The president of the European Central bank, Jean-Claude Triche and the chairman of the Federal Reserve Bank, Ben Bernanke, debatably the two most influential financial commentators in the world, think the worst is behind us.

Mr. Bernanke in particular, suggested economic activity looks to be brewing in the US and further a field too. The chances of a return to growth in the near term appear to be promising. Critical challenges still remain and recovery is likely to be slow, but overall he is clearly of the opinion that we are getting back on track. Three cheers!

As usual, the stock markets are way ahead of these guys, hitting new highs for the twelve months from last October.

Despite the rally, it has been a very difficult period for many cautious investors this year. Many wanted to see more concrete figures to encourage them back into the market. Feedback from lots of our clients is that patchy news has kept them away from equities and the rally has been hard to latch onto.

Some words of caution were added by the European banker, Monsieur Triche, when he stated that talk of economic prosperity returning to normal gives him some feelings of unease. So a mixed message then, but grounds for optimism?
But hang on a minute, Nouriel Roubini, the analyst who most accurately predicted the global meltdown, is still troubled by the possibility of a W-shaped recession. According to him, the threat of a “double-dip” is still in play. Mr. Roubini believes there might be a fleeting rally before a new drop in markets. Certainly the rose-coloured views of a V-shaped recovery still appear open to interpretation, despite a good deal of positive commentary from all sorts of experts and analysts. So are we trying to talk ourselves out of the crisis or am I just being cynical?

Casting our minds back to where this all began, and who or what to blame? Well, the cue that signaled many of the problems came from the property market, particularly in the USA. There are now stateside indications that the real estate market has stopped its free fall, and it could even be showing signs of recovery in some of the hotter spots. Still these numbers could be a mere blip, too early to read a great deal into. The seasonal high point for real estate sales is the spring, completions follow a month or two later and could distort the truth lying behind the reported market numbers. Of course any recovery is to be welcomed, but lenders are still very reluctant to fund many potential house purchases. The property market still has the potential to stagnate for some time yet.

Growing rates of unemployment remain a persistent and troublesome reminder of the real economic health of the worlds leading economies too. Although unemployment is often cited as an economic lagging indicator, it is still difficult to see any sustained recovery driven by consumers spending in most western economies. Historically low interest rates have doubtless contributed to fuelling some of the consumer spending. Cash incentives from various sources have stimulated the dire motor industry, but to what extent? Have the car sales simply been artificially brought forward by the financial stimulus? If so, when the sales are through, what will replace them?

As for our beloved governments, at some point very soon, we all know that they must bite the bullet and begin a painful programme of public spending cuts. National debts will have to be reigned in to sensible levels and the sick patient, us, will have to take the prescribed medicine.

We are a cautious bunch in forestry, perhaps it’s just the nature of the timber industry to be looking ahead more than just a couple of months? But the underlying question from much of the data that has to be asked is: If a difficult winter were to come along, what are the implications for company profits? It is hard to see too many corporate balance sheets showing any spectacular improvements in the year to come.

Before being accused of being a gloom and doom merchant, it certainly looks less likely that we will see anything like the kind of equity sell-off witnessed over the last market capitulation. General consensus now is that the market from here will simply track sideways and the dreaded double dip will never come. Let’s hope so.


It’s official, Brazil is the first Latin American country to come out from recession. Brazil also happens to be one of the first G-20 countries to have recovered. Analysts are citing the strength of its domestic economy to have been the most significant trigger for Brazil’s rapid recovery.

Following two quarters of economic decline, which had put Brazil into recession technically speaking, the rebound came with the vibrancy of the Rio Carnival. The speed of this economic recovery has been largely due to the booming consumer spending from Brazils ever-growing middle classes. Brazils finance minister, Guido Mantega, pointed to the fact that Brazil was one of the last major economies to fall into recession in 2008, and yet one of the quickest to recover. Brazil’s strong macroeconomic fundamentals and prudent fiscal and monetary policies were the prime reasons for Brazil’s out-performance of developed nations, according to Mr. Mantega. He expects the recovery to accelerate in the third and fourth quarters, with gross domestic product rising by 3.5% in the second quarter, considerably higher than many experts had been predicting.

Brazil’s growth rate will continue to forge ahead in 2010, supported by the recovery shot from quantitative easing and lower inflation. This will also help investment levels to recover in 2010. With the elections later this year, public spending is also forecast to increase.
Brazil's recession has been widely recognised as being one of the world’s most shallow, which, considering the astronomic economic growth the country has experienced, must be viewed as an outstanding performance. It also reflects well on the competence of the Brazilian financial system and the degree of diversification that exists within the economy.

Although Brazil’s exports are down quite significantly from last year, they account for a mere 13% of gross domestic product, considerably less than in Germany and China for example. Exports there are currently running at around 40% of gross domestic product. The effects of the global downturn have clearly not impacted on Brazil quite so severely.

Financial institutions, investment banks and credit-risk agencies have almost unanimously pointed to Brazil’s resilience to global turmoil as their main reason for keeping their positive credit ratings. Standard & Poor’s and Fitch Ratings both ascribe an investment-grade rating to Brazil’s sovereign debt

Since the Brazilian stimulus package in comparison to many of the western economies is relatively small, Brazil’s fiscal situation will be in better shape than those of many other G-20 countries next year. Mr. Mantega believes that the current fiscal stimulus will not need further input beyond this year end, by which time the economy will be up and running once more.


Not about Philip Pullman, but a gentleman by the name of Abraham Darby.

Anyway here is the story.

Once upon a time, long before the industrial revolution, forests were chopped down to supply the carbon that iron manufacturers needed to convert their iron ore to metal. The iron used to be produced using the “bloomery” method. Small batches of iron ore were put in pans, covered in charcoal, then blown with bellows. Charcoal was one of the few fuels that could reach a high enough temperature to smelt the iron.

But then along came a Quaker Englishman by the name of Abraham Darby. He had a brainwave at the Cheese Lane Foundry where he worked, and he became responsible for a pioneering new way to forge the metal, Coke. It was the real thing, for iron production.

It was from this key development in history that the industrialists involved in iron production would have expected the days of charcoal-burning to be well and truly burnt out, to coin a phrase.

Of course they have been proved categorically wrong, but hindsight is a wonderful thing.

To be fair, those industrialists would naturally have assumed that the future of iron manufacturing was based entirely on the bountiful supplies of coal, from which the coke is produced.

But the switch from charcoal to coke was in reality the starting point for a catastrophic rise in carbon dioxide into the world’s atmosphere. The subsequent aftermath of global warming is well documented. The twist in the story is that one of the major solutions for addressing the problems of climate control is now reliant on the high carbon charcoal. So we have turned full circle.

Because most animals, insects, plants etc are not able to digest or process carbon in its purist form, carbon won’t rot quickly and will stay around almost permanently. The “tera preta” or black earth in Latin America is thousands of years old. Tera preta, specifically refers to areas of very dark, fertile, carbon rich soils in the Amazonian basin. In the natural “carbon cycle”, trees and plants absorb carbon dioxide as they grow.

Every tonne of lumber produced takes out about three tonnes of carbon dioxide from this “carbon cycle” and every single hectare of plantation forest produces the same amount of timber as 30 hectares of natural forest. If this timber is then put through a process known as “pyrolysis” (sorry for the techno jargon), a controlled burning process in a low oxygen environment, the product is charcoal, between 88-95% pure carbon.

The net result is vast amounts of CO2 are extracted from the atmosphere and the end product is then used to either lock in the carbon and help produce a carbon rich fertile soil, or to forge the metal for the steel hungry consumers.

There are many who think charcoal or ”biochar”, will give the planet a new means of solving the problem of global warming, and we will all live happily ever after.

Brazilian Forestry Fund launch

uncef and Petrobras and Caixa Economica plan to invest $550 million in their “Forestry Investment Fund”. This is under the control of JBS and the entrepreneur.Mario Celso Lopes Andradina. Petros and Funcef will each have 24.75% stakes.

The fund will be closed to other investors

Details are sparse but the fund is to be structured by Law firm Demarest and Almeida will ultimately manage $1.1 billion of investment. Other partners involved are Victory Asset management and JF Participacoes.

Already owning land in Mato Grosso, Goias and Tocatins in Brazil, the fund intends to buy half a million hectares of land for reforestation. The plan aims to supply timber for pulp, charcoal and furniture. It’s eucalyptus plantations will harvest from the 7th year.

We will try to find out more details on the above.

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Sincerely, Joe Randall
Greenwood Management

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