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Sustainable Ecologics and Economics At The Outset of 2014

fund-balance-logo-smallSustainable Economics and Ecologics

At The Outset of 2014

 

Section I: Impact Investing 2013 Overview/2014 Outlook

THE Intergovernmental Panel on Climate Change reported in September 2013 that it is “extremely likely” that human activity was the dominant cause of global warming or about 95 percent certain — typically the standard of rigor in scientific accuracy.

Accordingly, in 2014 the principle that environmental and development issues are inseparable from business will continue to integrate with global commercial and social functions. Impact investing in 2013 was characterized by a sense of urgency for adapting precepts of wealth creation and stewardship to 21st century realities. This matched up with the year’s abundant, rational exuberance in asset markets. We expect a cautious optimism to persist in 2014 though much of the reality based upside from 2013 is likely already priced into market values.  A correction then should not be ruled out, and those with short term objectives should consider capturing some profit. Looking further ahead, markets and society will increasingly reject notions that a Faustian bargain holds between employment and shared prosperity on the one hand and fresh air and healthy water supplies on the other.

There is, of course, more work to do. It became clear to many in 2013, in Shanghai, China for example, that regions with little to no regulation of pollution suffer poisoned water, air, and thus economic inefficiency. Wholesale deregulation of energy extraction then are at best short term fixes to long the term economic challenges of mitigating climate change and renewable resource stressors within the context of exploding energy demand across the globe. More troubling news issued from China at the turn of 2014 where the results of the world’s largest natural experiment in unsustainable economics are coming in, and they are nothing short of tragic.

An alarming glimpse of official findings came on Monday, when a vice minister of land and resources, Wang Shiyuan, said at a news conference in Beijing that eight million acres of China’s farmland, equal to the size of Maryland, had become so polluted that planting crops on it “should not be allowed.”….

One-sixth of China’s arable land — nearly 50 million acres — suffers from soil pollution, according to a book published this year by the Ministry of Environmental Protection. The book, “Soil Pollution and Physical Health,” said that more than 13 million tons of crops harvested each year were contaminated with heavy metals, and that 22 million acres of farmland were affected by pesticides.

A signal moment came in May, when officials in Guangdong Province, in the far south, said they had discovered excessive levels of cadmium in 155 batches of rice collected from markets, restaurants and storehouses. Of those, 89 were from Hunan Province  {, where Ms. Ge farms.}

Given the above outcomes and outlooks we share the that view bringing electricity to developing nations is a key goal for sustainable economics for a host of reasons. Xi Chen and William Nordhaus have found that luminosity is a strong predictor and proxy of economic growth rates. As GDP per capita rises quality of life improves and more often than not environmental degradation lessens. Fund Balance sees such considerations as essential for economic planning and maintenance in the US and EU as well.
US vs. China CO2Carbon Footprints: US vs. China
With these principals in mind we look back on the Fund Balance practice in 2104 and its plans for 2014. Continue reading Sustainable Ecologics and Economics At The Outset of 2014

Section I: Impact Investing 2103 into 2014

Sustainable Economics and Ecologics

At The Outset of 2014

 

Section I: Impact Investing 2013 Overview/2014 Outlook

The Intergovernmental Panel on Climate Change reported in September 2013 that it is “extremely likely” that human activity was the dominant cause of global warming or about 95 percent certain — typically the standard of rigor in scientific accuracy.

Accordingly, in 2014 the principle that environmental and development issues are inseparable from business will continue to integrate with global commercial and social functions. Impact investing in 2013 was characterized by a sense of urgency for adapting precepts of wealth creation and stewardship to 21st century realities. This matched up with the year’s abundant, rational exuberance in asset markets. We expect a cautious optimism to persist in 2014 though much of the reality based upside from 2013 is likely already priced into market values.  A correction then should not be ruled out, and those with short term objectives should consider capturing some profit. Looking further ahead, markets and society will increasingly reject notions that a Faustian bargain holds between employment and shared prosperity on the one hand and fresh air and healthy water supplies on the other.

There is, of course, more work to do. It became clear to many in 2013, in Shanghai, China for example, that regions with little to no regulation of pollution suffer poisoned water, air, and thus economic inefficiency. Wholesale deregulation of energy extraction then are at best short term fixes to long the term economic challenges of mitigating climate change and renewable resource stressors within the context of exploding energy demand across the globe. More troubling news issued from China at the turn of 2014 where the results of the world’s largest natural experiment in unsustainble economics are coming in and they are nothing short of tragic.

