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Alcohol-ism By Mike Gasior I am keenly aware that this September edition is, at the very least, a bit tardy, but I am determined to regain my monthly rhythm after throwing a couple of bi-monthly issues into the mix during 2006. Fortunately (for me anyway), I am in the throes of a wonderfully busy year that grabbed me by the lapels in January and has been shaking me furiously since then. With all that admitted, I will also tell you that my stutter steps in authoring these newsletters had everything to do with an extreme lack of time, and not one iota to do with me having nothing to say. This month I had four separate topics, each of which could have carried an entire newsletter all alone, but I'm hoping this "problem" will allow me to catch up and remain on schedule. With that in mind, I am going to attempt to be concise and to the point in sharing the topic I have chosen for this month with you, but I promise to not give you only half of the information. I think this subject is amazingly interesting and important, and more substantial to me because it's been very much ignored by the mainstream media. As you know with me, I have given you many a story that would later arrive onto the radar screens of press and the public and I am hoping that this will be one of those instances. So let's get this party started. 2006 AND 2007 PROGRAMS It is difficult for me to accept how close we now are to having 2006 draw to a close, but the calendar does not lie. Clients have already begun calling to secure 2007 dates to hold in-house training sessions for their staff and I'm frankly amazed by how much of next year's time has already been spoken for. My staff and I will soon sit down to choose days for our regional sessions in New York and offshore. If your organization would like to hold an in-house seminar for your staff in 2007, please contact my office at (860)347-6568 and they will make the scheduling of the program an amazingly easy process. Below is a link that will allow you to download an Adobe PDF version of our entire course catalog, which will give you the details of every seminar we offer. Also keep in mind that we will gladly customize any array of topics that will precisely address the needs of your group for no additional expense. The link for our course catalog is: http://www.afs-seminars.com/documents/Catalog2006.pdf Finally, I will be presenting three terrific programs in New York in November and there is still room available in each session if you would like to attend. You can view everything related to these courses by visiting the corresponding links below: Securities Operations, Processing & Accounting CMO, ABS & CMBS Securities Sarbanes-Oxley for Investment Departments Now let's get onto to the topic for this month. VIDEO COMMENTARY NOW ADDED TO THE WEBSITE I have been asked during my training sessions many times how a weak currency can actually benefit the country whose currency it is, and I have used this month's video commentary to explaining it. I took advantage of the lovely backdrop of Kinderdijk, Holland for this one and the windmills you see still turning behind me are hundreds and hundreds of years old now. You can view the high-speed Internet version of the video at this link: http://www.afs-seminars.com/video/2006-August-768K.wmv You can view the low-speed Internet version of the video at this link: http://www.afs-seminars.com/video/2006-August-56K.wmv And you can find all past video commentaries by visiting this webpage: http://www.afs-seminars.com/v-commentary.html I'll also remind you that you can view all past editions of this newsletter at the following link: http://www.afs-seminars.com/newsletter.html ALCOHOL-ISM I have confessed on far too many occasions my own concerns about the dependence on oil and the efforts and movements I've made to reduce my own personal reliance on it. Although I might have taken a poke at Al Gore a couple of months ago (and enjoyed it too), I do indeed think that global warming is quite real and something we need to do something about sooner rather than later. Hopefully those positions of mine are clear. What I have never really spoken of in this newsletter is the fact that I come from a very rich heritage of farming. As a child nearly every family holiday was spent at "the farm", as my father's family referred to it, and until I was a teenager my uncle operated the largest dairy farm in New England. On my Mom's side, I used to enjoy visiting her family in upstate New York who operated a massive farming operation themselves. I can still vividly remember being shown their newest tractor when I was around 12 years old, and the thing was not only the biggest tractor I had ever seen, but it also had an enclosed cab that would allow you to work in the rain and the snow. Plus it was air-conditioned and had a radio! It was frankly the coolest piece of equipment I had ever seen. What has been pretty sad for me to watch is not only my own family's retreat from farming during the latter part of my life, but the decline of farming across New England and the United States in general. American farmers have fed much of the world for many years, and it has been horrible to watch the Midwest become decimated from the difficult time that agriculture has suffered during the past 30 years. It is seldom the case today that a child who grows up on a family farm chooses to remain in those small towns and keep the family farm operating. This is what has made this whole ethanol "thing" so exciting for me. It seemed that there might now actually be a ray of light shining from the end of what