Most of the time God,Pratt & Whitney or General Electric, will give you another turn in the Barrel.

These are my opinions and my opinions only they do not reflect the opinions of any of my family members or their employer. Note we NOW have NO employers.

Back from a 5.5 Year PCS from the confines of the far Southwest corner of Bundesrepublik Deutschland. The Federal Republic of Germany and Retired.

Friday, November 30, 2012

Is it going to be a sprint to the exit?

Who will be the last NATO member troops is a given, it is the United State.  The question is what will that date be?  Our NATO partners have already left the starting gate and are accelerating the withdrawal of their troops and funding.  Are we going to be the cheese who stands alone?
 The House of Representatives wants to keep 68,000 troops Afghanistan for the year 2013 and 2014. The Department of Defense has not objected to these force levels for 2013 and 2014, it delays their force reduction trials and tribulations.  Several groups (Think Tanks) have proposed that the troop level in the out years should be around 30,000 troops.  The Department of Defense has been strangely quiet on the post 2014 troop levels.
The United Senate just past a resolution passed by 62 members of the Senate asking the administration to accelerate the withdraw United States forces from Afghanistan.
Why not, if you believe the various NATO/DOD reported by statements of the various leaders, and by written documentation say that the ANA is ready willing and able to assume the lead in counter terrorism missions, then it appears to be a no brainer, to quote the Nike Corporation slogan “Just Do It”.
Let us just declare victory, leave, and quit spending the money.  Some have suggested that it will take at least 30 Billion dollars per year to keep and support a proposed 30,000 troops post 2014 footprint in Afghanistan.  If we want to keep the troops in the Service so be it, keep them in the United States.  I will content that it is better to spend the estimated 30 Billion dollars within the confines of the United States and reap the rewards rather than boost the economy of some foreign government.

How to waste an afternoon looking at the Deal of the Century

This afternoon I started a journey down the rabbit hole, this journey stated after a conversation with an individual who had a past association with several DOD program management offices and hearing some of the stories associated with these programs they were the managers, I sat on the other side of the table as a contractor.  The question came up as to just how much a F-35 the new hope for manned combat aircraft for the United States Air Force, the United States Navy, and the United States Marine Corp airframe cost the Department of Defense.

This individual was quick to quote the latest flyaway cost, the actual cost to build that airframe.  I asked is that really how you should calculate the cost?  I asked what about all of the R&D cost associated with the program that had been accumulated and still are accumulating?  Their response was to forget about it after all they were sunk cost, which sent a chill through me.  My experience in developing commercial products where the cost of development for my company came from cash flow and loans told me a different story.  These “sunk” development cost are typically quite sizeable in comparison to the actual production cost of the individual item, and that they have to be accounted for and eventually recovered through the sale of the end product, after all we hopefully are a profit making enterprise.  I foolish asked that since they had been associated with this program (for abet a short period) did they have an idea of amount of these costs?  Their response was that it was unknown to them.
This was quite a shock, and if this individual mindset were anywhere typical of the personnel in the program management office, then that would go a long way to explain the predicament of the project.  Note this is not to be critical of any individuals they have to operate and advance within the rules of the system that is the Department of Defense.  It is more of an indictment of the United States Congress for allowing it and the Department of Defense for perpetuating it, because in the end it is after all OPM (Other Peoples Money).
Military personnel are transient in their career ladders, never allowed to sit in any one billet for any extended period, never really allowed to master any single program or task.  The continuity is typically provided by the DOD civil service employee, however typically the ones that stay for any extended period in a program office have little if any real authority to effect change in a program, and those civil service employee that do have any real authority are typically quickly moving on to other slots.
My First step into the Abyss was a staggering in that it took at least an hour to find reliable detailed sources of data, and that is a story for another day.  But once the sources were found (typically Volume 2 RDT&E), one might expect that everything would be easy after that point, boy was that was a mistake.
The next step trying to make headway into the data was worse than the first step.  The data had to be extracted from various DOD budget documents (in this case USAF since they are the lead agency for the program), and various locations in these documents, along with several format changes, and in many cases the grand totals of actual expenditures for a given year had to calculate since they were not presented in the documents.   Additionally the various actual expenditures had to be computed several times in that next year budget document would provide revised actual expenditure from previous years.  For some unexplained reason the Department of Air Force could not added up expenditures, especially if they contain expenditures by other services or countries.
Due to my eyes glazing over and the headache that was building I decided not to aggregate cost of the F-35 program that exist in other parts of the Department of the Air Force budgets, like the Operations and Maintenance Budget, and Military Construction Budget, and in other weapon development program budgets (for example the Small Diameter Munitions program, but there are F-35 program cost in other program budgets)
If I did not know better I might suspect that some elements in the DOD, the Congress, and the contractors might be trying to hide something, but that could not be true, not in our Democracy.  Our elected representative and the individual that are appointed to positions in the Department of Defense both civilian and military are all honorable individual with no hidden private agendas or vested personal interests in these programs.
Well here are the results of one afternoon of scrounging around the DOD Budgets and it is not pretty.  First the data, for the full effect I decided to presented the data with all of the associated with digits, that way one can see just how large the numbers are.
The DOD repots typically record the numbers either in terms of Thousands or Millions of Dollars.  I think that it is done in an attempt to keep the appearance of the numbers small that way individuals who are just casually looking will not realize just how large they are and continue on their merry way none the wiser.
Before I get to the numbers that I could find, as a side note the cumulative spending (actual and planned) on the F-35 program if it were a nation would place it number 55 on the IMF nominal GDP list of 184 countries, and number 51 on the World Banks nominal GDP list of 190 countries, and finally number 51 on the United Nations List of nominal GDP list of 193 countries.
F-35 program actual and projected expenditures to date would exceed the nominal GDP of some 70 percent of the nations of the world.  We, and our allies have either spent or plan to spend a great deal of money on this weapon system that at the end of the day become one hell of a revenue stream and profit center for the Lockheed Martin Company.
Incremental Spend
Cumulative Spend
Table 1
These numbers are astonishing in their size.  The sheer magnitude should be mind-boggling.  For those who are more visually inclined is a graph of the data in table 1.
The DOD is big on talking about flyaway costs, partly I suspect is that sticker shock might kill if not maim members of the Congress and more importantly the taxpayers of the United States.  Theoretically flyaway cost are the costs associated with actually building the airframe, and just forgetting any other accumulated program cost, after all those costs are sunk.  As of this writing the DOD is estimating that the flyaway cost for an airframe at 150 Million Dollars, and is estimated to fall to 100 Million Dollars (assuming 2443 airframes).  Just a side note in 1996 DOD projected the flyaway cost at 35 Million Dollars per airframe.  F-22A flyaway costs have been reported at 142.7 Million Dollars per airframe based 187 airframes.  Flyaway cost is a red herring it is designed to keep your eye off the true cost of airframe.
You and I paid those cost and they do matter.  Projected airframe cost for 215 airframes that the DOD is anticipating to have built by 2016 would bring the average cost per airframe to $671,779,893.02 Dollars each, 672 Million Dollars each.  That is a great deal of money to spend for an airframe, especially one that is expected to go into harms way.  Table 2 displays the cost of airframes based on cumulative program costs.
The first F-35’s (all two of them) cost the United States Government and the other participants at least $14,723,459,000.00 each for the first two airframes, for those who do not like to count up all the digits that is 14.7 Billion Dollars.  This is just an estimate in that I could not easily find program expenditures prior 1997.
Table 2

Below is a graph of the data in Table 2.  It would take the production of a great many airframes to get the cost down to point where the average cost of an airframe get under 500 Billion Dollars per airframe, and it is very likely that the cost of the airframe would never get below 250 Billion Dollars per airframe, given that there is current projected fly away cost for airframes are being advertised as 150 to 167 Million Dollars.

Well so much for this installment of the deal of the century.  The funds that we have spent to date on this program are lost.  But the funds that are currently planned to be spent can be saved and might actually make a small dent in our ever-expanding national debt.

This just in the JSF/F-35 Program office announced late in the afternoon 30 November that they have just reached an agreement with Lockheed Martin on the "Flyaway Cost" for the next batch of airframes (32) and will sign the contract modification for some $4,400,000,000.00 Dollars also know as 4.4 Billion Dollars sometime in the next few weeks. This is part of the allocated 12.8 Billion for FY 2013.  Why the big hurry, committed funds via contract or contract mod are not subject to sequestration.  We are taking care of the elephants, they will have enough food and water to weather the coming  storm, and the ever-expanding national debt just keeps rolling on to the sea.

