The profit in Global warming

[darthtang aw]

I've never met a politician that is smarter than the free market.
Or a scientist.
Or an economist.
The problem with elitist "management" of "free" markets is the inevitable unintended consequences. Sometimes those consequences are accurately predicted by conservatives. Other times it takes turning the government micro-management loose on the free market to see what happens.
“They quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year...
So since 2005 the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct. The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage.” (MSNBC)
So while the whole concept of carbon credits was to reduce gases related to alleged global warming, this perverse system has actually created an incentive to create more of those gases.
This would be a good time for conservative critics of carbon credits to say "We told you so."
We told you so.
The whole concept of carbon credits is the worst of both worlds. Not only is the government interfering in the free market, it's trying to create a market out of thin air by forcing people to want something they really have no use for (carbon credits).
But--as mentioned above--the free market is smarter than any politician, government, scientist or economist. The free market will look for a way to profit, and it will always out-smart the politicians and their regulations.
So here we have an example where an industry creates two gases regulated by carbon credits. And it just so happens that by creating more of one, it can create and destroy more of the other--resulting in the accumulation of artificial, yet lucrative, carbon credits.
To those who would quickly suggest "fixing" the regulations to eliminate this loophole, good luck. The combination of global warming gases produced by this process is unique to this process. Any of the other unknown number of industries that generate controlled gases will produce them in other combinations, or perhaps the same gases in different proportions.
There's truly no way to architect a carbon credit scheme that will accomplish the stated environmental goal.
This should come as no surprise. Carbon credits were marketed as "regulation light" or even a "free market" solution. They're neither. They're hard-fisted government regulation with all the downsides and costs involved in any other regulation. And given artificially imposed regulations, the free market has done what it does best: It has figured out how to profit, and the politicians have actually created an incentive to make matters worse.
This should serve as yet another crystal clear example of the dangers of government regulation and market manipulation.
Even supposedly good-intentioned regulations can produce results precisely opposite of what was desired. Encouraging home ownership led to a housing bubble and crash. Interfering in the higher education market has led to higher tuition and a student loan bubble. Artificially low interest rates has led to the stock market ballooning and crashing. And trying to manipulate the market to reduce certain gases has actually result in their increase. One shudders to think of the eventual outcome of government interference in the health care industry.
Politicians tinker with the free market at our own risk because politicians aren't as smart as they think they are. The free market is much smarter every time. In this case, the air conditioning industry just outsmarted the entire worldwide global warming industry.
And, in fact, the air conditioning industry is currently profiting from the arrogance and stupidity of the global warming industry.
Now if I could just convince the government to create a stupidity credit market from which I could skim a commission on each transaction, I'd be all set.

 

[slice]

I think the politicians have figured out how to finally beat the free market:
http://www.politico.com/politico44/2012/08/obama-lets-repeat-auto-rescue-with-every-manufacturing-131566.html

 

[darthtang aw]

I think the politicians have figured out how to finally beat the free market:
http://www.politico.com/politico44/2012/08/obama-lets-repeat-auto-rescue-with-every-manufacturing-131566.html
if that were true the volt would be meeting sales expectations and they wouldn't have stopped manufacturing them. Even with a 7200 tax credit..
If that were true, Solar Panel companies wouldn't need the huge subsidies to make them viable. Incidentally...Anyone find it odd, that solar Panel manufacturing plants....use the most Energy from the Electric companies over any other manufacturing outfit? If that isn't redundant.

 

[darthtang aw]

