Inflation Is Broken - Mauldin Economics

Inflation Is Broken - Mauldin Economics

Inflation Is Broken

By John Mauldin | Mar 13, 2021

  

Housing vs. Shelter
Assumed Supply
Broken Inflation
Painful Solution
What Will Inflation Be?
What’s in Your Investment Kitchen?
Puerto Rico and the Future of Travel Plus SIC

I have been writing for many years that the US in particular and the Western “developed” world in general were approaching a time where none of our choices would be good.

We have arrived. Any choice the government and central banks of the US and the rest of the world make will ultimately lead to a crisis. Just as the choices that Greenspan and Bernanke made about monetary policy created the Great Recession, Yellen and Powell’s choices will eventually lead us to the next crisis and ultimately to what I call The Great Reset.

I believe we have passed the point of no return. Changing policy now would create a recession as big as Paul Volcker’s in the early ‘80s. There is simply no appetite for that. Further, the national debt and continued yearly deficits force monetary policy to stay accommodative.

Today we will look at these problems through the lens of inflation. In general, consumers agree inflation is undesirable. They don’t want the prices of things they buy to go up.

But let’s talk about academics and central bankers. A little inflation makes sense from their viewpoint. They want to always have room to cut interest rates, should the economy falter. They would prefer to avoid negative interest rates. They need “normal” interest rates a comfortable distance above zero. That’s hard to maintain unless the economy has some degree of inflation. So, they tolerate a little inflation and, when necessary, actually encourage it.

But this raises another question: How do central bankers, or anyone else, actually know how much inflation exists? They depend on data, and data can be twisted, misinterpreted, or just plain wrong. Sometimes all at once.

I touched on this problem last week in Everything Is Broken. So much of our broken economy is the result of broken monetary policy, resulting from broken data. This affects everything. If Federal Reserve officials think inflation is low when it’s actually high, or vice versa, they will set interest rates too high or low. Governments, businesses, and consumers will all make similarly bad decisions, all of which will eventually coalesce into a catastrophe like the Great Recession. And it will all trace back to a data problem.

Inflation is far from the only data problem but it is probably the most consequential. So today we’ll dive deeper into this subject. Our distorted inflation data has a lot to do with housing “prices.” I use quote marks there because price may not be the right word, as you will see.

Housing vs. Shelter

We have to start with a definitional issue. For most people, housing is a major expense, and often the single largest one. Hence it is rightly a big part of the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE).

The Federal Reserve favors the PCE measure, while for whatever reason, the business media seems to focus on CPI. Typically, the core CPI and PCE move more or less in tandem. But notice that both measures use housing as their biggest component. This table shows the weightings.

Source: Wikipedia

Notice that owner’s equivalent rent (OER) in the CPI is 23.4%, but total housing costs are weighted at 42.4%. The BLS tries to take into account how many people own their home, rent their home, and then what the other costs of housing are. Some people own their home outright and other people have large mortgages. As you will see, there is a lot of guesswork involved.

First, do you actually “consume” housing? In one sense, no. The house is still there after you sleep in it, just slightly used. You didn’t consume the house itself. You consumed the shelter it provided you for that particular night. I know, a subtle distinction. But it matters to academics and the way we measure housing/shelter inflation.

Shelter is a service; a house is a capital good. When you buy one you aren’t consuming; you are investing. Since 1981, the inflation benchmarks haven’t measured housing prices directly. They measure something called “Owner’s Equivalent Rent” (OER).

So where do the benchmarks get that OER number? They do a monthly phone survey. Respondents are asked if they own or rent their home. Renters state how much they pay. Easy enough. Homeowners are asked what they “would” charge someone else to live in their same home, if it were empty and unfurnished.

See a problem? This is completely subjective. Have you done the market research to see what you would charge to rent your home? Have you actually tried to rent it at that price? Probably not. So OER is uninformed guesswork from the start. Nonetheless, the survey responses go into a giant formula that looks like this…

Source: BLS

… from which they derive the monthly change in OER for a given area. The “sixth root” of this relative number is the one-month change in OER. Simple, unless you have a swimming pool or other complications, in which case they make adjustments.

I believe the wonks who calculate all this are smart, dedicated public servants. They want to get it right. They have unfortunately been given a difficult and maybe impossible task. Adjusted subjective opinions of how much rent a given residence in a given place would fetch in a given month are a huge part of our inflation measures.

As an aside, the BLS typically sends out price checkers to verify prices for the various items they measure. But lately, due to COVID, they have not sent humans but instead relied on phone calls and estimates, as noted in their February release. How big a distortion is this? No one really knows.

There is no reason to think these inputs reflect reality, and many reasons to suspect they don’t. This has consequences.

Assumed Supply

Housing prices have no direct influence on our inflation measures. They do have indirect influence via the imputed, subjective “owner’s equivalent rent” methodology. Its accuracy is questionable at best.

What’s not questionable, though, is that home prices have a direct impact on the homeowner’s spending power. The mortgage payment is a function of the home’s purchase price and, if higher, reduces the amount the homeowner can spend on other goods and services. The impact varies, of course. Maybe you got a great deal on your house years ago, then prices rose even more in your area. You have a lot of equity which raises your net worth and probably makes you confident enough to raise other spending. But it can go the other way, too.

