Read This

[dstars]

This is a beautiful piece of work:

http://www.harpers.org/archive/2008/02/0081908

by Eric Janszen

[Injin]

This is a beautiful piece of work:

http://www.harpers.org/archive/2008/02/0081908

by Eric Janszen

I like it.

Conclusion is wrong, but hey, the man is obviously well educated so no surprise there.

[dstars]

I like it.

Conclusion is wrong, but hey, the man is obviously well educated so no surprise there.

You can't know his conclusion is wrong. The chances of him being right may not be that high but this is flutterland he's talking about.

I like his thinking. It has originality. The fact that he delivers with great panache simply makes it a more riveting read.

But his conclusions, for there were many, were not barked out nor were they filled with numbers to conceal idiocy (a la the preponderance of our press to respond like the fawning puppets that they are).

This is proper analysis. He took great care to define certain terms that are usually bandied about by monkeys in suits. That was important and it separated him from the crowd.

All is now obvious. The things we are about to witness have, in a real sense, already happened. This guy actually added to the debate. He offered a historical analysis that rose above the usual lip-service that history is awarded in economic diatribes.

You and I may have known for quite a while that this was going to happen, in this way, but this guy has the sound of someone unsurprised by recent events.

I once worked in a very minor capacity in the world of dotcom finance. Interestingly, it was for a gold broker trying to jump on the wagon whilst gold was in its deserved shitehouse. (Exactly where it should be now, I should add, although it promises to go to the sky and beyond; so I'm just an old scaredy.)

His experience rings true. I used to sit in rooms looking at pairs of old men and young boys (and not all of the rent-boy variety). The old men had their grandsons and great nephews in to help them with the computery bits and they'd show junior how to make big bucks easy.

It never quite worked like that. And I was fired from another job for writing articles saying that dotcom was gonna burst its britches.

Eric Janszen sounds like a man with experience as well as talent.

I think what he's saying is important.

[Injin]

You can't know his conclusion is wrong. The chances of him being right may not be that high but this is flutterland he's talking about.

I like his thinking. It has originality. The fact that he delivers with great panache simply makes it a more riveting read.

But his conclusions, for there were many, were not barked out nor were they filled with numbers to conceal idiocy (a la the preponderance of our press to respond like the fawning puppets that they are).

This is proper analysis. He took great care to define certain terms that are usually bandied about by monkeys in suits. That was important and it separated him from the crowd.

All is now obvious. The things we are about to witness have, in a real sense, already happened. This guy actually added to the debate. He offered a historical analysis that rose above the usual lip-service that history is awarded in economic diatribes.

You and I may have known for quite a while that this was going to happen, in this way, but this guy has the sound of someone unsurprised by recent events.

I once worked in a very minor capacity in the world of dotcom finance. Interestingly, it was for a gold broker trying to jump on the wagon whilst gold was in its deserved shitehouse. (Exactly where it should be now, I should add, although it promises to go to the sky and beyond; so I'm just an old scaredy.)

His experience rings true. I used to sit in rooms looking at pairs of old men and young boys (and not all of the rent-boy variety). The old men had their grandsons and great nephews in to help them with the computery bits and they'd show junior how to make big bucks easy.

It never quite worked like that. And I was fired from another job for writing articles saying that dotcom was gonna burst its britches.

Eric Janszen sounds like a man with experience as well as talent.

I think what he's saying is important.

True, my statement was more definite than it should have been.

For me, this is about state/banking collapse and the inevitable end point of any system of coercion. Without the simple feedback mechanism of being told "no thanks" things like the financial sector and the government grow until they collapse, spectacularly.

For me, the fact that the bubble was in housing is a bad sign, a very bad sign, or a great sign depending on your time frame and preference for centralised systems of coercion of all kinds because housing is so mundane.

Exotic - mundane - exotic doesn't really make sense to me, so it's collapse I am forced to think we face. Not of the economy though, I think that people have a trick or two up their sleeve. I think the parasite will die this time, or at least be vastly reduced.

[stonethecrows]

Cool article which explains well the mechanisms involved in speculative bubbles. He may or may not be correct in his suggestion regarding renewable energies, sustainability etc but I got a bit put off the windfarm thing after watching this vid http://www.architectsjournal.co.uk/news/da...es_berserk.html

[Ursus Helvetica]

This is a beautiful piece of work:

http://www.harpers.org/archive/2008/02/0081908

by Eric Janszen

You should check out itulip.com - he writes a lot more there. Janszen is most impressive for a forecaster - called the end of the dot com boom, recommended gold in 2001 (yet to advise selling), etc. When you read his stuff regularly, you realise the extent to which his ideas are pinched by other commentators.

