t current regulatory and infrastructure rates of change, yes, it would be fair to say that it is 10-20 years off. But in terms of technology being practically applied right now the cars exists, function, and are completely consumer ready. In terms of manufacturing, the German marques are all quite serious when they say they could be mass produced in the next available model year. Aside from my somehow ingrained cultural and genetic predisposition to things German that might be blinding me into thinking hydrogen is the superior future fuel, the issues that compromise the other alternatives seem to me to be the more likely ones to have unintended consequences.
For example, the cars that rely on a hybrid system of a gasoline primary engine coupled to an electrical storage/redistribution system have two problems. The first is obvious- it still uses gasoline as a primary fuel. If the goal is to reduce or eliminate the need for a fossil fuel, then any vehicle that still requires gasoline remains part of the long term problem even if such a vehicle seems better compared to a standard gasoline fueled vehicle. Sure it might boast of getting 30 MPG combined performance, but it would ultimately remain a problem in that even if every car was a gasoline/electric hybrid we would still need massive amounts of gasoline for such a fleet. Given that our population will continue growing, as will the numbers of households with automobiles, in a very short time of years we would again return to our current levels of consumption of oil. If oil is a scarce market commodity now, what is the likelihood that it will be plentiful in the future?
The second problem with the gasoline/electric hybrids is tied up in the added resource costs and ultimate disposal costs associated with such vehicles. In terms of manufacturing, the additional need to put larger DC alternators on gasoline engines so that they can additionally serve as an electric drive do not just grow on trees. The additional requirements for copper windings of larger diameters means that copper would become and even more stressed resource. In the case of hub-driven hybrids, instead of having a single alternator per-vehicle, you have five. Then there are the batteries themselves. In terms of efficiencies they have become better at holding a charge, delivering a charge, and returning to the pre-charge level. It is this development which has made it feasible to even make gasoline/electric hybrids.
The problem is that these new batteries are made from essentially exotic metals. Nickel, cadmium, lithium, & other exotic metals are not exactly materials that grow on trees and aren't better used in other tools. Imagine for a moment if we were now having to dispose of such batteries after their utility as
storage for a hybrid drive system has failed. Many cars never make it to junk yards. Do you want such metals decaying into your water table? Even if recycled, the recycling costs are almost as high as the original construction of such batteries. Plus there will be unrecyclable material that cannot be reused and cannot go into anything other than an inert landfill. Do we really have such an abundance of landfills that meet this qualification that we can absorb the yearly waste metal slurry from hundreds of thousands of batteries? We have enough problems with the waste left over from the yearly recycling of standard automobile batteries right now. Imagine if the waste was double or triple the amount, but instead of being plain old lead byproducts it is instead lithium or cadmium.
The other pollution component is a function of it still being a gas powered system. You still have exhaust gasses. Yes when the gasoline part of the engine is idled in favor of the electric side, the emissions are zero. But, the minute you turn it back on it still churns out noxious gasses that at the least effect the local environment. If the Global Warming nutcases are serious in their belief system, any automobile power plant that still releases noxious gases should be a problem due to the scale of numbers of such cars that would be on the road. Surely, such cars would likely cut in half the current automobile pollution levels from exhaust. But if Global Warming is such a dire disaster, the priority should be to replace cars that emit tons of noxious gases per hundred miles with cars that release pounds of non-noxious gases per hundred miles.
Environmentally the hydrogen cars are the better solution because in the short term, they can utilize the old petroleum based gasoline distribution system while the hydrogen distribution system is deployed. Meaning the upfront costs of deploying the fleet can be spread across a decade. Meaning we wouldn't have to destroy our economy with a massive emergency deployment. As more hydrogen cars come online, automobile emissions will decline rapidly. Within ten years, passenger car emissions of noxious gasses would drop to less than 10% of what it is today. In ten years of deployment of a hybrid based system, you would possibly drop it to only 30% of today's value- but eventually the numbers would start to climb as new population growth put more vehicles into service. At some point you would again face the same problem we do right now in terms of pollution and consumption requirements of fossil fuels.
I can't remeber the name of the General Motors all electric car that was leased to people in California. I think it was the Impulse. Alex is wanting to go play so I will just make my point quickly. The car was a response to a California legal regulation. It made it possible for General Motors to meet California zero emissions standards and allow it also to keep selling normal cars. Any way, the cars cost a fortune to make and GM lost around $4,000 on each car. You couldn't buy one but could only lease it for three years. Then the car would need to have its batteries removed and new ones installed, the car was supposed to be cosmetically refurbished, and then the car was supposed to be re-leased to a new person. They made something like 1000 of the cars- and they were ugly, small, practical only for a concentrated urban environment, and prone to battery failures/fires. As the first ones began being returned, GM discovered that the batteries were essentially unrecoverable and had to pay a fortune for each disposal. If GM had added the cost of disposal to its original finished good cost, the price would have increased by half. It became very obvious to GM that a car that cost that much to refurbish and required each car to need a sanitary secured disposal burial plot was an idea that made zero sense. Plus, after three years of trying to lease the things, they still hadn't managed to lease all of them.
In the end, GM collected all but a handful of the cars which went to a handful of museums. The rest, including the ones that it never managed to lease one time, were sent to a specially built landfill site. The cars were all crushed, deemed toxic waste, and buried.
The thing is companies in America including Ford, GM, and Chrysler all bet that electric cars would be legislated into viability by California and the infrastructure would be mandated legally. It didn't happen. Environmentally, the cars were supposed to be vastly superior to standard cars. They weren't since 99% of the entire material in the construction run is now toxic waste in a secured sanitary landfill. The only net positive that resulted from the failed product was that GM, Ford, & Chrysler all decided it would be better for them economically if they took a baby step into gasoline/electric hybrids.
And that is the real problem. American companies jumped on the gasoline/electric hybrid bandwagon with the Japanese manufacturers. Its really where most of their R&D investment has went for the last ten years. They knew about the Germans and their various duel fuel hydrogen systems. But they reasonably concluded that an incremental step would be regulatorilly neutral and remain compatible with the existing fuel delivery system in the country. Now that petroleum is pushing the futures markets at $120 a bbl, they see the potential to be able to have the public make their investment profitable.
They do not want to see the hydrogen cars come easily to market.
The benefit to Hydrogen system cars is obvious. They can run on either existing fuel sources or on hydrogen. They are essentially the exact same engine as a standard gasoline only engine. The canister bottle is almost indestructible and 100% recyclable. The hydrogen car is as recyclable as any standard car is. It holds the potential to ultimately derive all of its energy needs from non-fossil fuels. It has the potential to reduce overall greenhouse gas emissions from the national automobile fleet to levels not seen since the early 1900's. Additionally it has the potential to contribute only H₂O as an automobile derived greenhouse gas.
In short, the Germans invented the magic bullet. The American & Japanese makers gambled on an incremental step, the Germans succeeded on an evolutionary step.
If we expect to remove the Middle East oil flow from our considerations in the future, the only viable solutions are those which eliminate fossil fuels from the equations.
Monday, April 28, 2008
Cutting the Petroleum Knot
Sunday, April 13, 2008
Hillary's Misspeak.
Strange at it may seem for me to be defending Hillary, I really do think she was simply a victim of campaigning. Call it diarrhea of the mouth, brain fade, or simple exhaustion- what she said compares to the other instances where politicians on the campaign trail say things that are simply untrue. I don't think it is or was intentional on her part. The part of me that holds Hillary to indeed be insanely smart and insanely calculating tells me that I should be taking her statement as an outright lie, intentionally told, to serve one of her machinations that would place her in the White House. But the rest of my thought processes tell me that there is absolutely no machination plausible that would account for her having ever mad this statement.
It's much like Obama's "bitter" comment that was followed by examples of provincialism that results from such bitterness. Do people buy guns because they are bitter over their economic situation? Do people go to religious services because they are bitter about the economy? The man is suffering from campaign fatigue. Plain and simple. Given a couple of weeks of sleep he probably would never have phrased his comments the way that he did.
