Pentagon Loses Control of Bombs to China Metal Monopoly

By Peter Robison and Gopal Ratnam - Sep 29, 2010

A senior manager at a company that churns out metals routinely used in U.S. smart bombs pauses in mid-sentence when his phone rings: a Wall Street stockbroker looking for information. He makes a note to have an assistant call back -- someone who is fluent in English, not just Chinese.

“It’s a seller’s market now,” says Bai Baosheng, 43, puffing a cigarette in his office in Baotou, China, where his company sells bags of powder containing a metallic element known as neodymium, vital in tiny magnets that direct the fins of bombs dropped by U.S. Air Force jets in Afghanistan.

A generation after Chinese leader Deng Xiaoping made mastering neodymium and 16 other elements known as rare earths a priority, China dominates the market, with far-reaching effects ranging from global trade friction to U.S. job losses and threats to national security.

The U.S. handed its main economic rival power to dictate access to these building blocks of modern weapons by ceding control of prices and supply, according to dozens of interviews with industry executives, congressional leaders and policy experts. China in July reduced rare-earth export quotas for the rest of the year by 72 percent, sending prices up more than sixfold for some elements.

Military officials are only now conducting an inventory of where and how U.S. suppliers use the obscure but essential substances -- including those that silence the whoosh of Boeing Co. helicopter blades, direct Raytheon Co. missiles and target guns in General Dynamics Corp. tanks.

Warning Signs

“The Pentagon has been incredibly negligent,” said Peter Leitner, who was a senior strategic trade adviser at the Defense Department from 1986 to 2007. “There are plenty of early warning signs that China will use its leverage over these materials as a weapon.”

China may already be flexing its muscles amid a diplomatic spat with its East Asian neighbor Japan. China last week imposed a “de facto” ban on exports to Japan of the metals used in liquid crystal displays and laptop computers, Japanese Economy Minister Banri Kaieda said Sept. 28. That followed Japan’s detention of a Chinese fishing boat captain whose ship collided with two Japanese Coast Guard vessels. Japan later released the man.

No such ban exists, China’s Ministry of Commerce spokesman Chen Rongkai said.

New Factor

“What it does, clearly, is bring a new factor into the consideration of supply of critical materials,” said Dudley Kingsnorth, director of Industrial Minerals Co. of Australia, a forecaster in Perth.

The U.S. Congress’s investigative arm, the Government Accountability Office, in April warned of “vulnerabilities” for the military because of the lack of domestic rare-earth supplies. The House of Representatives Armed Services Committee will hold a hearing in October, the same month a Pentagon report on how to secure future supplies of the metals is due.

“The department has long recognized that rare-earth elements are important raw material inputs for many defense systems and that many companies in our base have expressed concern regarding the future availability of the refined products of these elements,” Brett Lambert, director of the Pentagon’s Office of Industrial Policy, said.

While two rare-earth projects are scheduled to ramp up production by the end of 2012 -- one owned by Molycorp Inc. in California and another by Lynas Corp. in Australia -- the GAO says it may take 15 years to rebuild a U.S. manufacturing supply chain. China makes virtually all the metals refined from rare earths, the agency says. The elements are also needed for hybrid-electric cars and wind turbines, one reason supply may fall short of demand in 2014 even with the new mines, according to Kingsnorth of Imcoa.

Doggy Day Care

Just how far U.S. manufacturing has waned is apparent at a factory in Valparaiso, Indiana, where dogs skitter across a bare concrete shop floor, their nails clicking. This brick plant on Elm Street once made 80 percent of the rare-earth magnets in laser-guided U.S. smart bombs, according to U.S. Senator Evan Bayh, a Democrat from Indiana. In 2003, the plant’s owner shifted work to China, costing 230 jobs.

Now the plant houses Coco’s Canine Cabana, a doggy day care the current tenants started to supplement sagging income from their machine shop. On most days dogs outnumber the 15 metalworkers, said Kathy DeFries, co-owner of Excel Machine Technologies Inc.

“When things got slow for manufacturing, we had this big empty shop floor,” said DeFries, nuzzling a floppy-eared puppy. “It’s a great stress reliever.”

Expensive to Mine

The rare earths are chemically similar elements, with names such as yttrium and dysprosium. China has the largest share of worldwide reserves, about 36 percent, and the U.S. is second, with 13 percent, the U.S. Geological Survey says. While the elements aren’t rare, they’re less frequently found in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements.

China produced 120,000 tons, or 97 percent, of the world’s 124,000-ton supply last year, according to the GAO. Half of that came from Baotou, said Kingsnorth. The raw elements have many applications. Neodymium is used by Chinese companies including magnet makers, who sell to U.S. suppliers of defense contractors.

Export Quotas

Export quotas and taxes for overseas buyers that the GAO says can reach 25 percent are pushing up prices of elements even in relatively large supply. For example, the cost of a kilogram of samarium powder, needed for the navigation system of General Dynamics’ M1A2 Abrams tank, jumped to $34 in early September, from $4.50 in June, according to U.K. researcher Metal Pages Ltd.

The U.S. and the European Union consider Chinese restrictions on a range of raw goods part of a strategy to draw in higher-paying manufacturing jobs by making them cheaper to buy inside China. The export taxes violate World Trade Organization rules because China pledged to limit them to 84 product categories when it joined the trade group in 2001, said Terence Stewart, managing partner of Washington law firm Stewart & Stewart. In 2010, China had taxes on 329, he said.

The U.S. and the EU filed a WTO complaint over raw materials including bauxite and coke last year. China’s commerce minister, Chen Deming, said Aug. 28 that the policies comply with WTO rules.

Some manufacturers in China are lobbying the ministry to back off the latest quotas because a dispute will disrupt the market, said Constantine Karayannopoulos, chief executive officer of Toronto-based Neo Material Technologies Inc., which has rare-earth production facilities in China.

Risk of Trade War

“It was very sudden and didn’t give the industry any time to adjust,” he said. “This quota action could risk a trade war.”

For Western companies, China’s policies are creating the real “unobtanium,” the fictional mineral fought over in James Cameron’s 2009 film “Avatar.”

It’s taking as long as 10 weeks to get neodymium magnets, double the previous wait time, said Joe Schrantz, group supply chain manager at Moog Inc. in East Aurora, New York. He said the company buys hundreds of thousands of magnets a year to make motors for cars, trucks and weapons including Raytheon’s AMRAAM -- or Advanced Medium-Range Air-to-Air Missile -- and Boeing’s Joint Direct Attack Munition, a tail fin kit for making precision-guided “smart” bombs out of ordinary weapons.

Rising Prices

Rising neodymium prices are forcing up the price of magnets, which typically cost between $2 and $30 apiece. That’s having a “significant” effect on profit, and suppliers say costs will keep going up, Schrantz said. The company is considering buying blocks of raw material and storing it.

“If everybody does that, then it’s going to get really crazy,” he said.

Neodymium, a silvery metal, is essential in a magnetic alloy developed separately by engineers at General Motors Co. in Detroit and Sumitomo Special Metals Co. in Japan in the 1980s. The magnets are now in millions of stereo speakers, computer disk drives and motors.

In missiles, they replace a hydraulic system of pumps and fluids that was costlier and heavier. Motors in weapons like the JDAM might be three times as big without advanced magnets, said Todd Brewster, senior design engineer at Kollmorgen, a unit of Washington-based Danaher Corp. The JDAM has been used extensively in Iraq and Afghanistan.

