Monday, August 18, 2008


To insure a win, McCain needs to pick up an extra rust belt state. He needs to win Michigan or Pennsylvania. For this reason, he has spent a lot of time making campaign stops with Tom Ridge and Mitt Romney.

Tom was born and raised in the heart of steel town (Pittsburgh) while Romney's father was an auto executive and governor of Michigan. Tom has a lengthy resume which includes service in Vietnam, in congress, as Governor of PA and, as Director of Homeland Security. He is pro-choice and a close friend of McCain.

A large number of Christian Conservatives once said they would not vote for McCain under any circumstances, even though he has always been pro life and he has always defined marriage as a union between a man and a women. Faced with the threat of an Obama Presidency, most Christian Conservatives have begrudgingly accepted McCain. Should McCain chose a pro-choice running mate, would McCain lose in the most conservative states? Certainly not. Does Tom have the experience to be a good President? Yes. As vice-president he would support McCain's policies. Now-a-days, even Obama says he is against partial birth abortions. The status quo is not about to change, the US policy is to discourage abortions while avoiding the problem of making women and doctors criminals.

PA would be a huge pickup. The state carries 21 electoral votes. Kerry beat Bush in PA; 51% to 49%! Current polls show it is in play, at 46 to 41. Obama is holding slight leads in MN and IN which carry 10 and 11 electoral votes. McCain has a slight lead in Ohio which carries 20 votes. Romney might help McCain pick up Michigan, with 17 votes. Both Romney and Ridge would help McCain through out the rust belt and either would give counter balance to the possible selection of Bayh of Indiana. Normally, republicans can count on the 11 votes from Indiana. This time could be different.


Democrats are very tired of hearing the chant of Drill, Drill, Drill. The congressional ban on offshore drilling is separate and apart from drilling in ANWAR but the ban on off shore drilling does affect several parts of the Alaskan coast.

The estimated reserves in ANWR of 10 billion barrels of recoverable oil were established when oil traded at $40 per barrel. The actual reserves are probably much higher. Recoverable reserves automatically go up as the price of oil goes up because oil companies can afford to use expensive techniques to increase the percentage of the oil recovered. On average, only one third of the oil is recovered. Scientist believe they will develop the means to extract the other two thirds. The bottom line is that there is plenty of carbon reserves provided our congress will stop trying to force corn oil and wind mills down out tail pipes.

In the case of ANWR, using the old $40 number, production could easily reach one million barrels per day or $36 billion dollars worth per year (at $100 per barrel). ANWR also holds natural gas, 150 trillion cubic meters. All these resources are available from land described by a French explorer as "The land God gave to Cain". The caribou will mate even if a small portion of this wasteland is temporarily occupied by drilling rigs.

The left insists that it would take 10 or 20 years to actually produce oil but Brazil will start limited production only 2 years after starting offshore exploration. The only reason it takes so long in the USA is the regulatory road blocks promoted by the corn oil crowd. Billions of taxes paid by Exxon have been used to subsidize wind mills and ethanol. Neither work. After years of subsidy, windmills produce .77% of our electricity.


If your friends are democrats they are most likely unhappy because of the war in Iraq, because peak oil is going to lead to $200 per barrel oil or because global warming is going to flood the earth. If your friends are republican, they are unhappy because of the predicted win by the tax and spend democrats.

It is hard to be happy in the face of the steady reminder of high gasoline prices, the repetition of bombs blowing up daily and stock prices that are down the tube. The decline in stock prices has certainly not been limited to airlines. In one year, medical practitioners are down 63%, savings and loans are down 51% and mortgage investments are down 61%; enough to make a grown man cry.

However, just like in 1982, small stocks have started moving up even while gloom is in the air. Even broad indexes such as the NASDAQ composite is showing strength. This index is down 5% for the year, which is certainly not in the Bear Market category. If you have not done so already, it time to switch your 401-K accounts to small, US stocks.


