The stock market was falling, the Government spent a quarter of a billion taxpayer dollars to bailout selected financial companies, and plans were being made to spend almost $1 trillion dollars on the bad debt still floating in the market. While all this is happening House Speaker Nancy Pelosi is trying to promote increasing the debt of the nation even more. How kind.

House Speaker Pelosi, who still has not publicly acknowledged her substantial investments in alternative energy, is now pushing a $50 billion stimulus plan which is similar in some ways to they prior $168 billion stimulus plan that was enacted earlier this year. That early stimulus check failed to do anything except push-off the eventual downward trend in the economy.

I was never in favor of the stimulus check plan. It was a waste of money. With the problem of foreclosures and slower growth the initial checks were used to pay down on debt and mortgages, as opposed to the purchases of new goods that was hoped for. Which seemed obvious to me.

This time Pelosi wants to spend the money

“…that would fund road, bridge and other construction projects, help low-income families pay upcoming winter heating bills, give more food stamps to the poor and help states pay the higher costs of health care for the poor.”

This plan is a little bit smarter than the first but still does nothing to help the people that need it most. Unless you work in construction building a road or bridge will not directly affect you. So that is a waste, and money best spent at the local or state level. Giving poor people more food does not help them learn skills or get jobs that will help them not be poor anymore. Though I agree letting people starve is not nice, in the long run it only trains them to rely on the Government more, as they have been trained to do since the 1970’s.

Of course another problem about the higher costs of food is directly tied to Nancy Pelosi’s investment portfolio. As is the higher cost of heating oil. Nancy Pelosi has held off discussions of domestic drilling for nearly the whole year so far. She has supported everything that will limit this drilling. She wants to build up alternative energy exclusively.

It will take at least 10 years, if not more, to effectively create any alternative energy sources. The one source currently being pushed is corn-based ethanol. Because it’s based on corn food prices are going up. Because only 5 states in the nation have pumps with ethanol, and the fact that only 2 allow public purchases there is a glut of ethanol. And Government mandates will increase that glut by 60% next year.

So effectively, Democrats and Speaker Pelosi are hurting the poor with their plans, and this additional stimulus plan is a band-aid on the wound they inflicted.

I have to wonder how this stimulus plan will help anyone. I have to wonder how this will do anything more than just temporarily hold at bay the problems Democrats have enforced in the nation.

Will this bill pass? Of course. Politically the timing is perfect. The Government is already bailing out the financial sector for $1 trillion, what’s another $50 billion. And how bad will a Presidential candidate look if their Party refuses to pass a bill that targets the poor. The average American does not connect one dumb political idea with another, nor do they see the connection of all these things to the domino effect they create in the future. So it will happen.

Of course that means that the Government will swell further, and the economy will worsen. And the taxpayers will become poorer, at all income levels. These issues are not a rich versus poor issue. If the economy is bad, every American is affected. And the plans being put in place are just trying to push those problems off the minds of Americans till just after the election.

Speaker Pelosi is deceptive in her refusal to acknowledge her personal benefit from her politically based ideas. Senator Obama, in supporting this idea, is ignorant of the real fundamental issues causing the problems. Democrats are too absorbed in political gain to deny this act of futility.

Still never fear, this bill will pass. It will also do nothing to benefit anyone. Especially when crude oil prices increase over the winter as they always do. Especially as food prices go higher as more ethanol is created and sits unused. Especially as domestic drilling sits on the background delaying any potential help it can garner to the public because its ultimate benefit won’t happen for several years (just as alternative energy will take a decade or more to be effective).

But not to worry, bigger Government, larger wastes of tax money, increased national debt, and inept plans from Congress are ok by Democratic standards. Just elect Senator Obama and continue a Democrat-led Congress and they will ensure that the Government will take care of you more; instead of you taking care of yourself. Because they know better. Just look at their record and you can tell.

Labels: Congress, Crude oil prices, Democratic Party, ethanol, Nancy Pelosi, Speaker of the House

I ran across an interesting article and comment just before I decided to drop off to sleep. I will share my response with you and you can tell me what you think.

