Someone Else Sees What I'm Seeing

Julian Robertson sees the pink elephant, and publicly called out the 2008 fiasco. Now he can't figure out how the US and several other countries will avoid triggering hyperinflation with the amount of money they're printing (I can't either). He's noticed that no one is buying long bonds (who would?) and buyers for short ones have dwindled to a few usual suspects. This guy, pun intended, bears watching. He has placed big bets on shorting treasuries and appeared on CNBC to help talk them down:

The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.

"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."

Robertson said inflation is a big risk if foreign countries were to stop buying bonds.

“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”

Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds.

“That's much worse than not buying,” he said. “The other thing is, they're buying almost exclusively short-term debt. And that's what we are offering, because we can't sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.”

A clever person concerned about hyperinflation and wanting to make a financial killing would use exchange-traded funds to go long on 2-year Treasuries and short on 10-year Treasuries, which is probably something like what Julian Robertson is doing.

GM Takes Out Full-Page Ad In Automotive News

"You wouldn't buy our shitty cars. So we'll be taking your money anyway. The Bailout. Coming this January."

That's how the ad could've read. In its own way, the actual one was much better, titled: GM's Commitment to the American People. It would be wise to practice and master this particular form of contrition: "We know, we screwed up. Now we really, really need 18 billion dollars. Even though we've still got 16 billion in the bank."

The crowd from home plate on up to the peanut gallery was, you might say, a bit underwhelmed. GOP congress-critters worked up the spunk to actually heap a helping of scorn and derision on Dick Cheney for asking them to become communists. (Get used to a steady diet of those. Dick.)

Actually, GM would probably be ok if it hit Chapter 11, so it just needs a bridge loan, like, I dunno, maybe from a bank that has just shared in 4 trillion dollars of largesse. GM has some good models like the Malibu and Impala, can restructure a couple brands, and can bring in good models from subsidiaries where people haven't forgotten how to build them, such as Opel-Europe and Saab. All told, they probably need $5-8 billion before the Volt comes on line, which is an electric car powered by gasoline. (Don't ask.)

Ford probably doesn't need a bailout at all to avoid chaptering, with a stronger model line and high-quality small cars it's already bringing in from its European sub. It also owns part of Mazda, which it could sell without much difficulty. But Ford would feel quite snubbed if GM got a bailout, and it did not. It might fail out of sheer pique, just to get back at us, so look for something in the $4-6 billion range, with concessions of a green nature, and promises not to bust the union too openly or ship all production to Malaysia.

Chrysler? It is, in the Catholic sense, beyond redemption. It has no compelling models coming online, no far-off subs to get them from, no reserves, just liabilities. Daimler-Benz paid billions to be shot of it for good reason. There's talk of forcing GM or Ford to merge with it in order to save the doomed, lobbyist-chocked private equity firm ("Cerebus") which was dumb enough to buy it from Daimler, but whoa-ho. When you're drowning, you don't catch anchors.

So there's the quick-n-dirty state of automotive affairs. Please don't actually believe any of the above, your mileage may vary, etc. I've just always loved cars, and will mourn the loss of these once-glorious enterprises which made some of the best, now become wart-nosed, blinded, degenerate albatrosses. And someday I'll get around to writing about our new Honda Fit.

(Update: I'm about as flip-floppy as the rest of the country on the bailout issue, with 47% for, 42% against, 11% undecided. Cars have killed and maimed more Americans than the total casualties of all US wars, one hit me in a crosswalk in LA, one permanently messed my neck up in a rear-ender. Yet it was cars which first united the US as a country, and they remain the building block of our present structure. Transitions away must be gradual, and add to that the fact that England, France, Germany, Italy, Holland, and Sweden amongst others all bailed out or nationalized indigenous failed car companies. Car industry is heavy industry, the engineering know-how can be readily harnessed to other purposes, so we should be solidly in favor of a limited, controlled bailout (let none dare say Nationalization.) Amazingly, it looks like Congress will be of the same mind.)

Competitive Environmentalism: Buying The Right Car

There are a lot of reasons for buying new cars. Mine are honestly motivated by lowering emissions, slowing global warming, and befouling the earth less, and I fully appreciate the pathetic irony of my position. Burning a forested park would probably be more earth-friendly. The energy and water required to find, dig and smelt the metals, run the factories, get workers to and fro, form plastics and vinyls, and assemble about 20,000 individual parts into a shiny conveyance would, I'm guessing, power and hydrate an average US residence for about a hundred years. And the aluminum, great Scott, the aluminum!

In most new automobiles, between 5 and 15 percent of their total weight is in aluminum. One time I got a private tour at the Alcoa plant in Vancouver, Washington, and learned that it used nearly half the electricity consumed by a little town across the river, the one called Portland, Oregon. The plant manager had a benign, wait-for-it smile as he let the stats he just quoted, something on the order of 500 megawatts (a small nuclear power plant's output) sink into my skull. Then as my jaw went slack and my lips started to twitch like a carp's, he told me how much freshwater was required to slake all the white heat passing through his humming facility. I don't remember the figure, but it couldn't be absorbed by the topsoil of entire counties, and he was talking about something the size of a respectable river.

Whilst I know my sins, I focus on how far I've come. Because of the ongoing, frustrating unavailability of quality plug-in hybrids, a couple of years back I decided to go biodiesel, a resolute experiment joined by an outwardly sleek Mercedes station wagon with the personality and hygiene of Lilly von Schtupp. Vehicular vaudeville is entertaining, learning experiences can be good, and fuel adaptability is a great feature in a car. But now that the best farmland in the US is under water, ethanol subsidies are sending corn feed to distilleries, and a bag of Doritos is heading to 17 bucks by November, biodiesel just isn't as consensual as it used to be.

Inside a year people will probably be yelling "Murderer!! You're burning food, asshole!" at drivers of diesel cars, self-righteous biodiesel bumper sticker on display or not, and woe be it unto us if, I dunno, there's a dog food shortage and People magazine puts pictures of starving, doe-eyed Cocker Spaniels on its cover. "Helpless Animals Are Dying because we're combusting food-oils" Then we'd really be in for it. If everyone in Darfur and Haiti dies from starvation, there'll be no backlash from that, oh no, but the potential plight of pets keeps me up at night. All it takes is one properly neglected, well-publicized mongrel, and biodiesel drivers will be dragged from their clattering, greasy vehicles, easily identified by the tell-tale smell of Chinese food, and beaten to death by mobs chanting, "That's for the puppies in Haiti! That's for the puppies in Mexico!"

No such fate for me and mine, no sir no ma'am. About six months back I began to engage in my second favorite pastime, car-buying. It's not quite as satisfying as buying new tires, true, as tire technology has greatly improved in the years since I began abrading them into steel threads--the research is quick and casual, the consequences for error less severe. With a car, it's a serious research project, and what with my city and neighborhood, the question of environmental friendliness is keenly incumbent in an urbanscape proliferating with scooters and SmartCars. There are certain constraints, attributes to emulate, even some appearances to maintain. While the ideal Seattle pimp-mobile would be one powered by light rains, there are plenty of more accessible performance options the ladies will appreciate, and some leeway left before we start shooting each other while siphoning gas tanks.

Personally, let's face it--notwithstanding our "friendly" competition with the ruthless greenies-next-door, the biodiesel-wafting Andersons (puppy killers), Casa Lord's carbon footprint is still about as svelte as that of Akron, Ohio. We could probably heat our house on just the junk mail we throw out, so we've fixed bayonets: gasoline, in moderation, is back on the table. With that in mind, here were some vehicular considerations:

1969 Pontiac GTO, "The Judge"
Buying a 1969 GTO and slapping a "Powered By Natural Gas" bumper sticker on it would be a hoot. Powered by any kind of gas mixed with a little nitrous oxide, and it'll run the quarter mile in 12 seconds and burn rubber in all gears. We're not looking for a commuter car, so this would be bitchin,' and smacks the "Fun" category right outta the park. Of course, my memories of its weak drum brakes are unnerving. They burn into crispy, useless asbestos vapors under moderate demands, the perfect pairing for your pants-pissing terror while Dead Man's Curve speeds like a 95-mph anvil towards your head, you're exerting 600 ft-lbs. of force on the brake pedal, and you finally have to toss into a last-chance 75-mph powerslide to scrub off speed and hope to survive. Fortunately there's lots of crush space if it doesn't roll over, and it can get above 10 miles to the gallon under perfect conditions. Fun, roomy, simple, girls still love it and it holds value well, although it's dangerous, impractical, and out of touch with the times. Mental note: great brakes are an absolute necessity.

SmartCar
Very cute, utilitarian, excels by getting 55 mpg and, as a bonus, is made by the people who brought you the Swatch. Compelling street cred, but only has two seats and three cylinders. The brakes are fine, and don't really matter, since stopping quickly exponentially increases the likelihood of getting rear-ended and killed. With a wheelbase of only six feet, it can get crushed like a styrofoam egg carton between a Ford F-350 pickup and a Jeep, and the air bags won't help much with your bodily fluids squirting out through the door sills like grapefruit juice. A step forwards, but one too far. Next on the wish list: excellent crash safety.

