In the news Tuesday: Carbon credits

Vatican Penance: Forgive Us Our Carbon Output
Upon receiving a donation amounting to about 37-acres worth of forest generated carbon credits, the Vatican will become the globe’s first carbon-neutral state (in addition to holding its throne as the world’s only non-commercial economy). The donation comes from eco-restoration start-up KlimFa (subsidiary of Planktos (PLKT.OB) –the parent company is not yet profitable [2Q07 10Q], which hasn’t stopped  its stock from erratic rallying at the announcement of private funding; up 75-ish% YTD). KlimFa, headquartered in Foster City, CA despite being based in Hungary and dedicated to restoration projects in the EU (since the US is not yet on board w/ cap and trade), acts as a third party forest restorer to owners of dilapidated forestlands. The company takes a portion of its fees, presumably, in the form of carbon credits which poses issues such as how one should value the restoration efforts, the explicit fruits of which are simply saplings which may or may not capture the credits agreed upon over the contractual timeframe for which the owners are being billed. The evolution of this industry will be interesting to watch, especially as/if/when the US follows the EU’s lead with cap-and-trade. 

Lights Go Out for Carbon Credit Scheme [The West, Australia]
When it’s Too Hard Being Green [The Age, Australia]
Australia’s The Age is claiming that the recent collapse in the price of carbon credits in Australia (now $6 after a fall from $12) has forced Easy Being Green out of business. The company’s website makes no mention of the insolvency, but simply notes that their good Samaritan efforts –installing energy efficient light globes and showerheads at no cost to homeowners–have been placed on indefinite hold, and that they plan to lay-off 240 employees (a sum that represents about a quarter of Australia’s carbon market labour force). According to Easy Being Green, “the carbon industry looks almost certain to go under” as long as “finger pointing…between the State and Federal Governments” prevents a bailout (which ranges from establishing lower thresholds for emissions limits to ceasing to make comments alluding to the fact that they may scrap the entire cap-and-trade program altogether).  

Other links:
Freight and carbon credits help hedge funds [FT]

In the news: Tuesday

UAE restates 2006 GDP growth rate: 9.4% [Khaleej Times]
The country’s economic ministry revised their 2006 full-year growth rate to 9.4% from the 8.9% reported earlier this year. They attributed the gain to (surprise) fast expansion in the oil/gas sector, which accounts for about a quarter of the country’s GDP. The oil/gas sector is expected to slow down this year.
2005 GDP: 10.5%
2004 GDP: N/A
2003 GDP: 11.9%
If aggregate growth rates that beat China on account of smaller denominators interest you, you may want to look into the following ETF: SPDR Emerging Middle East & Africa (AMEX: GAF).

Physics + Economics = Milton Friedman, Meet Richard Feynman [Slate]
Economists at the NBER are working with physicists to draw pictures of economic space in order to explore explanations for why poor countries remain poor. The idea is that the progression from a poor economy to where it would be when rich may not be smooth. “For instance, to move from drilling oil to making silicon chips might require simultaneous investments in education, transport infrastructure, electricity, and many other things. The gap may be too far for private enterprise to bridge without some sort of coordinating effort from government—a ‘big push.’” The maps plot countries’ export goods according to their degree of similarity, and show that poor economies tend to exhibit clustering around unrelated goods, while rich economies are diversified and tend to produce goods focused at the center (taking advantage of production synergies and such). The problems that then arise concern how governments should push production toward the center, and whether it’s a worthy goal to do so at all.

Profile on the carbon-emissions trading group @ Credit Suisse [Trader Daily]
Interesting read. Bigger groups devoted to trading carbon credits should be the way of the future. David Moss @ Trader Daily interviews Paul Ezekiel of Credit Suisse.

Zimbabwe, currently battling a 4,500% inflation rate…

Where money for projects has not been found, we will print it.
Robert Mugabe, President of Zimbabwe  [NYPost]

The country of Zimbabwe has come out with a $200,000 Dollar Bill denominated in the highly inflated Zimbabwe dollars. The banknote is worth $13 in U.S. dollars, but can be bought for a dollar on the black market. [Stockerblog]

In the news: Thursday

Fashion house, Chloe forces Topshop to destroy entire stock of a hideous yellow dressTopshop, Sir Philip Green’s British counterpart to Sweden’s H&M – or Spain’s Zara, but not quite that of America’s rather trashy, in comparison, Forever 21 – has been slapped with a lawsuit accusing the designer-replicas-trends-on-a-budget stores of copyright infringement. Chloe, the fashion house that put Stella McCartney on the map, claims that Topshop (whose version is pictured on the right) ripped off their original design of the sorry looking yellow rag you see pictured on the left. Topshop was selling the dress for about $70, more than 75% less than the cost of the designer original. Chloe has a zero-tolerance policy for knock-offs and is known for sending out undercover solicitors “to seek out pictorial evidence of counterfeits.” Thus far, the strategy has helped them to preserve the façade of originality worn by hedge fund and soccer wives. Because Sir Philip Green is a rational man, and one that knows to part with ugly when he sees it, Topshop  paid them £12,000 [for damages/legal fees] without any admission over whether it was or it wasn’t [a copy]…[and] felt it was easier to do that and get on with the rest of our lives.” [The Times]

New Zealand’s central bank raises key interest rate to 8.25%
Like pretty much every other country on the planet, barring Brazil and others known for their zests for life, New Zealand’s central bank raised its benchmark borrowing rate by 25 basis points to 8.25% in an attempt to contain inflation. Alan Bollard, the Bernanke of under down-under, appears to think that this will be the final rate hike necessary to reach the central bank’s comfort level, “we think the four successive rate increases we have delivered will be sufficient to contain inflation.” The hike is expected to push the value of the Kiwi north, while hurting domestic exports and helping retail forex traders (read: grandma, substitute teachers, Theatre majors and future actors of the Kabuki school of drama, etc.) in Japan. Though consumer confidence is waning, New Zealander’s are currently riding high on a skilled labor shortage, overall unemployment rate under 4%, and an international rally in commodity prices which has driven world demand for domestic products. [Bloomberg]

OPEC increased output (so far) this month
According to Petrologistics, a company that tracks tanker shipments, the OPEC consortium (barring Iraq and Angola) will have pumped an additional 100,000 barrels of oil per day when all is said and done at the end of July. However, “there’s no major opening of the taps…They fear that if they opened the taps, prices would slide.” While a lull in militant disruptions has allowed Nigeria to up its output, with Iran following suit, Saudi Arabia stands firm despite near-record highs in oil prices this summer. [Khaleej Times]

In the news: Wednesday

Budget hotel chain, Travelodge to get rid of porn
In a move that will eliminate many millions of dollars from Travelodge’s revenue stream, the hotel chain will remove “all pornographic pay-per-view TV channels from its 20,000 bedrooms, in an effort to become more family-friendly.” This move comes shortly after the budget hotel chain went above and beyond the law by banning smoking in all of its rooms. The company plans to distract its guests – because who doesn’t enjoy porn with loved ones while vacationing on a budget – with approximately $20m worth of flat screen televisions packed with family programming. Despite the fact that income from ‘adult programming’ amounts to 10% of an annual stream of hundreds of millions of dollars for the hotel industry, Travelodge hopes to attract more of the middle-class vacationers who currently contribute about 70% of the hotel chain’s sales. Considering that cheap hotels and porn are about as complimentary as peanut butter & jelly, and vacationers – as opposed to business people, traveling salesman, circus performers, etc. – are the first to drop out of the customer base on account of minor trifles such as recessions and the like, this seems like a risky move. [Daily Telegraph]

Italy forced to bail out Italian bank, Italease
Italease is reported to have lost approximately 75% of its value since April on bad – and leveraged, lets not forget – trades in the derivatives markets. In response Italy’s central bank plans to “install its own interim management after conducting a review (“very harsh criticisms,” apparently) of Italease’s disastrous bets on leveraged credit futures.” This situation is somewhat odd in that it spiraled out of control in a matter of weeks, and at a bank that went from generating none of its income in 2003 to roughly a quarter of its income in 2006 from futures contracts. A representative from the Italease told London’s Daily Telegraph, “These derivatives were very complex [duh, they’re derivatives] and suddenly turned against us. They started moving in a non-linear way [duh, not all movements in the market are linear], so the losses were rising exponentially.” If you don’t understand a product, or aren’t prepared to deal with its non-conforming feature in an erratic setting, then you shouldn’t bet the bank on it. [Daily Telegraph]

Surprise: Bank of Israel raises interest rate
In an unexpected move, Israel’s central bank raised its benchmark lending rate to 3.75% from 3.5%. Some describe the decision as “panic,” and are concerned about shekel appreciation and its affects on exports. BOI cited the following as reasons (note the persistent citing of ‘expectations’):

  • Rapid economic expansion –expected at 5.1% this year, after y/y growth of 6.3% and the lowest unemployment rate in a decade during the first quarter

  • Expectations for higher worldwide inflation, specifically in the energy and food-stuffs sectors, which will affect prices for Israeli imports. To which an Israeli economist aptly responds, “higher Israeli rates won’t offset the inflationary impact of higher world commodities prices.”

  • Israel’s current-account surplus is expected to reach $6.6 billion, falling from a record $8b. last year

  • Wages are expected to increase 3% this year after a 2% rise in 2006

  • Forecasters expect inflation to rise by 2.7% within the next 12 months [Jerusalem Post]

Toastmasters coming to Abu Dhabi: A beginning to the end of a once decent track for owning most of the world – Abu Dhabi’s Chamber of Commerce and Industry (ADCCI) plans to work with Toastmasters, a US company that encourages public speaking through local club membership, in order to develop some sort of communication/leadership program to serve government and local businesses. A representative for the ADCCI says that “the programme aims at supporting the society’s needs and requirements, so that it may add knowledge and experience to all those working for different government bodies, local companies, private and official institutions.” When thinking of Toastmasters, as I do never, impressions of global dominance and constructiveness almost never cross my mind. If you have to teach people to listen, then you have bad people. [Khaleej Times]

In the news: Tuesday, the stuff-that-can-be-ingested edition

Finally, cheap bread soon to grace Israeli supermarket shelves once again
 – After a bitter struggle between the Israeli government and its country’s bakers over using price ceilings on bread as a conduit to fight economic inequality, the government has agreed to back down through increasing the ceiling by 12.5%. Israelis on social security will receive monthly allowances to compensate for the increase, a crutch that undermines the 35-40% increase in the price of flour and other inputs in recent months. In an even wilder turn of events, a committee formed in reaction to the bread shortages may prompt the state to refrain from fixing the price of bread completely –though, not at the behest of the public, 77% of which believe that “basic foods such as bread should remain under government controlled price regulation.” [Jerusalem Post]

Onion exports backlogged due to Middle Eastern rains
Recent rains responsible for halting the onion trade supply chain between two cities somewhere in the Middle East have resulted in the loss of approximately 800 tons/week of onion that would have otherwise found their way to generally any place hosting both Indians and food. The monetary losses are expected to continue through monsoon season, and have reached several hundreds of thousands of dollars per week, which forgive us, but doesn’t seem particularly troubling.[Khaleej Times]

Diet soda and obesity: which causes the other, researchers duke it out – For every medical study that claims diet soda drinkers are more likely to be obese (31% according to this one), there’s inevitably a researcher that will say otherwise, and sometimes you won’t have to pay him. This study claims that health problems common to soda drinkers occur at the same rate of incidence despite whether the soda being consumed is sugared or sugar-free. So, depending upon your gullibility in the face of medical practitioners’ use of statistics, you may as well opt for the sugared variety –unless of course you prefer the taste of a beverage that evokes about as much sensory pleasure as a homeless man doused in Pine Sol. Though the study makes no claims of causation, “nutritionists say the study should be a wake-up call for soda drinkers, noting that a zero-calorie beverage can’t undo the damage of an unhealthful diet.” [WSJ]

In the news: Monday

Indian infrastructure: funds available, but few projects in the pipeline
 – India’s central and local governments are in disagreement concerning infrastructural projects in the pipeline, namely why there aren’t many. Considering most Indians abhor physical labor, and don’t understand what the western world considers to be so tragic about the situation posed in the Tragedy of the Commons, it should be no surprise that India has issues.  Upon the most recent counting of the beans, the country’s finance minister addressed the states: “Given the [$10B], I wonder why there is not an adequate pipeline of projects.” The states countered with something to the effect of ‘that isn’t true.’ [Times of India]

Prophecies peg oil at $95-100/barrel by the end of the year
According to analysts at Goldman Sachs and CIBC, not to mention old T. Boone Pickens himself, a $100 barrel is just around the corner. So far, the all-time high for crude oil futures occurred last year at just below $80/barrel. “At face value this market is strikingly similar to a year ago. What is different? Supply is down a million barrels a day, demand is up a million barrels a day. The market is in a deficit,” says a commodities analyst as Goldman Sachs. Meanwhile (global political tension, refinery capacity constraints, and hurricane season aside), OPEC’s head researcher was quoted in Kuwait Petroleum Corporation’s July newsletter as saying that “OPEC seeks to supply markets sufficiently at proper prices,” and that a “fair price for both oil producers and consumers for a barrel of oil would be around $60 to $65 a barrel,” according to Dubai’s Khaleej Times. [Bloomberg] [Khaleej Times]

Mentally ‘ill’ children in the UK: more than a few
Prescriptions written to school-aged children in Britain for afflictions ranging from depression to daytime fatigue have quadrupled over the last ten years. According to UK children’s charity, NCH, today 1 in 10 children suffers from a significant mental illness, a ratio which has doubled in intensity over the past decade. Politicians are upset and claim that the pressures forcing children into dubious mental states are further being fueled by chaos in the home, and by the liberal pens of family doctors. The Economist ran a similar story about suicide among students in Asia in a recent issue. The pressure for people of all ages, children included, to be lucky perfect is becoming pervasive as information finds faster and more efficient ways of traveling through the virtual world. Images and stories of success, or ideal ways of being – consider: the anorexiaischic campaign, the profiles of one or two jack-of-all-trades-master-of-none-but-that’s-what-makes-them-unbelievably-‘stellar’ teens who didn’t get into an Ivy league university and are made to be warnings for all successive applicants – around the globe that wouldn’t have five, ten, etc. years ago, now make it onto our radar, and are often paraded in front of our faces through longer media blitzes. Unfortunately, children are bearing the negative brunt, and to an extent we’ll only fully realize when in fifteen years or so that inevitable spike in [insert mind-numbing, buzz-inducing substance] abuse and/or suicide rears its ugly head. [Daily Telegraph]

In the news: Tuesday

Karachi: No man’s land to sell stake in exchange to overseas bourse
 – As the Karachi Stock Exchange converts to a public company, the board and investors believe that selling a 5-10% stake to a larger regional (such as the Dubai International Financial Exchange) or European bourse, “would be a step in the right direction because it will help bring in technology infrastructure, cross- border listings and product development…[KSE is] still a plain vanilla exchange [that] needs derivatives and other products to be brought in.” The growth story here revolves around a small denominator: $5B (consider, Polo Ralph Lauren (NYSE:RL) has a market cap of over $10B) to $70B in 6 years.

To its credit, the exchange achieved this growth during a time of serious political and social instability, both now hallmarks of the culture, which is apparent to anyone who’s spent even a day in the region (you quickly realize that any thing/person/belief/moral can easily be bought or exchanged for the right price –often a low one). The market regulator hopes to combat these natural tendencies by installing a “real-time system which will give minute-by-minute updates of who is doing what and will flag various trading patterns.” Currently, even without a surveillance system, “corporate results are leaked out and there is abnormal price movement prior to the announcement, but unfortunately nothing is done by the regulator to catch insider traders.”  [Bloomberg]

Consumer confidence: Egyptians rank highest in Middle East
The latest survey of consumer confidence in the Middle East and Levant (MEL), commissioned by MasterCard (NYSE:MA, up 286% y/y) in the first half of 2007 measures perception of consumer confidence for the six months ahead. The countries surveyed include: Saudi Arabia, the UAE, Kuwait, Lebanon, Egypt, India, and South Africa; and scores are based on individuals’ answers to questions regarding employment, their respective national economy, regular income, the regional stock market, and quality of life. Total scores against their counterparts from 6 months ago are out of 100; the results follow:

Egypt…………..94.3, up from 78.2
Saudi Arabia….92, down from 97.3
Kuwait………….91.6, down from 94.5
UAE……………..88.8, up from 80
South Africa….80.7, down from 86.5
India…………….63.6 down from 65.1
Lebanon………38.6 down from 67.6

Perhaps not surprising with its rampant inflation, although relative to Zimbabwe (3,400%+), the term is hardly appropriate, India scores a lowly 63.6 out of 100, down from last year’s 76.4, indicating that Indians are bordering on neutral concerning the country’s economic situation. With a service sector employment attrition rate of 40%, largely fueled by workers taking bets on the idea that they can get better jobs and higher salaries through lateral job shifts, the confidence index suggests that inflation could be having a much more pronounced effect on consumer sentiment than believed by simply reading the Times of India (of which I’m guilty).  [Khaleej Times]

In the news: Monday

The Euro Happy Planet Index: Iceland takes home the prize
 – According to the Happy Planet Index, published by The New Economics Foundation (NEF), Scandinavian countries are best at translating resources into well-being. The Index ranks European countries based on a combination of objective and subjective criteria, including: life expectancy, life satisfaction and carbon footprint. The think tank found no link between the amount of resources consumed and well-being of a country’s population. Representatives for the group point out that, “these findings question what the economy is there for. What is the point if we burn vast quantities of fossil fuels to make, buy and consume ever more stuff, without noticeably benefiting our well-being?” Iceland ranked first, while Britain placed toward the low end (21 out of 30). Though, if I spent my days lounging in the Blue Lagoon (see image) while my money market accounts earned a risk-free rate of 14-ish%, I’d probably be happier than most people in Europe. [Daily Telegraph]

Sheepmeat exports to MidEast: a new record
For those following/interested in the
Macquarie Pastoral Fund, or just the death of sheep in general, Australian mutton exports to the Middle East set a new record, increasing 42% during fiscal year 06/07. [Khaleej Times]

TV networks discover Twitter
Twitter, the social network dedicated to life’s minutiae: “making a ham and peanut butter sandwich,” “couple across the alleyway locked in a sexfest, come over ASAP,” “why can’t the universe play Buena Vista Social Club’s Veinte Anos in the background,” is increasingly being used by television networks to promote new shows. According to television producer Greg Yaitanes, who used the service to promote his Fox show “Drive,” communicating with the audience through an online medium such as Twitter is appealing because “the idea that someone from the show is coming to sit down and talk with everyone, it all of a sudden makes it feel more special.”  ABC Family, MTV and Fox have already ‘taken the Twitter plunge,’ while CBS and CW plan to toy with the site to promote new shows scheduled to air this fall. [WSJ]

Bollywood bubble: male stars see 200-300% increase in salaries
Should you find yourself attending a Bollywood film and not standing in a line, you can be certain that one of the three recognizeable Bollywood actors will not be showing his face on your screen. Since Bollywood plotlines come in three varities, the dearth of testosterone supply results in the same film being released every year under a different title and w/ a new big-eyed, leading lady. The general scarcity means that actors get away with murder (does anyone know the number of people Salman Khan has killed over the years?) while walking away with increasingly bigger paychecks. According to Sameer Nair, former CEO of Murdoch’s Star Entertainment India cable channel, “Everyone has shown up with a truckload of cash to make bigger and better movies but they have got to move on from relying on these same few movie stars.” [FT]

In the news: Tuesday


New rules allow foreign stock exchanges to attract Chinese listings  – China is now allowing major foreign stock exchanges –who have been in business for over 10 yrs– to set up representative offices in the country for the purpose of attracting listings by Chinese companies. This is China that we’re talking about, so the privilege will be bestowed only upon foreign stock exchanges with a “record of sound operational and financial conditions” that have also entered into regulatory cooperation agreements with China’s securities regulator. Chinese investments overseas are expected to top $100B, with $50B (consider, GOOG mkt. cap = $170B-ish) coming from Chinese companies between now and 2009, but global exchanges will have to stick to courting business enterprises while avoiding “any form of public advertising or private promotional activities targeted at individuals.” [Times of India]

Consumer borrowing reflects shift from cash to card-carrying culture
I use my credit card for all kinds of asinine purchases: one cookie ($1), one cup of coffee ($1.25), one banana ($.60). My credit card bills are much longer these days, but my pockets are lighter, and I haven’t been inside of a bank in at least three months. The new Visa commercials, in which cash carriers are condemned for their inconvenient ways, are just a reflection of the cultural phenomenon currently displacing paper currency with the electronic variety. According to the Federal Reserve, national borrowing increased at an annual rate of 6.4%, but when broken down reveals a 9.8% increase in revolving credit, the everyday crap that’s gaining steam and driving the growth story in credit card companies (American Express (NYSE:AXP) up 20-ish% y/y, MasterCard (NYSE:MA) up 250-ish% y/y, Visa IPO expected later this year). [WSJ]

Zimbabwe: How to deal with business(wo)men who violate price ceilings? Send armed policemen – In case some of you have been hiding under a rock and don’t already know this, Zimbabwe is facing a substantial inflation problem, and by substantial we mean the multiple thousands percent kind of inflation. With inflation at 3,700% –“one Harare resident told the BBC that a single banana now cost more than she had paid for her four-bedroom house in 2000”– the country’s officials thought it’d be a great idea to force businesses to cut their prices in half. But, because this would strip owners of the will to get out of bed in the morning, those that haven’t closed their businesses have instead opted to ignore the price ceiling altogether. Zimbabwean officials have responded by sending policemen to enforce retail prices, which translates quite directly to many business(wo)men being dragged away in handcuffs (1,328 so far). The police pledge to “sustain this operation at all costs to make sure at the end of it there is sanity in the business sector” –or to get rid of the only class of people with the fiscal resources to bring down Mugabe, who most economists agree is “to blame for ruining the economy.” [BBCNews] 

Israeli bakers still on strike: Considering bread represents such a large share of HH monthly expenses, the unsubsidized varieties are out of the question  – Israel continues to use bread as a weapon in some fight against economic inequality: the Trade Ministry refuses to raise the price ceiling, and the bakers refuse to run unprofitable businesses amid rising input costs (blurb from last week). But, class warfare has far too negative a connotation –we rather see the situation as an opportunity to let Bob Atkins reshape the nation’s BMI distribution curve. [Jerusalem Post]