The original post is LET THE ENERGY GAMES BEGIN. The comment was:

Rick Says:
September 11th, 2008 at 2:05 am e
Please give me a reference to the statement that “George Bush’s own Energy Department has said that if we opened up new areas to drilling today, we wouldn’t see a single drop of oil for seven years…”
I want authoritative facts so I can warn others that it is not a quick fix to the high gas prices as republicans want to mislead them to believe.

My response is

Rick,

I did not write this post, but I am very aware of the issues it discusses. And I wanted to take a moment to address what has been said so you have a full understanding of what is before all Americans.

It is a fact that crude oil prices have increased roughly 1000% since 1972. It is a fact that oil usage in the U.S. has increased dramatically over that same time period. And it is also a fact that Democrats have long sought to prevent domestic drilling.

But to say that only Republicans are at fault for the current, and future, dependence on oil would be a lie. Inaction by both Republicans and Democrats since the 1970’s are the cause of the crisis. Neither side has effectively presented a plan of action, nor explained to the general public the cost of failing to seek a new alternative.

Currently America will spend some $700 billion on foreign oil. Part of that reasoning is due to the idea of using up foreign sources of oil while maintaining reserves for the future – ensuring the continuation of the American quality of life. That reasoning was solidly in place 30 years ago, and far less so today.

Another reason has to do with ethanol. The U.S. chose to use corn as the base for ethanol, whereas other nations have chosen and effectively use grass and sugar. All these bases for ethanol result in a fuel that is only 75% as useful as gasoline, thus requiring more fuel to be burned. In addition there is a debate on whether ethanol production is amplifying the dead-zones found in the Gulf of Mexico. Lastly by using corn as the base food prices have been forced higher, which is a core inflation factor.

Oh by the way, there is currently a glut of ethanol, with a mandate from the Government to increase that glut by 60% next year. Ethanol is currently available only in 5 states, of which only 2 allow its sale to the public (those 2 being Illinois and Michigan).

Solar energy, geothermal, wind, biomass, oil shale, and all other alternative sources at this time are either ineffective or inefficient.

Because of these facts, the only options that will effectively provide the energy that America requires to maintain it’s current quality of life and allow for research and development of new energy sources are coal, nuclear, and oil.

Coal is available, and starting to gain greater interest though many ecologically sensitive groups are against its use because even the latest developments create too much carbon dioxide and residue.

Nuclear has long been an energy source that Democrats oppose. Fear, without regard for advances in science and safety, and political preferences have held back the development of any new nuclear plants since the 80’s. This is in the face of significantly greener nations like France that use this as an energy source.

Thus we are back to oil. If we are to maintain current energy usage oil is the only logical and constant source. Since dependency on foreign oil is expensive and unreliable domestic drilling makes sense. The money saved can be used to fund alternative sources of fuel.

But will domestic drilling tomorrow cause oil prices to drop tomorrow? Yes and no.

Crude oil is priced like a stock or more accurately an option. Thus the price reacts in advance of actual events most of the time. When OPEC cuts production the price of oil rises long before the supply is affected. When a nation that produces or ships oil is under strife or war the price fluctuates whether production is affected or not.

So on that basis the knowledge that domestic drilling will decrease the demand by the largest buyer, prices will drop for a period of time until other buyers step in to make up that difference. If OPEC does not just reduce production to maintain current prices.

But more importantly if nothing is done today, as it was not in the 70’s, 80’s, 90’s, and on then you are guaranteed to have higher prices 2 years from now as well as 10. And where will the alternatives be then? As more money, maybe $1 trillion dollars a year or more, goes to foreign nations, where will America get the extra money to fund the 2nd, or 4th, or 7th year of research?

And lastly I want to inform you of something that many Democrats, particularly Speaker Pelosi have not made public. Nancy Pelosi makes money every time alternative energy is funded. She owns a substantial position in alternative energy stocks. It’s to her benefit to not allow domestic drilling. It fills her pockets with money every time that the debate lingers.

How is Nancy Pelosi different than the charges made of Republicans when she is in the pocket of Big Wind?

So to answer your question is oil going to resolve all America’s fuel needs forever? Of course not. Will domestic drilling drop the price of crude oil significantly tomorrow, or short-term? Not overly likely, though some effect will happen. Do Republicans understand this, and the alternative? More than you are giving credit to.

But the real question should be this, what alternative is being proposed by Democrats that will ensure the energy needs of America now, and provide any hope of reduced cost and increased energy in the next 2 years? Or 4? Unless you don’t mind not heating your home during the winter, or being unable to use the internet when you wish.

Oil is not the answer, we can all agree on that. But by using oil, particularly domestic oil, we improve our ability to create new sources of energy.

Labels: alternative energy, Crude oil prices, domestic drilling, ethanol, Nancy Pelosi, nuclear energy, oil shale, OPEC

A friend of mine recently asked me what was a good tech stock to purchase. As the discussion went forward I realized 2 things. One that they had no idea what a tech stock was, and second that tech stocks today encompass more companies than say 20 years ago.

The average person will think of a tech stock as just a computer company. And that is accurate. But it is limited. Right now computers include companies like car companies, oil drillers, wind energy, cell phones, even washers and dryers. So what might be a more accurate view of technology stocks?

The most accurate answer would be that it’s new innovations on technology. It’s not just computers, but how they are used, or how new things are crated and used.

Look at clean and renewable energy companies. There is the development of high density, long charge, rechargeable batteries. Solar energy has new developments in solar cells, and better transfer of electricity. Biomass turns garbage into a fuel source. Not to exclude the potentials still to be learned about oil shale, or ethanol derived from wood and grass.

That’s just one source, and it’s popular. Considering the numerous people that believe in ‘global warming’ (which I do not) and those that wish to clean up the earth, this is a sector that will not be going away. In fact we can be sure that more funding will be funneled into this arena no matter who wins the Presidential election.

[But if Democrats win it can be a real big area. Considering that Speaker Nancy Pelosi is making money from her investments in Clean Energy Fuels Corp., T Boone Pickens' company, you can count on the sector gaining a lot.]

But that is just one area.

Water purification, needed on a global and consumer level, is another concept. Cars are advancing technology as the hybrid cars are now being developed and improved. Pure electric cars are receiving a lot of research money as well. And what about service stations to fix and fuel these cars.

Or what about the engineering and construction companies that build the various plants and components needed. Or the ones that might be building newer, safer, nuclear and coal energy plants.

My point is this. The concept of technology stocks is not limited to just the latest version of modem, or processing chip that a computer maker comes out with. In fact computers need not be involved, or the primary component, of a technology company.

The big thing to keep in mind when buying any technology stock is the following

• Is the technology needed en masse


• Will funding come from private or government sources


• Is the technology building upon an existing product or service, or is it a new innovation that has to develop a market


• Does the technology have applications in other industries beyond the one it was made for


• Is the technology user friendly

Based on those answers you can weed out many different ideas and get a bit closer to what you believe is a good investment for you. Of course other factors are always important to keep in mind. Like the economy, competition, potential profitability, political environment, retail or institutional end use, executive management, size, and proof of concept.

Obviously I like some of the new technology in the energy sector. It covers several of my criteria. But that does not mean this is the only option out there. Do your homework and you may have a pleasant reward over time.

Remember that investing in technology stocks is like any other investment. Proper planning, time and management are critical to a positive return. Looking for a homerun usually winds up in taking on more risk than you really want and often does not provide a reward.

Labels: ethanol, global warming, hybrid cars, oil shale, renewable energy, Solar energy, tech stock

The 110th Congress is now on vacation. You might be asking yourself when they haven’t been. I know I have.

The Democrat led Congress has earned and justified the 14% approval rating it has recently received. And a big cheer should be made that they increased the rating by 3%, from the all-time lowest rating for Congress ever. That includes just before and after the Civil War.

You might ask what has this Congress done?

Well they don’t work longer than any other Congress – though it was a campaign promise. They haven’t achieved any of their major goals. They haven’t even really lived up to their rally call in the 2006 mid-term elections, which was change if you forgot. Well, if you count the numerous Congressional hearings then they did change a few things – how much money was wasted.

This Democrat led Congress boosts the achievements it made, like U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007,. Of course they leave out the fact that this emergency funding was required because their refusal to fund the military in the first place. And the funding, finally passed in May 2007, runs out in September. Also note that the only way the Democrats would allow funds to go to our troops that are actively fighting in Iraq and Afghanistan was by attaching an increase to minimum wages and funds for the victims of Hurricane Katrina.