What Does the Next GM Bankruptcy Look Like
John Ransom
It’s not too early to start thinking about how the next great crisis in the auto industry will shake up the world.
With the general economic slow down worldwide, declining auto sales and uncertainty surrounding the future direction of the automotive market, another automaker meltdown isn’t out of the question.
And because the high profile federally-financed bailout for GM has generally gotten poor reviews from politicians, voters and Wall Street, General Motors is a good place to start to look at what the next automotive bankruptcy could entail.
Already there is at least one suit pending that threatens to undo the work of the first bankruptcy.
“The new General Motors Co. (GM) could be undone by a lawsuit that pits general creditors against hedge fund,” reports Bloomberg, “including Elliott Management Corp. and Fortress Investment Group LLC (FIG) over $3 billion, the car company said in a lawsuit that went to trial today.”
The trustee for the old GM is contending that certain hedge funds got special treatment from the company while the company was preparing for bankruptcy. The trustee is asking for the court to reverse almost $3 billion in claims by the hedge fund.
If that happens, GM claims that it would essential nullify the sale of new GM by the old bankrupt GM, which will create a mulligan for the entire bankruptcy since 2009.
The court trial began yesterday. If the plaintiffs are successful, it would result in GM being restored to pre-bankruptcy days, a situation that GM characterizes as “chaotic” according to Bloomberg.
Barring those developments, there is sizable room for worry.
While GM has a big cash stake of about $34 billion according to Seeking Alpha - a little less if you look at figures from Capital IQ- the company also has $134 billion in pension liabilities, of which about $25 billion is currently unfunded.
In fact, the company is trading at about the same amount of cash they have in the bank. That’s usually not a very good sign for a publicly-traded company.
If this company didn’t have the full-faith-and-credit of the U.S. government standing behind it, it’d likely be trading much lower. Because those pension liabilities will most certainly eat into cash. And guess what? Come November the full-faith-and-credit of the government might be removed from the company at the polls.
It’s those pension liabilities that that have the street worried, says Robert Broens of Seeking Alpha.
“The company operates with roughly $14.7 billion in short and long term debt. The company furthermore has massive pension fund liabilities and retirement benefits outstanding,” greatly affecting valuation. To help make good those pension liabilities is why the U.S. government gifted a portion of the bailout proceeds to GM.
In the quarterly report released in August the company said that “certain retired participants in the salaried plan are being offered lump-sum distributions. Retired salaried employees that are not offered lump-sum distributions or those that decline the lump-sum offer will receive annuity payments from [an] insurance company in accordance with the terms of the group annuity contract. We expect to incur pre-tax special charges in the range of $2.5 billion to $3.5 billion ($3.0 billion to $4.0 billion after tax) in the second half of 2012,” in order to fund the annuity contract.
While the company would like to make us all believe that U.S. sales are robust, and all the troubles are in Europe, the truth is that bigger manufacturers like GM have been getting out-hustled the last two years by smaller competitors says Autonews.com
“July industry volume is up 10 percent,” says Autonews, “but not for the four best-selling automakers in July 2010: Ford 1 percent higher, GM 2 percent, Honda 4 percent and Toyota group is down 3 percent. So who's winning the July 2010 to July 2012 comparison? The next four in line. Then No. 5, but now No. 4, Chrysler Group is up 35 percent in two years. Hyundai-Kia Automotive is up 23 percent, Nissan Motor Co. 19 percent and Volkswagen of America 54 percent.”
The problem is that the bigger companies dominate the market for trucks, which American drivers love. Ford and General Motors each produce more trucks than cars. Truck sales have surged from around 2 million in 1980 to over 9 million units today, more or less. Truck sales however, are more dependent on economic factors like the housing market, the small business environment and gas prices than cars are. If the economy is not growing trucks sales get hurt.
Sales need only decline to from about 14 million vehicles currently to 10 million in the U.S. in order to undo the math on which the GM bankruptcy was predicated.
As sales decline in the wake of a stagnating economy in Europe, China and the U.S., it’s quite possible that GM could face a cash crunch from those overhanging pension liabilities.
With the likelihood of further stimulus measures fading, incentive programs like cash for clunkers having run their course, the next bankruptcy certainly would be forced to deal with the pension liabilities- which represent the biggest long-term threat to GM’s survival- in a much more honest way.
In short, the next GM bankruptcy, with it's dooming pension drag, will look an awful lot like the last one.
But maybe next time someone can re-build GM, you know, to last.

 

[reefraff]

I saw a story the other day about how GM's finance is carrying paper on a ton of loans that are very shaky. If the economy continues to slow down and people start defaulting on those loans GM is dead.