Category Archives: economics

Less than 1 year to the crash

Stock market crashes happen for a reason, and generally the reason is that owning stock is seen as less profitable than owning bonds, gold, guns, or hundred-dollar bills stuffed into one’s mattress. For this essay, I thought I might explain the reasoning behind the alarm bells that virtually every economist has been sounding. For the last year and a half they’ve been sure a severe correction is imminent. The reason has to do with price and predictions of profitability.

Let’s begin with Nobel Laureate economist, Paul Krugman of the New York Times. He has been predicting severe job losses, and a permanent stock collapse since Trump’s election in November 2016. Virtually every week he announces that the end is near, and every month the economy looked better. A lesser man would give up, but he has not. Why? Mostly it’s his hatred of all things Trumpian: Krugman can not accept that Trump could avoid destroying the economy, and con not imagine that any investor would see things otherwise.

Apparently some folks felt otherwise, and caused unemployment to drop and the market to rise. but then, in September 2017, Krugman’s dire predictions were echoed by Robert Schiller, 2013 Nobel winner, and author of a textbook the majority of schools use to teach market analysis. Robert Schiller, has argued that valuations are extremely expensive. “This stock market bears striking similarities to that of 1929. “The market is about as highly priced as it was in 1929,” “In 1929 from the peak to the bottom, it was 80 percent down. And the market really wasn’t much higher than it is now in terms of my CAPE [cyclically adjusted price-to-earnings] ratio. So, you give pause when you notice that.”

What Schiller is referring to is his particular version of the price to earnings ratio, the price of the average stock share divided by the amount of the average earnings per share. Schiller’s CAPE version uses the ten-year, inflation-averaged earnings, rather than today’s earnings, and finds the ratio is high, as the graph below shows. When he made these comments, this ratio was 25, nearly as high as the 1929 peak. The ratio is now higher, 32.74, higher than it stood on “Black Tuesday.” Why this number is important is that the profitability of a stock-share is merely the inverse of the Price/ Earnings ratio. The current ratio, 32.74 suggests that the average dollar’s worth of shares will return about 3.05% (1/32.74 = 3.05%). By comparison, one could buy a five-year treasury bond and get 2.96%. That’s hardly less, and federal bonds are totally safe. More alarming yet, the Federal Reserve has indicated that it will continue to raise interest rates at planned rate of 1%/year for at least the next year. At some point, people will decide bonds are the far better bargain, and will exit stocks en-mass. And then it’s crash-city, or so the theory goes.

The Schiller Price to Earnings ratio as of July 27, 2018. It suggests a crash is past due.

Shown above is a historical plot of Schiller’s particular version of the price to earnings ratio based on the S+P 500 index, with data going back to 1880. It’s argued that his version using a ten-year, trailing average of corporate profits, is better than the non-adjusted, one year P/E ratio: the version you find in the newspapers. In the newspaper version, the peaks don’t show up until just after the crash because company profits tend to spike along with prices. In this version, profits can’t exactly spike, and stock crashes show up as valuation peaks. The crash is seen as a consequence to high values of the Schiller P/E. In terms of CAPE, we are at a more dangerous spot than in 1929. We are more exuberant than in 2008, or when Alan Greenspan warned of irrational exuberance. Schiller: “you give pause when you notice that.”

Schiller Price to earnings ratios are a good predictor of future stock prices. We are past the end of this chart, suggesting a significant loss of stock value ahead.

Schiller Price to earnings ratio plotted versus 20 year stock return. The higher the Schiller P/E, the lower the return. We are past the end of this chart suggesting we should expect a significant loss of capital value.

Stock pull-backs are sometimes gradual, as in 1968 through 1982, but more often the pullback is sudden, a crash. People typically expect a stock return in excess of bonds of 2% or so. They sometimes accept less, and sometimes demand more. Schiller calls the cause “animal spirits.” The fear is that investors will suddenly go back to the historical norm and demand of stocks 2% more return than the 3.05% they get from bonds. If they’d suddenly demand a 5.05% return on stocks to balance, the stock prices would fall by 40%. If the crash happened now, it would take a 40% drop in stock prices to raise the earnings ratio to 5.05%. But if they wait a year, until after the Fed raised the interest rate to 3.5%, we’d expect a greater pull-back 50% or so, a major crash. As early as last year, Schiller has advised moving out of US stock into foreign stocks, particularly European, noting that the US market was the most expensive in the world. I don’t agree that Europe is a safe haven, but agree that a crash is likely given current return rates, snd the treasury plan to raise interests by 1% over the next year.

Schiller claims that the reason the recession has not hit so far is that people trust Trump. I would not have expected a comment like that from a Yale economist, especially given the constant carping from the TV news. Still Schiller may be on to something. The stock market went up dramatically after the Trump election. There are some advantages to a narcissist president. It also seems Trump’s tariffs are helping to provide jobs, as I predicted. In this quarter, the GDP rose at an impressive 4.1% rate. Gains came even where you’d expect otherwise. US soybean exports rose by 9600% despite a boycott from China. If the economy keeps going like this it might be as much as a year before the correction. A likely scenario is that the Fed raises interest rates, growth slows to 2.5% or less, and with bond interest rates at 3.5% people will get out of stocks in a big way. My expectation is that China will suffer too, and with it Europe. With luck, the Fed will then lower interest rates to 2%, or so. In my opinion interest rates should matches the inflation rate, more or less. I don’t know why the Federal Reserve does not do this, but instead swings its interest rates from very high to low, now aiming for a far excess of inflation rate. I suspect it’s mistake, one that we will pay for soon.

Robert Buxbaum, July 29, 2018. My only other stock analysis post was on bitcoin, In December 2017 I thought it had gone about as far as it would go. Shortly there-after bitcoin value crashed. I hope I don’t cause a crash

The wealth of nations in beer

Trump, tariffs, and the national debt

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My previous post was about US foreign policy, Obama’s and Trumps. This one is about Trump’s domestic policy as I see it. The main thing I see, the pattern is that I think he’s trying to do is pay down the national debt while increasing employment. So far unemployment is down, but borrowing is not. I suspect that a major reason for the low unemployment is that Americans (particularly black Americans) are taking jobs that used to be held by Mexicans. As for US borrowing, it’s still bad. For his first budget, Trump, like all other recent politicians caved to the forces that favor borrow and spend than to pay back. In this century, only Wm. McKinley, Theodore Roosevelt, Taft, Harding, and Coolidge managed to pay down the national debt. But only one man, Andrew Jackson, managed to pay it off completely. Jackson’s picture hangs in the pride of place in the Trump white house, something that I find significant. I suspect that Trump’s tariffs and spats are intended to pay down the debt without raising unemployment, or weakening the military. Andrew Jackson is his idea of “Make America Great Again.”

All recent presidents have raised the national debt. Trump claims he will shrink it.

All recent presidents have raised the national debt. Trump data to April 20, 2018.

As the graph above shows, if Trump plan is to pay down the debt, he is not succeeding. Trump is overspending — at a somewhat slower rate than other recent presidents, but in 1 1/4 year he’s increased the debt by 6.3%, about $1220 B. He’s saved a few billion by reduced payments to the UN, and to the EU for climate studies, and he’s asking NATO to pay more for Europe’s defense, but he’ll have to do a lot more, and the rest of the world is already unhappy with him.

Many US economists — Keynesians – are not happy with him for another reason. They claim that debt is good, and that borrowing increases employment. As proof they note that FDR borrowed and spent heavily though the 1930s,and we got out of the depression. Other economists point out that it took longer in the US to get out of the depression than in many other countries. More recently, under Jimmy Carter, deficit spending created a combination of high inflation and high unemployment, “stagflation,” suggesting that Keynes should be modified to “Neo Keynesians” who claim you can overspend if you don’t outspend the GDP growth rate. Sorry to say, even in these terms, Obama and GW Bush overspent badly, as did Reagan before them (see graph below). Obama raised the debt from 65% of the GDP to its current 105%, and GW Bush raised it from 50% of GDP to 65%. This borrowing did not increase employment, or raise the standard of living for most Americans, though several at the top became fabulously wealthy. As Alan Greenspan noted, “If national borrowing was a path to wealth, Zimbabwe would be the richest country on earth.” I’m more of a hard money man, as Greenspan was, inclined to think that a balanced budget is good, and that tariffs are good too.

