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By coincidence a number of comments received on last month's musings
and Views and Review)
drew attention to hope. Whether a quantitative or qualitative observer
of life, people seem to want a hopeful sign that everything is going
to be alright. It would be fantastic if that could be. But it is only
fantasy. Whether your god is religion or science, the fact of nature
is that there is order. And that order even extends into our virtual
world of money: that world which interprets participants' values.
But hope is not a strong foundation for planning for the future.
It is teh foundation upon which the sub-prime mortgage market ballooned
during the past 5 years. We must be drawn to the concerns of the
World of Money because, while players continue to say its all fine,
the actual foundation looks shaky. We know that we've had a good run
of obtaining credit on the promise that we will pay for our consumption
in the future. But as we realise that we've borrowed more tahn
we can hope to repay, we start to take desperate measures. The
delusion of asset prices increasing while the economic news is so dire
and regulatory authorities are reacting as if there is a problem, suggests
that we are desperate to continue the illusion. Unfortunately
this can only lead to trouble. First inflation. And if this
becomes gross, then the efficiency of financial markets will be compromised,
participants will be unwilling to risk what they have on the uncertain
future and our ability to operate as a cohesive market will dissipate.
If, however, we allow our feet to resettle on the ground, bring our
expectations back in to the realm of nature, and stop confusing consumption
with happiness, the adjustment will be easier, even pleasant.
But it requires that we appreciate the human values upon which communities
thrive, not the belligerent values upon which individuals rise.
Do not confuse this with a step backward. It is in fact a step
forward, but a big one. It is elevating humanity from bestial
constraints of a simple organism to the self-aware delight of a fully
conscious being. It is humanity working together as one and interdependent
on nature. The stimulation of space age technology will flourish,
but we must be relish the stimulation of natural systems too.
This means making space for nature; which means moving aside.
As has been discussed over the past months, the economic imbalances
around the world have grown beyond normal measures for some years
now. Trade imbalances, government debt, consumer spending have
all been beyond expectations in the US and other mature economies.
With the tremors of collapse touching many since the cracks in US
housing started to show in July have focused the attention of analysts
who are increasingly focused on the scale of the mountain of credit
that has accumulated over the past 5 - 10 years. Last month's
commentary characterised the pyramid-scheme type of credit accumulation
that has been allowed by financial derivatives: dicing and splicing
of financial assets to create derivatives more and more removed from
the reality of the underlying instruments. Analysts have increasingly
focused on the dysfunction that occurred in the sub-prime lending
niche as rating agencies, investment banks, asset managers, lenders,
mortgage brokers and other fiduciaries became caught up in the game
of singing the same tune: "doesn't the emperor have lovely new
clothes". And this deluded song had been taken up by all of
us from regulators to consumers.
Historically one could expect that the multiple of credit to cash
(which together underlie money for the economy) might be of the order
of 10:1. But this has grown, perhaps by a factor of 10, as credit
builds upon credit to build an economy based on leverage. We
have bought a wonderful life, but have not recognised the mortgage
secured on our future.
The challenge is to deflate this balloon of credit in an orderly
manner. And this is made difficult by the need to change human
behaviour, to change our expectations. It will be impossible
for developed economies to continue the illusion because the natural
resource constraints are bringing the reality of debt from "the
future" to today. There is no doubt that the currently used
measures of economic growth, focussed on GDP, can only show a flat
or negative trajectory while the global financial system deleverages.
This requires that regulators, governments and business must either
adjust to alternative methods
of economic measurement, which are increasingly advocated, or
suffer the pain of depression era economies.
It is not certain how long the illusion will remain. We all
want to retain it, especially since our cultures and measures of progress
are slaves to the notion that more consumption is desired, ad infinitum.
But I do not expect it to hold for long because the imbalances have
reached the ends of the earth. Our economic systems have become
contained by our natural world, both by physical resource interconnectedness
and virtual communications. We must learn to live together or the
pain of adjustment will be gruesome.
The best advice for taking a step in the right direction is to not
be afraid of letting go of the illusion. Enlightened individuals
and leaders have already started to do so. Make an effort to
recognise that you have enough and focus your energy on building relationships
with family and friends, not business.
The World of Money
Andrew Hunt has pointed out that many UK banks have been behaving
as if they were non-banks. This is likely to have been the case in America
and elsewhere too.
Hunt points out that:
the problems in the UK banking system have arisen because the banks
have, in effect, been behaving as though they were non-banks. Since
the end of 2004, the UK commercial banks have expanded their sterling-denominated
loan books by some GBP 429 billion. They have also added GBP 53 billion
of sterling bonds to their portfolios, giving them a total on balance
sheet expansion of circa GBP 480bn to residents since 2004. On top
of this, the banks have lent a further GBP 220 billion of sterling
to non-residents and although some of these funds may have been used
abroad, many may have been used within the UK by companies and individuals
acquiring assets in the country. Therefore, the banks have enjoyed
total GBP asset growth of circa GBP 700 billion. This expansion of
assets has, however, only been matched by a GBP 430 billion increase
in resident deposits. The building societies, meanwhile, have increased
their assets by around GBP 80 billion but they have apparently only
financed half of this growth through traditional deposits. From this,
we can gather that the UK banks and building societies have financed
between a tenth and a fifth (and at times more) of lending to residents,
and perhaps 40% of total GBP credit since 2004 through recourse to
the wholesale money markets, thus behaving as though they were non-bank
Thus significant leverage has been hidden in plain sight and the recent
trouble with Northern Rock shone a light on the issue.
While there is no easy way out of this one suggestion that bears merit
is to consider regulating two tiers of banks. The banks with a
loan to deposit ration of 90% would be able to avail of a guarantee
facility, while those with higher leverage would not and customers would
clearly be able to see the difference. This is a simple solution
that is transparent and understandable by customers.
A recent article
in the NYT describes how financial analysts are opting to learn
on the job, rather than do MBA's. While the article is largely
anecdotal, what is apparent is that the culture of Wall Street encourages
a cut-throat approach to business. While you can make more money
than you need (maybe even more than you want) very quickly, there is
little loyalty and only cash counts. The hedge fund career is
mentioned frequently and raises the profile of a mercenary approach
to investment. While those making money will fully support this
culture, I've never been a fan of it. Although philosophically
it may be justified by objectivist
(even hedonistic) perspectives like that of Ayn
Rand and Milton Friedman, which discount any value of a moral code
to the duty of "rational self-interest", it provides fuel for the
criticisms of capitalism and globalisation. And it would
be wrong to say that this is what Adam Smith advocated or that it is
the only or appropriate way. We may choose to manage assets so
that the financial performance is enough, but our approach to business
also leaves space for relationships, family and leisure. Growing
up in an investment bankers' family can be a privileged path, but it
ought to be underpinned by necessity to survive rather than greed because
otherwise one finds oneself in later life with dysfunctional family
and friends who only communicate with you if there's something in it
for them. It is not a happy result, as some realise after the
first or second heart attack.
