Release 2.0

O'Reilly Media has acquired Esther Dyson's newsletter Release 1.0:

The Job Market for College Graduates in China

Has gotten a lot tougher:

A tide of more than 30,000 students with polished résumés and high hopes surged into a job fair here so eager to meet with employers that they shattered four glass doors and splayed the side walls of an escalator in what became a near riot.

As the crowd of youths swelled out of control, students and security guards said, police tried to beat back the throng but to no avail. Pushing, screaming and climbing over one another, the students charged on, heading for the booths inside the Zhongyuan International Exhibition Center, where company recruiters waited with the keys to China's new economy.

"You didn't even need to walk in the main hall, because people were sweeping you along all the time," said Hou Shuangshuang, 23, an e-commerce major with long hair who was among the students who overflowed the job fair when it opened Sunday. "At some points, your feet couldn't even touch the ground."

Hou and her classmates from Zhengzhou University, along with students from other schools in this Henan province city about 500 miles south of Beijing, provided a dramatic example of rising anxiety over employment among millions of Chinese students. After years in which graduates were ensured of a good job in the fast-growing economy, the number of degree-holders has outstripped the number of jobs, and the guarantees have evaporated.

"I don't think we have a very bright future," said Yu Honghua, 23, another e-commerce major at Zhengzhou University who shoved her way into the fair. "I saw only one company that needed students who majored in e-commerce, and they just needed one person."

... So far, the party has delivered on its part of the bargain: The economy has grown by more than 9 percent a year recently, and the main beneficiaries have been educated urbanites. Content to claim their share in the prosperity, most students have shown little interest in politics since the Tiananmen Square protests of 1989.

But a large pool of unemployed or underemployed university graduates, some analysts have suggested, could become a new breeding ground for opposition. An educated opposition, they said, would have far more organizational and ideological ability -- and present a greater threat to the government -- than the left-behind farmers who have been the main source of unrest in recent years.

The Labor and Social Security Ministry estimated recently that as many as 4.9 million youths will graduate from universities by the end of 2007, up by nearly 20 percent over 2006. Another 49.5 million will graduate from high school, also a 20 percent increase. The sharp climb in graduation rates represents a dramatic improvement in the lives of many Chinese, made possible by the economic transformation that has taken place here over the past quarter-century.

But indications have emerged that, booming as it is, the economy may not be able to absorb that many degree-holders into the jobs for which they are being trained. "The fact is that it's very hard for college students to get the right job these days," said Zhang Xuxin, a Zhengzhou student with close-cropped hair and plastic-rimmed glasses who plans to pursue postgraduate studies next year. "You may have a job, but it's very hard to have an ideal one."

A waitress in a German restaurant near Beijing's Ritan Park, for instance, said she has been looking for work in the computer industry since graduating last summer, but in the meantime, she has to serve sausages and beer to pay the rent because nothing is available in her field.

... Tensions over employment after graduation have exploded repeatedly in recent months, betraying the pressure students say they feel. Students at Shengda Economics, Trade and Management College, affiliated with Zhengzhou University, rioted in June when they discovered that their diplomas would not be the same as those from the university itself, putting them at a disadvantage in job hunting. A similar riot erupted last month at the Ganjiang Vocational and Technical Institute in Jiangxi province south of here. The Hong Kong-based Information Center for Human Rights and Democracy has recorded 10 such disturbances since summer.

Turn Around in the Philippines

Business Week has a pair of articles: links to part I and part II.

Buy Nothing Day

Is today. I wonder how this group is faring?

Low Energy Lifestyle

From the Washington Post:

A band of idealists in the mountains of North Carolina is trying to build a low-energy lifestyle. But must we all live like hippies in the woods to make a difference?

The Merc on New Resource Bank

The SJ Mercury News has an article on New Resource Bank:

... Hoping to cash in on fast-growing demand for solar power, organic food and other green industries, a group of investors -- including a number of prominent Silicon Valley business leaders -- has formed what it is calling the nation's first commercial bank targeting green industries. New Resource Bank holds its grand opening today in San Francisco.