Ratio of US government debt to GDP

As of June 1, 2018, Trump has imposed ~20% tariffs on five items: wood, steel, aluminum, washing machines, and solar panels. Combined, these items constitute 4.1% of our imports, $130 B/ year. Taxed at 20%, the US will collect $25 B/year. it’s a step, but I suspect that Trump knows that, if tariffs are to wipe out all of our deficit, he’ll have to impose a lot more, about 40% on all of our imports ($3,100 B/year). Trump may yet do this, and may yet cut spending, and put a lot more America to work. My sense is that this is his aim.

The next step in the Trump MAGA plan involves adding another $35B to the list of items being taxed; that’s about 1.1% of US imports (5.2% total). In response, our trade-partners have complained to the press and to the world court, and have imposed their own tariffs — so far on about $100 B of US products, mostly food items, like bourbon and cheese, chosen to hit Republicans in politically – sensitive states: Tennessee and Wisconsin. Canada now taxes US cheese at over 100%. It’s an effort to embarrass Trump and get Democrats elected in 2018. If these tactics don’t work, Trump will impose another round, e.g. on foreign-made cars and motorcycles. I’d also expect him to cut NATO funding unilaterally, too, as a counter-slap to the EU.

US unemployment by race, data to May 2018.

Speaking of Keynesian economists, Nobel Laureate economist, Paul Krugman of the New York Times has been predicting severe job losses, and a permanent stock collapse since 2016, and especially following Trump’s election. Virtually every week he announces that the end is near, and every month the economy looks better. But he’s not deterred, and neither are most economists. In a survey of nearly 100 economists by Reuters, 80% said that Trump’s policies will hurt the U.S. economy, and the rest said there would be little or no effect.^[1]. So far it looks like they are all wrong. Unemployment is at record lows, particularly for African-Americans (see chart above); we’re adding new jobs at the rate of 200,000 new jobs per month, nearly 0.8% of the population per year. Inflation is a modest 2.3%, GDP growth is excellent, at 3.2% (or an incredible 4.5%). All we need now is a sensible immigration policy plus some healthcare reform, a modified social security tax, and for the economy to stay this way for another 5-10 years. It’s unlikely, but that’s the plan.

Robert Buxbaum, July 5, 2018. I’d hoped to see the employment and deficit numbers for June by now, but it’s not out. I’ve also argued that free trade is half right, as there is a benefit to workers, And there is a certain greatness that comes from paying your bills. Today, the EU offered to lower some auto tariffs if Trump does not move forward.

Beyond oil lies … more oil + price volatility

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One of many best-selling books by Kenneth Deffeyes

While I was at Princeton, one of the most popular courses was geology 101 taught by Dr. Kenneth S. Deffeyes. It was a sort of “Rocks for Jocks,” but had an unusual bite since Dr. Deffeyes focussed particularly on the geology of oil. Deffeyes had an impressive understanding of oil and oil production, and one outcome of this impressive understanding was his certainty that US oil production had peaked in 1970, and that world oil was about to run out too. The prediction that US oil production had peaked was not original to him. It was called Hubbert’s peak after King Hubbert who correctly predicted (rationalized?) the date, but published it only in 1971. What Deffeyes added to Hubbard’s analysis was a simplified mathematical justification and a new prediction: that world oil production would peak in the 1980s, or 2000, and then run out fast. By 2005, the peak date was fixed to November 24, of the same year: Thanksgiving day 2005 ± 3 weeks.

As with any prediction of global doom, I was skeptical, but generally trusted the experts, and virtually every experts was on board to predict gloom in the near future. A British group, The Institute for Peak Oil picked 2007 for the oil to run out, and the several movies expanded the theme, e.g. Mad Max. I was convinced enough to direct my PhD research to nuclear fusion engineering. Fusion being presented as the essential salvation for our civilization to survive beyond 2050 years or so. I’m happy to report that the dire prediction of his mathematics did not come to pass, at least not yet. To quote Yogi Berra, “In theory, theory is just like reality.” Still I think it’s worthwhile to review the mathematical thinking for what went wrong, and see if some value might be retained from the rubble.

