After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Saturday, July 20, 2019

I am not a crook

A cartoon by Pat Bagley.

Scotland on path to 100% green electricity by 2020

Ardrossan wind farm.  Source: Wikipedia

From World Economic Forum:

So far this year, Scotland's wind turbines have produced almost double the amount of wind energy needed to power every household in Scotland, according to WWF.

As WWF explained in the report, between January and July of 2019, Scotland generated 9,831,320 megawatt hours (MWh) of wind energy, as per data recorded by WeatherEnergy. That's enough to power 182 percent of all 4.47 million Scottish homes, or nearly 100 percent of homes in both Scotland and the North of England. The new figures have set a new record for the country's wind power output.

“These are amazing figures, Scotland’s wind energy revolution is clearly continuing to power ahead. Up and down the country, we are all benefitting from cleaner energy and so is the climate," Robin Parker, WWF Scotland's Climate and Energy Policy Manager, said in a statement for WWF.

Alex Wilcox Brooke, Weather Energy Project Manager at Severn Wye Energy Agency, added that these statistics show how reliable wind energy can be. “These figures really highlight the consistency of wind energy in Scotland and why it now plays a major part in the U.K. energy market," Brooke told WWF.

Scotland is pretty forward-thinking when it comes to renewable energy. As detailed on Scotland's government website, the country has a goal of using renewable energy sources to provide 100 percent of Scotland's gross annual electricity by 2020. If Scotland accomplishes this goal, that would mean that beginning next year, Scots will not be using any fossil fuels to generate electricity.

When Scotland set that 2020 target, it also set an interim goal of powering 50 percent of its electricity with renewable energy by 2015.

Since achieving that interim goal in 2015, Scotland has continued to ramp up its dependency on renewable energy. The Independent called the country a "world leader" in renewable energy, and noted that in 2016, 54 percent of Scotland's electricity came from renewables, and in 2017, 68.1 percent came from renewables. And in 2018, 74.6 percent of Scotland's gross electricity came from renewable sources, according to Power Technology.

When a country at first starts to replace fossil fuels with renewables, the percentages seem to mount so slowly.  It's just 2% then 4% then 6%, and fossil fuels remain overwhelmingly important.  The task of getting to 100% seems overwhelming.  But then we reach a tipping point, where suddenly renewables are significant, and not long after that, it is fossil fuels which provide only small percentages of total generation. 

This is because of the effect of compound growth.  If renewables capacity is growing by 20% per annum, even if you start with just 5% of your electricity coming from renewables,  within 10 years it will have reached 30% and within 20, 100%.    The annual growth rate in renewables capacity is the key factor, eventually, even though at the beginning the transitions seems so slow.  Every country should commit to increasing their renewables capacity by 20% per annum.  Even if at the beginning that doesn't lead to big falls in emissions, within a few years, it will.

Friday, July 19, 2019

Convincing NASA

SpaceX's Starship on the Moon and Mars

Musk is interviewed by Jeffrey Kluger of Time Magazine.  It's well worth reading the whole interview, but I'll reproduce just part of it here.

JK: It could not have been easy getting a home-brew space mission and rocket company off the ground. How did you begin?

EM: I went to Russia a couple of times because I couldn’t afford the American rockets. They were too expensive. Russia was decommissioning a whole bunch of ICBMs [intercontinental ballistic missiles]. So in 2001 and early 2002 I went to Russia to try to buy some decommissioned ICBMs, which sounds crazy, but you know, they’re gonna throw them away anyway. But they kept raising the price on me.

I also came to realize that even if we doubled NASA’s budget, unless NASA had good options for rocket contractors, they would still not make progress ’cause it would just be more expendable rockets and we’d be at risk of a flags-and-footprints outcome for Mars, which is still better than not going there at all, but not as good as having a base on Mars, a base on the Moon, and ultimately a self sustaining city on Mars. And so I was like ‘okay I gotta try building a rocket company here.’

I thought this was almost certain to fail. In fact, I would not let anyone invest in the company in the beginning. Not because I thought it would turn out well, but because I thought it would fail.

JK: If the Elon Musk of 2019 could talk to Wernher Von Braun, Chris Craft, Gene Kranz and all of the heroes of the 1960s—if you had one piece of advice to give them whether it was technological, spiritual, salesmanship, long-term vision, what would it be?

EM: Well, Wernher Von Braun really knew what he was doing. His plans were for reusability. But those plans were stymied. It doesn’t matter how you skin the cat, you just have to get reusability done. It’s so insane the way rockets work today. It would be like if you got a plane and the way you get to your destination is you bail out with a parachute over the city in question and your plane crash lands somewhere. That’s how rockets work today—with the exception of Falcon 9. This is completely bonkers.

In order for us to be a multi-planet species we must solve full reusability of rockets. In the absence of that…. It would as though if in the old days if ships were not reusable. The cost of an ocean voyage would be tremendous. And you’d need to have a second ship towed behind you for the return journey. Or you can imagine if airplanes were not reusable, nobody would fly, you know, because airliner costs a couple hundred million dollars.

