8 years later, nobody understands what went wrong…

I recently watched The Big Short, which was a phenomenal movie that explained the toxic result of decades-worth of bad policies designed to increase economic growth while skirting personal responsibility.  Can we at least agree on this?  This is endemic to economics in general, as people are always looking for ways to easily hop into the engineered “middle class” that Democrats like to drone about so often.  But what amazes me is the sheer volume of so-called “professional” opinions on the internet that STILL cannot comprehend what caused this financial meltdown.  Isn’t it funny how the voices that were being silenced prior to the recession are the same ones being silenced after the recession as our Keynesian government attempts to bludgeon the economy once again?  Think about that for a minute…  In fact, a number of journalists scoffed at Michael Burry for voicing his views on the post-2008 economy!

After the financial meltdown, economists from CATO Institute and AEI came out with comprehensive research regarding the overwhelming role of government policy, Fannie Mae, and Freddie Mac in creating this disaster.  70% of the mortgages that defaulted in the crisis were backed by one of these two institutions, while banks were blackmailed, through government policies, to take on these high-risk loans.

Left-wing logic and outrage ensues: “well… the percentage of homeowners classified as ‘poor’ stayed stable at 6% through the lead up to the financial crisis.”  Since when does that mean anything?  The idea is that prospective home buyers regardless of their socio-economic status were taking on mortgages they couldn’t pay off.  If someone made the 2007 standard per capita GDP in America of $48,000 per year but took on a mortgage for a the average house priced at approximately $325,000 in early 2007, they’re still classified as “middle class” even though they’re going to default on their mortgage with almost absolute certainty…

I gathered a snippet from a nerdwallet calculator using 2007 GDP per capita figures.  According to this calculator, a homeowner who can put forth a $10,000 down payment on $48,000 year can afford a home worth $183,000 in Cleveland, Ohio (a city with a mid-priced housing market).

Average Mortgage 2007.PNG

The safe and easy alternative is to NEVER buy a home unless you have so much money lying around that you can safely afford to do anything you want.

The more I learn, the more cynical I become about the general state of society where NOBODY learns to take responsibility for his/her actions.  As Julius Evola stated, the only solution for the critical, rational, and analytical thinker is to “Ride the Tiger” of insanity, pursuing paths independently against the chaotic tides of society.  I guess improvement comes at a very slow pace.  Just be grateful for the privileges we all have in society today. However bleak future events may seem, somehow our incredibly dysfunctional society manages to progress forward.  At the same time, those who refuse to be complacent and constantly seek the truth must speak up and let their voices be heard.




A Libertarian Response to Pollution, Pt. 2

I was watching a video last night on Vice TV, which is the YouTube channel of the media outlet known as Vice Media.  The video had something to do with a “petcoke” plant in Chicago where people were protesting over the massive mountains of petcoke soot building up in the area.  Understandably they were pissed as hell.  Apparently this stuff has the consistency of fine dirt but is sticky at the same time, meaning it blows all over the place and seriously disturbs surrounding communities.

It brought me to thinking a great deal about Milton Friedman.  Friedman acknowledges the handful of scenarios where a governing body is necessary, among them is the need for an environmental agency that simply administers cap and trade permits.  The reason this is necessary is because the environmental externality associated with certain forms of pollution is often too difficult to pinpoint to any one, particular firm.  While class-action lawsuits have traditionally been used to handle such matters, we are familiar with just how difficult it can be to fight a team of corporate lawyers.  The burden of proof is on the victims and they must prove that XYZ company is directly responsible for so-and-so’s lung cancer.  Despite this, we all know that certain pollutants cause major health issues and can also damage private property value.  This creates the distinct need for an active market of cap and trade permits under a government body.

Cap and trade permits can be used for virtually anything because they simply determine the acceptable limit of pollutants that can be released into the air, water, or earth.  The government body simply sets the limit for the year and firms go about trading permits with one another and creating a supply and demand market for releasing pollutants.  It may also be useful to create a limit on the amount of permits that any particular firm can purchase.  This way the most powerful company in the region can’t simply buy out all of the permits for the year.  Cap and trade could easily be administered for carbon dioxide and methane emissions, waste water, biological hazards, and would also take care of this petcoke issue in Chicago.  Clearly the firm found it most useful and cheap to simply dock their petcoke in Chicago, but a permit limit for Chicago would have prevented this from happening on the scale that it did.  The firm can then find the most cost-effective way to work around that issue, but no matter where they look they will have to purchase pollutant permits along the way.

