Good article. First one about energy that connects the dots with all options and whats happening and what will happen. We, our leaders, need to make the hard decisions NOW.
The next energy crisis is here
Nuclear power is dangerous, our oil supply is unstable, and alternative energy is stumbling. With no easy options left, how will we power our future?
By Michael McCullough
The catastrophe at Japan's Fukushima Dai-ichi power plant has undeniably damaged the nuclear industry, setting back its slow-building recovery from the Chernobyl accident 25 years ago. Not only has Japan, the world's third-largest economy, shut down plants (some of them permanently) that provide one-fifth of the country's electricity, but Germany, China and Switzerland moved to halt expansions and life-extending refits to their nuclear plants.
But nuclear is far from the only villain. There seems to be no source of new energy we can live with. Last year, it was deep-water oil drilling that provoked a public outcry. The leak from BP's well in the Gulf of Mexico inspired moratoriums and costly regulations not just in the United States but around the world. The accident offered new reasons to oppose carbon-belching sources like coal and oilsands.
Adding to the list of undesirable power sources, Quebec this year reacted to concerns about water contamination, methane gas leaks and other issues by imposing a near moratorium on shale gas drilling. Likewise Ontario, already committed to phase out coal power by 2014, cancelled a project to build a gas-fired power plant in Oakville last year in the face of fierce local opposition. Even renewable sources like wind power are coming under fire from residents fearful of "wind sickness." Al Gore, the world's most prominent environmentalist, last year changed his mind about biofuels, the environmental benefits of which are looking increasingly doubtful
The non-monetary costs of energy production now loom so large that governments are stuck in policy gridlock, unable to approve any new option that could help meet rising demand — with results ranging from higher gasoline prices to the rolling blackouts that Japan is now experiencing. It graphically illustrates the point made by Canadian energy economist Peter Tertzakian in his books and speeches, that we are approaching a "break point" where no major energy source is simultaneously cheap, secure and clean. Following 12 months of rising demand, catastrophic spills and political instability in the Middle East, oil is none of the above.
"What we're seeing today is very classic in terms of how history has treated energy or how society has evolved with its energy," Tertzakian says from his office at Arc Financial Corp. in Calgary. "Every few generations, there's a series of events that come together to punctuate and change the way we do things."
In his 2006 book, A Thousand Barrels a Second, Tertzakian predicted a new energy break point within 10 years, when major economies would switch from one "disadvantaged" source of energy to one, or several, other options. Now he believes that time has come.
"The hallmark of a break point is when government gets involved and starts enacting a whole series of policies that change the way things are done," he says. "It's just a matter of time before you're going to see policies implemented by major consuming countries to deal with the oil situation. And now we have a nuclear situation. In some ways, it's a double break point."
Both North America and the developing world will need to think hard about how they will produce the energy needed to meet growing demand. Even mature economies like Japan and Germany must decide how to backfill their energy needs as old nuclear plants come offline.
"The scalable winners out of this are going to be coal and natural gas," Tertzakian says. There will also be a move to renewables, but they can't replace the output of an oil well or a nuclear plant. And in the time-tested hierarchy of energy needs, security — knowing that the lights come on when you flip a switch — always comes first. Affordability comes next, and cleanliness comes last — "unless it's going to kill you," as in the case of Japan's nuclear emergency.
"What you see at a break point is a tremendous tension between those three dimensions," Tertzakian says. "People are going to have to prioritize."
There is, of course, another way of dealing with a break point, which is cutting back energy use, though it has seldom been used throughout history. "Society has become accustomed to supply-side solutions," Tertzakian observes. However, as he argued in his most recent book, The End of Energy Obesity, modern societies have at their disposal the technological tools, and possibly the social pressure, to consume less energy in absolute terms, not just per capita or per dollar of GDP. "Ironically, the one country that has made the most use of that dimension," he says, "is Japan."
If there is an upside to the new energy crisis, it's the greater understanding it gives consumers of the non-monetary costs of their energy consumption, instead of just taking the benefits for granted. "There really is no energy source that comes for free. There are issues that come with every single one," Tertzakian says. "Some will kill you slowly; some will kill you fast."
Wednesday, March 23, 2011
Wednesday, March 16, 2011
Warren Buffett’s annual address. Interesting stuff on the world...
Thought to turn to Mr. Buffett for some colour on things. Here are some of the highlights:
On Discussing why Berkshire keeps so much cash on hand:
"Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed."
****
“Money will always flow toward opportunity, and there is an abundance of that in America.”
****
On human potential and the nation’s future:
"Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War—remains alive and effective."
