Replacing Crude Oil : Missing Woods For Corn

You know when dealing with subjects as expansive as weather, and the effects of our actions on the global environment, there are so many variables & so many hidden cost involved that it is difficult to fathom if we have done the right thing. Take the instance of biofuels which are the new rage out here, maybe there is a thinking that just by using biofuels instead of gasoline, one just gets over the guilt of there hedonist lifestyle and do nothing about the bigger problem. Its not bio-fuels that would solve the problem, it is this voracious appetite for energy & consumable goods that is the problem. This is what has to say about the real effects biofuels, the devil is in the detail though.

Why is so much money still being poured into such a misguided enterprise? Like the scientists and environmentalists, many politicians genuinely believe biofuels can help decrease global warming. It makes intuitive sense: cars emit carbon no matter what fuel they burn, but the process of growing plants for fuel sucks some of that carbon out of the atmosphere. For years, the big question was whether those reductions from carbon sequestration outweighed the "life cycle" of carbon emissions from farming, converting the crops to fuel and transporting the fuel to market. Researchers eventually concluded that yes, biofuels were greener than gasoline. The improvements were only about 20% for corn ethanol because tractors, petroleum-based fertilizers and distilleries emitted lots of carbon. But the gains approached 90% for more efficient fuels, and advocates were confident that technology would progressively increase benefits.
There was just one flaw in the calculation: the studies all credited fuel crops for sequestering carbon, but no one checked whether the crops would ultimately replace vegetation and soils that sucked up even more carbon. It was as if the science world assumed biofuels would be grown in parking lots. The deforestation of Indonesia has shown that's not the case. It turns out that the carbon lost when wilderness is razed overwhelms the gains from cleaner-burning fuels. A study by University of Minnesota ecologist David Tilman concluded that it will take more than 400 years of biodiesel use to "pay back" the carbon emitted by directly clearing peat lands to grow palm oil; clearing grasslands to grow corn for ethanol has a payback period of 93 years. The result is that biofuels increase demand for crops, which boosts prices, which drives agricultural expansion, which eats forests. Searchinger's study concluded that overall, corn ethanol has a payback period of about 167 years because of the deforestation it triggers.

2008 American Credit Crisis

Thou' speak when the damage is already done. Alan Greenspan & his take on the deepening credit crisis

The news is getting increasingly ominous here, some are already hinting that this crisis in american financial markets could easily be the most gravest since the great depression, I am no expert on such a fancy subject but even the talk of comparing these two events makes you realize that things are maybe unravelling a bit too too fast. Maybe its all hoax, but then how could a company like Bear Stearn's be worth 2 bucks a piece just in matter of a fortnight. Being devalued 99% in fifteen days is something. There is more to it then meets the normal eye, and the way fed intervened [ Remember when satara-based UWB, that was sold lock,stock & barrel in three days by RBI ] to save it from going under suggests that its failure is maybe incomprehensible and could trigger a cascading set of failures. It means that there are other pressure points in the system that are under a lot of strain & are possibly waiting to rupture. I am surprised by the inherent flaws that this 'small' credit crunch has exposed in the glitzy american financial markets and its domino effect around the world. The seemingly hard and tinted glass building hides a lot of skeletons inside.

Its the return of the Karma in the financial markets these days, finally we are seeing that gigantic de-leverage-ing of the entire financial muddle that has been created over the years. Frankly, do we need so many financial instruments just to manage risk? All this risk based default swaps, where the risk can be quantified. It's good that some sanity is getting back into the system, but at a heavy cost. Somehow, how did not anybody saw this coming, how come those blue-blooded analysts were caught unaware. Over the years, Greenspan's low interest rate regime boomed these fancy paper and the housing market. Caution was the first thing that everybody threw to the winds, I guess if you keep good times for too long, then complacency sets in. But then some day the cookie had to crumble, and look the way it crumbled.

2008 Crisis : My Take On Coming Full Circle

Yesterday it was Carlyle capital, today its Bears Sterns & Co and rumors are hot that Lehman Brothers is also in a bit of trouble. The story keeps getting better or morbid whatever way you call it. Are there any lessons to be learned from so much deadwood floating around. Yes, Obviously for one greed is bad, it always has been bad, two convenience (i am not sure if its the right word) is not always such a good thing, making it possible for sub prime credit rating people to own homes was not probably the brightest of ideas. Attempting to build castles that has its foundations of sand is always a risky proposition, but then greed took care of pragmatism. Third, such moderation is maybe good or even necessary every decade to remove the complacency that builds up into the system. Fourth, this recession could lead to cooling of commodity prices worldwide that have been on the roll for quite some time now, last seen Brent was at $111 a barrel, I can still recall when the basket was ruling at sub-10 levels (around 1997). Every central bank worldwide is having a tightrope to walk between recession & inflation and Last this could be a clarion call to the US that its no longer the centre of the economic & industrial activity that it had been till now, the balance of power has started to move towards Asia and US can not continue hoping that it can be the richest borrower for all its life and not keep its own house in order.

Are there any lessons to be learned from this for India, Yes, one there is nothing like decoupling, we will not go into negative growth, but yes we will feel the pain,see ICICI Bank sub prime write-offs. second, avoid excesses in investments of any kind as you could be holding on to an assets for a long amount of time as market moves possibly sideways. Third, the India growth story is intact but the exuberance could wear of a little, so no more of hefty jumps on job hopping, Fourth growth would now have to be created as world economy has slowed, earlier we were on a gravy train that built the our growth rate with its own momentum, no since the train is de-accelerating India must push its engine harder to keep the train going faster. To take growth to the next level we needs reforms, solid reforms & with the election just around the corner, I am not putting my buck on reforms.

Stock Market's Nervous Breakdown

How can I have not guessed it, damn it. this turn of events in the stock market have taken even die hard market watchers literally with their pants down. Even I am, among the millions of so called small investor that have seen there investment go down week after week for last six weeks now. and you know what, I have stopped opening my demat account now , but should we be complaining as such?

Haven't we lost the right to complain about the precipitous fall when the rise of the markets was itself dubious. I have no problem with that, I have no problem in losing money when things crash, provided I had gained profit when the market was scaling high day after day. That's where the problem is, I invested in quality stocks that rose hardly in last couple of months of the bull market but have retraced a lot more when the chips were down. Bad sentiment I guess, has no reason, panic has no mind of its own, all it has is a momentum of its own. And still some people have the guts to come on TV day after day, saying that this support level would hold & we have bottomed out, that too when there were no more fundamental reasons for it to fall as there were for its heady ascent.

The bubble had to burst, the sorry part was that I was part of this circus, where no amount of smart investing works, hope this carnage ends fast, for its hurting now.