Tesla’s Model 3 is practically turning into a welfare program

Tesla’s Model 3 is practically turning into a welfare program.  The company is banking on a slew of federal and state subsidies to decrease the cost of it’s model 3 from $35,000 to around $9,500 for the most qualified customers in California.  The lifetime value created per customer does not exceed the amount being used per customer for subsidies, meaning it’s a net drain on taxpayers.  According to an analyst from Seeking Alpha, the company is trying to apply subsidies for those below 300% of the poverty line.  Seriously, this company is starting to annoy me.  I like Space X because the company is actually making NASA more efficient and high-tech; however, Tesla I just can’t agree with.  Toyota and Honda would drive Tesla out of business with their hybrid automobiles but Tesla is being propped up by a Keynesian government aggressively trying to “combat” carbon emissions.

If consumers are, at the very least, duped into taking the subsidy bait, they will back out at the thought of their car spontaneously exploding or blowing up their house due to the potentially lethal battery running the car.  Electric vehicles have been around since gas-powered vehicles and I’m pretty sure there’s a reason society has overwhelmingly chosen gas-powered vehicles over the past hundred years…  If you want to support the environment, buy yourself a hybrid vehicle, a technology that has phased out subsidies and will save you more money in the long-run.  Better yet, forced-induction vehicles are now becoming the norm for many companies because they’re equally as powerful and have way more gas efficiency than their naturally-aspirated forefathers.

Automation vs. Artificial Intelligence

Did Adam Smith ever take into account the possibility of artificial intelligence?  How would he have reacted to this development?  What are we supposed to do about the rising intelligence of computing power and the possibility of independently-learning computers?

First of all, we MUST make the distinction between automation and artificial intelligence.  Automation is a net positive for society.  It allows us to make quicker decisions and complete processes much quicker than in previous years.  Why is this positive?  Well automation has changed occupations but hasn’t actually decreased anyone’s employment.  There are countless professors and researchers who have studied this topic only to find that automation simply creates new jobs where old ones are retired.  The beauty of this system is that certain processes may remain in place as long as we are content with them.  Microsoft Excel and it’s various add-in automation solver components, for example, has been useful for over 20 years now.  The essence of Excel has barely changed yet has been useful for increasing the efficiency of various other industries.  This blank-slate program has made it easier to create strategic business decisions and has probably improved our overall quality of life as a society.  Excel has opened up an opportunity for an expansion of careers involving Excel.  The better we get at using it, the more we realize we can use this tool to do some incredible stuff.  Nowadays if you are very proficient at Excel, you can land a job quite easily, in my opinion.

Computer Engineer.jpg
Automation creates new positions

Artificial intelligence, on the other hand, is a far greater challenge to actually achieve.  The concept of AI was first really brought into the public light by Alan Turing in 1950 when he asked if computers could think independently and grow without human input.  Both of those stipulations, in my opinion, are impossible to achieve.  Human input will always be involved.  The random synapses in our brains combined with our organic composition make us incredibly incredibly unique.  Organic beings have limitations, no doubt, but we also possess a randomness that makes us so creative and unique.  Machines will always be our tools, in my opinion.  We, as humans, program them and tell them to do things.  Maybe they will end up beating Gary Kasparov in chess or winning Jeopardy, but does that mean they are actually artificial?  No.  Artificial intelligence strives to emulate human beings, albeit at a faster rate of learning than human beings.  If human beings are also evolving organically, we should instead marvel at human intelligence, not artificial intelligence.

As machinery becomes more and more complex, we must understand that it is all simply automation.  Humans have very basic desires and needs and computers are merely here to serve our needs in a simpler process.

The Gates Foundation and Contraceptives

The world’s population is growing way too fast, but here’s the thing: population growth in Europe, China, Japan, and America has virtually come to a standstill or even reversed (well, the reversal needs to be addressed as well and that post is for another day).  The areas where we need effective birth control are also the poorest nations on the planet.  Allowing people to plan offspring prevents problems related to nutrition and sanitation and clearly raises living standards for families that use contraception.

I was thrilled to hear that the Gates Foundation will be administering a massive contraception effort in 69 impoverished countries with a drug called “Depo-Provera.”  This drug costs 1 dollar per shot and will be produced by companies like Pfizer through Gates Foundation funds.  The drug will be available at little to no cost and requires almost no technical expertise in administering the shot.

