Algae Oil

http://seattlepi.nwsource.com/business/328499_inventure22.html

Various and Sundry Notes...

Posts have been infrequent of late. There was a trip to Spokane, WA, and somewhat of a lack of optimism. Even so, I've done work, spreading the word where I can. This housing bust has been somewhat frightening, but hopefully awareness of the issues, as well as proper corrective action taken by the main players involved, will allow the market to take its beatings where they are due without letting panic do additional unnecessary damage.

I'm holding a very small amount of First Solar, and a very large amount of Composite Technology. Yesterday I bought some LDK, and today I sold some but not all of it.

Having initially invested in March of this year, I've been up 50%, but by Thursday I was back down to where I started. I was seriously thinking about selling everything, and waiting until the Mortage Lenders finished collapsing, but it looks like things are stable right now, and CPTC has gone up about 14% from it's bottom. The volume is low, but it's hopeful nonetheless. A bit of good news would be helpful.

I'm working on another Solar-Related Website for a potential contract job. I'm also thinking that I might be able to double up the use of that Site / Database to gather business from other Alt Energy Companies. We'll see, I've got a few technical challenges to get through first.

BTW: Here's a heck of a Bloomberg article on how Subprime is present in Money Market Funds, which are supposed to be among the safest of Investments.

Subprime Infects $300 Billion of Money Market Funds, Hikes Risk

Remembering more rational days.

Back in Clinton / Gore days they used "targetted taxcuts" to give direction to producers and consumers in support of national needs and goals. Under this President, the taxcuts have simply gone to those that make the most money, no matter how they got it. It's no wonder that we're in the state we are right now.

Here's an article about some people who are doing good right now

I'm glad to see it.

The Corn Belt Gets Rich, Quietly

Making Gasoline from Bacteria

http://www.technologyreview.com/Biztech/19128/

Mortgage Meltdown...

It seems to me that it's pretty obvious that foreclosures are not in the best interest of the Banks, or the homeowners going into foreclosure.

The way that seems most likely that they will "solve" this problem will be for the Fed to lower rates, or otherwise bail out the holders of bad debt.

On the other hand, as far as mortgages that are going to go into foreclosure we're not done yet, as mortgage rate increases have yet to hit many people, and right now even mortgage-holders with the best credit are unable to refinance out of a suddenly bad deal. Support for the holders of future bad debt without looking at the other end of the equation, the homeowners, seems to be a losing proposition.

Is there any way that some remedy could be had that would help to minimize these future forclosures without causing more harm than good?

Say you have a homeowner. They have a job, and are paying their mortgage. Some time in the next year or so, their rate is going to jump, and they can not now refinance as they'd planned. Nobody wins if they foreclose in this market, and the bank was hoping to make a ton of cash off of that increasing interest rate. Could something be done to, say, modify that person's loan and find a new balance between profit to the lender vs affordability to the customer without need for refinance?

Thinking about it, there's such a web of contracts involved, and complexities like mortgages being broken up into bits, packaged, and sold around the world, that I don't know that any such thing could be done... so that basically leaves a vast Government bailout to the same people that created much of the problem in the first place by creating a culture drunk on risk.

Am I totally naive? :)


X-Posted to LJ


Addition: It seems to me that the Government should team up with the lenders and set up a program by which borrowers are supported in refinancing out of bad mortgage agreements, so that they can lower their monthly payments and stabilize their interest rates, the cost of which is shared by both the bank and the taxpayer. It has to be fair, though, and so the lenders should take the most significant part of the loss (loss as compared to original projected profit off of the original predatory loan, anyway), as they're the ones that used poor judgement in the first place. This would be a bailout, but one in which the needs of the "little guy," the borrower was well considered. Nobody benefits from foreclosures.

Of course, the chance of GW supporting such a move is approximately nill, but that's another story.

Distorting the Energy Market, a Bill by Devin Nunes.

Bloomberg.com has this item by Kevin Hassett.

A Modest Proposal to Revolutionize Oil Market

He sets the story with much gushing about Nunes.

Nunes, a third-generation farmer from the heavily agricultural San Joaquin Valley, has proposed a pilot futures market project that is a financial economist's dream come true. Clearly, he has put his graduate degree in agriculture to good use, since well-trained farmers are old hands working with futures markets.

He connects the story to a famous economist with no actual supporting evidence.

Here's the back story. Nobel Prize-winning economist Joseph Stiglitz studied situations where the nonexistence of markets can cause economic systems to end up in strange places. Nunes's fascinating insight is that energy markets might be a case study in the kind of market failure that Stiglitz had in mind.

"Fascinating."

Nunes's specific application is in alternative energy. Imagine you are deciding whether to sink a billion dollars into a plant that makes an oil substitute. If you eyeball the history of the oil market, you will immediately see a problem. The price goes up and down over time, frequently falling to levels so low that factories producing alternative fuels would be uneconomical.

He states the problem.

Nunes's specific application is in alternative energy. Imagine you are deciding whether to sink a billion dollars into a plant that makes an oil substitute. If you eyeball the history of the oil market, you will immediately see a problem. The price goes up and down over time, frequently falling to levels so low that factories producing alternative fuels would be uneconomical.

