Renewable Future

[BRUTE]

In short, if you eat the standard diet, my hope is that after reading this you will strongly consider shifting your diet by one “Wheaton”-level.

in all fairness, while it's likely always better to think about what to do than blindly follow everyone else, jacob's advice in that diet thread was pretty much along the lines of "don't have a latte every day and become a millionaire".

[oldbeyond]

I wholeheartedly agree on the importance of a deep understanding of financial markets if you are to depend on them for your livelihood. I think you are a bit unfair towards "passive" investment styles, though. A big appeal in any mechanical system(which can be "active" or "passive") is the removal of emotions/human error. Of course, creating a simple mechanical investment strategy that is resilient and viable over the long term isn't trivial, and perhaps impossible, so being able to identify the crucial assumptions of the strategy and if they break down is key.

[ThisDinosaur]

Well, if the core of that message is that "even the best strategy only works SOME of the time, so you have to pay attention," then you've eased my cognitive dissonance on this issue. But I will say that there is still a huge difference between, say, learning guitar and investing your life savings. Unless you are betting your life savings on whether or not you get a record deal. Then its the same 'ting.

cmonkey and oldbeyond are talking about using mental models and carefully chosen assumptions. I think that's how everyone operates, investors or not. A human's assumptions and model may be wrong, and overconfident types can lose their shirt. People who broadly diversify into, say, the Market Portfolio, are operating under the assumption that the future is unknowable, and even the ones who know damn near everything have some Unknown Unknowns. Kahneman says that when we ask a question that's too hard (what will the world economy do next?) we subconsciously answer an easier one. I think this kind of thinking leads to rigid, blind faith in simple investing strategies. I don't think I'm unusually susceptible to that bias, but I do think I am uncommonly susceptible to another one: believing a hypothesis that *makes sense to me* over one that's too complicated given my current knowledge. Since I know that about myself, I'm trying to increase my knowledge and search for counterviews.

[7Wannabe5]

theanimal said: You mentioned how batteries aren't a sustainable solution. I wholeheartedly agree. At the moment, are there any alternatives? In my mind, the answer I come up with is no.

You could figure out how to store the energy in a system of springs or other mechanical devices or you could use the energy to run a pump to move water up into a storage tower to be released later down-gravity to produce electricity as needed.

Or you could use solar energy to grow a crop to feed to a mule and then you could hook the mule up to a mechanical hub that is also attached to a magnet. I am currently exploring the possibilities of a similar system to make some sort of use of my sister's 3 useless dogs. They eat 1lb of dry brown rice and 8 eggs/day and produce nothing but poop that is very difficult to compost. Obviously, you could also use solar energy to grow a crop like potatoes to feed yourself, and then put yourself on an exercise bike hooked up to your laptop in the evening. Here's some of the information you will need to see if this will prove worthwhile.

1) Yield potatoes= .445 lbs/square ft over 100 days growing season 14 hours of sun/day
2) Energy from sun =100 watts/sq. ft
3) Energy available to human from potato=347 kcal/lb.
4) 1 Watt = .86 kcal/hours
5) energy necessary to produce materials to construct simple solar oven in which you can bake the potatoes so you can eat them ?/lifespan of solar oven?
6) energy used by laptop= 20 watts
7) energy burned by average human pedaling bicycle/hr at high speed= 600kcal
8) energy necessary to produce exercise bike and convertor=?/lifespan of these devices =?
9) efficiency of conversion of mechanical pedaling to electricity < 50%

[jacob]

As a percentage, just how big are index funds? I mean, at 3% of the market share, I don't think they form much of a systemic threat. At 60%, I'm sure they do. Just how much is invested blindly?

Quick google: http://www.marketwatch.com/story/troubl ... 2014-12-30

Data from investment researcher Morningstar that Stack highlights indicates that many indexed investors can expect trouble ahead. Interest in index funds isn’t new, but the extent of it is unlike anything witnessed before. Actively managed funds still hold a majority of total stock fund assets, 63% at the end of September. But in the first nine months of 2014, actively managed stock funds attracted $2.5 billion, while $173 billion found its way into index funds, or 98.6% of the total.