The XAU gold and silver index was at 205 a month ago. It has fallen 33% in one month! The turn is real.

For 18 months or so, I kept saying, it is gonna happen. I lost credibility when I kept saying it would but it didn't. Now it has actually happened when my readers are tired of hearing about it. The turn is a big deal. Millions will be made by aggressive investors. Your friends who bought a beach house in 2005 are very unhappy, the value might be half of what they paid; but the few who will buy one now will be very happy in a few years. Falling gold prices, indicate falling inflation rates, which indicates lower mortgage rates and higher home prices.

The decline in oil prices is just getting started. Even though China's growth is likely to average 10% for the next decade, their oil consumption growth will not. Central planners have gotten the message. They have slapped a 40% sales tax on any car sold with an engine as big as 4 liters. Cars with 3 to 4 liter engines are taxed at 25%. The tiniest of cars, those with engines smaller than 1 liter, are taxed at 1%. The central goal is to reduce consumption by 20%. To support this goal, gas and diesel fuel subsidies are no longer available.

For good measure, the Chinese have 75 Gigawatts of nuclear electricity on order. A gigawatt is 1,000 megawatts which is 1,000 kilowatts which is 1,000 watts; or, a gigawatt is 1 billion watts. But, a watt is a measure of energy per second. Multiply 75 billion watts per second times the number of seconds in a 24 hour a day-year (31.5 million seconds) to get the amount of nuclear energy China has on order! (2.3 billion billion watts or 2.3 x 10^18 watts).

Assembly lines are being built to reduce construction of nuclear power plants to two years. I repeat these facts because marginal cost of electricity is projected to be down to the equivalent of gasoline at 88 cents per gallon in three to five years!

Can you imagine the "Joy in Mudville" when gasoline gets down to 88 cents per gallon? (Even if it takes 15 years to get there?) Can you imagine how many jobs the Chinese will create relative to the USA if the US continues to subsidize wind mills while the Chinese build 75 Gigawatts of nuclear power? Can you imagine the American landscape if we built 75 Gigawatts of windmill power? Can you imagine the anxiousness of left leaning voters who realize they are pushing for Boone Pickens to receive hundreds of millions of dollars of government subsidies?

McCain's advertisements show pictures of windmills while the voice-over is about clean alternative energy. Still, McCain is a strong supporter of nuclear energy. The McCain skeptics say his ads are designed to mislead. The writings of Obama explain the McCain ads. "I think that oftentimes the ordinary citizens are taught that decisions are made based on the public interest or grand principles, when, in fact, what really moves things is money and votes and power."

McCain recognizes that the people want lower energy prices. He will push for open markets so that the most economical sources rise to the top. McCain is not against ethanol but he voted against ethanol subsidies. He is not against big oil but he voted against oil company subsides. He is not against wind but he voted against wind power subsides. Our government needs to get out of the business of choosing the winners and losers. Low prices are the result of free markets.

Our government policy has been to hold back nuclear and drilling. The unintended consequence has been the burning of trillions of tons of dirty coal. Hundreds of thousands, if not millions of people have died because we have allowed the government to choose.

The madness is not over but it is wanning. Sixty one percent of Americans want the congress to come back for a special session to vote on drilling. Lower oil prices are going to slam Iran hard. Between now and year end, I predict a deal with Iran which will lead to even lower oil prices. Between now and the election, I predict more than one vote in congress that will result in more drilling or more nuclear power.

My guess is that Tom Ridge will be the vice-presidential nominee. His resume is impressive. A successful conclusion to negotiations with Iraq, Iran and Russia will make Condi Rice an American hero. The failure of negotiations will emphasis the need for a strong Commander in Chief. If one were hiring a Commander in Chief and reviewing the resumes of McCain, Ridge and Obama, the choice would be clear. The first to be offered the job would be McCain, the second would be Ridge. Hillary and many other democrats would beat out Obama for the job.