Sunday, 14 August 2011

11:28 – Colin is now officially a Fearsome Predator. Ever since the robins showed up this spring, Colin has been trying to catch one. I keep telling him that he can’t catch birds because they can fly away. Today, Colin successfully stalked and pounced a robin that was too busy listening for worms to pay proper attention to the Fearsome Predator nearby.

Fortunately, no robins were harmed during this exercise. Colin carefully stalked to within about 10 feet (3 meters) of the unwary robin. Colin then fired off the afterburner and accelerated from zero to top speed in about one step. The robin saw him coming and tried to fly, but Colin overran it before it could get airborne. Border Collies have all the hunting, stalking, and pouncing instinct of wolves, to which they are closely related, but have all of the kill instinct bred out of them. So Colin didn’t chomp the bird, satisfied with merely overrunning it. The bird was knocked sideways, but quickly recovered and took off pretty much straight up. It didn’t even lose a feather, but it’ll have a story to tell the wife and kids when it gets home.

Saturday, 13 August 2011

11:58 – The Euro farce continues to degenerate. All parties are desperately searching for a solution, except Germany and the other conservative northern tier countries, which know there is no solution. The Euro is and always has been fundamentally broken. Every competent economist knew that even before the Euro was introduced. Even I knew that before the Euro was introduced.

The fundamental problem is that it is impossible to have a monetary union without a fiscal union, and Germany, the Netherlands and Finland would be insane to agree to such a union, particularly now. As Milton Freidman predicted back around the time the Euro was adopted, it would collapse at the first serious economic crisis. And that’s exactly what’s happening now. Also, as I and others predicted, the ridiculously expensive social programs in Europe would bankrupt them, and that too is coming to pass.

Simply put, there is no solution to the Euro problem, or at least there is no solution that is acceptable to all parties involved. Greece, Portugal, Ireland, Spain, Italy, and other bankrupt EU nations are now clammering that there’s no alternative to a fiscal union, starting with expansion of the EU bailout fund from its current €440 billion to something in the €3 trillion to €4 trillion range and followed by the introduction of Euro bonds, which are basically blank checks that allow the bankrupt EU nations to borrow as much as they wish and have Germany pay the bills. The problem is, Germany is no more likely to agree to those measures than I am to cosign a mortgage loan for a homeless drug addict. At least I’d have a better chance of being repaid than Germany would.

The only possible solution is one that European politicians are not (yet) ready to speak of. Germany and the other rich northern nations need to leave the Euro and go back on their own currencies. That leaves the Euro bankrupt, along with all of the countries that would still be using it, including France and Belgium. Holders of Euro-denominated bonds from those bankrupt countries would lose essentially everything. They’d be lucky to get one cent on the Euro. But eventually the markets would adjust. Greece, Portugal, et al. would not be able to borrow any money, and would return to being very poor nations, which they’ve actually been all along.

I’m doing laundry, and I just went into my lab to collect towels. It occurs to me that one of my unusual personality quirks is how I handle used towels, paper towels, surgical gloves, disposable pipettes, and so on as I’m working. I toss them on the floor, to be collected and washed or disposed of later. Same thing on the very rare occasions when I contaminate a set of splash goggles. Onto the floor they go, and I pull a new set off the shelf.

I actually remember when I started doing this, as a teenager working in my darkroom. I dried my hands with a towel, which turned out to be contaminated with a processing chemical. I then touched a print, which was ruined. From that day forward, as soon as something becomes contaminated, onto the floor it goes. That way, I know that an item on a counter must be uncontaminated, or it would be on the floor. So, there is method in my madness.

Friday, 12 August 2011

08:56 – Colin turns 6 months old today. He’s a huge puppy, already as large as most adult male Border Collies. Duncan was a big boy, at 75 pounds (34 kilos) and about 4″ (10 cm) taller than other male BCs, but I think Colin will be bigger still.

The US Postal Service is losing $8 billion a year and is now in what amounts to Chapter 11 bankruptcy, or would be if it weren’t a pseudo-government agency. It’s due to make a $5.5 billion payment to its retirement fund next month which it doesn’t have the money to make. The USPS has announced plans to cut 220,000 jobs, or 30% of its workforce, between now and 2015. About 100,000 of those will be by attrition, but the remaining 120,000 will be actual people losing their jobs. It also plans to close thousands of post offices.

That’s actually much too little, much too late, and doing the wrong thing anyway. Service levels will be badly impacted by those cuts, which will in turn further reduce mail volume as mailers shift even more quickly to alternatives. What the USPS needs to do is:

1. Eliminate rural free delivery, which is extremely costly. Establish population-density metrics to determine whether any particular home or business is eligible for free delivery or must pick up its mail at the nearest post office.