An alarming glimpse of official findings came on Monday, when a vice minister of land and resources, Wang Shiyuan, said at a news conference in Beijing that eight million acres of China’s farmland, equal to the size of Maryland, had become so polluted that planting crops on it “should not be allowed.”….

One-sixth of China’s arable land — nearly 50 million acres — suffers from soil pollution, according to a book published this year by the Ministry of Environmental Protection. The book, “Soil Pollution and Physical Health,” said that more than 13 million tons of crops harvested each year were contaminated with heavy metals, and that 22 million acres of farmland were affected by pesticides.

A signal moment came in May, when officials in Guangdong Province, in the far south, said they had discovered excessive levels of cadmium in 155 batches of rice collected from markets, restaurants and storehouses. Of those, 89 were from Hunan Province, where Ms. Ge farms.

Given the above outcomes and outlooks share the that view bringing electricity to developing nations as a key goal for sustainable economics for a host of reasons. Xi Chen and William Nordhaus have found that luminosity is a strong predictor and proxy of economic growth rates. As GDP per capita rises quality of life improves and more often than not environmental degradation lessens. Fund Balance sees such considerations as essential for economic planning and maintenance in the US and EU as well.

US vs. China CO2

Carbon Footprints: US vs. China

With these principals in mind we look back on the Fund Balance practice in 2104 and its plans for 2014.

 

Fund Balance Sustainable and Impact Investing ETFs 2013 Results
The Fund Balance Équilibre Impact Investing Market Index returned 51.1.% in 2013 with 167% over 5 years compared with 31.8% and and 128.% 2 for the S&P respectively. Equilibrer is composed of stocks whose prices have mostly risen over the the past 12 months. While it has yet to achieve fixity in terms of its constituents, it serves as a proxy for us of a basic large-cap market tracking index like the S&P 500.
Equilibrer
Screen Shot 2014-01-01 at 1.58.25 PM
While the Dow Jones Sustainability World Index (W1SGI in the charts above and bel0w) returned 19.7% YTD and 69.12 over 5 years.
Screen Shot 2014-01-01 at 9.11.30 AM
A promising development in the calibration and refinement of impact and sustainable investing and capital stewardship: in 2013 Fund Balance will also be utilizing Climate Counts rankings which put companies’ self-reported emissions data in the context of GHG reductions called for by climate scientists while scaling this assessment based on market share. Researchers Bill Baue, Mike Bellamente, Mark McElroy looked at factors such as emissions output and contribution to GDP to assign a company-level carbon budget in determining whether reported emissions are on track with science-based thresholds.

Setting aside questions of Sustainability Indices, talk of bubbles have featured prominently in market analyses. An integral part of energy market analysis and policy planning increasingly requires careful attention to unburnable carbon.

Carbon Bubble Economics

The concept has occurs with increasing frequency, including a much discussed article in the Financial Times, as well as in the growing literature of sustainability investing. Although bubbles are best seen in retrospect, investors should always be alert to the potential, particularly after our experience just a few years ago.

The Carbon Bubble relates to the amount of our planetary fossil fuel reserve that is unburnable? As  governments and energy firms ramp-up climate change mitigation strategies much carbon not currently used may well remain in the ground due to a pairing of decreased demand and significantly higher costs. In short as The Economist wrote: “Either governments are not serious about climate change or fossil-fuel firms are overvalued.”

Markets can misprice risk, as investors in subprime mortgages discovered in 2008.  The value of oil, gas and coal companies depend in part on their reserves. What then of scenarios where reserves can never be dug up and burned?

Over the next decade date determined climate policies will likely converge on rules that leave a large portions of carbon in the ground. Analysis by The Non-profit Carbon Tracker along with the Grantham Research Institute on Climate Change at the London School of Economics finds that if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent only ~t 1,000 gigatons of CO2 (GTCO2) can be released between now and 2050. The is the world’s  so-called “carbon budget”.

Most of the reserves are owned by governments or state energy firms; they could be left in the ground by public-policy choice (i.e. if governments take the 2°C target seriously). But the reserves of listed oil companies are different. These are assets developed using money raised from investors who expect a return. Proven reserves of listed firms contain 762GTCO2—most of what can prudently be burned before 2050. Listed potential reserves have 1,541GTCO2 embedded in them.