Wednesday, November 28, 2012

Why is Italy different?

Paul Krugman in his blog asked the question “What’s The Matter With Italy?” the question was how come the Italian worker less productive than a French worker.  Several difference fundamental differences between the two countries might be the reason for the difference.  Italy has higher percentage of self-employed individuals (27.0 %) than France (8.0 %)1.  Italy has a lower percentage of tax compliance (62.47 %) versus France with (75.38%)2.  Italy has a much lower transparence score (3.9) than France (7.0) according to Transparency International 3.  Italy has a higher percentage of cash transactions (90.0%) versus France with (59.0%)4.
Self-Employed, and Cash transaction add up to the perfect storm for hiding income from the taxman, and the government, which in the end could skew the government calculation of GDP, which could cause the reported productivity per person to be understated.  The failure to report all of the cash transactions in order to reduce taxable income, and the out right failure by a significant portion of the population to submit to taxing authorities, and the possible indifference of public servants via verbatim compliance with a myriad of complex, contradictory, and intractable rules and regulations, could also add to difference.  Corruption could also play a significant factor.
Just how accurate this last source is somewhat questionable?

Sunday, November 18, 2012

Why would a Gold Trader/Dealer/Broker advise you to BUY GOLD on the Dip?

What a lucky soul you are in that you found that article that someone had so conveniently posted  on that business and financial news web site, you know the one that quoted this great advice by Mr. Trader/Dealer/Broker (aka Mr. Trader) on this investment (in this case Gold).  You know the web site I am talking about the one with all the advertisements for Brokerage House, Mutual Funds, Investment News letters, that are just one click away.  How fortunate you are, and you do not even realize it.
What possible reason would a Gold Trader/Dealer/Broker (aka Mr. Trader) advise you (aka Mr. Little) to buy Gold on the Dip?  Is Mr. Trader just an all around nice guy trying to help the “little guy” out?  Could be that Mr. Trader is trying to make the world a better place? (We maybe just for himself)  Is he your brother? (Nope)  Is he your cousin? (Probably not)  Is he your cousin’s cousin? (Might be)  Is he your friend?  (Do you still believe in the Easter Bunny?).
Or could it be he has a large unrealized net gain in his Gold position, and he would like you to help him to convert to a realized net gain? (On a scale of 1 to 10, this rates as an 11).
Could it be that his commission income not quite where they need to be for his yearend bonus? (On a scale of 1 to 10 it is about a 9).
Could it be that he has a big customer (much bigger than you) (aka Mr. Big) that has a large unrealized net gain in their Gold position who has decided to take their capital gain now while the tax rate is favorable?  And it just so happens that he will realize a nice healthy commission from Mr. Big (He might have even given Mr. Big a discount in order to keep the Golden Goose, no such luck for you my little friend you must pay full fare) and a commission from you Mr. Little (How lucky you are to be allowed into the tent). (On a scale of 1 to 10, this is somewhere between 10 and 11).
Gold is up some 560 percent sine 2001, is it realistic to think that it will continue at this blister pace for the foreseeable future? (Just my only humble opinion, but on a scale of 1 to 10, I rate it a 1).  Remember that guy Newton?  Well he formulate this little theorem called Reversion to the Mean, or Regression to the Mean, just a fancy way of saying that physical systems like to be lukewarm or Momma Bear porridge (Not too hot and not too cold).  It appears that gold has been on a tear since 2001, what is in the cards that would or could lead someone to assume/construe/conjecture that it will continue like it has in the future? (I do not know and I would suspect that a great many do not know, so maybe it is a good time to get out of Dodge, to find a greater fool to buy this tulip bulb, or an island with untold riches in the south seas).
Ok so now that you have your antenna up, your asking your self (Self, what is in it for this guy (me)?).  There is something in it for me, but probably what you might expect.
This post is but one in a series of post that I have generated for my children.  I have a vested interest in their future success (genetically that is, my limited immortality).  I know that my time like all of our time is limited on this planet (God gave us only so much and he does not care to share with us the amount that he has allocated to us, he has his reasons).  These posts are an attempt to codify some of the things that I learned the hard way and some of the wisdom that was given to me by my parents, grandparents and great grandparents, in an attempt to keep my children from making my and their mistakes.  I have paid for each of my mistakes with the most precious commodity that I have (no it is not money) it is time.  So take it for what it is worth to you no more no less, after all these are only the words of an old man.