In any case, the size of your mortgage payment (even if it is zero because you don’t have one) certainly affects the amount you would want to rent your home to someone else. So do other factors: property taxes, expected maintenance costs, the tax impact of having rental income. Furthermore, your mortgage payment itself may be a moving target if you have a variable rate.

There’s more. If, hypothetically, you are going to move out of your home and rent it to someone else, where will you go? How much will it cost? Have you even thought about it? Maybe not. But you would have to consider all these things to properly estimate your OER.

Econ 101 also tells us cost doesn’t set prices. Supply and demand set prices. In this case, though, you are told to simply assume you would supply your home for rent, and estimate a price at which you would do so. That’s not how real life works. You can’t instruct people to imagine doing something that may be inconceivable to them and expect to get any kind of reliable answer.

Yet that’s how we arrive at a number that is the largest single input into (arguably) the single most important economic data point, which a committee at the Fed looks at when setting the single most important price in the world. See the problem?

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Broken Inflation

Central banks all over the world, including the Federal Reserve, have an aspirational goal of 2% inflation. If you are age 30–40, that means every dollar you save today will lose half its value by the time you need it for retirement. And that’s what passes for planning by a committee. They literally plan on destroying the value of your dollar. The only real debate is over how fast to destroy it.

But forget that for a moment. The problem is we would already have 2% inflation, and probably more, if we correctly measured housing in the PCE and CPI with the actual cost of homeownership instead of imputing it via OER, as is done in both CPI and PCE.

Despite all the issues described above, housing prices and OER actually stayed fairly close for many years. I remember writing about OER in 2005 when it was much closer to being an acceptable measure of housing price inflation. Up until about 2000 or so, home prices and OER moved more or less in in tandem most of the time, though with OER far less volatile.

I argued back then it didn’t matter which measure you used as long as you were consistent. That is no longer the case because OER and housing prices are no longer consistent. And they diverged because home prices took off higher when Greenspan kept rates artificially low, creating a housing bubble which led to a subprime bubble. Bernanke piled on (remember subprime is under control?) and then Yellen and now Powell.

Mish Shedlock has a great chart showing the disconnect between CPI, OER, and housing prices.

Source: MishTalk

Starting about 2000, and becoming increasingly severe, there was a huge divergence between housing prices and OER. The gap shrank as the Great Recession unfolded, but took off again as it became clear the Fed wouldn’t tighten policy. The 2013 “Taper Tantrum” looks like a turning point in that regard.

And here we are. OER is the single biggest component in CPI at 24%. It rose 2% in the last year. The Case Shiller Home Price Index is up over 10% in the same period. Substituting the Case Shiller index for OER, as Mish did in this next chart, shows 3.5% total inflation, not the 1.4% that the CPI suggests, and which is even less in the PCE measure.

Source: MishTalk

Painful Solution

Now, imagine an alternate universe in which, ahead of the Great Recession, the Fed had looked at inflation based on housing prices instead of implied OER. Instead of cutting rates to stimulate growth, they would have likely raised rates to fight the obvious inflation.

You can go back even further. If Greenspan had raised rates because of rising inflation starting about 2003–4, there would have been no housing bubble, no subprime crisis, no overheated stock market, and no stock market crash. We would not have had the worst unemployment numbers since the Great Depression. Retirees and everyone else would have been able to earn reasonable yields on fixed income instruments.

Wouldn’t higher rates have killed the stock market? I don’t think so. It might have risen less, but based on productivity and profits instead of irrational exuberance. I think most investors would prefer reasonable growth and no market crashes.

People hail Greenspan and Bernanke as some kind of maestros who orchestrated an economic symphony. I disagree. I think their actions were the root cause of the Great Recession, just as Yellen and now Powell and his successor will cause the next crisis. Artificially low inflation benchmarks, due in large part (though not exclusively) to the housing mismeasurement, give them the justification they need to give Wall Street (and increasingly Main Street) what it wants.

The data is very clear to anybody who wants to look, and especially to the Fed. They simply refuse to pay attention because it doesn’t fit the narrative they want everyone to believe.

You could argue that the Fed should normalize rates based on the above measurement. Paul Volcker in the 1970s was the last Fed chairman willing to do that. There is zero appetite at any central bank in the world to embrace such a philosophy.

Thanks to years of mistakes, Powell is locked into a policy trajectory that leads nowhere good but also can’t be changed without enormous pain.

What Will Inflation Be?

Inflation in February was benign. But starting with March, because of the COVID effect, the year-over-year comparisons will begin to show higher inflation. If you go back two years inflation will still look benign, but that is not what the BLS or the media will do. They will focus only on one-year change. And for March through June/July, the comparisons will probably show inflation rates well above 2%. Before the end of summer, combined with the recent stimulus package, it could actually approach 3%.

I believe this will be transitory, but the bond markets will see those numbers and want to push interest rates higher. The Fed will tolerate higher interest rates on the 10-year bond up to a point. They have said they would be willing to accept 3% inflation for a time, but they also want to keep interest rates down. Without actually implementing Yield Curve Control, per se, they can simply modify their bond buying to include longer maturities, and/or increase the volume of US government bonds they buy.