I've seen more recent numbers of over 50%.

[jennypenny]

Assuming I understand the question correctly, I think the impact on individuals would probably be higher than the overall percentage suggests because (1) index funds constitute the majority of 401K offerings, and (2) many funds that would be counted as managed funds, like target date funds, are mostly just a basket of index funds.

[Toska2]

Capacitor battery and a very low night time usage. (Led lighting only?)

Anything mechanical (flywheel, water & springs) or chemical (battery) will wear out before the solar panels.

Keep in mind what ever is using the power has to last too. Laptops? Ha.

[ThisDinosaur]

@theanimal, 7Wannabe5, Toska2

http://festkoerper-kernphysik.de/Weissb ... eprint.pdf

http://energytransition.de/files/2014/0 ... anking.png

The chart is from a study comparing the EROI with and without energy storage for various sources of energy. (Yellow bar is WITH storage, blue is without) They used pumped water storage as the common thread because it requires the least energy investment to manufacture. Solar thermal advocates (myself included, until this week ) like molten salt for energy storage over night, but you have to input energy to mine and transport the salt...bummer.

All of this is for commercial scale operations, not small scale residential. There is definitely a place for batteries, but, like hydrogen cells, they're not going to help our energy production needs or fix the systemic problem.

[FBeyer]

theanimal said: You mentioned how batteries aren't a sustainable solution. I wholeheartedly agree. At the moment, are there any alternatives? In my mind, the answer I come up with is no.

You could figure out how to store the energy in a system of springs or other mechanical devices or you could use the energy to run a pump to move water up into a storage tower to be released later down-gravity to produce electricity as needed.

Or you could use solar energy to grow a crop to...

[jacob]

http://www.lowtechmagazine.com/ contains in-depth articles about low-tech solutions to high-tech problems so to speak.

Certainly things can be done but they're going to be done differently in the "kind" sense, not the "degree" sense. For example, instead of email and UPS, the pneumatic tube system might be reimplimented. Invented in the later 19th century, it delivered mail four times a day(!). That's a more likely candidate to future delivery systems than drones, for example. Drones are only possible because of high-density energy system. It's not more than two decades ago that RC flying was run by small gas engines. Batteries were simply too heavy relative to how much power they supplied.

So the key here is energy-density. What's been almost exclusively suggested above are low-density solutions (except the flywheel, which is used in high energy lasers to dumb energy for the shot, and high voltage capacitors ... both are short time solutions because of leakage) or highly inconvenient or intermittent ones.

Consider spring power and compare:

Time between recharges for a watch driven by a mainspring. About 1 day.
Time between recharges for a watch driven by a lithium battery. About 1000 days.

The spring and the battery takes up the same space, so we can conclude that the energy density of a battery is some three orders of magnitude higher than a spring.

Scaling up ...
Range of car on batteries: 400 miles.
Range of car on springs: 0.4 miles.

Of course that's not to say that springs aren't going to be used for extreme low energy applications, like, e.g. clocks. What you want to compare is the energy density of a fuel source because that's the number that determines what's technologically realistic. You can run a clock on a spring. You can't use a spring for mass power storage.

You can see the importance of energy-density in terms of technological development by looking at human history. The Roman Empire was just about maxed out in terms of what could be done with human potato power (i.e. slavery). However, they had indoor plumbing, five story apartment buildings, a working financial system (of mortgage investing), central heating, and dinner ware that's indistinguishable from what you can buy at walmart today. Their soldiers had multitools (leatherman style)---A level of technology that wasn't reached again until the early-mid 19th century.

With oxen you can get more power. With horses even more. Then comes steam. And so on.

Now, the loss of Roman culture is a good example of the importance of technology in terms of making a difference. If the Romans had central heating with slaves but the British didn't with steam power; the difference is one of technology and political/organizational structure.

If supreme effort is taken, it's possible, for example, that one could build a steam engine out of a clay blower and iron from river bacteria ... however, the result would take many years to build and would be more on part with an object of worship or the toy of a king. The Ancient Egyptians describes the existence of batteries.

