Internet/Economy: A Green Revolution?

Are you worried about climbing prices at the gas pump, traffic jams and the greenhouse effect? There could be a surprising answer to all these issues: The Internet. At least the growing use of the World Wide Web could slow down these developments. This suggests a recent study by Gartner (cnn.com). The research firm asked the question: Given a choice between internet access or keys to a car, which would you choose? 46% of all 18-to-24-year-old drivers in the U.S. surveyed answered they would choose the Internet and give up their cars.

 “Mobile devices, gadgets and the Internet are becoming must-have lifestyle products that convey status,” said Thilo Koslowski, lead automotive analyst for Gartner, according to the  "New York Times"  (nytimes.com). “In that sense these devices offer a degree of freedom and social reach that previously only the automobile offered.”

Those who get a driving license now drive less, too, writes the New York Times. The papers quotes the Transportation Department which says 21-to-30-year-olds now drive 8 percent fewer miles than they did in 1995.

These numbers aren`t really surprising. If you ride a bus, a train or even some subway lines (as in New York City) you can text, call your friends or surf the Internet using Smartphones , Kindles or iPads. Doing this while driving a car would be hazardous and illegal.

And: The Internet has at least another effect which could slow down the use of cars. More and more people are shopping online and are driving therefore less frequent to the shopping mails, avoiding traffic jams and searching time for parking slots.

If there is really a change in the collective behavior and a trend, as the Gartner study suggests, then the rising use of the Internet could slow down the use of cars and therefore the burning of fossil energies, at least a bit.

Of course, the Internet also needs energy. The big server farms from Google, Facebook & Co. burn a lot of electricity, and iPhones and other devices are sucking energy too. But the energy used for texting and other Internet apps is less than for driving and the technological progress reduces the amount of energy used for collecting and transporting data.

Movies: The Rum Diary

Journalists lead a life full of alcohol, adventures & affairs, according to a common cliché`. It seems, the late American journalist Hunter S. Thompson had enjoyed such a life, at least when he was young. The movie "The Rum Diary" (imdb.com), based on his homonymous autobiographic novel, lets us share Thomson´s experiences while he was working for a newspaper in Puerto Rico in the 60s.

The film displays the boozed & stoned spirit of the writer`s alleged tropical adventures and looks partly like an hallucinatory trip. Bruce Robinson, the director of the flick, had a bottle of alcohol a day while writing the script, explains Wikipedia (wikipedia); the screwyness of the movie also reflects the high temperatures (above 100 Fahrenheit) and the extreme humidity on the set.

I reckon Johnny Depp is perfectly cast as the young, boozed and curious Thompson (named Paul Kemp in the film). Depp`s face acts as a screen for the surprises, misbeliefs and disgusts the writer experienced on his exotic travails. Giovanni Ribisi, who acts as the perma-drunk and stoned workmate, fits well into this intoxicated climate. The alluring Amber Heard, who plays Kemp/Thompson`s object of desire, legitimates her casting as well. She seems to be more disturbing and addictive than all the rum and drugs together. I had fun with Thompson`s exotic & boozed adventures and left the cinema without any hangover.

Commodities: And Another Bubble Popped

If you are late for an appointment, blame it on the Euro crisis. If you forgot your wife`s birthday, blame it on the Euro crisis. If you blew your exam,  blame it on the Euro crisis. It seems everything can now be blamed on the Euro crisis.

The "Financial Times" does it in the case of the falling price of cocoa (minus 35% since begin of the year). They write "the sovereign debt crisis in Europe has claimed an unexpected casualty – the price of cocoa" (the article is called "Euro debt crisis bites into price of cocoa " ft.com, needs registration). Oh, really? Does anybody eat less chocolate because of the Euro crisis? And why did the price of oil  (WTI) rise around 30% since early October and the stock market (S&P) move sideways since summer. Why does the Euro crisis affect the price of cocoa, but not so much the prices of oil & stocks?

Maybe there is another explanation for the crashing price of cocoa. Maybe cocoa 
was just another bubble which has popped now. The rising cocoa price (until April) was part of a general boom in commodities. Oil, copper, wheat, corn and a lot of other commodities are traded on financial markets (represented by delivery contracts called futures) - like stocks, bonds and currencies - and are therefore influenced by speculations. The German magazine "Der Spiegel" (The Bittersweet Wars Battle Pits Cocoa Speculators against Chocolate Makers spiegel.de/international) quotes estimates, that speculation in the commodities markets alone entails somewhere between $400 billion and $800 billions. The prices of commodities are therefore strongly influenced by hedge funds, brokers and banks who are betting on falling or rising prices or just earn money with counseling & accomplishing the financial transactions.

Commodities in general had been rallying because of speculation that a rising demand, especially from emerging markets (because of rising incomes) meets a constrained supply. The price of cocoa got hot because of speculations that the crops won`t be enough to satisfy the demand, because of unfavorable weather conditions (to wet or to dry) and other factors.

