3M should patent groundwater

Households in St. Paul are on bottled water, after their private wells (i.e. tapped into the groundwater) showed up with chemicals belonging to 3M.

The Minnesota Department of Health issued drinking water advisories to the homeowners after finding perfluorooctanoic acid (PFOA), formerly used in nonstick cookware and other products, at levels slightly above health guidelines.

The chemical had previously been detected in community wells in Oakdale and dozens of private wells in Lake Elmo. A different 3M chemical, perfluorobutanoic acid, or PFBA, has turned up in a wider area of the east Twin Cities metropolitan area that includes public wells serving Cottage Grove, Woodbury and four other communities.

The tests are part of an ongoing sampling of wells in south Washington County to determine the extent of ground water contamination, health officials said.

If something good comes of it, I hope 3M gets the patent and private households have to pay to use bores. Hey, if it’s good enough for rice, it’s good enough for what you cook it in, right?

Meanwhile a different 3M chemical, perfluorobutanoic acid, or PFBA, has also showed up elsewhere in the state.

Sydney’s housing affordability

Earlier this year Jim Kunstler was writing about sub-prime mortgages (he was one of the early ones – NPR seems to have discovered them only last week). Specifically, he was addressing a comment made by Alan Greenspan that the problem was not easy/improperly-assessed credit, but house prices. If only they’d go up 10%, the problem would go away. Jim Kunstler’s response?

What kind of a rock does this fucking idiot Alan Greenspan live under?

(this is not a family blog).

Yes, as he then went on to demonstrate, if one took median incomes and median house prices in his area, and jacked those house prices up 10%, they’d only go still further out of reach of more and more households. Which is how sub-prime lending began in the first place. What Greenspan seemed to want was a vicious circle – but then he’s always had a fondness for boom-busting economies.

I was reminded of this while reading about the newly-released census data, showing that

• Mortgage repayments in Sydney are 40% higher than the national median.
• Rents in Sydney are 31% higher than the national median.
• Incomes in Sydney are only 12% higher than the national median.

Whoops. More people have mortgages (31.1% – 23.7% in 2001), which is neither here nor there. But the shares of people owning their home outright (30.1%, down from 39%, and the total numbers thereof (2,478,000 vs 2,657,000), have fallen, which is here or there (whichever is the bad one). The proportion of household income going on mortgages (and, by the looks of it, rent) is also up: 31.6% vs 27.7%. With Sydney’s median income AUD1154 per week, that 3.9% difference is about AUD195 per month extra. Not a whole lot, but a movement towards utter subservience of living expenditure to interest rates (those interest rates that never go up under a liberal government).

These statistics come from differently, related, things. Increasing incomes, increasing density/expansion, increasing levels of leveraged home-ownership, all come together to push house prices very very high (in Sydney’s case, certainly). Hence the house prices exceeding incomes (higher leveraging), as well as rents (lower vacancy rates in rental homes remaining). Repayments take up higher percentages of household income partly because of the higher borrowing, partly because the permissiveness of easy credit (back to Jim Kunstler and Alan Greenspan) allows people with lower incomes than before buy more expensive houses than before. Like the US at the moment, these people will be hit first and hardest.

These are also creeping kinds of statistics. They seem small enough, but they are a trend. Increasing proportions of household income going on mortgages is a ‘bad’, at a time of increasing energy costs, (hopefully) water costs, food costs, etc. It’s also why I referred to boom-bust economies. If left alone, this will only trend as it already is – it will only trend the other way when people start defaulting, going too far under in debt to buy a house, etc. Then house prices decline, as do house purchases. Like they are in the US now.

Inflationary pressure won’t go away after that, though, nor will unsecured debts. The costs of energy and food are not related to house prices, and if anything our credit-card borrowing will escalate as we try to keep our houses. Australia is certainly moving in and around some pretty good company, these days, but I’m sure the government would prefer it wasn’t. Ordinary Australians will definitely wish they weren’t.

Dams 50% full, 25% polluted, 100% undrinkable? Burragorang and Warragamba in trouble

I made those numbers up.

A massive plume of polluted water has been detected in Warragamba Dam, posing a threat to Sydney’s drinking water supply.