The previous administration was certainly willing to run up the deficit. The current administration is going to do so on steroids with infrastructure and other programs, on top of the just-passed COVID relief. The Federal Reserve’s balance sheet is around $7.5 trillion now, and rising some $120 billion per month.

Source: Federal Reserve

The fiscal 2021 US deficit will certainly be more than $4 trillion and approaching $5 trillion, and the Treasury has more debt that has to be rolled over. The US government simply can’t afford higher interest rates. Financing costs would overwhelm the budget. Further, we are beginning to see Treasury auctions coming in “weak,” meaning investors demand higher yields.

The Federal Reserve is going to become the buyer of last resort, exactly like the central banks in Japan, the ECB, and to some extent the UK are. I expect the consequences will be much the same: lower GDP growth.

I’m asked all the time, how long can this go on? Probably longer than we can imagine. It will continue until it doesn’t. The Federal Reserve will continue to hold rates down, punishing savers and retirees. Their policies will aggravate wealth and income differences but no one will deal with the actual causes.

In summary, nothing is really going to change in terms of Federal Reserve policy. It will keep using broken data to justify its loose monetary policies, the monster deficits will require them to purchase even more Treasury bonds and, given their presuppositions, they really have no choice.

They will continue on that course until there is a crisis, and then they will double down. There is absolutely no way to know when that will happen. Japan and Europe have gone on for a long time. There is no reason to think the US can’t. Powell and whoever succeeds him will echo Mario Draghi’s “Whatever it takes” line.

I don’t want you to fight the Fed, but at the same time you don’t have to play the game. You have alternatives. Think in terms of an absolute return strategy, combined with value-oriented companies and more active management. Friends don’t let friends buy passive index funds. Not in these times.

What’s in Your Investment Kitchen?

To that point, a brief commercial. In a world of high valuations, zero-bound Treasury rates, and junk bonds yielding 4.1%, what does an investor do? You look for new portfolio ingredients. At CMG and our partners (like my old friends at Alphacore who have joined the Mauldin Team), we now have scores of offerings designed to help you meet your personal goals. Cash flow/income strategies in the mid-to-high single digits, absolute return strategies uncorrelated with market fluctuations, highly targeted dividend strategies, and exciting growth opportunities from my network of relationships. We have begun to refer to all of the above as the Mauldin Kitchen. To show you what’s in our kitchen, whether you need an appetizer (a single idea) or a full portfolio meal, I have prepared a short special report called “What’s in Your Investment Kitchen?” Simply click on the link to get your copy. I would be very surprised if some of the ideas in my kitchen don’t tempt your investment palate. And I’ll be making a few calls myself to get a feel for what it is that you are really thinking about, what’s important to you, and what you need. So don’t be surprised if you get a call from me.

Can Republicans Capitalize on Urban Political Opportunity? | City Journal

Can Republicans Capitalize on Urban Political Opportunity? | City Journal

The culture of the Democratic Party has become more urban in character, shaped by racial heterogeneity and cultural liberalism and responsive to—if not necessarily supportive of—globalized, knowledge-intensive urban markets and the redistribution that accompanies them. By contrast, the Republican Party has become more exurban and rural, characterized by racial homogeneity, cultural conservatism, and suspicion of—and alienation from—urban economies.

Fed’s Keeper of Secret Teal Book Lifts Veil on New Forecast Era - Bloomberg

Fed’s Keeper of Secret Teal Book Lifts Veil on New Forecast Era - Bloomberg

 

Fed’s Keeper of Secret Teal Book Lifts Veil on New Forecast Era

By 

Craig Torres

March 11, 2021, 10:00 AM GMT

 

 

Stacey Tevlin is the most important person in U.S. economics that you have probably never heard of. She leads a team of 357 people in the Federal Reserve’s Research and Statistics division, which is entrusted with the forecasts for policy makers as they weigh interest rates every six weeks.

 

Her work appears in a document called the Teal Book, which is kept confidential for five years. She doesn’t go on television, give speeches, or even talk to reporters very often. Yet her team’s work has so much influence on the policy debate that one former Fed governor calls the staff forecast “the 13th member” of the Federal Open Market Committee.

 

Bloomberg News spoke to her in February. The interview has been edited for brevity and clarity.

 

1. Where did you grow up, what did your parents do, and how did that shape your world view?

Where I grew up definitely shaped my world view. I grew up outside of Detroit in the 1970s and 1980s. I lived through some of the big recessions that hit Detroit hard. That was a presence as I was growing up. People were losing their jobs and moving out of town. My parents’ jobs weren’t affected by that. My dad was a history teacher and my mom taught English, but we lived in a neighborhood which was mostly auto workers and their families.

 

Tevlin, 52, earned a Ph.D. in economics in 1995 from the Massachusetts Institute of Technology and a B.A. in economics from Northwestern University in 1990. She wrote her dissertation on how successful firms distribute profits. Her adviser was Robert Solow, winner of the Nobel Prize in Economics.

 

When I went to college, I thought I would be an engineer because I really liked math. Then I took Bob Gordon’s macro course in my freshman year and recognized it was about those gyrations we had lived through. That really grabbed me on a personal level, and that’s part of the reason I decided to become an economist.

 

2. How did you forecast the virus and the economy in the days before the vaccine and how do you do it now?

We forecast both the course of the virus and vaccine availability because we have to. They are basic assumptions that underlie our understanding of the economy.

