In a bottle, apparently...

Watch an obviously drunk Max Baucus ask (and ask and ask) "where's the courage?"...

Ted Kennedy would be gratified on so many levels. Ugh...


The Race to The Bottom Continues at Ford Motor Company

Ford is offering a cash buyout and early retirement incentives to ALL 41,000 of it's hourly workers in an attempt to reduce the size of it's workforce. They'll pay you $50,000 plus a $25,000 car voucher to go away.

Must be the recovery, eh?


My Expectations for the Housing Market

Herewith a pair of charts that illustrate my continued pessimism. The first, from Agora Financial, shows the second wave of mortgage resets (thankfully not quite as big as the first wave) due to hit hard from mid 2010 through 2012. What this chart shows will be disastrous, but what it doesn't show is even worse. The situation on the street is deteriorating right now. As this chart shows, we're in presently a "reset lull" yet, counter to propaganda, foreclosures/serious delinquencies are actually up 55% this fall over last. Why?

No doubt some sub-prime foreclosures are still working their way through the snake, but this year's increase is largely due to two other factors. First is the millions of people who have lost their jobs and/or businesses and are now losing their homes. Second is that many option ARM borrowers are paying a minimum payment that won't even cover current interest. (That this is even an allowable practice says plenty...). The unpaid interest is then added to the principal balance each month, and the loans automatically reset to a much higher payment when the loan to "value" ratio reaches 125%(!). Hence, many of the option ARM's in the chart are resetting early - a major red flag. Many option ARM's were written for good credit borrowers on larger homes, so the dollar value represented is higher than one might think...

With that, here's the chart:

The second chart comes from the Glenn Beck show a few months back and shows inflation adjusted housing price history for the last 120 years. Various versions of this chart have been floating around on the web, all based on the highly credible Shiller data. The peaks and valleys in the market are fairly well explained and it's easy to see what's likely to occur in the near future. Here 'tis:

(Yes, Beck's kind of a clown, but you should play this video a second time and pay close attention to the triple bottom of the Great Depression/WWII era. I think the likelihood of that recurring is high as well. The real estate bottoms were mirrored by the stock market, and a lot of folks were destroyed during the depression on the second and third leg down. Don't let history repeat using your portfolio as the fodder.)

Home values must drop back in line with historical norms, and as this happens the number of people upside down in their loans will skyrocket (as though this number weren't high enough already!) Making matters worse, a Realtor friend tells me that most of the folks now buying homes with the government tax credit are immediately upside down upon closing.

He's pessimistic that a high percentage of these previously foreclosed homes will soon reappear on the market. I agree. These sales won't stick. The housing stimulus program has produced nothing more than a fresh crop of subprime paper. These people are just "secured renters" who actually have no equity to fight for. As the song says, "freedom's just another word for nothing left to lose"...

Despite happy talk about the market bottoming and a recovery being underway, I believe a monstrous shadow inventory of unsold properties will depress the market for years. This inventory consists of 1) bank owned homes not yet on the market (a growing number), 2) homes in the delinquency/foreclosure pipeline (another growing number), 3) high rise condos and lofts that don't show up in any tally because they've never been listed, and 4) homeowners waiting for a better market in which to sell. This last may be the largest number of all, and it will be a long wait.

How bad is this shadow inventory? In the largely agricultural county where I live, well over 10% of the ag parcels are already in foreclosure. New foreclosure notices are published weekly in our little local paper, and dividing these into the total number of ag parcels shows that another 1% of the total parcels in the county join the foreclosure inventory every 6-8 weeks. With a few years to go in this crisis, we could end up with 1/3 of the parcels in foreclosure even if trends don't significantly worsen along the way. God knows where we'll end up!

So little is selling that it's difficult if not impossible to even pull comps. I drive past several vacant properties every day and no attempt is being made to sell any of them. Listings cost money, after all, and what Realtor wants to go broke listing stuff that isn't selling? And, who would lend in this environment? Who would buy??? Clearly, only a fool. When the viability of a market depends on fools, you have a house of cards.

Similar trouble is brewing in the commercial real estate market - trouble bad enough to reach beyond the banks and threaten the solvency of a number of insurers - but that is a bedtime story for another night.

Sleep well...



After attempting to explain to someone what the real intentions are behind all the economic machinations of our government, my listener's response was to ridicule me. Apparently what's wrong with me is that I think "the sky is falling"!!!

I've heard this more than once recently, and I'm sure a lot of us get a similar response these days. It's good to keep in mind Arthur Schopenhauer's observation about truths: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

A noted philosopher, Schopenhauer lived from 1788 to 1860. Among the many reasons I like his thinking is the fact that he called Hegel (a contemporary) a "clumsy charlatan" and often took on Hegel's work, exposing the fallacies Hegel camped on. I've already written here about the Hegelian Dialectic. If you don't understand it yet (as my listener today so clearly didn't) you need to read up.

(And no, I don't think the sky is falling, but that brings back to mind a great atmospheric analogy I've been contemplating. I'll try to turn it into a post sometime soon.)


Low cost portable diesel gensets

This is a response I wrote in another forum to someone considering the purchase of a Chinese made Aurora diesel generator. I'm not all that familiar with the light duty air cooled diesel gensets, but they do outlast and outperform air cooled gasoline gensets hands down. Well, the Aurora gets pretty good reviews, and my response turned out to be a pretty fair general intro to installing and operating backup power in the context of preparedness. Enjoy.

The 3600 RPM Chinese diesel generators should (generally) outlast their gasoline powered counterparts by a wide margin, and they'll use a lot less fuel along the way. You already store diesel fuel, the price is right and you'll have a local dealer for advice and parts. Sounds good to me!

