Room with a view

May 2011

2011-06-02T19:51:00.002-07:00

Natural Gas
Canada

2011-06-02T19:51:00.000-07:00

Canadian Blue Chip - The ‘blazingly simple,' must-have portfolio-G&M - Canadian Blue Chip - InvestorVillage

2010-12-07T21:55:00.000-08:00

Canadian Blue Chip - The ‘blazingly simple,' must-have portfolio-G&M - Canadian Blue Chip - InvestorVillage
The ‘blazingly simple,' must-have portfolio-G&M
The ‘blazingly simple,' must-have portfolio
ROB CARRICK

From Saturday's Globe and Mail

By picking only seven stocks, a retired professor generated stunning 10-year returns

Let’s strip your investment choices down to the essentials.

That would be shares of CN (CNR-T65.740.220.34%) CP (CP-T66.480.220.33%) Enbridge (ENB-T57.200.410.72%) Fortis (FTS-T31.370.220.71%) RBC (RY-T55.321.041.92%) TD Bank (TD-T74.810.570.77%) and TransCanada (TRP-T35.980.020.06%)

About 10 years ago, retired political science professor Mike Henderson singled out these companies for the essential roles they play in the Canadian economy. He then invested in each of them for the core of the retirement savings he and his wife would rely on. The cumulative average 10-year total return on these stocks (that’s share-price gains plus dividends) was 305 per cent, far better than the 72-per-cent gain for the S&P/TSX composite index.

Though he has a PhD from the London School of Economics, Mr. Henderson is no financial pro. Think of him as an informed amateur whose investing was influenced by his experience lecturing on the interaction of government and large corporations in Canada.

“The idea just came to me, and it was blazingly simple,” he said from his Toronto home. “I basically sat down and thought, what is absolutely essential to our society, and who provides those essentials?”

Don’t confuse what we’ll call the Essentials Portfolio with companies that are “too big to fail,” an idea that proved faulty after the global financial crisis took down the likes of Lehman Brothers and Merrill Lynch. Mr. Henderson’s focus is on the function of a company, not its size.

The first step in building the portfolio was to set a rule that all stocks had to pay a dividend. As a retiree, dividend income is essential to Mr. Henderson.

Next came the search for the right companies. The first group of essential companies, Enbridge, TransCanada and Fortis, operate pipelines that carry oil and/or natural gas. (Fortis actually made the portfolio through its 2007 acquisition of natural gas utility Terasen). The reasoning here is that a guaranteed source of oil and gas is necessary for the country’s industrial and transportation needs, not to mention home heating. “If someone declares that winter is cancelled, I’m going to sell TransCanada and Enbridge,” Mr. Henderson joked.

The essential nature of railways was shown a year ago when locomotive engineers at CN went on strike, he added. The company and its workers resumed bargaining only after the federal government, worried about damage to a fragile economic recovery from the recession, started talking about back-to-work legislation.

Banking is the other essential sector in Mr. Henderson’s analysis, and one that raises safety concerns about the whole strategy.

Canada’s banks were lauded ad nauseam during the financial crisis for not getting caught up in the same problems as many of their global counterparts, but the fact remains that the S&P/TSX capped financials index lost more than half its value between late 2007 and early 2009.

There was genuine concern back then that a Canadian bank could fail, but Mr. Henderson said he draws comfort from the oversight of the banking sector provided by the federal Office of the Superintendent of Financial Institutions. To add a level of safety, he has chosen the two largest and arguably most stable banks, Royal Bank of Canada and Toronto-Dominion Bank.

Investing for the long haul is key

The non-bank stocks in the Essentials Portfolio held up well compared with the index during the financial crisis, CP excepted. But Mr. Henderson is much more focused on 10-year results than he is on any one particular year.

“Any data that is for less than 10 years is deceptive,” he said. “It will not encompass market reaction to a full short-term business cycle, which normally takes six to eight years.”

For that reason, he feels the right approach for the Essentials Portfolio is to buy and be prepared to hold through a full market cycle, while ignoring daily ups and downs.

As for setting up the portfolio, he suggests a dollar-cost-averaging approach of periodic purchases rather than committing all your money at once. You’ll pay more in brokerage commissions this way, but there’s an offsetting benefit in that your risk of buying at peak prices is reduced. If prices fall, you’ll also have opportunities to capitalize.

Using the long-term view preferred by Mr. Henderson, the Essentials Portfolio did extremely well over the past decade. According to his data, all essentials stocks outperformed the S&P/TSX composite index and the best stocks in the group did vastly better.

Mr. Henderson doesn’t make a big deal of it, but the Essentials Portfolio stocks offer an additional attraction beyond good long-term performance. Each not only pays a dividend, but also has a record of increasing the quarterly payout periodically. Rising dividends are a sign of a well-run company, and they increase your income flow in a way that bonds never can.

The Essentials Portfolio has been the core of Mr. Henderson’s retirement fund for years, but it’s not all he owns. He’s had some success with income trusts and continues to hold some of those. Also, he has what he calls a “gambling account” where pursues his belief that the energy sector has great potential.

No role for fixed income

Where are the bonds? There aren’t any. Mr. Henderson believes the yields are too low to sustain a retirement fund, and they don’t offer any inflation protection.

The Essential Portfolio stocks are a pretty good inflation hedge, though. Companies like Enbridge are, to varying degrees, government regulated, Mr. Henderson argues. If inflation rises, these companies will be allowed to raise their prices because the government recognizes the need for them to remain profitable and continue their vital role in the economy.

An obvious issue with the Essentials Portfolio is an extreme lack of diversification. Its seven stocks cover only three of the 10 TSX sectors and there’s also the absence of bonds.

But there’s also the security that comes from investing in companies providing essential services. As Mr. Henderson argues, it’s hard to see demand for oil, natural gas, rail transport and banking disappearing.

20 Things I Learned About Browsers and the Web

2010-12-01T23:04:00.000-08:00

20 Things I Learned About Browsers and the Web

阋墙御侮

2010-12-01T16:59:00.001-08:00

【成语】：阋墙御侮
【拼音】：xì qiáng yù wǔ
【解释】：阋：争吵；阋墙：兄弟相争于内；御侮：抵御外敌。比喻虽有内部争吵，仍能一致对外。
【出处】：《诗经·小雅·棠棣》：“兄弟阋于墙，外御其务（侮）。每有良朋，烝也无戎。”
【示例】：凡我国民，务念～之忠言，懔同室操戈之大戒，折衷真理，互相提携，忍此小嫌，同扶大局。 ◎蔡东藩、许廑父《民国演义》第一二回
相关成语：
逾墙钻隙　视同儿戏　事无巨细　驹光过隙　抵瑕蹈隙　逢场游戏　遗簪脱舄　矮子看戏　断线偶戏　另眼看戏武爵武任　五里雾　五申三令　五色相宣　五言长城　五味俱全　五音六律　五陵豪气　五尺之童　五月披裘

http://www.zdic.net/cy/ch/ZdicE9Zdic98Zdic8B20836.htm

齟齬

2010-12-01T16:59:00.000-08:00

Google Blog Search【名稱】：齟齬不合
【拼音】：jǔ yǔ bù hé
【釋義】：齟齬：上下牙齒不相配合。喻意思不合，有分歧。
【出處】：宋·陸游《賀吏部陳侍郎啟》：“然賢能之進，常齟齬而不合，亦稀闊而難遭。”
【例子】：
【序號】：26015

jǔ yǔ ㄐㄨˇ ㄧㄩˇ
龃龉（齟齬）　
(1).上下齿不相对应。明徐渭《秦望山花蕊峰》诗：“宛如齿齟齬，张吻讼所苦。”
(2).比喻不平正；参差不齐。明徐弘祖《徐霞客游记·滇游日记三》：“始甚峻，一里，转西渐夷，於是皆车道平拓，无齟齬之虑矣。” 清李必恒《铙歌·役者讴》：“輦粟陟砠，山石齟齬。”
(3).不相投合，抵触。汉扬雄《太玄·亲》：“其志齟齬。” 范望注：“齟齬，相恶也。” 唐韩愈《答窦秀才书》：“又不通时事，而与世多齟齬。” 丁玲《一九三○年春上海（之一）》二：“虽然两人的性格实在并不相同，但也从不龃龉的过下来了。”
(4).不协调，差失。多用于文辞。南朝梁刘勰《文心雕龙·练字》：“状貌山川，古今咸用，施於常文，则齟齬为瑕。” 金王若虚《论语辨惑四》：“然记者以此属于圣人无毁誉之下，义终齟齬，疑是两章而脱其‘子曰’字。” 明归有光《先妣事略》：“孺人中夜觉寝，促有光暗诵《孝经》，即熟读无一字齟齬，乃喜。” 苏曼殊《＜梵文典＞自序》：“﹝梵文﹞音韵既多齟齬，至於文法，一切未详。”
(5).不顺达。多指仕途。《新唐书·王求礼传》：“然以刚正故，宦齟齬。神龙初，终衞王府参军。” 宋叶绍翁《四朝闻见录·庆元党》：“出而齟齬于仕，坎壈其身，几陷入于深文。”
(6).谓别离。宋王安石《酬冲卿见别》诗：“两地尘沙今齟齬，二年风月共婆娑。” 宋苏轼《端午游真如迟适远从子由在酒局》诗：“归来一调笑，慰此长齟齬。”
http://www.zdic.net/cd/ci/13/ZdicE9ZdicBEZdic8384980.htm

Warren Buffett's Recommended Reading List ~ market folly

2010-03-04T07:43:00.000-08:00

Warren Buffett's Recommended Reading List ~ market folly
Warren Buffett's Recommended Reading List
We're back with the latest iteration of our recommended reading list series. This time around we feature the favorite reads of none other than the Oracle of Omaha himself, Warren Buffett. Over time, he has recommended various books and here is the comprehensive list:

Common Stocks and Uncommon Profits by Phil Fisher: Regarding this book, Buffett said that, "I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits and Other Writings. When I met him, I was as impressed by the man as by his ideas. A thorough understanding of the business, obtained by using Phil’s techniques . . . enables one to make intelligent investment commitments."

The Smartest Guys in the Room by Bethany McLean: This was recommended in Buffett's annual letter from 2003 and details the rise and fall of Enron.

The Intelligent Investor by Benjamin Graham: This is an obvious choice as Buffett has said that this is "the most important investment book" and in particular has highlighted chapters 8 and 20 as essential.

John Bogle on Investing: The First 50 Years by John Bogle. This book is more aimed at the fund investing crowd given Bogle's expertise (Vanguard funds). In the past, Buffett has advocated investors who don't have much time on their hands to invest in index funds.

The Essays of Warren Buffett by Warren Buffett & edited by Larry Cunningham: There's no better way to learn from Buffett than through his own words. Buffett would agree as he says "The most representative book on my thinking is what Larry Cunningham put together."

Sam Walton: Made in America by Sam Walton: Another read Buffett recommended back in 2003, this book details how Walmart was built from the ground up.

And while this next pick is not from Buffett, we wanted to add it to the list because it is an in-depth biography of him. Those of you interested in the investing legend himself should check out The Snowball: Warren Buffett and the Business of Life by Alice Schroeder.

Read more: http://www.marketfolly.com/2009/10/warren-buffetts-recommended-reading.html#ixzz0hDtLJr8n

What's Better: Gold, Gold Stocks or Gold Miners? -- Seeking Alpha

2010-03-04T07:08:00.000-08:00

What's Better: Gold, Gold Stocks or Gold Miners? -- Seeking Alpha

低息環境難持續趙國雄預警樓泡 - 香港文匯報

2010-02-08T12:12:00.000-08:00

低息環境難持續趙國雄預警樓泡 - 香港文匯報
本報記者梁悅琴
　低息環境，加上股市大幅波動下，促使資金持續流入相對「穩陣」的樓市。今年以來，本港一、二手住宅樓價承接去年升勢持續上升。長實集團(0001)執行董事趙國雄昨表示，低息環境不可能長期維持，本港樓價已升得過急，應會出現調整，買家無可能期望今年的樓價可以再升40%。他呼籲自住買家置業要量力而為，亦要小心樓市出現泡沫。估計樓市會調整的趙國雄，上月更已沽出一直作收租用的跑馬地豪宅，大賺1,548萬元。
　這是繼金管局總裁陳德霖上周提出警告，指熱錢湧入已令本港出現一定程度的資產泡沫後，本港最大地產商高層就樓價問題首度表示擔憂。本港地產股昨日個別發展，長實午後一度跌0.94%至89.25元，收市報90.65元，升0.61%。
8個月飆40% 升勢不正常
　趙國雄昨接受《彭博通訊社》訪問時認為，現時樓市升勢有點不正常，樓價或升至某一點將出現調整。他指出，本港樓價自去年6月至今年1月期間，已上升40%，有關升幅今年難望重現。他指出，自住買家應視乎自己能力來置業，亦要小心樓市出現泡沫，政府去年底已經採取適當措施，警告投資者樓市過熱情況，並會增加土地供應，防止樓價飆升。
新盤開價進取仍大受追捧
　事實上，近期港島區多個一手盤開價相當進取，全部高於市價至少10%開盤，部分單位的呎價更可媲美海嘯前的半山豪宅（見另稿），依然大受用家及投資者追捧。眼見近月樓市急升，趙國雄於上月已以2,168萬元沽出一直作收租用的跑馬地豪宅，獲利1,548萬元。該單位為樂活道比華利山A座30樓以上極高層2室，以面積1,729方呎計，呎價12,539元，創該屋苑97年後新高呎價。
　資料顯示，趙國雄早於93年5月以620萬元購入該單位，並曾擇居於此，近年一直將單位放租，早前單位已交吉，持貨近17年，單位升值2.5倍，因物業已升值不少，趙國雄決定將單位出售獲利。
今年樓價升幅料放緩至15%
　趙國雄續稱，去年因按揭息率低企，加上內地資金來香港購置物業，令香港樓價上升29%，他預期今年豪宅價格將上升15%，中小型住宅新盤價格料會上升15%至20%，換言之，中小型住宅價格會跑贏大市。金管局總裁陳德霖上周已提醒，香港正面臨三大潛在的風險，其中資產泡沫乃最大風險，因低利率和高流動性會推高價格，當各國政府開始退市，屆時利率將回升；資金流向也將逆轉，資產價格就會大幅波動。
　然而，美聯物業首席分析師劉嘉輝指出，目前香港的住宅平均樓價及供樓負擔比率仍只是97年高峰期的一半，現時說樓市出現泡沫仍言之尚早。
　根據世邦魏理仕發表報告預期，售價逾1,000萬元及面積逾1,000呎的豪宅價格今年上升20%，至於中小型住宅價格今年會上升15%。
內地客佔比重或增至三成
　一向採取「貨如輪轉」銷售策略的長實集團，今年新盤供應量相當充足。趙國雄早前表示，長實於本港、內地及新加坡擁有合共約1,000億元市值項目(見表)，將逐步安排推售，其中本港今年計劃推售涉及單位約9,500伙，市值約達600億元，今年頭盤將是東涌海珀名邸、沙田名城1期正待批售樓紙後便推售。同時長實亦會力吸內地客選購集團於香港及新加坡樓盤，他估計今年入市的內地客比例會由以往的10%增至30%。

Stock Picks in China 李剑论价值投资:做好股票的收藏家 2007-12-15 12:46

2009-07-16T18:43:00.000-07:00

编者按：本文作者是深圳一位成功而低调的证券投资家。他善于学习，勤于思考，在理解和运用巴菲特投资理论方面见解深刻独到，被一些股民誉为“中国了解巴菲特最深的人之一”；他2005年6月应邀在“深圳市民投资论坛”所作的演讲“如何在中国做价值投资”，被当作学习巴菲特理论的“经典范文”；他总结的十二字投资策略“好股、好价、长期持有、适当分散”，已成为很多价值投资者的口头禅。本文进一步系统阐述了他的投资理念，深入探讨了如何选择“好股”这一重要问题。相信对那些希望在投资领域有所建树的读者会有新的启迪。

股市是一个喧嚣嘈杂的地方，很多在生活中比较明白的人一进股市便耳目失聪；股市又是一个充满诱惑的地方，很多在工作中较为理性的人一进股市便方寸大乱；股市更是一个不确定性很大的地方，这个世界的变数和搏弈太多太多。因此，投资股票需要独立思考，沉着镇定；需要化繁为简，弃小就大，抓住主要矛盾；需要耐心持有，“以不变应万变”，达到“不战而胜”的至高境界。

人性是有弱点的，我也走过很长一段弯路，属于比较愚笨之人。总结自己的投资过程，1999年到2002年期间特别重要。为了清算1999年前因盲目投机几乎导致破产的错误,连续三年读了几百本书，上千份财务报表，重点调查了十几家上市公司，在对投资的思考上可谓绞尽脑汁，几经痛苦，然而几番实践后“柳暗花明”，发现投资的道理其实非常简单。概括起来，就是四条经验，即：投资要大气，选股要严格，买股要随时，持股要耐心。

投资要大气股票投资应大气。在市场价格潮起潮落、涨跌不定的氛围之中，在牛市、熊市更迭交替、利多利空层出不穷的环境之下，应该高屋建瓴，抓住核心问题，以此为指导，就容易解决赚钱的一切问题。核心问题是，从长期而言，社会是不断进步的，经济是不断发展的，股市是永远向上的。不管经历多少风风雨雨，都改变不了股市长期向上的本质。美国道琼斯工业指数上个世纪初是100点，现在已经超过了13000点；上证指数1990年是100点，现在已经跃过了5000点。作为一个投资者，只需要严格的选股，简单的买入并持有就行了。

具体而言，投资要大气包括以下几点：

一是思想上不要计较小的利益。比如一截波段，一点差价，甚至买入卖出时讲究挂低挂高几分钱等等。关注蝇头小利而成天炒来炒去的人难以成就大事业。有些股民尽管也知道某个股票有极为良好的成长性和发展前景，十年能涨十倍，但却在买入后老是盯着起起落落，计较几块钱的差价，倒来倒去，结果，捡了芝麻丢了西瓜，再也买不回来了，因小而失大。比如贵州茅台、中国石油、招商银行，很多股友都跟着我在极为低廉的价格买到过，但一直持有到现在的人却极少。事实上，世界顶尖的投资大师没有一个是炒短线的。认真思考一下就会知道，既然股市总体趋势永远向上，投资者就应有远大的目标，牢牢抱住优秀公司的股票不为所动，立志赚足利润，依靠时间最终成为亿万富翁。

二是操作中不要讲究小的技巧。比如高抛低吸、止损、底部顶部、金字塔结构、时间之窗、黄金分割位、包括所谓的牛市策略、熊市策略等等都不外乎是技巧方面的东西，而不是智慧方面的东西。在技术分析中有100多种令人眼花缭乱的技术指标，里面充满着各类看似精妙的技巧，就象赌场里的《21点必胜法一样》，其实都是一些雕虫小技,以此操作成功的能有几人？其中波浪理论最为典型，大浪里面有小浪，小浪下面有细浪，走向永远有无数种可能，你怎么操作？我后来投资股票，自定“五不主义”（曾经讲过三不主义）：不依大盘，不听消息，不作预测，不重技巧，不信技术。技术分析最致命的问题是脱离公司的基本面,空对空地以价格变化去解释一切，也就是本质和现象相脱离，或者是离开本质谈现象。投资者应该摈弃一切技巧。这并不是说过头话,而是重要的理念问题。古代项羽说过:“学剑，一人敌；学书，万人敌！”将军可以不是神枪手，但能指挥千军万马。真正的盖世高手是不要任何武器，空手就能致胜。买入并且长期持有虽然简单，却是智慧层面的东西。智慧高于技巧。人的一生当中其实只要长期拥有极为优秀的几只好股票，就享用不尽了,就象香港持有万科18年而成为巨富的刘元生那样。

三是心态稳。不去理会大盘的波动涨跌，也不要害怕类似“9·11”、金融危机以及最近的美国次级债券危机等等这类突发性事件。心态不稳是长期投资的大敌。健全稳定的神经系统是投资制胜的一个重要条件。同时也不要去预测短期的走势而自寻烦恼，那其实是为股市算命。股民一预测，上帝就发笑。我一直主张不要看盘，不要去看价格的红绿跳跃，只要关心上市公司的基本面就行了。1999年前我做了5年技术分析，下的功夫远超过当年读大学，最后得出的结论就是短期走势无法预测，也不用去作短期预测。要说底部顶部，改革开放前就是中国经济最大的“底部”，而“顶部”这辈子是看不到的。我们只应关心是不是优秀的公司，着眼的是公司的未来，选择的是长期持有，注重的是长期回报。

四是眼界高。气魄大，眼界就高，就不会老盯着平庸的和失败的公司,也就是不会去买垃圾股,就会下决心只拥有最优秀公司的股票,就会努力提高自身的素质和本领,磨练出一双鹰一般锐利的眼睛,去辨别各种各样的公司。我们要挑选的应该是极优秀的公司，不只是在行业中最佳，而且要在国内市场中最佳，最好还要将它们放在世界的大舞台上考察比较。要把时间和精力都放在选择公司上面，要尽力使自己股票品种全是最好的，打开帐户，鲜花盛开，而不是杂草丛生。

投资要大气很重要，否则学价值投资就学不到精华。学价值投资当然比学技术分析和听小道消息好得多,但并不等于就是学巴菲特，学巴菲特是要在价值投资的基础上追求卓越，追求大气，有了大气的思维，在思想意识上才有远大目标，目光才可能长远，思想才可能崇高。做好人，买好股，把资金投到对社会有积极影响的公司中去。荣毅仁先生的家训中有一句话很值得我们效仿：“发上等愿，结中等缘，享下等福”，首先强调的也是立志要远大。这是指导思想和投资理念中很重要的东西。

选股要严格

严格挑选股票是股票投资中的主要矛盾。投资的核心问题是如何用较低的风险取得较高的回报，要解决这一问题就必须选好股票。什么是投资哲学？这就是投资哲学。

回顾历史，在所有传统的股票投资理论中，最基本的理论就是“长期好友理论”了。这一理论有句名言：“随便买，随时买，不要卖”。它抓住了股市永远向上这一关键问题，但可惜方法不够严谨，思想不够卓越。我主张批判继承这一经典：反对“随便买”，因为“随便买”会影响长期的收益水平，流于平庸；有些赞同“随时买”，因为“随时买”适合大多数人；完全赞同“不要卖”，因为“不要卖”抓住了投资的大方向。我的格言是“严格选，随时买，不要卖”。

世界上许多投资大师的辉煌业绩证明，严格选股是极为重要的。下面着重谈“严格选”的问题。

这就不得不提一下“随机漫步理论”，这种理论莫名其妙的非常出名，它为了证明市场是有效的、投资者的选股功课是徒劳的，经常举出猴子掷飞镖的例子来说明买股票用不着花工夫去认真选择，选择的结果与猴子乱掷的结果也差不了多少。这实验虽然非常有趣，却并不科学，并不能证明“随便买”正确。因为大部分人的注意力被实验者引向了猴子，却忘了与猴子做类比的投资者是些平庸的投资者（准确地说是些华尔街的股评家）。因此，巴菲特严肃地指出，如果市场总是有效的话，我们这些人只有去喝西北风了。

要成为一个卓越的投资者，就必须严格挑选极为优秀的公司。我曾对采访我的记者反复说过，投资者要有“股不惊人誓不休”的精神。

那么，什么样的股票才是惊人的呢？主要有两层意思，一是在有生之年能拥有几只涨幅达到100倍的股票。我已经用五年时间拥有了几只涨幅十几倍的股票，相信能有那么一天，某只股票在我的珍藏下涨幅能超过100倍。我已年过50，深感觉悟太晚，所以只敢提100倍。我对女儿的要求就不一样了，是要在有生之年拥有几只涨幅超过300倍的股票。第二层意思是选择的股票必须要“万千宠爱在一身”，就是要拥有多种独一无二的竞争优势。无论从哪个方面来考察公司，无论怎么苛刻，都挑不出影响公司长期成长和收益的毛病来，它是那样地卓越和超群。

很多人一听100倍会有些吃惊，其实稍微举几个例子就能说明这并不罕见。比如沃尔玛和微软公司上市也不过20~30年，股价都已涨了500~600倍之多，我们身边的万科按1990年的原始股股价一元计算，则已涨了1400多倍。

具体应该怎么来选择这样的优秀上市公司或股票呢？是不是要多看财务报表呢？我要强调阅读财务报表只是价值投资的一个基础方面。我自己就走过一段弯路，还差点钻进牛角尖。注意研读财务报表只是表明关心基本面，这与专看k线图和听小道消息确实不一样，但这还不算是价值投资，更不等于是学巴菲特。我认为,调查和思考企业的重大问题,比如持续竞争优势问题,盈利模式问题,自主定价权问题，未来利润增长点问题,行业特点问题，管理层问题,市场价格和内在价值的差异问题等等,才是价值投资的首要步骤和关键内容。这些问题财务报表上没有，或者说不直接反映。阅读财务报表含在调查里面。要通过阅读财务报表去思考企业的重大问题。“我思故我赚”，思考的重要性就在这里。因为要选择极为优秀的公司，光阅读财务报表是远远不够的。好的投资者应该是董事长，而不是会计。

要从大处着手，首先考虑公司有没有独一无二的竞争优势。这个“独一无二”极其重要，你会一下子就把优势公司和一般公司筛选出来。我有个习惯，如果用半个小时都找不出一个“独一无二”出来，我就要放弃它了，尽管它可能看起来股价较低。如果有人问我某只股票怎么样，我先会反问：“它有什么独一无二的优势？”

说到独一无二的竞争优势，很多人会以为这就是常说的核心竞争力。其实，它包括核心竞争力，但不光是核心竞争力。严格说，核心竞争力是管理科学的概念，这个概念是两个美国管理科学家在1990年提出来的，主要是指企业的研究开发能力、生产制造能力和市场营销能力，是在产品创新的基础上，把产品推向市场的能力。它强调的是核心能力和技能。这种能力，只属于我所说的独一无二的竞争优势的一种，仅以此来作为评判企业优劣的标准是远远不够的。管理学是科学，投资则是科学与艺术的结合。在投资学上，独一无二的竞争优势含义要丰富得多。否则就无法理解什么是“傻瓜都能赚钱”的公司了。

独一无二的竞争优势有很多种，为了更加易于理解“什么是好股”，我归纳了主要的六种，可能互相之间会有点重合或者互为因果。

第一，垄断优势。按照经济学上的“垄断”的含义，是指单一的出卖人或少数几个出卖人控制着某一个行业的生产或销售。我用自己的话说，就是独家生意。或者说得长一点，是独家经营，或者重要产品、服务的最先推出和独家拥有。香港交易所和澳大利亚交易所就是独家生意，在本地区本国独此一家，别无竞争。美国辉瑞药厂的伟哥刚推出来的时候，也是独霸天下。当然，垄断除了独家生意以外，还有一种叫寡头垄断，我们在市场上经常能发现，80%的市场和利润被两至三家最大的生产组织所拥有。银行信用卡大部分必须通过万事达或维萨两家国际组织的网络,世界上的碳酸性饮料的市场基本上就被可口可乐和百事可乐所垄断。国内牛奶的市场最大的两家是蒙牛和伊利。不过，我更推崇的是独家垄断。

第二，资源优势。资源就是与人类社会发展有关的、能被利用来产生使用价值并影响劳动生产率的诸要素。很多公司都拥有各自的资源。资源的关键在于稀缺，按照稀缺的程度可以分成不同的等级。比如江西铜业拥有铜矿，但却还不具备独占的优势，因为很多铜业公司也有铜矿，不能算是最高等级。中国石油的等级就要高一些，南非的黄金钻石等级更高一些，而盐湖钾肥所拥有的钾盐矿，则占全国总量的近90%，这种资源的优势就具有独一无二的性质。又比如离开了茅台镇就生产不了茅台酒，那么茅台酒厂资源优势就具有独占性质。我最喜欢的是具有独占性质的资源优势的公司。

第三，品牌优势。有品牌的企业很多，有了品牌并不等于有了独一无二的优势。品牌优势的独一无二简单地说就是要强大，强大到行业第一。茅台号称国酒，同仁堂号称国药，耐克公司那简单的一勾，就是世界最好的体育用品公司和运动产品的标识，已深深为全世界特别是年轻一代消费者所喜爱。这种优势也是巴菲特的最爱，他叫做消费独占，我有时把它叫做消费者心理霸占，就是把消费者的魂勾去了。比如同样的产品，人家就要买这个牌子的,哪怕这个牌子贵了一大截。

第四，能力技术优势。也就是大家讲得最多的核心竞争力。能力指的是公司团队在决策、研发、生产、管理、营销等方面的技能，比如万科公司，它在品牌强大之前，主要是管理团队极为优秀，能力太强，堪称地产界第一。烟台万华的mdi制造技术独家拥有。微软的技术优势简直是世界老大，任何软件产品不适用dows系统，你就麻烦了。1997年我第一次接触到招商银行的一卡通时，就深为他们的专业能力、创新能力和服务能力所震动。一张卡片，居然可以活期定期本币外币全包含，而且比存折易带，又不暴露存款数字。这在当时可是全国领先。其后他们还不断推出金融服务创新品种，一直在同业中处于领先地位，这就是能力技术优势最直观的例证。

第五，政策优势。政策优势主要是指政府为加强相关产业的战略位置，制订有利于发展的行业政策与法规，使相关产业形成某种具有限制意义的优势。除了专利保护和减免税优惠政策外，有个原产地域保护政策也很有意思。例如香槟酒。香槟是法国一个地方，只有这个地方生产的气泡酒才能叫香槟，别的地方就不行。政策优势，就是指这种具有限制性质的优势。云南白药，片仔癀，马应龙三个公司的产品被列为国家一类中药保护品种，在很长时间内别人都不能生产，甚至也不能叫这个名字。茅台镇上也有别的酒厂，但只有茅台酒厂的酒才能叫茅台这个名字。

最后，行业优势。行业分析是投资者作出投资抉择很重要的一步，有时甚至是投资成功的先决条件。因为有些行业牛股成群,投资的赢面高;有些行业却牛股稀少,投资获胜的概率低。这是因为基本面确实如此：有些行业就是有先天优势，有些行业注定要吃亏。有些行业就是稳定增长，没有周期性，比如食品饮料业；有些行业就是门槛高，大部分企业进不来，比如航天业；有些行业就是有提价能力，不会你杀价我也杀价，比如奢侈品行业；有些行业的产品就是不怕积压，甚至越积压越值钱，比如白酒葡萄酒；有些行业就是集中度高，它们的优势就是竞争对手少，比如银行业、保险业，更不要说交易所和银行卡国际组织。有专家喜欢用行业利润永远趋向平均化的经济学理论与我辩论，意思是当一个行业拥有暴利的时候必然会引起更多的人和企业进入，从而带来行业利润最后平均化。其实这只是一般而论，很多情况并不如此，因为行业壁垒是客观存在的。

当然，拥有其中一种独一无二的竞争优势，还不能构成买入这家公司的充分条件。有了其中一种独一无二的竞争优势就有了关注的前提。接下来要考虑的是这种优势能不能形成极强的赢利能力？比如自来水、电力、燃气、桥梁、高速公路、铁路等公用事业公司，虽然具有明显的垄断优势，可是价格受管制，没有自主定价权，能赚大钱的不多。在美国上市的中国公司中，广深铁路表现不佳，11年只涨了一倍多。铁路是高度垄断行业，业务好的不能再好，它不太赚钱就是因为事关民生票价不能乱提。张小泉是著名的剪刀品牌，当没有能干的管理层去经营去继续开发的时候，它根本就赢不了利。很多公司拥有资源优势，但当国际商品资源价格处于低潮时，它也是一筹莫展。我们投资股票，最重要的一点就是看它有没有良好的收益，所有的优势最终也还得落实在收益上。

那么，极为优秀的公司平均每年的利润增长率至少应该是多少呢？我前面说过要“股不惊人誓不休”。好股票应该具有数十倍的成长潜力和前景，平均每年的利润增长率不能低于20%，当然，能超过30%就更好。茅台，招商银行，万科就超过了30%。蒙牛在前几年甚至达到了惊人的90%。

有了某种独一无二的竞争优势，又有极强的赢利能力，是不是够条件了呢？还是不够，还要看它的优势和盈利能力能不能长期保持。也就是通常所说的持续竞争优势。这一点难度更高，更有技术含量。买股票就是买未来，长寿的企业价值高。一个公司在某一年赚钱不难，难的是一辈子赚钱。bb机刚出来的时候风光无限，但没几年就不行了。柯达、乐凯等生产胶卷的公司由于数码相机的出现变得非常被动。这就需要我们的眼光更为长远，思想更为深刻。这就需要这个公司“万千宠爱在一身”,也就是多种竞争优势都具有。

可能会有人说，您说的公司近乎完美，好像很难寻觅。其实在我的持股名单中符合的就不止一个，有兴趣的读者不妨用条件套一套。要做到“股不惊人誓不休”，当然不会是一件轻而易举的事。但你发了上等愿，至少能结中等缘吧。我主要是提供一个严格的思路，在挑选股票方面要精益求精，锦上添花，没有止境。这才是追求卓越，这才是无懈可击。

谈了这么多，一直没有谈到价格，价格不太重要吗？不是的，价格当然重要，“安全空间”这个词简直是价值投资者的口头禅。好公司加上好价格才是好股票。我曾经把巴菲特的投资策略概括为十二个字：好股，好价，长期持有，适当分散。就已经把好价包括在内了。但我们谈的主要问题是优秀公司的问题。同时我认为，相对价格来说，好股是第一位的。先好股，再好价；先定性，再定量。这也是一种投资哲学。

买股要随时

买股要随时，就是主张“随时买”。必须申明，这是针对大多数人尤其是有稳定后续资金的工薪阶层而言的。

经常有人面容严峻地向我提出：“随时买，价格不用管了吗？万一买到高价的怎么办？”其实，提问题的朋友没有深思熟虑过，价格问题是个复杂的问题，在实践中甚至是可遇不可求的问题，能力圈之外的问题。你如果有幸常能在入市时遇到“9·11”或者金融危机之后这样的大机会，当然是件美事，然而股市牛熊难测，风云莫辨，不确定性是主流，必须“以不变应万变”来对付。我的经验是，努力捕捉机会也会丧失机会，放弃这样努力也许就逮住了更多机会。多想想方法，而不要动太多的脑筋去想买入时机的问题，也不要成天去盘算市赢率的高低。不同的人参加工作有先后，入市时间有早晚，一旦决定投资，难免会买到高点低点，但有了严格选和不要卖，即使是不那么幸运，最终还是会大获全胜。

有的股友引用巴菲特先生坐拥几百亿现金不出手，并表示愿意一直等下去（等到合适价格）的例子，来反驳我的“随时买”，甚至指责我有背离巴菲特的嫌疑。然而我经过再三思考，坚信这并无大错，尤其是这么多年，眼见很多朋友一再等待贵州茅台、招商银行、港交所等股票的价格跌到他们的心理价位，结果或者是永远无法买到，或者是失去耐心买得更高的事例，更能感受到学习巴菲特不能教条的重要意义。不要忘了，在美国投资界百万富翁和千万富翁组成人员状况的调查中，尽管顶尖的往往是职业投资者，但人数比例最高的恰恰是在二战以后简单买入并且长期持有的普通投资者。

大史学家司马迁在《史记———货殖列传》中说过一段精辟的话：“无财作力，少有斗智，既饶争时。”就是“没钱靠体力，钱少靠智力，钱多靠掌握时机”。坐拥几百亿现金的巴菲特已经取得了巨大成功，属于世界顶尖“钱多”的那一类。我的这个“随时买”不包括拥有大资金的投资者和专业投资机构，只是针对大多数普通投资者而言。大多数人属于“钱少”的工薪阶层，每月有固定的工资奖金收入，“随时买”就是每个月都用工资奖金的剩余部分买，这种固定的买法最终能使买到的股票成本平均化，既不会太高，也不会太低，但由于严格挑选，买到的基本上是优秀公司的股票，长期来看，收益率还是极为可观。这是靠智力的买法，只要实施，可以说人人都可以成为亿万富翁。不信的话，看看我给出的这个方法：

深圳的年轻人如果月薪在3000元左右，那么一对情侣如有毅力又有恒心，每月拿出收入的20%，即每个月各拿出600元来进行投资，按月买进那些平均利润递增在20%以上的公司股票，无论如何都不再卖出。40年后，就轻松成为亿万富翁了。有兴趣的朋友不妨计算一下。

当然，选到平均每年不低于20%增长的优秀股票有一定难度。但工资奖金是会不断增加的，如果把增加部分中的20%再追加投资，不就好事易成了吗？

持股要耐心

投资的辩证法在于：该复杂的复杂，该简单的简单。“选股要严格”，属于复杂的范围，但“买股要随时”和“持股要耐心”则格外简单，就象风暴之后天空特别碧蓝一样。

在中国古代哲学中，有很多极具智慧的话语，如“不战而胜”，“无为而无不为”，“不战而屈人之兵”，等等。特别是“大道至简”和“以不变应万变”这两句话。把这些用来指导投资，就成了轻松赚钱的学问。也就是说，精选了好股以后，把好股简单的留起来就行了。我曾经说过:“象集邮一样收藏好公司的股票”，更爱说的是：“做好股收藏家”。

经常有人问我，你是不是一个特别有耐心的人？你的一些股票五年多没动一下，你怎么能守得住？其实我在生活中是个很急躁的人。只是投资股票和其他事情不一样，你不长期持有就很难稳赚不赔，很难成就一番事业。发财要有耐心，这是千真万确的。赌场和摸彩票能提供一夜暴富的机会，但概率才多少？收藏的发财概率比赌博和摸彩要高一点，但收藏到珍品真迹的不多，大部分是收了假古董赝品什么的；做期货、买权证的发财概率比收藏的又高一点，但长期成功的实在太少；短线炒作股票成功概率又要高一些，但总体而言，失败多于成功。可是你放眼世界，多少人通过长期持有股票和房地产成为亿万富翁。这些认识在前面说过，也是经过惨痛的失败才换来的东西。这个东西叫“定力”，我把它看得很重，仅次于“眼力”。我经常建议朋友，在你的投资字典里删掉那个“卖”字。

没有丰富投资实践的人大多会想，如果结合短线，不是赚得更多吗？这是不知道鱼和熊掌不可兼得的道理。有一定经验的股民往往会问：“难道涨的太高也不卖吗？” 我的回答是不要卖。因为有些东西说说容易，就像低买高卖，实际操作时很难判断什么是高，什么是低。就象无法判断明天是涨还是跌一样。很多短线利润是要放弃的，因为放弃你才能得到更多。有舍才能有得，这就是辩证法。我和很多股友有充分的实践证明，判断高低涨跌这些东西太复杂了，这是自己能力圈之外的东西，也是害人的东西，它让我们只见树木不见森林，只拣芝麻不抱西瓜。如贵州茅台、招商银行、万科哪天卖合适？哪天卖都不合适。从长期趋势看，任何卖出好公司的行为都是愚蠢的，逆经济发展潮流的行为。其结果都不理想。最多在一个局部战役中获胜，而在全局上落败。股市上流传着很多似是而非的东西，有些东西的影响还非常之大，比如“高抛低吸”就是一例。我们看到的是绝大多数人恰恰相反，低抛高吸，大盘一向上就追涨，大盘一下跌就斩仓；上证指数跌到1000点时，每日成交量只有几十个亿，可见大多数人没有“低吸”，上证指数涨到5000点时，每日成交量高达两三千亿，可见大多数人没有“高抛”。再说，判断高低也是个技术层面的东西，不是智慧层面的东西。小赚靠技巧，大赚靠智慧。为什么股市中最后总是赚钱的人少呢？这和过度操作有关。许多人基本上每天都盯住股市行情不放，不停地在捕捉所谓的时机，不停地想低吸高抛。但真有几个人成功？还是举大家都知道的刘元生先生长期持有万科公司股票的例子，就是简单持有，买了就不卖。其实这18年中万科股票有无数次下跌，要是他老想着高抛低吸，能从几百万变成几个亿吗？技巧层面的东西，不但把人弄得非常辛苦，而且并没有给很多人带来可观的收益，至少在电脑房里炒得昏天黑地的股民情况大致是这样。人们经常会忽视：最好的往往是最简单的。

谈到这里，或会有股民质疑：“难道公司的基本面严重变坏，你也坚持不卖吗？”我的回答一如既往。即便不能排除这种情况，还是可以坚持不卖。这似乎不太符合巴菲特的思想。但我仍然认为这是对的，而且这是经过认真思考和实践过的。我很喜欢彼得林奇的看法，假如你有十个股票的长期投资组合，中间有一个股票出了问题，由于选的都是极为优秀的公司，那么我们持有的其他九个股票还是在给你赚大钱，几十年后，也就是一个亿和九千万的差别而已。何况那只股票也不会跌到零。就算你在某个优秀公司基本面出问题之后成功卖出，只是在策略上对了，战略上你却错了。你可能失去获得将来长期收益的大好机会，你也可能在心理上由于变得过于关心，由藏家变成了炒家，因小失大。在这个问题上我们要有一点哲学思维。进一步说，一个优秀公司的基本面出了问题，你可能事后才知道，而这时股价已经下跌了不少，这时卖出很难说是正确的行动。也许，情况又是恰恰相反，你要继续买进了。有几个例子很说明问题。一个是沙特王子阿瓦立德的“花旗之战”。1990年前后，花旗银行因房贷和拉美业务的拖累而陷入困境，当时许多人疯狂出逃，股价掉得一塌糊涂。这个时候阿瓦立德反而不断注资增持。4年之后，花旗银行终于渡过难关，有着坚定信念的阿瓦立德成为最大的单一股东，十几年后又成了最大赢家，一举收获近百亿美元！占他全部身家的一半。阿瓦立德说他总是在寻找同样的东西，那就是国际上知名的公司，它们拥有健康稳固的根基，但却陷入了暂时的困难之中。另一个例子是2004年底伊利股份公司的董事长郑俊怀被抓，基本面出现了问题，股价从14元掉到9元。我身边的一些朋友有些惊慌，我则劝他们在9元时再买进并一直持有，现在听我建议的朋友都取得了很好的收益。深发展也是如此，它在1997年后基本面不佳，但从1990年就开始一直持有的人还是大大的赢家。

可能还有人会问：“如果我需要用钱也不卖吗？”这个严格地说是个投资以外的问题。需要用钱有很多种情况，除非牵涉到极其巨大的家庭或个人的剧变，需要大笔的钱来救急和转危为安，比如家人患病急需用钱，你还坚持不卖，那就失去了投资的意义。投资就是要让自己和家人幸福安乐。一般情况下，要学会坚持不卖，否则我们就很容易找到各种借口把优秀的好股票卖出去。等到赚了大钱之后，就能体会到那种意义了。到那时对资产结构进行一点调整，都是很简单很自然的事。对于投资者来说，首要考虑的是怎么赚，而不是怎么花。而一直持有就是最好的赚钱方法。

还会有人问到：“当我们发现了更好的公司股票，可不可以卖呢？”我的回答是，这种情况不叫卖，叫换股，因为总的投资数量和投资金额没有变，还是在收藏好公司的股票。只要不是太频繁，这是可以考虑的。对于非职业投资者，我还是倾向于不卖先前的股票，而是用后来的收入再买进。因为深思熟虑的人不多，很容易把换股变成炒来炒去。

在这里，我想再举一个深圳人有亲身感受的例子来说明为什么要长期持有。大多数深圳人既买房又炒股，这几年房市、股市都是大牛市，按说两个市场的赢输概率应该差不多。然而统计数据表明，买房赚钱的高达98%以上，而在今年五月的统计中，在股市牛气冲天时居然有30%的人亏损。什么原因？买房的人很少频繁地“炒短线”，而炒股的人却不少有“手痒症”或“多动症”。

在现实生活中，确实是关心卖的人多，而想当收藏家的不多。其实，卖掉好公司的股票才是最大的风险。“炒”是投机者心中的魔鬼。澳门赌王何鸿燊在回答记者有关什么是赌博赢钱的诀窍时，说的是“不赌”。如果有人问我炒股赚钱的诀窍，我的回答是“不炒”。我们买的是极为优秀的企业，它们是最有活力的公司，有最为宝贵的资源、最有前途的产品，处在最好的行业中，也有最能干的经营管理者，你可以心安理得地坐享其成，一劳永逸。股市其实是一个“乌龟”打败“兔子”、“懒人”战胜“忙人”、“笨人”战胜“聪明人”的地方。

李剑论价值投资:做好股票的收藏家 2007-12-15 12:46

Attractive Hong Kong Stocks -- Seeking Alpha

2009-07-09T23:47:00.000-07:00

Attractive Hong Kong Stocks -- Seeking Alpha

Well known value investor and manager of the 3rd Avenue Value Fund, Marty Whitman has made public through his latest investor newsletter in April that 39% of his fund is invested in Hong Kong-based companies and that he sees extreme value in Hong Kong real estate companies while revealing a bearish outlook on U.S. stocks. As the Applied Finance Group (AFG) is expanding its coverage globally, we have created a report to highlight some of the companies we find attractive in Hong Kong.

Below is a look at 15 attractively priced Hong Kong stocks based on AFG’s valuation metric. These companies rank high in valuation, have a non-sell default recommendation, and are expected to improve their profitability in the next fiscal year according to AFG’s Economic Margin Framework (the company's earnings above or below its true cost of capital). Our Economic Margin Framework is a systematic approach to converting as-reported accounting data into a performance metric that is comparable across time, peers, industries and even countries while eliminating many of the accounting distortions caused by GAAP.

click to enlarge
15 Attractive Hong Kong Companies

The table below shows the Percent to Target returns in each country when we compare Top Half and Bottom Half backtest strategies vs. the entire universe. AFG's default valuation works well across sectors, styles, industries and even different countries.

Source: AFGView Databases:
World Return is the weighted US$ return for the 17 countries shown. It is calculated by converting each country's return into US$ returns and weighting them at its beginning period country market caps.
*Canada data begins 6/30/2004, Taiwan data begins 2/28/1995.

Equal Weighted, Monthly Re-balanced Total Returns.

AFG's global insights include:

AFG's Valuation Metric – Measures the percent to target (deviation between a stock’s current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model (modified discounted cash flow model).

Economic Margin - A corporate performance measurement that addresses the gaps in GAAP, eliminating distortions caused by accounting policies to measure what a company is truly earning above or below their cost of capital.

Management Quality – Assesses management’s ability to make wealth creating decisions.

Attractive Hong Kong Stocks -- Seeking Alpha

2009-07-09T23:42:00.000-07:00

Attractive Hong Kong Stocks -- Seeking Alpha: "Well known value investor and manager of the 3rd Avenue Value Fund, Marty Whitman has made public through his latest investor newsletter in April that 39% of his fund is invested in Hong Kong-based companies and that he sees extreme value in Hong Kong real estate companies while revealing a bearish outlook on U.S. stocks. As the Applied Finance Group (AFG) is expanding its coverage globally, we have created a report to highlight some of the companies we find attractive in Hong Kong.

Below is a look at 15 attractively priced Hong Kong stocks based on AFG’s valuation metric. These companies rank high in valuation, have a non-sell default recommendation, and are expected to improve their profitability in the next fiscal year according to AFG’s Economic Margin Framework (the company's earnings above or below its true cost of capital). Our Economic Margin Framework is a systematic approach to converting as-reported accounting data into a performance metric that is comparable across time, peers, industries and even countries while eliminating many of the accounting distortions caused by GAAP.

click to enlarge
15 Attractive Hong Kong Companies

The table below shows the Percent to Target returns in each country when we compare Top Half and Bottom Half backtest strategies vs. the entire universe. AFG's default valuation works w"

Training Software and Training Plans for Triathlon, Running, Cycling & Endurance Sports

2009-06-11T19:00:00.000-07:00

Training Software and Training Plans for Triathlon, Running, Cycling & Endurance Sports

A Reporter at Large: The Island in the Wind: Reporting & Essays: The New Yorker

2009-06-08T17:42:00.000-07:00

A Reporter at Large: The Island in the Wind: Reporting & Essays: The New Yorker

A Reporter at Large
The Island in the Wind
A Danish community’s victory over carbon emissions.
by Elizabeth Kolbert July 7, 2008

Keywords
Climate Change;
Global Warming;
Samsø;
Denmark;
Tranberg, Jørgen;
Energy Reform;
2,000-Watt Society

Jørgen Tranberg is a farmer who lives on the Danish island of Samsø. He is a beefy man with a mop of brown hair and an unpredictable sense of humor. When I arrived at his house, one gray morning this spring, he was sitting in his kitchen, smoking a cigarette and watching grainy images on a black-and-white TV. The images turned out to be closed-circuit shots from his barn. One of his cows, he told me, was about to give birth, and he was keeping an eye on her. We talked for a few minutes, and then, laughing, he asked me if I wanted to climb his wind turbine. I was pretty sure I didn’t, but I said yes anyway.

We got into Tranberg’s car and bounced along a rutted dirt road. The turbine loomed up in front of us. When we reached it, Tranberg stubbed out his cigarette and opened a small door in the base of the tower. Inside were eight ladders, each about twenty feet tall, attached one above the other. We started up, and were soon huffing. Above the last ladder, there was a trapdoor, which led to a sort of engine room. We scrambled into it, at which point we were standing on top of the generator. Tranberg pressed a button, and the roof slid open to reveal the gray sky and a patchwork of green and brown fields stretching toward the sea. He pressed another button. The rotors, which he had switched off during our climb, started to turn, at first sluggishly and then much more rapidly. It felt as if we were about to take off. I’d like to say the feeling was exhilarating; in fact, I found it sickening. Tranberg looked at me and started to laugh.

Samsø, which is roughly the size of Nantucket, sits in what’s known as the Kattegat, an arm of the North Sea. The island is bulgy in the south and narrows to a bladelike point in the north, so that on a map it looks a bit like a woman’s torso and a bit like a meat cleaver. It has twenty-two villages that hug the narrow streets; out back are fields where farmers grow potatoes and wheat and strawberries. Thanks to Denmark’s peculiar geography, Samsø is smack in the center of the country and, at the same time, in the middle of nowhere.

For the past decade or so, Samsø has been the site of an unlikely social movement. When it began, in the late nineteen-nineties, the island’s forty-three hundred inhabitants had what might be described as a conventional attitude toward energy: as long as it continued to arrive, they weren’t much interested in it. Most Samsingers heated their houses with oil, which was brought in on tankers. They used electricity imported from the mainland via cable, much of which was generated by burning coal. As a result, each Samsinger put into the atmosphere, on average, nearly eleven tons of carbon dioxide annually.

* from the issue
* cartoon bank
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Then, quite deliberately, the residents of the island set about changing this. They formed energy coöperatives and organized seminars on wind power. They removed their furnaces and replaced them with heat pumps. By 2001, fossil-fuel use on Samsø had been cut in half. By 2003, instead of importing electricity, the island was exporting it, and by 2005 it was producing from renewable sources more energy than it was using.

The residents of Samsø that I spoke to were clearly proud of their accomplishment. All the same, they insisted on their ordinariness. They were, they noted, not wealthy, nor were they especially well educated or idealistic. They weren’t even terribly adventuresome. “We are a conservative farming community” is how one Samsinger put it. “We are only normal people,” Tranberg told me. “We are not some special people.”

This year, the world is expected to burn through some thirty-one billion barrels of oil, six billion tons of coal, and a hundred trillion cubic feet of natural gas. The combustion of these fossil fuels will produce, in aggregate, some four hundred quadrillion B.T.U.s of energy. It will also yield around thirty billion tons of carbon dioxide. Next year, global consumption of fossil fuels is expected to grow by about two per cent, meaning that emissions will rise by more than half a billion tons, and the following year consumption is expected to grow by yet another two per cent.

When carbon dioxide is released into the air, about a third ends up, in relatively short order, in the oceans. (CO2 dissolves in water to form a weak acid; this is the cause of the phenomenon known as “ocean acidification.”) A quarter is absorbed by terrestrial ecosystems—no one is quite sure exactly how or where—and the rest remains in the atmosphere. If current trends in emissions continue, then sometime within the next four or five decades the chemistry of the oceans will have been altered to such a degree that many marine organisms—including reef-building corals—will be pushed toward extinction. Meanwhile, atmospheric CO2 levels are projected to reach five hundred and fifty parts per million—twice pre-industrial levels—virtually guaranteeing an eventual global temperature increase of three or more degrees. The consequences of this warming are difficult to predict in detail, but even broad, conservative estimates are terrifying: at least fifteen and possibly as many as thirty per cent of the planet’s plant and animal species will be threatened; sea levels will rise by several feet; yields of crops like wheat and corn will decline significantly in a number of areas where they are now grown as staples; regions that depend on glacial runoff or seasonal snowmelt—currently home to more than a billion people—will face severe water shortages; and what now counts as a hundred-year drought will occur in some parts of the world as frequently as once a decade.

Today, with CO2 levels at three hundred and eighty-five parts per million, the disruptive impacts of climate change are already apparent. The Arctic ice cap, which has shrunk by half since the nineteen-fifties, is melting at an annual rate of twenty-four thousand square miles, meaning that an expanse of ice the size of West Virginia is disappearing each year. Over the past ten years, forests covering a hundred and fifty million acres in the United States and Canada have died from warming-related beetle infestations. It is believed that rising temperatures are contributing to the growing number of international refugees—“Climate change is today one of the main drivers of forced displacement,” the United Nations’ high commissioner for refugees, António Guterres, said recently—and to armed conflict: some experts see a link between the fighting in Darfur, which has claimed as many as three hundred thousand lives, and changes in rainfall patterns in equatorial Africa.

“If we keep going down this path, the Darfur crisis will be only one crisis among dozens of others,” President Nicolas Sarkozy, of France, told a meeting of world leaders in April. The Secretary-General of the United Nations, Ban Ki-moon, has called climate change “the defining challenge of our age.”

In the context of this challenge, Samsø’s accomplishments could be seen as trivial. Certainly, in numerical terms they don’t amount to much: all the island’s avoided emissions of the past ten years are overwhelmed by the CO2 that a single coal-fired power plant will emit in the next three weeks, and China is building new coal-fired plants at the rate of roughly four a month. But it is also in this context that the island’s efforts are most significant. Samsø transformed its energy systems in a single decade. Its experience suggests how the carbon problem, as huge as it is, could be dealt with, if we were willing to try.

Samsø set out to reinvent itself thanks to a series of decisions that it had relatively little to do with. The first was made by the Danish Ministry of Environment and Energy in 1997. The ministry, looking for ways to promote innovation, decided to sponsor a renewable-energy contest. In order to enter, a community had to submit a plan showing how it could wean itself off fossil fuels. An engineer who didn’t actually live on Samsø thought the island would make a good candidate. In consultation with Samsø’s mayor, he drew up a plan and submitted it. When it was announced that Samsø had won, the general reaction among residents was puzzlement. “I had to listen twice before I believed it,” one farmer told me.

The brief surge of interest that followed the announcement soon dissipated. Besides its designation as Denmark’s “renewable-energy island,” Samsø received basically nothing—no prize money or special tax breaks, or even government assistance. One of the few people on the island to think the project was worth pursuing was Søren Hermansen.

Hermansen, who is now forty-nine, is a trim man with close-cropped hair, ruddy cheeks, and dark-blue eyes. He was born on Samsø and, save for a few stints away, to travel and go to university, has lived there his entire life. His father was a farmer who grew, among other things, beets and parsley. Hermansen, too, tried his hand at farming—he took over the family’s hundred acres when his father retired—but he discovered he wasn’t suited to it. “I like to talk, and vegetables don’t respond,” he told me. He leased his fields to a neighbor and got a job teaching environmental studies at a local boarding school. Hermansen found the renewable-energy-island concept intriguing. When some federal money was found to fund a single staff position, he became the project’s first employee.

For months, which stretched into years, not much happened. “There was this conservative hesitating, waiting for the neighbor to do the move,” Hermansen recalled. “I know the community and I know this is what usually happens.” Rather than working against the islanders’ tendency to look to one another, Hermansen tried to work with it.

“One reason to live here can be social relations,” he said. “This renewable-energy project could be a new kind of social relation, and we used that.” Whenever there was a meeting to discuss a local issue—any local issue—Hermansen attended and made his pitch. He asked Samsingers to think about what it would be like to work together on something they could all be proud of. Occasionally, he brought free beer along to the discussions. Meanwhile, he began trying to enlist the support of the island’s opinion leaders. “This is where the hard work starts, convincing the first movers to be active,” he said. Eventually, much as Hermansen had hoped, the social dynamic that had stalled the project began to work in its favor. As more people got involved, that prompted others to do so. After a while, enough Samsingers were participating that participation became the norm.

“People on Samsø started thinking about energy,” Ingvar Jørgensen, a farmer who heats his house with solar hot water and a straw-burning furnace, told me. “It became a kind of sport.”

“It’s exciting to be a part of this,” Brian Kjær, an electrician who installed a small-scale turbine in his back yard, said. Kjær’s turbine, which is seventy-two feet tall, generates more current than his family of three can use, and also more than the power lines leading away from his house can handle, so he uses the excess to heat water, which he stores in a tank that he rigged up in his garage. He told me that one day he would like to use the leftover electricity to produce hydrogen, which could potentially run a fuel-cell car.

“Søren, he has talked again and again, and slowly it’s spread to a lot of people,” he said.

Since becoming the “renewable energy island,” Samsø has increasingly found itself an object of study. Researchers often travel great distances to get there, a fact that is not without its own irony. The day after I arrived, from New York via Copenhagen, a group of professors from the University of Toyama, in Japan, came to look around. They had arranged a tour with Hermansen, and he invited me to tag along. We headed off to meet the group in his electric Citroën, which is painted blue with white puffy clouds on the doors. It was a drizzly day, and when we got to the dock the water was choppy. Hermansen commiserated with the Japanese, who had just disembarked from the swaying ferry; then we all boarded a bus.

Our first stop was a hillside with a panoramic view of the island. Several wind turbines exactly like the one I had climbed with Tranberg were whooshing nearby. In the wet and the gray, they were the only things stirring. Off in the distance, the silent fields gave way to the Kattegat, where another group of turbines could be seen, arranged in a soldierly line in the water.

All told, Samsø has eleven large land-based turbines. (It has about a dozen additional micro-turbines.) This is a lot of turbines for a relatively small number of people, and the ratio is critical to Samsø’s success, as is the fact that the wind off the Kattegat blows pretty much continuously; flags on Samsø, I noticed, do not wave—they stick straight out, as in children’s drawings. Hermansen told us that the land-based turbines are a hundred and fifty feet tall, with rotors that are eighty feet long. Together, they produce some twenty-six million kilowatt-hours a year, which is just about enough to meet all the island’s demands for electricity. (This is true in an arithmetic sense; as a practical matter, Samsø’s production of electricity and its needs fluctuate, so that sometimes it is feeding power into the grid and sometimes it is drawing power from it.) The offshore turbines, meanwhile, are even taller—a hundred and ninety-five feet high, with rotors that extend a hundred and twenty feet. A single offshore turbine generates roughly eight million kilowatt-hours of electricity a year, which, at Danish rates of energy use, is enough to satisfy the needs of some two thousand homes. The offshore turbines—there are ten of them—were erected to compensate for Samsø’s continuing use of fossil fuels in its cars, trucks, and ferries. Their combined output, of around eighty million kilowatt-hours a year, provides the energy equivalent of all the gasoline and diesel oil consumed on the island, and then some; in aggregate, Samsø generates about ten per cent more power than it consumes.

“When we started, in 1997, nobody expected this to happen,” Hermansen told the group. “When we talked to local people, they said, Yes, come on, maybe in your dreams.” Each land-based turbine cost the equivalent of eight hundred and fifty thousand dollars. Each offshore turbine cost around three million dollars. Some of Samsø’s turbines were erected by a single investor, like Tranberg; others were purchased collectively. At least four hundred and fifty island residents own shares in the onshore turbines, and a roughly equal number own shares in those offshore. Shareholders, who also include many non-residents, receive annual dividend checks based on the prevailing price of electricity and how much their turbine has generated.

“If I’m reduced to being a customer, then if I like something I buy it, and if I don’t like it I don’t buy it,” Hermansen said. “But I don’t care about the production. We care about the production, because we own the wind turbines. Every time they turn around, it means money in the bank. And, being part of it, we also feel responsible.” Thanks to a policy put in place by Denmark’s government in the late nineteen-nineties, utilities are required to offer ten-year fixed-rate contracts for wind power that they can sell to customers elsewhere. Under the terms of these contracts, a turbine should—barring mishap—repay a shareholder’s initial investment in about eight years.

From the hillside, we headed to the town of Ballen. There we stopped at a red shed-shaped building made out of corrugated metal. Inside, enormous bales of straw were stacked against the walls. Hermansen explained that the building was a district heating plant that had been designed to run on biomass. The bales, each representing the equivalent of fifty gallons of oil, would be fed into a furnace, where water would be heated to a hundred and fifty-eight degrees. This hot water would then be piped underground to two hundred and sixty houses in Ballen and in the neighboring town of Brundby. In this way, the energy of the straw burned at the plant would be transferred to the homes, where it could be used to provide heat and hot water.

Samsø has two other district heating plants that burn straw—one in Tranebjerg, the other in Onsbjerg—and also a district plant, in Nordby, that burns wood chips. When we visited the Nordby plant, later that afternoon, it was filled with what looked like mulch. (The place smelled like a potting shed.) Out back was a field covered in rows of solar panels, which provide additional hot water when the sun is shining. Between the rows, sheep with long black faces were munching on the grass. The Japanese researchers pulled out their cameras as the sheep snuffled toward them, expectantly.

Of course, burning straw or wood, like burning fossil fuels, produces CO2. The key distinction is that while fossil fuels release carbon that otherwise would have remained sequestered, biomass releases carbon that would have entered the atmosphere anyway, through decomposition. As long as biomass regrows, the CO2 released in its combustion should be reabsorbed, meaning that the cycle is—or at least can be—carbon neutral. The wood chips used in the Nordby plant come from fallen trees that previously would have been left to rot. The straw for the Ballen-Brundby plant comes mainly from wheat stalks that would previously have been burned in the fields. Together, the biomass heating plants prevent the release of some twenty-seven hundred tons of carbon dioxide a year.

In addition to biomass, Samsø is experimenting on a modest scale with biofuels: a handful of farmers have converted their cars and tractors to run on canola oil. We stopped to visit one such farmer, who grows his own seeds, presses his own oil, and feeds the leftover mash to his cows. The farmer couldn’t be located, so Hermansen started up the press himself. He stuck a finger under the spout, then popped it into his mouth. “The oil is very good,” he announced. “You can use it in your car, and you can use it on your salad.”

After the tour, I went back with Hermansen to his office, in a building known as the Energiakademi. The academy, which looks like a Bauhaus interpretation of a barn, is covered with photovoltaic cells and insulated with shredded newspapers. It is supposed to serve as a sort of interpretive center, though when I visited, the place was so new that the rooms were mostly empty. Some high-school students were kneeling on the floor, trying to put together a miniature turbine.

I asked Hermansen whether there were any projects that hadn’t worked out. He listed several, including a plan to use natural gas produced from cow manure and an experiment with electric cars that failed when one of the demonstration vehicles spent most of the year in the shop. The biggest disappointment, though, had to do with consumption.

“We made several programs for energy savings,” he told me. “But people are acting—what do you call it?—irresponsibly. They behave like monkeys.” For example, families that insulated their homes better also tended to heat more rooms, “so we ended up with zero.” Essentially, he said, energy use on the island has remained constant for the past decade.

I asked why he thought the renewable-energy-island effort had got as far as it did. He said he wasn’t sure, because different people had had different motives for participating. “From the very egoistic to the more over-all perspective, I think we had all kinds of reasons.”

Finally, I asked what he thought other communities might take from Samsø’s experience.

“We always hear that we should think globally and act locally,” he said. “I understand what that means—I think we as a nation should be part of the global consciousness. But each individual cannot be part of that. So ‘Think locally, act locally’ is the key message for us.”

“There’s this wish for showcases,” he added. “When we are selected to be the showcase for Denmark, I feel ashamed that Denmark doesn’t produce anything bigger than that. But I feel proud because we are the showcase. So I did my job, and my colleagues did their job, and so did the people of Samsø.”

Around the same time that Samsø was designated Denmark’s renewable-energy island, a group of Swiss scientists who were working on similar issues performed a thought experiment. The scientists, all of whom were affiliated with the Swiss Federal Institute of Technology, asked themselves what level of energy use would be sustainable, not just for an island or a small European nation but for the entire world. The answer they came up with—two thousand watts per person—furnished the name for a new project: the 2,000-Watt Society.

“What it’s important, I think, to know is that the 2,000-Watt Society is not a program of hard life,” the director of the project, Roland Stulz, told me when I went to speak to him at his office, in the Zurich suburb of Dübendorf. “It is not what we call Gürtel enger schnallen”—belt tightening—“it’s not starving, it’s not having less comfort or fun. It’s a creative approach to the future.”

Stulz, who is sixty-three, is a softspoken man with dark wavy hair and a salt-and-pepper mustache. He was trained as an architect and later became interested in energy-efficient building. In 2001, when he took over the 2,000-Watt Society, his mandate was to push it into the realm of the practical. (His work is funded in part by the Swiss Federal Institute of Technology, which has campuses in Zurich and Lausanne, and in part by private donations.) He began holding meetings that brought researchers together with government officials from cities like Zurich and Basel.

“I divided them into groups,” Stulz recalled. “And I told them, At four o’clock each group must come and tell the whole session what project they will do in the future, and who will lead the projects. And they said, Oh, it’s not possible. But at four o’clock everybody came with a project. And that’s how we started.” The cantons of Geneva and Basel-Stadt and the city of Zurich subsequently endorsed the aims of the 2,000-Watt Society, as did the Swiss Federal Department of the Environment, Transport, Energy, and Communications. “At first glance, the objective of a two-thousand-watt society appears unrealistic,” Moritz Leuenberger, the head of the federal department, has said. “But the necessary technology already exists.”

One afternoon, Stulz took me to visit the headquarters of an aquatic-research center known as EAWAG, which was designed to meet the 2,000-Watt Society’s energy-efficiency goals. (EAWAG is an acronym for a German name so complicated that even German speakers can’t remember it.) We drove over in his Volvo, which runs on compressed natural gas produced in part from rotting vegetables. When I first caught sight of the place, I thought it was covered with banners; these turned out to be tinted-glass panels. Inside, hanging from a set of chains in a large atrium, was what I took to be a sculpture of a bug. This turned out to be a model of a water molecule, enlarged some ten billion times.

Among the many unusual features of the EAWAG Center is a lack of usual features. The building, which opened in 2006, has no furnace; it is so tightly insulated that, on most days, the warmth thrown off by the office equipment and the two hundred people who work inside is enough to keep it comfortable. Additional heat is provided by the sun—in winter, the outside panels tilt to allow in the maximum amount of light—and by air sucked in from underground. The building also has no conventional air-conditioners: in summer, the panels tilt to provide shade, and if the building gets hot during the day, at night the windows at the top of the atrium open, and the warm air rushes out. It supplies about a third of its own electricity with photovoltaic panels installed on the roof, and gets its hot water from solar collectors. Its bathrooms are equipped with specially designed “no mix” toilets that separate out urine, which contains potentially useful phosphorus and nitrogen. (“Exploiting common waste as a resource is a mark of sustainable civilization,” a booklet on the building observes.)

“It’s not a miracle, such a building,” Stulz told me when we went to have a cup of coffee in the center’s cheerfully modernist cafeteria. “It’s just putting smart elements together in a smart way.” Outside, it was rainy and forty-three degrees; inside the temperature was a pleasant seventy.

One way to think about the 2,000-Watt Society is in terms of light bulbs. Let’s say you turn on twenty lamps, each with a hundred-watt bulb. Together, the lamps will draw two thousand watts of power. Left on for a day, they will consume forty-eight kilowatt-hours of energy; left on for a year, they will consume seventeen thousand five hundred and twenty kilowatt-hours. A person living a two-thousand-watt life would consume in all his activities—working, eating, travelling—the same amount of energy as those twenty bulbs, or seventeen thousand five hundred and twenty kilowatt-hours annually.

Most of the people in the world today consume far less than this. The average Bangladeshi, for example, uses only about twenty-six hundred kilowatt-hours a year—this figure includes all forms of energy, from electricity to transportation fuel—which is the equivalent of using roughly three hundred watts continuously. The average Indian uses about eighty-seven hundred kilowatt-hours a year, making India a one-thousand-watt society, while the average Chinese uses about thirteen thousand kilowatt-hours a year, making China a fifteen-hundred-watt society.

Those of us who live in the industrialized world, by contrast, consume far more than two thousand watts. Switzerland, for instance, is a five-thousand-watt society. Most other Western European countries are six-thousand-watt societies; the United States and Canada run at twelve thousand watts. One of the founding principles of the 2,000-Watt Society is that this disparity is in itself unsustainable. “It’s a basic matter of fairness” is how Stulz put it to me. But increasing energy use in developing countries to match that of industrialized nations would be unacceptable on ecological grounds. Were per-capita demand in the developing world to reach current European levels, global energy consumption would more than double, and were it to rise to the American level, global energy consumption would more than triple. The 2,000-Watt Society gives industrialized countries a target for cutting energy use at the same time that it sets a limit for growth in developing nations.

The last time Switzerland was a two-thousand-watt society was in the early nineteen-sixties. By the end of that decade, energy use had reached three thousand watts, and by the mid-seventies it was up to four thousand watts. This rapid rise could be said to follow from technological advances—the spread of automobiles, the advent of jet travel, the proliferation of appliances and electronic devices—or it could be seen as just the reverse: a failure to apply technology where it is needed. A few years ago, a group of Swiss scientists published a white paper—or, to use the Swiss term, a “white book”—on the feasibility of a 2,000-Watt Society. Relying on widely agreed-upon figures, the scientists estimated that two-thirds of all the primary energy consumed in the world today is wasted, mostly in the form of heat that nobody wants or uses. (“Primary energy” is the energy contained in, say, a lump of coal; “useful energy” is the light emitted by a bulb once that coal has been burned to produce steam, the steam has been used to run a turbine, and the resulting electricity has been transmitted over the grid to heat the bulb’s filament.) This same paper concluded that, with currently available technologies, buildings could be made eighty per cent more efficient, cars fifty per cent more efficient, and motors twenty-five per cent more efficient.

In Switzerland, I visited several other buildings that, like the EAWAG Center, had been specifically designed to maximize efficiency. One was an upscale apartment building in Basel. The apartments have eighteen-inch-thick walls filled with insulation, triple-paned windows coated with a special reflective film, and a heat-recovery system that captures eighty per cent of the energy normally lost through ventilation. Instead of a boiler, it has a geothermal heat pump, which essentially sucks energy out of the groundwater. In the summer, the same system is used for cooling. (In compliance with Swiss building codes, the building also contains a bomb shelter.)

“The construction industry is very traditional,” Franco Fregnan, an engineer who showed me around the apartments, said. “If you bring an innovation to them, you usually have to wait another generation until it arrives into a building. And we are trying to change that, step by step.”

“It usually makes sense to become more intelligent in any human activity,” Stulz told me. “As the former Saudi Arabian oil minister Sheikh Yamani once said, the Stone Age didn’t end because there were no more stones. It ended because people became more intelligent. ”

What would it take to lead a two-thousand-watt life? When I posed this question to Stulz, he gave me another research paper, which offers case studies of six fictionalized households. The Jeannerets are an imaginary family of four who live in Glattbrugg, a town north of Zurich. They own an energy-efficient house, travel by electric bike or train, and occasionally rent a car—they belong to a car-sharing service—to do their grocery shopping. The Moeris, fictional farmers who live northeast of Bern, generate their own electricity with natural gas produced from cow manure; and Alain, Michel, Angela, and Marlène, fictional students living in Geneva, share all their appliances, use the tram, and like to go hiking in the French Alps during school breaks. “There is no formula for how to achieve a two-thousand-watt society,” the paper declares. “Three things are needed: societal decisions. . . technical innovation, and the resolve of every individual to act in an energy-conscious way.”

Very broadly speaking, the average Swiss today uses energy as follows: fifteen hundred watts per day for living and office space (this includes heat and hot water), eleven hundred watts for food and consumer items (the energy that it takes to produce and transport goods is referred to as “embodied” or “gray” energy), six hundred watts for electricity, five hundred watts for automobile travel, two hundred and fifty watts for air travel, and a hundred and fifty watts for public transportation. Each person’s share of Switzerland’s public infrastructure, which includes facilities like water- and sewage-treatment plants, comes to nine hundred watts. Reducing these five thousand watts to two thousand would seem to require a significant reduction in every realm. Assuming that infrastructure-related consumption could be cut to five hundred watts, a person who continued to use fifteen hundred watts for living and office space would have nothing left for food, electricity, and transportation. Similarly, a person who continued to travel and use electricity at current rates would consume two thousand watts without having anywhere to live or work, or anything to eat.

While I was in Switzerland, I kept looking for people who actually led two-thousand-watt lives.

“I’m pretty close, except for this stupid air travel,” Gerhard Schmitt, the vice-president for planning and logistics at the Zurich campus of the Swiss Federal Institute of Technology, told me. “I go once to Shanghai and it’s gone.” (A round-trip flight between Zurich and Shanghai is the equivalent of using something like eight hundred watts continuously for a year.)

“Let’s skip that question,” Stulz said when I put it to him. While he lives in an energy-efficient apartment, he, too, travels a great deal; when I visited, he had just returned from a conference in New Delhi, a round trip that used roughly the equivalent of six hundred watts for the year.

The one person I spoke to who did seem to be leading a two-thousand-watt life, or something very near to it, was an engineer named Robert Uetz. Uetz works in the same building as Stulz, and when we returned from visiting the EAWAG Center he was still in his office, even though it was after six. Stulz encouraged me to go talk to him.

“We don’t experience it as a restriction,” Uetz told me of his two-thousand-watt life style. “On the contrary. I don’t feel that we’re giving up anything.” Uetz and his wife, a dentist, live with their two children in the city of Winterthur, near Zurich. About ten years ago, they bought a two-thousand-square-foot house in a newly built energy-efficient development. The house is heated with a geothermal heat pump—“It’s crazy to heat a house with fossil fuels,” Uetz said—and has a solar hot-water system. Uetz added photovoltaic panels to the roof to produce electricity; in the winter the panels produce somewhat less power than the house uses—it’s equipped with the most energy-efficient lights and appliances the family could find—and in the summer they produce somewhat more, so that over the course of the year the house’s electricity use nets out to zero.

“The most important decision was that we wouldn’t have a car,” Uetz told me. “That was a conscious decision. We looked for a house where we didn’t need a car.” Driving a lot—even in what, by today’s standards at least, counts as an energy-efficient vehicle—also makes it difficult to live within two thousand watts. A person who drives a Toyota Prius ten thousand miles a year consumes roughly two hundred and twenty-five gallons of gasoline. This is equivalent to consuming around eight thousand kilowatt-hours, or to using nearly a thousand watts on a continuous basis. (For a family of four, the same gasoline consumption would come to almost two hundred and fifty watts per person.)

“It’s a matter of what you’re used to, but I find taking the train a lot more pleasant than driving,” Uetz went on. “On the train I can work and relax. If I took a car, I’d have to worry about parking and traffic, rain, snow, and a certain number of people who can’t drive but are on the road anyway.” When Uetz and his family go on vacation, they travel by rail. “The only thing I’d say that is sort of a restriction is the flying,” he said. “Because, obviously, with the train where you can go is limited. We can’t go to China, or if we did it would take a week.”

“I don’t make a religion out of it,” he added. “I wouldn’t do it if I didn’t feel good about it—it’s how I like to live.”

By the 2,000-Watt Society’s own reckoning, cutting consumption is just half—or, perhaps more accurately, a quarter—of what needs to be done. The project’s ultimate goal is a world where people consume no more than two thousand watts apiece and where fifteen hundred of those watts come from carbon-free sources. In such a world, everyone would use energy sparingly, like Robert Uetz, and generate it renewably, like Jørgen Tranberg. In such a world, filled with windmills and net-zero houses, carbon emissions would fall sharply, and the concentration of CO2 in the atmosphere would slowly level off. But how realistic is such a scenario?

Before I left Switzerland to fly back to New York (a trip equivalent to using roughly two hundred and fifty watts continuously for a year), I went to speak to the president of the research council of the Swiss National Science Foundation, Dieter Imboden. Imboden, who is sixty-four, is a compact man with an oval face and silvery hair. He received his training in theoretical solid-state physics, later became interested in environmental physics, and for several years chaired the Swiss Federal Institute of Technology’s environmental-sciences department. In the late nineties, he served as the director of the 2,000-Watt Society. He said that as a scientist he could see no technical barriers to creating a two-thousand-watt world.

“We are putting our mental energy into the wrong basket,” he told me. “Nothing has to be reinvented—for an engineer it’s not even a challenge.”

“The problems of the twenty-first century are a different kind of problem,” he went on. “And I think our society will be measured according to the solution of this new kind of problem, which cannot be solved with the same recipe as the flight to the moon, or the Manhattan Project. It’s a qualitative difference—a paradigm change in the role of science for our society.”

He continued, “The difficult thing is what I call ‘constructed Switzerland.’ You in America could call it ‘constructed United States’—the buildings and how they are built, but also where they are built and, even more important, the roads, the railroads, the lines for energy, for wastewater, and so on. It’s not economically feasible to replace everything in one instant.” But since infrastructure should in any case be replaced at the rate of roughly two per cent a year, if the project is approached incrementally, it’s a different task. Then, Imboden said, “it suddenly is feasible.”

As of yet, no one has undertaken a rigorous analysis of the economics of a transition to two thousand watts. Researchers have tended, rather, to focus on the price of stabilizing carbon-dioxide levels in the atmosphere at a given concentration—either, say, five hundred and fifty parts per million, which is double pre-industrial levels, or four hundred and fifty parts, which, many climate scientists say, is the very highest level advisable. Perhaps the most often cited economic study is the Stern Review, commissioned by the British government and named for its lead author, Sir Nicholas Stern, formerly the chief economist for the World Bank. The Stern Review, published in October, 2006, concluded that greenhouse-gas levels could be stabilized below double pre-industrial concentrations at a cost to global G.D.P. of around one per cent a year. (The Stern Review considered not just CO2 but other greenhouse gases, like methane and nitrous oxide, as well.) An analysis released last year by the Swedish utility Vattenfall, with research assistance from the American consulting firm McKinsey & Company, reached a similar conclusion: it determined that many measures to reduce carbon emissions, like improving building insulation, would save money, while others, like installing wind turbines, would carry a price. The Vattenfall report estimates that “if all low-cost opportunities are addressed,” CO2 levels could be stabilized at four hundred and fifty parts per million with an annual expenditure of six-tenths of one per cent of global G.D.P.

Though one per cent of the global economy is clearly a lot of money, in the grand scheme of things it’s also clearly manageable. It is about a ninth of what’s currently spent on health care, a seventh of what’s spent on oil, and half of what’s spent on defense. (More than forty per cent of all the world’s military expenditures are made by the United States.) Perhaps most pertinent, it’s a far smaller figure than the cost of inaction. The Stern Review projects that if current emissions trends are allowed to continue, the eventual damage from climate change will “be equivalent to losing at least 5% of global GDP each year, now and forever,” and that “if a wider range of risks and impacts is taken into account” that figure could “rise to 20% of GDP or more.”

Twenty years ago, NASA’s chief climate scientist, James Hansen, testified on Capitol Hill about the dangers of global warming. Just a few days ago, Hansen returned to the Hill to testify again. “Now, as then, frank assessment of scientific data yields conclusions that are shocking to the body politic,” he said. “Now, as then, I can assert that these conclusions have a certainty exceeding ninety-nine per cent. The difference is that now we have used up all slack in the schedule.” Hansen went on to warn that there would be no practical way to prevent “disastrous” climate change unless the next President and Congress act quickly to curb emissions. Few parts of the U.S. may be as windy as Samsø, or as well organized as Switzerland, but just about everywhere there are possibilities for generating energy more inventively and using it more intelligently. Realizing these possibilities will require a great deal of effort. We may well decide not to make this effort. Such a choice to put off change, however, will merely drive us toward it. ♦

Matching Rights in Merger Agreements

2009-06-05T00:22:00.000-07:00

M & A Law Prof Blog: Matching Rights in Merger Agreements

May 28, 2009
Matching Rights in Merger Agreements

Rights of first refusal in merger agreements are a little bit of a hobby horse of mine. Except for papers by David Walker (here) and another by Marcel Kahan (here) they don’t get much attention. This is always a bit surprising to me. In the Deals class, the incentive effects of rights of first refusal take up a full class period, but yet there isn’t much attention given them. Maybe they don’t get much attention because their incentive effects are so obvious.

I take that back. Match rights were a central argument in the Toys R Us case. But there Vice Chancellor Strine evaluated the expert opinions of Prof. Guhan Subramanian and Prof. Prescott McAfee and found their conclusion – that the presence of a match right can/should dampen the effects of a competitive auction by deterring potential second bidders – lacking. In fact, he noted that examples of matching rights in merger agreements “are simply not that unusual.” He’s right on that mark. Matching rights in merger agreement are pervasive. In some research I have percolating on matching rights in merger agreements, I found that the vast majority of the merger agreements in my sample had one form or another of a matching right. So, Vice Chancellor Strine is right so far as that goes. On the other hand, I found that transactions with matching rights also had statistically significant lower prices. [An aside: It looks like Toys just announced an acquisition of FAO Schwarz today.]

However, because matching rights come in a variety of flavors – from weak to strong – they are a coding nightmare. For example, take a look at the matching right at question in the Toys case (merger agreement here):

6.5 Acquisition Proposals … (b) Notwithstanding anything in this Section 6.5 to the contrary, … the Company may terminate this Agreement and/or its Board of Directors may approve or recommend such Superior Proposal to its stockholders …; provided, … however, that the Company shall not exercise its right to terminate this Agreement and the Board of Directors shall not recommend a Superior Proposal to its stockholders pursuant to this Section 6.5(b) unless the Company shall have delivered to Parent a prior written notice advising Parent that the Company or its Board of Directors intends to take such action with respect to a Superior Proposal, specifying in reasonable detail the material terms and conditions of the Superior Proposal, this notice to be delivered not less than three Business Days prior to the time the action is taken, and, during this three Business Day period, the Company and its advisors shall negotiate in good faith with Parent to make such adjustments in the terms and conditions of this Agreement such that such Acquisition Proposal would no longer constitute a Superior Proposal.

There is a three day matching period that’s not uncommon. What is less uncommon and gives this right of first refusal its real teeth is the requirement that Toys negotiate in good faith with the initial bidder until such time as the second bid no longer constitutes a superior proposal. This type of match right (the ‘good faith negotiation right’) is the strong form. There are weaker forms.

For example, in AMD’s acquisition of Broadcom last year, the parties included the mildest form of a matching right – ‘information rights.’ Here’s the relevant language (merger agreement):

4.2 No Solicitation (b) … In addition to the foregoing, if … Seller or any of its Representatives receive any Competing Proposal or Inquiry, Seller shall immediately notify Purchaser thereof and provide Purchaser with the details thereof, including the identity of the Person or Persons making such Competing Proposal or Inquiry, and shall keep Purchaser fully informed on a current basis of the status and details of such Competing Proposal or Inquiry and of any modifications to the terms thereof, in each case to the extent not prohibited by a confidentiality, nondisclosure or other agreement then in effect and entered into prior to the date hereof …

This language places no obligations on the seller other than to keep the initial bidder fully informed. Presumably a fully informed initial bidder that is actively interested in completing a purchase will be able to use such information to engage in ongoing negotiations and match any other offer on the table. Still, information rights are the weakest form of matching right – mostly because there is no “right” involved.

There is another matching right solution. This involves a combination of information rights and a delay before the seller is permitted to terminate the agreement, change its board recommendation, or have its board meet to consider a superior proposal – a ‘delayed termination right’. For example, you can find an example in the D&E Communications transaction (merger agreement here).

6.2 No Solicitation of Transactions … (4) f) Notwithstanding the foregoing, at any time prior to obtaining the Company Shareholder Approval …, the Board of Directors may (x) make a Company Adverse Recommendation Change or (y) cause the Company to terminate this Agreement pursuant to Section 8.4(b) if: … the Company delivers written notice to Parent (a “Notice of Superior Competing Transaction”) advising Parent that the Board of Directors intends to take such action and specifying the reasons therefor, including the material terms and conditions of any Superior Competing Transaction that is the basis of the proposed action by the Board of Directors (it being understood and agreed that any amendment to the financial terms or any other material term of such Superior Competing Transaction shall require a new Notice of Superior Competing Transaction and a new five Business Day period), and after the fifth Business Day following delivery of the Notice of Superior Competing Transaction to Parent the Board of Directors continues to determine in good faith that the Competing Transaction constitutes a Superior Competing Transaction …

In the example above, the initial bidder gets information rights combined with a 5 day delay during which time the initial bidder can presumably negotiate its way back into the picture.

Or, what the heck, you could just draft a match right that all elements of the above – below is Sumtotal Systems recent agreement (merger agreement) that includes information rights, good faith negotiation rights and a delayed fuse on both termination and a board recommendation.

5.3 No Solicitation (f) (iv) in the case of clauses (x) and (y) above, (A) the Company shall have provided prior written notice to Newco at least three (3) Business Days in advance (the “Notice Period”), to the effect that absent any revision to the terms and conditions of this Agreement, the Company Board has resolved to effect a Company Board Recommendation Change and/or to terminate this Agreement pursuant to this Section 5.3(f), which notice shall specify the basis for such Company Board Recommendation Change or termination, including in the case of Section 5.3(f)(y) the identity of the party making the Superior Proposal, the material terms thereof and copies of all relevant documents relating to such Superior Proposal; and (B) prior to effecting such Company Board Recommendation Change or termination, the Company shall, and shall cause its financial and legal advisors to, during the Notice Period, (1) negotiate with Newco and any representative or agent of Newco (including, without limitation, any director or officer of Newco) (collectively, “Newco Representatives”) in good faith (to the extent Newco desires to negotiate) to make such adjustments in the terms and conditions of this Agreement such that the Company Board would not effect a Company Board Recommendation Change and/or terminate this Agreement, and (2) permit Newco and the Newco Representatives to make a presentation to the Company Board regarding this Agreement and any adjustments with respect thereto (to the extent Newco desires to make such presentation); provided, that in the event of any material or substantive revisions to the Acquisition Proposal that the Company Board has determined to be a Superior Proposal, the Company shall be required to deliver a new written notice to Newco and to comply with the requirements of this Section 5.3 (including this Section 5.3(f)) with respect to such new written notice

The effect of all of these common provisions is to reinforce the position of the initial bidder and dissuade second bidders unless the second bidder has a private valuation that it believes is substantially higher than the private valuation of the initial bidder. I’ll post some more thoughts on matching rights another day.

- bjmq

May 28, 2009 in Deals, Merger Agreements | Permalink
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Oil And Gold To Figure Large This Week - Brad's Desktop - Hard Assets Investor

2009-04-14T19:21:00.000-07:00

Oil And Gold To Figure Large This Week - Brad's Desktop - Hard Assets Investor

Oil And Gold To Figure Large This Week
Written by Brad Zigler
Monday, 13 April 2009 13:31
Real-time Monetary Inflation (per annum): 7.9%

Easter Mondays leave Yanks more time to leisurely ponder the week's trading prospects, as many global bourses are closed. We get to trade - and talk, as Linda Richman used to suggest - amongst ourselves.

Gold and oil naturally figure large in this week's scenario. Particularly, oil over gold, if you've been listening to commodity maven Jim Rogers. Rogers thinks the International Monetary Fund (IMF) is a likely seller of some of its 3,200-ton metal stash, so he's talking up black gold over yellow.

It's not as if the world finds this surprising. Whether the IMF sales take place or not, the world's been spoiling for a showdown between the two commodities.

Let's look at oil first. The nearby crude contract gathered strength in its 50% retracement of the February-March rally, and is now poised to challenge the run-up's $54.64 high.

Nearby NYMEX WTI Crude

Nearby NYMEX WTI Crude

True, near-term fundamentals still indicate oversupply. The re-growth in the contango tells you that. The quarterly carry trade was pinched to 80 cents a barrel a month ago; now it's in the $4-5 range. If you've got a carrying charge market, you've got commodity enough to carry into future deliveries.

No, this has been a rally built more on expectations of improving economic prospects - hand-in-hand with the equity market rally - than on a supply retraction. Oil inventories at the Cushing, Okla., terminus may be down from their peak, but supplies in other regions have ballooned to more than compensate for the off-take.

Now, about gold ...

Momentum and sentiment have turned sour for the yellow metal. But you probably suspected that, right? The recent 30,000-contract downdraft in COMEX open interest was led mostly by fund sellers. Net long positions held by large speculators tumbled more than 18% last week.

COMEX Nearby Gold

COMEX Nearby Gold

Technically, gold's very vulnerable. Pushed to test its 100-day moving average on the downside and weighed down by overhead resistance at the $888 level - formerly support for the February-March topping action - the nearby market's squeezed. Gold spreads (as mentioned in "Another 'Make It Or Break It' Hurdle For Gold") indicate plenty of liquidity in the lease market. Supply's not the issue for gold either. At least not yet.

Oil's technical strength over gold is readily apparent in the gold/oil ratio. A rising ratio, meaning gold's price is gaining on oil's, is indicative of poorer economic conditions to come. A decline, not surprising, signals the market's forecast of better prospects. The ratio's been testing the 17-to-1 level over the past couple of weeks. An oil breakout could put this indicator on course to look for support at the 15-to-1 level.

Gold/Oil Ratio

Gold/Oil Ratio

It seems traders are essentially anticipating a reflation trade by making one of the primary engines of inflation, oil, their target rather than gold, inflation's classic beneficiary.

This should be an interesting week.

Why a Big Meal Makes You Hungry - WSJ.com

2009-04-13T20:13:00.000-07:00

Why a Big Meal Makes You Hungry - WSJ.com

*Source: "The Skinny" by Louis J. Aronne
Discuss

* Have you found ways to cut your appetite? Join the discussion at Journal Community.

After 23 years of treating patients -- some of it espousing liquid diets -- Dr. Aronne has concluded that refined carbohydrates and foods with high sugar and fat content promote what he calls "fullness resistance." They interfere with the complex hormonal messages the body usually sends to the brain to signal that it's time to stop eating. People feel hungrier instead.

This happens in part because refined carbohydrates raise blood-sugar levels, setting up an insulin surge that drives blood sugar down again, causing rebound hunger. That insulin spike also interferes with leptin, the hormone secreted by fat cells that should tell the body to stop eating. Obese people have loads of leptin, but it either doesn't get to the brain, or the brain becomes resistant to it. "This is not a failure of willpower, it's a physical mechanism," Dr. Aronne writes. The body also becomes resistant to insulin, setting the stage for diabetes.

Other researchers have described similar phenomena. An article in this month's Medical Hypothesis argues that for some people, refined foods with high sugar and carbohydrate content can be just as addictive as tobacco and alcohol.

Eating foods high in protein, vegetables, fiber and water have the opposite effect, Dr. Aronne says. His plan recommends revising what you eat, one meal at a time, to restore your sense of fullness:

Breakfast: Loading up on lean protein -- ideally from egg whites or a protein shake -- in the morning reduces hunger all day long. Eating muffins, bread, sweetened cereal and juice does the opposite. A study of 30 overweight women at Saint Louis University School of Medicine found that those who ate eggs for breakfast consumed 140 fewer calories at lunch, and ate less for the next 36 hours, compared with women who ate bagels in the morning.

Some people argue that they aren't hungry in the morning, but Dr. Aronne notes that ghrelin, the hormone that typically signals hunger, adjusts to habitual meal patterns. After a few days of eating breakfast, you should find that you are hungry in the morning, and are eating less the night before, he writes.

Lunch: Some dieters try to cut calories by skipping this meal. But going more than five hours without food causes hunger hormones to rise and fullness hormones to drop, and sends more of the calories consumed at dinner straight to fat cells. Dr. Aronne recommends starting lunch with a salad -- at least two cups of lettuce -- then more vegetables, and then lean protein. Skip the cheese, croutons, bacon and creamy dressings, he advises. Using vinegar alone will cut your appetite and slow the rise in blood sugar.

Dinner: The end of the day is fraught with temptation. Obese people consume significantly more calories at dinner than slimmer people. Here, too, load up first on salads, clear soups, or high-protein appetizers like shrimp cocktail, then have a lean protein main course. Unlike some other diet plans, Dr. Aronne's program allows a half-cup of grains or a small dessert at the end of the meal, but only if you're still hungry.

Eating bread before dinner makes people lose their sense of fullness and eat more, Dr. Aronne warns. Alcohol makes it worse by lowering your resistance and promoting fat storage.

Snacks: Like many other weight-loss experts, Dr. Aronne believes that midmorning and midafternoon snacks can act as mini appetite suppressants, preventing blood sugar from dropping too low. But the same principals apply: high-sugar, high-starch, high-fat snacks -- including those little 100-calorie cookie packs -- start a vicious cycle of more cravings, whereas fruit, nuts, vegetables and clear soups can halt them.

Beverages: It should go without saying that juice and sweet soda can add hundreds of extra calories a day. A few studies have shown that even artificially sweetened beverages can prompt people to crave real sweets during the day. Cut back on all sources of liquid calories, Dr. Aronne advises; stick with water.

To be sure, if you eat as Dr. Aronne suggests, you'll consume fewer calories overall. The point is, eating protein early in the day may make it much easier to cut down. "It definitely does make a difference," says Ned Sadaka, a New York investment manager who consulted Dr. Aronne to drop 30 pounds that had crept up on him in recent years. He's lost 21 pounds and 5 inches off his waist since January.

Not everyone agrees that consuming more protein cuts appetite. Harvard School of Public Health's Frank Sacks led a study recently published in the New England Journal of Medicine that compared 811 overweight adults on four diets with varying levels of protein, fat and carbohydrate. "We found absolutely no difference in their satiety and hunger levels," Dr. Sacks says. All the groups lost similar amounts of weight.

Other weight-loss experts say that's not surprising, since there were only modest differences in their fat, protein and carbohydrate intakes, and many participants didn't stick to their plans.

Eric Westman, director of the Lifestyle Medical Clinic at Duke University Medical Center, who espouses the same kind of low-carb plan that Robert Atkins made famous, says in his experience, "There is almost complete appetite suppression when you eat protein."

The debate will doubtless continue -- weight loss is an extremely complex area, and not everyone's metabolism is the same. Dr. Aronne suggests trying his plan yourself: "Have 200 calories of egg white omelet or protein shake for breakfast, and then another day have 200 calories of juice and look at your hunger, hour after hour." Sometimes being a clinical trial of one is the best way to do your own research.

* Email HealthJournal@wsj.com

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Don’t forget, inflation is our friend

2009-04-03T18:23:00.000-07:00

FT Alphaville » Blog Archive » Don’t forget, inflation is our friend: "Don’t forget, inflation is our friend
Posted by Izabella Kaminska on Apr 02 17:35.

Moderate inflation is and always has been our friend (hence the reason why government targets are 2%etc).

Accordingly, and perhaps unsurprisingly given current deflation fears, a little bit of inflation would be welcomed by any Western economy.

Going further, however, Merrill Lynch Bank of America (MLBoA) explains to what degree high inflation could actually prove the solution to the current crisis.

High inflation, they say, is the easiest way to help consumers, banks and corporates in their de-leveraging process because in high enough inflation environment, nominal house prices will not need to decline at all and non-indexed loans will lose their value without having to be formally written down. As they put it:
Inflation is, in our view, a compelling solution to stop the vicious cycle and thus one that governments around the world are unlikely to ignore.

Of course, with quantitative easing efforts about the risk of inducing too much inflation is very genuine. As MLBoA state: Looking past the short-term—where we do not see inflation as a problem for OECD economies—it may however prove difficult to engineer a U-turn on money supply growth once economic"

FT.com / Markets / Insight - Inflation fears surface again

2009-04-03T18:22:00.000-07:00

FT.com / Markets / Insight - Inflation fears surface again

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Inflation fears surface again

By David Oakley and Michael Mackenzie

Published: April 1 2009 19:37 | Last updated: April 1 2009 19:37

Even before deflation has fully hit the world’s leading economies, investors are fretting about inflation.

Inflation - a changeable climateSince the Bank of England and the US Federal Reserve announced plans to buy government debt, the inflation trade has become increasingly popular.

This has been reflected in a boost for emerging market and cyclical stocks, such as mining and general retailing, the jump in gold prices and rising demand for inflation-linked bonds. Some of these trades, such as buying miners and emerging markets, reflect a rise in risk appetite, while others – purchases of gold and inflation-linked bonds – suggest a more cautious strategy.

Michael Hartnett, co-head of international investment strategy at Bank of America Merrill Lynch, says: “There is nothing more inflationary than a whiff of deflation because the deflationary response in policy terms has to be inflationary.”

The impact of quantitative easing – the printing of money to revive the economy – has been most dramatic on cyclical stocks.

In the UK, mining stocks have jumped by 20 per cent since the Bank of England announced plans to buy up to £75bn ($108bn) in gilts on March 5. This compares with a rise of only 7.3 per cent for the FTSE All Share index.

General retailing, which is also heavily reliant on growth, has risen by 11.4 per cent, while the oil sector is up 10.3 per cent. In contrast, defensives have fared badly: gas, water and multi-utilities are down by 4.8 per cent over the same period, while the tobacco sector has dropped by 2 per cent.

Robert Parkes, UK equity strategist at HSBC, says: “Since the start of March and QE, we have seen a sharp change in sentiment in equities. Deflation fears are still around, but they have receded.”

Investors have also inundated banks with requests for gold and inflation-linked bonds as they worry that printing money will inexorably lead to inflation.

Gold has risen from around $900 a troy ounce in mid-March, when the US announced plans to buy $300bn of government debt, to around $925. Yields, which have an inverse relationship with price, on inflation-linked bonds have dropped by half a percentage point over the same period.

John Reade, strategist at UBS, says: “We have seen a lot of enquiries, particularly for physical gold as more people want to protect themselves against inflation. Owning physical gold is the ultimate safe trade.”

Mihir Worah, managing director at Pimco, says: “We have seen a heavy allocation into Tips (Treasury inflation-protected securities) during 2009 with investors in Treasuries looking to buy insurance. Policymakers are clearly trying to reflate the economy and while we are not out of the woods with respect to disinflation and possibly deflation, my base case is that central banks will succeed.”

Alan Wilde, head of fixed income and currency at Barings, adds: “We are building up our global index-linked bond positions as it is clear that policymakers will struggle to turn off the QE tap at the right time, so inflation will come back.”

However, deflation concerns are still influencing many investors, with medium-dated conventional government bonds, in particular, gaining support from the threat of falling prices.

Alan Ruskin, strategist at RBS Greenwich Capital, says: “For the short term, deflation still trumps the risk of inflation for many people. The global economy is filled with excess capacity and the output gap in the system is massive. We face deflation pressures for a prolonged period.”

Scott Minerd, chief strategist at Guggenheim Partners, adds that the prospect of inflation returning was a long-term risk event for the US.

“If we focus on Japan’s experience, we see that they engaged in quantitative easing for five years before rates were raised. We won’t see inflation get going until corporate credit spreads come in,” he says.

Analysts stress that with such an uncertain economic outlook, the wise investor should hedge their positions in an attempt to take advantage of both the inflationary and deflationary scenarios.

A common move has involved selling conventional government bonds and switching into corporate and index-linked debt.

For example, in the UK, cash from selling gilts can be used to buy triple B company paper and index-linked notes for a higher overall return. The corporate bond offers the yield, while the index-linked security protects against inflation.

Steven Major, global head of fixed-income research at HSBC, says: “It does make sense to swap your gilts for linkers and sterling corporates to get the best of both worlds.”

Mr Hartnett says hedging bets is critical in such volatile markets, which can swing sharply in the matter of hours.

“In market terms, we are seeing a war between inflation and deflation, with sentiment often changing quite quickly. This will go on over 2009 and 2010.

“The first battle has arguably been won by the policymakers as inflation expectations have picked up as they had hoped by announcing quantitative easing. But there is a real danger that the financial sector could bring us all back down to earth again.”

Mr Hartnett believes bank first quarter results later this month could mark a turning point, with hopes rising that they will show the worst of the financial sector problems are over.

“The market is expecting the results of the banks to be relatively good. If they aren’t, we could see another big sell-off in equities and inflation concerns will recede again,” he says.

Mr Parkes adds: “Fears can quickly switch from inflation to deflation. Last July everyone was paralysed by fears of inflation, yet by the turn of the year concerns were almost entirely directed at deflation.”

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Books of The Times - Leslie H. Gelb’s ‘Power Rules’ Argues for Common Sense in American Foreign Policy - Review - NYTimes.com

2009-03-23T18:23:00.000-07:00

Books of The Times - Leslie H. Gelb’s ‘Power Rules’ Argues for Common Sense in American Foreign Policy - Review - NYTimes.com

March 23, 2009
Books of The Times
Common Sense to the Rescue of Policy
By MICHAEL IGNATIEFF
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POWER RULES

How Common Sense Can Rescue American Foreign Policy

By Leslie H. Gelb

334 pages. Harper. $27.99.

Few Americans know the inner world of American foreign policy — its feuds, follies and fashions — as well as Leslie H. Gelb. He served Lyndon B. Johnson in the Pentagon and Jimmy Carter in the State Department. He was a foreign affairs columnist for The New York Times and president of the Council on Foreign Relations. “Power Rules” builds on that lifetime of experience with power and is a witty and acerbic primer for moderate pragmatists.

His chief targets are ideological dogmatism and imperialist hubris. America should be unafraid to exercise power, but it must be mindful that power’s reach usually exceeds its grasp. According to Mr. Gelb liberal Democrats should stop apologizing when they use American power, and conservative Republicans should stop believing that no problem can resist the application of American force. Both need to understand that power is wasted when it’s used unwisely. The chief missing ingredient in United States foreign policy, he argues, is common sense.

Common sense for Mr. Gelb means an anti-utopian, evidence-based, pragmatic, moderate foreign policy focusing on achievable goals, rather than unattainable and hubristic master strategies like trying to foster democracy in countries where you can’t drink the water.

We can’t drink the water in Afghanistan, and Mr. Gelb advises that America should abandon ambitions of state or nation building there and concentrate instead on eliminating Al Qaeda. Military force alone can achieve little. To marginalize Al Qaeda and deny it sanctuary, America needs to find someone — President Hamid Karzai or a democratically elected successor — who can make the deals with southern Pashtun tribal leaders that might pull them away from the Taliban and from Al Qaeda. Engaging India, Iran, Pakistan and Russia will help provide Afghanistan the minimum external guarantees it needs to survive as a state, while cunning alliance building by the Afghan government with local tribal leaders in the south may help isolate the insurgents and drain away their popular support.

Surging the United States military into the south of Afghanistan will help chiefly as a political demonstration of commitment. It tells the insurgents the West is there to stay, at least until political stability is irreversible.

Even these pragmatic and modest goals may not be attainable. America, Mr. Gelb fears, is “at the point of declining as a nation and a world power.” It still has no competitor at the top of the power pyramid, but its long-term dominance is being eroded by unmet challenges. No country with a debt America’s size, he points out, has ever remained dominant for long, and no country with schools as lacking in rigor as America’s has much hope of dominating a global economy for long either.

President Obama can’t hope to achieve much overseas, Mr. Gelb argues, unless he first rebuilds at home: better health care, decent education, less dependence on foreign oil and less of the even more deadly dependence on foreign creditors.

Reckoning with the limits of American power is not a new challenge. Tiny states like Cuba have defied America for 50 years, Mr. Gelb says, and ideologically resolute ones like Iran have bested it for 30. What is new is the painful discovery that although America can win any pitched battle it fights, it cannot stop any moderately cunning terrorist from inflicting terrible casualties on its soldiers and civilians.

Asymmetric threats are new, but they can be met by adapting doctrine, training and equipment. Military superiority remains an essential component of American power — Mr. Gelb is against cuts in defense spending — but force must be the servant of politics and diplomacy, not its master. Unless the threat of military force is backed by what he calls a “power package” of diplomatic threats and political inducements, force alone can rarely achieve its goals.

Mr. Gelb’s favorite test case of success in the application of the power package is Libya. Col. Muammar el-Qaddafi had felt the wrath of Reagan’s jets, so the application of force concentrated his mind. But it was the package of political inducements offered by President George W. Bush that persuaded him to stop supporting terrorists and abandon his nuclear ambitions.

At the same time America needs allies and partners to get anything done. Both Britain and the much despised United Nations were helpful in bringing Libya into the fold. America has to realize it can’t achieve its goals without allies, and its allies need to accept that they can’t solve problems without American leadership.

Nothing will happen on global climate change, for example, unless the American administration forms a green coalition among the next most powerful countries in the world: China, India, Russia and the Europeans. Canada, my country, ought to be on the list — it’s an energy superpower, supplying almost a quarter of United States energy requirements, and it’s also a green energy pioneer — but it merits not a single mention in “Power Rules.” The point here is not to carp, but to reinforce Mr. Gelb’s own message: America can’t afford to ignore friends.

Mr. Gelb says he believes in problem-solving coalitions, but he doesn’t want Gulliver tied down by the United Nations or other multilateral bodies. Indeed, he seems allergic to creating new multilateral institutions.

Case-by-case problem solving has the virtue of lowering global expectations — and fears — of American power, but Mr. Gelb’s approach may miss the particular challenge of our current situation. It also forgets when America showed greatness. America’s true glory days were moments of institution building, when Roosevelt and then Truman created the United Nations, NATO and the Bretton Woods financial system.

Talk of Bretton Woods II may be overambitious, but some new global architecture of financial regulation and oversight, or at least more effective coordination of national regulation, is going to be necessary once we touch bottom in this financial crisis. American financial misrule may have gotten us into this mess, but it will be American leadership that will have to dig us out, with the help of solvent allies with good banking systems, like Canada’s, among others.

Michael Ignatieff is the leader of the official opposition in the Canadian Parliament.

Son of Sylvia Plath Commits Suicide - NYTimes.com

2009-03-23T18:21:00.000-07:00

Son of Sylvia Plath Commits Suicide - NYTimes.com

March 24, 2009
Son of Sylvia Plath Commits Suicide
By ANAHAD O’CONNOR

Nicholas Hughes, the son of the poet and novelist Sylvia Plath and the British Poet Laureate Ted Hughes, killed himself at his home in Alaska, nearly a half-century after his mother and stepmother took their own lives, according to a statement from his sister.

Mr. Hughes, 47, was a fisheries biologist who studied stream fish and spent much of his time trekking across Alaska on field studies. Shielded from stories about his mother’s suicide until he was a teenager, Mr. Hughes had lived an academic life largely outside the public eye. But friends and family said he had long struggled with depression.

Last Monday, he hanged himself at his home in Alaska, his sister, Frieda Hughes, said over the weekend.

“It is with profound sorrow that I must announce the death of my brother, Nicholas Hughes, who died by his own hand on Monday 16th March 2009 at his home in Alaska,” she said in a statement to the Times of London. “He had been battling depression for some time.”

Mr. Hughes’s early life was darkened by shadows of depression and suicide. Ms. Plath explored the themes in her 1963 novel “The Bell Jar,” which follows an ambitious college student who tries to kill herself after suffering a nervous breakdown while interning at a New York City magazine. The novel reflected Ms. Plath’s own experiences, including her early struggles with depression and her attempt at suicide while working at Mademoiselle in New York as a college student.

After a stay at a mental institution, Ms. Plath went on to study poetry at Cambridge University, where she met Ted Hughes, who was on his way to world fame as a poet. The two were married in 1956, and had two children — Nicholas and Frieda — but separated in 1962 after Mr. Hughes began an affair with another woman, Assia Wevill. Ms. Plath killed herself at the age of 30 by sticking her head in an oven in her London home on Feb. 11, 1963, as Nicholas and Frieda slept nearby.

Six years later, Ms. Wevill, who had helped raise Nicholas and Frieda after Ms. Plath’s death, killed herself and her 4-year-old daughter, Shura. Ms. Wevill styled the murder-suicide in the same manner, using a gas stove.

Mr. Hughes, who became Poet Laureate in 1984 and was widely regarded as one of the greatest poets of his generation, resisted speaking openly about the deaths for many years. But in his last poetic work, “Birthday Letters,” published in 1998, he finally broke his silence and explored the theme. He died the same year, as the book — in some ways considered a quest for redemption — was climbing best-seller lists.

Mr. Hughes was said to have protected his children from details about their mother’s suicide for many years. But in at least one poem he seemed to indicate that Nicholas, who was only 1 at the time of her death, was pained even as a small child, recalling in one stanza how Nicholas’s eyes “Became wet jewels/ The hardest substance of the purest pain/ As I fed him in his high white chair.”

Nicholas had a passion for wildlife, particularly fish. As a young adult he studied at the University of Oxford, where he obtained a bachelor of science degree in 1984 and a master of arts degree in 1990. Afterward, he traveled to the United States, earning a doctoral degree from the University of Alaska Fairbanks, where he became an assistant professor at the School of Fisheries and Ocean Science. According to the University, Mr. Hughes was an expert in “stream salmonid ecology” and carried out his research in Alaska and New Zealand. He resigned from the faculty in 2006 but continued his research, the school said.

One graduate student there, Lauren Tuori, recalled a peculiar habit of Mr. Hughes’s, saying he would often “seek out a larch tree in a forest of spruce.”

She added, “Alaska could use more biologists like Nick who still display wonder at the small things around them.”

Correction: An earlier version of this article referred incorrectly to Mr. Hughes as an evolutionary biologist. He was a fisheries biologist.

Copyright 2009 The New York Times Company

From Tehran to Tel Aviv - NYTimes.com

2009-03-23T18:12:00.000-07:00

Op-Ed Columnist - From Tehran to Tel Aviv - NYTimes.com

The New York Times

March 23, 2009
Op-Ed Columnist
From Tehran to Tel Aviv
By ROGER COHEN

With his bold message to Iran’s leaders, President Obama achieved four things essential to any rapprochement.

He abandoned regime change as an American goal. He shelved the so-called military option. He buried a carrot-and-sticks approach viewed with contempt by Iranians as fit only for donkeys. And he placed Iran’s nuclear program within “the full range of issues before us.”

By doing so, Obama made it almost inevitable that one of the defining strategic issues of his presidency will be a painful but necessary redefinition of America’s relations with Israel as differences over Iran sharpen. I will return to that below.

The innovations in the president’s Persian New Year, or Nowruz, overture to Tehran were remarkable. He referred twice to “the Islamic Republic of Iran,” a formulation long shunned, and said that republic, no other, should “take its rightful place in the community of nations.” Here was explicit American acceptance of Iran’s 30-year-old clerical revolution.

He said establishing constructive ties would “not be advanced by threats,” a retreat from his own campaign position that the military option must always remain on the table. Instead he offered “mutual respect.”

I was in Iran in January and February. The visit convinced me that confrontational American high-handedness has been a disaster; that facile analogies between the Iranian regime and the Nazis dishonor six million victims of the Holocaust; that the regime’s provocative rhetoric masks essential pragmatism; and that the best way to help a young, stability-favoring population toward the reform they seek is through engagement.

Obama has now taken all the steps I called for then. The policy changes emerged from an interagency review of the failed Iranian policy of recent years. The shift demanded courage.

One of the people involved in the review told me he had been bombarded by warnings from Israel and Sunni Arab states that engagement with Iran would lead nowhere. Of course they would say that; any Iran breakthrough will shake up current cozy U.S. relationships from Jerusalem to Riyadh.

Obama’s overture represented a victory not only over such lobbying but also over officials’ favoring tightened sanctions or delaying any American initiative until after Iran’s June presidential election.

The hard part has just begun.

Iran’s supreme leader, Ayatollah Ali Khamenei, responded to Obama with a scathing speech at the country’s holiest shrine in Mashad, recalling every past U.S. misdeed, describing prerevolutionary Iran as “a field for the Americans to graze in,” and demanding concrete steps — like a lifting of sanctions — rather than words.

View all that as an opening gambit. Khamenei also quieted the crowd when it began its ritual “Death to America” chant and he said this: “We’re not emotional when it comes to our important matters. We make decisions by calculation.”

That’s right: the mullahs are anything but mad. Calculation will demand that Iran take Obama seriously.

The country’s oil revenue has plunged, its economy is in a mess, its oil and gas installations are aging. It has deepening interests in a stable Iraq and an Afghanistan free of Taliban rule. Its nuclear program involves a measure of brinkmanship that must be carefully managed. Khamenei’s essential role is conservative — the preservation of the revolution. He can only be radical up to a point.

Iran’s apparent inclination to take up a U.S. invitation to attend a conference on Afghanistan later this month may be more significant than Khamenei’s words. In any event, overcoming a 30-year impasse will take time and consistency.

The clock is ticking — and Obama’s will not be the same as that of Israel’s prime minister designate, Benjamin Netanyahu.

Already divergent U.S. and Israeli approaches to Iran were evident in Israeli President Shimon Peres’s coupling of his own Nowruz address to the Iranian people (not its leaders) with a statement predicting that they would rise up and topple “a handful of religious fanatics.”

A senior Israeli official told me Iran has 1,000 kilos of low-enriched uranium and will have 500 more within six months, enough to make a bomb. It could then opt for one of three courses.

Rush for a bomb by shredding the nuclear nonproliferation treaty, adapting its centrifuges and producing enough highly enriched uranium within a year.

Move the process to a secret site, in which case getting a bomb would take longer, perhaps two years.

Or continue making low-enriched uranium so that “it would have enough for 10 bombs if it decides to rush at a later stage.”

And where, I asked, is Israel’s red line? “Once they get to 1,500 kilos, nonproliferation is dead,” he said. And so? “It’s established that when a country that does not accept Israel’s existence has such a program, we will intervene.”

I think there’s some bluster in this. Israel does not want Obama to talk, talk, talk, so it’s suggesting military action could happen in 2009, within nine months.

Still, this much is clear to me: Obama’s new Middle Eastern diplomacy and engagement will involve reining in Israeli bellicosity and a probable cooling of U.S.-Israeli relations. It’s about time. America’s Israel-can-do-no-wrong policy has been disastrous, not least for Israel’s long-term security

'Trader Vic' Sperandeo on Oil, Gold and Quantitative Easing -- Seeking Alpha

2009-03-23T17:11:00.000-07:00

'Trader Vic' Sperandeo on Oil, Gold and Quantitative Easing -- Seeking Alpha

We last spoke with Victor Sperandeo ... aka "Trader Vic" ... in January of 2008, during a very different market for commodities. Victor is one of the world's most outspoken commodities traders, and is author of "Trader Vic on Commodities," the third in a series of books on trading. In addition to trading his own account, Trader Vic has invested independently for the likes of George Soros, Leon Cooperman and BT Alex Brown. Sperandeo was featured in the best-selling books, "The Super Traders" and "The New Market Wizards."

HardAssetsInvestor.com [HAI]: Top of mind for all of us right now is the Fed's so-called "quantitative easing." That certainly made all of the commodities markets react, particularly gold. What's your take?

Victor Sperandeo (Trader Vic): Well, two and two is four. I understand the movements of gold pretty well as a trader and as an investor, and as a fundamentalist - if you will - investor in gold. This kind of action is pure inflationary stimulus, which down the road is going to have a significant effect. So gold would be the obvious place to be a buyer in this newly created bubble in bonds.

It's a very logical step. I'm surprised gold's not over $1,000 today based on the long-term prospects. Now, you know, things don't work out as simple as that. But in the long run, gold is going to double from here for sure. For sure.

HAI: A double? That puts us close to $2,000. When you're talking long term, are you talking 50 years or five?

Trader Vic: The context that I'd like to put that in - because that's a fair question - is this: When the Fed is successful and the Treasury is successful in getting the economy rising to some degree, it will be accompanied by rising prices. And at that stage, gold will anticipate a great deal more inflation before the Fed can take this stuff off. So I would say it'll be concurrent once you see GDP start to rise. So it'll start to move - not in the same day obviously - but in the direction, once that occurs.

Now most people conceive of that event in the fourth quarter. I highly disagree with that. The whole bet here is on the money supply growth and fiscal policy. What they call a stimulus is really a detriment. It isn't going to help the GDP growth. And understand that - and I point this out because I've never seen it in print or mentioned once - lowering interest rates is normally a very stimulative event when banks can borrow money cheaply and are willing to loan and make the spread.

If banks are not willing to make loans - which they aren't today - lower interest rates have a harmful effect on the economy, because it punishes savers. Right now you could have $10 million in the bank and you'd be making less on your money than a bartender. No one's thinking about this. I'm going to estimate this ... this is not a firm number ... I'm going to estimate that in savings, with pension fund money and all forms of savings, if you will, that there is somewhere in the vicinity of $40-$50 trillion floating around.

If you lower interest rates from 5% to 0%, that's 5% of whatever that big number is for savings that somebody isn't getting. They, therefore, can't spend it. Right? So if they can't spend it, that's a de-stimulus. But meanwhile, where's the stimulus? Right now you go to a bank to get a loan, they won't give it to you; they won't give you anything.

Now I'm exaggerating: It is very, very difficult to get any kind of a decent loan. If I applied for a line of credit - a guy with no debt and I've got a substantial net worth - they really don't want me to borrow money.

Right now, they put off people like me by saying, "Well, give us five years of tax returns." Nobody likes to do that. So they have ways of discouraging you from really even asking for money.

They look at the gross aggregate numbers of rising unemployment, rising delinquency rates and rising bankruptcies. And if those are accelerating, they want to shrink from making loans, because they can get a percentage of those problems. So it's logical. If I were a banker, I'd be doing the same thing.

My point is this: The injection of cash is - down the road - stimulating and will be inflationary. Right now, there is a de-stimulus, which no one's talking about. And that is that lower interest rates mean lower spending, because people are not getting the money. You see my point?

HAI: Right, because it comes off the table in terms of the interest people collect, and yet there's nobody actually loaning anybody any more money, which they could then go spend. So we're in this sort of dead zone.

Trader Vic: Exactly. If you lower rates and you don't get the effect of the multiplier effect - people borrowing and redepositing, and borrowing and redepositing - you have a de-stimulus by lowering rates. So it's not as easy as people seem to make it.

But to get back to the specifics of your question, you will have inflation once GDP starts to turn up. You will start to get accelerating price movements. And gold will anticipate that. And gold is $2,000 at that. I'm not saying a straight line. But it's very easy for it to go there.

HAI: So if the money's not getting loaned, that immediately makes me think about the ags. We're told all the time that the agricultural markets really rely on liquidity from the banking sector to fund fertilizer, to fund production. Do you think that that means we see continued problems with production in things like corn and soybeans?

Trader Vic: Absolutely. Everything is affected. Not only that, of course, the government is going to stop subsidizing the ... according to Obama. So a lot of big farmers won't get subsidies. So it will make it harder. So that'll mean higher prices.

HAI: What about the energy markets?

Trader Vic: I am a major bull on oil, and I have been. In this case, I'm in print because I send out letters - I virtually caught the low here. When Benjamin Netanyahu became the prime minister of Israel, which was several weeks ago, oil - the oil I have right now is April oil - was $40. The low on April oil was about $37. Right now that same oil's $51.

The reason is really simple. This is the Barry Goldwater of Israel. Barry Goldwater was not somebody you messed with. Neither is Netanyahu. He doesn't care about collateral damage. He doesn't care about anything. If he believes that you're a threat, he will take you out. And that means Iran. And if he believes Iran has a nuclear weapons and the U.S. refuses to do anything about it, he really won't care. He'll go in and take them out and he'll create an unbelievable problem in the world. But he won't care about that either, because his main goal is the survival of Israel. And that's what it should be.

[Oil] is a geopolitical position, not necessarily a short-term supply/demand phenomenon. Because that's all he has to say ... is one small indication that he will be aggressive. And of course the counter by Iran is they'll sink a ship in the Strait of Hormuz, and that will cause oil to pop to $110, $120 - name the price.

The bottom line is ... there is only one position in oil now, and that's long. Now, should you have 50% of your assets in oil? Absolutely not. I think if you have 5-10% of your assets in oil, and 5-10% - depending on how bullish you are - in gold. I think the rally in equities is a bear market rally. So I wouldn't be long equities here. That's my judgment for now.

And I think that that is the place to be: very liquid cash, and basically gold, some oil. I'm not necessarily recommending anything other than that at the moment. But that's a play where any one of many things can happen - Pakistan can erupt. It's basically a play on a problem in the world that's not being anticipated, and isn't a problem today, but may be a problem tomorrow.

HAI: And you're on record as being kind of an oil bull on the long term, just based on fundamentals ...

Trader Vic: Exactly. But, to be fair to the readers of this, we go out of oil at $130. And we have not touched it except for minor little scalp trades. This is the first bullish position. And we write letters once a month. So I wrote the bullish position at the beginning of March. Netanyahu was nominated, the lows were in February. So when it was $40 - which was on the 24th, the 25th, in there - we were bullish.

HAI: Well Victor, thanks for the time. Food for thought.

Trader Vic: You're welcome.

Profiting in a Political Economy -- Seeking Alpha

2009-03-20T20:03:00.000-07:00

Profiting in a Political Economy -- Seeking Alpha

Wednesday the Federal Open Market Committee (FOMC) announced a Treasury purchase program of up to $300 billion “to help improve conditions in private credit markets.”

Minutes later, the markets reacted aggressively:

Interest rates on T-bonds took a dive and drove a sudden increase in the value of these securities. David Hightower, editor of our options and futures alert, the Casey Trend Trader, and owner of the respected Hightower Report, called me as this was unfolding. He asked me:

Have you seen what just happened in the last fifteen minutes? The T-bond rose eight points on the Fed’s announcement. In my thirty-plus-year career of tracking the commodities markets, I have never witnessed such a dramatic move.

Clearly the Fed has shown again its willingness to do whatever it can to drive long-term interest rates down… and it worked, at least for now.

The stock market reacted favorably to lower interest rates, seeing them as a further stimulus to the economy.

Simultaneously, though, gold jumped by 5%. Within fifteen minutes, it climbed from $892 to $930, and within less than two hours, it almost reached $950. That the markets reacted so strongly shows fears over inflation and devaluation of the dollar. Many investors are clearly starting to question the ability of the Treasury to raise the $2.5 to $3 trillion it needs to finance this year’s deficit and the various bailouts. In fact, even the euro managed to show some strong – albeit probably temporary – gains against the dollar on this news.

We believe that the objective of the Fed was two-fold; firstly, to put downward pressure on the long-term interest rates and stimulate the economy by squashing their recent gains, and secondly, to fill in the gap between a very sizeable increase in government spending and the demand for Treasuries at a time when traditional foreign investors are reducing their exposure to the dollar. They no longer have the same export surpluses, they need to invest domestically and support their own economies, and are truly starting to question whether the U.S. government will ever be able to pay them back without significantly devaluating the dollar.

Interestingly enough, yesterday’s announcement follows closely last Monday’s (3/16) TIC release for January. The U.S. Treasury then disclosed a very disturbing figure. In January, international sales and purchases of U.S. assets showed a net outflow of $148.9 billion for the month. This is in contrast to net inflows of $196 billion at the height of the credit crisis last October.

While China has not stopped (yet) buying $12 billion in Treasuries, 95% of its recent purchases have been in short-term T-bills. Lower interest rates on the T-Bonds will not encourage China or any other foreign investors to increase their long-term commitments to Treasuries and agency debt.

In fact, at Casey Research we expect that very soon, foreigners will demand much higher returns for their dollar investment. At that point, the Fed has to either let rates rise (difficult politically) or expand its purchase of Treasuries to whatever level will be needed to support the budget deficit and bailouts. Already, foreign investors have cautioned the Obama administration about their concerns with the extensive use of the printing presses and the impact this will have on the value of their assets.

However, foreigners do not vote. Thus we can be assured that the administration is going to favor printing over raising interest rates… that is, until foreigners start withdrawing some of the trillions of dollars they have invested in government and Treasury debts ($2 to $3 trillion of which is coming to maturity in the next year).

We could soon see the next phase to this crisis, a stampede away from the dollar. Like any bubble, the government debt bubble may take a long time before it finally bursts – and you need to be ready for the pop because its consequences will be far reaching for America and the world.

As my esteemed partner Doug Casey likes to say, in every crisis lie opportunities. The contrarian investors that prepare will benefit greatly, while the others may have to line up in front of the soup kitchens.

Marathon Q+A: Steve Smythe - Runner's World Racing

2009-03-20T19:09:00.000-07:00

Marathon Q+A: Steve Smythe - Runner's World Racing

Marathon Q+A: Steve Smythe
By Steve Smythe
Experienced coach - and Lucozade Sport Super Six mentor - Steve Smythe answers your frequently-asked marathon questions

GETTY IMAGES

Q. What single aspect of training would help me run a faster marathon? Intervals, tempo sessions or more miles? Johnny Blaze

A. Unfortunately, it's just not that simple. Making improvements is all about the overall mixture - how you put long runs, speedwork, tempo sessions, rest and warm-up races together. The single most important session though is the long, slow steady run.

Q. I was hoping for a sub-4:00 marathon but have been setback by injury. My best run so far has been 13 miles in just under two hours. With just over five weeks to go, what would you recommend for getting used to the distance? Neil Sharma 2

A. Focus on building up your long runs every week - for example 15 miles, 17 miles and so on. Also, try to do some faster mid-week runs so things will feel easier when you reach halfway.

Q. I'm running a 20-mile race this weekend to gauge my pace. I don't want to run too hard as I may not recover in time and it might affect the remainder of my training. Should I aim to run the first half slower, and the second half at marathon pace? Experimental Penguin

A. I agree - running a flat-out 20-miler at this stage would be a risk. But by pacing the race as you suggest, you can turn it into an excellent training session without exhausting yourself. Make sure you hold yourself back in the first half and don't go mad when you hit the acceleration phase. Count how many runners you can overtake in your fast period to make it more interesting!

Q. I've a couple of 20-milers and long races under my belt so far, but I'm concerned about breaking down before race day. How many more long runs should I do? Ian Burdin

A. One more 20-miler should suffice. Try to run a shorter longer run at marathon pace too - if you keep your other runs shorter still, you should be fighting fit for the marathon.

Q. I did a local 20-mile road race, but although it advertised plenty of drinks stations these were only stocked with water. I hadn't taken any energy products with me, and at around Mile 14 I ran out of gas and plodded home 10 minutes behind schedule. What advice can you give on fuelling - how often and when during a marathon? Anthony Scott 3

A. Personally, I like to consume a carbo-gel at the start, another between 10K and 10 miles, a third carbo-gel between Miles 13 and 15 (I find this one the most useful) and a final one at about Mile 20. I keep myself topped up with energy drink too. Of course, no fuel strategy can make up for poor pacing or insufficient training.

Q. I'm thinking about entering a 10-mile race the weekend before the marathon. If I run it at marathon pace (or just a bit faster) will it do me more harm than good? I also do a club marathon-pace session on Wednesdays - should I do this session so close to a marathon? Stat

A. Running 10 miles flat out the week before is too much. 10 miles at marathon pace should be OK, as long as you refuel immediately afterwards and have a relaxed easy week.The fast mid-week club run has probably done you well up to now but it might be best to run with slower runners the week before your marathon so you don't overdo it!

Q. Is it better to start at the pace you want to maintain (in my case, 9min/mile) or start a little slower, see how its going and try and catch up in the second half? Shaken & Stirred

A. Space permitting, set off as close to the pace you need to run as you can. Take care not to go too fast - just try and get into a nine-minute-mile rhythm. Practice it in training so you can settle into it automatically.

Q. How much fluid should I drink on the morning of the marathon? Last year I drank too much and had to use the loos on the way round! inlastplace

have to be careful not to overdo the drinking and stick pretty much to what you are used to in training pre race. remember there are drinks every mile and unless it is very hot you don't need to drink at every drinks station. Drinking too much is more dangerous than drinking too little

Q. This will be my seventh marathon - my PB is 3:05 (last year). I've managed to hit all my training targets (for a sub-3:00 marathon) but my mileage is relatively low as I'm extremely injury-prone. Should I still be aiming to run sub-3:00? JFDI

A. If you have stuck to the times and training then you should be fine. Not everyone can handle high mileage. The sessions are more important than the numbers - as long as you do the long runs, then the rest of the week is not too important.

Q. Do you have any tips for a brand new runner who has a year to train for a marathon? I've found a 16-week schedule and want to make the most of the year to really prepare myself, but I don't want to do too much too soon. NorwichRunner

A. In theory, the fitter you can get prior to starting the schedule, the faster you will be when you start your marathon training. Get into a regular routine of a weekend long run (building up gradually), some faster mid-week runs and a few faster efforts in the middle of some of your sessions. It's probably best not to do too much speedwork initially - build up your stamina, and do everything gradually to let your body accustom itself to the higher workloads.

Q. How can I maintain my fitness after the marathon without overtraining? Ang12

A. The marathon will leave you with plenty of fitness to keep your endurance levels high during the summer. Firstly, make sure you recover properly after the race and don't do too much for a few weeks afterwards. Then, gradually try and get back into a routine - a month after the marathon you should start upping the pace of your runs and target some shorter races. If you've been doing 50 miles a week during your marathon build up, 35 - 40 miles a week should be sufficient to maintain your endurance and still allow you to train faster to increase your speed and speed endurance.

Rationale Behind Shorting Treasuries ~ market folly

2009-03-20T00:28:00.000-07:00

Rationale Behind Shorting Treasuries ~ market folly

Wednesday, November 12, 2008
Rationale Behind Shorting Treasuries

For all intents and purposes, U.S. Treasuries are setting up to be a great short opportunity. Last week, I laid out a basic thesis for shorting treasuries. We may be early in this call, but present and future actions are sending us signals we simply cannot ignore. The presently increasing and future supply of treasuries is simply too large. As Martin Hutchinson over at Money Morning has highlighted,

"The U.S. Treasury Department announced Nov. 3 that it intended to borrow a record $550 billion in the fourth quarter. That represents a staggering $408 billion increase over Treasury's borrowing estimate from early August and includes $260 billion for the recapitalization of U.S. banks. Make no mistake about it: There will be enough U.S. Treasury bonds to choke on, as the government tries to finance this debt."

All signs point to this trend continuing. In the quarter prior, the government borrowed $530 billion. Now, with the recent news out that they will borrow an additional $550 billion, the question becomes, when does it end? The current flooding of the market with treasuries is reason enough to get short them. But, with the impending tsunami of future government borrowing still to hit, it just makes the bet that much sweeter. Hutchinson goes on to say that,

"Inevitably $800 billion to $900 billion of additional money flowing from domestic investors into Treasury bonds will do three things:

* It will drive up interest rates on Treasury bonds.
* It will tend to crowd out other financings, making finance difficult to obtain for medium-sized and smaller companies and more expensive even for the behemoths.
* And finally, it will increase inflation, as the Fed is forced to expand money supply to give investors enough money to buy all the Treasuries."

So, we can see that the consequences of their actions definitely plays right into our shorting thesis. The main point we're focused on here is the fact that interest rates on Treasury bonds will rise. When the yields increase, prices will drop, thus benefiting our short position. And, the case can easily be made that the longer dated treasuries will suffer the most. After all, do you want to loan the government money for 20 years at a paltry interest rate? We didn't think so.

Warren Buffett was even out mentioning the under-performance of cash equivalents in his latest comments. He wrote,

"Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts."

Now, although Warren was using that argument to make the case for buying equities in his piece, his point is that cash and cash equivalents will underperform and are thus not desireable. And, a basic principle of investing is to go long outperformers and short underperformers. Cash and cash equivalents (treasuries) are set to underperform and thus make a delicious short for you to sink your teeth into.

The actions of the government not only lay out the premise for shorting treasuries, but also the US Dollar. As inflationary pressures will weigh heavily on the Dollar in the future, eventually something has to give. The only problem here is that other forces are at work on the US dollar as the world continues to deleverage and hedge funds are forced to sell assets and continue to face redemptions. So, this play could ultimately take even longer to play out. But, we will address shorting the US Dollar in a separate post further devoted to that rationale.

The main thing to take away here is that the government has demonstrated that they have and will continue to borrow money by the hundreds of billions. As yields on treasuries rise, prices will drop, especially on longer-dated treasuries. Now, the question becomes how exactly do we play this? Not everyone has access to shorting the 10 year and 20 year treasuries outright, so I am here to offer some other alternatives. As I laid out in my first post on shorting treasuries, there are a few vehicles in the stock market that one can turn to, such as tickers PST and TBT.

PST is the ETF for UltraShort the 7-10 year treasury. An Ultrashort ETF seeks twice the daily inverse of the underlying security. So, buying PST gives you twice the inverse of the performance of the 7-10 year treasury (effectively a double-short). Additionally, TBT is the ETF for UltraShort the 20+ year treasury. This ETF seeks twice the inverse daily performance of the 20+ year treasury (also a double-short). So, those are two very easy ways for people to get short treasuries by buying those tickers in the stock market. Additionally, Hutchinson suggests the Rydex Inverse Government Long Bond Strategy (Juno) Fund, ticker RYJUX as another way to play it. That fund takes various short positions in treasury bond futures and thus will also rise as treasury prices decline.

* 1/12/09 Author's note: Please be advised that since publication, we have further researched the PST and TBT trading vehicles are are NO LONGER recommending them as proper vehicles for shorting longer-dated treasuries due to their poor correlation to their underlying indexes over time. Instead, we are recommending a straight short of TLT. Expect a follow-up post soon.

Jim Rogers' Recent Portfolio Moves -- Seeking Alpha

2009-03-20T00:26:00.000-07:00

Jim Rogers' Recent Portfolio Moves -- Seeking Alpha

Market Folly

Jim Rogers has been in the media a lot over the past couple weeks and we wanted to provide a summary of these thoughts. He is a noted investor and founder of the highly successful yet now defunct Quantum Fund (with George Soros). Rogers has been out providing his opinion on various topics and giving us a deeper glance at some of his portfolio plays. We've compiled a list of some of his major positions below. First, we'll examine some of the plays he's revealed just over this past week.

The rally we've been seeing in equity markets is a bear market rally that can last anywhere from days to months, according to Rogers. He sees the economy as getting worse before it gets better, citing more bankruptcies to come. It might be 'a bottom,' but it's not 'the bottom,' Rogers said. He's very bearish on a macro level and thinks it could take 7 to 8 years to really clean out the system. He's noted that all the bailouts have added to the risks of an economic depression. His displeasure with the US government is no secret, as he thinks they are 'throwing money' at the wrong things.

In terms of the US financials, Rogers has covered his Citigroup (C), which was a short that paid him off handsomely. He has also mentioned that he has covered most of his short positions in stocks. But, he is now short JP Morgan Chase (JPM), as he sees negative 'off balance sheet' exposure, along with derivatives exposure, and large exposure to the credit card business. Rogers has noted something that we here at MarketFolly have been talking about for some time: credit cards as the next credit crunch. And head of JPMorgan Jamie Dimon even acknowledges this as well. Rogers has chosen to short JPM for a myriad of reasons, but credit cards are certainly one of them. Even the 'good house' in the 'bad neighborhood' can't escape. While he has that short position in the financial space, he has no positions in the insurers. He notes that sure, financial institutions can rally back from their lows, but that they still aren't financially sound. He thinks that financials won't be an attractive investment for years to come. Additionally, while not a financial, he mentioned he was short IBM, presumably due to their large financial services exposure.

Rogers has again re-voiced his concern with government debt, which has recently expanded five-fold. He was previously short the long-dated treasuries, but had to cover back in the fourth quarter. He has been patiently evaluating for a time to re-enter this position for the longer trend he forecasts. In the midterm, he won't fight the government though, as he expects them to buy treasuries in an effort to stem borrowing costs. Governments around the world are printing a ton of money and borrowing insane amounts. Rogers cites this as the reason for his desire to short the bonds eventually. We agree with Rogers on this point, and are willing to have extreme patience before entering this trade in size. It undoubtedly will take much longer to play out than many realize, especially when the Federal Reserve is still active and busy. We laid out our basic rationale for shorting treasuries down the road as well. Again, as Rogers emphasizes, patience is key.

Additionally, he has been waiting to establish a short position in the US dollar. He has been long the dollar, which he says is rallying artificially, and is looking for this unwind to continue before he unloads the rest of his dollar position, as he believes the US is trying to devalue its currency. He also currently owns some Japanese Yen and has elaborated on currencies recently. Considering his distaste for some of these paper currencies, he has a small gold position. But, he prefers silver and agriculture to gold.

We already know that he is bullish on commodities, and very bullish on agriculture. He has re-hashed this view numerous times. He might be early, but he has always claimed that he is not a market timer. He feels this trend will eventually arrive and he is poised to benefit from it. Raw materials and commodities are the only sectors with improving fundamentals according to Rogers. He expects low inventories and tons of shortages in the longer term (10-20 years). You have to keep in mind that Rogers is not a market timer and instead positions himself for broad, longer-term trends. He favors the commodities themselves over commodity resource stocks. And, he has even gone out and bought physical farmland. He has active investments in Agcapita Farmland Investment Partnerships (in Canada) and Agrifirma Brazil. As we noted in our hedge fund portfolio tracking series, Rogers' ex-Quantum Fund buddy George Soros has also bought a ton of Potash. So, they definitely share a bullish stance on agriculture. Last, its also worth noting that respected investment strategist Don Coxe is also an ag bull.

Overall, Rogers has a bearish macro view and expects bear market rallies, as they are just part of the cycle. And, while certain toxic companies like the financials may rally, he notes that they still have big problems ahead of them. He isn't a market timer and expects rampant inflation as well as bull markets in agriculture and commodities. He has placed bets to the tune of these forecasts and will continue to monitor the investment landscape for broad macro trends he can capitalize on in the future.

If you've missed them, you can also see Rogers' thoughts on the topics of:

* China, inflation, & the recession
* Agriculture
* Commodities
* The British Pound
* Other Currencies
* Long-term US bonds

Sources:Bloomberg, (again), CNBC, and various other media appearances

Marathon calendar for Asia

2009-03-19T21:33:00.000-07:00

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2009-03-19T21:24:00.000-07:00

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Vittachi: Explaining war in Gaza to children

2009-03-18T17:31:00.000-07:00

Vittachi: Explaining war in Gaza to children

Monday, 19 January 2009
Explaining war in Gaza to children

Palestine shrinks By Nury Vittachi

*

Chapter one

Once upon a time, there was a family called Pal.

They lived in a property which was hot and dusty, but they liked it, and had lived there for more than 2,000 years.

Then one day, they had some visitors. "We are the Izzy family," said the head of the new arrivals. "And we're moving in."

"What?" said the Pal family. "You can't do that."

"Yes, we can," said Mr Izzy. "THEY said we could." The newcomers pointed to some heavily armed "minders" who were accompanying them. Their names were Usa and Uk.

"Hi," said the biggest one. "I am here to tell you that Izzy and his family have suffered terrible trauma. They need a new home."

"I sympathize," said Mr Pal. "But this is our home, and it's very small. Why don't you give them space in your homes?"

"They want to live here, because their ancestors lived here," said Usa.

"But that's not fair," the Pal family objected.

There was an impasse. The wider community was called to adjudicate.
*
Chapter two

The Izzy family said the issue could be boiled down to one simple question: "The Izzy family has a right to exist, yes or no?"

The giant Usa agreed enthusiastically: "Yes, we declare that the Izzy family definitely has the right to exist."

"Hang on," said a member of the Pal family. "The issue is not whether the Izzy family has a right to exist. It's whether they have the right to exist ON OUR PROPERTY."

Usa looked deeply shocked. "Outrageous! You're saying the Izzy family do not have the right to exist, so that automatically makes you a group of genocidal terrorists. Now you're in trouble."

The Pal family members were at a loss about what to do. They realized that they needed a powerful friend, too.

They took the matter to court. The chief judge was a man named Yuen, sometimes spelt UN. Yuen talked to many members of the community, including Ms Asia, Mr France and so on. They all agreed the situation was fundamentally unfair. Judge Yuen passed several edicts to make the situation fairer.

But the Izzy family ignored these edicts, and were fully supported by Usa.
*
Chapter three
The Izzy family got bigger and stronger and tougher and richer. The Pal family got poorer and poorer. Years of unfairness and abuse resulted in the inevitable.

One desperate, tormented member of the Pal family, a man named Hamas, couldn't take it any more. He went off the rails and started to fight back.

In retaliation, the Izzy family unleashed a massive wave of violence.

"Please stop," said the Pal family, after 900 members of their family had been killed.

Judge Yuen and most members of the international community called for the invasion to stop.

But the most powerful member, Usa, told the Izzy family to continue the slaughter, explaining that the horrible injuries to the Pal family were all their own fault. "The Izzy family has a right to exist," Usa said. "And it has the right to defend itself."

And they all lived miserably ever after.
*
Epilogue
It's a sad story, isn't it? There's just one way this tale can have a different ending.

The new US administration needs to remember the words of Abraham Lincoln, forgotten by the old US administration: "There's only way to destroy your enemy: make him your friend."

Monday, 19 January 2009 in Current Affairs | Permalink

Technorati Tags: middle east crisis, war in gaza

A Few (Negative) Words about Naked Short Selling

2009-03-16T20:42:00.000-07:00

TheCorporateCounsel.net Blog
The Practical Corporate & Securities Law Blog

Broc Romanek and Dave Lynn are Editors of TheCorporateCounsel.net
« Mark-to-Market Accounting Now on the Regulatory Fast Track | Main
March 16, 2009

A Few (Negative) Words about Naked Short Selling

When the market surged 6% last Tuesday, it was allegedly due to the rumor that the SEC would bring back the "uptick" rule (on Friday, the SEC announced it will hold an April 8th Commission meeting to propose a new uptick rule). The use of short selling by hedgies to move markets for their own gain was discussed during the conversation between Jon Stewart and Jim Cramer on Thursday. Add us to the chorus that something has to be done about short-selling. And something different than the SEC's emergency short-selling restrictions implemented last Fall, which some argue had no impact.

We've always believed that naked short selling is a form of manipulation, particularly when it occurs near the market's opening and close (even if it's part of a hedging strategy, it's often still manipulative). There now have been a number of stories revealing what short sellers have been doing over the past few years and it's clear that this is destructive behavior.

It's time that the SEC and other regulators step up. Otherwise, this is one more aspect of "deregulation" that will continue to allow some to artificially manipulate stock prices - and feed the widespread belief that the markets aren't safe.

How to Fix It: Totally Eliminate Naked Short Selling

Many thanks to Carl Hagberg, for allowing us to reproduce his fine article below from the most recent issue of his "Shareholder Service Optimizer":

Here's the simple fix: We still can’t figure why smart people haven’t been able to understand exactly how naked short sales cheat investors – and how they can and do create cascades of sales to spook legitimate investors into panic selling – so the shorts can lock-in their profits, guaranteed – AND how simple the “fix” to the naked short-selling scandal really is:

Every single trade must be settled on T+3, or a mandatory buy-in must be executed by the seller's agent...no excuses or exceptions allowed. Something the SEC is still – shockingly and wrongly allowing.

We’ve been equally surprised by the large number of very smart people who think that restoring the “uptick rule” is the solution to the problem. It isn’t – especially since with trades now moving in one-cent increments, any crook in town can create an uptick to sell on - but still fail to deliver, sale after sale, after sale, etc.

How the markets are supposed to work: Let’s patiently review what should really be simple logic, about the way securities markets are supposed to work – and also about the inexorable, but basically simple law of supply and demand:

- First, let’s remember that one of the main reasons the SEC was formed in the first place – and the main reason that SEC registration of all publicly tradable shares was (and is) required – is to prevent fraudulent “over-issuances” of securities. In other words, if 100 shares of Company-A are registered, and I own 10 of them, the SEC rules and regs are meant to assure that I own one-tenth of the company, regardless of whether the shares are $1 each or $10 each.

- Second, let’s note than when shares are “sold short” there is always, by definition, a buyer. That buyer is entitled to have possession of his shares, and all the rights pertaining thereto, on T+3. And, under the present system, the buyer’s agent automatically credits the buyer with the ownership.

- But thus, please note, it is not enough for a seller to simply “locate shares” or to simply “ascertain that shares are available for lending” as current SEC rules seem to say is sufficient: the “short seller” must literally “borrow” the shares – and literally deliver them to the buyer for cancellation and re-registration; otherwise the issuer is “over-issued.”

Let’s review: For every single day a short-seller is allowed to go “naked” – i.e., the seller or his agent has failed to deliver the shares sold for cancellation – the issue is literally “over-issued” by that number of shares.

- In other words, if I sell 10 shares and the buyer has taken ownership of ten shares … but I haven’t delivered 10 shares for cancellation… there are now 110 shares “floating” out there in our little example. And, most important to note, in economic terms, this represents a 10% dilution of the SEC-registered shares.

- Theoretically, the 10% dilution – and the accompanying economic distortion of the true “equilibrium price” of the stock – is supposed to be immediately corrected by a forced “buy-in” of the undelivered shares, which will automatically bring the price back to a market-based “equilibrium” price.

- But when the buy-in rule is not strictly enforced, as is presently the case, “smart” naked-short-sellers will make as many more naked-short-sales as they possibly can – since allowing shorters to go naked almost guarantees that the shares will continue to fall – which will allow them to “cover” at even lower market prices than if they’d been covered on time.

- Please note carefully that allowing “naked shorts” to go uncovered by T+3 creates a “double whammy” in terms of market dynamics and in terms of the economics: Not only is there a frightening drumbeat or repeated sales – that tends to encourage a barrage of covered-sales too – each “naked sale” dilutes the number of shares they’ve bought, but no shares have been presented for cancellation.

- Please note too, that if a mandatory buy-in takes place, the “outstanding shares” are immediately brought back to the registered number of shares – and the market purchase automatically assures that the price is brought to a market-based “equilibrium number”…which, of course, is the correct number from a market-based perspective.

Let's review the math again: If I make a short sale of 10 shares of the 100 shares outstanding on Monday, and don't deliver on Thursday - and I am not automatically bought-in - as theoretically required, Company-A is over-issued by 10%. If I decide to make another naked short sale of 10 shares - and once again fail to deliver and fail to get bought-in, Company-A is now over-issued by 20%. Make no mistake about it: the SEC is allowing this to happen every single day!

Let's review the consequences again: The market - and the market price of the stock - are being inexorably distorted...because in reality, sellers are being allowed to sell something they do not have...or ever plan to have and for every day they are allowed to go naked they have been allowed to sell shares that should no longer truly exist under the charter and bylaws of the company - or under SEC rules.

So let's sum up: There is absolutely nothing wrong with short selling...as long as one ponies-up the shares on settlement date...regardless of whether one owns them outright or borrows them. (If one bets the wrong way, as very often happens, and the shares go up – and pass the point where the seller “sold short" legitimate short sellers will, of course, have to “cover their bet" at some point and repay the borrowed shares - either by delivering shares they may now own or buying them at the market price, which keeps the price of said shares at the market-based “equilibrium price").

But note: There is something that is both immoral and illegal about selling something you don’t own – or where you haven’t actually borrowed the goods to make delivery...and made delivery, pursuant to the normal terms of the sale. (And if you sold short with no intention of ever delivering the goods…that’s fraud.)

If one allows the supply of shares to multiply by 5% or 10% or more - as naked short sellers actually have done...while the “demand” to buy shares is constant, other things being equal, the price of said shares will definitely fall. (This is the first law of economics by the way). And if one adds to the normal desire to sell – by initiating a panic, fueled by sales of shares that one doesn’t own, and doesn't intend to lay claim to and deliver try the agreed upon date...(i.e. an artificially induced ‘disequilibrium’ between real supply and real demand)...the price will fall even more!

- Broc Romanek

Posted by broc at 06:31 AM
Permalink: A Few (Negative) Words about Naked Short Selling

Tips to get you motivated to run

2009-03-13T03:26:00.001-07:00

Tips to get you motivated to run: "101 KICKS IN THE BUTT"

Tips to get you motivated to run

2009-03-13T03:26:00.000-07:00

Tips to get you motivated to run: "The Loneliness of th"

John Paulson

2009-03-13T02:11:00.000-07:00

Economist.com

IN TODAY’S gut-wrenching markets, winners are as rare as a house that sells for the asking price. Even Warren Buffett is looking less than sagacious after his holding company posted its worst year ever. But one investor who continues to win plaudits is John Paulson. His hedge funds have had a superb crisis. They clocked up triple-digit returns in 2007 betting against subprime mortgages, netting him $3.7 billion personally—a sum that made George Soros’s winnings from currency bets in the early 1990s look modest. Mr Paulson’s funds continued to do well last year, rising by 7.9-37.6% even as those run by other hedge-fund titans, such as SAC’s Steve Cohen and Citadel’s Ken Griffin, suffered miserably. His funds were all up again in the first two months of 2009, and they now hold $30 billion—a war chest that Mr Paulson is now starting to use to gobble up the very securities that made him rich when they collapsed in value.

He cut his teeth in risk arbitrage, which involves punting on actual or potential merger targets. This remains an important strategy for him, and he had reason to celebrate this week when Dow Chemical agreed (under legal pressure) to complete its $15.3 billion acquisition of Rohm & Haas, another chemicals firm, in which Mr Paulson’s funds own a big stake. But he is best known for his canny bets against mortgage-backed bonds and financial shares. The firms in which he was “short” (ie, betting on a fall) last year lost, on average, 90% of their value.

Success has not bred arrogance. On the contrary, Mr Paulson is a fitting icon for the post-boom age: mild-mannered, bordering on weedy and so soft-spoken that when testifying before Congress in November he had to be asked to speak up. His first taste of business was to buy sweets in bulk and sell them to classmates at a hefty mark-up, but it is hard to imagine him having had the guts for such a scheme. He has never charged more than 1½% of assets and 20% of profits, a reasonably modest fee for a hedge-fund superstar. His job is, he says, more about preserving clients’ principal than gambling for outsized returns.

Accordingly, his funds generally eschew leverage, or making bets with borrowed money. He insists that his fruitful subprime trade, far from being stunningly clever, was a no-brainer for anyone who bothered to analyse the complex securities’ underlying collateral. “It was obvious that a lot of the stuff…was practically worthless at the time of issuance,” he says. He finds it “perplexing” that the banks holding the higher-rated tranches could not see this danger, and that so few others were prepared to believe that Wall Street’s finest could have miscalculated so badly.

Another motivating factor for Mr Paulson was the alluring asymmetry of shorting credit. The most you can lose is the spread over some benchmark rate. Yet if the bond defaults, the gains can be mouth-watering. He targeted BBB-rated tranches, the lowest in subprime securities. With credit spreads so low because of a liquidity glut, his possible upside as a buyer of protection using credit-default swaps (CDSs) was as much as hundred times the potential downside. One $22m trade is said to have netted him $1 billion when Lehman Brothers went bust. Though the CDS market has been good to him, he believes it “blew out of control” and needs to be regulated and moved onto exchanges, with margin requirements to limit excessive speculation. He also advocates tighter oversight of hedge funds.

He is, however, robust in his defence of short-selling, which has been vilified for its perceived role in driving down banks’ share prices. He sees it as a “valuable” tool, used not least by banks themselves to hedge their various exposures. More importantly, he argues, it is too small a part of stockmarket activity to move prices. His shorting “made absolutely no difference to the performance of any mortgages, securities or banks.” The blame lies with reckless lending, not with those who capitalise on the resulting mispricing of securities. There is, therefore, no “moral dimension”—though he allows that some of the “more vocal” shorts may have hurt banks’ prospects of raising fresh capital.

Still, his vast profits make him a target in a world where high finance is held in low esteem. Portfolio, a business magazine, dubbed him “The man who made too much”. He retorts that the bulk of the profits went to his investors, which include foundations, endowments and pension funds. They are not the only ones with reason to thank him: a $15m donation is helping families facing foreclosure to keep their homes, by paying for lawyers to exploit the sloppy documentation that accompanied the often-hurried pooling of subprime mortgages into securities. Mr Paulson says he has many other philanthropic arrows in his quiver, but to publicise them would “take away the altruism”.

Distress call

Just as markets used to hang on Mr Soros’s every move, they are now keen followers of Mr Paulson. He does not see the economy reaching bottom this year and is still a net short-seller of financial firms. More encouragingly, he has started buying up bombed-out mortgage securities. The number-crunching that told him subprime-linked paper was overvalued now suggests that some previously AAA-rated tranches are a bargain. He talks of distressed debt—mortgages, leveraged loans and the debt of bankrupt firms—as a $10 trillion opportunity.

At some point, his “number-one focus” will be to provide equity to recapitalise sick but viable banks. He is already dipping his toe in: his latest vehicle, the Recovery Fund, recently took a 25% stake in IndyMac, a Californian bank that the government seized last July. But the timing of any bigger push is uncertain. Mr Paulson is acutely aware of the costs of moving too early: those who have bought into financial firms since the start of the crisis have lost, on average, 80% of their investment. Still, in these dire times it is comforting to know that such a smart investor believes there will be something worth saving.

Twenty years of the world wide web | What's the score? | The Economist

2009-03-13T01:36:00.000-07:00

Twenty years of the world wide web | What's the score? | The Economist

Science inspired the world wide web. Two decades on, the web has repaid the compliment by changing science

Rex Features A proud father

“INFORMATION Management: A Proposal”. That was the bland title of a document written in March 1989 by a then little-known computer scientist called Tim Berners-Lee who was working at CERN, Europe’s particle physics laboratory, near Geneva. Mr Berners-Lee (pictured) is now, of course, Sir Timothy, and his proposal, modestly dubbed the world wide web, has fulfilled the implications of its name beyond the wildest dreams of anyone involved at the time.

In fact, the web was invented to deal with a specific problem. In the late 1980s, CERN was planning one of the most ambitious scientific projects ever, the Large Hadron Collider, or LHC. (This opened, and then shut down again because of a leak in its cooling system, in September last year.) As the first few lines of the original proposal put it, “Many of the discussions of the future at CERN and the LHC era end with the question—‘Yes, but how will we ever keep track of such a large project?’ This proposal provides an answer to such questions.”

Sir Timothy is now based at the Massachusetts Institute of Technology, where he runs the World Wide Web Consortium, which sets standards for web technology. But on March 13th, he will, if all has gone well, have joined his old colleagues at CERN to celebrate the web’s 20th birthday.

两会代表委员呼吁电网改革破解"煤电顶牛"僵局_财经频道_新华网

2009-03-12T18:43:00.000-07:00

两会代表委员呼吁电网改革破解"煤电顶牛"僵局_财经频道_新华网

“关于解决煤电争端、理顺能源矛盾的提案，我几乎每年都提，可是一直没有收到明显的效果。”担任过两届政协委员的中国电力科学研究院副总工程师蔡国雄颇有些无奈地说。

2009年两会期间，“煤电之争”的话题再次成为代表委员们激辩的焦点。不论是身为人大代表的地方煤炭企业老总，还是作为政协委员的中央电力企业“巨头”，对“煤电之争需要合理解决”已达成共识，并提出若干方案，如建议设定电煤指导价、煤电联营、增加清洁能源上网比例等等。

但是，更多的代表委员认为，解决煤电之争最根本的措施在于推进电力体制改革，首先要推进电网的改革，包括调整电力价格形成机制，推行电网的输配价格分离，积极进行大用户直购等措施。而在当前因经济危机使电能的供需矛盾有所缓解的情况下，出台相关政策恰逢其时。

　　“煤电顶牛”两会上演

继煤炭订货会之后，煤电双方的博弈在两会继续上演。“煤价如果继续高涨，则电力企业仍然面临亏损。”中国大唐集团公司总经理翟若愚委员说。

中国电力投资集团总经理陆启洲委员则指出，“煤炭价格如果今年继续上涨的话，70%的发电企业要破产了。”

而中煤能源集团原董事长经天亮委员却说：“煤炭增值税税率提高了4个百分点，相当于煤炭企业吨煤支出增加了20元。”言下之意是煤炭企业为安全生产、资源开发等多付出了大量成本，煤价不会轻易下调。

长久以来,“市场煤”与“计划电”两套价格体系使得煤电矛盾突出,煤炭企业可以根据市场供求调整价格,但发电企业却是政府定价,2008年高涨的煤炭成本导致电力全行业亏损。

国电电力集团原总经理周大兵委员惋惜地指出，煤电本来是一个产业链上的上下游，应该是一家子。现在这种“顶牛”是对国家、社会资源的极大浪费。

　　“煤电联营”治标不治本

为了解决煤电顶牛，许多代表委员呼吁通过煤电联营的方式解决。

全国政协委员、中国电力投资集团公司副总经理兼中国电力国际有限公司董事长李小琳在提案中再次呼吁进行煤电联营。在去年的两会提案中，她建议要通过煤电联营解决一次能源和二次能源如何调配的问题，减少不必要的成本上涨和资源浪费。

她在提案中指出，要大力推进由央企主导的电力和煤炭重组、联营，在尊重市场经济规律的同时，由国家宏观经济管理部门协调处理煤电联营涉及到的行政障碍问题，更合理、更均衡地加快煤电基地的建设。

全国人大代表、同煤集团董事长吴永平认为，要在调整产业结构和产品结构同时，做好“非煤”产业，特别是电力的建设。“国家应出面负责协调，加快实施煤电企业跨行业、跨区域、跨所有制融合，实现高层参股、深度重组。”

观察人士认为，煤炭与电力的老总同时都提出要通过煤电联营的方法解决煤价与电价的矛盾，但这一方法被认为没有抓住问题的根本要害，只是用过渡性的方法暂时缓解矛盾，而且存在重复建设的嫌疑。

　　电网改革是关键

在2009年政府工作报告中，温总理用了58个字的篇幅阐述资源产品价格关系：“2009年将推进资源性产品价格改革。继续深化电价改革,逐步完善上网电价、输配电价和销售电价形成机制,适时理顺煤电价格关系。”观察人士称，这是历年来首次如此详细地阐述电价问题，而且首先就抓住了电网的要害。

“煤电矛盾的根源在于电价不改革；而电价改革的关键则在于电网的改革。”神华集团原董事长陈必亭委员一语道破其中奥秘，即要跳出煤企和电企的行业利益，从更高的层面来看待双方的矛盾。

目前我国的电力产业链条中，发电端已经实现了五大集团竞争，但在输配电环节，电价由电网包办，购电价格和最终售电价格相差极大，电网享受了巨大的利润。在这种垄断下，上网电价不能松动，竞价上网无法实现，最终导致了煤电顶牛，无法化解。

全国政协委员、国家电监会原副主席邵秉仁透露，国家发改委已经着手研究电价改革，突破的关键在于在成本核算上进行输配分开。

如果推行了输配分开后，另一个可以直接压缩电网利差的办法也可以顺理成章地进行，那就是大用户直购。此前发改委发布《关于开展电解铝企业直购电试点工作的通知》,遴选了15家优质电解铝企业参与直购电试点工作。这意味着，用电大户通过支付电网企业低廉的“过路费”,就可直接从发电公司以较低价格购电,而不必再统一从电网企业购电。

改革政策不会马上出台

“以前闹电荒的时候，人们争相建设电源，而现在发电回落，电网的问题更加突出，所以现在改革正当时机。”蔡国雄说。改革的方向应该首先明确定价机制的改革方向，然后再明确改革的力度和能够接受的程度，最后要养成人们对资源的节约意识。

蔡国雄认为，需要纠正一种错误的观点，价格改革并不意味着涨电价。电价改革需要形成有利于市场化运作的电价机制，如弹性电价机制，高峰时期电价高，低谷时期电价低，鼓励人们错峰使用，而均价保持不变。

“错峰电价一直没有实施，原因是我们缺乏制定电力价格的法律规定，人们担心市场化改革就是放开电价。所以必须要改变人们这种观点。”蔡国雄强调。

电价定价机制的改革方向是向市场化逐步过渡，不能一蹴而就。当前的时机是个好时机，但改革的政策不会马上出台。“据我了解，发改委一直在研究针对电价改革的措施，但这不是由主管部门独家决定的，而是由煤炭、电力、发改委和电网四方充分协调之后拿出的意见。总而言之，仓促之下改革，还不如不改的好。”蔡国雄说。

HKEx Drops Late Auction - WSJ.com

2009-03-12T17:25:00.000-07:00

HKEx Drops Late Auction - WSJ.com
HONG KONG -- Hong Kong's stock exchange abruptly scrapped its late-trading regulations Thursday, less than a year after setting them up, marking the second retreat from major new rules in a month in a city already known for its light regulatory touch.
[HKEx CEO Paul Chow] Reuters

Paul Chow, chief executive of Hong Kong Exchanges & Clearing, said the stock exchange will scrap the 10-minute closing auction starting March 23.

Paul Chow, chief executive of stock-exchange operator Hong Kong Exchanges & Clearing Ltd., said Thursday that the exchange will scrap the 10-minute closing auction it uses daily after 4 p.m. to determine closing share prices. It will revert to its previous system effective March 23, under which the closing price of a share was calculated as the median of the day's last five trades.

The move follows a 24% drop Monday in the local share price of HSBC Holdings PLC, which had already seen its share price become more volatile due to a $17.7 billion rights offering. HSBC said Tuesday that a "few trades" had hammered its shares, though the stock rebounded in the next two sessions. Monday's late drop raised concerns among some investors over the system's vulnerability to manipulation by large traders.

Mr. Chow said the change wasn't tied to any company in particular but alluded to public attention devoted to HSBC's share-price moves. He also mentioned large capital-raising efforts that have added an extra measure of volatility in the middle of a financial crisis.

"This change is a way for us to ensure that investors have confidence in our market," Mr. Chow said. He added that the exchange would listen to opinions in the market, and consider introducing a modified version of the closing auction system at a later date.

The move to scrap the closing auction requires the approval of the Securities and Futures Commission, the local market regulator. The regulator said in a statement Thursday that it would consider the rule change.

The exchange's abrupt shift comes a month after it backed off on a plan to block company directors from trading in their shares ahead of results announcements, which like the closing-auction rule was aimed at aligning Hong Kong more closely with international practices. That plan was peeled back after more than 200 company directors mounted a high-profile campaign to overturn it.

The retreat comes as many other markets in the world tighten regulations as the global financial crisis adds volatility to markets. A number of shareholder activists argue that the retreat could leave Hong Kong out of place, though several local business leaders cite intense competition with other exchanges.

Hong Kong's stock-exchange operator, also known as HKEx, introduced the closing auction last May to get closing prices that more accurately reflect market sentiment, as well as to bring the exchange in line with a system widely used among global stock exchanges.

Almost immediately, the system attracted criticism after closing prices in some shares began swinging wildly during the 10-minute auction. In November, HKEx responded to the concerns by introducing a 2% cap on trading volatility during the auction. That measure, which was to take effect in June, was canceled by Thursday's announcement.

While dropping the closing auction removes an immediate source of controversy for HKEx, it leaves unresolved questions about what the exchange will do next.

Raymond So, a finance professor at Chinese University of Hong Kong, said simply pulling the plug on the auction "isn't addressing the real issue."

"Closing auctions work fine in other major financial centers, so it doesn't make sense to just scrap it when you run into a problem," said Mr. So, who blamed market enforcers for not stepping in to prevent market manipulation.

David Webb, a former HKEx director and independent shareholder activist, said Hong Kong's closing auction system was "defective," but argued that investors would continue to find ways to manipulate the market without it.

"This simply shifts the manipulation back into the regular session," he said of the change, which he called a "panic measure" after HSBC's abrupt share-price decline this week. He advocates a London-style system in which a computer randomly chooses a closing time from within a set window of time.

China Eases Investment Approvals - WSJ.com

2009-03-12T17:22:00.000-07:00

China Eases Investment Approvals - WSJ.com

By TERENCE POON

BEIJING -- China's government has allowed local governments to approve certain foreign investments, shifting control away from Beijing in a move to ease foreign investment at a time when it has been declining sharply.

Under the new rules, which took effect last week, foreign businesses setting up an investment company with registered capital of less than $100 million will need to seek approval only from local commerce bureaus, the Ministry of Commerce said Thursday.

China previously required local and ministry-level approvals for foreign investments.

Local commerce bureaus have been given the authority to review plans by foreign-invested auto makers to expand production capacity. The bureaus can also now approve deals by foreign companies to buy domestic firms in certain industries, where the deal value is less than $100 million.

The Commerce Ministry said it is easing regulations to facilitate investment. Foreign direct investment into China has fallen in recent months as companies world-wide are hurting from the financial crisis. In January, the Commerce Ministry said, foreign direct investment fell 33% from a year earlier to $7.54 billion.

Foreign investment in China, while not huge in comparison to the country's gross domestic product, has been vital for providing jobs and introducing new technology and management practices.

However, many foreign companies are now cutting back. A survey of U.S. companies in the country published this week by the American Chamber of Commerce in China found that 39% of respondents are postponing or have canceled planned investments this year, while 21% expect to shrink their China work forces.

In recent months, China has actively sought to paint itself as a good international trade participant, sending Chinese officials and business executives on shopping trips to Europe to buy machinery and other products. Such spending sprees come amid concern in Beijing that the global recession could prompt protectionist moves by its trading partners.

The European Union Chamber of Commerce in China said it welcomed the relaxation of the rules. "The Chamber strongly supports China's efforts to ensure continued economic growth, and hopes to see the introduction of more policies like this that help to build a level playing field for all businesses," it said in a statement. The Chamber also called for "greater transparency of approval processes on a local government level."

Foreign businesses looking to invest in China have often complained of heavy bureaucratic hurdles and that several sectors, such as telecommunication services, remain severely restricted for foreign companies.

RW Racing News: A Brief Chat With Marc Bloom

2009-03-12T03:15:00.000-07:00

RW Racing News: A Brief Chat With Marc Bloom

Marc Bloom's newest book is "Young Runners," subtitled "The Complete Guide to Healthy Running for Kids Marcbloomheadshot1_2 from 5 to 18" (Fireside Book/Simon & Schuster). Bloom's other books include "God on the Starting Line," "Run With the Champions," "The Miler" (a biography of Steve Scott), "The Runner's Bible," "Olympic Gold," and "The Marathon." He's a "Runner's World" Contributing Editor, an award-winning writer for "The New York Times," and the former Editor-in-Chief of "The Runner." Bloom also publishes "The Harrier," the high school cross country and distance running magazine. He was third in his 60-plus age group at the USA Cross Country Championships in Maryland in February. Bloom lives in New Jersey, and he'll be signing copies of "Young Runners" on Saturday at the Barnes & Noble in Freehold (3981 US Hwy 9) from 2:00 to 3:30 p.m.

As I was reading the beginning of "Young Runners" and noting some of the points you were making, I remembered the video we'd posted of the Louisiana 3200-meter indoor champion Gabrielle Jennings, who is just ten years old and who, when asked what her goal for outdoor season was, replied "to have fun." That seems to be one of your themes - that running is a great thing for these kids to be doing, that beyond any pushing and stressing out, they should be having fun and adults should assist them in having fun.
Marc Bloom: Very definitely. We parents want the best for our kids, and in our very competitive society, we often allow running to be very competitive, because that's certainly the sports environment that we see and know about on a daily basis. And we forget that the adult values that apply to running are not exactly what kids really want and would thrive on, certainly at an early age. Kids will lead you to recognize what's fun about running if you just let them - and that's for all of us adults, not only the parents but teachers and coaches and PE people. Any survey you take of sports psychology people eliciting responses from kids as to what's most important to them, in running or other sports, "fun" comes out first virtually all the time. And there's a lot that goes in to what it means to have fun.

I was particularly taken by a quote from Bill Sumner, who conducts the kids' Introduction to Running program at the Orange Country Marathon. He says "kids run carefree with a smile on their faces. It's hard to find a kid who's grunting and grinding." His philosophy was to let them do that - don't even bother them with things like pace and form at the very outset. Let them be the kinds of kids that they are.
MB: Bill's a great coach, and he's certainly one of the experts and one of the important people in running in southern California. You don't want to give kids too many rules about running at the outset, and if you take them to a "fun run," as I think it's a great idea to do even when they're five or six or seven and they run a loop around the parking lot of whatever they might have, you want to tell them not to run too fast at the start. You'll find that no matter what you tell them, they're going to run too fast at the start, because that's like telling kids on a soccer field not to run to the ball. You let them learn on their own. They will learn, like they learn in school. And you nudge them in the right direction, and you take a patient common sense approach to it.

Your book is aimed at discussing running for kids five to 18, but you talk of instances of some beginning as early as age three, right? nothing seriously, obviously.
MB: "Running" in quotes, if you will, Running can really begin in earnest when youngsters are of school age. Prior to that, the only context I use is the so-called Toddler Trots or Diaper Dashes at a few events. There's nothing wrong with having a kid sort of waddle for 30 seconds down the road because his older brother is doing it and he's going to get a lollipop at the end and everyone's going to get excited. It's just seeing an environment that's healthy and encouraging. It's not "running." But I think a five or six-year-old can do a little bit or running in a casual fun way and go from there.

So many of the races we link up on the Racing News here actually have a marathon, half marathon, 5k, and "kids fun run."
MB: Absolutely, and by and large, they're great. I think they originate from a marketing concept where the race administrators realize get families involved is good for their event, and good for the bottom line, and sponsors like it. The net effect is you're going to have kids' events, they're going to run, they're going to see mom and dad running, hopefully, and it's going to be treated in a sort of non-pressured fun-loving way that it should. I've interviewed many race people who are youth running directors at many of these events across the country, and I would say that their hearts seem very much in the right place.

You warn to make sure the kids don't overdo it, don't stress the kids out, and don't make them do anything more than they're naturally inclined to want to do.
MB: Absolutely, and in some cases you might have to hold the kids back. I know that notion is anathema to some parents, but to be a parent is to look after your kids' best interests and well-being in every aspect of their health and fitness, not just running. But when it comes to running, I don't think you want to have an eight or nine-year-old running 30 or 40 miles a week. Some do it; let's admit that. But I think you want to be very patient about it.

Kids like to run fast. We adults kind of just motor along at a slow pace, but let kids do some sprint work. It's wonderful. They love to sprint, they love to run relays. They can race other kids in a nonthreatening way. They run down the park, run down the soccer field, run a lap of the track, do half a lap. There are many ways to advance your youngster at seven or eight or nine or ten but without putting on the kind of miles and volume on a kid that can be a negative as time guys on. And kids don't really like to jog that much. A few might; they might be very disciplined, or might follow the parent. But work on their speed, reward them in many ways, and give them healthy snacks. Make a fun thing out of it.

Do you think that in schools, we've gotten away from the idea of running as "punishment," that the worst thing a coach or anybody can do is make a kid do extra laps?
MB: It is mostly something we've gotten away from, thank God. I certainly didn't witness it in anything I watched as I traveled. But we still do hear the isolated case when some basketball or football coach - in some ways innocently, 'cause they don't know any better - says "somebody was talking when they shouldn't, take a lap." I don't think they mean any terrible harm. They just don't realize it's kind of a silly and ridiculous thing to do and it certainly does convey a negative attitude you don't want to see spread. But I think by and large, you're not going to see that in any gym class.

There were several instances in "Young Runners" in which you demonstrated that running obviously extends itself beyond the pure physical well-being we seek. Dr. Bill Roberts (past president of the American College of Sports Medicine) was talking about how kids who run get socialized and improve their grades. There was the Students Run LA program, with kids whose graduation rate from the high schools was 30 percent higher than the rest of the city. And there was the "Read, Right, Run" program in St. Louis, in which kids also read 26 books and have 26 good deeds to perform. Running is making these kids into very complete people.
MB: When you talk about the well-being of kids and the health of youngsters, you're also talking about the health and well-being of our society. And to give kids a certain grounding in values - right now, let's face it, we are living through some very serious societal and cultural problems. And I think that for the kids, for their families, for their communities, and for the greater good, running can be a great tool with which to teach values and give kids more of a wholesome and complete education so it does lead to reading and to doing good deeds. What can you think of that would be better for kids and their communities? And it's kind of contagious. I don't know who gets credit for being first, but people are copying other programs. But okay, let them copy. And a lot of individual schools and clubs that I learned about and whose administrators I spoke to had the same concept.

When I was in Durham watching the Durham Striders youth track team, I had to admit I went down there with a little bit of a bias because I was never one to be that happy about age group track from some experiences I've had where it looked like kids were overdoing it to win a trophy. I went down there and I was educated, and I saw an amazing group of kids with volunteer coaches led by a pediatric cardiologist, who I quote in different parts of book because she's got so many interesting things to say. She's Dr. Brenda Armstrong at Duke University, a wonderful woman. I stayed at a complete practice and I interviewed children and parents and coaches, and I was very impressed by the manner in which they teach kids. The point I'm making is they have standards and they check report cards. It's all part of the same thing. They don't isolate the running from the rest. If you don't bring home a satisfactory report card, you're not going to go to practice for a couple of weeks because you're going to put that time in working on your schoolwork. And they also have very demanding requirements of the families regarding nutrition and hydration. Again, it's kind of a tough love situation, but the doctor, who sees the worst excesses of our society in her practice, insists that kids eat healthy and families make the changes. If the families don't institutionalize those changes, the kids just aren't going to get the benefit of good nutrition. It can't be part of the day. It has to be all day. Again, it's happening around the country and it can be done.

At the Armory in New York City in the winter, we'll see as many as 10,000 high school athletes competing. That's no exaggeration. That must be encouraging to you.
MB: I mention the Armory in a couple of places in the book. In one reference I say something like "it might be the best example of engagement of teenage runners in the country." In every respect, the Armory is an embarrassment of riches. It's not only an Olympic level track where kids set PRs and break records and dominate the Internet coverage. It's a laboratory for learning. It's a laboratory of diversity, first of all, because every type of background imaginable is present at the Armory in virtually every meet, so kids get to share an experience that's totally inspirational and become better people for that. These are kids who are training year-round, doing their cross country and track. They learn how to compete, and hopefully keep it in perspective. It leads to college scholarships in some places; college coaches are at all the big meets, looking at kids. All the people at the Armory deserve all the credit that we can give them.

And we're seeing people like German Fernandez who make the transition from being young high school phenoms to continuing to run well after that. Dathan Ritzenhein did that, too, and on into the pros. We'd hope that more people can enjoy and excel at the high school level and not be burnt out by it.
MB: The high school situation sometimes is delicate with the distance runners, because when you have an environment like we just mentioned with the Armory, it is so compelling and so magnetic. It's easy to get enraptured by that. There's a risk of maybe doing too much competition and too much emphasis at certain times of the year. As I say in the book, a high school experience really is four seasons. You have your summer base work for cross country, and then cross country, indoor track, and outdoor track. I don't advise people to do all four seasons all four years. I think that's biting off a little more than is healthy. You need some breaks, and you have to have parents and coaches who take some responsibility for recognizing that not every youngster can do four seasons for four years and come away with the best experience. You have to take it on an individual basis.

But German Fernandez is one of the bright lights we have. One of the differences today with the promotion of track and the national events is that unlike ten or 15 or 20 years ago, a lot of great athletes are turning to track or cross country - the type of athlete like a Marty Liquori who, back in the day, was playing basketball and running and decided to give up basketball for track. A pretty good decision. That kind of kid, who has running potential but plays other sports, more often now, I think we're finding turning to track and cross country. So we can get the German Fernandez types, the Chris Derricks, the future Dathan Ritzenheins and Ryan Halls, speaking on the male side now. And certainly females like Shalane Flanagan, who was a swimmer and played a little soccer, and obviously her current running performances speak for themselves. All the good signs are there.

Let's not overlook your own running. You got third in the 60-64 group at USA Cross Country. Things are obviously going pretty well for you. What team are you running more?
MB: I compete, if that's the word, for the Shore AC. It's a great group with outstanding runners in the younger age groups. But a few of us oldtimers carry the banner in the upper age groups. On a personal level, I kind of made a bit of a renewed commitment three years ago to see if I could enjoy my running a little more from a competitive standpoint as I neared 60. So I started doing what for me passes for quality training, a little track work, and I've sort of sputtered with it on and off. I'm still doing it a little and finding I'm running decently. I enjoy the cross country. I enjoy the masters. I don't run marathons anymore. I enjoy the shorter stuff. It's pretty amusing to find, when the race was over, I actually got the bronze medal, because I wasn't actually thinking of any of that. It was a tough course. But it was fun.

What would you like to say, in summation, about "Youth Runners?"
MB: As a concluding point, running can be effective with any youngster, but we have to recognize that the ways in which youngsters will approach running and what they'll get out of it will differ from child to child. You have to allow for those individual variations. Some kids will gravitate more to the competitive end, others will gravitate toward the social end, to doing it with friends. Some need the external reward of some kind of prize for running a certain amount, and others can just deal with the intrinsic satisfaction. And this even carries through into teenagers. We can't assume all kids will respond to running in the same way. as you go through the book, you'll see that I try to represent all those different facets of how youngsters can enjoy running. You have to provide a landscape for them and let them indicate their preferences. Give them choices - group running, a club, a team, one of those family events, whatever it is. Don't make it narrow so if one aspect of running turns them off a little, they're finished. You need to let them pick the part about running that most connects with them and makes them feel good about themselves.

Evidence in an Age of Self-Surveillance

2009-03-11T19:29:00.001-07:00

http://www.law.com/jsp/legaltechnology/pubArticleLT.jsp?id=1202428950936&rss=newswire
Evidence in an Age of Self-Surveillance
By Ken Strutin
New York Law Journal
March 11, 2009

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George Orwell's state-run surveillance society had children spying on parents, neighbors scrutinizing neighbors and Big Brother watching over everyone. What Orwell did not foresee was a time when people would voluntarily publish chronicles of their lives for public consumption.

Imagine bookstores suddenly inundated with truckloads of privately published diaries, photo albums and home movies. An unlikely scenario until the mass marketing of computers, digital cameras and Internet access provided an inexpensive outlet.

Millions are participating in online social networks in an age of unprecedented self-surveillance (sousveillance). And these sites are pushing criminal investigation into uncharted waters.

Two of the most popular networking sites are MySpace and Facebook, each of which boasts over 100 million users. And according to a 2008 Pew Internet and American Life Project survey, the numbers of adult users with online profiles increased more than 400 percent over the last four years.[FOOTNOTE 1]

Evidence derived from social networking comes into play in several ways. Law enforcement and prosecutors use it to identify suspects and build cases. And defense attorneys have begun to mine this resource for information that can exculpate their clients, impeach a state's witness or provide a basis for a reduced sentence or post-conviction review.

A couple of months ago, Newsweek reported on an investigation concerning the murder of a British college student in Italy.[FOOTNOTE 2] The suspects in that case were identified through Skype, an Internet phone service; and additional leads revealed by photos and short stories appearing on a Facebook page, an unsettling YouTube video and queries found in the history of a Google search engine. All told, these social networking and Internet communication sites collectively created a "virtual crime scene," the output of which is finding its way into the courtroom.

In a Niagara County Court, a judge increased the bail of a defendant charged with felony assault and misdemeanor weapons possession based on pictures found on a MySpace page.[FOOTNOTE 3] The accused had been released on $5,000 bail, but during his arraignment the prosecutor introduced 10 pages of MySpace photos. They allegedly showed him wearing gang clothing, giving gang signs and standing with others in gang colors. Based on this and other information supporting a likelihood of conviction, the judge raised bail to $50,000.

And during a Michigan murder trial, the prosecutor introduced Molineux-type evidence of intent and planning from defendant's MySpace site. The evidence in People v. Liceaga, 2009 Mich. App. LEXIS 160 (Mich. Ct. App. Jan. 27, 2009), included photos of the accused with a gun, purportedly used to shoot the victim and "throwing" a gang sign. Admission of the images was upheld on appeal because they established familiarity with the weapon and a pattern of threats made to other victims.

Social networking evidence plays an increasingly important role at other stages of the criminal process.

In United States v. Ebersole, 263 Fed. Appx. 251, 253 n.4 (3d Cir. Pa. 2008), a sentence of supervised released for interstate stalking was revoked because it was claimed the defendant sent a threatening e-mail to the victim. "At the revocation hearing," the court said, "Ebersole testified that he used his MySpace web page as a 'vehicle to voice [his] frustration.' (App. 29.)" The court admitted the profile page evidence to put the message in context.

Recently, in People v. Fernino, 2008 NY Slip Op 28044, 3 (N.Y. City Crim. Ct. 2008), a Staten Island judge held that a friend request intended to reach the complainant's MySpace page violated the "no contact" provision of an order of protection. "The defendant should not be exculpated because she, instead of contacting her victim directly, used the MySpace Mail Center Friend Request Manager," the court said.

In both cases the indirect nature of the communication was an unavailing defense. However, communication is a two-way street, and as illustrated below, the actions of the recipient may determine the outcome of a case.

In People v. Rodriguez, 2008 NY Slip Op 28123, 5 (N.Y. City Crim. Ct. 2008), an 18-year-old defendant's expression of "unrequited teenage love" for a 14-year-old complainant via MySpace failed to reach the level of aggravated harassment.

A key factor in dismissing the charge was the complainant's willingness to access defendant's messages on her page. No attempts were made to block them nor did she ask him to desist. At some point, the prosecution claimed she disabled her account, but offered no evidence to determine when it occurred or whether it was done in response to defendant's epistles.

The virtue and vice of social networking, and the Internet in general, are that it empowers everyone to be an investigator. But incautious use of publicly accessible profiles can lead down the wrong path in some cases.

A North Carolina resident had been arrested and prosecuted for injuries to a victim in an Albany bar fight.[FOOTNOTE 4] Some time after the incident, the victim had gone to a MySpace page where he saw an image of a person he thought was the attacker. Meanwhile, the man in the photo, who lived more than 700 miles away, denied ever having been in Albany. One DNA sample later, the case against him was dismissed.

DUE DILIGENCE

Internet searching has emerged as a necessity in legal investigation. And with the advent of Google cache and the Wayback Machine to resurrect defunct sites and links, the search parameters have broadened. And now social networking is redefining due diligence in online investigation.[FOOTNOTE 5]

Sites like Facebook and MySpace may hold the keys to an alibi,[FOOTNOTE 6] justification or mental health defense or mitigating evidence. In addition, they may provide material to impeach law enforcement and expert witnesses or assail the credibility of eyewitnesses.[FOOTNOTE 7] Mistaken identifications and false or misleading information might be uncovered as well.

A defendant's social networking page can also be turned to advantage because, like most personal sites, it represents part of a life story. There may be postings that show strong roots in the community supporting a bail application or positive reputation evidence from testimonials useful in developing a defense theory or mitigation at sentencing.[FOOTNOTE 8]

Depending on the material posted, it could prove to be a valuable snapshot of a client's experiences -- similar to a day in the life movies used in civil litigation.

JURY BEHAVIOR

These sites can open the door to opinion making, where the power of one person or a 1,000 to post their views about a pending case can impact due process.

In United States v. Boyd, 2007 U.S. Dist. LEXIS 88493 (E.D. Tenn. Nov. 30, 2007), the accused moved for a change of venue based on pretrial publicity. In addition to TV broadcasts and newspapers articles, attorneys involved with the defense testified that there were YouTube videos, opinions about the case posted on Internet news sites, and extensive Google search results concerning the victim. All of the electronic information was available to any potential juror in the venire district.

While the attorneys could not determine how many potential jurors might have viewed the YouTube videos, for example, they noted: "[A]nyone, located anywhere on Earth, with access to a computer and the internet, could create a video about Christian and Newsom [victims], or the prosecutions arising from their deaths, and put it on YouTube."

The trial judge denied the motion as premature, being unable to determine the existence of actual prejudice, and instead granted a defense motion for individual voir dire as needed.

The dangers of jury pool contamination intoned by the defense attorneys in Boyd were realized in a West Virginia case.

K.J., one of the alleged sex abuse victims in State v. Cecil, 221 W. Va. 495, 504 (W. Va. 2007), had a MySpace account. A private detective working for the defense testified that she posted a statement about being "famous someday," and "used the website to communicate with older boys contrary to her mother's testimony that K.J. was now withdrawn and did not like to be around older boys or men."

The curiosity of two jurors got the better of them, and during trial they tried to visit K.J.'s MySpace page. However, the profile had been restricted or removed before trial and inaccessible -- reducing its prejudicial impact. Still, one of the jurors did discuss the site with her daughter, who knew the other victim and her family. While the jurors' attempted investigation was not productive, their actions combined with other misconduct by a third juror denied Cecil a fair trial.

As this next case illustrates, Web sites have to be seen to be impactful.

In State v. Gaskins, 2007 Ohio 4103, P30-P35 (Ohio Ct. App., Medina County, Aug. 13, 2007), the defendant was charged with sex crimes against two underage victims. During trial, he attempted to introduce evidence that one of the complainants held herself out on her MySpace page as an 18 year old with experience in adult sexual relationships.

The court permitted photos of the victim from that site to be admitted based on testimony about her appearance at the time. However, since no proof had been offered that the defendant had ever seen the site, and it was created after the event, questioning about the MySpace page was not permitted.

Jury selection has to take into account the fact that many in the pool will be familiar with social networking and Internet searching or have their own sites.

In view of the potential for unwanted publicity or juror curiosity, voir dire and jury instructions should consider how these sites can infiltrate and influence the proceedings. The questions from the Pew survey might suggest a few starting points.[FOOTNOTE 9]

INFORMATION QUALITY

Since Web pages can change or disappear, archiving or making a demand for preservation may be necessary. Admission or exclusion of testimony about the contents may hinge on this early capture of Web content.

Distinct from content is the conduct of the person profiled, whether a party or witness. The act of removing a page, privatizing access or changing the nature of the material posted may be probative as a virtual recantation, recent fabrication, inconsistent statement or basis for impeachment.

Depending on the reason that a complainant shuts down her site or a witness restricts access to his MySpace page, the next step may involve a subpoena to the networking host, a discovery motion, a Rosario demand or preclusion motion, and ultimately, an adverse inference jury charge.[FOOTNOTE 10]

Foreclosure of such evidence might run afoul of the confrontation and compulsory process clauses.

Moreover, if photos from Facebook were used in an identification proceeding or statements on a blog found their way into a search warrant application, there might be a basis for suppression.

The integrity of self-published online information depends on its authenticity and reliability. Well-known phenomena plaguing Web sites apply with equal force to social networking, such as hacking, identity theft, malicious misinformation and misrepresentation.

The Pew survey reported that 4 percent of users deleted their profiles because their page had been hacked or password stolen.

Social networking sites are personal. They represent an extension of conversations that take place between friends or reveal the desire to create casual relationships. The informality and dubiety of their content can be questioned. Whether offered as evidence by the prosecution or considered for use by the defense, fact checking is essential.[FOOTNOTE 11]

CONCLUSION

Media rich social networking sites have pulled back the curtain on the activities of multitudes. And lawyers are representing an increasing number of clients with an online presence, and trying cases where complainants and witnesses post information that can lead to impeaching or exonerating evidence.

Criminal defense is now virtual defense. And unlike memories that fade with time or physical evidence that deteriorates, a Web site will continue communicating to a global audience for a long time.

What will it mean when we live in a society where everyone knows everything about everyone? And how will it affect the rights of defendants to confront their accusers and prepare their cases?[FOOTNOTE 12]

A world with "virtual crime scenes" demands a comparable set of safeguards to ensure access to and the integrity of the virtual evidence that is fast becoming a staple of criminal prosecutions.

Ken Strutin is director of legal information services at the New York State Defenders Association.

::::FOOTNOTES::::

FN1 Pew Internet Project Data Memo: Adults and Social Networking Web Sites (Jan. 14, 2009). See "New Numbers on Social Network Usage," CNET News, Feb. 10, 2009, .

FN2 "Murder Most Wired," Newsweek, Dec. 3, 2008.

FN3 "MySpace Page Used Against Gang Suspect," Buffalo News, Jan. 23, 2009.

FN4 "Bar Brawl Indictment Dismissed," Albany Times Union, Feb. 18, 2009.

FN5 See generally "Due Diligence With Social Networks," Law Technology News, Dec. 12, 2008, ; "Making Internet Searches Part of Due Diligence," Los Angeles Lawyer, Feb. 2007, at 46.

FN6 See, e.g., "Lack of Internet Access Muddies Case Against Sex Offender's MySpace Site," Law.com, Nov. 6, 2006.

FN7 See, e.g., "MySpaced-Out Cops: NYPD Eyes Web Pages of Recruits," New York Post, Jan. 21, 2009; "Litigation Clues Are Found on Facebook," National Law Journal, Oct. 15, 2007>

FN8 But see "Social Networking Puts the Bite on Defendants," Law.com, July 22, 2008; "Danger of Self-Inflicted Damage on the Web," Pennsylvania Lawyer, November/December 2008, at 34.

FN9 Cf. "Social Networking Sites Help Vet Jurors," National Law Journal, Aug. 13, 2008.

FN10 Cf. "MySpace, Facebook Pages Called Key to Dispute Over Insurance Coverage for Eating Disorders," National Law Journal, Feb. 1, 2008.

FN11 See generally "When Reporters Go Into MySpace," News & Observer, Dec. 31, 2007.

FN12 See generally Anita L. Allen, "Dredging Up the Past: Lifelogging, Memory, and Surveillance," 75 U. Chi. L. Rev. 47 (2008); "India's Novel Use of Brain Scans in Courts Is Debated," The New York Times, Sept. 14, 2008.

Food Stocks

2009-03-09T19:53:00.001-07:00

Whoever proclaimed food stocks were safer than other companies might want to get his or her head examined. The logic of the argument made perfect sense - everybody has to eat and when the economy is in an up cycle, these so called "defensive stocks" theoretically should produce lower returns than their counterparts. These types of equities are supposed to offer lower risk, therefore they should also produce less reward.

Wrong. These food stocks have literally shafted their owners , as they achieved lower returns during the good times and larger losses in the bad times. Go figure. Sorry about my ranting, I guess I just needed to get some of this disappointment off my chest, as a form of therapy to cope with my losses.

This last week of trading, the DJIA fell about 6% while my Basic Food Fund index dropped at almost twice the rate, from $114.50 to 103.14 or 10%. What’s that all about? The index now is precariously close to penetrating the all important psychological $100 level. The good news is, the carnage has gotten so out of hand that dividend yields have risen considerably.

Meaty dividend yields: Nine of the fourteen components of the “BFF” pay a cash dividend. It is surprising to note that even though SCS recently cut its dividend in half, the stock still yields a juicy 8.2% return, second only to PBY’s current 8.9% payout. The balance of BFF’s dividend yields are: SLE; 6.2%, IPSU: 5.2%, CAG: 5.1%, SVU: 4.8%, CKR: 4.1%, TSN: 2%, and SWY: 1.8%. All the company’s earnings are sufficient enough to cover their dividend payouts except PBY and TSN.

Low valuations based on earnings and book value: Every single component but CAG and CKR are selling at book value or at a discount to book. The index contains an average multiple of about 10 times 2009 earnings estimates, excluding PBY, GAP and SFD who are expected to post losses. From these beaten down prices, it would be logical to assume all the bad news and then some has already been beaten into these companies. The market is irrational and typically overreacts in extreme measures. When cooler heads prevail, these valuations should respond accordingly.

Zero debt is king: They say cash is king, but having no debt on your balance sheet is also regal-like. It gives companies the option to raise cash through borrowing if an attractive opportunity presents itself (bankers always want to lend to those who do not need it) and the freedom from the nagging bite of the interest expense associated with debt service. The BFF components free of debt are: BRID, IPSU,and WINN.

Bottom line: It’s been hard to stomach the effects of a portfolio in free fall status. I am tempted to buy more, but the famous line, “don’t throw good money after bad”, keeps pounding in my head. I thought these companies were good bargains at twice the price, but the market has the tendency to humble you real quick. I really thought I could outsmart the market, yet instead the market has picked my pocket and is laughing hysterically at me and all the other suckers out there who thought they had the world by the tail.

I realize the market will probably continue to ratchet down with occasional blips to the upside, but a pattern of lower lows and lower highs will likely prevail. A trip down to a 5000 Dow could transform into a bull trap –There are many at that point, who would rush in, thinking a bottom has been reached, only to be met by a further demise, as longs use the temporary spike as a selling opportunity and shorts sell to open additional positions. The point is, buyers at the 5000 level could see the rug pulled out from under them.

Could 2000 be the bottom? I have no clue, and more than likely, none of us really know where this damn thing is heading. What can we do about this? (1) Go short on high PE stocks (I realize there are few left-but try anyway). (2) Buy gold. (3) Buy high relative strength stocks - try for stocks paying a nice dividend. (4) Sit back and relax, and when the market and economy finally begin to recover, go full speed ahead and bet the farm, because the huge amount of cash sitting on the sidelines will act akin to the release of a giant coiled spring, unleashing an unprecedented amount of energy to feed the upside.

Hot Commodities

2009-03-09T19:49:00.000-07:00

A few years ago, Tom Fernandes was working as an equities trading and analyst in New York. One day, he happened to read Jim Roger's book, Hot Commodities, and it struck a chord.

"As soon as I put down the book, I turned to my wife and said, 'I've got to get into commodities,'" says Fernandes.

On a trip to Atlanta, he met up with Ashmead Pringle, the founder of Grain Services Corporation and an expert in commodity futures. He eventually took a job with Pringle, and they have worked together on a variety of projects, including launching the GreenHaven Continuous Commodity ETF (NYSE Arca: GCC).

He spoke with HardAssetsInvestor.com about the outlook for commodities.

HardAssetsInvestor.com [HAI]: Given the huge volatility in commodity markets over the past year, what do you say to an investor who's wondering if they should make an allocation to commodities in their portfolio?

Tom Fernandes, director, GreenHaven Commodity Services (Fernandes): There are probably a few reasons to own a commodity index product. One of those reasons is the possibility for inflation or unanticipated inflation, which could wreak havoc on your purchasing power over both the short and long run. I know a lot of investors are looking at their equity portfolios right now and seeing that they have been flat or down over the past 10-20 years. The dollar is off about 40% over that time, and that hits home. They're not keeping up with inflation.

I think equities are a core holding for most portfolios. But over both the long term, and more specifically over the past 5-10 years, having something that's less correlated with equities and that is positively correlated with inflation would have made a lot of sense. Yes, commodities are down: the product I manage, the GreenHaven Continuous Commodity ETF (NYSE Arca: GCC), is down about 35%; the DJ-AIG Commodity Index is down about 45%, and the S&P GSCI is down more than that. But if you have a long enough holding period [the benefits reveal themselves].

HAI: But what about an investor who's looking at this terrible economy and thinking, there's no demand for anything right now. How can commodities possibly be a good idea?

Fernandes: It's an interesting question. There's a Yale study that's often cited for justifying commodity investments. It shows an interesting thing about commodities and the business cycle.

If you go back from 1959 to 2004, the overall inflation using the Consumer Price Index was about 4.2%. In an expansionary business cycle it was about 4%, and in a recessionary business cycle it was about 6%.

In other words, when we're in a recession, inflation using CPI has been 20-50% higher than during expansions. It's a little counterintuitive, but it makes sense in one way. We've seen this before: One of the ways you get out of a recession is with some inflation. That may be caused by central banks printing money, which you're certainly seeing now. And it's showed up historically in the data. It will be up to the investor as to whether they think commodities will reflect a positive performance compared to other things in this kind of environment.

HAI: Is there any one piece of the commodities market that looks better than the others?

Fernandes: When you go through and break down commodity sectors over early and late recessionary periods, you notice some interesting trends. I don't think anyone can come out publicly and say we're in an early or late recession, but the Yale study shows that in early recessions, energy products have done pretty well. In fact, it's entirely possible that many recessions are actually brought on by high input costs from the energy. In each recession that has occurred from 1959 to 2004, we saw high energy prices heading into the early parts of the recession.

In a late recession, most but not all energy gains are given away. Historically, crude oil total returns are up about 30% in an early recession, and then give back about 26% of those gains in a late recession.

The ags perform differently. Corn is typically down 4% in an early recession, but it's up 9% annually in a late recession and up 14% in a late expansion. I won't go through all the commodities, but you find some interesting divergences that have happened over many, many business cycles. Sugar typically does really well in an early recession, rising 54%, and it doesn't give up those gains in late recessions, when it rises 24%.

We don't think you can take these ideas to the bank and assume they will happen. But we do think that it's fair to say that commodities like copper and cocoa have a low correlation to each other, and that the business cycle trends that influenced them in the past are likely to affect them in the future.

HAI: Are there any outside-the-box developments that investors should be keeping an eye on?

Fernandes: Well, we're pretty deeply involved in grains from the physical side of the market. And one of the things that we've been thinking about in grains, which doesn't necessarily get followed by the general investing public, is the possibility of macro global developments being a shock to the grain market. And we happen to think that there's more risk to the upside than the downside if a shock occurs.

HAI: Like what?

Fernandes: The only downside shock we can think of is a bird flu pandemic. A bird flu pandemic, which could happen, would be terrible news for grains, as it would directly impact demand.

But a more realistic probability from a macro perspective is what you're seeing in Argentina. Argentina is the No. 3 supplier of corn to the world, and it's in the process of nationalizing its grain business. At the same time you have China, the largest swing consumer in terms of protein consumption per capita, building stockpiles of food and taking bulks shipments of food. So we think that the grains have some macro and geopolitical forces at play that could really impact them to the upside.

We've seen this happen before with governments hoarding food. Eighteen months ago, Korea was buying much of its corn from China. China made a decision it was not going to export corn anymore, and Korea had to find another producer, which was the U.S. and Argentina. That pushed up prices here.

HAI: So you're bullish on grains?

Fernandes: Yes. And the other thing we've been thinking about grains recently is that they're one of the best ways to play water. About 75% of the world's fresh water gets used for ag production. We've seen a lot of investor interest in the water ETFs: the funds that track water utilities and water technology companies. And we agree that water is an important investment theme.

But we think grain may make a good proxy for water. If the cost of accessing water goes higher, it directly feeds into the cost of agriculture. If you happen to be bullish on water, tilting to agriculture makes sense.

Time to Buy China, Copper, the Canadian Dollar and Oil

2009-03-09T17:59:00.001-07:00

My last article featured continued caution on equities of all stripes, given the free fall in equity markets world wide for the past year or so. We've all been looking for "the bottom" or at least a tradeable bottom. Patience and cash has been well rewarded, and the US Dollar and US Treasuries have enjoyed striking rallies within the past year as equities both domestic and abroad have fallen historic amounts.

We have noted a recent gradual reversal of this flight to safety, as US interest rates have begun slowly upticking, gold has fallen 10% recently, and certain stock markets appear to have stabilized at lower levels, such as the Chinese market. Other markets such as those in Japan, the US, and many other Western Countries have continued to decline and sink to lows not seen in over a decade.

Certain disconnects seem to be emerging which need a catalyst to spark upward price movements. One clear catalyst this week has been the Chinese Government committing to further fiscal stimulus to stem the slowing of their domestic economy, regardless of export slowdowns to the weakened Western economies.

Indeed, word of such a new stimulus in the works Tuesday night sparked a huge 10% rally in the Shanghai Stock market, in oil, in copper, and lesser rallies in stock markets world wide today. The big winners were those companies and commodities most likely to benefit from increased Chinese demand: iron ore miners like BHP, and RIO, copper miners like FCX, oil and ETFs such as USO, and stock markets such as those in Brazil (EWZ), China (FXI), other BRIC countries, and other resource rich countries like Canada (EWC) and Australia (EWA).

The US Markets' reaction was more muted, weighed down by financial concerns and stocks that continue to deteriorate, and a lack of confidence in the current administration to stop making things worse with policies antithetical to the very investor class needed to resume spending and investment to stimulate US economic growth. Although I day traded SPY for a small gain given the highly oversold nature of the US equity markets, I felt no confidence in making it even an over night holding.

On the other hand, there is data to suggest copper inventories have been falling, as have oil inventories, which could be supportive of their prices, companies which produce them, and countries and currencies dependent on stable or rising commodity prices.

Therefore, yesterday I went long FCX, FXI, FXC, and USO. There are clear sell-stop levels on the charts that would indicate such new trades were in error. Other stocks I'm interested in include BHP, PCU, XLE, EWA, EWC, IFN, and especially EWZ. All are either commodity stocks or countries rich in commodities. I'm also interested in the Australian dollar FXA at these levels, although I'm concerned about its banking problems not shared by Canada or China.

Other than being oversold, it's hard to make the case for US equities in general given the overall state of the US economy, the lack of confidence in the US administration, and the lack of a cohesive plan to stabilize the banking sector.

I happened to watch Jim Rogers on Asia's Squawk Box on CNBC last night and he is very bullish on agriculture in the years to come. This keeps me looking at the various agriculture ETFs such as DBA, and companies such as MOS, etc.

Disclosure: Long FXI, FCX, FXC, USO. No shorts.

Month of Fundays - Excellent Tips on Marathon training

2009-03-09T17:47:00.001-07:00

http://www.runnersworld.co.uk/news/printablearticle.asp?sp=&v=1&UAN=3903
Month Of Fundays

06/03/09

If you're running a marathon this spring, you're about to enter the most critical – and difficult – four weeks of training, when 1) your weekly mileage is at its peak; 2) your motivation may be flagging; and 3) you're most likely to get sidelined by an injury. So when the going gets tough, it's time to train intelligently.

Walking the tightrope. That's how elite runners describe their 120-mile weeks, when they put their bodies on the line day after day. Of course, you're probably not up on a tightrope yet, but any time you train for a race, your mileage goes up. At first, the increases seem small. Then they become larger and larger. Then you hit the Monster Month – the four weeks of heaviest training that come after the build-up phase that boosts your fitness, and before the pre-race taper that lets you recharge for the big event.

Let's assume you're in decent shape after increasing your training through the early winter. To thrive during your Monster Month, it's more important than ever to pay attention to the details of staying fit, focused, and balanced. You have the most to lose, but also the most to gain. So make sure you gain every advantage you can.

Boost your fitness

Don't overtrain
Your body will tell you when you're training too much – a common pitfall during this critical high-mileage, high-intensity period – but you have to listen. Some signs are obvious, such as fatigue, catching a cold, or muscle soreness that lingers for several days. Others are subtle: you're irritable, you're feeling unmotivated, or you aren't sleeping that well. The cure-all is rest. Don't run for a day or two, and when you start up again, stick to easy runs until the bothersome signs disappear.
Treat your feet
Those beefy, well-cushioned shoes you wear on longer runs do absorb road shock and reduce injury risk, but at this point in your training you're looking to maximise fitness gains. So consider wearing a lighter pair of trainers for speed sessions and on shorter runs when you're going faster. Lighter shoes will help you run even faster than you expected in your speed sessions, and that will boost your confidence for the big race ahead. You can wear these shoes in the race, too, after breaking them in.

Don't play catch-up
If something unexpected interrupts your training programme, don't try to catch up by lengthening your long runs and cramming hard sessions closer together. Especially not when you're in the Monster Month. Trying to make up for lost time is never a good idea. Most enforced training breaks are caused by something that leaves you in a weakened condition – often an illness or an injury – so the worst thing you can do is train harder than usual the minute you resume training. Do that, and you're asking for a relapse.

Train by time, not distance
When you train by time, you don't have to measure a route, and you aren't "penalised" for wind, hills, or trails. (Whether you run six miles on hilly trails or eight miles on flat roads, if they each take you an hour and your effort is the same, they have equal value.) This is especially important on your longest runs, which you'll be doing during this big training month. Some slower marathon runners think they need to do a 20-miler, which could take them four hours or more, but you shouldn't do long runs that exceed three and a half hours, because they are too debilitating physically. The only time when it's better to train by distance is when you're doing speedwork on the track.

Do a dress rehearsal
Treat one of your longest runs – preferably the last long one you do before tapering for your big race – as a race simulation. The same would apply whether it's an eight-miler in preparation for a 10K race or a 20-miler in the run up to London. Keep the pace comfortably slow, but do everything else as if it's race day. Run at the same time of day and on similar terrain – even on the course itself if that's practical. Wear the running shoes and kit you plan to race in and mimic the eating and drinking plan that you aim to follow before and during the race. This physical and mental rehearsal can reveal a problem that you can correct, and will make the race itself seem less daunting. If you're aiming for the Flora London Marathon try to run one of the big spring half-marathons as preparation for the race: they are the closest approximation to the kind of runner congestion you can expect on April 26.

Cross out cross-training
Or at least cut back on it during this month of higher-mileage running. Lighten up on the weight-training, too. Cycling, swimming, and weight lifting are great most of the year, as part of low-key training months when your main goals are general fitness and injury prevention, but the heavy training month before a big race needs to be a month of living a little dangerously. This means running more and cross-training less, because as you approach your goal race, it's all about the running.

Stay healthy

Freeze the pain
When you're training hardest, soreness, aches, and pains are unavoidable – and if you ignore them, they can lead to an injury. When they occur, back off a little on your training, and ice the afflicted area several times a day for at least 48 hours to increase blood flow. This promotes healing by reducing swelling, inflammation, and destructive enzyme activity. Icing can also control pain and decrease muscle tightening, cramping, and spasms. Apply a frozen gel pack for 10 to 20 minutes. Two other choices: massage the area with ice that's frozen in a paper cup or apply a bag of crushed ice for 20 to 30 minutes.
It's all you knead
Regular massages are most valuable during your heaviest training months because they can hasten your recovery from training and help keep you injury-free. The best time for a massage is the day after your long run or after a speed session, when those kinks need to be kneaded the most. A good massage therapist will zero in on your tightest muscles.

Eat right

Boost your immunity
You'll be especially susceptible to colds and flu during the Monster Month, so reinforce your immune defences with foods rich in antioxidants and glutamine. "Beans and raw spinach are good sources for both," says RW Nutrition Editor Anita Bean. "Most brightly coloured fruits and vegetables – especially blueberries – are also rich in antioxidants. Glutamine-rich sources include beef, chicken, fish, dairy, and cabbage. On days when your diet isn't optimal, pop a multivitamin as insurance. Also, it's important for your immune system to take in carbohydrates before, during, and after runs of an hour or more."
Liquid or solid?
Energy bars, gels, and drinks all supply much-needed carbohydrates before, during, and after those long runs you'll be doing this month, but which is best? "The harder you're running, the more blood is diverted from the stomach to the working muscles," says Bean, "so you don't want to fill it with anything solid. Energy bars and gels need to be broken down in the stomach, but drinks don't." Therefore, stick to sports drinks unless it's after running or on easy-paced runs or run/walks.

Try (fat-free) milk
Consuming more dairy products than usual during heavy training is an excellent idea because dairy contains carbohydrates (12 grams in a 225ml glass of milk), protein (eight grams), and bone-fortifying calcium (300mg). You can limit the fat by favouring low-fat or fat-free yogurt, cottage cheese, and milk rather than higher-fat cheeses, cream cheese, and whole milk.
Motivation

Live in the present
How do you stay motivated through a hard training month when that big race is still a way off? "Focus a portion of your mental energy on the present," says Dr Alan Smith, a marathon runner and sports psychologist. "Short-term and even daily goals are beneficial because they keep you focused on the here-and-now and build confidence as you achieve them. That way, the big race is simply the next step on the ladder."
Build on success
Some runners become so tired during their Monster Month that they begin to doubt their chances of finishing the full 26.2. They fear that they're becoming more tired instead of stronger. What if the programme backfires? "There's no guarantee of success," says Smith, "but it's certain that you won't have a pay-off without the hard work. Training is essential not only for the obvious physiological reasons, but also to build confidence – and your hardest training will give you the most confidence." So, even when you're tired, remember that you're still on target, and you will feel better when you reach your marathon taper.

Beat boredom
Let's face it: long runs aren't always as exciting as an Arsenal v Tottenham derby. To maintain your long-run motivation, you need to try different tricks. For example, don't run solo, run with others. If you can't find a running friend to join you for even half the distance, jump into a weekend group run organised by a running club (some of these are listed in the race diary at the back of this magazine). If you must run your long runs alone, wear a music headset to keep you humming down the road (just be safe and aware of your surroundings). Programme your MP3 player to play laid-back music for most of the way to restrain your pace, then up-tempo hits in the last hour to propel you home when you need the lift.

This is just a test
Let's say you run a race as a test of fitness in the midst of your heavy training month, such as a half-marathon as a marathon tune-up. Let's say it's a disaster, well off your goal time. Don't panic. First, it might have just been a bad day. Second, during high-mileage training, you shouldn't expect a good performance anyway. What matters most is the bigger race coming up, when you'll be better rested after tapering.

Just do it
It's more important than ever during a high-mileage month that you don't skip scheduled runs. Here's how to nail them all: first, lay out your kit at your bedside the night before a morning run so that you've invested some time in heading out. Second, do afternoon runs from some point between work and home – dress at the office or gym and run from there – rather than going home first (where there are too many temptations to distract you). Third, schedule as many runs as possible with friends, so that you'll feel guilty if you stand them up.

Be balanced

Don't lose your job
If you're struggling at work because of the heavy training load, especially on Monday mornings after long Sunday runs, there are several options. First, schedule long runs on Saturdays so that you have all of Sunday to recover. Second, go to bed earlier every night – or sleep later – because heavy training requires more sleep. If you're still sluggish, back off on the mileage because you may be overtraining. Or maybe it's just that wacky office prankster slipping decaf into the coffee maker again.
Justify it to others
Feeling guilty that your marathon training is cutting into time with family and friends? Explain to them the reasons for doing it. Tell them why your fitness and athletic goals are worthwhile. Invite them to join you on your easy runs, too – they can bike alongside you – to bring them into your world and help them understand it and always give them advance notice of your running plans if it affects their plans. Younger children, however, will have a harder time understanding your running, so try hardest not to miss their functions.

Justify it to yourself
Of course, you will have to make sacrifices, but all this training – setting goals, conquering fear and overcoming obstacles – is also excellent training for life challenges that lie ahead. Successfully making it through a 20-mile run or a high-mileage week will make it easier to handle the tough stuff in the real world, whether it's managing employees, raising children, taking care of elderly parents, or dealing with illness.

Monster maxims

During heavy training there should be a big difference between your easy and hard training paces. Be sure you run truly easy on easy days so you'll have a spring in your step on the hard days.

On long runs, try a few light accelerations over the last 20 per cent of the distance. By picking up the pace slightly for one to three minutes at a time, you'll keep your legs fresher.

Share your big-race goals with training partners. This will let you feed off their encouragement as you train hard for the big day. Better yet, get them to come to the race and cheer you on.

Don't always run when it's cool out. Mix in some afternoon runs when it's warmer. If you've trained when it's in the 70s, the 60s on race day will seem cool.
Beginner Tactics

If you're fairly new to running or higher-mileage training – maybe you're attempting your longest race ever this spring – here are some essentials to keep in mind.

Shorten your stride When it comes to form, the most common mistake distance runners make, especially beginners, is they overstride. This tires you out faster and increases injury risk, because you're jarring your body more. A good rule of thumb is to aim for about 180 footfalls per minute while running.

Spice it up It's easy to get into a training rut when a big race is coming up because you're afraid to upset a routine that seems to work for you, but a good routine can easily become too rigid, leading to burn-out and loss of motivation. So vary the route, terrain, scenery, distance, pace, and training partners whenever you can.

Don't worry Long runs – whether they're 10-milers while training for a half-marathon or 20-milers before a marathon – can be so exhausting, you may wonder how you'll ever make it through the even longer race distance. Relax. The excitement of race day will help carry you home. Veteran runners call this "race-day magic". Before too long, you'll be explaining it to all your non-running friends.

Make the time How do you find time for high-mileage training and still have a life? First, accept that sacrifices are necessary. Second, smooth the path in advance of your Monster Month by postponing family trips, intensive work, home projects, and so on.

Fresh pessimism sweeps over credit sector

2009-03-09T17:35:00.000-07:00

Fresh pessimism sweeps over credit sector
By Michael Mackenzie and Aline van Duyn in New York
Published: March 9 2009 19:46 | Last updated: March 9 2009 19:46

Credit market indicators – barometers of stress since the financial crisis began 18 months ago – are once more flashing red.

Heightened concern over the fate of US carmakers and worries about escalating losses at banks and financial institutions and at General Electric, the largest debt issuer in capital markets, are creating a grim mood.

“There has been a strong repricing of credit risk as there is a panic almost about the financial sector,” Brian Yelvington, strategist at Creditsights, says.

“So far, most of the pain of the problems at financial institutions is being taken by shareholders and taxpayers, but there are real concerns that the problems will be so large that the pain will shift to holders of bonds and other securities.”

Debt from financial institutions – including some of the biggest banks such as Citigroup and Bank of America – is widely held by investors ranging from pension funds to insurance companies.

Concerns about the value of these holdings have pushed risk premiums higher across the board.

“We are in another round of the credit crunch where the intensity is spreading,” Mary Miller, director of fixed income at T. Rowe Price, says.

“There is a lot of government support still to come, but the details are uncertain.

“This uncertainty is worrying investors, because they do not know if they will or will not be included in the government support.”

In the credit sphere, high yield debt has been hit hardest as companies at risk of bankruptcy are punished.

Delicate balance of bonds, equities and derivatives
The rise in the cost of default protection for General Electric Capital highlights how tightly credit derivatives are linked to equities and bonds, writes Nicole Bullock in New York.
Credit default swaps on the financing arm of General Electric last week jumped to distressed levels. GECC CDS implies a rating 14 notches below its triple A, says Moody’s Capital Markets Research.
General Electric stock collapsed on fears that the top rating was in jeopardy. That raises the threat of collateral calls on GECC’s financial contracts – a scenario that crushed AIG.
“The basic idea is that as the equity price falls, then the asset value of the firm drops below the value of the liabilities and boom: bankruptcy,” says Tim Backshall, chief strategist at Credit Derivatives Research.
Mr Backshall says it is unclear which market led the moves.
“Over the past six months, equity has actually been the leader of weakness in the capital structure,” he says.
Adding to the pressure, ratings concerns led to hedging of collateralised debt obligations, whose top tranches are full of GECC bonds.
At higher prices, CDS become an uneconomical hedge, forcing dealers to sell equity or buy puts, closing the negative feedback loop.
Fund data for the week ending last Wednesday show that US investors pulled $911m from high yield bond funds, making it their worst week since early in the fourth quarter of 2008, according to EPFR Global.

The high yield credit derivative index for US companies set a series of record wides last week, driven by worries over carmakers and a forecast by Moody’s Investors Service of a 14 per cent default rate by the fourth quarter.

The Markit iTraxx Crossover index of mostly sub-investment grade European credits hit a record wide of 1,170 basis points.

US high yield debt has slipped 3.3 per cent so far this month, reversing early gains for the year, according to Barclays Capital.

High yield in Europe has fallen 5.1 per cent in March, reducing its gain for the year to 3.5 per cent.

Not even investment grade is escaping the selling pressure. The US CDX index – which tracks 125 investment grade credits – is trading at a risk premium of 250 basis points over US Treasuries, its widest level since last December.

This comes at a time when some investors have shunned equities and plumped for high grade credit exposure. The moves in credit come, however, as equity values continue to tumble.

The deteriorating mood follows the Federal Reserve’s unveiling of a credit facility designed to restore securitised borrowing for credit cards, car and student loans.

The inability of the Fed’s term asset-backed securities loan facility to boost confidence in banks and for asset-backed securities is adding to pressure on financials and credit markets.

“The Fed’s delayed but still quite welcome debut of the initial version of the Talf programme to try to restart consumer ABS markets elicited almost no reaction from investors, a seemingly unduly pessimistic attitude about the potential for this programme to help unclog bank balance sheets,” Ted Wieseman, economist at Morgan Stanley, says.

In spite of the Fed’s various liquidity programmnes, the money market’s benchmark rate, the three-month dollar London Interbank Offered Rate, has been rising.

Libor set a low of 1.08 per cent in mid-January and has been creeping up. The move gathered pace last week, when Libor rose 5 basis points to 1.31 per cent.

The upward pressure comes amid uncertainty about the banking system, with government “stress tests” looming in April and banks having to contribute more money to the Federal Deposit Insurance Corporation.

The end of March also marks the conclusion of the first quarter, with banks facing further writedowns from deteriorating credit and mortgage exposure.

Forward measures of Libor show the market expects no alleviation in stresses in 2009.

“This key gauge of bank balance sheet pressures is thus showing that investors see no prospect for improvement this year, a very pessimistic outlook for any medium-term easing in the credit crunch,” Mr Wieseman says.

The renewed pressure in Libor is weighing on interest rate swap spreads, which reflect the credit quality of banks in the inter-dealer derivatives market.

The two-year swap spread is back above 80 basis points, its widest level over the two-year Treasury yield since mid-December.

A short history of modern finance

2009-02-25T02:15:00.000-08:00

Instapaper

Oct 16th 2008
From The Economist print edition
The crash has been blamed on cheap money, Asian savings and greedy bankers. For many people, deregulation is the prime suspect

Illustration by Brett Ryder

THE autumn of 2008 marks the end of an era. After a generation of standing ever further back from the business of finance, governments have been forced to step in to rescue banking systems and the markets. In America, the bulwark of free enterprise, and in Britain, the pioneer of privatisation, financial firms have had to accept rescue and part-ownership by the state. As well as partial nationalisation, the price will doubtless be stricter regulation of the financial industry. To invert Karl Marx, investment bankers may have nothing to gain but their chains.

The idea that the markets have ever been completely unregulated is a myth: just ask any firm that has to deal with the Securities and Exchange Commission (SEC) in America or its British equivalent, the Financial Services Authority (FSA). And cheap money and Asian savings also played a starring role in the credit boom. But the intellectual tide of the past 30 years has unquestionably been in favour of the primacy of markets and against regulation. Why was that so?

Each step on the long deregulatory road seemed wise at the time and was usually the answer to some flaw in the system. The Anglo-Saxon economies may have led the way but continental Europe and Japan eventually followed (after a lot of grumbling) in their path.

It all began with floating currencies. In 1971 Richard Nixon sought to solve the mounting crisis of a large trade deficit and a costly war in Vietnam by suspending the dollar’s convertibility into gold. In effect, that put an end to the Bretton Woods system of fixed exchange rates which had been created at the end of the second world war. Under Bretton Woods, capital could not flow freely from one country to another because of exchange controls. As one example, Britons heading abroad on their annual holidays in the late 1960s could take just £50 (then $120) with them. Investing abroad was expensive, so pension funds kept their money at home.

Once currencies could float, the world changed. Companies with costs in one currency and revenues in another needed to hedge exchange-rate risk. In 1972 a former lawyer named Leo Melamed was clever enough to see a business in this and launched currency futures on the Chicago Mercantile Exchange. Futures in commodities had existed for more than a century, enabling farmers to insure themselves against lower crop prices. But Mr Melamed saw that financial futures would one day be far larger than the commodities market. Today’s complex derivatives are direct descendants of those early currency trades.

Perhaps it was no coincidence that Chicago was also the centre of free-market economics. Led by Milton Friedman, its professors argued that Keynesian economics, with its emphasis on government intervention, had failed and that markets would be better at allocating capital than bureaucrats. After the economic turmoil of the 1970s, the Chicago school found a willing audience in Ronald Reagan and Margaret Thatcher, who were elected at the turn of the decade. The duo believed that freer markets would bring economic gains and that they would solidify popular support for the conservative cause. A nation of property-owners would be resistant to higher taxes and to left-wing attacks on business. Liberalised markets made it easier for homebuyers to get mortgages as credit controls were abandoned and more lenders entered the home-loan market.

Another consequence of a system of floating exchange rates was that capital controls were not strictly necessary. Continental European governments still feared the destabilising effect of hot money flows and created the European Monetary System in response. But Reagan and Mrs (now Lady) Thatcher took the plunge and abolished controls. The initial effects were mixed, with sharp appreciations of the dollar and pound causing problems for the two countries’ exporters and exacerbating the recession of the early 1980s.

But the result was that institutions, such as insurance companies and pension funds, could move money across borders. In Britain that presented a challenge to the stockbrokers and marketmakers (known as jobbers) who had controlled share trading. Big investors complained that the brokers charged too much under an anti-competitive system of fixed commissions. At the same time, big international fund-managers found that the tiny jobbing firms had too little capital to handle their trades.

The Big Bang of 1986 abolished the distinction between brokers and jobbers and allowed foreign firms, with more capital, into the market. These firms could deal more cheaply and in greater size. New York had introduced a similar reform in 1975; in America’s more developed domestic market, institutional investors had had the clout to demand the change long before their British counterparts.

These reforms had further consequences. By slashing commissions, they contributed to the long-term decline of broking as a source of revenue. The effect was disguised for a while by a higher volume of transactions. But the broker-dealers increasingly had to commit their own capital to deals. In turn, this made trading on their own account a potentially attractive source of revenue.

Over time, that changed the structure of the industry. Investment (or merchant) banks had traditionally been slim businesses, living off the wits of their employees and their ability to earn fees from advice. But the need for capital led them either to abandon their partnership structure and raise money on the stockmarket or to join up with commercial banks. In turn, that required the dilution and eventually, in 1999, the abolition of the old Glass-Steagall act, devised in the Depression to separate American commercial and investment banking.

Commercial banks were keen to move the other way. The plain business of corporate lending was highly competitive and retail banking required expensive branch networks. But strong balance-sheets gave commercial banks the chance to muscle investment banks out of the underwriting of securities. Investment banks responded by getting bigger.

Expansion and diversification took place against a remarkably favourable background. After the Federal Reserve, then chaired by Paul Volcker, broke the back of inflation in the early 1980s, asset prices (property, bonds, shares) rose for much of the next two decades. Trading in, or lending against, such assets was very profitable. And during the “Great Moderation” recessions were short, limiting the damage done to banks’ balance-sheets by bad debts. As the financial industry prospered, its share of the American stockmarket climbed from 5.2% in 1980 to 23.5% last year (see chart 1).
Risky business

As banks’ businesses became broader, they also became more complex. With the help of academics, financiers started to unpick the various components of risk and trade them separately.

Again, Chicago played its part. Option contracts were known in ancient history but the 1970s saw an explosion in their use. Two academics who had studied, or taught, at the University of Chicago, Fischer Black and Myron Scholes, developed a theory of option pricing. And the Chicago Board Options Exchange was set up in 1973 as a forum for trading.

Whereas futures contracts lock in the participants to buy or sell an asset, an option is more like insurance. The buyer pays a premium for the right to exercise his option should prices move in a set direction. If prices do not move that way, the option lapses and the buyer only loses the premium. The Black-Scholes formula shows that an option’s value depends on the volatility of the underlying assets. The more the price moves, the more likely the option is to be exercised. Calculating that volatility was made a lot easier by the growing power of computers.

The next great development in risk management was the swap. Bond markets had been domestic, with buyers focusing on issuers from their home markets. That created the potential for arbitrage, issuing bonds in one currency and swapping them for another, creating lower interest rates for both borrowers.

It was a short step from currency swaps to interest-rate swaps. Borrowers on floating (variable) rates could swap with those on a fixed rate. This allowed company finance directors (and speculators) to change their risk exposure depending on their view of where rates would go. Rather than pay each other’s interest costs directly, the payments would be netted out.

The final stage emerged only in the past decade. A credit-default swap (CDS) allows investors to separate the risk of interest-rate movements from the risk that a borrower will not repay. For a premium, one party to a CDS can insure against default. From almost nothing just a few years ago, CDSs grew at an explosive rate until recently (see chart 2).

Futures, options and swaps all have the same characteristic: a small initial position can lead to a much larger exposure. Futures contracts are bought with only a small deposit or margin; option sellers have to cover buyers’ losses, which may be many times the value of the premium; the net exposure of a swap counterparty may be smaller but the gross position will be huge, a problem if the counterparty defaults.

This made it hard for regulators to keep track of a firm’s exposure. For years, therefore, they concentrated on improving the infrastructure of the market, making sure that deals were well documented or settled through a central clearing house (something yet to be achieved for CDSs).

The biggest hiccup in the growth of the derivatives markets came after the 1987 stockmarket crash, when a technique known as portfolio insurance took a lot of the blame. This involved investors selling stock-index futures to protect themselves from falls in the value of their portfolios. The problem was that the two markets acted on each other; as the futures price fell, so did the cash value of shares, forcing institutions to sell more futures and so on. That prompted the American authorities to introduce “circuit breakers”, limiting the use of portfolio insurance at difficult times.

Derivatives caused more embarrassment in the 1990s as naive local authorities, such as Orange County in California, and corporate treasury departments lost fortunes in contracts they did not understand. But gradually the authorities learnt to love these markets; Frankfurt, for example, competed hard to win trading in German government-bond futures away from London. The theory was that, by allowing business and investors to spread risk, both markets and economies would become more robust.

Alan Greenspan, the chairman of the Fed from 1987 to 2006, was in the vanguard of this view. In his book, “The Age of Turbulence” (2007), he welcomed the growth of CDSs, arguing: “Being able to profit from the loan transaction but transfer credit risk is a boon to banks and other financial intermediaries which, in order to make an adequate rate of return on equity, have to heavily leverage their balance sheets by accepting deposit obligations and/or incurring debt. A market vehicle for transferring risk away from these highly leveraged loan originators can be critical for economic stability, especially in a global environment.”

Securitisation, which has been at the centre of the current crisis, is another child of the 1970s. It involves bundling loans into packages that are then sold to outside investors. The first big market was for American mortgages. When homeowners pay their monthly payments, these are collected by the servicing agent and passed through to investors as interest payments on their bonds.

Again, this business was encouraged by the authorities as a means of spreading risk. Everybody appeared to win. Banks earned fees for originating loans without the burden of holding them on their balance-sheets (which would have restricted their ability to lend to others). Investors got assets that yielded more than government bonds and represented claims on a diversified group of borrowers. No wonder securitisation grew so fast (see chart 3).

These asset-backed securities became ever more complex. Securitisation eventually gave rise to collateralised debt obligations, sophisticated instruments that bundled together packages of different bonds and then sliced them into tranches according to investors’ appetite for risk. The opacity of these products has caused no end of trouble in the past 18 months.

More fundamentally, securitisation opened a new route to growth for banks. No longer were commercial banks dependent on the slow, costly business of attracting retail deposits. Securitisation allowed them to borrow in the markets. Few imagined that the markets would not be open at all times. In 2007 Northern Rock, a British mortgage lender, was the first spectacular casualty of this false assumption; many more banks have been caught out in 2008.
Asleep at the wheel?

While all this was happening, regulators were not wholly passive. They had to deal with crises such as the failures of Drexel Burnham Lambert, which dominated the junk-bond market, and Baring Brothers, a British bank brought low by a rogue trader. But these were regarded as individual instances of mismanagement or fraud, rather than as evidence of a systemic problem. Even the American savings-and-loan crisis, an early deregulation disaster, was tidied up with the help of a bail-out plan and easy monetary policy, and dismissed as an aberration.

Rather than question the principle of deregulation, some governments redesigned their regulatory structures. Britain devised the FSA in 1997 (even taking away banking regulation from the Bank of England) in a conscious attempt to create a single supervisory body. In America the SEC shares authority with the Commodities Futures Trading Commission, the Federal Deposit Insurance Corporation, state insurance commissioners and so on.

The authorities did make a more fundamental attempt to regulate the banks with the Basel accord. The first version of this, in 1988, established minimum capital standards. Banks have always been a weak link in the financial system because of the mismatch between their assets and liabilities. The assets are usually long-term loans to companies and consumers. The liabilities are deposits by consumers and investors that can be withdrawn overnight. A bank run is hard to resist, since a bank cannot realise its assets quickly; worse still, doing so—by calling in loans—may cause economic havoc by prompting bankruptcies and job losses.

The Basel accord was designed to deal with a different problem: that big borrowers might default. It required banks to set aside capital against such contingencies. Because this is expensive, banks looked for ways around the rules by shifting assets off their balance-sheets. Securitisation was one method. The structured investment vehicles that held many subprime-mortgage assets were another. And a third was to cut the risk of borrowers defaulting, using CDSs with insurers like American International Group. When the markets collapsed, these assets threatened to come back onto the balance-sheets, a prime cause of today’s problems.
Illustration by Brett Ryder

It would be a mistake to argue that, had politicians rather than bankers been in charge, policy would have been more prudent. Indeed, politicians encouraged banks to make riskier loans. This was particularly true in America, where a series of measures, starting with the Community Reinvestment Act of 1977, required banks to meet the credit needs of the “entire community”. In practice, this was social policy: it meant more lending to poor people. Fannie Mae and Freddie Mac, the two government-sponsored giants of the mortgage market, were encouraged to guarantee a wider range of loans in the 1990s.

The share of Americans who owned their homes rose steadily. But more buyers meant higher prices, making loans even less affordable to the poor and requiring even slacker lending standards. The seeds of the subprime crisis were sown, and the new techniques of securitisation allowed banks to make these loans and then offload them quickly.

Initially, the growth of homeownership was seen as a benign effect of deregulation, as was the ability of consumers to borrow on their credit cards, a habit they took to enthusiastically. The authorities largely welcomed this boost to consumer demand. In the 1970s and 1980s, they might have worried about the effect on inflation or the trade deficit. But technological change in the 1990s, and the impact of China and India in the 2000s, kept headline inflation down, while liberalised capital markets and Asian savings made external deficits easy to finance.

In addition, those countries with big financial centres were delighted to have them because of the tax revenues they yielded. That hardly encouraged them to look too closely at the financial industry. Nor did it hurt that political parties in both America and Britain received a lot of contributions from financiers.

Liberalisation happened for many reasons. Often, regulators were simply trying to catch up with the real world—for instance, the rapid development of offshore markets. In addition, deregulation provided things that voters wanted, such as cheap loans. Each financial innovation that came along became the object of speculation that was fuelled by cheap money. Bankers and traders were always one step ahead of the regulators. That is a lesson the latter will have to learn next time.

Amid the crisis of 2008, it is easy to forget that liberalisation had good consequences as well: by making it easier for households and businesses to get credit, deregulation contributed to economic growth. Deregulation may not have been the main cause of the rise in living standards over the last 30 years, but it helped more than it harmed. Will the new, regulated world be as benign?

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Soros - The eurozone needs a government bond market

2009-02-24T23:59:00.000-08:00

FT.com / Comment / Opinion - The eurozone needs a government bond market

The eurozone needs a government bond market

By George Soros

Published: February 18 2009 19:32 | Last updated: February 18 2009 19:32

The euro suffers from certain structural deficiencies; it has a central bank but it does not have a central treasury and the supervision of the banking system is left to national authorities. These defects are increasingly making their influence felt, aggravating the financial crisis.

The process began in earnest after the failure of Lehman Brothers when, on October 12 , the European finance ministers found it necessary to reassure the public that no other systemically important financial institution would be allowed to fail. In the absence of a central treasury, the task fell to the national authorities. This arrangement created an immediate and severe financial crisis in new European Union member states that have not yet joined the euro and eventually it also heightened tensions within the eurozone.

Most of the credit in the new member states is provided by eurozone banks and most household debt is denominated in foreign currencies. As the eurozone banks sought the protection of their home countries by repatriating their capital, east European currencies and bond markets came under pressure, their economies sagged and the ability of households to service their debts diminished. Banks with large exposure to eastern Europe found their balance sheets impaired.

The capacity of individual member states to protect their banks came into question and the interest rate spread between different government bonds began to widen alarmingly. Moreover, national regulators, in their efforts to protect their banks, were unwittingly engaging in beggar-thy-neighbour policies. All this is contributing to internal tensions.

At the same time, the unfolding financial crisis has convincingly demonstrated the advantages of a common currency. Without it, some members of the eurozone might have found themselves in the same difficulties as the countries of eastern Europe. As it is, Greece is hurting less than Denmark, although its fundamentals are much worse. The euro may be under stress but it is here to stay. The weaker members will certainly cling to it; if there is any danger, it comes from its strongest member, Germany.

Germany is at odds with most of the world in its attitude to the current financial crisis but it is easy to understand why. It has been traumatised by its history during the 1930s when runaway inflation in the Weimar republic led to the rise of Hitler. While the rest of the world recognises that the way to counteract the collapse of credit is by expanding the monetary base, Germany remains opposed to any policy that might carry the seeds of eventual inflation. Moreover, while Germany has been a steadfast supporter of European integration, it is understandably reluctant to become the deep pocket that finances bail-outs in the eurozone.

Yet the situation cries out for institutional reform and Germany would benefit from it just as much as the others. Creating a eurozone government bond market would bring immediate benefits in addition to correcting a structural deficiency. For one thing, it would lend credence to the rescue of the banking system and allow additional support to the newer and more vulnerable members of the EU. For another, it would serve as a financing mechanism for co-ordinated counter-cyclical fiscal policies. Properly structured, it would relieve Germany’s anxiety about other countries picking its pocket.

The eurozone bond and bill markets would complement but not replace the existing government bond markets of individual states. They would be under the control of eurozone finance ministers. The regulation of the financial system would then be put in the hands of the European Central Bank while the task of guaranteeing and, when necessary, rescuing financial institutions would fall to the finance ministers. This would produce a unified and well supported financial system within the eurozone. Even the UK, which is struggling with an oversized and undercapitalised banking system, may be tempted to join.

Eurozone bonds could be used to assist the new EU member countries that do not yet belong to the eurozone. They could also serve to increase the lending capacity of the EU beyond the current mandates of the European Investment Bank and European Bank for Reconstruction and Development. The EU could then finance investment programmes that combine a counter-cyclical function with important European objectives such as an electricity grid, a network of gas and oil pipelines, alternative energy investments and employment-creating public works in Ukraine. All these investments would help break Russia’s stranglehold over Europe. The objection that they would take too long to serve a counter-cyclical purpose can be rejected on the grounds that the recession is also liable to last a long time.

Two thorny issues would need to be resolved – one is the allocation of the debt burden among member states and the other is the relative voting power of the different eurozone finance ministers. The existing precedents, namely the EU’s budget and the composition of the ECB, would be considered unfair and unacceptable by Germany. But many member states will balk at agreeing to a solution that changes the balance of power within the EU. Nevertheless some concessions would have to be made to bring Germany on board. Usually it takes a crisis to bring about a compromise but the crisis is now brewing and the sooner it is resolved the better.

The writer is a founding member of the European Council on Foreign Relations and author of ‘The Crash Of 2008 And What It Means’

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VMware: Touts Private Cloud Computing -- Seeking Alpha

2009-02-24T16:33:00.000-08:00

VMware: Touts Private Cloud Computing -- Seeking Alpha

VMware (VMW) on Tuesday outlined a few more components of its cloud computing strategy as the company aims to shift the playing field as rivals like Red Hat (RHT), Microsoft (MSFT) and Citrix (CTXS) gun for its core virtualization software.

At VMworld Europe, CEO Paul Maritz elaborated on VMware’s cloud computing strategy, which was introduced in 2008 without a lot of detail. This go round, Maritz put a little meat on the concept (statement, Techmeme).

VMware’s aim is to enable private cloud computing and bridge companies to external cloud platforms. Naturally, all of these connecting clouds and data centers will be glued together with virtualization software.

Maritz…

* Demoed VMware’s Virtual Datacenter Operating System (VDC-OS), which will ship its first instance in 2009;
* Outlined extensions of the VDC-OS;
* And noted desktop virtualization and other tools to tie it all together.

Private clouds are likely to have their appeal to the enterprise. For starters, a private cloud computing set-up will allow IT shops to deliver service as they would a utility. IT managers would also get more centralized control and be able to better manage computing environments.

VMware’s effort is notable because it shifts the virtualization conversation. While the hypervisor heads toward commodity-ville VMware is moving upstream. If the company becomes known for using virtualization to enable clouds and future proof networks it won’t matter if the hypervisor is built into everything–for free.

VMware outlined some early companies transforming data centers to mini clouds.

If you zoom out a bit you quickly realize that the turf war between VMware, Microsoft, Red Hat and Citrix isn’t about virtualization as much as it is the future of the operating system. If you believe–and I do–that the virtualization layer will be the future operating system then it’s not hard to see why Red Hat and especially Microsoft are being fast frenemies with a common target: VMware.

The Demise Of Poison Pills? - WSJ.com

2009-02-24T16:07:00.000-08:00

The Demise Of Poison Pills? - WSJ.com

By HEIDI N. MOORE

In the 1980s, mergers-and-acquisitions battles often had corporate raiders facing off against companies wielding shareholder-rights plans designed to ward off hostile-takeover attempts.

But now it seems so-called poison-pill plans are about as popular as the cyanide that inspired the names. There were only 1,206 such defenses in place at the end of 2008 at U.S. publicly traded companies, down from 2,218 in 2001, according to data provider FactSet SharkRepellent. Meantime, hostile offers have accounted for 47% of the number of M&A deals this year, compared with 24% in all of 2008 and 7% in 2004, according to FactSet.

Deal Journal spoke with Ian Hartman, a partner with law firm Dechert LLP, about the state of poison pills.

Deal Journal: Why is the poison pill falling out of favor?

Ian Hartman: Part of what happened over the past four to five years is that you had companies take several approaches to poison pills: not adopt them if they didn't have them; let them expire or actually taking them down; and amending them so that they would expire. Why were companies doing this? One big driver was Institutional Shareholder Services, which is now owned by RiskMetrics. They had a policy that, if a company adopted or renewed a pill that was expiring and the company didn't commit to put it to a shareholder vote within a year, RiskMetrics would recommend withholding support from that company's directors. In addition, RiskMetrics likes to see a qualified offer provision that would put a potential transaction in front of shareholders instead of before the board. The other issue is that shareholders used the ability to put proposals in proxy statements. In the face of that pressure, what a lot of companies decided to do was to be ready so that if they thought a threat was emerging, they would have a pill ready to implement.

DJ: It seems there is a tension between shareholders and boards, as shareholders seek to have the final word while the board wants to vet deals.

Mr. Hartman: Some shareholders would like any and all offers to come through shareholders, but others say that the board is there for a reason, part of which is to look out for shareholders. Of course, you're not seeing dozens of companies adopting those provisions.

Market's Collapse Determining Status of World's Largest Fund of Funds, New York State -- Seeking Alpha

2009-02-24T01:31:00.000-08:00

Market's Collapse Determining Status of World's Largest Fund of Funds, New York State -- Seeking Alpha: "n the wake of the Madoff scandal, it is only a matter of time before the Fund of Funds industry disappears, as investor anger grows at the glaring failure of Fund of Funds' primary responsibility - due diligence. Fund of Funds are currently perceived as worthless middle men between hedge funds and investors, pocketing 1% management fees and 10% incentive fees for arguably doing no work whatsoever.

So as the investment industry contracts and Fund of Funds do all they can to stay around for a few more quarters, it makes sense to take a look at some entities that few have considered: the state pension and retirement funds. Notable among these are the California Public Employees Retirement System (Calpers), The Teachers Retirement System of Texas (TRS), the Oregon Public Employees Retirement System and the granddaddy of them all: The New York State Common Retirement System and the New York State Teachers Retirement System. Which brings us to an interesting point: As the financial system collapses and states' budget deficits skyrocket, the lives of citizens are about to get very ugly as legislators' only options are to cut state employees (i.e. police officers, healthcare workers and educators) and raise taxes through the roof."

Market's Collapse Determining Status of World's Largest Fund of Funds, New York State -- Seeking Alpha

2009-02-24T01:29:00.000-08:00

Market's Collapse Determining Status of World's Largest Fund of Funds, New York State -- Seeking Alpha

n the wake of the Madoff scandal, it is only a matter of time before the Fund of Funds industry disappears, as investor anger grows at the glaring failure of Fund of Funds' primary responsibility - due diligence. Fund of Funds are currently perceived as worthless middle men between hedge funds and investors, pocketing 1% management fees and 10% incentive fees for arguably doing no work whatsoever.

So as the investment industry contracts and Fund of Funds do all they can to stay around for a few more quarters, it makes sense to take a look at some entities that few have considered: the state pension and retirement funds. Notable among these are the California Public Employees Retirement System (Calpers), The Teachers Retirement System of Texas (TRS), the Oregon Public Employees Retirement System and the granddaddy of them all: The New York State Common Retirement System and the New York State Teachers Retirement System. Which brings us to an interesting point: As the financial system collapses and states' budget deficits skyrocket, the lives of citizens are about to get very ugly as legislators' only options are to cut state employees (i.e. police officers, healthcare workers and educators) and raise taxes through the roof.

One need look no further than California which is on the brink of collapse, as absent federal assistance, it will be unable to fund its $42 billion state deficit. New York is in no better position, and David Paterson has had numerous media appearances attempting to warn New Yorkers just how difficult lives in the state are about to become. In the meantime, public workers, current and retired, of troubled states will shortly begin receiving very disturbing news, as their pensions and benefit packages are about to be drastically reduced if not eliminated altogether. The culprit? The falling market.

New York State Retirement System

At the market's peak a little over a year ago, the two principal funds that New York uses to invest retirement money, the New York State Common Retirement System and the New York State Teachers' Retirement System, had equity assets valued at over $120 billion. Since then, the value of assets in these funds has plummeted and is currently at a little under $60 billion, a 50% decrease! This, unfortunately, is the pattern with all other state retirement funds, which have suffered comparable losses over the past year. The top 20 stock positions of the two New York State pension funds are listed below (click to enlarge, holdings are presented on a combined basis). And if the drubbing of financial stocks continues, it is very likely that the value of these top holdings, which have traditionally accounted for about a third of the total funds' values, will likely continue dropping, due to the prominent positions held in both JP Morgan (JPM) and Wells Fargo (WFC).

However, direct investing in stocks does not make the pension funds "Fund of Funds" per se: at most it makes them bad mutual fund-type stockpickers. And state pensioners will have ample opportunity to voice their displeasure with the performance of the funds' Chief Investment Officers, Robert Arnold for the Common Retirement Fund and George Philip for the Teachers Retirement Fund.

What is more curious is an often missed page in the Office Of The State Comptroller's website (link here) in which the New York State Common Retirement Fund discloses its monthly indirect investment in other asset managers, be they private, public equity or real estate focused. Compiling the publicly available data from February 2007 yields some curious results. Turns out in 2007 the New York Common Fund invested over $5.9 billion directly into a plethora of other hedge and private equity funds, and a total of $7.3 billion net invested over the past 2 years. Some curious names that stand out:

* Guggenheim, which received $100 million in May 2007 and a total of $500 million, and which has since shuttered;
* Bear Stearns, which received $20 million in June 2007, after the blow up, only to see a the entire investment (including previous installments) of $490 redeemed in August, likely at a great loss;
* The investment of $415 million in 24 assorted office properties in October 2007 (peak of the commercial real estate market) through a JV with Liberty Washington;
* Apollo's latest Investment Fund (VII), which received $350 million in August 2007, which somehow closed in late January with $15 billion in total commitments. Looks like New York ignored the stellar performance of the prior fund, in which most leveraged buyouts are currently bankrupt or on the verge;
* BlackStone Real Estate Partners VI, in which the fund invested $800 million, and which closed in March 2008 with total commitments of $10.9 billion. Blackstone Real Estate became famous for its bidding war for the Equity Office Properties REIT which it won at the peak of the market with a final purchase price of $39 billion, and in which it invested almost $4 billion in equity, only to flip most of it to pay down the associated debt; they are likely stuck with the balance at a significantly underwater valuation.
* Harbinger Capital Partners, which received a $71 million investment from the fund in 2007, and which is likely worth roughly 60 cents on the dollar;
* Cerberus, which received $50 million in May 2007, and which might very well have been immediately funneled into such sterling investments as Chrysler and Aozora bank;
* GoldenTree, which received $35 million in 2007, and is now running dutch auctions to offload all its illiquid holdings;
* Xerion, which received $13 million in 2008, months after it was acquired by Perella Weinberg. As we have written, Joe Perella is probably the most important financial advisor in the country currently, advising the FDIC on its assorted activities (with very little information on how the process is compensated). If New York is invested in a fund which is run by a firm compensated by the FDIC, the potential conflict of interest here, absent further disclosure, could have massive proportions.

This is not to say that The Common Fund has only had horrendous indirect investments. In 2007 the Fund also invested $5 million in Paulson's Fund (followed by $48 million in 2008), $150 million in Chelsea Clinton's former employer Avenue Capital, and $12 million in Izzy Englander's Millennium Partners, which seem to believe in generating CD type returns with no down month as far as one can remember. The full list of fund recipients is presented here as per the data on the New York State Comptroller's page.

A Little Too Much Affirmative Action?

Following the Spitzer fiasco, and David Paterson's appointment as New York Governor, there was a marked shift in the investment targets of the Common Fund. Beginning in March of 2008, the biggest recipient of funding, by a very wide margin, were funds that are defined in the Monthly Transaction Reports as "minority-owned firms." In fact, David seems to be such a supporter of minority-led hedge funds, that in 2008 more than half of the $1.4 billion invested in assorted asset managers went to minority-owned companies, $760 million to be exact. Which implies that the only way to get startup funding these days, with traditional avenues closed, may be to apply to the New York Common Fund and check the non-white box.

The Upcoming Pension Mess

Pension funds' calculations for actuarial purposes presume a roughly 8% annual growth in perpetuity, the result of which funnel through into the over- or under-funding estimates for a State's budget for any given period of time. The current dislocation implies that absent an approximately $50 billion injection of new capital, New York's Pension Funds are guaranteed to be unable to keep up with increasing cash outflow requirements.

As we mentioned, New York is not alone in this predicament, with all major public employee reitrement funds currently down anywhere between 40% and 50%. While public anger is still focused merely on the huge deficit in the state's income statement, soon all hell will break loose when millions of current police, healthcare and educational retirees realize they will have go back to work as their pensions disappear. The speed of the market's collapse will determine how quickly that day comes.

Corporate Law and Governance: Hong Kong: company law reform update

2009-02-24T01:28:00.000-08:00

Corporate Law and Governance: Hong Kong: company law reform update

The Financial Services and the Treasury Bureau has published conclusions in response to its second and third company law reform consultation papers. With regard to share capital and capital maintenance, the relevant conclusions document notes, inter alia, that the current requirement for authorised share capital will be removed. Companies will, however, be able to specify the maximum number of shares that can be issued in their Articles of Association.

In the published conclusions for the second consultation, a partial codification of directors' duties is proposed. In order to clarify the law, a provision similar to Section 174 of the UK's Companies Act (2006) will be adopted with regard to directors' skill and care. A more complete codification, introducing an enlightened shareholder approach of the kind included in the UK's Companies Act (2006) by Section 172, was rejected. The document notes:

The consultation indicates that the idea of codifying the directors’ general duties remains highly controversial. Responses are highly divided save as the issue regarding the proposal to incorporate the 'enlightened shareholder value' concept into the duties of directors, which has received only limited support. It would be premature to go down the route of comprehensive codification at this stage. Nevertheless, we see some merit in clarifying the directors’ standard of care, skill and diligence as proposed by some respondents".

Posted by Robert Goddard at 18:30

Even Google seems uneasy as it overwhelms its rivals - Print Version - International Herald Tribune

2009-02-24T01:27:00.000-08:00

Even Google seems uneasy as it overwhelms its rivals - Print Version - International Herald Tribune

By Randall Stross
Monday, February 23, 2009

SAN JOSE, California: The popularity of the Google search engine in the United States just grows and grows. In the past three years, its market-share gains have even been accelerating, making some people wonder whether the company will eventually obliterate what remains of its competition in search.

Certainly, antitrust scrutiny is a growing worry at the Googleplex, the nickname for the company's headquarters. Last year, the company abandoned a proposed advertising pact with Yahoo when the U.S. Justice Department said it would file an antitrust lawsuit to block the deal. Last week, a small Web site operator, TradeComet.com, filed an antitrust suit accusing Google of unfairly manipulating its advertising system to harm a potential competitor.

And when I asked to speak with Google's chief economist about why its market-share gains were accelerating, the press office also gave me, unrequested, a second, separate appointment with Dana Wagner, the company's "competition counsel" - that is, its point person on antitrust issues.

Google maintains that its lead in the Web search market is tenuous, and that a user's loyalty could evaporate with a simple click of a mouse.

But consider this: As recently as July 2005, Google was ahead of Yahoo in market share by just 6 percentage points, 36.5 percent to 30.5 percent, according to comScore, the market research company. Today, that advantage stands at 63 percent to 21 percent.

"You almost feel sorry for Google," said Danny Sullivan, editor in chief of Search Engine Land. "They're doing a good job, and people are turning to them. But when they pass 70 percent share, people are going to be uncomfortable about Google becoming a monopoly."

Google does not register gains every month. The comScore numbers for January reflect a 0.5 percent drop in its share from December and a 0.5 percent gain for Yahoo. But according to Hitwise, another online measurement service, Google has already surpassed the 70 percent benchmark. It estimates that Google has 72 percent of the U.S. market, versus 17.9 percent for Yahoo. Microsoft's two search services, MSN and Live.com, come in a distant third at a combined 5.4 percent.

Sullivan said that while the Yahoo search engine benefits from traffic from Yahoo Mail and other Yahoo sites, its ability to pull in search engine users from outside is relatively weak.

Many Web site owners who track where their visitors come from report that Google's search engine now refers 80 to 90 percent of their visitors. For instance, almost all visitors sent by search engines to Stack Overflow, a community of software developers raising and answering programming questions, are from Google. In January, Stack Overflow received more than three million visits referred by 22 search engines. Of those, 99.34 percent were from Google.

"I have no beef with Google," Jeff Atwood, a co-founder of Stack Overflow, said. "I like Google. But I'm concerned. If you project this trend forward four years, just follow the graph. A world in which there is no competition strikes me as unhealthy."

At Google, Hal Varian, its chief economist, and Wagner, the competition counsel, said the public was not blindly loyal to any one search engine. They cited a recent survey by Forrester Research in which 55 percent of the adults polled used more than one search engine every week.

"You buy a car, use it for four years, and then you'll look around at your choices," Varian said. "But for search, we're competing on a click-by-click basis." If more users are going to Google, he said, it is because they are concluding that Google is superior.

Sullivan, who has been studying search engines since 1995, said similar surveys have been done for many years, and always fail to reflect that most people have a primary attachment to a single search engine. When users try an alternative, he said, they "don't go into active taste-testing mode"; afterward, they revert to their favorite.

"Google is a habit," he said, "and habits are very hard to break."

Both Yahoo and Microsoft contend that their search engines' results have achieved parity in quality with Google, based on internal statistical measurements they do not disclose publicly.

"Whether we're slightly ahead or slightly behind Google in core relevance is not a game changer in search," said Prabhakar Raghavan, Yahoo's chief search strategist.

Yahoo's best opportunity, Raghavan said, is to offer radically new ways of presenting information that will help users finish whatever it is they started before the search, like finding a job or buying a plane ticket. "People don't want to search. It's a digression," he said. "They want to complete a task."

What Yahoo and Microsoft have not been able to attain, however, is parity with the Google brand, which had become a recognized verb by 2002. I asked Sullivan, of Search Engine Land, if we should deliberately spread our searches, doing a small part to help keep competition alive. He said such a campaign would not be sustainable.

"I'm probably going to continue to use the thing that I have a good relationship with, which is Google," he said. "If you suggest that someone should go use Microsoft search, it's like saying 'You should go get a new best friend."'

A soft spot for print is costing Murdoch - Print Version - International Herald Tribune

2009-02-24T01:26:00.000-08:00

A soft spot for print is costing Murdoch - Print Version - International Herald Tribune

International Herald Tribune
A soft spot for print is costing Murdoch
By Tim Arango and Richard Pérez-Peña
Monday, February 23, 2009

NEW YORK: Rupert Murdoch had an office built for him at The Wall Street Journal within days of buying it 14 months ago, and he has made ample use of it - ordering up a wave of changes in the once-staid paper's content and culture, from the addition of a weekly sports page to general news displacing financial news on the front page to the thinning of its layers of editing.

But Murdoch, as much old-fashioned press baron as 21st-century multimedia mogul, faces a depressing reality: his lifelong fondness for newspapers has become a significant drag on the fortunes of his company, News Corp.

The company recently took $8.4 billion in write-downs, including $3 billion on its newspaper unit, which includes The Journal's publisher, Dow Jones. Meanwhile, News Corp.'s stock price has fallen by two-thirds in the last year, a sharper decline than at its media conglomerate peers like Time Warner and Viacom.

In more vibrant economic times, investors and Wall Street analysts were more willing to look past Murdoch's attachment to newspapers - now the company's biggest single source of revenue, about 19 percent in the most recent quarter. But they find that a tougher chore these days, as other media struggle and newspapers suffer through their worst slump since the Depression.

"The thing I hear from investors is that they wish News Corp. was everything but newspapers," said David Joyce, a media analyst at Miller Tabak.

"Investors are more forgiving when they are in a better mood," he said. "The hope for a turnaround in the newspaper business is looking elusive."

The declining economy and the sinking fortunes of print publications have placed in stark relief Murdoch's love of newspapers and his deal to acquire Dow Jones just before the recession set in.

Murdoch, chairman and chief executive of News Corp., paid more than $5 billion for an asset that generated about $100 million in operating income last year, a price that now looks like a staggering overpayment. Murdoch would not comment for this article.

On the surface, News Corp.'s Feb. 5 earnings report, for the quarter ended Dec. 31, appeared to show a nearly $90 million increase in newspaper division revenue from a year earlier. But that was an illusion created by the addition of Dow Jones, which News Corp. owned for only 18 days of the year-ago period.

The company revealed in a later filing with the Securities and Exchange Commission that Dow Jones had $535 million in revenue in the last quarter, more than one-third of the total for its newspaper segment.

Subtracting the effect of Dow Jones, revenue for that segment fell about 25 percent - due partly to weaker currencies in Britain and Australia, where News Corp. has many papers - compared with an 11 percent drop for the rest of the company.

The company does not disclose details on The Journal's performance, but executives there say that, like the rest of the industry, they have seen a significant decline in advertising revenue.

In another area, however, The Journal has outperformed almost all its competitors by maintaining its paid circulation of more than two million, in print and online, in the most recent reporting periods, while nearly every other major paper declined. Some of those subscribers receive only the online edition, making The Journal one of the few papers to successfully make its online readers pay for content.

Some of that success, however, could be due to heavy discounting, a practice that predated News Corp.'s takeover. According to the most recent figures the paper filed with the Audit Bureau of Circulation, for the six months ended Sept. 30, on an average day The Journal sold 501,000 copies at less than half the basic price, up from 420,000 in the same period in 2007 and 214,000 in 2006.

Murdoch has a well-earned reputation for making the deals that appeal to him personally, like the Dow Jones purchase, even if experts do not agree. The instinctual, from-the-gut aspect of Murdoch's business persona was once appreciated - he was lauded when he swooped in to buy MySpace in 2005 for $580 million, outbidding Viacom - but it now seems to be a mark against him in Wall Street's eyes.

"Emotional biases and attachments play into our strategic decisions in really significant ways," said Sydney Finkelstein, a professor at the Tuck School of Business at Dartmouth College. "And with Rupert Murdoch, there's a general attachment to the newspaper business because that's where he got his start, and he really has a feel for it, and also an attachment to the idea of owning The Wall Street Journal."

At The Journal, the imprint of Murdoch and Robert Thomson, the managing editor he installed, is visible on the front page, where there are bigger headlines, more political coverage and fewer of the long, sometimes whimsical yarns that were one of the paper's signatures. They have also made articles shorter and pushed some business coverage deeper into the paper.

But some journalists also described a certain relief that the new regime has meant an end to the factionalism and politicking of Dow Jones's last independent years. Reporters and editors also say that Murdoch and his crew have loosened what was once an exceedingly careful culture, where multiple, lengthy memos were required to initiate a reporting project, and an article went through several rounds of editing.

"There's this kind of attitude that planning is overrated, and memos are for wimps," said one Journal reporter, who insisted on anonymity for fear of antagonizing his new bosses. "They aren't as interested in the time-consuming, in-depth projects, either."

And while the new boss has been a frequent presence at The Journal, he will soon be able to keep an even closer eye on his new prize: the company plans to move The Journal from its financial district offices in downtown New York to News Corp.'s Midtown Manhattan headquarters.

With revenue falling, Murdoch has not followed through on his early talk of expanding The Journal's news staff. In fact, it recently laid off some journalists, but the reduction was minimal by recent industry standards.

"I have great faith, and, if we continue the way we are going, we may even get lucky and not have so much competition at the end of it all," Murdoch said in a recent conference call with Wall Street analysts. "We are in good shape on the newspapers."

While Murdoch's personal attention has lately been on The Journal, the financial performance of News Corp.'s other newspapers is undergoing stricter scrutiny these days.

For years, Murdoch has stomached tens of millions of dollars in annual losses at The New York Post, in exchange for the power the paper afforded him. But given the economic times and the shift of his attention to The Journal, there is a sense of urgency in the News Corp. executive suite about stemming The Post's losses.

Executives briefed on the matter, who spoke anonymously to discuss private conversations, said Murdoch remained committed to the tabloid but was seeking ways to save money by combining back-office operations, purchasing, printing and delivery with those of The Journal and The Post's rival, The Daily News. There have also been discussions with Newsday, the Long Island newspaper owned by Cablevision, about sharing certain costs with The Post.

And recently, the company said it would lay off 65 people at its British newspapers, which include The Times of London, The Sunday Times, The Sun and News of the World.

Some analysts and investors have suggested that News Corp. separate its newspaper businesses from its other entities, like film and satellite television.

In a research report in late January, Rich Greenfield of Pali Research summed up one of the prevailing sentiments on News Corp., writing, "Previously, we had focused on the fact that News Corp.'s so-called 'bad assets,' including newspaper and TV stations, would become such a small part of the News Corp. story that they would no longer impact growth."

He continued: "Our fear is that News Corp. is so committed to its existing businesses that it will be willing to sustain businesses that slip in to negative profitability for years (similar to its approach to the N.Y. Post)."

News Corp. still has significant strengths, including the Fox film studio, which appears poised for a better year than it had in 2008, with cash reserves of $3.6 billion, and the Fox News Channel, whose revenue and profit are growing. The company's operating income in the last quarter, $818 million on revenue of $7.9 billion, was down 42 percent from a year earlier, but hardly anemic.

It seems that Murdoch's greatest hope, when it comes to his newspapers, is to wait out the downturn and anticipate a future with many fewer papers to compete against.

"That's in his blood," Joyce, the analyst, said of Murdoch's devotion to newspapers. "That's how News Corp. started 50 years ago."
Correction:
Notes:
International Herald Tribune Copyright © 2009 The International Herald Tribune | www.iht.com

BBC NEWS | UK | Magazine | Decision time

2009-02-24T01:25:00.000-08:00

BBC NEWS | UK | Magazine | Decision time

BBC NEWS
Decision time

Standing at a personal or professional crossroads, do you try to think rationally or go by gut feeling. It might be time to start thinking about the way you think, writes Jonah Lehrer.

Ever since Plato, humans have thought of ourselves as rational creatures.

When we make a decision, we are supposed to consciously analyse the alternatives and carefully weigh the pros and cons. This simple idea underlies the philosophy of Plato and Descartes, forms the foundation of modern economics and drove decades of research in cognitive science.
“ Elliot endlessly deliberated over irrelevant details, like whether to use a blue or black pen, or what radio station to listen to, or where to park his car ”

Over time, our rationality came to define us. It was, simply put, what made us human.

There's only one problem with this assumption of rationality - it's wrong. It's not how our minds actually work. For the first time in human history, we can look inside our brain and see how we think.

It turns out that we weren't engineered to be rational or logical or even particularly deliberate. Instead, our mind holds a messy network of different areas, many of which are involved with the production of emotion.

Whenever we make a decision, the brain is awash in feeling, driven by its inexplicable passions. Even when we try to be reasonable and restrained, these emotional impulses secretly influence our judgement.

Pathological indecision

Some of the first evidence for this theory came from the work of the neurologist Antonio Damasio. In the early 1980s, Damasio began studying a patient named Elliot who, after a brain tumour, lost the ability to experience any emotion at all.

At the time, scientists assumed that our emotions were irrational. A person without any emotions - in other words someone like Elliot - should make better decisions.

But that isn't what happened to Elliot. Instead, his tumour left him with a devastating disorder - he was pathologically indecisive. Routine tasks that should have taken ten minutes now required several hours.

Elliot endlessly deliberated over irrelevant details, like whether to use a blue or black pen, or what radio station to listen to, or where to park his car.

When choosing where to eat lunch, Elliot would carefully consider the restaurant's menu, seating plan, and lighting scheme. He would then drive to each restaurant to see how busy it was.

But all this analysis was for naught. Elliot still didn't know what to do. Pure reason is a disease.

And yet, this doesn't mean that we should always trust our emotions. Although our gut feelings can often be astonishingly wise, they can also lead us to make a consistent set of decision-making mistakes.

Emotional flaws

When we eat too much food, or spend too much money on our credit card, or make bad investment decisions, it's probably because we're listening to our emotional brain, when we should really be thinking rationally.

When our emotions get out of control - and there are certain things that reliably make this happen - the result can be just as devastating as having no emotions at all.
“ You can't avoid loss aversion unless you know that the mind treats losses differently than gains ”

In recent years, psychologists and neuroscientists have identified a long list of these emotional flaws that regularly lead us astray.

Consider a mistake known as loss aversion, which was first identified by the psychologists Daniel Kahneman and Amos Tversky.

The psychologists noticed that, when people were offered a gamble on the toss of a coin in which they might lose $20, they demanded an average payoff of at least $40 if they won.

The pain of a loss was approximately twice as potent as the pleasure generated by a gain. Furthermore, our decisions seemed to be determined by these feelings. As Kahneman and Tversky put it: "In human decision-making, losses loom larger than gains."

Loss aversion is now recognised as an important mental bias, with widespread implications. Our desire to avoid anything that smacks of a loss often shapes our behaviour, leading us to do foolish things.

Losing shares

Look, for example, at the stock market. When investors evaluate their stock portfolio, studies show that they are most likely to sell stocks that have increased in value.

Unfortunately, this means that they end up holding on to their depreciating stocks. Over the long term, this strategy is exceedingly foolish, since it ultimately leads to a portfolio composed entirely of shares that are losing money. (A study by Terrance Odean, an economist at the University of California, Berkeley, found that the stocks investors sold outperformed the stocks they didn't sell by 3.4%).

Even professional money managers are vulnerable to this bias, and tend to hold losing stocks twice as long as winning stocks. Why do investors do this? Because they are afraid to take a loss - it feels bad - and selling shares that have decreased in value makes the loss tangible.

We try to postpone the pain for as long as possible. The end result is more losses.

So how should we make a decision? The key is something called metacognition, or thinking about thinking.

Because the mind is like a Swiss Army knife - it's stuffed full of different mental tools, each of which is well-suited to a specific situation - it's essential that we learn how to adjust our thought process to the task at hand.

It doesn't matter if we're choosing between mutual funds or political candidates. We might be playing poker or football. The best way to make sure that you are using your brain properly is to study your brain at work.

Why is thinking about thinking so important? First, it helps us avoid stupid errors. You can't avoid loss aversion unless you know that the mind treats losses differently than gains. And you'll probably think too much about buying a house unless you know that such a strategy will lead you to buy the property.

The mind is full of flaws, but we can outsmart them. There is no secret recipe for decision-making. But learning about how we think can help us think better.

Jonah Lehrer is the author of The Decisive Moment: How the Brain Makes Up Its Mind.

This reminds me of my favourite decision-making process. I toss a coin. However, it's not the result of the coin that I'm looking at; I base my ultimate decision on my reaction to that outcome. If the coin tells me to do one thing, I might be happy that that's the outcome, in which case I go with what the coin says. If however, I get a little sinking feeling at the outcome of the coin, then I know to go with the other choice, even if it's not what the coin says. This way, I really know that I'm making the right decision; it's helped me out countless times.
George, London UK

"So how should we make a decision? The key is something called metacognition, or thinking about thinking."

Except, of course, that the process with which we are thinking about thinking must (by definition) share the irrationality of the thinking it's thinking about, rendering the "meta" rather meaningless. The only way such a metacognition would be possible would be through an analysis by a non-human agent (a robot or alien, for example), in which case the resulting analysis would be highly unlikely to be either intelligible or acceptable to us.
Dan, Oxford

I don't think you can describe Elliot as being rational; a rational being would still make decisions according to some internal penalty function (just one more susceptible to analysis than those the rest of us use) - it seems pretty clear that Elliot was unable to construct any internal penalty function whatsoever.

If loss aversion ruled human behaviour there'd be no suicide bombers, (and no soldiers of any kind), no adulterers, no gamblers, no victims of Ponzi schemes and indeed no Ponzis to scam them. In all of humanity's most irrational decisions, the losses would appear to be irrationally discounted, not irrationally amplified - the MMR scare is about the only counterexample supporting the idea of loss aversion that I am able to think of.
Ian Kemmish, Biggleswade, UK

I once bought some shares that went up ten fold, and I watched, hypnotised, as they went back down to the price I paid. I did not lose money, but could not bring myself to sell when they fell by 30% from their peak, even though I had 'decided' in advance to do this.
Michael Gover, Sheffield

I was going to comment but could not decide what to say.
Timesman, Worcs

Not true. Many investment managers keep certain shareholdings not because they're trying to 'postpone the pain of taking a loss', but rather because they feel the holding will turn around in the years to come. Investment management is, after all, primarily about investing in companies/holdings for the longer term; anything else and you may as well be a day trader.
Jill, Oxford, Oxfordshire

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/uk_news/magazine/7905536.stm

Published: 2009/02/23 11:28:01 GMT

© BBC MMIX

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The Serious Need for Play: Scientific American

2009-02-19T19:14:00.000-08:00

The Serious Need for Play: Scientific American
* Childhood play is crucial for social, emotional and cognitive development.
* Imaginative and rambunctious “free play,” as opposed to games or structured activities, is the most essential type.
* Kids and animals that do not play when they are young may grow into anxious, socially maladjusted adults.

On August 1, 1966, the day psychiatrist Stuart Brown started his assistant professorship at the Baylor College of Medicine in Houston, 25-year-old Charles Whitman climbed to the top of the University of Texas Tower on the Austin campus and shot 46 people. Whitman, an engineering student and a former U.S. Marine sharpshooter, was the last person anyone expected to go on a killing spree. After Brown was assigned as the state’s consulting psychiatrist to investigate the incident and later, when he interviewed 26 convicted Texas murderers for a small pilot study, he discovered that most of the killers, including Whitman, shared two things in common: they were from abusive families, and they never played as kids.

Brown did not know which factor was more important. But in the 42 years since, he has interviewed some 6,000 people about their childhoods, and his data suggest that a lack of opportunities for unstructured, imaginative play can keep children from growing into happy, well-adjusted adults. “Free play,” as scientists call it, is critical for becoming socially adept, coping with stress and building cognitive skills such as problem solving. Research into animal behavior confirms play’s benefits and establishes its evolutionary importance: ultimately, play may provide animals (including humans) with skills that will help them survive and reproduce.

Most psychologists agree that play affords benefits that last through adulthood, but they do not always agree on the extent to which a lack of play harms kids—particularly because, in the past, few children grew up without ample frolicking time. But today free play may be losing its standing as a staple of youth. According to a paper published in 2005 in the Archives of Pediatrics & Adolescent Medicine, children’s free-play time dropped by a quarter between 1981 and 1997. Concerned about getting their kids into the right colleges, parents are sacrificing playtime for more structured activities. As early as preschool, youngsters’ after-school hours are now being filled with music lessons and sports—reducing time for the type of imaginative and rambunctious cavorting that fosters creativity and cooperation.

Interview: Alan Sillitoe | Education | The Guardian

2009-02-19T01:10:00.000-08:00

Interview: Alan Sillitoe | Education | The Guardian

There's a great story about Alan Sillitoe that's always done the rounds. He's hanging out in Mallorca in the late 50s, writing six or seven unpublished novels, when he asks fellow expat Robert Graves to do him a favour and read his latest effort. The distinguished writer duly obliges and offers Sillitoe five terse words of advice. Stick to what you know. Bish-bosh, Sillitoe mines his Nottingham roots and launches his career with Saturday Night, Sunday Morning - one of the defining books of the postwar era.

Like many great stories, though, it's not quite true. "I had actually written a number of short stories based in Nottingham before Robert made that suggestion," Sillitoe laughs, "and when he did I just thought, 'Bugger this, what does he know? Why should I take any notice of him just because he's old and famous?' It was only two years later, when I was sitting under an olive tree working on The Adventures of Arthur Seaton [the book that would become Saturday Night, Sunday Morning] that I decided to pour in some of the incidents from the short stories to give the narrative more life."

Take Two Advil and ... What Ills Can the Pfizer-Wyeth Merger Cure? - Knowledge@Wharton

2009-02-18T22:08:00.000-08:00

Take Two Advil and ... What Ills Can the Pfizer-Wyeth Merger Cure? - Knowledge@Wharton

When the giant pharmaceutical company Pfizer announced on January 26 that it was acquiring Wyeth for $68 billion, analysts immediately started questioning what benefits the deal would bring and for whom. Pfizer executives suggest the acquisition makes strategic sense by expanding the company into a range of new areas, and by helping make up for an expected loss of more than $12 billion in annual revenues once its Lipitor patent expires in 2011. But Wyeth also brings some liabilities to the mix -- notably, continuing lawsuits over its hormone replacement drugs and fen-phen diet pill. Knowledge@Wharton asked Wharton health care professor Patricia Danzon and marketing professor Jagmohan Raju to offer their views on the pros and cons of the deal.

FT Alphaville » Blog Archive » HBOS: The Moore Memo

2009-02-18T22:05:00.000-08:00

FT Alphaville » Blog Archive » HBOS: The Moore Memo
HBOS: The Moore Memo
Posted by Sam Jones on Feb 11 08:49.

MP’s on the UK’s Treasury Select Committee caused quite a stir yesterday when they disclosed that they had been given testimony by Paul Moore, the former head of risk management at HBOS. Testimony in which Moore had identified “a total failure of all key aspects of governance” at the beleaguered bank.

Moore was booted out of HBOS four years ago by the then CEO, James Crosby - who features rather prominently in Moore’s criticisms. Sir James is now deputy chairman of the FSA.

We’ve reprinted the Moore memo in its entirety below.

Global Infrastructure Spending Could Reach $35 Trillion over the Next 20 Years -- Seeking Alpha

2009-02-18T22:00:00.000-08:00

Global Infrastructure Spending Could Reach $35 Trillion over the Next 20 Years -- Seeking Alpha

A wave of government bailouts around the world and a sharp deterioration in existing infrastructure could lead to as much as $35 trillion in public works spending over the next 20 years, according to a new study by CIBC World Markets.

The study, released last week, says that many of the countries that balanced their budgets over the past 10 years did so by skimping on the construction costs for new public assets and the maintenance of existing buildings and roads, CIBC reported.

M & A Law Prof Blog: Private Equity's Option to Buy

2009-02-18T18:57:00.000-08:00

M & A Law Prof Blog: Private Equity's Option to Buy

Private Equity's Option to Buy

In times of market stress, agreements that at the time seemed reasonable can cause dilemma for the parties. Perhaps the most interesting of these right now is the one associated with the liability limiting provisions that private equity actors have sometimes negotiated in their acquisition agreements. These provisions limit the liability of the private equity companies to a set amount no matter whether they intentionally breach the deal or not. The amount is typically at three-four percent of deal value. And, these provisions exclude the possibility of specific performance to require the private equity firm to consummate the transaction. So, the net effect is to give the private equity adviser a walk-away right with a cap on their liability at a fixed dollar amount.

Jeffrey Christian: Gold and Silver Could Spike - Seeking Alpha

2008-11-15T08:36:00.000-08:00

Jeffrey Christian: Gold and Silver Could Spike - Seeking Alpha: "Jeffrey Christian is one of the most established names in the commodities industry. The founder of CPM Group, a fundamentally focused commodities research and asset management firm, Christian is also author of 'Commodities Rising,' a 2006 book examining the long-term outlook for commodities.

Before founding CPM Group, Christian was head of commodities research at J. Aron & Company, which was acquired by Goldman Sachs. He spoke with the editors of HardAssetsInvestor.com about recent trends in the commodities market and how investors should be positioning their portfolios today.

HardAssetsInvestor.com (HAI): Let's get right to the point, Jeff. The commodities markets and commodities pricing has been crazy recently. Just look at oil, moving from $50/barrel to $140/barrel and back to $50/barrel again. What is going on?

Jeffrey Christian, founder, CPM Group (Christian): Basically what you're seeing right now is a massive liquidation of assets across all asset classes. You're seeing institutional investors and proprietary trading desks liquidate their leveraged investment positions, at any price.

They've been doing it for a couple of reasons: 1) prices are falling; 2) credit lines are either being pulled back or completely taken away. In many cases, these investors have no choice but to liquidate their positi"

FT.com / Weekend / Reportage - Letter from Iceland

2008-11-15T08:33:00.000-08:00

FT.com / Weekend / Reportage - Letter from Iceland: "Letter from Iceland

By Robert Jackson. Photographs by Bjarki Reyr

Published: November 14 2008 11:51 | Last updated: November 14 2008 11:51

Hallgrímskirkja cathedral looms up out of the mists and gloom of downtown Reykjavík
Think of Ireland. Rotate it 90 degrees clockwise, make it a third bigger and hang it like a pendant from the Arctic Circle. Crack open the earth’s crust below to release limitless supplies of geothermal steam, then fill its territorial waters, all 200 miles of them, with an abundance of cod.

Give it a population of 300,000, about the same as Coventry, 70 per cent of them in the cities of Reykjavik and Akureyri. Ensure they are all related and give the majority the ability to trace their ancestry back to the times of settlement, more than a thousand years earlier. Endow these people with industry and ambition. Give them their own language – all but unchanged for a millennium – a literary tradition, three national newspapers, two television channels, free universal healthcare and education and close to zero unemployment. Give this country a consistently high ranking in the world standard-of-living charts and you have the Iceland of the recent past. Not a bad place, all in all.

Now allow this country’s banks – virtually unregulated – to"

Google adds searching by voice to iPhone software - International Herald Tribune

2008-11-15T08:22:00.000-08:00

Google adds searching by voice to iPhone software - International Herald Tribune

致富的簡單法則：尋找會派息的豬 (Ray's 財經台)

2008-11-12T16:25:00.000-08:00

致富的簡單法則：尋找會派息的豬 (Ray's 財經台)

一段"歷史"故事，可能改變你的投資人生

誠意邀請你耐心閱讀下面的故事！『《福布斯》1978年10月2日 - (轉自：但斌的blog)

每個人都在以自己的方式學會怎樣在股市中贏利。我喜歡聽休斯頓的梅爾維德.霍根講述有關他個人領悟的故事。

"在二次世界大戰結束後，我退役了。接著就參與鑽探設備制造行業，順便開始買賣股票，開始時是作為一種愛好。到了年末算帳時，我總是出現淨虧損。我嘗試了各種所讀到或聽到的方法：技術分析的方法，基本分析的方法，所有這些分析方法的綜合......但我不知為什麼總是以虧損告終。

在1958年的大反彈期間，甚至連瞎子都不會虧損的時候，我虧錢了。是在進行短線買賣和自作聰明的轉換中虧損了許多錢。但是在1961年的一天，我當時沮喪萬分、心情鬱悶。來到位于休斯頓的美林證券的辦公室裡，一位高級財務主管坐在前面的桌子邊，我知道他注意到了我臉上的不快，我的情況對他來說已經是多少年一直如此了，他打手勢叫我到他桌子前去。「你願意見一個人嗎，」他有氣無力地問道，「他在股市從沒有虧損過！」

我結節巴巴地說，「從沒有虧損過？」

「總的來說，他從來沒有虧損過」，這位經紀人慢聲慢氣地說，「我替他管理帳戶已將近40年。」然後他用手指著坐著看股票行情的自動收報機人群說，一位穿著笨重工裝褲的人就是他。

「若你願意會會他，你最好快點」，這位經紀人建議說。「他每隔幾年才來這裡一次，除非他打算買進的時候。他總是徘徊幾分種，發呆地看著自動收報機。他是一位來自海灣城郊的種稻子和飼養家畜的農民。」

我穿過人群，在穿著工裝褲的陌生人旁邊找到了一個位子坐下。我首先自我介紹，接著與他談論了一會兒有關種稻和打獵（我是一個熱心的打獵者）的事情，慢慢地進入了有關股票的話題。

使我吃驚的是，這位陌生人非常願意談論股票。他從口袋裡拿出一張紙，上面用鉛筆潦草記錄著他剛剛賣完的股票並讓我看。

我簡直不能相信我的眼睛！此人的整個股票投資組合獲得50%多的長期資本收益。在這30種股票中，只有一個股票失敗了，但其他股票分別增長100%，200%和甚至500%。

他向我說明他的技巧，這種技巧其實非常簡單。當熊市期間，他在報紙上看到股市又下降到新的最低點，專家們預測道.瓊斯指數還要多下降幾百個點時，這位農民朋友仔細瀏覽一份標準普爾股票指南，並挑選市場價格已下降到10美元以下的大約30種股票，這些股票有的穩健，有的盈利好，還有的是鮮為人知的小公司（如核桃種植公司，家庭裝飾公司等）。所有這些公司都支付股息。然後，他來到休斯頓，買進50000美元一攬子股票。

1年，2年，3年或4年以後，當股市高漲，預測者在談論著道.瓊斯指數將衝上新的高點，他便來到城裡，賣出他整個一攬子股票。事情就這麼簡單。

其後直到他去年去世，我還一直與沃馬克先生交往，有時還到他肥沃的田野上打鴨子。在這期間，我學會了他的許多投資哲學。

他把買股票看作是買一卡車豬。當豬市蕭條，他進豬的價格越低，在下一輪賣方市場到來是，他可以獲得的利潤越多。他還說明，如果股票市場也是同樣情況時，他寧願買股票而不願買豬，因為豬沒有股息。你還必須飼養它。

他對股市基本上採取一種耕作的態度。在種植稻子時，有一個種植季節和收獲季節；在其股票買賣方面，他也嚴密注視著相同的季節。

沃馬克先生似乎從沒有在股市最低點買進或者在高點時賣出。他似乎願意在底部區域或頂部區域附近買賣。當他打算買進時，他不顧什麼多年來的陳詞濫調，「永遠不要吃虧了又吃虧。」如在1970年市場跌穿底部時，他又另增加50000美元到其原本已特廉價的交易上，因而在整個一攬子股票上賺了大錢。

我想現代股市技術分析專家可以在沃馬科先生買賣股票簡單的方法裡，發現許多α法、β法、相反理論和其他一些理論。但是我所知道的人，沒有一個人像他那樣重視'買價'。

我意識到許多因素決定一種股票是否值得購買。但是我更明白在股市蕭條期間，若能夠在一種股票低價區域獲得成本優勢，即使日後有許多錯誤的判斷，也不礙大局且都是可以原諒的。

在股市上漲期間，你可以盡快出售並贏利；如果在最高價時出售，獲利更多；甚至在下降過程中出售，仍然可以獲利。既然有這麼多有利于你獲利的機會，耐心地等待較低廉的買進成本是值得的。

在市面蕭條時對此胸有成竹總是令人欣慰的，此時，圖表分析者會吃驚地看著你在他的圖表剛剛發出賣出信號時，你居然買進股票。

總而言之，沃馬克先生對于股市並沒有什麼深奧的見解。他教導我，你不可能在一年中的每月每星期或每天都在買股票，並獲利；同樣你也不能每月、每星期或每天都種稻，並有收獲。

他改變了我的投資風格，從那時起我賺錢了。 (他會否改變你的投資風格呢？)

我需提醒讀者注意的是雖然這種對市場規律的感覺是一種可以獲利的有益的感覺，但他不是唯一的策略，也不是最好的策略。沃馬克先生若只買賣並持有成長股，也同樣會取得成功。』

何以為大家送上一個如斯陳舊的故事呢？皆因大陽底下無新事，"投資"在百多年來，實質上沒有什麼重大的改變。時至今日，你仍不需要戰勝市場，只需戰勝你自己就可以了！

如果這故事已啟發了你，真的可喜可賀！若沒有的話，下面分享一下rayray的個人觀點：

1. 即使領略箇中意思，但仍需配合適當的"時機" - "豬價"要夠便宜。若果現時恆指仍處30,000多點時，亦只能進入"等待"期。而現時恆指已在15,000點樓下，已進入"豬價"夠便宜的區域。
2. 上面的故事，道出一個投資真理 -「他似乎願意在底部區域或頂部區域附近買賣。」，他並不是神，巴菲特也不是神，他與巴菲特都無法預知股市的底部，於是只能在一個相對便宜區域買貨，但一般人(包括rayray自己)都希望能夠買在最低價，或受到"財經預言家"的"還會再跌"預言影響，最終與低價區失諸交臂失。
3. 要明白這句話的意思：「你不可能在一年中的每月每星期或每天都在買股票，並獲利；同樣你也不能每月、每星期或每天都種稻，並有收獲。」- 在便宜區出現的投資機會，是一個以"年"作為單位的暴利機會，它並不會令你短期內致富。
4. 文中另一重點：「他寧願買股票而不願買豬，因為豬沒有股息。你還必須飼養它。」。時機之外，另一點也不可忽略 -嚴選股票。環境惡劣仍有派息能力，是反映出公司在逆境的生存能力(現金充足才能派息啊)，所以不失為選股的其一個指標。在基本面優良的大前提之下，如能配合不錯的派息的話，更能堅定長線持有的決心。

The Reckoning - How Merrill Lynch Faltered and Fell - Series - NYTimes.com

2008-11-10T16:52:00.000-08:00

The Reckoning - How Merrill Lynch Faltered and Fell - Series - NYTimes.com: "By GRETCHEN MORGENSON
Published: November 8, 2008

“We’ve got the right people in place as well as good risk management and controls.” — E. Stanley O’Neal, 2005
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The Reckoning
Doubling Down

Articles in this series are exploring the causes of the financial crisis.
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Times Topics: Credit Crisis — The Essentials
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Merrill Lynch, via Bloomberg News, left; David Karp/Bloomberg News, right

Ahmass Fakahany, left, and Osman Semerci, center, worked under E. Stanley O’Neal to expand Merrill’s investments related to mortgages. Such investments led to a $7.9 billion write-down a year ago, and Mr. O’Neal was forced out.
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Richard Sheinwald/Bloomberg News, left; Douglas Fry/Cazenove Group, via Bloomberg News

In 1997, J. P. Morgan bankers like Blythe Masters, left, and William Winters served on a small team that pioneered synthetic C.D.O.’s.
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Susan Farley for The New York Times

Michael A. J. Farrell, head of a real estate investment trust that manages mortgage assets, says derivatives have made the financial collapse worse.
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The Reckoning - How Merrill Lynch Faltered and Fell - Series - NYTimes.com

低息環境難持續趙國雄預警樓泡 - 香港文匯報

两会代表委员呼吁电网改革破解"煤电顶牛"僵局_财经频道_新华网