Still Want a CFL?

The EPA has updated cleanup guidelines for broken CFL bulbs in a house. Considering that incandescent light bulbs are soon to be banned and LEDs are less than compelling at this point you may want to stock up. The nasty part of the mercury in the CFLs is an inhaleable form that is released when a CFL breaks. Respiratory inhalation of mercury in any amount is not good regardless of what the EPA or other pro-CFL groups present.

Mercury has long term negative physiological effects.

In humans, approximately 80% of inhaled mercury vapor is absorbed via the respiratory tract where it enters the circulatory system and is distributed throughout the body.[16] Chronic exposure by inhalation, even at low concentrations in the range 0.7–42 μg/m3, has been shown in case control studies to cause effects such as tremors, impaired cognitive skills, and sleep disturbance in workers.

Here are some highlights for cleaning broken CFL bulbs.

• Open a window and leave the area
  
• Turn off the HVAC for several hours

I recommend you read the document below as it is informative and very short.


cflcleanup -

Fannie Creates Moral Hazard

According to Bloomberg today Ally Financial, Inc. and Fannie Mae have settled on repurchase claims from Fannie in the amount of $292 BILLION for a hefty fine of $492 million.

Ally Financial Inc., the auto and home lender majority owned by the U.S. government, said its mortgage unit reached a $462 million settlement to resolve repurchase claims by Fannie Mae on $292 billion in home loans.

Excuse me, but a fine that low is insulting. Let's tell originators to go ahead and take the chance with shoddy paper - even if you get caught you'll only get a minor slap on the wrist. Where are the subpoenas? What about an appropriate level of penalty for the problem? Why can't we charge people in the financial industry for creating paper that had to be knowingly fraudulent?

Turning to "Why" points to the fact that Ally wants to have a share sale. Well we can't have a sale when there are major questions about put-backs. No problem, we'll have the government controlled mortgage backer basically give a pass to the government owned/backed mortgage originator. Great, we have now made sure that bankers get to take excessive risks (again) and possibly even commit fraud. Based on this the penalties would seem to say take the chance.

Normally I worry about government policies and the unintended consequences. This appears to just stupid policy.

Why Mass Transit Isn't Better

"Airline travel has become nearly as energy efficient as Amtrak." From the Coyote Blog.

The report linked in his post is from the Department of Energy and is 385 pages. It is very interesting because it shows that energy intensity (BTUs per passenger mile) for buses is decreasing while passenger cars are getting better. If the trend continues it will be less energy intensive for vehicle travel. This is not surprising and does not take into account the economic loses of inflexible routes and the schedule costs versus on-demand travel for an automobile.

The beneficial claims of rail efficiency and high-speed rail in particular are very suspect from the information report. Airline efficiency is encroaching on rail efficiency and, again, if the trend continues the energy benefits of air travel may exceed rail travel. Rail will never replace longer trips across the country. I don't intend to spend four days of a seven day vacation traveling by rail just from Detroit to Washington, D.C. - ignoring the insane prices as well. Business travelers will surely not travel more than a few hours by rail even with the kabuki theatre we call the TSA.

Rail has economic losses besides energy intensity. Rail can work but show me it works without subsidy. Amtrak has some very successful lines in the Northeast that would survive unsubsidized. Rail is more inflexible once the high speed routes are established. Business and industry shift geographically over time. The rust belt (note the name) once was the economic engine of the United States. Now different industries in different regions are our economic drivers. There is no reasonable way high-speed rail would substantially supplant air travel for vacationers nor business travelers. Federal rail initiatives will be an expensive long-term subsidized boondoggle that will cost the taxpayers dearly.

Quote of the Day

If You're Not Paying for It; You're the Product

Hat Tip: Lifehacker

Famous Last Words

Regarding the sovereign debt crisis that appears to be heading away from Ireland towards Spain with a stopover in Portugal.

From Portugal we from the Financial Times:

Portugal has denied as "totally false" reports that it is under pressure ... to request an international financial bail-out.

And also from the Financial Times we are told by Spain:

Jose Luis Rodriguez Zapatero, Spanish prime minister, on Friday ruled out any rescue package for the country ... "I should warn those investors who are short selling Spain that they are going to be wrong and will go against there own interests," Mr. Zapatero said

For a refresher below are some other not so prescient quotes.

First we have Ireland and this quote from the Irish Times:

Asked about the four-year plan, Mr Cowen said: “In coming weeks it will be finalised and then we will deal with it, and then we’ll have the budget”.

Asked to comment on reports, citing eurozone sources, that negotiations were going on behind the scenes for emergency funding for Ireland from the EU, he said: “We have made no application whatever for funding.

And that was November 13th, 2010. About a week before bail-out talks were admitted.

Then we had these quotes on January 29th 2010 from Business Week:

European Union policy makers have no “plan B” to help Greece, the bloc’s top economic official said, and Greek Finance Minister George Papaconstantinou said he’s not aware of talks of a possible rescue.

and this gem, while still true is unlikely to last.