McCain confusing Sunni & Shia sects at least twice falls into the same category as well. Taking into account his Senate committee assignments, it is very doubtful that were it not for continued campaigning, he would not have made such a slip up.
Reagan, Ford, Carter, and even Bill Clinton had their gaffs as well during campaigns. The difference is that technology has so caught up with campaigning methods that almost an entire candidate's run gets digitally recorded. What gets said in New Hampshire is worldwide news for 24 hours. There are no private moments.
And as an example today you have video of Clinton doing a Crown Royal shot & Obama serving cheeseburgers in a restaurant. In a very real sense, the camera lens combined with digital signal streaming feeds makes it entirely possible to catch every single hiccup made by a candidate. At some point, normal mortals will break.
All three remaining candidates have broken. It's that simple. Would Clinton have said what she said if she wasn't a political zombie right now? Would Obama be caught on camera serving cheeseburgers to white people in a style that practically screams "House Slave" ever have happened were it not for the ghoulish campaign?
Honestly, while such gaffs are entertaining grift, what do they actually indicate about the candidates? In a word-nothing. They are instead concentrating on explaining away the gaffs, while real issues such as their plans for domestic and international policy get ignored by the camera. It is very telling that even though all the candidates have given policy speeches, the only ones that even get more than a few minutes of live media play have been Obama & Romney speaking on their own religion. McCain's speech on solar energy policy was only covered because he was expected to get an endorsement from Guilianni at the same speech. CNN & Fox started covering it, but when it became apparent that McCain wasn't planning on handling the endorsement until after his policy speech, both networks broke away.
It is a function of salaciousness, that our media has devolved its coverage down to such important questions as "Boxers, Briefs, or Freeball?". The current crop of candidates I think tried to earnestly put policy plans of multiple issues on the table. But, despite that attempt, we have instead gotten coverage of the exceptional. Such as Oprah hosting a campaign rally for Obama. Hillary "crying" in New Hampshire. And a few hundred more trivialities that really were never important campaign events or even being news worthy.
Tuesday, April 8, 2008
Home Mortgage Crisis?
House equity is only being sucked away if they are trying to sell heir house, and once agreed to it being sold, sell it for a value less than the outstanding loan amount left on their mortgage. If you aren't selling the house you aren't losing any equity value.
95% of all loans are being paid. 3% are 90 days late. 2% are being foreclosed. In historic terms- its normal.
About the only people actually taking a equity hit, are house flippers who bought high on the expectation of selling high & people who incompetently took on more debt in purchasing a home than they could afford.
Case in point, when we went to shop a loan for our current house four years ago, the approval prelim came back and we were told that we could afford a $500,000 mortgage. We laughed our buts off when we heard that. We knew what our cash flow was, what our budget was, and what we could reasonably afford in a worse case scenario. We took a loan out for $160,000K plus closing costs out the yazoo.
After pouring approximately $40,000 into our house, we have scene its actual market value put it between $230-240K. Meaning in terms of equity on our home we probably have $60,000 in equity on the property right now. We have not opened a line of equity credit, nor do we plan on selling any time in the near future. So in a real sense, over the past four years we have poured 40K into a mortgage/property taxes & 40 K into home repairs/ improvements.
We could have dumped that 80K into things like investments or simply having fun and saving money by renting a house for far less. I don't think we are an exceptional circumstance either. We certainly aren't dealing with a cash flow problem even though it hasn't changed in four years. If anything our expenses have repeatedly turned out to be unexpected things like water heaters and walls.
I simply don't think a lot of people know what debt is. Or equity. Or loss, profit--- or even how the money pool functions at all. Those that don't are among the 5% of mortgage owners country wide who are now finding out that just because you qualify for a McMansion 100% financed- does not mean you should sign the closing papers on such a house.
As your quote indicated, and you even emphasized the "Money" part of it, most people do exactly what your quote says. They do not understand what equity is. My equity in my house is properly termed, only the amount of the mortgage I have paid off. All improvements made to the propert have been funded without any loans. IE we saved cash for each project, and then paid for them outright. In a very real sense those purchases are adding to the equity of the home- but only if the mortgage is paid off.