Hybrid-Electric Motors

A Chinese supplier makes neodymium magnets for hybrid- electric motors the Navy is developing to cut fuel use of Arleigh Burke-class destroyers, according to the GAO. The agency also says Lockheed Martin Corp.’s SPY-1 radar on Aegis destroyers contains samarium-cobalt magnets that will need to be replaced over 35 years. China is virtually the only supplier of yttrium needed for laser gun sights in the General Dynamics Abrams tank, the U.S. Geological Survey says.

“It’s amazing how this issue seems to have caught the country off guard,” said U.S. Representative Mike Coffman, a Colorado Republican who was a U.S. Marine Corps infantry officer. He noted that China’s capabilities have expanded significantly since 2001, when the U.S. Army canceled plans to buy Chinese-made berets under pressure from Congress. “How ironic is that we were concerned about berets?”

Jon Kasle, a spokesman for Raytheon of Waltham, Massachusetts, said his company hasn’t experienced supply shortages. Spokesmen for Bethesda, Maryland-based Lockheed Martin; General Dynamics, of Falls Church, Virginia; and Chicago-based Boeing declined to comment. “There is a particular need to focus on rare-earth minerals,” said Alexis Allen, spokeswoman for the Aerospace Industries Association, an Arlington, Virginia-based lobby group for defense contractors. “The Department of Defense should consider many alternatives to reliable access.”

Stockpile

One option is to stockpile the metals with allies. Since 1994 the Pentagon has sold off excess raw materials for $7 billion.

Another is subsidies of U.S. manufacturing. The U.S. House of Representatives approved yesterday a proposal by Representative Kathy Dahlkemper, a Pennsylvania Democrat, that would set up a research and development program at the Department of Energy to help U.S. rare-earth manufacturers such as Molycorp with measures including loan guarantees. To become law the bill, which cleared the House on a 325-98 vote, must have a matching Senate version and be signed by the president. Currently there is no such measure.

While Molycorp plans to mine almost 20,000 tons of rare earths annually by late 2012, it doesn’t yet have the capacity to refine the raw elements into metals.

‘No Substitute’

Complicating matters is that even the Pentagon has been unsure of its own needs. Stephen Luckowski, chief of materials manufacturing and prototype technology at the U.S. Army’s Picatinny Arsenal in New Jersey, told participants at a February conference in Cleveland that it took him a month to learn that rare-earth metals are in the nose of the Excalibur missile, and he still wasn’t certain of the exact supply route. Luckowski, a metallurgist, was sure the Army needed the rare earths. “That may be a case where you have no substitute,” he said.

China’s dominance in the materials comes as it scours the planet for resources to feed its economy, which is expanding more than 10 percent this year while the U.S. struggles with an almost 10 percent unemployment rate. The country has been snapping up oilfields, buying copper mines and investing in wind power. China is also expanding its military, developing an aircraft carrier, nuclear-powered submarines and ballistic missiles, the Pentagon said in an August report.

Deng’s Quotation

In the lobby of Bai’s company, a unit of state-owned Baotou Iron & Steel Group Co., a now-famous 1992 quotation by Deng is emblazoned in pink marble. It reads: “The Middle East has oil, and China has rare earths.” A May interview with Bai is regularly interrupted by calls from stockbrokers, analysts and fund managers looking to learn more about the company.

“Because export quotas are limited, we basically can choose our clients; we are no longer compelled to sell to just about anybody who comes knocking,” said Bai, who handles investor relations for Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. The shares have more than doubled in the past year, reaching 72.72 yuan on Sept. 29, giving the company a market value of $8.8 billion.

The company is especially proud of the samarium-cobalt magnets used in the Shenzhou 7 space capsule that lifted Chinese astronauts into space in 2008. They were developed at the nearby Baotou Research Institute of Rare Earths.

Environmental Costs

The export restrictions compensate for the heavy environmental toll, said Zhang Anwen, vice secretary of the Chinese Society of Rare Earths, a group of researchers in Beijing. “It’s unfair for the U.S. to be pointing fingers at China now,” he said. “To undo the damage done to the earth, we need to return the vegetation, increase water flow and treat the ground. It’s an extremely costly repair.”

Deng set China on its path with a 1986 initiative whose goals included acquisition of technology in “exotic materials” such as rare-earth metals, new energy compounds and high- capacity engineering plastics, according to a U.S. House of Representatives committee report.

That year Zhu Weiheng, an electrical engineer at the Chinese Academy of Sciences, wrote a report to Chinese officials suggesting they control exports of rare-earth minerals because of their high value in manufacturing. Zhu had studied at the Massachusetts Institute of Technology in Cambridge, Massachusetts, and in 1965 designed a motor for China’s first satellite, the East is Red. Later he spent part of Chinese leader Mao Zedong’s Cultural Revolution under arrest as a suspected spy.

‘Real Revolution’

By the early 1980s, Zhu was testing samples of neodymium iron boron, the alloy perfected by engineers at GM and Sumitomo. Two Chinese research institutes also developed it, said Zhu, 91. “It was a real revolution,” he said.

In 1990, Zhang Hong, the Chinese academy’s deputy director of technology, visited Magnequench, a GM unit in Indiana that used a spinning wheel to quench, or cool, the molten alloy into flakes to make magnets. Five years later, a group including then state-owned San Huan New Materials and Hightech Inc. agreed to buy Magnequench.

The Committee on Foreign Investment in the United States, a cross-agency board that reviews foreign takeover deals, allowed the purchase partly because the partners agreed to keep open facilities in the U.S.

Shipped to China

The company opened a new plant in Tianjin in 1998 and shut a former GM operation in Anderson, Indiana, four years later. Magnequench also purchased and later closed the factory in Valparaiso, where Kathy DeFries now boards dogs for $5 an hour. That plant’s tools were shipped to three San Huan operations in China, according to Shannon Song, a Beijing-based executive at Magnequench.

“What they were basically doing was replicating the production lines in China,” said Leitner, the former Pentagon official.

Indiana’s Bayh and Hillary Clinton, now U.S. secretary of state, both cited Magnequench as an example of the U.S. losing jobs and expertise to China. In the 1990s a dozen U.S.-based suppliers of magnets employed 6,000 people. Today there are four, employing 500, said Ed Richardson, vice president of Thomas & Skinner Inc. in Indianapolis, one of the survivors.

Business Decision

The plant closures were a business decision after the technology bust in 2000 hurt sales, Song said. Most of the Valparaiso factory’s business came from computer makers; defense was a minor share, she said. In 2001, labor costs in Anderson averaged $7.32 per kilogram of neodymium powder on top of $10.07 in direct production overhead, she estimates. In 2003 in Tianjin, labor costs were 16 cents and overhead $3.20.

“It was a question of letting the ship sink or doing something to cut the operating cost,” she said.

Toronto-based AMR Technologies Inc. bought Magnequench in 2005 and renamed the merged company Neo. The company’s shares rose to C$4.92 yesterday from as little as C$1.05 in early 2009.

San Huan, now known as Beijing Zhong Ke San Huan High-Tech Co., went public in 2000. Sales have risen more than fourfold, from 371 million yuan that year to 1.6 billion yuan in 2009. The stock has almost tripled in the past year, reaching 17.14 yuan on Sept. 29.

God and Magnets

“God created the universe from nothing and organized it with the help of a magnet,” the company declares on its website, in English and Chinese.

Shares of Aluminum Corp. of China Ltd. rose 18 percent over the past two days in Shanghai trading after its parent announced a plan to invest at least 10 billion yuan ($1.5 billion) to build a rare earth production base in Jiangxi province with a local partner.

