Friday, December 25, 2009

Toronto Trash Recipe

(c) 2009 F. Bruce Abel

Toronto Peppermint Trash (I call it, to go with our other recipe Texas Trash)

1 lb dark chocolate 70% cacao (we used Ghirardi 60% and it tasted just fine!)
chop, ideally w/serrated edge knife
cook low heat, heavy pot (she did this; we did microwave)

then mix in
peppermint extract
½ tsp

pour it over, and spread it out with a spatula over
parchment paper laid on pan (MOM HAD US USING REYNOLDS FOIL WITH SIDE UP where you can read the lord "Reynolds.")
refrig for 20 minutes or longer

then work on white choc
chop choc up, serrated edge knife
peppermint extract
½ tsp

mix crushed candy canes chopped into the white chocolate after you’ve heated; leave some for sprinkling on the top to assure that people handling it will get sticky hands and pieces on their clothing.

20 minutes or ad infinitum in refrigerator or out the back where raccoons can get at it, for dark
20 minutes in refrig for both

this presentation will last for 1 to 2 months

break bark pieces up when you take it out of refrig (or from outside as we did it) it’s made because it will have a tendency to melt at room temp.

This recipe was in Toronto Globe and Mail yesterday (December 22, 2009) as a video. No written recipe given, so took it off the audio.

Gretchen Morgenson -- Always a Good Read

(c) 2009 F. Bruce Abel

We've talked about this a lot but this article must be read anyway:

Be Back January 5, 2010

See you then.

Wednesday, December 23, 2009

Flynn's Oil Prices

Exeter, NH

Natural Gas Futures -- Near Month

Aggregation's Poor History in Ohio -- The Best Article

(c) 2009 F. Bruce Abel

In May, 2009, Dan Gearino wrote this excellent article on the bogus nature of competition and aggregation in Ohio, in the Columbus Dispatch.

Cramer Last Night

(c) 2009 F. Bruce Abel

Last night Cramer continued on his important theme of not investing in bonds or bond funds and instead investing in high dividend stocks, which have the 15% maximum tax advantage.

His specific call last week to invest in Best Buy just before earnings were announced, was a disasterous call going against what he writes about -- do not play a stock just before announcement of earnings.

Tuesday, December 22, 2009

Hot Air -- The Difficult English Language in Written Form

(c) 2009 F. Bruce Abel

Boring but sort of good:

1) The bandage was wound around the wound.

2) The farm was used to produce produce.

3) The dump was so full that it had to refuse more refuse.

4) We must polish the Polish furniture.

5) He could lead if he would get the lead out.

6) The soldier decided to desert his dessert in the desert.

7) Since there is no time like the present, he thought it was time topresent the present.

8) A bass was painted on the head of the bass drum

9) When shot at, the dove dove into the bushes.

10) I did not object to the object.

11) The insurance was invalid for the invalid.

12) There was a row among the oarsmen about how to row.

13) They were too close to the door to close it.

14) The buck does funny things when the does are present.

15) A seamstress and a sewer fell down into a sewer line.

16) To help with planting, the farmer taught his sow to sow.

17) The wind was too strong to wind the sail

18) After a number of injections my jaw got number.

19) Upon seeing the tear in the painting I shed a tear.

20) I had to subject the subject to a series of tests

21) How can I intimate this to my most intimate friend?There is no egg in eggplant nor ham in hamburger; neither apple nor pine in pineapple.English muffins weren't invented in England or French fries in France(Surprise!).Burn, turn, fern, learn, urn, stern, --- Why do we use the "e" the "u" or the "ea" for the same sound?

Sweetmeats are candies while sweetbreads, which aren't sweet, are meat.

Quicksand works slowly, boxing rings are square and a guinea pig is neither from Guinea nor is it a pig.

And why is it that writers write but fingers don't fing, grocers don't groce and hammers don't ham?If the plural of tooth is teeth, why isn't the plural of booth beeth?One goose, 2 geese. So one moose, 2 meese?Doesn't it seem crazy that you can make amends but not one amend.If you have a bunch of odds and ends and get rid of all but one of them, what do you call it? Is it an odd or an end?If teachers taught, why didn't preachers praught?If a vegetarian eats vegetables, what does a humanitarian eat?In what language do people recite at a play and play at a recital? Park in the driveway or drive on the parkway? Ship by truck and send cargo by ship? Have noses that run and feet that smell?How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites?You have to marvel at the unique lunacy of a language in which your house can burn up as it burns down,In which you fill in a form by filling it out, and in which, an alarm goesoff by going on.English was invented by people, not computers, and it reflects thecreativity of the human race, which, of course, is not a race at all.That is why, when the stars are out, they are visible, but when the lights are out, they are invisible.Why doesn't "Buick" rhyme with "quick?"

Cramer Last Night -- A Seminal Piece Last Night

These three solid dividend payors are ones you should buy right now!

Monday, December 21, 2009

Jim: I am on a jihad against the fall security of bonds and CDs. I'm not saying they're not safe, I'm saying you could lose some of the gains that you have versus other things that you could do if you're in bonds. And CDs of course will pay off, but in very minimal amount. And yet people are pulling out of the stock market and pouring them into these safer investments. And I'm telling you that's wrong! They're "safer" like this…I don't think that they're that prudent right here, not with these low yields. See, if you're looking for income, for the kind of investments that let you sleep soundly at night because you're not worried about being beaten by inflation instead of staying up all until dawn worrying yourself silly…on the dirty linoleum floor or even cheap scotch is too expensive. Then as I just explained before the break, you invest for the future! And the assets with the best feature, particularly against inflation, are stocks not these bond funds…with high dividends, stocks with high dividends. Or the stocks of companies that are serial dividend raisers...

Bill Gross's Utility Play

Guru Screen
Utilities Good Enough For Gurus And Bill GrossJohn Reese,, 12.21.09, 06:50 PM EST
Utility stocks that sport fat yields or specialize in natural gas score well with models based on the world's best investors.

The historically low, near-zero interest rates that the Federal Reserve has kept in effect for the past year or so have been a boon for companies and corporate profits as we emerge from the credit crisis of 2008. Those low rates have a dark side, of course: They've made money market accounts useless for those looking to growth their cash and they've also made it tough to find nice yields among investment grade corporate bonds.
This low-rate climate is something PIMCO's Bill Gross discusses in his most recent investment outlook, a piece entitled, "Anything but .01%," a reference to the yield he says he's getting on his own money-market account.

