Month: March 2019

How buying a second hand hybrid can yield a 15% ROI

The bane of my existence has become the bridges in and out of Levin. Having accepted a new and challenging role in the Horowhenua region, I now am forced to relinquish my good habits around cycling to work (which have netted me an 8kg weight loss in the last few months in addition to hundreds of dollars in savings) in exchange for driving the admittedly slightly shorter distance, simply because the bike cannot negotiate the challenging high speed bridges in and out of Levin safely.

This is a big step backward for my plans to reduce my environmental footprint and lower my petrol costs. Not to mention that with my new role, I may be expected to travel great distances each week. But with each change comes the opportunity for positive adjustment.

I basically need to replace my car anyway. There’s no rush, but there has been an unsightly bit of cosmetic damage that would cost almost as much as the car is worth to repair. The main question is what type of car do I aim to get next – a petrol car or a hybrid? My main focus is to drive a car that at levels of high (read: sales career) usage, realistically pays for itself over time. There’s no point buying a car that’s cheaper upfront if the operating cost is over $1000 or more extra per year. If this leads to a reduction in carbon emissions that is all well and good as well. 

The main problem with hybrids has been cost efficiencies. Hybrid cars have often been reviewed negatively in the past, particularly in the US where many of these reviews originate from, simply because the economics do not stack up – the comparatively miniscule savings in fuel does not offset the higher capital cost of the new product. But this is not so much the case in NZ, and in particular is not so much the case in the second hand hybrid market, which is now flooded with apparently reasonable quality vehicles available for even less than $10,000. Part of the reason for this is that New Zealand taxes fuel far more heavily than the US, meaning that many of the reviews you read about hybrids ought to be discounted in the New Zealand context. 

I’ve scoured online sites and found a number of second hand hybrid cars for what I would consider good value – there is even one currently on sale for $2.50 with no reserve, although it has over 170,000 kms to its name. But, more to the point, there are a range of cars in the $6,000 to $8,000 price range, available for immediate purchase. It’s not like there’s just one or two of these options – there are dozens in this price range, each with well under 100,ooo kms to their odometer. Of course, with Trade Me, you’ll almost certainly need to make a trip up the line to get to it. 

I’ve done a spreadsheet which covers the calculations to justify a ROI of over 15% at the price point of $6995. It’s important to note that this calculator assumes continued fuel price inflation of 2.2% per year (around about the 10 year average in NZ). Because I’m replacing my car anyway, all I’m really doing is stripping the operating cost in a way that saves me money and pays for the new investment.

https://www.balancetransfers.co.nz/wp-content/uploads/2019/03/Jazz-vs-Hybrid.xlsx

The next thing to look at is how I can finance it, or if I have to pay cash. That is a question for another article, but one of the benefits of having a profitable business is that I can potentially put a lease through it. 
A car that pays for itself in six years that’s significantly more eco-friendly for a traveller? Hard to say no to. 

Turning Green Eatz’s Food Carbon Footprint into a calculator you can use

In the spirit of sharing useful Excel spreadsheets, I’ve adapted Green Eatz’s table of the amount of carbon emissions from the type of food consumed into what I hope is a useful calculator.

The calculator shows you the same table, but applies it to your household. All you have to do is enter the “Amount my household consumes” column and the calculator will tell you the total amount of CO2 emissions that result from your eating choices.

Household Co2 Emissions from FoodDownload

That gives you a sense of the relative weighting of each food type. For me, it has been really helpful in helping me visualise the amount of emissions that result from each type of food.

For instance, even though my household consumes only a few kilograms of lamb per year, those few kilograms amount to almost ten percent of total carbon emissions from food consumption attributable to the household.

From that data it’s pretty easy to see what can be improved upon – but the improvements you make are entirely up to you. I’ve just done this based on a bit of curiosity about what switching to an EAT Lancet or vegan diet might mean for my household’s overall carbon emissions.

A meal plan for EAT Lancet

The EAT Lancet report Commission recently released a report providing guidelines for how much meat to eat per day. The goal of this report is to reach a global consensus on what constitutes a sustainable diet. The results are quite punishing: according to the report, individuals should eat just 14g of beef, 14g of pork and 58g of chicken per average day. 
That’s not much. On a weekly basis, that works out to just under 100g of beef, 100g of pork and 406g of chicken per person per week. 

