Comments from our Houston, Texas dealer: “I’ve been a technician & service manager for over 40 years and have extensive experience with construction lasers. The Pro Shot line by Laser Reference is the best instrument for the money, available today”                  -  Ron McCuen, Service manager    Read the rest of what Ron said here: Laser Reference, Inc.  •  USA Toll Free 1.800.238.0685 2/22/12  •  Obama’s Corporate Tax Proposal From the New York Times: “WASHINGTON — President Obama asked Congress on Wednesday to scrub the corporate tax code of dozens of loopholes and subsidies to reduce the top rate to 28 percent, from 35 percent, while giving preferences to manufacturers that would set their maximum effective rate at 25 percent.” However, if you look at this chart that shows the rate companies pay broken down by industry, there are three industries whose effective rates will come down, while the rates of all other industries in the study will go up. Via Ezra Klein at the WaPo: I suspect there will be some serious lobbying and whining on the part of some of these segments. Railroad and tobacco are probably indifferent to the proposal, and the companies in the 20% and under will go kicking and screaming. Blog Laser Reference factory • San Jose, California 12/12/11  • Climate Change, the Point of No Return I need a drink, or several. It appears that the Durban talks on climate change will result in perhaps agreeing to greenhouse emission cuts in 2020. David Roberts writes in Grist that if we are to limit an end of the century global temperature increase to 2º Celsius (3.6 º F) from pre industrial levels, (at which we encounter dangerous consequences, above which we court catastrophic consequences), we are out of time to begin to do so. The farther in the future our carbon emissions peak and begin to decline, the more steeply they must decline for targets to be met. For instance, if we delay peaking of carbon emissions until 2020: Of the available scenarios for peaking in 2020, says Anderson, 13 of 18 show hitting 2 degrees C to be technically impossible. (D'oh!) The others involve on the order of 10 percent reductions a year after 2020, leading to total decarbonization by 2035-45. Just to give you a sense of scale: The only thing that's ever pushed emissions reductions above 1 percent a year is, in the words of the Stern Report, "recession or upheaval." The total collapse of the USSR knocked 5 percent off its emissions. So 10 percent a year is like ... well, it's not like anything in the history of human civilization. Additionally, rising temperatures may trigger other releases of greenhouse gases such as those trapped in melting permafrost, creating a feedback loop where we will be locked into and unable to reduce our own emissions enough to prevent dangerous levels of warming. That would mean reaching higher global temperatures sooner than projected. Regarding the idea that we grin and bear a greater rise in global temperature to 4º Celsius (7.2º F) by the end of the century: The thing is, if 2 degrees C is extremely dangerous, 4 degrees C is absolutely catastrophic. In fact, according to the latest science, says Anderson, "a 4 degrees C future is incompatible with an organized global community, is likely to be beyond 'adaptation', is devastating to the majority of ecosystems, and has a high probability of not being stable." A 4º C increase in temperature may be an existential threat. Worse, the International Energy Agency says we are on track for a 6º C increase. At a Melbourne conference in July this year, (from the Sydney Morning Herald): Keynote speaker Professor Hans Joachim Schellnhuber, director of the Potsdam Institute and climate adviser to the German Chancellor and to the EU, has said that in a 4-degree warmer world, the population “carrying capacity estimates [are] below 1 billion people”. 12/20/11  •  The Holidays 2011 Don’t forget there are a lot of people who could use some help. The Second Harvest food bank reports it is feeding 1 in 10 people in Santa Clara and San Mateo counties. That’s really terrible considering this is the Silicon Valley. That means things are even worse in less affluent areas. Furthermore, the Census Bureau reports that almost half of Americans are now considered to be living in poverty or are classified as low income. “The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.” It will be very difficult to have a thriving domestic economy if we are replacing the middle class with low income or impoverished people. We send you our Best Wishes for the Holidays, Merry Christmas, and Happy New Year. 10/28/11  • Inequality of Wealth Distribution There is a lot of argument about who pays what taxes, what is fair and what is not, why people are or are not deserving of wealth or lack thereof, and who is being taxed too much or too little. However, a study on the distribution of wealth in the US shows a stunning disparity in household wealth, (property, savings, investments minus debts, as opposed to income). In reality, the top quintile, (20%), owns about 84% of total wealth, the next quintile owns about 11%, the third has about 4%, and the bottom two quintiles don’t show up on the graph at all. If you look at surveys of people differentiated by income, political affiliation, and gender, their estimates of reality and what an ideal distribution should be are nowhere close to reality. Leaving aside debates about what is equitable or who deserves what, if consumer spending drives the economy, and the bottom 60% of households hold only 5% of the wealth and the bottom 40% hold only 1%, it will be very difficult to have a robust economy. That is bad for everyone. Even if you are in the top quintile, with a high income, a bad economy is eventually bad for you.  11/3/11  • Our Pretty Flat Tax System Since the flat tax has reared its head again in our political discourse, let’s take a look at the talking points about people who pay no income taxes and tax equality. In reality, everyone with an income does pay some federal tax, (just not federal income tax), and when all taxes, (sales, state, local), are included, we’re pretty close to a flat tax structure already.  