This linked article, How
We Got into the Subprime Lending Mess (published by my alma mater
Wharton), describes the background to the changes in the mortgage
industry that contributed to the dislocation between stated risk/return
profiles and reality of the loans. The comments following are insightful
This statement from hedge fund manager Hamid Hakimzadeh bears serious
The global financial system is critically predicated on future
energy supplies meeting projected demand. The credit pyramid presumes
that future expansion is adequate collateral for today’s
debt. The emerging reality on energy undermines this assumption,
which in turn erodes the valuation of wide variety of financial
assets. Since low quality covenants cave in first when confronted
with cash flow stresses, it is no surprise that sub-prime assets
are the first to register the drain cause by sustained higher
energy costs. The sub-prime crisis may be no more than the opening
salvo of an energy crisis.
While the logic is not novel, what is important is that the concurrent
analysis that resource limits are being reached (as reflected in
rising energy prices) makes the reality of this situation more present.
The consequence being that global economic dynamics are going to
change in fundamental ways that change the philosophy of capitalism.
Our holonic perspective suggests that there will be a leveling of
the playing field. But in the meantime, energy and credit
businesses will become increasingly important as they adapt to changing
A comprehensive review of the characteristics of the world's main
financial centres by The Economist (EIU): Magnets
for money. While the impact of technology on transformations
of financial centres in recent decades is analysed, there could
have been a more critical review of the outlook for the decentralisation
of financial services through ICT.
Retail sales and industrial output both slowed in the US in August.
Shop sales grew 0.3% in August, below market expectations of a 0.5%
rise and below July's 0.5% increase, but excluding car sales, which
are at their strongest in two years, retail spending actually declined
0.4% in August.
Industrial output rose 0.2%, the slowest pace in the past three months;
output at U.S. factories fell 0.3% last month, the first decline in
manufacturing after five straight increases.
Last month the economy also shed 4,000 jobs. The August figure from
the Department of Labor came as a surprise, because economists had anticipated
data showing an increase of 110,000 jobs. The last time the US economy
shed jobs was four years ago in August 2003 when the total number employed
fell by 42,000. The Department of Labor also cut its estimates for the
number of new employees hired in June and July by a total of 81,000.
Meanwhile, figures from the University of Michigan showed that consumer
confidence remains close to a yearly low.
A piece of more positive economic news: the US balance of payments
deficit, which has been a factor in the weakness of the dollar, narrowed
to $190.8 billion in the second quarter from $197.1 billion in the previous
three months. However, this may be partly a consequence of a slowing
economy and more expensive imports. The financial system is working.
We expect data to continue to be modest, but this is appropriate and
will equalise the imbalances in the US economy, allowing a natural adjustment
there and globally. Importantly, these changes must be underpinned by
a changing culture, one which saves more and spends on infrastructure,
health and education as much as convenience consumption.
A useful summary of data points from John
Mauldin illustrates that the US housing market is still receding.
This matches the IFC chart showing that sub-prime mortgage problems
are not expected to peak till the beginning of the year. (That
chart is in the July Review here.)
First the inventory of existing homes rose yet again to 4,581,000,
which is an increase of more than 1,000,000 since March alone. It
is more than double the supply since the beginning of 2005. In January
there was a 6.6 months supply of homes for sale. Now it is 10 months.
Over 500,000 homes are in the process of foreclosure and will soon
come onto the market. I think that means in the near future we will
see a 12 month supply of existing homes for sale.
Remember, that is an average. In some markets, that means there
may be a two year supply and a three month supply in areas of higher
demand. It is going to become a buyer's market in the middle of next
year as sellers
Want to buy a condo? Existing condos for sale have risen by 35%
since January to 661,000. That is almost 12 months of supply, and
there are a lot of new condos coming onto the market as there are
a lot of construction projects that are just now nearing completion.
New home sales in August saw the largest decline in three decades,
down 8.3%. Mean new home prices are down 11% in the last five months.
The inventory of new homes for sale is up to 8.2 months and rising.
Greg also spotted something which I suspected and hinted about in
previous letters. The number of homes above $750,000 which are selling
is down by over 35% from last year. Sales of home from $500,000 to
$749,000 is down by 25%. Jumbo mortgages are just hard to find at
rates that make sense. I think it is likely that Congress will allow
Fannie and Freddie to take larger loans onto their books. I would
not be shocked to see the number at $600,000, at least temporarily.
Right now they are limited to taking $417,000 loans. With a 20% down
payment that means about $525,000 for the sales price of the home.
These anecdotal data points illustrate that the adjustment in US housing
has not yet completed and we can expect more downward pressure on consumption
and by extension the economy in general.
This extract from John
Mauldin's Thought's From The Frontline suggests that the downturn
in US housing could be bad for inflation:
Indeed, there may be some concerns that the CPI (Consumer Price
Index) number could come under pressure from the housing component.
Given that home prices are falling, that may be considered odd by
many. But CPI does not measure home prices. It measures something
called owner's equivalent rent. And even as house prices rose by
93% in real terms (per Bob Shiller) in the last decade run-up, rent
in real terms did not go up all that much, so the cost of a new
home was not reflected in the CPI.
Now, we may have the opposite problem. As more and more people
cannot get a mortgage coupled with a very precipitous rise in foreclosures,
we are seeing more people who need to rent. Rental property availability
in many markets is quite tight, which means that rent prices are
increasing. If you go to the Bureau of Labor Statistics and look
at the housing rent data, it is not too hard to think that the housing
component of CPI could easily rise by more than 4% in the fourth
quarter given the current trend.
Since the housing component is about 30% of the total CPI, a 4%
inflation in housing could be significant. And oil is over $80 and
rising. The dollar is falling, meaning that import prices are going
to rise. And should we mention that food costs a lot more than this
time last year?
Although Commerce Department data for August showed a rise in August
and a moderation of core inflation, this data should be considered
warily as they may be a result of unusual incentives. Consumer
confidence and housing are still down.
Consumer spending rose 0.6% in August, the largest increase since
April and more than expected. The rise was underpinned by strong
sales of durable goods, automobiles and weather-related services.
