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The MiniC.A.T

The vehicle has a top speed of 68 miles per hour, and a range of 125 to 185 miles and runs on compressed air.

The FED’s Nervous!

Do you remember what Tim Geithnner said back on March 1st, 2006?

Timothy F. Geithner is the president of the Fed Bank of New York and he warned that the U.S. financial system is evolving faster than the ability of investors, lenders and regulators to evaluate and manage the risks involved.

The rapid growth in complex new investment instruments and recent changes in market structure have helped make the nation’s financial system more flexible and resilient…But, “there are aspects of the latest changes in financial innovation that could increase systemic risk” — the danger that the losses of a few investors could set off a chain reaction of events that disrupts the broader financial system, as did the near-collapse of a heavily leveraged hedge fund in 1998.

Business Week writes that analysts listen to what Geithner says because …the bank he runs is the most powerful of the Fed system’s 12 regional banks. Moreover, Geithner is a close adviser to Fed Chairman Ben Bernanke.

Geithner spoke at a conference sponsored jointly by the Federal Reserve Bank of New York and Princeton University.

The New York Fed chief said central bankers are concerned about a snowball of fear in the markets, or what he called “the risk of an adverse, self-reinforcing dynamic in which concerns about overall liquidity magnify concerns about credit problems.” (my emphasis)

Tim Geithnner FED Mover Mike

MBIA And AMBAC, On The Ropes!

I was registered as a stockbroker in 1969 and sometime in the 1970’s we started seeing insured municipal bonds, insured by an insurance company as to payment of principal and interest. According to a new Pershing Square Capital Management, L.P. report, How to Save the Bond Insurers, only general obligation or G.O. muni bonds had this insurance. The question I always asked was why does a G.O. need insurance, it is protected by a taxing power on ALL the property in the district, be it a state, county or city. G.O.s were either AAA or AA rated without the insurance and the insurance made the issue AAA.

Pershing says like all good things this one came to an end and when the returns were compressed by competition. So bond insurance companies bagan to write insurance on Utilities, Hospitals, Toll Roads, etc. where credit profile was based
on meeting projections rather than tax-payer support. These munis were marketed as AAA, but I told my clients to avoid them, if they couldn’t stand on their own as AAA or AAs.

As late as 1990, 100% of the insurance was involved with public finance issues. Pershing says that by 2006, due once again to compressed returns, 32% of the insurance was used to GUARANTEE Structured Finance. Structured Finance transactions at MBIA and AMBAC now account for 66% and 55%, respectively, of their insurance transactions. Pershing says that the annual premium as a percent of the bond insurers exposure was insufficient at 18 bps and 21 bps, respectively. In order to reach 12% ROE, the insurers needed to use extreme leverage of near 150 to 1.

The report singles out MBIA and AMBAC holding companies as insufficiently capitalized and the underlying business is going south fast. Pershing expects the holding companies will be unable to raise sufficient capital and face bankruptcy!

Mish’s Global Economic Trend Analysis posted AMBAC Blows It…Again!

AMBAC MBIA Structured Finance

Bond Insurers Mover Mike

Food Inflation, Food Shortages

This story at Le Metropole Cafe (by subscription only) caught my eye.

Global food prices were under further pressure on Monday as benchmark prices for cereals at much higher levels came into operation, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies.

In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak.

It was the corn price information that shocked me. The last time I looked Corn was down 25% from its high to $3.35. Now the March, 2008 contract is $4.38! The Wall Street Journal notes

The global commodities boom that has lifted prices of everything from gasoline to gold is now elevating rice — a staple food for half of the world — to its highest level in nearly 20 years.

Rice’s surge has complex consequences for the global economy. Used in everything from sushi to burritos to Rice Krispies, the ubiquitous grain is suffering poor harvests and tight supplies in some of the biggest rice-exporting and rice-consuming nations, just as demand grows in places like India and the Philippines.

Keep an eye and an ear out for blowback from the food inflation. Food shortages were common in the revolution in Russia. By 1917, serious famine threatened much of the country.

