July Round-up

Venture Capital

Both CalSTRS and Calvert see efforts to identify emerging money managers as smart business and socially responsible as well. The California State Teachers' Retirement System launched a new initiative to leverage the value of diversity in investment management firms. CalSTRS, the third largest US public pension fund with $129 billion in assets, is partnering with a New York City-based consulting firm specializing in identifying undiscovered, underutilized, or undercapitalized investment firms.   http://www.socialfunds.com/news/article.cgi/article1776.html

New Energy Capital, a portfolio company of VantagePoint Venture Partners, yesterday announced the start of construction of a 40 million gallon per year ethanol production facility in Rensselaer, Ind., named the Iroquois Bio-Energy Co. New Energy provided most of the project's equity, secured a $38.6 million loan from Farm Credit Services of Mid-America and will undertake financial and asset management for the approximately $70 million project. Other backers include nearly 300 local farmers and businesses, Fagen Inc., The Andersons Inc., Noble Americas Inc. and Indeck Energy Services Inc. In addition, the U.S. Department of Energy provided a grant. www.newenergycapital.com

A briefing note on The Trouble with Venture Capital is available here.

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Interest Rates and Currencies

The US interest rate continues its upward trend and recent comments by the Federal Reserve suggest that this will continue, particularly in light of concerns about a housing bubble.  The housing bubble may be only in certain pockets, but it is felt to be widespread enough and deep enough to be a serious concern.  It may be that economic dampening from the devastation of Katrina will achieve the Fed's goals in which case rates may stabilise in three months; but wait at least a month to see.

The imbalances in the global econmy, such as the US deficit, are not disipating despite market signals and data.  Part of the reason has been the housing boom that has kept consumption high and reduced the effect of rising interest rates on consumer spending.  There is no simple solution to this although the shock of Katrina may prove to be the crisis that helps people in America focus on more soullful consumprtion than the stock market, SUVs, brand names and social cosmetics. 

Trade and FDI

"This is this world:  We have poor and homeless people.  We have a couple of billion people who are not adequately clothed.  And mountains of sweaters, shirts, etc are piling up in European warehouses" from a exasperated trade observer.

The apparel industry faces turmoil as orders placed in China can't now be imported because limits agreed by Brussels have already been exceeded in just two months. When existing textile quotas were lifted at the start of 2005, the volume of Chinese textile imports into Europe rose dramatically. Many companies went to China, sourced suppliers and committed to orders. New European Union quotas to limit the explosive growth of Chinese clothing imports have already been exceeded, just weeks after they were agreed with Beijing, leaving some retailers worried about shipments they have already paid for but not received as the busy autumn-winter season gets under way. In Germany, the threat has already led to a warning from Economy Minister Wolfgang Clement that the limits on soaring imports of textiles and clothing from China could seriously harm German companies.  The European Union's trade chief has begun moves to free up Chinese garments held at EU ports in the row over quotas.  Chinese state media has demanded an immediate end to quotas, accusing the EU of protectionism.  With around 50 million sweaters and 17 million pairs of trousers detained at European ports, stores across the continent are anxious that the clothes are released in time to prepare for the Christmas rush. "It is very possible that towards November or December you will see prices rising simply because there is not enough capacity now to produce the kind of cheap goods that China has excelled in," said Alisdair Grey, from the British Retail Consortium.  Despite widespread claims that China is flooding western markets with cheap goods - some manufacturers worst hit by the quota system are actually owned by European firms.

The Report on the Free Movement of Workers in the EU-25 was compiled by the civil rights group European Citizen Action Service, has highlighted the benefits of migrants from central Europe to older member states.  Ireland for example received 85,000 migrant workers fom the 10 new EU states following enlargement. The economic impact in Ireland was similar to that in Britain where 175,000 migrant workers, who registered in the year following EU enlargement, generated £500 million in extra economic output.  This economic performance was achieved without boosting unemployment or straining the welfare system.  It has allowed Ireland, in particular, to maintain a lively economy as work ethic and new skills have improved. The report pinpointed Poland, Lithuania and Latvia as the three new EU states providing the highest number of migrants. It also characterised the typical migrant from eastern Europe as a young, male, single worker who sends money back to his home country.  "The scaremongers who had predicted a large influx of cheap labour from central and eastern Europe have been proved wrong," said Tony Venables, director of the European Citizen Action Service, at the launch of the report.  Ireland, Sweden and Britain were the only three states to open their labour markets fully to migrants from the 10 new member states.  Other states, such as France and Germany, which have high unemployment, put restrictions on the right to work for several years to protect their own labour markets. The European Commission will recommend next year whether these restrictions should be shortened.

Oil is traded too, and America imports most of what it consumes.  If oil stays near today's level that would mean over $300 billion per year going outside the US. That is an extra $150 billion over where it would be at $30 oil. Even backing off to $50, that would take an extra 1% of GDP out of the country.

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Energy

Last month I made a wild prediction of $ 80 per barrel oil before the end of the year.  It doesn't look so wild now, with a 16% rise in one month!  But as one of our readers notes, the pain isn't being felt:

"The pain is not sufficiently great yet to influence a change in behaviour. It is more like an annoyed grunt at this stage, except for the poor who always get it between the legs before anyone else. The reality is, as we both know, that we are literally living in a fool's paradise. The folks in the fuel industry are as fossilized as the resources they engage with, but they are making a huge amount of money preserving their franchise. The folks on the other side are well intentioned but pretty naive. "

The pain isn't being felt, YET.  But soon will be.  John Mauldin, a hedge fund advisor based in Texas paints the picture:

Texans are not used to $2.65 a gallon. The local good old boys can now spend over $70 to fill their Ford F-150 pickups. Let's work the numbers on that. The truck gets 14 miles per gallon. In Texas, you can have a long commute to work. If you do 20,000 miles per year, you will need 1428 gallons. That is $3,785 or $72.80 a week. For a guy making $15 an hour or $600, less taxes, with say a take home pay of $500, that would be almost 15% of his paycheck! Tough to support a family on that!

And signs at the pump are that people are now waking up.  Petrol stations changing price all follow slightly different rules. In one local community, Sam's Club sets its price once, at the beginning of the day, the Mobil station adjusts its placard in the late afternoon, the other stations typically adjust their prices late in the morning. The end result is that there is a window of time where these normally competitive stations can have vastly different prices for essentially the same product.In that short window when the prices are radically different, customers respond to the queues. Just recently, for instance, Sam's Club set its price for the day at $2.46. Later that day, the price of crude oil continued its ascent. On that news, all the other stations in the area started charging $2.69 per gallon. With a $0.23-per-gallon advantage, the Sam's Club station had cars lined up throughout the store's parking lot. The other stations were empty.   People were willing to wait half an hour -- or longer -- to fill their tanks in order to save money.

Pressures on fossil fuels will continue to grow because over the next five years emerging economies, including China, could account for 3/4 of the increase in world oil demand.  The infrastructure for alternatives is inadequate because pressure from oil industry has delayed capitalisation of proven alternatives, like biofuel, solar, wind, hydro.  America consumes 50% more oil per dollar of GDP than Europe - the discrepancy is largely due to price which is now $ 6 a gallon in Europe but only $ 3 per gallon in the US.  China and America must wean themselves from their addiction to oil if they are to reduce economic volatiliy at home, and abroad.

The rise in oil is waking up the carbon market.  The winner-takes-all world of stock markets and financial trading is not usually associated with attempts to save the planet, yet if some of Britain's biggest pension funds get their way, City traders will soon be discussing how climate change could affect the stock prices of FTSE 100 companies. Nick Robins, of Henderson Global Investors, believes it might not be long before the market sees a profit warning from a company as a result of a failure to grasp the impact of emissions on business. "It is probable that some corporations will have made investments without taking into account the likely tightening of limits under the Emissions Trading Scheme (ETS)," he warns.

