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Is America back in the space business?


If you were watching television this Thursday, you may have caught the launching of a low-orbit Spanish government-commissioned satellite launched from Vandenberg Air Force Base in California. The difference between today and 25 years ago is that it was a private company called Space X, rather than NASA, that made it happen.

For old guys like me, space exploration was a big deal while growing up. Americans my age cheered and cried as the U.S. raced for space from the tragic death of the crew of Apollo One in 1967, to the first moon walk in 1969 (and no, I don’t mean Michael Jackson).   The work day would be put on pause as everyone watched the latest rocket launch from Cape Canaveral.  If the launch was on the weekend, the family would gather around the television to applaud our latest leap into space.

But America’s interest and commitment to space waned as the years went by. The space shuttle program was expensive and the government had other wars to fight. Building new space craft required lots of new technology with no guarantee of success. And there was a limited pool of people that had the expertise in space flight operations and even less who were capable of space flight operations.

Yet, there were some among us, call them entrepreneurs, visionaries or just good businessmen, that still believed in space. But in addition, they believed that there were economic possibilities in pursuing space. People like Elon Musk (the electric car guy) who was willing to go where others feared to tread. A flood of new private money began to flow into private space projects. Rather than construct the behemoth rockets and huge space ports of yesteryear, today companies such as the Musk-owned Space X make do with a few trailers and super-thin rockets topped by large payload capacities.

In a new approach to cost savings, rocket parts are designed to be reusable (like the old space shuttles). Space X, for example, tries to save the first stage of its rockets. New technologies also allow for many of these modern rockets to land once their mission is over, which saves even more money.

This Thursday’s successful launch, for example, is the second time Falcon 9 is being used for space duty. It is the same rocket that was launched in 2016 on a cargo resupply mission for NASA. Its payload this time is a satellite for the Spanish government.

Space X is reported to be charging $60 million for the service, plus launching costs. There have been other cargos that commanded even more (upwards of $160 million), depending upon the amount of cargo involved. The cost to make the Falcon 9 was roughly $60 million, plus $200,000 to fuel it.

These private efforts were spurred on last year by a series of actions by the federal government and a president who has long harbored a soft spot in his heart for space. The difference this time around is that President Trump, while rededicating the U.S. to the exploration and utilization of the moon, Mars, and space in general, will rely on private companies to achieve that goal. He wants to make the U.S. “the most attractive jurisdiction in the world for private-sector investment and innovation in outer space.”

Space exploration is a goal that all of us can get excited about, something that could pull us together again and provide an enormous pay-off in ways we cannot even begin to imagine. I don’t care how we get there, just as long as we do. As one of my heroes once said “to infinity and beyond” –let’s do it!

 

 

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Is America back in the space business?


If you were watching television this Thursday, you may have caught the launching of a low-orbit Spanish government-commissioned satellite launched from Vandenberg Air Force Base in California. The difference between today and 25 years ago is that it was a private company called Space X, rather than NASA, that made it happen.

For old guys like me, space exploration was a big deal while growing up. Americans my age cheered and cried as the U.S. raced for space from the tragic death of the crew of Apollo One in 1967, to the first moon walk in 1969 (and no, I don’t mean Michael Jackson).   The work day would be put on pause as everyone watched the latest rocket launch from Cape Canaveral.  If the launch was on the weekend, the family would gather around the television to applaud our latest leap into space.

But America’s interest and commitment to space waned as the years went by. The space shuttle program was expensive and the government had other wars to fight. Building new space craft required lots of new technology with no guarantee of success. And there was a limited pool of people that had the expertise in space flight operations and even less who were capable of space flight operations.

Yet, there were some among us, call them entrepreneurs, visionaries or just good businessmen, that still believed in space. But in addition, they believed that there were economic possibilities in pursuing space. People like Elon Musk (the electric car guy) who was willing to go where others feared to tread. A flood of new private money began to flow into private space projects. Rather than construct the behemoth rockets and huge space ports of yesteryear, today companies such as the Musk-owned Space X make do with a few trailers and super-thin rockets topped by large payload capacities.

In a new approach to cost savings, rocket parts are designed to be reusable (like the old space shuttles). Space X, for example, tries to save the first stage of its rockets. New technologies also allow for many of these modern rockets to land once their mission is over, which saves even more money.

