T. Boone Pickens: Let’s transform energy with natural gas

The US consumes 25% of the world’s oil — but as energy tycoon T. Boone Pickens points out onstage, the country has no energy policy to prepare for the inevitable. Is alternative energy our bridge to an oil-free future? After losing $150 million investing in wind energy, Pickens suggests it isn’t, not yet. What might get us there? Natural gas

T. Boone Pickens: Let’s transform energy — with natural gas – YouTube.


S&P P/E still not “cheap”

From 1900 into the mid-1990s, the PE ratio tended to peak in the low to mid-20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to extraordinary levels during the financial crisis (late 2000s). 


via Chart of the Day – S&P 500 PE ratio at a level not often seen since 1990.

“The Apple Conundrum”: Why One Fund Is Not Buying The iKool-Aid

Apple launched its first iPad in April 2010 and is now on its 3rd version, so the iPad has about a two-year shelf life for the company (it might milk a few more years out of each version, but the company’s business model is to continually launch new product iterations and slash prices on the older versions). Though it’s not disclosed in the financials, a guess would be that the new iPad will sell 26 million units its first year and 14 million in its second. If each version of the iPad earns $260 per unit, then Apple investors can expect somewhere in the range of $10 – $15 billion in total pre-tax profit for this newest version of the iPad. Unless investors thought Apple’s stock was way too cheap before the new iPad announcement, they seem to be expecting much more value to be delivered to shareholders from the iPad launch than can be reasonably be delivered by sales of the iPad device itself. The $172 billion increase in the company’s value far exceeds the approximately $15 billion that will come from the iPad, so it will have to come from something else. We don’t know yet what that “something else” is.

When we look at our cash flow models, assuming Apple can maintain its current operating margins (a heroic assumption in the face of increased competition in the tablet market), to justify the current stock price, it appears to us that Apple will have to sell about $2.6 trillion worth of total products and services over the next ten years. Last year’s revenues (for the fiscal year ending 9/24/11) totaled $108 billion. If Apple’s margins shrink, it will have to sell a lot more. This level of Apple product sales will make up almost 1.5% of U.S. GDP (of course it  also sells products outside of the U.S.). That means that with the average GDP per capita in the United States being around $50,000, each person must spend $750 on Apple products and services annually (since 30% of sales are domestic, this means that about $225 per U.S.  citizen would go to Apple every year). Since not all 310 million people in America use Apple, those who do need to spend a lot more and the vast majority of those sales will need to be on devices because iTunes sales do not bring much profitability.

via “The Apple Conundrum”: Why One Fund Is Not Buying The iKool-Aid | ZeroHedge.

Natural gas is incredibly cheap


Forget the collapse of the housing market, this is much bigger news. It’s the most dramatic change that is happening beneath the surface of the U.S. economy today. As the rest of the world struggles with oil prices that are very expensive both nominally and in real terms (see chart below), the U.S., thanks to new tracking technology, is enjoying the fact that natural gas prices are plunging. Even as crude oil prices have surged over the past 13 years from $12/bbl to over $100, the price of natural gas in the U.S. is roughly unchanged on net. That means (as the second chart above shows) that natural gas has dropped by an astounding 85% relative to crude oil. We’ve never seen anything like this. The U.S. now enjoys an incredible energy price advantage that not only is transforming industries (for example, it shouldn’t be too long before we start seeing cars that run on LNG), but that should be an important source of growth for the entire economy. This could be the best reason to be bullish.

via Calafia Beach Pundit: Natural gas is becoming incredibly cheap.

Best Resume Ever: Leonardo Da Vinci

Some time in the 1480s (experts tend to agree with 1483/84, at which point he was approximately 32-years-old) Leonardo da Vinci applied for a job at the court of Ludovico Sforza — then de facto ruler of Milan but not officially its Duke for another few years. Da Vinci did so by way of the following application letter; essentially a fascinating list of his abilities which, in an effort to appeal to Sforza’s needs at the time, is dominated by his undeniably impressive military engineering skills. His artistic genius isn’t really hinted at until the end.

Da Vinci’s efforts paid off, and he was eventually employed. A decade later, it was Sforza who commissioned him to paint The Last Supper.


via Letters of Note: The Skills of Da Vinci.