In January the average daily carbon volume traded in Europe was about 300,000 tonnes but, give or take intermittent spikes, the daily average had trebled to about 1 million tonnes by June. The value of the market has grown even more sharply because the price of an allowance for a tonne of carbon dioxide emitted has shot up from E6 to E20 ($32), with a peak in early June of E29. On those days in July when 2 million tonnes were traded, the value of those transactions approached pound stg. 40 million.  It has now fallen to around 22 euros, but this is still higher than many analysts had expected.

At the end of July, landscapers were installing a "green" roof at Silvercup Studios in Long Island City, Queens, where the television series "The Sopranos" is filmed.  Sitting above Tony Soprano's head will be New York City's largest green roof, a thin layer of plants covering 35,000 square feet, or 3,300 square meters, designed to reduce air pollution, control heating and cooling costs, and absorb storm runoff. Getting this particular roof in place has taken more than two years, but its proponents are hoping to use data collected from the installation to persuade New York City's commercial property owners and developers that not only are green roofs good for the urban environment, but they also can benefit the bottom line. While studies in Chicago and in cities in Canada and Europe have demonstrated the environmental benefits of green roofs, green roof proponents know they need hard numbers to convince New York's development community of the economic benefits.  The highly visible location in New York, near the large Silvercup Studios' sign and visible from the Queensboro Bridge linking Queens to Manhattan, will be the green roof's best advertisement. A matrix of 1,500 planters will have 20 species of plants intended to display red, yellow and green when they are in full bloom.

Climate Change and Environment

Scientists have documented Alaskan natives recollections of weather patterns adding to evidence of climate change.  People still lead sustainable lives, harvesting fish and crops in traditional ways at particular seasons, and are therefore very aware of environmental changes.  An interesting aspect of the stories, which go back 100 years in living memory and more in historical accounts, is that the changes were first noticed in the 1970s, about a decade after the "enviornmental" movement started.  http://news.bbc.co.uk/1/low/sci/tech/4748287.stm

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IT

It is ironic that the comparisons between Yahoo and Google are so indifferent to Yahoo.  While Google is now compared to Microsoft, it is also begining to look like the monopolist.  It is part of a very tight Search oligarchy and is expanding in to other areas, most recently VoIP phone services.  The concerns raised earlier in the year concerning the privacy issues of Google are increasingly important as they spread further into our communications and entertainment lives.

Recent closing prices of Google shares, which have tripled since the IPO, have given the company an estimated value of over $80bn. The operator said it intended to use the net proceeds, of $ 4 billion, from the offering for general corporate purposes, including working capital and capital expenditures, and possible acquisitions of 'complementary businesses, technologies or other assets'. The company has also entered the voice market. Google Talk, which is being released in a beta test version, works only on PCs running Windows 2000 and Windows XP and eventually, the company plans to release a version for Apple's Mac OS X. But these developments have Silicon Valley wondering what's going on behind the doors of Googleplex and given many more people reason to gripe as they wonder whether the company that once could do no wrong and shunned corporate advances may be turning into the next Microsoft. Because Google is headhunting the most talented in the Valley, it is harder for start-ups. And the search giant is also being blamed for a recent 25pc to 50pc salary inflation for engineers in the region. In the mid-1990s, entrepreneurs often complained that the spectre of Microsoft hung over their every attempt at raising capital with venture capitalists. Now, they say the same about Google. But is it just sour grapes? Once upon a time the company they loved to hate most was Microsoft, now . . . you've guessed, it's Google. Google's success has already caused Microsoft to develop its own search engine, a project code-named Underdog, and at the same time Google has its teams of engineers beavering away on a number of projects that could, if successful, dislodge Microsoft from its pedestal.

The age of chemical photography is dying.  UK High Street retailer Dixons, which started by selling 35mm cameras, is to stop stocking the items because of the popularity of digital cameras.  The company has said it will not be stocking any more after the current stock of the film cameras runs out.  Improved quality and lessening prices have seen digital cameras grow in popularity and this year sales will outstrip the 35mm by 15 to 1.However, the firm will continue to sell some 35mm cameras at its airport branches, to cater for professional photographers looking to buy duty-free products.

