Obama Keeps Gates at Defence

It seems that Obama is really trying to fashion a Lincoln-like government by keeping Gates on at Defence for at least a year or more.

Gates and retired Gen. James Jones would bring decades of experience to the administration of a 47-year-old commander in chief who campaigned on a pledge to redeploy combat troops in Iraq within 16 months while simultaneously ramping up the U.S. military presence in Afghanistan.

Obama is picking the right man for the job over and over again in his Cabinet. Even Joe Lieberman agrees.

"Everything that President-elect Obama has done since election night has been just about perfect, both in terms of a tone and also in terms of the strength of the names that have either been announced or are being discussed to fill his administration," Lieberman said during a visit to Hartford.

A Solar Investors Primer from Forbes

It seems that the Solar Industry has some interesting trends starting to develop in it. I'm convinced that solar will be the best growth industry going forward once things shake out a bit. Here are some key points from the article.

1.) Thin film versus crystalline silicon-based cells-based cells. Some companies are staking their money on one technology or the other. First Solar (FSLR) is the thin film leader while SunPower (SPWRA) leads in home and utility installation of crystalline silicon. Thin film takes up less materials to build and thus should be cheaper

2.) New solar technology called organic solar cells which are being developed by companies like Konarka. (which isn't publically traded)

These solar cells are made of carbon molecules that figure to be cheaper, more flexible, lighter and more customizable than silicon or thin-film. In some cases they might even be disposable.

They could be the game changing technology that could conceivably get the cost closer to parity with other forms of energy. If we have an office building made with windows that double as solar cells then this organic solar cell technology will be what they use. There might be a time when every window in your house will double as sun harvesting device.

3.) A new business model is being developed to securitize the solar power system into a fixed income security. This defrays the high upfront costs and spreads the project risk to multiple investors. I think they do this through securitizing the solar incentive tax credit but the article doesn't say.

4.) Solar companies are starting to become vertically integrated. They are basically making the solar cells, designing the setup, and then building the solar plants using this securitization model mentioned in 3. This would be quite lucrative if they can sell their electricity at a cost basis that can compete dollar for dollar with a coal/oil power plant.

Here government intervention from Obama will really be a boon. If he put caps on carbon that raises the costs for oil/coal plants ,or provides incentives for utilities to use solar generated energy, then these vertically integrated solar companies will really take off. In the meantime they can control costs and receive a steady income from selling the electricity into the grid at market rates. This could be the so-called "Solar Utility" model going forward.

Cisco to Shut Down for 5 Days

It seems that companies are cutting back on tech buying this quarter and into next year.

"In particular, this will help lower payroll and facility expenses," wrote Nikos Theodosopoulos, analyst with UBS, in a research note Tuesday. "We believe it is prudent for Cisco's management team to plan for cushion in the event of weaker than expected revenues."

That seems like a pretty extreme measure in order to lower their expenses. I guess capital spending on networking equipment is being deferred to quarters where the buyer can afford it. I mean most companies can get by with their old equipment for a few years long before they need to upgrade anything.

FED Now Buying Bad Debt

The FED is still spending like a drunken sailor.

Under the new mortgage program, the Fed will buy up to $100 billion of debt issued by government-sponsored mortgage enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It will also buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

I must be nice to just print more money when you have a need for it. I guess this is just more US debt that China gets to hold.

Public Utility Spending Should Carry Solar

I like how public utilities may be what carries solar companies like Sunpower through the next few quarters.

"In our view, SunPower's track record for successfully developing and executing some of the world's largest photovoltaic projects gives it a major edge when competing for utility contracts," he said, adding that he reaffirms SunPower's rating of "Strong Buy."

Now we need Obama to offer some higher tax incentives that get utilities to switch over from oil power plants to natural gas and solar. I am envisioning a time when the worlds deserts blossom with millions of solar panels that go right into the power grid. I mean the sun is simply baking the sand there now and should be harnessed to power our electric cars.

Obama and Bush Work Together in Transition

It seems that Bush and Obama are really working together quite well now that the hand-over of power is assured. It seems that Bush made a decision on the Citigroup bailout Obama was informed soon afterward.

His statement took only two minutes, but it included this paean to his successor: "I talked to Obama about the decision we made. I told the American people, and I told the president-elect when I first met him, that anytime we were to make a big decision during this transition, he will be informed, as will his team."

