Now that I have your attention…

Let's dance…

Dude, Where Is My Caviar?

What Is Caviar?

Caviar is the luxurious edible commodity made from roe extracted from wild sturgeon from the Caspian Sea or the Black sea1. From its first recorded uses in ancient Persia it was a precious (and delicious) commodity, primarily due to its supposed medical benefits. Afterwards it became a luxury food consumed by the “elites” of the world, the kings, queens, etc. The best quality Caviar is extracted from the sturgeon in the Caspian Sea, which accounts for 80 to 90% of the supply of caviar in the world3.

The Good Ol’ Days

Prior to the collapse of the Soviet Union sturgeon in the Caspian Sea was controlled and harvested by the two countries bordering the sea, the Soviet Union and Iran5. Both countries were aware of the profit associated with this fish and tightly regulated the supply of caviar on the market5. Following the collapse of the Soviet Union, the shoreline was divided between five countries—Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran. Since the states that previously comprised the Soviet Union were now independent, they commenced fishing based on their own interests, thereby overfishing the precious sturgeon3. The problem was so severe that in 1996—seven years after the fall of the Soviet Union—sturgeon from the Caspian Sea was added to the list of threatened species9, as well as to the Red List of the International Union for Conservation of Nature in 19985. It still carries the same status on the list.

The Beginning of the End

With the collapse of the Soviet Union, overfishing became a major problem. The UN’s Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) became involved, issuing an export ban on the fish from 2002 until 2011, occasionally lifted in 2007 and 2010 to permit very limited exports (around 80-90 tonnes) 3. Being a luxury good, caviar is already an expensive good. The ban exerts its effect not through the demand but through the supply, making the (legal) supply of Sturgeon from the Caspian and Black Seas illegal. This supply shock causes the price of the good to go even higher, making poaching sturgeon and illegal trade of caviar a very lucrative business. To compare prices, at the beginning of the current year following the trend in reduced export quotas, prices were around 70$/ounce8, whereas seven years prior—when the supply was greater than current levels—it was priced around 250$/ounce on the black market11.

So… What’s the Problem?! :-/

Given the great profit margin it is very easy for poachers and illegal traders to bribe security officials in charge of monitoring the seas2. The poaching problem was so bad that CITES estimated that in 2002 around 8000 tonnes of sturgeon were taken by poachers, ten times the number permitted by quotas.

In addition to poaching and overfishing, the nearly 20 years required for the females to become sexually active further exacerbates the problem4. Moreover, once sexually active, the females do not spawn annually4. Add to this slow reproductive process the fact that sturgeons are anadromous—i.e. fish that migrate upstream in fresh waters to spawn—and is consequently greatly affected by dams built on rivers, particularly the Volga2. Pollution from construction and trash and poor mining and drilling practices in the ocean floor have also eroded their habitat2.

That’s all? Pfftt… That’s Nothing L…

Discarding is a large issue. Given that these fish are very close to extinction it is nearly certain that catching this fish is going to be very difficult, with a lot of other fish being caught as well. This raises a potential problem if the unintended catch—i.e. anything but sturgeon—is discarded, as it lowers their mortality. Discarding is also a problem as it increases the effort expended by the fisherperson in an inefficient manner. However, if the fisherperson receive fair market value for the fish caught, in theory, they would not discard and would prefer to sell the fish. Given the particular case of sturgeon, however, this is unlikely to be true because of two factors. First, the value of sturgeon is far greater than other types of fish in the Caspian Sea. Second, the fisherperson has only limited space on their ship to carry their catch. As a consequence, the fisherperson would rather discard the unintended catch so to save that room for the more valuable sturgeon.

Gulp…So What Can We Do?

According to the FAO, Iran has one of the healthier stocks of sturgeon, primarily due to the existence of the powerful state fishing monopoly, Shilat7.In fact, until 2010, Iran was the only country out of these five to have a state monopoly in this industry7. The organization’s 174 years of experience, 87 of which specifically have dealt with this issue12, have provided it with highly relevant experience. Following the recommendation of CITES, Shilat has invested greatly in the sustainable management of their industry7. They have banned certain gilled nets that harm young and immature sturgeon, while at the same time allowing increased income opportunities for fishermen that use gilled nets7. In addition, they have further diversified the fishes in the Caspian Sea by releasing fingerlings of other profitable fish into the Caspian sea7. The implementation of aquaculture to farm genetically similar sturgeon in order to preserve the life stock has been another avenue where the Iranian authorities have excelled7.