Microsoft is urging Windoze users to update their systems with the latest security patches it has released to fix three critical flaws in its software.  The flaws mostly affect Windows 2000 and Internet Explorer. Users with updated Windows Server 2003 and XP systems are not as much at risk. If left unplugged, they could allow hackers and virus writers to take control of personal computers remotely. 

Open systems are naturally designed.  They have, inate to the design approach, the facility to emerge new functions.  Its collaborative creation naturally designs in the ability for complexity effectively.  This is not the case for the monopoliy product.  This is why it can not be improved only reengineered to more like Linux!

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Integral Systems and LOHAS

The use of computer games in education is going to be tested out in four secondary schools in the UK.  The project aims to find ways in which school teachers can include video games in their teaching. It will also be trying to help game developers learn about potential educational uses for their products. The year-long project is being backed by the games giant Electronic Arts (EA) and lottery-funded education organisation Futurelab. 

Go organic! (Even if you don't know what it means :-) )A scientific survey commissioned by BBC One's Real Story suggests that significant numbers of chickens on sale in UK shops are contaminated with superbugs.  Of the British-grown chickens analysed, over half were contaminated with multi-drug resistant E.coli which is immune to the effects of three or more antibiotics. More than a third of the 147 samples, which included overseas and UK produced chicken, had E.coli germs resistant to the important antibiotic Trimethaprim which is used to treat bladder infections. The Health Protection Agency scientists testing the meat also found 12 chickens had antibiotic resistant Campylobacter.  And VRE, or Vancomycin Resistant Enteroccci, were in 1 in 25 of the samples, although more tests would be needed to confirm the exact type of the bug found.  No organic chickens were used - 64 were from the UK and 83 from abroad.  The survey's results could partly explain a rise in the number of women whose bladder infections did not respond to standard treatments according to a medical expert. The World Health Organisation has named antibiotic resistance as one of three major threats for the future.

The illegal trade in wild animal products over the internet is driving the world's most endangered species to extinction.  An International Fund for Animal Welfare (Ifaw) probe found 9,000 live animals or products for sale in one week on trading sites like eBay. Ifaw claims many traders are taking advantage of the internet's anonymity. The UK Government says it takes wildlife crime seriously, but Ifaw urged it to act urgently. During a three month investigation, Ifaw found some of the world's most endangered species for sale online - almost all being traded illegally. These included a live gorilla for sale in London and a Siberian tiger and four baby chimps on US websites. Animal body parts included hawksbill turtle shells, shahtoosh shawls from the Tibetan antelope and taxidermy specimens of lions, and peregrine falcons. Ivory items and traditional Asian remedies containing parts of endangered tigers and rhinos were common place. "The result is a cyber black market where the future of the world's rarest animals is being traded away." Phyllis Campbell-McRae, Director IFAW UK.The report, Caught in the Web: Wildlife Trade on the Internet, said many animals were being targeted by poachers to meet the demands of wealthy consumers.  Of the 9,000 animals and animal parts found for sale by the probe in its first week alone, 70% were from species protected by international law.

The closure of a major farm for the production of animals for experimantation, Darley Woods, closed to much rejoicing from animla welfare supporters.  There is a reasonable argument, though disputed, that animal testing is the only way to take science forward.  However, closure does signal a milestone in the enlightenment of our culture.  We still have a way to go: the couple of million animals (mainly rodents) that die in UK laboratories are more humanely killed than the billion or so animals (mainly poulytry) on UK farms.  And similar comparisons would apply elsewhere in Europe and North America.

Niger's nomadic groups are facing extreme hardship as a result of the food crisis.  Nomads surveyed by the charity said that up to 70% of their livestock had died because of a lack of fodder.  Livestock are essential to the nomadic way of life and "targeted assistance" will be needed to help them.  Nomads such as the Tuareg and Fulani make up about 20% of Niger's 12.9 million population.  "For Niger's nomads, the situation is desperate. To these people, losing your animals is like losing your life savings. Without their animals, they have no means of survival," said Natasha Kofoworola Quist, Oxfam's Regional Director for West Africa. "Twelve centuries of nomadic culture are threatened with extinction if these people do not get long-term help to rebuild their livelihoods," she added.

