So here are some of the thoughts I’ve had about the first part of Senator McCain’s interview with Bill O’Reilly on the O’Reilly Factor. I plan to provide the full set of videos as soon as I can have them downloaded. Currently I’m having an issue with the sound mixer. Please be patient.



To start with it’s obvious that Senator McCain has a far superior level of experience when it comes to the military and military actions. Neither Democratic candidate has served a single day in defense of this nation or ever in the military during peace time. That lack of understanding may be fine for a President during peace times, but whether you like it or not we are currently engaged in 2 military actions – thus experience matters. Ultra-liberals may enjoy the concept of peace, from cozy houses without fear of death from anything, but that freedom is only possible by the cost soldiers pay every day since the creation of America.

The conversation goes on to discuss taxes. Now as I have previously posted - $31,850 is the new definition of rich - both Democratic candidates have voted to increase the taxes of everyone making $31,850 and up. A far cry from their claims of only the rich being taxed don’t you think. Senator McCain voted against that increase.

But consider something else. If you own any stocks, mutual funds, or bonds the Democratic candidates want to increase the tax you pay if your investment makes money. So all that money you are trying to save for retirement – kiss a good part of it away if the Democrats have their way. That money will go to Government programs to decipher why April 2008 was the coldest on record, but Global Warming is creating a hot house in the world.

But don’t forget that all these taxes are coming out of pockets that have to pay more money for food because the glut of ethanol production is using up corn that would otherwise go for food. And gasoline costs more because of OPEC, and the fact that we are pushing for more ethanol plants instead of oil refineries. Don’t even mention nuclear power to the eco-ultra-liberals. Their fear of hurting an owl or some such supersedes the fact that without an alternative source of energy millions will eventually die.

Moving on to Senator Obama’s preference to speak with nations that are dedicated to the eradication of America. Senator Obama wants to speak with North Korea, Iran and other nations that hate our existence. Why? What can you offer or discuss with a country that has spent 50 years on one thought only, finishing the war they had with us (that’s North Korea for the younger readers). They have gone nearly bankrupt and many are starving as they divert all funds and food to their military.

How about Iran. A nation that would kill millions solely because of their religion. Do you believe that leaders with such intolerance would be any friendlier to a nation of multiple religions they disagree with, and lifestyles they abhor? They are extremists, given, but how do you compromise with someone that believes that God wants them to obliterate the existence of those that do not believe and act exactly as they do?

I need only say one thing about the media driven Rev. Wright issue, which I thing Senator McCain nailed.

“This campaign is not going to be about, in all due respect about, Rev. Wright or Mr. Ayers. It’s going to be about vision; it’s going to be about a plan of action for the American people that are hurting right now.”

As for the government running healthcare, I stand by Senator McCain. Name one agency that the Government runs that is fiscally sound. Name one Agency that is not mired in red tape and inefficiency. Name one that provides all the services it is supposed to do, and in a timely manner. I know of none. And the Democratic candidates want to create another of these agencies because they believe that YOU are not smart enough to be given money and chose the healthcare program you think is best for you and your family. How kind of them.

But there is also the media to consider with Senator John McCain. Where were the months long outrage and media investigations of his connection to Pastor John Heagy. Aren’t that pastors comments against gays and Catholics unacceptable? But if Senator McCain’s refutation of his unsolicited remarks, and endorsement, are enough to keep the media off his back – shouldn’t Senator Obama’s be the same?

But the media is far from even-handed, or focused on the issues. The New York Times has made that very clear as their attack on Senator McCain was backed by nothing. It was a blatant attempt to discredit a Presidential candidate whose political views they don’t agree with. Another reason I say that you need to check the candidate’s positions as the media wants to decide that choice for you and get a President that may not be in your best interest.

It should be noted though that Senator McCain has weathered this and other smears throughout his career. At no time has he fallen back and whined about it. He has refuted the positions and waited as other media groups proved these smears false. This is highly unlike at least one Democratic Presidential candidate that runs behind their gender anytime they are questioned strongly or find their campaign in a weak position.

Lastly, I know of no one that questions the honor and dedication of Senator McCain. Anyone that would call him a traitor, in the face of direct first-person comments contrary by fellow Prisoners of War, is simply a fool. There are few in the nation that have given so much to this nation, and to besmirch that is to be ungrateful and deceptive in the most cruel and vile way. There is no reason unsubstantiated smears should be allowed for any candidate, regardless of political party, because such claims against Senator McCain are no better than calling Senator Obama a fanatical Muslim or attacking his race.