Last year cocoa had hid a 33 year-high, reports the "Financial Times". The British paper tries to explain that with "a disappointing crop in the Ivory Coast – which supplies two-fifths of the world’s cocoa - caused by low fertiliser use and ageing trees, as well as worries that farmers would abandon plantations or switch production from cocoa to rubber". I like their use of the word "worries", which is just an euphemism for rumors and speculation, which are heavy influencing this markets. 

You could find a proof for this in an article by BBC News (bbc.co.uk). In July 2010 the hedge fund manager Anthony Ward bought contracts for about 240,000 tonnes of cocoa, enough to make more than five billion chocolate bars! This put other buyers, especially the producers of chocolate, under pressure. They had to fear not getting not enough raw material for their production.

Of course, Ward and other speculators where at least pleased by price driving news, where ever it came from. It was a strange coincidence that last winter in the Ivory Coast a civil war broke out. The conflict stopped the cocoa deliveries from this country and drove the price of cocoa to a new record, rewarding Ward & Co.  "Cocoa production in war stricken Ivory Coast will likely fall over the next two years", claimed the broker Macquarie last April (thejakartaglobe.com).

But the bank was wrong. The conflict ceased in April and the Ivory Coast came back on the cocoa market. Since then the price of the commodity is under pressure. This year Ivory Coast an other producers delivered  crops which where higher than last year and raised the supply of cocoa on the world market, rebutting all the rumors about insufficient harvests.

The rising crops weren`t really a surprise, they were quite natural. The farmers did, what ever they do when the price for their products is rising: They planted & fertilized more, because they expected more profit. This basic law of markets popped the bubble finally.

Cocoa isn`t alone. The situation reminds me of the rise & fall of the price of cotton (I wrote about that in November drivebycuriosity). And the prices of wheat and corn also are under pressure, because their harvests also are much bigger than the banks and speculators tried to hoax us (bloomberg.com). this is good news for the consumers, but bad for the friends of banks like Macquarie, who predicted in January that 2011 will be the year of rising prices on the market of agricultural commodities (The return of agflation commodities-now.com).

Oil: A Dangerous Method

The price of oil (WTI marketwatch.com) is over $100 again. Yesterday the oil price rose 0.9% to $101, even when the stocks (S&P 500) closed almost unchanged, because of the still negative European news. Now oil costs around 30% more than in early October!

The price of oil doesn't´ have much to do with the economy these days, supply and demand doesn`t matter much. The oil price is political. It is driven by the fear that the oil supply in the near future could be endangered by political factors.

"Oil rose to a two-week high amid concern that tension between Iran and the West will intensify, threatening shipments from OPEC’s second-biggest crude producer," claimed Bloomberg yesterday (bloomberg). Last week the U.S. Senate passed a bill aimed at Iran’s central bank and the European Union tightened sanctions, Bloomberg reported further. Both political institutions are trying to stop Teheran`s nuclear program which allegedly could lead to nuclear weapons.

The spiral of rising oil prices is fueled by the fear that Teheran could retaliate and will curtail its oil exports. The tensions also could lead to a war against the Iran in which the gulf nation could close the Strait of Hormuz. This is an important waterway which is used for transporting most of the Arabian oil to the west.

The climbing oil prices are bad news for the global economy. Consumers will have to spend more at the gas pump and will have less money for shopping. The consumer expenditures  also could  be curtailed by rising costs for heating and more expensive products which are made from or with the help of oil (many chemicals). Rising energy prices could also implement higher interest rates to fight the inflation.

Yet, while sanctions and threats against the Iran are driving the spiral of higher oil prices, they don´t show any impact on Teheran`s policy. The Iranian government seems to continue doing what it does, ignoring all the sanctions & threats. If Europe reduces the imports of Iranian oil, as it says it will do, it still needs energy and has to get it from other sources, and then for a higher price. If the Iran has to reduce its oil exports to Europe the country easily will find other customers who are grateful for the commodity, for instance China.

This isn`t a new development. For years the conflict with the Iran - and the permanent discussion about sanctions and a possible war against Teheran - are influencing the price of oil and keeping the energy costs high. In the year 2008 sanctions and a possible war against Iran (washingtonpost  see also wikipedia) were one of the reasons that the oil price jumped to $146. This oil price explosion in a beginning recession worsened the following economic downswing.

Ineffective sanctions and threats which are just driving the oil price and therefore endanger the global economic recovery are a dangerous method. They show the ignorance and the economic illiteracy of the politicians. It seems that the European  Union and U.S. Senate don´t care about the risks they induce to the global economy.

And who is the winner? Iran! The country is still one of the leading oil exporters and earns the majority of its national income and wealth from oil! A policy, which raises the price of oil, gives the Iranian government more money in their hands. Rising oil prices are making Teheran stronger and are helping them to finance their expensive nuclear projects. Sanctions & threads are very counterproductive at least.

Economy: The Cult Of The Peak

(Drivebycuriosity) - The zeitgeist rules. Its name is pessimism. Part of the negative zeitgeist is the cult of the peak. For instance many experts tell us that global oil production has reached its the peak, they call it the "peak oil" (peakoil.com). If this is true oil production would drop, driving the world into a new energy crisis, the "peak oil crisis". You can find a lot more alleged peaks: A new study claims that at least the Britons are consuming less, than they did a decade ago (reuters.com). Reuters calls this the "peak stuff". Others lament that the speed of innovations & inventions has peaked (google), or that incomes & wealth in U.S.  have peaked and so on and so on.