The Guardian in November, 2007 reported

Empty shelves in Caracas. Food riots in West Bengal and Mexico. Warnings of hunger in Jamaica, Nepal, the Philippines and sub-Saharan Africa. Soaring prices for basic foods are beginning to lead to political instability, with governments being forced to step in to artificially control the cost of bread, maize, rice and dairy products. (emphasis added)

How does it end this time?

Food Inflation Food Shortages Mover Mike

The ZENN and the ZAP-X

Brian Toye writes on the Oregonian op-ed page about ordering the ZENN car. ZENN stands for Zero Emmissions No Noise. He had the same reaction I did when he read that Congress has worked with auto makers to improve U.S.fleet mileage to 35 mpg by 2020. Our first reaction|: That’s unacceptable!

Brian’s solution was to buy the ZENN, built in France and re-engineered in Canada.

Reading the comments to the YouTube, I became aware of other alternatives in the wings, the ZAP-X for example:

Where are the American auto companies? Oil is almost $100 a barrel and gasoline is $3.00 at the pump. We could be looking at $4.00 gasoline in May. These two examples of electric cars are perfect for the commuter, the mom-taxi, and the short trips around town. I guess the Americam auto companies are going to cede this market, too.

ZENN ZAP-X Electric Cars

Historic Quakes Off Coast From Yachats, OR

There was a 4.7 Earthquake off the coast of Yachats, OR. That’s pretty sizable by recent quake standards, but not an isolated event in this particular area. Here’s a chart of historic seismicity since 1990:

Yachats Earthquake Mover Mike

Energy Prices Have A Long Ways To Go!

Back in May of 2005, I posted about Pebble Bed Modular Reactors (PBMR) . I thought of that article when I read yesterday that “Developing countries like India and China continue to unveil new coal-fired plants—at the rate of one every seven to 10 days in the latter nation.”

I read that South Africa is going ahead with its development of PBMRs

The South African government has set up a company, Pebble Bed Modular Reactor (Pty) Ltd, to develop new nuclear power technology and plans to spend some 1 trillion yen over the next 20 years to build 24 small installations…

From the Pebble Bed Modular Reactor (Pty) Limited (PBMR)2007 Annual Report:

World energy requirements are escalating at an
unprecedented rate.
It has taken 2 000 years for the
population of the world to grow from 250 million to six
billion people. By the middle of this century, it will reach
10 billion.
This rapid increase in world population, with a simultaneous increase in standard of living, especially in the developing world, will cause world energy requirements to triple over the next half century.

At this exponential increase in the rate of energy
consumption – in a world that is relying on fossil fuels for
80% of its energy requirements – it is questionable whether
economic oil and gas supplies will last beyond the latter
part of this century. Price increases, security of supply
concerns and related commercial risks will be the fruits of
the burgeoning global population and create unforeseen
challenges. Climate change and tertiary effects of
greenhouse gases will challenge human ingenuity

Now here’s the disturbing part: In May of 2005 Uranium was $20 a pound!

Today it is trading around $90, and the recent high was $135. Money Week in September, 2007 wrote

By 2050, scientists estimate the world will need about 900 more nuclear power plants to keep up with growing energy requirements.

As a result, the undeniable reality is that demand for uranium is outstripping supply. In 2005…

• Supply from mines was 102.5 million pounds
• Demand was 171 million pounds
• The gap was 68.5 million pounds.

In May of 2005,

Oil was trading at $50 per barrel (currently $92)
Natural Gas was trading at $6.20 (currently about $7)
and Gold was trading at $416 (currently $795)

Reuters UK wrote in September of 2007,

Record high coal prices and tight supply are piling the pressure on electricity generators already hit by soaring oil markets and high gas prices, industry players say.

Coal fuels about 40 pct of global power generation. Physical coal prices for delivery into Europe have risen by over 50 percent this year.

Unless, some technology like Genie, takes off, it is not hard to see that the future brings much higher energy prices. Commodities seem to be the place to be for the next half century.

Pebble Bed Modular Reactors (PBMR) India and China South Africa

nuclear power Uranium Mover Mike


The Financial Disaster

The WSJ has an article about the mortgage mess. All sorts of plans are being floated many for the purpose of shoring up the banks, many to bail out the homeowners.

