Solar is getting very attractive.

Germany has spent a lot of money on subsidies
for solar on political reasons, not economic ones.

A smarter location is Australia where photovoltaic
installations are very competitive with existing sources.

In the US, solar will likely take off in a few years if
the current price/performance graph continues.

In contrast, wind generators will continue to be only
marginal if they can't improve on price or reliability.

One aspect of energy generation that doesn't get

much notice is nuclear.  In the US and Europe it

has a bad reputation but in China, Russia, and India

it's growing.

An investment in uranium mining is looking attractive.
This year the "Megatons to Megawatts" program expires.  This was

the agreement to use uranium from old USSR weapons

in civilian reactors.  New uranium sales will probably be

at higher prices.

Plus this week an Al Qaeda group attacked a uranium mine
in northern Africa and production might be affected.

Wealth Effect

One driver of the world's stock market is

called the "wealth effect" where the Fed prints
lots of money and and pushes down interest rates.

The expected result is that investors will change
their choice by making more investments in risky

stocks and less in safer bonds.

The hope is that this change in investments will

stimulate the economy. At least that's the theory.

While stocks have gone up from the Fed's QEs

and Japan's cash injections, has the stimulation

happened?  Hard to tell.  Lots of the extra money is

being held by banks instead of being lent out. Plus
a lot of the stock gains hasn't escaped the stock
markets as traders have mainly bought not sold.

By the way, the political slogan of "trickle down"

sounds related.  That slogan was popularized by

a speechwriter of FDR against the theory of that

era that urged high-paying jobs instead of many

low-paying jobs.  Now some mouth off on being

anti trickle down but for "living wage"...

Knights and bank II

[NOTE: This is the second part at looking at how organizations of knights affected banking.]

In the first part, the Templar Knights had lent to the French king and then were exterminated by the king after a political battle.  France's King Phillip also forced the Catholic church to end the Templar order.

Any resources of the Templars that were not taken by France were absorbed by other orders of knights, principally the Hospitaller Knights.

Templar Knights had produced many innovations in banking -- secure accounts, a type of travelers check, safe deposit boxes, and structured large loans.

With the end of the Templars, the Hospitallers soon gave up banking too because they feared the same outcome would hit their order.

This meant the field of banking was opened for new lenders to use the Templar's innovations.  Pawn shops met the needs of small borrowers but governments needed bigger lenders.

Many of the large lenders didn't require interest payments on the loans because usury was still viewed as anti-religious.  Instead the lenders requested extra "conditional" payments on the loan.  Banks would receive rent payments, or ownership of crops, or direct reception of taxes.  For example, the kingdom of Naples that controlled the southern half of modern Italy was completely run by banks.

As the banks run by orders of Knights stopped, family-run banks grew.  These family dynasties grew quickly.  Italian cities became known for their banks. Florence banks dominated international finance and the gold florin coin was widely used. By the 1300s two Florence families, the Bardi and Peruzzi families, grew amazingly wealthy from their banking businesses.

In England, King Edward III ran up big debts from these Italian banks to fund a war against France. When the king was unable to repay the loans, the king defaulted on the loans in 1342 and the Bardi and Peruzzi houses went bankrupt.

Those bankruptcies caused a massive economic depression that probably ranks as the worst ever in human history.

Misled by models II

Many financial models use a Guassian model for characterizing risk.  This model is a normal distribution of movements.

It is used in Modern Portfolio Theory, Efficient Market Hypothesis, and other “random walk” models of investments.

Why use Guassian bell curve?  Because it is well-understood, simple, and works well for the average case.

But the model breaks down outside of typical days.  The phase "black swan" popularized this known problem of mis-matched volatility.

How much mismatch?

• In the past century of the Dow-Jones Index, the model would predict a few dozen days of +/- 3.4% changes.  In reality, about 1,000 days had moves that large.
• For bigger moves of +/- 4.5%, instead of the 10 or so predicted days there were several hundred.
• For even bigger moves of +/- 7% where less than one was expected, in reality there nearly 50.

Clearly it is not a good strategy to blindly follow the simple model.

Bloodlines and banks

Dan Brown has a new book.  His previous book
"The Da Vinci Code" was a huge best-seller.
Brown's books are written using semi-historical
backdrops for his cliffhanger stories.

His "holy bloodline" plot-line has a FVN-related
real banking story --

The Bible has a passage that discourages lending
money with usury or interest to "your brother".
http://www.tentmaker.org/lists/UsuryScriptureList.html

But, people still want to borrow money occasionally.
So, of course, there was hair-splitting on the
definition of "your brother".  Somebody in your
family? In your community?  Hard to draw a line.
Eventually, it was settled as "in your religion".
So Christians couldn't lend to another Christian.

But ... that pushed the question to 'what is a loan?'.

As a result, pawn shops and lombard banks thrived.
http://en.wikipedia.org/wiki/Lombard_banking

Lombards were a German tribe that conquered Italy

about 600AD and, being non-Christian, could lend.

In France, about the time of the First Crusade in 1099,
the Jews were thrown out. After losing the Jewish-run

pawn shops, the Catholic Church set up Templar Houses
which were run by the Knights Templar.

Templar Houses expanded beyond loans to individuals

and made big loans to governments.

Governments of that era are like current ones and

quickly over-spent themselves into huge debt levels.

This is where the Dan Brown holy bloodline comes in.

The French King was deeply in debt to the Knights

Templar and was pushing for control over it. In response

the Templars claimed it found a blood line connection

from Jesus to a rival family of the French King. That

seemed to trump the "divine rite" claim of the king.

Game over, right?

In response the French king killed all the Templars...