The minuscule returns on cash and weak returns on many bonds have driven Gross to look at equities, and in particular to one specific sector. "In a low growth environment, it seems to me that a company’s stock should yield more than its less risky debt," he writes, "and many utilities provide just that opportunity. Utilities and even quasi-utility telecommunication companies now yield between 5% and 6%, whereas their 10- and 30-year bonds yield less and at a higher tax rate to you the investor."
Coach (COH), Garmin (GRMN) and Aeropostale (ARO) all appear in the Buffett-style portfolio. Click here for a look at all of the guru buys when you try the Validea Hot List .
Gross' comments got me thinking about utilities, and the sector then caught my eye again last week for another reason, whenExxon Mobil ( XOM - news - people ) snatched up natural gas specialist XTO Energy ( XTO - news - people ). Exxon's CEO said natural gas is expected to be the fastest-growing major energy source, and the move led to speculation that other big oil players could follow with natural gas acquisitions of their own.
With all of this in mind, I decided to see which utilities get high marks from my "Guru Strategy" computer models, each of which is based on the approach of a different investing great. What I found was that that many of the highest yielders don't have the fundamentals needed to make the grade, making them what you might call "yield traps" (i.e., their businesses may not have the strength to sustain their high dividend payouts or their stock prices over the long haul).
Some utilities did score rather well with the strategies, particularly the approach I base on the writings of the great Peter Lynch. Here's a look at some of the favorites, including some that have the strong yields that Gross might like, as well as some that would stand to benefit from increased use of natural gas.
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RWE AG (RWEOY.PK): This Essen, Germany-based holding company manages RWE Group, the largest power producer in Germany and the second-largest in the U.K. It is involved in the generation, transmission, sale, and trading of electricity and gas, as well as the water business. The firm has 20 million electricity customers and 10 million gas customers, and it has plans to significantly reduce its current coal operations and almost double its gas operations from 2007 levels by 2020. The $47.2 billion market cap company is currently rewarding shareholders with a stellar 6.1% dividend yield.
RWE gets approval from the Guru Strategy I base on the writings of Lynch, one of the most successful mutual fund managers in history. Its 19.9% earnings per share growth rate (I use an average of three-, four-, and five-year EPS figures) and high sales ($68.3 billion over the past year) make it a "stalwart" according to the Lynch approach -- the kind of large, steady firm that Lynch found offered protection during downturns or recessions.
To find growth stocks selling on the cheap, Lynch famously used the P/E/Growth ratio, adjusting the "growth" portion of the equation to include yield for stalwarts, since they often pay solid dividends; yield-adjusted P/E/Gs below 1.0 are acceptable to my Lynch-based model, with those below 0.5 the best case. When we divide RWE's 11.3 P/E by the sum of its growth rate (19.9%) and yield (6.1%), we get a yield-adjusted P/E/G of 0.43 -- a sign that it's a bargain.
Lynch also liked conservatively financed companies, and RWE passes one of my Lynch model's balance sheet bonus tests, the net cash/price ratio. Lynch defines net cash as cash and marketable securities minus long-term debt, and a high net cash/price ratio (above 30%) dramatically cuts down on the risk of a security. At 45.8%, RWE easily makes the grade.
FirstEnergy Corp. ( FE - news - people ): This Akron, Ohio-based utility is the parent of seven electric utilities that form the U.S.'s fifth-largest investor-owned electric system. The $14 billion market cap firm serves 4.5 million customers throughout Ohio, Pennsylvania and New Jersey. Its stock is currently yielding about 4%.
FirstEnergy is another "stalwart" (18.2% long-term EPS growth rate and $16.5 billion in annual sales) that gets approval from my Lynch-based model. Its yield-adjusted P/E/G ratio is 0.51, falling just outside the strategy's best-case category, a sign that it's a bargain. FirstEnergy's debt/equity ratio (180%) is higher than 80% upper limit my Lynch-based approach uses for most firms, but because utilities generally carry higher debt loads than companies in other industries, the model doesn't see that as a problem.
DPL Inc. ( DPL - news - people ): Since I wrote about it back in early July, DPL--the parent of The Dayton Power and Light Company -- has gained almost 20% while paying a strong dividend yield. Dayton Power and Light supplies power to about 500,000 customers in West Central Ohio, generating a total capacity of 3,700 megawatts of electricity at 10 power plants. The stock, with a $3.4 billion market cap, is currently yielding a bit over 4%.
DPL remains a favorite of my Lynch-based approach, as it was back in July. While utilities usually produce slow or moderate growth, DPL's 22.6% long-term EPS growth rate makes it a "fast-grower" according to my Lynch model--Lynch's favorite type of investment. For fast-growers Lynch also used the P/E/G ratio, though he didn't adjust for yield since they typically don't pay the hefty dividends that stalwarts or slower-growing firms do. But even putting its solid 4% yield aside, DPL still has a 0.57 P/E/G, easily passing the Lynch-based model's most crucial test.
This Houston-based natural gas utility has about 20,000 miles worth of pipeline in the U.S., and serves more than half a million natural gas end-users in Missouri and Massachusetts. It has a market cap of about $2.7 billion.
Unlike the utilities I've mentioned so far, Southern Union isn't a big yielder--its 2.7% yield is decent, but slightly below the market average. But the firm is the lone U.S. utility in my database that gets approval from two of my Guru Strategies, earning high marks from both my Lynch-based model and my James O'Shaughnessy-based approach.
The Lynch model considers Southern Union a "fast-grower" because of its 26.4% EPS growth rate (based on the average of the three- and five-year figures). That growth rate and the stock's 11.4 P/E ratio make for a stellar 0.43 P/E/G ratio, indicating that the fast-grower is a bargain at its current price.
My O'Shaughnessy-based growth model, meanwhile, isn't as concerned with magnitude of growth as it is persistence. It targets firms that have upped EPS in each year of the last five-year period, and Southern has done just that. The O'Shaughnessy model also uses a critical pair of variables: the price/sales ratio, and relative strength. O'Shaughnessy found that stocks with high RS scores and low P/S ratios were being embraced by the market, but hadn't yet become overpriced. With a 1.19 P/S ratio and 73 RS, Southern looks good on both counts.
Entergy Corporation ( ETR - news - people ): Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, and delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas. It also supplies natural gas to close to 200,000 customers in Louisiana, and is the second-largest nuclear generator in the United States.
With a 12.1% long-term growth rate and annual sales of more than $11 billion, Entergy is another stalwart that my Lynch-based model likes. The firm is currently yielding about 3.6%, which is part of why it has a solid yield-adjusted P/E/G of 0.94. Entergy, which has upped EPS in six straight years, also has a reasonable amount of debt for a utility, with a debt/equity ratio of 131%.
John P. Reese is founder and CEO of and Validea Capital Management, and co-author of the new investing bookThe Guru Investor: How to Beat the Market Using History's Best Investment Strategies (John Wiley & Sons). He is also co-author of The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Click here for more of Reese's insights and analysis, and to subscribe to the Validea Hot List.At the time of publication, John Reese was long SUG and XOM.

Sunday, December 20, 2009

Baseline Scenario -- Missing the Meeting With the President

(c) F. Bruce Abel

A simple but powerful effort by Simon Johnson:

The Baseline Scenario
“It’s Certainly Not For A Lack Of Effort”
Posted: 19 Dec 2009 06:21 AM PST
The fundamental divide in opinion regarding our financial system is: Are the people running “large integrated financial groups“ hapless fools, buffeted by forces beyond their comprehension and control; or do they know exactly how to ensure they get the upside and the awful, sickening downside is borne by society – including through high unemployment.
Some light was shed on this issue by Monday’s meeting at the White House or, more specifically, by who didn’t turn up and why. Of the dozen bank CEOs invited, Vikram Pandit was supposedly busy trying to extricate Citi from TARP and asked Dick Parsons to attend instead – a wimpy but smart move, as Parsons is close to the President.
However, three executives – Lloyd Blankfein, John Mack, and Dick Parsons himself – did not show up in person and had to join by conference call. Their excuse was bad weather (fog) in DC meant that they were unable to fly in; Mack was quoted as saying, regarding their absence, “It’s certainly not for a lack of effort“.
But really there are three possible interpretations:
Pure bad luck. This happens to us all; even the best laid plans are for nought sometimes.
Bad management by the executives and their logistic teams – who are ordinarily the best of the best.
Wilful defiance of the government which, while not premeditated in this instance, means that the executives grabbed an opportunity to show disrespect and relative power.
We don’t know all the facts of how these executives planned to travel or exactly their routes on Monday morning – and I would be happy to be corrected on any details – but here’s what we can readily construct from the public record. (We do know they didn’t try to come down Sunday evening, because that would have worked.)
President Obama held a press briefing after his meeting with the bankers, starting at 12:36pm. The meeting itself lasted a bit over an hour. As we all like to start meetings, particularly important meetings, on round numbers, it seems fair to assume that the appointment at the White House was for 11am. Even VIPs need some time to clear security, so let’s assume that the CEOs were asked to arrive by 10:30am.
All three of the missing bankers were apparently coming from New York. There are many ways to make the flight, but US Airways is among the most reliable – flying from LaGuardia to National Airport, every hour on the hour, from 6am. The flight takes just over an hour, it’s easier to get to LaGuardia from Manhattan before 7am, and delays are common at LGA as air traffic builds up over the east coast. Any conservative banker, who really did not want to be the only person missing a meeting with the president, would aim for the 7am shuttle – putting him on the tarmac in DC at 8:10am, with a comfortable time cushion (and an opportunity to have coffee with his chief lobbyist).
There was thick fog in DC on Monday morning, but this did not descend in a matter of seconds during rush hour – it was evident already by 5am. Corporate jets could get through (Jamie Dimon came that way), but let’s limit ourselves to public transportation – remember that the Acela train service is not generally slowed by fog and on Monday ran almost on time.
So the question becomes: At what point did the CEO realize that there was a fog issue, and was there still time to come by train? The Acela leaves Penn Station every hour on the hour, with the 7am train getting to DC at 9:49am and the 8am arriving at 10:49am.
We can rule out explanation #1 (bad luck). These are experienced people who travel all the time, with first class support staff, and they are supposed to be the best in the timely information business. These executives don’t generally wander around airports trying to puzzle out flight information displays.
Is explanation #2 plausible (bad management)? It is possible that at least one bank team wasn’t paying close attention and sent their boss to the airport for the 7am shuttle (although what are the odds that this would happen for 3 of our biggest and most dangerous banks?) An experienced traveller, who has checked in on-line, might aim to arrive at the airport at 6:30am – to discover the delays already in progress.
So then the question becomes: Can you get from LaGuardia to Penn station in 90 minutes early on a Monday morning? My experience is: Yes (if any New Yorkers know differently or if anyone saw John Mack pushing desperately through the crowds at Penn Station just before 8am Monday, please post or send that information in).
The implication is inescapable. These three bank executives did not plan on missing the meeting but, once they learned of the fog delay, they did not rush to the train station – which is what any other business traveller with a pressing commitment would have done.
These three executives – who were, in some sense, the primary audience for the president’s remarks – did not really want to attend. They do not see the need to show deference or even respect. They won big from the crisis and that is now behind them. As they move on (and up), there is nothing – in their view – that the executive branch can do to hold them back.
Even so, it wasn’t polite to behave in this fashion; showing disrespect to the President of the United States is always objectionable. But there is a pattern of behavior here, reflecting a deeper culture on Wall Street. This arrogance will eventually prove their undoing - no self-respecting White House can let this kind of repeated insult pass unaddressed.
By Simon Johnson

Saturday, December 19, 2009

Free Advice on Keeping Brian Kelly by a Penn State Sports Law Professor

(c) 2009 F. Bruce Abel

At first glance I agreed with this article. After consideration, I don't.

Good legal advice could have kept Kelly
By Stephen F. Ross • December 17, 2009

University of Cincinnati head football coach Brian Kelly's decision to abandon the Bearcats for greener pastures at Notre Dame was greeted with understandable disappointment among his Bearcat players gearing up for perhaps their most important game, a BCS appearance in the Sugar Bowl against the Florida Gators.

As a sports fan, I feel for these players. As an attorney and law professor, I'm frustrated because their disappointment - and that of university officials, alumni and fans - could have been avoided with good legal advice.
In January 2008, Kelly signed a new five-year contract with Cincinnati, giving him a $1.8 million raise and committing the University to the construction of new facilities. At the time, Kelly stated that he wanted a long tenure at UC, and a university trustee was publicly quoted as saying, "I want Mr. Kelly to be locked up completely." However, Kelly's contract provided that he could terminate the agreement with a paltry (by current standards) $1 million buyout payment.
Lawyer-bashing and lawyer jokes are common, but this is one example where good lawyering would have come in handy. Competent counsel would have advised the inquiring trustee that this contract didn't even come close to "locking up" Kelly. Would Notre Dame have hired Kelly if, in addition to Charlie Weis' $18 million, they had to pay $10 million to Cincinnati?
Now perhaps Kelly, who in 2008 had already shown signs of success after his debut season with a 17th-place ranking and a Bowl victory, would have refused to sign a contract extension if the UC counsel had drafted a clause that really would have locked him up. But let's think this through in terms of hard bargaining: If Kelly, a first-year coach at a rising-but-not-elite program, refused a contract extension, recruits are going to know about it. How likely is it that Kelly will be able to recruit top high school stars to Cincinnati if everyone knows he is looking to leave at the first opportunity?
Top high school recruits should demand that the coach bring a copy of his contract into their living room. They should ask a family friend or local attorney (make sure it is someone with no connection to a major football program, lest they be accused of undue influence) to look at the contract and advise them on how likely it is that the coach will remain at the school. They can then make an informed decision.
If I were counseling a five-star recruit (and I can't, of course, being at Penn State!), I would demand that the contract language be changed, to (1) specifically identify the school's football players as "third party beneficiaries"; (2) acknowledge that student-athletes recruited by the coach have relied on the current contract terms as a substantial factor in selecting the school; and (3) specifically note that the coach provides unique services to the school and the players (the latter clause is standard in professional player and coaching contracts). This would ensure that any buyout terms are strictly adhered to, and prevent the university and the coach from renegotiating a substantial buyout clause after the star athlete had already committed to the school.
The NCAA has a thick rule book that purports to allow student-athletes to make informed and sensible choices about where to attend college. If the member schools were truly concerned, they would allow student-athletes to immediately transfer when their coach leaves (which would give athletic directors a far greater incentive to insist on huge buyout clauses).
This reform is unlikely, so student-athletes need to protect themselves with good legal advice.