2. Negotiate “last mile” delivery agreements with UPS and FedEx, whereby UPS and FedEx deliver packages to USPS distribution centers, and the USPS makes the local deliveries to the recipients. Eventually, eliminate most local deliveries by USPS personnel and negotiate contracts with local businesses for last mile deliveries. That is, the USPS should be making one delivery per neighborhood to a local contractor who actually delivers the mail and packages to homes.

3. Crush the postal unions and reduce pay and benefits to no more than a third of what they are now, for both current employees and retirees. Right now, post office employees are paid at least two to three times more than they’d earn for doing the same job in private industry. Retirement and medical benefits are ridiculously high. All of that needs to stop if the USPS is to have any chance of surviving.

Despite the protests of the Big Three credit-rating agencies and the French government, the market believes that France doesn’t deserve a AAA rating. And they’re absolutely correct. If the USA is only AA+, France should be at least two or three levels below that. Forget S&P and Moody’s and Fitch. If you want a real credit rating, all you need to do is look at what the free market says the credit ratings really are. That’s what the basis points on credit default swaps provide, and it’s instructive to look at CDS prices for the various countries.

Greece ~ 1,800
Portugal ~ 900
Ireland ~ 800
Italy ~ 400
Spain ~ 400
France ~ 150
Austria ~ 140
Germany ~ 90
UK ~ 85
US ~ 55

A basis point is 0.01%. These CDS prices vary constantly, but they represent the actual free-market cost to insure a bond against default. So, for example, the one-year premium to insure $1,000 of Greek bonds against default is $180, while at the other end of the risk spectrum, it costs only $5.50 to insure $1,000 of US debt for one year. That’s why it’s ridiculous for ratings agencies to assign AAA ratings to the UK, Germany, Austria, and France while assigning the US a lower rating. The free market gives the real ratings, and they’re completely out of line with what the ratings agencies are saying. I know which I trust more.

11:22 – This has been a stunning week for medical discoveries that are potentially huge breakthroughs. Earlier in the week, a PLoS paper reported incredible results with a process called DRACO, in which cells that have been infected by a virus (and only those infected cells) can be forced to undergo apoptosis, which kills the infected cells, leaving the viruses without host cells. The really significant thing about DRACO is that it is not virus-specific, like nearly all current antiviral treatments. Any cell that has been infected with any virus (presumably; DRACO was shown to be effective against 17 widely different viruses) is detected and eliminated. And here, Derek Lowe reports on a potential breakthrough that does pretty much the same thing against leukemia, and presumably eventually other cancers.

Thursday, 11 August 2011

08:14 – Interesting article in the paper this morning about cable/dish cutters. Last quarter, cable TV and satellite companies showed a net loss of between 380,000 and 450,000 households. The article attributes most of that to people cutting back because of the poor economy, including kids who’ve moved back in with their parents no longer needing their own subscriptions. It claims that on-line viewing is a minuscule factor in the falling number of cable/satellite subscribers. Of course, it also says that people can watch TV episodes on Netflix for free.

What’s never reported is the number of people who’ve downgraded their cable/satellite subscriptions. Barbara and I fall into that category. We cut back several years ago to the minimum cable TV level, which gives us only local stations for something like $10/month. We use Netflix, both disc and streaming, for nearly all our viewing. Many of our friends have also cut back their service levels, albeit often not as dramatically as we did. But many of them who were paying $100+ per month for TV service are now paying half that or less, and using Netflix for a large percentage of their viewing. This phenomenon is probably more of a threat to cable/satellite providers and networks than those who out-and-out cut the cable.

I finally saw an article yesterday that mentioned the dirty little secret of ratings agencies. The truth is that few investors pay any attention to anything they say, particularly about sovereign and large corporate debt. In fact, many investors have made lots of money by adopting contrarian strategies, buying instead of selling when one of the Big Three ratings agencies downgrades a country or corporation. When S&P downgraded US debt, investors ignored them in droves. Investors remember that these agencies were rating junk mortgages AAA right up to the moment they collapsed, and that these agencies are paid by those who they’re rating. Even a cursory look at how the market rates sovereign debt tells you just how far from reality these agencies’ ratings are, and just how little attention the market gives the ratings.

Based on yields and the free-market price to insure sovereign debt, for example, Germany is a worse risk than the UK, which in turn is a much worse risk than the US. In fact, based on market behavior, US debt is the only major sovereign debt that should rate AAA, with Germany and the UK two or three steps below that, and France lower still.

Wednesday, 10 August 2011

08:38 – As it turned out, all the discussion about security of digital camera images was moot. When Barbara got home yesterday, she told me that she’d removed our memory card from our DSLR and was using a memory card that belongs to her law firm.