So companies and governments already have far more oil, gas and coal than they need (again, assuming temperatures are not to rise by more than 2°C). Logically, the response to this would be for governments to leave their reserves untouched and for companies to run theirs slowly down, returning more of what they earn to shareholders. Neither of these things is happening. State-owned companies are taking an increasing share of total energy output. And in 2012 the 200 largest listed oil, gas and coal companies spent five times as much—$674 billion—on developing new reserves as they did returning money to shareholders ($126 billion). ExxonMobil alone plans to spend $37 billion a year on exploration in each of the next three years. Notably the firm is setting an internal price on carbon, much higher than than many other targets  Presumably this effort is a hedge against policy actions which it opposes by and large.

Planning to extract more carbon fuel reserves at first cut seems illogical in the context of unburnable carbon. Perhaps companies are betting that government climate policies will fail. In this case they can burn all their reserves, including new ones, after all. Our best science tells that this his implies global temperatures soaring past the 2°C mark, if not restrained by technological advances, such as carbon capture and storage, or geo-engineering.

And indeed in the current policy landscape make such bets seem rational. On April 16th the European Parliament voted against attempts to shore up Europe’s emissions trading system against collapse.      The system  is the EU’s flagship environmental policy and the world’s largest carbon market.

This suggests the EY has lost their  will to endure short-term pain for long-term environmental gain. Nor   is this the only such sign. Several cash-strapped EU countries are cutting subsidies for renewable energy. And governments around   the world have failed to make progress towards a new global climate-change treaty. So on the other hand, betting against tough climate policies seems almost prudent.

But that is not what companies say they are doing. All the big energy firms claim to be green. They say they use high implicit carbon prices to guide investment decisions. Nearly all claim to support climate policies. None predicts their failure.

Yet markets clearly are mispricing risk by valuing companies as if all their reserves will be burned. Investors treat reserves as an indicator of future revenues. They therefore require companies to replace reserves depleted by production, even though this runs foul of emission-reduction policies. Fossil-fuel firms live and die by a measure called the reserve replacement ratio, which must remain above 100%. Companies see their shares marked down if the ratio falls, even when they pull the plug on dodgy, expensive projects. This happened to Shell, for example, when it suspended drilling in the Arctic in February. And many energy industry analysts and actors have watched rapid draw down of valuations in US coal producers.

Worries about mispricing crop up more and more. Citi Research looked at Australian mining companies. It concluded that “investors who strongly believe in ‘unburnable carbon’ would find it more productive to actively tilt their portfolios” (ie, sell fossil-fuel firms).  HSBC Global Research argues that “if lower demand led to lower oil and gas prices…the potential value at risk could rise to 40-60% of market cap.” The 200 largest listed companies had a market capitalisation of $4 trillion at the end of 2012, so this is a  huge amount. HSBC added: “We doubt the market is pricing in the risk of a loss of value from this issue.”

Are Carbon Bubble Concerns are Overstated?

Economist Richard Tol sees little to worry about even if all oil firms values collapse to nil:

Fossil fuel companies are among the largest companies in the world, but their total market capitalization is small relative to the total stock market. Even if they were wiped out completely, the world economy would shrug its shoulders and move on. We have witnessed rapid falls in the stock market value of fossil fuel companies – of all companies as the oil price fell, or of particular companies as disaster struck – and we know from those episodes that the economic impact is limited.

1. Quantities of Unburnable Carbon Cannot Known With Precision

Quantification of climate risk within carbon-heavy assets derives in main part from the widely cited 2°C threshold for irreversible damage from climate change, and its resulting “carbon budget” as determined by the International Energy Agency.  It indicates that at least two-thirds of fossil fuel reserves will not be monetized if we are to stay below 2° of warming. Serious consequences for investors in oil, gas and coal would necessarily ensue.

The IEA’s calculation of a carbon budget depends on the parameter of climate sensitivity.  Yet, the IPCC’s Summary for Policymakers includes an expanded range of climate sensitivity estimates, compared to the IPCC’s 2007 assessment, of 1.5°-4.5°C with a likelihood defined as 66-100% probability. It goes on “No best estimate for equilibrium climate sensitivity can now be given because of a lack of agreement on values across assessed lines of evidence and studies.” The report indicates that recent observations of the climate — as distinct from the output of complex climate models — are consistent with “the lower part of the likely range.”