A group of U.S. investors led by Denver-based private equity firm Resource Capital Funds wants to challenge China’s dominance by restoring the fortunes of Molycorp, the largest supplier of rare earths for much of the last century. Its mine, west of Las Vegas in California’s Mojave Desert, shut eight years ago, under pressure from Chinese competitors and regulatory scrutiny of wastewater spills.

Molycorp, based near Denver, says it needs $511 million to refurbish and expand. It raised $379 million in its July share sale, and has applied for a $280 million loan guarantee under a U.S. Department of Energy program for “innovative technologies.” The shares have almost doubled, closing at $26.73 yesterday from $14 in July.

Joshua Trees

Costs of environmental compliance will be steep, Molycorp warns in a filing that says it spent $3 million last year alone. Beyond a 300-foot-deep open pit, John Benfield, manager of quality assurance, points to a valley sheltering Joshua trees where slurry left after processing ore will be pumped and harden like concrete.

The trees, protected under California law, will be given new homes after their precise positions are measured with compasses. Their bark burns in the desert sun without the right orientation. Even so, only 20 percent of replanted trees survive, Benfield said.

The company will keep processing costs to $1.26 per pound, half the average in China, by recycling more water and using a single acid to separate elements, said Mark Smith, Molycorp’s CEO. Molycorp is also negotiating with potential partners to alloy metals and turn them into neodymium magnets in the U.S., creating as many as 900 jobs.

“It was a very, very strategic move that the Chinese made,” he said. “They created a very, very large number of jobs for the citizens of China. We ought to be looking at executing that exact same strategy here in this country.”

To contact the reporters on this story: Peter Robison in Seattle on robison@bloomberg.net Gopal Ratnam in Washington at gratnam1@bloomberg.net.

To contact the editor responsible for this story: Melissa Pozsgay in Paris at mpozsgay@bloomberg.net Gary Putka in Boston on gputka@bloomberg.net.

http://www.bloomberg.com/news/print/2010-09-29/pentagon-losing-control-of-afghanistan-bombs-to-china-s-neodymium-monopoly.html

Franken Fish

We Need More Research On Genetically Altered Salmon Says FDA Advisory Panel

A panel of experts that advises the US Food and Drug Administration (FDA) decided on Monday more research was needed before it could vote on whether to recommend approval to allow genetically modified salmon to be bred for human consumption in the US.

An analysis by FDA staff that was released prior to the meeting had concluded that the AquAdvantage salmon from AquaBounty Technologies of Waltham, Massachusetts, was as safe to eat as conventional Atlantic salmon and posed little risk to the environment, reports the Wall Street Journal.

However on reviewing the available evidence, the FDA's Veterinary Medicine Advisory Committee did not vote on the issue but instead offered a series of recommendations calling for more evidence, for instance on whether the genetically altered fish might provoke allergic reactions and other health problems in consumers, said a report in the Los Angeles Times.

If approved, the AquAdvantage salmon would be the first genetically altered food animal to be consumed in the US.

Panel member Dr James McKean, a veterinarian and professor at Iowa State University told the LA Times that there were "questions that have not been answered by the data that has been presented".

Other panel members were of the opinion there was essentially no difference between the genetically engineered salmon and the conventional type.

A professor and fish researcher at Washington State University, Dr Gary Thorgaard, told the paper that he would "not feel alarmed about eating this kind of fish".

The FDA has been considering the case of this particular salmon for over a decade: scientists starting producing the modified fish in the lab nearly 13 years ago.

According to AquaBounty, one of the advantages of the genetically engineered AquAdvantage salmon is that it grows twice as fast as conventional salmon, but is in other respects indistinguishable from Atlantic salmon: it just reaches the same size faster.

To make the genetically modified Atlantic salmon, they take the growth gene from the Pacific chinook salmon and insert it into the DNA of newly fertilized Atlantic salmon eggs. However, this of itself is not enough to keep the salmon growing all year round: to keep the growth gene permanently "switched on", the AquaBounty scientists also add a small piece of DNA from another fish called the ocean pout.

In the wild, Atlantic salmon differs from Pacific salmon in many ways, including appearance, habitat, and ability to survive in different environments.

One of the main differences between Atlantic salmon and Pacific salmon is that Atlantic salmon do not die after returning to spawn in the streams in which they hatch: they can go back to the sea. Mature Pacific salmon, however, generally die within a few days or weeks of spawning.

AquaBounty says its genetically modified Atlantic salmon, which would be bred exclusively on inland fish farms, is reproductively sterile (all the fish would be sterile females), which "eliminates the threat of interbreeding amongst themselves or with native populations, a major recent concern in dealing with fish escaping from salmon farms".

Curiously, the FDA's powers to regulate genetically modified animals for human consumption (under the provisions of the Federal Food, Drug, and Cosmetic Act, FFDCA) require them to consider the "new product" as if it is a drug. In this case, the "drug" is the piece of DNA that is added to the Atlantic fish eggs to change its characteristics.

Under the FFDCA provisions, the agency must assess the health of the affected animal, examine the characteristics of the food products derived from it (such as milk, cheese, meat), consider the risk of a toxic reaction to these products in humans, and also assess the impact on the environment.

To date, the FDA has approved one application related to a genetically engineered animal: this was for a genetically altered goat that produces a human pharmaceutical compound in its milk. The pharmaceutical, recombinant human antithrombin III, for use in individuals with clotting disorders, has also been approved in Europe.

The FDA has also given approval to many genetically modified plant products, including quinoa, soybeans, cotton, flax, corn, rapeseed (Canola), rice, potatoes, bananas, and squash.

The FDA panel meets again on Tuesday in open session and will consider comments from the public, for instance on what should appear on the consumer product label, if the salmon is approved.

Sources: FDA, AquaBounty Technologies, Sacramento Bee, LA Times, Wall Street Journal.

Written by: Catharine Paddock, PhD
Copyright: Medical News Today

Third Party Park Atlanta Handing Out Tickets Willy-Nilly

ATLANTA -- Some Atlanta residents said they are fuming after getting parking tickets in front of their own homes.The city-contracted private company, Park Atlanta, gave David Kwon and his wife a ticket for parking in the wrong direction along their quiet, residential street.People living all over the city are making similar complaints.“To get a ticket like that, it just kind of feels like a slap in the face honestly,” said David Kwon's wife.

Gold Hits Record High

NEW YORK (Dow Jones)--Investors propelled gold to record highs Tuesday as they continued buying the precious metal as a way to offset potential losses from a faltering global economic recovery and dollar.

The most actively traded gold contract, for December delivery, rose $24.60, or 2%, to a record settlement of $1,271.70 an ounce on the Comex division of the New York Mercantile Exchange. The intraday high was $1,276.50. Nearby but thinly traded September gold also settled at a record, $1,269.70, up $24.60, or 2%.

Gold--seen as a relatively safe place to park cash during times of economic uncertainty--took a bump higher after news of a sharp drop in a closely watched survey of expectations for Germany, Europe's largest economy.

"Safe-haven demand is continuing as there are increasing doubts about the robustness of the recent economic recovery and concerns that markets may be subject to further turmoil," said Mark O'Byrne, director of Dublin-based bullion dealer GoldCore.

The dollar--which sank to a 15-year low against the yen, dipped below parity versus the Swiss franc and fell to a series of one-month lows against the euro--also helped dollar-denominated gold, by making it less expensive for buyers using other currencies, boosting demand.

As the yellow metal moved higher, more and more traders began piling on.