Saturday, November 17, 2012

If this is what victory looks like I would sure hate to see defeat.

I am sure the following article in the was overlooked during the that installment of the fast and furious (AKA the election and its associated campaign).
Here is the link for you to read for your self.
If ISAF, the majority composition being United States forces, is truly wining the hearts and minds of the Afghanistan then why are these numbers being reported?
Why on Sept 20th 2012 did the head of the Joint Improvised Explosive Device Defeat Organization (JIEDDO) (What a name, who the hell comes up with these zingers?  He should be fired!) Lt. Gen Michael Barbero reported to the House Appropriations defense subcommittee “in the past two years, IED events have increased 42 percent, from 9,300 in 2009 to 16,000 in 2011. This year we’re on track to meet or exceed the number of events we saw last year. In fact, this July we saw the highest number of monthly IED events ever recorded.”
Does this sound like we are wining?
And this from the Air ForceTimes
At the time Air Mobility Command Combat Tactics Branch chief and director of operations Maj. Thomas Lankford, now Lt. Col. Thomas Lankford is quoted as saying “about 40 forward-operating bases were supplied by airdrop alone last year”. That would be for the year 2011.  This number was later updated to 43 forward operating bases.
“43 forward operating bases in Afghanistan were supplied solely by air, with 27,000 troops receiving all of their food, water, ammunition and fuel from the sky, dropped primarily by the U.S. Air Force” (Defense weekly)
Imagine that?  43 manned forward operating bases that through a combination or impassable terrain, poor to non existent roads, IED’s, and either direct attack by hostile enemy forces or the threat of direct attack by hostile enemy forces, we the ISAF/NATO United States Armed forces were forced to resupply these elements via airdrops.  It sounds like the end game at Stalingrad for the Sixth German Army, and or the French Far East Expeditionary Corp at Dien Bien Phu.  Thank god that the Taliban do not have anywhere near the anti aircraft artillery that the Soviet Army and Viet Minh had.  It appears that we the United States Armed forces do not control our lines of communications (LOCs) (This is not a good thing).
We have had 10 years to improve the road networks, but for a myriad of reasons have been unable to accomplish this task.  Number one reason cited is the territory is not safe, meaning the hostiles currently have enough of a presents to deny us the use of the ground.  But even in area where it appears that we do control the country side improvements seem to be singularly unimpressive.  Case in point is the Salang Tunnel, which with the loss ground resupply routes from Pakistan via Khyber Pass, has now taken on new importance, since it is now the only ground route left for bring NATO/ISAF supplies into or in the case of a draw down out of Afghanistan.  The toll and fees on the Pakistan route are considered to be too excessive.  Cannot really blame Pakistan, with the announced draw down and such the money train is due to leave the station soon, and you want to strike while the iron is hot.  NATO/ISAF staff is just getting around to planning on upgrading this tunnel, which by most accounts is in terrible and fairly unsafe conditions.   The tunnel that was completed in 1964 was designed for 1,000 vehicles per day traffic now experiences traffic in excess of 16,000 vehicles per day.
While and when the Pakistan route via the Khyber Pass was in use as the primary supply route for NATO/ISAF supplies it accounted for 80 percent of supplies delivered.
In 2005 the first year that the Air Force started to track airdrop of supplies, only 2 million pounds were delivered in this manner.  In 2006 3.5 million pounds of supplies were reported as airdropped.  2007 8.1 million pounds of supplies were air dropped.  2008 16.5 million pounds of supplies were delivered by airdrop.  2009 32.2 million pounds of supplies were airdropped.  60.4 million pounds were recorded as airdropped in 2010. It was reported that 30 million pounds of supplies were air dropped.  In 2010 the United States Air Force reported that 60 million pounds were air dropped.  In 2011 80.4 million pounds of supplies were air dropped.  We do not have number for 2012 but my bet is that it is greater or equal to 2011 numbers maybe 92 million pounds (it is just a guess).
For those of you who are more visually inclined I have provided the following graph.
To put into daily terms and scales that most of us know as to how much is being delivered via airdrop in Afghanistan, I have provided the following examples.
In 2006 it was weight equivalent of dropping the 1.4 Ford F-150’s from the sky everyday for the entire year.  2007 we are now dropping 3.26 F-150’s from the sky everyday of the year.  In 2008 we are up to 6.65 F-150’s everyday of the year or 1 every 4 hours of everyday of the year.  2009 it is 12.97 F-150’s, a little over one every two hours everyday of the year.  2010 we at 24.17 F-150’s everyday, or 1 every hour of everyday for the entire year.  2011 it is 32.39 F-150’s everyday, or 1.34 every hour of everyday for the entire year.
Be advised in the process of doing all of this we are flying the guts out of our C-130, C-17, and C-5 aircraft fleets, they will not make there project operational life time since those calculation were based on lower number of annual flight hours, but that is another problem for another day.
There was also the US Marine Corp experiment in Afghanistan with 2 unmanned K-MAX helicopters with the capability to the delivery of up to 3.5 tons of supplies to forward operating bases.  The Marines decided to perform this task at night in order to reduce the chance that the vehicles would be taken out by ground based small arms fire.  As reported in Defense Industry Daily, since November 2011 to July 2012, the 2 K-Max aircrafts have flow 485 sorties, with 525 hours in flight and delivered more than 1.6 million pounds of cargo.  This 1.6 million is in addition to that delivered via airdrop by the United States Air Force.
And then there is this from the following link
June 2012 the United States Air Force Air Mobility Command Chief Gen. Raymond E. Johns Jr. predicts that about a third of the forces in Afghanistan later this year will be supported exclusively by airdropped supplies- everything from food and ammunition pallets to water and fuel bladders.  If that is not another stone on the pile that we do not control the ground what is?
The ever increasing tonnage of supplies being airdropped to forward operating bases, the increasing number of IED being encounter, and one must assume that these are in the area’s that NATO/ISAF feels are under there control, since we can deduce by the airdrop numbers that the command will not even consider resupply to these sites by convoy.
Does this sound like we control the countryside, or even enough of the countryside to make a difference.
Based on Brian Cloughley (Analyst for IHS/Jane’s Sentinel) post in found here in the The News
God only knows how sedated the briefer of the Secretary General of NATO Anders Fogh Rasmussen was and for that matter how sedated the Secretary General of NATO was when he was briefed.  The Secretary General is quoted as saying afterward that “The enemy is being pushed further back from the population”, and “We saw Afghan security forces that are growing more capable and more confident” as stated in the article these statements by the Secretary General are “ misleading to the point of downright dishonesty.”
We still have Green on Blue incidences, yes the number are down, I suspect because NATO/ISAF has significantly reduced the amount of exposure NATO/ISAF personnel have to ANA personnel.
Does it sound like victory?

