House Fix It Blog

( There’s a New Kid in Town)

Fuel cells. Well over a century old, fuel cells have been an intriguing scientific anomaly to turn chemicals into electricity without combustion. In the past, the problem with fuel cells was the small amount of electricity generated for the size of the cell, the use of expensive platinum as a catalyst, and the reliance on hydrogen gas to react with oxygen in the air. And until fairly recently fossil fuels have been abundant and cheap, so the economic incentives to produce commercially viable fuel cells were not there. True, there are some busses in European cities that are powered by hydrogen fuel cells, but these are very expensive government subsidized vehicles.

Now all the problems that previously challenged commercial fuel cells appear to have changed. A startup company in Silicon Valley California has patented a new generation fuel cell that uses sand to create the wafer sandwich, surrounded by an anode and cathode, and either natural gas or methane from the local landfill to initiate the chemical reaction. The company, Bloom Energy, www.bloomenergy.com has taken their product past the test tube stage and has built working prototypes. Bloom Boxes, as they are dubbed, are now powering buildings at Wal Mart, EBay, Federal Express, Staples, Bank of America and Google. One box (about the size of a large refrigerator carton) generates about 100 kw, enough to power an average office building or 100 homes. Capital costs are recaptured in about seven years.

While fuel cells and solar energy share the common feature that they are both self-contained and hence do not require a transmission grid, there are many advantages of fuel cells over solar. Solar requires more space. Solar panels are generally placed on south or west facing roof surfaces, and due to space limitations, the typical solar installation provides about 25% to 30% of a homes’ electrical demand. A commercial building or an apartment, which have a higher ratio of occupied space to roof area, can only generate using solar a much smaller fraction of electrical demand. And of course, the sun has to be shining to produce solar electricity, so nights and cloudy days make the user dependent upon the conventional power grid. Fuel cells operate 24/7, and can supply 100% of a home’s electrical needs. True, the Bloom Energy fuel cells require either ethanol, natural gas or landfill methane to operate, but here is an ample supply of these alternatives in the USA and Canada.

K.R. Shridhar, the CEO of Bloom Energy, envisions a future where houses and commercial buildings have their own power supply in the back yard or campus. Centralized distribution of electrical power will become a thing of the past. It’s like having your own well for water.

As the old saying goes “perception is reality”. When it comes to the perception of money or perceived wealth, this old saying couldn’t be more appropriate. Even if you are jobless or homeless, or both, your “perception” of money has likely undergone a change over the past two years. The urge to spend is gone, and the urge to save is here. We know that buying goods and services is beneficial to our society, but we just can’t take that leap of faith right now.

To better understand our relationship to money, consider a dollar that is obtained in one of five ways, and how we value that dollar. Ranking the following five categories from most important in perceived value to least important, consider:
Wage Earnings. This dollar was earned by your sweat, your labor, and you know what you will have to go through to get more dollars by this method. This dollar is perceived as most valuable.
Investment Income. Although you didn’t earn it, you nevertheless made a wise decision some time ago to obtain this dollar. You congratulate yourself and look for similar opportunities.
Inheritance. Now we’re beginning to straddle the fence between perpetuating the family legacy versus “found money”. In a few cases the inheritor will use the new capital base successfully to build greater wealth. However, in most cases the inheritor was not part of the wealth generating process and the estate proceeds will eventually be squandered on bad investments, and material goods. Such actions have given rise to the expression, “How to make a small fortune? Answer: start with a large one”.
Ill-Gotten Gains. To acquire money through dishonest or criminal activity is not a strategy for wealth building, but rather it is a thrill seeking behavior pattern to see if “I can get away with it”. It would be the exceptional embezzler who wants to enhance his 401-K with his bounty. Laundering money is always a challenge for the most successful crooks. This dollar wasn’t earned, it wasn’t investment income and it wasn’t inherited; consequently, it is not very high in perceived value. It is reminiscent of a Woody Allen movie with dollar bills flying out of the back of the convertible.
TARP Funds. A TARP dollar is everybody’s dollar, but yet it is nobody’s dollar. When you own the printing press, as most central governments do, printing money is the sovereign right of the nation. A little ink, some paper, and how many trillion would you like today? The gold standard has been gone for nearly 80 years, so there is nothing backing up this endless supply of paper. This dollar is considered least valuable, because it is so easy to make another one.

“Civilization ends at the Hudson River”

Notwithstanding the recent notoriety US Airways Captain Schullenberger gave the Hudson River, there is an old saying in Manhattan that “Civilization ends at the east bank of the Hudson River.” Those who espouse this belief add to its arrogance by stating that the Mayor of New York City holds the second most powerful job in the world. So that leaves the rest of us somewhere between Hee Haw and a Saturday night tractor pull.

