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Private and Confidential

March 2007

• Perspective
• Investment, finance & VC * Interest rates and currencies * Trade & FDI
• Activities and Media

The following sections are delivered through Astraea. The links below will take you to those sections.

• Geopolitics * Risk and terror
• Energy * Climate Change
• ICT
• Holonics and LOHAS

Perspective

The boiling frog analogy* doesn't help much if you're the frog.

Everything we see, hear or feel tells us that we are giving up our souls for convenience.  That we are eating ourselves out of house and home.  But we keep doing it.  Even if we know we ought not.  Even if we know how to live differently.  But we eat more than we need and give less than we take.  Me too.

Watch the video here which presents a timeline of forecast developments over the next century.  The words and pictures show a trajectory in which humanity chooses a convenient, virtual reality rather than choosing to live with nature.

But take heart.  The observations post 2099 are at least insightful:  "conscious entities do not have a physical presence" and "life expectancy is no longer a viable term in relation to intelligent beings". (Both surprisingly by technophile Ray Kurzweil.)   That is something understandable, after all we all know we have an identity, a self, a spirit, that bit inside that is "me".  And we all know its not a part of our physical anatomy.  It may be in our mind, but it is not part of our brain.  (A scientific perspective is revealing too: 96% of all cells in our bodies die and are replaced each year - we don't die with the cells we're were born with.  But we keep our "self" irrespective of what happens to our bodies.)  So while we plainly don't know the route our system change will take, we already have the intuition of the destination, and its got nothing to do with money or power.  This system change is an ethical revolution.

Humans may be distinguished from other life (though not separated) by greater emotional capacities.  Our emotions give us morality.  The feelings we have drive moral judgement.   It is this capacity that is being stimulated by emerging consciousness around the world.  How we make decisions on moral, not scientific grounds, will determine the future of the species and planet. 

It seems that we may be realising that the water termperature is rising.  Let's hope we're not frogs.

* Put a frog in hot water - it will jump out.  Put a frog in cold water and heat it up - the frog will boil to death because it doesn't notice the gradual change.

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Investment, Finance & VC

Markets appear buoyant despite continuing data that shows structural economic weaknesses (including a downward revision in US 4Q06 GDP data) and former US Fed-chairman Greenspan mentioning the R-word and putting a 1 in 3 probability of recession occurring.  The main themes are common housing, inflation, interest rates, energy and China.  And these are generally priced in the market.  Now we must consider what the emerging imbalances might be, which are not commonly discussed in the media, to see where the tide of investment might next flow.  This will require reflection - do not be hasty to draw a conclusion.  However, in general all sectors are accelerating their transition to more holonic systems and our consistent policy of selecting companies by multiple parallel holonic screening will achieve the desired reduction in risk.  In terms of sectors, as well as the obvious energy and transport businesses, initial consideration suggests that the food sector will offer oportunities, because it is under supply pressure from climate volatility and has a persistent upward trend in demand.  In particular businesses able to deliver "clean" food and fresh foods will benefit.  Another general theme is smaller, modular operating units (cellular dynamics), which need not mean small businesses.  With this in mind consider areas like microfinance and craft cooperatives.

Gary Shilling has laid out his 12 investment themes for 2007.  Eight of them are likely to unfold this year while four will probably work but maybe not until later.  It makes interesting reading ...

1. The housing bubble will burst.  If so,

2. The Fed will ease; meanwhile, the yield curve will remain inverted

3. U.S. stock prices will fall, perhaps below the 2002 lows, in the midst of a major recession

4. China will suffer a hard landing due to domestic cooling measures and U.S. recession

5. Weakness in U.S. and China will spread globally, dragging down economies and stocks universally

6. Treasury bonds will rally

7. The dollar will rally, but not before the recession is global

8. Commodity prices will nosedive

9. Maybe global and chronic deflation will commence in 2007.

10. Maybe U.S. consumers will start a long-run saving spree, replacing their 25-year borrowing and spending binge

11. Maybe deflationary expectations will become widespread and robust

12. Speculative areas beyond housing may suffer in 2007

In the US the subprime market continues to implode with reverberations felt in  rest of the housing market and economy.  Because of its small size relative to other sectors it is not expected to initiate a collapse in itself, however, it is making a strong contribution and it is difficult to predict when the dominoes will stop falling.  It is worrisome to note that a senior  US Federal Reserve official admitted that the Fed should have been more aware of the financial risks posed by the sub-prime mortgage market.  We know that attention was drawn to the problem over a year ago when we first highlighted the problem and offered you a small research portfolo on the subprime problem, including government papers.  The Fed plainly dropped  ball on this issue - what other issues are in store for us?

