I didn't die, Britain has 2 minds, Benifer Movie Blech!, Demo Biodiesel in the CLASSROOM, please!

I didn't die this week. More on that topic below!

Bernie Madoff was a small time operator compared to the kind of "ponzie" scheme perpetrated on American (and World) Business by insurance companies. Frankly, I am now of the opinion that saving AIG was the biggest mistake thus far in the financial crisis that has gripped the world. AIG like any insurance company only has its own reputation to offer the "assurance" that they have the financial wherewithal to make good if loses occur due to events covered under the specifically named risks their policy covers. Because the risk assessment by AIG (and others, these weren't the only guys playing fast and loose in order to create profits for the insurance companies) was completely underestimated they created an illusion of "security" in the derivative products that contained securitized mortgage tranches without actually collecting enough money in premiums to be able to sustain the losses that did occur (or that have yet to occur, but will, if the decline in home values continues as the default rate on the mortgages continue to climb). This happened because they themselves (the underwriters at AIG and other insurance institutions didn't understand the underlying risks in the housing and home mortgage businesses, especially as related to the changes in lending practices, brought about, largely, because of the liberalization of legislation and regulation by Democratic policies originating in the Clinton Administration.

There was a "real" trigger to the financial crisis, and because the products (securitized mortgages) had been so internationalized the world took a serious hit from it, but thatīs mainly because the "insurance" components known as debt default swaps were not secured by adequate assets (actual money) at insurance companies like AIG, which put the banks in jeopardy because they had been taking these assets as AAA, (the very highest quality of low risk investments, that are generally considered to be) "good as cash" because of the existence of the insurance component. When the default rate exceeded AIGīs ability to pay the claims, thatīs when the s**t hit the fan, and the banks were being forced (by a DUMB accounting rule called "mark to market") to stop making new loans because the no longer had those "cash" assets to satisfy their regulatory requirements for capital on hand.

In theory at least, all of this would have "stopped" as soon as the federal government bailed out Fannie Mae, Freddie Mac and AIG but only IF they had actually "unwound" the "toxic" (or "tainted," or "troubled," or whatever you want to call them) mortgages from the complex derivatives that put everyone in a tailspin. Since they didnīt the "crisis" continues. But the best advice I have heard yet on the subject is from White House Chief-of-Staff, Rahm Emanuel, which the Wall Street Journal quotes him as saying, "Never let a serious crisis go to waste. What I mean by that is itīs an opportunity to do things you couldnīt do before."

From a business point of view (like an investment point of view) this is the time to be a "contrarian", to go against the conventional mainstream of thinking. BUY STOCKS donīt sell. Prices have never been lower. I made 75% (on paper) on a tiny investment in Citibank last week alone, and now that they have turned down further "bailout" money from the government the stock value is just expected to grow again. Yes, there are cynics who are suspicious of the Citibank report of a highly profitable quarter right after their "bailout" by the federal government, just on the eve of being "nationalized" to prevent further instability, but it was probably a clever strategy that will cause an increase in consumer confidence and force the federal government to, at minimum, come up with more creative language should any further support prove necessary any time soon. I am not saying that the downside has completely gone out of the market, and as I type this I am reminded to paraphrase investment adviser, and former host of the PBS program, Wall Street Week with Louis Rukeyser, [Jr.] that "timing the market" as your basic investment strategy is a good way to go broke.

GROW YOUR BUSINESS. Fill the gap left by all the others who are pulling in their horns to guard against imagined disasters that havenīt happened yet. Just by SHOWING YOUR BOLDNESS you will stand out from the crowd. To some extent that is already true of General Motors, the one of the "big three" automakers who was most in trouble financially, but also the one who has been most prominent and most vocal about their "all electric" (hybrid) which, in the current design uses an "all-electric" drive train, but also includes a small internal combustion engine to continuously charge the batteries as you drive. (If they are smart, the Chevy VOLT, or other electric models should also include a plug-in feature that allows consumers to draw cheap electricity from the national grid during the "off-peak" overnight hours to charge the batteries before starting out in the morning with a fully charged battery.)

It's not every day that a massive failure and fizzle are announced so proudly as an unexpected success, but that is just how they are characterizing the failed launch of a biodiesel fueled rocket on March 7th, 2009. The standard 150 pound RocketDyne rocket was fueled up with biodiesel. Flometrics, an aerospace engineering firm that was conducting the test then loaded it on the launch pad (attached to a launch guiding tower). It is, after all a tiny rocket but no kids toy, RocketDyne isn't in the toy business, at least not yet, this rocket is 20 feet tall. When the launch count reached "zero" a flare of flames emerged from the tail for a moment, then the "abort" switch caused the nosecone to eject itself WITHOUT the rocket. The nosecone (if there was any actual payload in the nosecone that fact was not revealed) drifted back to the ground, as intended, descending via its own automated parachute.