Many people- lots of them being idiotic, looked at market values and took out equity lines of credit based upon the potential sales value of their properties. They then used this creit line to purchase on credit improvements to their homes. The problem is that these improvements are credit purchases. They may improve the over-all salebility of the home, but for them to be considered equity, one would have to first pay off the equity line and second also manage to sell the house at a price level that covers both the original mortgage and also the cash purchase price of whatever improvements they purchased with the equity line.
If your credit goes south, or the market values fall, or the market becomes a buyers market, anyone who made equity line purchase improvements would have to be extremely lucky to break even or even net an equity profit on a final sale.
The true equity value of a house is only reached in one of two ways. Way one is you look at it as a long term investment and take a couple decades to pay off the mortgage without adding on equity lines or churning your loan. The other way is to opportunistically sell the house on terms that far outweigh the mortgage costs left on the house while also being able to purchase a replacement home for less than the original home you sell.
Most people instead look at their houses as virtual piggybanks. They assume that since the local market sales price has increased, their properrty must also be worth that much. So they assume that they can afford second mortgages or equity lines.
It is an idiotic theory, especially if it is your primary home.
Right now I have 40 K off my primary mortgage. Assuming I could sell the house for the original purchase price, I'd take out 40k in equity. But in order to make it a good sale, I'd have to be able to find a very simular house for 40K. Something which is entirely doubtful and next to impossible. The longer I hold this house and keep paying for it, the higher my take vs original mortgage sale price will become. First because inflation will negate some of the up front quoted price. Second because the closer to term the mortgage gets, the more advantageos the value of the mortgage becomes.
Eventually, once the house is paid for, which would incidentally be about the time my kid gets ready for college, I will have only a property tax as a liability against the property. If I need to purchase tuition for my kid, I will be able to access the equity in the house by taking out a new first mortgage. The difference however in valuation at that time will however be based on both market values & the results of all the improvements I have made. Only then will the equity value for example of installing a new kitchen from the studs up get included in the valuation.
Most people assume that since they can get an equity line, they should. They assume that their home improvements are instant equity in their home. It isn't the case.
A lot of people made that mistake, so 5% of the mortgages held in the USA are going belly up.
Its not true in every circumstance, but most of the people in mortgage trouble are there because they are/were idiots due to the simple fact that they understand equity as a real estate agent defines it vs. what an accountant undersands it to be.
Failure to take those steps is indeed idiotic. People in general take more time and effort to research consumer electronics purchases than they do when buying real estate. Do you assume that your home theater system, video display, computer, and service provider will all seamlessly integrate because they are part of the electronic entertainment industry? Do you just assume everything will work as represented without doing any research? Without consulting with salespeople? Without looking at multiple manufacturers? Without visiting multiple retailers?
To make such a purchase in that manner simply invites easily avoidable problems. There are indeed many people who bought HD-DVD systems without doing much homework, trusting the industry to work seamlessly. Had they done even a marginal effort at research on whether to buy a HD-DVD or Blueray based video-data disk playback system, they would have easily come to the conclusion that Blueray was the most likely winner in the industry standards race. Those who did aply effort have Blueray systems. Those who didn't and bought an HD-DVD system in the last year or so just got impacted by what amounts to a market collapse. HD-DVD was dropped.
In the same way, those who jumped on the bandwagon of buying homes in markets of ever increasing property values even though they did not understand they purchase are now finding themselves being responsible for continuing to pay off something they bought without regard to being informed consumers. So do these people deserve a Federal amnesty? Do the people who bought HD-DVD systems deserve a Federal amnesty?
There isn't much I am missing on this issue that needs to be addressed. The issue is consumers not doing their own due diligence, and are now paying the penalty. It is really only an issue right now because it has become a political issue. Two candidates are offering and forebarances to prevent any foreclosures for up to 6 years. One candidate is describing the situation correctly as being little more than a statistical blip in terms of historic foreclosure rates & advises that the market is already correcting itself.
Where was the demand for amnesty and forberances in the 1980's when people had 12% mortgage rates and 3% were being foreclosed?
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