And yes I know that an early funding was vetoed by President Bush, Again the Democrats knew what they were doing, wasting time and money. They knew that President Bush would not give the enemies of our nation (and people fighting our troops are enemies) the means to hurt our soldiers by telegraphing our moves with a timeline. He told the nation as much. But they did it anyway to try to look like I don’t know what.

And of course there was the farm subsidy act, Food, Conservation, and Energy Act of 2008. A real brainstorm here. This act increased food stamp benefits which is a good thing since it also increases ethanol production – corn ethanol. Corn based ethanol increases the cost of food. Thus food stamps have to have more benefits just to stay even with the higher price of food. And higher food prices is a leading cause of inflation.

Speaking of energy and Congress, notice that Nancy Pelosi and the Democrats will not allow a vote about domestic drilling? So they are pushing corn ethanol, which 96% of the nation cannot buy or use, and is less efficient that gasoline, and is actively increasing the cost of food. And they are really only pushing ethanol. All other alternatives are off the table.

Does that make sense? Considering no one knows what energy source is the best for mass production shouldn’t they want to try everything? Shouldn’t we be ramping up wind, solar, hydroelectric, biomass, grass or sugar based ethanol, nuclear, and domestic drilling all at once? Considering none of these will be the answer for at least 5 to 10 years, imagine what the cost of oil will be if we don’t start trying everything now then.

But I detract (and yes I blame Republicans for the energy mess equally, though corn ethanol and refusing to even have a vote is purely Democrat).

The 100th Congress has been very busy though. It takes work to avoid having debates about domestic drilling, and to be in nearly non-stop meetings. There have been Congressional hearing on so many issues that Democrats make sound like absolute importance. They just use the polispeak and obfuscate the facts a bit. Like the massive hearings on the lawyers the President fired (CONTINUING INVESTIGATION INTO THE U.S. ATTORNEYS CONTROVERSY). Democrats were all revved up on this.

What was obfuscated? The fact that each of those lawyers work at the pleasure of the President. Meaning that at any time, for ANY reason the President can fire any of them. It’s not illegal, and every President has done this. But the Democrat led Congress had to find a reason why the President fired these lawyers and tried to find a law that was broken, where no law exists. There went several weeks.

A few other top hearings that resulted in nothing:

WHY DEFICITS MATTER

IMPROVING THE LABORATORY EXPERIENCE FOR AMERICA'S HIGH SCHOOL STUDENTS

COMPETITION AND THE FUTURE OF DIGITAL MUSIC

AN UPDATE: PIRACY ON UNVERSITY NETWORKS

MEETING TO DISCUSS MATTERS PERTAINING TO THE CONTESTED ELECTION IN THE 13TH CONGRESSIONAL DISTRICT OF FLORIDA

CREDIT CARD PRACTICES: CURRENT

GASOLINE PRICES, OIL COMPANY PROFITS, AND THE AMERICAN CONSUMER

The list goes on and on.

To help out in listing a few more items I found this video



So my overall point is this, there is an election coming up. Not just for the Presidency but also for Congress. When you go to vote consider why this Democrat led Congress has the lowest approval ratings ever. Consider why President Bush, who is not brilliant and has made mistakes, is regarded better than Nancy Pelosi, Harry Reid and the Congress by 10%. Consider that every major policy issue that the Democrats promised to do in the 2006 elections still have not happened, and that they have spent more time looking for people to blame than passing laws to help the nation.

Perhaps it’s me but I expect a Congress to do something. For god sake they couldn’t even get together to pass an Act to apologize for slavery. House voted yes the Senate just let it go by.

In November you can vote to keep the Democrats leading Congress, if not the nation, or you can “vote for change”. Unless you have a perverse desire to see if Congress’ approval rating can reach single digits.

Labels: Alberto Gonzales, Congress, Democratic Party, energy alternatives, ethanol, Harry Reid, Iraq, Nancy Pelosi, oil prices, President George Bush

Senator Obama is quite a man. I mean that seriously. It takes quite a man to step up to the plate for a position that most my age or above never expected to happen. He is facing down the most difficult hurdle an African American has ever come against in this nation’s politics and looks to be competitive.

Though with that said I have to say that I wouldn’t vote for him. Historical importance and all, he is not ready for the position – but he is damn close.

My problems with Senator Obama are purely on his political experience and policies. In terms of his presentation, the fact that he is breaking barriers and making history are all things I deeply respect about the man. I find him charismatic, and a capable public speaker. His ability at polispeak is unmatched by neither Senator McCain, nor any of the past Democratic primary candidates he beat.

But that is not enough to be President.

I’ll give you an example. Senator Obama visited Iraq for less than 2 days, after 2 ½ years since his last visit of less than 48 hours. That is not fact finding, nor is it being open minded to changes that he opposed. That is building voter interest on the backs of the soldiers in Iraq. The same can be said of his time in Afghanistan.

Senator Obama has not changed his position. He never was going to. Thus the trip, with enough media coverage to rival the President, was just a new take on the shake-hands-kiss-babies politicing. He got into the race saying he would remove all the troops in Iraq in his first term, then shifted to a 16-month policy that will still leave some unknown number of troops in Iraq, and after his trip he still maintains that policy.

But as I have said to many people and in this blog, how do you expect to win a fight if you tell your opponent that you will stop before it’s over? If this were boxing, Queensbury rules all the way, but this is war. When America left Saigon did anyone view that as a win? Besides the North Vietnamese. Can anyone give me a reason to believe that Al Quida and any other insurgents won’t just bide their time for 16 months to end, if Obama is elected President, and then rally to make Iraq a bigger mess than it is?

If people want to praise Senator Obama for his unyielding position on Iraq, which essentially calls for retreat and means that every orphan and anyone who lost a loved one in Iraq will be gunning for Americans within 5 years of our departure, even if it is not popular then how can they not praise Senator McCain for his unyielding and at times unpopular stance to win the war? Mark my words, not winning in Iraq means that more American lives will be lost, and in our nation not overseas.

But there is also the issue of domestic economic instability. The housing markets are tanking, as are many financials that facilitated this drop. Senator Obama is looking to speak with advisors (though not 300 as he uses for foreign policy which is impractical) that include Treasury Secretary Robert Rubin, former Federal Reserve Chairman Paul Volcker and billionaire investor Warren Buffett.

Obama said in his meeting with advisers he expects to ``get their read on where the economy is going,'' and fashion some ``additional steps'' to address the short-term economic and financial and housing issues.

Robert Rubin helped to advise Senator Hillary Clinton. While many have chosen to forget, I recall that her campaign ended in debt of some $20 million. That’s after she loaned herself in excess of $6 million for her campaign. Somehow I think Rubin’s advice was ignored and/or faulty, you can pick which.

Warren Buffett is the greatest investor ever. He has made billions via investing. Yet he does not give one extra dime to the government than he has to. He has never donated any money to the I.R.S., but he has been very vocal to say that taxes should be raised. He is so sure that the government should have more of his own money that he is donating the bulk of his billions to a charity, run by Bill Gates – another man that made billions via business and investing. This tells me that he does not believe that the government can efficiently use his vast fortune to the benefit of Americans, whether Democrats or Republicans are in charge.

Paul Volcker, the predecessor to Alan Greenspan – the man who tried to get the Clinton Administration to do something about the internet bubble, is best known for ending stagflation and creating a recession that killed farming. To recap for those younger than myself Volcker reduced the inflation rates at the end of President Jimmy Carter’s term (13% in 1979) to reasonable levels during the President Regan Administration (3% in 1983). He also helped increase unemployment levels to those near equal to the Great Depression, bankrupted farmers, and generated the most protests that any Federal Reserve Chairman has ever received.

Senator Obama’s choices make a few things clear. It seems that his intention is to raise taxes (not just on the rich as he has already voted to raise your taxes this year), spend your money on policies that will feed the hungry as opposed to help them be able to feed themselves, and drive up prices for energy and oil.

The last 2 come from the fact that Senator has voted the most extreme liberal of the entire Democratic Party. He is not bi-partisan according to his record. Thus the Democratic Party opposes any domestic drilling for oil, preferring to use corn ethanol. That means that we will continue to drive up the price of oil – funding some of the enemies of America with more money than ever before – slowing the economy as businesses contract to offset the higher energy cost, and the cost of food will go higher since the price of corn is increasing. That’s inflation as I understand it. That’s hurting the average American. Higher taxes, higher energy costs and higher food costs – that is what I understand he is being advised to do.

There are other questions about Senator Obama that I have, but these are some of the more prominent right now. This is what the news media wants America to focus on. And just these reasons are enough for me, even though I have several others.

But is that what you want? Is this what you expect from a President after the polispeak is gone and action is required?

Labels: Bill Gates, Crude oil prices, Democratic Party, ethanol, Iraq War, IRS, Paul Volcker, Presidential election race 2008, Robert Rubin, Senator Barack Obama, Warren Buffett

Well how much fun are you having today? If you hold investments, it may not be a fun day at all.

Back in the 4th quarter of 2007 I said I believed the Dow Jones Industrial Index would hit 11,000. I thought this would be a move in the late 1st to 2nd quarter. I was wrong… on the timeframe. But this is not a pat yourself on the back kind of moment.

With Indy Mac having failed and fears rampant over whether Freddie Mac and/or Fannie Mae will follow there should be no doubt that the Dow will cross into the 10,800 area on Monday. Add crude oil prices that are continuing to rise on fears from Iran and you get a bad situation. But perhaps the real culprit for this current situation is the Fed (Federal Reserve).

The Fed has been providing banks extra money to ensure their solvency, but not requiring that loan reserves be increased. It’s kind of like stopping a leak in your tub by adding more water. The problem is not getting fixed and may get far worse. And all the panic about the mortgage industry seems to have done nothing but whip up polispeak from political candidates and political parties, each looking to sway voters.

Loan reserves must be raised at all financial institutions. That especially means Fannie Mae and Freddie Mac. And several institutions need to fail. That of course means that some people will lose their homes. Nothing can, or should be done about that.

When I some will lose their homes I don’t just mean the roughly 4% of homeowners that are in default. I include in that group those that will fail this winter due to the cost of heating oil increases. I expect that in total some 7% of homes are in danger of foreclosure this year. While it’s not a nice thing to say, they need to lose their homes for the economy to survive.

This is not unlike the enormous wash-out that occurred when the internet bubble broke in the stock market. Money was lost, as it should have been, and opportunities were created. Those that made bad financial decisions, whether corporate or individuals, lost and others benefited from that loss. It’s a standard cycle in the markets.

Of course what is likely to happen is that Congress (with it’s 9% approval rating – sure to go lower) will take taxpayer money and bailout homeowners and financial institutions alike. Thus more water will fill the leaky tub. Undoubtedly the current Administration will be blamed (even more than they should) and the war in Iraq (and possibly Afghanistan) will be identified as the cause of all these ills. Which is false.

The outcome will probably be a surge for Senator Obama, who prefers a bailout. This may lead to him being elected and higher taxes to pay for that bailout. And if anyone thinks a bailout of this size will be limited to just the top 1% of the nation they are insane.

I believe, looking at current factors several things are highly probable:

1. Confidence in all financial will go lower forcing the need for more liquidity
2. Several institutions will fail – focused mostly on those dealing with housing markets first
3. Interest rates will increase by 1pt by the end of 2008, increasing another 1pt early in 2009.
4. Crude oil prices will jump to maybe $160 a barrel by mid-September as winter starts, with a commensurate move in heating oil prices.
5. Gasoline will reach $5.15 a gallon
6. Home foreclosure will hit 5.5%
7. Bankruptcies will increase by 3%
8. Higher energy prices will be blamed for the further slowdown in corporate profits and significantly lower (negative) holiday sales in the 4th quarter.
9. A Democratic Congress will be re-elected
10. Senator Obama will likely be elected
11. Republicans will be blamed
12. Taxes will be increased for all incomes by 3% by 2009
13. Corporate taxes will be increased by 10% early in 2009
14. Inflation will soar unchecked by 3 - 5%
15. Unemployment will grow to 8.5% by December 2008

While each of these items may or may not happen they are all interrelated. I expect each item to happen, at least to the degree I stated, generally in the timeframe given.

As money tightens, gold will be a hedge and prices for all precious metals will soar again. Credit will get severely crunched, and credit card rates will fly. The debt load on the average American will increase from the current $6,000 to $8,500. Most of this increased debt will be from higher energy costs. Thousands of small businesses will shutdown.