“There is no bailout problem,” Monetary Affairs Commissioner Joaquin Almunia said today in an interview with Bloomberg Television at the World Economic Forum’s annual meeting in Davos, Switzerland. “Greece will not default. In the euro area, default does not exist.”

In the not so distant future that comment will leave a mark.

Moving to this side of the pond we have Dick Fuld's "I'm gonna burn the shorts" comment on CNBC before Lehman Brothers blow up.

New Light Bulb Technology

There is a new threat to CFL bulbs besides LED. It is call Electron Stimulated Luminescence or ESL for short. It recently got UL Laboratories approval and could be on sale in the US in early 2011. This technology appears to have a lot of benefits.
- No mercury or disposal problems
- Long life
- Dimmer support from standard dimmers
- Cheaper than LED solutions

Have a look at VU1 Corporation's website. I expect to be an early adopter. I hate those CFLs and LEDs are still quite expensive.

Currency War

So as we debase our currency we are holding China to account for basically offsetting our devaluations. If China devalues just to keep level with the US dollar is their fault and the US is blameless?

Currency Devaluation Non-Solution

On the October 13th "Breakfast with Dave", David Rosenberg correctly points out that currency revaluation by the Chinese will not likely have the outcome desired.

Since 1985, dollar-yen has sunk nearly 70% and yet the US has the same bilateral deficit with Japan today as it had then. So why does everyone think that a Chinese revaluation will necessarily clear out any perceived imbalances? Maybe if U.S. policy encouraged thrift over asset-based consumption growth, these trade imbalances would dissipate more quickly.

Voting is Not the Will of the People

Imagine four people choosing three types of fruit from a menu. They decide to be democratic and vote. If 2 people like bananas and each of the other participants choose an apple and pear then, accordingly, the will of the people will be to eat bananas for this meal. For the two people who did not get their primary choice - the will of the people is not so great. Voting for a politician is very similar. One side wins and claims "the will of the people" therefore it is just.

Additionally, this type of voting does not reflect intensity of desire. If the two people causing the majority like bananas slightly more than the other two fruits, they would have been content with any choice. Further, what if the two people left out despise bananas and adore their respective choices? As we see in voting the will of the people is not always reflective of intensity of desire.

Democratic voting is preferable than a dictatorial situation but I present this for educational purposes. With the election coming up - regardless of who wins it will not be the will of the people.

The Tennessee Municipal Fiasco Applied

There was a recent problem in Tennessee where to have municipal fire service you must pay a $75 annual fee. A man did not pay his fee and the fire department did not put out the fire even though they arrived on scene and the victim offered to pay (at least the $75). Put aside for this conversation he had pets in the house. This was not a free market failure. I don't know too many businesses that would, in a non-monopoly position, would refuse to extinguish the fire. This was a municipal policy failure. As an aside, the quick fix would be that the fire department in this case would put out the fire but for a unsubsidised price of $5000 or cost which ever is lower. That was not a choice in this situation which I find odd.

Suffice it to say that Krugman, et. al. have said what a horrible society we would have if the above fire department policy was in practice more broadly. To some degree I agree and feel content to pay taxes to provide municipal fire and police but that is for each municipal entity to define.

For a thought experiment, let us say that not only could you not insure for the $75 payment after the fact. Presume also that a home owner could not hire and pay the cost of the fire department services in the event of a fire. Now imagine a situation where you could not hire a different department to extinguish the fire nor attempt to resolve the problem amongst neighbours by law with penalty of fine and/or incarceration - even if equipped with both knowledge and equipment. Finally, even if health or life could be in danger, alternative means of handling the fire would be illegal.

Would not that be an even more horrible society than what many critics of the Tennessee municipality claim?

Readers from Canada may recognize this as their single-payer health care system. The single payer system can actually act to bar a person from alternative or paid medical care by force of law. The analogy is not perfect but the flaw is not that you can pre-pay but that while you have coverage demand exceeds supply and thus causing queuing with mechanism to equalize. It is a system that actively prevents the resolution of the supply/demand imbalance.

Hat tip: David Henderson for the clarity http://econlog.econlib.org/archives/2010/10/krugman_tenness.html

The Paperwork Problem

The banks and services have filed 10's of thousands of affidavits regarding loan documentation, etc and apparently with some fraudulent documentation. What the CNBCs and CNNs have mis-characterized as paper work problems are completely wrong. There is also an incorrect belief by analysts and delinquent mortgage holders will lead to free houses. In a few cases maybe but in general these home owners are severely delinquent and the house will be foreclosed unless it cures - who has standing in the foreclosure is not clear currently. This is a problem where the holders of the mortgage backed security may be able to unwind the contracts and "put back" the securities and the IRS may be looking for some money from improperly conveyed REMICs that normally allow for tax pass through when legal and proper.

Regarding the "paperwork" problem, this is a comment from a reader named "Ella" on the Naked Capitalism blog regarding affidavits.

