252 (17 February 2016)

Welcome to week 252!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(1 February 2016): “Big Agriculture Gets Its Sh*t Together” (http://fortune.com/fair-oaks-dairy-manure-fuel-farming/)

——–Former veterinarian Mike McCloskey is a co-founder of Fair Oaks Farms, located in northwest Indiana on the site of what was to have been the Chicago-area’s third major airport.  With 36,000 cows involved in the operation, it is in the top 1% of U.S. dairies.  With agriculture being a “major contributor to climate change” and with farms among “the biggest victims of weather associate with climate” disruption, “McCloskey is working to change the mind-set of the industry, demonstrating that farms can tackle environmental problems and still make a profit.”  McCloskey notes that he and his wife Sue dream “to have a zero-carbon-footprint dairy . . . And I believe I can get there.”  Driving the dream “of a zero-emissions dairy is cow poop—and lots of it.  Fair Oaks cows produce about 430,000 gallons of manure every day.  The heart of what the McCloskeys do is turn that waste from what could be a liability into an asset.”

********Perhaps the imaginative and business-minded approach of McCloskey might also be applied to the hog-waste lagoons of eastern North Carolina.  For a related article, see “What to Do About Pig Poop?  North Carolina Fights a Rising Tide” (http://news.nationalgeographic.com/news/2014/10/141028-hog-farms-waste-pollution-methane-north-carolina-environment/).

********While we are discussing dairy products, the article “The Parmesan Cheese You Sprinkle on Your Penne Could Be Wood” (http://www.bloomberg.com/news/articles/2016-02-16/the-parmesan-cheese-you-sprinkle-on-your-penne-could-be-wood) is worth a look.  It turns out that not all Parmesan cheese is made of Parmesan.  “Acting on a tip, agents of the U.S. Food and Drug Administration paid a surprise visit to a cheese factory in rural Pennsylvania on a cold November day in 2012.  They found what they were looking for: evidence that Castle Cheese Inc. was doctoring its 100 percent real parmesan with cut-rate substitutes and such fillers as wood pulp and distributing it to some of the country’s biggest grocery chains.”  According to Dean Sommer of the Center for Dairy Research in Madison, Wisconsin, cellulose is a safe additive “and an acceptable level is 2 percent to 4 percent,” but samples of store-bought grated cheese, purchased by Bloomberg News and tested by an independent laboratory, revealed cellulose levels of 8.8 in a cheese bought at Jewel-Osco and 7.8 percent in a cheese purchased at Wal-Mart Stores Inc.  “Until recently, there was little incentive to follow labeling rules . . . because the FDA, which enforces the country’s food laws, prioritizes health hazards.”

(11 February 2016): “Slave-Labor Loophole Closed by U.S. Senate After 8 Decades” (http://www.bloomberg.com/news/articles/2016-02-11/slavery-loophole-is-closed-by-u-s-senate-after-85-years)

——–“For 85 years, the U.S. government has turned a blind eye to companies that import goods derived from slavery—so long as domestic production couldn’t meet demand for those goods.  That’s about to change.”  On Thursday, the U.S. Senate “voted to closed a loophole in the Tariff Act of 1930, which bars goods made by convict, forced or indentured labor, amid a new focus on slavery in the supply chains of global companies.”  According to the United Nations, “Almost 21 million people are enslaved for profit worldwide, . . . annually providing $150 billion in illicit revenue.”  Concern about the use of slave labor in global supply chains are exemplified by California-filed lawsuits that “accuse Hershey Co., Mars Inc. and Nestle SA of ignoring slave labor in their West Africa cocoa plantations.”

********The U.S. bill is H.R. 644, which you can see at: https://www.congress.gov/bill/114th-congress/house-bill/644.  You can find the relevant sentenced by searching on the word ‘forced’.  The Tariff Act of 1930 is probably best known as the Smoot-Hawley Tariff Act.  You can learn more about it at: https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act.

(11 February 2016): “Oil Is the Cheap Date From Hell” (http://www.bloomberg.com/news/articles/2016-02-11/oil-is-the-cheap-date-from-hell)

——–“It’s scary out there.  The rout in the stock market that began around Jan. 1 took a turn for the worse early this month.  By Feb. 10 the Standard & Poor’s 500-stock index was down 9 percent for the year.  That’s its worst start since the recession year of 2008.  Falling oil prices were blamed . . . Trigger-happy investors have gotten accustomed to selling stocks whenever oil dips.”  According to Tobias Levkovich, who is Citigroup’s chief U.S. equity strategist, “The toughest problem for people to deal with is oil getting linked with the market.”  But the sense “that falling oil is bad for stocks is mostly a matter of timing and conspicuousness.”

********The article goes on to discuss a variety of factors that enter into to synchronizing of oil and stock prices, which are primarily driven by demand factors related to overall economic activity.  Falling oil prices, however, have had a significant impact on recycling, as is made clear by “Skid in Oil Prices Pulls the Recycling Industry Down With It” (http://www.nytimes.com/2016/02/13/business/energy-environment/skid-in-oil-prices-pulls-the-recycling-industry-down-with-it.html).  A case in point is Newark’s recycling facility run by Waste Management.  One year ago the company “could have fetched $230 for each bale of thin translucent plastic.  But today, thanks to the glut of cheap oil flooding global markets, they are worth just $112 each.”  The profits that were available for “all the players in the recycling ecosystem” are not there anymore.  “With concerns about climate change mounting, it’s an awkward time for the recycling industry to be under such pressure.”  That pressure is coming from the price of the recycled materials: “recycling is a commodities business.  The paper, metal, plastic and glass the recyclers collect, sort and sell competes against so-called virgin materials.  And right now, many commodities are cheap.”  Abundant oil, for recyclers, is the latest headache.

