Self-Fulfilling Recession Talk, Greenline+ENGlobal, Chinese Electrics, GM Bailout, BATMANx2

Ben Stein was RIGHT, AGAIN!!

It seems to me that I began this column a couple of years ago with an article in which I disagreed with the eloquent Mr. Stein. He is too conservative by half for my taste and yet I keep finding myself agreeing with him. In this case, (sorry, this is not exactly "breaking news") he had a short editorial on CBS Sunday Morning (on March 8th, I believe the TiVo dated it, though I just saw it) in which he took the side of William Jefferson Clinton against Barack Obama for talking too much doom and gloom with respect to the economy and more particularly the recovery. While I can understand President Obama wanting to "shape" expectations, we did, as Ben Stein says, elect him as "Cheerleader-in-Chief". The main thing that got us into this economic crisis (other than the stupidity or misdeeds at AIG and the hyperactive lending practices of mortgage brokers who knew that securitized mortgages were not going to be their personal problems when they either rolled over or defaulted -- after all they were being securities with "default swap" insurance by AIG) so the main creator of our dilemma is and was all the negative talk about going into a recession. Recession, if not depression, is a self-fulfilling prophesy if you can get enough people to believe your doom and gloom scenario.

How bad "was" it? As you probably know by now, I am aware that with a little creativity you can get "statistics" to say pretty much anything you want them to say, but here's a recent quote from financial advisor, John Mauldin:

"Side note: The economy did not contract at 6.3% in the 4 quarter. That is an annualized number. The quarter actually contracted at about 1.6%. If we go a whole year with a 6% contraction, that would be truly horrendous. We would blow right on through 10% unemployment. While it is possible, we should start to see somewhat better numbers in the second half of the year, although I still think they will be negative." [Emphasis and underline is mine, because I feel considerably more optimistic than that, but hey, I'm not as nervous about being wrong as most financial advisers are at this time.]

I was reminded as I read that I had heard the story before, but it seems apropo of our situation in what some people are calling the 17th month of our current (USA) recession.

The story, retold in this case by Mukesh Arora goes that a stranger to India came upon a whole line of huge elephants standing still, held in place by just a thin rope attached to one front leg. When he asked why the elephants didn't just walk away, since obviously the rope was far to frail to prevent an elephant from going wherever and whenever it wanted to do so, he was told that the elephants are tied with exactly the same size rope when they are first born. At that time the rope is more than enough to prevent the baby from wandering away, and they soon come to accept that they are incapable of breaking the rope. As they grow they never test their strength against the rope again, having discovered it was useless after months and months of trying as a youngster, so they now believe that the rope will hold them, and this it does. In reality, of course, the elephants are prisoners of their own beliefs.

Sadly, humans are not all that much brighter than elephants (and all evidence lately points to a convergence in waist sizes of the two species as well). When we hear something often enough, we believe it to be true without much critical thinking. These days, that is a dangerous thing because the means of spreading "information" (notice I didn't say, "facts") are so readily available, and so infrequently thoroughly verified that, "a lie is as good as the truth, as long as everyone believes it." And the means to get people to believe something is often just (like the baby elephants) to repeat it often enough that it is no longer being challenged. Right now, with respect to the economy, too many people are repeating dire predictions about a long, slow and painful recovery (including President Obama, as noted above). The more people hear it, the more they believe it.

Far too much of our economy is now based on this kind of herd mentality, too little on the bold pioneer, entrepreneurial spirit that built the industrialized economies. Indeed certain key business failures acted as "triggers" to the worldwide recession, but what happened as a result of those triggers was mostly because of the pre-conditioning of doom and gloom forecasters and popular media casting everything in the most dire of terms just to "sell newspapers" (obviously I mean sell advertising, since newspapers, like the elephants in Mukesh's story seem not to be adapting to new dynamics of size and mode, and are not "selling" well at all these days).

But LET THE DOOM AND GLOOMsters TAKE A VACATION for the rest of the year! PLEASE! There is no functional reason the world economy can't be significantly on the way to recovery in the next few months and well into recovery BEFORE the end of the year (and I mean 2009, just to be clear about that).

Anyone forecasting wallowing in recession into 2014 is obviously a Cadillac driver. That is, someone also stuck in an "old" way of thinking. Anyone who has driven (or even SEEN) a Tesla, the all electric sports car (for about 1/2 to 1/3 the price of those Italian gas powered speedsters), already knows that electric cars and plug-in hybrids (that can get 100 or even in one recent report 170 MPG) can be "juicing up" the economy by next year, and that means they have to start building them VERY soon.