Enter Wall Street and real estate. For the past 25 years the investment banking community has been trying to treat real estate like a stock or bond. As you know, stocks and bonds represent a “claim” upon the assets of public corporations, and most of these assets are goodwill. In the United States today, with some exceptions such as REIT’s, human capital produces earnings rather than earnings produced from traditional brick and mortar assets. But real estate is “dirt” and as Will Rogers said years ago “Buy land, they ain’t makin’ any more of it.” The loans against real estate are mortgages or trust deeds, and the security for these instruments is the land and improvements on it.

Contrary to what the media has told us over the past 12 months, there has not been a real estate collapse; the land is still there and the improvements are still there. What collapsed was the “House of Cards” created by Wall Street to expand the CDO (Collateralized Debt Obligations) market to an unrealistic level. Derivatives and fractionalized mortgage bundles do not provide any security to the holder as many hedge funds and pension plans have discovered. As a nation, we are paying the price for straying from the basic tenets of making real estate loans.

If Wall Street is the epicenter of world finance, it follows that it is also the epicenter of world confidence. Despite a change of administration in Washington, the folks in the Hinterland have lost their confidence, they are scared, and scared people don’t borrow money or make purchases. Yes, the confidence will return, but not at the same rate that it was lost. “Once burned, twice shy”.

The Era of “Greenwashing” has Begun

As a nation we are becoming more aware of the importance of saving the planet earth. In the course of this paradigm shift, economic opportunities are created, and the “Green” movement is no exception. Green products are typically viewed as an upgrade, like organic food, and hence there is a surcharge connected to them.

Greenwashing is the term given to claims made by manufacturers that their products are environmentally friendly, all natural, non-toxic, and helpful to reduce global warming. Greenwashing is designed to appeal to the “feel good” side of the consumer’s conscience. Green products can range from cleaning supplies to computers, to cars, offices, and houses-a very broad spectrum. With each product claiming to be green, by what standards are they judged? After all, if 100% natural products are “green”, then arsenic, radon, lead and asbestos would be green since all these substances occur in nature and are not man made.

Apart from the Federal Trade Commission (FTC) which has published environmental marketing guidelines on product claims made by manufacturers for the past 16 years, there are other organizations that rate various products according to established environmental standards. The most recognized one is the federal government’s Energy Star Program which covers not only appliances, but just about any device that consumes electricity. Other organizations include: EcoLogo for many household products, Green Seal also household products, EPEAT which covers computers and peripherals, Forest Stewardship Council which certifies wood and paper that come from renewable non-old growth forests, U.S. Green Building Council and Build It Green . These latter two organizations certify buildings as they are being built to give them a green rating according to each organization’s point-by-point checklist.

For a newly constructed residence to achieve an independently recognized green rating, considerable effort must be undertaken by the builder. Under the broad goal of trying to get to zero energy consumed by the house, specific items such as super insulation packages, air-tightness of ducts, photovoltaic collectors and tankless water heaters are considered. Even the percentage of construction waste that is recycled is a factor. Because a point system is used, not all green rated houses will have the same energy saving components.

At this time, a few municipalities have adopted mandatory green building standards as part of the building permit process. Where there is no government mandate, builders are free to follow any green program they like, or follow none. To stay competitive and say they are building a green home, several builders are creating their own green building standards. Since the homes will not be built according to a recognized green building program, the issue of greenwashing comes front and center. Without exhaustive studies or research performed by utility companies, it will be extremely difficult for a builder to approximate to a buyer how much energy their home will save compared to a home without the green features. Predictably, the sales brochure is likely to list the energy saving and green features, and the consumer will have to decide whether this house is greener than the one on the other side of the fence.

Regardless of your favorite media, internet, television, or print, you can’t get by without a daily bombardment of negative news. At the present it’s all about worldwide terrorism or the next sector of the economy that is predicted to fail. Most experts who have been around for 40 years or more as adults, confess they haven’t seen any scenario quite like this one.

However, before you throw in the towel and assume the situation is hopeless, consider:
* At an unemployment rate of 8% (predicted to occur in 2009), 92 % of the people still have jobs;
* The steep decline of the stock market has presented buying opportunities that haven’t existed since the dot.com bust seven years ago, and finally;
* General Motors is not going to go out of business. They may seek a Chapter 11 reorganization, there will still be a model 2010 and 2011 Chevrolet rolling off the assembly line.

What’s this have to do with a cheap 2008 Holiday Season? Much of our wealth is in our heads, not in our wallets. If we think we’re well off we’ll behave differently than if we think we’re hurting. Part of the doom and gloom cast upon us was that Black Friday was going to be a retailer’s disaster. Yet, when the dust settled, overall sales were up 3% over 2007. While one day doesn’t make an entire Holiday Season, consumers are acting in a more responsible way this year, but they’re not staying home. The use of plastic is down and that’s good. A large percentage of consumers are still paying off their balances from Christmas 2007. Many shoppers are actually going to their bank first and withdrawing cash to stay within a budget. That’s also good. A debt riddled nation is an enslaved nation. So while the 2008 Holiday Season is likely to be less in total sales than 2007; consumers will still consume, albeit more moderately, and there will be a whole new school of surviving retailers who have taken a chapter from the Book of Wal Mart.