(11 February 2016): “The Shipping Industry Is Suffering From China’s Trade Slowdown” (http://www.bloomberg.com/news/articles/2016-02-11/shipping-industry-suffering-from-china-s-trade-slowdown)

——–“When business slows and owners of ships and offshore oil rigs need a place to store their unneeded vessels, Saravanan Krishna suddenly becomes one of the industry’s most popular executives.  Krishna is the operation director of International Shipcare, a Malaysian company that mothballs ships and rigs.”  At a time when oil producers and shippers are removing rigs and boats from service, Krishna notes that “There’s a huge demand” for the berthing services his company provides: “People are calling us not to lay up one ship but 15 or 20.”

********Interesting article which drives home the point that the same conditions that cause one industry to decline can simultaneously lead another to thrive.  The fact that ships and oil rigs are durable and movable plays an important role in this case.

(11 February 2016): “This Is The World’s Best Country for Working Women” (http://www.bloomberg.com/news/articles/2016-02-11/this-is-the-world-s-best-country-for-working-women)

********This is Episode 24 of Bloomberg’s Benchmark podcast and it includes a discussion of gender equity in Norway, the U.S., and Japan, but focuses on Norway.  The podcast is 25-minutes long and there are a variety of interesting things covered.  I was especially struck by the statement that Norway’s move to extend parental leave benefits to men and women meant that one reason to favor the hiring of men over women was eliminated, as men could just as easily be expected to take parental leave as women.

(13 February 2016): “Negative 0.5% Interest Rate: Why People Are Paying to Save” (http://www.nytimes.com/2016/02/13/upshot/negative-interest-rates-are-spreading-across-the-world-heres-what-you-need-to-know.html)

——–“A decade ago, negative interest rates were a theoretical curiosity that economists would discuss almost as a parlor game.  Two years ago, it began showing up as an unconventional step that a few small countries considered.  Now, it is the stated policy of some of the most powerful global central banks, including the European Central Bank and the Bank of Japan. . . . But as negative rates—in which depositors pay to hold money in bank accounts—become a more common fixture, there are many unknowns about what these policies mean for finance, for the economy and even for the definition of money.”

********This article provides a look at key questions and, where possible, provides answers.  We will be hearing more about negative interest rates in the future.  Fed chair Janet Yellen recently testified that “the American central bank was taking a look at the strategy, though she emphasized no such more was envisioned.”

(16 February 2016): “E-Commerce: Convenience Built on a Mountain of Cardboard” (http://www.nytimes.com/2016/02/16/science/recycling-cardboard-online-shopping-environment.html)

——–Scientists and policy makers are “grappling with the long-term environmental effect of an economy that runs increasingly on gotta-have-it-now gratification.  The cycle leads consumers to expect that even their modest wants can be satisfied like urgent needs, and not always feel so great about it.”  The environmental cost of this development “can include the additional cardboard . . . and the emissions from increasingly personalized freight services.”  Still, measuring the effects of personalized shipping presents challenges, for example, “As people shop more online, they might use their cars less.  And delivery services have immense incentive to find the most efficient routes, keeping their fuel costs and emissions down.”  However, “Many drivers deliver just one item.  This is often the case for Postmates, which has a fleet of 15,000 freelance drivers signed up to make deliveries of whatever the customer orders—an Uber-like service, but for deliveries.”  Even when cardboard is recycled, there are costs like “emissions from shipping it to the recycling centers, which use a lot of energy and water.”

********It is interesting the extent to which this article depends, albeit implicitly, on the provision of public goods and externalities.  Water is typically provided by “public works,” unless you are on a private well like I am.  Roads are typically provided by various levels of government.  And emissions are placed in the air that we all share.  The discipline of Public Economics has a lot to say about the production and provision of these items.

(16 February 2016): “How a Reporter Pierced the Hype Behind Theranos” (http://www.propublica.org/podcast/item/how-a-reporter-pierced-the-hype-behind-theranos)

——–“When the blood-testing company Theranos opened to the public in 2013, founder Elizabeth Holmes made bold claims of having revolutionized the diagnostic-lab business. . . . Theranos received fawning early media coverage, but last October Wall Street Journal reporter John Carreyrou took a more critical look.  With descriptions of unreliable equipment, skeptical employees and deficient practices, he reported that the company’s PR blitz outpaced its actual medical technology.”

********This is primarily a preface to the 19-minute podcast interview with Journal reporter John Carreyrou.  I was impressed by the knowledge, clarity, humility, and bravery of Carreyrou, as well as grateful for those in the media who daily risk their economic, reputational, and emotional wellbeing to report the news.  All of the invisible forces are clearly at work here.  Theranos will continue to be in the news until its scientific claims and market promise are resolved one way or another.  You can read two related articles at: http://californiahealthline.org/morning-breakout/theranos-proposes-lab-fixes-to-cms-regulators/.

May you have a good week!



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