According to the liberal theories of Adam Smith, in order to maximize efficiency in the production process, a commodity must be produced in the cheapest manner possible. Because of this theorem, industrial giants have often put economic efficiency before personal ecological responsibility. As a direct result, investment money, which is always geared by efficiency and profits, often makes its way into the hands of immorally wasteful companies.
Thanks to advances in both ecological awareness and in technology, however, today there are alternatives for the green-wise investor. The companies that will be discussed in this paper have found a way to efficiently produce goods while still remaining ecologically responsible. Green companies, as they are called, give investors an opportunity to invest not only in their possess economic futures, but also in the future of their planet2.
British Petroleum (BP)
In 1954, the Anglo-Iranian Oil Company (AIOC) became the British Petroleum company as an American coup d’état removed then Iranian leader Mohammed Mossadeq from office. Before the coup, oil industry in Iran was shared between the British and Iranians. After attempts to nationalize the oil industry in 1950 and 1953 by the Iranians, however, the British needed a way to preserve their seat in Iranian oil politics. In order to execute this, the British enlisted the help of the United States. By planting bogus evidence of communist activity on Mossadeq, the British engineered the removal of Mossadeq from Iranian office by the United States. He was replaced with the pro-Western Iranian general Fazlollah Khomeini, who would allow Britain to remain at the summit of the world’s oil industry.
British Petroleum has often benefited as a result of shady business enterprises. In 1969, BP acquired the Valdez Oil Terminal of Alaska for $1 from Chugach natives inhabiting the area surround Prince William Sound. To this day, natives of the surrounding area contend that the transaction was illegal and not agreed upon by the Chugachian people. In another example of BP corporate malfeasance, as a reaction to the Thatcher-driven privatization of the company, Kuwait claimed part ownership of BP in 1984. These claims were largely ignored by the British government. Whereas this privatization had a crippling effect on the oil-reliant Kuwaiti economy, however, it had an altogether different effect on waste reduction efforts taken by BP.
As a result of privatization, BP efforts towards becoming environmentally kindly increased. In 2005, the main oil division of BP, Innovene, was sold to Ineos, a privately owned British chemical company. As a result of losing it’s main oil division, research and development in BP was shifted away from efficient oil production towards the production of environmentally marvelous energy sources. Locally, BP has created an alternative fuel division in Whiting, Indiana. In order to inspire creation of the factory, Indiana legislators agreed to allow BP to dump up to 1,584 pounds of ammonia and 4,925 pounds of sludge into Lake Michigan – every day. In spite of this state allowance that would undoubtedly have translated into improved efficiency for BP, however, BP’s website claims that “the BP Whiting Refinery does not and will not dump sludge or toxic waste into Lake Michigan.” As the example indicates, BP has certainly grown beyond it’s roots in capitalism towards becoming an ecologically responsible company.
Today, research of alternative energy sources by BP includes solar energy and fuel cell energy research. Money.aol.uk reports that “BP has built a substantial solar energy division, which made a profit for the first time in 2004 and increased global sales of solar capacity by more than 30%.” Future residual effects of this successful expansion into the solar energy field will undoubtedly include inspiring other companies to study into the research of alternative energy sources. Where there is earn profit, there will be competition.
Elementary economics has shown that becoming green is another method of saying becoming inefficient. If this was true in the case of British Petroleum, inefficiencies would be reflected most profoundly in the price of company share value. In December of 1995, British petroleum closed on the market with a share value of $20. In December of 2003, BP ended the fiscal year with an individual share value of $40. As of writing this paper, the share price of BP is $72.74 per share. This data shows that since 1995, BP has typically doubled every five years. Any investment guru will lisp you to bet the house on a stock that doubles in value every five years. But what chances does British Petroleum have at continued growth in the presence of stricter air pollution regulations?