To assist you with a Cheap 2008 Holiday, we are offering free shipping and handling on any book purchase made before December 31, 2008. This is a minimum saving of $4.95 or possibly more depending upon your purchase amount. You’ll need to order through our website: www.HouseFixIt.com. Have a happy and cheap holiday!

In the throes of an election year, the recent financial collapses in late September and October add additional and unforeseen challenges to the new Washington administration in January. When the year began, the election rhetoric was all about the Iraq war. You hear a lot of talk about Wall Street vs. Main Street, and the change in terminology from “bailout” to “rescue”. The fact is, we’re all in this together, including economies of countries that only recently became interdependent on us and us on them, such as Russia and India.

According to a recent CNN poll, nearly 60% of Americans believe our country is headed for another depression like the 1930’s. Despite the pessimism, a 1930’s type depression is not likely to happen. Here’s why:

1. Bank deposits are insured now up to $250K and in some cases $500K. In the 1930’s there was no insurance for deposits;

2. The foreclosures that were expected to occur in 2009 will be greatly diminished due to forced workouts that lenders will have to apply. We will see interest rate reductions, and even principal reductions. Lenders are finally coming to their senses that helping a homeowner stay in his house makes better economic sense than to take the house back and be forced by the federal banking authorities to sell the property at a loss;

3. Credit markets will loosen up and banks will start to loan to one another again. However consumer credit is likely to remain tough to obtain for the next 12 months;

4. Housing, the segment of the economy that started the downturn, will lead the recovery. The biggest problem that builders face today is the competition with foreclosed homes. Once the foreclosed housing stock is absorbed, building permits will be pulled, and the cycle of new home building will begin, albeit slowly.

However, the real recovery for the long term is to get our snouts out of the trough of foreign oil. Too much of our country’s wealth has already been transferred to the Middle East. Not only is oil harmful to the environment, it is a finite, non-renewable commodity whose price is likely only to go up in future years. Modes of transportation need to change. Unlike other means of automotive propulsion, the electric car offers great promise. The alternatives of hydrogen, fuel cells and liquefied natural gas all require a rebuilding of our infrastructure, but electrical outlets are everywhere. The internal combustion engine may still have applications in aircraft, rail and shipping, but for the rest of us, we’ll be supporting a new, non-polluting industry.

With the rates of foreclosures on homes at a record high, there are some good bargains to be obtained in nearly every region of the country. The subprime market, the collapse of some Wall Street institutions, and spiraling gas prices have created the “Perfect Storm” for declining home values. Auction service companies are bombarding us with attractive opening bids on hundreds of foreclosed homes. Where is the bottom of the market, and are we there? Before you make a firm decision to buy a foreclosed home, here are some tips to keep in mind:

Previously Occupied Home. This is a house that has either been occupied by an owner or a renter. The chances are that there has been no maintenance performed on the house for quite some time. There may be unrepaired water leaks in the roof, walls and basement. The furnace and air conditioner may not be working. You will need to look past the weeds in the yard and the peeling paint to find out the true condition of the house.

New Home. This is a house that a building contractor could not sell, and so it went back to the bank. Although it has not been previously occupied, it may not be complete, and all the utilities may not be connected. It is important that the house received a final inspection and certificate of occupancy from the local building department. You will need to have some handyman skills to complete the inevitable host of “punch list” items.

Home Inspectors. Before making any decision to buy a foreclosed home (or any home for that matter), have it inspected by a professional home inspector. He or she should be a member of either the American Society of Home Inspectors or the National Association of Home Inspectors. Some states require home inspectors to be licensed. The home inspector will check many items in the house that are not purely cosmetic, such as roof cover, evidence of leaks, furnace, chimney and flues, plumbing, electrical, and condition of the cladding and frame. They are not permitted to render opinions on pest control. If you, as a buyer, are represented by a real estate agent, it is not advisable to use the home inspector that the real estate agent recommends. Agents have been known to pressure home inspectors to “look the other way” if they want to get any of the agent’s future business. If the selling agent (whether it is an auction house or a brokerage company) will not permit a thorough home inspection, pass on the deal. Since these houses are sold “as is” (without any warranty), you could end up spending far more in hidden repairs than the discount you thought you were receiving.

Short Sales. A short sale is a home sale where the defaulting seller sells to a buyer for an amount less than the mortgage loan on the house. The idea is to avoid a formal foreclosure and preserve the seller’s credit. The catch is that the bank must be willing to accept less than what they are owed. Most banks don’t like to do this, and hence they only consider short sales on a case-by-case basis. This means that a buyer could enter into a purchase contract, pay appraisal fees, and become emotionally attached to the home only to find (usually 30 to 45 days later) that the bank will not accept a short sale. It is estimated that only one in twenty short sales is consummated nationally.