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'Hey, It Will Only Cost $7 Billion To Build A Storm Surge Barrier For New York - Whaddya Say?'

November 05 2012, 8:14am
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'Hey, It Will Only Cost $7 Billion To Build A Storm Surge Barrier For New York - Whaddya Say?' - My thanks to a reader for this topical article by Henry Blodget (would you believe?) and Rob Wile for Business Insider. Here is the opening, written in New Yorkese:

One of the tragedies of our budget crisis is that the amount we spend on on stuff that helps everyone - infrastructure - continues to decline to make room for our ballooning entitlement spending.

And the deficit has become so politicized that any time anyone proposes spending a bit more on infrastructure - and putting more Americans back to work in the process - members of one of our two political teams freak out.

That's a bummer.

Because lots of Americans are out of work. And our national infrastructure is becoming a global joke.

Countries that don't mind having taxes that are modestly higher than our taxes and infrastructure spending that is modestly higher than our infrastructure spending are building awesome new tools that help everyone.

Like storm surge barriers.

New York isn't the only city in the world (or country) that is exposed to storm surge damage. And, unlike many other cities, New York appears to have a relative easy way to protect itself.

The attached slides, from a 2009 deck, offer one potential solution to New York's storm-surge exposure - a porous barrier across the entrance to New York Harbor. According to the deck, such a barrier would cost $7 billion.

To put that $7 billion in perspective, its significantly less than the $12 billion price tag on one of our new aircraft carriers, the U.S.S. Gerald Ford.

So, whaddya say, folks? Time to consider a storm surge barrier for the country's biggest city? Or should we increase defense spending and build two-thirds of another aircraft carrier?

My view - They make a good point. This article also contains numerous photos and diagrams of other storm surge defences.

London, which is mostly built on a floodplain, has long had its Embankment defence and the Thames Barrier was finally approved in 1965, following the drowning of over 300 people in 1953.

I would question whether it is adequate to deal with the surge that NYC has just experienced. Personally, I would rather see London's flood defences reinforced, upgraded and extended, rather than have our tax money pay for Trident.

Do you believe in life after debt? -
Tim Price's memorable letter is given over to Dominic Frisby this week. It is posted in the Subscriber's Area but here is a sample:

Many people spend a lot of time thinking about how to make more money. But not many people think about how our system money actually works.

It's a system that has been in operation globally for just 40 years - since the US finally departed the gold standard in 1971. The Bank Of England calls it "fiduciary money", others "fiat currency". Under this system, money is the issuance of governments. It's not backed by anything tangible except the law. Banks have the power to create money through lending.

In 1971, I could have taken my son to the FA Cup Final for £2 (now over £100). The Mars Bar I bought him at half-time would be 2p (now 60p). The beer I bought myself would be 11p (now £5 a pint at Wembley). The gallon of petrol I needed to get me there and back would be 33p (now £7). And the house we went home to would be something like 2% of the price it is now.

Average earnings have increased too, but not by the same multiples. They have risen from around £1,500-2,000 per annum to about £25,000 today. The differential has been covered up by more debt, longer working hours, more women in the workplace and so on.

Yet through the 100 years of economic growth of the 19th century, prices actually fell according the wholesale price index, and wages rose.

Why does everything - except mass-produced goods - relentlessly rise in price? It's this system of fiduciary money. There is almost no limit to how much can be created. And the more money there is, the more diluted its purchasing power becomes, and the higher prices will rise.

My view - Everyone reading this will be familiar with the problem, not least veteran subscribers. By understanding this process of currency debasement, as investors we can at least protect ourselves against it, somewhat. Fullermoney will never lose site of this challenge.

Today's interesting charts - Watch the markets in the manner of a technical naturalist, for evidence of both their directional consistency and periodic change.

Brent Crude Oil (weekly & daily) continues to roll over beneath its earlier peaks in 1H 2011 and 1H 2012. A close above $110 is the minimum required to reaffirm support near current levels and question medium-term scope for lower ranging.

This item continues in the Subscriber's Area.

Email of the day (1) -
On Jackson Wong's 'running with global leaders':

"Is Jackson Wong producing running with global leaders? That report has been one of my favorites. As always, thank you for the great service."

My comment - Thanks for the feedback, which may encourage Jackson to resume those reports at some point. Although never part of Stockcube's subscription services, I also thought they were good and two are posted in the 'Presentations' section (menu shown upper-left, ninth item down).

Email of the day (2) -
On Aberdeen Asian Income Fund:

"David/Eoin can the collective offer any information on the Aberdeen Asian Income Fund's forthcoming £50M share placing where existing shareholders can buy C shares at £1 each? There seems to be a paucity of information available. What plans do Aberdeen have for the funds they are raising?

