The official "blog of bonanza" for Alfidi Capital. The CEO, Anthony J. Alfidi, publishes periodic commentary on anything and everything related to finance. This blog does NOT give personal financial advice or offer any capital market services. This blog DOES tell the truth about business.
Ballyhooing a resurgence in U.S. solar exports is probably a short-lived phenomenon, driven by the weakening U.S. dollar. Instead of providing loan guarantees, which both bankrupt companies above were offered in spades, the U.S. government might be better off pursuing anti-dumping complaints against China through the WTO. Ending the oil depletion allowances that give hydrocarbon producers big cost advantages is also worth a look, although it won't do much to improve solar makers' cost disadvantages compared to China.
Nota bene: No positions at all in any solar manufacturers at this time. I had no positions in either Evergreen Solar or Solyndra prior to their troubles.
Perhaps airlines like United are better off with whole engine replacements targeted at their oldest aircraft as a partial solution to their fuel cost headaches. Hedging with forward contracts can smooth out those fuel costs that can't be minimized cost-effectively with new airframe buys. Decisions like this are the provenance of CFOs. Those CFOs who ignore them contribute to the old financial folk tale that the airline industry has not generated one dollar of net income in its history, adjusting for bankruptcies.
Big banks are turning into big babies right before our eyes. They're whining about the new Basel capital surcharges that they fear will hurt their competitiveness. Spare me the crocodile tears. Big banks have all the competitive advantages in the world. They can borrow at the Fed's discount window at next to nothing. Their lobbying gets them first in line for taxpayer money to bail them out of self-inflicted balance sheet disasters. Their name recognition gets them right in the faces of customers who are too busy to shop around.
I'm really starting to think that options with weekly expirations will become a regular part of my portfolio. The covered calls I wrote last week on GDX expired unexercised last Friday. I sold calls again on GDX to expire this Friday. I made no other changes.
The advantage of using shorter expirations is that the option's premium decays more rapidly, i.e., the shorter the option, the more likely it will expire. This should reduce my portfolio turnover in the long run if I keep refreshing the options with weekly expirations. Only time will tell.
I like Charles Schwab (SCHW), both the man and his brokerage. He persevered against all odds and built a major brokerage from nothing. The established Wall Street firms opposed his ambitions at every turn. Now his brokerage is once again taking on the big players. SCHW is suing U.S. banks for their manipulation of the LIBOR lending benchmark. Banks that are too big to fail think they are too big to be sued for antitrust violations because regulators have ignored their transgressions. Think again, big shots.
Charles Schwab hasn't forgotten what it's like to be a small investor. That's probably why SCHW hardly faced any regulatory trouble or lawsuits in the aftermath of the credit crunch. The MBA preppies in TBTF land never knew what it means to be accountable for one's actions. This lawsuit is a rare example of a moral good in the financial services wilderness. Go Chuck!
Full disclosure: No positions in SCHW or any other financial stock at this time. I do use SCHW as my brokerage.
The collapse of European banks and then equities will of course be felt here in America. Wall Street insiders know what's about to hit. So does Warren Buffett, which is why he invested in Bank of America's preferred stock (senior to common shareholders in claims on a firm's residual assets) and not its common stock. The warrants he obtained can be exercised in the future, presumably after a recapitalization wipes out that bank's common equity. Not that BAC would ever need a recap, of course, as long as the Fed and Treasury stand by ready to funnel it with some TARP 2.0.
Full disclosure: No positions in any banks at this time, certainly not BAC.
China possesses about a third of the world's store of rare earth elements but ramped up its production to 95% of the world's output. The intent behind this move was to flood the market with supply that would drive smaller producers outside China out of business or make new exploration prohibitively expensive. China would then be free to impose export controls on its metals that would force dependent manufacturers into a bind. They could do without the metals and let their supply chains atrophy while they sought production elsewhere, or invest directly in China to manufacture stuff there.