The draft technical report, Summary for Policy Makers, provides more detail on this. It further assesses a probability of 1% or less that the climate sensitivity could be less than 1°C. That shouldn’t be surprising, since temperatures have already apparently risen by 0.8°C above pre-industrial levels.

2. Transition to Low-Carbon Energy Is Not Occurring At a Rate Sufficient to Threaten Today’s Investments in Fossil Fuels

From 2010 though 2012 global solar installations grew by an average of 58% per year while wind installations increased by 20% per year. Yet hey still contribute a small fraction of today’s energy production. History avers of abundant, significant risk for investors that extrapolate high growth rates indefinitely. Carbon Bubble skeptics also caution that investors should bear in mind the IEA’s 2012 World Energy Outlook.  In short demand will increase exponentially and its no clear replacement for dirty energy seems capable o coming online fast enough. Behavioral shifts around energy consumption are also currenty slow in coming. Notably, in its April 2013 “Tracking Clean Energy Progress,” the IEA warned, “The drive to clean up the world’s energy system has stalled.”

3. Not All Fossil Fuel Assets Have Equivalent Potential for Bubbles

Not all carbon-intensive assets are created equal. The vulnerability of an investment in fossil fuel reserves or hardware to competition from renewable energy and decarbonization does not just depend on the carbon intensity of the fuel type — its emissions per equivalent barrel or BTU — but also on its functions and unique attributes.

Coal for example is rapidly loosing ground for a host of reasons in China and the US. New EPA regulations makeit much harder to build new coal-fired power plants in the US. And fundamental, structural challenges facing coal. ADD CHINA SMOG PICTURE HERE. Power generation now accounts for 93% of US coal consumption, as non-power commercial and industrial demand has declined. This leaves coal producers increasingly reliant on a utility market that has many other (and cleaner) options for generating electricity. That’s particularly true as the production of natural gas, with lower lifecycle greenhouse gas emissions per Megawatt-hour of generation, ramps up, both domestically and globally.

Shanghia Smog

The takeaway: coal accounts for about half of the global fossil fuel reserves that Mr. Gore and others presume to be caught up in an asset bubble.

Not so for oil:

At 29% of global fossil fuel reserves, adjusted for energy content, oil still has no full-scale, mass-market alternative in its primary market of transportation energy.

Electric vehicles offer more oil-substitution potential in the long run, though they are growing from an even smaller base than wind and solar energy. Their growth will also impose new burdens on the power grid and expand the challenge of displacing the highest-emitting electricity generation with low-carbon sources.

Meanwhile, natural gas, at 20% of global fossil fuel reserves, offers the largest-scale substitute for either coal or oil. In any case, it has the lowest priority for substitution by renewables on an emissions basis, and so should be least susceptible to a notional carbon bubble.

4. Fossil Fuel Valuation Models Are Weighted Towards Near Term Cash Flows

The most important factors in the valuation of any company engaged in discovering and producing hydrocarbons: discounted cash flow (DCF) and production decline rates most oil and gas companies valuations derive from risked DCF models where near-term production and profits count much more than distant ones.Rolller Coaster Underwater

So compounded decline curves typical of many large hydrocarbon projects mean that the first 3-5 years  of a project account for more than half its undiscounted cash flows. Hence they will be highly sensitive to long-term uncertainties in aggregate. Industry professionals tell us that this is even truer of shale gas and tight oil production, which yield faster returns and decline more rapidly.

Based on estimates of our own and those of others, the risk of a 10% or greater drop in global demand for oil or gas in the 2030s would not really impact on their price targets for companies, if balance sheet concerns are the only factor once considers. Yet those that ignore sentiment and animal spirits do  so at their peril. 

5. Fund Balance Conclusions – The Probability of a Carbon Bubble is High Fossil Fuel Share Prices May Not Fully Account for Climate Risks

The instantiation of a carbon bubble in fossil fuel assets will ultimately depend on investor ignorance and bias against climate-response risks, presumably because companies haven’t quantified those risks for them. To the extent the latter condition is true, it represents an opportunity for companies seeking to capitalize on the boom in sustainable investing.

