The Russians Are Coming. Strutting Nuclear Power

We knew it was coming. Then it was refused permission. But now, the Russians have arrived! Tuesday in the late afternoon sunlight it was quayside. Dark, blue, sharp - all latent power, metallic angles and drilled sailors in whites. The Russian nuclear cruiser Pyotr Veliky [Peter the Great], flagship of the Russian Northern Fleet, is tied alongside next to the container channel in Cape Town Harbour with a shiny red star on the bow. Battlecruisers like Pytor are some of the largest warships in the world, second only to aircraft carriers, and are similar in size to a World War 1 battleship.

The South Africa’s National Nuclear Regulator originally refused entry to dock in CPT, with good reason based on the Russian Navy's history, q.v. comment by the Russian Northern Fleet Chief Commander, Admiral Vladimir Kuroedov in 2004 “Pyotr Velikiy's reactor was in an extremely bad condition and could explode ‘at any moment’,” and the disaster of K-141 Kursk nuclear submarine.

The Pyotr Veliky captain’s orders must have been clear – sail to Cape Town, get to the V&A Waterfront, and do some shopping in the January sales. At least that's what we assume because news reports it was “deemed too big to berth at the V&A Waterfront” and I cannot recall other capital ships trying to turn right after entering the harbour... When the Russian Navy wants to strut their stuff, they are very subtle. Next time the Americans send their nuclear-powered aircraft carrier back, they’ll probably want to park it in front of the V&A clocktower! The Americans had the discretion to float gently in the Table Bay gales when the USS Theodore Rossevelt arrived in October 2008. On the other hand, maybe the US Navy was just exhausted having determinedly conducted shock-and-awe against red tape for years to make it happen.

Maybe the Russians saw a few too many Cape tourism photos, or South African parliamentarians are about to make another arms deal that will distract presidents and would-be presidents for years to come…let's hope not like THAT other one, the one Archbishop Tutu has requested an inquiry into. The military ship was being patrolled last night by a SA Navy inshore boat [see it near the stern, above], watching for any protesters or drunken seals. Local NGO The Anti-War Coalition did react to the arrival, as they did to the US carrier in 2008. Note also the Russian Navy flag, looks a bit like the Scots. Unfortunately, I will not be sneaking happy snaps up close.

Are there any other nuclear-powered ships from any other nations of the world that want to dock in CPT to check out the new FIFA WC2010 stadium at Green Point? Guys, maybe just read the WorldCupblog. Perhaps the approval for the visit from Pretoria is the SA government serious about creating jobs [part of the ANC’s election manifesto the past three elections, but…]. The last time a nuclear-powered ship wanted to dock in 2005 but was denied, a storm in a teacup brewed up:

“The ship [US aircraft carrier USS Harry S Truman] eventually sailed past, prompting an outcry from local businesses that would have benefited from the spending power of more than 6000 visiting sailors”.

Well, at least the American sailors in 2008 did play rugby! I wonder how many crew the Russians have ready to buy wine and biltong, how many play rugby, and oh, I would pay to see some Russian sailors try and haggle with a minibus taxi driver, hanging out the window calling destinations with thick Cape Flats accent… Maybe that’s why all hands were on deck astern for at least an hour in the twilight last night getting a briefing from the captain and/or liaisons.

Curious minds that you are, one expects the reader will want to know what it takes for a nuclear ship to dock in SA. The original dates were blocked by NNR for “specific criteria for the refusal related to a safety certificate from the Russian regulatory authority; a liability letter that provided only for international nuclear damage; and an emergency plan that was ‘not comprehensive enough’". Good to know that instructions to evacuate CPT will be issued in Russian. Pyotr Veliky sits in the harbour about 1.5km down the mountain from here – wonder how fast after "dear comrades, we regret to inform you..." I could whip the MTB out and pedal over Devils Peak?!