Deffeyes’s Maltheisan proof went like this: take a year-by year history of the rate of production, P and divide this by the amount of oil known to be recoverable in that year, Q. Plot this P/Q data against Q, and you find the data follows a reasonably straight line: P/Q = b-mQ. This occurs between 1962 and 1983, or between 1983 and 2005. Fro whichever straight line you pick, m and b are positive. Once you find values for m and b that you trust, you can rearrange the equation to read,

P = -mQ²+ bQ

You the calculate the peak of production from this as the point where dP/dQ = 0. With a little calculus you’ll see this occurs at Q = b/2m, or at P/Q = b/2. This is the half-way point on the P/Q vs Q line. If you extrapolate the line to zero production, P=0, you predict a total possible oil production, Q_T = b/m. According to this model this is always double the total Q discovered by the peak. In 1983, Q_T was calculated to be 1 trillion barrels. By May of 2005, again predicted to be a peak year, Q_T had grown to two trillion barrels.

I suppose Deffayes might have suspected there was a mistake somewhere in the calculation from the way that Q_T had doubled, but he did not. See him lecture here in May 2005; he predicts war, famine, and pestilence, with no real chance of salvation. It’s a depressing conclusion, confidently presented by someone enamored of his own theories. In retrospect, I’d say he did not realize that he was over-enamored of his own theory, and blind to the possibility that the P/Q vs Q line might curve upward, have a positive second derivative.

Aside from his theory of peak oil, Deffayes also had a theory of oil price, one that was not all that popular. It’s not presented in the YouTube video, nor in his popular books, but it’s one that I still find valuable, and plausibly true. Deffeyes claimed the wildly varying prices of the time were the result of an inherent quay imbalance between a varying supply and an inelastic demand. If this was the cause, we’d expect the price jumps of oil up and down will match the way the wait-line at a barber shop gets longer and shorter. Assume supply varies because discoveries came in random packets, while demand rises steadily, and it all makes sense. After each new discovery, price is seen to fall. It then rises slowly till the next discovery. Price is seen as a symptom of supply unpredictability rather than a useful corrective to supply needs. This view is the opposite of Adam Smith, but I think he’s not wrong, at least in the short term with a necessary commodity like oil.

Academics accepted the peak oil prediction, I suspect, in part because it supported a Marxian remedy. If oil was running out and the market was broken, then our only recourse was government management of energy production and use. By the late 70s, Jimmy Carter told us to turn our thermostats to 65. This went with price controls, gas rationing, and a 55 mph speed limit, and a strong message of population management – birth control. We were running out of energy, we were told because we had too many people and they (we) were using too much. America’s grown days were behind us, and only the best and the brightest could be trusted to manage our decline into the abyss. I half believed these scary predictions, in part because everyone did, and in part because they made my research at Princeton particularly important. The Science fiction of the day told tales of bold energy leaders, and I was ready to step up and lead, or so I thought.

By 2009 Dr. Deffayes was being regarded as chicken little as world oil production continued to expand.

I’m happy to report that none of the dire predictions of the 70’s to 90s came to pass. Some of my colleagues became world leaders, the rest because stock brokers with their own private planes and SUVs. As of my writing in 2018, world oil production has been rising, and even King Hubbert’s original prediction of US production has been overturned. Deffayes’s reputation suffered for a few years, then politicians moved on to other dire dangers that require world-class management. Among the major dangers of today, school shootings, Ebola, and Al Gore’s claim that the ice caps will melt by 2014, flooding New York. Sooner or later, one of these predictions will come true, but the lesson I take is that it’s hard to predict change accurately.

Just when you thought US oil had beed depleted for good, production began rising. It's now higher than the 1970 peak.

Just when you thought US oil was depleted, production began rising. We now produce more than in 1970.

Much of the new oil production you’ll see on the chart above comes from tar-sands, oil the Deffeyes considered unrecoverable, even while it was being recovered. We also discovered new ways to extract leftover oil, and got better at using nuclear electricity and natural gas. In the long run, I expect nuclear electricity and hydrogen will replace oil. Trees have a value, as does solar. As for nuclear fusion, it has not turned out practical. See my analysis of why.

Robert Buxbaum, March 15, 2018. Happy Ides of March, a most republican holiday.

Bitcoin risks, uses, and bubble

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Bitcoin prices over the last 3 years

As I write this, the price of a single bitcoin is approximately $11,100 yesterday, up some 2000% in the last 6 months. The rise rate suggests it is a financial bubble. Or maybe it’s not: just a very risky investment suited for inclusion in a regularly balanced portfolio. These are two competing views of bitcoin, and there are two ways to distinguish between them. One is on the basis of technical analysis — does this fast rise look like a bubble (Yes!), and the other is to accept that bitcoin has a fundamental value, one I’ll calculate that below. In either case, the price rise is so fast that it is very difficult to conclude that the rise is not majorly driven by speculation: the belief that someone else will pay more later. The history of many bubbles suggests that all bubbles burst sooner or later, and that everyone holding the item loses when it does. The only winners are the brokers and the last investors who get out just before the burst. The speculator thinks that’s going to be him, while the investor uses rebalancing to get some of benefit and fun, without having to know exactly when to get out.