Eugene Fama was  named as the 2013 co-recipient of this year’s Nobel Prize in Economics for the Efficient Markets Hypothesis (EFM). Many doubters of Carbon Bubbles point to how the Internet allows average investors have access to most of the same information on this subject as Mr. Gore and his partners. Yet their are still sharp discontinuities: institutional investors and analysts, have the same resources to access even more information. Yet one of his co-recipients and EFM skeptic, Robert Shiller, said ““I just want to be realistic about the world we live in.” Indeed, as the rampant collusion in LIBOR has shown, collusive and shadow banking practices are worringly entrenched in the culture of marketmakers. From TABB Forum on LIBOR and money markets, which are indispensable to the flow of petrodollars:

At stake is the integrity of a market that affects the daily valuations of private and public money alike, from the $261 billion Sacramento-based California Public Employees’ Retirement System to the $237 billion Scottish Widows Investment Partnership in Edinburgh, from the $4.1 trillion BlackRock Inc. (BLK) in Manhattan, the world’s largest asset manager, to the $1.2 trillion Tokyo-based Government Pension Investment Fund, the biggest pension.

“This is a market that is far more amenable to collusive practices than it is to competitive practices,” said Andre Spicer, a professor at the Cass Business School in London, who is researching the behavior of traders.

The news about manmade climate change gets more dire every day. So in conclusion, as much as possible sustainable investors need to track their carbon exposure, consider shadow banking,  policy driven mandates on institutional investors, and contingencies that not all market participants have the ability to see the same information at the same time. Such lack of access to actionable data on carbon fuel price movement will create noise in market signals. Fiducaries and investors need to ensure they are properly diversified in not completely decarbonized in the event of rapid movement to equilibrium, that is the bursting of a bubble.

Screening For Green: Sustainability in The Fixed Income Marketplace

Screen Shot 2014-01-01 at 10.46.39 AM

In 2013 three companies become the first corporate Green bond issuers, Bank of America Merrill Lynch and Swedish property Group Vasakronan. All found solid demand and raised a combined total equivalent to around $2.6 billion. Market issuance in November increased the market size by 50%. Issuers and investors not traditionally interested in Green offerings are entering the marketplace thereby driving up demand. Proceeds from the bonds are used for projects aimed at curbing greenhouse gas emissions or adapting to a warmer climate, to sustainable agriculture in China.

Key thoughtpoints for Impact/SRI and Green bonds:

  • A slate of deals in November doubled the  total raised in 2013 to ~$10 billion
  • The Climate-related bond market stands at $346 billion vs, the ~$2.3 trillion in investment grade bond issuance in the first 3 quarters of 2013.
  • Universal standards and criteria are not in place for defining Green bonds; this market is currently just over $15 billion
  • A signal event for sustainable fixed income markets occired in 2013 where French power group EDF reported its record-breaking 1.4 billion euro ($1.9 billion) deal was broadly similar to its non-Green bond issuances
  • Usage of the instruments to finance nuclear is controversial among many established SRI investors
  • expectations that more will follow.

Even with all the above taken into consideration, these instruments only form a fraction of the multi-trillion dollar global bond market. Yet the entrance of issuers from the private sector marks an important expansion beyond the limited domain of development banks.

Interest among new buyers, corporate bond investors and others an inflection tipping point. While still a a still-niche sector, pricing has revealed consistent demand and enthusiasm for ethical investing which means essential benchmarks of liquidity are forming for the nascent market.

Critics have held that the number of governments cutting their subsidies for renewable energy projects would curtail high demand for Green bonds.  Evidently, even as subsidies wane, companies still want to use debt to finance their projects and accurate market assessments by issuers has delivered attractive pricing for many investors. As markets put more money behind Green bonds, Fund Balance sees a breakthrough for sustainable fixed income instruments that qualify as Socially Responsible Investing, or SRI, including but not limited to Green bonds.

In short, ethical investment in the fixed income domain is becoming ever more mainstream. As a result of the success of these issues, serious interest is being expressed from potential new corporate issuers in sectors such as utilities, telecoms and real estate indicating a breakout from SRI themed investors.

For example, 60 percent of an issue the French firm EDF issue was taken up by SRI investors, some, such as Jupiter Fund Management, which invested for the first time in a Green bond as part of EDF’s issue, were not concerned about the label attached to it. Societe Generale reports that investor demand has risen over the last 18 months and been growing since the first corporate SRI bond was successfully launched last October by Air Liquide.

In conclusion, the main theme in sustainable fixed income is that management teams  in a diversity of arenas increasingly place sustainability high on their priorities for long-term planning.  We recommend same in their planning as they look to the second half of the 2010’s.

