Archive for May, 2008

District of Columbia v. Heller

May 31, 2008

The Second Amendment

“A well regulated Militia, being necessary to the security of a free State, the right of the People to keep and bear Arms, shall not be infringed.”

Who could have guessed that twenty-seven words on a piece of parchment would result in so much controversy.

In 2003, six residents of the District, including Dick Heller, filed a lawsuit challenging a ban on the ownership of handguns. The suit was dismissed by the District Court. On appeal, the U.S. Court of Appeals reversed the decision, stating that the ban violated the Second Amendment guarantee of the individual right to keep and bear arms.

In November 2007, the U.S. Supreme Court agreed to hear the case. Oral aguments were heard on March 18 of this year and a decision is expected to be rendered sometime in June which begins tomorrow.

I fully expect the justices to rule that gun ownership is an individual right, but may be regulated in the name of public safety. Very similarly to the common interpretation of the First Amendment. Then we will spend the next several decades litigating over what constitutes reasonable regulation.

There are some who will continue to insist we only have the right to own a musket because that is all the founders had. Such a bogus argument. Much in the same way as arguing that the guarantees of freedom of the press and freedom of speech in the First Amendment do not apply to radio, television and the Internet because those did not exist in the 1790s.

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How to bring down oil prices, part 2

May 30, 2008

We have been hearing that oil inventory levels indicate the supply of crude oil is essentially in balance with demand and that the current high price is due to speculation.

To understand the effect of speculation requires knowledge about the basic tool of the trade, the futures contract.

A futures contract is a standardized agreement to sell or buy a specified quantity of a specified asset for a specified price on a specified delivery date. This contract creates an obligation to buy or sell on the delivery date. The seller of the contract is the party providing the asset; the buyer of the contract is the one taking delivery.

There are two broad categories of traders in futures: hedgers and speculators. A hedger has an interest in the underlying asset while a speculator is looking to make a “paper profit” by correctly predicting the future value of the asset.

A hedger is typically either a producer or a consumer of the asset. For example, a farmer believing the price is going down may sell a wheat future contract to lock in a higher price for his crop. On the other hand, a bread manufacturer may purchase wheat futures to lock in the current price of the raw material if it is believed to be going up. Or the farmer may simply want to eliminate risk in the price of his product by giving up a potentially higher price in return for a guarantee of the current selling price. And the manufacturer to ensure he can get the raw material he needed at any price. It was this fundamental purpose the futures market was originally created; not as a casino.

Before the creation of the futures market, a farmer might bring crops to town after harvest and find that supply vastly exceeded demand. His product might be worthless and left to rot in the street. Conversely, someone who needed the crop may find the supply to be nonexistent, such as in the offseason or in bad years. The initial futures market was for grain and served to stabilize prices and ensure supply, both by matching sellers and buyers and by increasing the size of the marketplace beyond the local town.

A speculator is merely betting that the value of the asset will go up or down with no intention to make or take delivery in the asset. Once a contract is made, it cannot be cancelled; but one or both of the originating parties may opt out of delivery by taking an opposing position in another contract so that the two cancel out with respect to the quantity of the asset. There is usually a value difference between the two contracts and that is how money is made or lost in the futures market.

Where did the speculators come from and why are they there? To a speculator, the futures market is just another of many places to invest his money to try to make a profit. In the past year, returns in the stock market have been disappointing. Interest rates are down. Real estate is losing value in many cities. The dollar has become very weak. There is much money looking for a place to multiply and commodities have great intrinsic value because the global economy has been expanding. This shifting of capital has affected not only oil, but gold, copper, wheat and rice. The effect may not be desirable or “fair,” but it is not illegal.

So why don’t we just prohibit speculation to bring down the price of crude oil? Speculators do serve a useful purpose in the market by providing liquidity. If only those with an interest in the asset were allowed to trade, it would be a very small marketplace indeed. Price discovery is the process in which each trade in a market tends to drive the price toward the true value of the asset, provided there is no shortage of buyers or sellers. The problem with a small marketplace is that it may be very difficult to match a buyer with a seller. A seller may have to settle for an unreasonably low price to make a deal at all or a buyer may have to pay an exorbitant price. In either case, the transaction price bears little resemblance to the true value of the asset. Not a good thing. Any regulation to discourage speculation has a side effect of making the marketplace less efficient for those using it “legitimately.” Investigations into whether there has been any oil price manipulation have turned up nothing so far.

The problem is not the speculator but the belief that oil will be worth more tomorrow than today, and more than in other forms of investment. Bear in mind that the speculator is not in oil today because he wants to be in oil; he is there because he thinks there is currently money to be made in oil. Several things can be done to encourage the speculator to take his money elsewhere.

One is to raise interest rates. If the rate of return is higher, many speculators will gladly shift money into safe government and corporate bonds rather than risk it on the futures market. Some will argue that a higher cost of borrowing will slow the economy, but the high cost of oil has a similar effect.