Affidavits, perjury and fraud on the court.
An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdiction, the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who they claim to be.

If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

The affidavit issue is being portrayed in the MSM at a paper work problem. Lying to the court is not a paper work problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries’ knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paper work problem.

What are the impacts going to be?

• Banks are going to have a lot to write down


• Bank earnings and stock prices will take a big hit


• State budgets will be impacted due to the likely pause in foreclosures (no taxes paid by delinquents)


• Short term home inventories may look better as distressed properties don't come to market


• Longer term there is going to be a surge in inventories and an offsetting drop in prices when the foreclosures do clear - the housing downturn is not going to be over for a few more years.


• Current foreclosure sales are going to fall through reducing near term home sales


• Some lawyers are going to make out from all this very well on both sides of the problem

We Don't Need No Stinking QE

David Merkel over at The Aleph Blog explains the quandary created by quantitative easing (QE) and the negative impact on yield seeking investors. Here is a sample.

QE leaves investors in an awkward spot. There are no safe places to place money with any yield. So, you can earn zero, or take risks that seem uneconomic to gain yield. Almost makes me want to be a trader, because there is little logic to where I invest. There is no obvious place for me to invest.

If the government thinks that QE will force investors to invest, I have news for them — yes, some will take more risks, but they will lose through their investing. Risky assets are only good at a fair or fear price, not at one dragged low by QE. Trying to tweak our psyche as a whole is ridiculous, and deserves only scorn by voters and investors.

Ben Bernanke take your hand of the print button and then go back and start your dissertation over with what you have learned in the last few years.

Rent Seeking

At Kids Prefer Cheese Blog Mike Munger (yes NC gubernatorial candidate) provides a great concise definition of rent seeking.

In private markets you can only make money if you produce something other people value.

But in the presence of artificial rents like this drug enforcement subsidy, the link between "make money" and "produce something of value" is broken. It is an artificial rent. And the resources devoted to seeking the rent, to the extent that such resources are taken away from other useful purposes (preventing property crimes, protecting citizens) are wasted.

Rent-seeking isn't really about the rent, which is a transfer. The cost of rent-seeking is the wasted resources devoted to capturing the rent.

Emphasis mine.

Monstrously Dumb

An interesting post over at The Aleph Blog on FED policy actions.

The Fed always delays trouble in the modern era. Slow to tighten, quick to loosen. No wonder that we built up a mountain of debt, because the Fed would always ride to the rescue of crises, but never let the pain settle in that would liquidate poor investments.

We need fewer banks, fewer homebuilders, and fewer auto companies. But guess what we bailed out? We bailed out the very things that were the least productive in our economy, and taxed those more productive to do so. Monstrously dumb.

Extremely Over Stimulated

An interesting post over at The Economics of Oil Empire and Peak Oil pointing out that extreme government borrowing only gives the appearance of economic growth.

Thus, properly perceived, the private sector of the US economy is not growing and cannot grow with the price of oil above $40-$60. Gov't deficits of 10%+ of GDP (and 5-6% less the decline in receipts) merely give the appearance that the overall GDP is no longer contracting, whereas the private sector continues contracting yoy at a rate which occurred during the worst recessions of the 20th century.

A "double dip" for the US private sector will likely occur from a growth rate at or below zero.

My hope is that the government cuts spending, reduces "entitlements", and consumers de-leverage as orderly as possible as soon as possible. Then we can borrow again.

BFF

Bank Failure Friday (BFF) is where the FDIC shuts down banks due to violations of regulatory capital requirements. The bank is unable to honor its liabilities (your deposits) and its assets are given to another more solid bank with funds to cover the losses from the FDIC's Deposit Insurance Fund.

Even though the rate of failures is increasing the loss rate appears to be diminishing. Losses in excess of 30% were not uncommon meaning the bank was allowed to be severely broken before action was taken. Recent weeks, however, have losses to the FDIC falling below 25%. Sun American Bank in Boca Raton, FL, for instance, was seized today with $535M in assets and cost to the FDIC deposit insurance fund of $105M. Less than 20%. This is good news. The FDIC is taking prompt corrective action and following its mandate and insuring the safety of customer deposits.

iPad Pro

With speculation beginning on an iMac Touch and now on a Mac OS-X version of the iPad I'll throw my bet out there.

My hunch is we'll see the OS-X iPad in the fall refresh and expect it to be called the iPad Pro. It will have a larger screen, faster processor, at least one camera.

Time will tell.

Build America Bond Program

The Obama Administration is providing a further tacit bailout of the states and the guaranteeing of more debt by the federal government and thus the tax payers. Bloomberg indicates that the administration is seeking to extend and expand the Build America Bond Program indefinitely. It was to end this year.

Sadly the taxpayer is on the hook for ever more debt while increasing the level of moral hazard. As Bastiat wrote "Everyone wants to live at the expense of the State. They forget that the State lives at the expense of everyone."