This page has been archived and commenting is disabled.

On Student Loans, Accounting Gimmicks, Electric Cars, FX and a note on SS

Bruce Krasting's picture





 
 
 
 
Student Loan Battle

 

There was a big fight in D.C. this past week over student loans.

The issue is a scheduled increase in interest on new student loans from 3.4% to 6.4% set for July 1. Clearly this is a dumb plan. I don’t see any political opposition to the idea that the summer of 2012 is a horrible time to double the cost of student loans. It will shock no one that the ‘solutions’ being put forward by the politicos are the same ones they propose for every other problem.

The House Republicans have put forward a Bill to extend the 3.4% rate for a year. The cost (increased deficit) of the twelve month extension is $6B. The Republicans want to offset the $6B with (surprise) $12B in reduced spending for the Affordable Care-Act. The Republicans love to trade marbles for reduced Obamacare. They want a 2-1 reduction in medical spending versus education costs. Maybe the “Reds” have the chips to push this outcome. They might settle for a 1-1 deal, but the White House will hate this outcome.

The Senate Democrats want to raise taxes on those making over $250K to offset the cost of the one-year deferral. Their argument is similar to the Buffett tax plan they tried a few weeks ago. Lacking support, it was so clear it wouldn't pass that it was never voted on. I would give the Senate legislation on student loans a zero chance in the House. It is D.O.A.

There will be the same ideological pissing match and the same result. We will get a one-year extension “paid” for with “promised” reductions in expenses starting in 2017. Another kick of the can, and another big problem in 2013.

This is what happens over a crummy $6B. On January 1, 2013, there are cutbacks and higher taxes totaling $500B scheduled. The coming “Tax Armageddon” is supposed to be resolved in a lame duck session of Congress after the November election. There is a “zero” chance of that working out.

 

+
One in a Hundred
 

I have been following the evolution of new global lease accounting standards. At the heart of this issue is the recognition that a lease is just another form of debt, and that the debt should be put on the balance sheet of the lessor. The big hitters in the US leasing business (and their accountants) have opposed the new standards. At this point 100 countries have signed on to the new accounting rules, but the adoption has been delayed by the good old USA.

.

 

At the G-20 meeting last week, finance ministers extended the deadline for the our rule makers to adopt the new rules till June, 2013. That date is already 30 months late. My guess is that there will be another delay, and the source of the delay will be the powerful companies, (think GE) that have a lot to lose if a lease is treated as debt (as it should be).

The Foxes are the cops in this hen house. When it comes to accounting and full disclosure, nothing has changed.

 
+
On Electric Cars

 

GE has dug itself deeper into the electric car business:

It’s all well and good if GE wants to put its shareholders at risk on the future of electric cars. My concerns are that a great deal of money is being spent by D.C. on this effort, and that GE's, Jeff Immelt, is the President’s policy adviser. Jeff blows smoke in Obama’s face and the government doles out billions to support  GE, Ford, Fisker, Tesla and others.

.

.
 

If I were running the show, I would have invested in the infrastructure for delivering natural gas as a fuel for vehicles. The US has an abundance of cheap natural gas. A fair bit of that energy is just being flared into the air these days.

It’s not as if Natgas cars are some untested concept. Brazil has been using them for thirty years. Globally, there are about 15m Natgas powered vehicles. Of that amount only 300,000 (2%) are in the US.

So why is the government, the car manufactures and the energy companies avoiding this opportunity? The answer is that it is much more profitable to sell expensive gasoline to consumers than it is to sell cheap Natgas.

Note: Honda makes a Natgas powered car. This vehicle was named Green Car of the year in 2011 as it gets 31 miles to the gallon with much lower emissions than gas powered cars. If there were a distribution system available, these cars would be more popular than electric cars.  The cost of running cars on Natgas is about half of the cost of a gas car.

Why is the government supporting one technology over another? Why is it supporting the expensive alternative versus the cheaper one? Another example of the foxes being the cops.

 

+
On FX
.

There was very little net movement in the major currencies last week. I was surprised that the Euro did not weaken. The news is terrible. There is a very good chance that the French and Greek elections on May 6 will bring about political changes that will undermine the stability of the EU.

If the French kick out Sarkozy (I think they will) then the chances of Spain getting a desperately needed rescue package will fall to zero. Without France standing shoulder to shoulder with Germany in support of the Euro, the whole experiment may fall into the crapper. Yet the Euro managed to eek out a small weekly gain against the buck.

Some are attributing the relative strength of the Euro to ongoing capital repatriation by the EU banks as they reduce their non-Euro assets. (Zero Hedge) Others are suggesting that large existing EURUSD short positions are the problem.

Maybe, but I’m catching a whiff of dollar weakness. I don’t pay that much attention to the hourly trading action in FX, but I do watch how the USD trades when news comes out. When there has been “good news” the dollar has not traded higher. When there is “bad news” (the weak GDP report) the dollar has traded lower.

I believe that the US is currently in 3rd place in the race to the bottom. The EU and Japan are leading this race. So this makes me (reluctantly) a dollar bull. I’m not getting fat on this position, I’m not even getting fed, so I cut some positions on Friday. I took a small loss on some recently acquired USDYEN and took a nice profit on an older (smaller) position on USDYEN that I picked up under 79.00. I took the net gains and bought one month puts on the EURUSD.

Note: The EURCHF has been trading at less than 1/8th percent away from the intervention level of 1.2000 for over a month. This is an accident waiting to happen. It looks very quiet on the charts, but there is a steam kettle with a hot fire underneath this chart. If the French election goes against Sarkozy, I have to believe the kettle is going to blow a few rivets.