However, analysts have noted that retailers offered discounts and
other incentives to move product, especially 2007 cars.
The core personal consumption expenditure deflator, posted its smallest
year-over-year gain since February 2004. The core deflator index,
which excludes food and energy prices, rose 1.8% on an annual basis,
continuing a downward trend since February. This adds to the
confidence the US Fed might have in reducing interest rates again.
However, we still believe this would be dangerous as it contributes
to moral hazard (attested to by the spike in stock markets since the
rates were dropped on 18 September) and would reduce their ability
to reduce rates in future, when it may be more needed.
Separately, construction spending increased 0.2% in August after
a 0.5% decline the month before, though many had expected another
drop. Nonresidential construction offset a decline in home building.
This data continues to give mixed signals, contributing to uncertainty
which make business planning difficult. It is pragmatic
to focus on core business in this difficult environment and be prepared
for a downturn - it is easier to rise with the tide, than stay afloat
while everything else is sinking.
Interest Rates and Currencies
Oh dear ...
Well, it wasn't as if it wasn't expected. Futures were pricing a
100% chance of a drop of 0.25% and a 50% chance of a drop of 0.5%.
But I still think it was a dangerous mistake. Inflation is pulling
at the rein and the speculative dynamic of stock markets continues
to undermine fiduciary responsibility and sensible personal wealth
management. (For more on these concerns, please see August
GRI Equity Review here.)
The first sign that the rate cut wasn't appropriate was the bounce
in the stock markets. After the decision was announced all three major
US indexes were up more than 1%.. The Dow Jones industrial average
was up 1.37% at 13,587.54, the S&P 500 Index was up 1.87% at 1,504.29,
and the Nasdaq was up 1.60% at 2,622.95. As of this writing markets
are still open, and up.
There will be a speculative rush for a few weeks until the reality
that interest rates are not the problem sinks in. Perhaps on a positive
note, they could be increased again if inflation accelerates too soon.
The most unnerving conclusion, however, is that the Fed is not able
to give the tough love the markets need, or, even worse, emotions
and personal interests got in the way of the decision.
The lower rate will encourage another bout of gorging on debt and
further extension of an unsustainable mountain of credit. Consumer
behaviour needs encouragement to change, to become more practical.
The sooner the better.
(And here's another discussion of the Fed's
Irresponsible Move published in BusinessWeek.)
Will the interest rate cut be seen as prescient salvation or impulsive
band-aid in the coming months? The Fed, it seems, were swayed by Frederic
Mishkin who, notes The
argued forcefully in a recent speech that central bankers can cushion
the impact of falling house prices on the economy, provided they
act quickly and decisively, at little cost in terms of inflation.
While the markets bounced quickly it is not certain to be sustained
and much can happen in the coming months. Let's hope for stability,
though our track record is not good and I can't help remembering that
Enron hired The
Smartest Guys in The Room. We shall watch markets and data in
the coming weeks to see where the pressure bears (ha ha).
As always, screening should be selective. Prefer fundamentals to
Further reading: An
essay by The Economist discussing the Fed's policy approach.
observers have noted the spike in food commodity prices, underpinned
by interest in corn for ethanol in the US. There also appears
to be a broader rise in prices of commodities which is bound to push
up inflation. Last year the pressure on metal commodities from
demand from China was observed. As the chart from Reserve Bank
of Australia shows, commodity prices have spiked as prices for metals
and food are now rising. Their index is at an all time high
and the index chart for the past couple of years is vertiginous.
While central bankers and regulators scramble to be seen to do something
about the stagnation of financial markets, I do not think that interest
rate reductions are going to help. In fact they may exacerbate
problems as they contribute to the moral hazard of investors believing
there is no downside and contribute to the difficulty of ascertaining
the balance of economic conditions because of unnecessary changes
in monetary and fiscal policy.
The European Central Bank left interest rates unchanged at 4% on
7 September, but it is not clear that they will not be increased
to 4.25% soon.
The ECB is reacting to the increase in perceived risk in financial
markets, catalysed by the sub-prime meltdown. At the same
time as the hold on rates increase, the ECB provided another €42
billion to the banking system, whose liquidity has dried up as banks
continue to be reluctant to lend to each other, without knowing
the scale of losses in the lending markets.
Unfortunately, it will be some months before the scale and scope
of the liquidity crisis might be known, and this will make interest
rate decisions more difficult. However, I think it unlikely
that they will be brought down this year.
China’s central bank increased rates for the fifth time
this year. The one year lending rate is now 7.29% as authorities
attempt to ease inflationary pressure. However, the build-up of
reserves continues as those that can borrow US$ at under 5%, like
multinationals and foreign investors, do. The discrepancy
between interest rates net of currency appreciation, fuels a carry-trade.
Their other tactic has been to ease investment control allowing
investment outside China, which offers some pressure relief valve
for money to find its way out of China. This is unlikely
to be sufficient however to moderate inflation. This is
therefore going to add to pressure for teh Yuan to appreciate.
While the Chinese authorities may accelerate that appreciation
they are very unlikely to pursue destabilising step changes in
the currency that American and European authorities have been
Its not just the professionals that have benefited from the yen carry
trade. Japanese housewives have been moonlighting as currency
speculators too. Unfortunately, in the past couple of months
the reality that there is no risk free investment has hit them hard,
often wiping out savings in a few weeks because of leveraged/margin
positions. This linked
article from the NYT tells some of the stories.
Trade and FDI
cost of food is rising fast. We had been expecting this because of
variations in weather patterns which we feared would upset cultivation.
However, the sudden interest in corn for ethanol, since the warnings
last year by the Stern Review, An Inconvenient Truth and IPCC, has
also contributed to an increase. The chart here shows the Reserve
Bank of Australia's index for food commodities since 1982. (Includes
Wheat, Beef and veal, Wool, Cotton, Sugar, Barley, Canola, Rice.)
It is now at its highest level ever, having bounced up in the past
couple of months.
While we will start to feel the pinch at the basic end of our consumption
spectrum and this relative scarcity of food commodities will push
up inflation, it is the poor of the world that will suffer most, particularly
the poor in developing countries. The first sign of this pain was
the hike in corn prices in the middle of the year as agro-industrial
giants and investors rushed to invest in US corn for ethanol, which
meant Mexican's staple tortilla doubled in price. Now signs of a wider
pain are showing as we learn that US
food aid has halved because of increasing prices: The amount of
food bought for American food aid programs has fallen to 2.4 million
metric tons this year from 4 million metric tons in 2005 and 5.3 million
metric tons in 2000.