Blind Side -- See It!

(c) 2009 F. Bruce Abel

Blind Side. A wonderful movie with Sandra Bullock and Tim McGraw. Saw it last night and was secretly (we went with another couple) wiping tears of joy off my cheecks all night.

Friday, December 18, 2009

Another Dan Gearino Post in the Columbus Dispatch

(c) 2009 F. Bruce Abel

He's my go-to guy on aggregation in Ohio now.

Natural-gas price drop will cut heating bills
Thursday, December 17, 2009 4:51 PM
(Source: The Columbus Dispatch, Ohio)By Dan Gearino, The Columbus Dispatch, Ohio
Dec. 17--January's heating bill might seem like a late holiday gift for Columbia Gas of Ohio customers.
The price of the natural gas itself will drop to the lowest level since 1999, leading to a projected savings of $85 that month for a typical household, the company said yesterday.
A typical residential customer is expected to pay $114.61 for the month, down from $199.84 a year ago. Those figures include taxes and fees.
The commodity cost -- the largest component of the bill -- will be 41 cents per 100 cubic feet of natural gas, down from the current price of 49 cents.
"That's good news for consumers," said Ohio Consumers' Counsel Janine Migden-Ostrander, the state's consumer advocate for utility issues. "At a time when utility rates are rising in other industries, it's good to see that natural-gas prices are getting lower."
January is often the most expensive month for gas customers, so the low price couldn't come at a better time.
Prices have fallen for a variety of reasons, including reduced demand from businesses and an increase in supplies from domestic sources.
"We've really been producing more than we've been consuming for quite a while now," said Chris Lafakis, an economist specializing in energy issues at Moody's He credits the use of new technology, such as horizontal drilling, for helping companies extract more gas.
Another factor helping local customers is an impending change in the way Columbia obtains its gas. In anticipation of the shift, Columbia is changing the way it accounts for certain costs. The effect of that technical change for consumers is that the January price is lower than it would be otherwise, said Columbia spokesman Ken Stammen.
Starting in April, the company will switch to an auction system for buying gas, allowing outside providers to bid for the right to sell to Columbia's customers. The process, approved by state regulators this month, will be at the wholesale level, so customers aren't likely to notice.
Residents need to go back to April 1999 for a price as low as January's. Then, it was an identical 41 cents. The last time it was lower was July 1998, when it was 36 cents.
At the other extreme, the price hit a record high of $1.43 in the summer of 2008, right before the bottom fell out of the economy and commodity prices.
Stammen declined to speculate on what might be in store for February.
"We don't know if this is the bottom or not," he said.

Cohen -- An Important Column

(c) 2009 F. Bruce Abel

I agree with this important point of view, totally.

Brooks -- Health Care

(c) 2009 F. Bruce Abel

This is timely and seriously thought-out. Damned if we do, damned if we don't.

Baseline Scenario -- A Good One

(c) 2009 F. Bruce Abel

Simon gets an award and Volcker Picks Up a Bat, very good.

The Baseline Scenario

Paul Volcker Picks Up A Bat
Posted: 17 Dec 2009 04:15 AM PST

For most the past 12 months, Paul Volcker was sitting on the policy sidelines. He had impressive sounding job titles – member of President Obama’s Transition Economic Advisory Board immediately after last November’s election, and quickly named to head the new Economic Recovery Board.
But the Recovery Board, and Volcker himself, have seldom met with the President. Economic and financial sector policy, by all accounts, has been made largely by Tim Geithner at Treasury and Larry Summers at the White House, with help from Peter Orszag at the Office of Management and Budget, and Christina Romer at the Council of Economic Advisers.
With characteristic wry humor, Volcker denied in late October that he had lost clout within the administration: “I did not have influence to start with.”
But that same front page interview in the New York Times contained a well placed shock to then prevailing policy consensus.
Volcker, legendary former chairman of the Federal Reserve Board with much more experience of Wall Street than any current policymaker, was blunt: We need to break up our biggest banks and return to the basic split of activities that existed under the Glass-Steagall Act of 1933 – a highly regulated (and somewhat boring) set of banks to run the payments system, and a completely separate set of financial entities to help firms raise capital (and to trade securities).
This proposal is not just at odds with the regulatory reform legislation then (and now) working its way through Congress; Volcker is basically saying that what the administration has proposed and what Congress looks likely to enact in early 2010 is essentially — bunk.
Speaking to a group of senior finance executives, as reported in the Wall Street Journal on Monday, Volcker made his point even more forcefully. There is no benefit to running our financial system in its current fashion, with high risks (for society) and high returns (for top bankers). Most of financial innovation, in his view, is not just worthless to society – it is downright dangerous to our broader economic health.
Volcker only makes substantive public statements when he feels important issues are at stake. He also knows exactly how to influence policy – he has not been welcomed in the front door (controlled by the people who have daily meetings with the President), so he’s going round the back, aiming at shifting mainstream views about what are “safe” banks. Many smart technocrats listen carefully to what he has to say.
This strategy is partly about timing – and in this regard Volcker has chosen his moment well. The economy is starting to recover, but this process is clearly going to take a while and unemployment will stay high for the foreseeable future. At the same time, our biggest banks are making good money – mostly from trading, not much from lending to small business – and they are lining up to pay very big bonuses.
Not only is this contrast – high unemployment vs. bankers’ bonuses – annoying and unfair, it is also not good economics. Bankers are, in effect, being rewarded for taking the risks that created the global crisis and led to massive job losses. And they are being implicitly encouraged to do the same thing again.
The case for keeping big banks in their current configuration is completely lame. Even if we are lucky enough to avoid another major any time soon, the fiscal costs are enormous and coming right at you (and your taxes).
Now that Paul Volcker has picked up his hammer, he will not lightly set it aside. He knows how to sway the policy community and he knows how to escalate when they don’t pay attention. Expect him to pound away until he prevails.
By Simon Johnson
This is a a slightly edited version of a post that previously appeared on the NYT’s Economix; it is used here with permission. If you would like to reproduce the entire piece, please contact the New York Times for permission.

Move Over, Bernanke
Posted: 17 Dec 2009 04:00 AM PST

Ben Bernanke is Person of the Year. Matt Yglesias has criticism, although he does say it was an appropriate choice. Now, the Time award is meant to recognize newsworthiness, not necessarily exceptional conduct, and it’s hard to deny that Bernanke has been newsworthy. But I think that 2008 was Bernanke’s year, not 2009–that was the year of the real battle to prevent the collapse of the financial system. As far as the crisis is concerned, I would say the face of 2009 has been Tim Geithner–PPIP, stress tests (largely conducted by the Fed, but Geithner was the front man), Saturday Night Live, regulatory “reform,” and so on. But I can see why Time didn’t want to go there. Besides, I’m not sure that the financial crisis was the story of 2009; what about the recession? They’re related, obviously, but they’re not the same thing.
But in real news, Simon was named Public Intellectual of the Year by Prospect Magazine (UK). (This year they seem to have restricted themselves to financial crisis figures; David Petraeus won in 2008.) Over Ben Bernanke, among others. (Conversely, Simon didn’t make Time’s list of “25 people who mattered”–but Jon and Kate Gosselin did, so that’s no surprise.) The article says that Simon “has also done more than any academic to popularise his case: writing articles, a must-read blog, and appearing tirelessly on television,” which sounds about right to me.
Prospect got one thing wrong, though. The article has a cartoon of Simon holding a sledgehammer and towering over a Citigroup in ruins. But no matter how many times you keep taking whacks at Citigroup, it refuses to die. One hundred years from now, maybe people will still be saying there are two common ingredients in all U.S. financial crisis: excess borrowing … and Citibank.c
By James Kwak

Thursday, December 17, 2009

Need For Quorum at a Public Hearing

Volker's Ideas

Read the excellent comments too!

Allegheny Technology Inc.

(c) 2009 F. Bruce Abel

Bought 200 ATI in advance of CNBC interviewing CEO of ATI coming up. They used to be a utility client of mine and they have a beautifully-run company making specialty steel. John Walton, how are you?

[hour later]

Interview may have been taken off the schedule, over the Bernanke fight. Got out with a $224 profit, as ATI is up today anyway.

Cramer Last Night -- Still Bullish on Best Buy

(c) 2009 F. Bruce Abel

To those of us who follow Cramer's every nuance his recommendation to buy BBY before their quarterly announcement Tuesday morning, was highly unusual. So I did, in the after-hours Monday night. I now have a paper loss of $800 most of which occurred almost immediately, i.e. even before the market opened Tuesday at 9:30 am. BBY came out with their earnings before the opening.

Last night Cramer "doubled his credibility bet," so to speak, and at the same time apologized for recommending that his followers buy just before the Tuesday morning announcement, the buy-just-before-earnings being a highly unusual recommendation that went against his teachings and writings.Playing psychologist for a moment, did Cramer subconsciously want to make a gambling call just before his known appearance-to-be on Meet the Press last Sunday?

Wednesday, December 16, 2009

No Hot Air

(c) 2009 F. Bruce Abel

No Hot Air Today:

Dec 15, 2009
XOM and XTO follow up
The morning after on what we now learn is the largest Exxon Mobil acquisition since Mobil.
But this isn't just about them: This is about shale gas. As Bloomberg says via Business Week
Exxon Deal May Be Green Light for ShaleOthers may have to follow its $30 billion purchase of XTO, a company that specializes in fracturing rock with water and sand to make natural gas flow
If you didn't know about shale already, you do know. Those who have doubts may find themselves even more isolated than before. Exxon's takeover of XTO is a sign that shale gas has arrived.
Similarly, newspapers around the world suddenly find themselves having to do some research to explain to their readers what shale gas is, one reason why the NHO webstats went crazy yesterday.
But even the pros at somewhere like Petroleum Economist didn't see this one coming:
ExxonMobil tends to act slowly, but decisively, and this week's purchase of XTO Energy will send tremors through the oil and gas world. The move could trigger further consolidation among the leading shale-gas players in the US, or draw in other majors
Who gets bought next is only a short term issue for some gas companies. What's important here is that December 14 was the day shale gas came of age.
Posted at 06:08 PM in Current Affairs, Energy Prices, Next Big Things, Shale Gas Comments (1) TrackBack (0)
Dec 14, 2009
Exxon and XTO and shale
Exxon announced a buyout of XTO today, and Exxon's wish to access more shale technology was a big part of that.
In one of the largest deals of the year, Exxon Mobil is acquiring XTO Energy Inc., a large supplier of natural gas, for $31 billion of stock. The deal represents Exxon’s strategy to diversify way from oil and into natural gas, which is considered a cleaner fuel. The deal could presage other acquisitions by big energy companies of U.S. natural gas suppliers.
“XTO is a leading U.S. unconventional natural gas producer, with anoutstanding resource base, strong technical expertise and highly skilledemployees. XTO’s strengths, together with ExxonMobil’s advanced R&D andoperational capabilities, global scale and financial capacity, should enabledevelopment of additional supplies of unconventional oil and gas resources,benefiting consumers both here in the United States and around the world.
We've been waiting a while for the oil majors to take advantage of low gas prices to buy into the shale secret sauce that they missed the boat on first time around, although judging by Exxon, Chevron and ConocoPhllips interest in European shale in Germany and Poland, they aren't repeating the mistake. Will this mean another round of M+A activity? Probably
Posted at 02:28 PM in Current Affairs, Next Big Things, Shale Gas Comments (0) TrackBack (0)
Natural gas falls out of the sky
The Clean Skies Foundation presentation at Copenhagen available here is worrying and significant where Senator Tim Wirth says how European natural gas leaders didn't "know what we were talking about". And we thought it was just us.
Wirth said that shale gas was a game changer that fell out of the sky. Hopefully, natural gas is starting to bubble up the agenda, especially as neither CCS or large scale nuclear will be available for decades whereas gas is here today.
In his remarks at the forum, U.S. Senator Timothy Wirth noted, “Now that economically accessible reserves in the U.S. have grown by more than 60 percent, it is important to rethink the role of natural gas in climate and energy policy. The dramatic new discoveries and reserves are almost a gift, giving us a chance to develop a faster and smoother transition toward a low-carbon economy.”The premise that brought forum organizers together is that the expanded availability of natural gas makes it possible to accelerate the decarbonization of energy supplies by substituting natural gas for coal and to a lesser extent oil. In addition, a new generation of flexible, efficient gas-fired generators will facilitate the introduction of larger shares of wind and solar power into the world’s power grids
One of the sponsors, World Watch Institute noted that we have to come up with viable solutions very soon, and natural gas can provide that. Chesapeake CEO Aubrey McLendon was key speaker, as one would expect from one of the leaders in shale:
“Compared with coal, natural gas allows a 50-70 percent reduction in greenhouse gas emissions,” said Christopher Flavin, President of the Worldwatch Institute. “It’s a good complement to the wind and solar generators that will be the backbones of a low-carbon electricity system.” Aubrey K. McClendon, Chairman of ACSF and Chesapeake Energy, the largest explorer of natural gas in the U.S., and Vello Kuuskraa, President of Advanced Resources International, discussed the abundance of natural gas in the U.S. and other parts of the world.
“There really has never been much debate about whether natural gas is a good fuel – its carbon light molecular structure guarantees that,” commented McClendon. “The issue has always been whether there has been enough of it to begin moving our electric generation system in the United States as well as other parts of the world away from carbon-heavy coal and oil. The major natural gas shale plays in the U.S. have made it clear we have enormous reserves of natural gas to successfully address our economic, environmental and energy issues now.”
It will be interesting to see if they were speaking to the converted, or were able to raise some questions, and some doubts among European regulators especially over CCS. The Chesapeake Presentation was titled "America's, and soon the world's clean energy answer to Climate Change".