Another is to improve the value of the dollar. While the dollar is only one of many currencies in the world, it is the denomination of the futures market. As the dollar got weaker, commodities got cheaper for the rest of the world relative to their currencies, putting pressure on each commodity to go up in value.

The most effective solution is to substantially change the long-term balance between supply and demand.

As oil has become a virtual necessity in the economy, a drastic reduction in demand is not easy. High prices have made some consumers reduce how much they drive. And a slowing economy will reduce demand for fuel by businesses. But without a major cultural shift such as a 4-day workweek or widespread telecommuting, the demand for gasoline will not change much. Only a prolonged period of high prices will cause widespread replacement of vehicles with more energy-efficient ones. Some companies are learning to become more energy efficient, but there are limits on the easy savings.

The growth of emerging economies, namely in Asia, are blamed by some for adding demand for oil. There is some truth to this as some of these countries subsidize the cost of fuel and by keeping the price for the consumer artificially low, encourage consumption instead of conservation. These subsidies are a major burden for the treasuries of these countries, so this situation is due for a change. China is a huge offender, but do not expect any change in their energy policy at least until the end of the Olympic games in August.

Oil has seen many dramatic price changes in its history. Members of OPEC are notorious for cheating on their production quotas in the past and this flooding of the marketplace has driven some of the major price declines. But with the price so artificially high, many currently realize that they can maximize their revenue by not driving the price down.

New sources of oil do not have this incentive to keep prices high. Any amount they make is an improvement over the zero they make now. Only by adding to the sources can the supply be truly increased. Those already in the marketplace will not produce at full capacity because they can make more by producing less.

So how about it, US of A? You have as much in proven oil reserves as nearly any oil producing country. And you stand alone as the one not increasing your production. The ball is in your court…

Things which peeve me Thursday – For whom the road tolls…

May 29, 2008

I am not opposed to the original concept of a toll road in which bonds are sold to raise money for building a roadway and a toll collected for its use to pay off the bond. Once the debt is retired, the toll is removed.

Many do not know that there was once a toll road connecting the central business districts of Dallas and Fort Worth. Now designated Interstate 30 and known as the Tom Landry Highway, only a few oddly-shaped interchanges give away the route’s former identity as the Dallas-Fort Worth Turnpike. It opened in 1957 and became free when the construction bonds were paid off in 1977, 17 years ahead of schedule. As it should be.

What bothers me is the modern concept of a toll road. It no longer matters when the construction bonds are retired. Toll proceeds are viewed as just that – revenue to be used for other road projects or even non-road expenditures. In perpetuity, or a close approximation thereof like 50 or 75 years.

Texas state highway 190 was originally planned to be a freeway. Dubbed the President George Herbert Walker Bush Freeway, it opened as a turnpike. Quite a fitting tribute for someone who once said, “Read my lips, no new taxes,” before signing a huge tax increase into law. I do not anticipate being able to drive on that highway for free in my lifetime. At around 15 cents per mile, the toll costs more than many of us pay for the fuel to drive on it, at least until recently.

Another travesty is building a roadway with public tax money, then delaying its opening for several months to make it a toll road. Such is the case with state highway 121 in Denton County. There are no bonds to retire in the first place. Just the milking of the cash cow commuters.

Now, the widening of state highway 121 in Collin County from the Denton County line to McKinney has been approved as a toll facility. There was much bargaining between the Texas Department of Transportation and the governments of the county and cities over whether this project was to be tolled. The local governments finally relented when promised that they would receive a portion of the toll revenues for their road projects. A couple of weeks ago, the other shoe dropped. It was revealed that the Regional Transportation Council, part of the North Central Texas Council of Governments, is likely to use the toll proceeds for projects in the entire region, not just in Collin County. Collin County, you dance with the devil, you get burnt.

Hybrid vehicles and the blind

May 28, 2008

The National Federation of the Blind has been concerned that blind pedestrians may be in danger because they cannot hear hybrid vehicles running essentially silently in the all-electric mode of operation.

Many kids have already invented a solution to this problem: tape a baseball card to the frame so that it sticks into the spokes of a wheel…

Seriously, though, it is nothing short of amazing how independent a blind person can be with some simple help from society. For example, audible crosswalk signals allow the blind to cross busy streets in many cities. A rational solution to the silent vehicle problem can do much to help maintain this independence.

So far, the National Federation of the Blind has been asking for a minimum sound standard – that a hybrid vehicle always make at least as much noise as a specified sound level. Most agree that adding a noisemaking device would be relatively inexpensive. Ideally, the device would produce a sound which correlates to vehicle performance similiar to the natural sound of an internal combustion engine. Noise which is louder when the vehicle is accelerating or moving faster, but at a speed when tire and wind noise is sufficient to be heard, the noise can be turned down or off. Enough sound to be as easily detected as a conventional vehicle, but no more. Critics say such a requirement is a step backward in reducing noise pollution from motor vehicles; some are quite adamant that no artificial noise be added.