Learning About, and Drinking, Wine Encourages New Brain Cells

A Startling Discovery: Learning About, and Drinking, Wine Encourages New Brain Cells 
About 20 years ago, around the same time as the French paradox caused a dramatic rise in North American wine consumption, a century-old scientific belief, as self-evident as gravity and as immutable as the speed of light, was unintentionally proved false by the song of a bird.
Over the course of the 20th century, neuroscientists came to believe that humans are born with a complete set of brain cells, and that once infancy was over, the brain stopped changing, evolving, and growing. A neuron lost was never replaced, resulting in a dwindling network of neural pathways that degenerated over the course of our lifetime; the waves of years slowly but inescapably eroding our minds, washing away our capacity to think and remember. How depressing.
That is, until Fernando Nottebohm, working at Rockefeller University in New York City, made his startling discovery. In an elegant study of birdbrains, not remotely aimed at disproving our fated neuro-degeneration but rather at unlocking the secrets of birds’ remarkable capacity to learn new songs, Nottebohm observed neurogenesis. He saw that new neurons were born regularly in parts of a mature bird’s brain, and that these new neurons were essential to the song learning process. His amazing results were at first marginalized by the scientific community, since avian brains were seen as irrelevant to mammalian brains, but the door was opened to an entirely new field of inquiry. Old papers from the ‘60s hinting at the fact were dusted off and re-read, and further studies on mammals were conducted. In time, the crushing weight of evidence would overturn the long-held dogma that the brain doesn’t regenerate, and an unavoidable conclusion was drawn: mammals, including humans, grow new brain cells with comforting regularity.
Others before Nottebohm had searched for evidence of neurogenesis, though most experiments ended in failure. What Nottebohm had unwittingly done differently was to study birds in their natural environment, as opposed to a laboratory, as others has attempted. Earlier studies on mice and monkeys trapped in cages in dreary labs surrounded by white coat-clad scientists showed no signs of birthing new neurons. Neurogenesis, it turns out, is highly dependent on your surroundings. Unnatural, uncomfortable or otherwise unpleasant environments cause stress, which is now understood as an even more insidious and effective killer than previously thought. Stress inhibits neurogenesis. Sleep deprivation, too, has also been shown to curb the number of newborn neurons. Yet more reasons to avoid stress and sleep more, as though you needed a reminder.
The flip side, and here’s where I’ll get around to my tenuous tie-in to wine, is that anti-stress activities increase neurogenesis. Though alcohol is known to unwind the body, resulting at least in neurons transmitting electrical signals in the same alpha waves-pattern as is observed when the body is relaxed, I won’t suggest for a moment that drinking wine increases the birth of neurons (in the same way that it increases other types of birth). In fact, I’m sure that just the opposite is true. No, I’m referring to other anti-stress activities. Enriching your environment, talking a walk in the woods (or the park) does wonders for the mind. Regular exercise is a proven new neuron stimulator. And yet another effective stimulator, as Nottebohm stumbled across, is learning. Acquiring new knowledge not only increases neurogenesis, it also makes newly born neurons live longer (most new brain cells die young) and integrate better into existing brain structures, effectively putting them into use.
So, why not do your neurons a favour while engaging in something you enjoy? The field of wine is vast and full of learning opportunities. And the homework is not at all stressful. There is also a further benefit to delving deeper into an enjoyable field, a type of virtuous circle or positive feedback loop: learning about wine not only stimulates the birth of neurons, it also directly increases your capacity to enjoy it, which in turn will encourage you to learn more about it, and on and on.
A further fact about neurogenesis makes the case for delving into wine even stronger: neurons only grow in the parts of the brain that happen to be most titillated by conscious wine tasting. Studies so far have shown that the greatest regions of neurogenesis are the hippocampus, the memory and learning center, and the olfactory bulb, where all aromas are processed. It appears that new olfactory bulb neurons are critically involved in odor discrimination and improved odor memory. At the same time, differentiating between smells, as wine drinkers are constantly doing as they swirl and sniff, actually increases the survival rate of newborn olfactory neurons.
In other words, repeated smelling and tasting of wine, coupled with ongoing learning about grapes, regions, places, producers and everything else related, plus travel to beautiful wine country under relaxed conditions, could very well increase your brain regeneration capacity. And you’ll inevitably end up enjoying wine a little bit more, too.
Well, that was a whole lot of scientific mumbo jumbo to reach a starkly obvious conclusion. But at least now you have rock solid, scientific evidence that your passion for wine is not only enjoyable, it’s good for your brain, too.

John S. Szabo, MS

via Wine on the Brain & Top Ten Smart Buys – John Szabo’s Vintages Preview for Mar 31st, 2012.

Hugh Hendry “hyperdeflation happens before hyperinflation”

The world is very fearful of hyperinflation. Pension schemes have a preponderance of real assets, from forestry to gold to TIPS [Treasury inflation-protected securities], because they are very fearful. The road to hyperinflation is via hyperdeflation. That is why it’s proving so difficult for hedge funds to make money. How does the rational mind that anticipates hyperinflation own 10-year government Treasuries yielding less than 2%? It can’t. That’s why people are struggling. To lay the seeds of hyperinflation, you need really, really bad things to happen. I thought the U.S. housing market having a massive crash would be hyperdeflationary. But then my Chinese friends pumped $1 trillion of credit into their $5 trillion economy, and created a global recovery, which has just come to an end. I’m speculating that hyperdeflation happens before hyperinflation. What’s the worst that could happen? But the sum of all my fears would be China having a real hard landing of minus 5% or minus 10% GDP growth. If we had that—and Europe—the Fed would be printing $20 trillion, and I would have gold at $5,000. You can have a modest amount of gold, but you can’t have all your assets in real assets, in case we get that hyperdeflation event.

via Keeping an Eye on Wealth-Creation – Barrons.com.