As a result of all these things I expect that the Dow Jones will drop to 10,200 by December. If I am correct about Congress and Senator Obama – for the reasons stated – then I further expect a drop to 9,300 during 2009. A significant bear market indeed.

The main problem is that the solutions being looked at now raised taxes and increased liquidity, fail to resolve the actual problem. And the combination will weaken the dollar, to a point where holding U.S. bonds is unattractive. I won’t even mention the increase in retirees and Social Security.

But there is opportunity. I see the housing markets as a great buy, for those willing to hold for 5 years. Buys in the secondary city markets will probably do best having a lower purchase cost and holding value better.

Several financial stocks will be excellent buys. Some have far better balance sheets than others, but will be blasted by the same investor fears as those in bad shape. Companies like Citigroup are trouble spots as they reinsure their own loans and thus hide them better on the balance sheets. Financials will lead the markets down, but they also will signal the start back.

Coal will likely start to regain interest in the quest for alternative energy sources. I expect nuclear energy will also get a push, with at least 1 new nuclear plant being authorized to be built in 2009. I expect a call to switch to ethanol produced by grass and sugar to go initially unheeded until mid-2010. Further harming the ethanol push is the fact that there will be a glut of ethanol by mid-2009 through 2011.

Bond rates will be more attractive in 2009 than today with the likely increases in interest rates. Of course inflation rises will remove that benefit.

There may be other sources of opportunity but they will be guided by factors including but not limited to:

Iran
Iraq and Afghanistan wars
Crude oil prices
Heating oil prices
Inflation
Unemployment
Manufacturing and Industrial layoffs
Retiree growth rates
Healthcare costs
International political stability
Another terrorist attack on the United States

That is the outlook that I have based on what is currently ongoing in the world today. Some of this is just my on interpretation, some my deduction. But I believe that if only ½ of my expectations occur, the general outcomes as stated are accurate.

But look around and determine your own answers. Better to be prepared than taken by surprise.

Labels: Congress, Crude oil prices, Dow Jones Index, election 2008, ethanol, Federal Reserve, Freddie Mac, gold stocks, heating oil, real estate, Senator Barack Obama, stock market

I was looking through the net today, trying to get back on pace with the Presidential election, and I ran across an interesting post by Andy Ostroy on the Huffington Post. Its title is Why Obama Must Become President.

The post is filled with problems. Problems about America’s racial past, our economic current, and our unsure future. It highlights the failures of the President Bush Administration, and several points that I’ve heard ultra-liberals spout since Democrats started announcing their intention to run in 2007. And not once does it give a reason to vote for Senator Obama.

Mr. Ostroy correctly points out the many hurdles that were in the way of a Senator Obama nomination. He hints at the racial bias and emphasis used against Senator Obama throughout the primaries. He even quickly glanced over the fact Senator Obama has virtually no experience. But none of those are reasons to pick a President.

His main reasons why Senator Obama should win can be summed up in these 3 things:
He is Black
He is not President Bush
It’s a good thing for the Democratic powerbase

That’s it.

Now I would love to see a Black President in my lifetime. I agree that

“America needs to get over itself and finally break down these walls of racism. It's time that its citizens stop viewing each other through the prism of color, and focus instead on the person beneath the skin.”

But a President is more than just a color barrier. Racism is a major issue in America, I know because I have lived with its influence in my life. But it is not the only nor main issue in America.

“Whites would finally be presented with a black president and be forced to confront their inherent fears, while hopefully accepting the cultural reality that success or failure in the Oval Office has nothing to do with race. And for some blacks, they would no longer be able to hide behind the contention that the "system" is keeping them down, and instead assume a greater responsibility for their own successes and/or failures.”

This is all true. A Black President would be a great force in defeating stereotypes and excuses all too readily used and portrayed in the media and many people’s lives.

But how would Senator Obama’s color change the economy? How would his eternal tan prevent Iran from creating nuclear weapons? How would the breakdown of stereotypes end the Iraq and Afghanistan Wars, or disuade groups like Al Quida from attacking Americans?

Race is a central theme in America, but it has little power over national economics, international policy, or national defense – to name a few issues.