The faster China attracts high-value manufacturers, the sooner it will have the technological capacity to become a military peer competitor to the U.S. Asian nations need to take note and plan accordingly for tighter links with India and the U.S. American investors need to plan accordingly for undeveloped rare earth deposits in the Anglo-West.
In an age of crony capitalism, it's important to identify the cronies. Their investment decisions provide lessons in minimizing the impact of financial repression. Warren Buffett has purchased preferred shares in Bank of America along with warrants for more common shares. This fits his method of investing in companies with durable competitive advantages, although this bank's advantage comes from its ability to obtain your taxes as a capital cushion. He fully expects BAC to exercise its option to buy back the preferred shares once the government funds anohter bailout round, so this is likely a way for him to earn an above-market rate on some spare cash.
It's worth noting that Buffett made this decision after taking a phone call from the President of the United States. We can only wonder at the details discussed, but Buffett excels at reading a macroeconomic climate. He's risking capital on a bank that has been first in line for government bailouts for several years. Too big to fail means no investment can fail as long as the government is there to backstop a bad bank. Mr. Buffett's political fundraising is his way of saying thank you.
Average investors who mimic the moves of the plutocracy may do very well indeed, provided a jealous neighbor doesn't prompt law enforcement to levy an asset forfeiture action against them. Don't ever say America has ceased to be the land of opportunity.
First, solar thermal technology is a more resilient approach. It is simpler to manufacture than photovoltaics; no billion-dollar clean rooms are needed to keep impurities out of panels. Polished mirrors and steel girders are easier to source and maintain than PV cells. Mirrors also last a lot longer (sometimes decades) than PV panels.
The project team is also forgoing a $2B loan guarantee simply because it claims its investors find PV more attractive. That is simply stunning. These genius investors have not done their homework on the technology at all. It's worth noting that the project retained Citigroup and Deutsche Bank to seek investors. Those two financial institutions were not exactly known for their adroit management of their own balance sheets during the 2008 credit crunch. Can you see the sales pitch now? "No, you don't want those boring mirrors. PV is what you really want because it's more exciting." Bankers are skilled at putting words in the mouths of the gullible rich with whom they have profitable relationships.
I am grateful not to be an investor in a complicated energy installation that will require a complete redesign of its enabling technology and supply chain. I'd rather hold out for a decent solar thermal project that investors are smart enough to see through to completion.
Full disclosure: No positions in the two banks mentioned, or in this energy project.
My regular readers know that I've been long FXI for quite some time as a long-term bet on China's growth. That country is still going through the growing pains of an emerging market. Chinese regulators have good reason to reassure American regulators that they can police their equity markets. You see, fraud is rampant in China's stock market and knowledgeable non-Chinese investors are getting spooked.
I'm all in favor of more discipline in Chinese capital markets. More scandals will scare away the liquidity China needs to make its domestic manufacturers attractive to foreign partners. Remember that China's rare earth metal strategy is designed to attract value-added manufacturing to China's shores. That goal will be increasingly difficult to reach if Chinese regulators don't work hard to reassure foreign investors.
This month's updates were simple to execute but deserve long explanations. Some of my GDX holdings (in my IRA) rose through the strike price of the covered calls I had written; I bought back a portion and let the rest go away. The GDX holdings I keep in my taxable account rose significantly but did not trigger the strike price of their respective covered calls. I wrote those calls last month with a fairly high strike price.
I renewed my covered calls on GDX but with an intriguing twist. I noticed that my brokerage now enables trading in call options with weekly expirations. That is a boon for holders of extremely volatile assets like any securities derived from precious metals. I wrote calls on my remaining GDX that expire Friday, so if they don't expire I'll return to the well next Monday to fill my bucket with a little more cash. The premiums from rolling covered calls with weekly expirations should prove to be higher (net of commission) than calls with monthly expirations. BTW, I will allow the passive exercise of my GDX options to gradually pare down my gold hedge. Gold did its job by hedging my portfolio against volatility, but it seems to be responding to the Fed's erosion of the dollar more than anything else. Anything that provokes a run on the dollar from non-U.S. investors will force up real yields on Treasuries. That would be very negative for gold and I don't need to be stuck with a large gold exposure when it happens.
