By Eldon Mast, on March 4th, 2010
Virginia’s Landmark Solar Power Project to be Hosted on University Campus
Eastern Mennonite University (EMU) in Harrisonburg will soon be the site of Virginia’s first commercial-scale solar photovoltaic (PV) installation in the Commonwealth.
The new installation is part of a proposed revision to the campus master plan to allow for approximately 600 kilowatts of solar energy panels to be installed on the campus. The installation is expected to generate about 12 percent of EMU’s total electricity use and save the university an estimated $2 million in avoided electricity costs over the 25-year project.
EMU was one of the three national leaders in efficient energy use out of 90 colleges and universities surveyed by the Association of Higher Education Facilities Officers in 2007. In addition to the new solar initiative, EMU sponsors numerous green programs on campus, including an institutional commitment to sustainability.
Under an innovative financing program that has been used extensively by universities in states like California and Colorado, EMU will effectively “host” the installation, paying only for the electricity generated by the panels installed on the campus through a 25-year power purchase agreement with Secure Futures, LLC, a private solar development company based in Staunton, Va.
“This will represent a signature project for EMU, as it embodies the stewardship values of our institution as well as building on our record as a leading green university,” said EMU President Loren Swartzendruber.
“The signature components of this project include using state-of-the-art solar technology, and, through Secure Futures’ unique financing model, supporting a three-tiered sustainability program including campus, curriculum and community sustainability,” said Ron Piper, vice president for finance at EMU.
Staunton-based Secure Futures, LLC, obtained a grant commitment of $225,000 from the Virginia Department of Mines, Minerals and Energy (DMME) for the project. Tony Smith, CEO of Secure Futures, said “this project will represent a milestone for renewable energy in Virginia insofar as scale and impact. We’re excited to see a first example of a solar project achieving electricity rates comparable to those offered on the electric grid, especially since Virginia has among the lowest electricity rates in the country.”
Ken Jurman, renewable energy manager for the Virginia Department of Mines, Minerals and Energy (DMME), noted that “The EMU solar project as described fits well within the scope and intent of Virginia energy policy to encourage renewable energy resources. I’m very pleased that this initiative is moving ahead – it’s exactly the kind of thing we want to encourage across the Commonwealth to move toward a sustainable energy future.”
Secure Futures designs, develops, finances and maintains turnkey distributed solar solutions in collaboration with tax-exempt entities to reduce their electricity costs and to create environmental and economic benefits for customers and their communities.
By Stephan Zimmermann, on March 24th, 2009
In a recent move, Switzerland’s second largst bank, Credit Suisse, has agreed to buy back more than half a billion dollars in securities and a hefty fine of fifteeen million dollars. The settlement arose due to an investigation by New York’s Attorney Genera;, Andrew Cuomo. The agreement stipulates that Credit Suisse will buy back securities from “individuals, charities and small businesses with accounts valued up to $10 million” according to
North American Securities Administrators Association (NASAA) – the oldest international organisation devoted to investor protection.
In consideration of the settlement, American states will agree to terminate their investigation of Credit Suisse’s marketing and sale of such securities to individual investors.
The ARS market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as every seven days.
Market meltdown
They were sold as being as safe as cash but the market fell apart amid the downturn in credit markets.
Investigators have been trying to work out who was responsible and whether banks knowingly misrepresented the safety of the securities when selling them to investors.
In a statement from New York, the Zurich-based bank noted: “Credit Suisse neither admits nor denies allegations of wrongdoing.”
Eligible individual investors must have bought their ARS through Credit Suisse before February 14, it added.
The bank joins a growing list of major financial institutions – including Switzerland’s largest bank UBS – to reach settlements, with more than $51 billion targeted for repurchase, and state and federal penalties totalling an estimated $537 million.
“The industry is taking responsibility for correcting a problem they helped create, and that’s a good thing,” Cuomo commented in a statement.
« The industry is taking responsibility for correcting a problem they helped create… »
Andrew Cuomo, New York State Attorney General
“Return money”
“The fundamental goal has been to return money into the hands of investors, and that’s what these deals do.”
NASAA President Karen Tyler was also satisfied with the Credit Suisse settlement.
She described it as “another step on the road to recovery for thousands of Main Street investors who have been trapped in the auction rate securities meltdown”.
UBS last month announced a comprehensive settlement, in principle, for all clients holding auction rate securities at an estimated cost to the bank of $900 million.
It pledged to buy a total of $8.3 billion of ARS at face value from most private clients during two years from January 1, 2009. However, private clients and charities holding less than $1 million in household assets would be able to obtain this relief from October 31.
It said it would also provide solutions to institutional investors and agreed to buy all or any of the remaining $10.3 billion at face value from its institutional clients from June 30, 2010.
