SpaceX: General Falcon and Dragon discussion (Thread 2)

[Robotbeat]

What's more, you are underestimating the general devaluation of the dollar. If you expected a price of 27M in 2003/4 that easily translates to 40M today, and about 47M for 2015.

By 2015 I think it will be closer to an equivalent value of $80-$100Million than $47M.  Quantitative Easing.  It's called "printing your way out of debt = massive inflation".  That is also imo why there is a thread about future EELV prices going a lot higher.  No.  More like the dollar going a lot lower!

But regrettably that's the price you'll pay for your fiscal deficit and lax bank regulation. I real pity since you used to were a beacon of true capitalism to the rest of the world.

 
Amen.

Ha! Right now and for the last year or two, we've had either deflation or virtually no inflation. Certainly below the 2%-5% inflation that is typically expected for a healthy economy.

[newtype_alpha]

Deflation my butt. We've seen noticeable price increases in just about everything over just the past three years, let alone the past ten.

Not to get too far into an economic debate, but there's a certain amount of B.S. involved in the assumption that inflation is always a good thing and deflation is always a bad thing. Deflation turns into a net advantage for holders of long-term investments and savings, since the quantity of money in the account remains the same while the real value of that money begins to rise. Thus a company with 650 million in investments suddenly makes out like a bandit when the cost of everything suddenly drops by five percent.

[baldusi]

Ha! Right now and for the last year or two, we've had either deflation or virtually no inflation. Certainly below the 2%-5% inflation that is typically expected for a healthy economy.

USA is in a very deep recession, and thus some prices might be lower. But SpaceX buys a lot of stuff at international prices. And the dollar has been plummeting. In fact, it has forced the rest of the world to emit and thus almost every money has lost value. But dollar has lost faster.
You can see that in the commodity prices. And SpaceX, being an integrated company, has almost all input prices increased in dollars. In any case you should keep that in mind when stating that they have increased prices.
The other issue is that the SpaceX risk premium has been also lowering. If you signed a contract, even a IQIT, in 2005, for 2013 you should expect a lot of discount for betting on a company full of good intentions but with nothing to show. Now let's say you are in 2012, they have successfully executed COTS 2 and COTS 3 (2 missions) nominal and successfully launched a Falcon 1e. The SpaceX risk and Falcon 9 risk would be way lower. As such, the increase in price can also be explained by the company's reliability. That's how capitalism work.

[Sen]

And: when things are still in early planning and haven't been decided, the options are nearly infinite.  Why stop at VAFB and Kwaj?  Kodiak?  Chile?  Brazoria County?  Nova Scotia?

If you expected a price of 27M in 2003/4 that easily translates to 40M today, and about 47M for 2015. Coming from a third world country, I'm used to a money losing its value. It's difficult for you, that have been the premier accounts denominator. But regrettably that's the price you'll pay for your fiscal deficit and lax bank regulation and cowboy economic attitude. I real pity since you used to were a beacon of true capitalism to the rest of the world.

Dont cry for us Argentina. Economics is a cycle and we have and will make it through just fine in the end.

[go4mars]

What's more, you are underestimating the general devaluation of the dollar. If you expected a price of 27M in 2003/4 that easily translates to 40M today, and about 47M for 2015.

By 2015 I think it will be closer to an equivalent value of $80-$100Million than $47M.  Quantitative Easing.  It's called "printing your way out of debt = massive inflation".  That is also imo why there is a thread about future EELV prices going a lot higher.  No.  More like the dollar going a lot lower!

But regrettably that's the price you'll pay for your fiscal deficit and lax bank regulation. I real pity since you used to were a beacon of true capitalism to the rest of the world.

 
Amen.

Ha! Right now and for the last year or two, we've had either deflation or virtually no inflation. Certainly below the 2%-5% inflation that is typically expected for a healthy economy.

If you like fudged numbers than sure.  CPI in the US doesn't include food, energy, or taxes.  Which is rediculous.  Might as well only pick things that are going down in price through better technology, or relatively cheapening overseas labour and call that farce CPI (sarcasm in that sentence).  Inflation is only good for the very wealthy.  If you want to help the little guys, deflation (which you truly haven't had) is good.  Inflation is already evident in stock markets over the last 3 months (the first place your new money from Kinko's goes).  It is the primary source of cost rises for future EELV (though there may be other smaller factors).  The future will cost more for all launchers.  Except maybe ones that are already sitting in warehouses.   