"Do the fundamentals justify it? Probably not," said Craig Ross, vice president of Chicago-based brokerage ApexFutures.com. "It's going up more because people read about it going up last week. You can't stand in front of this freight train."

Gold is used to diversify investment portfolios because it isn't as closely linked to economic cycles as more-industrial materials like copper and oil, or equities that act as proxy for the economic outlook.

Just last week, gold posted a record settlement on fresh worries over Europe's banking sector. It then fell back as those concerns eased, but investors remained reluctant to sell the metal too aggressively.

Traders keep bidding the metal higher as interest rates remain at historically low levels, reducing the opportunity costs of holding gold, which pays no interest. Investors have been reluctant to move money back into real estate, and although equities are doing better, they remain wary because questions about the ability of some European nations to manage their debt loads persist.

"People aren't sure where to put their money," Ross said.

The Federal Reserve will probably keep its short-term interest rate close to zero at least through 2012 because of the protracted weakness in the U.S. economy, according to Goldman Sachs Group Inc. The Fed also could announce a new program of asset purchases to support a weak economy as early as November, Jan Hatzius, chief economist at the bank, said Tuesday.

In addition to the low interest rates, keeping easy monetary policy in place is generally considered supportive for gold as some see it weakening the dollar and potentially fostering inflation over the long term. However, such concerns have been floating around the market since the Fed engaged its response to the 2008 financial crisis, and prices overall haven't crept up.

"Market discussion ... of quantitative easing is supportive of gold," said Jim Steel, senior vice president and metals analyst with HSBC in New York.

Gold also has a backdrop of support from seasonal factors and on news that Russian production of the metal is on the decline, said Ira Epstein, director of the Ira Epstein division of the Linn Group in Chicago.

Russia produced 98.08 metric tons of gold in the first seven months of the year, or 3.15 million troy ounces, 3.6% less than in the corresponding period last year, according to figures released Tuesday by the gold producers' union. Gold mining in the period produced 83.892 tons, down 5.93% on the year.

September also often is a stronger month for gold as market participants return from summer holidays and festival- and wedding-related buying ramps up in India, the world's largest gold-jewelry market.

This year, however, that buying could be dented if gold's rally continues.

A move above $1,300 could push world jewelry demand in the fourth quarter down as much as one-fifth on the year, London-based metals consultancy GFMS Ltd. said Tuesday.

Gold demand in India, the world's largest consumer, has picked up due to festivals, but purchases are still below expectation as prices continue to rise, industry executives said Tuesday.

Other precious metals traded in New York also rose Tuesday. Comex December silver gained 1.4% to settle at $20.432, after extending its highest point since July 2008 to $20.550. Nymex October platinum rose 2.9% and hit its highest point since August 4. December palladium on the exchange added 4.5% and touched its strongest price since April.

San Francisco, San Bruno Gas Line Explosion

The level of degradation in America's aging infrastructure is appalling. This didn't have to happen.

In a frightening conflagration fueled by a broken 24-inch gas main, a massive fire in San Bruno on Thursday destroyed 53 homes in the hillside community, killed at least six people, critically injured two dozen and sent scores of residents fleeing as firefighters battled the ferocious blaze.

Early this morning the fire chief said that at least six people have died and that authorities fear the death toll may rise as more homes are searched, according to according to ABC7-TV..

Motorists from nearby Interstate 280 and eyewitnesses described the towering flames reaching as high as 60 feet into the air more than an hour after the huge fireball ignited with a sudden explosion in the packed residential community,

*Refresh page to view map.

a few miles from the San Francisco International Airport.

Yasmine Kury, who lives in an apartment complex near the fire's origin, saw black smoke drift over Interstate 280, after a thunderous explosion rocked the Crestmoor community in the area of Skyline Boulevard and Sneath Lane about 6:15 p.m.

"We heard it and felt it, and everyone ran out of the building," Kury said. "It was just a huge explosion."

The noise was so deafening that residents at first thought a plane had crashed, but Pacific Gas & Electric officials said one of its natural gas pipelines had erupted, fueling the flames that quickly began devouring homes and forced a wide-scale evacuation. PG&E, however, said the cause of the blaze had yet to be

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determined.

About 200 firefighters from across the Bay Area rushed to help control the huge fire that had already damaged 120 homes. As of 11 p.m. Thursday, fires continued to burn, turning the neighborhood into an apocalyptic scene. Only half of the fire had been contained.

Two brothers, Bob and Ed Pellegrini, live near the house at the center of the explosion, reported to have occurred at Claremont and Glenview drives. As the ground shook violently, they thought an earthquake had rattled the Bay Area. Then they saw the flames outside their window.

"It looked like hell on earth. I have never seen a ball of fire that huge," Bob Pellegrini said.

It was too hot to escape out the front door, so the brothers ran out the back and up the hill, the fire chasing them. It felt like a blowtorch on the back of their necks, they said. Then they saw that their house and four cars were destroyed in the fire.

"The house is gone," Ed said. "I have nothing. Everything is gone. We're homeless."

As helicopters dropped water and fire retardant on the leaping flames, San Mateo County opened emergency centers and a shelter at the San Bruno Recreation Center while activating a reverse 911 message system to alert

residents. Many of the injured victims were taken to San Francisco and Daly City hospitals.

Fire officials confirmed one fatality, but there were late reports of two others dead. City officials declared the city a disaster area, as it seeks state and federal resources.

The California Public Utilities Commission, meanwhile, is investigating the cause of the explosion and fire, working with local officials and federal agencies as well as PG&E. Some residents in the neighborhood reported "a really strong smell of gas" last week, with PG&E responding at the time.

At Bayhill Shopping Center, residents huddled together in shock and tears as they watched the terrifying scene unfold on television.

Patty Blick, who lives on Claremont Drive, was driving home from work when she was suddenly met with flames and heat. "My house is gone. I'm just not really here right now," she said, sniffling. "I just don't want to leave even though I know nothing is there. I keep thinking I will find something."

John McGlothlin, who lives on the same street, was at home when the explosion happened.

"To me, it felt like an earthquake. Hearing rumbling, movement, stuff like that," said McGlothlin, who was buying a sweatshirt and other essentials at the shopping center where police initially directed many of the displaced residents.

In the San Bruno neighborhood where the explosion rattled the largely residential community, emergency vehicles blanketed the

area.

Marilyn Siacotos, a neighbor who lives at the intersection of Fairmont Drive and Concord Way, drove by and picked up a family of four who lost their cat in the fire.

Siacotos, 76, escaped through the back door because the flames were licking down the front of her street.

"I didn't look back," she said. "I just got out before anybody (emergency responders) came."

Siacotos, and the family members, who did not want their names used, said the explosion originated at a home in the immediate vicinity of Fairmont Drive, a one-block road enclosed on both sides by Claremont Drive.

None of them had any time to grab any belongings before fleeing the scene.

Many described a chaotic scene, with residents scrambling for their lives, some suffering burns and cuts as they escaped the intense, radiating heat.

Retired San Bruno Fire Battalion Chief Bob Hensel, who also had to evacuate, said it was the biggest fire he had seen in decades. When he left the house, with his two cats left behind, he saw his wife's car bumpers melt from the heat.

"I heard a big whooshing sound and there was a boom. Stuff started hitting the house and then it got yellow outside and then real warm," Hensel said.

Though Thursday's explosion may have resulted from a possible ruptured natural gas main, it brought reminders of a similar incident in the Bay Area.

