Recent Discussion on Africa

Here is the transcript of a recent online discussion on Africa, led by Douglas Farah, former West Africa bureau chief for The Washington Post. China is going to be a key player in the continent over the coming years. Given that their only consideration seems to be to feed their resource-starved economy, their presence may actually worsen the human rights situation in several countries:

... There are some efforts to get at the money of dictators, but they are underfunded, not a priority and rely greatly on international cooperation. The U.S. is not the only country that ignores Africa. most of Europe does too, except to protect direct national investments. If France and Belgium and others are not willing to go after the money, it will not work and does not work.

... There were several free and fair elections that Mugabe won, no question. But his decision to throttle the opposition when he ran the risk of losing power, coupled with his decision to destroy the nation's economy and establish a police state cannot be blamed on colonialism or anything other than the decisions of a leader determined to hang on to power at all costs. The West has committed innumerable mistakes in Africa, without a doubt. But leaders like Mugabe who seek to perpetuate themselves in power and use force to do so must take responsiblity for their actions.

... China does pose a huge problem for that reason-they will buy, bribe and corrupt whomever they can to get to the resources they want. As scant as U.S. and European efforts have been to deal with corruption, the Chinese government has none. That is a problem that will strengthen the big men and set democracy back even further

Farah also wrote an excellent article for Washington Post magazine. I'm not particularly informed when it comes to the African continent and I found both the article and the online discussion particularly illuminating:

... Some of the worst include Teodoro Obiang Nguema of Equatorial Guinea, who has pillaged his country since 1979; Omar Bongo, who has ruled Gabon since Lyndon Johnson was president; Robert Mugabe's kleptocracy in Zimbabwe; and the teetering dictatorship of Idriss Deby in Chad.

But when the Bush administration speaks of spreading democracy around the world, these petty and cruel tyrants, who make Saddam Hussein seem tolerant, are not condemned. Secretary of State Condoleezza Rice just days ago called Obiang a "good friend" while being photographed beaming at his side during his visit to her office. This is the same Obiang whose regime her own department routinely denounces for its macabre brutality.

There are historic reasons that this tragic style of leadership has prospered. Among them are the legacy of colonialism and the Cold War perceived imperative of supporting anyone who was the enemy of your enemy. In sub-Saharan Africa, these dictators were U.S. allies against Soviet- and Libyan-backed regimes. But independence for most of the nations came more than 50 years ago. The Cold War is long over. The regimes survive today because of their ruthlessness, international indifference, their control of vital resources or a combination of these factors.

... Obiang seized power by murdering his predecessor and uncle, Francisco Macias Nguema. Obiang was Macias's chief of police and ran the notorious Black Beach prison, where Macias reportedly showed up to execute prisoners by smashing their heads with concrete poles. Now Obiang runs a police state of his own, surrounded by Moroccan bodyguards because he doesn't trust anyone, even his own family.

He survives in part because his tiny country pumps 350,000 barrels of oil a day and has reserves of 1.2 billion barrels, along with 1.3 trillion cubic feet of natural gas. As a result, oil companies and governments are willing to support a regime that has long since silenced the press, driven almost a third of its population of 540,000 into exile and crushed any hint of dissent.

In recent months Obiang has been making overtures, through the offer of oil deals, to the leader of one of Africa's most astonishing stories of failure--Robert Mugabe of Zimbabwe. In recent years Mugabe, who took office in 1980 as a national hero, has gradually strangled his nation's political life and economy. He now controls the closest thing the region has to the Disneyland for terrorists and transnational criminal groups that Taylor created in Liberia.

Under Mugabe's despotic rule, Zimbabwe, long a net exporter of food with a vital economy and functional health and educational facilities, teeters on the edge of starvation. The nation has one of the highest HIV/AIDS infection rates in the world.

In the meantime, Mugabe and his inner circle have stashed millions of dollars outside the country, much of it acquired by renting the nation's armed forces to fight in the neighboring Democratic Republic of Congo.

Large U.S. Cities and an Oil Crisis

Given that oil seems likely to stay above $60 for the foreseeable future, which U.S. cities are best prepared for an Oil Crisis? I'm not sure what to make of this ranking. I would love to get my hands on the raw data:

SustainLane analyzed commute trend data within major cities--how many people rode, drove, carpooled, walked, or biked to work. Then we looked at how much people rode public transit in the general metro area, and metro area road congestion. Sprawl, local food, and wireless connectivity made up our final areas of data analysis (see chart below for weighting of these criteria). The index did not take into consideration energy impacts associated with heating or electricity, which would be largely dependent on non-oil energy sources, such as coal, natural gas, and nuclear energy. Only one U.S. city in our study, Boston, uses a significant amount of heating oil. For this reason Boston, ranked #2, gets an asterisk: if heating oil usage were used as a criteria its rank would be somewhat lower.

Roubini on Global Rebalancing

Great post highlighting that while there is a growing consensus that the U.S. deficits (Current Account and Fiscal) need to be addressed, there is less agreement over whether the U.S. should continue urging China to revalue the Yuan. After reading the arguments for and against, it really is hard to imagine how rebalancing can take place if China does NOT revalue the Yuan:

So, McKinnon and Roach are correct in stressing the important role that US fiscal adjustment can play in supporting an orderly global rebalancing. But their view that such rebalancing does not require any exchange rate adjustment in China is at odd with over thirty years experience with flexible exchange rates where exchange rate flexibility has helped undoing exchange rate misalignments that do occur from time to time. Adjusting relative prices via nominal exchange rate movements is less costly that trying to adjust such relative price via costly deflation or inflation.

One can also point out that the risks of a deflationary spiral in China are minimal. Currently, in China inflation risks are increasing - not decreasing - (as Goldman Sachs has recently pointed out) and the actual inflation rate is artificially kept low via various administrative freezes on the price of energy and the price of many public services. So, the risk of deflation via a currency appreciation is minimal. If anything, by appreciating its currency China could successfully control inflationary pressures - such as those deriving from the skilled labor shortages pressures on wages in the high growth regions of China - while providing to its citizens an increase in terms of trade or purchasing power over foreign goods.

Also, the McKinnon concern about the deflationary effect of a Chinese and Asian appreciation on their economies can be turned on its head as a failure to flexibilize the Chinese and Asian currencies may lead to deflation in the US, Europe and Japan. Indeed, if the Chinese/Asian appreciation does not occur via a nominal appreciation and it does not occur via higher inflation in China (as slow growth of Chinese real wages may keep such inflation under control), then the only way in which such real appreciation can occur is through the fall in the price of traded goods in the rest of the world (i.e. a fall in prices in the US, Europe and Japan). Thus, while McKinnon worries about Chinese deflation, he does not consider the possibility that the needed real exchange rate adjustment could - in principle - occur through a destabilizing deflation in advanced economies. And, as the experience of Japan in the last decade suggests, such deflationary pressure would have severe consequences on the productive sector of the advanced economies.

Thus, a US fiscal adjustment without a change in relative prices (the Chinese/Asian nominal and real exchange rate) will not trigger enough of an expenditure switching effect that is required to reduce the global imbalances. Both are required to have an orderly global rebalancing. Unfortunately, however, the U.S. has very little legitimacy in brow-beating China to do its part of the global rebalancing via an RMB reval as the U.S. is doing nothing to address its fiscal deficit problem that is an important source of such imbalances.

U.S. Immigration: Asian and Latino Perspectives

Asians have a different perspective on immigration. To come to the U.S. from Asia, most likely requires a round trip ticket, and a valid visa (tourist, student, work, or immigrant visa), thus producing a perspective on immigration not completely aligned with what is prevalent among Latinos. The article notes that siblings of Filipinos who are U.S. citizens face a 23-year wait to get an immigrant visa! Think about that for a second: from the Asian perspective their relatives have to wait years in order to get an immigrant visa, why would they support amnesty for those who crossed the border and "jumped the line"? To be fair, amnesty does not mean permanent residency, but for those who have relatives who need to wait years, they would rather have their family here sooner rather than later, and for the most part, those family members cannot simply cross the border to the U.S. While most Asians I talk to recognize the hard work and the valuable contributions of the 11M illegal immigrants, their notion of immigration reform is focused on shortening the wait times for their friends and family.

With those thoughts in mind, the statistics cited below become less surprising. From the LA Times:

... Their priorities, however, are often different from Latinos'.

Statistics help explain why: Only about 8% to 10% of the Asian population is here illegally, compared with more than 20% of Latinos.

Latinos accounted for 78% of the nation's 11 million illegal migrants in 2005, compared with 13% from Asia, according to the Pew Hispanic Center.

As a result, Asian activists say, their communities are most concerned about reducing family visa backlogs — a goal opposed by some immigration-control groups. Asians also oppose other proposed measures that they say would harshly curtail the civil rights of legal immigrants.

Because their homelands are an ocean away, they are not as concerned with a proposed guest worker program or with enhanced border enforcement.

In addition, more Asians than Latinos are naturalized U.S. citizens, college-educated and professionally employed — attributes that may make some feel less connected to the struggles of predominantly low-skilled illegal immigrants.

... Although the majority of legal Asian immigrants support legalizing the undocumented, one recent multilingual poll sponsored by New America Media, an ethnic media consortium, showed that 39% favored the deportation of all illegal migrants, compared with 8% of legal Latino immigrants who held that view.

A 1994 Times exit poll showed that 47% of Asian Americans voted for Proposition 187, the state initiative that would have denied public benefits to illegal immigrants had it not been struck down by the courts. Less than a quarter of Latino voters supported it.

When San Gabriel attorney Shawn Chou recently spoke about immigration on one of Southern California's most popular Chinese-language radio shows, he said the response startled him: Well more than half of the callers opposed legalizing illegal immigrants, saying they were lawbreakers who shouldn't jump the line and would shrink the pool of public resources.

"If they cross the border illegally, you can't give them citizenship — it's somewhat unfair to people who waited in line," Joe Fong, 40, a naturalized U.S. citizen from Hong Kong, said at a Monterey Park coffee shop.

Overall, Asian American activists say their greatest priority is to ensure that the issue of more family visas does not get shortchanged in the current policy debate, which so far has focused on illegal immigration and guest worker plans.

Asians face among the longest waits of any immigrant group for relatives' visas. Filipino siblings of U.S. citizens, for instance, face a 23-year wait, according to the U.S. State Department website.

Hamas in Disarray

The LA Times has an article on the party now in control of the Palestinian authority. As predicted, it is much easier to criticize and second-guess from the sidelines: delivering security and basic services is much harder. Definitely worth reading the full article.

... Rivalries have steadily sharpened in recent weeks between Hamas and Abbas, who was elected a year earlier than Hamas and wields powers of his own as head of the executive branch. The two sides have repeatedly sought to limit each other's authority and cancel each other's decrees.

Within Hamas, it has become clear there is little in the way of an established chain of authority. Ismail Haniyeh, the Palestinian prime minister who is generally thought of as a leader of Hamas' pragmatist faction, has found himself preempted again and again by the group's hard-line exiled leader, Khaled Meshaal.

Israeli analysts believe that Haniyeh, despite having a loyal following in Gaza, has been unable to muster any genuine authority in policy decisions and is fast proving a figurehead.

"The thing is, no one is really in charge," said Shlomo Gazit, a former head of Israeli army intelligence. "There are so many competing interests within Hamas, so the status quo, the fallback position, is the ideology that Hamas has always had, and they will adopt positions that have an internal logic consistent with that."

Socially Responsible INTERNATIONAL Investing

Mutual Funds are coming up with products to help Socially Responsible U.S. Investors diversify with international companies. The screening criteria is slightly different from domestic SRI funds:

Some investors, impatient with years of sluggish returns from US stocks, have found they can get a bigger bang for their buck in foreign markets. In addition, those who want their overseas investments to have a social impact are dipping into mutual funds geared toward socially responsible investing (SRI).

Eight funds fitting that description now have some $4.6 billion under management. Together, they have racked up a healthy 24.2 percent average annualized return for the three-year period ending March 31, according to fund-tracker Morningstar.

... About 5 of every 6 of the world's 600-plus SRI funds operate overseas. Investors who go with an offshore SRI fund in some ways leave behind the usual focus of US-based SRI funds. The Henderson Industries of the Future Fund, for instance, seeks to invest in child-care providers and builders of affordable housing - two niches that SRI fund companies in the US tend not to emphasize. While most domestic SRI funds operate by screening out problematic industries, this Henderson fund includes only firms in industries deemed to have a positive influence on societies and the planet. With a 67 percent cumulative return since inception in 2002, the fund remains competitive with its American counterparts.

Globalization and Overseas Workers

Great slideshow (with audio), and article from the LA Times. These are part of a larger series on "The New Foreign Aid".

For some poor countries, the supply of skilled/educated workers far outpaces the local economy's ability to generate new jobs. Globalization has increasingly meant that the workers travel to other countries where their services are needed. In an earlier post, I highlighted just how dependent developing countries are on the income of these overseas workers.

Renewable Energy: Recent Statistics

From the U.S. Department of Energy (DOE):

[1] Renewable Share of Total Energy U.S. consumption => 6%

[2] Hydro-electric and Other Renewables, share of Total U.S. Electricity generation => 9%

[3] Hydro-electric share of Total World Electricity production => 7%

PG&E Delivers Wind Energy

A newly launched 75 MW facility in Solano County is the first of many such facilities in the works.

Rolling blackouts; energy shortages; price gouging by out-of-state producers. Common phrases from five summers ago that helped bring down a California governor.

A Solano County project built in response now helps reduce the chance of such a thing happening again.

Solano County's Shiloh Wind Project, the first energy generator built in California since the statewide energy crisis of 2000, recently began delivering power to PG&E, a spokeswoman for the utility said Monday.

"Very few energy generation sources were built after the

Not only does the Shiloh wind farm contribute 75 megawatts of energy to the thousands needed in Northern California daily, but the power generated is clean and renewable, Randle said.

Just like the California energy crisis a few years spurred the Golden State's investments in renewable energy sources, $70 per barrel of oil may spur more investments across the U.S. The Bush administration is making noise in favor of renewables, hopefully favorable policies will follow. Luckily we won't have to rely completely on the current administration: what happens in the Golden State, eventually gets adopted nationally.

Greenpeace Founder Goes Nuclear

In a Washington Post article, Patrick Moore explains why he has become a proponent of Nuclear Energy. In a previous post, I outlined the reasons why the NRDC believes Nuclear energy will not be able to compete with renewables. I would love to hear Patrick Moore and Ralph Cavanagh of the NRDC in a public debate.

UPDATE: Transcript of an online chat with Patrick Moore. Here are some interesting bits:

Do you have a suggestion for the proper mix of renewables and nuclear power sources. And are there modeling and simulation tools that might help in calculating and quantifying such a mix of sources?

Patrick Moore: I don't think there is much justification for solar voltaics on the grid. Wind may be able to produce 10% cost-effectively. Geothermal heat pumps are cost-effective in every building and should be widely deployed. Hydro-electric already produces a substantial % of electricity but it is mostly built out. So the majority of power must be produced by coal, gas or nuclear. I would emphasize nuclear and try to reduce reliance of coal and gas.

Rockville, Md.: Dr. Moore, I'd guess that your support for nuclear power receives some funding from industry groups or their representatives, as your positive views on logging are underwritten in part by commercial forestry interests. There's nothing wrong with being employed by those whose point of view you share, of course, but in the interest of full disclosure, can you tell us what nuclear trade or media groups contribute to your income or the income of your company, Greenspirit?

Patrick Moore: We work for the Nuclear Energy Institute in DC and the Canadian Nuclear Association in Ottawa.

... Reston, Va.: Is Greenpeace willing to actively work for the start of nuclear reactor construction in the United States? What type of reactor design does Greenpeace favor?

Patrick Moore: I left Greenpeace 20 years ago, note it describes me as a "former leader" at the bottom of the article. Greenpeace is religiously opposed to nuclear energy. I think they need to rethink their position.

... Berkeley, Calif.: Why haven't there been any nuclear power plants built in the last 30 years? There is no law against them; even the loud and popular protests against one of the last plants built, Diablo Canyon (in California) in the 70s, didn't stop it. Isn't a matter of economics?

Also, will the same proportion of government subsidies be required over the next 50 years as existed over the 50 years between 1948 and 1998 when, according to the National Resources Defense Council, nuclear power subsidies were an estimated 60 percent of the total federal energy research and development funding, while 23 percent went to oil, coal, and natural gas, 11 percent to renewable energy sources such as wind, hydro, geothermal, and solar power, and only seven percent to energy efficiency technologies. And this doesn't include the 'subsidy' that the nuclear power industry receives through the Price-Anderson Act which limits the liability from catastrophic accidents.

Patrick Moore: Economics has played a role, coal has been cheaper in the past. So if you want cheap we get air pollution and greenhouse gases.

I don't know the NRDC report. Do they include military nuclear costs?

Nuclear technology is very R&D intensive, a legitimate role for government/industry co-operation.

Karen Armstrong Interview

The SF Chronicle has a two-part interview with Religious Scholar Karen Armstrong:

• Part I
• Part II

Sarbanes-Oxley May Need Some Tweaking

I think the time has come to see if the landmark Sarbanes-Oxley act can be tweaked, while maintaining its primary goal of better financial disclosure. I keep reading that the U.S. is losing foreign companies to European and Asian exhanges:

London has certainly benefited from others' actions. For example, the Sarbanes-Oxley legislation in the U.S. has created a governance framework that discourages foreign companies from raising capital in the U.S.

On the other hand, as an investor I prefer to invest in equity markets that are transparent, I suspect that foreign and domestic long-term or institutional investors feel the same way. Remember that Sarbanes-Oxley passed at the hight of the Enron/Worldcom/Adelphia/Qwest/etc. meltdowns, so a re-examination may now be warranted. The NYTimes had a recent article on the backlash and the reaction of institutional investors:

"There is no question that, broadly speaking, Sarbanes-Oxley was necessary," said John A. Thain, chief executive of the New York Stock Exchange, in remarks echoed by others at the roundtable.

Nick S. Cyprus, controller and chief accounting officer for the Interpublic Group of Companies, was even more specific, praising a provision of the law that has become a particular target for many critics. "I'm a big advocate of 404," he said, referring to Section 404 of the law, "and I would not make any changes at this time."

Section 404 requires companies and their auditors to assess the companies' internal controls, which are the practices or systems for keeping records and preventing abuse or fraud. Something as simple as requiring two people to sign a company check, for example, is one type of internal control.

Of the 2,500 companies that filed internal controls reports with the Securities and Exchange Commission by the end of March, about 8 percent, or 200, found material weaknesses, the agency's chairman, William H. Donaldson, said at the roundtable. That exceeds the 5.6 percent rate that Compliance Week magazine found in a review of the first 1,457 companies to report.

Executives at the roundtable consistently said that complying with Section 404 has been more expensive than they had anticipated, and they questioned whether the benefit - which no one has been able to quantify - is worth the cost.

There are, perhaps unsurprisingly, several studies of the cost of compliance from various business groups. Financial Executives International, a networking and advocacy organization, said last month that a survey of 217 publicly traded companies showed they had spent $4.36 million, on average, to comply with Section 404.

A different survey, of 90 clients of the Big Four accounting firms - Deloitte Touche Tohmatsu, Ernst & Young, KPMG and PricewaterhouseCoopers - found that the companies spent an average of $7.8 million on compliance. That was about 0.10 percent of their revenue, and less than the $9.8 million paid, on average, to C.E.O.'s at 179 companies whose annual filings were surveyed earlier this month in Sunday Business.

The accounting firms noted that as companies become more familiar with Section 404, the amount they spend to comply with it may drop this year, by as much as 46 percent, according to the survey.

Despite forecasts like this, complaints seem to have registered with regulators. William J. McDonough, the chairman of the S.E.C.'s Public Company Accounting Oversight Board, said at Wednesday's event that the agency would consider ways to provide more guidance on 404 requirements in the next few months.

The quiet campaign against provisions of the Sarbanes-Oxley Act may have had something to do with the proposal by Representative Ron Paul, a Republican from Texas, on Thursday to eliminate Section 404 entirely. In a statement, the congressman said the provision "has raised the costs of doing business, thus causing foreign companies to withdraw from American markets and retarding economic growth."

But representatives of institutional investors emphasized that they are the real parties paying the bill for compliance, and that they are happy to do so. Changes to the rules - and certainly to the underlying legislation - are premature, Cynthia L. Richson, corporate governance officer for the Ohio Public Employees Retirement System, said in a telephone interview after the roundtable. "At this point," she said, "the benefits are just starting to be realized and, of course, the first year is going to be somewhat difficult from a cost perspective."

Scott C. Newquist, chief executive of Board Governance Services, a consulting firm to corporate directors, said he felt little sympathy for executives seeking to lighten the burden of the new reporting requirements. After all, he said, the law was passed in the wake of several big corporate frauds. "It relates back to the argument that there are only a few bad apples and it's not a systemic problem," he said. "I would argue that a lot of these problems are systemic."

BEYOND the costs of assessing their internal controls, executives focused on a few specific concerns. Auditors, they said, were too conservative - requiring disclosure of everything, testing controls that could not have a material effect on financial reports - because they worry about second guessing by regulators and plaintiffs' lawyers.

Meeting the demands of Section 404, they added, also took time away from more productive activities. Executives from smaller public companies said they should not have to meet the same requirements as larger companies, which they said have more resources to handle regulatory compliance. Several executives complained that relations with outside auditors had deteriorated.

Raymond J. Beier, a partner at PricewaterhouseCoopers, said that while some of these concerns had merit, 2004 was the first year that the new rules had been in place. "Refinements in the process will better serve the system," he said in a telephone interview after the roundtable.

Ms. Richson of the Ohio pension fund said the environment might only become more charged, and added that she expected companies to try to weaken Section 404 and other Sarbanes-Oxley provisions once the atmosphere turned more friendly to business.

"If you listened carefully, you can reach the conclusion that there's more to come, if the business interests are successful at trying to erode some of the investor protections that were put in place three years ago," she said. "That would not be a good thing."

A Future Without Oil?

Is actually closer than we think, even for the transportation sector. Kudos to the LA Times:

... But proponents believe the decades of inertia could be broken by a rare convergence of technology, money, political will and motivated motorists.

"I see a broader base of interest and support now than ever before," said James Boyd, a member of the California Energy Commission.

Even the president, a onetime oilman, shifted his stance by declaring in January's State of the Union speech that the country was "addicted to oil" and that it should "move beyond a petroleum-based economy."

Renewable fuels such as ethanol and biodiesel hold the greatest promise of immediately reducing oil consumption because they are available today for use in existing vehicles.

Ethanol is made from organic material such as grain crops, wood chips and agricultural waste. A distillation and fermentation process, similar to what goes on in a brewery, converts corn kernels and the like into ethanol.

The fuel is made from renewable sources, boosts octane levels and pollutes the air less than gasoline does. Regular vehicles can run on gasoline blends of as much as 10% ethanol without changing anything, and the nation's more than 5 million so-called flex-fuel vehicles can use gasoline blends with as much as 85% ethanol.

Government subsidies help keep the cost of ethanol close to that of gasoline, and last year, oil companies blended ethanol into about one-third of the nation's car fuel. In California, ethanol has been widely used as a component of cleaner-burning gasoline since 2004, when the state banned the use of methyl tertiary butyl ether because it contaminates groundwater.

About 4 billion gallons of ethanol were used last year, replacing 170 million barrels of oil. Under a federal mandate, ethanol consumption could almost double by 2012.

"It is the only option we have today in terms of a liquid fuel alternative to gasoline that can be used in the existing distribution system," said Neil Koehler, who has spent half of his 48 years pushing ethanol as a way to loosen crude oil's hold on cars.

Fresno-based Pacific Ethanol Inc., where Koehler is chief executive, recently won an $84-million pledge from Microsoft chief Bill Gates' investment firm. The company plans to open the first of five ethanol plants this year in Madera County.

Still, ethanol is no silver bullet.

... Biodiesel is another alternative fuel gaining momentum.

It is most commonly produced from animal fats or natural oils such as those found in corn and soybeans. Some biodiesel is made from used vegetable oil tossed out by restaurants, giving a vehicle's exhaust the faint smell of fried food.

Production of biodiesel requires simple chemical reactions, which can be carried out in a good-sized refinery or a backyard contraption. The finished product can be sold as is to motorists, but it's more commonly blended into regular petroleum-based diesel in concentrations of 2% to 20% biodiesel. A company backed by country singer Willie Nelson has drawn attention to the fuel by selling BioWillie, a 20% biodiesel blend.

Stephen Flynn is among the converts. More than a year ago, the Valencia resident dumped his gasoline car for a 1996 Chevy Suburban diesel he found on EBay, and he's been filling up with 99% biodiesel ever since. Flynn, a prop master for television commercials, says he goes as much as 500 miles before refueling.

Any diesel engine can operate normally on a low concentration of biodiesel; a high concentration can require minor modifications.

"It runs great and clean," Flynn said. "I don't see any cons."

Biodiesel not only reduces consumption of petroleum-based diesel, thereby cutting harmful vehicle emissions, but also boosts the diesel equivalent of octane and improves lubrication in the engine.

The principal drawback is its expense compared with that of traditional diesel, though the gap has closed substantially with government incentives, tax breaks and the recent rise in diesel prices. In addition, biodiesel can be difficult to find because it is sold at only about 600 filling stations nationwide.

Flynn solved the problem by joining a co-op in West Los Angeles, where members fill up with 99% biodiesel from a self-serve dispensing trailer set up in a leased section of a parking lot. The group's 40 members pay an average of $3.40 a gallon for the fuel, a slightly inflated price to help offset overhead costs, according to co-op founder Colette Brooks.

Portfolio Diversification and Commodities

Diversification with commodities is getting easier, the SF Chronicle has the details:

However, new avenues for commodities investing are emerging in the form of exchange-traded funds.

Exchange-traded funds, as you may know, trade just like regular stocks and are becoming increasingly popular as a substitute for index mutual funds. While conventional mutual funds discourage frequent trading, you can buy and sell the same ETF all day long, should you desire. Thus, ETFs are useful for traders who want to quickly move into and out of particular industries or other market segments.

Recently, a new form of ETF has emerged. It started in November 2004 when the StreetTRACKS Gold Shares fund (ticker symbol GLD), which tracks the day-to-day movements of gold bullion, started trading. Just two months later, in January 2005, the iShares Comex Gold Trust (IAU), which also tracks gold bullion, became available.

The next shoe dropped on Feb. 6, when the Deutsche Bank Commodity Index Tracking Fund (DBC) began trading. Unlike the gold funds, which track a single commodity, the Deutsche Bank fund attempts to mirror an index that tracks the prices of the major commodities: crude oil, heating oil, gold, aluminum, corn and wheat.

Recently, the first exchange-traded fund that tracks oil prices became available. The U.S. Oil Fund (USO) tracks the movement of West Texas intermediate crude oil futures, which is the U.S. oil price benchmark. Another ETF that tracks the price of silver will probably be introduced shortly.

If you're in the camp that thinks gold, oil or commodity prices in general are headed higher, you can buy the appropriate ETFs. Conversely, if you think that gold prices have peaked and are headed down, you can sell one of the gold ETFs short (short selling is a strategy for profiting when a stock or fund price drops).

Commodity prices often move opposite to the overall stock market. Thus, some experts advise allocating a small percentage of your portfolio to commodities to hedge against an inflation-driven market downdraft.

Linux as an Enterprise Desktop?

Maintaining Windows for a large number of machines is starting to drive IT folks nuts. One solution being tossed around is to install Linux and a piece of Virtualization software, then run Windows:

Over the last couple of years, there's been a lot of talk about the possibility of Linux making the jump from servers to desktops as a replacement for the ubiquitous Windows operating system. It hasn't happened, at least not in any meaningful way, and it doesn't appear likely to anytime soon. But maybe the real role of Linux on the desktop won't be as a replacement for Windows but as an underpinning for it. Writing on the Security Focus website, Scott Granneman argues that companies should be installing Linux as the default desktop OS and then running Windows virtually on top of it.

Why? For better security. He points to the dire assessment of Windows malware threats that Microsoft security specialist Mike Danseglio presented at a recent conference. "When you are dealing with rootkits and some advanced spyware programs," Danseglio advised, "the only solution is to rebuild from scratch. In some cases, there really is no way to recover without nuking the systems from orbit."

...Running Windows virtually, Granneman says, "will make your life infinitely easier":

If a you receive a phone call that a problem has developed on Bob's "Windows computer" in legal, just use SSH to run a script that closes the virtualization software, blows away or backs up the damaged Windows image so that you can review it, and then copies a master copy of the Windows VM from your server. In just a few minutes Bob will be back up and running, and he'll never know how easy you have it.

If the mac were cheaper and had all the needed arcane software running on it, I would opt for the mac as my Enterprise desktop. Interesting discussion on this subject at Nick Carr's blog.

Michael Pollan

In an earlier post, I talked about the growing number of food "activists" moving to the SF Bay Area. One of those activists, UC Berkeley Journalism Professor Michael Pollan, was recently interviewed on Fresh Air. I found his perspective on the role of corn in the Agriculture industry in the US intriguing. He also points out the challenges facing companies who raise organic/free-range meat on an industrial scale. Definitely worth listening to the entire show.

I always encourage friends who can afford to buy organic/free-range dairy & meat, organic fruits, produce and cereals, to do so. Not only is it good for the environment, the stuff just tastes better. The processed food industry realizes this, and they are starting to hop on the bandwagon in a major way. I'm hoping the majority of producers in the wine and cheese industry follow suit!

But as Pollan points out, buying food LOCALLY is probably the most important thing we can do for the environment.

UPDATE: Here is Michael Pollan on a recent interview with TruthDig.

The French Economy

Interesting Online Chat About the French Economy: Hosted by Steve Pearlstein of the Washington Post.

A portrait of two Frenchmen, high school friends, who have made very different career choices.

Pearlstein's recent article comparing the US and French economies.

The Tank Man

PBS Frontline just aired a great documentary on China. As we all know the rapid economic growth of China has been THE economic story of the last 5 years. The documentary reminds us of the events of 1989 in Tiananmen Sqaure. I remember being in grad school, and following the events with my fellow graduate students from China, Taiwan, and Hongkong. While the mainland Chinese students seemed more annoyed at the students, the goverment response was definitely condemned by all my classmates. What most Westerners sometimes forget is that the economic growth of China has not yet benefited a vast majority of its citizens. Most industrial jobs and foreign investments are in the major cities. A vast majority of people are peasants who live far from the flourishing coastal regions. With the move to a free market system, education and healthcare are no longer free, and retirement benefits are no longer guaranteed by the state. Why doesn't the goverment invest more to lift its citizens out of poverty? The film does a good job of explaining the plight of the worker in contemporary China.

A really sad part of the program is when the host showed the picture of the "Tank Man" to 4 students from Beijing University ("Bei Da"), the top school in China. None of the students recognized the picture! Search on google for images of Tiananmen Square, and you will see the "Tank Man" all over the place. Do the same search inside China, "Tank Man" is nowhere to be found. Thank you google, msft, yahoo and cisco! The tragic thing is that in 1989, Bei Da students where at the center of the demonstrations.

While I admire what the Chinese goverment has done on the economic front, I think more needs to be done to help the increasing number who are being left behind and those that are being exploited. Its a delicate balance, and governing a large country is hard to begin with. But I think they need to do more to build on the solid growth that has already been achieved.

This is an amazing program, I highly recommend it. Go HERE, to view the entire documentary online.

UPDATE: Here is the transcript of an online chat with the filmmaker.

AL GORE

... is on the cover of the latest Vanity Fair (along with RFK Jr., George Clooney, and Julia Roberts in the "Green Issue"):

Al Gore became the unlikely “It boy” of this year’s Sundance Film Festival, thanks to Davis Guggenheim’s documentary An Inconvenient Truth, which follows the former vice president on his relentless worldwide quest to expose the grave truth about climate change. But the fight against global warming is nothing new for Gore, who has made the environment a key part of his life for more than 25 years. Gore faced ridicule in the 2000 presidential campaign for pushing the idea of hybrid cars, and forged ahead with the Kyoto Protocol talks even after aides warned it was an unpopular move. Now, the Bush administration’s negligence toward our planet is facing one consequence it didn’t foresee: the unleashing of Gore’s anger, passion, wisdom, and intellect, untethered by advisers. Inside the issue, Gore’s essay, “The Moment of Truth,” explores the danger of the climate crisis, as well as the unprecedented opportunities it presents. Gore asks, “So why is it that our leaders seem not to hear such clarion warnings? Are they resisting the truth because they know that the moment they acknowledge it they will face a moral imperative to act? Is it simply more convenient to ignore the warnings?” Furthermore, he writes, “Where there is a blinding lack of situational awareness, the people perish.”

This guy could have been the president ("thanks Ralph!), I'm hoping he runs in 2008. He has been spending a few days a month in SF as Chairman of current.tv .

Brazil and Ethanol

A nice article from the NYTimes on what is possible. I think that renewables can be a factor in the US, sooner than the article suggests, especially with an administration that is really behind it:

At the dawn of the automobile age, Henry Ford predicted that "ethyl alcohol is the fuel of the future." With petroleum about $65 a barrel, President Bush has now embraced that view, too. But Brazil is already there.

This country expects to become energy self-sufficient this year, meeting its growing demand for fuel by increasing production from petroleum and ethanol. Already the use of ethanol, derived in Brazil from sugar cane, is so widespread that some gas stations have two sets of pumps, marked A for alcohol and G for gas.

In his State of the Union address in January, Mr. Bush backed financing for "cutting-edge methods of producing ethanol, not just from corn but wood chips and stalks or switch grass" with the goal of making ethanol competitive in six years.

But Brazil's path has taken 30 years of effort, required several billion dollars in incentives and involved many missteps. While not always easy, it provides clues to the real challenges facing the United States' ambitions.

... Ethanol can be made through the fermentation of many natural substances, but sugar cane offers advantages over others, like corn. For each unit of energy expended to turn cane into ethanol, 8.3 times as much energy is created, compared with a maximum of 1.3 times for corn, according to scientists at the Center for Sugarcane Technology here and other Brazilian research institutes.

"There's no reason why we shouldn't be able to improve that ratio to 10 to 1," said Suani Teixeira Coelho, director of the National Center for Biomass at the University of São Paulo. "It's no miracle. Our energy balance is so favorable not just because we have high yields, but also because we don't use any fossil fuels to process the cane, which is not the case with corn."

Brazilian producers estimate that they have an edge over gasoline as long as oil prices do not drop below $30 a barrel. But they have already embarked on technical improvements that promise to lift yields and cut costs even more.

... Some mills are now producing so much electricity that they sell their excess to the national grid. In addition, Brazilian scientists, with money from São Paulo State, have mapped the sugar cane genome. That opens the prospect of planting genetically modified sugar, if the government allows, that could be made into ethanol even more efficiently.

Six Feet Under

We are down to the Final Episode of this amazing TV series. I am sad to see the series end after five compelling seasons, but I'm sure the creative forces behind the show need to move on. I am mourning both the end of the show, and the events taking place in the storyline of the show itself. In some ways viewing the show is like reading a wonderful piece of fiction, you really get drawn into the world of the Fisher family.

While I primarily watch PBS programs, there are some great shows on HBO and Comedy Central. I am thankful that one can rent episodes of those shows on DVD. While most of what is on TV is trash, there are some gems that become available on DVD.

UPDATE: A nice interview of Peter Krause, a.k.a. Nate Fisher.

The Iran Plans

Seymour Hersh has a lengthy New Yorker article on the debate raging inside the U.S. Goverment about what to do about Iran. Folks, the situation is scary. Definitely worth reading from start to finish.

The attention given to the nuclear option has created serious misgivings inside the offices of the Joint Chiefs of Staff, he added, and some officers have talked about resigning. Late this winter, the Joint Chiefs of Staff sought to remove the nuclear option from the evolving war plans for Iran—without success, the former intelligence official said. “The White House said, ‘Why are you challenging this? The option came from you.’ ”

The Pentagon adviser on the war on terror confirmed that some in the Administration were looking seriously at this option, which he linked to a resurgence of interest in tactical nuclear weapons among Pentagon civilians and in policy circles. He called it “a juggernaut that has to be stopped.” He also confirmed that some senior officers and officials were considering resigning over the issue. “There are very strong sentiments within the military against brandishing nuclear weapons against other countries,” the adviser told me. “This goes to high levels.” The matter may soon reach a decisive point, he said, because the Joint Chiefs had agreed to give President Bush a formal recommendation stating that they are strongly opposed to considering the nuclear option for Iran. “The internal debate on this has hardened in recent weeks,” the adviser said. “And, if senior Pentagon officers express their opposition to the use of offensive nuclear weapons, then it will never happen.”

The adviser added, however, that the idea of using tactical nuclear weapons in such situations has gained support from the Defense Science Board, an advisory panel whose members are selected by Secretary of Defense Donald Rumsfeld. “They’re telling the Pentagon that we can build the B61 with more blast and less radiation,” he said.

... The House member said that no one in the meetings “is really objecting” to the talk of war. “The people they’re briefing are the same ones who led the charge on Iraq. At most, questions are raised: How are you going to hit all the sites at once? How are you going to get deep enough?” (Iran is building facilities underground.) “There’s no pressure from Congress” not to take military action, the House member added. “The only political pressure is from the guys who want to do it.” Speaking of President Bush, the House member said, “The most worrisome thing is that this guy has a messianic vision.”

... The President’s deep distrust of Ahmadinejad has strengthened his determination to confront Iran. This view has been reinforced by allegations that Ahmadinejad, who joined a special-forces brigade of the Revolutionary Guards in 1986, may have been involved in terrorist activities in the late eighties. (There are gaps in Ahmadinejad’s official biography in this period.) Ahmadinejad has reportedly been connected to Imad Mughniyeh, a terrorist who has been implicated in the deadly bombings of the U.S. Embassy and the U.S. Marine barracks in Beirut, in 1983. Mughniyeh was then the security chief of Hezbollah; he remains on the F.B.I.’s list of most-wanted terrorists.

Robert Baer, who was a C.I.A. officer in the Middle East and elsewhere for two decades, told me that Ahmadinejad and his Revolutionary Guard colleagues in the Iranian government “are capable of making a bomb, hiding it, and launching it at Israel. They’re apocalyptic Shiites. If you’re sitting in Tel Aviv and you believe they’ve got nukes and missiles—you’ve got to take them out. These guys are nuts, and there’s no reason to back off.”

... Any American bombing attack, Richard Armitage told me, would have to consider the following questions: “What will happen in the other Islamic countries? What ability does Iran have to reach us and touch us globally—that is, terrorism? Will Syria and Lebanon up the pressure on Israel? What does the attack do to our already diminished international standing? And what does this mean for Russia, China, and the U.N. Security Council?”

Bob Baer is the ex-CIA agent, whose life was the basis of the critically acclaimed movie Syriana.

Amartya Sen

I just heard Nobel Laureate Economist Amartya Sen interviewed on KQED. He works in areas that are not that fashionable in Econ circles: poverty, famine, development, etc. He is on a book tour to promote his latest book:

Identity and Violence-The Illusion of Destiny: (His) take on terrorism, the myth of Islam vs the West and the clash of civilisations.

I really liked what he had to say on a variety of subjects, and I liked that he was very humble and not forecful. I can't wait to read the book. Look for the podcast here.

Resistance or Militia?

In a recent program, Democracy Now host Amy Goodman, kept referring to the Iraqi "resistance" and "insurgents". I opposed the U.S. invasion of Iraq, and remain critical of how the U.S. is handling things out there, but at this point, I think these so-called "resistance fighters" or "insurgents" need to be called militias. Consider the following thought experiment: if the U.S. leaves next week, do you think the "resistance fighters" will stop attacking their fellow Iraqis? For the last six months, most of the operations launched by these so-called "resistance fighters" have been against Iraqi CIVILIANS, or even religious shrines.

Any group that launches attacks based on SECTARIAN reasons, smells more like a militia to me. Unfortunately the Western Left has a tendency to glorify movements that oppose U.S. Foreign Policy. You can be opposed to U.S. Foreign Policy without glorifying groups that launch suicide bombings against civilians and religious shrines.

The Value of the Euro

Brad Setser and Europe's role in the Global Imbalance:

I long argued that Europe has done more to contribute to "global balance of payments adjustment" than American critics of Europe's slow growth typically acknowledge. Europe's hasn't grown fast (setting frothy Spain aside), but it has let its exchange rate adjust. And that counts.

To over-generalize:

Emerging Asia = solid growth and no exchange rate moves. China being the main example.

Europe = slow growth and big exchange rate moves.

And generally speaking, US exports to Europe have grown faster than US exports to emerging Asia over the past few years despite Europe's far slower growth. Exchange rates matter, not just growth differentials. The fall in the dollar against the euro between 2002 and 2004 also helps the US in other markets.

Issue Stock or Debt?

This makes a lot of sense:

Managers avoid issuing equity when investors disagree with their expectations on the profitability of new investment projects. Issuing equity under these conditions would drive the stock price down. If managers are interested in short-term stock price movements, they will issue equity when they have the same expectations as investors. This implies that equity issuance will prevail when stock prices are high, and debt issuance when they are low. It also implies that equity issuance is followed by increased capital expenditure. These predictions are confirmed by the recent issuing behavior of US companies.

California Illuminates The World

We are members of the Natural Resources Defense Council, and I always look forward to receiving their quarterly magazine . This month's excellent cover article is on the " ... Golden State's pioneering efficiency plan". As is well-known in the energy industry, what happens in California is usually adopted by the rest of the country. I'm proud to say that my state is once again at the forefront of some of most exciting initiatives in the energy biz. A state with an economy roughly the size of France or England, but with half the number of people!

... Since 2001, California has bounced back, fashioning a new framework of utility regulations that places greater emphasis on efficiency than ever before. Through 2008, utility companies plan to spend $2 billion -- a record for any state -- to help Californians save energy. The investment will yield a net gain of $3 billion in economic benefits for the state by reducing utility bills. "This efficiency campaign will avoid the need to build three large power plants," says Brian Prusnek, a senior staff member at the California Public Utilities Commission. "In terms of greenhouse gas emissions, that's the equivalent of taking 650,000 cars off the road. How many other investments yield a 50 percent financial return and reduce pollution?"

Leading-edge policies and technologies that encourage efficiency have long been a California export, right along with merlot, movies, and semiconductors. Energy policy makers in other states as well as in the federal government look to California's energy-conservation measures the same way political analysts view the New Hampshire presidential primary -- as a bellwether for the nation. California was, for example, the first state to adopt efficiency standards for appliances. These went into effect in 1977 and were upgraded throughout the 1980s. Florida, Massachusetts, Connecticut, New York, and other states followed California's lead, sometimes copying the California code verbatim. This shift at the state level convinced appliance manufacturers to join with efficiency advocates in lobbying for a uniform national standard, which Ronald Reagan signed into law in 1987. Thus began a process that continues to repeat itself. Since 2004 several other states have adopted at least some of California's latest standards, many of which also wound up in last year's federal energy bill. "The general pattern," says Devra Wang, a staff scientist at the Natural Resources Defense Council, "is that California adopts new standards, other states follow, and then they're adopted at the federal level."

... Nobody knows the power of energy efficiency better than Art Rosenfeld, who was present at the creation of the concept as we know it. Rosenfeld is a kind of human power plant -- one that generates not megawatts, but "negawatts" of avoided energy consumption (to use the famous coinage of Amory Lovins, cofounder of the Rocky Mountain Institute).

... With state and federal funding, Rosenfeld's group refined the program, and then in 1976 released it into the public domain. Originally called "Two-Zone," it is now known as DOE-2. The California Energy Commission, created in the early 1970s to conduct research and create efficiency standards (among other mandates), adopted DOE-2 as the basis for setting energy-performance standards under Title 24. The commission estimated that buildings constructed under Title 24 -- and, therefore, designed using the Rosenfeld/DOE program -- eventually ramped up to energy savings of $5 billion a year.

... One invention was the high-frequency ballast -- a solid-state power source that improves the efficiency of a standard fluorescent rod but uses 20 percent less electricity. In the hands of lamp manufacturers such as Philips, the high-frequency ballast led to the creation of the compact fluorescent lamp (CFL), a mainstay of energy-efficiency programs throughout the world. Another breakthrough was the low-emissivity, or "low-e," window -- a window with a thin coating that allows visible light to pass through but captures or reflects the sun's invisible near-infrared radiation, which produces heat. Low-e coatings roughly double the energy performance of standard double-glazed windows.

... Rosenfeld takes a few moments to sum up the savings from the major efficiency technologies and policies that originated at LBL during his tenure. "Let's see," he muses. "The DOE-2 computer program is used in building standards that save the country, conservatively, $10 billion a year in electricity and natural-gas costs. High-frequency ballasts for fluorescent lamps are saving the United States around $5 billion worth of electricity a year. Low-e windows are probably saving between $5 billion and $10 billion a year. Then if you look at refrigerator standards, which originated with us, improvements in refrigerator efficiency since 1974 are now saving the country around $17 billion a year."

... California's recommitment to energy efficiency is partly a return to the past, but with a significant new wrinkle. Now, when utilities plan for long-term growth in electricity demand, efficiency is the resource of first resort, with renewable energy sources next in line. Utilities and regulators call this the "loading order." What it means, in Kennedy's words, is that "before our electric utilities spend a dollar to buy power in the market or build a new generation plant, they will first invest in ways to help us use energy more efficiently." If efficiency measures don't free up enough generating capacity to meet the growth in demand, the next resource in the loading order is renewable sources. Only then can utility companies turn to fossil-generated power (whether bought or built), and even then any new plants that are constructed must be no dirtier than a state-of-the-art natural-gas generating plant.

The Crisis in Darfur

The NYTimes Magazine has a cover article on efforts to build cases, in the International Criminal Court (ICC), against the people responsible for the genocide taking place. While the U.S. is not a supporter of the ICC, President Clinton signed the treaty and sent it to the Senate for ratification, where it languished upon the arrival of the Bush team. I just don't think President Bush and Condi Rice are talking enough about this issue. We can have another Rwanda on our hands:

The current Darfur conflict began raging after rebels ambushed the Sudanese Air Force at one of its bases in North Darfur early in 2003. It was a humiliating defeat for Bashir and his government's security apparatus. The government responded — as it had previously in the Nuba Mountains and the southern oil fields — by recruiting local militias to wage a counterinsurgency campaign, thus pitting tribes against one another. The name janjaweed means bandits or ruffians; it combines "devil" (jinn) with "horse" (jawad) and conjures a dark terror for Darfurians. The janjaweed were plucked from the mostly nomadic camel- or cattle-breeding Arab tribes of Darfur and neighboring Chad. Uneducated, destitute and landless, they are motivated mainly by promises made by Sudanese government officials of land and loot. Today the government uses them as a means of deniability: the militias are uncontrollable, the government says, and are merely carrying on an ancient tribal conflict or a centuries-old fight over resources between seminomadic Arabs and African farmers. Yet when the government wants to control them, it does, and many of the janjaweed have simply been incorporated into what are known as the popular defense forces.

... Sudan's rulers seem to contemplate the murderous violence that sustains their power with complete serenity. One evening in Khartoum I visited the former governor of South Darfur, Lieut. Gen. Adam Hamid Musa. We sat in his garden during Ramadan, accompanied by a professor friend of his. Hamid Musa lived in a residential area cordoned off for favored military officers. He was removed as governor in 2004 and now heads the Darfur Peace and Development Forum, which is financed by Sudan's ruling party. He suggested that talk of rapes and racial cleansing in Darfur was simple propaganda. "Do you think a governor will go to kill his own people?" he asked.

Even before he was made governor in 2003, Musa was part of a group of Arab ideologues who were in Darfur recruiting Arab nomads into the militia now known as the janjaweed. In the garden that night, he noted that the allegations of rape and slaughter all came from the tribes of victims.

"And they all lied?" I asked.

"Yes," he said. "A single case of raping hasn't been proved. The women there don't even know what the word means." He chuckled happily and popped a toffee into his mouth, as did his professor friend.

... At the same time, the Bush administration has stopped calling the crimes in Darfur a genocide. The administration does not want to lose the North-South agreement and the peace it has secured, and this may make it wishy-washy on Darfur. It has also found Sudan to be a useful ally in the war on terror. At least some Sudanese leaders being investigated by the I.C.C. are, according to American officials who asked not to be named, highly valuable, if unreliable, allies in hunting down Islamic terrorists. "In 2004, when the Sudanese decided to conclude the North-South peace, they got an A- on cooperation," a senior American official said. "They rendered people and gave us information on people we didn't even know were there. Since then they've done stuff that saved American lives." The C.I.A. flew Sudan's national-security director, Salah Abdallah Ghosh, to Washington for a debriefing last year. He shared information that his office had on Islamist militants training in Sudan before 9/11. Yet he is one of a handful of top security men orchestrating Khartoum's crimes in Darfur and deploying intelligence units that have carried out targeted killings since 2003. In December, a United Nations panel recommended that Ghosh and 16 other Sudanese officials face international sanctions. "The U.S. has pressed the U.N. not to include Ghosh on the list of people who should be subject to sanctions," John Prendergast, a senior adviser at the International Crisis Group, told me. "Trying to constructively engage with mass murderers in order to gather information is the wrong policy. It reinforces the regime's willingness to perpetrate atrocities."