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Lord Keynes is quoted as saying, "When the facts change, I change my mind. What do you do, sir?" The success of the Live 8 concerts, which were watched by 3.8 billion people, claims the biggest mandate for change ever assembled in history. It is time for us to change our minds.
Biology is the science of breakthroughs today. A number of interactions prompt this view, from biomimicry in IT to Intelligence in Nature (Narby), but the shining light is in the field of genetic engineering where recent discoveries have changed our view of DNA and evolution. Two discoveries in particular are of note: Personal characteristics are derived from, not 20 or so bits of DNA as taught till recently, but from several thousand some of which emerge depending on environmental conditions and from the interaction with RNA. The coding of characteristics has been embedded in DNA for millennia and characteristics emerge depending on evolutionary conditions, not just the genes themselves. This changing understanding compounds the risk associated with inter-species gene-splicing (i.e. GM food, which has not yet even been proven economically) and suggests that biological and psychological emergence of enlightened humanity could occur in a practical time frame. The best description of the state of science to day has been Darwin's Watch by Pratchett, Cohen and Stewart.
One of Astraea's founding principles was to focus on education so it is encouraging to see formal attention to education increasing. It has a long way to go; we know the liabilities of the traditional system, whether public or private, of treating everyone the same, focusing on rote instead of thinking and transferring old science instead of new. But movement is discernible. In June two big trends were highlighted: the rapid growth of the private education market as parents attempt to remedy the failings of the public system and home life, and the high correlation between wealth and education (coincidentally being addressed by the New York Times and the Wall Street Journal). Education was also raised with us on a micro-scale: We participated in an open space on education, we became involved with two initiatives to bring "big picture" education to main stream executive programmes, my brother launched YouTurn which delivers practical one hour intense courses for homeowners and parents, and in the second week of July we will deliver a new training course. While it may be proven that "education works", not everyone buys the rationale. But what is newly emerging is the extent of institutional recognition of the need to rejuvenate education and the breadth and depth of technology and infrastructure to do so. And in recognition of the need for poverty alleviation, let's quote PestalozziWorld: "a trained mind can conquer hunger"!
It appears that professional managers have taken over the role of monarchy in our psyche. They control the resources we use and get the media attention of kings. In 1974 the top 100 CEOs' pay was 39x the average, today it is over 1,000x the average! Inequality is desperate. In 2001 1% of US households earned 20% of the income and owned a third of the assets! For perspective, I recently had the pleasure of sitting next to a 93 year young woman on a plane trip. She earned $ 2 a day in depression America (like China today!), and could not afford school. Her grandchildren are all accomplished today, but we should remember that our perception of our own histories is often conveniently mis-remembered. There were over 50,000 sweat shops in New York. And today's illusions are not much better - 4,500 out of 7,000 work shops in New York today only pay $ 2 an hour.
Religion keeps appearing on the agenda. It has been always in the background because of modern wars - Ireland, Middle East, terrorism and recently Iraq. It was on people's minds with the changing Pope. But it appears that religion's grasp of political influence has grown beyond expectations. The principal cause is the increasingly rich and active evangelical movement in America which is influencing government policy, and America influences the world. The southern baptist and evangelical movements have policies and principles founded on unsound doctrine and contrary to scientific fact and prudence (e.g. creationist). One aspect is healthy - that people are paying more attention to their spiritual practice and ethics. Unfortunately, politics has infested religion and it appears religion is increasingly intertwined with policy and even process. It is not surprising that spirituality has a place in American society, after all its native culture was deeply spiritual and many of the first immigrants came to America to experience religious freedom. However, it is surprising that fundamental doctrine of specific sects is now felt in the administration; because America was founded as a secular nation. It is not one today.
Two significant transactions hit the headlines in June, both with Chinese companies bidding for US ones. China National Offshore Oil Corporation (CNOOC) has bid $18.5 billion in cash for Unocal, , the ninth-biggest US oil firm, which has large production operations in Asia. It is the biggest takeover offer by a Chinese firm and just after fridge and washing machine maker Haier bid $1.28bn for US domestic appliance group Maytag, the maker of Hoover.