[ThisDinosaur]

http://www.motifake.com/image/demotivat ... 147845.jpg

Wow. Its not more impressive than Egyptian batteries or Roman indoor plumbing, but this still managed to surprised me.

[BRUTE]

You can run a clock on a spring. You can't use a spring for mass power storage.

brute has heard about some absurd flywheels. they're not necessarily practical, as in humans cleared a 10 mile path out of the rotational direction of the thing and pointed it towards a mountain. but there sure seems to have been a ton of energy stored in that flywheel.

like with batteries, flywheels are probably too heavy, as mass is where they store the energy, brute thinks. and how about having a big, rapidly rotating mass inside a moving vehicle? scumbag physics.

brute thinks that unless humans discover another "miracle" like oil, the solution will likely be a lot of patchwork. sunny/windy places can probably just use renewables for houses, or nuclear power shipped in from places in nobody's back yard..

cars might run on a combination of slowly improving batteries and slowly running-out oil. maybe synthetic oil generation will become relatively affordable enough to go into the mix.

at one point, planning/logistics might have a higher RoI than technological improvements. a bit like supposedly FedEx invests lots of money into route-planning so their trucks never have to idle at red lights.

[ThisDinosaur]

@BRUTE
Synthetic oil would require an energy input to manufacture. The most likely source would be solar, hence, biofuels.

Craig Venter has been working on genetically engineering microorganisms that secrete biofuels.
http://www.jcvi.org/cms/press/press-rel ... logy-meth/

The problem is that existing PV cells are at least three times as efficient as natural photosynthesis.
http://www.scientificamerican.com/artic ... -sunlight/

So you might as well use PV cells and batteries.....

UNLESS it costs less energy input to make the synthetic bacteria than it does to manufacture the PV cells....

I think BRUTE may be on to something.

[vezkor]

BTW, anyone looking into alt energy needs to factor in that the Federal tax credits for solar, geo, etc go away this December. That is a 30% credit, not deduction, so whatever numbers you are looking at will be skewed differently in January.

Not sure about geothermal (or other renewables) but I know the 30% solar tax credit was extended until 2019, then it diminishes to 26% in 2020, 22% in 2021 and then 10% in 2020 on wards (they say "permanent" but it could be changed per the whims of congress)

http://news.energysage.com/congress-ext ... ax-credit/

Personally I'm a shareholder of BBL and NOV because I still drive an internal combustion vehicle to work (gasoline is one of my largest expenses, so this is a hedge), and FSLR because of what I believe to be 3 materially significant competitive advantages in a rapidly growing industry. I plan to sell the BBL and NOV sometime in the next 15 years. FSLR I might hold forever. Time will tell if these investments are wise... based on fundamentals and current valuations, I would purchase more FSLR but I would not purchase more BBL or NOV. I would not, at current values, sell any of my holdings.

[7Wannabe5]

jacob said: Certainly things can be done but they're going to be done differently in the "kind" sense, not the "degree" sense.

I do not understand why we don't have the vacuum infrastructure yet. Until recently I was either hauling stuff to my garden by walking and pulling a cart or intermittently making use of a borrowed car or truck. Then I was gifted with a very functional cargo trailer for my bike, so now I am much more efficient using this method all of the time, and my hauling is completely "potato"-fed human power. Of course, since I have chosen to early inhabit the dystopian world of the future, just like the title character in the novel "The Wind-Up Girl", I must "satisfy the decadent whims" of affluent Company Men who dwell in the Northern Suburbs and are granted Platinum Card Chips by their corporate overlords for doing their part in the raid on the last of the petroleum reserves in Dubai, Tehran and Canada in order to provide myself with enough calories and tools to complete my perma-culture project. However, my plan and hope is that by Harvest 2022, I will be Calorie Self-Sufficient plus One.

Anyways, it seems to me that EROI to Civilization Ratio Chart is essentially no different than a Personal Financial Spending to Quality of Life Ratio Chart. Therefore, if I can construct a solar powered life-style system which allows me time to engage in Art and Culture, and not just spend all my day hauling water to my potato patch, then problem solved. I do not care if the other people can no longer drive their monster trucks to the monster truck rally.

