Monday, November 17, 2008

Let Them Eat Cake

George Bush held a meeting of the G20 over the weekend to talk about the plight of the global economy. The G20 is comprised of approximately the largest 20 economies in the world.

I believe that there is almost always an old adage that is relevant and instructive to any given circumstance. In this case the old adage that comes to mind is: “Lead by example”.

Given the dire global economic circumstances, one would think that this group would lead by setting an example of thrift and frugality. Instead, they outdid themselves with an appalling display of supercilious indifference to the plight of their citizens. Their menu included "Fruitwood-smoked Quail," "Thyme-roasted Rack of Lamb," and "Tomato, Fennel and Eggplant Fondue Chanterelle Jus." To wash it down, they indulged in a $500 a bottle wine. $500 a bottle!!! Of course, this was all paid for by you the lowly taxpayers.

If the G20 elitists really wanted to lead and still have a great international dinner, they could have gotten some Chinese and Indian takeout, along with a $10 bottle of California wine from Trader Joes.

The “Fennel and Eggplant Fondue Chanterelle Jus” and $500 a bottle wine once again demonstrates that our so-called “leadership” is completely out of touch with reality.

What a surprise.

Thursday, November 13, 2008

Auto Industry Bailout: JUST SAY NO

Barack Obama is pushing for a $50 billion bailout for the U.S. auto industry. We are essentially being told that without this bailout the world will come to an end because the U.S. auto industry is just “too big to fail”.

Here is the essential question: Why is the U.S. auto industry in such terrible shape and in need of a bailout? High gas prices? Unfair competition? Bad luck? Nope. They are on the verge of collapse because collectively they have suffered from four decades of the most brain dead management on the planet.

The U.S. auto companies took too long to figure out that producing quality cars actually costs less, not more, and results in higher customer satisfaction and stronger brand loyalty. As a result of not understanding this, they lost their mindshare and market share in the U.S. a long, long time ago. The big thing that has propped these companies up for the last two decades were cheap fleet sales that were subsidized by their financing ventures. For example, a couple of years ago, the most profitable division of GM was GMAC, which was even in the mortgage business.

They were also completely clueless on how to compete in international markets. For example, they used to constantly whine about how Japan was unfairly closed to them. When I went to Japan for the first time in 1998, I noticed three things: A.) The Japanese drive on the left side of the road, like the British, B.) there were a lot of German cars on the road, and C.) there were very few American cars. The problem was that the U.S. auto companies took forever to sell cars that were suitable for the Japanese market (i.e., with the steering wheel on the right side). The complete misunderstanding of the market, along with their chronic quality problems doomed GM, Ford, and Chrysler in Japan.

The UAW “leadership” is equally culpable for the industry's long decline for refusing to enable necessary operational changes. For example, guess who has the most advanced and efficient auto manufacturing facility in the world? Ford. It’s in Brazil. The UAW would never allow a plant with that level of flexibility and supplier integration to operate in the U.S., which is a huge part of the problem.

My view is that there is no reason whatsoever why the taxpayers should be stuck subsidizing decades of gross mismanagement. GM, Ford and Chrysler are NOT "too big to fail". Even if they do fail, companies with smarter leadership will put their resources to better use. We'll all be better off.

So, it's time to “JUST SAY NO” to the auto industry bailout.

Bail THIS Out

The comedy show in the District of Columbia gets funnier every day. Yesterday, Treasury Secretary Paulson announced that he won’t use the $700 BILLION dollars to buy troubled assets after all. Instead, he will use all of the money to "invest" in companies. Paulson admitted that he knew that buying troubled assets wasn’t the right solution to the problem while the bill was being debated in Congress.

Regardless, this is going to cost us a lot more than $700 billion. According to, the U.S. government has already incurred a whopping $5 TRILLION of obligations in the various schemes by the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation to shore up the financial system.

The list of companies standing in line to get a taxpayer “investment” is getting longer every day. AIG and GE Capital are going after their second round of hand outs. American Express and the grossly mismanaged U.S. Auto Industry are next.

Guess what is going to happen to the corporate executives who got us into the mess? Bloomberg reports that they are going to get big, fat Christmas bonuses. For example, Goldman Sachs has set aside $6.8 billion for bonuses while Morgan Stanley has allocated $6.4 billion.

To top it off, the Democrats are planning some nice surprises for us next year. Congress is holding hearings on confiscating our 401Ks and turning them over to the Social Security Administration. Of course, many of us are going to get stuck with a big, fat tax increase as well.

It just gets better all of the time…

Sunday, November 9, 2008

Our New Nuclear Future?