From Jimmy Rogers

(c) 2009 F. Bruce Abel

Ah yes, Jimmy Rogers is able to do this. So have I!

Had dinner with Phillip Schuck and Abby Sunday night. Phillip has been able to do this too. Author, successful trader, farmer, sailor.

December 15, 2009

Lessons On Investing And Life
"You have to figure out what your own passions are. By following your passions, you'll never have a job. You'll just get up everyday and have a lot of fun"in

Tuesday, December 15, 2009

Baseline Scenario -- Pass it On

(c) 2009 F. Bruce Abel
Enter Paul Volcker

"OK, you guys, cut it out!"

"Who the Hell was that?"

The Baseline Scenario
“Wake Up, Gentlemen”
Posted: 15 Dec 2009 03:06 AM PST
The guiding myth underpinning the reconstruction of our dangerous banking system is: Financial innovation as-we-know-it is valuable and must be preserved. Anyone opposed to this approach is a populist, with or without a pitchfork.
Single-handedly, Paul Volcker has exploded this myth. Responding to a Wall Street insiders‘ Future of Finance “report“, he was quoted in the WSJ yesterday as saying: “Wake up gentlemen. I can only say that your response is inadequate.”
Volcker has three main points, with which we whole-heartedly agree:
“[Financial engineering] moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.”
“I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy”
and most important:
3. “I am probably going to win in the end”.
Volcker wants tough constraints on banks and their activities, separating the payments system – which must be protected and therefore tightly regulated – from other “extraneous” functions, which includes trading and managing money.
This is entirely reasonable – although we can surely argue about details, including whether a very large “regulated” bank would be able to escape the limits placed on its behavior and whether a very large “trading” bank could (without running the payments system) still cause massive damage.
But how can Mr. Volcker possibly prevail? Even President Obama was reduced, yesterday, to asking the banks nicely to lend more to small business – against which Jamie Dimon will presumably respond that such firms either (a) are not creditworthy (so give us a subsidy if you want such loans) or (b) don’t want to borrow (so give them a subsidy). (Some of the bankers, it seems, didn’t even try hard to attend – they just called it in.)
The reason for Volcker’s confidence in his victory is simple - he is moving the consensus. It’s not radicals against reasonable bankers. It’s the dean of American banking, with a bigger and better reputation than any other economic policymaker alive – and with a lot of people at his back – saying, very simply: Enough.
He says it plainly, he increasingly says it publicly, and he now says it often. He waited, on the sidelines, for his moment. And this is it.
Paul Volcker wants to stop the financial system before it blows up again. And when he persuades you – and people like you – he will win. You can help – tell everyone you know to read what Paul Volcker is saying and to pass it on.
By Simon Johnson

Elizabeth Warren

Tech Tips -- Regaining ESPNU

OK, I've got TIVO with two smart cards. And Time Warner.
Have never gotten 303, ESPNU.

Solution: turn adapter back on. It's off if the red light is on. There's a button next to it to turn it back on.

The problem was that the smart cards do not know to call up the channel.

OK, the above is gibberish, but that's it.

But I've missed a lot of games this fall by not calling Time Warner and getting this fixed. I just thought my plan didn't get ESPNU, period.

Monday, December 14, 2009

Two Columbus Suburbs Leaving Gas-Rate Program

2 suburbs leaving gas-rate programs
Thursday, December 10, 2009 3:27 AM
By Dan Gearino
DispatchPolitics.comComplete coverage of Ohio politics
The Daily BriefingThe Dispatch’s public affairs team sates the appetites of political junkies with bite-sized portions of the news and what's behind it.
Buckeye ForumVeteran political reporters examine Ohio politics in this weekly podcast.
Today's political news
Millions of missing Bush e-mails found
Granville schools weigh drilling for oil at intermediate school
Cadets got to Obama
Early-Medicare plan hits wall in Senate
Senate agrees on huge outlay
Summit County elections chairman removed
Report: Cleveland program added to foreclosures
Doctors detest proposed cosmetic-surgery tax
Can you take cell phones to court?
Safety rules, limits on drilling debated
Secure bicycle storage being studied for Downtown
The Hot Issue: Should cosmetic surgery be taxed to pay for healthcare reform?
Hilliard and Reynoldsburg are suspending their programs for buying natural gas.
In Hilliard's case, the city council made the move because of concerns that the program was leading to confusion and high prices for residents.
The switch comes as the commodity price of natural gas has plunged to its lowest level in years, a situation that has led some government leaders to question the value of fixed-rate gas contracts.
"In short, we just didn't feel like the current program was a good deal," said Kelly McGivern, a Hilliard City Council member.
Reynoldsburg's circumstances are more complicated. That program might be restarted next year, according to city officials.
The decision in Hilliard is in sharp contrast to that of a consortium of five other central Ohio suburbs -- Bexley, Dublin, Gahanna, Grandview Heights and Upper Arlington. The consortium has decided to maintain its gas program even though it pays the same price, $1.12 per 100 cubic feet of natural gas, that Hilliard finds unacceptable. The price is more than double that of Columbia Gas of Ohio.
The change will take effect next month for both Hilliard and Reynoldsburg. Participating customers will automatically switch to Columbia Gas.
A week ago, The Dispatch looked at the rates paid by the five-suburb consortium and showed how a typical household will pay an estimated $315 more this year under that plan than if it bought gas from Columbia.
The group has a fixed-rate contract that began last January, when commodity prices were much higher, while Columbia's rate, now 49 cents per 100 cubic feet, changes every month. Next month, the group's price will drop to 83 cents per 100 cubic feet, where it will remain through next October. The rates do not include taxes or fees.
In the five years since the consortium began, participants had net savings in two years (2005 and 2008) and net losses in the other three years, according to a Dispatch analysis. Data for Hilliard's program were not immediately available.
These gas programs, known as municipal aggregation, were approved by voters in each of the cities earlier this decade. The ballot issues specified that enrollment was automatic unless the customer decided to opt out.
Hilliard had three main concerns, McGivern said. One, the price was too high. Two, residents didn't seem to understand the contract terms, such as the need to opt out. And three, the city's gas consultant didn't cast a wide enough net for gas suppliers and pricing plans. She would be open to restarting the program if those issues can be fixed.
The consultant, Columbus-based American Municipal Power, or AMP, serves in the same role for the consortium, Hilliard and Reynoldsburg. In each case, AMP has brokered contracts between the cities and Dublin-based IGS Energy, for which AMP gets a fee based on the residents' gas usage.
"At the time we locked in the ($1.12 price), we were the best rate out there," said Terry Leach, who oversees aggregation for AMP.

Mindy Watkins, co-owner of Hilliard Dry Cleaners, gets gas for her home and business from Columbia.
"I don't have the time to shop for natural gas," she said.
She said she thinks the city will be better off without the fixed-rate gas plan.
Reynoldsburg hopes its suspension of its gas plan is just a temporary pause. Unlike the other cities, Reynoldsburg had a variable rate with a guaranteed 3.5 percent savings from the Columbia price. IGS Energy declined to offer those terms for 2010 because Columbia is about to change the way it purchases and prices gas.
Reynoldsburg city officials and IGS officials both say they hope to come up with a new contract for guaranteed savings sometime next year, once both parties have a clearer idea of how the new Columbia system will work.

No Hot Air

(c) 2009 F. Bruce Abel

Catching up with the latest blogging from the excellent site No Hot Air:

No Hot Air in the Media
Can Shale Gas transform UK energy policy?
No Hot Air Energy Procurement
Recent Posts
Natural gas falls out of the sky
Is our greener future a gas?
Poland shale gas again
Everywhere but here
And Chinese gas. But not shale.
And Canadian gas...
Australian gas
Poland, Russia, and us, continued
Shale gas could transform energy geopolitics
Which Russia to believe?
Recent Posts
Natural gas falls out of the sky
Is our greener future a gas?
Poland shale gas again
Everywhere but here
And Chinese gas. But not shale.
And Canadian gas...
Australian gas
Poland, Russia, and us, continued
Shale gas could transform energy geopolitics
Which Russia to believe?
Current Affairs
Energy Prices
Energy Tech
Fixed Price Madness
Food and Drink
LED lighting
Next Big Things
Prices and Politics
Shale Gas
Smart Metering
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
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Dec 14, 2009
Natural gas falls out of the sky
The Clean Skies Foundation presentation at Copenhagen available here is worrying and significant where Senator Tim Wirth says how European natural gas leaders didn't "know what we were talking about". And we thought it was just us.
Wirth said that shale gas was a game changer that fell out of the sky. Hopefully, natural gas is starting to bubble up the agenda, especially as neither CCS or large scale nuclear will be available for decades whereas gas is here today.
In his remarks at the forum, U.S. Senator Timothy Wirth noted, “Now that economically accessible reserves in the U.S. have grown by more than 60 percent, it is important to rethink the role of natural gas in climate and energy policy. The dramatic new discoveries and reserves are almost a gift, giving us a chance to develop a faster and smoother transition toward a low-carbon economy.”The premise that brought forum organizers together is that the expanded availability of natural gas makes it possible to accelerate the decarbonization of energy supplies by substituting natural gas for coal and to a lesser extent oil. In addition, a new generation of flexible, efficient gas-fired generators will facilitate the introduction of larger shares of wind and solar power into the world’s power grids
One of the sponsors, World Watch Institute noted that we have to come up with viable solutions very soon, and natural gas can provide that. Chesapeake CEO Aubrey McLendon was key speaker, as one would expect from one of the leaders in shale:
“Compared with coal, natural gas allows a 50-70 percent reduction in greenhouse gas emissions,” said Christopher Flavin, President of the Worldwatch Institute. “It’s a good complement to the wind and solar generators that will be the backbones of a low-carbon electricity system.” Aubrey K. McClendon, Chairman of ACSF and Chesapeake Energy, the largest explorer of natural gas in the U.S., and Vello Kuuskraa, President of Advanced Resources International, discussed the abundance of natural gas in the U.S. and other parts of the world.
“There really has never been much debate about whether natural gas is a good fuel – its carbon light molecular structure guarantees that,” commented McClendon. “The issue has always been whether there has been enough of it to begin moving our electric generation system in the United States as well as other parts of the world away from carbon-heavy coal and oil. The major natural gas shale plays in the U.S. have made it clear we have enormous reserves of natural gas to successfully address our economic, environmental and energy issues now.”
It will be interesting to see if they were speaking to the converted, or were able to raise some questions, and some doubts among European regulators especially over CCS. The Chesapeake Presentation was titled "America's, and soon the world's clean energy answer to Climate Change".
Posted at 11:29 AM in Current Affairs, Energy Prices, Energy Tech, Next Big Things, Prices and Politics, Shale Gas Comments (0) TrackBack (0)
Dec 12, 2009
Is our greener future a gas?
Movie review here from the Sheffield Documenary Film Festival of The Haynesville Movie :
We'd like to see it. And obviously lots of UK policy makers need to see it too, in the light of developments in Europe:
US documentary Haynesville premiered at Sheffield Doc/Fest last month. Now, the film - which tracks the discovery of the United States' largest natural gas field and the find's implications both for the local community living on top of it and for a country attempting to move to a greener energy future - has been selected to show as part of the United Nations Climate Summit in Copenhagen."It was a bit of a surprise to us," says director Gregory Kallenberg. "They called and told us about a film programme they were presenting and asked if we would be interested in coming over and showing our film. I thought about it for, let's say, 1.53 seconds and accepted. It's a huge honor to show Haynesville at the Climate Summit."The film will screen on Monday December 14, at 5pm at Pressen, Politikens Hus and Kallenberg will be there to talk about it.
Kallenberg sounds as if he has it about right:
Our goal was produce a film that was balanced and, looking at the energy picture, took the viewer through a methodical line of thinking," insists Kallenberg. "By that, I mean I wanted to look at current energy sources, the possible alternatives and their timeline and, ultimately what we can do now. That meant coming up with a strategy on finding experts. I was adamant that I didn't want anyone from the oil and gas industry in the film. That left with us with having to find scholars, pundits and environmentalists who could speak to the issues. The resulting group has a much greater impact in carrying the message of the film."The experts themselves were very willing to be part of it. I believe a lot of them felt that no one has addressed the energy issue in a rational way. It's neither a negative hardcore enviromental impact piece nor a industry puff piece.
Kallenberg financed the film himself. And what conclusion did he reach?
I do have a view, and that view was developed by making this film. In short, I believe natural gas is the way to go to help ensure a greener energy future. It's cleaner and, in my opinion, is the only way to a green energy future. Also, I want to see the world start to get off coal as soon as possible, I want to see superpowers put more money into the development of renewables, I want to see more attention paid to conservation of energy and, ultimately, I want to see a brighter energy for all of us.
Sounds a brighter future for business energy users than buying into the insecure energy supply, lets spend a fortune on CCS that DECC want for us. We'll try and set up a screening.
Many years ago I wanted to be in the movie business, so I can relate to the need to have the thirty second meeting in the elevator synopsis as being parallel to the thirty second presentation to energy ministers who've made up their own mind. Read more from the movie site here:
At the very least, it will end up on Channel Four at 2 am on a Tuesday, a good graveyard to dump the new inconvenient truth: The Energy Crisis is solved.
Posted at 09:01 AM in Current Affairs, Energy Prices, Prices and Politics, Shale Gas Comments (1) TrackBack (0)
Dec 11, 2009
Poland shale gas again
For those who think that European shale gas won't work for another ten years or so, further news from Poland today gives rise to the question of if that is so, why are so many companies investing big money today?
We already know ConocoPhillips, Exxon Mobil and Marathon among big players (and there are plenty of independents: Aurelian, San Carlo, BNK, 3 Legs etc)are investing in Poland. December 9 saw what should be the story of the month, where the energy adviser to the Polish Prime Minister predicted enough gas to export in 4 to 5 years.
So today's news from Chevron only underlines two trends. One is Poland specifically. This is getting too big to ignore. One company takes a gamble, two might be foolish, three might simultaneously jump on a band wagon and drive off a cliff. But there is a critical mass of companies in Poland. Something is going on, and it's unlikely that many companies will be wrong all at the same time.
Secondly, this underlines how US oil majors having missed the boat at home, won't let this happen globally.
Chevron, the second-largest U.S. oil company, will have five years to explore shale gas in the vicinity of the city of Zamosc.In the course of the last two years, the ministry has granted 30 such concessions in Poland, to companies such as U.S. oil major Exxon Mobil (XOM.N), Lane Energy or Marathon Oil (MRO.N)
What is really interesting here is that although latecomer Chevron looks like they are getting the leftovers, they may be simply sitting down at another workbench in the same factory. US experience of shales tells us that they extend far larger distances laterally as opposed to conventional gas reservoirs such as Groningen, Lacq, Morecambe Bay or Troll in Europe. Zamosc is in south eastern Poland nowhere near the acreage Conoco, Exxon, BNK etc have been busy with in Northern Poland.
So three key questions to answer.
One does this mean that Polish shale could be Barnett or Haynesville in it's scope?
Two: Since Zamosc is only 60 km from the Ukrainian border, could that shale extend into Ukraine too?
Three: If there is even the slightest hope that Ukraine has shale, shouldn't we exhaust that possibility before we in the UK commit ourselves, and a huge amount of money, to CCS schemes which depend on a fear of gas security to make sense?
Posted at 10:43 AM in Next Big Things, Shale Gas Comments (1) TrackBack (0)