Nuclear Power

Nuclear-powered ships are really about steam boilers driving pistons. Similarly, nuclear-powered electricity generation remains a tough item in the ongoing debates about responses to climate change. There is a reason no nuclear plant has been built in the US in 30+ years, mostly due to "Not In My Back Yard" [NIMBY] and no financial firms willing to fund the huge capital costs. Nuclear power is under-covered in South Africa. In apartheid SA it had a powerful isolationist, screw-them component. Koeberg, about 50km up the cold West Coast from CPT, is the sole nuclear plant, French-built [Framatome] and commissioned in 1984. New construction on partly SA-developed technology ["pebble bed modular reactor"] was shelved. But in 2009 all bets were back on after ESKOM failed to provide electricity leading to bad waves of brownouts in SA in late 2007/early 2008. And with a large portion of the planet’s uranium, seems to make sense. For investors into the nuclear sector in SA though, about the only direct exposure would be via ESKOM fixed income instruments.

Business Report this morning included a headline “SA's next nuclear power plant to come on stream by 2019” indicating nuclear is back in the mix and moving forward. The SA government is doing it directly because quasi-government ESKOM fumbled so badly, and dropped out. The SA government plans around 6000MW by 2019, which is two years later than original plans. Instead of supporting the ESKOM funding, the SA government is doing its own thing because “government wanted to launch a process that differed from the utility's one-time proposal to ensure it could build up the fleet over time” according to Nelisiwe Magubane, the deputy director-general at the minerals and energy department. It is not clear where the government's energy versus environment trade-off has led, though both nuclear power and Environment Minister Marthinus van Schalkwyk have risen lately, according to BR. Meanwhile, NGOs like Earthlife Africa are trying to keep focus on getting power to poor people in SA.

Nuclear energy remains a challenging item for sustainability investors like Insight Investment, those integrating environmental, social and governance factors into investment policy and practice [ESG], see article "Nuclear in my ethical portfolio please" and typical nuclear screens by EIRIS. The nuclear opportunity has an easy investment vehicle in the US, the Market Vectors Nuclear Energy (ETF) (Public, NYSE:NLR). Also, Barron's had a main feature Blossoming of Nuclear Energy and table of nuclear stocks this week [12 Jan]:

Exelon, Entergy and other nuclear-power giants are set to surge, thanks to the Obama administration's plans for heavy investment in clean energy.

It is just seven days until the Obama inauguration. A friend with a solid global strategy in Boston he developed for State Street knew he would face heat from some sections of investors and stakeholders [Union of Concerned Scientists is based in nerd-heavy Boston] but he was willing to consider it as part of the solution, names like Hitachi, Westinghouse, AREVA. GE pitched nuclear in 2005 as part of ecomagination, with response from the likes of Treehugger.com in 2006 quite equivocal, but fast forward to NEI Notes' response to Obama's plans in 2009. The respected ESG investment house in the US Calvert now has a position of:

"Calvert's two newest funds, the Global Alternative Energy Fund and the International Opportunities Fund, may in select cases invest in companies with existing nuclear power if they are demonstrating leadership in developing alternative energy. Moreover, the Funds will not invest in companies that own or operate new nuclear power plants or do not meet Calvert's safety and security performance standards".

Gov. Schwarzenegger in California says nuclear "has a great future", and recent graduate students will have good nuclear jobs in the industry. The Russian gas cuts via Ukraine to Europe again this northern winter have re-ignited the nuclear option in Europe. The UK mapped a nuclear policy in 2007, which has been criticized for not including government funding. Big, big numbers are involved when constructing nuclear power generation plans. In the US a coalition of socially responsible investors [SRI] and environmental organisations, including Friends of the Earth, Public Citizen and the shareholder activists Interfaith Center Corporate Responsibility (ICCR), in 2007 argued new nuclear power plants cannot be cost-competitive with other electricity generation alternatives [see Why a Future for Nuclear Industry is Risky, 2007].

Where Did All the Nucleons Go?

The issue is the same as for coal or consumerism: what happens to the waste? Between 70 and 90 percent of the world's spent nuclear fuel is of U.S. origin. No doubt, the siting of nuclear plants is the dramatic, as the accidents in Three Mile Island or Chernobyl suggest. Nuclear accidents are as cruel for civilians as Israel/Gaza, just silent and longer-term disfiguring. But the bigger issue, and little reported story, is where the nuclear waste [radioactive for longer than Larry King will by interviewing in suspenders] will end up. Where do all the nucleons go?

After over 20 years of research in the US and billions of dollars of “carefully planned and reviewed scientific field work”, Yucca Mountain located 80 miles northwest of Las Vegas, Nevada, is the only site under consideration for a proposed repository to store 77,000 tons of high-level radioactive waste from U.S. weapons sites and commercial nuclear reactors. But protests about shipping and storing rage on in the litigious capital centre of the world. Opposition is fierce. Senator Reid has flatly refused EVER to let the nuclear waste be stored there. And what does "low-level radioactive emissions" really mean?

Where is all the nuclear waste stored today? The IAEA has been talking about global standards [ironically in CPT in 2007], and nuclear plants even qualify for environmental standards [ISO 14001, who knew?!]. But if France gets 80+% of electricity from nuclear power, is it sitting under the slopes of Chamonix? More research is called for. One immediately wonders about the French Legion heading into the Sahara or why the Paris-Dakar Desert Rally was switched to Argentina in 2009…

Where does radioactive waste go? The current concern with CO2 is important, nuclear may be part of the solution, but building more nuclear plants needs to happen in the context of the outputs. The by-product of coal-fired energy generation is CO2 emissions, and costing outputs may have caused at least one coal deal by Dynegy to flounder. Investors - especially institutional investors - must cost outputs so we have no externalities: pollution is a deferred cost, not an externality. Just like coal-fired power plants. Just like mines. Radioactive waste from mines is a current and present danger in SA, but you would be hard-pressed to find this costed ex-ante. Storing spent fuel at Pelindaba is the SA nuclear waste plan - which implies it is being railroaded or trucked to the hillside outside Pretoria. Mmm. But then Pelindaba allegedly suffered a terrorist raid that was hushed up, according to CBS 60 Minutes [I wonder if the brave manager who foiled the raid ever got his hospital expenses paid?]. Some American administration types included the issue a year ago in an WSJ editorial page article as part of a campaign for nuclear munitions abolition at the Hoover NTI conference, and pitched Bush's call for an international spent fuel and decommissioning facility.

In the US one has some confidence that watchdog NGOs like UCS and Environmental Defense and their nuclear engineers like David Lochbaum are watching the nuclear picture, being:

“vigilant in monitoring the performance of nuclear plants and their regulators—the Nuclear Regulatory Commission”. We continue to find and expose safety and security problems at individual plants, in industry standards, and in the failure of regulators to take effective action”

The “successes” tab on UCS’s website is useful to track their progress, as is the US nuclear plants interactive map that allows users to search for safety issues.

SRI-Extra reported [6 Sept 2008 Hypodermics Overboard] about the critical nuclear leak hidden by an employee, yip, sometimes you just need a Homer Simpson on deck. The only time I want to read “near-miss” is when reading about cricket [see Neil Manthorp's adventures in AUS].

Well, where does this leave nuclear waste in Russia? It does not strike me that the Russian political leadership is open to scrutiny and Duma hearings with NGOs testifying, although Sally Osberg stated at Skoll World Forum, 2008 that “[i]n Russia, we’ve gone from virtually no NGOs eight years ago to more than 400,000 today”. WWF Russia, the Russian branch of the WWF, is active and brave. While at UNEP FI in Geneva I worked with Boris Shevchenko, Evgeny Shvarts and Elizaveta Nikonova and UNEP's Alexander Gudyma in getting the PRI translated for the first time into Russian in 2007/8 as a small engagement. In January 2009 Russian courts are weighing the threat to rare Western Pacific grey whales of the Sakahlin 1 project, litigating ExxonMobil and Rosneft to halt the pipeline. But it was the Italians who had to offer to contribute money to dismantle another Russian ship in 2004. Maybe the Russians are better in 2008 than 1998, but until 1990 nuclear waste disposal included...

“the Soviet Navy routinely dumped radioactive waste in Baltic, the northern Pacific (primarily the Sea of Japan)and Arctic waters, sites on the Kola Peninsula in the Russian North [Siberia], and on the Shkotovo and Kamchatka Peninsulas in the Russian Far East; and by holding radioactive waste on storage ships servicing the Northern and Pacific fleets”.

No wonder the Japanese wanted fresh southern African fish!. Nice. And maybe a reason why Russia claimed the Arctic in 2007? Ten years ago in 1998, around the time of the Russian bond defaults, academics reported

“[e]conomic hardships over the past decade have rendered Russia's radioactive waste handling capabilities inadequate. A severe shortage of radioactive waste storage space, coupled with a lack of funding allocations for new storage sites, has led to a difficult situation for Russia”.

The arguments for nuclear waste treatment are few and far between, lost in the calls to include nuclear power in the investment portfolio for "climate change friendly" power generation options. Lost like actual demonstrated carbon capture and sequestration [CCS] technology, the other "wonder technology". When Pyotr Veliky sails tomorrow, I hope it honours for Cape waters, and for every oceans, what a good few slobs on Table Mountain paths have not lately: when you leave, leave only your footprints.

SRIX.GS

Emerging Markets…Brutal BRICs?! II/II

In the week that began with Citi [C] becoming the US government's latest shareholding, JPMorganChase [JPM] was pitching their core competency as a lender, and Goldman Sachs [GS] was looking to stretch their sustainability advantage branding their research and investment products. JPM was busy offering a full page advertisement in WSJ Eastern edition A5 Tues 25 Nov pitching to the WSJ readership on their commitment to lending [“Our Business Is Lending. And That’s Exactly What We’re Doing”], including “in a responsible way”. Yes, I can only imagine what my mate who taught me how to build a BS filter for company ESG claims, the KLD research director in Boston, will say about that one!

Goldman Sachs was taking the front foot in the FT Mon p.3 with the first above-the-line hardcopy advertisement I have seen for GS Sustain, a fair advertising budget commitment to go above-the-line. Of course GS hedged bets by burying the ESG lead in the body, the sub-title “innovative thinking finds innovative companies”, and one has to mine the paragraph further for “a unique global equity strategy that brings together ESG (environmental, social and governance) criteria, broad industry analysis and return on capital to identify long term investment opportunities”. But GS now fronts their homepage with GS Sustain. Clearly someone is taking a big bet, and perhaps with freefall markets, a good time to try something completely different.

GS Sustain has a colourful history. It's strong underpin is from the GS sell-side in London via the work dating back to 2003 of Anthony Ling in the Energy Equity Research team, and then taken forward by Sarah Forrest, Marc Fox and colleagues. Sarah is now an Executive Director for Global Investment Research. After finally establishing a coordinated framework in early 2007 – GS Sustain – which launched to plaudits from the usual UN Global Compact types and affiliates in Geneva last July, the GS Sustain brand has been slowly building. Like IBM, no presenter looks dumb when quoting GS – a false security to be sure – but expedient for now. Indeed, in my MBA865 seminar at Kenan-Flagler Business School, Sustainability in Investment Strategy at Chapel Hill last week, one of the most informed students referred to “it’s Goldman Sachs!” as the GS halo in the ESG space proves to light the way for less skeptical inquiry of how sustainability plays in. Clearly GS benefits from being one of the two last i-banks standing, [mostly!], and may push for competitive advantage on sustainability matters in the FT, the print daily which positions itself in US as more global than the WSJ or NYT Business Day as a major business daily. Companies, as they do with any positive third party assessment, but especially when it is a major i-Bank brand, are only to happy to tout their standing in any competitive assessment, such as BG Group [LON: BG] a natural gas company.

I was first alerted to the new GS Asset Management product built off the GS sell-side’s GS Sustain framework in Manhattan at the Sustainable Investing 2008, People. Plant. Profit. on September 23-24th, 2008 at The Harmonie Club, New York City. At that time the product was available offshore only, but now institutional US clients may access it. The conference was hosted by Financial Research Associates, LLC for the first time, as a new conference publisher entering the sustainability space, with assistance from SIF.

In the next two weeks I will be having a more solid look at GS Sustain GSAM product as forward planning for when it has run a year at least and we may start recommending the strategy from an informed understanding to the benefit of asset owners and multi-managers. I like that GS Sustain is in the game, for sure, but a close examination of some of the underlying criteria makes me cautious based on my past experience of ratings that are built on "box checking". The framework looks good, but underlying data, and assumptions like memberships of an initiative or international organization sending signals about sustainability, may be sub-optimal. I am cautiously positive, and our recommendation at Sinclair & Company to investors is to observe closely, and stress-test the ideas before becoming convinced. I have not reviewed the strategy in detail since hearing about it in late Sept, partly because the most impressive aspect of the Sustainable Investing 2008 event had me moving to other thinking. Other than Tim Smith’s usual excellent chairmanship [when not chairing SIF, he is in Boston as Senior Vice President at Walden Asset Management], was the compelling speech by Joe Keefe CEO of PAX over lunch, one of the best expositions on where ESG/sustainability investment is in 2008, and where it may go, an extract of which is here.

And of games, well, it just would not be right to cover emerging markets and London in the same story, and fail to mention Saturday's smashing game the Springboks played against England which CNN titled "Springboks Thrash England at Twickenham". Rugby, like life, rewards grit as well as grace, with patience a coaching watchword lately. So comprehensive, the Brits found time to boo their team. Yikes! The tackles, the tenacity and the touch South Africa showed against England in their backyard, racking up the Roses’ biggest ever loss at home, was a fresh reminder of the entrepreneurial and rugged nature of the boys from the bottom end of Africa.

Sarah is an Aussie, so she would have enjoyed it, and the headliner from The Australian "Springboks Outclass England at Twickenham". The boys from Goldman are credited with the BRIC moniker coined the term ‘BRIC’ in our Global Economics Paper, ‘Building Better Global Economic BRICs’, published on November 30, 2001. Maybe they had seen Bakkies [“bricks”] Botha make a tackle sometime before, like the try-saving one he made on Saturday? [sidenote: should every rugby player hope for a wikipaedia entry?!]. Yes, I know, South Africa has the ability to play sublimely one week [has Australia recovered from 50-odd thwack at Ellis Park, their biggest ever Test loss?] to the slack - only one Tri-Nations title in all these years. But as I pitched at the Paris UN PRI Board meeting in Nov 2007 - to the sullen looks from the Englishman directly after Springboks won in Paris [and a smile from the Frenchmen] - nice to see EM on top. A small smile for EM slips out when running through the scoreboard from Saturday: Emerging Markets 42 vs. Developed Markets 6.

The England coach called it “brutal” and “a lesson”. Pretty much sums up the financial meltdown for EM and the rest of the world too, and the bleak '09 outlook. Enough said.

SRIX.GS

A Week in Politics, a sage’s birthday week

They say a week is a long time in politics. The week of 25 August 2008 must rank as one of the longest in the US for a while. The US media moved from the Georgian crisis to the immediate spectacle of politics played out in primetime. The tension, drama and hope of the Democratic Party played out to a climax on Thursday night at the Mile High Stadium in Denver, Colorado after months of preparation, drawing the greatest numbers ever to watch a political convention since Nielsen started tracking in 1960 [also bigger than American Idol, Beijing Olympic opening and the Academy Awards - confirming Obama as celebrity?]. The Democratic Party is one of the two dominant political parties in the US, the majority party in the elected government legislature, but not in the executive office of president since Bush vs Gore in 2000. The presidential election happens on Tues 4 November, as it does every four years. For all its warts, it is hard to argue against the US as being in the top tier of democracies around the world in 2008. The past 500 days since Obama and McCain announced has seen the candidate fields whittled down to the two majors in a demonstration of democracy in action, sometimes ugly, sometimes pretty.

For the first time ever, and because one senses something of great importance in the shifting tides, I watched the entire acceptance speech by a candidate. Barack Obama spoke late Thursday night, covered live on the public television station, a great scoop for PBS. The Democratic Convention this week reinforced my reminder, since coming back from the year sojourn in Europe and travels in emerging markets, that the US remains a nation of competitive individuals where marketing remains a core competency, perhaps a birthright. Earlier this week I smiled when I drove by the iconic US marketing icon in Cambridge MA: the classic American image of young kids selling lemonade at a streetside table with hand-scribbled signs. Taught from a young age, the average American is a able to pitch ideas directly, especially to a camera. To watch the political event, with TV-scripted moments, is to watch a masterclass in events management only slightly less well-planned than the Beijing closing ceremonies. The Obama speech apparently drew the largest ever TV audience [38m] and was carried live on public service television. PBS is one of America’s great institutions, along with Prairie Home Companion! In a taste of Americana for me, I was invited over to watch with a small gathering of Democrats in a small town in New Hampshire not far from Dartmouth University, the local Ivy league university. NH is a state that the ’04 model McCain impressed. It also has the most impressive state motto: “Live Free or Die”. Mmm. No wonder this state liked the guy who the Russians most dislike!

For the generation that sees sustainability as the defining challenge and opportunity of our time, the Obama speech seemed to leave a little missing. I missed the live Al Gore speech for his party earlier, where he did offer some pithy observations, including:

...it just so happens that the climate crisis is intertwined with the other two great challenges facing our nation: reviving our economy and strengthening our national security. The solutions to all three require us to end our dependence on carbon-based fuels.

Sustainability will be best met by a government with a leadership agenda, like I have seen in Singapore or Iceland. One hopes that the government at federal and state level in the US may wield their fiscal directing power, direct investment capital, and enormous procurement and services footprint to move forward adoption of climate smart policies and improving the sustainability footprint of business as usual. Obama floated his 10 year plan, but he seemed to flip it out, not drive it in as Kennedy did for the Apollo program to the moon. Maybe Gore distracted him from the need for making his own case for sustainability as generational imperative, and in prime-time. Both the McCain and Obama campaigns have been seeking to influence impressions of how green they are, delivering on-campus debates by their advisors and visiting salon-type situations in major cities like New York in the past months, none of which bumped the US$20/month bike commuter credit through Congress and Senate this summer. On the grandest stage opportunities exist for “green” stories next to stories of economic, educational and discrimination stories. Floating into view was this journalistic pearl of eccentric Brits driving restaurant-by-restaurant across Europe in their bio-diesels!

The tone was substantive. The image was poignant. Obama is a celebrity, the next big thing from 2004 now the most interesting prime time phenomenon. The orator did seem to authentically present the American experience, the itinerant lifestyle, the making it happen in spite of challenges, of the step up from education made possible by scholarships and loans. As an outsider, he does seem to represent the American brand, and the opportunity in this country of all countries where the story is possible. Being different remains a challenge for humans, as even the fascinating BBC show reveals in describing socialization of growing kids bbc.co.uk/childofourtime. Diversity is a reality and a strength for those who understand how to encourage it in their lives, and their experience. Both major Democratic candidates seemed to offer diversity this year, on race or gender basis.

The week ended with a striking counter-move from the other major party. The Republican candidate John McCain selected a female running mate in part to pick up disaffected female voters in a bold move, with unclear risk/return payoff for his campaign. If nothing else it swept away the analysis of the Obama speech from the Friday morning talking heads, and recovered the attention lost for the week’s drama in Denver. The long week has a snappy ending. All candidates are striving to be the “change”. Like definitions of “sustainability” by some fine greenwashing marketing types, the follow-on questions haunt the statement: change from what to where by whom?

So my week’s tutorial in the US political marketing game ended pointedly. I left the US in 2007 before Fox had launched their long-awaited business channel, FBN. When I flipped over to FBN on this Friday morning, I was greeted by a familiar face from CNN International I watched for international news during my law school days, Richard Varney. His smooth British accent has more sharp American intonations that makes him sound New York. But it was what he said that illustrated the direct political action that Fox is renowned for in the US: strong right-wing, Republican support. Varney invited comment from some suited talking head after the announcement of Palin by trying a long-winded, roundabout hook by using language like “since the news was announced and she spoke it seems to me that the market may have responded positively and the market has responded”. Politics certainly moves markets, as the response to the Russian tank adventures illustrated [see SRI Extra 23 Aug 08] and the WSJ reports the Russians major firms seeking debt financing in September as usual will face increased costs from skittish foreign investors. I had just flipped over from CNBC [certainly not a Democratic mouthpiece] where the on-air anchors reflected no great movement attributable, and reflecting that the impending Hurricane Gustav held greatest market-moving potential for closing business especially oil & gas in the Gulf of Mexico. While maybe one should not be surprised, I was. Maybe I was hoping for business news from FBN, and maybe it exists in other 3 minute segments between advertisements. FBN seemed handily placed to cover the VP pick, re-running an FBN 25 June interview with Palin where she espoused opening ANWR [note how industry nailed the winning URL, anwr.org. But the blatant put was more than even Kudlow on CNBC may be expected to give. But not on Friday. The week ends with space for more news on the sustainability theme as tackled by the Republican platform this coming week [although the official Republican policy position discredits “global warming”], and with a larger dump of salt needed for any FBN coverage.

Less sound-bite like, but the new focus of all campaigns, is the economy. In the tiny village of Woodstock VT the major business owners are nervous of a slump, and over-stretched by borrowings in the good times. The US Treasury Secretary Hank Paulson continues to struggle with major financial system components: the Freddie Mac and Freddie Mae challenges. One may reasonably argue this challenge is the perhaps greater challenge than becoming most popular person voted for by more Americans. Integrity Bancshares of Alpharetta Georgia became the 10^th bank failure of this risky season this week, the FDIC picking up the pieces again. They will not be the last. A renowned value fund manager at a solid SRI shop Ariel Funds in Chicago has let go of Citi, even choosing to book the loss the portfolio rode down with C 42% since the fund first purchased the stock. More spicy, was it’s dropping of Moody’s, saying “it lost confidence in some of the company’s ratings”. Late, but frank. No word on how the ESG ratings shops like Innovest, KLD or ISS [the latter the only listed entity through Riskmetrics] have suffered the same loss of confidence. Warren Buffett discussing financial services firms impressed with the wisdom of his circumspection on CNBC last Friday.

QUICK: When people start looking around to find the next potential Bear Stearns, Lehman Brothers is the name that comes up again and again. Should people be concerned about what's happening at Lehman?

BUFFETT: I don't think it's appropriate, really, to talk about financials.

QUICK: Financials, in particular, banks.

BUFFETT: No. I think that--I really think that's inappropriate to talk about them.

Banks run a juggling operation, and have limits for minimum capitalization of 5%, incredible leverage, meaning more than 9 of ten balls is in the air at any time in the borrowing/lending cycles. The FDIC has increased to 117 the banks they identify as in danger of failing, largest since 2003. Saturday 30 August is the birthday of Warren Buffet, born in Omaha, Nebraska (1930). In February 2008, he was ranked by Forbes as the richest person in the world, worth about $62 billion. I like his frugal living style and the fact that he lives in his old house and drives his old car, squeezing by on an annual salary from his investment company of about $100,000. His wealth will transfer to the Bill & Melinda Gates Foundation, which he announced in 2006.

In 1988, Buffett said:

"I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die."

After the recent dusting off of histories of China, Russia, Malaysia and Brazil to update my reading of the major moving parts in geopolitics, I find myself looking forward to a bit more time with a business librarian soon, the unsung hero of many MBAs. Though the future may be as different as Obama text-messaging his VP pick versus McCain using the old media-leak standard, I prefer to know more about the history of business to interpret the future of business, especially dramatic changes intercepting ESG factors like asbestos or clean water. Machiavelli’s “Il Principe” remains a standard for a reason. The interpretation of business past to the future is the art with the science. And as Buffet is credited as saying, "If past history was all there was to the game, the richest people would be librarians."