Kevin Drum in the Washington Monthly 2007: “the short answer is: there are many taxes other than the federal personal income tax. Honest. If you add them all up, everyone does pay "at least some tax," and the overall distribution is only modestly progressive. OK?” Source: New York Times Again, Kevin Drum: “However, this includes only federal income tax and payroll taxes. It doesn't include excise taxes, state income taxes, sales taxes, or property taxes. If you add in all that stuff, things get even flatter.” Having said this, we still could use a reform of the ridiculously complex tax code and a tax system that generates adequate revenues to pay for societal needs. 11/4/11  • How Quickly They Forget If you have been following the flaming trail of MF Global, they were betting on the EU to come up with a plan to contain the economic miseries of Greece and keep it from spreading to other distressed European economies. They were wrong and now they are bankrupt. Fortunately, MF Global is small enough that it can sink quietly beneath the waves and its investors will have to count their losses. Unfortunately, other financial entities are still counting on the kindness of strangers, (government money), to protect the institutions deemed “too big to fail”. From Bloomburg: Banks also buy CDS (Credit Default Swaps, or insurance) on their counterparties to hedge against the risk of trading partners going bust, Duffie said. To ensure those claims are paid, the banks may be turning to institutions deemed systemically important, such as JPMorgan, according to Duffie. “Systemically important” means “too big to fail”. In other words, failure of such firms would have such dire consequences for the global economy that governments would have no choice but to rescue them. Even if the firm does not have the resources to pay off on the insurance policies (CDSs) it sold against default, financial types think governments will step in and help that firm pay up. However, this status allows these too big to fail firms to take very risky bets because even if they fail and lose tons of money, they will get bailed out by the taxpayers. Has everyone forgotten how well the crisis of 2008-2009 has worked out? 11/9/11  • You Know Who Else Likes Debt Leverage and lessons not learned. If you have an investment that will pay you $106 on a $100 investment, that’s well and good, a $6 profit. But let’s say that you borrow $4000 and invest it with your $100, you now have 41 shares and your profit would be $246. You pay off the borrowed $4000 and you have your original $100 stake plus $246. This is almost a 250% (corrected)  return on your $100 investment, not too shabby. For you, this is called borrowing, for investment banks, it is called leverage. That is what investment banks lobbied successfully for from the Security and Exchange Commission back in 2004. From the New York Times: “They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.” ------------- “Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.” Trouble is, the investments turned out to be trash and dropped in value. So in the example above, if the investment can’t pay the expected return and drops in value by 50% to  $2050, you are still on the hook for the $4000 you borrowed. That assumes that you can sell the investment at all and get half the original value. (In the 2008-2009 meltdown, investors couldn’t even do that.) You take the $2050 and repay part of the loan, your original $100 is gone, and you still owe $1950. If you had invested only your own money, the worst you could have done was lose $100. With leverage, you lose $2100. Some of the mortgage backed “toxic” securities became untouchable because no one could figure out what they were worth. So during the meltdown, banks were saddled with investments they could not place a value on and could not sell. On top of this, they were on the hook for the money they borrowed to purchase the investment. This is how borrowing or “leverage” can take a problem and turn it into a catastrophe. If you think the banker types have learned their lesson, the recently bankrupt investment firm MF Global purportedly had a leverage ratio of 40 to 1. 11/14/11  • Cool Stuff: The Earth From 200 Miles Up Watch this beautiful and amazing time lapse video of the Earth shot from the International Space Station. Hat tip to Talkingpointsmemo blog. Here’s a list of the shooting locations, in order of appearance: 1. Aurora Borealis Pass over the United States at Night 2. Aurora Borealis and eastern United States at Night 3. Aurora Australis from Madagascar to southwest of Australia 4. Aurora Australis south of Australia 5. Northwest coast of United States to Central South America at Night 6. Aurora Australis from the Southern to the Northern Pacific Ocean 7. Halfway around the World 8. Night Pass over Central Africa and the Middle East 9. Evening Pass over the Sahara Desert and the Middle East 10. Pass over Canada and Central United States at Night 11. Pass over Southern California to Hudson Bay 12. Islands in the Philippine Sea at Night 13. Pass over Eastern Asia to Philippine Sea and Guam 14. Views of the Mideast at Night 15. Night Pass over Mediterranean Sea 16. Aurora Borealis and the United States at Night 17. Aurora Australis over Indian Ocean 18. Eastern Europe to Southeastern Asia at Night 12/1/11  • ADP: 206,000 Private Sector Jobs Added in November From Business Insider: “Analysts were expecting 130K new jobs, but instead ADP just reported that there were 206K new private payrolls added in November.” We’ll take good news where ever we can find it. Hopefully, losses in the public sector don’t counter this out. 12/2/11  • Spending More for Less Interesting piece from Ezra Klein’s Wonkblog in the Washington Post. Sometimes shrinking government can cost more. Key Points: • The size of the federal workforce has been roughly the same since the 1960’s despite a large increase in population. • When Congress mandated reducing the number of people working on defense acquisitions: “A 2009 GAO report found that the cost overrun on the average weapons system went from 6 percent in 2000 to 25 percent in 2009 — reaching $296 billion that year. The GAO blamed “shortages of acquisition professionals” • “For a long time, this was thought to save money, on the notion that workers in the private sector make less than government workers with inflated salaries. But this assumption turns out to be awry. In September, a study from the Project on Government Oversight found that private contractors tend to make 83 percent more, on average, than federal employees get paid to do comparable tasks.” This isn’t to say there aren’t areas of government where large cost savings and efficiencies in personnel can be achieved, just that it isn’t necessarily so. 11/29/11  • What Happens if the Eurozone Comes Apart? Over at Mother Jones, blogger Kevin Drum points out that unlike Las Vegas, what happens in Europe doesn’t stay in Europe. He calls it “Synchronized Cliff Diving”. “But whatever the reason, it sure looks as if the U.S. and European economies really are linked closely in some fundamental ways — which shouldn't be too surprising since Europe is our biggest trading partner and their banks are pretty tightly joined to the U.S. market. If Europe tumbles — and it sure looks likely that it will — we're likely to tumble too.” I suppose you could buy some credit default swaps (CDSs), which are insurance against bond defaults, but as I have written before, during the 2008-09 crisis, the companies that sold CDSs didn’t have enough dough to pay them off. Kind of like buying the winning raffle ticket for a ham and finding out the raffle seller has no ham. 12/7/11  • Pearl Harbor My mother was a student at the University of Hawaii in 1941. She told wonderful stories about the winds of the Nu’uanu Pali and the upside down falls, the blowhole in the lava at the beach that took a man out to sea, and the Portuguese Man of War jellyfish that looked like a blue bubble but stung like hell. The story that stands above all was the one about December 7, when her mother pointed out planes over Pearl Harbor and said they must be practicing. My uncle climbed on the roof of the garage and said one of those planes just went down. They ran into the house, turned on the radio, and heard the warning, “This is war, take cover.” Talkingpointsmemo has images. 1/5/12  •  Happy New Year! We hope 2012 will bring prosperity and well being to all of you. If you haven’t seen it, you might take a peek at our short video clip showing us knocking down an Alpha laser onto pavement. We show you the calibration at the same time. We build tough equipment, but we don’t recommend knocking your Alpha onto pavement this way. We also don’t recommend these scenarios, which have been reported to us over the years. 1. Don’t let your laser get kicked by a horse. 2. Don’t put your laser case near the exhaust of a generator and have the laser melt. 3. Don’t rear end another vehicle and have your laser go through your windshield. 4. Don’t hit your laser with a backhoe. 5. Don’t submerge your laser in fresh water or in the ocean. 6. Don’t run over your laser with a bulldozer. 7. Don’t let your laser bounce out of your truck as you leave the jobsite. 8. Don’t let your laser get picked-up up by a dustdevil and dropped from 20 feet up. Take care of your equipment and it will take care of you. 1/5/12  •  Nice Jobs News The US added about 200,000 jobs last month, and the nation’s unemployment rate dropped to 8.5%. That is heading us in the right direction. Furthermore, the gains are the result of real jobs being created, rather than discouraged workers ceasing to look for work. Still, this graph from Calculated Risk shows that we still have a very long way to go. 1/13/12  •  Spent Spent is a simple online exercise you can play. The scenario is you’ve lost your job, you’ve lost the house, your savings are gone, you’re a single parent, and you are down to your last $1000. Can you find work, pay the rent, and make it through the month? You make the choices, what kind of work you will do, how far from work will you live, will you buy health insurance, etc. It’s quite difficult. I click on “Play” and, oh crap! I flunked the typing test already. While last week’s job numbers were better than expected, they weren’t a reason to write home about. There are still 13.1 million unemployed Americans and 42.5% of them have been looking for work for more than 27 weeks. That means a lot of them have burned through their saving and are in a situation similar to that presented in Spent. Source: Center for Budget and Policy Priorities 1/23/12  •  Manufacturing in the USA The New York Times had a very informative piece about why iPhone manufacturing ended up overseas. It turns out that in addition to low wages, China can offer a flexible work force that can scale up and down at a rate that is unimaginable in a US workforce and a more robust supply chain. There are factories in close proximity that can supply gaskets, screws, circuit boards, and other necessary components. That supply chain exists only piecemeal in the US. This goes back to a point I was making awhile back in the discussion of the term “Made in the USA”. A product carrying this label must be “all or virtually all made in the US”. For electronic components such as microprocessors, resistors, transistors, etc., the supply chain is overseas. Most of these components are not produced in the US at all, making it impossible for any product containing electronics (and many other types of products) to use the “Made In USA” designation. How important is the supply chain? Note that Ford Motor supported the auto industry bailouts “arguing that a collapse of either GM or Chrysler could put its suppliers out of business and create a domino effect”. The supply chain was more important than elimination of its competitors. 