I have no exposure in the CHF crosses, but I’m watching the action. If the Swiss National Bank is forced to support its peg over the next few weeks, it will send a bunch of other lighting bolts flying.

+
On Social Security
.

I’ve been trying to stir the pot on Social Security this week after the release of the annual report (Link). I thought the report was ample evidence to stimulate a discussion of what changes are needed at SS, and by when. I was wrong. The terrible report and its terrible conclusions have been ignored. The typical response I get from the Defenders of SS is,

“The Trust Fund behind SS was always scheduled to run out some day; that it's happening ahead of schedule does not matter at all.”

To those who do not see the fire burning here I point to the following slides from the 2008 and 2012 reports to Congress:

 
 

The base case assumption on the timing of the peak in the TF balance has changed dramatically over the past four years:

 

Social Security is going to eat our lunch much faster than the public thinks. Those who think that this does not matter and that nothing should be done are dead wrong.

Note: I get a lot of flack about my focus on the Trust Fund (TF). I agree with those who say, “There is no Trust Fund”. The accounting on this is just a sham. But TF accounting is the reality in D.C., and that is not going to change. So I push on the deteriorating status of the Trust Fund (that doesn’t exist) in an effort to raise a red flag.

.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 04/30/2012 - 08:16 | Link to Comment Widowmaker
Widowmaker's picture

So that I can revisit this thread in a few years:

NG is wide open, and a lot of good trades exist at the present.  

As it relates to technology, the way to make NG viable is not through distribution networks and replacing the aveage-joe's US auto fleet.  It is (gasp) being smarter than the typical ZH idiot.  The way to skin this cat is through trains and public vehicle conversions.  So, buses, subways, and railroads first.  Instead of piping NG everywhere, consolidate services to where the NG is.  In rail, this means gas -> electric generation.  In garbage trucks, city vehicles etc, they all come to the fillup at the end of every day anyway.

Autos may come later but if you run out of NG on the road today you call a tow truck -- totally absurd and prohibitive (same with electric vehicles).

NG has a significant infrastructure already in place but under-utilized.  Hell, it's in many homes already, so talk of some vast infrastructure spending is propaganda and government spending bullshit.

Americans and Corporate Congress Inc would rather get fucked by bankers than make prudent decisions regarding this.  It's the banks that have kept America from progress.  Krasting is looking the other way as crooked banks Inc can do no wrong.  Congress traded comprehensive infrastructure overhaul twice over for TARP.  

Fraud finance is the root of inactivity, Bruce, revealing your lack of sense I present yet another misallocation of capital and abortion of common good by the banks themselves.  I'm sure its all an accident.  FUCK THAT!

If you can't tell, Widowmaker is bullish NG and the portfolio reflects that.  You should be too.

Mon, 04/30/2012 - 11:57 | Link to Comment alex_g
alex_g's picture

"The way to skin this cat is through trains and public vehicle conversions.  So, buses, subways, and railroads first.  Instead of piping NG everywhere, consolidate services to where the NG is.  In rail, this means gas -> electric generation.  In garbage trucks, city vehicles etc, they all come to the fillup at the end of every day anyway."

 

Early adopters are usually the ones that get the most utility or economic benefit from the new technology.  You mention many of them.  The vehicles that use the most energy per unit will benefit the most.  As the fueling system gets built out, the marginal cost of using natural gas as a transportation fuel will decrease.

Mon, 04/30/2012 - 05:28 | Link to Comment LMAO
LMAO's picture

"Note: The EURCHF has been trading at less than 1/8th percent away from the intervention level of 1.2000 for over a month. This is an accident waiting to happen. It looks very quiet on the charts........"

I think you can safely cut the euphemism Bruce, looking at the daily we can conclude that this sucker has flat lined since the beginning of the year. Everything else in this world being as volatile as hell the €/Swissie is looking beyond ridiculous.

 

Mon, 04/30/2012 - 05:13 | Link to Comment Element
Element's picture

"It’s not as if Natgas cars are some untested concept."

Nor are electric or especially hybrid-electric cars, and they are exceptionally fuel efficient and reliable.

A substantial increase in LNG volume is required over petrol volume to attain the same mileage, in the same car (if I remember correctly around 30% more LNG by volume is required, I'm sure someone else will have pointed this out).  Thus the 'cheap' LNG option is not as cheap as the price per litre might suggest, with less energy available per unit volume. 

I'm not in any way anti-LNG as a petrol replacement or substitute.  It works.  In Australia we have been using LNG conversion kits in engines that were designed as petrol-driven engines, for decades.  It is simple and reasonably cheap to convert them over (plus you retain the ability to use petrol also).

But I'm wondering why you're so quick to cast the notion of risk and investment aspersions on these proven electric and/or hybrid-electric ('Atkinson Cycle' valve-train) hybrid systems, already in widespread and proven use?  

Are you actually familiar with these vehicles Bruce?  They're quite brilliant.  The videos linked give a good intro into what makes them so efficient and shows also how they work;

http://www.youtube.com/watch?v=hEfOxKmCstg
http://www.youtube.com/watch?feature=player_detailpage&v=ZmHpSyTsfm0
http://www.youtube.com/watch?feature=player_detailpage&v=_iggjsKyq2Y

Now take note that the internal combustion engine used can be run on either petrol or LNG.

The best of both worlds, and massively lowered emissions, and also consumption.

The Prius, in particular, is THE hardcore fuel economy vehicle.  Yet it still has surprisingly impressive power and torque. You'll be surprised to find that it can haul-ass when you put the pedal to the floor.  The Camry Hybrid has a more power, but it is nowhere near as fuel efficient, it is a bit of a pretender to hybrid fuel efficency in my view.