Lake Burragorang is a bloody enormous lake – catchment area 9,051km² – and it’s up-stream from Warragamba, prime source of Sydney’s drinking water. That catchment area picked up some 200mm of rain over the last few weeks (good!), picking up, along with it, a lot of nutrients and waste as it went (bad!).

Hence today’s story – the big plume of polluted water spotted at the dam gates (that means not in our drinking water yet, but in the reservoir from whence it comes). I tried to find a useful map for all of this, but no luck. There’s a map here, if you’re interested.

The Premier says there are as yet no pathogens spotted in the water, which is being monitored (Sydney has some experience with pollution scares concerning its water supply). Meanwhile our water is to be drawn instead from Prospect Reservoir and dams in the Upper Nepean Catchment. Fortunately, of the dams, Warragamba didn’t do as well out of the rain as others did, so it’s better to have that supply under a cloud (pardon the pun) and rely on more well-filled catchment areas.

Two things:

1) This is potentially rather bad – we waited a bloody long time for that water and to lose it, and/or face the expense of cleaning will be a blow.

2) If the 1998 giardia/cryptosporidium panic is anything to go by, telling Sydney’s households that their water is as yet unaffected by an as yet non-harmful cloud of muddy water will not do much in the way of calming either them or the media down. Go buy shares in Coca-Cola Amatil.

The toxicity of Dick Cheney

Two pollution posts in a row. First is the latest of the Washington Post’s pieces on the US Vice-President, Dick Cheney (whom we know I don’t like. At all. I also swear they make that official photo look like they just stole a baby).

From the article,

Law and science seemed to be on the side of the fish. Then the vice president stepped in.

First Cheney looked for a way around the law, aides said. Next he set in motion a process to challenge the science protecting the fish, according to a former Oregon congressman who lobbied for the farmers.

Because of Cheney’s intervention, the government reversed itself and let the water flow in time to save the 2002 growing season, declaring that there was no threat to the fish. What followed was the largest fish kill the West had ever seen, with tens of thousands of salmon rotting on the banks of the Klamath River.
…
It was Cheney’s insistence on easing air pollution controls, not the personal reasons she cited at the time, that led Christine Todd Whitman to resign as administrator of the Environmental Protection Agency, she said in an interview that provides the most detailed account so far of her departure.

In the famous words of Simon Norfolk, for most of I have no words. For many of these stories there is clearly malignent, idiotic industry corruption in Cheney’s methods. For others there are the needs of pastoralists. In which case the science and the economics should be used to decide the issue – not political shenanigans so anti-democratic and non-transparent that environmental agencies shed experience and battles with the judicial branch are set up for years to come.

Romance, sarcasm, math and language

It is a horrid summer day in New York. Like that song.

If you have not read/heard of a webcomic called XKCD, I insisted you start (reading it. It’s too late to starting hearing about it).

Assessing risk in microfinance – could it possibly be worse than normal finance, these days?

Very interesting story in the Financial Times, just spotted. At a time when microfinance is growing rapidly (and doing wonders), it is apparently constrained by a lack of transparent assessability of risk.

…some experts say there are obstacles preventing the microfinance sector from reaching its full potential, including the absence of a global framework that mainstream investors can use to assess properly the risks associated with the sector.
…
Activity in the microfinance sector has been growing in the last few years and has involved increasingly complex deals. Last month, for instance, the first publicly rated microfinance collateralised debt obligation – which pools together packages of bonds – raised more than $100m. The deal was rated by S&P and completed by BlueOrchard, which specialises in the management of microfinance investment funds, and Morgan Stanley.
…
S&P expects to rate an additional two to three microfinance CDO transactions and around 25 MFIs in the coming months, with CDO issuance levels potentially reaching $500m by the end of 2007. As the existing microfinance institutions become adept at handling new inflows of funding, and more MFIs enter the market, securitisation volumes could reach between $1bn and $3bn annually over the next decade, the agency says.

You know, those number might need re-doing. I don’t know how potentially risky debt from developing countries will fare in a market that can’t sell CDOs from the US.

The amount of U.S. high-grade, structured finance CDOs that are being offered to investors has plunged to $3 billion, from $20 billion a month ago, JPMorgan said in a report dated yesterday.