In November 2004, a fuel pipeline killed five construction workers in Walnut Creek -- the deadliest gasoline pipeline explosion since one that killed six people in Texas in 1983.

"What makes this fire so devastating and so difficult is essentially it creates the equivalent of an eight-alarm fire in the heart of a residential neighborhood," retired Contra Costa Fire Battalion Chief Dave George said. "It behaves differently than most other fires because it grows in all directions at the same time. Whatever it wants to do, it does."

George said the heat of the fire would be upward of 1,200 degrees, which could create radiant heat hot enough to burn a couch inside a brick home through the window.

"This is really a worst-case scenario," he said. "The closest thing to something like this is when a wildland fire hits a residential neighborhood."

Atlanta commercial real estate , a dead standstill

Small Smyrna office example of Atlanta's new real estate reality

By Rachel Tobin

The Atlanta Journal-Constitution

8:19 a.m. Wednesday, September 8, 2010

One small office building was completed in metro Atlanta in the second quarter of this year.

And it wasn’t even a whole office building.

At 6,000 square feet, the project is a graphic illustration of the fierce slowdown in office construction wrought by the Great Recession in Atlanta. A market accustomed to adding hundreds of buildings with millions of square feet in recent years has declined to a single tiny outpost in Smyrna.

There, on South Atlanta Road, is Atlanta’s newest construction.

“I had no idea,” said T.R. “Ted” Benning III, when informed that the new training facility and gym for his construction company headquarters formed the lone newcomer from March to June this year, according to real estate services firm CoStar Group.

A year ago, it was a different a story. Seventeen buildings totaling 932,883 square feet -- nearly the equivalent of a 55-story tower downtown -- were completed in metro Atlanta in the second quarter of 2009. And just over ten years ago? A whole skyline emerged from the ground. In all of 1999, construction was completed on 258 buildings totaling 11.2 million square feet, according to CoStar.

By comparison, Benning’s 6,000 square foot addition is less than half the size of a typical Walgreens.

Clark Gore, market director for real estate services firm Jones Lang LaSalle in Atlanta, said it’s definitely a sign of the times.

“It’s no surprise that nobody has started a building that would be [completed] in the middle of this transition from recession to recovery,” Gore said.

“The gestation period for an office building is a long one. Design, permitting and construction can take 24 to 48 months depending on how big the building is."

Most of what was completed recently was conceptualized when the market was booming, he said.

Now it's even harder to start a new office building from the ground up, as vacancy rates are at historic highs, landlords of existing buildings are competing fiercely for tenants, and most banks are saying "no way" to approving new loans on office towers. At one point, metro Atlanta had a 12-year supply of office space.

Significant new towers completed in the last year include 12th & Midtown on Peachtree Street, 271 17th Street in Atlantic Station, and Terminus 200 and Phipps Tower in Buckhead. All have nearly 500,000 square feet or more. Still, all has not been smooth sailing: The developer of Phipps Tower filed for bankruptcy and Cousins Properties took a $38.9 million write-down on the value of Terminus 200.

Construction was completed on those buildings as the “market was cratering,” Gore added, leaving historic office vacancy rates in some parts of Atlanta.

As for Benning, he knows first hand about the vagaries of the real estate market.

The Great Recession hit the construction industry fairly hard, including his third-generation, family-owned firm that went from 150 employees to just under 100. His new office space gave his workers something to do as his own business mix changed.

Benning Construction, in business for nearly 60 years, made its reputation building Publix stores and movie theaters.

“That was nearly 80 percent of my business,” Benning said.

Today, it amounts to only a third. Another third is restoration and renovation projects, and the final third is government and medical office projects.

“When we started to see the market turn – and we saw the cracks of the housing bubble around 2006 -- we said we need to get ready to do this other sector of work. And we’re thankful to have it,” he said.

Benning believes the economy is recovering, however. His bullishness on his company’s future is why he built the new training facility that can fit 140 employees and an employee gym where a personal trainer comes every Monday.

He also made the addition “green,” as the new space is LEED certified. He wouldn’t discuss how much he spent on the additional space.

The 6,000 square foot addition brings his total office space to 16,000 square feet.

Still, there is a bit of irony to his story: The addition actually added empty office space to the northwest submarket, which had 16.8 percent vacancy rate at the end of the second quarter, according to CoStar.

Benning can’t use all the space, which is why he retained a broker at Ackerman & Co. to lease 2,000 square feet for $14 per square foot.

Benning said his his firm eventually will “absorb” all the space, once business is back to normal.

To be sure, the 2,000 square feet added to the market is barely a blip on the market.

“It’s a nonevent,” said Gore, “compared to what we’ve delivered in Atlanta over the last 18 months.”

Metrowide, Atlanta’s vacancy rate is 17.3 percent, CoStar said, though other firms report the vacancy rate above 20 percent.

The trend of completed office buildings will continue downward as construction starts continue to slide in metro Atlanta.

At the end of the second quarter, 258,971 square feet of office space was under construction, according to CoStar, compared to 3.28 million square feet that was started in the third quarter of 2007. Three hundred office buildings with nearly 6 million square feet were completed in 2007, according to CoStar.

Charting the change

Completed office space by number of buildings, square footage and vacancy rate in metro Atlanta

2010-Q2: 1/6,000 sf/17.3 percent

2010-Q1: 10/1.7 million sf/17.4 percent

2009-Q4: 5/112,106 sf/16.7 percent

2009-Q3: 22/1.4 million sf/16.4 percent

2009-Q2: 17/932,883 sf/15.7 percent

2009-Q1: 34/411,028 sf/14.9 percent

Is it still on with you, me and Arielle? 8:15 at the Starbucks by the Perimeter Pointe movie theatre is what I remember us planningJ

Thanks,

Catherine

Catherine Langell

Marketing Associate, Communications

Cushman & Wakefield, Inc.

55 Ivan Allen Jr. Boulevard, Suite 700

Atlanta, GA 30308

Direct: 404-853-5217 | mobile: 678-640-6383

E-mail: catherine.langell@cushwake.com

www.cushmanwakefield.com

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San Franciso Gas Lines Explodes

An explosion tore through the San Francisco suburb of San Bruno Thursday evening, igniting a fire that engulfed homes in flame and seriously injured at least five people.

The explosion was caused by a high-pressure gas line operated by PG&E Corp., the utility that serves the Bay Area, news stations reported. A PG&E spokesman said the cause wasn’t yet known.

A plane and a helicopter dropped retardant in an effort to contain the fire, and more planes were being dispatched by state emergency officials. Residents evacuated from nearby neighborhoods and gathered at a shopping center where authorities set up a relief unit.

“We have crews on the scene and are working with emergency officials to determine what the cause is,” Andrew Souvall, PG&E spokesman, said on KTVU-TV Channel 2 in San Francisco. “It is unknown at this point what the actual cause is. Our effort now is to make the area safe.”

About two-dozen homes appeared to be engulfed in flames as of 12:30 a.m. eastern time, and the northbound lane of Highway 280 through Silicon Valley was closed, news stations reported. The suburb of San Bruno is near San Francisco International Airport.

Fire trucks gathered on the perimeter of the fire zone, and firefighters went house to house dousing engulfed structures with water.

Critical Condition

Three victims were taken to Seton Medical Center in Daly City. One was transferred to St. Francis hospital burn center in San Francisco with severe burns, Elizabeth Nickels, spokeswoman for Seton hospital said. The two others that were treated have been released.

Two people with burns are in critical condition at San Francisco General Hospital, spokeswoman Rachael Kagan said in a telephone interview.