Prius hard-driving commutes for 300km = ~$28.50 AUD  (~19 litres)
Camry hard-driving commutes for 300km = ~$45 AUD (~29 litres)

(using local 95 RON Unleaded @ $1.53 AUD per litre)

Believe the hype Bruce, they're extremely reliable, unbelievably low cost to run hard all day and have enough power and long-range for open highway driving.  So I really don't see any dichotomy between LNG and Hybrid-Electric vehicles here - nada!

On top of this the latest top-of-the-line 2012 Prius comes not with just the larger battery capacity, and more efficient and powerful electric motors over the 2008 model, it also has an AC-mains recharging plug-in receptacle, to use the cars inverter to recharge the battery from a power point.

i.e. if you live 10 to 12 miles from work you can now actually run this new 2012 Prius 100% on the battery and use zero petrol to get to work or the shops, nor LNG, then charge it at work or the shops (for a few 10s of cents worth of electrons) and drive it all the way home again, from standard domestic power points!

In other words, the hybrid electric is rapidly evolving toward the option of using it as a fully-electric car for most urban trips, and if you want to go further, or require more power, the 1.8 litre engine will cut-in seemlessly to deliver it on demand.  It's that simple.

LNG verses Electric or Hybrid-Electric is a false dichotomy, as we're going to be routinely using both as one system. 

In my opinion, any existing car company not already making well-advanced plans to manufacture Hybrid-electric vehicles by the tens of millions, is unlikely to still be around in just five to ten years time. 

Mon, 04/30/2012 - 05:17 | Link to Comment Seer
Seer's picture

I'm sure that this will all come as great news to the 4+ Billion people on the planet that earn $3/day or less.  And then there are the rest, most of which are facing "austerity" measures.  Sigh, but I'm sure that the elites will be able to keep these con games going (that there's a brighter tomorrow if only you [with the "help" of the govt] chip in and shell out some shekels today).

If "we" were to convert (forced into this social experiment) it would be a disaster for the trucking industry, as their fuels are available via economies-of-scale because of all the gasoline burners out there.  DISCLAIMER: I've got a bit of a bias for protecting diesel fuel as I need it for my tractor (and I'm in the process of getting a diesel truck).  At any rate, people overlook the importance of trucking (NG and electric AREN'T going to cut it for trucking) and of the total dynamics.

Mon, 04/30/2012 - 05:54 | Link to Comment Element
Element's picture

Seer, I know you focus on the big picture end of resources thing, and population, etc., etc.

But that is not to say that conventional engine drive-train configured cars, upgraded merely to use LNG, are not a comparatively absurdly inefficient and obsolete approach to ... "fuel efficiency".

While hybrid-electric drive systems are also getting cheaper every year, and the batteries also, as the economy-of-scale effects continue to swing in their favour, as production volumes of hybrids continue a parabolic (resource unsustainable) ramp.

And don't imagine that I'm defending or in any way in favour of the use of tax-payer funds to support failed car companies in their wonton decrepitude.

Diesel is going to be around for hundreds of years, coal to distillate conversion will ensure that.

Want to feed the masses, then take note that Asian countries are making hybrid trucks and heavy vehicles right now.

And as any fisherman knows, many small fishing boats and trawlers are powered by truck engines.

It is only a matter of time until practical hybrid tractors and harvesters appear as well.

Now let's just imagine the possibilities if we discovered next Wednesday how to create cheap room-temperature superconductor materials ...

Like it or not, there are real possibilities to sustaining current productive capacity, despite the often assumed and voiced down-sides.
 
 
I'm just being realistic about it, genuinely fuel and energy-conversion efficient hybrid-electrics are going to take over, even as the world goes into it's reset and population induced convulsions.  Invest accordingly.

 

 

PS: Sorry, the global equality meme was always fantasy, terrible as that is, I flat out refuse to fall in a heap of sobbing guilt because 4-billion people live on >$3 a day. 

Mon, 04/30/2012 - 00:53 | Link to Comment q99x2
q99x2's picture

I'd go for a CNG car. The Santa Monica buses run on it.

Sun, 04/29/2012 - 23:50 | Link to Comment ViewfromUnderth...
ViewfromUndertheBridge's picture

"So I push on the deteriorating status of the Trust Fund (that doesn’t exist) in an effort to raise a red flag."

Bruce, that just says it all. If anyone doubts the wheels have fallen off and needs yet more proof, this is it.

IBG/YBG...remember that cryptic explanation between traders for all ills? I admire that you are still inside the burning house, holding up the ceiling, waiting for some deus ex machina fire-crew but just be sure you don't fall through the floor...the fire is in the foundations.

Farewell ZHers, VfUtB out, IBG.

Sun, 04/29/2012 - 23:38 | Link to Comment alex_g
alex_g's picture

Boil, CNG prices are more than 2 bucks less than unleaded prices in Seattle.  That's right, less than half.  If you have a home filling appliance, they are $1.20 per gge.  Less than 1/3rd.  The difference is remarkable.

The CNG Civic gets the same fuel economy as the unleaded version.  The exact same.  High mileage drivers (say 24k per year) will save over $2,000 per year on fuel alone.  You also change the oil less.  A lot less.

I understand the fueling issue, but that is changing, and that change will accelerate in the future.  For fleet vehicles, its a slam dunk.  Most of the new taxis here are CNG.

The major flaws in BEV's won't be ironed out in the next 10 years, maybe never.  Electric cars are a small niche that will take years to make a dent in CO2 emissions or oil consumption.  They are too limited, too expensive and too difficult to produce in volume (battery supply, plus the neg GDP to china would be devastating).