Words have meaning

The following statement is taken from a CNBC article.
“The Swiss Bank announced plans to fire 10,000 bankers last month, as it abandons much of its fixed income trading operation”
Should or could one construe or infer that the bank has employed for sometime and continued to employ for sometime some 10,000 underperforming bankers, and had just discovered that they underperforming?  If that were the case then the shareholders of the company would at first glance have a strong case against the management and board of directors for gross malfeasants.
What is your reaction when someone says that they were “fired”, versus “let go”, “laid off”.  Do the mean or imply the same thing.  Do these words have different connotations?  I suspect that many will agree that there are different connotations associated with the three cited passages, and that there could be a great deal of overlap between the latter two of them, but almost no commonality with the first.
Or could the statement have been as follows
“The Swiss Bank announce that because of recent changes in the market they were abandoning much of their fixed income trading operations, and therefore announced that reluctantly they were laying off 10,000 bankers.”
If brevity was one of the primary requirements for this article then the statement could have read as follows
“The Swiss Bank announced plans to layoff 10,000 bankers last month, as it abandons much of its fixed income trading operation”
Again what is the difference in connotation between “layoff” and “fired”.  In much of the world there is a big difference between being fired and being laid off, it has to do with ability to receive unemployment benefits, and or SUB-pay benefits.
Firing commonly refers to the involuntary termination of employment for cause, and in many cases to be dishonorable and a sign of failure the fault is the employee’s.
Laid off refers to the involuntary termination of employment usually not strictly related to personal performance but due to economic reasons, and or company restricting.
The most remarkable concern about the first quote for me is that an individual who graduated “Magna Cum Laude” from Columbia University could have produced it.  Have the academic standards at Columbia University slipped?
This is not the first time that I have encountered this type of commentary from this author, it is just the first time that it bothered me enough to sit down, take the time, and write a comment.