What is "Big Solar?"

It all started with a phone call that started, “Did you know John Bradford (my state representative,) is in the pocket of Big Solar?”  At that point, I reflexively clicked off like I do with all robocalls. A little later, I started thinking about this. What the heck is “Big Solar?”

For the past couple weeks, I have been getting multiple calls every day from organizations with names like Americans for Responsible Energy Choices (I made that one up, but they all have warm and fuzzy names like that.)  These calls claim that solar energy is either a big boondoggle or essential to the future of America.  I get calls telling me that I can get solar panels on my roof (I live in a condo) and that Duke Energy will pay part of the cost and then I can sell surplus energy to Duke to help pay for the rest. That would be unlikely since my electric company is Energy United, a co-op.

Now I’m putting it all together. The NC state legislature is ending its short session and on the table are hydraulic fracturing in NC, offshore drilling and debating the end of tax credits for solar energy in NC. Even my friends in the solar panel business admit that solar is not cost effective without government subsidies, and with the reduced cost of oil and gas as a result of fracking in the US, it will not be cost effective in the foreseeable future.

I now I understand the BIG. This past week Jim Rogers, the former CEO of Duke Energy said in a speech that the solar energy subsidies are essential to NC businesses. (I wonder what’s in his portfolio.) And, yesterday the Charlotte Business Journal reported that Google, Apple and Amazon have “warned” the legislature against ending the tax credits. Those three are among a dozen or so companies that have large data centers with massive solar arrays in Western NC.

Millions of dollars are at stake and millions are being spent in lobbying. Big Solar wants tax credits for the politically correct solar energy AND they want to stop fracking because cheap oil and gas makes solar energy even less cost effective.

In my humble opinion, cheap and abundant energy is essential to get NC and America growing again. Hydraulic fracturing and the proposed gas pipeline can provide that. Solar energy can be a good idea if and when it can compete. If we are going to invest in solar, let it be in the form of research grants to universities to develop solar collectors that are inexpensive to produce and don’t degrade over the years.

The Science is Settled?

 

“The Science is Settled.” We hear that statement frequently from politicians. Lately, we have heard this in regard to measles vaccination and climate change. Politicians who do not understand science will latch on to a theory, or the results of one scientist and run with it until the public actually thinks the theory is true. In fact, science is never truly settled. A scientific conclusion is accepted and adopted until someone comes along and disproves the conclusion or creates an alternate hypothesis with equal validity.

An example is the measles vaccine. In 1998, Andrew Wakefield published a report in The Lancet, a British journal of medicine, linking the MMR vaccine to autism. This report was widely received and resulted in a large drop in the use of the vaccine in Britain and the United States. This was accepted as settled science until other scientists were not able to reproduce Wakefield’s results and it was later found that Wakefield had conflicts of interest and had manipulated data to produce his desired result.

In 2003, The University of East Anglia’s Climatic Research Unit published report that greenhouse gas had reached levels that were making the Earth’s temperature graph look like a hockey stick and would shortly become irreversible, causing hurricanes, tornadoes and economic collapse. This panicked the environmentalists and the politicians like Al Gore used it to enrich themselves by hyping it and funneling money to cronies in the green industry, like Solyndra. Later, emails were leaked that showed that the research team had manipulated data to get these results. This theory was so discredited that the proponents had to change the name of the crisis to Climate Change. Now when they say “97% of climate scientists agree the climate is changing,” they are stating the obvious. The archeological record shows the Earth’s climate is and always has been changing.

The climate change theory is two stage. The first is that man’s activity on the planet can cause a big enough impact to be measurable. The next stage is that the impact will be large enough to create the feared climate destruction?”  There is scientific theory on both sides of that question, but the data so large that they can’t do a reliable model. The studies on the amount of temperature rise accountable to man’s activity in the last century ranges from 0.02 degrees to significant (no number stated) based on what the study assumes to be man caused activity.

They can prove parts of it, but not the entire theory. In field experiments, scientists have difficulty showing a long term rise in CO2. They can measure the amount of CO2 being put into the atmosphere, but they cannot reliably predict the long term effect.  When the CO2 levels rise, plants grow faster and increase the levels of oxygen in the atmosphere. This runs counter to the theory. Some alarmists are now adding uncontrolled plant growth to the fears. As for methane, termites and cows create more methane than man. The University of San Diego has done research on cows and have determined that corn fed cows produce significantly more methane than grass fed cattle and is even trying to develop grass pellets for cattle feed to keep down the methane level.

So, when someone tells you the science is settled, they are really telling you their mind is made up and they have found a report that backs up their preconceived notion. My best advice is recycle, don’t waste things, drive a fuel efficient car, don’t pollute and above all, DON’T PANIC. Oh, then there is that Middle East thing. If Iran gets nuclear weapons, we might have to dig up the late Carl Sagan’s speeches on nuclear winter.

Falling Out of Love with Apple

I believe I am falling out of love with Apple. I have avoided the iPhone, but I have owned an iPad and now I'm on my third iPod.