Unocal was committed to an agreed $18 billion merger with Chevron and US lobbying is fighting to prevent the premium bid by CNOOC, although the controversy coincided with comments from Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan, in testimony before the Senate Finance Committee, who recommended that the Bush administration avoid trade sanctions against Chinese goods and manufacturers. The merger of Unocal and CNOOC would be good for all because they have complimentary resources that are easy to integrate, e.g. the gas reserves of Unocal and the distribution capacity of CNOOC. The excuse of energy security is smoke and mirrors, because the US's only practical option for energy security is to develop alternative resource - Hubbert's Peak has peaked! In fact, this rationale would encourage the sale to CNOOC since Unocal (and any oil company) may be considered to be a wasting asset.
There is increasing talk of a housing bubble in the US. That it exists is not accepted but the evidence is mounting: house prices have spiked in the last three years, the price to earnings for housing is at a 30 year high, mortgage repayment as a percentage of household monthly income is at a 15 year high, sub-prime lending has spiked in the last two years from 8% to 17% of home equity lending, and the percentage of homes bought but not yet under construction is at an all time high (40%). Home ownership is at 70% so demographics and immigration are not the big demand drivers that they might be in emerging economies.
Insurance giant AIG has seen profits rise by almost a half despite the accounting scandal which forced the departure of its chief executive. The firm said earnings for the three months to March were $3.68bn (£2bn), up 44% from a year earlier. The firm is facing legal action for having overstated its profits by almost $4bn, or 10%, over five years. Maurice "Hank" Greenberg, the firm's chief for 38 years, resigned from all his posts at AIG earlier this year. The figures were boosted by a strong performance in Japan and South East Asia. But analysts pointed out that two key issues - a downgrade by credit rating agencies, making borrowing more expensive, and the leadership changes - both happened in late March, and thus had little effect on performance.
In June Novera and Renova Energy, an
American company that makes fuel from plants, listed on London's Alternative
Investment Market. The two companies join a tiny but growing band of listed
small and start-up entrepreneurial companies specialising in technologies
that lower emissions of greenhouse gases such as carbon dioxide. So far,
the sums raised by the two newly listed companies have been modest - £
5.3 million for Novera, £ 7 million for Renova - but the growing interest
of investors in the field they represent is bringing billions to renewable
energy companies the world over.
A report connecting the dots between climate change and investment opportunities coming from the World Resources Institute (WRI), an environmental non-governmental organization (NGO) with market expertise, is not surprising. What is surprising is such a report, entitled Energy Security & Climate Change: Investing in the Clean Car Revolution, being jointly produced with mainstream investment bank Merrill Lynch.
Holistic bodycare and natural medicines specialist Weleda UK reports that sales to independent health food stores are up by a “staggering” 35% on this time last year. The announcement underlines the growing confidence within the health food trade that has been seen over the past 12 months. Weleda, which celebrates its 80th anniversary this year, says that sales across its overall business are also up by a solid 12%. Strong year-on-year growth in recent years has seen total UK sales rise from £3 million in 2000 to £4.2 million in 2004. Internationally, turnover by the Weleda Group is around £100 million.
New York Attorney General Eliot Spitzer suffered his first major defeat in his campaign to clean up big business. Former Bank of America broker Theodore Sihpol was acquitted by a US court of 29 counts of helping a hedge fund to trade mutual funds illegally. A New York Supreme Court judge also declared a mistrial on four counts on which the jury was deadlocked.
A new study by academics provides evidence that the market value of Hong Kong listed companies is positively and significantly correlated with their corporate governance scores. Click here to download the research paper.
After dismissing electronic waste problems at its annual general meeting, Apple Computers announced it will offer free recycling of iPod music players at its retail stores throughout the US and a 10 percent discount on the same-day purchase of a new iPod. This fulfills the request made by socially responsible investment firm Green Century Capital Management at the AGM; however, the Computer TakeBack Campaign is advocating for Apple to go further, extending its recycling efforts throughout its product lines.
Forest companies received a warning from Time Inc. that their logging practices must meet sustainability criteria, or they won't get the business from the world's largest magazine publisher. David Refkin, director of sustainable development for Time Inc., told the Global Forest and Paper Summit that sustainable development is important to the business world, and it is time for forest companies to stop viewing it as a threat. Time Inc., which buys 650,000 tonnes of paper a year for its publications, does an annual review of its suppliers, evaluating them on a scale of sustainability targets. "Our strategy has been to reward leaders, encourage laggards, and for those who have egregious practices: No business," Refkin said.
PolyFuel apparently is going to raise £ 12 million,
which would give it an enterprise value of around £40 million. It's
initial VC funding round provided a post-money valuation of just $13.2
million, while a $15.6 million infusion in 2002 was post-valued at $35
million (according to our VentureXpert database). This is delivering
decent returns for first-round backer Mayfield, and later investors
like Intel Capital and Chrysalix Energy, and demonstrates
that opportunities are attractive in this uncharted line of work.
The Motley Fool has now also weighed in on the US VC overhang, predicting that tech VC will boom over the summer because of the capital overhang that will expire next year - funds must invest capital or lose it. They estimate the overhang at $ 13.5 billion. Thus buyin prices will rise and investors should be wary that their managers do not overpay. It will also be an opportunity for some funds to sell to other funds and potentially get top dollar.
The newly published guide Venture Capital and Private Equity
Funds for Development appears to be a useful reference by Holland's
International Cooperation and Sustainable Development Committee.
It is fairly priced at € 25 making it accessible to a wide audience.
The following note by Thomas Forest Farb, Managing Director of New America Partners, points out why understanding the impact of China is relevant to investing in the US and Europe as well as Asia:
As expected US interest rates are continuing to rise and is expected to continue.
Attention on Chinese Yuan revaluation continues, but do not expect anything soon. There are now serious questions about whether or not it is overvalued, even in the US.
G8 (the G7 plus Russia) agreed to cancel all the debts that 18 heavily indebted poor countries owe to three multilateral lenders, the World Bank, the International Monetary Fund (IMF) and the African Development Bank (AfDB). The beneficiaries are Guyana, Honduras, Nicaragua, Bolivia and 14 African countries. The debts in question have a face value of about $40 billion, on which an annual average of $1 billion-1.5 billion is paid in debt service. Nine other countries may benefit within a few years, and a further 11 would be eligible if their governments were not so inept and corrupt. One cannot know whether the money promised in London will come in addition to, or instead of, the money they would have given anyway.
Why forgive the debt? Several personal views available here add colour to our understanding of the inequality of the situation. One follows here ...
My name is Abdul Raufu Mustafa. I'm from Nigeria and I live in Cowley in England. The issue that Nigeria really is bothered about in the conduct of the G8 countries is essentially debt. In the 70s Nigeria borrowed something in the region of 17 billion dollars. Not all of this money got to Nigeria because of collusion between corrupt Nigerian officials and corrupt bankers. But since then Nigeria has paid over 30 billion dollars and still owes another 34 billion dollars in back interest and penalties and the lot. And that has become a major problem for the country because a lot of resources are being diverted just to service the debt. And this is happening in the situation where 7 million Nigerian kids are not having the most basic of primary education. The health system in the country is in dire condition, the universities, the roads, virtually all public infrastructure. That is a situation which is partly contributed to by internal problems but also no doubt by the debt burden. This is an unsustainable debt. And absolutely something has to be done about it at the level of the G8 so that ordinary people in Nigeria can get a look in to the issues of life.
As June draws to a close, the energy focused on the G8 meeting events start to get under way. Top of the agenda is poverty alleviation and climate change. Blair, president during this semester, raised the stakes at the end of June by connecting the UK's EU budget with a demand to scrap CAP. Scrapping CAP would have multiple benefits, even though a few farmers would have to change production practices. Removing subsidies would raise revenue to emerging economies and would reduce energy consumed by agriculture because emerging economies have more natural production systems.
The Common Agricultural Policy, which swallows more than 40 per cent of Europe's budget for the benefit of just 5 per cent of its population, is a relic of the postwar years, when the predecessor of the Union was founded. As the EU's official history of the CAP, on its website, puts it, 'The memory of postwar food shortages was still vivid and thus agriculture constituted a key element from the outset of the European Community.' Europe is not alone - the farm lobby in the US is also powerful, and Washington subsidises a range of products, from cotton to maize.
The greatest beneficiaries of CAP are the wealthiest landowners! In Britain, European Common Agricultural Policy subsidies are worth £3.5 billion. They are doled out to royalty, the wealthiest of aristocrats, food manufacturers and major agribusinesses. Small rural enterprises, in Britain and in poor countries, go to the wall. Anyone thinking the CAP helps small business should be reminded that last year the Queen received £545,897 for her farms on the Sandringham and Windsor Castle estates. Her eldest son, Prince Charles, did even better. He snaffled £680,835 for his Duchy of Cornwall and Highgrove estates. The CAP handout is now enshrined in the value of rural land. In business parlance, it is capitalised. This is why, as land prices fall in most of the country, farm land has retained its value. It sounds very comforting unless you are a would-be farmer. Peter Hardstaff, head of policy at the World Development Movement, said: 'There are some good reasons to subsidise agriculture in Europe, or anywhere else for that matter. For instance, protecting the environment or supporting small scale local operations. But paying producers or companies to export is a disgrace.' The CAP, far from being redistributive, stifles competition.
Dunce's CAP (from The Observer)
(By the way, we do not accept CAP subsidies at Ballin Temple as a matter of principle - while we can!.)
So it is good to hear that reform of the sugar subsidies is begriming in Europe. The reforms were necessary after the World Trade Organization last year ruled EU sugar subsidies were illegal following from Brazil - the world's biggest sugar exporter - and Asian producers. By 2009 the price set for white sugar will drop by 39%. Producers and refiners will be paid to go out of business in beet growing countries. The reform of sugar subsidies can contribute annually $ 4.9 billion in wealth, much for the benefit of emerging economies that grow cane. We are already seeing the pinch as neighbours growing beet have had to stop and seek alternatives, like contracting. Q&A: EU sugar subsidies
Commodity markets volatility continues to be high because of the role of China. Raw material prices shot up last year as demand for minerals could not keep pace with demand. Now, the supply of steel is putting downward pressure on prices and China is delaying delivery of ores. Global economic conditions will still impact prices, but China's appetite continues to grow and thus we expect the upward trend in prices to continue, with volatility remaining unpredictable and high. It is likely that prices will rise again within the next couple of quarters.
June activities focused on finalising our annual returns, final preparations for Astraea Integral - Nurturing Natural Performance and rejuvenating the garden while keeping on top of the weeds! Investment performance was decent.
Extracurricular reading took in Darwin's Watch which can not be recommended highly enough. It offer current science and insights relevant to frontier science (like time travel) and critical issues facing us today (like genetic engineering). Guards, Guards by Pratchett was a great fantasy story with dragons to boot; and it is a prescient parody of the Iraq War - fortunately there is a happy ending!
The PestalozziWorld summer newsletter is now available. Its a tenth anniversary issue and offers updates on the Asian Village as well as other activities. The Asian Village will provide accommodation for poor students in North India. PestalozziWorld supports the education of children in developing economies and has a policy of putting all donations directly to that end, not administration. There is a reception for some Asian Pestalozzians in London on July 19th so if you would like to meet them please contact PestalozziWorld.
We participated in an open space on education,
which revealed some great initiatives which are emerging across the country.
During the open space I was fortunate to (unintentionally) meet and chat
with David Holmgren. David is well grounded and a leading agent of change
- for 25 years he has pioneered permaculture design and
this is the first occasion upon which he has been persuaded to board a
plane to share his views globally (he resists traveling by plane because
of the environmental cost). He co-authored the quintessential permaculture
text with Bill Mollison. You can find him on the internet at www.holmgren.com.au.
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