A basic look at how climate scientists infer that man-made carbon gases are changing the climate, and how this view is contradicted by other climate scientists who are skeptics.
I am a former science correspondent with an interest in reporting the facts, not the media hype. My thanks to 9thgate for checking my script for errors.
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Part 2: Climate Change — the objections
This video, the second in the series, looks at alternative hypotheses explaining global warming. I am only looking at alternative hypotheses put forward by real, professional climate researchers, and the findings of real, professional climate researchers who disagree with them. Yes, I’ve left a lot of the detail out. This is a 10-minute video summarizing the arguments and counter-arguments, not a PhD thesis. The comments forum will be free and open, as always, but if you disagree with what real, professional climate scientists say, please take it up with them and dont expect me to defend their point of view. If you have a stunning piece of scientific evidence that disproves one side or the other, dont waste time on my channel, write a paper, and get it peer-reviewed and published in a reputable journal.
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Part 3 – Climate Change — Anatomy of a myth
I had planned to put several myths in this video, but discovered such an appalling web of deceit and fabrication in this first one that I felt I had no choice but to thoroughly debunk it. Like many ingrained myths, this one is so ubiquitous that it takes an awful lot of hard evidence to convince true believers that it’s been fabricated.
Joe Nocera has an interesting article in the NYT about FICO credit scores. Banks rely almost exclusively on the FICO scores when making loan decisions — despite the many flaws in the FICO scoring process:
“FICO scores are not the best predictor. The amount of equity a person has in his home, his debt-to-income ratio, his job stability and his cash reserves are all better predictors than credit scores, according to Dave Zitting, the chief executive of Primary Residential Mortgage, a leading mortgage lender. And yet, he said, “The credit score has become the line in the sand for the banks.” (emphasis added)
1) While toughness questioned and worst case not incorporated, EU stress test has less banks failing and smaller amount of money needed to be raised, so positive for now in terms of more info
2) German IFO, UK GDP, Euro zone mfr’g and service index, French biz/consumer confidence, Euro zone industrial orders all better than expected
3) Chinese stocks close at 4 1/2 week high, copper at 10 week high, CRB at 2 month high
4) US corporate earnings good so far
5) After falling for 35 straight days, Baltic Dry Index up 6 straight days
6) Brazil and Canada raised interest rates, better economy
7) Housing starts less than expected, we need less homes.
Negatives
1) Housing starts less than expected, impacts construction
2) Housing inventories continue to rise
3) NAHB builder survey falls to lowest since Apr ’09
4) Brazil and Canada raised interest rates, less liquidity
5) Bernanke says outlook uncertain
6) Bank earnings mediocre.
Whenever I travel, I always accumulate a list of things to read. Its good for airplane entertainment, and is the reason I will likely get an iPad (but I will wait for 2.0 version).
Anyhow, before I trek back to the conference to see Mark Faber speak, here are the items that have caught my eye.
• Congress, HMOs, Big Business Rank Last in Confidence in Institutions (Gallup)
• Feinberg Faults Banks for $1.6 Billion in Bonuses; 80% of Bank Comp is excessive (NYT Dealbook)
• The latest Big Mac index suggests the euro is still overvalued (Economist)
• What $1 Trillion Would Pay For . . . (Kiplingers)
• Chris Whalen: EU stress tests: who knows, who cares? (Reuters)
• Goldman Sachs Hands Clients Losses in ‘Top Trades’ (Bloomberg); see also Learning to Live With Conflicts of Interest (Bucks)
• Are Banks Withholding Highend Repossessions From the Market? (Real Estate Channel)
• The Brewing Coup Against Microsoft CEO (Daily Beast)
The ongoing deleveraging of the American Consumer continues apace. The most recent evidence of this is the 2.0% decrease in homeownership rates. My expectations as we work through the next 5 million foreclosures is that rate will revert towards historical means, before settling in near the 65% area. (John Burns forecasts 62%).
However, the NY Fed produced a report, however, that suggests a very different number. Back out “Home-Owers,” (Neg Equity Households) they say, and you already are at a 62% ownership rate:
“Recent years have seen a sharp rise in the number of negative equity homeowners — those who owe more on their mortgages than their houses are worth. These homeowners are included in the official homeownership rate computed by the Census Bureau, but the savings they must amass to retain their home or purchase a new home are daunting. Recognizing that these homeowners are likely to convert to renters over time, the authors of this analysis calculate an “effective” rate of homeownership that excludes negative equity households. They argue that the effective rate — 5.6% points below the official rate — may be a useful guide to the future path of the official rate.”
Expect to see more discussions on this interesting data point . . .
Sources: The Homeownership Gap
Authors: Andrew Haughwout, Richard Peach, and Joseph Tracy
May 2010 Volume 16, Number 5
JEL classification: G21, R31, R51 http://www.newyorkfed.org/research/current_issues/ci16-5.html
The results of the stress test were of course better than thought relative to the amount of banks ‘failing’ and the amount of total capital that needs to be raised in order to get every one of the 91 to a 6%+ tier one capital ratio. We can all debate whether the test was helpful or not since so many ‘passed’, whether sovereign debt was in the trading book or the banking book, etc… but the bottom line is the test was not truly stressed to the real worst case scenario, a sovereign default. If you’re in the camp that there is no way Greece defaults, then the results of the test can provide you with much clarity. If you’re in the camp that Greece will inevitably default and time is the only question, the stress tests have no meaning because all bets are off under a sovereign debt restructuring due to the huge sovereign debt cross holdings of a majority of the banks tested.
trading book vs banking book/European test
Ahead of the release of the European bank stress tests, the market is focusing on the headline on the tape that they will be limited to banks’ trading books rather than their banking books. This has been out for days and is not new news and I specifically talked about it yesterday. With respect to the methodology, I wrote “Another issue will be the haircut to sovereign debt. If a bank holds it in their trading book, a haircut will apply. If it’s in their banking book (held to maturity), there will be no haircut and accounting rules allow banks to shift between accounts.” Thus, while the euro reversed lower, it’s not new news.
Another key stress test assumption
Another key component of the European bank stress test is the assumption that there will be NO sovereign defaults. Thus, a sovereign bond in a trading account can be marked to market with a haircut based on its current trading level but the banking account assumes held to maturity and a repayment at par. The entire problem with this whole exercise therefore is the lack of a true worst case scenario which the bond markets have signaled is a real possibility as evidenced by the CDS level of Greece for example. The EU assumes their version of TARP and Greece’s separate package, prevents any default.
There is a BusinessWeek article that notes “Shares of companies whose CEOs dine with Obama outdo the S&P.”
I have a quote in that I would like to clarify:
“Just a coincidence? Only partly, says Barry Ritholtz, CEO of equity research firm Fusion IQ. Losers don’t get asked to hang out with the President, he says. The White House likely is putting together invitation lists so that the President is dining with executives at the top of their games and not associating with companies in decline or under investigation. “If the captain of your team gets a phone call from the White House, it probably means your team is about to win the World Series or already has won,” Ritholtz says.”
What I inartfully was trying to express was that it is not a coincidence at all. I am not sure it comes across, but the point is there is an inherent bias in the selection of these company CEOs — and that the selection process itself guarantees this was not a random group of stock picks. (Statistical invalidity and all that).
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Source: Stockpicking Tips from President Obama?
Nicholas Johnston
Business Week July 22, 2010 http://www.businessweek.com/magazine/content/10_31/b4189029842370.htm
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
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