If a group of US researchers have their way, lions, cheetahs, elephants and camels could soon roam parts of North America. The plan, which is called Pleistocene re-wilding, is intended to be a proactive approach to conservation. The initiative would help endangered African animals while creating jobs, the Cornell University scientists say. Evidence also suggests, they claim, that "megafauna" can help maintain ecosystems and boost biodiversity.  "If we only have 10 minutes to present this idea, people think we're nuts," said Harry Greene, professor of ecology and evolutionary biology at Cornell University, US. "But if people hear the one-hour version, they realise they haven't thought about this as much as we have. Right now we are investing all our megafauna hopes on one continent - Africa."  During the Pleistocene era - between 1.8 million to about 10,000 years ago - North America was home to a myriad of mega fauna. Once, American cheetah (Acinonyx trumani) prowled the plains hunting pronghorn (Antilocapra americana) - an antelope-like animal found throughout the deserts of the American Southwest - and Camelops, an extinct camelid, browsed on arid land. But man's arrival on the continent - about 13,000 ago, according to one prevalent theory - pushed many of these impressive creatures to extinction. Their disappearance left glaring gaps in the complex web of interactions, upon which a healthy ecosystem depends. The pronghorn, for example, has lost its natural predator and only its startling speed - of up to about 60mph - hints at its now forgotten foe. By introducing living counterparts to the extinct animals, the researchers say, these voids could be filled. So, by introducing free-ranging African cheetahs to the Southwest, strong interactions with pronghorns could be restored, while providing cheetahs with a new habitat.  Other living species that could "stand in" for Pleistocene-era animals in North America include feral horses (Equus caballus), wild asses (E. asinus), Bactrian camels (Camelus bactrianus), Asian (Elephas maximus) and African (Loxodonta africana) elephants and lions (Panthera leo).  Americans might do more than put up with their new compatriots - they might actually welcome them. According to Dr Donlan and his colleagues, the re-wilding plan would offer ecotourism and land-management jobs to help the struggling economies of the Great Plains and Southwest. Dr Donlan said that large tracts of private land are probably the most promising place to start, with each step carefully guided by the fossil record and the involvement of experts and research.

A major advance in overcoming the principal ethical objection to the medical use of stem cells derived from human embryos has been achieved. Scientists have generated embryonic stem cells - which might eventually be used to treat chronically ill patients - from a person's skin without creating or destroying human embryos in the process. Although the breakthrough is still in its early stages, the researchers believe they may one day be able to generate embryonic repair cells for a range of incurable illnesses, from Parkinson's and heart disease to diabetes and spinal injuries. The findings will reignite the vitriolic debate over the need to experiment with human embryos, although the scientists still believe such research is necessary, despite their discovery. Until now, it was assumed that the only way of generating embryonic stem cells from a patient's skin cell was by fusing it with an unfertilised egg, then destroying the resulting cloned embryo to harvest its cells. But a study by Harvard University scientists has shown that embryonic stem cells can be generated through another route by simply fusing a patient's skin cell with a pre-existing "line" of continuously dividing embryonic stem

Horseweed was once merely a nuisance to farmers hard to pull out, quick to sprout back after cutting, and capable of towering over tractors. Now, it's becoming a full-blown nightmare worthy of an agricultural horror movie. Scientists in California have found clusters of the weed that are resistant to scores of herbicides, leaving farmers to fight an increasingly formidable and costly foe. Pete Christensen said he watched his costs soar as the most popular herbicide became increasingly powerless to stop the weeds from choking the grapes on his 75-acre vineyard near Selma.About five years ago, he started noticing that Roundup wasn't withering the weed as usual. Three years later, he had tripled the concentration of the herbicide, and had doubled the applications, but the weeds were growing thicker than ever, rising over his vines and competing with them for water, nutrients and sunshine. "It was dominant in the landscape,' Christensen said. The weed, also known as mare's tail, has always been around, but it wasn't until last month that University of California researchers confirmed that some strains of it had become resistant to herbicides, posing a threat to the nation's most productive farmland. Bob Prys, a manager for the 13,000-acre Borba Farms, said the weed became a problem just three or four years after they started growing Roundup-Ready cotton on the 500-acre ranch. They sprayed the field, killing everything but the cotton plants, and saving money by having to till their fields less frequently.  Now Prys said they're relying on weeding again and adding other chemicals to their herbicide mix adding unexpected costs to the higher price they pay for Roundup-Ready seed.  http://www.sgvtribune.com/Stories/0,1413,205~24512~3003075,00.html