 

A year ago I wouldn’t have had any idea how to do that. We don’t have any epidemiologists on the staff. What we do have are a lot of people who understand complicated models and data really well.

 

A number of people on our staff have invested a significant amount of time learning both the math and the science of pandemics, mitigation strategies, and vaccines so we could build an understanding of how they are likely to evolve and affect the economy.

 

At the very beginning, we developed a whole new set of daily and weekly indicators to track the economy. We started a reading group where we compiled all the Covid-related economic research -- I think it was 200 papers last I checked -- making sure we are on top of the research. We got up to speed pretty quickly on this.

 

3. The Fed is experimenting with novel data sets that are closer to real-time indicators. Which gave you an edge?

Having timely data made a huge difference in our understanding. More than what we had in hand, it was that we had built up knowledge in how you go about acquiring, storing, and transforming these alternative data sets.

 

A lot of the things we wanted to know about changed, so while we did still use the high-frequency data that we had been developing for six years, we also pivoted very quickly to find what we needed.

 

We had a team of entrepreneurial data enthusiasts already in place who were willing to go out and uncover great new data sources before I would have thought to ask for them.

 

4. The FOMC has a new strategy focused on shortfalls from full employment. How has that changed your approach?

When we put together a projection, we need to write down a path for monetary policy that yields a sensible forecast. Using a monetary policy rule is a straightforward and transparent way to do that, even though the FOMC doesn’t use a rule for policy.

 

Last year, we made some changes to our rule to reflect those updates. For instance, we made some tweaks to incorporate and acknowledge what the FOMC said about achieving average inflation of 2% over time, and focusing on shortfalls from maximum employment.

 

They didn’t specify a rule, of course, so we are not going to capture exactly what they are going to do. To help them in their deliberations, we also present different simulations for the economy using different rules.

 

5. The board has few minority economists. Is that something you are trying to change?

Absolutely. Almost every year for the past 10 or so that I can remember we have made some changes in our recruiting process to try and improve how we are doing it -- working on finding ways to overcome implicit bias, making sure we have the best practices.

 

We also spend a lot of time and effort to make sure that we are helping to build a pipeline of new economists. In the last couple of years we have also really been making an effort to address the inclusion piece to make sure once you get diverse people at the board that they feel welcome.

 

I don’t want to make it sound all rosy. We are working hard on diversifying our workforce, but we are not where we would like to be.

 

6. How do you forecast the impact of unprecedented U.S. fiscal stimulus?

We are always having to write down some assumption of where fiscal policy is going to end up. We often have a pretty reasonable guess, but we don’t always.

 

Then it gets harder, because we need to estimate how much of the fiscal outlays actually get spent and when. We base that first on the economic research. But then we also augment those studies to tailor them to the current situation.

 

7. What’s the uncertainty around that?

It’s huge. There is definitely a lot of judgment we are imposing on this. We don’t think people will react exactly as they have in the past. We have a lot of debates on this as a staff.

 

We also run multiple scenarios. We know we don’t have all the right answers but we look at different versions and show different scenarios to policy makers.

 

We don’t know how people are going to behave. There is a little bit of introspection and there is a lot of looking at survey questions as we try and glean things, such as when people are going to be confident to go out and start doing stuff.

 

We can try to build on how they have behaved so far in the pandemic or across countries. We put all that together -- data, surveys, cross-sectional analysis, and model estimates -- and honestly we look at it and ask ourselves if the forecast seems at all reasonable. I wish we had a better crystal ball.

 

Even if we get the health variables right in a forecast, it is still an open question if we have the behavioral response right.

 

9. It’s been a long year. What do you do for a boost to get through the day?

If I can get out of the house, I would go ride my bike. That would be a boost for me. But if I can’t because I am sitting in a meeting, and this is kind of embarrassing to say, I am a big fan of chocolate milk and peanut-butter crackers.

 

10. The pillars of the economy are productivity, population growth, technological change and diffusion. What do they look like post pandemic?

We don’t know. But that is definitely something we are thinking about: What do we want to focus on in the post-pandemic world? It will likely be all of those pillars: What is the labor force going to look like, are people who have left going to stay out permanently, are they going to be drawn back in?

 

Definitely productivity is an important question since we are using technology so differently. How is that going to impact business models? We also have questions about market structure and pricing. There are so many interesting questions, but we don’t know the answers yet.

Tesla (TSLA) Is Plugging a Secret Mega-Battery Into the Texas Grid - Bloomberg

Tesla (TSLA) Is Plugging a Secret Mega-Battery Into the Texas Grid - Bloomberg

 

Tesla Is Plugging a Secret Mega-Battery Into the Texas Grid

 

By  and

March 8, 2021, 11:00 AM GMT Updated on March 8, 2021, 3:14 PM GMT

 

Elon Musk is getting into the Texas power market, with previously unrevealed construction of a gigantic battery connected to an ailing electric grid that nearly collapsed last month. The move marks Tesla Inc.’s first major foray into the epicenter of the U.S. energy economy.