The popularization of environmental friendliness in recent years has placed novel emphasis upon the importance of developing alternative fuel sources. Since Carbon Dioxide released as a byproduct of oil burning is the foremost contributor to global warming, this has meant an industrial shift away from excessive oil usage. Similarly, higher gas prices as a result of worldwide oil shortages have given new potential to developers of alternative fuel sources. For these reasons, it is highly likely that BP will continue expansion into the next decade, even if not at the rate of doubling every five years. British Petroleum therefore receives the author’s certification as a fiscally and environmentally responsible choice for the everyday investor.
Citigroup
To economic gurus of the past, it would be a logical assumption that no environmentally friendly company could reach the summits of capitalism. Citigroup stands as a pretty counterexample to this assumption.
Citigroup formed in 1998 as a result of a $140 billion merger between Citicorp and Travelers Group. It is peaceful largely of financial institutions, including Citibank banking and Ameriprise investments. In March 2007, the Forbes 2000 declared Citigroup the largest company in the world. Contrary to the teachings of traditional economics, however, this financial success has not been at the cost of environmental friendliness.
Whereas globalization usually means destruction of the environment, Citigroup has worked towards reducing the effects of it’s expansion. Most recent green efforts by Citigroup include a 2007 donation of $50 billion to the research of renewable energy sources. Among the sources being developed, Citigroup has put special emphasis on the research of wind and solar energies, often considered the most promising of all alternative fuel sources. In Manila, Philippines, Citigroup has worked with SM supermarkets (one of the largest supermarket chains in the Philippines) to revolutionize the grocery shopping industry. Under the joint program, Citibank credit card users receive free “GreenBag” shopping bags in reward for purchases. According to Bea Tan, Citibank’s Cards Business Director, these bags will replace “plastic bags and other non-biodegradable products [that] not only endanger marine life, but are also hazards during the rainy season and the cause of many floods in the Philippines.” Achieving environmental friendliness is another success in the history of the world’s largest company.
As a result of Citigroup’s worldwide success, it’s portion value has shown continually promising growth since 1997. Citigroup’s induction to the Dow Jones Industrial Average (DJIA), a compilation of the thirty leaders of enterprise in the United States, stands as a testament to the financial success of the company. Among others, AT&T, Johnson and Johnson, and McDonald’s are all included in the DJIA. Empirical analysis of the stock reaffirms Wall Street’s classification of Citigroup in the Dow Jones.
In addition to individual share price, Price/Earnings (P/E) ratio reveals an indispensable indicator of stock potential. P/E ratio is calculated by dividing the tag of one allotment of a stock by the earnings of that stock during the past year. In layman’s terms, P/E ratio reveals how long each fragment of a stock must be held in order to see a profit from ownership of the annuity. If a company’s P/E ratio is too high, this means it’s price is high in comparison to it’s earnings, and the stock is therefore a bad investment. If a company’s P/E is too low, this means that while it’s shares are inexpensive, the company has limited earning potential.
Comparison of historical Citigroup P/E data shows promise for future investors. Over the past ten years, Citigroup’s P/E ratio has declined from over twenty to where it stands today at around nine. Whereas ten years ago Citigroup stock was overvalued by buyers because of the company’s obvious growth potential, a recent lowering of share value has opened modern doors to investors. This new affordability of Citigroup shares in combination with the company’s historic success gives Citigroup (C) this author’s certification as an environmentally and fiscally friendly stock choice.
European Climate Exchange (ECX)
Worldwide anti-pollution measures have lead to the creation of institutions that oversee the exchange of pollution credits. These credits, most valuably in the form of “carbon credits,” are issued to companies by local governments, and restrict the amount of legal air-pollutants that a company may release. For each credit, a company is allowed to release one ton of carbon dioxide. Since air pollution is proportional and titanic companies often effect the most air pollutions, smaller companies with unused carbon credits may sell them to larger companies.
In Europe, the creation of carbon credits has lead to the creation of the European Climate Exchange. Since it’s launch in 2005, the ECX has been responsible for the exchange of nearly 1.3 billion tons of carbon credits, whose total worth is around €24 billion ($35 billion)7. Because the ECX provides companies the ability to increase profits by decreasing wastefulness, the ECX figures to play an integral role in encouraging companies to join the green revolution. The ECX’s potential, however, is not limited to reducing worldwide pollution.