Is it possible to still be a meat eater with a majority of meat meals and achieve these targets? Perhaps. Below I have a go at preparing a meal plan to fit such guidelines. 

I’ve skipped breakfast on the assumption it can easily be done as muesli or cereal or pancakes, all of which are non-meat. Lunch is listed first, dinner after.

Saturday

Blueberry pancakes. (Make enough for two batches and save for tomorrow.)

1.2 kg roast chicken (to feed three people)Celery, carrot, onion, rosemary, lemon, salt and pepper, and potatoes for lots of handcut chips and peas to serve.Eat about 200g per person and keep half of the meat for leftovers during the week.

Boil the bones down for stock after the meal.

Put a whole pumpkin to roast in the oven at the same time you are roasting the chicken, in order to use for meals later in the week.

Sunday

Blueberry pancakes.

300g pork mince (for meatballs and wontons – for three people)

Make meatball recipe using egg, carrot, onion, breadcrumbs, spring onions, salt and pepper, cumin and coriander to make the meat go much further – this would create about 18 meatballs.

Using some of the broth from last night, make wonton noodle soup using noodles, chilli sauce, fish sauce, spring onion, ginger, mushroom, bok choi, and two meatballs as wontons (with wonton wrappers) per serve.

Monday

Package up about 200g of chicken per person for use in sandwiches and salads during the week, along with as many hand cut chips as you can take. Use about 50g of chicken per serve in your lunch, buy bread at the local baker.

Use the leftover roasted pumpkin to make Pasta Rotolo. Need 1 jar of passata, spinach, garlic cloves and feta or ricotta cheese, sage leaves, along with pasta sheets for the rotolo. This will go for three serves across two nights

Tuesday

Chicken salad/sandwich and chips as above.

Pasta with meatballs. Make a tagliatelle with tomato sauce – garlic cloves, oregano, red wine vinegar, two tins tomatoes and parmesan. Cook and add in two meatballs per serve. 

Wednesday

Chicken salad/sandwich and chips as above.

Pasta Rotolo as above.

Thursday

Chicken salad/sandwich and chips as above.

Use the leftover chicken broth to make any of a number of soups or dishes, such as leek and potato soup, or French onion soup.

Alternatively, make another round of wonton noodle soup and use up your remaining 6 meatballs as wontons for three serves.

Friday

By now you should have run out of leftovers. Buy lunch, non-meat based, up to $10. Or perhaps use some leftover tagliatelle. 

Steak night. Have 100g top quality steak per person. Add in lots of chips or mashed potato and spinach or greens to make it a rounded meal. 

There you have it. Sticking within EAT Lancet guidelines, it is still possible to have 9 out of 14 lunch and dinner meals as meat meals per week. 

Basically the above can be done with relative ease, but does require a bit of a switch from some meat to some carbs, especially potatoes. Effectively it requires the dilution of meat in the diet through creative use of meatballs and stock – what I call meat derivatives. Using these two features greatly extends the way in which a fairly small amount of meat can stretch across a week of meals. 

I am going to try this. But I’m not going to rush into it. Across the next few months, I’ll try variations of the above diet one week out of four to ease in to the new model. 

Understanding limitations and nuances of renewable power

I guess a theme that is emerging from this blog and from my life in general is around the whole idea of how hard it is to actually go green, how many ideas need to be trialled and discarded before you come up with a way, a simple clearcut unequivocal way, to make a meaningful dent in your carbon emissions.

It can be discouraging. Often, it’s a process of two steps forward, one step back, as are most things in life. It requires a lot of math to go green meaningfully. But it has many side benefits, and for me anyway, is a worthwhile side project.

I am always on the lookout for scalable strategies – stuff that might work, but that people might not have tried in detail before. And I like to produce honest case studies based on my experience. Sometimes the failure is more interesting than the success.

As I go through each one of these processes, constantly scanning for new content, I learn not only about the benefits of a thing but also the limitations and drawbacks. I learn that the process of going green is very much circumstance dependent.