Saint Francis Memorial Hospital is treating three fire victims, according to Theresa Edison, a spokeswoman for the hospital. Two are in a critical condition and one is stable, Edison said.

Mills Peninsula Medical Center in Burlingame received 16 patients, all with minor injuries, said Jane Schulze, a spokeswoman for the hospital.

“The major fire in San Bruno, apparently caused by a ruptured gas main, is not having any direct impact on operations at San Francisco International Airport,” said SFO spokesman Michael McCarron, in an e-mail. All airport traffic is arriving and departing normally, he said.

The FAA has dedicated a controller in the airport’s air traffic control tower to handle aircraft involved with aerial firefighting and rescue operations.

The San Francisco Fire Department Airport Division at SFO dispatched three units to the scene as part of a county-wide mutual aid request, McCarron said.

Views from an options Trader

Inompetent, But Curious

After being hazed all day and into most evenings by my firm’s Options Specialists for about six months, I was given a seat on the trading floor. It is from that point on that I began the conversion from business school idealist to incompetent cynic. In fact, well before I officially became a trader, I witnessed “broad daylight” collusion every day. The myths of the “fair and orderly market” and the “competitive open outcry system” were dispelled almost immediately as soon as I had learned enough as a trainee to be able to slow down the frenetic action to a pace that was comprehensible. What do I mean? Why is this important? Well, in theory, the traders of options on a given stock are supposed to be competitors that do not cooperate with other members to set market prices on which the public will execute trades. The reality is that the main trader, typically the specialist, makes the bid-ask spread market and the majority of the time the entire trading crowd simply states their level of commitment to the market that he has made. Here is the problem, OUR watch-dog, the SEC, rarely if ever has done anything about this clear violation of the law. Many techniques and devices are employed to encourage market makers to play ball. Any time spent on some of the options floors over the years would have revealed this to the SEC. This means… they know it and they just do not care. They have always known it. This may not be a revelation here in 2010 with Rick’s “crowd” being a rather enlightened one, but 20 years ago this matter-of-fact flouting of the law initially stunned this “Econ/Finance” dual-major as these business practices were conspicuously absent from the textbooks. What does this prove? It proves what many of you — but until recently not nearly enough people — believed: The government is entirely about strategic, selective prosecution. Shocked, right? The government and the markets are corrupt! I am sure that many of you are floored! Hold on though, I am “going somewhere” with this as it is stated.

As you have probably already guessed, this “welcome to the real world of our markets” experience put me on a path that would shatter nearly all of my idealistic beliefs about a country with systems that I was raised to revere. Just in case you weren’t sure how corrupt things actually are within our markets, it’s my hope that any faith that you may have reserved is fully gone by now because if it can happen in plain view amongst competitors then much more can clearly occur behind closed doors. Let’s get back to that “assume that others know what you know” concept and in doing so, we’ll leap ahead in time by about five years.

Beneath the Surface

As the years in the options markets and on the floors and desks began to add up, less and less of the reality being presented to me actually made any sense to me at all. For the first five or so years of my career, the Internet wasn’t there to reference at all. The next few years brought some maturation to the Internet but the information available from it wasn’t nearly as raw and diverse as it is for us today. This made for tedious times when I would search for hours nearly every weeknight in an ongoing effort to learn more of the truth that I believed was out there somewhere. I gradually stopped feeling as though the marketplace was littered with cheaters and manipulators, as it always had been, and began to feel as though there was much more at work beneath the surface.

Yes, you are on to me again, I sensed the dreaded “conspiracy.” “Conspiracy theorist” isn’t the kind of description that most people would seek to invite upon themselves, but labels never really bothered me. I raise this because I want to encourage folks to stay on the path they are on in seeking the truth, despite the fact that I do not hold the answers, as I believe that the trends and developments that we’ve had to contend with over the past 20 years cannot be purely coincidental. These persistent and evolving feelings continued to develop and eventually led me to think of things within a simplistic biological construct in an attempt to draw the best analogy that I could. This was somewhat ironic because biology could very well be my area of greatest ignorance and not for a lack of competition. Fortunately, after searching for commentary that contained the analogies I was drawing, and before I was forced to relearn all the “stuff” from high school bio that I’d forgotten, a much more intelligent and well informed commentator brought forth the best description that I have found to describe what has and is happening to Uncle Sam and by extension his subjects. Her name is Catherine Austin Fitts, and although it remains impossible for me to verify her claims and research, her “take” on things seems the most plausible to me of all that I’ve researched and considered. Her profile has risen dramatically since I first encountered some of her work about 12 years ago but, in the case that readers haven’t come across her work, I encourage them to stop by her site even just to briefly peruse her writings. Her “type” of information (things like $2.3 TRILLION missing from our Federal Government) is what I was referring to when I noted how traders assume that other traders possess the same information. I hope that she will not mind me sharing this from her Solari website, as it is the basis for the operating thesis that I’ve co-opted ever since then:

Tapeworm Economy

In a tapeworm economy a small group of insiders centralize political and economic power at the expense of people, living things and the environment, in a manner that destroys real wealth. A tapeworm economy is one in which it is considered acceptable to make money from our popsicle index (Ed.- established societal standards) going down. In investment terms, it is an economy with a negative return on investment. It is parasitic in nature.

The way an actual tapeworm operates is to inject its host with a chemical that makes the host crave what is good for the tapeworm and bad for the host. So the Tapeworm Economy is adept at using media and education and numerous financial incentives to get us acting against our own strategic interests and instead supporting and depending on the Tapeworm.

The symptoms of the Tapeworm are many – narcotics trafficking that targets our children, runaway exploitive and predatory corporate practices such as the patenting of life, terminator seed and the destruction of our topsoil and food supply, fraudulent inducement of debt to homeowners, students and consumers, suppression of knowledge and renewable energy technology, criminal mismanagement of government credit and resources, black budget operations and the manipulation of currency, financial and precious metal prices and markets. These practices introduce organized crime throughout all aspects of our lives… these transactions drain our families and neighborhoods on a daily basis – much like a tapeworm drains its host.

A Revelation from Ms. Fitts

Again, this may not seem entirely like a revelation to many of you now, but as noted, I was by good fortune able to stumble upon Ms. Fitts’ commentary and website back in the late 1990s, if memory serves. Hers along with the commentary of assorted others gave me the confidence I needed to leave the legacy thought-paradigms that I’d been indoctrinated in as are most American kids. The more I thought about things from this newly confident perspective the more the cognitive dissonance receded from my mind. In an effort to bring a little more tangibility, I’ll over-simplify an example by using the dominant thought of the late 90’s era:

The market did nothing until the Republicans surged in the 1994 elections. Wall Street is supposedly tight with them so they must not like Clinton and thus his administration must not like Wall Street. So even though almost all of these earnings and economic reports seem entirely too perfect vs. expectations, Clinton’s SEC et al. wouldn’t let “Wall Street Fat Cats” and Evil Corporatists slide if they could nail them.

Hopefully you now have a sense of how much clearer things became for me when I felt confident enough to abandon the conventional consensus and traditional schools of thought regarding the current set of underlying problems. A technique that has always worked well for me is the old “step back and see the big picture,” especially when things seem either too perfect or incongruent. Detaching and deconstructing, drawing analogies and then putting them into perspective against what I’m seeing or sensing has normally helped to keep me slightly ahead of the consensus in the markets. This is important because as an options market maker you need to not only be concerned with the now but possibly two years out and beyond as you are making markets on options that can repeatedly affect your risk profile for those durations. The liquidity in long-term outer-month options is not nearly as reliable as the front months so you had better be pretty sure of yourself when you pull a two-year trigger. I did not find this to be simple task because there is not much time left for esoteric research after you have been focused on managing risks to yield profits in highly-bubbletized markets for most of the day.