[Robotbeat]

What's more, you are underestimating the general devaluation of the dollar. If you expected a price of 27M in 2003/4 that easily translates to 40M today, and about 47M for 2015.

By 2015 I think it will be closer to an equivalent value of $80-$100Million than $47M.  Quantitative Easing.  It's called "printing your way out of debt = massive inflation".  That is also imo why there is a thread about future EELV prices going a lot higher.  No.  More like the dollar going a lot lower!

But regrettably that's the price you'll pay for your fiscal deficit and lax bank regulation. I real pity since you used to were a beacon of true capitalism to the rest of the world.

 
Amen.

Ha! Right now and for the last year or two, we've had either deflation or virtually no inflation. Certainly below the 2%-5% inflation that is typically expected for a healthy economy.

If you like fudged numbers than sure.  CPI in the US doesn't include food, energy, or taxes.  Which is rediculous.  Might as well only pick things that are going down in price through better technology, or relatively cheapening overseas labour and call that farce CPI.  Inflation is only good for the very wealthy.  If you want to help the little guys, deflation (which you truly haven't had) is good.  Inflation is already evident in stock markets over the last 3 months (the first place your new money from Kinko's goes).  It is the primary source of cost rises for future EELV (though there may be other smaller factors).  The future will cost more for all launchers.  Except maybe ones that are already sitting in warehouses.   

You do not know what you are talking about. Okay, let's add in food and energy (see attached).

As you can see, it is still very low! In fact, it is actually negative for a few months. The preachers of "hyperinflation is here!" do not have supporting evidence. Stop making claims of inflation when there is no evidence of it! If you have evidence, you can PM me, because this whole thing is off-topic, and I apologize for contributing to the off-topic-ness, but when people are spouting pure nonsense (i.e. that we've been experiencing runaway inflation for the last couple years), then I am forced to respond. SpaceX's prices have been increasing in real terms since their claims of 2005. Deal with it.

SpaceX's prices have increased much faster than inflation.

EDIT:I misread your earlier comment and have appended both CPI (and CPI less energy and food). As you can see, we had a period of deflation for a little while, and the average inflation is still very low, even if you include food and energy. Also, as you can see, adding the CPI with food and energy shows a period of record deflation for a little while. But still no hyperinflation!

[go4mars]

Okay, let's exclude food and energy (see attached).

Why would you exclude those?

I apologize for contributing to the off-topic-ness, but when people are spouting pure nonsense (i.e. that we've been experiencing runaway inflation for the last couple years), then I am forced to respond.

I said that the past three months in the stock market are a pre-cursor. 

SpaceX's prices have increased much faster than inflation.

And what have their costs been doing?  How does the price of Lithium/niobium/RP-1/copper, etc. compare to 8 years ago for example (when SpaceX was new)?

btw.  I am not partisan how you think.  I am not even American (I'm Canadian).  Personally I agree with Baldusi that the risk of inflation does factor into a general discussion of future SpaceX launch prices. 

[Robotbeat]

Okay, let's exclude food and energy (see attached).

Why would you exclude those?

I apologize for contributing to the off-topic-ness, but when people are spouting pure nonsense (i.e. that we've been experiencing runaway inflation for the last couple years), then I am forced to respond.

I said that the past three months in the stock market are a pre-cursor. 

SpaceX's prices have increased much faster than inflation.

And what have their costs been doing?  How does the price of Lithium/niobium/RP-1/copper, etc. compare to 8 years ago for example (when SpaceX was new)?

btw.  I am not partisan how you think.  I am not even American (I'm Canadian).  Personally I agree with Baldusi that the risk of inflation does factor into a general discussion of future SpaceX launch prices. 

(Edited my previous post to add in cpi instead of cpilfens) The issue is that raw materials are just a tiny fraction of launch costs for SpaceX. SpaceX is finding out just how many people are actually needed to launch rockets.

Also:

CPI in the US doesn't include food, energy, or taxes.

This statement is FALSE. CPI includes food and energy.
http://www.bls.gov/cpi/cpiqa.htm#Question_1

[baldusi]

(Edited my previous post to add in cpi instead of cpilfens) The issue is that raw materials are just a tiny fraction of launch costs for SpaceX. SpaceX is finding out just how many people are actually needed to launch rockets.