I also renewed my covered call positions on FXI, with no changes to the underlying securities. That one has dropped significantly but I don't mind because China is a long-term bet. Even with its inflation and environmental problems, it will soon convert from an export-driven economy to a domestic consumer economy. That's the good news.
All of my short-term Treasury holdings matured. I did not buy any more. In fact, I bought no additional fixed income securities at all this month. I'm hanging on to my California muni bonds as a deflationary hedge, but frankly any more QE from the Fed will reduce the value of their principal upon maturity next year. I'm seriously considering buying into some kind of TIPS vehicle as an inflation hedge, but my due diligence is not yet complete.
Stay tuned. The U.S. stock market is getting cheaper by the week.
It took three years to get the Fed to cough up the numbers. Bloomberg News conducted the legal equivalent of a scorched-earth campaign to confirm the $1.2T our government handed to Wall Street's big shots. The term "aristocrats" is not hyperbole. It describes an elite class that no longer sees itself subject to the rule of law in a democratic society. The American aristocrats are no different from their European cousins, who also benefited from bailouts for the banks they have controlled for generations.
The Fed's claims of "no credit losses" are funny. I guess such a claim is technically true if the junk mortgages the Fed took onto its balance sheet can't be written down thanks to favorable accounting rule changes. The bailouts have not purchased any solid improvements in U.S. banks' financial performance. Bank of America is a joke, losing money like crazy. The rest of the banking sector only looks healthy as long as they can pretend their bad mortgage loans will someday recover cash flows.
Nota bene: No positions in any U.S. banks at this time.
I can get pretty darn ornery when the subject of careers in finance makes the news. BofA's plan for throwing away a big chunk of its workforce gives rise to a whole bunch of discussion on how far it will go. That article makes me giggle when I read that "anybody who could walk and talk" could have landed a job in the middle of the last decade. Folks, I had an MBA from a pretty good school and I had to settle for entry-level jobs that paid next to nothing, and I went completely without job offers for several years after getting that now-worthless MBA. Add "family pedigree" to the walking and talking criteria and you've got a viable MBA job candidate.
The article is generally correct that hiring in finance has been overdone for years and will now permanently contract to a more sustainable level. That also means that MBA enrollments should contract, since the workforce won't need so many MBA-certified people to replace existing employees. The MBA degree will eventually revert to what it was decades ago, when the top 20 programs were a rite of passage for blue-bloods destined to keep publicly held companies under the control of private families.
Let this be a warning to anyone considering an MBA as a prerequisite for a career change. Don't do it, people. You don't need it to get the entry-level jobs of the future that will be available in farming, recycling, and suburban deconstruction.
Protests at the homes of senior executives started happening during the first half of this long financial crisis back in 2008. Were those frustrated investors angry at corporate executives? The protests petered out after the bailouts. Now some Verizon workers are picking up the baton. Candlelight vigils are noteworthy for their ineffectiveness but at least the participants feel better for getting something out of their systems. How about flash mobs as the next stage in this movement? BofA is about to cut a whole bunch of formerly productive employees, so they're probably texting strategies right now.
Don't bring your flash mobs over to my place, folks. There just isn't enough room here to accommodate your gathering with all of these attractive women hanging around me wherever I go. Check my Facebook photos for confirmation.
Do you see something wrong here? Check this out. That's a container ship parked next to an offshore platform. The offshore platform has no cranes, no piers, no material handling equipment, or anything else that is absolutely required to make an economically viable effort at getting those containerized goods off the ship and into the hands of the platform's wealthy denizens. Seasteaders need a crash course in supply chain management. They should hire me as a consultant. I'll raise my rates just for them so they can brag about paying top dollar for advice.