Mon, 04/30/2012 - 00:32 | Link to Comment Seer
Seer's picture

I have no real objection to most "solutions" other than they NOT be subsidized: and fat chance that any BIG solution wouldn't eventually result in lobbyists buying huge subsidies.

Do keep in mind that if you INCREASE the consumption rate of NG (as with ANYTHING) you will increase the time-frame in which you exhaust its reserves.

I believe that the real reason that NG hasn't been pushed outside of the fleet applications is because of the insurance industry.  NG presents a BIG risk: think of the iCrap mentality having to deal with a fuel that's MORE dangerous.  I'll also state that I believe that this same "concern" applies to EVs too: mishandled charged batteries can make for some big problems.  With gasoline and diesel fuels risk has been been fairly well managed (discounting all other issues like environmental impacts).

Sun, 04/29/2012 - 23:06 | Link to Comment boiltherich
boiltherich's picture

Nyet to Nat Gas cars.  You say BK:

Honda makes a Natgas powered car. This vehicle was named Green Car of the year in 2011 as it gets 31 miles to the gallon with much lower emissions than gas powered cars. If there were a distribution system available, these cars would be more popular than electric cars.  The cost of running cars on Natgas is about half of the cost of a gas car.

That is true, but it is so one sided as to be almost Politicianese. 

The Honda Civic (1.8L engine) nat gas  model in question gets lower mileage than the petrol engine, and it is true that in most places nat gas is 30-40% cheaper than gasoline, but you are also getting lower mileage per gallon equivalent, so your fuel costs remain about the same.

IF and it is a big if, we are ever to have widespread use of nat gas cars we will need every single fuel station in America to add refueling for these cars, that will not be cheap, and as of now there are only about 400 fueling stations for these vehicles, more than half of them in California.  There are whole states that do not have any refueling for nat gas cars at all, and that is really bad on a road trip when you have only a range of 250 (if you are LUCKY) miles per tank.

What are some of the other reasons people are not buying and they are not being built? 

They cost a LOT more, the Civic gasoline version is $21,000, the Civic NG version is almost 6 grand more.  A home refueling station that fills your car overnight from your house gas supply is another $3,000. 

The NG cars have 110 horses as opposed to 140 for the petrol version, and that is just not good enough for most people, 140 is gutless enough, 110 is so underpowered it is practically dangerous.  To add insult to this injury the NG version is hundreds of pounds heavier.

The suspension in the NG version is far stiffer in order to handle the much heavier fuel tanks, it has been reviewed as one of the worst rear suspensions on the road, chiropractic bills will swamp any fuel savings to get your spine fixed.

Those same heavier fuel tanks also take up a lot more room, cargo space in the Nat Gas Civic is half that of the gasoline model.  I understand they are noisier as well. 

Of course there are advantages too and I want to be fair, the pollution is less from nat gas, and it is a domestic fuel we have a lot of which does not require nearly as much refining or cleaning up.  And, nat gas engines seem to last longer than gasoline. 

Nat gas makes a great fuel for fleet vehicles that do not need freeway or passing acceleration, and they are good for vehicles that do local delivery.

But, the drawbacks really outweigh the advantages, it would be I believe better and cheaper and greener yet to plow that same investment into ironing out the major flaws in electric vehicles, and use gas what it is better suited for, power generation. 

They have recently upped our nat gas reserves in the USA to about a 65 year supply at current production, but put all 200 million cars on the road into nat gas fuel and watch as that plunges to 20 years supply.  What then?  Right, we will be in exactly the same place we are right now with gasoline shortages and we will have to totally reinvent the technology and infrastructure to reboot electrics anyway.  Save the time and money and skip gas, go right to electrics.

 

***I almost forgot, you HAVE to buy the nav system with the nat gas version because it comes preloaded with the locations of the places you can get fuel, KA CHING, $1,800.

Mon, 04/30/2012 - 04:48 | Link to Comment John_Coltrane
John_Coltrane's picture

Not surprising when you consider all gas is roughly 1000X less dense than a liquid at standard temperature and pressures.  And getting really high pressures costs a lot more energy not to mention problems with things blowing up.  People should always remember this 1000x density factor whenever some scheme involving replacing a liquid fuel with a gas (say H2, or CH4) comes up.  You just can't beat the energy density of liquid hydrocarbons.  Unless you exploit that old E=mc^2 thing and go nuclear.  Nothing beats a nuclear reaction for energy release-just ask any star or supernova.

Mon, 04/30/2012 - 07:38 | Link to Comment Pope Clement
Pope Clement's picture

Coltrane- It is becoming increasingly apparent that nuclear powered stars, Black holes, Dark Matter are hallucinatory theories and 20th cenury concepts that have constrained advancements in physics and cosmology for almost 100 years....see  http://www.thunderbolts.info/wp/resources/the-electric-sky-preview/

Mon, 04/30/2012 - 00:05 | Link to Comment malek
malek's picture

I fully agree with some of your points:
I also seriously considered looking for a used CNG car, as I consider it the right thing to do from a technical/economical/ecological standpoint (even more than modern turbo diesels) but the number of fueling stations is really ridiculously low.

However I consider 90 or 115 PS to be enough for everyone not pulling heavy trailers.

And the "much heavier [NG] fuel tank" you might want to research once more. It weighs about 70 kg, equaling one lightweight adult passenger.

Sun, 04/29/2012 - 23:14 | Link to Comment FeralSerf
FeralSerf's picture

I guess you've never driven a 40 HP Volkswagen Beetle.  Yeah, you needed to plan ahead if you wanted to pass.

Mon, 04/30/2012 - 00:36 | Link to Comment boiltherich
boiltherich's picture

Yeah Feral, and I once had a 100 HP riding lawn mower, top speed 6. 

Sun, 04/29/2012 - 22:46 | Link to Comment boeing747
boeing747's picture

I can't believe some people still don't understand why we continue to build gas-powered cars. Because if we build natgas-powered cars then we won't import oil from mid-east and won't send military to that regine. But do you think the powerful forces control this country allow this to happen? 

Mon, 04/30/2012 - 00:39 | Link to Comment Seer
Seer's picture

Well, yes, it has a lot to do with maintaining the status quo, and for good reason.  When your existing system is running all-out it's kind of hard to bring a HUGE parallel system on-line.

TPTB don't care what happens as long as THEY continue to maintain their power.  Growth will, however, will eventually take the rug out from under them.

Sun, 04/29/2012 - 22:07 | Link to Comment hardcleareye
hardcleareye's picture

Student Loans, slow jam the news

http://www.youtube.com/watch?v=vAFQIciWsF4

ROTFLMAO.....  and I don't like Obama......

Sun, 04/29/2012 - 21:46 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

Rough Math: A 3% increase on $20k is $600 or $50 a month. This is for a 1 year extension that costs $6 billion or $100 million a month. It's hard to see how a 1 year extension is going to make much of a difference in most college student's long-term debt load, but that's not the intention, is it? 

Granted, that's a drop in the bucket of the $100 billion we are overspending a month, and there doesn't seem to be anyway to retard this until the bill comes due.

On an easy trajectory to a $17 trillion deficit by the election, 3% of that is $510 billion. 

 

Sun, 04/29/2012 - 21:58 | Link to Comment tempo
tempo's picture

How and when did all this happen? IMHO, the internet and globalization openned the labor market to billions of hard working, smart people who are eager to work for $1.25/hr (Foxconn). This ended the opportunity for most to establish a middle income wage progression and will end to social safety net in the West. Trillion $+ deficits and zirp can't replace $30+/hr jobs.

Mon, 04/30/2012 - 01:06 | Link to Comment Seer
Seer's picture

Not arguing in favor of $30+/hr jobs (though one has to identify currency and inflation metrics in this), but the REASON this failed is because it was the natural outcome of GROWTH.  That $1.25/hr number won't hold either.  People will demand greater pay (ever see a time in recorded history that had instances of people demanding LESS?), and they'll get it, in the form of inflation, and that there will be, just like as in the West, periods in which it LOOKS like it's working, BUT... pulling growth from the future can only last so long.

FYI - Those $1.25/hr jobs are propped up by deficit-spending folks in the West.  I'm guessing that these jobs won't survive.  The middle class was always propped up by deficit spending of the future (pulling real resources from the future).

Sun, 04/29/2012 - 20:56 | Link to Comment Orly
Orly's picture

The situation for the Euro today is quite similar to the one at the tail end of 2010 in that the 1.29-level on EURUSD seems to be the agreed upon bottom for the pair.  All last week, every time there came a sell signal, the pair would burst higher, even on seeming very weak good news, while the bad news was essentially ignored.  I remember how frustrating that was back in the day and I couldn't believe how beautifully seamless the contrary action would be when it was clear that the opposite should occur.  It was amazing

This is not an event risk driven market.  It is a market being driven by enormous unseen forces with their own agenda other than free and fair markets.  I know.  News flash, right?  Nowhere is the manipualtion more obvious than on the EURUSD pair.

At least I know that all my indicators are working properly!  Ha!  When I get a sell-signal on the EURUSD pair, I buy it...

...but, not so fast.  The action late last week was showing a strain in that relationship; something decidedly unenthusiastic. rather tired, not nearly as seamless or even amazing.  They have apparently been able to support the Euro lo these several years by thwarting sell-signal after sell-signal, trouncing the home-gamers and giving the illusion that the "risk-on" trade was alive and well.  I have no proof but I do have the feeling that some of the big-boy banks that have supported these coordinated efforts are starting to take note of the exits as they walk onto the trading floor.  The risk-on trade is certainly due for some sort of correction, or at least consolidation today and, indeed, a full-blown market correction may be on the horizon.

The feeling I am getting is that the European banks involved in the massive Euro buys, the others involved in drumming up stocks, know that the EURUSD pair should be trading around the 1.06-level and the great weight of coordinated manipulations is beginning to have heavy bearings going forward.  I sense murmurs on the trading floors, glances askance to make sure you're not wearing the "Sucker" cap.

Once the disenthusiasm becomes obvious to all involved, the floor built into the Euro crosses may start to move quickly- too quickly for tired players, such as the Swiss central bank, to act decisively enough to avoid huge swings in those pairs.  The 1.20-level on EURCHF could get trounced and the Swiss may be in line for a very expensive check should they try to catch this falling knife.  See if they don't learn their lesson this time!

I expect the EURUSD to show particular weakness for the rest of the year, if not somewhat longer.  A sustained move below 1.31 will confirm this, at least to heavy support at 1.29.  If that level fails, look for a consolidation effort at about the 1.208-level and then again at about 1.142.  The pair may end up at its long-term Fibonacci level at about 1.075, the 61.8% retracement level from its big moves at the beginning of the crisis.  A move back above 1.33 negates this entire idea.  :/

Of course, these numbers are for a "natural" market and work according to natural patterns.  What rabbit they can pull out of their hat remains to be seen but it makes common sense that they have little more than vaporous apparations to throw at this puppy over the medium term.

There.

I said it.  Short the EURUSD now!

Or not.

:D

 

Sun, 04/29/2012 - 20:07 | Link to Comment Money_for_Nothing
Money_for_Nothing's picture

All these debt slaves are going to go south. North America is going to have reverse immigration for awhile.

Sun, 04/29/2012 - 19:28 | Link to Comment nmewn
nmewn's picture

Note: I get a lot of flack about my focus on the Trust Fund (TF). I agree with those who say, “There is no Trust Fund”. The accounting on this is just a sham. But TF accounting is the reality in D.C., and that is not going to change. So I push on the deteriorating status of the Trust Fund (that doesn’t exist) in an effort to raise a red flag.

Thanks for the clarification BK...the government is dead ass broke, yet issues more debt to cover what they stole from everyone over their working lives.

In short, its a ponzi run by counterfeiters and confidence men. In a sane, ethical and legal world they would have been clapped in irons and thrown in a dungeon long ago.

Sun, 04/29/2012 - 19:21 | Link to Comment FeralSerf
FeralSerf's picture

Electric cars need better battery technology if they're ever going to be successful.  The current 100 mile range or ICE backup is silly.  Maybe battery packs can be standardized and just swapped at the "charging" station.  Why not buy the car without the battery and just rent them like one does a propane tank.  Much of the battery cost is in the construction materials.  They can and would be recycled if the batteries were owned by the energy supplier.

This looks interesting as well:

www.pcworld.com/article/248159/ibm_develops_a_lithiumair_battery_with_a_...

Mon, 04/30/2012 - 01:26 | Link to Comment Seer
Seer's picture

They need to be affordable, which means that people actually have to have jobs.

Everything needs "[a positive] economy of scale."  Though China is currently a market in which vehicle sales are increasing I figure that this is the exception and that the growth there will stall (and drop).

And then there's the FACT that most of US electricity comes from coal...

Swapping out batteries sounds good until you actually have to do it.  Propane tanks are LIGHTER when they're out of energy, not the case with batteries.

Sun, 04/29/2012 - 20:57 | Link to Comment Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Super (ultra) capacitors will be the answer!

http://www.supercapacitors.org/

Sun, 04/29/2012 - 23:42 | Link to Comment Clever Name
Clever Name's picture

The flux capacitor?

Sun, 04/29/2012 - 22:45 | Link to Comment GMadScientist
GMadScientist's picture

Flywheels!

 

Mon, 04/30/2012 - 01:28 | Link to Comment Seer
Seer's picture

I remember studying these.  I like the idea.  Issues with charging them up, not to mention concerns over keeping them balanced (if graphite ones self-destruct at least they aren't going to saw through someone's body).

Still goes back to where the power to store in them comes from.

Sun, 04/29/2012 - 22:58 | Link to Comment flacorps
flacorps's picture

Graphene flywheels.

Sun, 04/29/2012 - 18:54 | Link to Comment CTG_Sweden
CTG_Sweden's picture

 

Electric cars are not a bad idea, provided that the electric grid is sufficient. Currently, the pre-tax energy cost at cost-price for an electric vehicle that runs on wind power is less than a third of the pre-tax energy cost at market prices for a modern, European fuel-efficient diesel vehicle. Moreover, it is a lot easier to produce electricity domestically than renewable liquid fuels.

 

However, my assessment is that you need an electric grid in residential areas and at filling stations that can provide electric outlets with a 1000 volt/100 A capacity in order to make recharging quick enough for the consumers. You can´t recharge an electric vehicle faster unless you increase the voltage or the current. But if you improve the electric grid so that the consumer can get almost instant access to 1000 volt/100 A electric outlets you can simplify electric vehicles so that they don´t need an internal combustion engine too, like the Chevrolet Volt/Opel Ampera. By that, you cut weight and cost.

 

On the other hand, consumers probably want a larger battery and more range if you don´t have a range extending internal combustion engine. And lithium-ion batteries are expensive. The more lithium you use, the more expensive batteries. Alan Mulally claims that the cost for lithium-ion batteries is $689 a kilowatt-hour. So if you need a battery that produces 30 kW (41 hp) on the average during one hour, the battery will cost you $689 x 30 = $20 670.

 

I suppose that the average estimated energy consumption for the Nissan Leaf is somewhat less than 30 kW. Let´s suppose that the Nissan Leaf consumes somewhat less than 30 kW. I consider the 73 mile range as rather optimistic, but I suppose that it should be possible to drive this car hard for about an hour without recharging. Then we get somewhat less than 30 kW on the average during 1 hour. That will in turn result in a battery price just below the $20,000 mark.

 

Deduct $19,000 from the $35,200 base price of the Nissan Leaf and you get a $16,200 for an electric vehicle without a battery. An electric motor is less complicated and expensive than a diesel or gasoline engine but I guess that a car like the Nissan Leaf would not cost more than $20,000 with a gasoline engine.

 

The fact that lithium-ion batteries are so expensive makes it hard to produce attractive economy-class electric vehicles. Therefore, I think that electric motors make more sense for up-market vehicles which – if they are propelled by internal combustion engines – have engines that are expensive because of poor economies of scale. So in that respect car makers like Tesla and Fisker make sense. On the other hand I think that the consumers will prefer up-market electric vehicles produced by larger auto companies with better dealership networks once they are lunched.

 

My assessment is that it is a realistic idea to sell all-electric luxury cars for $50,000 with luxury car badges. A car that sells for $50,000 is usually not so much better from a perceived quality point of view that you can´t build a $30,000 car, add a battery for $20,000 and then charge $50,000 for the car. But if you charge $40,000 for a $20,000 car I reckon that too many people will notice the difference.

 

Another problem is that people who like cars and therefore are willing to spend more than others on cars, if they can afford it, generally don´t like electric cars. I don´t like electric cars. Furthermore, luxury car buyers generally don´t want a Chevrolet or Opel badge if they buy a car for $50,000 or more. They want a Cadillac or BMW badge. The car should probably also look like a $50,000 car rather than a $15,000-$20,000 car. The Nissan Leaf looks like a $15,000 car.

 

On the other hand typical electric car buyers tend to shun prestige symbols like Cadillac and BMW. But perhaps the US is the best potential market for up-market electric vehicles. It seems as if Americans who are not interested in cars but can afford luxury cars are generally more inclined to buy expensive vehicles than their European counterparts. On the other hand, the electric grid is even poorer in the US and people are also generally commuting longer distances. But if you got a 73 mile range I don´t think that range should be a significant problem even in the US, provided that you can recharge the car fast enough and provided that there are enough electric outlets available along the roads and where people work.

 

I don´t know whether a market share in the 5 % bracket or lower for electric vehicles would justify the cost for an improved electric grid that could offer a sufficient number of 1000 volt/100 A electric outlets. If the battery cost could be reduced to $5000 I reckon that an improved electric grid would definitely be a great investment for the society. The question is how low battery prices you need in order to justify a massive investment in an improved electric grid.

 

Another possible problem with electric vehicles is the risk of brain cancer. Locomotive drivers are more likely to get brain cancer than others. On the other hand it has also been claimed that frequent use of cell phones also causes brain cancer. I have heard that it is possible to shield people from strong electromagnetic fields but I don´t know anything about the cost and weight for such devices. This may also be an important factor to look into before decisions are made on an improved electric grid.

 

Sun, 04/29/2012 - 20:11 | Link to Comment alex_g
alex_g's picture

Electric cars are a small niche that will take years to make a dent in CO2 emissions or oil consumption.  They are too limited, too expensive and too difficult to produce in volume (battery supply, plus the neg GDP to china would be devastating).

Using natural gas as a transition fuel has none of the above problems.  It will buy us 20 to 40 years, while not destroying the economy.

 

 

Mon, 04/30/2012 - 15:52 | Link to Comment CTG_Sweden
CTG_Sweden's picture

 

 

 

alex_g:

 

 

Electric cars are a small niche that will take years to make a dent in CO2 emissions or oil consumption.  They are too limited, too expensive and too difficult to produce in volume (battery supply, plus the neg GDP to china would be devastating).

 

Using natural gas as a transition fuel has none of the above problems.  It will buy us 20 to 40 years, while not destroying the economy.

 

 

 

 

My comments:

 

Why invest in infrastructure for delivering natural gas as a fuel for vehicles rather than an improved electric grid? Furthermore, electricity will probably also be less expensive than natural gas. The problem with electric vehicles is the cost of batteries. If the market price for lithium had not risen so much because of increased demand and - so far - lack of substitutes I think that EV:s would have been a realistic solution also for less expensive cars.

 

And why not do like Brazil and let cars run ethanol rather than gasoline? Then you don´t need a new, expensive infrastructure. Diesel (compression ignition) engines can also run on ethanol. Methanol is also a possible solution. But methanol is more toxic and more corrosive than ethanol. Methanol is not a perfect solution but it is cheap and easy to produce.

Edit: Also keep in mind that is less expensive to produce a car with an internal combustion engine that runs on ethanol or methanol than a car with an internal combustion engine that runs on natural gas.  

Mon, 04/30/2012 - 01:40 | Link to Comment Seer
Seer's picture

I agree, except... there won't be any "transition," this is pretty much the end of the road: The biggest consumer economy is awash in vehicles, and much of this is still carrying debt.

People (in general) confuse STORAGE with actual ENERGY.  Batteries are ONLY about storage and efficiency.  NG is ALL about ENERGY.

Given that EVs would increase electricity consumption and that the majority of electricity in the US is produced by coal I don't see any high probability of them (over standard IC engines) decreasing CO2 emissions.

Sun, 04/29/2012 - 18:50 | Link to Comment FeralSerf
FeralSerf's picture

As more and more electricity is generated from natgas fueled turbines, electric cars are just another form of natural gas powered vehicles.

The SS trust fund is going to hell lately because it's become the long term unemployment insurance solution of choice for millions of unemployed that have discovered they could get on SS disability with the help of a legal specialist.  And, of course, unemployed workers don't contribute anything into the Trust Fund.  The ones now on SSDI probably never will contribute anymore either.  As more and more jobs go to China and/or into the shitter due to automation, this will only get worse.

What would you rather have:  hungry people wanting to kill your ass for a bite to eat or some sort of welfare (either in or out of jail)?  If you and I don't feed them, they will make life very unpleasant for us.  It costs about $50K a year to put them in jail, somewhat less to just give them an EBT card.  There are no jobs that will (take-home) pay them enough to provide minimal support and medical care.  No matter how I look at the problem, we're fucked.  There is no nice way out.

Mon, 04/30/2012 - 01:42 | Link to Comment Seer
Seer's picture

"If you and I don't feed them, they will make life very unpleasant for us."

Unless you're a farmer you are one of "them."  Anyway, it's why I figured that getting in to farming was the only rational thing to do in the face of what's coming.  ALWAYS refer to the fundamentals: Food, Shelter and Water.

Sun, 04/29/2012 - 18:40 | Link to Comment aerial view
aerial view's picture

Why do governments do the things they do?

Kleptocracy: a government where the officials are politically corrupt and financially self interested or in other words "rule by thieves".

Sun, 04/29/2012 - 18:37 | Link to Comment Corn1945
Corn1945's picture

SS has a 0% chance of paying out it's benefits as promised in real terms. "Real terms" is the key phrase there. They will try to pay in printed dollars but eventually the rest of the world will tire of that scheme. 