The bank is headquartered in a building on Howard Street ranked as ``gold certified'' under green building standards because of its recycled materials, non-toxic paints and energy-efficient lighting and heating systems.

... The bank is modeling itself after Silicon Valley Bank, which began with one branch in San Jose in 1983. By catering to technology and life sciences businesses -- trying to understand them and respond to their needs better than large banks did -- Silicon Valley Bank has boomed, and now has 30 locations from New York to Shanghai, with $5.4 billion in assets.

... One of the first deals by New Resource Bank is a partnership with SunPower, a San Jose company that makes solar panels. Under the terms, the bank will make 25-year loans to homeowners to install solar panels, so that the monthly payments are similar to what the customers' electricity bills had been.

So far, environmentalists also like the idea.

Eric Antebi, Sierra Club spokesman, noted that socially responsible mutual funds began about 15 years ago, followed by venture capital firms five years ago that focused on environmental technology. Banks are the next logical step, he said.

``Groups like the Sierra Club can reach people's hearts,'' Antebi said, ``but banks can reach their wallets.''

Washington Post on Biomass

It's amazing how many articles get written up about cellulosic ethanol. The Post's article is a good place to start. First off, what are the sources or inputs for this type of fuel:

... If ambitious plans taking shape in Washington and in state capitals come to fruition, this pile of stalks and many more like it will become the oil wells of the 21st century. The idea is to run the nation's transportation system largely on alcohol produced from bulk plant material, weaning America from foreign oil and the risks that go with it, including wars, global warming and terrorism.

Farmers have pushed for years to get more people using gasoline mixed with ethanol made from corn kernels, but so far such ethanol has replaced only about 3 percent of the nation's gasoline, and by most estimates, the country would never be able to grow enough corn to replace more than 10 or 12 percent of its fuel supply.

How is the fuel produced?

... Cellulose, like starch, is made up of glucose molecules, but packed so tightly they're extremely hard to break apart. Plants use cellulose chiefly as a structural material -- it helps trees and grasses stand upright. If efficient ways were developed to break open the molecules, a wide variety of agricultural wastes or specially planted energy crops could feed the new industry.

Scientific progress has been slow, but now it seems to be accelerating. Enzymes needed for the process used to cost more than $5 per gallon of ethanol, but biotechnology companies, under government research contracts, have reduced that to 30 cents per gallon. A handful of small companies, exploiting the drop, are already making small amounts of ethanol from biomass, and claim that they are close to doing so at competitive prices. Not only are they shopping for locations for bigger plants, they are also signing contracts with farmers to supply raw material.

A remarkable variety of groups, ranging from the Natural Resources Defense Council to conservative national-security hawks, have endorsed plans for biomass ethanol. "I've never seen anything with this many interest groups lining up behind it," said Brent Erickson, a vice president at the Biotechnology Industry Organization, which supports the efforts. A study by the government's Oak Ridge National Laboratory has estimated that the United States could replace more than 30 percent of its imported oil with fuel and chemicals made from biomass. Coupled with domestic oil, more corn ethanol and improved automobile efficiency, that would take the nation a long way toward energy independence.

But are there examples where ethanol has been used on a large scale?

... If the notion that a country the size of the United States could power its vehicle fleet on what amounts to moonshine seems crazy, consider this: Brazil is already well on its way to running a fleet on rum. After a 30-year campaign, Brazil has replaced 40 percent of its gasoline with alcohol produced from sugar cane. With new oil wells coming on line this year, the country is expected to declare independence from foreign oil producers.

Investment is starting to pour in, but the technology is largely unproven:

... Speculative investment capital and even money from some of the big oil companies is moving into the field. A handful of biomass-ethanol companies have built pilot plants, and some are scouting locations for bigger facilities. Politicians are trying to hurry the industry along, with Congress dangling potential loan guarantees to pioneer companies.

Yet fundamental questions about the biomass alternative have yet to be answered. The economics of making ethanol from biomass remain unproven on a commercial scale. Simply collecting all the necessary straw, cornstalks, wood chips and other waste would be a vast logistical problem, and growing energy crops would require big changes in U.S. agriculture.

Nobody is even sure how to store most types of biomass -- an elementary problem in producing a year-round fuel from a seasonal feedstock. That's the question the pile of cornstalks in Nebraska is meant to answer.

Scientists have projected that in the long run, ethanol made from biomass could be cheaper than gasoline or corn ethanol, costing as little as 60 cents a gallon to produce and selling for less than $2 a gallon at the pump. But right now it would be more expensive than gasoline, and the low prices are likely to be achieved only after large plants have been built and technical breakthroughs achieved in operating them.

Perhaps the biggest issue is this: Time and again, the country has grown interested in alternative fuels only to drop the subject as soon as oil prices fell. Will the United States be able to make a plan and stick with it for the long haul?

Jade Planet

At this year's Green Fest, I picked up a pair of Pachira boots from Jade Planet. Listed at $75, these boots made from recycled materials, were on sale for $39! Looking forward to slipping them on.

Green Fest last year was when I launched this blog. Happy 1st anniversary to FairTrader.blogspot.com !

Rush Was In Agony

Amazing quote from Rush Limbaugh following the 2006 Midterm elections (hat tip to Andrew Sullivan):

"There have been a bunch of things going on in Congress, some of this legislation coming out of there that I have just cringed at, and it has been difficult coming in here, trying to make the case for it when the people who are supposedly in favor of it can't even make the case themselves - and to have to come in here and try to do their jobs."

As Sullivan points out:

All together now: Awwww. I'm so sorry Limbaugh had to lie through his teeth to try and keep in the good graces of his Republican masters. Have you ever heard of intellectual honesty, Mr Limbaugh? You can look it up in the dictionary.

Desperate Realtors

From Nouriel Roubini:

I was this morning on CNBC's Squawk Box facing off the president of the National Association of Realtors (NAR). The NAR is becoming so "desperate" that is now wasting $40 million in an advertising (call it spin) campaign - the first ever in its history - that is titled with the Orwellian slogan "It is a Great Time to Buy or Sell a Home" (sic!).

More realistically, as David Rosenberg (the sober chief US economist for Merrill Lynch) has titled one of his most recent studies of the US housing market we are now at the "D" level for the housing market where "D...is for Desperation" as he put it. Realtors and home builders must be reall desperate to waste $40m in an double-speak orwellian campaign of spin, lies and non-sense. The reality is the "It is A Lousy Time to Buy or Sell a Home". It is a lousy time to buy as prices are falling - at an annualized rate of 10% for new homes - and they will be falling another 20 to 30% in the next two-three years as the glut of housing and the bust in the housing market unravels: which fool would buy a home now when a 20% down-payment and the entire equity in such down-payment will be altogether wiped out by a fall in home prices in the next few years? Anyone buying today at the still stratospheric prices will destroy his/her home equity in short order. Since buyers are not fools - in spite of the NAR spin - they are sharply reducing home purchases unless they get huge discounts. It is also a lousy time to sell as there is a massive glut of housing - both new homes and existing homes - on sales and demand is now well below a glut that is becoming worse as the completion of high housing starts at the beginning of the year will be soon dumped in the markets. Thus, expect more "ghost towns", the expression used by SF Fed president Janet Yellen. The sellers are becoming so desperate that they are now relying on Divine Providence to help them sell their homes: as reported in dozens of press items, sales of statues of St. Joseph are skyrocketing; it is has been a long-time popular belief that burying a statue of St. Joseph in the basement of your home helps you sell your home when housing is in trouble. Those statues sales skyrocketed in the housing bust of the early 1990s and they are going through the roof again today.

Book Watch: State of Denial

Bob Woodward's 3rd book on the Bush administration is a page-turner! Iraq is at the center of the book, and one can't help but walk away with the feeling that this is one heck of a dysfunctional administration. I strong recommend you skim through this book (go to your public library), to get a sense of how goverment is NOT suppose to work. Hearing anecdotes about how the Bush administration arrives at decisions is no substitue for reading this book.

Some highlights:

• Prince Bandar (Saudi Ambassador to the U.S. from 1983-2005): In the first few chapters, Bandar is all over the place. I did not realize how close he is with Bush Sr., they are extremely close friends. He probably has more access to Bush Jr. than most members of the administration!


• Condi Rice: Judging by media reports you think that Condi Rice is a star inside the administration, that she is one of the more competent managers. It turns out, a lot of respected Republicans in foreign policy circles regard her as weak and ineffective. Her main problem is that she is essentially a member of the Bush family: she spends weekends with and socializes with the President and his family. David Kay, best known for heading the Iraq Survey Group and acting as a weapons inspector in Iraq after the 2003 Invasion of Iraq, feels that pre-war intelligence was weak, and that Rice and NSC should have asked more questions:
  

  "The dog that did not bark in the case of Iraq's WMD program, quite frankly in my view, is the National Security Council."
  
  "... (Rice) could have stopped trying to be the best friend of the president and be the best adviser and realize she's got this screening function ..."
  
  "(Rice) was probably the worst national security adviser in modern times since the office was created."
  

Please don't tell me the Republicans will ask her to run for office!

• Richard Armitage (Colin Powell's best friend and Deputy Secretary of State): I would love a whole book just on this guy. He is extremely funny, and as Naval officer in Vietnam, he and Powell were the main proponents of diplomacy. Some quotes:
  

  Referring to Cheny, Rumsfeld and Rice: "Their idea of diplomacy," Armitage said to Powell once, "is to say, 'Look f***er, you do what we want.'"
  
  Prior to the Iraq invasion, Powell and Armitage had discussions about Bush, Cheney and the White House: "Don't they have moments of self-doubt?"
  
  On the the tendency for people to stay too long in office and to think they are irreplaceable: "You got to remember when you remove your fist from a pail of water, there's no hole."
  

• Jay Garner (retired United States Army general who was appointed in 2003 as Director of Reconstruction and Humanitarian Assistance for Iraq following the 2003 invasion of Iraq but was soon replaced by L. Paul Bremer): Based on reading this book, the administration probably should have left Garner in place, as he seems to have skills that Bremer doesn't have: management skills, i.e., the ability to delegate; listening skills and humility; and as an ex-military person, a clear appreciation of and experience in providing infrastructure and logistics. Newt Gingrich on Bremer: "(he) is the largest single disaster in american foreign policy in modern times."
  

For the record, I opposed the Iraq invasion, and one of my main reasons for doing so, was hearing diplomats and foreign policy experts warning about the post-war chaos. The ability to listen seems to be in short supply in this administration.

China’s Low-Profit Growth Model

From the Far Eastern Economic Review:

... At issue is not whether the profits of Chinese firms have grown, as the World Bank researchers suggest. No one disputes that. But a growing dwarf is still no giant. At issue is whether China allocates and uses capital efficiently enough so that it produces a return on capital at par or better than international markets. The question is: By international standards, how efficient is China in using its capital?

My own analysis of the same data used by the World Bank concludes that the return-on-equity numbers reported by it are significantly overstated because they do not net out such items as corporate income taxes. The World Bank does not dispute this. But it insists that Chinese firms are now making so much profit that undistributed profits or retained earnings finance more than half of their investments, whereas bank loans finance only one-third or as little as one-sixth. If this is true, it suggests that Chinese firms finance their investments with much less debt in proportion to equity on average than probably all their international peers, and therefore by implication they must have been more profitable. For evidence, the World Bank points to the increase in the proportion of corporate savings in China’s national savings, now accounting for more than 20% of GDP.

... As a macroeconomic concept, corporate savings consist of more than just undistributed profits. In addition, corporate savings include depreciation, amortization (both of which are treated as costs in any corporate income statement) and other things (including government subsidies). Depreciation alone is a big number. China’s growth is driven by fixed-asset investments which now represent more than 50% of GDP and still grow at 25% to 30% per year. As such, China’s fixed-asset base expands each year and so the amount of depreciation from such an asset base also increases. Nobody knows for sure how big the depreciation number is because China’s statistical authorities do not have complete data in this regard, but one can make some safe estimates. ... By this calculation, depreciation alone (11% of net asset value) is more than 1.2 times as large as undistributed profits (9% of net asset value) or at least 55% of corporate savings. Undistributed profits at most represent about 45% of corporate savings.