This Thursday’s successful launch, for example, is the second time Falcon 9 is being used for space duty. It is the same rocket that was launched in 2016 on a cargo resupply mission for NASA. Its payload this time is a satellite for the Spanish government.

Space X is reported to be charging $60 million for the service, plus launching costs. There have been other cargos that commanded even more (upwards of $160 million), depending upon the amount of cargo involved. The cost to make the Falcon 9 was roughly $60 million, plus $200,000 to fuel it.

These private efforts were spurred on last year by a series of actions by the federal government and a president who has long harbored a soft spot in his heart for space. The difference this time around is that President Trump, while rededicating the U.S. to the exploration and utilization of the moon, Mars, and space in general, will rely on private companies to achieve that goal. He wants to make the U.S. “the most attractive jurisdiction in the world for private-sector investment and innovation in outer space.”

Space exploration is a goal that all of us can get excited about, something that could pull us together again and provide an enormous pay-off in ways we cannot even begin to imagine. I don’t care how we get there, just as long as we do. As one of my heroes once said “to infinity and beyond” –let’s do it!

 

 

Don’t be fooled by this correction

 

Investors suffered through one of the worst weeks we have had in two years. Two out of the three main U.S. indexes have dropped by ten percent or more. Overseas, especially in Asia, some stock markets are down 12%. This waterfall-like decline is an opportunity to buy, not sell.

There is nothing fundamentally wrong with either the economy or the financial markets. We are simply having the correction I have been waiting for these past months. Last Friday, I explained what triggered the decline—higher wage growth, which led to a spike in interest rates. But as the sell-off deepened, other factors came into play.

You have heard me mention the Volatility Index, or fear gauge, from time to time. It is an index that for well over a year has declined month after month as the market climbed. All was right with the world as our Tweeter-in-Chief pointed to the climbing market as a referendum on his performance as president. More and more people believed that America was entering a golden age where all would be “great.”

In a market such as this, why not bet against this Volatility Index? And there just so happens to be several ways to play and profit from shorting the VIX. Some exchange traded notes and funds allow you to bet for and against volatility. Most of them are leveraged derivations (think real estate derivations back in 2008-2009) and plenty of people have made a fortune betting against an increase in volatility–until this week.

As the markets sold off and volatility spiked, these instruments cratered, leaving speculators to suffer major losses. To make matters worse, many of these gamblers had bought these instruments on margin (borrowing against other holdings in order to buy these VIX products at a fraction of their price). For many, it was a no-brainer and a method of minting money during the Trump Era.

As these derivative instruments declined along with the markets, major lenders demanded more security to maintain these margined positions. These calls usually go out in the afternoon and the money owed has to be delivered on the same day. As 3 P.M. margin calls became a daily occurrence, more and more traders were forced to sell stocks to raise cash in order to meet these calls.

It is one reason why the markets have tried to rally in the morning, but by mid-day or later, started to tumble. Some of these instruments have simply been shut down. Others are still trading and gyrating up and down while creating huge losses and gains by the hour.  I expect that in the next week, these derivatives will flatten out giving the overall market the space it needs to find a bottom.

I originally expected no more than a 5-6% pullback. Now that we have had a 10% decline, I’m loving the stock market. As for the second half of the year, there is not enough data out there for me to make a call just yet on whether this Republican-inspired tax cut will ultimately be the cause of a long-overdue recession. That may sound like a contradiction in terms, since tax cuts are supposed to help the economy, not sink it. Why and how that could occur, I’ve already mentioned in past columns, but over the coming months I will elaborate the risks.

Higher wages clobber markets

Gains in a worker’s paycheck are supposed to be a good thing, right? It means they can spend more, which contributes to growth in the economy, and maybe have a happier life. If all of that is true, why has the stock market swooned in response to Friday’s labor report? read more…

Health care and the three musketeers

Earlier this week, three of the country’s most influential corporate titans sounded a call to battle. Given the inaction of our government, these modern-day musketeers are preparing to storm the battlements of sky-rocketing health care costs. read more…

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About Bill

Bill Schmick was born in a blue-collar neighborhood of Philadelphia, just a few blocks north of “Rocky Balboa” territory where most of his Catholic schoolmates grew up to be either cops or criminals. He narrowly escaped both professions by volunteering to fight in Vietnam as a U.S. Marine... Read More

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