The iPods always seem to have no battery left when I want to go for a walk, but if I leave it plugged in, the battery life is shortened and eventually won't hold a charge long enough for my walk. Then Apple wants an insane amount of money to change the battery, so you end up buying another one.

Granted, my iPad is old. But that's the way I am. I use something until it dies; I do not automatically go buy a new one just so I can have the latest thing. So, Apple keeps changing the operating system until your iPad has very limited use. One by one, my apps become unusable because they require a newer operating system and my iPad 1.2 doesn't have enough memory to upgrade past iOS 5.5. Most apps now require 6 or higher to function due to enhanced graphics and videos on their sites.

I understand that. I use my iPad primarily for email, social media and as an e-reader. It still functions ok for these apps, except that if I try to open a link in an email or a video in Facebook, it will crash.
Once my Kindle app stops working, I'll buy a Kindle.

But, what really pisses me off are the people in the Apple stores. If you need help, you need to go back home and make an online appointment with the "Genius Desk." This week they sent me an email offering up to $200 dollars trade-in on a new iPad. I took mine to the Apple store yesterday. The greeter guy tells me I have to wait for a "specialist." Eventually this big unshaven guy comes out, tattoos all over both arms and legs, pierced ears and nose, takes one look at my iPad and says "We don't take iPad 1's in trade." I told him I wasn't interested in paying $500 for an iPad and he says, "No problem," turns around and walks off.

It may be a generational thing. People my age are not used to dealing with customer service people like this. It may be acceptable to Gen-Xers and Nex-Gens and whatever else they are, but it is not acceptable to us baby boomers. IF I ever decide to buy another iPad, I'll be doing it at Best Buy. I wouldn't keep buying iPods if all my music wasn't on iTunes.......iSh*t.

In Business, Relationships Rock!

September 8, 2013

In 1988, a man named Harvey Mackay wrote a book that set the business world on fire. It was called “Swim With the Sharks Without Being Eaten Alive.” It is an entertaining and enlightening handbook to be successful in your career and personal life. It is a networking bible. It established Harvey Mackay as a respected author and columnist.

The book chronicles Mackay’s career from a recent college graduate trying to find a job, becoming successful selling envelopes, to buying a failing envelope company and turning it into a huge success. The book has been re-printed and needs to be in every businessman’s arsenal.

As a construction Subcontractor, we are losing the personal relationships we have with our customers, the General Contractors. Invitations to bid are sent out electronically. To view plans, we go onto a contractor’s FTP site or to a service like iSqFt. We download and print plans or order the prints from a third party printing service. We send our bids by fax or email. General Contractors now have a “pre-construction” department that puts the bids together before handing them off to the project manager, sometimes with a purchasing department in between. Unless you have a relationship with a contractor, or a really low price, your lines of communication with the contractor are limited.

Getting to know the people in the company you want to do business with are more important than having the lowest price. Contractors are looking for the lowest responsible bid, and when the contractor knows you, you get a seat at the table when the job is bought out. What Harvey Mackay wrote in 1988 is relevant today, except that part about a Roladex. If you use Mackay’s principles, including the “Mackay 66,” the things you should know about your client, your business relationships will be greatly improved. For you youngsters, it is even available as an e-book.

How's Your Project Cash Flow?

September 2, 2013

In an uncertain economy, a positive cash flow is imperative. Your goal should be to exit the recession with the same amount of cash you entered with. If you don’t have cash, you won’t be able to fund the materials and labor necessary to take on additional work when the economy recovers. Your accountant furnishes you with a periodic cash flow statement at the end of the period, but very few subcontractors do a cash flow statement on their individual projects. A project cash flow statement will let you know how each job is affecting your overall cash flow.

You can download an Excel template for a simple cash flow statement at http://office.microsoft.com/en-us/templates/statement-of-cash-flows-TC001046101.aspx?AxInstalled=1&c=0 . You should have your project manager furnish a monthly cash flow statement on each project. You only need to do the top section, Cash Flows from Operational Activities. It is only 7 lines long and you are only concerned with the top three lines, cash received, cash paid for materials and cash paid for wages, benefits and other operating expense. The template will calculate your cash flow for the project.

Why do a project cash flow statement? The project manager has the most influence on cash flow and contractors fail when they run out of cash.

Tips for improving your project cash flow:

1.      Front load the Schedule of Values. This is critical to maintain a positive cash flow on the job.

 

2.      Get the billing in on time and done correctly. Re-work on the billing is deadly to cash flow.

3.      Negotiate for payment of stored materials.

4.      Negotiate lower retention terms. Make sure the contractor passes through any reductions he gets from the owner.

5.      Email your invoices. Even if you are still required to mail an original, the contractor will still be able to include your billing for the month if the mail is delayed or lost.