So this is why full and rapid reusability is the holy grail of access to space and is a fundamental step towards it—without which we cannot become a multi planet species. We cannot have a base on the moon or a city on Mars without full and rapid reusability. This is why we’ve been working so hard towards reusability at SpaceX.

JK: If you had to bet your house on it, when would you say the next boot prints show up on the moon?

Well, this is gonna sound pretty crazy, but I think we could land on the moon in less than two years. Certainly with an uncrewed vehicle I believe we could land on the moon in two years. So then maybe within a year or two of that we could be sending crew. I would say four years at the outside.

JK: And when you say, “We,” do you mean the U.S. or you mean SpaceX?

I’m not sure. If it were to take longer to convince NASA and the authorities that we can do it versus just doing it, then we might just do it. It may literally be easier to just land Starship on the moon than try to convince NASA that we can.

Obviously this is a decision that’s out of my hands. But the sheer amount of effort required to convince a large number of skeptical engineers at NASA that we can do it is very high. And not unreasonably so, ’cause they’re like, “Uh, come on. How could this possibly work?” The skepticism…you know, they’d have good reasons for it. But the for sure way to end the skepticism is just do it.

Instead of going with the Falcon rockets and Dragon spacecraft you’ve got and saying, “Let’s get ourselves to the moon in three years,” you’re going an even more ambitious step further with, the Super Heavy and Starship. Why do that? Why not say, “We can go now”?

Well, I think we could do a repeat of Apollo 11 and a few small missions—you know, send people back to the moon. But the remake’s never as good as the original.

We really wanna have a vehicle capable of sending enough payload to the moon or Mars, such that we could have a full lunar base. A permanently occupied lunar base would be incredible. Like we’ve got a permanently occupied base in Antarctica. And it’d be absolutely way cooler to have a science base on the moon.

So that’s why we’re trying to build it as fast as possible. You know, I think it’s generally a good idea for a company that is building technology to try to make its own products redundant as quickly as possible. It’s slightly discomforting because we’ve put so much work into Falcon 9 and Falcon Heavy and Dragon. But actually the thing we should aspire to do is to render them redundant as quickly as possible. And we’ll put them in the museum.

[Read more here]

I don't doubt that when SpaceX gets Starship to work, i.e., to get to orbit and return from it without disintegrating, then it will start buying berths on the Moon and Mars expeditions.  It would be silly not to.  Musk has already pointed to how much cheaper the steel Starship will be compared to the one which was to be made of carbon fibre composites, and suggested that it will cost less to build than the Falcon 9.  And if it is re-usable as well, the cost of launching 1 kilo into LEO will drop 500 fold.  Probably the first crew and passengers going to Mars will all be engineers, doctors, scientists and technicians, and most of them will be from NASA. 

But until then, NASA will prolly not give SpaceX much dosh, because politics.  As Teslarati puts it:

Although minor progress has been made in the last six or so months, NASA headquarters – for the most part – still effectively operates as if SpaceX’s next-generation launch vehicle plans do not exist, all while the agency is seriously considering other similarly unproven rockets with years of development remaining. In light of this frustrating inconsistency, Musk has taken to publicly acknowledging that developing, building, and launching Starship completely internally may be an easier (and faster) fight to win than attempting to convince NASA to assist in Starship development or even just be willing to use it as a launch option.

NASA assistance or support could come in any number of forms, ranging from a cost-sharing development contract, a developmental launch contract like the US Air Force’s STP-2 Falcon Heavy mission, or something as basic as publicly expressing support for the SpaceX program and a willingness to launch NASA payloads on it down the road. For now, the closest SpaceX has gotten to public NASA interest in and acknowledgment of Starship is an official Starship render posted by the Goddard Space Flight Center (GSFC).

In a sign of just how unengaged NASA is, the closest SpaceX’s Starship/Super Heavy vehicle has gotten to an acknowledgment from NASA headquarters is quite literally having an outdated BFR render subtly included in a few slideshows and documents published less than two months ago (late May 2019).

Record 20C+ north of the Arctic circle

Alert, Nunavit, Canada, according to Google Maps.  Click image to enlarge.
The map makes it easier to see why if Alert has temperatures of 20 C, Greenland's ice is melting.

The planet’s most northerly human settlement is in the midst of an “unprecedented” heatwave as parts of the Arctic endure one of their hottest summers on record.

Canada’s weather agency confirmed on Tuesday that temperatures in Alert, Nunavut, peaked at 21C at the weekend – far exceeding the July average for the area of around 5C.

Overnight temperatures on Sunday remained above 15C; again, well in excess of nighttime lows that usually hover around freezing in a settlement that lies less than 900km from the North Pole.

The previous temperature record for the town, of 20C, was set in 1956.