But perhaps housing won't be the debacle expected (though you should be very careful to make that bet - we are not!).  Worldwide investment in property is estimated at $ 900 billion in 2006, a surge of 38% over 2005, and nearly double 2003 volume, according to Jones Lang LaSalle's latest global real estate capital report, "Moving Further and Faster". New sources of capital are targeting the sector, increasing competition for assets in almost all markets. Cross-border transactions now represent 42% of total investment volumes (up from 34% in 2005). In addition to direct commercial real estate investment, investors privatised REITs and other listed real estate owning entities valued for $ 48 billion, and purchased multi-family residential investments totalling $ 170 billion, bringing global real estate investment to $900 billion. Tony Horrell, ceo of Jones Lang LaSalle's International Capital Group, said: "There is currently a large overhang of investment targeting the sector, with $5 of money chasing every $1 of product. Global real estate markets performed very strongly throughout 2006; it was the first year that all major developed and emerging market returns were both aligned and positive."

More interesting property news from China, which, after much debate, revised property ownership law which gives individuals similar protection for their property as the state.  Property ownership is a key to economic and social development - if people do not feel they have a stake in infrastructure they tend to abuse it rather than protect it.  If the judicial system is just, politics become more multilateral and media is a bit more open, this kind of legal liberalisation will very positive.  In the meantime the benefits will be inequitably distributed to the emerging middle-class.  And if wealth becomes too inequitable, simmering resentment in the countryside may explode.

The Asian Development Bank's latest Asian Development Outlook is as always a valuable datamine. While the regional outlook is promising the report suggests that the growth rates pre-1996 crisis will not quite e reached because of the lingering respect for market risk - a lesson all too easily forgotten.  Nevertheless, one can expect growth rates in South east Asia to exceed those in more developed economies of the West.

In the US new pay disclosure laws are coming into effect and March saw the release of a number of annual reports with CEO pay more fully disclosed.  The number of headlines criticising executive packages is already high and it's growing.  The change in reporting requirements has resulted in more than a doubling of reported pay compared between 2005 and 2006, largely because of the requirement to disclose perks of a value of more tan $ 10,000 rather than $ 50,000 (a perk of $ 10,000 is half the annual salary of many US workers!).  While it is clear that the high packages of senior executives add little marginal motivation or compensation and are simply ego packets and tools to prevent individuals moving company (which presumably they would not do at that level of seniority if they had integrity) investors are generally passive and are unlikely to do more than shrug their shoulders in the short term.  More active investment styles (like ethical investment engagement) may moderate practices in the coming years, but that will also have to be led by "titans of industry" - which does not appear likely in light of recent data.  If it does not happen, however, politics may require owners to have a say in executive pay, that is regulation would force engagement, and that would certainly even the playing field.

The Economist published a special report on China and its Region which illustrates the wealth, diversity and speed of change in China.  In a few years it will overtake the US as the world's largest economy ...

There is a Special Report on Family Business  from BusinessWeek. It is an inspirational collection worth checking out if you are in a family  business or you are an entrepreneur that might involve family in future.

The Ecomonist presents a special report on family business ownership and control which discusses dual class share structures.  One clear observation is that investors more often than not do not demand voting rights to accompany economic rights and often allow those rights to be negelcted.  The active investment style, or engagement, or ethical investment managers is rarely demanded from investors in general.

For those interested in businesses with family dynamics, as we are, you may enjoy this brief case study of Faber-Castell, the long lived pencil maker.

