Ultimate Guide to Power Efficiency
This is federal mortgage insurance to finance the cost of energy efficiency measures. A homebuyer may obtain an FHA mortgage that exceeds the normal maximum loan limits if the mortgage includes an amount for the purchase of energy-efficient improvements made or to be made to the property. The borrower does not have to qualify for the additional money nor make a down payment on it. The borrower must make a 3 percent cash investment in the property based on the sales price. One- to four- unit existing and new properties are eligible. The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating, which may be financed as part of the cost-effective energy package. Energy improvements to an existing home may be installed after the insured loan has closed within 90 days of closing unless the loan is insured under Section 203(k), in which case the improvements must be installed within 180 days. Energy improvements to a newly constructed...
Soft issues can be equally important blockers or enablers of performance within an organization. As an example, if engineers hold the belief, Every power plant we build must be customized, this may entail extra design and production expenses that cut into overall profitability, when in fact customers might be willing to accept standardized models. Leadership style can impede if managers' actions send out different messages about
We can benefit with the knowledge from where energy prices are, especially crude oil. As prices rise, oil-producing countries increase their wealth. However, oil-consuming nations are at a disadvantage, and the increased cost of fuel can contribute to a recession, as occurred in the United States in the 1970s. If you think about it, higher fossil fuel prices actually act like a taxing effect on consumers. However, after a prolonged price appreciation, to reflect the higher energy costs, producers eventually need to raise prices in their finished goods and services to maintain a decent profit margin and not absorb the burden of higher energy costs. Who pays the price You and I, the consumer, and that is inflationary. Crude oil prices hit an all-time high close at 78.40 per barrel on July 14, 2006 (see Figure 1.7), due to global demand and fighting in the Middle East. Tensions flared between Israel and Lebanon. Fears arose when many suspected Iran and Syria As a trader, I want access to...
This problem is an important one for the electric utility industry. It is much cheaper per unit of capacity to build a large coal-iired power plant than it is to add capacity in small amounts. Bui at the same time, utilities face considerable uncertainty over the rate by which the demand for their electricity will grow.14 Adding capacity in small amounts gives the utility flexibility, but is also more costly. Hence it is important to be able to value this flexibility. The options approach used in this book is well suited to do this. I lere we will illustrate the basic idea with a simple example in which demand growth is certain, but there is uncertainty over relative fuel prices.1
Global trading produces a new set of risks to your portfolio. If news events occur when the U.S. markets are closed, then large price moves could occur in foreign markets. This is particularly true for currencies such as the Swiss franc, Japanese yen, or deutsche mark energy markets such as crude oil and metals markets such as gold and silver. Often, an emotional reaction in foreign markets will produce a large opening gap stopping you out at extraordinary slippage. You may find that your profits are lower than anticipated due to these large opening gaps. Then to make matters worse, the markets may stage a recovery to close well inside your stop loss point. Thus, round-the-clock trading adds new risks to your portfolio.
HUD insures loans made by lenders to pay for improvements or additions to apartment projects, nursing homes, hospitals, or group- practice facilities that already carry HUD-insured or HUD-held mortgages. Projects may also obtain FHA insurance on loans to preserve, expand, or improve housing opportunities, to provide fire and safety equipment, or to finance energy conservation improvements to conventionally financed projects. Major movable equipment for nursing homes, group practice facilities, or hospitals also may be covered by a mortgage under this program.
In other words, if the market has a low energy level, even dramatic fresh information entering the market will have a limited impact on prices. Conversely, when the market is in a high-energy state, even relatively insignificant fresh information can trigger a large move, which in turn can lead to a rolling snowball effect. For example, as more and more participants reach their thresholds of pain at which they must act that is, close or reverse their positions, often simply because other participants have had to do so at an earlier price level the market gathers momentum. At these times, the market snowballs of its own accord. By fresh information, I primarily mean political or economic comments by leading figures or the published findings of reputable statistical publications that are out of line with market expectations. In this context, statistical results in line with market expectations are not fresh information. In the case of an extremely high-energy market, however, mere...