[Riggerjack]

@ jacob

So, from your linked article, index funds own nearly 2 trillion, and the NYSE is around 20T. Nasdaq at 11T, and I don't know how big the bond market is.

I'm not saying that this won't be a problem, or that the tail won't wag the dog. I'm saying it is clear which is the tail.

I wonder more about the amount of money controlled by algorithm. (certainly more YOUR area of expertise.) We have already seen some serious aberrations caused by algorithms. I expect the next wild ride caused by automation to be a combination of indexing and algorithms designed to take advantage of indexing, when the market moves in an odd way. But maybe that's just my lack of trust in programming to react as planned, in complex systems with feedback.

[jacob]

@Riggerjack - A dog is not a good metaphor. Prices are set at the margin between the people who buy and sell. Not at the ends points. The market doesn't run like a democracy with a single election at the end. The decisions are made constantly ... so it's more like politics where all the noise happens at the prices (political issues) where the point of disagreement lies.

The problem with an overweight of indexing (or any single-minded strategy, e.g. dotcom, retail real estate, ... ) is that the number of people setting/contesting the price of individual issues is disappearing, so what you need to compare is not the entire size of the market but comparing th daily volumes of different strategies.

As far as algorithms go, algorithms are one of those issues where the public's perception and what actually goes on are two very very different things. The sensational non-fiction books that are being put out there aren't really helping on that understanding. Suffice to say, when you see something like a flash crash it's as likely that it was caused by algorithms detecting something weird from a human and NOT being there than it is due to a programming error. There are circuit breakers for wild algorithms that goes layers deep. That algos are good at detecting one-sided motion actually reinforces the problem [strategy conformance] above.

If you have 10 different strategies (from people) in the market and someone wants to sell, then in all likelihood someone else will disagree and step in and buy. This prevents the price from going down. However, if, say, 6 out of the ten decide on exactly the same strategy and they all want to sell at the same time, the likelihood of one of the remaining 4 stepping is lower and the price will have to drop much further than before before any one will do it.

That last paragraph is crucial to understand in order to grasp why strategy conformance is a problem.

[Riggerjack]

OK. I see that, but what I see is it causing greater volatility. Price distortions getting more out of line than usual. But those distortions are already there. How does greater volatility harm a buy and hold investor? Sometimes he will buy at an artificial high, sometimes at an artificial low. It will all come out in the wash.

I think a part of the popularity of index funds is 401ks. I know mine has index funds as 1/3 of the options. If you count the specific date funds that are just groups of indexes, it is over half.

401ks usually limit investment options pretty severely. I know that when my options are index vs high cost managed funds, I will go index. I've seen me do it. I don't see the systemic risk being greater than the losses guaranteed thru fees.

But then, I diversify by investing directly in real estate, so I may not be a good example of a typical index investor.

[eudaimonia]

@Riggerjack To answer your question the reason these price distortions are a problem is because they are not evenly distributed. The reason for this is described by @Jacob above - because the dominant strategy (buy and hold) creates the price distortion those participants following that strategy pay the adverse price more frequently than not because they essentially are moving the market.

This doesn't even actually touch on systemic or counter-party risk. See the Swiss Frank 41% overnight move for an example of price shocks, Japan from 1997 to now to show that stock markets don't always go up, the Great Depression, etc. There are even long periods (decades) of 0% gains in the U.S. stock market during the last 100 years. Current buy and hold investors ignore these warnings due to recency bias. Keep in mind that the last 5 years of U.S. stock market growth is in the 98% percentile for all rolling 5 years periods in the last 200 years. The next 5 years are unlikely to be the same as the last.

Also, I think it is exactly your line of thinking regarding 401ks (reasonable though it sounds) that is contributing to the index investor bubble. If one is serious about their investing there are tax deferred vehicles. I actively manage my portfolios through a self-directed IRA and there are also similar self-directed products for Roth IRAs, trusts, and SEP-IRAs for small businesses.

[7Wannabe5]

In the first chapter of "Little House in the Big Woods", Pa Ingalls raises two hogs for meat to get through the winter. One of the hogs he keeps penned close to the cabin and feeds. The other hog he sends out into the woods to forage.