There are countless examples of countries that have stopped skyrocketing birth rates through simply contraception efforts by the government.  Bangladesh, a poor Muslim nation next to India, recently dropped birth rates from around 7 children per woman down to about 2.2 (!!!!) through a government effort to provide free contraceptives.  The way they did this was by allowing women to spread the drug themselves, apparently, meaning it spread quickly and women trusted one another that it would be safe.

As much as I want government to stay away from progress, I am happy to pay a tiny chunk of change to help nations deal with their booming populations.  Paying that small amount upfront could prevent the hassle of dealing with poverty on the back-end through expensive volunteer work efforts (shipping in food, sanitation supplies, etc., etc.) and knowing that millions upon millions of people won’t be starved, aimless souls walking around the planet.



On Backflips, Adrenaline, and Your Learning Style

What is your learning style?

I recently watched several videos of professional trick ski jumping.  It was one of the most incredible acts of human talent I’ve ever seen (except maybe Daredevil stunts such as those attempted by Evil Knievel).  I think what I found so fascinating is the sheer bravery required to do these acts.  Each event carries the risk of traumatic injury and these acts of showmanship and human bravery require the ability to disengage from the human fear response.  Often times the people who attempt such stunts have the cojones factor.  This could be due to a higher level of testosterone and/or a short-term thinking personality type.  Although I don’t really NEED to learn to flip on skis, I tend to try skills that do involve some sort of adrenaline rush.  More recently I’ve been dedicated to learn a backflip.

My learning style is influenced by the fact that I’m a long-term thinker and weigh costs and benefits: I don’t want to try something that could involve me potentially hurting myself badly.  I think about the pain that would happen IF I did mess something up to that point and it becomes clear why I wouldn’t do this.  However, I recently learned how to do a backflip on hardwood floor.  And guess what?  It’s incredibly easy…  Let me put it this way: I finally squatted 275 pounds just this past week.  The months of struggle I went through to build enough muscle, master the technique, and achieve progressive overload simply dwarf the amount of time it took me to learn the backflip.  That being said, a backflip is simply frightening.  So how did I actually achieve such a goal as a long-term, cerebral thinker?

I started with steps that I knew were going to be completely safe.  I began on a gymnastics trampoline runway and would flip onto a three-foot memory foam mat.  In addition, I also recruited an instructor to spot me on the flip.  This part was crucial because I knew he had the strength to keep me going in the right direction.  I started with some technique drills to learn the vertical nature of the movement, but they weren’t that helpful to me.  I just needed to do it.  But the safety measures I had in place were mandatory for me to make this possible.  I made that first flip and it was frightening, but I was operating just close enough to outside of my comfort zone to where it was possible.  The most interesting part is what happened afterwards.  Although I went through a lot of flopping onto my stomach, I began to see that some of my biggest fears were not even physically possible.  Snapping my neck?  More like flopping onto my stomach in the worst case scenario… I repeated the movement over and over again.  Sometimes I practiced with a spotter to get the technique, and sometimes without a spotter just to do it solo.

My ability to harness my learning style allowed me to dial up the intensity while feeling almost completely comfortable.  I began to identify the sticking points in my flip and realized that jumping from a trampoline wasn’t generating maximum vertical leg drive.  I needed the hard surface and luckily my gym has a spring wood floor.  This is an excellent step for someone looking to progress in the backflip.  However, once again: I needed to grab a spotter.  It also helped to put a 4 inch mat directly behind me so a less-than-360 landing didn’t feel too rough.  Doing this over and over again helped me get the vertical height and the tuck.  I removed the foam mat and told my spotter to just keep his hand hovering for mental assurance.  Within two more flips, I achieved a perfect landing.  I’m now working on perfecting the move through repetition and will soon be moving towards other cool tricks like aerials!

When I look back on this, I’m kind of astounded that I was so afraid of this movement.  If someone had brought me to a grassy park and told me to backflip, I would have never done it.  But it seems as though the route you choose for your mind makes all the difference in the world.  I have friends who actually don’t learn this way.  They like to just go for it…  I have all the respect in the world for those people, but are they any better than us long-term, cerebral thinkers?  I don’t believe so…  In fact, we may be better.  Those who think in the short-term may have an edge when it comes to the most ballsy of actions, but they lose out on average.  In terms of sports, they get injured more and don’t have as much longevity.  I would encourage those people to begin adopting long-term thinking strategies for many of their sports and activities in life.

I think this will be a really interesting post for many of you to read and I hope it will allow you to attempt things you were always too afraid to do in your life…

What Are the Boundaries of a “Clean” Energy Portfolio?

