Ponca City, We love you writes “Scientists believe that powerful and unstable sound waves, created by energy supplied by the combustion process, were the cause of rocket failures in several US and Russian rockets. They’ve also observed these mysterious oscillations in other propulsion and power-generating systems such as missiles and gas turbines. Now, researchers at the Georgia Institute of Technology have developed a liquid rocket engine simulator and imaging techniques to help demystify the cause of these explosive sound waves and bring scientists a tiny closer to being able to understand and prevent them. The team was able to clearly demonstrate that the phenomenon manifests itself in the form of spinning acoustic waves that gain destructive power as they rotate around the rocket’s combustion chamber at a rate of 5,000 revolutions per second. Researchers developed a low-pressure combustor to simulate larger rocket engines then used a very-high-speed camera with fiber optic probes to observe the formation and behavior of excited spinning sound waves within the engine. ‘This is a very troublesome phenomenon in rockets,’ stated Professor Ben Zinn. ‘These spinning acoustic oscillations destroy engines without anyone fully understanding how these waves are formed. Visualizing this phenomenon brings us a step closer to understanding it.’”

Read more of this story at Slashdot.

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Filed under: International markets, Columns, Housing, Recession

Every economic problem or setback seeks a scapegoat — someone decision makers, pundits, and others can blame (unjustifiably) for a turn of events that’s preferred by virtually no one.

The criticism is parsimonious, unfair, and injurious — but that hasn’t seemed to cease practitioners from venturing forth with charges that are often tenuous, if not absurd.

Scapegoat-of-the-moment

The ever-incisive FT columnist Martin Wolf points out that former U.S. Federal Reserve Chairman Alan Greenspan is being cast as ‘the villain’ for the housing bubble, its bursting, and consequent impact on credit/bond markets and credit availability. All of it is unfair, Wolf notes, and he provides ample evidence to support his point.

Chiefly: Greenspan did not create low, long-term interest rates. The low, long-term rates were caused primarily by a global savings glut, Wolf said. (See: China’s savings rate.) The Fed had little control over this — Greenspan even creatively and accurately referred to the Fed’s inability to force long-term rates higher despite the Fed’s ideal effort: he called it “a conundrum.” Given the surplus savings sloshing around in global markets at that time, among other factors, those low rates would have occurred regardless of who was Fed chairman.

That Americans are unwilling to recognize this undeniable fact — long-term interest rates beyond the United States’ control — would not be inconsistent with the American ethos, Wolf notes. Americans never want to admit that there are circumstances the nation can not control, hence the need to find ‘a person who caused’ the housing tragedy.

Second, Wolf notes that housing bubbles occurred in other countries, as well, during 1997-2007: in the United Kingdom, Ireland, Netherlands, and Australia, among other countries. Unless one is prepared to state Alan Greenspan caused these bubbles, as well (an empirically weak argument), then one has to admit that perhaps there were other factors — perhaps even global factors — that contributed to housings’ great ride up and ride down.

Bubbles here, there, and everywhere

Further, Wolf does not point it out but it bears repeating: in addition to housing, the United Says has now experienced a string of bubbles (silver, dot-com / tech, Nasdaq, fine art?, oil / grains / commodities?) in its recent history. Greenspan wasn’t involved in any of these. But given that they occurred, perhaps it’s prudent to research what other structural factors in the American economy might have produced these bubbles. (Regarding fine art, if it conforms to housing’s asset appreciation dynamic, fine art values are in for a major decline. Stay tuned.)

Economic Analysis: Wolf does criticize Greenspan for being part of the government structure that contained what we now know was (and is) inadequate mortgage regulation. But to state that the housing sector’s current woes rest with him, and not with the FDIC, Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the U.S. Congress, is a simplistic and flawed argument, if ever there was one.

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Filed under: Other issues, Products and services, Berkshire Hathaway (BRK.A), Bargain stocks, Chasing Value, USG Corp (USG), Stocks to Purchase, Housing

Last year I wrote a very positive Chasing Value article suggesting that USG Corp (NYSE: USG) looked like a value proposition when it was trading around $52 a share. We bought it and to state we were way too early would be very very kind because it dropped with the market in the summer and has only recovered slightly.

Even worse, Alan Greenspan and Ben Bernanke are finally talking about a recession and USG is still laying off more workers, attempting to balance labor and product demand in a weak housing market and soft economy.

Berkshire Hathaway (NYSE: BRK.A) is still the largest shareholder, owning over 17% of the outstanding shares. Most of what I liked last year holds true but the depth of the economic downturn shows little signs of improvement. Housing and most related construction service industries are just trying to survive. They have all cut back production.

There’s tiny consensus when the economy might begin to show significant signs of improvement, but there are few people who think it will be soon, and I’ve spoken with many in the business community who think it will be 18 months at least. However, timing the market is always difficult so I believe that the ideal you can do is try and purchase solid companies on the cheap. The difficulties that USG is weathering now will turn into strengths in the future as it streamlines the enterprise, reduces debt, and plans for the future.

The discussion of USG in terms of value should not be hard to comprehend. Besides Warren Buffett’s big stake in the company, it should also be noted that value investor Fairholme Capital Management, L.L.C, lead by Bruce Berkowitz the long time managing member and portfolio manager, is the second largest shareholder with almost a 7% stake in the company.

The stock isn’t among the common types of companies I would include among my recommended watch list. Even though it has a low P/S of 0.66 (under one is favorable) and a low P/B of 1.61, it is losing money and currently has very low profit margins. It also pays no dividend, so this one isn’t for everybody.

You can see from the chart that USG is trading around the same price it was three years ago before the housing market went nuts. When I bought it around $50 there seemed to be some pricing stability but that was just the calm before the storm. I do not know when the housing market will recover but I think it will not get much worse. We will continue to see defaults and meager construction starts but not further collapse.

When the turnaround comes, the stock market does not usually send out formal notices, nor do I advocate tea leaves, fortune cookies or palm readers, so your best bet, if you are interested, is to buy a few shares now and a few shares later and ease into this boring company. If you do, you will be in good company. The shares shut up yesterday at $37.67 and is up further in trading this day.

For those who do not have the resources to dollar cost average into this stock and don’t have any interest in riding a stock with zero yield, patience is the order of the day. Perhaps it will test its lows again and an even superior opportnity will arrise. There are no must own stocks.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B and USG.

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