has been an extremely dark tunnel. Farmland has begun shifting to the growing of corn and with the ethanol production plants being built nearby. This new industry is now bringing investment and jobs to a region that is sorely in need of it. Perhaps the move to ethanol might now be the savior of some of these farmers who may have failed without. Not to mention how ethanol is a renewable energy resource that is friendlier to the environment and will reduce our dependence on Middle Eastern oil. Not long ago, Jason Grumet who is the director of the National Commission on Energy Policy made the following proclamation about ethanol: "This is truly about the possibility of changing the world, about ensuring the homeland here, improving our economy, eliminating global poverty and actually challenging the petroleum oligarchs so that we can spread this global freedom and democracy around the world." President Bush is also clearly a proponent of ethanol who used his State of the Union address to lament the U.S. addiction to foreign oil and suggest that ethanol will "change how we power our automobiles." There are already state and federal regulations in place that ensure that ethanol increases its presence at the fuel pump, and the auto makers have been given tax credit incentives that will make certain that increasing amounts of vehicles can operate on it. The more one looks at the future that ethanol offers, it seems like a complete slam-dunk. Lower gas prices, coupled with a cleaner environment, a brighter future for farmers and the U.S. Midwest plus relief from our destructive reliance on oil from the Middle East. It would seem that ethanol is most definitely the fuel we will use to power ourselves to Utopia. It's a shame that it just isn't true. And it's even worse that this whole thing is just another plate of crap being served to the American public by their government with them being told it's filet mignon. Let's start from the beginning because I want you all still here with me at the end. The first thing I'd like you to know is that the price of corn in 1974 was above $3.80 per bushel and it really flirted with going through $4.00. What a lot of Americans do not know (unless of course if you're a corn farmer) is that corn prices for the last five years have hovered right around $2.00, between 40% to 50% lower than the price was basically 30 years ago. Many corn farmers of today will tell you, that they have to get at least $3.00 per bushel before they are even close to profitable, which now brings in the government and the pork barrel policies of weasel politicians. When corn (and other grain prices) began to fall, the United States government began to subsidize farmers starting back in 1973. Between the years of 1995 and 2004, the government made payments to farmers in Kansas and Missouri alone of $2.6 billion. These payments to farmers gave the incentive to grow a crop that was so large, even the most obese nation on earth couldn't consume it all. This lead to corn prices to actually plummet to levels below $2.00, and for the agricultural states to demand even more help to save their farmer constituents. What in the world were we supposed to do with all of the excess corn that was being grown? Well, in 2005 the federal government passed a law that will require 7.5 billion gallons of renewable fuels to enter the U.S. fuel supply by the year 2012 and had already been subsidizing ethanol production since the oil crisis of the 1970's. People seem to forget that former senator Bob Dole of Kansas used to be referred to by his own press office as "Senator Ethanol". Both the federal and the state governments have been offering a variety of rebates and incentives to the plants that are being built to produce ethanol, which has included a $.52 per gallon federal tax exemption as well as a variety of tax credits and abatements by the local jurisdictions. Congress has also passed credits for auto makers for every vehicle they make that can use ethanol in any way in its operation, including the very popular versions known as "flex fuel", which can use regular gasoline, or the E85 blend that is 85% ethanol and 15% gasoline. The credit is not contingent at all on the purchaser of the car EVER pumping a gallon of E85 into the tank though. I can also tell you that finding E85 in my area of the northeastern U.S. is pretty darn difficult, and whenever I've actually seen it, E85 was more expensive than the cheapest gasoline. But golly. What a noble and honorable thing for the politicians to do. They're saving the environment AND reducing our dependence of that evil foreign oil. Or are they? You see, Americans consume on average 140 billions gallons of gasoline per year. The government mandate of 7.5 billion gallon of ethanol by 2012 will replace just a tad over 5% of our gasoline. There is no doubt that this is at LEAST a step in the right direction, but one has to wonder how much our pollution situation will really improve or how much our appetite for imported oil be reduced if we're still using 95% as much gasoline as we've ever used by the time we reach the year 2012. What I'd also like you to know is that ADM (Archer Daniels Midland) is the leading producer of ethanol in the country and will produce in the order of a billion gallons of it this year. That's more than the following five producers combined. I'll add to this that ADM has contributed about $3,000,000 to the campaigns of federal legislators since the year 2000. There is no doubt (although I could not identify the precise figure) that the oil industry's contributions to candidates dwarfs that of ADM, I can predict that "big