Of power plant is best to replace the horse. Next, decisions such as the best steering, brakes, and tires became important. It became obvious that the tiller design used with the previous technology did not meet the needs of the new technology. In today's car, there is little uncertainty about the power plant1, steering, or braking. Consumers today are more concerned with safety, efficiency, and performance, not with the basics of how the car works. It is this combination of new technology and users' perceptions of their evolving needs that creates market uncertainty.
A comparison of how the various commodity groups correlate with the CRB Index from 1984 to 1989 shows that the Grains have the strongest correlation with the Index (84 ). Two other groups with strong correlations are the Industrials (67 )*and the Energy markets (60 ). Two groups that show weak correlations with the Index are the Meats (33 ) and the Imported markets (-4 ). The Metals group has a poor overall correlation to the CRB Index (15.98 ). However, a closer look at the six years under study reveals that, in four of the six years, the metal correlations were actually quite high. For example, positive correlations between the Metals and the CRB Index were seen in 1984 (93 ), 1987 (74 ), 1988 (76 ), and the first half of 1989 (89 ). (Source CRB Index Futures Reference Guide, New York Futures Exchange, 1989.) The three most important sectors to watch when analyzing the CRB Index are the grains, metals, and energy markets. The oil markets earn their special place because of their...
If you believe that this is a great market that you want to be in because you can help the world make improvements in its energy consumption, look at what's available in the marketplace and keep following it to stay abreast. Again, this is part of the due diligence process. If you're interested in an emerging new market, such as wind power, you need to keep in mind that it is a new industry. Even if the industry as a whole seems to have very good potential on the upside, the newer smaller companies don't yet have a track record against which to evaluate your investment.
The same scenario is found with expenses. The seller typically cuts back on spending to show artificially low expenses, or claims that the buyer can cut expenses through an energy conservation program or some other seemingly sensible method. This mindset assumes that the current owner hasn't taken advantage of legitimate ways to cut down on expenses.
Along with some traditional sources, some new investors are stepping up. China, is more and more interested in securing mineral and agricultural products to fuel its growth, and is increasingly investing in many South American countries. In Venezuela President Chavez is increasingly using its oil wealth to subsidize the energy costs of his own country and other Latin American countries fighting against what he sees as the yoke of American capitalism. In recent months he has been making agreements with members of the southern cone and has announced Pet-rosur, an oil-based regional agreement, for increasing Latin American cooperation. Venezuela is also buying bonds from Argentina at very favorable rates, without insisting on the high interest rates demanded by the international markets.
U.S. manufacturers, who for years had thrived on low energy prices, were totally unprepared to deal with surging oil costs. The recession that followed the first OPEC oil squeeze pummeled the stock market. Productivity plummeted, and by the end of 1974 real stock prices, measured by the Dow-Jones average, had fallen 65 percent from the January 1966 high the largest decline since the crash of '29. Pessimism ran so deep that nearly half of all Americans in August 1974 believed the economy was heading towards a depression such as the one the nation had experienced in the 1930s.4
From the balance sheet, we find that ConEd has 5501 million of outstanding long-term debt. If we want a detailed description of a company's capital structure, we can access online its regulatory filings at the SEC. We examine Note B of ConEd's 10K for 2001 filed with the SEC through its EDGAR service. We see that ConEd has 25 different taxable debentures aggregating 4.105 billion with maturities from 2002 to 2041 and interest rates ranging from 6.375 percent to 8.125 percent. ConEd also is the obligor in 1.191 billion of tax-exempt debt that was issued on ConEd's behalf by the New York State Energy Research and Development Authority. The 13 tax-exempt issues have maturities from 2014 to 2036 and interest rates ranging from 1.81 percent to 7.5 percent. ConEd also has at least four series of preferred stock outstanding with an aggregate face value of 269.6 million. Is ConEd's capital structure confusing enough
Another response to loss is to repeat oneself, to make more of the same efforts rather than to step back and reassess. The losing trader keeps trading the same stocks in the same way. Reliance on memories of past trading experiences and remaining stuck in an old trading style keep one from seeing what is happening today. A trader may put too much energy into trying to protect a losing position, hoping that it will turn around, rather than saving energy by getting out of the trade. The unwillingness to face the truth and readjust to the new requirements of today's market is a good example of the psychological defenses of denial and rationalization that lock the losing trader into repeating yesterday's errors with yesterday's strategy.
Overall, we believe that the distressed sectors will perform well in the next few years as inflationary pressures push interest rates higher. Performance for the strategy is not expected to repeat the high levels of 2003, but should still be respectable. We think investors should focus on experienced managers who have been active in this strategy over the past several years with a proven ability to maneuver through a less favorable capital market environment. Highly leveraged companies that are not successful at fixing their operational problems could very well experience cash flow problems and may be unable to deleverage if access to the capital markets diminishes. Additionally, manufacturing companies hurt by import substitutions or increased energy costs could be excluded from the economic recovery. Distressed securities managers will need to be cognizant of the potential for a wide variety of colliding trends rising interest rates, falling currency costs, and rising energy costs...
Having identified the two strongest groups, the trader should look within each group for the best performing individual commodities. Figures 11.4 through 11.6 plot the relative performance of the three energy markets crude oil, unleaded gasoline, and heating oil. The energy group turned in the best performance, with a 100-day relative ratio of 104.46. This means the group as a whole gained 4.46 percent during the previous 100 days relative to the CRB Index. The rankings among the three energy markets are 1. Crude oil (112.24) 2. Gasoline (111.39) 3. Heating oil (103.11)
The chart in Figure 9-27 is for the stock that represents ownership of FedEx Corporation (FDX). This is another stock that I love to trade, for a few reasons. First, on the business side, FedEx is exposed to the energy markets on the cost side of its business and the overall economy on the income side. As a result, it proves itself to be a very volatile (and fun to trade) stock. Second, the first industry for which I was ever given investment responsibility was transportation, and FedEx (Federal Express at the time) was an early company in my coverage. Finally, I grew up in Memphis (FedEx headquarters), where everyone knows someone at FedEx. Needless to say, the company is close to my heart.
High oil prices in the 1970s shocked most Americans into giving energy costs at least a second thought. People bought more energy-efficient cars, drove at slower speeds on highways, and turned home heating down. Affordability trumped comfort. The government even provided tax breaks for improvements to make homes and buildings more energy-efficient and for investing in solar, wind, and geothermal technologies. *I have learned a great deal from alternative energy experts, particularly the various industry associations, the Renewable Energy Policy Project, and the U.S. Department of Energy. Such solar power devices, which convert radiation from the sun into electricity, can range in size from a small portable solar stove to huge centralized solar power plants using acres of mirrors to generate electricity. Once such plant in Barstow, California Solar Two has a 10-megavolt capacity, capable of powering 10,000 households. The Japanese have reportedly spent more than 10 times as much as the...
Swimming pools or servant quarters will not qualify under this program. Eligible items include roofing, plumbing, electrical upgrading, painting, floor coverings, fencing, and most anything having to do with energy conservation such as double-pane windows, new doors, weather stripping, and better insulation.
Julie Moon is an energy analyst examining electricity, oil, and natural gas consumption in different regions over different seasons. She ran a regression explaining the variation in energy consumption as a function of temperature. The total variation of the dependent variable was 140.58, the explained variation was 60.16, and the unexplained variation was 80.42. She had 60 monthly observations. B. What was the sample correlation between energy consumption and temperature D. Compute the sample standard deviation of monthly energy consumption.
Supply Realities Barring robust demand from Brazil, China, and other emerging economies, the International Energy Agency (IEA) has made sharp downward revisions to estimates of overall global demand. Despite the risk of projected slowdown in global oil demand, the underlying supply realities continue to provide vital support for prices going forward. Oil production has been impacted by a series of disruptions, such as pipeline sabotage in Nigeria, the Iraq war, strikes among oil workers in Nigeria and Gabon, as well as confrontations between the Turkish army and Kurdish guerillas in the oil-rich region of northern Iraq.
FIGURE 22-1 A far-reaching price shock. A vivid reminder of price shocks occurred on August 16, 1991, and again 3 days later when Russian premier Gorbachev was abducted and then released. Most financial markets were affected simultaneously, as were the energy markets. In the case of the currency markets, many traders profited from the first shock, which occurred on a Sunday, then gave it all back on the following Wednesday.
