Articles from 04/13/08 to 04/19/08

Wall Street was thrilled that Citigroup cleared its books of much of the debris left by the hurricane which swept through the credit markets. Citi wrote off billions on its holdings of CDOs and auction rate securities and other high risk pools which are now can barely be given away, let alone sold.

But analysts I talked to today warned that Citi still faces the same kind of risk other financial sector companies face in this time of economic crisis. More write-downs are expected for credit, home equity, mortgage and other kinds of retail debt as consumers battle with lower home values and higher prices for food and energy.

By the way, for those of you who saw my Tech Talk segment last night, I got a call today from Verizon. Stay tuned for more.

On the drive up to Pittsbrugh from Washington DC two things stand out: the billboards for the coal industry and the giant windmills slowly turning along interstate 76.

The coal industry is spending a chunk of change to make the point that more than half the state's electricity comes from mines. People here have been digging out coal for more than a century. 250,000 thousand people still make a living off the industry.

But now there are windmills here too. A new carbon economy is rising up. Pennsylvania companies are rushing to take advantage of new opportunities in nuclear, wind and solar power.

Most surprising thing I learned: Pennsylvania is fortunate to sit two to three miles above geological formations that might just be perfect places to pump in greenhouse gas emissions. The idea is to pipe the gas deep underground where, over time, it may eventually turn back into rock.

Imagine that. Pennsylvania could make money off greenhouse gases coming and going -- digging it up and burying it.

Maybe that's why I didn't find voters in Pittsburgh were overly concerned about plans by presidential candidates to cap and trade carbon.

I found it fascinating, in the process of reporting today's story on world food prices, to learn how the impact of changes in one part of the farm economy here in the U.S. can have such broad implications for the rest of the world. Perhaps you've read or heard about some of the riots that have occurred in parts of Africa, Haiti, and Bangladesh over sharply rising prices for rice. The less-obvious aspect of this story is how U.S. rice exports factor into the equation.

The U.S. exports nearly all the rice it grows...and ranks among the top five rice exporters in the world. The interesting fact, pointed out to us by Wachovia Securities grains analyst Bill Nelson, is that U.S. rice growers have in recent years devoted less acreage to rice planting -- and more to corn. Why? Because of the high prices ethanol producers will pay for corn. US acreage has dropped by some 600,000 acres in the past few years, and that's helped play a role in whether rice supplies are adequate to meet rice demand in the rest of the world.

Since record gasoline prices are on many people’s minds these days, I thought it might be interesting to tell you about the "Fuel Cost Calculator" I discovered on the AAA site today.

Here’s the link: http://www.fuelcostcalculator.com/TripGasprice.aspx

Basicially, you imput the city you are driving to and from, as well as your vehicle make and model, and it will tell you how much your trip costs. I discovered, for example, that driving from New York to DC, where my parents live, will cost about $80 round trip for gasoline.

That’s actually underestimating it because AAA uses the national average for the price of gasoline, and the price in the New York metropolitan area is always substantially higher. And that $80 doesn’t include tolls or wear and tear on the car, either.

A trip to Pittsburgh has convinced me that the Carbon Economy is real.

The defining feature of this economy is that manufacturers, indeed any business, will soon be paying for carbon. Want to make steel, electricity or cars? Companies will soon have to pay for the right to emit the carbon required to make those products. With President Bush calling for the growth in US carbon emissions to peak in 2025, the only real debate seems to be how soon this happens.

Let's put this issue in more concrete terms. The market price to emit a ton of carbon in Europe is now about $40 a ton. The US emits 1.9 billion tons of carbon a year. At today's market price those emissions would cost about $76 billion a year.

That's a huge market and companies I talked with in Pittsburgh already see the opportunity to supply the technology needed to manage and reduce carbon emissions. Frankly, I thought Pittsburgh might be behind the curve. Now I think the city has a real chance to emerge as a leader in the carbon economy.

I just couldn't resist including this link to a graph laying out PBS viewership and stock ownership.

I am not sure what this really shows, but I suspect it is related to education and income. States with higher levels of college education seem to watch PBS more and own more stocks.

How to pay for college is a stressful subject. Honestly, it makes me want to bury my head in the sand. I opened a college savings account for my oldest daughter in 1999, dumping a small chunk of change in an “aggressive” tech fund, thinking I wanted to maximize return and not worry too much about risk, since at that time college was a long way off. Ok, so that didn’t work out. My “less risky” funds have not fared much better of late.

What is almost as stressing is all the talk about the high cost of college. Luke Swarthout, a higher education advocate for U.S. PIRG, compared college affordability to buying a car – if the only ones available were Bentleys and Rolls Royces. But I worry about the kids who want to go to college and get discouraged from even trying. There are affordable schools out there and with tuition assistance it can be a manageable expense. Why is it that colleges post such a high “sticker price,” even though the majority of their students don’t pay it?

It’s easy to understand why investors are piling into Bear Market funds.

Consider that the Direxion NASDAQ-100 Bear 2.5X Inverse Fund is up 35% year to date. It is designed to produce 2.5 times the inverse of the Nasdaq 100’s daily return. What most investors probably don’t know is that last year it tanked 36%.

This is a prime example of the volatility of these funds -- they can go down as quickly as they go up.

Historically, the stock market has gone up more often than it has gone down. So, while the funds may outperform in the short term, they don’t usually do well over long periods of time. That’s why financial planners say one of the most common mistakes investors make is holding bear market funds too long.

It’s done. Finished. Complete. Mailed. Yes, mailed. I don’t seem to be able to e-file my tax return, and that’s just one of my gripes. Mind you, I am not a tax protester. Of course, less is always preferable, but in truth my federal income taxes don’t seem to be too bad. Don’t get me started on my property tax.

No, my gripe about taxes is less about the amount and more, in fact, mostly, about the unbelievable complexity. For a few years back in the 80s I had an accountant. But when the accountant’s fee went into 4 digits, I decided to fight back. The government, in my view, may have a right to make me pay a fair share to support government. But it does not have a right to make it so darn difficult to file that I have to spend big bucks for professional help.

So each year I spend under $100 to buy Intuit’s TurboTax program. That includes the fees for two states since I live in New Jersey but work in New York. Then I clean off my desk, pile on the receipts and records (carefully maintained with Microsoft Money throughout the year) and do the best I can with a hopeless task.

I spent much of last week in Pittsburgh, and now that I'm back I can't understand why the candidates are going at it so hard over NAFTA.

Frankly, I just don't think voters in the state are that concerned. Though the economy is softening, Pennsylvania is doing fairly well on the jobs front. People in Pittsburgh tell me that the economy had held up fairly well and there is a need for skilled labor and even basic construction. This is not Ohio where job losses are more pronounced.

Trade issues are important, but I got the impression most Pennsylvanians want to know what the candidates will do to keep the state competitive with China. How about their positions on global warming and caps on greenhouse gases? What about health care?

NAFTA? At best it is a proxy issue for a candidate's views on worker rights or a candidate's consistency on trade policy. But real concern about NAFTA in Pennsylvania? I didn't find much.