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Cramer’s Mad Money – BMS=Buy My Stock (7/20/09)

July 21st, 2009 admin No comments

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday July 20. Bemis ( BMS ), Rio Tinto ( RTP ) Complete Story »

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Wonga: How the Net Should Kill the Finance Industry

July 21st, 2009 admin No comments

wonga_203x150What’s awesome about the Internet is how it breaks up monopolistic markets where middlemen unfairly gobble up outsized fees, leaving us little choice but to keep paying them. It happened with software, it happened with music, and it’s happening now with media. But there are a few sectors of our economy that have stayed mostly undisrupted—one of them is banking.

Sure there are companies like eTrade that opened up the market for buying and selling stocks. But it didn’t fundamentally change the market that much, it just moved part of it online. The thought for a long time was that banks needed to be too controlled, too regulated to be turned over to the Wild West of the Net. Then the credit meltdown hit and we saw just how reckless these so-called safe and regulated institutions were.

The time is right for the Web to unleash its full market-destroying power on the finance world and while I was in the UK I found a company making a promising start: Wonga.

Now, Wonga would hardly say its role is to upend the world’s financial institutions. But it’s one of the most dramatic examples I’ve seen of a Web company using what the Web does well to remake lending.

Wonga gives people a way to borrow small amounts of money quickly, between £50 and £200 for first time borrowers to be repaid between five days and 30 days. (Returning customers with a good repayment record can borrow up to £750.) A would be borrower gives Wonga just eight pieces of personal data online, and its algorithms find 1800 data points based on that within 2 seconds, making a rapid decision about whether that person is a good or bad short term credit risk. If approved, the money is wired into the borrower’s account within the hour. And, the borrower gets to decide when to repay the money, with no penalty for early repayment. One of the most notable things about the UI is a sliding scale, which shows exactly what fees someone would owe Wonga for every dollar borrowed and extra day before its repaid. No fine print and formulas to calculate; the cost of every dollar you borrow is calculated for you.

Wonga was founded by Errol Damelin, a serial entrepreneur who previously started a supply chain software company named Supply Chain Connect. He sold that company in 2005 and decided he didn’t want to build another enterprise software business. (Smart move.) So he traveled around the world looking for ideas. In the U.S. he became captivated with payday lending companies—an industry of strip mall storefronts that generates a whopping $12 billion in fees.

There was a clear demand for short-term loans to tide people over or take care of emergencies. But it was a polarizing industry, seen as predatory and exploitative. Damelin spent more than a year digging into it, and brainstorming with well-known UK angel investor Robin Klein on how to rethink it and make it better.

Two things excite me most about Wonga. The first is that it isn’t peer-to-peer lending. Peer-to-peer lending in a social sense, like Kiva, is one thing, but I’m not convinced peer-to-peer lending for profit works or scales. It feels a bit like trying to apply Web 2.0 ethos of wisdom of the crowds and social networking somewhere that it just doesn’t fit. Instead, Wonga has raised $28 million from Balderton Capital, Greylock Ventures, Accel Partners and Dawn Capital and is loaning out its own cash. In its first year of business it did more than 100,000 loans, for an average of £250 each, and it’s already profitable. “This is the best business I’ve ever been in,” Damelin says.

Second, it’s the first time I’m aware of that a bank that has actually aligned its incentives with what’s right for the customer. Put another way: Wonga makes its money when you repay the loan, not by keeping you in debt longer. Think about it: Credit card companies make the most of their money from people just able to make their minimum payments every month. And payday advance chains make most of their money by rolling over your debt to the next payday.

Critics have said that Wonga is usurious by charging a 1% interest fee per day. But that’s a knee-jerk response. Wonga is simply charging a premium because it allows borrowers quicker access to cash than any other service, the same way a town car is going to charge you more than a cab off the street. And because it only makes money when a borrower repays the amount, there are no tricks to keep you in debt longer. Wonga’s ideal customer is someone who uses the service two to three times a year and always repays on time, Damelin says. If more financial institutions had this basic orientation to doing business, we wouldn’t have had the credit meltdown because people would have known exactly the risks of agreeing to ARMs and zero-down mortgages.

Sure, you can say Wonga is dangerous because it’s giving people an easier way to live outside their means. But that’s a bit like arguing giving kids condoms encourages teenage sex. You can’t change human behavior, but you can help make people safer.

Now here’s the downside on Wonga: It’s only available in the UK, and it will likely stay that way thanks to a bevy of licenses and regulations entailed in getting near the finance sector. It’s even worse in the US, where each state has its own laws. Even a copy cat business might be cost-prohibitive in the U.S. because of all the state-by-state regulations and red-tape.

As our taxpayer dollars continue to bail out the same lousy institutions, it’ll take innovators like Wonga to force real change in the finance world. But in this country, it’ll need an assist from the government as well.

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Bil Browning: Steele: GOP woos blacks with "fried chicken and potato salad"

July 14th, 2009 admin No comments

The Young Republicans convention was held in Indianapolis last weekend and their election of a racist, middle-aged woman as President isn’t the only controversial item to come out of the GOP gathering.

Local Republican blog Hoosier Access was able to get RNC Chairman Michael Steele to sit down with a group of bloggers and they taped the conversation. The old gaffe-o-matic (or as I like to call him, the Republican Joe Biden!) answers a question from a gay person of color in this clip about the GOP’s diversity outreach.

Yes, that’s right. To lure African-Americans into the GOP, Steele is offering “fried chicken and potato salad.” Since he mentions Republicans should also be reaching out to the LGBT community, I wonder what stereotype he’s going to offer us? Buttplugs and Birkenstocks?

(Crossposted at Bilerico Project)

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Financial Times Tweets That It Now Has An iPhone App. Yup, It’s Pink.

July 14th, 2009 admin No comments

International business newspaper and website Financial Times, founded in 1888, is now part of the Apple’s Iphone app club with the release of a free application on the iTunes App Store (iTunes link). The move comes after most of its competitors released applications for the platform back in 1891 (ok not really, but long ago anyway).

Remarkably, FT announced the release of the application using its Twitter and TwitPic accounts, which means we have screenshots too. As you can tell from the pictures, Financial Times’ Apple’s Iphone app comes with a world map view of the global markets, in-depth looks at stocks with interactive charts and detailed tearsheets so you can track performance for individual companies.

It’s good to know there are still certainties in life: the app comes in trademark FT pink salmon (whatever).

Update: while the app is free, there are restrictions to which users can access content free of charge:

First-time users receive 3 free articles per month as well as unrestricted access to the markets data sections and currency converter. Registered users can view 10 free articles per month, have access to their FT.com portfolio and have unrestricted access to markets data and the currency converter.

Standard and premium subscribers have unlimited access to news, access to their FT.com portfolio and full access to the markets data and currency converter sections. Premium subscribers have the additional bonus of access to Lex content.

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Google Finance Gets A Little More Fancy

July 14th, 2009 admin No comments

It’s been more than a month since Google Finance shed its beta label, and finally today it is rolling out some design tweaks it has been testing out for the past few months.

In the screen shot above you can see most of the changes. There is now a persistent navigation bar on the left with links to news, portfolios, historical prices, and financials. In the left column, you also now see streaming live quotes for the most recent stock tickers you’ve entered. It is a sparer version of the left-hand column on Yahoo Finance, with more dynamic and personalized content.

The charting is also a little more sophisticated, with various technical charting capabilities available as an option via a drop down menu below each chart. Finally, the company comparison table is now more customizable, allowing you to choose which financial metrics you want to add or remove. It doesn’t go as far as Wikinvest’s recent redesign, which highlights much more insightful industry metrics for many stocks.

All in all, the tweaks to Google Finance are a step in teh right direction, but nothing too radical.

(Hat tip to reader Michael Konen).

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Dan Imhoff: Chile’s Salmon Farms Verging on Breakdown

July 12th, 2009 admin No comments

It seems like not a week goes by without industrial animal food production somehow making headlines — the H1N1 flu pandemic, astounding meat recalls, high levels of arsenic in chicken feed, or any of a dozen other concerns. One recent story that should have generated some rather large waves, however, has made only a minor splash. Chile’s salmon farming industry, second only to Norway’s, is on the verge of collapse.

Salmon are not indigenous to Chile, but grown in crowded cages installed in the bays and estuaries of the country’s otherwise beautiful southern fjord region. These “farmed” Atlantic salmon are fed a steady diet of wild fish–perfectly edible for humans, but more profitable when converted into “value-added” finfish. The approximately three pounds of wild fish needed to produce each pound of farmed salmon has caused some people to refer to finfish aquaculture operations as “reverse protein factories.” Equally alarming, salmon farms have become excessively dependent upon toxic pesticides to combat sea lice and antibiotic medicines to thwart viruses that can run rampant among the high concentrations of rapidly growing, penned fish–not unlike industrial-scale hog, poultry, and cattle CAFOs on land.

But the drugs are no longer working. According to industry source Intrafish, Chile’s 2009 salmon output could decline by as much as 87 percent from last year–a drop from 279,000 metric tons in 2008 to between 37,000 metric tons and 67,000 metric tons. The cause is the widespread outbreak of a virus known as infectious salmon anemia (ISA). When the virus first appeared in 2008, many offshore aquaculture companies moved their production farms further south in Chile, into waters still unaffected by ISA. Instead of lessening the problem, the industry actually spread the virus into the southern waters.

The Chilean government and regulatory agency are now implementing measures to address the crisis, but their efforts, for the time being, have been too little, too late. Chilean salmon stocks have been devastated, and this is expected to send ripple effects throughout the world’s food supply. A 20 percent shortfall in the global supply of farmed Atlantic salmon is predicted for this year and perhaps 2010 as well. The human toll in this saga is also significant, as the salmon industry has become a primary employer in the southern region of the country, and could lead to the unemployment of as many as 15,000 people.

Experts had been cautioning for years about the hazards of unsanitary conditions and overcrowding in industrial salmon cages. The first widespread die-offs due to ISA began to mount early in 2008, but the industry declined to take protective measures to guard against further spread of the infection. Critics have called for improved conditions by limiting the number of salmon in the cages and by spreading the farms farther apart from one another to avoid transfer of disease and to lessen the concentration of harmful chemicals, antibiotics, and other adverse affects of large-scale fish production.

Unfortunately, this has not been the only alarming news in 2009 about Chilean aquaculture. In February, the Pew Environment Group obtained documents from the US Food and Drug Administration (FDA) revealing that the Chilean salmon industry has been using antibiotics prohibited on fish destined for the United States. Apparently, the FDA notified the three companies guilty of using the unapproved drugs that they can no longer use them on fish raised for the U.S. market. But questions remain whether or not the FDA will enforce these restrictions, and if so, how they will go about ensuring that the banned substances are not used.

Concerns over antibiotic overdosing and its potential to create antibiotic resistant disease organisms that could harm humans may become less of an issue if the Chilean salmon industry suffers an even further decline. Many are calling for a dismantlement of the industry. Others caution that without real reforms it could implode of its own unsustainable production practices. At a minimum, we should take this as one more in a long series of wake-up calls that our concentrated animal food operations — whether on land or at sea — need to be urgently reconsidered, before they are all on the verge of collapse.

Pew Press Release on Unapproved Chemicals
Pew Letter on Unapproved Chemicals
New York Times article on Chilean Salmon Virus
New York Times article on Chilean Salmon Industry Rehabilitation efforts


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Jodie Allen: How’s That Again?

July 12th, 2009 admin No comments

“Tumbling price of oil helps stocks end day down,” read the business headline on MSNBC.com on Tuesday, a warning repeated in another Associated Press story on Friday.

Gee that’s funny. I used to think that falling oil prices were good for the economy. After all Americans buy (and increasingly import) a lot of gasoline so that rising prices are a real hardship for both consumers individually and for the larger economy. Don’t I recall that less than a year ago economists and business commentators were wringing their hands about how soaring oil prices were threatening economic growth and posing challenges to presidential candidates?

And here’s another seemingly upside-down concern. “Consumer credit outstanding continued to fall in May…which continues to drag on the economy,” worried the Wall Street Journal on Thursday. Come again? Wasn’t the fact that American consumers have been borrowing and spending their way into financial oblivion in recent years a major cause of the current economic collapse? Wasn’t the unprecedented string of negative savings rates much deplored by financial experts? Didn’t we want the U.S. public to stop spending beyond their means and start saving?

It’s not that the stock traders and business analysts don’t have grounds for these apparent 180- degree shifts in their preferences. Falling oil prices do indeed drive down energy company stocks, just as rising prices sent them soaring in recent years. Of broader consequence, if the price decline reflects falling industrial and consumer demand it may well signal continuing economic weakness.

And given that our economy has become so dependent on credit-financed consumption, any indication that consumers are finding it hard to borrow — or even losing their taste for red ink — clearly spells further trouble for already weak housing markets and shopping malls.

Well OK, but let us not lose sight of the longer-term — I don’t mean decades, the thought of which, I understand, glazes over the average American at the mere mention. But maybe till the end of the year at least. The fact is that if we as a nation, not to mention all the other countries that wisely or foolishly have cast their lot with our economic fortunes, are to get back on a sounder footing, we have to stop spending beyond our means. And we have to start making more of what we buy instead of depending on the short-term kindness of strangers to lend us the money, never mind the long-term ultimate cost. And maybe then the economic news won’t seem so [anatomical expletive deleted]-backward.

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Bob Dinneen: The Days of Energy Malaise Are Over

July 11th, 2009 admin No comments

Wednesday, July 15th, marks the 30th anniversary of President Jimmy Carter’s famous “malaise” speech.

As with many historic events, this speech was very different from the disaster that we now remember. First, Carter didn’t use the word “malaise” even once in the speech. Second, his ratings in the public opinion polls went up after the speech. Third, it was largely about the energy crisis of the summer of ‘79 when Iran held U.S. hostages, OPEC restricted our oil supplies, and Americans were waiting in long lines at the gas stations.

Carter deserves credit for calling for decreasing our dependence on imported oil. As Americans learned when gasoline prices skyrocketed last summer — and as we’re reminded whenever Hugo Chavez or the Iranian ayatollahs threaten our petroleum supplies — it is still costly and risky to rely on oil imported from unstable countries with unfriendly governments.

“Malaise” is better than denial. When Carter addressed the nation 30 years ago, he warned that “almost half the oil we use comes from foreign countries, at prices that are going through the roof.” Now, nearly two-thirds of our oil is imported, at prices that are riding a roller coaster.

So when are we going to wake up to the fact that our dependence on imported oil is worse than in the days of malaise? And what are we going to do about it?

For all his courage in calling attention to the problem, some of Carter’s prescriptions now seem just as dated as disco, pet rocks, and mood rings.

Back in 1979, Carter called for the country to “switch to other fuels, especially coal, our most abundant energy source.” But now, as the Congress debates energy and climate change legislation, most policymakers see coal’s carbon emissions as a major contributor to carbon emissions and global warming.

More prophetically, Carter also called for “twenty percent of our energy coming from solar power by the year 2000.” That is still a worthy goal. But, while solar, wind, and geothermal energy can generate electrical power, it would be costly and cumbersome for these energy sources to produce the electricity that would then power a significant share of the nation’s cars, trucks, buses and other vehicles.

That leaves an energy source that Carter didn’t mention, but supported, that was emerging in the late ’70’s — biofuels, especially ethanol produced from corn and other grains. During the final year of the Carter Administration, the new domestic ethanol industry produced only 175 million gallons.

Last year, the U.S. ethanol industry produced more than 9 billion gallons of fuel, reducing oil imports by 321.4 million barrels. This year, we will produce more than 10 billion gallons. That’s bad news for OPEC and good news for the USA.

Creating good-paying jobs is just as much of a concern now as it was during the economic stagnation of the late ’70’s and early ’80’s. From a handful of factories employing a few hundred workers, the U.S. ethanol industry has grown to nearly 200 biorefineries that support almost half a million jobs.

Not only in terms of energy independence and economic growth but also environmentally, ethanol is a success story. Academic studies show that ethanol produces far fewer carbon emissions than petroleum products, and ethanol production is reducing its own consumption of water, electricity and other energy sources and natural resources.

Thirty years after the grain ethanol industry emerged, the U.S. ethanol industry is beginning to produce fuels from “cellulosic” (non-grain) feedstocks, including grasses, woodchips, and even garbage. As our new President Barack Obama has explained, grain ethanol is still essential because the “transition to [the next generation] will be successful only if the first-generation biofuels industry remains viable in the near term.”

Maybe if President Carter — and all Americans 30 years ago — had foreseen this promising part of the energy future, no one would have talked about “malaise.” If we keep producing more and better biofuels, Americans thirty years from now will look back on today’s Americans with gratitude, not grief.

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Stocks Grind to Flat Finish

July 10th, 2009 admin No comments

Major market indexes ended narrowly mixed as bank and energy shares gained but health-care and consumer-staples stocks sank.

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William S. Becker: Obama’s Farm Team

July 9th, 2009 admin No comments

Members of the Obama Administration have embarked on a “listening tour” in rural America this summer, but let’s hope the visits involve more than listening. This is a moment for the Administration’s top officials to engage farmers, ranchers and rural residents in a robust exchange of ideas about their role in a new American economy.

That role seems as obvious as it is dynamic. The “clean energy economy” President Obama advocates can revitalize the nation’s long-neglected rural communities. Many of them can become the epicenters of sustainable energy production in the U.S., as well as our principal providers of carbon sequestration services.

In his climate and energy policies, Obama is sowing the seeds for that new era of rural prosperity, but it will be up to rural America to bring in the harvest.

Federal ethanol subsidies seem to be getting all the attention from the farm lobby, but ethanol feedstocks (make that cellulosic) are just one of the new crops that will power America in the years ahead. In parts of the United States, landowners already are making thousands of dollars a year in lease payments to host wind turbines on their fields. Each turbine occupies a very small footprint, which allows farmers and ranchers to continue cropping or grazing the land. That makes wind a very lucrative crop as well as a source of new property tax revenues for rural communities. According to the U.S. Department of Energy’s National Renewable Energy Laboratory:

“There is a bright spot on the rural economic development horizon: wind. In fact, achieving the goals of the U.S. Department of Energy’s Wind Powering America program during the next 20 years will create $60 billion in capital investment in rural America, provide $1.2 billion in new income for farmers and rural landowners, and create 80,000 new jobs…

Wind energy offers rural landowners a new cash crop. Although leasing arrangements vary widely, royalties are typically around $2,000 per year for a 750-kilowatt wind turbine or 2% to 3% of the project’s gross revenues. Given typical wind turbine spacing requirements, a 250-acre farm could increase annual farm income by $14,000 per year, or more than $55 per acre. In a good year, that same plot of land might yield $90 worth of corn, $40 worth of wheat, and $5 worth of beef.” (Blogger’s note: This report and its numbers are 5 years old. I’ve heard of lease payments of $5,000 per turbine.)