Brazilian Real Brazil's currency has reaped the benefits from its position as the world's largest exporter of ethanol and soybeans at a time when these two items loom large at the top of commodity league. Increased energy efficiency and environmental awareness has spurred world demand for biofuels. Brazil's vast sugarcane fields make its sugarcane-based ethanol cheaper and more energy efficient than the corn-based ethanol produced in the United States. Despite its cheaper and cleaner attributes, Brazil's ethanol faces export tariffs in both the United States and the European Union as they protect their local farming industry. Brazil competes with the United States for the number one slot in soybean exports and was number one in 2008, exporting 25 million tons of soy, or 39 percent of the world's total. Accelerating production of biofuels and soybeans as well as a promising future for crude oil have all helped bolster solid advances in Brazil's equity markets and currency.
Brazilian Real Brazil is known as home to the world's largest sugarcane fields and the cleanest and most energy efficient type of ethanol, but it may also become a major player on the crude oil scene. One year after the world's biggest oil discovery since 2000 was made in Brazil's Tupi field in 2007, a new discovery emerged in Brazil, estimated to raise the number of discovered reserves to as much as 33 billion barrels. Full exploitation of these reserves could lift Brazil to the top-five list of oil producers from its current 19th position. Combining these future-looking oil-specific issues with Brazil's current strengthening fundamentals in ethanol, soybeans, defense technology, and information technology, the prospects for the currency remain promising. Separately, Brazil's partially state-owned oil company Petrobras has become the third-largest publicly traded company in the Americas as of April 2008, with a market value of US 295.6 billion. The company has even surpassed...
Inflation-indexed securities became popular on Wall Street in 2005 as consumer prices increased due to accelerating energy costs. Various states and cities issued their own inflation-indexed municipal bonds, as did Sallie Mae, the government agency that offers education loans to college students. Despite the proliferation of inflation-indexed securities, there is no question that they offer disadvantages to investors as well as advantages.
In 1973, at the beginning of the embargo years, U.S. energy consumption represented an estimated 2.1 percent of Gross Domestic Product (GDP).1 The embargo years produced intense conservation efforts, multiple research projects to develop a number of alternative energy sources, and a national awareness of the United States's long-term energy dependencies. Almost 30 years later, the United States is more dependent on energy imports than ever before, treats conservation as a disease primarily afflicting environmentalists, and has upped its energy consumption as a percentage of GDP to more than 6 percent. The steadiness of energy supplies at reasonable prices is critical to the United States, yet between the oil embargo years and the new millennium, energy investments beyond Big Oil were rarely the focus of investor interest.
The problem can be well modeled as a two stage stochastic program. Thus one should plan in advance against essentially all scenarios then if a bad scenario actually occurs one can optimally revise. It sounds simple but it provides a way to plan stage 1. How optimal was the crisis preparation Stochastic programming computer codes and applications to many areas of finance, production, energy policy, etc. are detailed in Wallace and Ziemba (2005). In fact the evidence is that the planners in New Orleans did just that. They foresaw an event like Katrina and planned for it. The trouble was largely in the response by the various stakeholders.
By far, the most significant factor today that helps the companies that produce oil is the OPEC cartel. Though the cartel controls only a bit over a third of the world's oil output, the energy markets tend to be highly sensitive to small disruptions and spikes in supply. This gives OPEC more than enough power to manipulate commodity prices for the entire industry's benefit, keeping long-term commodity prices above the long-term costs to produce the commodities.
The first contribution implies that default correlation should in general be positive even between companies in different sectors. Within the same sector we would expect companies to have an even higher default correlation since they have more in common. For example, the severe fall in oil prices during the 1980s resulted in the default of numerous oil-producing industries. On the other hand, the fall in the price of oil would have made the default of oil-using industries less likely as their energy costs fell, thereby reducing their likelihood of default and reducing the default correlation. However the sheer lack of default data means that such assumptions are difficult to verify with any degree of certainty.
The financing of a new plant, facility or other infrastructure (such as a power plant or toll bridge), may involve Project Financing techniques. Financing is needed to construct the asset and to allow it to operate (working capital), and a mixture of financing instruments will be used (possibly including lease finance) in a manner that minimises the risk for debt providers and equity providers, and maximises the equity return.
