How Both Sides Of The Global Warming Debate Use Same Data To Make Their Case

In a post on Forbes.com by contributor James Taylor published on  3/6/13, he stated that "global temperatures are essentially the same today at they were in 1995". The statement directly contradicts a claim made in a post on Weather.com published on 2/27/13 that indicates "climate change is making the world, on average, a warmer place. The United States is no exception".

The reason that both claims can be supported is that by cherry picking the starting point on a step chart it is possible to support vastly different conclusions.

As shown in the chart below, adding a trend line to U.S. temperatures going back to 1900 shows a steady rise . However, graphing a line from 1995  to 2012 indicates that the U.S. temperature has remained relatively unchanged.

The above chart offers a good illustration of how cherry picking the starting point on a step chart can dramatically impact the slope of a trend line. The case made by global warming skeptics that the earth is not warming would be stronger if they were able to make their case without cherry picking the warm years of 1995, 1998, 2002, 2007, or 2010. It could well be that Mr. Taylor is correct that the earth's temperature has stopped rising. However, it seems much more likely that he has disingenuously cherry picked a starting point that allows him to make his case. Using a 17 year period to measure a trend seems rather unusual unless talking about cicadas.

Will Beijing Real Estate Market Stumble Due To Pollution Problems?

Who wants to live in a city where the air pollution is so bad that it is damaging to the health of your family? That is the question that confronts the citizens of Beijing. The smog was so bad during January that it was referred to as "airpocalypse" or "airmageddon". 

On January 12, the index for airborne particulate matter smaller than 2.5 microns in diameter (PM 2.5) reached 886 micrograms per cubic meter, about 35 times the guideline set by the World Health Organization. These particulates contained a “complex mixture of solid and liquid particles of organic and inorganic substances” that contribute to cardiovascular and respiratory diseases, and lung cancer.

While the elevated levels of smog only lasted for 20 days, it seems likely that air pollution will get even worse in the future and that Beijing's blackest day is still to come (as predicted by Oilprice.com). While the P.M 2.5 level returned to levels below 20 in early February, a combination of a sandstorm and smog raised the level back to 500 again on February 28.  

The wealthiest residents of Beijing (and presumably government officials) are purchasing pricey air purifiers and sending their children to the elite schools that can afford expensive air filtration systems. However, this does not seem like a very desirable long term solution for those with sufficient financial resources to leave Beijing and is not a viable solution at all for the vast majority of the population.

While most of the 20 million residents of Beijing have little choice but to remain in the city due its position as China's political, cultural, and economic center, and headquarters city for many of China's state owned companies, at least a small exodus may be in the offing. So far, despite the pollution, housing in Beijing remains tight. Thus, at present there is no basis to support speculation that the air pollution levels will lead to a population exodus  However, as the problem worsens, there is certainly the potential for an out migration to occur among those that have the wherewithal to leave the city. And if this exodus occurs, the real estate market will stumble. 

It may be that the bigger short term threat to the Beijing real estate market is China's recently implemented property curbs. However, if smog inversions become more common, it would be a serious threat to the real estate market.

Time will tell if the cost of residential real estate in the prime areas of Beijing remain at $1,600 a square foot. However, current prices seem insane for real estate in a city which already is having bouts of toxic air quality and is likely to have more in the future.

Was Paul Ryan A Fool To Blindly Parrot the Romney Platform

Listening to Paul Ryan repeat the Romney stump speech, including his support for tax cuts, leads me to question Ryan's integrity. Supporting tax cuts was stupid politics and foolish economics. Paul Ryan had been one of the few politicians to be willing to address the third rail issue of entitlements. As a senior member of the House Ways and Means Committee, he is acutely aware of the unsustainable nature of the rapidly growing U.S. deficit. It seems hard to believe that Ryan really supported tax cuts, despite his espousing them as he parroted the Romney message. The support for tax cuts played right into the Obama campaigns claims that Romney was just out to help the rich.

What happened to Ryan's backbone? Neither he nor Romney really took Obama to task for the dangerous deficits that the U.S. is running up. Given that Romney lacked the political courage to back any sort of deficit reduction plan that would might risk his alienating key voting blocks, he was unable to attack Obama for being a spendthrift. Romney's own plan barely even touched upon how he was going to address the deficit.

Paul Ryan should have been an attack dog, going after Biden and Obama for putting social security, health benefits, and the economic future of all U.S. residents under age 55 at risk  However, rather than attack Obama's continuation of his trillion dollar a year deficits, he parroted the Romney platform. In particular, Ryan's support of tax cuts was nauseating. There is no way that any meaningful cuts to entitlements can be made without making some compromises on tax increases. Not only would the Senate reject attempts to cut entitlements without corresponding tax increass, the domestic turmoil engendered by benefit cuts might make the Occupy movement seem mild, as I pointed out in a post entitled Beware of Little Old Ladies With Signs 

I can only guess that when Ryan signed up for the Romney campaign, he agreed to parrot the current stump speech/ However, by doing so, he emasculated his capability to attack Obama's biggest weakness, the trillion dollar deficits. Thus, he blunted his own effectiveness in the debate with Biden, and raised questions about his own integrity. So, yes Ryan was a fool to blindly parrot the Romney platform.

U.S. Stock Market Euphoria is Insane as Europe Economy Crumbles

A friend just returned home from a trade show in Europe. Attendance at the show was down and the mood was downbeat. While it may be rash to jump to a conclusion based on an anecdotal report from a single trade show, I judge a good case can be made that this weak trade show offers a pretty good  indication that the downward trending economic situation in Europe is on its way to becoming a vicious cycle. European purchasing managers are holding back on purchases. The reduced purchasing by retail stores will ripple through the entire economy. European income will continue to slip and tax revenues will continue to fall.

There is no way the European debt crisis can possibly be fixed while the member nations' economies continue to shrink. Europe will continue to stumble from crisis to crisis in a worsening cycle, until the ECB's money printing pronouncements can no longer save the markets.

My forecast back in December that the problems in Europe would begin to pull the U.S. stock market down was woefully premature, and obviously dreadfully wrong given the gains by the stock market . However, European kicking the can down the road can not go on forever as sovereign debt continues to grow and money flows out of the banks in Greece, Italy, and Spain.

Eventually, the European recession (soon to be depression?) will have a horribly negative impact on the U.S. stock market. The biggest question in my mind is whether it will be before or after the huge declines in U.S. stocks that are likely as we march along the calendar toward the fiscal cliff and bumping up against the debt ceiling. Given that these events will occur in about 3 1/2 months, the Europeans may well be able to keep kicking the can down the road until next year, and the approaching year end fiscal cliff and debt ceiling may be a bigger short term risk.

The risk to the U.S economy and stock market from Europe's declining economies is so large, that just this alone leads me to judge that U.S. stocks are overpriced. Add in the upcoming fiscal cliff and debt ceiling, and the potential for a spike in oil prices if war breaks out in the Mideast, and the euphoria in the market seems very difficult to justify. Seems like this might be a good time for me to take capital gains at the current rates.

Chicago Taxpayers are the Big Losers From Teachers' Strike

Lost among the sound bites arising the Chicago teachers strike is the fact that local taxpayers are getting hosed. Chicago's schools are broke. The Chicago Public Schools would have run a $665 million deficit even if the school board had only had held firm on the originally proposed 2% raise for this year. They certainly do not have a revenue stream that supports paying teachers 16% more in pay, even with the raises spread over 4 years. Thus, future tax increases will be the results of giving in to teacher's outsized salary demands. 

The school board folded on the pay raise issue almost immediately. Thus, future tax increases will be required to pay for the higher teacher salaries, unless Chicago's tax base miraculously increases. The widely publicized strike preparations of the Chicago Teachers Union over the summer led to an exodus of many families to the suburbs. The teachers actions have diminished an already shrinking tax base. Given the fact that taxpayers do not have a seat at the in these negotiation, decisions by upscale families to move out of the city are understandable.

On the public relations front, the Chicago School Board has failed miserably to communicate to taxpayers in Chicago how much a 16% raise translates into as a tax increase per household. Thus, for now Chicago's taxpayers are seem oblivious to the tax implications of the teachers' raises.

According to the Windy City Young Republicans, the total base salary/pension per year: $74,798 which if calculated into pay/per hour for the year would add up to about $34.50/hour assuming the teacher used all of their sick days.

Additionally, CPS teachers receive health coverage and are required to pay a minimal contribution from their base salary toward the plan. Currently the average contribution for a CPS teacher with a family is 1.8% of their base salary. Thus, the average teacher pays $1,282 toward the cost of their health plan. The range in employee contribution is from 1.3% - 2.8% depending on the level of coverage selected.

As long as teachers and public service unions continue to hold leverage that leads to their getting outsize raises, the downward spiral to economic calamity in cities like Chicago and states like Illinois will continue. The immense political contributions of the public unions keep politician under their control. The playing field has to be leveled if cities and states are to avoid bankruptcy. While it won't happen in Democrat party controlled Chicago, it would be a welcome development to see a school board decide to fire overpaid striking teachers and replace them with the 1000's of teachers that are out of work. 

Another teachers' strike is taking place in a suburb to the north of the city, Lake Forest. Time will tell whether the school board in this more conservative town holds the line in salary negotiations with the teachers. However, it will be challenging for the school board volunteers who care about their student to stand up to teachers that shamelessly hold students hostage.

Burning More Coal Due To Shutting Down Nuclear Plants

The environmental movement in Germany is so deeply brainwashed that its members fail to realize that shutting down nuclear plants leads to burning more coal. The naive assumption of the Greens that nuclear plants can be replaced via clean energy sources is ridiculously misguided. In reality, coal will be a primary source for electricity if Germany goes ahead with its plans to shut down all its nuclear plants.  The Germans are building over 20 coal-fired power plants to offset the shut down of nuclear power. Thus, shutting down nuclear plants increases air pollution and CO2 emissions. Some researchers even judge that the soot from burning coal is a bigger factor in the increased arctic temperatures than are CO2 emissions.

Germany drew some 20 percent of its total power from wind, water, solar and thermal energy sources in 2011. Even at this level there were increased costs as well as huge problems distributing power from the windy northern sections of Germany to the southern part of the county. On particularly windy days, some wind turbines had to be switched off because the current network cannot cope with the quantity of wind power being generated. It will require years, if not decades, to get all the permits required to build new power lines across the country that would make the goal of 50% of electricity from renewables feasible. 

Germany has already experienced a 10% increase in the cost of electricity. The costs will sky rocket if they close all their nuclear plants, as the country will go from being an exporter of electricity to being an importer. In addition to the increased number of coal fired plants within Germany, some of the imported energy will come from coal fired plants outside of German borders. Further, the intermittent nature of wind power requires wildly expensive backup power plants being built to fill in the gaps during periods of light wind, making significant increases in wind energy a form of economic suicide for Germany's energy intensive manufacturers.

Thus, the anti-nuke Greens in Germany are leading to increased soot and CO2 emissions due to forcing the country's utilities to burn more coal. 

Retail Sales in August 2012 Will Be Disappointing

The consumer in the U.S. is hurting. The large bills for air conditioning this summer, high priced gasoline, and the high cost of food are combining to hit consumers with a triple whammy. Disposable income is increasingly scarce in many households that are skimping to get by and pay for inflated food and energy costs.

Within my household, the battle over use of the air conditioner is becoming a major source of family conflict. We kept the house relatively cool during the record breaking heat wave in July (in my opinion, ridiculously cool), and the bill from ComEd is astronomical. We will be substituting macaroni and cheese for steak this month to cover the cost of this bill. This substitution of lower priced products and reductions in spending will be replicated in households across the country

Retail sales during August in the U.S. will be negatively effected by the reductions to discretionary income due to higher food and energy costs. The 0.8% increase in July sales came “after three very weak months and consumers had  not yet felt the bite of higher prices that are just beginning to work through the production chain,” says economist Chris Low of FTN. “Because the food price increases are the result of a supply shock, not stronger demand, they will weigh on consumption down the road.”

Thus, my prediction is that the economists predicting another month of positive retail sales growth in August are going to be dead wrong. If there is any increase in sales at all, it will be due to higher costs, not increased demand. Be prepared for a disappointing retail sales reports when the August reports from are released by retailers and the Commerce Department.