"I know from having attended two excellent Chart Seminars with Eoin, that their chart is very much a textbook chart with the share price continuously rising over time and almost always to the left of its 200 Day MA. I'd grateful for any information from the collective."

This item continues in the Subscriber's Area.

Please note - I will be away on Monday.

Albert Einstein Was Right - My thanks to a subscriber for this item which I suspect will resonate with many of you.

Quote of the week - On not a great man:

"It is a great advantage to a president, and a major source of safety to the country, for him to know he is not a great man."
Calvin Coolidge (courtesy of Jules)

Additional commentary by Eoin Treacy

Resources US Housing starts are up while excess inventory is steadily being chipped away at and the uncertainty of the election will soon be behind us. The Eurozone's debt issues remain a concern but the focus is now on resolution rather than crisis management. China's decennial leadership handover is progressing peacefully despite some high profile hiccups over the last six months. Japan is edging towards greater stimulus. Outside of these major economic regions, the rest of the global economy is getting on with day to day life and Asia remains the engine of GDP growth. There are of course some considerable challenges facing major economies but the question now is how much of this is already in the price?

Over the last 18 months, against a background of considerable economic uncertainty, the resources sector has experienced downward pressure. The commonality of this decline, particularly when compared to the relative and absolute performance of the consumer sector has been particularly poignant. Sentiment towards the sector generally has been moribund with widespread anxiety about the parlous state of various government finances. However as the possibility that perceptions may swing back toward a more optimistic perspective gains ground, there is potential for a rerating of the sector generally.

I clicked through a number of the resources oriented sections in my Favourites this morning to ascertain which shares are moving to positions of outperformance.

This section continues in the Subscriber's Area.

Independence day Thanks to a subscriber for this report containing a number of articles from the Economist evincing a sceptical view on the potential for US energy independence. The report is posted in the Subscriber's Area but here is a section on potential US gas exports:

The economics, meanwhile, are likely to worsen before they get better. One reason is that, as producers have shifted to wet plays, a glut of NGLs has emerged and liquids prices have fallen sharply Ethane, which accounts for roughly 40% of a barrel NGLs, has lost most of its value since 2011. Some experts fear that producers could be forced to give it away in particularly congested delivery hubs if overproduction persists. As drillers are discouraged from extracting NGLs, gas volumes are also likely to be hit.

More fundamentally, US gas prices cannot be expected to stay at current levels, which are below the cost of production. For this reason, we expect a process of market-balancing to take effect. Low prices will now lead to a dip in gas production by 2013. Tighter supply will in turn stimulate price rises, encouraging a pick-up in production. This will eventually create an excess of gas that could be sold overseas.

Whether US policymakers will be keen to export much of the country's endowment of still relatively cheap gas, however, is moot. On balance, it seems likely that the US will only be shipping a fairly modest amount of LNG even in the latter years of this decade. The likes of Qatar and Australia have little reason to panic yet.

My view Veteran subscribers will be familiar with our contention that unconventional oil and gas production are game changers for the global energy sector. While the number of companies lining up to profit from the arbitrage between Henry Hub and global pricing continues to rise, this opportunity is merely a symptom of a much larger global trend.

This section continues in the Subscriber's Area.

Eoin's personal portfolio: commodity stop triggered
This section continues in the Subscriber's Area.

Asia Pacific Debt Market Update Thanks to a subscriber for this interesting report by from KPMG on Asian debt markets. It is posted in the Subscriber's Area without further comment but here is a section from the conclusion:

In conclusion, we expect syndicated lending to remain subdued throughout the remainder of 2012 and into the first quarter of 2013 due to restrictions on bank liquidity, a refinancing bottleneck, and increased costs of funds.

We do not anticipate a sudden change to these three fundamentals in the short to medium term, principally as a result of global economic uncertainty and the ongoing introduction of broad regulatory changes in the bank market.

Moreover, as we have outlined here, ASPAC corporates are already discovering new approaches to funding their growth and can take heart from the increasing depth of the region's bond markets as well the potential options provided by alternative investment sources such as private equity, credit funds, and export credit agencies. If and when the conditions for more traditional syndicated lending eventually rebound, they will do so in a different, and in some ways much more dynamic lending environment.

Speaking engagements
I have agreed to teach a three-hour course on global strategy investing at the World Money Show in London tomorrow . Here is a link to the details.

The Chart Seminar in 2012 - Our remaining confirmed venue for 2012 will be in London on November 22nd & 23rd at the Radisson Edwardian Hampshire on Leicester Square.

The full rate is £950 + VAT. (Please note US and Australian delegates, as non EU residents are not liable for VAT). Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates. 



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