Dan on February 19th, 2015

One of the most interesting things about the recent study released on climate change was the different headlines the different media sites put on the article.  Here are just a sample:

Scientists Recommend More Research on Geoengineering

Anti-‘Geoengineering’ National Academy Report Opposes ‘Climate-Altering Deployment’

US scientists say ‘climate intervention’ strategies are unlikely to work

Man-made climate change may need man-made remedies, science panel says

Here is the link to the actual study:

http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=02102015

To my eyes – this article didn’t break much new ground  – as you might expect the message was somewhere in-between what the headlines read into it.

However, after reading the paper, there were a couple points of contention I have with it:

1.  Ethical, political and social issues are not limited to climate intervention.

This quote caught my eye:

If society ultimately decides to intervene in Earth’s climate, any actions should be informed by a far more substantive body of scientific research, including ethical and social dimensions, than is presently available, the committee said.

Umm.. – even if society ultimately decides to implement worldwide carbon reduction or deforestation mitigation – there are ethical and social dimensions to be considered (Should carbon reduction be based per capita consumption, or size of economy?  Can the world intervene on sovereign country (i.e. Brazil) land practices?  Also, doing nothing will also result in ethical and social dimensions – who bears the responsibility for the loss of land in low lying countries such as Bangladesh and Pacific Islands?

So I agree that there are ethical and social dimensions to the solutions, but are they more serious than the alternatives?

2.  Are they resigned to the fact that albedo-modification techniques (AKA GeoEngineering)  are the only viable political solution (other than doing nothing)?

(The Committee) opposed deployment of albedo-modification techniques, but recommended further research, particularly “multiple-benefit” research that simultaneously advances basic understanding of the climate system and quantifies the technologies’ potential costs, intended and unintended consequences, and risks.

They oppose albedo-modification techniques, but want to move forward with further research.  That kind sends a mixed message, which perhaps is how the media headlines were able to slant it so many ways.

We have hacked the planet before

 It surprises me that nobody mentions we have used (unwittingly)  albedo-modification techniques before. One of my first posts back in 2011 (Our First Nuclear Winter) discusses a Japanese paper showing the correlation between the nuclear testing in the 1950’s and reduction in global temperatures.  So this isn’t totally new ground.  Perhaps the fear is that if this is widely known, there will be a greater push to use this to solve the problem.

I encourage everybody to read the paper and make their own conclusions.  While I am not pro-geo engineering, given the dollar cost will make it easy for one country to unilaterally deploy, I think we should prepare for it.  I have said this before – ‘The moment waters start lapping the door of the New York Stock Exchange, America will lead the charge for geo-engineering’.

 

Dan on February 13th, 2015

When I saw the news that Radio Shack is closing over a thousand stores,  I assumed our neighborhood Radio Shack was on the list.  Sure enough, when I saw it on the list, I was not surprised, but felt a bit of nostalgic sadness.

Not that I am an avid Radio Shack customer, But Radio Shack has held a peculiar place in American retail.  Our local radio shack opened when I was in Jr. High, and I thought it was a cool store with all sorts of oddball applicances, toys and cables.  I even was a card carrying member of the battery-of-the-month club.  But as I got older, the Radio Shack appeal faded – and Radio Shack was known for having low quality stereo equipment and components.

Over the last 30 years, Radio Shack has been kind of my store of last resort.  If I can’t find a cable or electronic component anywhere else, I will try Radio Shack.  Even then, its usually not a pleasant shopping experience – not so much to blame Radio Shack – but to find unique electronic components amongst the array of stuff is nearly impossible without the help of a salesperson.  Also, I don’t know if they still do this, but they used to always ask you for your name and address whenever you bought something – and I think that creeped a lot of people out.

To be honest I am surprised Radio Shack has lasted this long – I think my brand impression is shared by most.  I think Radio Shack finally fell victim to online shopping – its much easier to plug a part number into a browser and buy it online.  Perhaps its ironic that Amazon is rumored to be in talks to buy Radio Shack stores.

So I don’t know if I will miss Radio Shack, but like Blockbuster and the local record store, it appears to be another American icon falling victim to the 21st century.

Dan on February 8th, 2015

At first I thought this news about a theme-park hotel staffed with robots was just a gimic:

http://indianexpress.com/article/world/asia/worlds-first-robot-staffed-hotel-to-open-in-japan/

But if you think about it, if you were a company wanting to start automating basic hotel functions, this would be a great place to start  (on the other hand, I take it nobody in this company ever saw Westworld).  Assumedly this first version will be rough – I doubt the robots will be much more than show pieces – but it provides a good training ground for seeing how robots could be integrated into human customer service industries.