Well that’s what I got out of the first part of Senator McCain’s interview. I admit that I agree with many of his opinions. The issue of immigration is not one of them obviously. But that will be discussed in a later video on the issue.

Labels: Bill O'Reilly, ethanol, global warming, Iran, Presidential election race 2008, Republican Party, Rev. Wright, Senator John McCain, tax policy, universal healthcare

As the Dow Jones Index tumbles again, down some 200 points today, I had to look back on some of the things I’ve said recently. I can’t say I am surprised at the condition of the market, nor the outlook being discussed now. On reflecting I found that I mentioned many of these things back in November 2007.

“The Fed's huge new credit facility, announced on Tuesday, "can help in a rather small way ... but the underlying risks will remain with the institutions that borrow from the Fed, and this does nothing to change their capital," National Bureau of Economic Research President Martin Feldstein noted.

And I stated.

“I had a friend recently ask me what I thought would be happening to the economy, and my answer was it’s going to get bad. Perhaps recession bad. And I added that the current group of Democratic candidates may only make it worse.

I say this because of several factors. Not the least of which are, the housing crisis, the financial sector, the cost of oil, and potential tax ramifications based on the current plans announced by candidates.”

Perhaps I was too general. Maybe I could have been more clear.

“One broker, whom I respect and consider quite sharp [even when I disagree], had an interesting comment on my predictions. I believe that the move to junk rating of ACA, the probable $6 - 12 billion loss at JP Morgan [significantly higher than expected], eventual losses from Citigroup - which reinsures itself, oil breaking $100 a barrel, and the multiple overseas investments will all hit the market in mid-January 2008. Thus I think a move to 11,000 is more than probable.”

Maybe if could have seen what would be the effects

“The facts are that China and India need gold. Even in a global slowdown their demand has increased pressure on supply. Recession and inflation fears and a lagging stock market in the United States have not diminished though they are not leading world headlines this moment. Oil prices are foreseeable going to continue higher and place more pressure on world economies, especially if OPEC cuts production rates as expected. And the prospect of a Democratic President in America is generally seen as a negative for the stock market, further spurring a move to gold to hedge investments.”

Fine, all that having been said at points in the past, what do I have to say now?

We need to see the stock market crash. Seriously it needs to drop to my target of 11,000 I called for in 2007. And every single action by the Fed and Congress to stop this will only create a bigger and longer lasting problem.

At the moment the Government is trying to create an artificial floor for the market. The reason is to give investors a false sense of hope and a bit of political momentum. Neither is worth the problem it is creating. The Fed has reacted too slowly and in moderation thus not correcting any of the liquidity issues. Huge rate cuts may look impressive, but since they don’t have an effect for months if not a year, the short-term effect is windowdressing. A series of stagard smaller cuts (started far earlier) over a period of time is far more effective.

Injecting money into the pockets of citizens is also a waste of money. The momentum and problems are not with people failing to buy things, it’s with the cost of the things being purchased. If oil costs are up 40% then there is just that much less to spend in a discrectionary manner.

Giving people money in the middle of chaos means that the money will either go to pay immediate bills or stashed away for the possible immediate need to pay a bill. Rather, let the emotion and the weakness in the market play out and then give the stimulus. Otherwise you are throwing money down a drain hoping it will eventually clog if you dump enough. And we are weakening the dollar in the process, which hurts the very economy we are trying to fix.

The financials are not done with the mortgage crisis. Some would like to divert attention from this, but the fact is that we are still in the crisis. And a great number of people will lose their homes. The housing market will have it’s crash, which is long overdue, and credit will be harder to get. All of which is normal.

For too long people have had too much credit without any security to back it on. A full generation of young adults have grown up thinking that this was the norm. We need this correction to get back to reality.

Want lower oil prices? Develop new sources of energy. Not because it’s an ecological thing to do, or because of some nightmare dreamed up based on barely enough information to make an estimate on. We need to do it because it will create jobs that can’t be exported, will lower dependance on oil, and infuse the economy with cash. It also means that the equity structure of the market will change, several blue chips will lose value and new ones will be created. Such is a dynamic market, which we don’t have now.

Gold will strike my target of $125 and oil $1125 this year. And they will both do so far faster than I expected if we continue to weaken the dollar and fix they symptoms and not the problem. Loss is part of an investment, as is long-term gain based on fundementals. To try to prevent one prevents the other.