It is perhaps time to think more seriously of ending the food subsidies
that rich countries pay their farmers. That would have the multiple
benefits of moderating prices of commodities, helping feed people
in poor countries and realigning resource use to a more natural and
economical profile in rich countries.
(Further browsing: the UN Food and
Agriculture Organisation (many divisions, lots of news and data)
USDA Food sector
site and an interesting site
on food history.
Recent hype about problems with Chinese manufactured goods was
used as an excuse by some protectionist politicians and lobbies
in the US to push for trade sanctions and even used as a tool to
push for revaluation of the Chinese renminbi. The greatest hype
surrounded the recall of more than 20 million toys by Mattel. However,
now has admitted that most of the toys recalled in recent safety
scares had "design flaws" and that Chinese
manufacturers were not to blame!
This is not surprising in light of the story we related in August
Review about Bush ignoring the toxic off-gassing results of
a Mattel doll that were shared with him by Michael Braungart 3 years
ago. And perhaps more revealing is the declaration that China
is simply following good capitalist practice (role-modeled by the
US of course) by using
lead paint because its cheaper!
A senior Mattel executive apologised for the damage that the incidents
had done to the reputation of Chinese-made goods. Too little too
late, perhaps. Mattel needs to make a public apology in the US,
and the general tone of belligerence that the US employs on all
"partners" needs to be softened as America grows up.
As previously reported, the head of China's Food and Agriculture
minister was executed for corruption and dereliction of duty earlier
this year. That sets teh tone for measures that will be taken in in
China to maintain standards. But it is more extreme than one would
like. So, with the spate of product quality issues in the summer,
Vice Premier Wu Yi has been appointed head of a task force to raise
standards in China. As BusinessWeek
reports she has a good chance of making a positive change quickly.
Wu is off to a fast start. In the three weeks since she took over
the job, Chinese authorities have banned the use of lead paint in
toys, shuttered 953 unlicensed food processing plants, closed more
than 2,000 factories making fake goods, and suspended the licenses
of 1,200 drug and medical equipment companies. As she did when she
oversaw the fight against SARS four years ago, Wu will likely create
a nationwide campaign to motivate the public, boost coordination
among various ministries and agencies, and fire officials who resist
We must remember though, that most stakeholders are happy with the
rough playing field, including western brands outsourcing manufacturing
to China. It is western markets that push Chinese factories to produce
more product, more cheaply and turn a blind-eye to standards that
would not be accepted at home. It is the "child-labour" story
with different actors, but the same directors. Businesses operating
in China know its standards are more permissive - that's why they're
more than one-fifth of China's food products failed government safety-tests
last year. Corruption, blackmail and counterfeiting are rampant.
Eight buyers at Carrefour, a French supermarket chain, are under
investigation for accepting kickbacks from suppliers. Zheng Xiaoyu,
a former boss of the SFDA, was executed
earlier this year for taking bribes to approve fake drugs and certificates
claiming that the paint used by Mattel's suppliers was lead-free.
Yet many foreign managers working locally say bosses in Europe or
America do not understand these problems, or do not want to hear
Higher standards in China will mean higher prices globally which
will mean some short term pain and an incentive to recreate opportunities
The Columbia Program on International Investment and the Economist
Intelligence Unit published World Investment Prospects to 2011:
Foreign Direct Investment and the Challenge of Political Risk. The
report contains the first authoritative data on FDI flows for 2006
and forecasts flows until 2011, with 2007 set for a new record.
It pays special attention to the rise of FDI protectionism and regulatory
pdf of the World Investment Prospects to 2011 report.
Mauldin writes convincingly that the Fed is trying to preempt
the negative consequences of the housing collapse. However, the players
in the market are behaving as if a bail out had occurred. In order
for the message to be correctly heard, other signals need to be forthcoming.
The problem is that asset markets are not responding to the crisis
appropriately. Prices should be down, but they are up ... the illusion
Are lower rates going to reduce the chance of recession. Not really.
The people that will benefit are those least exposed to the sub-prime
problem; those higher up the income ladder. And it won't encourage
a change in behaviour of them either. In fact we will continue to
do our supermarket shopping ...
Hugh Moore of Guerite Advisors writes:
"Consumer spending accounts for two-thirds of the U.S. economy.
Total Household Debt is particularly important in supporting the
growth of consumer spending. This indicator includes mortgage debt
due to the important role that Home Equity Withdrawal (HEW) has
played in sustaining the growth in consumption since the beginning
of the decade.
"As shown in the graph below, each time the year-over-year
increase in Total Household Debt has dropped more than 40% below
its recent peak, a recession (or in the case of 1967, a mini-recession)
has occurred. The mid-1980's slowdown touched this level, but did
not exceed it. The current -38.9% level is approaching this boundary
and, based on recent credit tightening by financial institutions,
is likely to drop significantly below the -40% level.
The Economist asks whether
the golden age of stable growth enjoyed by America and others for
2 decades is coming to an end.
Regular readers will know that my prognosis is not optimistic. While
the risk of a global coordinated slump is low, it seems that economic
imbalances have grown rapidly beyond historical norms in the last
5 to 10 years and a more balanced flow of economic and social energy
is likely. Expansion of emerging economies like China and India should
provide an engine while selective opportunities in developed economies
will be attractive. The most likely catalyst of a global slump today
is a coordinated housing slump, but that is a more remote possibility
and the most exposed countries like the US and UK will weather the
And if the US does suffer recession, this might even be good for
China. As the Economist notes in a review
of China's economy:
A recession in America would reduce China's growth, but since Beijing's
policy-makers are fretting that the economy is starting to overheat,
weaker exports and hence slower GDP growth
might be a good thing. Not only would it reduce the risk of inflation,
but it would also help to trim China's embarrassing trade surplus.
Fed Chairman said during testimony to the the House Committee on Financial
Services on 20 September that losses from sub-prime mortgages have far
exceeded "even the most pessimistic estimates". This statement
is disappointing because it undermines any build-up of confidence that
might be encouraged by recent rate cuts and liquidity injections.
But worse, his comments do not quantify the Fed's understanding of
the losses. We shared an estimate of sub-prime exposure of $ 250 billion
some months ago, although most analysts estimates are closer to $ 100
billion. If the exposure exceeds even our pessimistic number, the knock-on
effect will be devastating; if, however, it exceeds the previous consensus
the ramifications are already accounted for.