1/31/12  •  It’s about time From the New York Times: “A draft of the European Union summit meeting communiqué calls for ‘‘growth-friendly consolidation and job-friendly growth,’’ an indication that European leaders have come to realize that austerity measures, like those being put in countries like Greece and Italy, risk stoking a recession and plunging fragile economies into a downward spiral.”  Duh! It’s like having your breadwinner have a heart attack, (an economic version that was dealt to us by the economic crash of 2008-09), and now that he or she is out of intensive care, (but is still weak and not fully recovered), saying our debt is out of control so it’s time to cut back on medication and treatment. 2/2/12  •  On the Expectation of Return to Bubble                   Housing Values Dean Baker on why it is hard to stay well informed. Can't the Washington Post Talk to Anyone Who Understands the Housing Market? Thursday, 02 February 2012 05:40 The Washington Post distinguished itself during the run-up of the housing bubble by relying on David Lereah, the chief economist with the National Association of Realtors, and author of Why the Real Estate Boom Will Not Bust and How You Can Profit from It, as its main source on the real estate market. It seems that it is continuing its policy of not using anyone knowledgeable about the housing market as a source for its articles on housing. Its piece on President Obama's new plan for mortgage refinancing implies that house prices will somehow rise back to their bubble levels. People who know about the housing market would tell readers that this would be like expecting the Nasdaq to bounce back to 5000 following its crash in 2000-2002. Unfortunately such voices continue to be excluded from the Post's coverage of the housing market. While Americans believe and hope home values will recover, falling home prices have taken values into the non bubble historic norm. The following chart is a graphic illustration of the bubble. From JP’s Real Estate Charts: 2/8/12  •  World of Concrete 2012 Things seem to be headed in the right direction. Attendance at the World of Concrete increased to 52K. Better than 2011, but far off the 92K peak in 2007. A lot of exhibit space that would have been filled prior to the recession was partitioned off and all the exhibitors in our sector of the industry had scaled their exhibits way back. There was a general sense among the exhibitors that demand for their products was increasing. We are seeing the same thing from our domestic dealers, but we are still far off our peak. As I said, movement in the right direction, but we still have a long way to go. 2/9/12  •  Job Seekers Ratio Drops Below 4 The Economic Policy Institute: “Today’s Job Openings and Labor Turnover Survey (JOLTS) release from the Bureau of Labor Statistics shows that the number of job openings increased by 258,000 in December, to 3.4 million. The total number of unemployed workers in December was 13.1 million (unemployment is from the Current Population Survey). Therefore the ratio of unemployed workers to job openings was 3.9-to-1 in December, an improvement from the November ratio of 4.3-to-1.” However, if you look at this graph, we still have a long way to go. 2/15/12  •  Something to Do Before You Die Check out the Harbin Ice and Snow Festival. 2/17/12  •  The Pain in Spain A silly declaration from the BBC: “The Spanish economy has shrunk for the first time in two years, increasing fears the country could be heading for a recession.” The most common technical definition of recession is a decline in GDP for two or more consecutive quarters. It really doesn’t matter if Spain is in an actual recession meeting that definition, because it has a massive, economic disaster on its hands. “Household spending fell by 1.1% from the previous quarter, while spending by public bodies dropped by 3.6%. The country has the highest jobless rate in the EU, with almost one in four people out of work.” On top of that, austerity measures including a nearly 9 billion euro budget cut and tax increases are about to kick in. Judging by how well that is working in Greece, (which is going to have either a controlled default or an uncontrolled default), everything ought to be coming up roses in Spain any day now. By the way, Spain had budget surpluses in the three years prior to the economic downturn. Debt and deficit were not the cause of Spain’s woes and treating them as if they were will not be the cure. Dean Baker: “Spain's problems have nothing to do with excessive government spending or budget deficits, they stem from the collapse of a huge housing bubble that the European Central Bank (ECB) was too incompetent to notice and/or take steps to rein in. The same ECB officials responsible for this disaster are now dictating terms to the countries that face deficit problems as a result of the collapse of speculative bubbles across Europe and the rest of the world.”