Volt full of trouble

In a prior post, The Inconvenient Electric Car, I discuss the limitations battery powered electric cars face as the only replacement for gasoline and diesel powered vehicles. In a nutshell, electric cars lack range obtained from the battery charge and are not capable of moving heavy loads. This post is going to cover General Motor's Chevrolet Volt, a vehicle going into production this year.

First of all, I can remember the media touting the Volt as a revolutionary all electric car. It is not an electric car in the purist sense. The Nissan Leaf being released in December of 2010 is a true all electric car. The Volt really is a hybrid with plug-in capability similar to the Toyota Prius. Toyota began delivering a plug-in Prius version December 2009 according to Wikipedia. Once again, American car makers are behind the Japanese. This is nothing new.

Second, the main focus of this post is cost. Last week, Yahoo! reported that the Volt was going to be sold at a MSRP of $41,000. This is a typical price for a luxury American car. Compare this to the Leaf's $32,800 and the Prius' $22,400 sticker prices and one wonders, "Why would I buy a Volt?" I believe most people are going to answer this with a resounding "no".

The basic business lesson here is simple. If a product is to be successful, make the price competative and do not misrepresent the facts. It seems as if Chevy is intentionally making a product flop.

Paul the oracle octopus update

In my last blog posting, Paul the oracle octopus in western Germany was mentioned for accurately predicting 2010 World Cup soccer games. The post was before the tournament's final and semifinal games. Well, Paul proved his psychic prowess by accurately picking Spain as champion and Germany as 3rd place. Paul was 100 % accurate in German team World Cup predictions. This article gives further information that Paul is going to retire. No more Paul in the limelight. He is going back to entertaining children as a day job.

I am guessing what you are not seeing behind the scenes is Paul is really being squidnapped by powerful authorities during aquarium off hours to predict other big sporting events. They will then bet big in Las Vegas and make millions. This octopus is worth big money!! Well, there is my half-baked conspiracy theory. Please take it with a grain of salt.

It is time to go visit my folks in Washington State next week, so it will be a while before any more posts.

Octopus oracle

Usually, I post about science or other serious topics. Today concerns an octopus in Germany who had accurately picks soccer match winners up to this point. Paul, the psychic soccer octopus (picture above) lives in the Oberhausen Sea Life aquarium in the western German city of Oberhausen.

According to the Yahoo! article, the octopus has been accurate in picking winners of the FIFA 2010 World Cup tournament up to this point.

Paul correctly predicted Germany’s wins over Argentina, England, Australia and Ghana and the country’s loss to Spain and Serbia.

This mollusk had a small, cult following in the past beginning in 2008.

Paul first developed his abilities during the 2008 European Championship in which he predicted five out of six games involving Germany correctly. But while he had only a community of local fans two years ago, his World Cup prognostications have brought him international stardom.

It looks like the aquarium put 8 legged prediction maker on the spot by having Paul predict a German game. Not being human, Paul had a politically incorrect answer for a German defeat against Spain in the semifinals. The knives and grills came out after Paul's correct choice leading towards an international political incident.

Spain’s defeat of Germany in the semifinals as predicted by Paul prompted many Germans to wonder about how he would taste grilled for dinner. Spanish Prime Minister Jose Luis Rodriguez Zapatero fretted about the safety of “El Pulpo Paul,” as he’s known in Spain, and offered Paul protection.

“I am concerned about the octopus,” Zapatero said. “I’m thinking about sending in a team to protect the octopus because obviously it was very spectacular that he should get Spain’s victory right from there.”

In response to hundreds of angry e-mails from disappointed German football fans who sent in recipe suggestions for the 2 1/2 year-old floppy mollusk, the aquarium actually did take extra precautions, Porwoll said.

“I even told our guards and people at the entrance to keep a close look at possible for football fans coming after Paul for revenge,” Porwoll said. He added, however, that the number of love declarations the aquarium is receiving from Paul’s fans far outweighed the hate mail.

Paul most likely taught us a good lesson, people hear what they want to hear and not the truth. This even pertains to an oracle octopus.

If I could find a small aquarium creature with clairvoyant powers like Paul, Vegas watch out!

The stock market casino

One institution that has significant amounts of mythology and lore surrounding it operation is the US stock market. Wall Street has made many a man wealthy. These wealth generating stories are legends. What no one really talks about is about those who lose money and are often bankrupted by the same institution. In a prior post, Baseball cards as equities, I give a brief analogy describing stock trading as an ongoing auction. What is important is stocks have no value except what an individual is willing to pay and in the end, it is a zero-sum game.

As the market has been plunging over the last week and a half, it caught me by surprise on Tuesday with a sudden drop. That is the nature of the casino. I am guessing most stock owners are in a bloodbath at the moment. This gives me a chance to outline three kinds of investors on Wall Street.

Investor #1, The Insider
The insiders are professionals who either play stocks/bonds as a profession or are extremely wealthy individuals who have the inside track to corporate America. This group is the smallest consisting (guessing here) of at 0.1 % or 1 in 1000 investors. I guess they own 15-20 % of all stocks and bonds though. This group will always make money in the end because they have the knowledge and power to manipulate individual stocks. Insiders know when a big time news event is going to happen even before a public announcement. One fictional character who fits this category is Gordon Gecko in the 1987 movie Wall Street. The majority of all profits reside in this elite group. We define this group as those who know what is occurring.

Investor #2, Experienced, Successful Traders
This group of traders do not have the inside track as The Insiders do, but they have an idea of how Wall Street works. This group consists of smart hedge funds, individual traders and those at big bank trading groups. They consist of about 10 % of all investors. They probably have 15-20 % share in total assets. This group makes money most of the time. Since they lack advanced insider knowledge, they also lose on many trades. One subcategory of this group are high frequency traders (HFT). This subgroup uses high speed supercomputers to beat the market. What is even more interesting, HFT represent ~80 % of all trades made on the New York Stock Exchange. HFT are what control the majority of stock movement in modern stock exchanges. We define this group as those who know that they do know what is occurring.

The initial two groups outlined above are known as the smart money. They make money off of stocks and bonds. Who do they make money from? The following group, the dumb money.

Investor #3 Retail Investors and Inexperienced Traders
This group of traders represents the majority of investors. It includes all of those who put money into mutual funds, 401ks, IRAs, day traders (yes, day traders) and the majority of part time traders. This largest group of investors is fed the normal "fundamentals" and "over the long run stocks are the best investment" advice. Unfortunately, this is not the case because the stock market does crash. Crashes wipe out a significant amount invested in this group. As I previously stated, stocks are worth only what someone is willing to pay and they do not have an intrinsic value. The "fundamentals" advice is just smoke and mirrors to convince the average Joe to invest. Smart money knows these stock truths and avoid crashes. The lost dumb money proceeds ends up going to the smart money. We define this clueless group as those who don't know that they don't know.