In a further alarm bell for the region, the mercury climbed above 20C for a second day on Monday – the first time Alert’s climate station has recorded two consecutive days of 20C-plus temperatures in its history.

Alert is the northernmost permanently inhabited place in the world – with a population numbering less than 100 – and is far to the north of the Arctic Circle.

David Phillips, Environment Canada’s chief climatologist, said the weather in the far north of Canada was “quite spectacular” and “unprecedented”.

He told the Canadian Broadcasting Corporation: “It’s nothing that you would have ever seen.” 

Armel Castellan, a meteorologist at the Canadian environment ministry, told AFP the extreme weather was “quite phenomenal”.

“It’s an absolute record, we’ve never seen that before,” he said.

Tyler Hamilton, a meteorologist at the Weather Network, said: “This is in fact the first time a temperature warmer than 20C has been measured north of 80° on the planet.”

Alert’s heatwave comes as nearby [it's not actually 'nearby', although it is adjacent to the Arctic] Alaska saw its own record temperatures earlier this month.

Anchorage, the state’s largest city, sweltered in 32C on 4 July – shattering the seasonal high of around 24C.

Other local records were set across southern Alaska and came after five weeks of above-average temperatures in the outlying US state.

Rick Thoman, a climate specialist at the University of Alaska, said at the time that exceptionally warm weather events would only become more frequent because of the loss of sea ice and warming in the Arctic Ocean.

“These kinds of extreme weather events become much more likely in a warming world,” he said.

“Surface temperatures are above normal everywhere around Alaska. The entire Gulf of Alaska, in the Bering Sea, in the Chukchi Sea south of the ice edge, exceptionally warm waters, warmest on record, and of course record-low sea ice extent for this time of year off the north and northwest coasts of the state.”

[Read more here]

Was that it? Is the US recession over?

After big falls in June, both the Philly Fed and the Empire State surveys rebounded.  As you can see in the chart below, the rebound suggests that the US "recession" is over. 

OK, these are just 2 of the Federal Reserve's 5 regional surveys.  Yet the fit with the cycle (using GDP growth to measure it) is good, though not perfect.  However, taken together with my US diffusion index, which has turned up, it suggests that the US economy is recovering.  It's possible that the economy suffered a shock after the trade wars started, and now that supply lines have been partially rejigged, and confidence has recovered, it has picked up.  Or it is undergoing just another of the those mini cycles we have had since 2010. 

What this means, though, is that after the Fed's probable rate cut at the end of this month, there will be no further rate cuts.  Which has implications for bonds (the bull run in Treasuries is over), for the US $ (likely to continue to strengthen), and for equities.  Wall St is battling the head wind of falling company profits  right now, but if the economy is rebounding, so will earnings.  Meanwhile, it scarcely seems possible that the Fed will raise rates yet.  So there will be a brief "sweet spot" where earnings are likely to increase while interest rates don't. 

What about the rest of the world?   It is because of global weakness that I think the Fed will cut at the end of July.  If, though, the US economic growth heads back to 3%, domestic considerations will trump (as it were) foreign conditions, meaning that there will be no further cuts should that happen.

We still have to worry about Trump's erratic switches concerning trade wars and blood wars, of course.  And I can't help you there.

Thursday, July 18, 2019

Inherit the legend

Nearly 50 years ago, on July 21st, 1969, the first man ever to do so set foot on the Moon.  In perhaps another 3 years, there will once again be humans on the Moon, this time to stay.  SpaceX plans commercial launches of its BFR to LEO (low Earth orbit) starting two years from now, and 'Dear Moon' is scheduled for 2023.  What an achievement the first Moon landing was.  We are standing on the shoulders of giants.

Here is a image from HumanMars by Gravitation Innovation of the Saturn V rocket next to SpaceX's Starship (BFS) and Super Heavy (BFR).   BTW, I think Gravitation Innovation is too pessimistic.  Unless something goes very wrong we'll be on the Moon before 2025, and on Mars in 2025.  Could something go very wrong?  Alas, yes.  The stainless steel Starship might not be viable.  It might disintegrate on re-entry, for example.  There will be other failures like the 'unscheduled disassembly' of Crew Dragon, which will delay the whole process.  Since we can, realistically, only get to Mars whenever it is is opposition to the Earth (i.e., when it is closest) a 3 month delay would postpone the Mars expedition by 2 years.   That doesn't apply to the Moon, though.  A 3 month delay will be just that for expeditions to the Moon.

US Housing permits slow

In the USA, statistics for both housing starts and housing permits are calculated.  On the whole, housing permits are perhaps slightly the better indicator, because starts will be affected by the weather, while the number of permits issued will not, plus permits have a slightly better lead, because obviously a permit has to be obtained before construction can start.  Housing permits issued are falling, though not precipitously.  But they have been falling since early 2018.  Given that the long-term mortgage rate has been falling for months (it started rising in July), one would have expected housing starts to pick up not fall.  

Interesting—an indicator of consumer and investor uncertainty about the longer-term eco picture.