Toyota Prius
The 2009 model year had potential, promising 85 mpg in plug-in hybrid form. The #1 search on Cars.com is for the Prius, but Toyota couldn't deliver a plug-in hybrid for 2008, the mileage numbers for 2010 versions still aren't set, and snagging a mystery model by mid-2009 means ponying up six or seven grand above sticker. That combined with 96 cubic feet of non-configurable interior volume means there's about enough space for 3 passengers with their medium-sized orders of McDonald's fries, nine napkins, and 2 laptops in the battery-crowded trunk. I'm exaggerating slightly, but a vacation with a wife, one car-seat-bound kid much less two and their luggage are out. That, and it doesn't exist yet. Hyper-mileage bragging rights, commuting godhood, and adequate brakes will, eventually, be in.

Various Micro Cars, New And Used
Small cars are to the auto industry as chicken breasts are to a fine restaurant--the chefs hate making them and the waiters hate selling them. Unless soaked in something exciting, like maybe napalm, they're the blandest, cheapest entree on the menu. Very hard to make money off chicken, which is only on the menu as a nod to desperate vegans and Pritzker patients. Basically, most micro-car design teams are given four pogo sticks, wheels, a chainsaw and a roll of wire and told to make something "better this time." Small cars are usually conceived with indifference at best, are sold by American car companies with unconcealed revulsion, and as a driver you're expected to forgive some major oversights and annoyances in your motoring experience in return for low cost. (Btw, almost all small American cars are re-badged Suzukis, Kias, Nissans, Mazdas, or Toyotas, and that's a good thing.) Twenty-plus years ago, when Japanese cars were still actually small and had excellent mileage, they made wonderful things...but we were hoping for something not old and busted. Now they and even Koreans make excellent, luxurious, top-performing mid- and large-sized cars, but collectively they have the Enviro-Cred of The Dukes of Hazzard. "Small and good, small and good," goes the mantra.

1912 Stanley Steamer
Although it has a safe top speed of only 21 mph, it seats four, is a tidy convertible, can be stopped by any two-by-four dragged on the ground, and represents a fantastic solution to our junk mail problem. Downside: can be hard to find. Six months of Craigslist and Ebay searches didn't reveal one for sale.

Mystery Solution Car!
You've no idea, in trying to be low key, how little I've indulged my automotive OCD impulses here. But this post is already too long, and I'll report back with what we got later. Criteria were reliability, big car in small package, agility/handling, good mileage, nice looks, decent comfort and amenities. Oh, and an internet search hint: it has the highest lane-change speed ever recorded for any passenger vehicle sold in America, faster than the hottest Corvette you can buy, faster than the hottest Ferrari. And those aren't passenger vehicles.

Thanks For The Melamine!

"May you live in interesting times." My handler taught me the Chinese for that in the mountains somewhere north of Shinhua. Instead, maybe I should've asked the Chinese phrase for, "Where is the nearest dialysis machine?"

Anyhow, melamine certainly is interesting. And it's coming to a meal near you. One your pets have eaten. One we've most likely ingested in any number of foods in the past 6-7 months. We and our pets live in the same houses and are served by the same loving, caring Global Corporate Entities.

Melamine's chemical formula is C3H6N6. Similar to cyanamide, basically it's a complex trimer cyanide molecule with three amino acids hanging on it. It is formed in the bodies of mammals after they have consumed and metabolized cryomazine, a pesticide. Plants can also metabolize cryomazine into melamine, and its industrial applications include polymer formation processes and adding it to resins as a fire retardant. So it's really not too surprising why Lord Cat was barfing up blood along with his Eukanuba, flirting with kidney failure, and generally looking like he was about to die. This last point about the fire retardant may not explain why so many people had difficulty incinerating their pets after their food killed them.

I'm supposed to know a thing or two about capitalism, supply chains, queing theory, profit, shareholder adoration, the use of yarrow sticks in corporate boardrooms, how to read the entrails of spread-sheets, and generally how to worship the Horned God of Optimization and the Fertility Goddess of Capacity Utilization. Many people who rely on the outmoded quaintnesses of common sense may ask me, "Why would North American pet food companies buy wheat gluten from China?" Simple: because it is cheaper to ship wheat grown in North American fields to China, have a NORINCO corporation process it into flour or wheat gluten, put it into bags, and ship it back across the ocean to pet food processing plants. Having melamine in the wheat actually helped it win contracts, because the extra amino acids made it look in tests not like a deadly compound, but like it was more protein-rich. A better product at a lower price. And the compound is very common in the Chinese food-producing system.

So, what has the FDA done? Well, 50,000 swine have been quarantined in Illinois. I haven't been eating much pork for awhile anyway. Also, the Chinese wheat gluten was actually simply wheat flour adulterated with melamine, not wheat gluten. It was sold to many fish and animal farms in the US and Canada. The FDA can't say to which farms owned by which corporations in which states. That's ok, though. I haven't been eating much farmed Salmon lately. Or bread with flour in it. Or waffles. Or fortune cookies. Plus, the FDA thinks melamine is not a "residue of concern" to begin with. Phew! Glad we got that concern over with. I'll tell Lord Cat to either keep chowing his pet food down or he'd better start catching some birds on the back lawn.

