU natural gas heater was $50,000.)

Pickens plan might work if we were willing to spend the money for it and the money for the additional transmission and distribution infrastructure needed, and the additional money to make 20% of our grid reliant on a variable output source, and additional money to develop offshore gas production and transportation infrastructure for Alaskan natural gas (good luck with the last 2).

I am all for reducing our dependency on foreign oil, that why we need to reduce what we use, drill here at home, develop the trillion plus barrels we have in shale deposits and build lots more nuclear plants not blindly buy into a woefully underpriced plan.

A Big Pill

Although I never cared much for Ron Paul on a lot of issues, his former economic advisor Peter Schiff was spot freaking on in 2006:

Whether it starts in 07 or 08 I think is immaterial. I also think its going to also not just for quarters but for years. The basic problem with the US economy is we have too much consumption and borrowing and not enough production and savings and what’s going to happen is the American consumer is basically going to stop consuming and start rebuilding his savings especially when he sees his home equity evaporate.

And when you have the Economy 70% consumption you can’t address those imbalances without a recession. Rather than the recession being resisted, it should really be embraced because the disease is all this debt financed consumption. The cure is that we stop consuming and start saving and producing again, and that’s a recession. Sometimes medicine tastes bad but you gotta swallow it.

To which our newly ordained Dear Leader says:

The government will do ``whatever it takes'' to revive the economy, Obama said. That means ``we shouldn't worry about the deficit next year or even the year after,'' he said, adding that in the short term, ``the most important thing is that we avoid a deepening recession.''

I don’t know if this is the most prudent course of action, later on in the video Schiff makes the case that we need to get the deficits under control, otherwise inflation will explode and do more damage than to the economy than any correction. Unfortunately as spot on as Schiff was, I think that people will continue to ignore him at our peril.

No one wants to acknowledge the hard truth that we have collectively been living beyond our means for the past 20 years, it will only get harder to correct this imbalance the longer we allow it to continue.

Obama's Economic Stimulus is Working!

Looks like Obama’s anti-gun stances are reaping large sales and profits for the gun industry.

Indianapolis - Gun control was an issue that was largely out of the spotlight in the presidential campaign. Fears the new administration will impose stricter regulations have caused a spike in the number of firearms sold nationwide.

At Popguns on the east side, business is literally booming. Racks with long guns are half empty. Hand gun cases are thinning out too. Last weekend, firearms sales here increased 250 percent.

I know from my own experience that gun sales have taken off since last Tuesday. Just today I went into buy the following Rock River AR-Clone, knowing that I might not get the chance to ever do this again in a couple of months.

I asked the salesman how many of these he was going through and he told me that in an average month he would sell between 50 and 60 of the Rock Rivers (this is a huge gun store) but since the election he has been selling 40 of them a day and cant get ebough from the distributor. Similar sales, although not in the same magnitude, were being seen for M1’s, AK’s and tactical shotguns.

I certainly hope that The Dear Leader can spur a similar uptick in the auto industry.