****
"John Kenneth Galbraith once slyly observed that economists were most economical with ideas: They made the ones learned in graduate school last a lifetime. University finance departments often behave similarly. Witness the tenacity with which almost all clung to the theory of efficient markets throughout the 1970s and 1980s, dismissively calling powerful facts that refuted it “anomalies.” (I always love explanations of that kind: The Flat Earth Society probably views a ship’s circling of the globe as an annoying, but inconsequential, anomaly."
****
One footnote: When we issued a press release about Todd [Comb's] joining us, a number of commentators pointed out that he was “little-known” and expressed puzzlement that we didn’t seek a “big-name.” I wonder how many of them would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959. Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit. (Whoops–that may not be the smartest metaphor for an 80-year-old CEO to use.)
****
On hedge funds:
The hedge-fund world has witnessed some terrible behavior by general partners who have
received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners.
****
Berkshire and the housing/mortgage crisis:
Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income. In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did.
(Emphasis added)
****
On home ownership
Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates. … But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender–often protected by a government guarantee–facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.
****
On the worst of the global financial crisis:
As one investor said in 2009: “This is worse than divorce. I’ve lost half my net worth–and I still have my wife.”
****
In discussing the bazaar that is the coming annual meeting:
Remember: Anyone who says money can’t buy happiness simply hasn’t learned where to shop.
Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.
Life and Debt
The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire. Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.
Leverage, of course, can be lethal to businesses as well. Companies with large debts often assume that these obligations can be refinanced as they mature. That assumption is usually valid. Occasionally, though, either because of company-specific problems or a worldwide shortage of credit, maturities must actually be met by payment. For that, only cash will do the job.
Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed. Even a short absence of credit can bring a company to its knees.
In September 2008, in fact, its overnight disappearance in many sectors of the economy came dangerously close to bringing our entire country to its knees. Charlie and I have no interest in any activity that could pose the slightest threat to Berkshire’s wellbeing. (With our having a combined age of 167, starting over is not on our bucket list.) We are forever conscious of the fact that you, our partners, have entrusted us with what in many cases is a major portion of your savings. In addition, important philanthropy is dependent on our prudence. Finally, many disabled victims of accidents caused by our insureds are counting on us to deliver sums payable decades from now. It would be irresponsible for us to risk what all these constituencies need just to pursue a few points of extra return.
A little personal history may partially explain our extreme aversion to financial adventurism. I didn’t meet Charlie until he was 35, though he grew up within 100 yards of where I have lived for 52 years and also attended the same inner-city public high school in Omaha from which my father, wife, children and two grandchildren graduated. Charlie and I did, however, both work as young boys at my grandfather’s grocery store, though our periods of employment were separated by about five years. My grandfather’s name was Ernest, and perhaps no man was more aptly named. No one worked for Ernest, even as a stock boy, without being shaped by the experience.
On the facing page you can read a letter sent in 1939 by Ernest to his youngest son, my Uncle Fred. Similar letters went to his other four children. I still have the letter sent to my Aunt Alice, which I found – along with $1,000 of cash – when, as executor of her estate, I opened her safe deposit box in 1970.
Ernest never went to business school – he never in fact finished high school – but he understood the importance of liquidity as a condition for assured survival. At Berkshire, we have taken his $1,000 solution a bit further and have pledged that we will hold at least $10 billion of cash, excluding that held at our regulated utility and railroad businesses. Because of that commitment, we customarily keep at least $20 billion on hand so that we can both withstand unprecedented insurance losses (our largest to date having been about $3 billion from Katrina, the insurance industry’s most expensive catastrophe) and quickly seize acquisition or investment opportunities, even during times of financial turmoil.
By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well. Moreover, during the episodes of financial chaos that occasionally erupt in our economy, we will be equipped both financially and emotionally to play offense while others scramble for survival. That’s what allowed us to invest $15.6 billion in 25 days of panic following the Lehman bankruptcy in 2008.
The pace of the earth’s movement around the sun is not synchronized with the time required for either investment ideas or operating decisions to bear fruit.
Is it about time for a really good financial advisor? let us recommend one of the very best to you:
Financial Concepts. We highly recommend them.
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example. saverio manzo
http://www.everyoneweb.com/saveriomanzo/ http://saverio-manzo.jimdo.com/ http://saverio-manzo.yolasite.com/ http://saverio-manzo.webs.com/ http://saverio-manzo.weebly.com/ http://saveriomanzo.terapad.com http://www.shareowners.org/profile/SaverioManzo http://www.linkedin.com/pub/saverio-manzo/b/995/63 http://twitter.com/saveriomanzo http://www.facebook.com/people/Saverio-Manzo/854720596?ref=search
On Discussing why Berkshire keeps so much cash on hand:
"Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed."
****
“Money will always flow toward opportunity, and there is an abundance of that in America.”
****
On human potential and the nation’s future:
"Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War—remains alive and effective."
****
"John Kenneth Galbraith once slyly observed that economists were most economical with ideas: They made the ones learned in graduate school last a lifetime. University finance departments often behave similarly. Witness the tenacity with which almost all clung to the theory of efficient markets throughout the 1970s and 1980s, dismissively calling powerful facts that refuted it “anomalies.” (I always love explanations of that kind: The Flat Earth Society probably views a ship’s circling of the globe as an annoying, but inconsequential, anomaly."
****
One footnote: When we issued a press release about Todd [Comb's] joining us, a number of commentators pointed out that he was “little-known” and expressed puzzlement that we didn’t seek a “big-name.” I wonder how many of them would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959. Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit. (Whoops–that may not be the smartest metaphor for an 80-year-old CEO to use.)
****
On hedge funds:
The hedge-fund world has witnessed some terrible behavior by general partners who have
received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners.
****
Berkshire and the housing/mortgage crisis:
Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income. In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did.
(Emphasis added)
****
On home ownership
Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates. … But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender–often protected by a government guarantee–facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.
****
On the worst of the global financial crisis:
As one investor said in 2009: “This is worse than divorce. I’ve lost half my net worth–and I still have my wife.”
****
In discussing the bazaar that is the coming annual meeting:
Remember: Anyone who says money can’t buy happiness simply hasn’t learned where to shop.
Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.
Life and Debt
The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire. Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.
Leverage, of course, can be lethal to businesses as well. Companies with large debts often assume that these obligations can be refinanced as they mature. That assumption is usually valid. Occasionally, though, either because of company-specific problems or a worldwide shortage of credit, maturities must actually be met by payment. For that, only cash will do the job.
Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed. Even a short absence of credit can bring a company to its knees.
In September 2008, in fact, its overnight disappearance in many sectors of the economy came dangerously close to bringing our entire country to its knees. Charlie and I have no interest in any activity that could pose the slightest threat to Berkshire’s wellbeing. (With our having a combined age of 167, starting over is not on our bucket list.) We are forever conscious of the fact that you, our partners, have entrusted us with what in many cases is a major portion of your savings. In addition, important philanthropy is dependent on our prudence. Finally, many disabled victims of accidents caused by our insureds are counting on us to deliver sums payable decades from now. It would be irresponsible for us to risk what all these constituencies need just to pursue a few points of extra return.
A little personal history may partially explain our extreme aversion to financial adventurism. I didn’t meet Charlie until he was 35, though he grew up within 100 yards of where I have lived for 52 years and also attended the same inner-city public high school in Omaha from which my father, wife, children and two grandchildren graduated. Charlie and I did, however, both work as young boys at my grandfather’s grocery store, though our periods of employment were separated by about five years. My grandfather’s name was Ernest, and perhaps no man was more aptly named. No one worked for Ernest, even as a stock boy, without being shaped by the experience.
On the facing page you can read a letter sent in 1939 by Ernest to his youngest son, my Uncle Fred. Similar letters went to his other four children. I still have the letter sent to my Aunt Alice, which I found – along with $1,000 of cash – when, as executor of her estate, I opened her safe deposit box in 1970.
Ernest never went to business school – he never in fact finished high school – but he understood the importance of liquidity as a condition for assured survival. At Berkshire, we have taken his $1,000 solution a bit further and have pledged that we will hold at least $10 billion of cash, excluding that held at our regulated utility and railroad businesses. Because of that commitment, we customarily keep at least $20 billion on hand so that we can both withstand unprecedented insurance losses (our largest to date having been about $3 billion from Katrina, the insurance industry’s most expensive catastrophe) and quickly seize acquisition or investment opportunities, even during times of financial turmoil.
By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well. Moreover, during the episodes of financial chaos that occasionally erupt in our economy, we will be equipped both financially and emotionally to play offense while others scramble for survival. That’s what allowed us to invest $15.6 billion in 25 days of panic following the Lehman bankruptcy in 2008.
The pace of the earth’s movement around the sun is not synchronized with the time required for either investment ideas or operating decisions to bear fruit.
Is it about time for a really good financial advisor? let us recommend one of the very best to you:
Financial Concepts. We highly recommend them.
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example. saverio manzo
http://www.everyoneweb.com/saveriomanzo/ http://saverio-manzo.jimdo.com/ http://saverio-manzo.yolasite.com/ http://saverio-manzo.webs.com/ http://saverio-manzo.weebly.com/ http://saveriomanzo.terapad.com http://www.shareowners.org/profile/SaverioManzo http://www.linkedin.com/pub/saverio-manzo/b/995/63 http://twitter.com/saveriomanzo http://www.facebook.com/people/Saverio-Manzo/854720596?ref=search
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