Sure, I don’t think I want to be one of the first people to stay at this hotel – I think I would wait til the bugs get worked out.  However, I was interested to see this:

Room rates will vary depending on demand. Instead of being presented with a fixed price, guests will bid for rooms during peak season. The highest bidders will secure rooms, though there will be a price cap on bidding.

The hotel says room fees at opening will be from 7,000 Yen (USD 60) for a single room to 18,000 Yen (USD 153), the highest possible price after bidding, for a triple room.

An interesting booking model, and pretty low prices.   Of course I’ll bet the prices at Westworld were pretty cheap too..

Dan on February 1st, 2015

What caught my eye on this story about Scotland renewable energy is that they had success with wind more than solar power.

http://ecowatch.com/2014/11/27/renewable-energy-powers-scotland/

I guess it shouldn’t surprise me too much, since no doubt that Scotland has more wind than sun,  but it was interesting to see that they have had success with wind on such a large scale.  I understand the argument in the article about people who oppose windmills, which is why I think the growth in wind power will slow, and switch to other renewables.   Tidal power is the choice that I am surprised hasn’t moved forward faster for Scotland, but  Scotland is moving with tidal power projects.  There is big money behind tidal power also, German conglomerate Siemens has a company specializing in marine turbines, Marine Current Turbines.

Regardless of which renewable technology wins out it seems clear that improving technology will enable at least one renewable to eventually displace oil as the primary energy of choice, and this will continue to put downward pressure on oil.

Dan on January 20th, 2015

Over the past weeks as I read the predictions for 2015, I have been mulling different points of view about where interest rates are headed in 2015.  I think I have made up my mind that interest rates will be heading lower in 2015.

This chart as highlighted in this Business Insider article is rather telling:

10 Year Interest Rate Comparisons

 

Looking at this chart, the yield on the 10 year US Bond (the white line) appears out of line with the other primary developed countries. If you believe the US economy will stay the course in 2015, in comparison to its foreign peers, you would expect the US yield to be closer to the others.  Interestingly, given Japan’s debt problems, the Japanese debt also appears to be mispriced;  .03% seems awfully low for a country with the highest debt load of any country – investors in Japanese bonds seem confident that they will get all of their money back in 10 years. I would not be that confident.

So how low will interest rates go?  After all, they are almost at 0% now.  Well, we are in historic economic times – and negative interest rates are spreading.  Look at this price chart of German Bund interest rates:

 

The Swiss Bond Index is also negative, so its not inconceivable that US Bond yields could go negative this year.  So conventional wisdom was rates have nowhere to go up – but this shows how we are in very unconventional times and it may be time for unconventional thinking.

Dan on January 14th, 2015

I ran across this post regarding the increasing risk of deflation, and this chart caught my eye:

deflation

 

It is interesting to me how this shows clearly that as Quantitative Easing has winded down in 2014, the inflation that the Fed was manufacturing immediately died down.  So that got me thinking, is deflation such a bad thing?  Why has the government used such a historically drastic strategy  to try to spark inflation and avoid deflation?  On the surface, it would seem to me that deflation is a good thing for savers and workers ( wages typically do not keep up with inflation).  If you have huge debts (like the government)  deflation would be a bad thing as it makes your debt more expensive.

So I did some searching and found a couple good arguments on whether deflation is good or bad.   First up, Paul Krugman had a good article on why he thinks deflation is bad.  He gives three reasons why deflation is bad – I would encourage the reader to read the article and decide if the arguments make sense.

I also found this article covering how there is good deflation and bad deflation.  The article makes some of the same points as the Krugman article, but covers some different scenarios.

In reading these articles, I guess I haven’t made up my mind if deflation is good or bad. Arguably in late 2008 and 2009 we were on the brink of bad deflation due to the high household debt and drop-off in economic activity.  However now, it appears that the dropping oil prices and productivity improvements hint at ‘good deflation’.

I am going to keep mulling this whole issue over in my mind for awhile.  Because looking at the above chart – good or bad – it looks like we are about to be hit with a dose of deflation.

 

Dan on January 5th, 2015

I was amused when I saw the ‘curious’ call in the Dallas – Detroit NFL playoff game that has garnered so much attention.

