Big Green Trucks

Be sure to enjoy the new article about flywheel hybrids here!

Hybrids got a lot of press when gas was $4 a gallon, but now that it is below $2, does anybody care? Well, Eaton does.

Eaton has been in the power, hydraulics, and automotive business for quite some time, quietly developing new technologies used in most cars, trucks, and heavy trucks today. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

As I have written previously in "Hybrid Hummer Hums," Eaton was a main supplier in the hydraulic units for that vehicle. In this article, I will discuss two Eaton implementation of hybrid technologies.



Parallel Hybrid System
The picture above graphically displays Eaton's Hydraulic Launch Assist system, a heavy vehicle (garbage truck) with a standard engine, and hydraulic system is supplemental power. It is designed to capture energy through regenerative braking, store it in hydraulic fluid, and then use it to "launch" the vehicle from a stop.

From Eaton's web site, "During acceleration, fluid in the high-pressure accumulator is metered out to drive the pump/motor as a motor. The system propels the vehicle by transmitting torque to the driveshaft." This system is able to work in either Economy or Performance mode. The difference being that engine doesn't perform acceleration until after the hydraulic system is spent in Economy mode, while in Performance mode, both the engine and hydraulic system work together. In either case, Eaton predicts a 20-30% fuel efficiency increase.

Series Hybrid System
A series hybrid varies from a parallel system in that, "... conventional transmission and driveline are replaced by the hybrid hydraulic powertrain and energy is transferred from the engine to the drive wheels through fluid power."

The series hybrid allows the engine, mated to a continuously variable transmission (CVT) to operate at optimum efficiency, while "energy is transferred from the engine to the drive wheels through fluid power." This system also uses regenerative braking and managed engine cut-off to show fuel efficiency improvements of 50-70%. Would you feel better if you had more energy? Try FRS® Healthy Energy™ Free*!


Although these systems are not in full production, they are the leading edge in hybrid technology for heavy vehicles. Think about these hybrid systems when you see a city bus or garbage truck accelerate from a stop. Imagine seeing that same bus accelerate, but without that black cloud. That is progress.

Stop the Meddling With the Market!!

On the front page of the 04 December print edition of "The Wall Street Journal," the headline is "U.S. Eyes Plan to Lift Home Sales." Are you kidding me?? The article states unbelievably, "The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages."

You just read what I read, Freddie and Fannie back loans whose rate is below market. Good grief!! The goal is to extend more loans and "address falling home prices." Doesn't anybody remember the housing bubble? Why does the government think it makes sense to prop up home prices instead of allowing the market to price them? Also, why allow failed institutions to back below-market mortgages? I feel like I am living in the Twilight Zone.

Let's take this a step further. This scheme is only for buying a home and not refinancing. However, later in the article, Secretary of the Treasury Paulson says "...is to reduce the cost of mortgage finance so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages." Huh? Now he wants to subsidize mortgages? Maybe the plan can include only those refinancing with bad credit, as the rest of us suckers are stuck with what we've got.

When I bought my house, I had to scrimp and save to get a suitable down payment, as well as prove employment and the ability to pay. Guess what, I have been able to pay my mortgage, on time, and without any "adjustments." So why should things change now? What should happen is that those institutions that made bad loans face the consequences.

As a taxpayer, and somebody who pays on time, I resent that some new home buyer is going to get a subsidized mortgage. I also resent the fact the lenders are going to rewarded for not applying standard risk models and setting rates. Stop this madness!! If the US government wants to restore both faith in the financial markets, as well as stability, mortgage and home prices should be set by the market, not by government interference (and my money!).

Another Look at Hybrids

With gas below $4, and in some states below $2, I thought I would take another look at hybrids and their economic efficiency.

While I am not against hybrids per se, I still am not completely convinced that the value proposition is there.

In my previous column about hybrids titled "Hybrids, the Real Deal or Flavor of the Month" and "Hybrid Hummer Hums," I made a general statement about how to determine if the fuel savings of the hybrid is greater than the additional acquisition cost. Also, I recommended using the MPG calculator at http://www.fueleconomy.gov/feg/savemoney.shtml.