[Ursus Helvetica]

Cool article which explains well the mechanisms involved in speculative bubbles. He may or may not be correct in his suggestion regarding renewable energies, sustainability etc but I got a bit put off the windfarm thing after watching this vid http://www.architectsjournal.co.uk/news/da...es_berserk.html

Why? Do you spend a lot of time standing under wind turbines during gales?

[gravity always wins]

A weak dollar may short-circuit the supposed boom before it happens.

Uhhhh?

A wealk dollar is the catalyst. The money will only flow into energy conservation technology only if there is a pricing incentive to do so.

Weak dollar equals higher oil price which equals incentive to conserve.

This would actually be a good bubble bring it on.

[Nationalist]

Plenty of 20-20 hindsight there. However this looks very prophetic...

The megabucks surf the bubbles, buying before others even know they're in a bubble and selling before the pop. In truth everyone knows it will all end in tears but the last phase of the boom is: "It's the new reality."

How do I buy into energy?

[Methinkshe]

Reassuring to discover that someone with far more knowledge than I have of finance and economics also believes that the next bubble is already in place.

I posted the following in the global warming thread a few days ago - not because I had read about alternative energy being the next bubble (until this article), but because I'd come to that conclusion through observation and applying reason and common sense.

Global Warming..... Post #426

Sorry to interrupt your cosy eco-disaster chat. But it's always a good thing to hear an opposing pov - tends to prevent one from becoming too entrenched in what could very well turn out to be the scam of the century and is almost definitely the next bubble. Global warming/climate change industries are already sucking in cash in a way that mimics the dotcom bubble. Let's see where it all ends.

As well as agreeing with the author's conclusions, I think the article offers an excellent explanation of how we got into this financial mess. Thanks for linking, dstars.

[EmpiricalBear]

This isn't just about wind turbines...

its about a shift to alternatives to oil. I think that when it does come about there will be the sort of bubble Jantzen speculates about. However... will it arrive in time to act as the reflator he is thinking of.?

Many basic technologies are now in place that just need critical mass to get going. Improved Solar, Biomass, Hydrogen, Electric cars, new nuclear technology options.

A bubble always has good spin offs, don't forget that.

1- The internet boom created the fibre we are talking to each other down now.

2- The house price bubble has caused the housing stock of this country to be greatly improved

An energy bubble might probably leave the planet a better place, while making a lot rich, and creating another bunch of numpty-losers

Edited February 27, 2008 by 2MeterBear

[Oliver Sutton]

2- The house price bubble has caused the housing stock of this country to be greatly improved

Are You Having a Laugh?

[DisplayNameChanged]

How do I buy into energy?

I have posted a reply to this before only to see the post deleted.

So without naming any specific trust - there are Investment Trusts that invest in alternative energy, which you can buy from share trading accounts.

EDIT: they, there

Edited February 27, 2008 by ds_t

[EmpiricalBear]

Are You Having a Laugh?

Not at all.

The property mania means that millions of ordinary people have had their houses brought up to spec. Extensions added etc.

Unsaleable houses along the Westway into London, long fallen into decay, are even as we write being gutted and rebuilt by the property mad.

Whatever else one says about this, the amount of renovation created by this boom has substantially improved the quality of the existing stock.

Of course... new builds are another matter

[auk]

I too found this one of the best written articles I've read for a long time.

I also share his view on alternative energy and infrastructure being potential areas for the next bubble. In my job I spend a lot of time reviewing investment opportunities and these are the two big things in institutional level growth capital raising at the moment. I believe that we are already seeing the formative stages of this bubble - indeed I would argue that to an extent we are already well advanced.

During the easy credit period of the past 10 years the "yield" on infrastructure assets has dropped dramatically, in the same way as it has in residential and corporate housing. In fact there is an uncanny similarity between some of the financing tricks employed in sub-prime mortgage lending and MEW with the economics behind infrastructure investments, in particular the toll road businesses of the large infrastructure funds.

The same could be said for the "asset" end of alternative energy - wind farms for example have been changing hands at aggressively low yields (i.e. people are paying high prices for them compared to the revenue they generate per year - in the same way as people have been paying high prices for houses compared to the revenue generated from rent).

The same is true of the development / technology companies. I looked up the first solar power tech company I could find - SunPower Corporation http://finance.google.com/finance?client=ob&q=SPWR - market cap $6Bn - revenue $800m, net profit, $9m. These numbers are still some way short of the madness of 2000 in the tech space (remember that Cisco's market cap was once $500Bn on revenue of ~$16Bn), but they are certainly indicative of extraordinarily high expectations.

The interesting fact is that at the end of last year, SPWR was worth $12Bn - alternative energy companies have suffered as much as anyone from the sudden shift in US sentiment.

Its important to note however that alternative energy is ultimately a subset of infrastructure; although there are lots of interesting tech companies in the space, the vast majority of the money is spent on the infrastructure side of things - building wind farms, ethanol plants etc.

Infrastructure "bubbles" when credit is easy. There is such a high upfront cost that financing is a major driver. See housing boom.

Technology bubbles when expectations of future revenue divorce from reasonable reality. See dotcom boom.

As I said, the majority of alternative energy "investment demand" is in infrastructure rather than technology.

It could be argued that in terms of pricing, the "infrastructure" end of the sector is already at, or past the peak. This is does not mean that the flow of money will stop. Far from it. Demand for alternative energy and other types of infrastructure is exceptionally high, and there will be lots of money to be made. However, so long as credit is tight, I do not believe that the pricing of infrastructure will increase (or, in other words, the yields will compress further)

What is likely to continue to boom/bubble are the prices of the alternative energy tech companies. I believe that this is already happening. I do not believe however that this will be as destabilizing as could be feared, since, as mentioned, this is a relatively small part of the alternative energy story (in terms of money).

As an aside - this could also end up being a "good bubble" - i.e. one that results in inefficient investment in assets (wind farms etc), but inefficient investment in assets that will have a long term benefit to society, in the same way as the US railway madness was a "good bubble", while the Japanese commercial property boom/bust was a "bad bubble".

Edited February 27, 2008 by auk

[gravity always wins]

Not at all.

The property mania means that millions of ordinary people have had their houses brought up to spec. Extensions added etc.

Unsaleable houses along the Westway into London, long fallen into decay, are even as we write being gutted and rebuilt by the property mad.

Whatever else one says about this, the amount of renovation created by this boom has substantially improved the quality of the existing stock.

Of course... new builds are another matter

This is very true our housing stock has been greatly improved. (not including new builds - different kettle of fish)

Imagine the cost to the Govt if even 10% of these properties were state owned.

[Disillusioned]

Bump. Great article. Great thread.

[auk]

Just another thought about "good" and "bad" bubbles - the big problem with the housing bubble has been that consumption has been over-stimulated by the wealth effect / MEW - i.e. that this paper capital gain has been, effectively, wasted. To an extent this happened in the dot.com bubble as well, but not, I think, to the same level, simply because fewer individuals were involved. I would expect that any alternative energy / infrastructure boom would also have a much smaller wealth/over-consumption effect. This type of boom is far less harmful (providing that the assets invested in have a real long term benefit)

Edited February 27, 2008 by auk

[ParticleMan]

Quality. Now all we need is a way to work out how to consume vast amounts of precious metals as part and parcel (of an emergant Alt-E technology). Then the string will have its elephant, Mr Stars and Mr Finger can kiss and make up, millions of housewives the world over will be happy, and we all shall go to the ball after all.

[The Hooded C law]

I got a bit put off the windfarm thing after watching this vid http://www.architectsjournal.co.uk/news/da...es_berserk.html

where's the radioactive plume and contamination? Call that a disaster? Pah!

[The Hooded C law]

This is very true our housing stock has been greatly improved. (not including new builds - different kettle of fish)

Imagine the cost to the Govt if even 10% of these properties were state owned.

Cobblers - who's to say the stock wouldn't have been improved anyway. Magnolia paint and fake wood flooring are not improvements in my book. Neither is knocking down substantial family homes to build flats. Nor is building on Gardens.

The question we need to ask is has the median the sq footage of properties gone up or gone down. Have the size of Gardens increased or decreased. Is living density up or down. Has the amount we spent on housing increased or decreased.

[Methinkshe]

Just another thought about "good" and "bad" bubbles - the big problem with the housing bubble has been that consumption has been over-stimulated by the wealth effect / MEW - i.e. that this paper capital gain has been, effectively, wasted. To an extent this happened in the dot.com bubble as well, but not, I think, to the same level, simply because fewer individuals were involved. I would expect that any alternative energy / infrastructure boom would also have a much smaller wealth/over-consumption effect. This type of boom is far less harmful (providing that the assets invested in have a real long term benefit)

My concern is that the alternative energy market is being driven by governemnt subsidy and targets which allow speculators to jump on the bandwagon, not for environmentally sound reasons, but to make a financial killing. The market is a false one because it is driven by government intervention/subsidy, and as such any infrastructure or other assets that may be developed could well be over-valued and thus headed for a fall/correction sooner rather than later.

The following article touches on the financial scam that is wind generation.

The great wind scam's profitability is equalled only by its futility

It is six years since I first referred here to "the great wind scam" - the bonanza enjoyed by the developers of wind turbines, thanks to the hidden subsidy we all give them through our electricity bills. Under the Government's Renewables Obligation, they receive twice as much for such electricity as they produce as the owners of conventional power stations: a 100 per cent top-up which makes our wind energy the most heavily subsidised commodity in history.

Last week, the Financial Times finally woke up to this racket, in a series of articles explaining why wind industry profits in Britain are higher than anywhere else in Europe. But, astonishingly, the FT completely missed the other reason that this is such a scandal: namely why the amount of power we get as a result is so derisory.

The paper fell for the oldest trick in the wind propaganda book by referring to turbines' "capacity" rather than the mere 27 per cent of that figure which, with the fickleness of the wind, they actually produce. Thus the FT overstated the contribution of wind to our electricity needs by 300 per cent.

Interestingly, a victim (or perpetrator) of the same confusion is the industry's chief lobby group, the British Wind Energy Association (BWEA), which accuses me of misleading my readers by suggesting that, to meet our EU target, we need to build 20,000 turbines by 2020. To obtain "38 per cent of our electricity" from wind, the BWEA claims, we need no more than 8,500 turbines.

Let me remind them of the maths. According to the latest Government figures, our average annual electricity demand is 46 gigawatts (GW), ie 46,000 megawatts (MW): 38 per cent of this is 17.5GW. Let us generously say that the installed capacity of the average new turbine, onshore or off, is 3MW. But they produce only 27 per cent of capacity, so to generate 17.5GW would require capacity of 65GW. This needs over 21,500 turbines - more than I suggested.

Since this would require us to build more than two giant turbines a day - remember that offshore turbines can be almost the height of the Eiffel Tower - at a cost of far more than £100 billion, even the BWEA must know that there is no way this could be done.

They should stick to farming their subsidies and leave the rest of us to hope we can build enough nuclear power stations, at less than a quarter of the cost, in time to keep our lights on.

• Scared to Death by Christopher Booker and Richard North can be ordered for £14.99 plus £1.25 p&p from Telegraph Books on 0870 428 4115 or books.telegraph.co.uk

[thedebtisreal]

Agreed, a very good article and interesting comments on the thread.

Their is still a great deal of capital out there that needs a home.

Regarding New Builds, I think they get a bit of an undeserved bad name. They aren't of great quality, but they are liveable. Once they fall to their proper value of between 50-80k, they will make quite reasonable lower income accomodation.

Wouldn't get one myself, though.

[auk]

My concern is that the alternative energy market is being driven by governemnt subsidy and targets which allow speculators to jump on the bandwagon, not for environmentally sound reasons, but to make a financial killing. The market is a false one because it is driven by government intervention/subsidy, and as such any infrastructure or other assets that may be developed could well be over-valued and thus headed for a fall/correction sooner rather than later.

You're correct. Government subsidies are driving investment in alternative energy infrastructure. I'm less worried about wind farms (they can be enhanced with bigger / more efficient turbines over time), and more worried about solar plants. I wouldn't buy an operating solar plant at the moment. Bear in mind though that the point of these subsidies is to stimulate investment in the overall sector, leading to technology improvements. Cost per kwh has dropped and is continuing to drop at a rapid rate in both wind and solar. The point at which wind is a cost effective alternative to coal/natural gas/nuclear is not that far away.

[stonethecrows]

where's the radioactive plume and contamination? Call that a disaster? Pah!

What-you mean post a pic of a mushroom cloud on HPC forum?...think it's been done already