It seems to me faceguarding a player is one of the standard pass interference calls  to be made, and this looked like a textbook example.  So it was odd that even after the flag is thrown and the penalty is announced, the call gets reversed.

This article has a good recap of the events in case you missed it.   This play seemed to me the biggest playoff robbery since the mysterious interception that was overturned in the 2006 Pittsburgh – Indianapolis playoff game.   Interestingly enough, both of these legendary calls were made by Referee Pete Morelli.  This from 2006:

The league acknowledged Monday that referee Pete Morelli erred when he overturned on replay Polamalu’s interception of a Peyton Manning pass Sunday in the playoff game between Pittsburgh and Indianapolis.

That puts it mildly – that 2006 reversal was the worst call reversal I have ever seen.  So it interesting that Pete Morelli and his officiating crew  is in this latest controversy.  Its not like his calls have gone unnoticed over the years.  I stumbled across this article by a fan who did a review back in 2006 of games that Morelli has officiated, and the results weren’t flattering.

This excerpt from the 2006 review of Morelli’s crew:

Based on my grades this crew got two lukewarm passes and a failure. If I was a coach preparing for this crew, I would expect an even game called on the offensive line, I wouldn’t expect to be able to get a cheap pass interference call on a deep ball, I would expect some type of replay screwup, and I would be wary of having a penalty called on my team at a critical fourth quarter moment.

This officiating crew is not the best the NFL has. So why does the NFL continue to choose this crew for playoff games?    Perhaps they are taking a queue from Reality TV.  Fans of reality TV know that the shows are edited to build the best story line and build characters – they are not edited to provide a even handed journal of events.    The NFL is at the height of its popularity, so the NFL must be doing something right.   And the Dallas Cowboys – America’s Team  – is headed to the next round of the playoffs.

If you are an investor in Nordstrom (JWN) you should take a look at the December 2014 Investors presentation they released.  The chart from that presentation that got me thinking was this one:

nordstrom growth

Nordstrom’s is gaining traction on selling clothing online.  Nordstrom seems to have built the best of both worlds – with free shipping and their reputation for liberal return policies, they have given the consumer the ‘in-home dressing room’.

Business Insider also just ran this article discussing what Nordstrom is doing right.  So I wonder – who is  their biggest competitors in the online space?  There are the super high end retailers – i.e Tiffany’s and Nieman Marcus, but they don’t have the mass appeal as Nordstrom.  On the other end you have Macy’s, Target, and Amazon, who I don’t believe they draw the same class of consumer. So I think they have built a pretty decent spot fort themselves in clothing- a unique combination of online presence, customer service image, and brick and mortar stores.

Investors are taking notice – the stock is up 120% in five years, and is currently pretty richly valued.  But if you are a long term investor, or  if we see a pullback in their stock price,  I think Nordstrom is a company to consider for your portfolio.

Dan on December 21st, 2014

Thinking more about this recent drop in oil prices caused me to do a little more poking around the internet, and I came across the December 2014 OPEC Oil Report.  I must admit I haven’t read any of these reports before, but it is full of interesting economic graphs and worldwide economic data  (Click here to download the pdf).

In case you don’t want to read the whole report, below I have pulled out my favorite graphs which do a pretty good job of summarizing the whole oil situation:

oildemand

 

worldoilsupply

nonopecproduction

Note that from the charts above, the world is awash in oil thanks largely to increased US Production.   Demand for oil is expected to increase by 1+% in 2014 and in 2015, but supply is outpacing the demand.  OPEC is doing the rational economic response to this;  lowering production to increase prices will only sell more US Oil.  The OPEC cartel is broken – after all these years there are now too many other players.

Business Insider showed this great chart about break-even prices by oilfield.  This again shows it’s in OPEC’s best interest to squeeze the higher cost producers out.

 


World Oil Field Break-Even Prices (click image to expand)

So it looks like low oil prices might be around for awhile –  looking at the chart above one would think the floor would be in the $50 – $60 a barrel range.  Or assuming technological advances, maybe lower – throwing a huge curve ball to the worldwide fight against deflation and the assumption of constantly rising energy prices.

Dan on December 17th, 2014

I just posted an updated report on eMagin on Seeking Alpha.

Summary

  • eMagin is moving forward on the great consumer OLED opportunity.
  • Can eMagin execute, or will it be another disappointing year?
  • Financials improving, but still too early to be bullish.

Check it out at  http://seekingalpha.com/article/2757795-will-emagin-turnaround-in-2015.