This will feel bad, and unemployment may hit, gasp, 8%. 30 years ago that was a massive win. And it’s not a bad thing. If we aren’t throwing money at the public because they aren’t as comfortable as they were 5 years ago. If politicians had balls they would say this. Social entitlements should only be for those in need, not thouse that need to want.

The end of the 1st quarter will be another round of write-off for financials. And the market will continue to flounder as they try to stabilize their losses. At least one major financial will fail (actually will be forced to merge because they are too big to fail). And at 11,000 the market will stabilize and slowly rise. Growth will begin at that point at a moderate and unimpressive 1% or 7% in the market.

If gold moves as I expect, and the Government stops wasting money in stimulus plans, then there will be a sale in the commodity and an influx in the market. If wind and solar get a few positive laws there will be a spur in that arena and oil will drop slightly after hitting my target. IF taxes are increased, as was voted on yesterday, then the problem will extend into 2009 3rd quarter.

Patience, calm and paying attention to the underlying fundementals will do investors and homeowners more good than cutting rates and suggesting purchases of new Ipods that people can’t afford to have anyway. Shifting energy plans away from ethanol, which is driving up food prices and thus inflation, is also smart.

What will I do with my $600 from the Government stimulus plan? Leave it in the bank until I have a bigger purchase item I need for my business. I’ve already cleared my debt, and keep minimal revolving credit. My investments are balanced and long-term so the current moves don’t faze me. Unlike the Governments rush to do something – even if they have no idea what to rush and do, I have a plan and that allows me to sit and wait to see what happens.

So now you have my thoughts. I’ve factored in the lower refining levels due to the accident earlier this year. I’ve factored in the lesser supply of gold from South Africa, and the Olympics in China. I’ve looked at the real estate market, and the Dow Jones. So until the Dow hits 11,000 (plus minus 100 points or so – I’m not that good) oil and gold rise further and we enter the 3rd quarter it’s just time to accept the pain. But I’m sure this being an election year all of that will get mucked up by political ambitions.

We shall see.

Labels: China, Crude oil prices, Dow Jones Index, economic forecasts, ethanol, gold spot prices, green energy usage, mortgage crisis, Olympic games, tax increase

I was just watching Jim Cramer at 6pm on Tuesday. The stocks Cramer had been discussing included Monsanto, Potash and Deere. The subject was the increase in cost of food, international famine, and the glut of ethanol expected to be reported over the next several days.

The focus of the review of the potential for these stocks was primarily famine and the fact that because 35% of the grain production in America is being mandated to use for the creation of ethanol. There were in fact 5 stocks in the agricultural industry that were Cramer picks. Of note was the fact that Cramer mentioned that

“If I were a politician I would vote for ending using corn and grain, our food, for the production of ethanol… But I’m a broker so instead I will buy these stocks. If you want to help the world famine then buy these stocks and donate the profits to the U.N. world famine relief…” Paraphrased from the Mad Money program (if you have a video of this please let me know)

The argument is powerful and dramatic. Ethanol is a less effective means of fuel. That is a fact. And compounding that inefficiency by burning our food is in one point of view illogical. Especially when we have the example of Brazil where ethanol is created from sugar, thus not affecting the food supply or cost.

In watching this monologue from Jim Cramer I was struck by 2 things. I felt he really would rather that the world famine was being resolved by these companies as opposed to creating the roughly 164% aggregate increase in stock price since 2005 he noted. The other point was why other forms of renewable energy are not focused on.

In Florida nuclear plants shutdown and caused over 3 million to be without power mid-day. The price of corn is rising in commodity markets and supermarkets, as is beef. Ethanol is being mandated by the government even though it is more expensive and there is a glut of supply as it’s virtually impossible to find outside of the Midwest (mostly in 2 states).

Why then when all this is considered is the U.S. not seeking to promote wind energy, or solar, or any of a half dozen other ideas? Nuclear power is not green (due to the resultant waste) and problematic. Ethanol, as is currently being implemented, is counter-productive in multiple manners. What motivates the blind eye to all other forms of renewable green energy?

It doesn’t make sense to me. Ending corn as an ethanol base will not end world famine, but it may help deal with the problem. Wind energy does not harm anyone. Solar is plentiful and consistent. Biomass fuel is turning waste into a productive product. Shouldn’t we focus more on these answers?

