Nervousness as a communicable disease

World on the verge of a nervous breakdown
Capitalism’s ceaseless quest to cut costs made us more jittery in 2011, and there’s no relief in sight.

I like this part a lot:

…after the great global crash of 2008, traders everywhere are in a state of permanent PTSD.

I hadn’t looked at the markets this way before and I feel this view provides a lot of insight. It seems that better information actually leads to worse decision making. I have read a bit about that before that people make better decisions when they have fewer choices, something that is counter-intuitive in our society today. I guess that with the swamp of data that is flooding the marketplaces (another good quote: “…a story reporting how U.S. stock traders were increasingly setting their alarm clocks for the middle of the night, in order to absorb the latest news from Europe as soon as it started to break…”) people are settling into analysis paralysis, then leaping into action when they perceive the market has made a decision, then, whether that was a good decision or not, dropping back into analysis paralysis until the next panic move by the market. When I was in graduate school I tried to make the argument that Wall Street traders were moving as a herd (a concept greeted with derision by my professor and the other finance majors in the class; I still think I am right), perhaps that was the early stages of what this author was talking about (that was almost 20 years ago, boy do I feel old when I say crap like that!). Of course, if you can predict the movement of the herd then you can make a pile of money and it was my intent, at that time, to try to work on that sort of problem, but I never got around to it (back then I had no idea I wouldn’t be making a living in my chosen profession (biotechnology management)).

I guess volatility is the new norm and we should get used to wild swings in the market. The vast majority of the time it is just moving money from the pocket of one wealthy idiot into the pocket of another, but occasionally there are really large systemic movements that trigger the herd to head toward a cliff (the failure to bail out Lehman Brothers, for instance). Of course, since our government is in the pocket of the morons heading off the cliff you can expect more taxpayer bailouts in order to keep our society from following the idiot traders off the cliff.

No fishy deserts!

Study says evolution theory all wet
A UO scientist says fish probably made the transition to land in a wooded, humid environment, not a desert

I almost didn’t blog on this because it seems rather ‘Duh!’ to me, but figured, what the heck, perhaps my reader might be interested if he missed the article. While the article mentions that there were no _vertebrate_ predators to interfere with the movement of the vertebrate transition from fish to amphibian, as I recall things insects have been existing on land for millions of years (probably 10’s of millions of years) before the first proto-amphibian dragged its sorry carcass out of the water. I don’t know about you, but I would be very unhappy today meeting a hungry dragon fly that has a 3 ft wing span and I can run and dodge way better than any fish. I imagine that without the protection of the roots, branches, etc. mentioned in the article those fish attempting to explore new environmental niches probably would have just made the predatory insects very happy to have high protein, easy to digest meals. So, in addition to the arguments outlined in the article supporting the not-out-of-the-desert theory, clearly protection from predatory insects needs to be taken into account, further bolstering the author’s argument in spite of himself.

A sad tale on erosion of privacy

And the continued solidification of our Great Police State Nation…

2011: The Year Intellectual Property Trumped Civil Liberties

One could hope that the pendulum will swing back at some point, but I lack faith that our oligarchy will allow that. It is a rather depressing read, so those of you who want to maintain the fantasy that things aren’t as bad as they really are should avoid reading it.

Eating advice for us oldsters…

Study: Vitamins, Omega-3s may keep brain from shrinking

Of course, we don’t want to encourage any young people to follow this advice 😉 We oldsters need whatever advantage we can get!

This part sucks a bit though:

…the study suggests it makes good sense to limit trans fats, which are often found in fried foods, doughnuts, pastries, pizza dough, cookies, crackers and stick margarines and shortenings, and to eat lots of fruits, vegetables and fatty fish.

What was that?

The 6 Weirdest Things That Are Ruining Your Memory

Another Cracked article I just can’t pass up posting. Be sure to check out the pictures and captions, they are half the amusement of the article!

It amazes me how much people credit human memory. Anyone who has done more than a few minutes of research into the capabilities of human memory know that it isn’t worth a damn and is probably actually worst than random noise (because you will morph your memories over time based on the input you have received). Too bad people get convicted all the time based on such useless information, but what the heck there are just too damn many of us anyway, we need some method of reducing the population, right?

Alien footprints

SETI to Scour the Moon for Alien Footprints?

Of course, it is a long shot, as the article states:

If these hypothetical aliens are advanced enough to traverse the vast distances between the stars, and if they decided to pay the Earth-moon system a visit over the past few million years, they may have used the lunar surface as an ideal observation post.