Barack Obama’s victory will certainly result in the government putting more emphasis on alternative energy. Unfortunately, my guess is that this will only result in more subsidies going to special interests to fund unworkable solutions, like ethanol, rather than in making real progress towards solving our challenges with imported oil.

I’ve written here before about the tremendous amount of venture capital that is being poured into Silicon Valley solar energy startups. I’ve also written about the Picken’s Plan to build a corridor of wind turbines in the Great Plains. Ditto with plug-in electric cars, like the Tesla Roadster, and fuel cells. Another part of the solution may be lightweight nuclear power stations.

A company in New Mexico – Hyperion Power Generation – has licensed some technology from Los Alamos National Laboratory to produce small, compact nuclear energy modules that can be transported to locations wherever electricity is needed.

Each energy module is about the size of a hot tub and can supply the electricity needs of 20,000 homes for 7 to 10 years, at a cost of about $150 per home per year.

The modules don't contain any moving parts. The modules produce energy via a safe, natural heat-producing process that occurs with the oscillation of hydrogen in uranium hydride. The modules cannot go “supercritical,” melt down, or get too hot. They maintain a safe operating temperature without the use of cooling rods. Think of them as kind of a big battery.

The modules are sealed in concrete and would be buried underground. Each module would be removed and refueled at original factory every 5 years.

The modules don’t emit any greenhouse gases. The fuel used in the modules cannot be turned into weapons grade material. The amount of waste after 5 years of operation is about the size of a softball.

The modules can be built in a tiny fraction of the time it takes to build a large nuclear plant. The company already has orders and they expect to ship their first product in 2013.

Plug-in electric cars and creation of hydrogen for fuel cells will require the generation of a lot more electricity than we generate today. Solar and wind are important part of the mix, but they can’t fulfill all of our growing needs. Nuclear needs to be part of the solution and this is a game changing technology to provide it.

Let’s hope that Obama’s proposed increase in the capital gains tax won’t dry up investments for this and other innovative solutions to our most pressing problems.

Thursday, November 6, 2008

Obama and the End of Two Eras

The election of Barack Obama, as President of the United States, signals the end of two long running eras.

First, his election concludes the post-civil rights era, in which race baiting politicians corrupted Martin Luther King’s message to obtain power and status for themselves. Think of Al Sharpton with his Tawana Brawley rape scam, Louis Farrakhan’s various vulgar tirades, and ex-Detroit Mayor Colman Young, who managed to stay in office for 18 years by doing nothing more than sticking his finger in whitey’s eye, in spite of the vast corruption in his administration and the tragic decline of Detroit under his watch. It is simply not credible any longer to decry the U.S. as a “racist” country now that we’ve elected an African-American to the Presidency. Those days are finally over.

Second, it buries the post-WWII conservative era. The modern conservative movement was comprised of a loose collection of economic libertarians, religious fundamentalists, big business interests, and socially conservative blue collar workers, who had greatly differing views on many key issues. They came together as a coalition under the banner of fighting communism. After the Cold War ended, some parts of this coalition started questioning the need to maintain America’s Cold War foreign policy. This potential crack in the coalition alarmed the GOP leadership, so they went looking for a new villain. During the 1990s, many on the right desperately tried to vilify “Red” China, which in many ways is more capitalistic than the U.S. 9/11 finally handed the GOP a new focus of evil in the world and for a few years it worked to keep their coalition intact. Unfortunately for them, George Bush overreached by invading Iraq, which had nothing to do with 9/11. The GOP lost control of the Congress and now the Presidency. 20 years after the Cold War ended, the GOP’s anti-communist coalition is finally dead. It is not very likely that the GOP can revive it. Those days are also gone.

With the passing of these two eras, the election of Barack Obama positions the country to make the most radical departure with recent history we’ve seen since the Roosevelt era.

The big question is: what Obama will do with the opportunity? Will he overreach to placate the far-left’s crackpot “economic justice” agenda? Will he try to emulate the pro-business and fiscally responsible Clinton Administration? Will he parrot the crusading neo-conservatives, only this time with a focus on "democratizing" Africa, rather than the Middle East?

The other key question is what will the GOP do now? Will they return to their flaccid pre-Reagan “me too” liberalism? Will they repudiate their power hungry, big government ways of the last 8 years? Will they boot the neo-conservatives and return to their pre-WWII, non-interventionist past? Will they just drift along in chaos not knowing what to do, leaving the Democrats to control the national conversation and agenda?

In don’t think any of us know the answers to either of these questions. So, the next two years are going to be very interesting indeed.