In addition to having a strong authority to enforce the quota and prevent poaching, it would be very beneficial if the economic incentives for illegally fishing were removed by increasing the fishing quotas for other fish or through some other alternative measure.

So, What’s the “Sitch” Now? 

As of January 1st of this year the five littoral states have agreed to enact a one year ban on fishing sturgeon in the Caspian Sea, with the possibility of extending the ban up to five years8. The ban should prove more effective as Kazakhstan’s newly created fishing monopoly—the “Zhaik Balyk” 6—will better be able to enforce it.

 

 

 

 

 

Works Cited

 

#1       lan Davidson, Tom Jaine, The Oxford companion to food, Oxford University Press, 2006.

 

#2       https://web.archive.org/web/20080905160627/http://www.iran-daily.com/1385/2757/html/focus.htm

 

#3       http://edition.presstv.ir/detail/136154.html

 

#4       http://www.ifis.org/resources/features/sustainable-caviar-production-save-our-sturgeon!/

 

#5  http://www.azer.com/aiweb/categories/magazine/23_folder/23_articles/23_caviar.html

 

#6       http://russian.lingualift.com/blog/russian-caviar-roe/

 

#7       http://www.fao.org/docrep/006/y5261e/y5261e06.htm

 

#8       http://www.upi.com/Science_News/2013/12/27/Extinction-risk-prompts-ban-on-fishing-for-caviar-producing-sturgeon/UPI-41011388179609/

 

#9       http://www1.american.edu/ted/sturgeon.htm

 

#11     http://news.bbc.co.uk/2/hi/science/nature/6225723.stm

Smoggy Iran–Iran’s Approach to Reducing Carbon Emissions

Tehran on a clear day

 

I thought I would take this opportunity to provide an overview of Iran’s CO2 pollution and their approaches to addressing the problem.

Air pollution is a problem affecting Iran’s major cities. The overcrowded capital city of some twelve million inhabitants is on the subject of the majority of headlines. pollution holidays are not uncommon, and they are not just for schools. According to Iran’s deputy health minister around 4,500 people died due to air pollution in the first nine months of 2013. In fact, the pollution got so bad in 2009 that the apparently pollution-resistant black crows fled the city in large numbers.

The major cause of this air pollution is the fuel that Iran uses. It is important to first understand how this fuel is used and to what extent by each sector. As of 2008, about 70 percent was used for transportation, 7% by household and commercial purposes, 8% by power plants, 5% by industries and the remainder by agriculture and other activities (Avami & Farahmandpour, 2008). In addition, as of 2010, there were 200 motor vehicles for every 1000 individuals. It is important to note, however, that the majority of the cars produced domestically are not particularly fuel-efficient. Moreover, this number only reflects personal vehicles and does not take into account public transit vehicles as well as the astounding number of motorbikes, most of which are relatively old and are primarily used by lower-income families.

As the diagram below demonstrates, the majority of CO2 emissions can be attributed to residential and commercial sectors as well as to the transportation sector.

Source: Professor M. Hassan Panjeshahi, “Scenario Analysis for Energy Conservation and CO2 Reduction in Iran”

 

At the same time, Iran offers highly subsidized fuel for domestic purposes. The table below shows some of the prices

Prices in US Cents/Liter

2000

2002

2004

2006

2008
Diesel

2

2

2

3

3
Super Gasoline

5

7

9

9

10

Source: Transport Policy Advisory Services, 2009

 

 

The fuel subsidies that exist in Iran are the largest in the world. As of 2012 they accounted for over 82 billion USD, according to the Institute for Energy Research.

Fossil-Fuel Subsidies from Institute for Energy Research

These subsidies have multiple adverse effects. Firstly, they encourage wasteful consumption. Secondly, they permit ignoring much needed innovation in devising more fuel-efficient tools by not reflecting the true costs of superfluous consumption of poor-quality gasoline. Furthermore, even if the prices were at market value, so long as the damages are not internalized any use of fuel would still have great social costs. Thirdly, subsidizing fuels is a great expense on the country and deprives the government from spending this money on more socially beneficial services.

 

In order to address some of these issues, in December of 2010 Iran implemented a Fuel Price Subsidy Reform Program, with the goal of eliminating all fuel subsidies in the ensuring five years. Whereas previous to the reform program Iranians would pay 10 US cents per liter for normal quality gasoline and 40 US cents per liter for Super gasoline, Individuals would now pay 40 cents a liter for a monthly allotment of 50 liters. Anything above that would have to be purchased at a rate of 70 cents per liter (http://edition.presstv.ir/detail/156109.html). The next step, which will be implemented starting in the Iranian New Year on March 21st, is to raise the quota prices to 70 cents/liter for the first 50 liters in the month and 1$ for any use beyond this. It is important to note that this calculation is conducted using the same exchange rates as in 2010. This is not very accurate given that the Iranian currency has steeply depreciated since late 2011. A more accurate value of the upcoming prices would be 28 cents/liter and 40 cents/liter.

When comparing the consumptions of gasoline and gas oil over a three month period from December to March immediately after the implementation reform program with the same period one year before,  a reduction of 8.4 and 13.6 percent, respectively, could be seen.

 

Author: Fardin Eskafi, “Energy consumption and GHG emissions in the transportation sector of Iran”

 

In 1975 Iran passed the National Clean Air Act.  Since then the 1995 Clean Air Act, which requires inspection of motor vehicles to meet the required environmental standards, has been passed. In addition, there is the Air Pollution Emissions Standards of 1998, which applies to all cars, imported or domestically produced. In 2005 Iran stopped producing the Paykan, originally a British card from the 1960s that stuck around in Iran much longer than it should have. These inefficient cars, and others like it, are collected by the government, with the owners provided with low-interest loans, in addition to some monetary compensation, for purchasing of more fuel efficient cars.

 

Despite these laws and others like it, no specific carbon tax in place as of yet, resulting in increases in both total CO2 emissions and CO2 emissions per capita. This might be because the population would not be very receptive to the notion as years of using fossil fuels without a second thought to the adverse effects of it might be a difficult to accept. Instead, Iran has recently commenced conducting studies regarding creating a cap-and-trade system like China or Mexico. Cap-and-trade systems generally have higher administration costs and are not as effective as taxes because they cannot be extended across time, i.e. people cannot be allowed to borrow from future credits. This results in the system not internalizing the costs as well as the tax system. In addition, since the majority of Iran’s carbon emission are due to consumer behavior through transportation or residential/commercial uses, it is very difficult, or more likely impossible, to implement this cap-and-trade system at the end-user level.

CO2 Emissions (metric tonnes per capita). Iran, ME and World; WB Data

CO2 Emissions (kilo tonnes) for Iran and Middle East, World Bank Data

This is not the end…

It’s finished, the joyous, thrilling experience that was trading futures contracts. I must say, I really enjoyed it! I learned a few things, but far less than I would like to, which is why I plan on educating myself more and investing (time and money) in it in the future…

The most valuable lesson I learned I think is about loss. I learned that in this discipline you could lose nearly everything you have in a few seconds or minutes, so one must play within one’s means..that is to say, if I engage in this sort of trading any time in the future, I will do so with money that I can afford to lose; better yet, I consider that money lost, so that if I do end up losing it at least it won’t come as a shock; and if I do end up winning, well, who doesn’t like a pleasant surprise?

Looking forward to what future brings…

Thanks for reading

 

B

The Rise and Fall…

What a week!

Like many of you I was busy preparing for 501 midterm,  515 case studies (not really) and the 515 midterm for  that we submitted today. So, I am sure you won’t be surprised to find out that I didn’t really check Stocktrack that much…or rather, I didn’t spend that much time on it. I’d drop in, just to check how my hard-earned fake money was doing, and then bounce…and what a ride…

On Monday, I had a return of 50.32%…feeling pretty good about this. “I’m king of the world!!!”

On Tuesday, I had a return of 44.50%…feeling OK, “win some lose some, right?”

On Wednesday, I had a return of 31.90%…When I saw this I was shocked…that’s a near 20% drop. “My God! Why have thou forsaken me!!!!” I thought to myself I just lost 20,000 dollars!!! I could have gotten another Bachelor’s at UBC…or another Master’s… Am I glad this is not real money!!!

Thursday, I had a return of 31.74%… I’m still in shock because of Wednesday’s loss!

As for today, after spending many hours praying to  the Money God(s), I had a return of 45.26% WOOHOO!! I am soo glad I got lucky..again!!

 

 

As you can see, it has been quite a ride…but this episode got me thinking. What if it WAS real money? I would not have been this calm…I would have spent HOURS on the site, checked what the spot price was constantly, looked at Candle charts to see if new trends or patterns were forming so I could stay ahead…It would have been a lot more personal…I could have made a lot more money..and of course, I could have lost a lot more too. So, in a way I’m glad I have been using this fake money…it may not be as personal but at least I’m learning the basics so that when it comes to investing with my own money I can be prepared.

***

On a separate note, I’m going to be trading Currency futures for the next couple of weeks. I have been thinking about it a lot and I’ve come to realize that for a majority of the farmers/traders/companies/food processors/etc in the world another factor that adds significant risk is foreign exchange rates. Especially when you trade large quantities like a 100 tonnes or more of something, a 1 cent change in price per kilogram could lead to a 1000$ difference, which depending on how the local currency is doing compared to USD it could make a huge difference…

When I trade currency futures, I’m going to look at whether the prices move the way these agricultural commodities have and whether it would be easy or difficult to try to detect currency movements. I imagine it would be more difficult as there as so many extraneous factors involved, but I won’t know until I try.

 

So, wish me luck!!

A penny for Buffet’s thoughts?

I’ve always wondered how prices in the financial markets change..How those numbers turn green and then red and then green again…how do people, or rather the “markets”, make their decisions? I mean, they’d have to hear something, some news, some secret, some rumour, that would make them want to go long instead of short or the opposite or something else…But where does that information come from? And how do they manage all this information? How do they sift through the info, discarding the unreliable ones? This task of succesfully navigating the ocean of information is what I have found aweinspiring, and a little intimidating…

Well… I think I have a small idea of how it works. To my mind, there are two types of investors: The “Buffets: and the “Everyone else”… The former group study companies’ financial reports, analyzes markets and the whole 9 yards…that’s what they do full time, probably longer hours than the typical 9-5…

The latter group to which I belong,on the other hand, more generally follow trends and sentiments…At best, they would know some chart analysis (for which one can refer to this site called StockCharts), would follow the news somewhat closely or would have a “Buffet” type friend whom they follow…But that’s pretty much it…I think.

Most people tend to make buy/sell/hold decisions based on how they perceive the world, not based on any concrete info that suggests what they should do…In a way, it’s like democracy: everybody’s got an opinion, but only a few of those opinions actually stand the test of reason…

I say this based on my own experience trying to follow the news on Corn/Wheat/Soybeans…I spend an average of 1 to 2 hours a day going through the news. Sure, the first article is new; the 2nd one has an interesting argument…but by the time you read the 10th one you realize that it’s the first article rewritten differently…now if you do this everyday, you are not very likely to learn something substantially new that would motivate you to change your buy/sell/hold decision… (except certain days when financial reports are released or things of that nature)…

So why do those financial tickers change? What makes them go up and down, green and red when there isn’t that much change in information? Well, I think those decisions are similar to decisions people make about what to Tweet or what to put as their FB status. Just like FB/Twitter, a good majority of those posts/decisions are random, spur-of-the moment kinda thing…

Don’t get me wrong, it’s still important to follow the news. But surely there has to be a difference between the information available to you and me and the information that Buffet-types would get their hands on…that’s why they are paid the big bucks…

 

Week 1 — A rough start…

So, first week of trading…very fun and educational! I started by (re)learning the basics of trading by watching a couple of YouTube videos. This one was pretty good!

After doing my research and learning that the crops this year have been really good, apparently reaching record levels, I examined the charts (I was able to find the charts on Yahoo Finance) and noticed that wheat was trading at a positive the day before. Apparently the demand for wheat was much higher than before, in part due to Chinese wheat’s poor quality this year, leading them to import three times more than previous year. So, I decided to go long on wheat as it had closed higher than opened on Thursday. Assuming that the trend would continue, I bought 5 bus. at the beginning of trading in Asian markets on Friday, so around 12 am my time… when I woke up the next day it had lost around 9 cents or 1.6 percent…

So, lesson learned? a) Don’t do a trade at the beginning of a market session when the trend for that day has not yet been established; b) don’t trade and then go to sleep; had I been awake I would likely have shorted sooner c) in order to make up for my loss I bought a couple of other bus. When the price of wheat had bottomed out, thinking that any gains from this much lower position could offset my initial loss.

Also, I have been looking at this site called investopedia.com It is really educational and helpful! I really suggest you check it out!

Spam prevention powered by Akismet