Whatever the number is, the adjustment process must continue for some
Anatole Galetsky presents GaveKal's perspective in Here
Comes the Whale that Northern
Rock is the large problem that needs bailing out in order to pass
through the financial liquidity imbalance that has accrued during
the past few years.
... on past experience, the long-awaited appearance of the whale
- Continental Illinois, Chrysler, Brazil, Drexel Burnham, Kidder
Peabody, Mexico, LTCM/Russia, Enron/MCI/Argentina - would announce
the beginning of the end of the liquidity crunch. ...
... because we started thinking in the middle of 2006 that our
whale was overdue for an appearance, but it never quite turned up.
In February we finally realised what species of a fish we were looking
out for - a mortgage lender, with a specialty in high-risk loans
- but still the damn creature refused to show. But this weekend,
a whale finally surfaced, though somewhere totally unexpected. Until
last week, almost nobody in the markets had heard of Northern Rock
PLC. And even on Friday - when Britain's fifth-biggest mortgage
lender was officially "rescued" by the Bank of England in its
first lender-of-last-resort operation for 34 years - most people
in the markets saw this event as "a little local difficulty"
compared with the mess in the US sub-prime market or German state
Time will tell how history views these events and and Northern Rock's
place in history, but other "whales" where well known and media
savvy before the crisis, this one was not. It can be said, however,
that Northern Rock is contributing to the evidence that a rebalancing
of the price of liquidity is taking place.
A new African investment guide, Invest
in Kenya: Focus Kisumu, was launched by the Millennium
Cities Initiative and the Columbia
Program on International Investment in Nairobi on September 26.
MCI's first investor's guide focuses on Kisumu, the first city named
a Millennium City. Kisumu, located on Lake Victoria, is Kenya's third
largest city and an important economic center. Its location, climate
and safety, combined with Kenya's increasing access to foreign markets,
make Kisumu attractive to investment in a number of areas. One sector
of great potential discussed in the Guide is agriculture, with opportunities
in the areas of sugar cane, cotton, groundnuts, rice, and horticultural
crops. Other areas with potential include aquaculture, agro-processing
and dairy. The Guide delves into these opportunities as well as relevant
matters such as tax and regulatory conditions in Kenya.
We've mentioned it before - people are getting together with lawyers
to focus on polluters in the same way cigarette makers were targeted.
On the same day that US rates were lowered investors and NGOs petitioned
the SEC to clarify whether firms had an obligation to disclose how climate
change might affect them. It is certain that disclosure must
occur. Directors ought to know since it is a significant material
business risk, and if they know shareholders must too.
I came across a recent compilation of presentations from various
events entitled Integrity:
A Positive Model that Incorporates the Normative Phenomena of Morality,
Ethics, and Legality (page down to find link to full study). The
authors present a positive model of integrity that provides powerful
access to increased performance for individuals, groups, organizations,
and societies. They note that integrity is thus a factor of production
as important as knowledge and technology, however its role in productivity
has been largely ignored by economists and others. Their model reveals
the causal link between integrity and increased performance and value-creation,
and provides access to that causal link. The point: honesty
is good business.
The September issue of Sustainable
Investor discusses three green portfolios describing the manager's
rationale and an analysts' evaluation in each case. It is a useful
starting point for building your own green portfolio. If you are
not US based, it still offers insight in to the trade-offs you're likely
to have to make in building you global portfolio. I recommend
Progressive Investor for ethical investors.
EIRIS" new report "The State
of Responsible Business" details growing corporate responsibility in
businesses worldwide. The study, "The
State of Responsible Business: Global corporate response to environmental,
social and governance (ESG) challenges" casts a wide net, offering
an overview of current corporate responsibility. It also points out
trends in corporate responsibility. Generally, more and more businesses
are adopting responsible practices in regard to key issues identified
by EIRIS. These issues consist of corporate governance, environment,
equal opportunities, human rights and the supply chain. In spite of
the increase of corporate responsibility overall, not all areas of the
world are responding equally. Looking at company annual reports, sustainability/CSR
reports, company websites, survey responses and third party materials.
EIRIS' also identified and considered "green-wash" in its research.
EIRIS went beyond what companies say they do, to actually considering
what processes they have in place, and whether these processes are successful
in achieving meaningful results.
Europe leads the way in adopting responsible businesses practices across
the board. Almost 75% of European companies that have operations in
high-risk countries have a human rights policy in place, compared to
less than 40% of US companies and fewer than 20% of Asian companies.
Europe and Japan have the highest number of companies with environmental
protocols in place, with over 90% of companies having some form of an
environmental policy. In Europe, a number of factors drive strong ESG
performance: Stricter regulatory environment across the European Union,
the presence of many non-governmental organizations, individual awareness
of sustainability issues and investor willingness to put pressure on
companies to adopt better environmental practices all raise the awareness
of European companies. It is a shame to see that US companies are behind
European companies in their reactions to social and environmental concerns
and we hope that will change in the coming years.
Funds' review is here.
The FT describes how Norway's sovereign fund management sets the
Pension Fund-Global, part of Norges Bank, was set up by the Norwegian
government in 1990 and manages about €235 billion. It has worked
with authorities in Kazakhstan, East Timor, Bolivia, the Faroe Islands
and several African countries among others.
"We make no strategic investments," said Martin Skancke,
director-general of the fund at the Ministry of Finance. "We
invest in individual companies and sec tors. We are invested in between
3,000 and 4,000 companies in 40 countries and average ownership of
a company is below 1 per cent. We do not feel that this distorts markets."
Investment decisions are either made by individuals at the fund
with specific investment mandates or are contracted out to external
asset managers. At the end of 2006, 22 per cent of the fund was managed
by 50 external managers with 80 different mandates.
Transparency is paramount. The ministry receives advice on the
investment guidelines from the Central Bank of Norway. Consultants
are also employed to help with this work as well as to judge performance
and the management of costs.
Guidelines for the Government Pension Fund - Global Norwegian
Ministry of Finance
for Corporate Governance and the Protection of Financial Assets
A new report claims that excessive executive compensation in the US
is taking a staggering economic and social toll on American society,
threatening leadership in the business, government, and nonprofit sectors
and creating instability in the economy. The report gives a good summary
of the gross disparity between top earners and average earners and disparages
the arguments justifying the excesses.