That bitcoin is a bubble may be seen by comparing the price three years ago. At that point it was $380 and dropping. A year later, it was $360 and rising. One can compare the price rise of the past 2-3 years with that for some famous bubbles and see that bitcoin has risen 30 times approximately, an increase that is on a path to beat them all except, perhaps, the tulip bubble of 1622.

A comparison between Bitcoin prices, and those of tulips, 1929 stocks, and other speculative bubbles; multiple of original price vs year from peak.

That its price looks like a bubble is not to deny that bitcoin has a fundamental value. Bitcoin is nearly un-counterfeit-able, and its ownership is nearly untraceable. These are interesting properties that make bitcoin valuable mostly for illegal activity. To calculate the fundamental value of a bitcoin, it is only necessary to know the total value of bitcoin business transactions and the “speed of money.” As a first guess, lets say that all the transactions are illegal and add up to the equivalent of the GDP of Michigan, $400 billion/year. The value of a single bitcoin would be this number divided by the number of bitcoin in circulation, 15,000,000 currently, and by the “speed of money,” the number of business transactions per year per coin. I’ll take this to be 3 per year. It turns out there are 5 bitcoin transactions total per year per coin, but 2/5 of that, I’ll assume, are investment transactions. Based on this, a single bitcoin should be worth about $8890, slightly below its current valuation. The gross speed number, 5/year, includes bitcoin transactions that are investments and never traded for goods, and those actively being used in smuggling, drug-deals, etc.

If the bitcoin trade will grow to $600 billion year in a year with no other change, the price rise of a single coin would surpass that of Dutch tulip bulbs except that more coins are bing minted, and that the speed is increasing. If you assume that coin use will reach $1,600 billion/year, the GDP of Texas in the semi-near future, before the Feds jump in, the fundamental value of a coin should grow no higher than $44,000 or so. There are several problems for bitcoin investors who are betting on this. One is that the Feds are unlikely to tolerate so large an unregulated, illegal economy. Another is that bitcoin transactions are not likely to go totally legal. It is very hard (near impossible) to connect a bitcoin to its owner. This is a plus for someone trying to deal in drugs or trying hide profits from the IRS (or his spouse), but a legal merchant will want the protection of courts of law. For this, he or she needs to demonstrate ownership of the item being traded, and that is not available with bitcoin. The lack of a solid, legitimate business need suggests to me that the FBI will likely sweep in sooner or later, and that the value of a coin will never reach $44,000.

Yet another problem for those wishing to invest in bitcoin is the existence of more bitcoins (undiscovered, or un-mined so far) and the existence of other cryptocurrencies with the same general qualities: Litecoin (LTC), Ethereum (ETH), and Zcash (ZEC) as examples. The existence of these coins increases the divisor one should use when calculating the value of a bitcoin. The total number of bitcoins is capped at 21,000,000, that is 6,000,000 coins more than known today. Assuming more use and more acceptance, the speed (turnovers per year) is likely to increase to four or five, similar to that of other currencies. Let’s assume that the bitcoin will control 1 trillion dollars per year of a $1.6 trillion/year illegal market. One can now calculate the maximum long term target price of a bitcoin by dividing $1 trillion/year by the number of bitcoins, 21,000,000, and by the speed of commercial use, 4.5/year. This suggests a maximum fundamental value of $10,582 per coin. This is just about the current price. Let the investment buyer beware.

For an amusing, though not helpful read into the price: here are Bill Gates, Warren Buffet, Charlie Munger, and Noam Chomsky discussing Bitcoin.

Robert Buxbaum, December 3, 2017.