I really like this article because it shows everything I’ve been discussing for quite some time now…  This is a top performing clean energy portfolio; however, the fund managers really press the boundaries of clean… and for a good reason.  The nuclear and natural gas stocks here are the top performing stocks.  Wind is at the very bottom, followed by solar.  Maybe we should set aside our ostracizing sense of environmentalism and give a little more leeway, because the best forms of clean energy at the moment are being vilified for relatively small issues.  Check out the film “Pandora’s Promise” for more information on the unfair vilification of the nuclear energy industry.


I have one word for you, Benjamin: water…

Desalination looks like an attractive technology worth investing in.  Of course I’m not one for picking stocks, but this is similar to the famous line from The Graduate: “I have one word for you.  Plastics.”  I’m not saying I couldn’t be wrong, but having a good intuition about humankind’s necessity for resources allows you to focus in on a certain technology.  Let’s get the facts clear and on the table:

1. Population is growing in some of the hottest and driest areas of the world.  I doubt this will continue forever as population growth tends to tail off as nations grow more modern and advanced; however, as long as population is growing, demand for water will rise.

Population growth by country

2. Incomes are rising in these same regions due to economic growth.  This means standards of living are rising and consumers have more demand for reliable water sources.

GDP growth by country

3. Climate change is making regions even hotter and drier.  Climate is rising across the planet and global temperatures are up to record highs on average.  CO2 concentrations are rising as evidenced by the Mauna Loa Observatory’s readings.  This is common scientific knowledge that greenhouse gases trap IR radiation in the atmosphere and re-emit it within the atmosphere, leading to rising temperatures.

Climate change

For now, I will probably invest a small, disposable amount in water stocks.  As I approach my full-time job following graduation, I will think much more seriously about investing a larger stake in water stocks.  I don’t think it’s a “gamble” of sorts.  One of the sins of investing is using forecasting as a central argument for investing.  However, that is not the same thing is investing based on facts.  These three graphs are all you need to know to be wise about the future of water.

The State of Solar Power in 2015

Overall outlook: the state of solar power in 2015 is mixed by particular company and varies heavily by location; however, the overall trend is solid and continues upward in terms of growth.  Growth will not be nearly as fast as other industries like oil or natural gas, but installations are rising every year at a steady pace.  Companies are merging and vertically integrating.  The main players in the utility market are companies like SunEdison and SunPower, while companies such as SolarCity, Sunrun, and Vivint are dominating the residential market.

Correlation with oil prices?: It must be pointed out that solar fundamentals do not show correlation with oil prices, and in fact show slight signs of negative correlation with oil prices.

On-par with natural gas prices!: Utility-scale PPA prices decline steadily with natural gas prices and this trend has been occurring for about 5 years.  Solar prices were around $190/MWh in 2009 and a NGA contract was around $175/MWh.  In 2014 a solar PPA was around $50/MWh and a NGA contract was around that same area; however, much more volatile.

Raw material costs dropping!: Average global multicrystalline solar module prices in ($/watt) were around $1.30 in 2011 and as of the beginning of 2015 were around $.70.

Specific growth markets: Growth markets include: the Americas, India, Latin America, and South America, while China and Japan are large, but not growing.  Solar has succeeded in places like India due to relatively unpaved electricity access coupled with an extremely high amount of sunlight (shorter payback period) and an eager government that actively spots opportunities for solar development.

Microfinance in poorer nations: While average incomes in India are quite low, the government has set up microfinancing solutions that allow entire villages to pay for solar installations.  While ordinary lending institutions wouldn’t be willing to lend out to poor farmers with no history of credit, microfinance creates scenarios where payback is possible although not terribly profitable.  However, once installations occur, farmers benefit from and are thankful for tremendously improved productivity.  Solar water pump installations, for instance, allow farmers to extract water without the hassle of dealing with costly diesel pumps that require constant fill-ups.

Where solar is NOT doing well: Solar isn’t doing well in areas with low levels of sunlight and/or governments that don’t support policies like net metering.  Places like Arizona have tons of sunlight but energy prices are also relatively cheap there due to a large number of coal, natural gas, and nuclear power plants.  Additionally, the government in Arizona is not very supportive of solar energy installations, with very few incentives to help solar companies succeed.  Places like Germany are bad for solar, but the government there has dumped tremendous amounts of money into subsidizing the technology.