According to Executive
Excess 2007, the fourteenth annual survey of executive compensation
from the Institute
of Policy Studies and United
for a Fair Economy, the figures stand in stark contrast: the CEO
of a large company pulls down an average $10.8 million per year in salary
and bonuses (excluding perks and some stock options, whose value can
run to many millions more. But the average wage is only $29,544 (only
about 160% of the poverty level for a family of four). Despite an increase
this year to $5.85 per hour, the real value of the minimum wage has
declined 7% over the past decade and real wages have risen little over
the same period. During this time, executive pay has soared by 450%.
The stark comparison even raises the illegitimacy of capitalism and
democracy because the socio-economic profile is so feudal. You have
to ask what these "leaders" stand for when they are so intent on
grabbing more from so many who have relatively little.
The report appropriately debunks the rationalisations for excessive
compensation: Excessive compensation is not necessary to attract talent.
In fact it may do the reverse by attracting machiavellian individuals
out for themselves rather than their employer. Executive Excess 2007
makes the case that it actually erodes good leadership by giving the
highest rewards to those who ignore long-term stability in favor of
short-term market gains. Employee relations may also suffer, leading
to negative impacts on company performance. Enlightened analysis has
shown for a long time that money does not make happiness, in fact often
the reverse once average needs have been met. And high CEO pay does
not correlate with outstanding performance either. The great illustration
today is Angelo Mozilo of Countrywide Financial, "the sixth highest
paid CEO in 2006...with $42.9 million. In July 2007, the company's sub-prime
mortgage woes drove its foreclosure rates to the highest level in more
than five years and contributed to a global liquidity crisis."
The report makes some proposals for change:
Eliminate tax subsidies for excessive CEO pay.
End preferential tax treatment of private investment company executive
Cap tax-free "deferred" executive pay.
Eliminate the tax reporting loophole on CEO stock options.
Link government procurement to executive pay.
report here. See Social
Funds' review here
An interesting review of the run-up to the sub-prime mortgage meltdown
shows that SR investors started considering the implications of sub-prime
business exposure back in 1999 and a number of institutional SR investors
adjusted portfolio exposure accordingly. It shows that investors
who take a broader view of business (social and environment as well
as economic) have a built in capacity to screen for off-screen risks.
While they may not know who will be the next Enron or Countrywide
Financial or Northern Rock, they are more likely to have lower exposure
to sectors or companies with unrecognised dangerous risk profiles.
See the analysis
by Social Funds here.
The recent launch of Supercapitalism by Robert Reich which criticises
CSR has stimulated debate about its role in private enterprise.
You can see The
Economist's take here and an interview
with the author by BusinessWeek here.
It is naive, even primitive, to argue that corporations have no
ethical dimension, rather it is increasingly their role to reflect
the values of their shareholders. It is simplistic to reduce
the objective of a company to "making profits". While
businesses must be profitable to survive, their organisation has
never been the objective of making profits but to provide an understood
system for cooperation between people who would like to create something
greater than they can individually. (If the objective was
only profits there would be no rationale for being in any particular
business and criminal activity, with its very high return on investment
would be the most attractive option.) Company organisation
offers a substitute for feudal hierarchy and as we insist on ethics
in government so we demand ethics in business.
For most businesses the discussion has moved beyond "is it
appropriate for companies to pursue social responsibility?", the
answer to that is "of course". The challenge is now how
to build ethics in to everything we do and reflect the values of
our stakeholders; how to make the organisation more human.
According to a survey of more than 500 business executives by
Grant Thornton, executives believe that corporate responsibility
programs can positively impact their business and help achieve
strategic goals. While commentary by traditionalists might suggest
that CSR will be a cost, without benefit, only a quarter of survey
respondents agreed that profits need be sacrificed, while three
quarters believed corporate responsibility could enhance profitability
- 77% said they expected corporate responsibility initiatives
to have a major impact on their business strategies over the next
release with summary analysis is here and Social
Funds' analysis is here.
The first carbon
auction held on a regulated exchange just concluded in Brazil.
800,000 tonnes of carbon rights were sold by the City of Sao Paolo
which is earning them from power generation from methane released
by a massive urban landfill. The winning bidder, Fortis a European
bank, paid € 13 million or about € 16.25 per tonne; carbon
is now trading around € 21 per tonne so it seems like a good
investment. The Brazilian Mercantile and Futures Exchange expects
to have another 10 carbon auctions in the coming year.
The Carbon Disclosure Project
released its fifth
Global Corporate Climate Change Report, tracking carbon disclosure
and attitudes toward climate change in the world's largest companies.
The CDP this year also launched the Climate Disclosure Leadership Index,
an honor roll for companies who are best addressing climate change issues.
The launch coincided with the U.N. summit on how to mitigate climate
change in which over 80 world leaders taking part. These high profile
meetings on climate change illustrate the growing pressure on governments,
companies and individuals to act now on carbon emission and climate
change issues. The CDP is underpinned by over 315 global institutional
investors with more than $41 trillion in assets under management, a
collaboration includes some of the largest US and foreign institutional
investors, including CalPERS, Merrill Lynch, and Goldman Sachs. The
CDP has collected 90 new signatories and almost $10 trillion in assets
since last year's report. Although the CDP5 finds that the gap
between awareness and action is shrinking, there is still a huge disconnect
between awareness and action on the investor side. The CDP calls on
governments to help push investors into using carbon disclosure information
in their investment making decisions.
The ninth annual survey of the Dow Jones Sustainability Indexes is
More information about the report, as well as selected downloads about
each industry leader and regional rankings, are available at http://www.sustainability-indexes.com.
study by two professors at Penn's Wharton School lifts the lid on
a "secret" of private equity managers. The findings of Wharton
professors Andrew Metrick and Ayako Yasuda show that, "on average,
leveraged-buyout funds can expect to collect $10.35 in management fees
for every $100 they manage, whereas about half that, $5.41 for every
$100, comes from carried interest." Those numbers in total equate to
over 15% of funds under management - a big number.
Investors that become aware of this statistic may negotiate more on
the terms of management agreements where the GP is given the ability
to be on both sides of the table when it comes to negotiating corporate
finance fees. It should also encourage a move to more appropriate fee
structures in which interests of LP and GP are more closely aligned,
such as replacing
carry with fund equity and making the management company a subsidiary
of the fund.
The 53 page study dated September 9 which was featured in the Wall
Street Journal will also hardly help private equity firms with their
argument that the pending carried interest bill will damage the buyout
As we expected, there appear to be more money than deals in clean-tech.
