Baltbear on Finance markets are like marshmallows

there is now more evidence for the need for the “10 cent solution.”
the president has seen the strategic requirement to open east coast offshore exploration as an emergency measure to reduce trade deficits.
the petroleum idustry sees usa oil demand as having peaked 3 years ago, based on price efficiency models.
if transportation is to remain on any growth curve, without breaking the constraints of the supply model, there remains a high requirement for improved vehicle efficiency, and a steady rate of change model.
polk has now determined that a combination of factors ranging from quality improvements to economic hardship has stretched the time vehicle owners hang on to any vehicle by 10.8% over the past year, to 49.9 months.
does the economy, “green” or otherwise depend on reducing that number back towards the 36 months that was a standard expectation during the strong growth period of 1955-1974? that 3 year metric applied to new car purchases, and driving much of anything better than a “roller” that was only useful for the 2 mile drive to the steel mill.
in the middle of breaking open the national piggybank of energy reserve, it is past time to impose a 10 cent fuel tax with the proceeds going to driving vehicle scrappage.
with a slight modification in the original plan to weight towards getting guzzlers taken out first, by sending them to the tuna can factory after 12 years, and tightening the kill point on passenger cars to 18 years from 20, the auto industry goes back to work, the wons that support them stabilise, and capital markets can have a rational expectation for funding r&d and startups that are aiming 10-15 years out.
the “cash for clunkers” program partially worked, for the little while it was in place. it creaked and rattled from gimmicky eligibility, and broke down from its lack of funding source.
Those who don’t like thinking about $125 oil need to be thinking now about taxing the fuel made from $80 oil.

Posted under business

Can a transparent and choice driven market place prevent Washington from adding to the “czar syndrome”??
the AP reports: “A government “car czar” would oversee any bailout of U.S. automakers under proposed terms being negotiated by the White House and Congress for extending up to $17 billion in emergency loans that mainly aim to spare General Motors Corp and Chrysler LLC from bankruptcy.”
Adam Smith noted centuries ago that the job of government was protecting the process of markets, not markets; not the expansion of its own power, but the use of its power to protect the process of discovery, transport, utilisation.
the “bail out” in the auto indistry needs to be driven from the bottom up. There isno question that the indistry needs help. What is being forgotten is that “industry” is not a corporate flag, but the process of people connecting.
Currently, the “end receptors” are blocked by 2 real facts: at least 18 million households need  as part of the social contracct to replace cars, and those same households cannot afford to do so.
In addition, the neighborhoods and towns where those peole live are suffereing from the systm being clogged with underwater mortgages, job loss, and declining tax base.
While there is definitely a need for rigid oversite in dispensing any federal funds into the vehicle industry, it is a fact that most of the oversite needed is already in place if the right solution is invoked.
Mecnaisms exist for tracking and destroying titles for crushed cars. Mechanisms exist for moving the paper of delivered credits from the receiver of the dead car to a car lot, to a bank, to the corporate accounts back to the treasury. Mechanism exists for collecting an ongoing 10 cent federal fuel tax. All of this can be done
with the least possible additional “Beltway bureaucracy.”
And given when this idea was first laid out here, some of its innate power could have been in time for Christmas.

Posted under business

reuters, commenting on the "bailout" needs of the auto industry offer to america an interesting factoid:

"The companies say 1-in-10 U.S. jobs are directly or indirectly related to their businesses."

does this pass the "too big to fail" test?
probably. more importantly, what is the relationship between assembly line workers, r&d teams and distribution channels to things like the mortage industry, that are outside in "indirect" relationship?
  if the auto industry collapses, what does that do to the mortgage servicing of tertiary beneficiaries like the school districts where those mortages are platted? the rents and mortgages for commerial properties servicing those communities? the environmental and health industries level of burden if cars and trucks continue to turn to smog and rust for inability to replace them?

 reuters goes on to say,"Menendez and other lawmakers have said Alan Mulally of Ford, Rick Wagoner of GM and Bob Nardelli of Chrysler will have to deliver a convincing case about their distress and their prospects for recovery."
 to which i calmly reply, the heck with their distress. this is not about the suits, the corporate logos and brands. this is about the community where high school graduates can earn a reasonable living polishing cam shaft bearings for a toyota factory 100 miles away.

Sen. Arlen Specter of Pennsylvania, said on Tuesday the mood "candidly isn’t supportive" of a bailout.

"There’s a skepticism about their ability to formulate plans to survive."
 and that is more than fair enough, and needs be off the table. the companies that can properly service a market will endure.
 the issue is creation of that market.
 that’s why the "10 cent solution" needs to be a major part of the auto industry recovery: it creates the market, allowing properly transparet and accountible free market principles to go back to work.

"GM said in its appeal for $18 billion in cash and credit that it was prepared to cut jobs, dealers and brands."
  i would offer the american people are not preapred for that. they are prepared for a future with some promise to the coming generations, honest, unbloated pay for execs, and jobs remaining in the cities and towns that depend on that cash flow for survival.

 Want Christmas for 300 or so million americans without rewarding laziness and pride; arrogance and corporate "entitlement"? ten cents a gallon— $18 billion a year with an added primer of $10 -15 billion that will return to the treasury through taxes, to get a few million cars off the road that eed to be off the road, and replaced with a few million cars that geerate meaningful revenue throughout the economy by the act of being made.
  

Posted under business

"The group’s Business Cycle Dating Committee, the semi-official arbiter of these things, defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."

While analysts have been all but certain that a recession has been underway for months, there has been some debate over exactly when it began. Last winter, employers started cutting jobs and growth slowed significantly,"
 says the washington post, just 2 month after blaming all the troubles on bankers.
if we date "last winter" as strting around halloween, which is what  iwas seeing, then 3 mortgage payments later an accelerating process of failure to service derivatives begins to make the sytem weak. and by summer, with key end-payers in increasing trouble, the insurers of the derivatove packages get into serious trouble, and 3 months later things begin to be undeniable, and lehman bros, and aig "take the fall" for the fact that american industry was losing jobs while the number of people needing them stayed constant, a wave front briefly stabilised by migrant workers leaving–sometimes with "help"–but nonetheless, fewer and fewer ways for the end payer to make a payment, leading the banking industry to diog deeper and deeper into the risk pool to find cash flow, thereby making the collapse all th larger.
    This left the "media" free to blame banks for predatory lending, when the systemic culprit was merely an avbsence of need for goods and services, caused in part by improvements in qulaity in goods, extending their life cycle.
  (Most readers here wll not be able to recall cars needing a "valve job" or (if ur a brit) a "de-coking" every 10-20 thousand miles, then onto 50,000 miles, and onto the unibody rysting away without the head ever coming off on many cars. they will not recall 100,000 miles being the "life" of a reliable car, which then fell into a spiral of changing ownership faster ad faster as those who could choose nothing but the risk/reward profile of a "$50 roller".)
    Change these odds? Undertake a way to create "meaningful" jobs, ad let the results filter up into mortgage derivativs stability, bank profits, investment safety? Get 4.5 million cars off the road–fast–and >>replace them<< and add another 2.5 million cars a year to the "tuna can" part of the cycle. At the sae time, repair bridges, overpasses, bottlenecks and safety hazards that cuase fuel to be wasted. This gives reduced oil dependece as pure profit. Improved air qualuty gives lower health care costs, and quality of life as pure profit. It makes taking risk in "green" vehicles worth taking both by the end consumer and the angel investor.
   Inother words: let’s stop placing blame and begin finding solutions. 

Posted under finance