I have to believe that when brokers, like Jim Cramer, are highlighting the fact that they would prefer to not make money in a stock or industry the public and government should take notice. When he, and others, would prefer to work harder to make money – which is his job – because of the international benefit then I have to say good for him and shame on the rest of us.

The options are there, and we need to take advantage of them.

Labels: agricultural industry, commodity markets, Deere, ethanol, Florida, Jim Cramer, Mad Money, Monsanto, nuclear power, Potash, renewable energy, stock market, world famine

Oil at $100+ per barrel. Corn at $5 per bushel. Neither is a positive depending on who you ask and what their primary concern is. Neither of them is going to go down in the near-term either.

Why is that important? Because the high cost of oil, and the fact that it will run out in the foreseeable future, requires alternative fuels development and implementation. Those are facts that everyone agrees upon. Equally, because the primary alternative fuel in use now is ethanol, derived mainly from corn kernels, the cost per bushel is increasing. That arguably is increasing the cost of food prices throughout the world, hurting the poor. Not quite a fact, but a possible outcome.

So what is the result? In the U.S. markets ethanol manufacturers are falling, some dramatically by 50%. That’s because there is, or was, a glut of ethanol. I say was because in December 2007 law was enacted to increase ethanol production dramatically.

“Bob Dinneen, president of the Renewable Fuels Association, said the requirement in the bill that calls for 9 billion gallons of ethanol this year "obliterates anybody's notion that there is a glut of ethanol out there." Current ethanol usage is about 6.5 billion gallons per year.”

The goal of the law is to increase ethanol use in the United States to 10% of every gallon of gas. That ultimate goal is no small task.

As I mentioned previously,

“Another fact is that ethanol, regardless of blend or if used 100%, is less fuel efficient than gasoline. It takes more ethanol to go as far as with gasoline. Estimates range but roughly ethanol is 2/3 as effective as gasoline. Thus more needs to be used.”

Add to that the even bigger issue of

“…the fact that ethanol is virtually unavailable anywhere outside of 2 states in the nation. Outside of Illinois and Minnesota there are almost no stations offering ethanol to the public. In 4 of the most populous states across the nation (New York, Texas, California, and Florida) there are only 2 stations selling ethanol to the public combined.”

Still the use of blends of ethanol over the recommended levels stated by the Government did increase by 50% in 2007. And claims by Dinneen state that federal farm subsidies for corn decreased by $8 billion and the subsidy for ethanol only cost $3 billion, thus creating a surplus of $5 billion.

It seems that no matter where you stand on the issues there are virtually as many positives as negatives. I will say that no matter what the Government mandate, the actual extent of the current surplus, the fact that 80 additional ethanol plants are planned to be created as of this date, or the cost of oil and corn – none of it will matter if a majority of the nation does not have access to ethonaol fuel.

I previously mentioned [in prior posts on this blog] that such fuel will cost the average American more, no matter what, because of the loss of efficiancy. I already know of a few people that go out of their way (into a neighboring state) just to get non-additive fuel because the difference in efficiency is worth the trip and cost.

But no matter the issues, there is always a positive to any industry where the major players are publicly traded stocks. As I mentioned above there are many ethanol stocks that are suffering. The alternative fuel market is mired in sentiment of a current oversupply, future oversupply, and an unknown path to the enactment of the federal mandate. Yet over at TheStreet.com there are thouse with a positive outlook.

Chuck Marvin feels that beyond the short-term of 2008 there is opportunity in the inevitability of increased ethanol use. To that end he picked 5 ethanol based alternative fuels stocks that he sees surviving this murky period. Those stocks include industry production leaders VeraSun, Archer Daniels Midland, and lesser names like Green Plains Renewable Energy.

Pick your path, save your cash and realize that this is not the end of the story. Ethanol is beginning its part in the path to renewable energy and an end of oil dependency. Like most uncharted paths, the road is bumpy and pioneers sometimes are unsure of their way, but eventually you will finds what you are looking for. To that end, so will we.

Labels: alternative fuel, Archer Daniels Midland, Bob Dinneen, Chuck Marvin, ethanol, ethanol production, federal farm subsidies, Green Plains Renewable Energy, Renewable Fuels Association, TheStreet.com, VeraSun

In looking at the question of ethanol, there is a bit of interesting data. There is intense passion on both sides of the issue. Both sides have strong reasons for and against the issue. And there are more than a few conjecture reasons out there as well. But what is the real final answer?