About an hour and a half later, Obama unveiled his economic team at a Chicago news conference and mentioned that he'd spoken to Bush and Federal Reserve Chairman Ben Bernanke earlier Monday.

I really like the dignified hand-over of power from Bush to Obama. I'm pretty sure all of the keyboard keys will stay on the keyboards (not like the vandalism that occurred when Clinton handed over power to Bush) once Obama takes control in January. I like this new dignified, principled politics instead of the "Pit-Viper, kill-or-be-killed" Bush/Clinton derangement disorder politics of the last 16 years.

The USA is Now Long CitiGroup?

I guess it is one bad stock after another that the US government keeps buying in order to keep these sad companies afloat. They better break up Citi and unlock some of the value in that company.

ClusterStock's John Carney lays out terms of the $306 billion in loans:

• The first $29 billion of losses from the portfolio will be absorbed by Citi entirely.
• The Treasury Department will take 90% of the next $5 billion of losses, with Citi taking the rest.
• The FDIC will step in and take 90% of the next $10 billion of losses while Citi absorbs the balance.
• Losses beyond that will be taken by the Federal Reserve in the 90% government role. "Note that Citi is still supposed to take the remaining 10% at this stage but it's hard to believe that anyone really thinks Citi would be able to take any more losses once it had written down $40 billion more in this portfolio," Carney writes.

Automakers Plan Stunt at their next begging Session

I guess cheap theatrics will be replacing sound business plans when the Automakers shake their tin cups next month. I guess you can call it the "Million Poorly Made Car" March:

The Detroit area's auto industry, whose livelihood depends on the health of Chrysler LLC, Ford Motor Co. and General Motors Corp. spent the weekend e-mailing and discussing how to set up a giant car caravan to seek help from Congress.

I think the idea of them flying to the begging session in separate corporate jets shows how messed up these guys were. It made the car makers look like they are going to panhandle in a Rolls Royce. If even one of them showed up in a car made by their company then they would have looked a lot better then they had. Like if the GM CEO drove a Chevy Volt there then it would have looked like they were serious about electric cars. Instead they looked like clueless plutocrats.

Carbon Dioxide Found on Planet 65 Light Years Away

Great, now we have the gas that causes global warming on HD 189733b just like we have on earth. It is cool to find out all sorts of new things about these planets though.

"This is the first detection of carbon dioxide in the atmosphere of an extrasolar planet, which means that three of the Big Four biomarkers for habitable/inhabited worlds have now been seen: water, methane, and now carbon dioxide," explained Alan Boss, a planet-formation theorist at the Carnegie Institution of Washington who was not involved in the finding. "The only one that has not yet been detected is oxygen/ozone."

What GM needs to Do to Survive

This is a great rundown on what GM and Chrysler needs to do in order to save their miserable hides since Congress is not going to help them.

Lawmakers also rapped the automakers' high labor costs and particularly the jobs bank, in which laid-off workers get 95 percent of their pay plus benefits even though they aren't working.

The United Auto Workers said it has cut the jobs bank and placed time limits on it in new contracts signed with the companies last year. Still, more than 3,500 workers are getting paid for not working, and that number is sure to rise as the companies continue to cut jobs.

Yes only in the auto industry do you get paid to not work. Plus the number of these unpaid, unproductive workers will suddenly grow as they start to close plants to save money. Talk about a case-in-point on the power of unions in American industry. Plus I found this just mind boggling:

Initially the UAW said it already gave up a lot in the new contracts, agreeing to lower wages for new hires and to shift the companies' huge retiree health care costs to a union-administered trust.

That means GM is currently paying into a trust that their own Union runs? So they have no control over their own health care payouts? So in other words they need Union permission to cut the contributions into the trust, try to shrink its size, or even collect fees from running the thing.

I figured that they cut contributions into this trust as soon as they started to take those multi-billion dollar losses earlier in the year. I think GM needs to go into Chapter 11 simply to rewrite these contracts in order for them to compete with the Japanese. I'm pretty sure Toyota dosen't have the UAW running any part of their business.

Geithner for Treasury: Thank you Obama!

It seems that Obama is picking a real titan of global finance for Treasury.

President-elect Barack Obama intends to name Timothy Geithner, president of the New York Federal Reserve, as his treasury secretary to confront the nation's intense economic turmoil, senior Democratic officials said Friday. The stock market soared on the news.