Still, why not look? It isn’t quite like looking under the lamp because that is where the light is, but if there were any visitors that spent any significant time here, it is quite likely they would have checked out the moon as it is quite unusual based on what information astronomers have on moons around other planets.

Health care can’t be competitive

Why health care competition won’t work

I was quite skeptical when I read the title, but decided to read it anyway since it is a subject I follow fairly closely. It is quite interesting in looking at the psychology of health care users and to me the conclusion is quite clear, for-profit health care can never provide acceptable care over the long run. Only having non-profit organizations that make decisions based on the greatest good for the greatest number at the least cost could possibly provide the best care overall. I believe that we here in the US have proven beyond any reasonable doubt that maximizing the money spent on health care does not actually increase the health of the population (indeed, in my mind, it clearly is reducing the health of the population). It seems we need to move to a paradigm where any new drug/treatment must prove itself to not only be better than any alternative, but its cost/benefit ratio has to be superior as well. I believe that in our highly politicized environment this is the socialist idea of ‘evidence based medicine’ and is being denigrated by our current crop of (idiotic) GOP candidates. Of course, since our society is turning anti-science, it makes perfect sense that scientific measurements of health outcome should be considered inferior to any other way of measuring such things.

Biofuel calculations…

I thought I would document my thought process on a biofuel-based product that I recently conceived of. This is the sort of economic analysis I use when I evaluate alternatives (for my take on alternatives in general, please see The Energy Bogeyman) and I thought some of my reader(s) might be interested…

Recently my lovely wife and I were taking a walk along the country roads near our retirement house (well, it wasn’t supposed to wait for our retirement, but events overtook our plans) past some of the apple orchards that surround the area. The ground under the trees are carpeted with apples that are now in advanced stages of decay and putting off a rather powerful perfume of fermented sweetness. I got to thinking as we were walking that surely it should be practical to collect all those apples and turn them into ethanol for fuel (once an apple has touched the ground it is no longer considered safe for human consumption, though many people argue that with the typical sterilization involved in processing there is no inherent danger in such contact). Apples are high in sugar, the raw materials are free for the picking up (presuming, naturally, the orchard owner is OK with such activity), how could it not be a huge money maker? I started out by making some assumptions (pulling numbers out of my butt) and figured that there would be approximately 25 apples per square foot under the trees. I presumed that ‘under the trees’ meant about 1/4 of the land surface (the trees themselves look like they take up no more than half the land), so each acre would have about 270K apples. If we assume each apple is on average 100 grams, that translates to 27,000,000 grams per acre and if each apple has 11 grams of sugar then the total amount of sugar is 2,970,000 grams. Looking at the biochemistry it appears that each molecule of sugar is converted into two molecules of ethanol and if sugar’s molecular weight is 171 and ethanol’s is 46, then the proportion of sugar that is turned into ethanol should be 53% ((46+46)/171). Thus, it should be possible to get around 1,574,100 grams of ethanol or, with the density of ethanol being 0.79 grams per cubic centimeter, around 1,243,539 cc’s or 1,243 liters or around 330 gallons of ethanol per acre. I found that several years ago (didn’t find any more recent numbers) that fuel ethanol’s wholesale price was in the range of $2 per gallon, for gross revenue of $660 per acre.

Using some reported figures I found for Virginia apple growing I estimated that there are around 3,000 acres under production between Shenandoah county (where our house is) and neighboring Rockingham county, so there is potential revenue of $1,980,000 per year, based on these admittedly made up numbers. I started to get second thoughts about this project at this point, because I was suspicious that the operating costs would eat up way too much of that potential, but decided to continue with my analysis for a while. I figured a substantial cost would be the capital to obtain the fermentation tanks because I estimate that the volume of mashed apples per acre to be 7,200 gallons and in general polyethylene tanks run about a buck a gallon (stainless steel way more than that!), so while conventional tanks don’t automatically eliminate the idea, cheaper tanks go directly toward the bottom line. As for amount of ethanol from each gallon of apple mash, I estimate that with 10% of the apple mash being sugar (11 grams of sugar per apple with each apple weighing 100 grams) and converting 50% of the sugar to ethanol, each gallon of mash produces only 5% of its volume in ethanol. Upon research it seems that yeast will convert all the sugar to ethanol in approximately a week and I figured that the harvest season would be about 8 weeks, so each fermenting vessel would get used 8 times per year, or would produce around 40% of its volume in ethanol (or, at $2 per gallon, about 80 cents per vessel gallon). Now clearly the fermenting vessels will be reusable, potentially indefinitely, so obtaining the vessels will be a capital cost and something that must be obtained from investors somewhere. I figured that since the fermenting vessel is just a big water tight box, I could build something much like our pool project we are currently working on, so thought of a wooden framed box lined with pond liner would be about the least expensive way to go. According to my quickie calculations, the material costs for a 145K gallon container (approximately 14×14, 100 ft long) are about $21K. I guestimate labor would run around $9K, so a total cost of around $30K per vessel. Each vessel would have the potential to produce 6,800 gallons of ethanol per batch or almost 55K gallons per season (with 8 batches) or, at $2 per gallon, around $110K per year. Give the capital cost of $30K, the return on capital looks like it ought to be promising, so worthy of continued analysis.