According to a new report from Barclays, approximately 8 million UK households (one in four) will be dollar millionaires by the year 2016, giving the United Kingdom more millionaires than any other G7 country. The trend reflects a convergence of various factors. A robust economy and property market, coupled with attractive taxation policies for foreigners and a rich cultural life, have made the United Kingdom an enticing destination for the global elite. The super-rich, in turn, have had a positive net impact on local property values.  The top source of millionaire wealth was the sale of property,  according to the report. Additionally, the economic shift away from manufacturing to services has pushed down the price of setting up a business. The sale of a business was cited as the second leading generator of millionaire wealth, with inheritance coming in third - a dramatic shift from a century ago.

And continuing in that vein, John Mauldin shared the following article by A. Gary Shilling “How To Make Big Money: 11 Time-Tested Strategies”.  Shilling notes that a lot of people have made a lot of money in recent years.  Luck is often important, no strategy is sure-fire and some are self-destructive.  They identified 11 that have worked:

1. The old-fashioned way—skill, brains, clairvoyance, hard work—and so much government subsidy that you can't miss.  Consider healthcare, agriculture, real estate and energy.

2. Inheritance from rich relatives.

3. Small equity and big debt—as long as you're right on the investment's outcome.

4. Nonfinancial leverage such as from movies, TV and lawyers' associates billable time.

5. Great ideas, but often not the first implementer.  Ever heard of Seattle Computer Works, Chux or Carterphone?

6. Small slices of very big pies that benefit the likes of investment banks, private equity managers, mortgage lenders, CEOs, commercial banks and fast food franchises.

7. Cartels and monopolies, as long as cheaters, new supply, governments and weak demand don't intervene.

8. Sell the sizzle, not the steak to the naive, be it royal jelly, garlic and vitamins, penny stocks or how to get rich quick books.

9. Take advantage of addictions and vanities involving sex, nicotine, caffeine, booze, drugs, cosmetics and lavish clothes as well as small luxuries like greeting cards and fancy coffee.

10. Supply picks and shovels to potentially very profitable ventures.  Consider stock brokers, asset managers, stock market-oriented TV and radio, real estate brokers, mortgage lenders and corn farming equipment makers.

11. Get paid with money that isn't the payers', especially if they're desperate.  Winners include business consultants, corporate defense lawyers and soft commission dollar recipients.

Reflection 1 - capitalism is digital.  While human reality is an analogue show, capitalism (a system of social exchange that uses money as the medium of communication) works to a binary beat.  Underlying models and theories operate to the tune of discrete variables which either trigger action, or don't.  This gives an inherent weakness by limiting the flexibility of response.  However, it is a useful mechanism because it can be observed clearly.  It also models natural systems close enough that as human systems integrate with nature and feat currency is replaced by energy we will have the concepts in place to adapt easily.

Reflection 2 - the market is quantum!  Public market equity investors anchor expectations to performance of the market.  The professionals tie it all in to CAPM - the capital asset pricing model.  The theory says that the market is efficient and thus CAPM works.  Well of course the market is not efficient in the way we'd like (as Jim Montier explained in the article CAPM is Crap referenced last month).  While I haven't (and probably can't) done all the high level maths calculations, my intuition and observation suggests that a quantum perspective may lead to a clearer understanding and feel of the market.  That underlying perspective is that observing changes the behaviour of the observed.  You may have heard of the phenomenon of light  being both a particle and a wave form, depending on whether or not it is being observed.  Similarly the market (and/or its components) will behave differently depending on whether or not it is being observed.  At the extreme this is obvious - if the market is not observed it will not exist (no activity), if it is observed it will exist.  Allowing our analysis of future performance to consider the effect of the observer will help reduce risk, if not return.  Now I must reflect upon how a quantum model might apply to financial forecasting ...

Responsible Investing

The Association of Sustainable and Responsible Investment in Asia published the ASrIA SRI Fund Portal, which provides a comprehensive listing of SRI funds available for investors in Asia. The portal provides an easy to use format, which lists funds on a country by country basis. It also provides a single page overview of all known funds indicating their SRI related investment policies. The portal lists a number of SRI related private equity funds, hedge funds, and Syariah Fund. Altogether, the SRI portal has identified 186 SRI funds in the region, excluding faith based funds. Including Syariah Funds the portal lists 264 funds.