It takes a lot of time and space to turn or accelerate a Cadillac or an aircraft carrier, but a Tesla can equal the acceleration any other production car, or a SMART (Mercedes) car can turn around IN the parking space that was too small for the Cadillac to get into in the first place.

Have the storm clouds of the recession got you "down"? There is a reason, a very good one, that the ideograph for "crisis" and "opportunity" are the same in China. Remember that the next time you are faced with a "challenge" (you know those things we used to call "problems" before everyone got so politically correct) because if you are facing that challenge chances are good that so are at least 100,000 others, and if you can resolve that issue for all of those people, that's what I call "opportunity"!

"Let a smile be your umbrella," and "There is nothing as infectious as a good laugh!"

There have been a few reports of biodiesel makers in dire straits in recent weeks, but how do you define success in the biodiesel making business? Well, as proud as I was of Imperium for their massive facility at Grey's Harbor, they have fallen on financial hard times, but another company known as Greenline Industries, Inc. has 33 biodiesel processing lines in 4 countries that provide more than 250 million gallons of capacity. Greenline makes the equipment not the biodiesel. Not only that but they are poised for expansion (in just the optimistic way I have been talking about, not waiting for someone to 'signal' that the time is ripe) announcing an alliance with ENGlobal who describe themselves as a company that, "provides engineering, construction, automation, land and regulatory services principally to the energy sector throughout the United States and internationally." ENGlobal has over 2300 employees in 20 offices and is what is often known in the energy business as an EPC company. EPC stands for Engineering, Procurement and Construction, although they also propose to provide "asset management" for Greenline, too. Greenline's "waterless, modular" biodiesel process eliminates wastewater streams, and reduces volatile organics, saving both time and money. Since ENGlobal has built pipelines and petroleum refineries, their joint publicity release points to the fact that ENGlobal may be able to assist in siting facilities for Greenline that may be next to existing (or future) petroleum refineries, resulting in extra economies with respect to both processing and distribution logistics and costs.

As noted earlier in this column, newspapers aren't doing all that well in recent years, so you may not have read a New York Times item from Keith Bradsher about China's ambition to be a leading producer of electric and plug-in hybrid vehicles by the year 2011. Mr. Bradsher points out that during his interview with a top executive of a Chinese car maker, the exec received a phone call offering to loan him more money. In light of the "tough love" attitude adopted by the Obama Administration, Detroit automakers have every right to feel jealous. Or so you might think.

As I have said before, although the term "bankruptcy" sounds scary to many people it is usually because they do not understand that the common form of bankruptcy is actually not a "going-out-of-business" move but an attempt to declare all debts null-and-void in order to re-negotiate one's debts to a more manageable structure in order NOT to avoid them completely, but to be able to continue to pay those obligations within the means available to pay, which is to say, that after restructuring operations in some way that is acceptable to creditors, that the company (or person) can continue to pay some percentage usually less than, but up to 100% of the original debt obligation. In many cases lenders and other creditors are "lucky" to receive 40 or 65 cents per dollar owed under the original terms, but that is vastly better than the mere 10 or 20% they might receive if the business (or person) was forced to sell off the remaining meager assets at "used" market value to try to pay off whatever debt remained.

What is really happening here is that the Obama Administration is trying to appear to be being "dragged, kicking and screaming" to the bankruptcy conclusion, in order not to offend their strong supporters in the unionized labor camp. In fact, it is likely that the proposed "structured bankruptcy", or more accurately the "pre-structured bankruptcy" is rather likely to have been the strategy all along, since only actual bankruptcy proceedings have the power to set aside (and thus, void) union agreements that call for excessive health care and pension benefits to auto workers, and that prevent auto makers from closing a franchise of an auto retailer without substantial compensation according to the protectionist laws of many state governments.

If, for instance (and remember, Ford is one of the "big 3" automakers NOT asking for federal money, so this is intended as a purely hypothetical example, but one similar to GM's decision to eliminate their whole "Oldsmobile" line of vehicles a few years ago) but IF Ford wanted to close its "Mercury" line of products, and consolidate under the Ford brand, it would have to pay substantial penalty fees to Mercury dealers in several states. Medical and pension benefits are even harder to escape.

If the government can pull this off correctly, and therefore shift the burden of healthcare from the automakers to the public purse (as they have proposed by their healthcare reform proposals), then GM and others would be in the capacity to match European carmakers whose labor force already has some form of "socialized" medicine in place through their European, state government health plan already, and which is, therefore, paid for by general taxation, not by including those healthcare costs of its citizens in the prices of their automobiles.