One question is what exactly Washington policy makers should be trying to prevent. Does every homeowner facing foreclosure deserve help, or just some of them — and how should the deserving be identified? At what point do banks’ problems raising funds become a public concern?

The plan recently announced by the mortgage industry, with Bush administration support, could freeze interest rates on hundreds of thousands of troubled subprime mortgages that are set for rate increases over the next two years. But it won’t help everyone. Borrowers can’t have defaulted already. Some critics say the plan amounts to a rescue for the irresponsible, while others, particularly Democrats, say it won’t fend off foreclosure for enough people. (Emphasis added)

I know that our interests are not served by millions of homes repossessed and thrown onto the market. Our interests are not served by market values of existing homes plummeting. Our economy would suffer greatly if we had hundreds of thousands of suddenly homeless.

On the other hand if my neighbor bought the house next door with zero down and a 1% mortgage, that is due to rise to current levels, and can’t pay the mortgage at the higher rate, is it fair to have his rate frozen at this level. I was prudent and didn’t use my equity to buy a second home at inflated prices. Doesn’t a freeze reward stupidity or greed or lack of risk control? Shouldn’t people who make mistakes be accountable?

Sometimes, as in the forest fire fighting business, our past policies of fire prevention have created catastrophic fires that can’t be put out easily. So too in our economy. We have had a policy of no recessions. If your policy is recession prevention then little bankruptcies, small corrections never take place. Bubbles get created. This time we have created a financial mess that may be unstoppable. We may have no recourse, but the cleansing fire. And like those who lost their homes, we will rebuild, stronger, smarter and with a different currency.

FED Mortgages Mover Mike

Poor Hillary

Poor Hillary! The world’s smartest woman is in danger of losing the first four primaries. Former President Clinton on Charlie Rose seems to say it will be a miracle if she wins in Iowa and plays the “experience” card:

Americans who are prepared to choose someone with less experience, are prepared to “roll the dice” about the future of America.

And He says

…the notion that experience led the politicians to sanction the Iraq War is “absurd.”

Let’s see Hillary with all her experience voted for the war and Obama with his pitiful experience was against the war. To the Democrats that appears to be a vote for inexperience.

(Though Mr. Obama, the junior senator from Illinois, was a vocal critic of the Iraq war during his time as a state legislator and as a Senate candidate in 2004, the level of his criticism lowered when he arrived in Washington. In his first year in the Senate, he delivered one speech on Iraq, calling for a phased withdrawal by the end of 2006. But last November, Mr. Obama revised that time frame, saying the drawdown should begin in four to six months. Legislation he introduced late last month calls for redeployment to begin no later than May 1, with a goal of removing all combat brigades in Iraq by March 31, 2008.)

Sen. Obama’s inexperience has led him to side with the Democrats in Congress who 16 times since the last election have tried to end the war in Iraq and failed on each vote. Now, that the surge appears to be working, Democrats have crawled off and try to appear relevant in some other areas.

Howard Fineman writes that Hillary is on the brink of losing the first four primaries.

Dick Morris and Eileen McGann criticize the campaign strategy as an enormous mistake of claiming Hillary has experience:

The decision that Hillary should run as the candidate of experience was an enormous blunder. In a Democratic electorate that’s in the party precisely because it so intensely dislikes things as they are and wants change, experience is the wrong virtue to stress.

It’s a campaign for Republicans not Democrats. That tiara she wears for the title of world’s smartest woman is teetering. It has come down to this, Hillary vows she won’t quit early. Too bad, our Governor Kulongoski came out for Hillary, but I can see why:

Josh Kardon, U.S. (Sen.) Ron Wyden’s chief of staff, is helping run Clinton’s Oregon campaign. Kardon was a key player in Kulongoski’s re-election effort last year.

Poor Oregon. not only will the campaign be over by the time we have our primary, but our governor has committed to the one candidate that will probably be out of the running.

Sen. Hillary Clinton Sen. Barack Obama Mover Mike


It’s Been Quiet Near Maupin

map 1.7 2007/12/13 18:34:59 45.121N 120.933W 18.5 13 km ( 8 mi) ESE of Maupin, OR

Maupin Earthquake Mover Mike

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