Some propose the installation of rumble strips in the pavement before intersections so that approaching vehicles may be heard. But this kind of noise pollution may be worse than making a hybrid sound like a conventional car. The strips would be expensive to install and maintain. Plus many would not want to live close to them leading to a “not in my back yard” opposition to their installation.

An alternate idea being discussed is to outfit hybrid vehicles with a weak radio transmitter. A blind pedestrian would have to wear a headset to receive this signal and generate an audible indication when a hybrid vehicle is nearby. This technology has some major flaws. The wearer has no way to determine where the car is unless the headset can detect the direction of the radio signal and generate sound in stereo, albeit for a much higher cost. Accurately detecting more than one vehicle may also be difficult. There is the further problem of the headset interfering with hearing conventional vehicles. Additionally, many blind persons rely on a seeing eye dog; providing an extra headset for the animal and teaching it how to use one will be problematic.

I believe the best solution is a cross between the two concepts. Make the radio receiver part of the sound generator on the vehicle. The blind person would wear a radio transmitter to let the car know that sound is needed to warn of its approach. People other than the blind such as bicyclists or the parents of young children may also want to buy transmitters to get the same safety benefit. Highway departments might install transmitters along stretches of roadway where deer tend to cross to protect both the animals and motorists.

There have been reports of sighted pedestrians being surprised when a hybrid vehicle suddenly backs out of a parking space in silence, so the sound may also need to be turned on during some low speed driving situations even in the absence of a radio signal. Better that than have a string of tragic parking lot accidents result in the overreaction of mandating that cars go beep…beep…beep… like a truck when backing up.

Whatever we may end up choosing to do, we need to decide before hybrid and electric vehicles become too numerous.

The Phoenix has landed

May 27, 2008

Sunday evening, May 25, the Phoenix made a successful landing in the northern polar region of Mars. It is currently undergoing a check out of onboard systems before digging into the Martian soil and analyzing it for water and organic substances – the building blocks of life.

Jason Hubbard

May 26, 2008

Marine Lance Cpl. Jared Hubbard and his best friend and fellow Marine Jeremiah Baro, both of Clovis, California, were killed by a roadside bomb blast in downtown Ramadi in 2004.

Jason Hubbard and his brother Nathan enlisted nine months after their brother’s death to honor him. They asked to serve together and were assigned to the same unit, the 3rd Brigade of the 25th Infantry Division based on Hawaii, and deployed to Iraq the following year.

Nathan was killed in a Black Hawk helicopter crash near Kirkuk in Northern Iraq on August 22, 2007. Jason was riding in another helicopter in the vicinity and was part of the detail assigned to recover the bodies from the wreckage.

Invoking its “sole survivor” policy, the military pulled Jason from combat duty. You might remember the policy as the central plotline from “Saving Private Ryan” in which the last remaining brother was to be brought home from war. Hubbard was later offered an early discharge which he accepted. And that is when the injustices began. The Army wanted his enlistment bonus back because he did not serve out his full three years. He was also denied medical coverage for his family and educational benefits under the GI Bill.

Only after petitioning his Congressman were some of these benefits restored. Representative Devin Nunes recently introduced the Hubbard Act with three of his colleagues to ensure basic benefits to all soldiers discharged under the sole survivor policy. The Pentagon has identified 51 sole survivors since September 11, 2001.

On this day we remember our soldiers who made the ultimate sacrifice, let us not forget those who served with honor and survived. Please support the Hubbard Act.

Sick on Sunday – Lagniappe

May 25, 2008

Surely this was not what they had in mind when they said the customer gets “a little extra…”

The B word

May 24, 2008

Dallas Cowboy fans have a lot to be excited about. Their team is a contender again. They are about to start their final season of playing at Texas Stadium and will inaugurate their shiny new facilities in Arlington the following year.

But there is a dark storm brewing on the horizon. The new stadium will sport more seats. And they will be more expensive. Can you spell…

blackout?

Top 5 on Friday

May 23, 2008

Top 5 reasons to finally create your own blog

  1. You come to the realization you are writing comments longer than the original post in the blogs of others
  2. After mistyping the name of a blog at WordPress, they taunt that you can make the name yours by simply registering for free
  3. You find yourself keeping a file of your best material awaiting someone on your blogroll to post something suitable for you to make that oh-so-fitting comment in return
  4. That empty feeling while commenting on someone else’s blog because you do not fill in your web site address
  5. It seems like everyone you know, their kids and even some of their pets have one

Texas, the Energy Star state…

May 22, 2008

…at least for this weekend.

If you live in Texas or within easy driving distance, there will be an opportunity to save on sales taxes when purchasing some energy efficient products this weekend. Whether some of your appliances are about to quit or you want to replace your incandescent light bulbs with CFLs or you are finally going to get that ceiling fan or programmable thermostat, the Memorial Day weekend is your chance to save some money. May 24 to 26, 2008.

For more information: