Why airfares are headed in one direction for now

You can fly between New York and Los Angeles for as little as $370 round-trip, not including taxes and government fees, on JetBlue, and $20 more on American. And out of that, how much will the airline spend on fuel? Almost $300 per passenger for JetBlue at current prices, and nearly $500 for American. Just Friday's $10.75 leap in oil prices would raise the cost to JetBlue Airways Corp. to fly someone from New York to Los Angeles and back by almost $24.

Full article from WSJ here, but the above paragraph captures all you really need to know.

The Economics of Solar (in Cyprus)

As recounted to me on Sunday night:

• Capital cost for panels is 5,000 euros per Kw of capacity
• Over the course of the year, you can expect 5 full hours of capacity per day
• The severe summer heat actually reduces panel efficiency, but, overall, given the sunny climate, Cyprus has excellent solar characteristics (not a surprise)
• You can sell back into the grid at a premium 21 euro cents/KW vs buying at 14 Euro cents/kw
• Government subsidizes 55% of the upfront equipment cost
• Panels have a 25 year life

So assuming a 6% discount rate and flat electricity costs (14Kw/h), you have break even with a 13 year equipment life if you include the 55% equipment subsidy.

Even though Cyprus is a favorable location for solar, that does not strike me as too bad, given that: panel costs will clearly drop as volume / scale manufacturing increases and energy costs are probably biased upward over time. I would guess that in 7 to 10 years, in a location like Cyprus, solar is cost-competitive on an unsubsidized basis.

And that does not take into account the pollution externalities of traditional power generation and the explicit and implicit public subsidies oil-based energy receives (e.g. military, road building, etc).

Now, that does not mean 100% solar (you still need electricity at night, you need South exposures for this effectiveness,battery storage is expensive and difficult to maintain, etc), but it should certainly become a meaningful part of the mix.

Repaired?

I was asked today if I thought that parts of the financial system, greased by petrodollars, hadn't recapitalized and repaired themselves fairly effectively and were working down the backlog in syndicating LBO debt etc. This was my response.

1/ If "repair" is code for "write off amounts exceeding the fee revenue earned from 'financial innovation' in said lines of businesses over the last 3-4 years, blow your capital ratios, panic and raise capital from the Gulf and China that dilutes current shareholders from 10% to 30%, wipe the 5th largest US i-bank off the face of the earth and watch the 4th largest teeter on the brink, stick the Fed, the ECB and the Bank of England with all types of bullshit assets that will ultimately be eaten by the tax-payers (e.g. privatized gains and socialized losses for the least worthy interest group of all time). all the while not clawing back any bonuses that were paid along the way" then I agree that that those businesses have been "repaired". And some of them (Citi, Wachovia, etc) still have more pain coming.

But I am not sure why as a shareholder or taxpayer or US citizen that might not consider selling off chunks of our economy to be a good idea, why this isn't grounds for public flogging as opposed to being impressed by how "quickly" it was repaired

2/ Check out the 5 year stock charts

Morgan Lehman Citi Merrill

Goldman JP Morgan

Morgan, Lehman, Merrill, Citi = Flat or down; Only JP and Goldman are up and even then the CAGRs are pathetic. In no other industry do employees get so rich at the expense of shareholders. Actually hedge funds are even worse but the data is not publicly visible.

3/ Lest we forget, Americans are cumulatively 50% poorer against much of the rest of world since we have had to take sensible monetary policy to the woodshed to help with these repairs and the dollar is flirting with a run on the currency. Incredible for the global superpower and world's reserve currency.

USD-Euro Ratio

Another socialization of loss.

Plus huge reduction in strategic scope of action against competitors like China with their huge reserves locking up natural resources and with the ability to send the dollar falling to the floor if they ever started selling. Sure it would hurt them too, but that does not mean that the leverage is not there

4/ And anyway, Round 2 is still to come. And that is the slowdown in the real economy which will swing around and punch everyone in the nose again. We are not done yet.

5/ also note that the mortgage market outside of conforming is basically closed for business as are large parts of the student loan market and increasing amounts of home equity (and car loan is next)

Grand Theft Auto and An Incredible Pace

Grand Theft Auto: IV is one of the most anticipated video games of the year (though that is fairly irrelevant to the point I am about to make). It was released Monday at midnight I think and leaked on Pirate Bay the day before.

Mahalo.com, a human edited search engine run by Jason Calacanis has been all over this since either the release or the leak (not made clear).

Their Games team started playing, streaming live to 600 people who were commenting on what they were doing.

As of Tuesday night, they had completed the whole game and were almost done posting screenshots /instructions /cheat codes for every level of the game.

Now you might not care particularly for video games or cheat codes, but the point is about the rate and pace of "new media". In the old days when I played video games, this type of thing came out in paperback and certainly not 18 hours after the game release and for free!

Incredible.

Here is the announcement on Jason Calacanis Blog. How they did it is here.