I'll offer yet another item to my litany of nonviability. This city-state has no way to feed itself. You can't live without food no matter how many billions you have in your Swiss account or how fast your satellite broadband connection zips around the world. Are they going to have dedicated fishing fleets prowling local waters? A steady diet of nothing but cod, tuna, and king crab will bore these urban transplants to death in no time. Most American city supermarkets require replenishment every few days, depending on inventory turnover and spoilage. How many supermarkets can fit on a floating platform? I'm guessing just one, and it will be about the size of a typical Trader Joe's in San Francisco. How will it be supplied? Remember, there are no plans yet for the cranes and dock space necessary to make any trade in goods, let alone food imports, physically possible. Maybe Whole Foods can deliver risotto by airdrop (*snicker*).
I've figured out the mentality behind this effort. It's a stab at creating a gated community to reflect the exclusive status the creators of this stupidity feel they deserve. The thing about gated communities on land is that they're already connected to the infrastructure for energy, water, waste disposal, and transport that makes them livable. There won't be enough space on an ocean-going platform to make all of that possible. Check out the cramped quarters on an aircraft carrier for the only existing model of how thousands of people can live at sea. Note that the carrier needs to replenish its nuclear reactor's fuel every few years (in drydock, on land, which will negate our seasteaders sovereignty!) and is never self-sufficient in food or material goods. The carrier's residents have little personal space, let alone enough space for a hundred billionaire condos. The mentality of rich folks who expect Jeeves to rush into the parlor with a cocktail every time they ring a silver bell from Tiffany's doesn't transplant to a cramped offshore platform. Some rich people apparently aren't satisfied with seceding from society; they want to secede from reality as well.
Here's a final bit of free advice. Focus these platforms on fulfilling an unmet need for energy production from waves, tides, and offshore windfarms and you'll have an excuse to park them within sight of the shore. Proximity to shore means you can build causeways wide enough for trucks or trams and not worry about the lack of space for containerized trade I mentioned above. Get them approved as special economic development zones and you'll have reason to build things into them that would otherwise raise NIMBY objections. There may even be enough room for a dozen or so billionaire bachelor pads if they can stand the noise from all of the energy-generating infrastructure. Once they're profitable, maybe the residents can install a country club on the side of the platform facing the ocean. That will give them the illusion of turning their back on landbound commoners and seceding from reality, which is what they obviously want anyway. I'd love to see these things operating near San Francisco, as the backers intend, but I'll help them keep the endgame in mind. Hire me now before my rates go up again.
Full disclosure: I think this whole idea is stupid.
My fellow Americans, our time on the mountaintop is ending. The coming run on the dollar can't be abridged by another round of quantitative easing. It will require lifestyle curtailments and lowered expectations from every citizen who is not among the top 2% of the income ladder. Get ready.
Ask any seagoing folk - career sailors, merchant mariners, professional yachtspersons - about life on the ocean and they'll tell you it's grand. Out at sea, you can commune with nature on a daily basis and fantasize about chasing Moby Dick or exploring Davy Jones' locker. You can also live as a permanent expatriate in exotic ports of call, with adventures in Polynesia and the Mediterranean beckoning.
You can also fantasize about creating your own civilization from scratch, if you have lots of time and money on your hands. Serial entrepreneurs with libertarian ideals have those resources in spades. Some of them are willing to take a stab at creating a floating nation. New business models always need to be tested against the real world and this is no less important than for a new model of nationhood. The folks at the Seasteading Institute should consider how the following topics affect their plans.
Economic viability. A floating colony of a few hundred people will not have a diverse economy. The types of people who are attracted to this lifestyle and can afford it are knowledge workers. Hedge fund managers and media consultants can probably afford to buy a plugged-in condo on a twenty-story semi-submersible platform. They will also be uniquely vulnerable to the kind of downward pressure on compensation from global wage arbitrage that is offshoring white-collar intellectual work to China and Southeast Asia. Speaking of Southeast Asia, Singapore and Hong Kong are densely packed urban centers with vibrant knowledge economies, just like our imaginary seaborne civilization. They also have world-class port facilities and plenty of infrastructure for high-tech manufacturing. Putting any of that infrastructure onto a floating platform on the scale needed to make a viable economy is probably impossible. It will also require a whole bunch of workers with skill sets completely alien to our effete urban wannabe platform dwellers.
Physical security and safety. Building a whole town on the same superstructure as a semi-submersible drilling rig exposes the residents to the kinds of risks oil workers have taken for decades and adds some new ones. Will the structure have enough lifeboats moored in case something happens to render the thing unstable? What happens to one of these floating communities if a hurricane or tsunami comes its way? Today's oil drilling platforms have to be towed to shore upon notice of inbound hurricanes, as in the Katrina disaster. A tsunami would leave even less time to evacuate, so the rig would be stuck while residents scramble into lifeboats that will then be carried away by the tsunami's force. Ask yourself if you're in for the ride of your life. "All aboard the tsunami express - woooooo!" Daisy-chaining a few dozen platforms together to make an archipelago holds the entire civilization hostage to a structural failure on one platform. Think about that one: You look out your twentieth floor window and watch one of your neighboring platforms sinking, knowing your platform is chained to it by permanent infrastructure. Your twentieth floor view will be an underwater view in about five minutes. Ask anyone who's ever evacuated a sinking ship or drilling rig - like the Deepwater Horizon after it blew out in April 2010 - just how difficult it is to get into a lifeboat in a pitching sea. The people who survive those things are tough, trained marine technology experts; one disaster rehearsal with a bunch of transplanted urbanites will convince quite a few of them that ocean life isn't all it's cracked up to be.
Self-defense. This is closely related to the above paragraph on safety during structural failures. Security against natural disasters is hard enough without throwing malice and international intrigue into the mix. A floating rig full of rich, influential Westerners is a tempting target for blackmail by a rogue state. Think Somali pirates are tough? Try deterring a whole flotilla from a starving country hostile to the West without the protective umbrella of your own military. The aggressor wouldn't even need a WMD. They could just park an autonomous underwater vehicle loaded with high explosives under one of the platform's submerged pontoons. The floating city-state's mayor would then get the following call on his satellite phone: "Hello, this is Kim Jong Il, the Dear Leader of the Democratic People's Republic of Korea. You will wire $US100mm to my account in Zurich or I will blow your city out of the water. Cast your eyes out two miles at 15 degrees north latitude for a demonstration explosion. (BOOM!) See that spray cloud? That's you if I don't get your money. My hackers have already identified your account numbers so all you have to do is hand it over. You have one hour to complete the transaction or you sleep with the fishies. Thank you in advance for your business." Laugh all you want at the James Bond-type brinkmanship. Dictators are amoral psychopaths who will salivate at the target presented by a bunch of wealthy idealists aimlessly riding the waves. Try calling the nearest U.S. Navy carrier battle group if you need help in a pinch.
There's nothing wrong with testing the viability of permanent, autonomous floating communities. Private investors are welcome to do anything they like with their money. Nothing in the concept mandates that the communities be ocean-going. I suspect that the most viable application of this concept is a series of connected platforms moored very close to shore, no more than a mile or two out. They could hold a kind of special economic status (like Hong Kong, or other countries' designated high-tech zones for foreign direct investment) that would incentivize investment and give residents plenty of autonomy short of full independence. Tethering them to shore makes connecting infrastructure for energy input, waste output, and movement of people and goods much easier.