More than a billion dollars in new income is not loose change; it’s change farmers and rural communities can believe in.

Solar farms can be next, along with locally owned bio-refineries that turn agricultural and urban wastes into fuel and a variety of other consumer products. By harvesting methane gas from animal feedlots and local landfills, farms and rural communities can obtain renewable energy while preventing one of the most potent of greenhouse gases from entering the atmosphere. (Methane’s heat-trapping properties are more than 20 times more potent than carbon dioxide.)

Tomorrow’s farms will earn new income from dedicated energy crops such as switchgrass and other perennials and from non-food crops that can be turned into a wide variety of products now obtained from petroleum, ranging from cosmetics to road de-icers and biodegradable plastic bags.

In a robust carbon market, farmers also will earn money by managing their woodlands for carbon sequestration and by using low-carbon tillage methods.

Meantime, farmers must begin practicing sustainable agriculture to restore and preserve our soils, water and forests. This is an area rich for discussion as Obama’s team makes its rural visits. It means fundamental changes in farm policy, including federal subsidies that encourage crop diversity. It implies much more careful management of fertilizers to keep them out of waterways and much better management of nitrogen, itself a greenhouse gas. It means more efficient irrigation, the use of less-thirsty crops and the preservation of wetlands to help protect water supplies.

National farm policy must begin to resolve the conflicts between food, fiber and energy crops, as well as water conflicts between rural, urban and traditional energy production.

While members of the farm team are on the road, they might take along a copy of the Presidential Climate Action Plan’s chapter on sustainable agriculture. It details several changes in federal policy that would help rural farms and communities lead America’s transition to a new energy economy – changes such as focusing rural electrification and economic development subsidies to capitalize rural renewable energy development and extending electric transmission lines to rural areas with good wind and solar resources.

Before it heads back to Washington, the Obama team should pay a visit to the Land Institute in Salina, Kansas, and listen to Wes Jackson. Wes is one of the country’s apostles of sustainable agriculture. He proposes that we have a forward-looking 50-year farm bill rather than making policy by tweaking the law every five years in reauthorization bills.

The Land Institute has held its own “listening tours” from coast to coast with farmers and experts in sustainable agriculture. Jackson and the Institute propose fundamental, systemic change in national farm policy. As the Institute puts it:

“Our vision is predicated on the need to end the ecological damage to agricultural land associated with grain production – damages such as soil erosion, poisoning by pesticides and biodiversity loss. The most cost-effective way to do so and stay fed is the perennialized the landscape. The transition of agriculture from an extractive to a renewable economy in the foreseeable future can now be realistically imagined…We have little doubt that we can make the agricultural transition faster than the adjustments imposed upon us by climate change and the end of the fossil fuel era.”

That brings up two other huge farm issues: global climate change and national energy policy. Agriculture will be one of the sectors most affected by changes in precipitation and temperatures and by the spread of pests that affect crop production. It also is heavily dependent today on fossil fuels whose prices will rise when Congress puts a price on carbon.

If Obama’s farm team is ready to talk about these issues – the pressing as well as the promising – it wasn’t evident in the Administration’s announcement of the rural listening tour. In a sound bite that could only have been written by a staffer with no license for boldness, the White House quoted President Obama explaining the listening tour this way: “A healthy American economy depends on a prosperous rural America.”

That may turn out to be the most obvious understatement of Obama’s first year in office. In fact, our ability to build and sustain a healthy economy has everything to do with the health of our soils, woodlands and water supplies and with the renewable energy resources available in rural America. As every good farmer knows, you can’t achieve prosperity if you leave good crops unharvested (in this case solar, wind and biomass energy), if you deplete the natural resources on which your livelihood depends, or if you fail to plan for the weather (in this case, climate change).

Rural America and the Obama team have a lot to talk about. The team should indeed listen on this tour, but on all of these important topics it shouldn’t be shy about starting the conversation.

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