I decided to compare the Toyota Camry and Toyota Camry Hybrid. Here is a table I created using data from an auto buying service. The data surprised me.

2009 Toyota Camry 4dr Sdn V6 Auto XLE (Natl) vs. 2009 Toyota Camry Hybrid 4dr Sdn (Natl)

As configured, the MSRP is $2545.00 greater ($28695.00 vs $26150.00).
Engine Type 6 cylinders standard, versus 4 cylinders standard.
Fuel Economy City 14 mpg lower fuel economy in the city (19 versus 33).
Fuel Economy Highway 6 mpg lower fuel economy on the highway (28 versus 34).
Cruising Range City 216.1 less miles cruising range in the city (351.5 vs 567.6).
Cruising Range Highway 67 less miles cruising on the highway (518 vs 584.8).
Base Curb Weight 164 pound(s) less base curb weight (3516 vs 3680).

What does all of this mean? I couldn't believe that the non-hybrid was $2545 more than the hybrid. But the story doesn't end there.

In a recent article in The Wall Street Journal about small cars, the Journal reports that hybrids are more expensive to own. To me, that didn't seem possible until I read the article.

Insurance for hybrids is more expensive, as are repair parts and labor. "The 2009 Camry hybrid, for instance, costs an average $1,957 to insure for that 40-year-old male driver, while a similar conventional 2009 Camry costs just $1,302, according to Insure.com."

Also from the Journal, "Hybrid cars cost more to insure because they can't [always] use after-market parts, the labor charges per hour are higher, and the they take longer to repair," says Amy Danise, a spokeswoman for Insure.com.

Just when I thought I might buy a hybrid during the gas run up, I am glad I didn't. I had no idea about the insurance issue, but that is why I wrote this article.

I wanted to highlight the need for a smart consumer to perform comparisons based on all of the facts. Many people have bought hybrids to be "eco-chic" or some other non-measurable quality. Others only view the gas savings, but don't know about the insurance hit.

Ultimately, since its your money, you will decide the relative value of each option, but please, do so in an informed manner.

Keeping India Poor, One Company at a Time

**UPDATE: Tata Releases Nano to India!**

With the world's second largest population, India also has one of world's largest populations in poverty, no thanks to Mamata Banerjee and her anti-business politics.



As a an Indian MP, and member of Trinamool Congress Party, Banerjee was a leader in the violent protests against Tata Motors and the building of their Nano plant in Singur. See "Tata Motors Says "Tata" to Singur" for more information.

If that wasn't bad enough for the economically depressed city of Singur, now Banerjee announced that she would lead anti-industrial protests across Communist-led West Bengal. Further, some of her ilk would like to see her take this campaign industrial suicide nation-wide.

According to The Wall Street Journal, on 05 Nov 2008,:

"...she (Banerjee) voiced her opposition to land acquisition for a power plant, a shipbuilding yard and a technology park in the state... She said she intends to keep up pressure on Tata and wants it to return any loans it got on favorable terms from the state."

Is this what India needs? Fewer manufacturing jobs, less technology, and more subsistence farmers? These companies and opportunities will help West Bengal improve the standard of living for all who live there. Infrastructure will have to be improved, which is one of Banerjee's complaints. New jobs and job training benefits the entire population. However, Banerjee, who is wed to foolish notion that subsistence farming is somehow more virtuous than working in industry, and is willing to exploit for political gain, is deserving of great contempt.

Every country in the world that has transitioned away from primarily agrarian economy to an industrial economy has felt this type of pain. It is not easy, but is best for the well-being of the country as a whole. It is a matter of efficiency. Farming on a large scale is more efficient and requires fewer workers. Those workers could be trained to take higher paying industrial or technology jobs. Higher wealth creates a higher standard of living and demands for better services from the government, such as clean water, power, and environment. Has Trinamool Congress Party of the Communist done that for Kolkata or Singur?? I think not.