The genesis of the concept makes me wonder about people who wander outside their circle of competence (hat tip to Warren Buffett). Launching and managing a business model that focuses on shooting electrons between e-commerce portals like EBay and PayPal requires advanced skills in computing and electrical engineering. Those skill sets are not identical to those required to move and sustain physical structures in the chaotic real world where human life and property must be safeguarded from accidents and malice. Please tell Thomas Friedman that the world is not flat.
Nota bene: I have no desire to start my own brand new civilization offshore. I'm busy trying to save the one that's onshore.
Some hedge fund is probably working on a way to arbitrage this action, but a saner way ahead for the typical gold investor is to divide gold holdings between mining stocks and bullion. One very important caveat is the specious nature of gold bullion ETFs' accounting. Even bullion held privately (under your bed, in your closet, or some Swiss bank's vault) is of little use if it can't be divided into lots small enough to buy things.
The sad story of a quasi-government agency losing money even though it has a near monopoly on its market is common to Amtrak, Fannie Mae, and Freddie Mac as well as the post office. Whether their problems stem from bloated costs and obsolete strategies (Amtrak and the Postal Service) or insane mandates to underwrite malinvestment (FRE and FNM), the best solution should be the same in all cases - pull the plug. The American empire's experiment in living beyond its means is coming to an ugly end. This will force a radical reduction in the government's ability to fund stupidity.
This is how it starts. Banning short sales in Europe is the first step in a trans-Atlantic replay of the credit crunch of Sept. 2008. The next vector is a liquidity crunch that will start in Europe as funding sources for European banks dry up. American investors need to pay attention. The first hint of Asian or American banks' unwillingness to lend to European banks will probably spark a run on deposits in France.
The venerable banks that have served as fronts for the remnants of Europe's aristocracy may be about to lose their patina of invincibility. Nobles with their backs against the wall can turn desperate. If they have any remaining levers over the supposedly democratic governments of Europe, they will lean on regulators to initiate financial repression against depositors. Freezes on withdrawals will be the obvious first move, followed by stronger tactics like requirements to deposit paychecks in the least solvent banks at zero interest. The next couple of weeks will reveal whether it really gets that bad over there.
Following the lead of prop traders who only tip part of their hand to the public is not a good way either to keep up with said trader or beat Mr. Market at his own game. Gold has risen strongly thanks to the Fed's ZIRP efforts at keeping the dollar weak and thus less attractive than gold as a store of value. Anything that happens to drive up U.S. interest rates- an international run on the dollar, new Fed policies to fight price inflation, and the like - will hit gold pretty hard. Unexpected stuff like that will turn any prop trading, herd following strategy into a nightmare.
I've been slowly unwinding my long positions in GDX as gold has stayed strong. Nothing lasts forever.
Yesterday's U.S. debt rating downgrade opens the door to the kind of chaos we've seen for the past couple of years in Europe. The latest round of European crisis talks over debt relief give us a preview of what the future holds for us on this side of the Atlantic. There is of course no relief possible from a 100% or greater debt-to-GDP ratio aside from that provided by an immediate default. European central bankers are about to find that out the hard way when this round of conference calls breaks up.
"Hello, operator? I'd like to dial 9 for a bailout."
Sorry, but we cannot complete your call. Please check the number and dial again, but this time make sure you're calling the Fed for another $16 trillion.
Standard and Poor's regained a little of the ratings agencies' massively degraded credibility by making a sound decision today. It downgraded the United States' sovereign credit rating by one notch.The full report is over on the S+P's site. Moody's and Fitch were probably too timid to go first. Imagine the phone calls flying among their managing directors right about now arguing various shades of "I told you so" and "we should have gone first" with full-throated invective. Now the other agencies have to play catch up. Look for future downgrade reports, one notch at a time, for the next year and a half until the federal government has a junk rating.
S&P waited until after the close of market hours so corporate insiders could finish selling whatever is left of their blue-chip stock holdings. That's how our world really works. Stop kidding yourselves if you think otherwise.