The Payoff…

I do apologize for feeling it necessary to work some of my personal background into this piece, but now that I have, we can finally get to the payoff I’ve been driving towards. Much of what you’re about to read may no longer carry the shock value that it once did, but that’s always the case from what I’ve observed. Over 90 percent of our peers will always seem to treat the minority opinion with nothing less than disdain, only to claim in retrospect that “…well, everyone knew that. That’s no surprise.” Yes, they are pretty quick to price it into their working model when the rest of the majority has finally acknowledged that the unlikely has become the actual.

It’s been about 20 years since the “PAX Americana” and “peace dividend” discussions began to pollute the mainstream dialogue. So what happened? How is it that the USA now finds itself at the mercy of the central planners in communist China? Wait, hasn’t the MSM repeatedly told us that we weren’t in asset-price bubbles and that true prosperity was constantly being created as a result of these series of non-bubbles? What happened here in a “nutshell”?

Here is my brief “nutshell.” The last 20 years of faux “prosperity” are primarily the result of absurdly misguided credit expansion and various forms of hyper-manipulation (accounting fraud, falsified statistics and reports, ) engineered by various organizations and entities of various sizes, some of which work in concert. As for “backup” on my claims, I’d cite many of the same items that several other Rick’s Picks commentators have in their comments and possibly a few of my own: John Williams (Shadow Stats) on Statistical Fraud; John Hussman on pervasive Accounting Fraud; FASB Accounting Standards Degradation; Revelation of the True Value of and subsequent Humiliation of the Ratings Agencies; FED Serial Bubble Fomentation / Deformation of the natural Business Cycle; 20 years of housing appreciation and related activity condensed into roughly 5 years; various episodes such as Dell computer’s adding an estimated $1.8 billion over two years to the bottom line as the result of writing put options against their own share price while Michael Dell waxed on with boundless optimism; not having to account for employee stock options for years; Seagate’s filling warehouses with hard drives and counting them in “Sales” to “beat the number”; Henry Blodget-esque IPO-related fraud; the effective “Enronization” of corporations; Wall Street and our government at every level. Etcetera.

Web of Collusion

In 2010, most of the items listed above have been acknowledged, but I can tell you that arguing about these items and issues in real-time was not a pleasant experience, as the key information was not easily referenced. Most of the contra-side arguments focused on how “complex” a web of collusion would have been needed to pull off such thorough deception. The problem with this position for me has always been that the key vulnerability of the system is too easily overlooked. I’m referring to what is now popularly identified as the mainstream media (MSM). My perspective is that “if you have the MSM, you have all you need”. It shocks me still that most of the professional traders that I know still take their news from these propaganda outlets. The unfortunately reality for me though is that it all flows from there.

Another argument that I’ve heard quite a bit over the years is that the “profit motive” would serve to incentivize an MSM member or organization to report reality. I’m both surprised and unsurprised at times when I find myself listening to this argument for what seems like the thousandth time. Let’s just step back for a moment and consider things another way. The first rule of investing is preservation of capital, at least in theory. That being the case, why is it that the MSM (the people’s watchdog) has never exposed the widespread fraud that has underpinned all of these bubble-driven markets over the past 20 years? Why is it that they treated non-believers with scorn on the rare occasions when they actually permitted them to appear on air? Why didn’t they learn from the first bubble and become more skeptical in their treatment? Where were the investigative pieces, the exposés, that only seem to be broadcast-worthy after the inevitable pop has occurred?

USA Rapidly Deteriorating

Sticking with the step-back-perspective theme with an eye towards wrapping things up, let’s consider how dire things are at present. I hate to add even more length to this piece but it is clear from just a few headlines that the USA is in rapid deterioration mode, and not just fiscally/economically:

• A nearly perfectly divided electorate that’s addicted to the right/left paradigm
• Police are ignoring calls for certain serious crimes yet indoctrinated citizens are more fearful of firearms than of having to defend their families and homes against illegally armed thugs with no support from law enforcement
• Education here is largely a qualitative and fiscal farce
• In what could be described as an unimaginable achievement, popular culture now makes anything prior to the 70’s appear to have been a modern Renaissance period
• Our government is dedicated to Homeland Security at airports but our borders are porous. The MSM will never highlight this contradiction. Is it possible that “the war on drugs” only applies to those that aren’t with the company?
• Perpetual wars are by and large accepted when they are even thought of at all
• And of those plans to bring back those jobs that are never coming back and about revitalizing and retooling those manufacturing centers that will never hum again?
• Can we really Smartphone and service business our way out of the destructive vortex that we’ve allowed them to conjure at will with an end goal of debt enslavement?
• What I refer to as the “Manipulation Cartels” have amassed and consolidated power like never before
• The “button pushers” seem to want to implode the system but on their timeline and with some fragments of realism included to maintain “believability”

Now, does this seem like a country that should legitimately be on the verge of a genuine and powerful bull market leg towards new highs? I’m not sure about your life, but I’ve found it difficult to get my best-laid plans to work out even when I’ve done everything right consistently over a good period of time! Yet with our society crumbling into freefall before our eyes we’re told that the market is wildly undervalued. As I’ve noted in the forum, I do believe that the market can remain detached from realities for a good long time. New highs wouldn’t shock me at all because I’ve seen how powerful and resourceful the manipulation can be at times. What would still shock me is the number of people that wouldn’t question the legitimacy of such a scenario. By the way, are we sure that it is preferable that this dysfunctional prison-barge-of-a-society really is worth saving in its current form? Do you really have confidence that any of our real problems will be solved while working within this entirely gamed system?

Dystopia Is ‘In’

It is clear to see that the present and future are much bleaker for the people but that the elites have done a fine job to this point to preserve and expand their positions and thus have at least in relative terms set themselves up quite nicely for the next round of disparity expansion. The Bravo channel may not have officially pronounced it yet but Dystopia is “in” now and there’s a good chance that it will have more staying power than the leisure suit.

It is my belief that more Americans need to leave the type of thinking that they, like I, were raised to perform behind for their own survival. Because of what are generally described as libertarian beliefs and as I believe the quagmire to be hopelessly intractable, I strongly advocate peaceful secession from what is still referred to as the United States of America. It’s my wish that more folks would realize that we’re only united by the chains of debt enslavement and that it makes little practical sense to allow malicious statists on the other side of the continent to lord over the lives of our families and children. Ask yourself why the federal government should still enjoy our confidence? It, along with our representatives, has epically failed us in every conceivable way. It eludes me as to how folks can actually believe that it can all be attributed to political incompetence and chance. I would find it exceedingly difficult to calculate the odds of this rapid and complete collapse being pure in nature. I had planned to spin through the Carousel of Frauds, from NAFTA to the era of the PC to the era of the Internet; and with both productivity gains, to the commodities manipulation to the housing bubble and finally to the fact that it’s all been made to happen by the same cartels of legalized criminals, that despite it all, still control our lives to a large degree! But I’m literally 10x over my requested word limit already! [Perfectly all right, Will. I’d be eager to read this at book length. RA]

If You’re Unconvinced…

If you remain an unconvinced true believer in the American Way and believe that people like me have been taken in by the “conspiracy theory” cottage industry, all that I can respond with is, “You may be right”. It is impossible to know for certain what is referred to as the “absolute truth.” Nonetheless, I would ask that you only consider one more suggestion that I make here: Learn how to implement what is known by options investors as the “collar” strategy for your portfolio just in case your feelings change at some point in the near future.