Therefore, if corporate savings represent 60% of corporate investments, undistributed profits account for no more than 27%, from a macroeconomic point of view. How remarkable a percentage is that? Not very.

... By now, we know that average ROE for Chinese industrial firms is not high by international standards. We have also established that undistributed profits do not finance more than half of corporate investments. Neither do corporate savings. The increase in net margin for Chinese industrial firms in the past seven years comes entirely from interest rate cuts. Banks have played the rich uncle, rescuing and subsidizing Chinese firms with huge amounts.

So are Chinese banks profitable on average in comparison with their international peers? Not at all. The past three years were the best ever for Chinese banks. Yet, their average net return on assets, at 0.4%, is the lowest in Asia. Even without taking into account the need for provisions for bad loans, they are still the least profitable among their Asian peers with their pre-tax, pre-provision profit return on asset of merely 1.1%.

... China has embarked on major banking reforms and meaningful progress has been made. But the economy’s growth continues to be driven by excessive liquidity, and so is costly and inefficient. Improving profitability, returns and efficiency remains the highest priority. While China is on the right track in her search for a cure, the last thing she needs is someone in a doctor’s white gown to come along to tell her she is in excellent health. Fortunately, the leadership knows better. The policy of the central bank to raise interest rates, mop up excess liquidity, curtail lending to overheated industries and generally increase the cost of capital is correct and necessary for sustained growth in the long term.

Neocons Confidence In the Administration

Some of the biggest supporters of the war are profiled in this short article in Vanity Fair. Remember that a lot of what is happening in Iraq was predicted by career State Department officials, as well as members of the Clinton and Bush Sr. administrations. So while I welcome their change of heart, I still don't understand why they were so confident that Democracy can be transplanted so easily to Iraq. Money quotes:

(Richard) Perle goes so far as to say that, if he had his time over, he would not have advocated an invasion of Iraq: "I think if I had been delphic, and had seen where we are today, and people had said, 'Should we go into Iraq?,' I think now I probably would have said, 'No, let's consider other strategies for dealing with the thing that concerns us most, which is Saddam supplying weapons of mass destruction to terrorists.' … I don't say that because I no longer believe that Saddam had the capability to produce weapons of mass destruction, or that he was not in contact with terrorists. I believe those two premises were both correct. Could we have managed that threat by means other than a direct military intervention? Well, maybe we could have."

... David Frum, the former White House speechwriter who co-wrote Bush's 2002 State of the Union address that accused Iraq of being part of an "axis of evil," it now looks as if defeat may be inescapable, because "the insurgency has proven it can kill anyone who cooperates, and the United States and its friends have failed to prove that it can protect them." This situation, he says, must ultimately be blamed on "failure at the center"—starting with President Bush.

... Fearing that worse is still to come, (Kenneth) Adelman believes that neoconservatism itself—what he defines as "the idea of a tough foreign policy on behalf of morality, the idea of using our power for moral good in the world"—is dead, at least for a generation. After Iraq, he says, "it's not going to sell." And if he, too, had his time over, Adelman says, "I would write an article that would be skeptical over whether there would be a performance that would be good enough to implement our policy. The policy can be absolutely right, and noble, beneficial, but if you can't execute it, it's useless, just useless. I guess that's what I would have said: that Bush's arguments are absolutely right, but you know what, you just have to put them in the drawer marked can't do. And that's very different from let's go."

Election Links

U of Iowa Futures Markets:

• House of Representatives
• The Senate
  

TradeSports

Lest people get over confident about the Democrats taking one or both houses of congress, remember Ohio in 2004:

• Christopher Hitchens on Ohio's Odd numbers.
• RFK Jr. and the 2004 Presidential elections.
  

New Resource Bank

SF based, New Resource Bank:

... (is) a recently launched commercial bank based in San Francisco. NRB is one of a small number of community banks focusing on the needs of sustainably-minded businesses.

The bank's origins go back about two and a half years, when Peter Liu, the bank's founder and vice chairman, found himself among a group of individuals being asked by California Treasurer Phil Angelides to help implement the state's Green Wave initiative, which called on the state's two large public pension funds -- the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) -- to invest $1.5 billion in clean technologies and environmentally responsible companies.

... a developer of small local renewable energy projects might have trouble getting funding from conventional banks, or even local community banks. "They may understand real estate, but they don't understand that there are other things that can have cash flow, like energy projects," says Liu. "These can have a similar credit profile as real estate, so if a banker took the time to understand the security and soundness of the project, it's more likely to get financed than comparing it to land or a house or apartment." The same is true for producers of organic meat and produce, which cost more to produce but which garner higher prices in the marketplace. Bankers may miss the big picture -- seeing only the higher-cost side of the equation and basing their calculations accordingly.

... Time will tell, of course, but Liu and his colleagues are banking on the rising interest among consumers and businesses in products and services with green values. Banking in particular has been in need of some fresh ideas given the growing industry consolidation, with a handful of big banks dominating the scene and standardizing their services -- often leaving behind those needing tailor-made services.

New Resource Bank's official opening is November 14 (when the full complement of online banking services will debut), but last week at the Solar Power 2006 conference in San Jose, Calif., Liu announced the bank's first green financial product: a partnership with solar panel maker SunPower Corp. that will allow customers to more easily finance residential solar energy installations. (Robert Lorenzini, a co-founder of SunPower, is an investor in the bank.) Liu believes the customized home-equity lending, combined with tax credits, can make solar affordable to many California residents for whom it is currently out of reach.

Resveratrol: The Latest Anti-Aging Tool?

From the Washington Post:

... To examine for the first time whether resveratrol could also extend longevity in mammals, Sinclair and his colleagues studied year-old mice, which are the equivalent of middle-aged humans. One third of the mice were fed a standard diet. Another third ate the equivalent of a junk-food diet -- one very high in calories with 60 percent of the calories coming from fat. The last third lived on the unhealthy diet combined with resveratrol.

After a year, the researchers found that both groups of mice that ate the junk food diet got fat, and those that did not get any resveratrol experienced a host of health problems, including the early signs of diabetes and heart disease. They tended to die prematurely.

But the mice that got resveratrol remained healthy and lived as long as the animals that ate a normal diet and stayed thin -- adding the equivalent of about 10 or 20 human years to their lifespan. Moreover, the hearts and livers of the animals getting resveratrol looked healthy, the activity of a host of key genes appeared normal and they showed some of the biological changes triggered by caloric restriction. They also appeared to have a better quality of life, retaining their activity levels and agility.

"It is really quite amazing," Sinclair said. "The mice were still fat but they looked just a healthy as the lean animals."

... "I'm usually a very cautious person," said Cynthia Kenyon of the University of California in San Francisco. "But I'm seriously thinking about taking resveratrol myself. It seems pretty wonderful."

"I actually told my mother she should take it," Helfand said. "I even went out and got her some."

Here is the Wikipedia entry. Now I know why I need to drink Red Wine regularly.

Botched Joke

John Kerry botches a joke about President Bush, and Bush goes on the offensive. Josh Marshall breaks it down:

It's really a case study in the Republican outrage apparatus, one McCain's in on too now. What does President Bush have to apologize for? Let's see. Taking the country to war on the basis of what he knew were lies? Check. Distorting and lying about WMD intelligence to goad the country into war? Check. Having no plan for what to do in Iraq after Baghdad fell? Check. Lying about how badly things were going in Iraq because he coudln't face the truth and thus letting hundreds or thousands or American military personnel die? Check. Mmmm. Lying to the country about al Qaida being tied to Iraq, resulting in hundreds or thousands of American deaths? Check. Got any more?

Update: On Don Imus' show today, Kerry apologizes for the botched joke, and sets the record straight on who needs to apologize.