The short term effects are obvious. Banks will raise rates on loan products tied to ten-year Treasury yields, cratering home equity values and eventually forcing more homeowners into foreclosure. Bank of America and Wells Fargo hold plenty of mortgages for deadbeats already, so more inbound jingle mail from impoverished mortgage stuckees will be a nightmare for their servicing desks.
A further stock market selloff on Monday is pretty much assured. The eventual end of the dollar as the world's reserve currency is now assured. The U.S. government is incapable of putting its own house in order. Foreign creditors will now determine the Republic's fate and the ultimate disposition of its citizens' wealth.
Full disclosure: No positions in BAC or WFC at this time.
The only good news is that suffering carriers like SFL and FRO may finally have affordable entry points with their single-digit P/E ratios. I'll give the market a few more weeks to take them down a bit more. The ocean-going shipping industry won't disappear, but size has a lot to do with staying power for those carriers that will survive.
Full disclosure: No positions in shipping stocks at this time. I may open long positions in SFL and/or FRO in the near future.
Another exec bails out at troubled YRCW. The COO's job in a nutshell is to make the trucks run on time. Maybe he got sick of listening to Teamsters whine about having to actually do some work for a change.
Hey, YRCW, I'm available to act as interim COO. My first order of business when hired will be to shut down the union-heavy divisions and transfer as much traffic as possible to the USF Reddaway units (or to whichever low-cost, non-union parts of the company still exist). If that's a non-starter, I'd start farming out "last mile" deliveries to local owner-operators and start furloughing Teamsters. Most recent hires get the first pink slips. Bring on the DOL complaints. That's my Hail Mary plan to salvage as much shareholder value as possible before the recap leaves them almost penniless.
I drove past a former YRC Worldwide terminal here in San Francisco a few weeks ago. It looked pretty run down and I don't feel like guessing how long it's been unoccupied. The whole darn company will look that way pretty soon if it can't get rid of the union culture that's eating it alive.
Full disclosure: No position in YRCW at this time or any other time.
One very serious potential obstacle is the potential for height limitations on barges stacked with containers. Lock and dam upgrades will benefit all riverborne traffic, but double-stacking containers on barges will eventually require considerations of how bridges and rail overpasses spanning rivers will limit barge movements. In the short term, MARAD and state transportation regulators can help operators plan routes that avoid low bridges. Longer-term viability of this mode will require more infrastructure upgrades.
The Essential Air Service bears the hallmarks of a useless government handout. Rural air routes that were discontinued for being uneconomical should not be kept alive with government subsidies. Ending the program will lead to no more than an inconvenience as rural travelers either switch to trains and buses or stay where they are.
Loss of tax revenue will hurt in the short term but restoring this particular function is the easiest fix of all. Loss of airport construction is the biggest hidden blessing possible in this situation. We should put aside our envy of gleaming new airports in China long enough to realize that air travel is the single most expensive (and least fuel efficient) way to move people and cargo. Letting go of nonviable airports that don't serve major metropolitan hubs opens growth opportunities for rail service. Peak Oil will demand this transition anyway.
The coming months will bring us plenty of sob stories about government programs that were once affordable at the height of our civilization's power. Rural air transit and construction at low-traffic airports are inappropriate uses of capital for an empire in decline.
Full disclosure: No positions in airline stocks at this time.
It paid to be a short seller today (I was not, boo hoo). Declines across the board in the DJIA, Nasdaq, and S+P 500 indicate to this humble observer that equity markets are finally beginning to price in America's inability to put its fiscal house in order. U.S. economic data is going from not-so-bad to increasingly worrisome. Consumer spending is weakening thanks to the wage stagnation American workers have lived with since about 1974. It's not news (if you've been reading my blog) that the U.S. is in the same fiscal boat as Europe, with continental futures markets rendering their verdict on Italy's new crisis. It also shouldn't be news that the U.S. has become as economically sclerotic and plutocratic as Europe. That's a story for another day.