(I got that story via Calculated Risk) Yes, I expect BlueOrchard to be less risk and yield-happy than Bear Sterns or the ordinary hedge fund world, but we’re talking about basically the same thing. The way things are heading, I think microfinance is better off without. Anyone investing in CDOs – or investing in debt at all – is probably getting quite jumpy just now.

Also, via the Big Picture, a story from the Bloomberg markets magazine about the over-exposure of pension funds to CDOs. I’ve intimated before that I consider any exposure by pension funds to risky debt to be too much, but they’re being sold the riskiest of the risky debt – are they just plain stupid? More likely they realise that they’re dealing not only with Other People’s Money, but other people 40 years from now. Not likely to promote proper risk assessment. Which is kind of where we came in…

Venezuela 2:0 Everyone Else

I was tempted to the throw my ‘War on Terror’ category on this post as well, since it’s surely a matter of time (I mean, again).

Yes, the news is that state-owned oil company Petróleos de Venezuela Sociedad Anónima is taking control of some (4) heavy crude oil projects in the Orinoco belt. From the Christian Science Monitor,

I think the world could be divided into people who think of oil when they see that word, and people who think of Enya. And people who’ve never heard of either (damn Kalahari Bushmen). The projects are worth around USD25bn. One of the companies, ConocoPhillips valued their share at USD6bn, 10% of ‘their’ reserves and 4% of their production.

Views are mixed. Venezuela’s:

“This is an act of sovereignty for our country, for our people,” [Energy Minister Rafael] Ramírez declared, standing under a poster of Chávez emblazoned with the motto “Fatherland, Socialism or Death.”

Ahem. Funnily enough, also President of PDVSA. How Unocal. The firms, ConocoPhillips and ExxonMobil, are suggesting they’ve just had enough. PDVSA had announced not a take-over, but a move from 40% to 78% control – now 100%.

Meanwhile, Ramirez is saying that other firms said Chevron, Total, BP and Statoil will sign up and continue business in the belt. Canadian Petro-Canada also bailed.

Murky. The Big Two are also suing for USD3.5bn or more – which is more than the compensation PDVSA offered them for moving to a minority stake, less than they’d valued that stake, including goodwill. The markets seem to agree (I really don’t put all that much ’stock’ in the markets – get it? – but I do seem to like looking up share prices…)

Moreso for ConocoPhillips, who announced the bigger impairment (USD4.5bn)

Is the point of this sympathy for a couple of big oil comanies? Nope. It’s actually about peak oil-type considerations. Consider this: after the aforementioned coup, Chavez gave more than 20,000 PDVSA engineers the boot for striking and demanding his removal. Venezuela’s outpu has fallen 25% since Chavez took office – 3m barrels per day after the strikes in 2002/3. So the point of this is that the oil in the ground is not in dispute – nor is its value. How much of it is taken out and exported, and at what rate, is very much in question.

Which is where the peak oil discussion comes in. This, to me, is a reminder of something typically missed in the discussion about oil. Production does not equal exports. We often talk about how much oil Venezuela has (potentially more than Saudi Arabia), the Ghawar superfield and declining oil in fields everywhere. But even as the oil removed from these fields falls, post-peak, the amount exported falls even faster, as their own consumption grows. So Saudi Arabia’s oil is declining. Russia is using what it has to assert itself more and more. As much oil as Venezuela has in the Orinoco belt, it still needs to be able to get it to refineries, and with some sort of stability.

Venezuela ?:? United States

Finally, depending upon how mediation/arbitration/compensation talks go, Citgo Petroleum Corp. – owned by PDVSA – might find itself caught up in the mess. If Venezuela ’siezes’ the assets of a US company (especially a US oil company, of all things), why would the US government not respond in kind? Citgo owns several US-based refineries.

The US gets 14% of its oil from Venezuela. At the moment it looks like they’ve gone from hoping to get a lot more to facing the possibility of getting none – Chavez has repeatedly threatened to cut them off. In such an increasing market as this, he can probably afford to. I’m sure China and India would be only too happy to buy his oil and let his companies build refineries there.