 

 

 

Sun, 04/29/2012 - 18:14 | Link to Comment El Gordo
El Gordo's picture

I understand why the Dems keep talking about having to raise taxes somewhere to "pay for" any spending cuts somewhere else, but what amazes me is that the Republicans join in that song with them  Everyone knows (or should know) that tax cuts will result in increased revenues to the government as a result of the increased economic activity of the private sector.  Maybe everyone doesn't know this, but I'm pretty certain our politicians know it and yet they continue to lie (imagine that, a lying politician).  Everybody also knows (or should know) that it doesn't matter what happens to the interest rate on student loans because the CIC is going to forgive most of them before the election anyway - wait an see.  And anyone anywhere think Socialized Security is somehow separate from the rest of the U. S. Government which has already looted and spent every dime of contributions ever made to the "fund" and is solely dependent upon our broke government for SS obligations regardless of the "fund's" status. 

 

Natural gas should be fueling electric plants, but they are still being fueled by coal.  Now the price of electricity at one time was pegged to natural gas even though very little was produced using natural gas, but now that the price is so low I'm sure the electric companies have figured out a better peg - maybe the street price of Columbian cocaine or something whose price cannot be so easily manipulated. 

 

Rant off

Mon, 04/30/2012 - 01:52 | Link to Comment Seer
Seer's picture

"Everyone knows (or should know) that tax cuts will result in increased revenues to the government as a result of the increased economic activity of the private sector."

I have to question this premise (I agree that it "sounds" good).  Consider that the banking sector is basically having increased "revenues" (free loans!), I'm not seeing that they're giving us increased economic activity.  This can be said to also be occurring with other corporate sectors: increasing cash on-hand.

Where is the premised based?  I'd argue that it's based on consumption.  Consumers are swamped with debt- you can't push on a string.  And, you have to have sufficient wages to allow purchasing occur: as physical resources diminish (get harder/more expensive to mine) the imbalance isn't going to improve.

Sun, 04/29/2012 - 17:59 | Link to Comment TSA gropee
TSA gropee's picture

The student loan debacle seems to me to be just another tool to enslave (by debt). But wtf do I know?

Great work as usual Bruce.

Sun, 04/29/2012 - 17:55 | Link to Comment Don Levit
Don Levit's picture

Bruce:

I have gone toe to toe with Bruce Webb, before getting kicked off of the Angry Bear blog.

I continue to look for every pro Social Security blog I can find.  I am not against Social Security.  I am against the lies of the trust fund's liquidity.

Basically, the excess FICA dollars were supposed to go to special-issue Treasuries, reserved solely for Social Security beneficiaries.

People ask me "How are those Treasuries supposed to be kept intact and earn interest?"

I tell them "Beats me.  I didn't write the legislation."

Diverting the surplus to pay for current expenses is not reserving the surplus for SS beneficiaries.

 

I continue to focus on the cash deficit, which refutes the implication there are no financial repercussions until the trust fund is exhausted.  The cash flow deficits have the same implication as the trust fund exhaustion  -  new general revenues must be used.

The trust fund is simply a away to draw down from the Treasury without an appropriation.

It helps to have excerpts and links from the CBO, GAO, Treasury, and even the Social Securitry Administration itself.

That way, I say if you have a problem, don't take it up with me  -  take it up with the various government agencies.

Don Levit

Mon, 04/30/2012 - 09:44 | Link to Comment tsuki
tsuki's picture

Don:

 

The strum und drang of the Social Security "debate" is a ploy to divert attention from the real elephant in the room.  Until we look at the entire picture of government retirement benefits, including the unfunded and partially funded retirement and health benefits for federal employees, we do not have any idea of what is actually happening with the budget and the decifit.  But, even the "Catfood Commission" refused to look at the total picture.  They saved their rancor for Social Security and Medicare. 

 

It takes some digging, but when you start looking at the BIG picture, WOW.

 

tsuki

Sun, 04/29/2012 - 18:53 | Link to Comment Hedgetard55
Hedgetard55's picture

I think Bruce understands this but is quite reticent to talk about it. At least he admitted in this column that the "Trust Fund" is an accounting sham. That's progress.

Sun, 04/29/2012 - 19:59 | Link to Comment StychoKiller
StychoKiller's picture

The Truth (provided you can handle it):  http://reason.com/blog/2008/10/24/saving-social-security-episode

Sun, 04/29/2012 - 17:09 | Link to Comment ebworthen
ebworthen's picture

Natural gas for vehicles would only inflate the price for heating homes, water, etc.

Talk about a blow to the economy; imagine natural gas at ten times the price it is now and people not having a choice as to heating their homes and water.

The rest (student loans, SS, etc.) is the same old bullshit:  "I'll gladly pay you Tuesday for a hamburger today" when we know Wimpy has no money.

Mon, 04/30/2012 - 02:01 | Link to Comment Seer
Seer's picture

I exchanged correspondence with someone I know that sat on the board of a local electricity utility organization in which I told him that I recommended AGAINST promoting EVs.  I based this on the fundamental that "Shelter" comes before transportation.  This is essentially the point that you're making (and thank you for speaking out- we have to get back to questioning premises).

It's the same old trick, ply all the "hopeful" with promises of a better world tomorrow, meanwhile the elites get to take advantage of the various "tax 'incentives'" and live that "better world" today at the cost of everyone else's tomorrow.  Replay the "ethanol" tape... (Hummer owners get subsidies to purchase them AND then subsidies in the fuel that went in to them! what a life!)

Sun, 04/29/2012 - 17:50 | Link to Comment alex_g
alex_g's picture

Natural gas will not go up 10x.  It would only go up to the economic cost of producing more.  Drilling for new gas has almost stopped.  Associated gas (free gas) production doubled from 2010 to 2011.  Production of it will go up by at least 50% in 2012.  

Do NOT follow this link or you will be banned from the site!