India, don't let Banerjee and her brand of populism stop your country from being its best. Men like Ratan Tata have the right idea to improve the country. Industrial growth, while not perfect, offers a better life for the poor and their families. Don't be slaves to populist politics or subsitence farming, but be free to explore the possibilities of an improved economy.

Hold on to Your Wallets, Here Comes Obama

So you went and did America. You voted for Barack Obama. All of that "Change" and "Hope" talk snowed you, didn't it?

Well guess what? Starting with the new Democrat congress and Obama in the White House, taxes are going to skyrocket! One of the first things on the agenda will be allowing what was known as the Bush tax cuts to expire. That is an instant tax increase on all tax payers.

We also know that Congress and President-elect Obama are going to raise income taxes on anybody making $250,000, no wait, $200,000, nope, its $150,000, ok, just everybody. The tax increase that is really going to hurt the US economy is the capital gains tax.

Captial gains tax is a tax on the increase in investments. For simplicity sake, if your investment earns $100, current tax law takes $25. In percentage terms, if your investment earns 8%, your actual return is 6%, after taxes. President-elect Obama plans to raise that rate to 35%, thus making that $100 gain worth $65, or that 8% gain is really 5.2%. Will triple tax-free bonds become more popular?

What that really means is that folks will reconsider investing that next dollar, as the tax hit may not be worth it. Additionally, if companies have investment gains outside of the US, they won't repatriate that money because it will wipe out their investment returns. Without money to improve the business, or pay dividends, the economy begins to sputter. Considering the current state of the global economy, ANY tax plan that increases the burden on individuals or corporations is both dangerous and foolish. But don't blame me, I voted for McCain. Rant over.

"Beware of Geeks...Bearing Formulas"

Warren Buffett says it all, as reported in the 03 November 2008 print edition of the Wall Street Journal, titled "Behind AIG's Fall, Risk Models Failed to Pass Real-World Test." The article explains why the risk modeling used by AIG was one of the most significant causes of the storied insurers dramatic fall and current weakness.

As I have written in the past (Financial Crisis Primer), much of today's financial crisis is based on poor risk management. Additionally, the U.S. government had a strong role in the distortion of the mortgage and mortgage-backed securities market, creating a ripple effect felt through the credit-default swaps.

What is a credit-default swap? From the article:

"In essence, AIG sold insurance on billions of dollars of debt securities backed by everything from corporate loans to subprime mortgages to auto loans to credit-card receivables. It promised buyers of the swaps that if the debt securities defaulted, AIG would make good on them."

So, AIG had a Dr. Gary Gorton, formerly a Wharton professor and now a professor at Yale School of Management, build highly detailed models to determine "worst case scenarios" for the securities AIG was using for the credit-default swaps. While Dr. Gorton provided data based solely on the default potential of the backing securities, the AIG management was the final say on what was purchased.

So far, this sounds like a good practice. A very smart PhD economist builds a huge computer simulation to model risk. What the model didn't take into account is where this all falls apart and AIG is getting almost $100 billion in U.S. government loans.

The risk model of Dr. Gorton didn't account for the loss in value of the backing securities, nor did it account for the loss in value of AIG itself. Why? Mainly because the financial instruments used to create the credit-default swaps were so complex, and the other outside factors were near impossible to predict. In short, there were too many variables making proper risk management impossible also.

One can argue, as does a current criminal case, that AIG should have exercised better judgment in how it set up and sold credit-default swaps. One can argue that conservative risk management would have minimized these issues and allowed AIG to not require government financing. Perhaps there is another lesson in all of this. When something is too good to be true, like loose credit and cheap money, it pays not to be greedy. Just ask Lehman Brothers, or should I say, Barclays?

Price Discrimination in Health Insurance

According to the "New York Times," women pay higher health insurance premiums than men. The article, titled "Women Buying Health Policies Pay a Penalty," explains the reasons, but convolutes the issue for political reasons, shocking, I know.

In general, women pay more for health insurance because they tend to consume more health services. Seems pretty simple, right? Just like a life insurance is cheaper for somebody who doesn't skydive. Would you feel better if you had more energy? Try FRS® Healthy Energy™ Free*!