6.      Utilize ACH payments. The money is sent directly from their bank to your bank.

7.      Get a check scanner from your bank and immediately scan any checks received.

8.      Have one person dedicated to collections. Must be tenacious.

 

Forecast for 2014...A Lot Like 2013

Long-time members of ASAC-Charlotte, now NC Subcontractors Alliance, will remember a program in 2008 by Martha-Ann Marley, called “A Contractors Diet: How To Get Lean.” The program was a segment of her 2 hour seminar and based on an article she wrote for the CFMA magazine, “Building Profits,” January-February 2006 issue. Based on her 24 year experience as a surety underwriter with a major surety company, poring over thousands of financial statements, audits and economic data, she realized certain common attributes of companies that survived and thrived during down economies, versus those that failed. The main attributes being, maintaining liquid assets, cash flow and a plan for controlling costs during the downturn.

Based on her study of economic data, she predicted that the coming recession, now known as The Great Recession, would be deep and would not begin to show improvement until 2013. She gave a detailed list of things that contractor’s needed to do to survive and thrive during the recession. In her latest seminar based on her article “Stuck in Neutral?” “Building Profits”, May-June 2012 issue, Martha-Ann shows the data that indicates the bottom of the recession was reached in early 2013. But, there are not yet any indicators showing that the economy is pulling up off the bottom. She has now revised her prediction. Now, she predicts that the economy will not show improvement until late 2014.

 

The fact that you are still here is a good sign. You are a survivor. Some of the important things, according to Martha-Ann, are maintaining cash flow, protecting margins and accumulating the cash assets that are needed for working capital when business starts to grow. Remembering that subcontractors have to pay out cash for materials and labor, furnish a lien waiver, and then wait 45 to 60 days for payment from the general contractor and even longer to receive payment for retainage. The worst situation to be in now would be loaded down with cheap work and be unable to finance a great job that comes up in the future.

There is still a lot of uncertainty in the economy. What is the Fed going to do with interest rates? What is going to be the cost to your business for Obamacare? What will be the impact of pending federal regulations from OSHA and EPA? Remember, the EPA director in speeches has promised to “regulate the coal industry into bankruptcy.” What will that do to energy prices?

If you can’t attend one of Martha-Ann Marley’s seminars, you owe it to yourself and your company to read her articles. She is now NC President of Gardner Insurance Group. These articles are available on her website, http://www.gardner-insurance.com/ and can be downloaded in a pdf format by clicking on the pictures of the magazine covers.

Money and Banking 101

In the near future, I will begin posting on situations in the economy and government that affect my industry, subcontracting. To be taken as a serious source, I need to establish my bona fides. I graduated from Campbell University (then Campbell College) in 1970. I have a Bachelor of Science degree in Business Administration, but my true interest was in economics and I took all the courses I could in the economics area.

For Money and Banking, I was privileged to study under Dr. Charles E. Landon. “Dr. Charlie” was a man of small stature, but a man of large influence. He was one of the 3 founding fathers of the economics department of Duke University in 1926. He studied and taught through the “Roaring Twenties” and the Great Depression. He had great stature in the money and banking area and during his career, he was called on to counsel several presidents. He taught from an old fashioned professor’s desk, a raised desk similar to a judge’s bench in a courtroom. He was held in great respect by the students as he was always willing to take time after class to answer questions and coach us through the hard part. Dr. Charlie had retired from Duke University, but had come out of retirement to teach the course he loved most, Money and Banking.

Dr. Charlie is second from the left on the front row in this picture of the Duke University Economics Department taken in 1948.

Unlike many current economics instructors, Dr. Charlie kept to the facts. We covered all the different economic theories, including the good points and bad points of each. Keynes vs. Friedman. The various theories of money. Strong central bank vs. weak central bank.  Equal emphasis was given to each one and we, the students, were left to question the fine points and decide for ourselves.

Our current government follows the theories of John Maynard Keynes. His belief was that with a strong central bank (The Federal Reserve) the government could manage a consistent economy without the highs and lows of a free market economy. The Fed controls the money supply by changing the interest rates, issuing bonds and printing money. Keynesian theory holds that an increase in the money supply will stimulate the economy. If the theory is correct, then with the very low interest rates, all the government borrowing and spending and the Fed’s quantitative easing (printing more money), then why is our economy so stagnant.

One problem is that the Fed cannot control the Velocity of money. Velocity is the number of times a dollar will be spent over a period of time. For example, if I take $100 out of the bank and buy a painting from an artist, he might then take that money and buy food from a farmer, who might then take that money and buy a part for his tractor and so on. My $100 could conceivably stimulate the economy by many hundreds of dollars. In a slow economy, people tend to hold on to their money; save it or pay down their debts.  This produces zero velocity and has an adverse effect on the economy.

So, in my opinion, the economy will come back when jobs and confidence come back. People who are insecure in their jobs or don’t have jobs do not spend any more than they must and this does not create the money velocity to grow the economy. The fastest way to grow jobs is to stimulate business development. Right now, business confidence is low. There is so much insecurity about the future, including the unknown costs of Obamacare and regulations coming from various government agencies, that businesses are reluctant to expand and hire additional people.  Until the government changes its attitude toward business, this sluggish economy will continue.