It’s all part of a bigger long term vision. The other morning while I was writing in my diary at a cafe, I had a vision of all of Kapiti uniting as a single city, with the bright lights powered by renewable energy. The small things we do today I think create the future. The little tests, little experiments, build wisdom and resource for something far grander.

But the hard work and hard math has to be done first. Building the green city of Kapiti involves coming to an understanding about the limitations and nuances of renewable power. As much as anything.

Why I think quantitative easing will make things very, very hard

A few years ago as a result of the global financial crisis, central banks used quantitative easing to purchase securities from the market in order to lower interest rates and increase the money supply. The money was then distributed to lenders as a way of stabilising their balance sheets and then promoting lending.

The point is that despite everything feeling normal, we are actually in uncharted territory as far as economics is concerned. Following a major economic event that threatened to devastate the international economy and usher in a new great depression, central banks responded by dramatically increasing the money supply. This in turn resulted in a period of artificially low interest rates, more capital circulating in the economy, and the resumption of economic growth. It also led to (frankly), the return to old bad habits of investing in assets that have been shown so recently to be bubble-prone. 

This, despite the fact that the downsides of quantitative easing have not been figured out. We are very inexperienced with quantitative easing: this is, after all, a new maneouvre. There are two main drawbacks to quantitative easing that people regularly draw attention to, namely, that QE may cause inflation, and that it may devalue domestic currencies. But I believe that there is another, unscoped, potential risk to QE that will rear its ugly head in years to come. 

The loan hierarchy

To understand this third risk, we need to look at the loan hierarchy. The lenders to whom central banks have distributed the proceeds of QE have a hierarchy in terms of how they look at investment propositions. To radically simplify everything, let’s look at a hospital and the people who work within it and the way that banks may proceed in terms of funding certain investment propositions. 

A doctor comes to a bank to get a loan to buy a house. The bank looks at the doctor’s income, assets, and credit score, and notes that the doctor has a stable professional job and a good chance of repaying the loan over time. The lender therefore approves the loan. 

A nurse comes to a bank to get a loan to buy a house. The bank looks at the nurse’s income, assets, and credit score, and notes that the nurse has a stable professional job, albeit at a lower level of salary, and a good chance of repaying the loan over time. The lender therefore approves the loan. 

A part-time hospital orderly comes to a bank to get a loan to buy a house. The bank looks at the orderly’s income, assets, and credit score, and notes that while the orderly only works part time for the hospital, and that there is less of a margin on being able to service the loan due to an increase in asset valuations as a result of all the doctors and nurses having recently purchased houses, that the income nevertheless appears stable, and since the bank has relaxed their lending criteria due to having a surplus of capital to lend, there are some doubts, but if they don’t approve the loan, the orderly will go to the bank down the street and get it approved there. 

On and on it goes, during times of surplus capital and relaxed lending restrictions, until every man, woman and dog in the hospital has a loan. Eventually, the lenders are providing interest free loans to people to buy chainsaws to cut butter. Which leads to…

The mass creation of bad debt

A consequence of having so much capital circulating the economy is that irresponsible lending practices will likely result (again, as they did ten years ago). Lenders will reach further and further down the hierarchy in order to find ‘deals’. Even under normal circumstances, this could cause problems, but in the long run it also causes a major unforeseen event, which is that…

Loan defaults will be more responsive to interest rate rises

In the old days, when central banks increased interest rates in order to reduce inflation, they did so with at least some level of awareness of what sort of impact the interest rate might have on reductions in consumer spending. 

With QE, however, this has all changed. With dramatically more money in the economy, and that capital circulating around and around again due to the credit multiplier, the responsiveness of any nation to an increase in the central bank’s interest rate movements will be unpredictable and potentially more severe. 

To illustrate this, shifting interest rates upwards by 25 basis points would have dramatically more impact on consumer spending if it applied to one hundred million loans rather than 25 million loans. Particularly if the bottom 75 million loans are at the bottom of the loan hierarchy: loan defaults will skyrocket. 

My concern is not just that lenders may not have realised this, my concern is that people on the street (who under times of lax lending restrictions themselves become professional capital mispricers) may not have realised this. This is one of those things that is going to be so simple in hindsight – and yet, few, if anyone, will have seen it coming.