 

A Tesla subsidiary registered as Gambit Energy Storage LLC is quietly building a more than 100 megawatt energy storage project in Angleton, Texas, a town roughly 40 miles south of Houston. A battery that size could power about 20,000 homes on a hot summer day. Workers at the site kept equipment under cover and discouraged onlookers, but a Tesla logo could be seen on a worker’s hard hat and public documents helped confirm the company’s role.

 

Property records on file with Brazoria County show Gambit shares the same address as a Tesla facility near the company’s auto plant in Fremont, California. A filing with the U.S. Securities and Exchange Commission lists Gambit as a Tesla subsidiary. Executives from Tesla did not respond to multiple requests for comment.

 

As winter storms pummeled Texas in February and left millions without power for days, Musk took to Twitter to mock the Electric Reliability Council of Texas, or Ercot, the nonprofit group that manages the flow of electric power to more than 26 million customers. “Not earning that R,” he wrote. Musk, 49, recently moved to Texas and his various companies are expanding operations in the state.

 

The battery-storage system being built by Tesla’s Gambit subsidiary is registered with Ercot. Warren Lasher, senior director of system planning at Ercot, said the project has a proposed commercial operation date of June 1. The site is adjacent to a Texas-New Mexico Power substation.

 

While Tesla is known for its sleek, battery-powered electric vehicles, it’s always been more than a car company: its official mission is to “accelerate the world’s transition to sustainable energy.” Utility-scale batteries are needed to store the electricity produced by wind and solar, but they can also become lucrative opportunities. By storing excess electricity when prices and demand are low, battery owners can sell it back to the grid when prices are high.

 

Tesla has spent years expanding into residential energy technology. Back in March 2015, Musk unveiled a home battery product, dubbed the Powerwall, with a splashy event at its design studio near Los Angeles. Scores of utility and energy executives attended. A year later Tesla acquired SolarCity, the solar-panel installer founded by Musk and his cousins. Musk then hawked a “solar roof” that has gone through several iterations without becoming a strong contender in the market.

 

But the company’s product lineup already reaches beyond the home and into the electrical grid. The Tesla Powerpack and even larger Megapack were designed with utility customers in mind. Tesla’s battery project in South Australia, launched in 2017, is adjacent to a wind farm and can store surplus electricity generated on gusty nights for daytime demand. At 100 megawatts, it was the largest battery project in the world at its launch.

 

While Tesla’s focus on energy often takes a back seat to the increasingly competitive business of manufacturing and selling electric cars, Musk and his executive team continue to highlight energy as a key part of their growth. “I think long-term Tesla Energy will be roughly the same size as Tesla Automotive,” Musk said during an earnings call in July 2020. “The energy business is collectively bigger than the automotive business.”

 

Tesla’s battery packs are connected to Southern California Edison’s Mira Loma substation, located east of Los Angeles. The 20 megawatt system, which has been online since December 2016, supports grid operation during peak hours and helps the utility make the most of its renewable resources. In the San Francisco Bay Area, PG&E Corp. and Tesla are constructing a 182.5 megawatt system at an electric substation in Moss Landing that should be operational by August.

 

Tesla Energy could represent up to 30% of the company’s total revenue by the 2030s, up from roughly 6% today, according to analyst Alexander Potter of Piper Sandler. His research has highlighted the potential for Autobidder, a software platform Tesla designed for utilities. Tesla Chief Financial Officer Zachary Kirkhorn has described Autobidder as an “autonomous energy market participation system that does high-frequency trading.” Potter has a $1,200 price target on Tesla stock, the highest on Wall Street.

 

“Tesla’s energy storage business on a percentage basis is growing faster than their car business, and it’s only going to accelerate,” said Daniel Finn-Foley, head of energy storage at Wood MacKenzie Power and Renewables. “They are absolutely respected as a player, and they are competing aggressively on price.”

 

Musk’s empire has numerous branches in Texas, and with the billionaire’s recent relocation from California, the Lone Star state now appears set to become the center of his universe. Space Exploration Technologies Corp., or SpaceX, is building and testing Starship, a new rocket and spacecraft designed to take humans to Mars, at a facility in Boca Chica on the southern tip of the Gulf Coast. Another rocket-testing facility is located in McGregor, near Waco. Musk posted a family photo to Twitter on Monday, with the caption “Starbase, Texas.”

 

SpaceX has posted engineering positions in Austin for a “new, state of the art manufacturing facility” for Starlink, a space-based high speed Internet service. Tesla is also building a new factory in East Austin for its forthcoming Cybertruck, an electric pickup. Gigafactory Texas, as the facility is known, will create 5,000 mid-level manufacturing jobs and is supposed to produce the first vehicles by the end of this year.

 

Musk’s focus on Texas comes as the dominant U.S. energy hub—with its abundant natural gas, oil, solar and wind resources—is being transformed by the surging growth of renewables. For more than a century the Texas grid has transported power from large plants to customers over miles of transmission lines. The recent storms have highlighted just how fragile that legacy system is in the era of climate change. With the build out of giant batteries like those made by Tesla’s Gambit project and others, the state’s power grid could be remade around distributed generation that may prove more resilient.

 

About 2,100 megawatts of battery storage and 37,000 megawatts of solar and wind are in advanced stages of connecting to Ercot’s grid. “It’s not only stunning but the financing is already in place,” Jigar Shah said on March 2, a day before the clean-energy pioneer was named as director of the U.S. Energy Department’s loan finance office.