In July, UBS announced its intention to buy back up to $3.5 billion in auction-rate securities in the face of a lawsuit by Massachusetts’ authorities.
swissinfo with agencies
UBS, Switzerland’s largest bank, has similarly agreed to reimburse shareholders
Andrew Cuomo, New York state’s Attorney General, “The industry is taking responibility for correcting a problem they helped create
NASAA President Karen Tyler the Credit Suisse settlement.
She described it as “another step on the road to recovery for thousands of Main Street investors who have been trapped in the auction rate securities meltdown”.
UBS last month announced a comprehensive settlement, in principle, for all clients holding auction rate securities at an estimated cost to the bank of $900 million.
It pledged to buy a total of $8.3 billion of ARS at face value from most private clients during two years from January 1, 2009. However, private clients and charities holding less than $1 million in household assets would be able to obtain this relief from October 31.
It said it would also provide solutions to institutional investors and agreed to buy all or any of the remaining $10.3 billion at face value from its institutional clients from June 30, 2010.
In July, UBS announced its intention to buy back up to $3.5 billion in auction-rate securities in the face of a lawsuit by Massachusetts’ authorities.
By J.D. Seagraves, on September 24th, 2008
When the Federal Reserve fronted $80 billion to insurance giant AIG last week, most people were blinded by the staggering size of the bailout. Few people took time to consider the fact that the Fed—a pseudo-private banking cartel with the government-granted monopoly power to create money out of thin air—made this purchase/loan with no approval from Congress. The Fed acts “independently,” and can do whatever it wants. Is this healthy for capitalism or democracy?
But hidden even deeper in the day’s news was an announcement from another government bureaucracy intended to “protect us”—the Securities and Exchange Commission (SEC). In an effort to thwart “speculators,” they banned the “short selling” of 79 financial stocks from now until October 2. There was very little (i.e. none) protest from the supposed champions of the “free market” in the Republican Party.
Speculators as Scapegoats
That’s because, as we investigated in the first installment of this series, “speculators”—and short sellers are generally considered such—are an easy scapegoat for politicians. The average man or woman with any money in the market only generates profits when stocks go up. How dare these short sellers make money as the market goes down! How un-American!
This is the reflexive, reactionary and ultimately ugly view. But the truth is that, like all speculators, short sellers perform a valuable function in capital markets. Banning them will only create a greater dislocation between the real value of a stock and its market value at any given time and create more volatility, not less.
First, we must answer the question: what is short selling? Luckily, “shorting” is easier to comprehend than “credit default swaps” or even call and put options. Most everyone is familiar with the stock-market saying, “Buy low, sell high.” Well, short selling allows traders to do things in reverse order—sell high and then buy low.
A “Main Street” Example
Let’s escape Wall Street and turn to the world of sports collectibles. Imagine it’s the summer of 2007, and the first murmurings of Michael Vick’s impending legal troubles are beginning to circulate. Your friend, a huge Atlanta Falcons fan, is going on a month-long cruise, and you ask him if you can borrow his Michael Vick autographed football. It’s a strange request, but he says, “Why not? Just be sure you return it to me, in mint condition, when I get home.”
Once your friend is on his way to the Caribbean, you immediately go on eBay and sell the ball for $500. Are you stealing? Not if you’re “short selling.”
A few weeks later, the story breaks, and the demand for Vick collectibles plummets. You buy a new Michael Vick autographed football—exactly like the one you borrowed—for $50 and return it to your friend when he comes home.
To recap, you borrowed something, sold it, bought an exact replica and then returned the replica to the original owner. So long as you “sold high and bought low,” you made a profit, and your friend is no worse for wear, either. After all, he lent you a Michael Vick football, and you returned to him a Michael Vick football—what you did with the ball is no concern of his.
Why Short Sellers are Good for the Economy
When applied to stocks, “short selling” works almost exactly the same way. The only difference is that you have an intermediary, a broker, who does the borrowing for you. The person who has their stock borrowed doesn’t even know about the transaction!
Of course, things can go horribly wrong. Imagine you shorted Apple stock at $125 right before they announced a big new product launch, and the stock jumped to $150. You could either “let it ride” and hope that the stock comes back down or buy back the shares at a $25 loss. Shorting is actually much riskier than buying stock since a stock cannot go lower than $0 (capping a short seller’s potential gains), but there’s no limit to how high it might go (meaning unlimited potential losses for short sellers).
So how does short selling make the markets safer? The answer: by putting a cap on “irrational exuberance.” After all, if a stock’s market value (current share price) becomes completely divorced from reality—as with the tech boom—short sellers can and do sell borrowed shares to push the price down. By banning short sellers, the SEC is asking for the prices of the 79 financial stocks to be kept artificially high. But they can’t fight reality forever, and eventually, the share prices and reality will have to coincide. Regulations only prevent the inevitable and make it more painful when it finally does come to pass.