It would take around 20 such vessels to handle the processing of the estimated 3K acres of apples (we are, of course, presuming that the numbers I pulled out of my butt have some close relationship with reality, but with spreadsheets it is simple to update with real (or less unreal) numbers if the initial guestimates make it worth continued investigation) for an initial capital investment in the vessels of $600K. Of course, the vessels need to be put somewhere, but you could easily fit that many on a couple of acres and that amount of land can probably be had for less than $100K (clearly the land could be leased as well, thus reducing capital costs), so we are up to $700K initial investment. Some sort of machine would need to be produced to harvest the downed apples and based on some earlier research I did on a oil-from-grass project (if anyone is interested, please let me know, it seems practical to get an ROI of over 20%, potentially over 50%) I figured it would take one man on one machine to handle the 3K acres in the two counties in question over 2 months. I figured a prototype mower to be on the order of $250K, so I will assume this is a bit more expensive and call it $400K. Labor to do the apple collection is probably on the order of $30 per hour (fully loaded) so 40 hours times 8 weeks works out to a measly $10K, so clearly labor for apple collection isn’t going to be a show stopper. Someone is going to have to monitor the fermenting process and that someone needs to be educated in the art of fermenting, so I will assume that person will cost twice as much per hour and I doubt that person could be hired for only 8 weeks out of the year, so will figure a full-time cost for this person to be about $130K per year. There will probably need to be some additional laborers from time to time, so lets toss on another $40k for part-time labor and another $40K for operating expenses in general (total wild assed guess again). So at this point here is what we have:

Capital costs (for our putative 3K acres):
Fermenting vessels: $600K
Land: $100K
Harvester: $400K
Total: $1.1 million

Annual operating costs:
Harvesting: $10K
Fermenting: $130K
Labor: $40K
Operations: $40K
Total: $220K

Time for a quick check on the situation to see if it is worth continuing this analysis… If we are assuming we can get gross revenues of $660 per acre and there are 3K acres we could access then potentially get revenue of almost $2 million. With operating costs of $220K our net profits would be around $1.75 million for a return on capital of 160%. So far, this is looking like a really promising project, so lets continue the analysis.

Once we have fermented the apples and produced the ethanol there is the ‘tiny’ problem of separating the 5% ethanol from the 95% apple mash. The conventional approach is to distill the ethanol by boiling the mash, something that, according to my research, costs almost half the energy present in the final ethanol product. As such, it would seem to me that if you are basically throwing away half of your final product in order to produce it, you are now looking at revenues of $1 million. Remove operating costs and you get an operating profit of $780K for a return on capital of 70%. Seventy percent is still a very nice return, particularly when most investors are happy to get 20% (the long-term average of the stock market is 10-14%), so it would seem that even if we can’t develop a better way to extract the ethanol (there seem to be several with a lot of promise according to some reading I have done), this is still worth pursuing.

We also need to store the finished ethanol for some period until it can be sold. If we presume we have to store all that we produce for at least some period, we need to store about a million gallons. If we presume we are going to use the exact same means of storing as we do the fermenting (I am not sure, at this point, if the pond liner I would use for the fermenting would resist the full-strength ethanol), then we need 7 more vessels/tanks at an additional capital cost of $210K.

It is necessary to deal with the left over mash somehow. Simply dumping it into the waterways, while almost certainly illegal, is also a huge negative impact to the environment. It is necessary to treat it somehow prior to being released. Taking a cost of sewage treatment off the ‘net of $8 per 1,000 gallons we get a cost of around $170K to treat the waste.