 

The Gambit project was originally developed by San Francisco-based Plus Power, a privately held renewables company that has battery operations in several states. Scott Albert, the former city manager of Angleton, said it was obvious that Plus Power was working with Tesla. A project summary available on the city’s website features images of Tesla’s utility-scale battery products, and some of Plus Power’s principal staffers previously worked at Tesla. (Plus Power confirmed its sale of the project to an undisclosed party and declined further comment.)

 

The Gambit project is not hard to find in Angleton, a small town of roughly 3,000 people in the middle of the Brazoria National Wildlife Refuge. But people on the construction site appear to have instructions to avoid drawing attention or answering questions from passersby. A photographer who attempted to observe from the front gate was told by a worker that it was a “secretive project.” White sheets obscured what appeared to be Tesla’s modular Megapacks.

 

In Texas, Albert said, it’s common for developers in real estate or energy to begin projects with several potential partners or purchasers waiting in the wings. It made sense to him that the project ended up with the state’s biggest billionaire. “Elon Musk has a lot of activity in Texas right now,” said Albert. “It wouldn’t surprise me if Musk is thinking about starting his own power company.”

 

READ NEXT: After Texas Crisis, Biden’s Climate Plan Hangs on Fragile Power Grid

 

For a decade at least, contemporary architects have been exploring the unfathomable versatility of wood as a building material | Christie's

For a decade at least, contemporary architects have been exploring the unfathomable versatility of wood as a building material | Christie's

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When buildings branch out

Innovative architects all over the world are taking advantage of the new possibilities offered by wood, reports Jonathan Bastable

‘Wood is only a one-syllable word,’ wrote the German journalist and first president of the former West Germany, Theodor Heuss, ‘but behind it lies a world full of beauty and wonder.’

The wonder of wood surely derives in part from humanity’s primordial dependence on it. Our earliest ancestors, after all, were tree-dwellers: they were closely acquainted with living wood before anyone ever stripped a twig or whittled a stick.

The hominid universe was transformed by the discovery that trees could be burned, that wood equalled warmth. And it was wood that brought the troglodytes out of their caves, by making it possible for them to construct artificial caves on the flat, hot plains. Aeons later, when Aristotle wanted to coin a term for primal matter, he took the Greek word for wood, xylon, and bent it to his philosophical ends.

Barn B, Mason Lane Farm, Kentucky, USA. De Leon & Primmer Architecture Workshop, 2009: The grid-like façade of this barn is constructed from bamboo, not a material you encounter often in Kentucky. From a distance, the warp-and-weft effect of the beams creates the impression of something handmade: it looks like a tartan wrought from straw, which is entirely fitting for a building designed to dry hay. Photograph © Roberto de Leon

For centuries, we have lived in cities made of stone or of materials that mimic stone. We have come to see wooden architecture as something as quaint and old-fashioned as a four-poster bed. But wood has never gone away, and now architects the world over are experimenting with walls and floors of wooden sheets tightly glued together crosswise, so that the natural grain creates a warp and a weft. It is as if plywood — the stuff of cheap shelves and kitchen cupboards — had been re-engineered and magnified to the scale of architecture. 

Community Church, Knarvik, Norway. Reiulf Ramstad Arkitekter, 2014: This dramatic building on the Norwegian coast is a modernist take on the wooden stave churches of Scandinavia. The ‘windows’ on the jag of a spire are in the  same wood as the rest — but heartwood, which is darker. These rectangular patches make the pale sapwood steeple seem less sharp and dangerous, less like a shard of sea ice. Photograph © Hundven-Clements

The resulting building material is stronger and lighter than steel, clean and renewable, easy to shape and cut — and even fire-resistant because of wood’s moisture-retaining properties. Builders and designers speak of this wood sandwich as if it were a novel invention, and they have given it reassuringly techie names and acronyms: X-Lam, glulam or CLT (cross-laminated timber).

Architecture’s ferro-concrete era may be drawing to a close, and a second wooden age could be about to begin

The new ways with wood make all sorts of things possible. One Swedish firm has plans for a ‘woodscraper’, which sounds like something out of a carpenter’s toolbox but is in fact a 34-storey wooden apartment block destined to rise over Stockholm. This residential tower is a case of technowood imitating 20th-century forms and materials — just as, say, the marble pillars of the Parthenon are, at root, stylised logs or tree trunks.

Sharma Springs, Green Village, Bali. Ibuku, 2012: From above, this building looks like dry petals on a bed of moss. It is in fact a six-storey forest home made entirely of bamboo. Each lanceolate leaf is a roof covering an open wing of the house; the thick grey stalk is a tunnel that crosses a green ravine and leads to the building’s fourth floor. Photograph © Errol Vaes

But for a decade at least, contemporary architects have been exploring the unfathomable versatility of wood as a building material. A new book, Wood, showcases some of the world’s most beautiful and ambitious wooden architecture. 