Why Warren Buffett pays 0% social security tax

The energy cost of airplanes, trains, and buses

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I’ve come to conclude that airplane travel makes a lot more sense than high-speed trains. Consider the marginal energy cost of a 90kg (200 lb) person getting on a 737-800, the most commonly flown commercial jet in US service. For this plane, the ratio of lift/drag at cruise speed is 19, suggesting an average value of 15 or so for a 1 hr trip when you include take-off and landing. The energy cost of his trip is related to the cost of jet fuel, about $3.20/gallon, or about $1/kg. The heat energy content of jet fuel is 44 MJ/kg. Assuming an average engine efficiency of 21%, we calculate a motive-energy cost of 1.1 x 10^-7 $/J. The amount of energy per mile is just force times distance. Force is the person’s weight in (in Newtons) divided by 15, the lift/drag ratio. The energy use per mile (1609 m) is 90*9.8*1609/15 = 94,600 J. Multiplying by the $-per-Joule we find the marginal cost is 1¢ per mile: virtually nothing compared to driving.

The Wright brothers testing their gliders in 1901 (left) and 1902 (right). The angle of the tether reflects the dramatic improvement in the lift-to-drag ratio.

The Wright brothers testing their gliders in 1901 (left) and 1902 (right). The angle of the tether reflects a dramatic improvement in lift-to-drag ratio; the marginal cost per mile is inversely proportional to the lift-to-drag ratio.

The marginal cost of 1¢/passenger mile explains why airplanes offer crazy-low, fares to fill seats. But this is just the marginal cost. The average energy cost is higher since it includes the weight of the plane. On a reasonably full 737 flight, the passengers and luggage weigh about 1/4 as much as the plane and its fuel. Effectively, each passenger weighs 800 lbs, suggesting a 4¢/mile energy cost, or $20 of energy per passenger for the 500 mile flight from Detroit to NY. Though the fuel rate of burn is high, about 5000 lbs/hr, the mpg is high because of the high speed and the high number of passengers. The 737 gets somewhat more than 80 passenger miles per gallon, far less than the typical person driving — and the 747 does better yet.

The average passengers must pay more than $20 for a flight to cover wages, capital, interest, profit, taxes, and landing fees. Still, one can see how discount airlines could make money if they have a good deal with a hub airport, one that allows them low landing fees and allows them to buy fuel at near cost.

Compare this to any proposed super-fast or Mag-lev train. Over any significant distance, the plane will be cheaper, faster, and as energy-efficient. Current US passenger trains, when fairly full, boast a fuel economy of 200 passenger miles per gallon, but they are rarely full. Currently, they take some 15 hours to go Detroit to NY, in part because they go slow, and in part because they go via longer routes, visiting Toronto and Montreal in this case, with many stops along the way. With this long route, even if the train got 150 passenger mpg, the 750 mile trip would use 5 gallons per passenger, compared to 6.25 for the flight above. This is a savings of $5, at a cost of 20 hours of a passenger’s life. Even train speeds were doubled, the trip would still take 10 hours including stops, and the energy cost would be higher. As for price, beyond the costs of wages, capital, interest, profit, taxes, and depot fees, trains have to add the cost of new track and track upkeep. Wages too will be higher because the trip takes longer. While I’d be happy to see better train signaling to allow passenger trains to go 100 mph on current, freight-compatible lines, I can’t see the benefit of government-funded super-track for 150+ mph trains that will still take 10 hours and will still be half-full.

Something else removing my enthusiasm for super trains is the appearance of new short take-off and landing jets. Some years ago, I noted that Detroit’s Coleman Young airport no longer has commercial traffic because its runway was too short, 1550 m. I’m happy to report that Bombardier’s new CS100s should make small airports like this usable. A CS100 will hold 120 passengers, requires only 1509m of runway, and is quiet enough for city use. Similarly, the venerable Q-400 carries 72 passengers and requires 1425m. The economics of these planes is such that it’s hard to imagine mag-lev beating them for the proposed US high-speed train routes: Dallas to Houston; LA to San José to San Francisco; or Chicago-Detroit-Toledo-Cleveland-Pittsburgh. So far US has kept out these planes because Boeing claims unfair competition, but I trust that this is just a delay. For shorter trips, I note that modern busses are as fast and energy-efficient as trains, and far cheaper because they share the road costs with cars and trucks.

If the US does want to spend money, I’d suggest improving inner-city airports, and to improve roads for higher speed car and bus traffic. If you want low pollution transport at high efficiency, how about hydrogen hybrid buses? The range is high and the cost per passenger mile remains low because busses use very little energy per passenger mile.