So I have to reject the premise made by Mr. Ostroy that

“But if Obama loses to McCain in November, that will be an even greater statement of where America is with regard to race. That a candidate from a severely weakened party, who votes in virtual lockstep with Bush, could beat Obama while voters voice that they so desperately want and need change, would signal that having a black president is, in 2008, perhaps too much change.”

The election in November is not about what race the majority of Americans want to lead the nation, but who is the best person. The best person with the best plan – that can realistically be implemented – is the person who should win. That may or may not be Senator Obama, but you would never be able to know from Mr. Ostroy’s post.

Is President Bush’s apporval rating low? Yep, and those of the 2 year Democrat-led Congress are even lower. Government as a whole has failed the American people on many levels. Each party has failed to live up to promises and expectations. President Bush has failed to recognize and react to his mistakes in a timely manner, and the Democratic Congress can’t stop trying to blame the Administration for every ill known to man and actually pass a few of the laws they polispoke their way into office for.

Yet neither potential Presidential candidates has a last name that remotely sounds like Bush or Pelosi. Thus change from the abysmal political leaders of this nation, whether Democrat or Republican, is assured. The question that remains is which is best.

The energy problem in America is the result of 30 years of both political parties failing to act. The only actual answer is to say that America will investigate all energy avenues – including domestic drilling, nuclear, new refineries, switching to sugar and grass based ethanol as well as wind, solar, geothermal, biomass, and so on. But neiter political party is willing to say that, and the candidates both seem unwilling to annoy some of their political followers in favor of a real solution for the nation.

Similar statements can be made about real fixes to Social Security, Education, and the Economy. But when it comes down to it, one of the biggest issues facing this election is experience, not color.

Does America want a President that has decades of experience, or a candidate that will be learning on the job. Both have their good and bad points. Neither involves race. To say that it does is to overstate an issue and bully some into acting in a manner they don’t believe in. That’s wrong.

Mr. Ostroy makes a great emotional post. It sets up a wonderful argument over the importance of how the media and politics still use race to make the playing fields uneven. If this were an election for Govenor, or Mayor, then it might make more sense; but this is about the President and in all honesty it is not a priority.

I have long said that all fanatics are wrong no matter what the cause or reason, and that any decision made based on a fanatical view is misguided in the least. I feel that is true of suicide bombers, bailouts for dumb economic decisions, and elections.

If you want to vote for Senator Obama, or McCain, have a reason. Race is not a reason but a cause if it is the only basis for the decision. It’s fanatical reasoning, and in my eyes therefore inherently wrong. There are reasons to vote for either, and your vote does count. Don’t waste it on just one issue that does not resolve any other issue America will face in the next 4 years or decades. If you do I guarantee that you won’t like the result.

Labels: Andy Ostroy, Congress, energy alternatives, ethanol, huffington post, Nancy Pelosi, nuclear energy, Polispeak, President George Bush, Senator Barack Obama, Senator John McCain, Social Security

Utility stocks are the Shakespeare of the stock market. That’s the common thought. They don’t have big swings in price, are good for dividends, and are safe. Ask most stockbrokers and that’s what you will probably hear. Most think it’s the place to invest in bad economies and for old investors seeking to preserve money.

But is that true?

Utility stocks include several areas that are now, or possibly in the near future, growth industries. That includes ethanol, wind energy, biomass, hydropower, and other forms of green power generation. Each of these and many more are considered new areas of development that could help fuel the economies of multiple states, as well as the overall American economy.

A recent comment by Jim Cramer states

“Wind power is hands-down the best form of renewable energy.”

One of his picks in the wind power arena is Kaydon, which should have wind power account for 20% of the company's sales by 2009 possibly tripling by 2010. Kaydon is currently the market leader in wind-power bearings, with over 50% market share.

Now that is not the kind of growth that sounds stolid or boring. That sounds like big growth. And similar comments can be seen in several energy areas, that formerly were as unexciting as dividend returns (which have been cut by many utilities in recent years). Considering this a new look at utilities is in order.

There may be more reasons to be involved with utility stocks than you ever thought before. But check with a registered professional before making any investment decision.

Labels: biomass fuel, ethanol, green energy, Jim Cramer, kaydon, utility stocks, wind power

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