Kick start is often necessary: Solar markets blossom when energy policies create incentives for installation.  Due to the fact that solar requires time to pay off, PPA’s are often preferred and net metering has to be set up in some proportion in order to manage the flow of solar during the daytime and fuel source energy in the nighttime.  Rebates are not necessary for profit on solar systems; however, they do generate momentum due to the fact that solar is, and continues to be an ALTERNATIVE energy source run against mainstay utility companies.  Because consumers are not forced to take roof-top solar power, rebates help kickstart the industry and have also helped to speed up the drop in costs across the supply chain.

Energy Efficient vs. Hybrid vs. Electric: How to Evaluate the Alternatives

Elon Musk smugly laughing at you for buying a Tesla

I took three of the most efficient cars I could find from each category and compared the costs and underlying costs.

Mercedes CLA250: low-end Mercedes model with high MPG

Base Price: $31,500

MPG: (26 city * .50) + (38 highway * .50) = 32 mpg

Fuel Cost on 15,000 miles per year for 10 years at $3.00/gallon: (15,000/32) * $3.00 * 10 = $14,062.50

Total 10-year cost (excluding maintenance): $45,562.50

0-60 mph acceleration: 6.9 seconds

Acura ILX (Hybrid): middle-of-the-road Japanese luxury hybrid

Base Price: $28,000

MPG: (24 city * .50) + (35 highway * .50) = 29.5 mpg

Fuel Cost on 15,000 miles per year for 10 years at $3.00/gallon: (15,000/29.5) * $3.00 * 10 = $15,254

hybrid credits: none

Total (excluding maintenance): $43,254

0-60 mph acceleration: 6.3 seconds

Tesla Model S Electric: Tesla mid-line electric car

Price: $71,070 – average of $11,070 in incentives: $60,000

Fuel Cost on 15,000 miles per year for 10 years at a rate of half charging on Tesla supercharge network and half at home at $0.03/mile: (.5 * 0) + (7,500 * $0.03) * 10 = $2,250

Total (excluding maintenance): $62,250

0-60 mph acceleration: 5.9 seconds

So there it is.  All three of these cars are pretty comparable, mid-range luxury sports cars with a nice 0-60 acceleration of 6-7 seconds.  1st place is clearly the Acura ILX, which has the lowest cost of them all, and you’ll shell out almost $20,000 less than you would for the Tesla.  Mercedes has a really good value as well, although it is a bit slower than the other two, and I feel like a lot of the cost goes towards the brand itself.  Having a Mercedes is a bit sexier than having an Acura.  However, it’s still a great value.

A couple things to note here:

  • Gasoline costs are low and the cost rises a bit for both the gasoline and hybrid when you jack up the price to $4.00/gallon.  However, it’s not very significant and the Model S can’t compare to either of them.
  • Tesla takes advantage of some $10,000+ in subsidies.  People often forget that taxpayer dollars are going towards your neighbor’s sleek Tesla Model S.
  • Tesla is planning to make a $30,000 model in the coming years.  It’s going to be less powerful than this model and probably hits 0-60 in 8-ish seconds.
  • Battery costs are “expected to drop by 30%” when Tesla opens its’ $5 billion giga-thingy plant.  Tesla won’t disclose the cost to produce one of its’ batteries, but analysts estimate it costs about 30% of the total cost of the car.  Okay, so let’s do the math.  For that base model Tesla S it would be $21,000 for the battery and 30% of that would be roughly $6,400.  Well, given this EXTREMELY ambitious goal, that would bring the cost of our Tesla Model S down to just under $56,000.  Not even close.  Oh wait, then we add all of those taxpayers dollars back into the picture, and yeah…
  • The range on a battery-powered car is limited.  Just like your laptop battery that lasts for a very limited number of years, a battery-powered car starts losing it’s charge capacity after 100,000 miles or so.  Our calculation is out to 150,000 miles and there’s a good probability you will need an entirely new battery by then.
  • Electric vehicles take a charge from the power grid.  A power grid is comprised of coal, natural gas, and nuclear plants.  So that doesn’t necessarily mean you’re being more environmentally-friendly.  A number of sources have taken the liberty of calculating a “readjusted” mpg for your electric car by factoring in the sources of fuel that your state uses to power the grid.

I think a big takeaway here is that no matter how sexy and ambitious the electric-powered dream is, it’s not really that remarkable.  There’s no miraculous material that Elon Musk is using to power his automobiles.  He works with the same exact materials that everyone on the planet works with.  The electric-powered dream may be here in 50-100 years if gas prices skyrocket, but the material inputs are just so damned scarce.  It’s hard to imagine a highway full of Teslas in my lifetime.