The market cheered its encouragement to the tune of 494 points on the Dow. I think this might be one of Obama's best picks for any cabinet post. It is the most important one as well with the problems we are facing now. I think this guy could be one of the best guys at the helm of the bailout money and our economy going forward. He is a tried-and-true "world crisis warrior" as well helping in the South Korea and Brazil debt crisis's before he helped out with our crisis.

Also I am getting pretty tired of the long, slow dance that Hillary is doing to get the State job. Just announce the damn thing and get it over with. Either that or give the job to someone else. He can't mess around getting his team into place. He needs to hit the ground running as fast as possible.

Unlike Geithner's reported selection, the Clinton saga was proving to be one of the longest-running and more public of the secrecy-shrouded search for an Obama Cabinet.

A week ago, the New York senator flew unannounced to Chicago to meet with the president-elect. That gave way to days of negotiations in which her husband, former President Bill Clinton, agreed to disclose the names of donors to his library and charitable foundation in anticipation of the close scrutiny her nomination would be sure to face.

GE Facing some Hard Times

I was wondering if GE at $12.84 was a good buy and I came across this article and took some pause. It seems that their GE Capital arm might pull the rest of their fairly profitable businesses underwater.

GE is a bank disguised as an industrial conglomerate. GE Capital is a division of GE, which truly dominates the results of this company. GE Capital has three subdivisions (GE Commercial Finance, GE Money, and GE Consumer Finance). In 2003, GE Capital generated $5.9 billion of GE’s $17 billion of profits, or 35%. By 2007, GE Capital was generating $12.2 billion of their $29 billion of profits, or 42%. Being a bank during the boom years of 2004 to 2007 did wonders for GE’s bottom line. Being a bank now is a rocky path to destruction.

This part seems pretty scary too judging from the amount of insane debt that they have on their books.

GE has $43 billion of long-term debt maturing by June 30, 2009, with another $38 billion due by December 31, 2009. The terms for refinancing this debt will be much worse than the previous terms.

Will they be able to pay the new interest expenses on this debt? Also what happens if they get put on the Credit Watch list by Moody's or one of those other ratings agencies? If GE should lose their AAA credit rating then they are a dead duck. I wonder what the debt covenants and capital requirements due to a ratings cut is on that debt?

Japanese Schoolgirl Signed to Major League Contract

Women are breaking the glass ceiling everywhere. First Sarah Palin now Eri Yoshida was signed by the Kobe 9 Cruise of an independent Japanese baseball league.

Yoshida, a right-hander who is 5 feet and 114 pounds, throws a sidearm knuckleball and wants to emulate Boston Red Sox knuckleballer Tim Wakefield.

Yoshida threw a hitless inning against male batters during a tryout this month and was among 33 players picked in the draft.

A sidearm knuckleball sounds like a pretty scary pitch to hit as well. This is a perfect pitch for a 5 foot tall, 16 year girl because you don't need to overpower anyone with a knuckler. She can throw it at like 40 miles per hour and guys will fall out of their shoes swinging at it. If she can pick up a slider or a fastball (or any kind of consistent change of pace pitch) then she would be a scary reliever. She's cute as a bugs ear too.

These Automakers have some Stones!

You have to hand it to these automakers when they are begging for money.

In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended.

He said he couldn't say precisely, but that the company now was burning through "$5 billion each month."

Still, with the $25 billion emergency package, "We think we have a good shot to make it through this," Wagoner said. He said he anticipated that, if the package is approved, GM would qualify for about $10 billion to $12 billion of the money.

They are burning through $5 billion per month? Then that means this bailout will only keep them afloat until May of next year. So they have about a quarter and a half to turn things around or they will be back in Congress with their begging bowl out by Memorial Day. I think GM needs to go into Chapter 11 and hopefully emerge stronger and more able to compete like UAL did. Union concessions is the only thing that will save them now but no one seems to be talking about that.

The Author of Liars Poker On the Economic Crisis

Now this is some very good journalism on how this economic mess started and some of the people that were involved and actually made money from it. I hope this Michael Lewis guy writes more books because this was an outstanding article. This part is especially prescient:

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

Any business owner that leveraged his company 35 to 1 would be seen as a lunatic and would have his credit lines pulled. These investment banks did this as a way to inflate their massive bonus structures. Too bad they did it with other people's money.

The Youth Vote Won it for Obama

I have damned the youth vote for years. But I finally got a chance to look at the election numbers and how things were broken down and I think the youth may have strait up won the election for Obama.