A new report by SustainAbility, an independent think-tank and consultancy, was released. Drawing on the results of a survey of more than 100 'social entrepreneurs' -- leaders of organizations whose goals prioritize improving the quality of life for marginalized populations -- the report, "Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems," finds that these organizations have already penetrated deep into industries and markets that large corporations have barely scratched the surface of, such as renewable energy, affordable and effective health care, and fighting climate change. And the time is right for these kinds of partnerships: the growing global concern about environmental crises is leading to a fundamental shift in how businesses operate.  "Growing Opportunity" describes three phases of business operations with regard to sustainability: an early engagement, often driven by the need to comply with regulations, which the report calls Mindset 1.0; followed by a shift in focus to corporate citizenship - Mindset 2.0; and Mindset 3.0, the coming business trend, ties the growth and success of a business to sustainable operations.

The main conclusions of the report are:

• Social entrepreneurship is on a roll.

• The potential for breakthrough solutions is considerable and growing.

• The field is growing, but still relatively small.

• Money remains the main headache.

• Financial self-sufficiency is seen as a real prospect within five years.

• There is a real appetite to partner with business.

• Beware of blind spots.

• For real system change, we must focus on government and public policy.

According to a new report by the International Finance Corporation, banks that integrate environmental, social and governance concerns into their business strategy and seek out those opportunities make their businesses more valuable.  (This should not be news to long time readers since they will be familiar with the turnaround of ANZ which won the Spirit at Work award in 2004 for rejuvenating the bank by building holonic systems into its operations.)  The IFC, the private sector arm of the World Bank Group, issued "Banking on Sustainability," providing practical examples of 14 financial institutions in 12 countries that have taken concrete steps to integrate sustainability into their policies, practices, products, and services. In a 2005 IFC survey, 86% of 120 financial institutions interviewed reported positive changes as a result of steps they had taken to integrate social and environmental issues in their business.

A new report from the International Finance Corporation (IFC) and World Resources Institute (WRI) entitled "The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid," which analyses markets at the bottom of the economic pyramid and is the first to attempt to gauge its size. The report states that four billion people are living in "relative poverty" with the projected buying power of $5 trillion.To analyse the size and scope of BOP markets, WRI worked with the International Finance Corporation and Inter-American Development Bank to access national household survey data. The report also includes analysis and case studies of businesses that have succeeded in the BOP markets. In its geographic analysis, The Next 4 Billion finds the following global BOP numbers:

• The Asian BOP market (including the Middle East) is by far the largest, with 2.86 billion people and a total income of $3.47 trillion, constituting 83% of the region's total population and 42% of the its aggregate purchasing power.

• Eastern Europe's $458 billion BOP market includes 254 million people, 64% of the region's population, with 36% of aggregate purchasing power.

• In Latin America the BOP market of $509 billion includes 360 million people, representing 70% of the region's population but only 28% of aggregate purchasing power, a smaller share than in other developing regions.

• In Africa, the BOP market is $429 billion, but it represents 71% of aggregate purchasing power in this region. The African BOP includes 486 million people -- 95% of the region's surveyed population.

In studying the economic situations of the world's population, the authors found that base of the pyramid markets are often rural, underserved, and dominated by the informal economy, and as a result are relatively inefficient and uncompetitive. And these BOP markets, made up of people who on average earn less than US$3,000 per year, often run into a "Bottom of the Pyramid Penalty". Poorer people often have access only to goods that are more expensive than they can afford, or are very low-quality goods. The report seeks to help businesses think more creatively about new business models that meet the needs of these markets, and suggests the mobile phone industry is one that has shown how profitable these markets can become.  Professor C.K. Prahalad, who originated the "base of the pyramid" concept, said the mobile phone industry succeeded in "cracking the BOP code." Over 2.5 billion people now have access to the phones because of industry innovations like pre-paid phone cards, which gives them access to the service regardless of income.

A biannual survey by the Social Investment Organization reported that Canadian SRI assets have grown to more than CAN$ 500 billion. This is nearly an 8 fold increase from SIO's last survey which estimated 2004 SRI assets at CAN$65.5 billion. This increase can be pinned on growing institutional interest in SRI practices and the inclusion of Broad SRI strategies in 2006's asset total.  SIO's study, “Canadian Socially Responsible Investment Review,” is based on a survey of money managers and community investment providers, with data gathered between September 2006 and January 2007. The study has been produced every two years since 2000. The study's final asset estimates also include publicly available data on mutual and pension funds, and trusts.

“We do think that engaging companies is an excellent way to promote good governance and sound environmental and social practices” said Laetitia Tankwe, Extra Financial Risks Manager. “In addition to this ‘bottom up' strategy, we are very involved in ‘top down' strategies such as the Enhanced Analytics Initiative (EAI) and the Principles for Responsible Investment. We think that those kinds of initiatives send a clear signal that things are changing and that ESG is no longer a matter of SRI and ethics, but a new mainstream way of doing business for everybody's long term interest.”

It may be that microfinance is coming of age.  Recent interest in the sector has galvanised NGO backed incumbents to liquidate their portfolios to new-entrants and main stream investors are beginning to ask about access.  This is borne on the back of a continuing good track-record including exemplary repayment rates.  Increased interest will lead to improved efficiencies, which I believe is the single biggest impediment to increasing flows to the sector.  The demand is certainly proven by the success of online vehicles like kiva.org which offers a means to give entrepreneurs money for a certain period, after which it is repaid net of transaction costs, ie lending with no interest.  With denser microfinance infrastructure, including more people experienced in doing it, the attractiveness of the sector will grow.

Business Week offers a Special Report on Green Business here.  It covers a range of areas from investing to starting up to restructuring a business to addressing changing market dynamics.  It's worth a browse.

The Investor Environmental Health Network,a collaboration of 20 investment managers, working with companies to create safer chemical policies, released a report, entitled "Beneath the Skin: Hidden Liabilities, Market Risk and Drivers of Change in the Cosmetics and Personal Care Products Industry" which focuses on the cosmetic industry’s lack of regulation in the US. According to the report, the industry operates with little oversight by the Food and Drug Administration and has been able to sell toxic concoctions without consumer or regulator knowledge.

Standard & Poor's has launched a new index series to cover the clean energy, water and infrastructure sectors. The S&P Global Clean Energy Index is made up of the 30 largest stocks selected from 10 countries, with clean energy as either a significant part, or the primary focus, of their business. Roughly one third of the index is made up of energy generators, with technology and equipment providers accounting for the remaining two thirds. The biggest constituent, making up 6.35% of the index, is US firm MEMC Electronic Materials, which manufactures silicon wafers for the semi-conductor industry. Dutch wind turbine manufacturer Vestas Wind System is the second biggest component, at 6.28% of the index. According to S&P, the index would have returned 27.35% over the last year, compared to 17.44% for the S&P Global 1200 Index and 3.44% for the S&P Global 1200 Energy Index.  A nice launch statistic!  Using similar criteria for inclusion, the S&P Global Water Index is made up of the 25 largest water utilities and infrastructure stocks, and 25 water equipment and materials companies. Its biggest component is French environmental services company Veolia. Investors tracking the water index over the last year would have made 27.34%, compared to 17.44% for the S&P Global 1200 Index or 30.50% for the S&P Global 1200 Utilities Index. The S&P Global Infrastructure Index includes 75 companies, from 22 countries, in three "clusters" around transportation, utilities and energy.

Venture Capital

Private equity has been a hot business story for the past few months with its profile raised by regulatory issues, government concerns, ever growing buyouts, and even IPOs of PE firms themselves.  But private equity deals were down in Q1.

Less than three weeks after Stephen Schwarzman, chief executive of the private equity Blackstone Group, said public markets are ''overrated'' and ''really not worth it'' to his peers, Blackstone is filing an IPO. Blackstone Group filed for a $4 billion IPO, with Morgan Stanley and Citigroup are serving as co-lead underwriters.  This is a harbinger of a collapse of the excesses of the financial sector.  It signals that the private equity market is peaking as these massive bags of private money go public. Blackstone was prompted to act by Fortress, then other private equity firms likely will be compelled to act by Blackstone.

The privatisation of energy giant TXU, led by KKR and Texas Pacific Group, is worrying for the strategy that seems to underpin the move, namely to avoid public scrutiny in dirty energy businesses.  While privatisation to avoid governance and compliance costs of public companies may be acceptable because the new owners choose to take that risk themselves, erecting barriers to scrutiny because of unethical environmental practices should attract the concern of industrial regulators.  BusinessWeek reported that the bidders for TXU engaged with eco-groups prior to completing the bid - it was seen as a necessity to doing the business. If investors or electricity consumers loose out because of the $ 45 billion buy-out, discontentment will spread and criticisms of big private equity deals may lead to regulation, even if only because politicians can attract voters.

Another area that offers good opportunities is businesses run by females, or at least an executive team made up of both genders.  A profile of selected female entrepreneurs in the US is offered here for inspiration.

And the US National Venture Capital Association released its latest “Venture Impact” study (conducted by Global Insight), which claims that VC-backed company contribute 16.6% of U.S. GDP and 9% of the workforce.  The study also revealed that venture-backed companies comprise significant percentages of the jobs and revenues in the technology and retail sectors.  It’s worth pointing to a critique by Paul Kedrosky, who suggests that much of this success is borne of VC artefacts like FedEx and Staples, which would probably have a very difficult time getting funded in today’s VC environment.

Also, Thomson Financial and the NVCA released an exit poll on  Q1 US IPO activity.  Seventeen venture-backed companies raised $2.09 billion through IPOs on US exchanges, a 70% increase from the first quarter of 2006 when ten venture-backed companies went public. Venturebacked merger and acquisition activity declined significantly with only 62 transactions completed this quarter compared to 104 in the first quarter of 2006. However, the average disclosed deal size for the first quarter of 2007 was $161.2 million, one of the highest quarters in the last five years.

A survey by Deloittes titled, “Look Before You Leap: Investigative Due Diligence in International Business Relationships” examines how US financial and corporate buyers are using background/integrity checks to better manage risks before they enter into international business relationships. Key findings include:

• 33% of executives said their firms do not always conduct background/integrity checks before completing international M&A activity or equity investments. 

• 51% of executives reported they do not always conduct these investigations before entering into any international business relationship.

• 57% of executives said they have restructured or renegotiated potential deals as a result of information uncovered during background checks, and

• 70% reported having pulled out of a deal as a result of the information uncovered in an investigation

Is PandoraTV to be the YouTube in Asia?  The operator of a South Korean video sharing website has raised $10 million in Series B funding. DCM-Doll Capital Management led the deal, and was joined by return backers Altos Ventures, STIC International and Saehan Ventures.

Streetcar, a UK-based pay-as-you-go car club, raised £6.4 million from Smedvig Capital.

FoodShouldTasteGood Inc., a Connecticut, US-based maker of all-natural tortilla chips, has raised an undisclosed amount of private equity funding from Sherbrooke Capital Partners.

Gaia Power Technologies Inc., a New York-based provider of turnkey distributed electrical storage and power systems, secured $2.9 million of a $4 million Series B round. Participants include GHO Ventures, Empire State Venture Group, NJTC Venture Fund and the New York State Energy Research and Development Authority.

Gevo Inc., a California-based biofuel startup, raised over $2.5 million in Series A funding from Khosla Ventures, according to a regulatory filing.

Earthanol Inc., a company focused on converting waste into ethanol, has raised $3.44 million in Series A funding. Backers include @Ventures, Nth Power, Sail Venture Partners and Odyssey Investment Partners.

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Interest Rates and Currencies

The US Federal Reserve has left its main interest rate unchanged at 5.25% for the 6th time in a row.  There are concerns about slowing GDP growth and a weaker mortgage market  and the Fed changed the language of its statement, dropping the "tightening" bias, signalling that its inflation fears had subsided slightly.

The US economy grew at 2.2% in 4Q06, down from a previous estimate of 3.5% and below analysts' forecasts. The contraction came as firms cut their inventories and consumers spent less. Separate data showed new home sales fell nearly 17% in January from December, the biggest drop since 1994. Sales of big-ticket items fell sharply in January, indicating a slowdown in the manufacturing sector and raising fears over a wider economic strength. 

On the other hand, exports from the  US have reached a record high, helping to narrow the country's trade deficit.  During January the gap between imported and exported goods fell to $ 59 billion, down from December's $ 61.5 billion. However, the trade gap with China rose by 12% to $ 21.3 billion and is destined to trigger new accusations of unfair trade practices and a weak Chinese currency, not that China is causing the US's economic woes!

US unemployment rate fell slightly to 4.5%, although job creation was at its weakest in two years,  which underpins the contention that labour markets are tight and wage inflation may be expected.

Concerns over tightening labour markets globally continue.  The pressure is felt in north America (see above), Europe and Asia.  This will put pressure on wage inflation which will act as a damper on GDP.  If the pressure grows, social discontent will also have political ramifications.

The European Central Bank raised its key interest rate to 3.75%, in a bid to keep inflation under control.  The 0.25% rise was widely expected by analysts and takes the eurozone rate to its highest level in five-and-a-half years. The ECB repeatedly warns of the risk of growing inflation across the eurozone.

The Bank of England kept UK interest rates on hold at 5.25%. However, with UK inflation currently standing at 2.7% - well above the Bank's target of 2% - many analysts believe there will be another rate rise in the next few months.

With real interest rates in China close to zero, it is proving very difficult for the People's Bank of China to bring excess liquidity and credit growth under control. 

Global liquidity is driving growth in the demand for commodities, including gold.  The support for gold is comprehensively discussed by gold expert Greg Weldon here.

The linked piece by Resident Scholar at the American Enterprise Institute explains how duplicitous US foreign policy can be in the area of Chinese currency (as well as nuclear proliferation, democracy etc):

In a letter to Treasury Secretary Henry Paulson earlier this month, four leading Democratic congressman urged action to pressure the Japanese to strengthen the value of the Japanese yen by selling off its reserves of dollars and euros. They noted that a weaker yen had artificially cheapened Japanese exports and they attributed the yen's weakness to Japanese government policy. ...

The congressmen want the Japanese to sell their currency reserves to drive up the value of the yen at the very time that they are urging China not to intervene in its foreign exchange market. ...

The U.S. approach to Japan affects the credibility of their approach to the vexing Chinese currency issue. U.S. policy has been to urge the Chinese toward a more market-determined yuan. An expression of dissatisfaction with market-determined rates in Japan would signal that U.S. currency demands are unreasonable and impossible ever to satisfy. That would be unlikely to further the legitimate U.S. and global interest in allowing necessary movements in the Chinese currency.

Also notable is that three of the four who signed the Japan letter also supported the China Section 301 petition.

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Trade and FDI

While Doha festers, the new government mix in the US has raised the most interesting challenge to trade - a bi-partisan initiative to raise protective measures in trade with China.  There is a crude rationalisation that the trade deficit is China's fault.  It is very likely that protective measures will be put in place and this will be to the great detriment of America and American consumers.  Unfortunately historical success with hard power is seen to have been successful, even though it is only successful to the point of feedback on the initial impulse - and in today's world of IT, that feedback is almost immediate.  Protecting US industry will not damage Chinese industry - China is a massive and growing market in the middle of a larger fast growing market and has the capacity to grow at all levels of industrial initiative.  American prosperity is helped by China, cutting off China will not be comfortable for America.  It will accelerate the rebalancing of the US economy and the rise of China and other emerging economies.  (Readers of the Holonics section over the past year will also recognise the extraordinary coincidence of this pattern to the cosmic rhythm predictions noted by Calleman and others.)