The CRB Index, which was created by the Commodity Research Bureau in 1956, Presents a basket of 21 actively-traded commodity markets. It is the most widely-watched barometer of general commodity price trends and is regarded as the commodity markets' equivalent of the Dow Jones Industrial Average. It includes grams livestock, tropical, metals, and energy markets. It uses 1967 as its base year. While other commodity indexes provide useful trending information, the wide acceptance of the CRB Index as the main barometer of the commodity markets, the tact that all of its components are traded on futures markets, and the fact that it is the only commodity index that is also a futures contract itself make it the logical choice for intermarket comparisons. In Chapter 7, I'll explain the CRB Index in more depth and compare it to some other commodity indexes.
Ception that inflation was rearing its ugly head. (As of the printing of this book, the Fed was still in rate-hiking mode ) Due to higher energy costs and as reflected in the Producer and Consumer Price Indexes, we had seen a pickup in inflation and historically, many commodity prices rise besides gold and silver, such as sugar, coffee, and cotton.
Given the strength in demand for crude oil by the United States and China, and the lack of spare capacity in the production of crude and in refining capacity, Murti et al. (2005) attempt to estimate the range of crude oil prices that would sufficiently reduce energy consumption to balance supply and demand. The analysts note that it has to be a demand reduction that balances supply and demand since the addition of meaningful new quantities of supply would take 5-10 years.
What is the maximum VA loan There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised value or purchase price, plus VA funding fee and energy efficient improvements, if applicable. However, lenders usually won't make a no-down-payment loan larger than 359,650 due to secondary market limitations.
These three components have been in play in the commodity sector. The emerging economies' breakout growth phase has made them a bigger everyday consumer of commodities (see Figures 4.6 and 4.7). Consider the specific case of oil, a commodity that attracts significant attention in view of how often it features in different production and consumption chains. Recent data published by the International Energy Agency (IEA) show that China's consumption of oil has grown
The value of money can and does decrease when there is an upward revision of prices of most goods and services in a country. Generally, when a country's economy expands or when energy costs go up, goods ranging from clothing, food to computers, and services ranging from public transport to spa treatments get more expensive, thus eroding the value of money. The nice word for this erosion in value is, of course, inflation.
From 2001-2003, consumers were buying up SUVs . . . uh . . . ASAP. Demand was very high for those popular gas-guzzling vehicles and auto giant General Motors (GM) was racking up record sales. Investors noticed GM's success, and its stock surpassed 876 in 2001. However, the numbers (and the times) were catching up with GM. Their zero-interest financing program started to sputter. Debts and human resource liabilities (such as employee health & retirement commitments) started accelerating. Energy costs rose, making SUVs less attractive. The red flags came out. GM's 2004 year-end balance sheet showed debt of over 8451 billion while total shareholder equity was only 827.7 billion. GM's net income fell to just 1 percent of net sales, and its price-to-earnings (PE) ratio (see the Tooling around with ratios section, later in this chapter) ballooned to a lofty 39. The stock price hit 825 by April 2005. Although the price rebounded to the mid- 30s by July 2005, investors had skid marks on their...
One sure way to get tenants to conserve is to make them responsible for their utility usage. This approach can dramatically improve your NOI, and it's often a win win situation because many tenants make long-delayed energy-efficient changes to improve conservation practices. You can make these changes in a number of areas Electric usage Robert dramatically improved the NOI for one of his client's commercial office buildings by over 100,000 per year simply by installing separate electric meters and requiring the tenant to pay for its own electricity. The significant improvement in NOI occurred even after the tenant was given a reduction in the rental rate based on the utility company's estimate of a reasonable monthly expense for electricity for that suite. The tenant was a food broker and had 12 large, inefficient freezers that helped to generate a monthly electric bill of over 15,000 paid by the landlord. Surprise, surprise when the tenant began paying for its own electricity, it...