Now normally with this kerosene fueled rocket the tail would have been badly scorched and the rocket virtually destroyed by the fire in such an accident. The "success" part was the fact that because of the higher flash point of the biodiesel versus kerosene (93 vs. 28 degrees Celsius) there was no explosion, and very little fire. The conclusion drawn from this was that this appears to be a much safer fuel to use in manned space flight launches because it represents less danger to the occupants. You can see a video of the launch, or the lack of launch, along with further details on the domesticfuel website.

I have been thinking about starting a traveling show. The problem with the concept, however, is that in my experience, I'd never get permission to put it on. You see the show that I think that every kid should see is just how simple, relatively safe and yet inspirationally environmentally friendly it is to make biodiesel (especially compared to the more conventional petroleum based fuels). I am pretty sure that your average school principal would shut me down in less than a minute when she/he learned that I was about to teach their students how to make biodiesel fuel in a soda bottle. (The fact that I was also making an "alcohol" in addition to diesel fuel would likely have them running screaming from the building either because it was an alcohol, or because it was not a human consumable alcohol like ethanol, but a poisonous brew of glycerol, not that most school principals would know what that was either.)

My alternative plan, then is to try to encourage every science teacher in America to make their students familiar with biodiesel and teach them that biodiesel is an environmentally friendly form of fuel that can be used in internal combustion engines. And while the science teachers are at it they might want to get the social studies teachers into the conspiracy to integrate a lesson or two that attest to the fact that it would be a great economic boost for all non-oil-exporting countries to produce and consume their own domestic sources of fuel, and that "domestic security" issues of foreign sourced fuels also go away in the political equations. High school science departments may have a gallon can of lab grade ethanol somewhere on the storage shelves, but for those of you teachers who don't here's a quick video tutorial on how you can demonstrate biodiesel production safely, right in your own classroom.









And here's a quick suggestion for a followup episode (rather than, as the above video suggests allowing a week or more for the gravitational separation of the glycerol and biodiesel). Try a transformer with a high voltage low current output and do the following demonstration. (For some reason, most of the people making biodiesel commercially, or attempting to do so, have not learned this lesson yet, so I am not sure why I want to "give away" one of my own competitive advantages, but hey, this is an old technique that I didn't invent, nor did the demonstrators shown here.)









This demonstration is shown as a "kitchen table" demo in another video, but this one, using the meter shows that one needs to limit the voltage and amperage to be safe.

I do hope that at least a LOT of teachers will try this in their classrooms. I am pretty sure that it offers an opportunity to do integrated lessons on politics and government, science and technology, environment and energy, and even science and mathematics. More importantly, this is the kind of demonstration that can inspire students with a passion for learning in general and for science in particular that we do sincerely, desperately need in out schools.

News from the United Kingdom this week reminds me of the hilarious short story entitled, "Pigs is Pigs" by Ellis Parker Butler (1869-1937). In what seems like it could only come from deeply entrenched bureaucracy, two separate rulings contradict each other with respect to British government attempts to promote renewable fuels. It seems that a ruling from one agency has decided that if biodiesel is produced using methanol that is derived from natural gas (of petroleum origin, not recovered from landfill) it is considered to be fuel that comes from a petroleum origination and is therefore not eligible for "Renewable Obligations Certificates". However, if you use the same fuel in a vehicle it does still qualify for Renewable Transport Fuel Obligation Certification. All of which means that if you burn the same biodiesel in an electric generating facility you do NOT get the credit for doing your duty to Country and Queen, but if you drive on it, you do. Which in the final analysis probably means that now Prince Charles has to maintain two separate fuel tanks at Balmoral Castle, one to fuel the diesel powered Land Rovers and Jaguars, and a second for the standby generators in the dungeon. Perhaps he should invite the regulators to spend a few weeks in Newgate Prison and not let them out until they can work out their differences. (If he is wise the release should be on parole with a stipulation that they never again engage in such blatant stupidity.)

Yesterday as I left the movie theater, I tried to make note of a particularly scathing phrase or two to try to describe my "disappointment" with He's Not That Into You. I have since decided that the only real problem any of these characters ever had could have been solved by going to a discount therapist who would honestly tell that to get over their whining, petty, self-involved trivial problems and grow up. The pity is that the movie is filled with a cast so vast as to be overwhelming in total talent, but the movie itself does not seem worth the trouble to list them. I'm tempted to praise Jennifer Aniston and Ben Affleck just because they seem to be the only characters who "grow" (more mature) during the movie, but sadly the "big news" of some recent week is over yet another breakup between her and her latest "real life" boyfriend John Meyer. So, in this case, my advice is "grow up" Jennifer.

So, to try to find a cheery not to end on, my mother-in-law is at death's door and I'm trying to help pull her through.

Okay, that's an old joke. Indeed my mother-in-law is still in declining health, but is home from the hospital but under 24 hour care. On the other hand, my doctors remain distressingly blasé about my condition(s), and I have a nuclear stress test scheduled for next Thursday. Sure, I've had a cardiology "stress test" before, but now I have graduated to the "big leagues" with the "nuclear" variety. I am pretty sure that means I am hanging out with a better class of people. Would you agree?

Love and warm wishes,

Sincerely,

Stafford "Doc" Williamson

http://daochienergy.com