Finally, we've got nothing at all to worry about. Even if we had, the only thing that matters is that Big Business is able to make money, because that's what makes the world go 'round and engenders the competition which makes everything wonderful. The dance around the corporate May Pole is right around the corner. Do you know who the sacrifice is yet?

Re-post From Chris Floyd's "Empire Burlesque"

{This is encouraging; it indicates spines are re-growing at the margins of Congress, they've taken up whips and chairs and are starting to back the bureau-whores into a corner. I wanted to do a post on this, but Chris already did a better job than I could've, and so here you go.}

Rising From Their Knees: New Bill Strikes Blow at Oil Barons

Friday, 19 January 2007

House Votes to Rescind Oil Drillers’ Tax Breaks (NYT) Excerpts: House Democrats easily passed legislation on Thursday that would rescind $14 billion in tax breaks and subsidies for oil drillers and reserve the money to develop alternative energy projects and conservation technologies. The measure passed 264 to 163, with many Republicans joining a bloc of Democrats...The bill will rescind $7.6 billion in tax breaks for oil drillers that Congress passed in 2004 and 2005 and will add $6.3 billion in royalties from companies that pump oil and gas in publicly owned waters of the Gulf of Mexico and off Alaska... “Big Oil is hitting the taxpayer not once, not twice, but three times,” Representative Nick J. Rahall II, Democrat of West Virginia and chairman of the House Natural Resources Committee, said. “They are hitting them at the pump. They are hitting them at the Treasury through the tax code. And they are hitting them with royalty holidays.” This is good news, although it faces a certain Bush veto -- if, that is, it gets by the Senate in any strong form, as it's easier for Big Oil to pick off a few "moderates" in the smaller body than a passel of pols in the House. Still, the real importance of such bills lies in the fact that they force Republicans and "moderate" Democrats to take a public stand for their corporate paymasters. It smokes them out and puts them on record as voting for big tax breaks for oil companies who are now making not just record profits but world-historical rakeoffs unseen since the loot of the Caesars. We fight wars for these people -- we die by the thousands and we kill by the hundreds of thousands; they can at least pay a little more chump change (for that's all the amounts involved are to the oil barons) for the blood and treasure we've given them. With the thin Democratic majorities in both houses -- majorities that are riddled with spineless timeservers, bagmen and Bush-coddlers -- it is not likely that any strong legislation proposed by Democrats to rectify some of the monstrous imbalances and perversities of the Bush years will pass. Very few, if any, such bills will command enough support to be veto-proof. But again, the Democrats should be relentless in sending this kind of legislation (and even stronger bills) to the White House, over and over and over. Force Bush to veto every week some bill that would benefit the vast majority of Americans. Force him to veto a bill that would strip away some of the overwhelming bias toward the richest and most powerful that now distorts and corrupts the Republic. Make sure that all those -- Republican or Democrat -- who stand with Bush in perpetuating this immoral bias are put on the record as doing so. And then hang this record around their necks at election time. Enough already of this bullshit bowing and scraping to the rich. Let's take the country back.

The Unquestioned Orthodoxy

Bruce over at The River Blog (yes, it's that Bruce and that River) posted a contemplation of capitalism's effects, written by Ob Fusc from the Deobfuscation Zone. Bruce is a very capable filter and often catches high-blogsphere things of this nature. Here's an excerpt:

We're all coopted into reproducing this logic, this linear motion, which irrupts into contexts; this mode of working, which is linear, which converts nature and earth goods into commodities, and thence into capital. To which living rainforest is fodder; and the people who cultivate it an obstruction. this drive which knows no end, and which cannot be reasonable; irrupting into modes far wiser and richer, and overpowering them. How that must feel; the terrible merciless pulsing of an alien force.

And we are its living vectors, people at the centre; alive, anesthetised and comatose in a time of unimaginable drama. To be alive, let alone relatively young, relatively healthy, to have time to contribute, to have anthropophile energy to enact. To have integrity to practise. What a gift in spite of it all. The price of a reflex ego insurance is greater than people imagine; may the latter crack and run bankrupt, painfully so, ever.

Oddly, this imagery is very close to how George Soros describes the system of capital creation and flow in The Alchemy of Finance. Capitalist orthodoxy first began to really annoy me when I listened to a member of the Young Republicans get up in church about twenty years ago and deliver a sermon on how God Almighty wanted us to get rich through speculation and cheap labor. That may well be. But isn't capitalism is the same system which makes neighbors ignore your presence? And if it's so great, why hasn't it delivered the SUV I've been waiting for? As I said in Bruce's comment section, "I'm not buying it until one comes with Kevlar armor, front and side flame-throwers, and a turret ring to mount the optional .32 or .50 cal machine gun on it. It should be a biodiesel hybrid, and it should be called the Bitch-Master."