Whenever there’s a financial crisis, governments like to find scapegoats. Short sellers and other speculators are blamed along with the “free market” they represent. Well, the fact of the matter is that it is the government itself, with its implicit line of credit to Fannie Mae and Freddie Mac and the moral hazard it imposes by so frequently stepping in to bail out banks and other financial institutions when they make poor business decisions, is to blame. Americans need to become more educated in the subjects of finance and economics or risk being hoodwinked by slick-talking politicians whose primary aim is to consolidate more power in their hands at the expense of individual and economic liberty.
By J.D. Seagraves, on August 11th, 2008
American politicians from all across the ideological spectrum are beginning to blame speculators for our collective woes.
John McCain and Barack Obama both blame speculators for high oil prices—never mind the fact that these traders are only reacting to the threat of U.S. aggression against Iran when they bid up the price of crude. McCain and Obama, along with virtually every other national political figure, often portray these speculators as nothing more than parasites who add nothing of value to the economy.
In fact, speculators provide a wonderful service to the world by stockpiling surpluses when prices are low and selling those surpluses when prices are high. This, on net, makes prices higher than they would otherwise be when supplies are high, but it also makes prices lower than they would otherwise be when supplies are low. In fact, if speculators did not stockpile during the good times, there might not be any of the commodity in question when bad times came around.
But do speculators get recognized for their contributions to the world? No. Instead, they’re vilified and scapegoated because people don’t understand what it is that speculators do. This is an age-old human trait known as bigotry, and it is no more acceptable when applied to speculators than it is when applied to racial or ethnic groups. The key to overcoming prejudice is understanding. So with this article, we will look at the most basic of all speculators: the options trader.
“Speculating” on Options
There are options for nearly every type of financial security: commodities, foreign currencies, market indices, etc. But the easiest way to understand options is by viewing them as applied to the financial instrument most readers are familiar with: common stocks.
A call option gives the holder the right, but not the obligation, to buy a given stock at a given price on or before a given day. For example, AMZN 80 Oct Call gives the holder the right to buy 100 shares of Amazon stock at $80 on or before the third Friday in October. With Amazon trading at $76.95 as of August 7, how much would you be willing to pay for that right? Well, with two months and one week to go before expiration, you could have bought it for $5 per share ($500 for a contract of 100 shares).
Now if you bought this option for $500, there would obviously be no point in exercising it right away. After all, it would make no sense to buy shares for $80 (as your contract would allow you to do) when the market price of the stock was $76.95. But imagine the stock went to $90. Now you could buy shares for $80, even though the market price was $90, and turn around and sell them for the market price of $90. Or, more realistically, you could sell your options contract, which would have appreciated in value along with the stock, thus saving you from the burdensome expense of having to actually buy the shares of stock in order to make your profit.
Is Your Grandma a Speculator?
On the other side of the trade is the call writer. This person typically owns the shares on which he “writes” the call and agrees to sell them if the contract he writes is exercised. For every call buyer there is a call writer. Writing so-called covered calls (which means the writer owns the shares of the underlying stock) is a technique used by many retirees to earn income on the stocks they own.
For example, if your grandma owned 1,000 shares of Microsoft, which was trading at $27.39 as of August 7, then she could write ten covered call contracts agreeing to sell the stock for $32.50 per share any time between now and January 16, 2009, and receive a $0.53 per-share premium—$530. If Microsoft didn’t reach $32.50 in that time, the call she wrote would expire worthless, and she’d keep the $530. If Microsoft did reach or exceed $32.50 per share, she would be obligated to sell at that price, but she’d still keep the $530. It’s a win-win situation.
The speculator in these cases is the call buyer. He’s “speculating” that the stocks will go up, and rather than buying actual shares, he’s leveraging his bet by buying calls, which allow him to control many more shares for a fraction of the price. In response, conservative investors—like your grandma—are able to generate income on their portfolios.
How Speculators Make the World a Better Place
Who loses out here? No one. Who gains? Not only the speculator and your grandma but also the world as a whole. The existence of options trading makes the stock market more liquid, reduces the spread between the bid and ask prices of stocks (thus “cutting out the middle man”) and makes capital easier to raise. The entire world benefits.
Oil speculators provide a similar service. So before you castigate someone you don’t understand, make an effort to understand exactly what it is that they do. After all, you wouldn’t want to sound like a politician, would you?
For more information about the Stop Excessive Energy Speculation Act, the newest act proposed in Congress on controlling oil speculation, read G.L.C.’s post “The Government’s Latest Efforts to Rein in Oil Speculators.”
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