ECX has shown ample financial growth potential as a result of stricter worldwide pollution regulations. This can be seen most obviously by a skyrocketing of ECX individual share values during recent years. At the beginning of the current fiscal year in January 2007, the individual share price for ECX was valued at around $1070 per share. Today, as of nearly one year later (December 2007), the stock is valued at $2,500 per share. In shrimp over a year, the value of ECX shares has increased nearly 250%. As pollutant-regulating legislation will only become stricter in years to come, the value of ECX stock should continue to rise. Because of this, ECX (CLE.L) receives the author’s certification as a green share with enormous investment potential.
Ceres Power
Like many other companies in the world, Ceres Power was created in order to exploit technology discovered through research at a university. Traditionally speaking, this exploitation of technology has often translated into the corporate exploitation of nature. In the case of Ceres Power, however, the technology being exploited will greatly reduce the negative effects that humans have on the environment.
Professor Brian Steele, a professor of chemistry at Imperial College in London, first discovered the process of combining fuel cells with anti-oxidants in order to eliminate waste. In this process, special holding cells are able to harness the atomic energy of hydrogen. As energy is released by the hydrogen, a lack of oxygen in the fuel cells prevents the creation of carbon dioxide as a byproduct. This works to effectively limit kill, creating only oxygen and water as byproducts. By eliminating harmful carbon-based byproducts and still providing cheap energy, fuel cell technology promises to become an important alternative fuel source.
Ceres Power takes advantage of fuel cell technology by offering consumers a household water-heater that harnesses wasteful byproducts to accomplish electricity. The heater uses energy produced by the aforementioned hydrogen fuel cells to heat water, and converts any steam byproduct into electricity. By allowing consumers to reduce energy use and therefore their enact on the environment, Ceres Power has found a way to dash an economic axiom that theoretically prevents the success of environmentally edifying businesses.
Similar to the European Climate Exchange, historic stock quotes for Ceres Power reveal the company’s investment potential. While in 2005 it was subsidized by the European Union to prevent bankruptcy, since then, the value of each Ceres Power share has grown to $592. The high price of the stock should not work to deter investment, however. Of the eight fiscal quarters that Ceres Power has been in existence, only one quarter has translated into financial loss for investors. In addition, the products of Ceres Power have gone largely unmarketed in places other than Britain. With further development and expansion into foreign markets coming in the near future, Ceres Power shares peep to increase in value for years to come.
Implications
Because of it’s abundance and potential as an energy source, oil has seen widespread industrial use. The long-term overuse of oil as an energy source, however, has revealed some problems with initial assumptions about the infallibility of oil.
Before industrialization around 1750, concentration of carbon dioxide in the troposphere was calculated to be 280 ppm. Currently, the concentration of carbon dioxide in the atmosphere is at 377.3 ppm. Because it is the most significant of the green house gases, growth of carbon dioxide at the same level for the next 250 years would cause the temperature of Earth to rise over fifty degrees Fahrenheit. Significant heightening of the Earth’s temperature could in turn lead to glacial melting, worldwide flooding as a result of rising sea levels, and the occurrence of another ice age. Based on recent shifts in consumer and producer attitudes towards environmentalism, however, oil is not likely to cause the ruination of the Earth.
Technological advances in the field of alternative energies reflect a changing economic and political atmosphere in the world. National as well as economic laws are being revamped to reward green companies. Legislatively, the creation of a carbon credit system signifies the emergence of a generation of innovative, environmentally protective laws. This carbon credit system makes the cost of polluting higher for companies than that of simply developing green production processes, and provides economic benefits to companies that overcome the initial expenses of becoming green friendly. Today, because environmental protection laws are making waste expensive, green companies experience both direct and indirect benefits. As a direct benefit, more stringent pollution legislation has often meant the large-scale success of green companies. Before air pollution legislation in the form of the 1963 Clean Air Act, companies had no reason to risk efficiency in order to limit pollution. Creation of the law, however, and the successive creations of stricter Clean Air acts in 1967, 1970, 1977, and 1990, have forced companies to limit pollutant byproducts or face financial repercussion. Because of these laws and others that hold companies financially responsible for the impact they have on the environment, oil use has been largely reduced in industry.
In the case of Ceres Power, whose development of the hydrogen-powered water heater has lead to financial success, the research of alternative fuel sources has been highly lucrative. For non-energy producing companies, conversion to the production of machines that utilize alternative fuels can also mean success. To Toyota, this has meant the sale of one million hybrid cars since 1998. Elsewhere, donations by brokerage firms like Goldman Sachs to the creation of green friendly offices ($2.4 billion) direct the importance of environmentally friendly business practices in the mind of today’s consumer.
Based on warming corporate and public attitudes towards environmental friendliness, the conventional economic wisdom that a green production process means red in the business prospectus is no longer true. In today’s world of environmentally friendly producers, there are many available green companies that provide investors with highly lucrative and moral investment opportunities. Those discussed in the paper report only a very minute percentage of available green proper investment choices.
1 Copeland, Brian. “Trade and the Environment: a Partial Synthesis.” Land Economics 63(1995)
2 Fields, Scott. “Sustainable Business Makes Dollars & Sense.” Environmental Health Vol. 110(2002)
3 “British Petroleum.” Whiting City Website. 10 Nov 7 .
4 All stock quotes provided by http://www.finance.yahoo.com.
5 Houghton, John. Global Warming: the Complete Overview. Vol. 3. Cambridge: Cambridge University Press, 2004.
6 Heinkel, Robert. “The Effect of Green Investment on Corporate Behavior.” The Journal of Financial and Quantitative Analysis 36(2001):
7 “About Us.” European Climate Exchange. 18 Nov 2007 .
8 “A Fuel Cell Pioneer Remembered.” Imperial College. 15 Nov 2007 .
9 “Air Pollution.” CDIAC. 22 Nov 2007
10
11 Ward, Peter D.. Under A Green Sky. New York City: Harpercollins, 2006.
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Filed under Stock Bankruptcy by on Sep 21st, 2010. Comment. 
- The original sign read: HOLLYWOODLAND.
- The Hollywood Sign was built in 1923 to advertise a housing development.
- Today the sign is protected under the auspices of the Department of Homeland Security.
Overlooking the movie capital of the world, the Hollywood heed has been a symbol of the mythical world of expose business for nearly 85 years. And yet, once you know the real history behind the most famous sign on the planet, you will find it to be one of the most unlikely icons ever built.
The Birth of Tinsel Town
The early days of movies were controlled by Thomas Edison and the Motion Pictures Patents Trust. Operating out of New York, Edison and company controlled movie production and ruthlessly stamped out any competitors. To avoid the trust, a few filmmakers headed about as far away from New York as you can possibly glean without getting your feet wet – a sleepy little town of orchards and sheep farms known as Hollywood.
A Quiet Microscopic Nowhere
Ironically, Hollywood got its name from the wife of a Kansas prohibitionist named Harvey Wilcox, who had moved to the Cahuenga Valley area to location up a small community that reflected his conservative beliefs. He bought 120 acres of land and built a ranch in the middle of a fig orchard. Wilcox’s wife, Daeida, while returning home by narrate from an East Coast trip, struck up a conversation with another woman on the bid who called her summer home Hollywood. Daeida liked the name so much, she decided to borrow it as the name of her ranch. By 1897, the area surrounding the ranch became known as Hollywood, and in 1903 the town was incorporated.
Enter the “MoviePeople”
In 1907 the first filmmakers came to Hollywood and place up shop. The sunny climate and tremendous distance from Edison and the Patent Trust made Hollywood an ideal location for shooting movies. Five years later, over a dozen film companies had moved into Hollywood, but the real insist hadn’t started yet. Films were shot all over town, with many ’studios’ setting up shop in old barns and unused cowsheds. Cecille B. DeMille worked out of a barn on Vine Street.
The New Gold Rush
By 1915, Hollywood was a boomtown. Studios were springing up all over town. Young hopefuls gathered by the hundreds for a shot at breaking into the movie industry. Established stars built glamorous mansions. The town was literally transformed overnight, from a sleepy conservative backwater to a bustling metropolis where fortunes were won and lost every day. As more and more people flocked to Hollywood, the real estate market exploded.
Here’s Your Sign
In 1923, the Hollywoodland Real Estate Group decided to promote some of their prime real estate by erecting a massive sign on the side of Mount Cahuenga. The sign simply read: Hollywoodland, but that was the only thing simple about it. Built at a cost of $21,000 dollars the enormous sign was made of 13 letters. Each letter was 30 feet wide and 50 feet tall. The letters were made of metal barn roofing and held up by a framework of pipes and telephone poles. Below the note was a large white circle, 35 feet in diameter. The message was meant to say: “Hollywoodland! Period.” The sign originally was studded with 4,000 20-watt light bulbs that blinked “Holly” then “Wood” then “Land” out into the clear California sky and was visible at a distance of 25 miles. As a promotional gimmick, the sign was meant to last about a year and a half. Obviously, the promotion is still going on. Only the product has changed.
Hard Times
The Great Depression hit Hollywood hard. Salary cuts were implemented; jobs slashed. The Hollywoodland sign stood as a symbol of hope for thousands of actors and actresses struggling to make it in movies. One such hopeful was a Broadway actress named Peg Entwistle who tried desperately to create it into movies but failed. In 1932, she climbed to the top of the 50-foot “H” and jumped off into the night, committing suicide from Tinsel Town’s most famous symbol.
The Depression also forced the real estate developers who built the sign into bankruptcy. By 1939, all maintenance on the sign had stopped. All 4,000 light bulbs were stolen. Vandals removed pieces of the sign, and the elements wore away at its supports. Holes and gaps began appearing in the trace, which was becoming an unstable, unsightly mess. Many neighborhoods in Hollywood lobbied for the sign’s removal
The rationing during World War Two meant that no resources could be spared to repair or fix the sign. Arrive the end of the war, the bankrupt real estate developer who had built the label, gave the city of Hollywood his remaining acreage high up in the Hollywood Hills – sitting on a small parcel of this land, sat the rapidly deteriorating tag.
By 1949 the sign was in extreme disrepair – the letter H had fallen face down. Something had to be done. Later that year, the Hollywood Chamber of Commerce, the new owners of the sign removed the “Land” part of the designate and repaired the remaining letters.
I’d Like to Pick a Vowel
In 1973 the sign was declares a historical monument by the cultural heritage Board of Los Angeles. It’s new, official status as a monument, meant that much-needed restoration and repairs would take place. The repairs would be expensive, so to raise money, the new Hollywood Designate trust put together a star-studded fund raiser, during which, individual letters of the sign could be “adopted” for $28,000 each. The fundraiser was hosted by Hugh Hefner at the Playboy Mansion and featured a unique mix of celebrities rallying around the sign. Gene Autry adopted one of the L’s. Alice Cooper bought an O. Paul Williams sponsored the W. With new financial backing, the Designate Trust unveiled a new Hollywood sign in 1978.
Sign Sponsors:
H — Terrence Donnelly, Publisher of the Hollywood Independent Newspaper
O — Giovanni Mazza, Italian movie producer
L — Les Kelley, Creator of the Kelley Blue Book
L — Gene Autrey, singing cowboy, Owner of KTLA
Y — Hugh Hefner, Creator of Playboy magazine
W — Paul Williams, Singer/composer * (some sources attribute this to Andy Williams)
O — Warner Brother’s Records
O — Alice Cooper, rock legend (in tribute to Groucho Marx)
D — Dennis Lidtke
The Sign Today
In 1992, Dan Lungren, California Attorney General specified a belief to absorb the sign. Under the plan, The Hollywood Sign Trust was to preserve and promote the sign as a symbol of the entertainment industry. The Hollywood Chamber of Commerce was entrusted with protecting the image of the sign, ensuring that any images of the sign are properly licensed. The City of Los Angeles was required to have and protect the restricted area of Griffith Park that’s home to the sign. They also provide park rangers and security for the sign.