Utilities are primed to continue their long, if fitful, consolidation. The Energy Policy Act of 2005 repealed Depression-era limits on utility cross-ownership and will shrink the number of utilities from 100 to just 10 or 20 over the next decade, says Lowenstein. The big guns agree In May, Iowa's MidAmerican Energy Holdings Co., which is owned by Warren Buffett's Berkshire Hathaway, announced plans to buy PacifiCorp, an Oregon utility, for 9.4 billion. The need for almost half a trillion dollars' worth of energy grid upgrades laid bare for the world to see during the Northeast power blackout of 2003 underscores the importance of scale. A company such as Raleigh (N.C.)-based Progress Energy Inc., with a relatively digestible market capitalization of 11 billion, could soon end up in someone else's arms, says Lowenstein.
The U.S. economy is growing so are the economies of Europe, Asia, and the Middle East. That has meant bigger cars and homes in the U.S. and Europe and more motor scooters and cars in China and India, along with better-equipped houses that consume more heating oil and electricity, also generated by oil (and natural gas). From 1980 to 2001, U.S. oil consumption grew 20 percent, with large trucks accounting for two-thirds of that increase. During the same period, conservation and a decline in U.S. manufacturing have kept consumption under control in industrial, commercial, and residential electric-power generation. But even with conservation the Bush administration has estimated that a new power plant would have to be built every week in order to meet rising demand, estimated to increase 29 percent by 2020. After years of recession, the people of Japan, South Korea, and other Asian countries have been feeling more confident about their futures consumption there, too, has picked up. With...
HEATING OIL FUTURES (UPPER CHART) COMPARED TO A HEATING OIL CRB INDEX RATIO (BOTTOM CHART). HEATING OIL HAS BEEN THE WEAKEST OF THE ENERGY MARKETS DURING THE LAST 100 TRADING DAYS. IF THE ENERGY MARKETS BREAK DOWN, HEATING OIL MAY BE THE BEST SHORT-SELLING CANDIDATE BECAUSE OF ITS WEAK RELATIVE-STRENGTH RANKING.
Nearly all utility companies will help you discover ways to reduce your gas or electric bills. Some will even audit and inspect your property. Others will provide booklets or brochures and, perhaps, a customer service department to answer specialized questions. You can also find dozens of articles and books at your local library that discuss energy conservation.
With the development of financial futures over the past twenty years, futures traders can now participate in all financial sectors. Individual commodities, representing the oldest sector of the futures world, can be traded on various exchanges. Metals and energy markets are traded in New York, whereas most agricultural commodities are traded in Chicago. CRB Index futures provide a way to use a basket approach to the commodity markets.
The last time inflation was a major problem was the late 1970s and . . . you guessed it . . . the market was having a rough time. Interest rates soared to over 18 percent and it was economic headaches for everyone. Although inflation was generally tame during the '80s and '90s, it is showing renewed life during this decade due to a massive expansion of the money supply that started in earnest in 1995. I think that it is a minor scandal that the official inflation rate (Consumer Price Index or CPI) excludes food and energy costs. This significantly understates what our daily costs of living are. Without food and energy, the inflation rate recently hovered in the 2 1 2 to 3 percent range. Just think As long as you don't eat, turn on your lights, or drive, you're doing great If these costs were realistically included, the inflation rate would easily be two to three times higher.
The world's appetite for energy (oil, gas, and so on) has caused prices to hit record highs, and the coming years promise more demand. The energy markets have seen a sea of change that makes current conditions far more different and more serious than we've seen in recent decades. We have entered the age of Peak Oil (see more about this at www.peakoil.net), which means that cheap and readily available energy is a thing of the past. In August 2005, oil hit 67 per barrel as gasoline topped 3 per gallon in many spots across the country. All of a sudden, 100 oil and 7 gas doesn't seem so farfetched. Supply and demand is nowhere more evident than the world's energy market.
For the last two decades, unofficial U.S. energy policy has attempted to stabilize the Middle Eastern countries and to make sure oil continues to flow in the open market. More than one war has been fought in the Middle East to accomplish this goal. In terms of modern-day supply, however, oil has rarely been a scarce commodity. It simply and perversely, from a U.S. perspective, tends to be found in politically uncomfortable, remote, or naturally dangerous areas. OPEC, and most specifically Saudi Arabia, controls the world price of oil. Supplies are relatively secure and will be made available to the limit of productive capacity at prices determined by OPEC. Who will get the production is another and potentially more difficult problem as we look to the future.
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