The first 28 chemical blocks are complete, with the exception of 0.1 M IKI (iodine/potassium iodide) solution, which I’m in the process of making up. I actually have iodine and potassium iodide in inventory, so I could make up the solution directly from the two chemicals. But I’m preserving my stock of iodine crystals by working from purchased Lugol’s iodine, which is an aqueous solution of 2.2% iodine and 4% potassium iodide. To get a solution that’s 0.1 M with respect to both iodine and potassium iodide, I have to add a small amount of iodine to the Lugol’s solution and then dilute it. The problem is, it takes the iodine forever to go into solution. So I have a volumetric flask partially full of Lugol’s iodine solution to which I’ve added some iodine crystals. Every time I think about it, I give the flask a swirl. After several days, the iodine will eventually go into solution.

This is all because about three years ago the DEA reclassified iodine as a List I chemical, supposedly to combat illegal manufacture of methamphetamine. All they’ve really done is make things more difficult for people who need iodine for legal purposes. It used to be you could order iodine from any lab supplies vendor. For that matter, you could walk into the outfitter store at the mall and buy a bottle of iodine crystals. Now, anyone who wants to sell iodine has to jump through legal hoops to do so. There are all kinds of requirements, including keeping detailed paperwork on sales. And, if it turns out that the iodine you sell has been diverted to illegal use, you can be held responsible. Finally, the necessary license to sell iodine costs something like $2,500 per year, which means that most companies that used to sell iodine now find it uneconomic to do so.

The “trigger level” for iodine sales is now one bottle containing no more than one fluid ounce of a solution that contains no more than 2.2% iodine. If you go into Walgreens, you’ll find they still sell bottles of iodine solution of that size and concentration, which they can sell without restriction, as long as they sell only one per customer per transaction. But when I order one liter of 2.2% Lugol’s solution from one of my vendors, they have to record the transaction details and provide them to the federal government. In theory, the feds could show up at my door and ask me to provide details about the disposition of that liter of Lugol’s solution. In practice, that’s very unlikely to happen, but even so.

The Euro drama continues, with France increasingly under the gun. Right now, France is desperately worried that it will lose its AAA bond rating. As well it should. If US bonds are no longer rated AAA, no other major country’s bonds should be rated AAA. Rating the bonds of France, the UK, and Germany AAA while the US rating is lower is simply ridiculous. The US is much, much less likely to default on its bonds than any of those other countries, whose economies are in much worse shape than ours. The markets themselves have shown how ridiculous S&P’s rating reduction for US debt is. Since S&P reduced the US bond rating, risk-averse investors have greatly increased their purchases of–you guessed it–US bonds. Yields on US bonds have continued to fall, indicating that the markets think US debt is the safest there is. The demand for dollars is so high that US banks literally don’t want any more dollars from foreigners, because the banks have to pay to insure those deposits. Large US banks have started charging foreigners who want to make deposits. That’s right. Negative interest.

Tuesday, 9 August 2011

08:45 – On her way out the door this morning, Barbara asked if one of our Pentax DSLRs had any images on the memory card. She works in the IP division, where they frequently need to shoot images of clients’ products for patent and trademark documents. They’ve been using a point-and-shoot digital camera, but Barbara says they’ve been having problems with getting usable product images. She wanted to try shooting images with a better camera, so I pulled all the images files off the memory card so she could take a clean camera to work.

I assumed that she’d just bring the camera home and I’d transfer the images as usual and burn them to a disc or write them to a USB flash drive. I should have realized that was a non-starter. The stuff they do is confidential, and the images aren’t allowed to leave the law firm’s premises. So I gave her a USB cable that she could use to transfer the images and then delete them from the card. Fortunately, I remembered that the camera was set to record images in RAW format, which they’d have no way to handle, so I reconfigured it to save as JPG files.

Since they apparently need to shoot product images frequently, it seems to me that Barbara’s law firm needs to purchase a decent DSLR, a copy stand, tent, lights or slave flashes, and so on, and set themselves up an imaging station. Of course, they’re not really concerned with artistic merit. All they need is images to document the products for legal reasons, so they probably don’t care much about stuff like even lighting or controlling reflections.

Orders continue to arrive for the chemistry kits, which are currently back-ordered. We’ll complete one batch of 28 kits this weekend, which will lack only the one item that’s still back-ordered from our vendor, and start on the next batch of 28 kits. When the back-ordered item arrives here, it’ll take only a few minutes to drop it into each of the 56 pre-built kits and have 56 more kits ready to ship.

11:43 – I’m playing around a bit with the right-column layout. Given the presence of the monthly calender and the fact that I’m now naming each daily post only with the day and date, the “recent posts” section seemed superfluous. So I got rid of it and expanded the “recent comments” section from 15 to 25 comments, which should make it easier to find new comments on older posts. I’m seriously thinking about switching to a three-column theme and dedicating one of the side columns to my links.