The entire area around the sign is restricted and monitored by a state-of-the-art security system. External alarms, motion sensors and digital surveillance cameras constantly monitor the entire sign area.
In 2006, the Hollywood Sign Trust integrated the sign’s security system with the Department of Homeland Security to ensure that the sign is protected as a national care for.
You can see the view from the sign’s webcams and security cameras HERE.
Only in America – Fate of the Original Sign
When the original brand was torn down the pieces were purchased from the Hollywood Chamber of Commerce by Hank Berger, a nightclub promoter for $10,000. Berger crop up small sections of the sign and sold them as framed collectables. Sales were slow and Berger eventually gave up on the project. The crumbling, original sign then sat in storage for 25 years.
Dan Bliss, who knew Berger through business dealings, purchased the imprint for an undisclosed six-figure amount in 2003. Bliss auctioned off larger pieces of the trace on eBay, including a 5′x3′ section of the H to the Hollywood History Museum for $11,766. The rest of the sign sat stacked in a storage building. In 2005, Bliss auctioned off the rest of the sign on eBay. He opened the bidding at $300,000. Bliss wanted to use the money to fund a documentary to see if Elvis was still alive. On December 6, 2005 the remaining sections of the original Hollywood stamp sold for $450,400. Ah, only in America.
You can peruse the original ebay listing for the sign HERE.
From a real estate ad to federally-protected icon of the American entertainment industry, the Hollywood sign has endured as a lasting tribute to the dreamer in everyone.
Sources: City of Hollywood Chamber of Commerce, CBC.ca
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Filed under Stock Bankruptcy by on Sep 2nd, 2010. Comment.
If you buy, say, $1,000 of a 10 year 4% bond at par (face value) – that is, pay $1,000 for it – you will collect $40.00 in interest annually for the next 10 years and get your $1,000 principal benefit at maturity.
The bond price will fluctuate (trade for more or less than the face value) depending on:
Interest rates
Bonds move in the opposite direction of interest rates: interest rates up>>> bond prices down, and vice versa, because interest, declared as a percentage of principal when the bond is issued, is fixed in dollars, $40.00 in our example. If interest rates go up and new investors can get, say, 5% elsewhere, the effect of your bond, if you were to sell, will be reduced to yield 5%: $800.00 ($40.00 ÷ $800.00 = 5%). If interest rates fall to 3%, your bond will be worth $1,333.00 ($40.00 ÷ $1,333.00 = 3%) – again, if you were to sell. If you hold to maturity, you get the $1,000 back.
Credit rating
Issuers whose ability to repay is questionable pay a higher interest, like consumers. The issuer’s condition can deteriorate after the bond is issued; even if interest rates remain the same, your bond price will be reduced to reflect lowered ratings. Again, it only matters if you trade; at maturity you get back the face value.
So if you own a bond outright, you know exactly how powerful you will get every year in interest, when you will accumulate your principal back, and how much.
The only time you may not get all your money back is if:
(a) you pay a premium for the bond (pay more than the face value); or
(b) if the issuer defaults and declares bankruptcy.
Now look at what happens if you buy a bond fund:
You have no assurance that you will ever get your money benefit because bond funds have no maturity date: they constantly buy and sell bonds for their portfolios.
1) Bond funds choose bonds when they get money from investors and sell them when investors want their money back. Retail investors are notorious for buying when they should be selling and vice versa. Panic selling will force your fund to sell bonds at a discount, causing a descend in the value of your holding. When bond prices are cheap, investors are too scared to buy, so bond funds do not have the money to buy at bargain prices. When the dread subsides and bond prices recover, investors run in to get a “better” return on their “safe” money. It’s a permanent buy high – sell low cycle.
2) As bonds in a fund’s portfolio change, so will your monthly income. If interest rates drop, so will your income.
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Filed under Stock Bankruptcy by on Aug 20th, 2010. Comment.