China marked Consumers' Day in mid-March, with most media touting a variety of cases where companies had used their well known brand names to sell low quality or even unsafe products. TV studios, newspapers and websites were placarded with posters accusing and discrediting such companies that had been abusing their position to violate users' rights.  While we thought the big problem was copies of products on the streets of Asia, apparently far more damaging is the substitution of copies for the real thing in the real shops!  Buyers spend the full price to buy a good knock-off, but still a knock-off.

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Activities and Media

The solar equinox passed in May bringing summertime to Northern hemisphere countries.  The days have lengthened quickly and now the sky is light before 6am and after 9pm.  Spring is happening as buds blossom and wildlife emerges from hibernation.  Even the rejuvenation of bees in our roof is a welcome sight!  And the weather is warm and dry - we'll enjoy our transition to Mediterranean climate in Ireland.

March also had a lunar eclipse which is a special sight.  If you missed it there are a couple of photos here.

We launched a novel project on the old garden cottage - a roof extension.  It has provided an education to me and the children who can see the "bones" of a house and even help with a bit of hammering, sawing of mortar mixing.  If you get a chance to try a project like this, even on a smaller scale, it is worth the experience.

A selection of videos in avi format are accesible from astraea.net home page. You should be able to view them if you have an entertainment/av PC. (If you use windows you may need to download the appropriate codec.) All the videos are worth checking out.

As for written media, Gaia by James Lovelock is turning out to be a useful and interesting read, though I am not yet convinced of the automony of Gaia. Having said that, if the science of cosmic rhythms holds water then it probably exhibits as much autonomy as we do. But I've yet to finish that book.

The Bloodless Revolution is a hefty tome at over 400 pages, but is easy to read and very interesting. Though only just in to it, the discussion of radical changes in diet and philosophy bubbling from about 1600 is revealing. And the philosophical pioneers who changed their lifestyles are not unknown mystics but leading figures of teh day - people like Francis Bacon.

Pratchett's Wee Free Men trilogy is also be recommended, though I would say readers ought to be at least 9 or 10. While younger readers will not recognise the philosophcal undertone as such, they will derive a positive influence from exposure to the story.

Perhaps the LOHAS gathering is the next best thing after BeTheChange which would normally take place in May. The LOHAS industry (Lifestyles of Health and Sustainability) has generated significant momentum in its first ten years, changing the way many businesses work - and positively impacting the consumer choices of millions of people. The LOHAS Forum, the top annual, business-to-business gathering of thought leaders promoting sustainable lifestyle choices, has grown each year, as more businesses continue to embrace sustainability. Organizers predict LOHAS 11 will break former attendance records, attracting more than 800 leaders and decision makers from global businesses, governmental agencies and other organizations. Beyond business leaders, a number of environmentally focused celebrities including Lou Reed, Ed Begley, Jr., and Mariel Hemingway also are expected to attend. Since the 1990s, the results of LOHAS-oriented businesses and organizations have skyrocketed across myriad business categories. Organic food consumption is one of the fastest growing food sectors, solar energy has seen double digit growth in the last 10 years, and wind energy is five times as popular today as it was a decade ago. The movement also has spawned many new industries. More than $ 2 trillion have been invested in socially responsible causes and businesses.

Chinese investors may be interested to know that a Chinese language web site of Frontline Thoughts was launched.

Researchers might find the site DocuTicker  useful.   It offers a hand-picked selection of resources, reports and publications from government agencies, NGOs, think tanks and other public interest organizations.

Have a browse of The Economist's Greenview.  It is interesting because its focus is relevant to our work and because many articles are available only online.  Worth checking out.

Three high-profile female entrepreneurs, all who had successful careers in Corporate America before going out on their own, talk about the challenges of work/life balance at a high-growth startup, and what they learned at big companies that helps them achieve it.  Video here.

Thoughtware TV is a video sharing site that is populated with videos with a futuristic/scientific theme.  You will find interesting fare there.

Monday 9am TV short films ... that do something, is cute.

The cartoons in the Economist are usually brilliant and I just found out where they are online!  Here and here.

And if you want to find someone via their mobile phone (hopefully not a lost child) check out http://www.sat-gps-locate.com/.

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