New Energy Finance reports: 2006 was another record year for Venture
Capital and Private Equity investment in the clean energy sector, with
$18.1 billion invested in companies and projects. This represented a
67% increase on 2005 ($10.8 billion), and beat New Energy Finance's
original forecast. However, this rapid growth in VC & PE investment
only tells half the story: a significant amount of money ($2 billion)
resides in funds and has yet to be invested. During 2006 clean energy
VCs invested only 73% of the total money available to them a symptom
of a competitive market where demand for deals is outweighing supply,
thereby driving up company valuations.
Cleaning Up 2007: Growth
in VC/PE Investment in Clean Energy Technologies, Companies & Projects
Since Autumn 2006 attention to the sector rose as various reports came
out: The Stern Report, various IPCC reports, the movie The Inconvenient
Truth and so on. Private equity managers all rushed to get in on the
game because they saw it as an easy way to raise money and thought that
the fundamental economic drivers had suddenly changed. As is always
the case with too much money chasing too few deals it is likely that
many over paid. It is also likely that few had expertise or an understanding
of the emerging economic dynamics of the enlightened consumer. Money
will be lost.
The good result however is that more attention is being paid to this
area, especially aspects like alternative energy.
The better managers are those that can also look beyond clean tech
and make the connection with the growing LOHAS consumer profile as well.
A 2004 study, recently updated, adds to the debate about whether management
or the company is the important focus of investment screening.
study, written by Steve Kaplan of the University of Chicago, Berk
Sensoy of USC and Per Stromberg of SIFR, found that over 90% of successful
VC-backed companies have the same business model at the time of IPO
as they had at the time of initial VC funding. Conversely, only 72%
have the same CEO, and that number drops to 44% by the third annual
report. Interestingly, the researchers also examined a sample that included
both VC-backed and non-VC backed IPOs for 2004, and found no demonstrable
difference in the human variable's importance.
You might question the sustainable value of management, however, the
results may be a bit sterile and simply reflect the effecient evolution
of business aided by experienced VCs. As a company grows from
early stage to a self-sustaining critical mass, the nature changes from
entrepreneurial and adds other dimensions. This requires a changing
culture of management, which often requires new skills at the top which
may not be displayed by the founder or (incumbent CEO).
While we think management is critical to the success of VC investment,
it is also certain that if the company is in the wrong business, because
the market is not ready or passed, then even the best CEO won't make
Carlyle, the large successful private equity firm, has always been
a cause for concern because its claim to excellence at its inception
a decade ago was the raft of politicians on its board. The New
York Post revealed recently that it paid $12.3 million in fees
to a company tied to former state Comptroller Alan Hevesi's top political
consultant. Carlyle, which invests $1.3 billion for the state pension
fund, paid the fees to Searle & Co., of Greenwich, Connecticut,
from 2003 through 2006, when Hevesi served as comptroller. Apparently
the fees were "in connection with Hank Morris' work as a placement
agent related to [state pension-fund] investments". Searle, is not
the medical company which was run by Rumsfeld which "lobbied"
for approval of aspartame, but a small
financial-service firm headed by Robert Searle, a longtime personal
friend of Morris. Morris has been employed by Searle since 2003. Connections
and behaviour like this do not depreciate the value of Carlyle, which
is expected to launch an IPO soon. Investors prefer conflicted connections
is a link to the consultation report by Sir David Walker on
the UK private equity industry: Disclosure
and Transparency in Private Equity. It offers a profile
of the current industry and recommends guidelines for improving
transparency. It does not focus on tax treatment, though there
are implications for this.
Ethical Corp magazine reviews
The consultation response
period ends 9 October.
According to the Emerging Markets Private Equity Association, 107 private
equity funds focused on investing in the emerging markets
of Asia, Europe, Latin America, the Middle East and Africa raised US$21.5
billion in capital commitments in the first half of 2007, compared
to US$33.2 billion raised by 162 funds in all of 2006. Here's
their release in pdf.
Climate Change Capital
raised €200 million for a new private equity fund that will focus
on clean-tech opportunities in Europe. Limited partners include AlpInvest,
Robeco, HSBC, USS, Alliance Trust, Bankinter, Woelbern Group and Harcourt.
The fund will focus on expansion-stage, later-stage and buyout opportunities,
in areas like clean power, clean transportation, energy efficiency,
waste recovery and water.
Environmental Capital Partners,
a new firm, will focus on middle-market opportunities in the "green"
space. ECP recently received a $100 million cornerstone commitment from
New York Private Bank & Trust, and is planning to raise an additional
$100 million from other limited partners. Its typical transaction will
require an equity investment of between $10 and $25 million, for companies
focused on such things as green consumer products, eco-friendly building
materials, alternative energy and industrial environmental services.
Inc., a US manufacturer of thin-film solar cells, has
raised $50 million in Series D funding. The deal included six new investors.
Miasole previously had raised $56 million from firms like Kleiner Perkins
Caufield & Byers, VantagePoint Venture Partners, Firelake Strategic
Technology Fund, Garage Technology Ventures and Nippon Kouatsu Electric
Company. Company CEO David Pearce had told Cnet last September that
the company expected to go public within 12 to 18 months.
Ceres Inc., a US developer of energy
crops that can be planted as feedstocks for cellulosic ethanol
production, has raised $75 million in Series F funding led by Warburg
Pincus. It is unclear who else participated in the deal. Ceres has previously
raised over $77 million in VC funding from Artal Luxembourg, Oxford
Bioscience Partners, GIMV, H&Q, KBC, Monsanto Co., Oppenheimer Funds,
QuestMark Partners and Towerbrook Capital Partners. A 2001 round came
with a post-money valuation of nearly $200 million.
Solarity Inc., a developer of nano-structured solar cells,
has raised $5 million in Series A funding led by New Enterprise Associates,
according to a regulatory filing. The company is being spun out of Georgia
Tech, and is founded by Ajeet Rohatgi.
Nanosolar Inc., a US provider
of lower-cost solar energy panels, has received a $20
million grant from the U.S. Department of Energy. The company has previously
raised VC funding from such firms as Mohr, Davidow Ventures, Benchmark
Capital, Mitsui & Co., Onpoint, SAC Capital, GLG Partners, Swiss
Re and Grazia Equity.
Solar Power Partners
Inc. has secured $6 million of a $6.2 million Series A round, according
to a regulatory filing. Globespan Capital Partners led the deal, with
Globespan partners Barry Schiffman and Ullas Naik joining the SPP board
of directors. The Mill Valley, California-based company develops, owns
and managers a distributed network of mid-size commercial solar
energy facilities that is remotely managed from a central location.
Solar Notion Inc., a Sunnyvale,
Calif.-based maker of solar energy panels, has raised
around $10 million in Series A funding led by hedge fund Third Point,
according to a regulatory filing.
Solazyme Inc., a US developer
of biofuels through the use of microalgae, has raised
$5 million in venture debt funding from BlueCrest Capital Finance. The
company previously raised around $9 million in VC funding from The Roda
Group and Harris & Harris Group.
Pentadyne Power Corp., a US
commercial manufacturer of clean energy storage systems,
has raised $14 million in a venture recap round led by Loudwater Investment
Tioga Energy Inc., a US provider of solar power purchasing
services, has raised an additional $4 million in Series A funding
led by Nth Power. The round is now closed with just over $14 million,
including capital from NGEN Partners, Draper Fisher Jurvetson, Rockport
Capital, DFJ Frontier and Kirlan Ventures. Tioga is basically a restart
of CerOx Corp., which closed earlier this year after having raised around
$15 million over two rounds.
Solarcentury Holdings Ltd.,
a UK supplier of solar energy systems, has raised £13.5
million in new VC funding. Zouk Ventures led the deal, and was joined
by Vantania Holdings, Foursome Investments and return backers VantagePoint
Venture Partners and Scottish and Southern Energy.
ClearEdge Power, a US
fuel cell developer, has secured around $6.47 million
of a $19.47 million Series C round, according to a regulatory filing.
The only listed backer is existing shareholder Applied Ventures.
Sierra Nevada Solar Inc., a US solar energy startup,
has raised $4.5 million in Series A funding, according to a regulatory
filing. No investor information was disclosed.
Cocona Inc., a US maker
of textiles using green-friendly polymers derived from
coconut shells, has raised $4.86 million in Series A funding led by
FairHaven Capital Partners, according to a regulatory filing.
Purple Labs, a France-based
provider of embedded Linux solutions for the wireless
market, has raised $14.5 million in Series A funding. The deal was led
by Sofinnova Partners, which five months ago bought a majority stake
in the company from Vitelcom of Spain. Other backers include Earlybird
Venture Capital and Partners Group.
Intalio Inc., a US provider of
open-source business process management software, has
raised an undisclosed amount of VC funding led by Partech International.
This follows a $2.3 million recap earlier this year, and includes return
backers 3i, Cargill Ventures, Sippl MacDonald Ventures, Woodside Fund,
and XML Fund.
Yahoo Inc. has agreed to buy Zimbra
Inc., a US maker of open-source email server software,for
around $350 million. No other financial terms were disclosed for the
deal, which is expected to close in Q4. Zimbra has raised $28.5 million
since 2004, from firms like Accel Partners, Benchmark Capital, DAG Ventures,
Redpoint Ventures and Presidio STX.
Whole Body Inc., a national chain of yoga and fitness studios,
has raised $13 million in Series B funding, according to a regulatory
filing. Highland Capital Partners led the deal, with Dan Nova and Corey
Mulloy taking board seats. Whole Body was founded by Rob Wrubel, an
entrepreneur-in-residence with Highland between June 2001 and July 2002.
AEA Investors has hired Goldman Sachs to explore a sale of portfolio
company Burt's Bees Inc., a
US maker of personal care products like lip balm. The
news was first reported by The Deal, which said buyers may pay up to
Spectrum K12 School Solutions
Inc., a US provider of special education and IEP management
software, has raised $5.7 million in Series B-1 funding, according
to a regulatory filing. Backers include Novak Biddle Venture Partners
and Updata Partners. Past backer Warburg Pincus is not listed on the
filing, but lists Spectrum K12 as a portfolio company on its website.
Activities, Media and Gatherings
In September I took over most of the parenting chores to allow Pam
to study for exams at the end of the month. This involved a
minimum of 3 hours driving for the school run alone. Plus the
usual grocery shopping, cooking and laundry. And of course giving
the children something to do other than make a noise around the office!
It left about 5 hours a day for other things, which meant lots of
postponement. But it has been a very worthwhile project which
I'll continue in a less intense way. It really showed up the
benefit of hands on attention to children that makes parenting interesting,
challenging and productive. The children (4 of them aged 4-12)
get the kind of guidance that is missing at school and get to develop
a more friendly relationship with parents. It makes clear the
undervalued trade-off that people make by handing children over to
child-carers so that they can live and work without them. I
really recommend a more hands on approach to all parents.
The other big change has been the reformatting of this newsletter
to a blog format. That has been time consuming but adds much
more value because it is easily segmented by subject, titles become
summaries and entries can be more timely. However, I still have
catching up to do.
On the investment management side, I did reenter the markets, largely
in response to market sentiment, but with great caution for limiting
And in the garden some chores have been postponed till October, while
essential harvesting of tomatoes, french beans and root vegetables
did provide us tasty fare for the table (especially the cherry tomatoes
of which we've already harvested about 10kg
Be The Change 2007 will take place in November. Supported by
The Independent newspaper, The Sky's The Limit is
a collaboration between Be The Change, the World Future Council, The
Converging World, the new economics foundation and Rights and Humanity.
In three days of presentations, panels, world cafes - and with film
and music - participants seek to generate new, solution-oriented responses.
Participants include Prof. C.S. Kiang (China), Vandana Shiva (India),
Maude Barlow (Canada); Hermann Scheer (Germany), Frances Moore Lappe
and Drew Dellinger (USA) and from the UK, Bianca Jagger, Jonathon
Porritt, Nicki Gavron, Richard Reed, Rob Hopkins and many more: entrepreneurs,
activists, scientists, film-makers, poets and musicians.
November 15 - 17 at the magnificent Central Hall, Westminster, where
the UN General Assembly first met in 1946.
A campaign to end slavery, check out Not
For Sale and the interesting people
behind the campaign.
novel is on the stands. In today's volatile world of money its
bound to be revealing. We'll review it in due course, but Pratchett
is always brilliant.
This five part YouTube
series with now deceased TV newscaster Peter Jennings explores
how the food industry spends billions of dollars to sabotage your
health. Jennings also takes a critical look at the US government's
agricultural subsidy programmes, and the consequences of misguided
government policies on diet and health. For example, sugar and fat
receive 20 times more government farming subsidies than fruits and
vegetables. The food industry spends $34 billion per year marketing
their products, $12 billion of which is spent marketing unhealthy
foods to children. Learn how misleading advertising, food additives,
and a corrupt subsidy system have undermined public health.
Click here for the
videos: part 1. Part
4. Part 5.
Please forward this publication to associates, family and friends,
print it, and share it.
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particular needs of any specific persons who may receive this report.
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