Now the cult of the peak has a new blossom: The "peak of life expectancy", which I found on the media portal "Business Insider" (businessinsider.com). It is a contribution by the blog "Angry Bear"  (angrybearblog.com) which refers to the blog "Macrobusiness" (macrobusiness.com). The blog "Naked Capitalism" also refers to this thesis (nakedcapitalism.com). 

On "Angry Bear" I found this statement (angrybearblog): "Life expectancy has peaked in some US States according to recent research. This follows research published in 2005 that suggests current living children may not outlive their parents, and that peak life expectancy in the US may be reached between 2030 and 2040". The blog has a link to the "Institute for Health Metrics and Evalution" (healthmetricsandevaluation.org), but this connection didn`t function.

Anyway: I consider the "life-expectancy-peak" thesis as nonsense. It is just a kowtow to the pessimistic zeitgeist! Like many other peak claims, the "life-expectancy-peak" thesis uses some undigested statistics. "There are three kinds of lies: lies, damned lies and statistics" joked once Disraeli. "The only statistics you can trust are those you falsified yourself" agreed Winston Churchill.

Life, and the development of the whole humankind, doesn`t advance in straight lines. History moves in waves, with occasional ups- and downs. It needs some distance to discover the trend. Therefore it doesn`t make sense to use a short term movement and to try to extrapolate it. In the short term statistical data occur randomly and they are difficult to measure (this is one of the reasons why the quarterly reported growth numbers of the GDP are at least revised 2-times). Because of their weaknesses statistics can easily be manipulated and be bend for a certain purpose.

I am convinced that the trend of growing life expectancy, which started many centuries ago, will continue. One of the reasons is the general learning process. We are getting better in the things we do, even in health care.  The technical progress (including the advances in the sciences) will continue  to create better pharmeceutical and better methods to diagnose and to cure illnesses and therefore expanding our lifespan.

Movies: Melancholia

 

 (Drivebycuriosity) -  It is the time for the best of the year lists again. My movie of the year -  so far - is "Melancholia" (imdb). The film, directed by Lars von Trier, mesmerized me. The danish director  and his cinematographer Manuel Alberto Claro created pictures, Stanley Kubrick would have been proud of. Both cinema innovators show what cinema still could do. Days after watching this movie event I was still under its spell.

As the title promises, "Melancholia" has a dark & disturbing plot. The film focuses on 2 sisters, played by Kirsten Dunst and Charlotte Gainsbourg, who have to deal with depression and an enviable fate, a fatal crash of our earth with another planet.

The film doesn`t show the usual action you can find in Hollywood`s science fiction blockbusters, instead it confronts the viewer with the psychology of its characters, it is more Sigmund Freud than Isaac Asimov. Once again Lars von Trier confirmed his reputation as a provocative director and delivered a piece of art, worthy to discuss and contemplate.

Internet Stocks: Bubble? What Bubble?

"The reports of my death are a bit exaggerated", joked once Mark Twain. This reminds me of recent reports about the state of the Internet stocks. "The Tech Bubble Just Popped" titled "Gawker", a popular newsmagazine/blog (gawker.com). The "New York Times" (dealbook.nytimes) and "The Wall Street Journal" (allthingsd.com) had similar articles.

Indeed the shares of Groupon tanked around 30% last week and Linkedin plumped 15%. Netflix imploded around 75% since July. Even well established Internet companies got caught in the selling panic: Last week Google dropped 6%, Ebay lost 11% and Amzon.com tumbled 16%.

I guess the mentioned articles and the sell out are just mirrors of the general hysteria and fear on the markets. Funds and other short sighted speculators are panicking now. These speculators react like lemmings and are dumping everything which seems to be risky. This is a typical herding behavior we experience very often in scary times. Internet stocks, which are usually more volatile than the whole stock market, are just the scape goats of the general paranoia.

The dumping of the whole Internet sector doesn`t have anything to do with the reality. The Internet industry is doing way better than the whole economy, which is still solid (proven for instance by rising retail sales, a climbing industrial production and the shrinking weekly jobless claims).

It is typical for the general climate of neglect that media & market players are completely ignoring the perspectives of the Internet now. The World Wide Web is still in an infancy stage of its evolution. Many more technological innovations and enabling capabilities such as payments platforms are likely to emerge, while the ability to connect many more people and things and engage them more deeply will continue to expand exponentially, claims a recent report by McKinsey (mckinsey).

And: Intel expects that over the next five years 1 billion more people will join the global online community with 15 billion connected devices, including PCs, smartphones, tablets, embedded devices, and smart TVs (drivebycuriosity). The Internet sector will benefit from the falling price for these devices, thanks to the technological progress, and from the globalization. The numbers of Internet users in China, Brazil and other emerging markets already are exploding.