Three Mountains, Green Village, Bali. Jörg Stamm, 2006: This great bamboo roof covers a workspace for 300 people. Historically, bamboo buildings were always small and temporary, because they were doomed to be reduced to dust by powderpost beetles. These enormous poles have being steeped in a salty solution of sodium borate, which renders the bamboo inedible, so making it durable. Photograph © Mark Magidson   

In Beijing there is a library that looks like it was made from neat bundles of kindling; a glulam pavilion in Chicago Zoo has the curviness and airiness of shavings caught in the act of falling from the lathe. It may be that architecture’s ferro-concrete era is drawing to a close, and a second wooden age is about to begin. 

Wood  edited by William Hall, is published by Phaidon on 20 March

13 February 2017

FEATURE | NEWS

Main image

Spanish Pavilion, Shanghai Expo, China. Miralles Tagliabue EMBT, 2010: If this pavilion resembles some kind of wicker basket, that’s because a wicker basket is exactly what it is. Each panel has been woven from green switches and supple branches and applied like bark shingles to a steel frame. The aim was to create a ‘climatic membrane’ for the interior space; you could also call it straw-hat architecture. Photograph © Inigo Bujedo Aguirre/VIEW

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Which Covid Vaccine Is the Best, Moderna, Pfizer or Johnson & Johnson? - Bloomberg

Which Covid Vaccine Is the Best, Moderna, Pfizer or Johnson & Johnson? - Bloomberg

The One Vaccine Efficacy Number that Truly Matters

Shopping for the best Covid-19 vaccine? Here’s something to keep in mind.

 

By Faye Flam

March 6, 2021, 1:00 PM GMT

 

Something sounds fishy when public health experts advise us to take whatever vaccine is available even though some vaccines show much more promising efficacy numbers than others. And it’s understandable that people would want to shop for the best vaccine. Americans are accustomed to the idea of consumer choice in pharmaceuticals — why else would we have so much direct-to-consumer drug advertising? But cut through the noise and there’s only one thing that really matters: all three FDA-authorized vaccines seem to work equally well — close to 100% — at preventing hospitalization and death.

 

That message has gotten diluted in the reporting around the efficacy numbers for different vaccines. The efficacy numbers associated with the Moderna and Pfizer vaccines came in at around 95%, while the newly approved Johnson & Johnson vaccine has shown a less impressive 72% in the U.S., and even lower in other countries. As risk communication expert Peter Sandman says, people remember from school that 95% usually earns and A, and 72% a C at best.

 

The problem is that numbers most touted to measure “efficacy” measure various degrees of symptoms plus a positive test — criteria that vary some from trial to trial. They don’t measure what’s most important: protection against hospitalization and death.

 

And on that score, all three vaccines are outstanding. So public health experts are justified in suggesting people take the first vaccine available.

 

People aren’t only worried about dying from Covid; they’re also worried about getting so-called long Covid and transmitting the disease to others even after they’re vaccinated. There’s no data one way or the other one whether vaccination cuts the risk of long Covid for those who get sick, but all the vaccines appear to reduce the number of people who get mild illness or asymptomatic cases, and thereby probably reduce transmission.

 

While the Pfizer and Moderna vaccines work the same way, Johnson & Johnson’s vaccine works through a different mechanism. The first two use messenger RNA, and the latter uses DNA, which is ferried to the nucleus of cells with a different kind of virus, called an adenovirus, modified so it can’t replicate itself and cause disease. All three vaccines have good safety data, and all of them prompt the body to produce T-cells, which retain a sort of memory of the protein and attack it.

 

One reason for the seemingly stark difference in efficacy numbers is that the clinical trials were held in very different groups of people. The Johnson & Johnson trial enrolled more people with hypertension, diabetes and HIV, as well as more people over 60, says University of California infectious disease doctor Monica Gandhi. Johnson and Johnson’s results also came from testing people in South Africa and Latin America at a time when new variants of the virus were already rampant. The important thing to note, says Gandhi, is that nobody who got the vaccine in the clinical trials — for any of the shots — was hospitalized for Covid-19. None of them died. None even got a severe enough case to require medical intervention at all.

 

The absence of hospitalizations and deaths in the Johnson and Johnson trial looks even more impressive given that the volunteers included people who were more vulnerable to dying from the virus. Gandhi says she’d advise her own 80-something parents to get that shot if it was the first one available.

 

Earlier this year, Yale University epidemiologist Robert Hecht had told me in an interview that he thought more lives could be saved by vaccinating people in so-called hot spots where there was an unusually high burden of disease. I called him back and asked whether the single-shot advantage of the Johnson and Johnson vaccine might make it a good choice for those places. He agreed it would, but worried about the perception that it’s an inferior vaccine, which could incite outrage about racial or socioeconomic injustice.

 

Other experts are also wrestling with this question, since the Johnson & Johnson vaccine is cheaper than the other approved shots, delivered in a single dose, and requires only ordinary refrigeration rather than ultra-cold storage. That would make it a practical choice for vaccinating homeless people, and those in hard-to-reach rural areas, but again, experts are wrestling with the perception of inequality.

 

That concern isn’t justified, given a proper interpretation of the data. Even the perception of unfairness, though, could be harmful. Giving people the ability to vaccine-shop might help more hesitant people feel more in control and less coerced — but also inadvertently prolong the pandemic.

 

Getting the one-shot vaccine out as fast as possible and focusing on virus hot spots would save lives and hasten a return to some level of normal life. It’s now up to the public health community to send out a clearer message and get the public on board.