There are some things I haven’t consider cost-wise, such as taxes, insurance, yeast, etc. Taxes, of course, only apply to net profits, so it is hard to set a solid value on that. Traditionally taxes are assumed to be 40% of profits, but since profits are so easy to manipulate and further there are all sorts of tax breaks that could be had (particularly in the area of biofuels), taxes might be substantially lower, possibly even as low as just a few percent. Insurance, I have no idea whatsoever, though clearly it will have to be factored in. Yeast, I presume, is not a significant issue and is probably in the range of a few hundred dollars a year. If anyone thinks of anything I missed (particularly large, expensive things), please let me know.

So, in final analysis, we have this:

Capital costs (for our putative 3K acres):
Fermenting vessels: $600K
Storage vessels: $210K
Land: $100K
Harvester: $400K
Total: $1.31 million

Annual operating costs:
Harvesting: $10K
Fermenting: $130K
Labor: $40K
Operations: $40K
Waste treatment: $170K
Total: $390K

Revenue @$2/gal: $1 million (note that we are using half our ethanol to distill)

Net profit: $610K
Net return on capital: 46%

So, to conclude: it seems that, as long as we can assume our raw material is free (indeed, it seems it is worth paying some small price for the raw materials), it is a worthwhile idea to consider pursuing. Clearly long-term agreements need to be made with the orchard owners so it is possible to amortize the cost of the capital investment and even more clearly it is necessary to test the assumptions built in here to see if they pan out, but it looks like it is worth doing on a percentage basis. The second thing to consider is the total amount of return in dollars. While $600K sounds like a lot, if you borrowed the $1.3 million at 10% for 10 years the annual payment would be around $200K leaving $400K. While that is a nice chunk of change for an individual, it isn’t a whole lot for a company and when you figure the growth has a pretty hard cap (meaning there are only the 3K acres of apple orchards), there isn’t much prospect of getting more. However, it might be quite practical to decrease the cost of separating the ethanol from the mash, so if we assume we can recover 80% of the ethanol energy equivalent (meaning whatever we use to get the ethanol costs us about 20% of the value of the ethanol, or in our example, about $400K) our revenues jump up to $2 million, but our costs also increase by $400K. Still, our net profit nearly doubles to $1.2 million and thus our return on capital jumps to over 100%. Now, while the growth is still quite limited, a company that is consistently bringing in over a million dollars a year has enough going for it to be worth pursuing. Add in further that the major expense of waste treatment could likely be decreased substantially since the input is a well defined product and thus should be simpler to process (no solids to remove, for instance), it would seem that through economies of scale and advances down the learning curve it is practical to consider initial improvements in the processing to the point where the income could be quite dependable. That said, it is a small niche, which both helps and hurts. It helps because there are likely to be few people interested in competing, it hurts because it is often difficult to get the attention of investors when the potential is so small.

I started this article because my preliminary calculations were showing such a tiny return as to not make it worth considering. I thought it might be interesting to show how such obvious ideas had serious flaws and in doing so I exposed my own flaws in my preliminary calculations and have now convinced myself that this is indeed worth pursuing. Of course, there are several hurdles to overcome, but if I continue to believe I have the potential to produce a million dollars a year in a few years, then I am almost obligated to investigate it seriously.


Why use the banks at all?

How Banks Cheat Taxpayers

Of course, the reason is because the banks own the politicians. But lets envision (fantasize), for just a second, that there was someone in charge not in the pockets of the oligarchy. What would be the best way to sell bonds for municipalities? How about the exact same way the Fed sells bonds? And how about in the exact same place to the exact same customers? Clearly some municipalities are going to have to pay higher interest rates, but at least those rates are open and obvious to anyone and not some back-room deal some corrupt politician made with some corrupt lending institution. However, I am sure the GOP would scream bloody murder because that is just plain socialism, clear as day. It is way better to let taxpayers cough up loads more money for the same result because, clearly, rich people don’t pay taxes so fuck the middle class!

Is morality chemical?

Can a molecule make us moral?

The author seems very sure of himself, but without doing a bunch of reading I can’t tell if it is justified or not. I think the article is worth a read and while I do believe we are the sum of our interacting parts, I don’t think anything is as simple as he makes out. Just like genes are not destiny, I doubt one single brain chemical can possibly have total control over our actions. High levels might predispose you toward (or against) certain behaviors, but I think there are way too many non-linear feedback mechanisms to allow for any sort of absolute prediction.