oil" is probably not feeling particularly threatened by an industry that is going to reach 5% of their market six years from now. Nor will "big oil" try to block any legislation proposed that will slow down the ethanol train since the oil companies have been enjoying record profits for the past few years. Or will we actually be using MORE gasoline in 2012 than we are right now? And could ethanol production be helping to contribute to the increase? There was a study published in July in the journal "Proceedings of the National Academy of Sciences" that concluded that ethanol creates just 25% more energy than the energy that was used to produce it. The journal said that this was a remarkably "small gain" considering the heavy environmental impacts that are a byproduct of its production. One has to consider all the fuel that is consumed by the tractors that work the fields that produce the corn, the propane used to dry the crop and the fuels consumed by the trucks that bring the corn to the plants for the conversion to ethanol. There is also the staggering amount of fuel consumed by the plants during production. Never mind the mind-boggling amount of chemicals that are required to grow a corn crop. Did you know that, on average, a corn farmer has to put down 140 pounds of nitrogen and 60 pounds of phosphorous fertilizers to grow one acre of corn per year? Did you that besides helping to grow the corn, the runoff of these fertilizers into streams and lakes creates algae bloom, which drives away fish and other aquatic life? Had you any idea that Iowa, who is the largest producer of ethanol, had their own Department of Natural Resources report in 2005 that the nitrogen and phosphorous levels in their waters were as much as 10 times the levels that should be found in Midwestern streams? Could you have imagined that Des Moines, Iowa would have the largest water treatment plant in the world (not New York, Chicago, London or Beijing) and they still have to issue "blue baby alerts" during the springtime planting season warning parents not to give tap water to infants? Will it be difficult to refer to ethanol as an "American fuel" given the fact that 40% of this nitrogen fertilizer is imported from overseas and much of it from the Middle East? Is it possible that this might all actually will get much worse between 2006 and 2010 when it is estimated that another 8 million acres will be dedicated to corn crops in order to meet the government mandate? Were you aware that an average ethanol production plant requires 750,000 gallons of water PER DAY? Sounds pretty damn environmentally friendly to me. There are LOTS of smart people who agree with my point of view on this also. Two large studies that were published this year agreed that burning ethanol produces 14% less greenhouse gases than does gasoline. But Consumer Reports did their own study this past August of one Chevy Tahoe burning gasoline versus one burning E85. The summary of what they discovered is that the "flex-fuel" vehicle enjoyed reduced fuel mileage of 30%. This wasn't any sort of shock since a gallon of gasoline contains 115,400 BTU's, while a gallon of E85 produces 75,670 BTU's. You can view the entire article at: http://www.consumerreports.org/cro/cars/new-cars/ethanol-10-06/overview/1006_ethanol_ov1_1.htm So we've got a little less than an 11.9% decline in greenhouse gas emissions (remember that E85 is still 15% gasoline, so we don't enjoy the full 14% reduction I referenced previously) but we now have to use 30% more of the fuel to go the same amount of distance. This is arithmetic only the government can appreciate. Another research study by the "Union of Concerned Scientists", which is a non-partisan group in Cambridge, Massachusetts calculated that flex-fuel vehicles increased U.S. dependence on oil by 80,000 barrels A DAY in 2005, and that it ultimately grow to 200,000 barrels a day. The reason is that the credit that is given to automakers allows them to effectively evade the minimum gas mileage requirements as long as they produce these flex-fuel vehicles. Long story short, the can makers having been producing an armada of vehicles that get somewhere around 1.2 miles per gallon less then would be usually required. The thing is, it has been estimated that since these credits have been in place (about 10 years), that all the flex-fuel vehicles that have ever been produced only use ethanol based fuels about 1% of the time. So now we have millions of cars and trucks on the road, getting lower mileage than they should and that fact is what has increased our demand for imported oil. If you would like to review the entire report for yourself, the link is: http://www.ucsusa.org/clean_vehicles/cars_pickups_suvs/dual-fuel-loophole.html One more place I'd like you to consider is Missouri. Right in the middle of the farm belt and pushing the ethanol envelope by mandating that 10% of the fuel used by Missourians is ethanol. Sort of exactly what one might suspect. Just don't bring that up to Sam Swearngin, who is the superintendent of the City of Kansas City's municipal fleet. It was back in 1997 that Kansas City began a pilot program to move the city's fleet of vehicles to alternative fuels. Lots of the vehicles now are burning biodiesel, which is made from soybeans, and bunches of others are powered by compressed natural gas. What none of them burn is a single drop of ethanol. Don't get him wrong though. He has nothing personally wrong with ethanol. It simply comes with far too many disadvantages to make it a practical choice for his fleet. To burn E85, Kansas City would have to begin to acquire flex-fuel vehicles (which they currently do not have any), not to mention the fact they the city would then be required to install new tanks for its storage and distribution since E85 cannot be stored in standard tanks. On the other hand, any normal diesel vehicle can use the biodeisel fuel (or regular diesel) and biodeisel can be stored in standard tanks. Finally, Mr. Swearngin also doesn't like the fact that ethanol significantly reduces the mileage his fleet would enjoy, when biodeisel gets the same mileage as standard diesel. Also, the experts who monitor air pollution in the Kansas City area say that the city may have to get an exemption from the 10% ethanol mandate. It seems that using that amount of ethanol might push the city ABOVE the ozone standards required by the Environmental Protection Agency. Huh? Mr. James Joerke would not want you to consider him to be "anti-ethanol", but as the air quality manager for the Mid-America Regional Council, he and his employer are lobbying the state of Missouri to let Kansas City off the hook with regard to the 10% rule. "Yes, it is a bit cleaner," Joerke says, but the corn alcohol is an oxygenate, and while that helps the fuel combust, it also causes the fuel to evaporate into the atmosphere more easily. This means while you are fueling your car, or just leave it sitting in the driveway or parking lot on a hot afternoon, the fuel is evaporating into the air unburned and creating an ozone problem. I know that my argument against the idea of ethanol being any sort of savior is getting somewhat ridiculous and tedious, but I hope I've shared adequate facts with you so that you can generate an opinion of your own. But let me share a couple of final thoughts with you. I remind you that Americans consume 140 billion gallons of gasoline per year. If the United States stopped ALL exports of ALL grains and began converting those grains to fuel, it would result in 2 more gallons of fuel per month per person. Then, if Americans stopped consuming ALL the grains they do not export (so basically gave up eating all foods that contained grain) and used that grain to convert to fuel also, this would result in another 2 gallons of fuel per American per month. I personally don't want to give up eating all grain products, nor do I believe that 4 gallons of fuel per month is going to alter the face of the planet either. I would suspect that a mild alteration of my behaviors (a smaller car or driving less) would accomplish much more, with much less drama and sacrifice. So what is the final result of this ethanol initiative? Well corn prices are currently around $3.23 per bushel, which is almost 80% higher than they were just a couple of years ago. It's once again a good time to be a corn farmer. And once again the government has rammed an issue that ultimately benefits a fairly small cross section of the American people, down the throats of everyone. I know this whole story has been about corn, but oddly all it has made me do is think about pigs As they say, you can put all the lipstick you want on a pig. But it's still a pig. Ethanol is a pig with a wonderfully talented cosmetician. ONE OF THE MILLION REASONS I JUST LOVE BERMUDA As someone who visits the island of Bermuda on a very regular basis, and has been traveling there that often for nearly 20 years, there truly is an amazing array of things I just love about the place. One of the things I've always admired (and have tried to adopt in my own behaviors) is the grace and calm that Bermudans can exhibit in the most dire and horrible of circumstances. Below I have pasted a verbatim passage that appeared in the Royal Gazette newspaper on October 30, 2006 and was authored by a Mr. Scott Neil: "Telecommunications worker Marcus Gibbings, 32, was found with stab wounds to his body on Thursday. It is believed the first officers to arrive at the apartment in Derwent Lane at 12.45 p.m. on Thursday were confronted by a bloody scene and signs that a struggle had taken place. Police in Bermuda have yet to reveal how Mr. Gibbings died or if they are looking for any suspects. Detectives have not ruled out foul play following the discovering of the body." Let's review this for a moment. A dead body with multiple stab wounds in a bloody crime scene that exhibits evidence of a struggle. It is certainly good to hear that police haven't yet ruled out the possibility of foul play. YOUR SEPTEMBER TRIVIA QUESTION This may actually be as timely a trivia question as I have ever offered to my readers, and I like it because the answer was frankly surprising to me (I only managed to get one out of the four). Anyone who has read these newsletters for any length of time is familiar with my love all of sorts of music, but even a casual music fan has a shot at getting this one. Please give it a legitimate effort before peeking at the answer. I'd get a few friends or colleagues to offer their suggestions for the list, since they may suggest names you would have never considered. Here goes: "Michael Jackson just announced that he will make a rare public appearance to accept a 'Diamond Award' in November from the World Music Awards. The Diamond Award is presented to artists or groups who have sold in excess of 100,000,000 albums worldwide during their career, and has only been presented to four other artists prior to Jackson. Who are the four other artists that have received the Diamond Award?" Enjoy thinking about this, and here is the link to see the answer. http://www.afs-seminars.com/brainteaser_Aug2006.html Copyright 2006, Michael Gasior. All Rights Reserved AFS Seminars LLC |
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September
2006 Newsletter