You could drop your money into a costly plant, then watch the price of oil drop and lose your entire investment.

This type of uncertainty is a big deal for financiers. If a new plant has a working life measured in decades, then uncertainty over the future price of oil is a significant impediment.

He then goes on to provide support for a terrible solution!

The Nunes solution is to have the government create a market for long-run put options for alternative fuels. This would give those who have constructed qualifying facilities the right to sell (or ``put'') their product at a minimum price to the government should the actual price drop below that.

If you are planning to invest a couple of billion dollars in a coal-to-liquid plant, then you could purchase a U.S. government-backed option that would guarantee you a minimum price of, say, $70 a barrel. If the actual price is above that, you can sell your product for more than that. If the price drops below $70, the government pays you the difference between the market price and $70.

The price of these futures contracts would, under the Nunes bill, be set at auction. Accordingly, the policy would probably raise revenue in near-term forecasts. In the long run, taxpayers would be taking on a risk that oil prices will drop, but that risk is a natural one for them take.

More on this soon. First he follows with a package of rosy outcomes, even in a worst-case scenario as far as the taxpayers are concerned.

Booming Economy

If oil prices fall so low that the government must pay lots of money to alternative fuel providers who have purchased these options, then that would mean the economy will be booming because of the low energy prices. In addition, tax revenue will be flowing in, and the Treasury's coffers will be full.

...

If it becomes law, then my guess is the project will be highly successful and will rapidly apply to any alternative to imported oil. And when government creates this missing futures market, the flood of capital into alternative energy will make all the silly targeted subsidies unnecessary.

And then he subtly inserts a demonstration of the flaw.

Nunes's bill proposes using coal-to-liquid plants as a pilot project.


Disclosure: I'm not a supporter of Liquid Coal Technology. Note: It appears likely that Mr. Hassett is an unabashed Liquid Coal supporter.

Note: When I say "Liquid Coal," I mean "Liquid Coal." I am a supporter of Clean Sequestered Coal as an important bridge in our transition to Carbon Neutrality, and I have no problem with reasoned Government Support in making Sequestered Coal a reality. Liquid Coal, however, has no capacity for Carbon Neutrality, and so is a bad long-term bet.


Back to this Bill.

So, the Government creates this new "market." Well, he says it's a market, and he inserts market terminology like "put*," but it's obviously not really a market at all. It's a Taxpayer funded price control in support of Oil** / Liquid Coal products, in fact, it's an entitlement. Why is this? Because, for one, it's set specifically in the favor of existing oil / coal interests as these interests control the vast majority of the money with which to buy "puts" at auction, and so as the price of energy decreases, they will be the primary beneficiaries of the Government Payouts irrespective of their contribution to the solution of the original problem.

Even if Liquid Coal (or whatever technology) falls out of favor in the market compared to better technologies, the taxpayer will support its continued production, even if there isn't a single private buyer interested in paying for the product. Since the Government has guaranteed future prices based on an auction process, the very concept of Capitalist Competition in which the best products thrive, and the worst products fail, falls by the wayside.

Risk is a natural component of Investment, and any story that suggests that Risk can be eliminated is one that is making bad assumptions. In this case, the risk is borne by the taxpayer, and a double-whammy is quite possible where not only are the taxpayers paying an exorbitant price for energy through taxation to pay for puts, but it's also likely that taxpayers will be subsidizing the very product that an efficient market would correctly put out of business.

In other industries, I'll wager that Mr. Hassett is not in support of Government intervention in the market, but it appears that he's been fooled by the co-option of market terminology by supporters of Big Government Coal and Oil Entitlements in the creation of this unbalanced marketlike Government Program.



* "This would give those who have constructed qualifying facilities the right to sell (or ``put'') their product at a minimum price to the government"

** Like Shale Oil, and Oil Sands.

House passes Energy Bill. Go Go Go!

Get this Energy Bill through the Senate and onto the President's Desk for a veto. Let that dumbshit explain just why he's going to hold up progress on American Energy Development. Let him explain why pulling those tax-cuts from Big Oil are going to force these companies to raise prices (they'll still be making large profits without the incentives). Let that shithead explain why he consistantly acts in greater support of Saudi, Iranian, and Venezuelan interests than in the interests of the United States of America.

I'm sorry, this blog is not where I plan to be political, but this joker running the show right now in the whitehouse makes me fucking sick.

Interesting point from Nanosolar CEO:

"All things being equal, given the $/kg economics of solar panels, I don’t think the competitive end game is to be shipping them from China. The end-game winners will be optimized for net working capital days and proximity to customers. (Btw, shipping from China costs ten times as much as shipping to China these days…) The middle game will be dominated by quality issues; this is a product that people expect to last for decades."

http://www.greenbang.com/288/nanosolar-ceo-on-solar-biz-take-a-pass/

I'd never thought of it, and don't actually know it to be true, but it makes sense that they don't want empty boats traveling back from the US to China.

I count this as a good thing for US exports, even if it's a small effect...