 

The most important numbers here aren't 95% or 72%, but 0%: the number of vaccinated people who've died from the virus. When that's the emphasis, the message to get the first available vaccine makes a lot more sense.

 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

 

To contact the author of this story:

Faye Flam at fflam1@bloomberg.net

 

To contact the editor responsible for this story:

Sarah Green Carmichael at sgreencarmic@bloomberg.net

 

Why Didn’t the Vaccine Keep Me From Getting Covid? - Bloomberg

Why Didn’t the Vaccine Keep Me From Getting Covid? - Bloomberg

I Got Vaccinated, Then I Got Covid. What Happened?

As good as even the most effective shots are, they can’t promise total immunity. A Bloomberg Opinion editor found that out the hard way.

By Mary Duenwald and Sam Fazeli

March 5, 2021, 12:00 PM GMT Corrected March 5, 2021, 2:23 PM GMT

 

Mary Duenwald, a Bloomberg Opinion editor, tested positive for Covid-19 even after receiving both doses of the Pfizer Inc.-BioNTech SE vaccine. Here, she discusses her experience with Sam Fazeli, a pharmaceutical industry analyst for Bloomberg Intelligence. The conversation has been edited and condensed.

 

MD:  I was vaccinated for Covid recently  — I got my second Pfizer shot a few weeks ago. I was hoping that meant I wouldn’t get Covid, yet I tested positive this week. How is that possible?

 

SF: Thank you, Mary, for sharing your story. The reality is that so-called sterilizing immunity, or protection that completely blocks a virus from infecting you, is rare. In fact, only one vaccine has been proven to provide that, and that is the smallpox shot. If you think back to the phase III trials of the Pfizer-BioNTech and Moderna Inc. vaccines — arguably the ones with the best efficacy so far —  they were 95% effective, meaning some vaccinated people still developed symptoms after the second dose, even if at a very low rate. Also, outside the environment of a clinical trial, efficacy will be slightly lower; real-world data is showing about 90% efficacy. It’s also possible that you are infected with a new variant, such as the one that is circulating in New York, known as B.1.526. These variants are potentially better at getting past your antibody immunity.

 

MD: My symptoms are mild, as if this were just a cold. Can I assume the shot is still protecting me?

 

SF: Of course. You will never know how bad your symptoms would have been if you had not been vaccinated, but they could have been much worse. The vaccines have high efficacy against severe and critical disease — indeed their main purpose is to keep people out of the hospital and lower their risk of dying. Even the ones with apparently lower efficacy against mild and moderate disease, such as Johnson & Johnson’s shot, show better efficacy against severe and critical illness.

 

MD: Does being vaccinated mean I am less likely to transmit the virus to someone else?

 

SF: Some data suggest that is the case, but it is early days. The antibodies generated by vaccination can stop a virus from actually infecting you or from allowing the infection to “take.” Specifically, people who are vaccinated and then test positive have lower amounts of virus in their nasal passages and possibly even less in their lungs than if they were not inoculated. This means there is less virus in the air you breathe out. How long this lasts is not known, though. The data we have come from people soon after their vaccinations, when they have high levels of antibodies. As the months pass, these levels may fall to a level that they can’t stop an infection in the absence of a vaccine booster or a natural infection like yours. We need to see the data on asymptomatic infections at six months and 12 months after the second dose of the vaccine to have a better idea.

 

MD: I was tested the same day I learned I had been in contact with someone with Covid, and again the next day, and both tests came back negative. The positive test came a week later. Does that mean I wasn't infected by that person?

 

SF: No – there is an incubation period that can last as long as two weeks. It’s possible that people who are vaccinated have a longer incubation period as the virus is hampered by the immune system. The other interesting question is whether you need to quarantine as long as an unvaccinated person with an infection does. Might you be safe sooner because you’ve had the vaccine? You might, but we just don’t know yet.

 

MD: What’s the takeaway from my experience about how safe a vaccinated person should feel, and the kind of measures they still need to take, especially around the unvaccinated?

 

SF: Vaccinated people should feel safe until the data show otherwise. Currently, very few people are showing severe infections after being vaccinated, and that’s a good thing. At the same time, as long as there are people out there who are not vaccinated, it is best to continue with masking and distancing — for their sake.

 

MD: In a similar vein, some on the Bloomberg Opinion team had questions about the risks involved with an elderly vaccinated person visiting unvaccinated relatives. Would that be dangerous?

 

SF: The best answer is to wait until everyone in your bubble is vaccinated. Then you can resume your normal behavior when together.

 

MD: After I get through this, will I be immune to future infections?

 

SF: It is possible that your infection has given you a second “booster,” but I doubt anyone will ever be 100% immune to mild infections. What would be interesting to know is whether you are infected with one of the virus variants. If so, we could then look at your immune response to see if it has changed and can give you better immunity to this new variant the next time you encounter it. Sadly, we don’t have a lab at Bloomberg to do this analysis.

 

(Corrects answer to first question about vaccine effectiveness to not overstate the vulnerability of vaccinated people. )

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

 

To contact the authors of this story:

Mary Duenwald at mduenwald@bloomberg.net

Sam Fazeli at mfazeli@bloomberg.net

 

To contact the editor responsible for this story:

Beth Williams at bewilliams@bloomberg.net