Robert Buxbaum, October 30, 2017. I taught engineering for 10 years at Michigan State, and my company, REB Research, makes hydrogen generators and hydrogen purifiers.

Detroit 1967 to 2017: unemployment comes down, murder rate doesn’t.

If the wall with Mexico were covered in solar cells

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As a good estimate, it will take about 130,000 acres of solar cells to deliver the power of a typical nuclear facility, 26 TWhr/year. Since Donald Trump has proposed covering his wall with Mexico with solar cells, I came to wonder how much power these cells would produce, and how much this wall might cost. Here goes.

Lets assume that Trump’s building a double wall on a strip of land one chain (66 feet) wide, with a 2 lane road between. Many US roads are designed in chain widths, and a typical, 2 lane road is 1/2 chain wide, 33 feet, including its shoulders. I imagine that each wall is slanted 50° as is typical with solar cells, and that each is 15 to 18 feet high for a good mix of power and security. Since there are 10 square chains to an acre, and 80 chains to a mile we find that it would take 16,250 miles of this to produce 26 TWhr/year. The proposed wall is only about 1/10 this long, 1,600 miles or so, so the output will be only about 1/10 as much, 2.6 TWhr/year, or 600 MW per average daylight hour. That’s not insignificant power — similar to a good-size coal plant. If we aim for an attractive wall, we might come to use Elon Musk’s silica-coated solar cells. These cost $5/Watt or $3 Billion total. Other cells are cheaper, but don’t look as nice or seem as durable. Obama’s, Ivanpah solar farm, a project with durability problems, covers half this area, is rated at 370 MW, and cost $2.2 Billion. It’s thus rated to produce slightly over half the power of the wall, at a somewhat higher price, $5.95/Watt.

Elon Musk with his, silica-coated, solar wall panels. They don’t look half bad and should be durable.

It’s possible that the space devoted to the wall will be wider than 66 feet, or that the length will be less than 1600 miles, or that we will use different cells that cost more or less, but the above provides a good estimate of design, price, and electric output. I see nothing here to object to, politically or scientifically. And, if we sell Mexico the electricity at 11¢/kWhr, we’ll be repaid $286 M/year, and after 12 years or so, Republicans will be able to say that Mexico paid for the wall. And the wall is likely to look better than the Ivanpah site, or a 20-year-old wind farm.

As a few more design thoughts, I imagine an 8 foot, chain-link fence on the Mexican side of the wall, and imagine that many of the lower solar shingles will be replaced by glass so drivers will be able to see the scenery. I’ve posited that secure borders make a country. Without them, you’re a tribal hoard. I’ve also argued that there is a pollution advantage to controlling imports, and an economic advantage as well, at least for some. For comparison, recent measurement of the Great Wall of China shows it to be 13,170 miles long, 8 times the length of Trump’s wall with China.

Dr. Robert E. Buxbaum, June 14, 2017.

Solving the savings dilemma (how to have savings)

A few days ago, I wrote a post about the lack of savings in America, the social causes for it, and the damage it causes. I had some governmental suggestions, but suspect I didn’t emphasize that the main responsibility is personal: if you want savings, you’ve got to save.

Every rich person spends less than he earns. If you aspire to be rich, spend less on clothes than you can afford.

If you want to have savings, it is up to you to spend less than you earn. If you don’t, you’ll never be rich, you’ll never have savings or net-economic worth, and you’ll always be strung-out over emergencies. Income and gifts won’t help if spending rises to match. At all incomes, the people who get richer are those who tailor spending to be less than earnings.

There is another personal honesty issue here, and a marriage issue too. If you spend more than you earn, someone will be cheated, and that person (your wife, husband, neighbor, friend) is likely to get mad. Earn $100 and spend $99.99, you can be honest and well liked. if you earn $1000 and spend $1000.01 and you will cheat someone you love sooner or later. Be an honest fellow and spend less. Clothes is a good place to start: say no to the fancy dress and the fancy wedding, and to fancy clothes in general. If you smoke, vaping can be a life and money saver. And try to avoid pot-smoking, at $400/oz that’s got to be a killer. And here are some water savers.

A good way to know if you are doing things right :Start a bank account, and check the balance and resolve to see it $10 higher at the end of the week than before. And that’s my two cents.

Robert Buxbaum, April 26, 2017.

REB Research Blog

Random thoughts about hydrogen, engineering, business and life by Dr. Robert E. Buxbaum

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