Obviously, as a regular reader, I value Rick’s perspective, but I feel as though I differ with him rather significantly with regards to the levels and totality of manipulation of various forms that are at work not only in the markets but that has permeated nearly everything at this point in time.

Having spent nearly 20 years doing what I can to uncover the truth after continually witnessing the statistically improbable occur just on the heels of the highly unlikely, I’ll conclude with this: No matter how cynical one thinks he or she is, I’ll take the contra-side every time and bet that the overwhelming majority of investors are not nearly cynical enough in their analysis. My friends, these financial sociopaths and their sociopol lackeys play for keeps.

Transocean Slams BP’s “Self-Serving”

By Tiernan Ray

Transocean (RIG), owner of the Deepwater Horizon drill rig that exploded April 20th in the Gulf of Mexico, today slammed BP’s (BP) internal report on the matter, released this morning, that had accused Transocean of shared responsibility in the matter.

BP in its report accuses Transocean of ignoring negative pressure readings in the period leading up to the explosion, and argues that, “Transocean’s team failed to recognize and act on the build-up of hydrocarbons before they got into the riser,” among other things.

The Transocean response, emailed to me by the company a short while ago, is as follows:

This is a self-serving report that attempts to conceal the critical factor that set the stage for the Macondo incident: BP’s fatally flawed well design. In both its design and construction, BP made a series of cost-saving decisions that increased risk – in some cases, severely. Those decisions, made exclusively by BP, included:

• Using a long production string rather than a casing tie back, decreasing the number of barriers to gas flow.

• Neglecting to run a cement bond log (CBL) to test the integrity of the cement.

• Installing fewer than one third of the recommended number of centralizers, dramatically increasing the risk of cement channeling and gas flow.

• Failing to conduct a complete “bottoms up” circulation of the well to insure the quality of the cement seal.

• Not running a lockdown sleeve to secure the production string to the well head, eliminating yet another barrier to a blowout.

Transocean’s investigation is ongoing, and will be concluded when all of the evidence is in, including the critical information the company has requested of BP but has yet to receive.

Family health costs soar 14% in 2010

Parija Kavilanz, senior writer, On Thursday September 2, 2010, 1:17 pm EDT

American workers are taking yet another blow to their wallets this year -- a whopping 14% jump in costs to insure their families.

The spike comes even as premiums for family coverage rose only 3%. This discrepancy is a result of cost-conscious companies shifting more of the insurance burden onto employees.

Employees are paying about $4,000 to buy family insurance in 2010, $482 more than they did last year, the Kaiser Family Foundation said Thursday.

Companies still pay the bulk -- nearly $9,800 for a family of four -- but that was down a little from 2009.

The Kaiser survey was conducted between January and May 2010 and polled more than 3,000 employers nationwide.

Over the past five years, employees share of insurance premiums have risen 47%. That has outpaced a 27% jump in overall premiums and an 18% increase in wages, according to Kaiser.

Deborah Chollet, senior fellow and health economist with Washington-based Mathematica Policy Research, said the recession and a turbulent job market are key catalysts for rising insurance costs.

"Employers are struggling to keep their head above water. They're cutting costs just to maintain employment," Chollet said. "One way to do that is to make workers pay more."

In a strong job market a higher turnover rate actually helps companies contain increases in insurance costs, without having to increase workers' share of the expenses.

"New workers spend some time getting acclimated to their new jobs. They may not use their health benefits for a while," said Tracy Watts, senior health care consultant with leading benefits consulting firm Mercer.

In a down economy, the turnover rate is lower and existing employees tend to use their benefits more.

Another factor pushing up insurance costs is a trend whereby young employed adults forgo buying coverage as a way to save money, until they absolutely have to, she said.

This is a big risk for companies, because it can suddenly inflate their health care costs if there's an unexpected rise in the number of sick people buying insurance.

Health reform, Chollet said, may not offset all of the costs but it can help stabilize the overall market.

"The hope is that with reform, there's an increase in the number of insured people and this will help drive down the big increase," she said.

But others aren't so sure. They say employees could see even higher costs in their plans come open enrollment for 2011.

"Next year, the increases could be even bigger," said Gary Claxton, vice president with the Kaiser Family foundation. "We've heard stories about insurers asking for bigger employee contributions for next year's coverage."

Watts said she's not aware of any factor that could help drive down costs in the near term.

"Health reform mandates new levels of coverage that will increase employers' costs at least until 2014.," she said

For example, beginning next year, employers will have to provide coverage for dependents of employees till age 26.

Deadly Year for Oil and Gas

HOUSTON (Reuters) - Energy production and distribution in the United States can be a dangerous pursuit, in spite of strict safety regulations for oil, gas and coal producers and processors.

Following is a look at energy-related disasters that have rocked the United States in the course of 2010, including the deadly and environmentally destructive oil spill at BP's Macondo prospect in the Gulf of Mexico, which began in April.

Sept 2 - An offshore production rig operated by Mariner Energy in the Gulf of Mexico had a fire, forcing the immediate evacuation of 13 personnel and a major rescue response -- currently in progress -- from the U.S. Coast Guard, which said it identified an oil sheen at the site. The company had recently been producing around 1,400 barrels of crude and 9.2 million cubic feet per day of natural gas at the site.

July 26 - The Enbridge 6B crude pipeline, capacity 190,000 barrels per day, ruptured in Michigan and spilled more than 19,000 barrels into local waterways in one of the largest U.S. pipeline disasters ever. The pipeline remains closed and has affected some refinery operations across the U.S. Midwest.

June 7 - A natural gas pipeline explosion on a line owned by Enterprise Product Partners in North Texas killed one person. The 36-inch (91-cm) pipeline exploded 15 miles south of Godley, Texas. An electrical crew was digging a hole when it struck the gas pipeline. Enterprise violated several state regulations including adequately marking the path of the pipeline, according to the Texas Railroad Commission.

June 7 - An explosion and resulting fireball burned seven members of a crew drilling for natural gas at an abandoned coal mine in West Virginia, the second big fire at an energy project in the region in less than a week.

June 4 - Workers capped a natural gas well in central Pennsylvania after it ruptured during drilling, spewing gas and drilling fluid 75 feet in the air. The well, operated by EOG Resources Inc blew out when a drilling team was preparing to extract gas. No one was killed or injured, but officials later ordered the company to halt natural gas drilling in the state.

April 20 - Explosion and fire on Transocean Ltd's drilling rig Deepwater Horizon licensed to BP; 11 workers were killed on the rig stationed in deep waters south of Louisiana. The runaway oil well spilled up to 4.9 million barrels before it could be capped in mid-July, according to government estimates, making it the worst offshore oil spill in history.

April 5 - An explosion at the Upper Big Branch coal mine in Montcoal, West Virginia, killed 29 miners in the deadliest U.S. mining disaster since 1972. The mine owned by Massey Energy has had a worse-than-average injury rate over the last 10 years, with three fatalities since 1998.

April 2 - Four workers died in a blaze at Tesoro Corp's refinery in Anacortes, Washington, in the worst U.S. refining disaster since 2005. The fire resulted from equipment failure in a highly flammable unit producing naphtha at the plant.

March 2 - A fire on an asphalt tank under construction killed two workers at Holly Corp's Navajo refinery in Artesia, New Mexico.