President Obama's request that former GM CEO Rick Wagoner step aside is most likely an excuse for Wagoner, and a symbolic gesture on the part of President Obama to assuage some of the public outcry over AIG and other Wall Street "bonuses".

The Chevy Volt is scheduled for release with the 2010 models (actually, Nov. 2010) which sounds more like the 2011 model year to me, but they are calling it a 2010 car. That's the good news [except that GM reports that there already "scam" artists who are taking money for "orders" for this vehicle launch]. Meanwhile, back at that Chinese automaker story in the WSJ CSM Worldwide, an auto industry consulting firm, is predicting that the Chinese will have a production capacity of 500,000 electric and plug-in hybrid vehicles by 2011, while all of the US output will amount to just over 1/4 million (267,00 to be more precise) plug-ins and all electrics, but Japan and Korea while sell twice that (1.1 million). And bad news for my eco-conscious Canadian friends, the GM-Volt.com website is now reporting that the Volt won't be available in Canada until July of 2011.

Shai Agassi, CEO of Better Place, was also in the "news" this past month for his "Better Place" plan to supply electric cars and electric "filling stations"; some 225,000 charging stations in the San Francisco Bay area alone, according to a CBS Sunday Morning interview with the SF Mayor. With Israel, Hawai'i, and Denmark coming "on line" next year to the Better Place scenario, it is a remarkable achievement on their part in such a short history of the company. Demand for electricity is going to go up sharply when these and Detroit plug-ins start selling at a good pace in the US, especially in Hawai´i where electric prices are already one of the highest in the nation.

However, it is also this past week that T. Boone Pickens was staging his "virtual march" on Washington and its lawmakers, claiming several million have signed up for this "protest". Ol' Boone is STILL LYING. Not about the number of supporters, at least not the I know of, he is LYING about CNG being the only green fuel that can power trucks. In the first place the "natural gas" he is talking about is the same kind of fossil carbon molecules that are in gasoline, millions of years old, so that immediately makes them "not green". Admittedly the pollution from burning natural gas is far less toxic than from gasoline, but that doesn't make it "green" either. Biodiesel, derived from plants (especially specifically algae) takes carbon from the atmosphere to build its oil molecules so it is actually "sequestering" as much carbon as ever gets released from its combustion, and secondly, it is as powerful (actually more so) than CNG, and virtually as power packed as petroleum diesel.

I have been keeping an eye on Newark, New Jersey lately. Why? Well, frankly I was impressed with their mayor, Mr. Cory Booker. He seems like a very enthusiastic supporter of his town, and I am expecting big things from him. Indeed, I discovered a couple of videos about biodiesel in New Jersey recently, one being a brief item on Innovation Fuels, a biodiesel producer located on the river there who exports much of their production to Europe, and another about New Jersey Governor Ed Rendell's announcement of the New Jersey mandate for 2% biodiesel content. I also found a little video about a company called Keystone Biofuels. Keystone seems to be one of Governor Rendell's buddies, but more importantly, they have partnered with Penn. State Harrisburg, and they have some exciting stuff going on there regarding JATROPHA. For all my readers who are interested in jatropha, this COULD be a very important development in progress. See the video below.



Not all "genetic engineering" is Creature from the Black Lagoon type stuff.

For some reason, and it may just have been that I´m old enough to feel like it is too expensive to pay movie ticket prices these days to sit in uncomfortable seats to watch a movie that I may not enjoy anyway, but I managed to avoid both of the more recent BATMAN movies. Well, I saw both recently, in reverse order, but that has to tell you that I enjoyed the second one, Dark Knight enough that I assumed I was going to enjoy Batman Begins , and Idid, likeboth, that is. As adorably cute as Katie Holmes is, frankly I liked the more mature Maggie Gyllenhaal in The Dark Knight (both played the role of "Rachel Dawes", Batman´s would-be sweetheart). My wife, (also)Maggie, liked Heath Ledger as "The Joker" character. I felt the much praised and Academy Award winning performance was over-hyped, and not as good as his work in Casanova.

My "happy note" to end this column today is just that my health, while less than perfect, is not as bad as was feared. Apparently the earlier EKG was "mistaken" about prior heart attacks. The "lab report" on my echocardiogram was "normal" and my cardiologist did a "nuclear stress test" (with radiological contrast medium) showing no damaged areas and pronounced that I would live to be 120 years old.

Love and warm wishes,

Stafford "Doc" Williamson

http://daochienergy.com