I just want people to make an educated purchase, and it's important to understand the limitations of an inexpensive (a relative term!) generator. Given your circumstances and intended use, I see nothing wrong with the one you're looking at. For a few weeks of post-hurricane grid-down living your biggest concerns will probably be maintaining communications and refrigeration, and the one you're looking at is big enough to start at least two and probably three large fridges or freezers simultaneously. It'll easily run a well pump too, if that's a consideration - just not at the same time as those three fridges! You won't even need to run it continuously - a couple hours 2 or 3 times a day should do everything you need under that scenario.

BTW, all generators are rated at sea level. Folks like me up at higher elevations need to subtract 3.5% from the rated output for every 1000 feet of elevation, and then subtract at least another 10% for density altitude on hot days just to be sure. It's much better for both generator life and power quality to run a larger generator at 80% output than to strain a smallish one at 103%!!! (This is not a concern for the unit you'll be running in Texas, but it could be critical for others reading this topic...)

You should install a manual transfer switch (big fine for electrocuting a lineman these days!) just to be sure you don't inadvertently energize the grid. This is how you'll monitor/control/alternate loads as necessary, so I much prefer transfer switches with a meter even if the generator has a meter too. Have an electrician hook it up if you have ANY doubts...

If the grid's down for a few weeks after a hurricane, plan ahead for looting. If it were me, I'd make provisions to keep it inside the garage and pipe the exhaust out through a wall or the roof. That way, it'll be less likely to go for a walk. It's going to be noisy in the garage when it's running, which could easily mask the sounds of a break-in, so I'd be inclined to beef up garage security and perhaps cement a big eye-bolt into the floor and chain the generator down as well. That way it'll stay safe even if someone gets in or your garage doors are damaged in a storm. (A lot of running generators were stolen during the big northeast ice storm that left 10 states in the dark a few years back. Clever thieves worked at night and put running lawnmowers beside the generator before stealing them so the noise stayed fairly constant and didn't alert the owners sleeping inside!) That exhaust pipe will get hot, so where you pass it through the structure, allow some clearance to combustibles and shield the hole with metal that doesn't contact the pipe. Sheet aluminum is really good for this, and the air gap is important for safety. You can secure a metal screen across the air gap with high-temp silicone but don't stuff insulation in there. (Most insulation is combustible!) If you do this think about adding an extra inline muffler to lower the noise level even further.

You'd have to spend considerably more to get a nice 1800 rpm rig or the Listeriod set-up I have, and that's just not necessary given the light duty use you have in mind. You're right about the weight, too - the cherry picker couldn't lift mine after it was mounted on it's I-beam frame - we had to use the forks on the neighbor's backhoe! When you get moved and buy a more durable unit, this one can serve as your backup.

I think the most important thing with any stand-by power source is to run it - under load - every few weeks. I've worked on a few of these units, and every facility that has backup power for critical loads performs regularly scheduled testing under load. You should too. That keeps everything in good running condition, forces you check things out regularly and builds operational familiarity. (You'll be stressed out and dealing with plenty of other problems in an emergency anyway. Knowing your power system like the back of your hand will be a godsend.)

I'd strongly suggest you put thermometers in your fridges right away and find out exactly how much run time you need to keep your food cold. (If you're not going to run A/C, keep in mind that refrigerators run longer and more frequently when they're in a hot environment. The appliance manufacturers have power usage data for different ambient temps that you'll want to find online or request.) Use the generator for this run testing, and run all the other loads as well - just as you will when the grid goes down. It'd be best to turn your main breaker off and live on generator power for a day or two right away just to test your assumptions and figure out the best way to do things. (Do this before you decide which circuits to tie the transfer switch into, using extension cords for the loads you're running.) Note your fuel consumption, adjust run time and/or run frequency for fridges in a warm house and then adjust your fuel storage accordingly. (Of course, all these part-time running calculations go out the window if you're planning to care for anyone who needs medical equipment to stay alive. Then you really need to think about fuel storage!)

On this generator the fuel tank is above the engine, and you NEVER refuel this type of generator when it's hot. The fuel consumption notes from your practice runs will tell you how often you'll need to refuel. Chart the appliance run time info and cold fueling schedule and post it on the wall by the transfer switch. A cheap wind-up oven timer is really handy to keep track of generator run time in a grid down emergency.

Use a fuel stabilizer (and I concur with the recommendation of Pri-D, the best diesel stabilizer out there) in all your stored diesel. Use the internet and the local dealer to find out what problems other owners of this generator may have had and lay in spare parts accordingly. If the alternator isn't brushless, be sure to stock some brushes and learn to change them at night with just a flashlight for illumination. I'd also figure out which synthetic oil works and after some break-in hours or at the first scheduled oil change I'd switch to that. Most likely Rotella Synthetic from your local Wally World would do fine.

This is a hair off topic, but I'd think pretty seriously about putting in a small bank of deep cycle batteries and a little modified sine wave inverter to power cellphone chargers, cordless phones, battery chargers, TV's/TV receivers and laptops/routers so your comms continue to work without running the generator full time. If you have a security system you'll want to keep that running during an emergency, too. (An LCD or LED TV is very energy efficient and this is a good excuse to get one if you don't have one yet! "We need it to monitor the news in an emergency, honey...")

For years I ran all my comm loads off batteries full-time and charged the batteries with grid power. When the grid's down, a few hours of charging twice a day should keep the batteries happy as long as you minimize use and unplug the various loads when they're not in use. (Then, as time passes, you can add a PV module or three, and a charge controller, more and bigger batteries, a sine wave inverter... It's a disease, really )

Kudos to you for making the preparations, but here's hoping you never need them!


Interesting EMP Videos

With so many variables, there's no saying just how bad the effects of an EMP would be, but I present these for your consideration. It's something we need to be thinking about...

Part One:

Part Two: