Today we start a new series on NASCAR. But rather than focus on what a great sport it is, we’re going to focus on what a great business it is.

What does it take to run a NASCAR team? Who gets involved in this kind of business? How does it work?

All this week, we’ll discuss how a driver “gets a ride” and who the people are behind the scenes that makes this sport a great business.

My alma mater has announced the two finalists to be the next president.  And regardless of who is chosen, ACU can’t lose with either one.

Phil Shubert s executive vice president at ACU. He is responsible for the development and coordination of university-wide strategic planning; he oversees operational areas including ACU’s admissions and recruiting, marketing, university relations, finance, information services, facilities and human resources.

Rick Lytle is dean of ACU’s College of Business, a position he has held since 2000. He also serves as professor of marketing. He helped secure AACSB accreditation for COBA in 2004, then again in 2009.

I know both of these candidates.  And I know that these two outstanding men make for two outstanding candidates.  The real winner in all this is ACU.  In 2010, ACU will have a new president and a bright future.

This week the blog is focused on the rising cost of oil. What can explain this since peak drive season is gone, demand is down and inventories are up? In a word: speculation.

http://www.investmentu.com/IUEL/2009/October/oil-prices-heading-higher.html

As the article notes:

“With the perception that the U.S. economy is finally moving out of the doldrums, all the hedge fund and speculative money that has sat on the sidelines for months is finding a home in the oil market. Depending on which report you read, world demand for oil is expected to pick back up, and this is adding fuel to the fire.”

In other words, speculators are guessing that the economy is coming back and therefore are pushing prices up. That’s crazy. Why should we pay more at the pump just because some speculators think the economy may or may not be improving? Shouldn’t the price of gas be based on facts, not forecasts?

When it comes to oil, the facts often don’t matter.

Here is a hypothetical for you.  What would you say about the leader of an organization who had the following track record:

His organization hadn’t won a big award in years;

He consistently hired the wrong people who were unable to do the job right;

His competition consistently outperformed him in the marketplace;

He occasionally hired people with either criminal backgrounds or a history of causing problems with their coworkers;

And he spent an amount equal to the value of the entire company on a new corporate headquarters.

You would say that leader should be fired, right?  So would I.  Only the person I just described isn’t a hypothetical leader with a hypothetical organization.  It’s Jerry Jones of the Dallas Cowboys.  Did you realize:

His team hasn’t won a playoff game in 13 years?

He has presided over some of the worst drafts in franchise–if not league–history?

The Cowboys routinely lose games, especially toward the end of the season?

He has brought in low-lifes like Terrell Owens and Pac Man Jones?

And he just opened up a new stadium that is roughly equal to his entire franchise?

If this were any other business, Jones would be fired.  But since this is football and he owns the team, we’re stuck with a man who doesn’t know what he’s doing running the team.

It will be a long time before this team wins another Super Bowl.

Today we conclude our five-part series on cap-and-trade. And we do so by looking at the political gamesmanship that went into writing this bill.

Want to know how insincere the authors of this bill were? Insincere enough that they wrote in key exceptions, usually timed to coince with elections:

“Consider also that electoral politics are practically written into the bill. The first year of cap and trade would be the presidential election year of 2012, when emissions would be limited to 97 percent of 2005 levels. So, not overly draconian while Barack Obama faces re-election.

“Democrats have also actually scheduled emissions increases in 2014, just in time for mid-term elections, and in 2016. Clearly, they are trying to limit cap and trade’s effect on the next few elections.”

http://www.ajc.com/services/content/printedition/2009/07/02/wingfielded0702.html

My question is: if cap-and-trade is such a great answer to global warming, then why don’t these Washington lawmakers have the courage of their convictions and implement these regulations even during election cycles?

Of course, that question answers itself.

The sooner we get past cap-and-trade and get onto alternative energy like biomass, solar and wind, the better off we will all be.

This week we’ve focused on the cap-and-trade legislation that the Senate will soon take up in Washington. Until now, we’ve talked about the impact it will have on America. Today, I want to talk about the impact it will have on Texas:

http://www.azle-news.com/news/get-news.asp?id=9948&catid=5&cpg=get-news.asp

As Comptroller Susan Combs points out, Texas will be disproportionately impacted by this legislation.  Why?  Because we are an energy-producing state, for starters.  But more importantly, because our summers get hot.  You think your electricity bill is high this summer?  Just wait until this bill passes.

And Comptroller Combs is also right to point out that the solution to our problem is already being worked on right here in Texas:

“Texas also has enormous potential to develop solar, nuclear, biomass and other alternative sources of energy.”

Exactly.  Let’s not make people pay more for electricity; let’s find new ways to create more energy.

Mark Twain once joked that Wagner’s music was much better than it sounded.

Washington wants us to think the same thing about cap-and-trade. Even though it’s obviously going to mean higher costs for consumers, we’re supposed to believe it’s going to be better than that.

It’s not. And now, even Democrats are beginning to realize it:

http://www.marketwatch.com/story/cap-and-trade-faces-uphill-climb-in-senate

As the article notes, some Senate Democrats are already warning that the bill must be fixed. Here is how Senator Claire McCaskill tweeted about it:

“I hope we can fix cap and trade so it doesn’t unfairly punish businesses and families in coal dependent states like Missouri.”

But cap-and-trade can’t be fixed because it inevitably means raising prices for consumers. That’s how the whole thing works.

A better solution would be to invest in renewable energy. That’s a plan that doesn’t rob working people; in fact, it helps them and it helps the entire country.

How ironic that our government is considering cap-and-trade legislation at a time of economic difficulty. Yesterday, I wrote about the harm cap-and-trade could do to consumers through higher costs. Today, I want to talk about the harm it could do to our national economy by damaging our trade relationships with other countries.

Martin Feldstein was President Reagan’s Chairman of the Council of Economic Advisors. He also happens to believe that the scientific evidence suggests global warming is true. Yet he opposes cap-and-trade as the solution. Why? Because it will harm free trade. Here’s why. Different countries will issue different permits that cost different amounts. As a result, Feldstein warnes:

“A cap-and-trade system can cause serious risks to international trade. Even if every country has a cap-and-trade system and all aim at the same relative reduction in national CO2 emissions, the resulting permit prices will differ because of national differences in initial CO2 levels and in domestic production characteristics. Because the price of the CO2 permits in a country is reflected in the prices of its products, the cap-and-trade system affects its international competitiveness.”
http://www.business-standard.com/india/news/martin-feldstein-cap-and-trade-=-protectionism/362252/

So cap-and-trade is bad for consumers and bad for our national economy. Surely there is a better way to combat global warming and reduce our dependence on foreign oil. And there is: alternative energy.

Last Friday on a narrow vote, the US House of Representatives passed legislation to curb greenhouse-gas emissions. The bill, based on the cap-and-trade model, now goes to the Senate.

The bill is designed to reduce global warming; instead, it will likely increase your taxes:

http://online.wsj.com/article/SB123655590609066021.html

The idea is that the government would create a new commodity that is scarce: the right to emit carbon. Then, government would mandate that businesses buy this right. Businesses that need to emit carbon, like those in the energy sector, would likely purchase these permits…and then pass it off to you the customer in the form of higher energy bills.

As the Wall Street Journal article notes:

“The Congressional Budget Office…estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That’s about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).

Translation: your electricity bill is about to go up. And there will also be an impact on renewable energy, too. Currently, electricity that is produced from wind and solar is sold and purchased on the wholesale market along with other electricity produced from fossil fuels like crude, coal, natural gas, hydro and nuclear. Today all of these sources are priced competitively and renewables cost the same as coal. Renewable energy companies must charge the same rate as fossil fuel producers or today the customer will buy whatever is the lowest cost. Once the cap-and-trade starts renewables will be a very special and nitch market that will be in high demand from big power users. Now energy producers will be able to charge a high premium for their kwh production from renewable sources. That will likely enable the other energy companies to increase their market prices too, which will in turn hammer the small businesses and consumers.

Let me say again that I agree with the President that we need to reduce our oil consumption. But this is not the way to do it. Instead of penalizing all of us with higher energy bills, why not do more to encourage alternative energy, like biomass, solar and wind?

For two weeks now, I’ve warned that the economy is bad and will likely get worse.  But it’s not just me saying it.  So is the Oracle of Omaha, Warren Buffett:

http://www.bloomberg.com/apps/news?pid=20601039&sid=aUgpE2pRx5eU

According to this Bloomberg article:

“There’s evidence, though, that Buffett is awake to America’s problems. He says there will be no quick rebound in consumer spending, the economy has ‘fallen off a cliff,’ and we are now ‘fighting a war.’ Berkshire Hathaway Inc.’s real- estate arm just estimated that the backlog of unsold houses is double the official figures.”

So my advice to everyone reading this blog is: fasten your seatbelts.  We are not out of this rough stretch of road yet.

But there is also some good news: cash is again king.  So hold onto your cash; pay down your debt; and keep your eyes open.  In the next year or so there will be great deals.  Maybe it’s a new house; maybe it’s some land.  If you have the cash on hand, get ready to experience a buyer’s market.

And that buyer’s market will eventually, as always, bring the economy back.  So let’s keep a positive outlook as we endure today’s challenges and get ready for tomorrow’s opportunities. As Warren Buffett once said, “‘Buy American: I am.”

For two weeks now, I’ve warned that the economy is bad and will likely get worse.  But it’s not just me saying it.  So is the Oracle of Omaha, Warren Buffett:

http://www.bloomberg.com/apps/news?pid=20601039&sid=aUgpE2pRx5eU

According to this Bloomberg article:

“There’s evidence, though, that Buffett is awake to America’s problems. He says there will be no quick rebound in consumer spending, the economy has ‘fallen off a cliff,’ and we are now ‘fighting a war.’ Berkshire Hathaway Inc.’s real- estate arm just estimated that the backlog of unsold houses is double the official figures.”

So my advice to everyone reading this blog is: fasten your seatbelts.  We are not out of this rough stretch of road yet.

But there is also some good news: cash is again king.  So hold onto your cash; pay down your debt; and keep your eyes open.  In the next year or so there will be great deals.  Maybe it’s a new house; maybe it’s some land.  If you have the cash on hand, get ready to experience a buyer’s market.

And that buyer’s market will eventually, as always, bring the economy back.  So let’s keep a positive outlook as we endure today’s challenges and get ready for tomorrow’s opportunities. As Warren Buffett once said, “‘Buy American: I am.”

Today, our series on the economic challenge facing our country looks at the Fall of 2008. How did this perfect storm gather and then erupt?

As previously noted, the dramatic increase of gas prices in the summer put enormous pressure on family budgets all across the country. Folks with more mortages than they should have had began having trouble making payments. And that led to the housing crisis that had been building for some time.

Next came the banks. With so many people defaulting on their mortgages, banks began to struggle. And when banks struggled then the financial services industry began to struggle. It was a chain reaction that devastated our economy.

And what was the common thread among all these problems? Speculative buying. For example, people bought more home than they could afford because they speculated the values would rise and they would make the money up. But when the housing market crashed, the bubble burst and folks ended up losing their investment.

Tomorrow we’ll take a look how the Fall of 2008 might recreate itself again in the commercial real estate market.

Two days ago, we talked about the Bear Stearns collapse. Yesterday, we discussed the Bernie Madoff implosion. These may seem like two different financial scandals. But they were essentially both runs on the bank. And as such, two common threads tie them together.

First, any run on the bank begins with a deception. In some way, investors are conned into believing one thing about their money when another thing is the truth. In the case of Bear Stearns, it was deceiving investors about how much of their investments were exposed to the subprime market. In the case of Bernie Madoff, it was deceiving investors into thinking that the unreal returns they were seeing were real.

Second, any run on the bank ends with fear. When people are afraid, they are ready to storm into the bank and demand their money. And when that happens, it’s bad for everyone.

The good news is, it doesn’t have to be that way. With honest lending by financial institutions and calm thinking by investors, we can have a steady financial system. That’s why I support many of the new regulations put in place by the Federal Reserve to shine the light on the financial system.

Information is power. And sunlight is a great disinfectant. It’s too bad it took Bear Stearns and Bernie Madoff to remind us of this. But it’s a good lesson to learn.

Yesterday, we talked about the collapse of Bear Stearns and the impact it had on the economy in the Spring of 2008. But if Bear Stearns became the company most associated with the 2008 market meltdown, then Bernie Madoff was the person most associated with it.

Madoff had been one of the most respected investors on Wall Street. He had set up an investment fund called Ascot Partners. For years, the Ascot Partners fund provided outstanding returns for investors. But when the stock market collapsed in 2008, Madoff found himself in trouble. His investors came calling and wanted their money.

But there was a problem: the money wasn’t there. Almost from the start, the Ascot Partners fund had been a Ponzi scheme. Madoff would pay off investors with new money from new investors. No one really made any money off their investments other than Madoff who was laughing all the way to the bank. When Madoff’s house of cards collapsed and he was arrested, the market continued to tank. Thus, Madoff’s devious ways hurt not only himself and his investors but anyone connected to the stock market, which is to say everyone.

So what began in housing, then spread to major financial houses like Bear Stearns and later to rich and powerful investors like Bernie Madoff. By the end of 2008, the American economy was in a complete free fall…and it is only now beginning to stabilize itself.

In March of 2008, Bear Stearns looked to be on top of the world. For the first quarter, the legendary financial house was set to announce $115 million in profits. By the middle of the month, the company had collapsed. Eighty-five years of history vanished. And with it, the economic meltdown of 2008 began. The aftermath continues today.

What happened? It all begins at home. Or, in this case, it all began with housing. A few years before, Bear Stearns pioneered the securitization and asset-backed securities market. As investor losses grew in 2006 and 2007, Bear Stearns increased its exposure to mortgage-based assets, including many that would become central in the subprime mortgage crisis.

Subprime mortgages were loans given to folks with poor credit histories. In previous times, most of these folks would not have received a mortgage. But thanks to government pressure, financial institutions began offering subprime mortgages as a way to democratize the housing market. But when many of these new home owners had to default on their loan, the subprime mortgage crisis was underway. And since Bear Stearns had invested so much in the securitization of these loans, the entire company began a rapid descent into disaster in March 2008.

But Bear Stearns was just part of the problem. Check out the blog tomorrow for more information on how the 2008 economic crisis went from bad to worse.

Yesterday, I wrote about the news that oil had dropped a bit.  Today
comes news that OPEC will do everything it can to push it back up
again:

http://www.reuters.com/article/GlobalEnergy09/idUSTRE5513BW20090602

Since the 1973 Yom Kippur War, Arab states have used oil as a
geopolitcal weapon.  OPEC wants us to use its oil resources to make all
of us dependent.

As the article notes:

"'The price will go to $80-$90 maybe at the beginning of 2010,'"
OPEC's Abdullah al-Badri told the Reuters Global Energy Summit.

"'I don't think the price will go down... By the end of the year
we'll see $75. $80-$85 is possible -- not with the demand we see at
this time, but if demand picks up month after month, then maybe we'll
see this price.'"

I ask the question again: how long are we going to let groups like
OPEC have this kind of power over our energy policy?  It's time for a
change.  It's time for biomass.

The appropriately named Progress Energy announced plans to buy 50 megawatts of electricity from a biomass power plant:

http://www.newsobserver.com/business/story/1497196.html

According to the article:

“Progress will redistribute the electricity to its customers in the Carolinas. Using electricity generated by biomass will count toward meeting a 2007 state law to increase use of renewable energy resources. The plant would burn wood waste — limbs, stumps and tree tops — left over from logging operations.”

Think about this: this is leftover wood that would have to be burned anyway. So why not use it for energy? This is the magic of biomass. It uses renewable sources of energy, it does not negatively impact the environment and its homegrown right here in America.

Now that really is progress!

Happy Earth Day!

On this Earth Day there is an exciting new development in biomass. Lockheed Martin has opened its first biomass facility in Oregon:

http://www.pressconnects.com/article/20090421/BUSINESS/904210427

The article describes the process this way:

“Operating much like a pellet stove in someone’s home, but on a much larger scale, the roughly 11,000-square-foot biomass plant uses sawdust, wood chips and bark primarily from Wagner Lumber in Owego, but also Gutchess Lumber in Cortland and other lumber mills, to generate steam used to heat, cool and provide supplemental electricity year-round at the approximately 1.6 million-square-foot Lockheed plant.”

When a major defense contractor is using biomass for electricity at one of its plants, you know that biomass is here to stay. That’s why I’m so excited that my company, Advanced Trailer, is partnering with the University of Idaho. Our trailers are a perfect fit for drying the wood chips that fuel biomass.

To find out more about biomass and how our trailers are helping make a difference, stay turned for a new ebook that I will release in a few days.