Monday, 8 August 2011

09:48 – I see that Spanish and Italian bond yields are down slightly because the ECB has begun buying them. That won’t last long, either the ECB buying these junk bonds or the lower yields on Spanish and Italian debt. At a very high price, the ECB has bought a few weeks at best, and more likely a few days. And the first shoe has dropped. A national political leader, the former prime minister of Finland and the current leader of the opposition party, has suggested a break-up, with the northern FANG nations splitting off from the bankrupt southern tier, a proposal that is almost certain to gain the support of Germany, the Netherlands, Austria, and Luxembourg.

Work on building more chemistry kits continues. The first batch of chemical blocks is mostly complete, and that’s the part that requires most of the work.

Sunday, 7 August 2011

08:53 – Mainstream European newspapers are now starting to talk about the collapse of the Euro and the breakup of the EU, not just as a possibility but as something that’s likely to occur. Of course, their timeframe is wildly optimistic. I just read one article that quoted an economist as saying he estimated only a 20% likelihood that the Euro (and therefore, inevitably, the EU itself) would last in its present form for 10 years. Ten years? Give me a break. I’d estimate there’s only a 20% probability that the Euro will last in its current form for the next 90 days, and maybe a 1% probability it’ll still be around at the end of the year. In fact, it wouldn’t surprise me if the Euro and the EU crashed by the end of this month.

Many people disagreed with me that Germany will return to the Deutschmark, or something very like it, but I still think that’s almost certain to happen. Or, if Germany decides not to go it alone, it may form a new union with Austria, Holland, Luxembourg, and Finland. I think that’s less likely than Germany going it alone, if only because Germany is now well aware of the extreme hazards of a currency union without a political union and a fiscal union, and those are not things Germans are likely to tolerate.

Work on building more chemistry kits continues. I’m filling, capping, and sealing containers and Barbara is labeling them. She can do that about twice as fast as I can do my part, so I try to get a backlog built up while she’s doing other things.

Saturday, 6 August 2011

11:53 – Well, we’re now down to zero kits in inventory, having sold the last five yesterday. Barbara is off on a day trip with her friend Bonnie, and I’m working on more kits while I do the laundry. By far the most time-consuming part is building the chemical block, which contains 44 chemicals and 6 test tubes (packed in the foam block for safe shipping). We do them in batches of 28 because there are 28 labels per page. That’s 1,232 containers to fill and label per batch, of which 13 chemicals (364 containers per batch) have to be individually sealed with tape to meet small-quantity exemption shipping requirements.

I’ve tried using heat-shrink cap bands, but that’s actually more time-consuming than applying tape manually. While I was looking for a better way to seal caps, I happened to notice a roll of ScotchBlue masking tape that Barbara had bought for a painting project. I tried using it to seal a cap, and it worked so well that Barbara was unable to twist off the cap without first removing the tape. That’s good enough to meet shipping requirements, so that’s what we’re using now.

Friday, 5 August 2011

08:29 – Black Friday. I suspect that when we look back upon this day, we’ll see it as the day the Euro died. And probably the EU itself. Even Barroso, the chief EU cheerleader, now concedes that the “contagion” has spread beyond the periphery. After denying, as late as Wednesday afternoon, that it would even consider doing so, Spain has now withdrawn a bond auction scheduled for later this month, in hopes that people won’t notice that its bonds are nearly worthless.

With the stock market crashes across the world yesterday and US employment numbers that are likely to be worse than everyone fears due later today, the stage is set for a real Black Friday on the markets today. And most of the EU country leaders have caught the last train for the coast, unwilling to interrupt their planned vacations. Geez.

Incidentally, for weeks news reports have been using the word “unsustainable” with regard to bond yields. I read an article this morning that reported that benchmark 10-year Spanish and Italian yields were “approaching 7%, a level that most economists consider unsustainable”. Just to be clear, there is no single rate that marks the “unsustainable” boundary. It varies from country to country, according to its own economic situation. For countries in horrible economic shape, like Spain and Italy, that rate doesn’t have to get to 7% to be unsustainable. For them, 6% is just as unsustainable, as is 5%, as is 4%. Looking at the numbers, I think 3% or even 2% is unsustainable for Spain and Italy. In fact, they’re both in such bad shape that anything much over 0% is unsustainable.

Barbara is taking the day off work today to help me build more chemistry kits. Just in time, too, because we’re down to less than half a dozen in inventory.

21:37 – Oh, my. The United States of America, which has had a AAA credit rating since before my mother was born and before my father’s father was fighting in the trenches in France, has now been downgraded by S&P to AA+. It’s ridiculous, really, and unlikely to have any real effect on US debt yields. After all, where else will investors put their money? Britain, despite its AAA rating, and Japan have higher debt loads than the US, and less dynamic economies. Switzerland is solid, but much too small to matter. The Euro is a joke. No one in his right mind would buy Asian debt. And does anyone really believe that bonds issued by Belgium, which hasn’t even had a government for the past year or so, are of the same risk level as US bonds?