However, and this is where you should get nervous, "Women’s advocacy groups have raised concerns about the differences, and members of Congress have begun to question the justification for them."

I will save these groups and members of Congress the trouble by explaining this issue with data from the article itself.

"In general, insurers say, they charge women more than men of the same age because claims experience shows that women use more health care services. They are more likely to visit doctors, to get regular checkups, to take prescription medications and to have certain chronic illnesses." Pretty simple, right?

How about this:

Thomas T. Noland Jr., a senior vice president of Humana, said: “Premiums for our individual health insurance plans reflect claims experience — the use of medical services — which varies by gender and age. Females use more medical services than males, and this difference is most pronounced in young adults.” Again, women are consuming more health services. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Again, for the advocacy groups who claim insurance should cost the same, in the name of equality, "Mr. Bykerk, a former executive vice president of Mutual of Omaha, said, “If maternity care is included as a benefit, it drives up rates for everybody, making the whole policy less affordable.”

So there you have it. Disparities in the cost of health insurance for women are based on usage. It seems like this is just another contrived issue for big government types to get there hooks into the best health care system in the world. These are same government types that brought you the TSA. Think about that!

A Global Nuclear Renaissance

An article in the 24 October 2008 print edition of the Wall Street Journal (B2) reports that France's Areva SA and Northrop Grumman are forming a joint venture to build heavy equipment for the nuclear power industry, as well as an engineering center in Newport News, VA.

According to a joint press release on 23 October:

The 300,000 square-foot facility represents a significant investment of more than $360 million in the U.S. commercial nuclear and manufacturing industries and will bring more than 500 skilled hourly and salaried jobs to the Commonwealth of Virginia. AREVA Newport News will be the first full-scale manufacturing facility dedicated to supply heavy components, such as reactor vessels, steam generators and pressurizers to the U.S. nuclear energy industry.



What the casual reader should know is the that the Newport News facility is one of the world's largest shipyards, and only one capable of building a Nimitz-class nuclear aircraft carrier. In short, it is a gigantic heavy industry site with highly-skilled labor.

This story is relevant to this blog not only because it follows the path of several previous articles:
"A Nuclear Renaissance in Germany?", "Nuclear, French Style", "Nuclear, India Style", "Nuclear, America Style", and "Build Wind, Drop Nuclear - Germany Loses its Mind" but also because nuclear power is one of the "greenest" and most reliable source of energy on the planet. This joint venture is also a shot in the arm of US heavy manufacturing, as the predicted market for its products is $100 billion.

Nuclear power is good for the US and those nations who are responsible. Let's hear it for Areva and Northrop Grumman for expanding the opportunity for clean and reliable power to the rest of the world.

A Nuclear Renaissance, in Germany?

In two previous posts, "Build Wind, Drop Nuclear? Germany Loses its Mind!" and the follow up post "Germany Loses its Mind- Follow Up" I wrote about how the German government was looking to decommission nuclear plants in favor of building 17 wind farms. As you can tell from the above titles and posts, I think it was a pretty bad decision.



However, there has been a ray of hope! I found this article on Platts titled "Germany's RWE to build new nuclear plants at home, abroad." The CEO, Juergen Grossman stated the following to the German newspaper, Sueddeutsche Zeitung, (as reported by Platts):

"RWE will engage in projects in Germany as well as abroad. An exact number will depend on the financing options available and possible partners, but we reckon about three to five new builds."

Well, it seems like Herr Grossman has the inside track. Maybe Germany has figured out that there is a real need for clean, reliable, nuclear power and that it doesn't have to be a zero-sum game with wind power.



Interestingly, he also makes this statement, that on first blush, is counter intuitive, considering the enormous capital costs surrounding the construction of nuclear facilities:

"Grossman believes the credit crunch provides an opportunity for RWE to grow as people look to greater security in their energy supplies. The crisis may require affected governments to reduce the amount of imported natural gas and re-focus on national resources, such as nuclear or clean coal technology, he said."

Let's hope that Germany can get back on the nuclear track while it lives out its wind fantasy.