Well in just a cursory review you will find that ethanol is the production of fuel from plants. Essentially it’s a moonshine that is not consumable by humans. Looking just a bit deeper you will find that it’s also possible to make ethanol fuel from wood, cheese whey, and other parts of plants besides the most common source which is corn kernels.

Also, there is the fact that all ethanol is not used independent of gasoline but in combination with it. Ethanol is used as a blend with gasoline in ratios that vary from roughly 20% to 85% (denoted as E20 – E85). The reason for this will be explained below.

Each of the positives and negatives contain a bit of the opposing side when you honestly review ethanol.

There is the fact that ethanol use reduces ‘greenhouse’ gases, notably CO2 emissions. This is a positive of course, especially if you believe in global warming (which in itself is a questionable issue). But with the lower CO2 you can also receive higher nitrogen based emissions, depending the blend with gasoline used.

There is also an argument out there that states that ethanol creates more CO2 than it cuts. This is due to several factors. The first is that producing more corn (the main fuel source used currently) creates more problems for the environment via pesticides and diesel fuel. Another is that the creation of ethanol itself takes energy and that energy releases greenhouse gases. A recent study from University of California at Berkeley states that overall ethanol cuts CO2 by 13%. And a separate report possibly links ethanol to the ‘dead zone’ (an area that cannot support life) that is in the Gulf of Mexico, and is growing.

Another fact is that ethanol, regardless of blend or if used 100%, is less fuel efficient than gasoline. It takes more ethanol to go as far as with gasoline. Estimates range but roughly ethanol is 2/3 as effective as gasoline. Thus more needs to be used. Whether more use of ethanol blends gives off the same equivalent of greenhouse gases or not is not readily deciphered. It does have a direct effect on cost.

Cost comparisons have several components. The first is for corn. Higher ethanol consumption increases, as is currently happening, the price for corn. Second is the fact that ethanol costs more than regular gasoline. The actual cost varies on where you are in the U.S. but is invariably higher. Even if you were to be in the Mid-West, where ethanol blends are cheaper than gasoline, the cost per mile is higher.

“If you fill-up the Impala’s 17-gallon tank at a station in the Midwest, you’ll save $5.10 by using E85. So far, so good. However, you can’t drive as far on E85 and will have to refuel sooner than if you had purchased conventional gasoline. In fact, your cost per mile is higher using E85: 9.7 cents/mile vs. 8.4 cents/mile for regular gas.”

Costs on the West and East Coast are dramatically higher (far in excess of 200% more). But the actual effect on an annual basis equates to roughly a range of $200 - $600 more in fuel costs. For some that is not too expensive, for others it’s way too much to be feasible.

Another issue is the fact that ethanol is virtually unavailable anywhere outside of 2 states in the nation. Outside of Illinois and Minnesota there are almost no stations offering ethanol to the public. In 4 of the most populous states across the nation (New York, Texas, California, and Florida) there are only 2 stations selling ethanol to the public combined. Thus ethanol use is currently infeasible.

A positive that is not disputed is that ethanol is a reproducible fuel. Supplies can be replaced in less than a year. In addition, research is being made to use other sources of plants and waste material which can improve quality and amounts available.

But a negative that is not discussed is the tax credit that goes with ethanol.

“Ethanol is subsidized with a 51-cent federal tax credit. Increased consumption of blended gasoline leads to higher taxpayer funding for the ethanol industry.”

So is ethanol a good or bad thing?

It depends on your view. Currently the reality is that ethanol is ineffective on a national level, regardless of benefits or detractions. It’s just not available to a wide portion of the nation. But the future is a big unknown. Improved technology, new fuel sources, improved car engines, and environmental impacts of additional emissions all need to be evaluated. Widespread availability is also critical in the ultimate outcome, as are alternative fuels.

Looking forward there is one thing that we can be sure of. Ethanol, like all alternative fuels, must be taken seriously if we are to change our usage as a nation. We will never know the full positive, and negative, effects until we evaluate all the options before us.

One day oil will be gone. That is a fact. An alternative is needed. Giving our children a cleaner and greener world is a benefit that we can do. Whether or not global warming exists, that is something that we can provide them that will benefit their lives and I see no reason why we shouldn’t.

Labels: alternative fuels, CO2 emissions, corn kernels, ethanol, federal tax credit, gasoline, global warming, greenhouse gases, reproducible fuel, University of California