Avoiding Facebook

(c) 2009 F. Bruce Abel

I'm avoiding Facebook today because of the buzz about problems with a hacker.

So this is off topic but probably good ( if I had had the time to view the presentations.

Sunday, December 13, 2009

Tech Tips -- Whaa?

(c) 2009 F. Bruce Abel

Is this possible?

Rich -- On "Up in the Air" -- the Movie

(c) 2009 F. Bruce Abel

Now this is a gold standard piece, made more forceful by the layoffs at the New York Times, where Rich works:

Thursday, December 10, 2009

The AIG and I

(c) 2009 F. Bruce Abel

When is an annuity an AIG annuity? You better find out!

Wednesday, December 9, 2009

Baseline Scenario -- A Good Read

(c) 2009 F. Bruce Abel

Baseline Scenario is good today. Even though I have not gotten through it fully. My normal scenario, I'm afraid. He's so good and all-inclusive, with key links, etc., that you could spend all day on it, and then what? I see no way to communicate to him, but others seem to be able to do it. Not that I would have many unique insights. I generally agree with his analysis, although his solutions are one-track and therefore repetitive. Although correct.

The Baseline Scenario
Gerry Corrigan’s Case For Large Integrated Financial Groups
Posted: 08 Dec 2009 02:19 AM PST
Increasingly, leading bankers repeat versions of the argument made recently by E. Gerald Corrigan in his Dolan Lecture at Fairfield University. Corrigan, former President of the New York Fed and a senior executive at Goldman Sachs for more than a decade, makes three main points.
“Large Integrated Financial Groups” – at or around their current size – offer unique functions that cannot otherwise be provided. The economy needs these Groups.
Breaking up such Groups would be extremely complex and almost certainly very disruptive.
An “Enhanced Resolution Authority” can mitigate the problems that are likely to occur in the future, when one or more Group fails.
These assertions are all completely wrong.
Gerry Corrigan’s first claim (p.4), that Large Groups are indispensable, is completely at odds with the data. The current size of our biggest financial firms is a recent phenomenon. In 1998, when Corrigan already worked there, Goldman Sachs was roughly ¼ of its current size and was regarded a top international investment bank.
More generally, in the mid-1990s today’s big six “Large Integrated Financial Groups” added together had assets worth less than 20 percent of GDP – with no bank being larger than 4 percent of GDP (including off-balance sheet liabilities). Today, these six are over 60 percent of GDP combined and still growing.
What has changed for the better in the functioning of our financial system, in how it assists the real economy, or in how it facilitates government fiscal policy since the mid-1990s?
The financial system worked fine (not great, but fine) in the mid-1990s. It should be rolled back to that level. Hard size caps, as a percent of GDP, are the way to achieve this (e.g., no high-rolling investment bank can exceed 2% of GDP; no boring commercial bank can be bigger than 4% of GDP).
Corrigan’s second claim, that breaking up banks would be hard to do, is based on assessing a “straw man” proposal – that the government dictate the microstructure of any bank downsizing. But no one serious has put forward such an idea.
A hard size cap for total assets would operate just as the hard cap (10%) on share of total retail deposits was envisaged by the Riegle-Neal Act. The bank itself is responsible for complying with this regulation, subject to supervision by the authorities.
If any bank complies with any regulation in a way that reduces shareholder value, its shareholders are going to be very upset. Goldman Sachs is filled to the brim with smart people; they can figure this out.
Corrigan’s final claim, that an Enhanced Resolution Authority can deal with the manifest problems of Too Big To Fail, is simply wishful thinking.
It is a fantasy to think that any national Resolution Authority would make a difference. All banking experts, when pressed, agree that you need to have a cross-border Resolution Authority in order to deal with the failure of a Large International Integrated Financial Group. Show me the G20 process in place or any other international initiative that can achieve this faster than in 20 years. (I made this point recently to leading financial officials; one of the most influential people present said, in effect, “it will never happen”.)
At moments in his speech, Corrigan is brutally honest.
“First; it is inevitable that at some point in the future, asset price bubbles, financial shocks and seriously troubled financial institutions will again occur.” (p.6)
“Unfortunately, events – and not only those associated with the current crisis – have graphically illustrated that the threat associated with financially driven systemic risk has not diminished but has sharply increased [since 1987]” (p.7)
But if you combine that blunt assessment with his policy prescription, what do you get? Our top bankers are publicly and blatantly proposing the recipe for repeated debilitating bailouts. This is an anti-growth and anti-jobs agenda.
By Simon Johnson