SpaceX is an aerospace PRODUCER, not CONSUMER. So you need to use the PPI (Producer Price Index). In fact, there's an aerospace index, and I've attached a 2000 to 2010 series. As you see, the cost has raised a 30% in ten years very steadily. And this was all in the middle of a terrible recession. Similar trends show the commodities prices. What seems reasonable to think, is that USA is printing money, but the recession compensates at the consumer level. In fact, that's why the govt is printing so much and having such a deficit.

[Robotbeat]

If we calculate inflation (including fuel and food) for the last five years since 2005 when SpaceX announced the Falcon 9, we have about 2.3% inflation average (or about 12% over 5 years...). In 2005, Falcon 9 was $27-35 million for a flight. Nowadays, the flight cost is listed as $49.9-56 million. There is a slight performance improvement for the block 2 Falcon 9 (which is the one listed now), but those costs have increased 84-60%. Much faster than inflation.

EDIT: Yes, if we are talking "aerospace inflation" (which I think is a little ridiculous, since it's sort of an oligopoly) then sure, SpaceX looks a lot better. But still, their costs have increased faster than even aerospace inflation, I don't see the point.

And the US has a deficit because we are both fighting two wars and have cut taxes at the same time. That's pretty much a recipe for a deficit.

[meekGee]

This discussion is ridiculous...   The bulk of the change in cost is due to the fact that it went from an early stage design estimate to a flying rocket.

In comparison, what's the actual ratio of promised cost to actual cost for a NASA launch vehicle?  A US commercial LV?

And besides, never mind the increase from 5 years ago - how does the actual development cost and actual per-mission cost compare to other vehicles?  This is what matters...  The rest is just nitpicking when there are hardly any nits left to pick.

[Robotbeat]

This discussion is ridiculous...   The bulk of the change in cost is due to the fact that it went from an early stage design estimate to a flying rocket.

In comparison, what's the actual ratio of promised cost to actual cost for a NASA launch vehicle?  A US commercial LV?

And besides, never mind the increase from 5 years ago - how does the actual development cost and actual per-mission cost compare to other vehicles?  This is what matters...  The rest is just nitpicking when there are hardly any nits left to pick.

I agree.

[go4mars]

This statement is FALSE. CPI includes food and energy.
http://www.bls.gov/cpi/cpiqa.htm#Question_1

Have you looked into how much it is weighted in CPI vs. how much of a household income is spent on food and energy?  It has essentially been unjustly sidelined out of CPI even if technically it is in there in a tiny tiny way.  The spirit of the statement is not false.

http://www.shadowstats.com/article/consumer_price_index

But I'm willing to drop this if you are.

[Robotbeat]

This statement is FALSE. CPI includes food and energy.
http://www.bls.gov/cpi/cpiqa.htm#Question_1

Have you looked into how much it is weighted in CPI vs. how much of a household income is spent on food and energy?  It has essentially been unjustly sidelined out of CPI even if technically it is in there in a tiny tiny way.  The spirit of the statement is not false.

http://www.shadowstats.com/article/consumer_price_index

Yes, the spirit of the statements is false. And I have looked into it. Read the rest of the FAQ that I posted above.

[go4mars]

http://www.shadowstats.com/article/consumer_price_index
Read the rest of the FAQ that I posted above.

I did.  Such gems as "The hedonic method of quality adjustment is used by at least 11 of the 29 other OECD nations" do not impress me much.  But I'm glad to know that 2/3 of OECD nations are still resisting really bad tinkering with their statistics.  For example, on their hedonic page http://www.bls.gov/cpi/cpihqaitem.htm.  Are mens Wool pants really that much better than they were 30 years ago?  1 year ago?

I didn't see anything on your link where it refers to the weighting methodology and rationale for energy, food, or taxes in CPI. 

Shall we continue or would you like to agree to disagree regarding the specter of inflation and its potential effect on the price of future SpaceX launches?

[Robotbeat]

http://www.shadowstats.com/article/consumer_price_index
Read the rest of the FAQ that I posted above.

I did.  Such gems as "The hedonic method of quality adjustment is used by at least 11 of the 29 other OECD nations" do not impress me much.  But I'm glad to know that 2/3 of OECD nations are still resisting really bad tinkering with their statistics.  I didn't see anything lower down where it refers to the weighting methodology and rationale for energy, food, or taxes in CPI. 

Okay. So we're going to ignore technological advances, then? I guess that's okay, but I am using a computer far, far more useful than one twenty years ago of the same cost. This needs to be factored in somehow, not just how much 2 pounds of computer costs. Same with my cellphone, which has much greater battery life and more useful features than a cellphone 20 years ago. Or that my refrigerator consumes far less electricity but has autodefrost and a built-in ice-maker. Etc. Etc. This is off-topic, now. I do think there are some things which are a little unfair in the way the economy is measured and portrayed (okay, so I buy that the "average" American is making more money, but is the "median" American male making more? Nope! Wages have been completely flat since the 1970s, adjusted for inflation which you claim is already too low... Not a good picture. ), but this topic is getting pretty far off-topic, and probably will be trimmed back.

But the fact remains that SpaceX's prices have risen faster than any measure of inflation since 2005. In the coming year, we will see how the prices change, since the current prices have this disclaimer:

*Standard Launch Services Pricing through 12/31/10.

[go4mars]

This needs to be factored in somehow, not just how much 2 pounds of computer costs.

Does it?  How much extra benefit is there to society/GDP if an average American has a faster computer?  Are they doing monte-carlo analysis?  Or are they still just playing games, e-mailing their buds, and looking at photos of ladies?  Tough example, because computers actually have become relatively less expensive (unlike most things).

is the "median" American male making more? Nope! Wages have been completely flat since the 1970s, adjusted for inflation which you claim is already too low... Not a good picture.

I would suggest that wages have gone very negative since the 70's adjusted for true inflation, which is not the watered down inflation brought to you by your friendly gov't (CPI).  That's why it often takes 2 employed adults now to make ends meet.  And I made no claim that inflation is already too low.  Quite the opposite. 

In the coming year, we will see how the prices change, since the current prices have this disclaimer:
*Standard Launch Services Pricing through 12/31/10.

That is a good observation!  Now it just comes back to discussing which factor will play a larger role in the *increase; 1) inflation, or 2) SpaceX underestimating costs/overestimating revenue or 3) just because they can.  Since EELV prices are also going "a lot higher", I would submit that expectations of inflation will be a significant factor.  Unless I've been reading you all wrong, you think higher future SpaceX prices will be more from underestimating costs/overestimating revenue, and not much from inflationary concerns.

[baldusi]

Before tying to steer the thread back in topic, I would like to explain what hedonist method is. It basically says that a car is not a car, but X_1 amount of HP, plus X_2 trunk volume, plus X_3 seats, etc. The secret is that if you include computers and software in a significant weight, it will show a downtrend.
Now, as I stated before, one thing is the price of a promise of a system from a company that doesn't have anything real (SpaceX 2005), vs a company with the track record of SpaceX as of 2011. They should price their launches just cheap enough to fill their launch capacity, but not more than that. I find they are pricing accordingly. As a start up with a paper project, they prices 1/3 of competitors. After COTS 1, they might 2/3 of competitors. It seems reasonable. Specially since they have so much to develop (Vandenberg, Dragon, DragonLab, Heavy, Merlin 2, Raptor).
There's another economic point. At what rate would a company like SpaceX of 2005 borrow money? I doubt less than 18%. At rate it's cheaper to finance by actually getting money in advance and losing when you deliver in the future. You have to make up with higher prices in the future, thou. Rings a bell?

[blairf]

no baldusi, hedonistic pricing says a car is a car is a car but....

the the utility delivered by car X 5 years ago is now delivered by car Y. Therefore to get utility/$ you need to compare car Y now with car X five years ago.

The hedonistic adjustments are a real and persistent weight on CPI calcs, but if you want to find where the real downward pressure has come you need to look to semi-durables and manufactured consumables (tee shirts, trainers and toasters to you and me ;-)

The prices for these have collapsed due to outsourcing manufacturing to low cost economies combined with trade liberalisation. Unfortunately that was a once only gig, so things aren't so good for the next twenty years.

[clongton]

This discussion has gotten so far off track that you're gonna need a passport to get back in. These last few pages have zero to do with SpaceX, Falcon & Dragon.

Come on guys - stow it!