Between 22 and 24 million young Americans ages 18–29 voted, resulting in an estimated youth voter turnout (the percentage of eligible voters who actually cast a vote) of between 49.3 and 54.5 percent, according to an exit poll analysis released Nov. 4 by CIRCLE, a nonpartisan research center at Tufts University. This is an increase of 1 to 6 percentage points over the estimated youth turnout in 2004, and an increase of between 8 and 13 percentage points over the turnout in the 2000 election. The all-time highest youth turnout was 55.4 percent in 1972, the first year that 18-year-olds could vote in a presidential election.

And 66% of that turnout was for Obama. That means that 14.52 million young voters picked Obama over McCain. Obama won the popular vote by 7.2 million. So you can say that all the Text messaging the VP candidate, the YouTube debates, and college outreach by the Obama campaign swayed this fickle of all voters his way.

It will be very interesting to see what this "what have you done for me lately" generation does when Obama fails to deliver his change message due to the bad economy. Hopefully they can stay with him through this difficult period because this generation has just elected their first President.

Yang is Out at Yahoo

At last it might even be safe to own the stock again.

Yahoo Inc. co-founder Jerry Yang is stepping down as chief executive, ending a rocky reign marked by his refusal to sell the Internet company to Microsoft Corp. for $47.5 billion -- more than triple Yahoo's current market value.

Too bad there is currently a slowdown in online advertising spending but I think MSFT may come sniffing around the carcass now that they have an "Under New Management" sign up. Too bad they will probably get quite a discount on their new offer. You can forget $31 a share but maybe they could get $15-20 a share.

Car Company Bailout May Not be a Sure Thing

It seems that the government might not be so quick to bailout these poorly run businesses after all.

Behind the logjam is a troubling reality for the car companies: Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue.

I still think any bailout needs to come with an automatic renegotiation of UAW contracts so salaries can be set at competitive rates with Japanese automakers. Anything else will just result in another bailout when the automakers blow this $25 billion in a couple of quarters.

Gadget Users Hardly Use Tech Support

I was kind of surprised by the numbers from this recent survey.

However, for all the talk about online communities, the Pew survey showed only about 2 percent of people solved their technology problem online.

About 38 percent of respondents called customer service, 28 percent fixed the problem themselves and 15 percent got help from friends or relatives.

The rest — about 15 percent — gave up.

15% is a pretty high percentage that just threw the thing in a box and forgot about the problem. I would be willing to bet you that those people might never use a product from a company that they gave up on again.

I can also tell you that the 38% that called customer service probably dreaded the experience. I think the outsourcing of tech help has gone a long way toward making these numbers so low. Most gadget owners figure that they could fix the problem themselves or get a tech savvy person to do it rather then talk to some guy named "James" from Mumbai.

GMs Collapse May Cost $200 Billion?

Great, now we have systemic risk from a company that has nothing to due with the credit crisis and everything to do with being poorly run. Their income statement is an absolute joke. What kind of company has a Cost of Revenue that is $5 billion higher then the actual Revenue? That means it costs more to build the cars and trucks then they get from selling them. It is like paying $2.22 to make a lemonade and getting $2.00 for each cup. However the devastation that GMs bankruptcy would cause is scary as well.

The projected expense of $100 billion to $200 billion covers funds for existing programs, such as unemployment insurance, and new measures that would be needed to revive economic growth after millions of auto-related job losses.

Such a sum would be an eightfold increase over the $25 billion bailout package that will be debated in Congress next week to help prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC amid the industry's worst sales year since 1991.

Plus the US Government would be on the hook for GMs outrageous pension plan. The government would suddenly be forced to pay for an extra $11 billion dollars so that retired UAW members can get a pension.

One of the biggest fears in Washington is how a bankruptcy filing by one or all of the auto makers would affect the federal agency that insures the retirement savings of almost 44 million Americans. The Pension Benefit Guaranty Corp. ended 2007 with a $14 billion deficit, though that shortfall was expected to shrink to about $11 billion. Were GM to place its pension burden on PBGC, it would more than double the agency's current shortfall.

I think any GM bailout needs to come with strings attached like the removal of the CEO and upper management. The bailout must also force GM to renegotiate their labor contracts so that they can get that Cost of Revenue number down to something manageable.

Anything else would just keep the company going for another 3 quarters or so and if Revenue doesn't improve in that time (it might not due to a multi-quarter recession) they will simply ask for another $25 billion next year or they will go bankrupt then instead.