This is the kind of problem that makes us so cautious about introduction of genetically modified organisms.  The recent approval for Monsanto's GM seed in Europe is devastating news.Monsanto received approval for GM livestock feed crop which is modified to be glyphosate ready.  It is destroying US nature as we see above - now it will destroy Europe's.

Last month a number of references were made about toxic residues on supermaket foods.  For more information visit http://www.panna.org/ the Pesticide Action Network North America.

Some of the great apes - chimps, gorillas, and orangutans - could be extinct within a human generation. The World Atlas of Great Apes and their Conservation is published by the UN's environment and biodiversity agencies.  It brings together data from many sources in an attempt to assess comprehensively the prospects for the remaining great apes; the gorillas, chimpanzees and bonobos of Africa, and the orangutans of south-east Asia. Human settlement, logging, mining and disease mean that orangutans in parts of Indonesia may lose half of their habitat within five years.  There are now more than 20,000 humans on the planet for every chimpanzee.

The general conclusion is that the outlook is poor. The World Atlas comes with a foreword by UN Secretary-General Kofi Annan, in which he argues forcibly for the preservation of apes. "The great apes are our kin," he writes. "Like us, they are self-aware and have cultures, tools, politics, and medicines; they can learn to use sign language, and have conversations with people and with each other. Sadly, however, we have not treated them with the respect they deserve."

His thesis on the close kinship of ape and man has been reinforced by the publication this month of the chimpanzee genome, demonstrating that humans and chimps share 99% of their active genetic material. But stopping the decline of ape populations may not be easy, with human encroachment continuing, often under the pressure of poverty.

Soft drinks giant PepsiCo has been forced to respond to consumer health trends and political pressure by adhering to a fizzy drinks ban within US elementary and middle schools, at last. The policy of significantly reducing sugar and calorie filled soft drinks has been backed up and developed by the American Beverage Association (ABA), which is encouraging all producers of soft drinks to sign up to the voluntary ban. Healthier options, such as water, 100% juice dinks and sports isotonic alternatives, will replace all beverages during school time bringing children’s drinks in line with new, healthier school meals and snack bars.
The campaign is said to be spurred on by the underlying need to tackle the growing crisis of childhood obesity. Both Coca-Cola and PepsiCo are said to have recorded slower growth for their staple markets of fizzy cola drinks this year, and have launched a number of sugar-free ranges to compete with the growing bottled water market. However, new products such as Coca Cola’s Zero and PepsiCo’s Pepsi One are unlikely to be welcomed onto the shelves of natural products stores since sugar has simply been replaced with artificial sweetners.

The first UK cases of organic fraud have been pressed by Richmond council trading standards who recently prosecuted a number of businesses for falsely trading under an organic label.  Stephen Sains of Organic World in Richmond has been prosecuted and fined £6,020 for being in breach of the EU Organic Regulation. Said to be selling non-organic meat at premium prices, Sains was found guilty of labelling his stock as organic. The name of his store, Organic World, was also judged to be misleading. In carrying out the investigations trading standards also uncovered other businesses in the Richmond area taking advantage of the organic price mark-up, as well as some falsely claiming to be certified by bodies such as the Soil Association.  This story offers a couple of lessons: 1) the label "organic" does mean something because its being policed, 2) buy local and know your suppliers so that you know what you're getting whatever the label says.

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Activities, Books and Gatherings

Louise Smart

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