The Carbon Markets, Policy, and Technological Innovations 

Physicist Jesse Henshaw observes its “not what you know but what your world is learning”. In the paper System Energy Assessment (SEA), Defining a Standard Measure of EROI for Energy Businesses as Whole Systemsco-authored with Carey King, and Jay Zarnikau, findings are presented that indicate a ” ~500% error in carbon and energy impact measures form not accounting for businesses working as whole working systems”.

The world’s carbon budget is almost certainly far tighter than international policymakers acknowledge and financial planners envision. And with this in mind well functioning, publicly supported carbon markets, cap and trade mechanisms, and carbon tax regimens are of tremendous importance in addressing the challenges of climate change. But behavioral changes and entire redefintions of economic growth and prosperity need be the objective for policy-making praxis and econometric fixities.

And more firms than many might think are preparing for a price on Carbon. The Huffington Post reports:

Exxon posts its assumption on its website. Company spokesman Alan Jeffers said the company is also operating under the assumption that the price will increase to $80 a ton by 2040.

“We think that will be the net impact of the various policies that various government’s around the world impose in efforts to curb CO2 emissions,” Jeffers told The Huffington Post. “The risk posed by co2 emission in the environment, raising temperatures, climate change, etc., are motivating governments to take action to put a price on carbon, to try to tackle that issue. We want our planning for that to be as accurate as possible.”

Meanwhile, two firms that we follow at Fund Balance, Hess (HES) and Statoil (STO), are leading the industry in their commitments to sustainability and carbon mitigation under the OGSS’s Global Reporting Initiative can be found here and here. Their reports can be seen here and here. At Fund Balance, while we strive to help partners decarbonize portfolios we also work to identify carbon firms addressing the challenges in bringing about determined yet appropriately measured transitions to a low carbon energy future.

Lastly, improving technology, declining costs, and increasing accessibility of clean energy have been quite ubiquitous in 2013.  Key developments:

  • Using thermal salts to keep producing power from solar at night,
  • Electric vehicles that can power buildings (Nissan’s groundbreaking ‘Vehicle-To-Building‘ technology)
  • Solar electricity hitting grid parity with coal.
  • Advancing renewable energy from ocean waves and harnessing ocean waves to produce fresh water.
  • Ultra-thin solar cells from the likes Alta Devices, a Silicon Valley solar manufacturer that are break ing efficiency records.
  • Cutting electricity bills with direct current power.
  • Innovative financing bringing clean energy to more people. In DC, the first ever property-assessed clean energy (PACE) project allows investments in efficiency and renewables to be repaid through a special tax levied on the property, which lowers the risk for owners. Crowdfunding for clean energy projects made major strides bringing decentralized renewable energy to more people — particularly the world’s poor — and Solar Mosaic is pioneering crowdfunding to pool community investments in solar in the United States.  And Washington, DC voted to bring in virtual net metering, which allows people to buy a portion of a larger solar or wind project, and then have their portion of the electricity sold or credited back to the grid on their behalf, reducing the bill.
More can be found on these developments here in a post from Think Progress.

A Tale of Two Bubbles, Where a Third is Curiously Missing

By Walter Borden

“Everything… is very simple, but the simplest thing is difficult… things do not turn out as we expect. Nearby they do not appear as they did from a distance” — Karl von Clausewitz

ONE hears little talk of a potential carbon bubble in financial media and the role of policymakers in its potential formation. Yet, a broad array of business and economic institutions along with professional investors such as Tom Steyer maintain carbon-free portfolios in response to negative long-term trends for carbon-derived asset values.  Asset bubbles typically refer to cases where a group of widely held assets are overvalued as evidenced by appreciation rates and valuation ratios far above their historic on trend averages. This overvaluation then implies sudden, acute drops in value for both the holder of the assets. This effects the broader market as a function of the assets default presence in keystone funds and indices that must reflect markets in composite. Yet, definitions of asset bubbles exist primarily in the vernacular.  Many scholars and technicians argue that buubles can only be recognized post ante. Setting this debate aside, potential equity and real estate asset bubbles discussions appear frequently in the media while the possibility of a carbon bubble is largely ignored. Why? Of these three possible bubbles, which of them present the graver threat to shared prosperity?

Goldman Sachs reported, “the window to invest profitably in new [coal] mining capacity is closing” this past July. According to Bloomberg: “The top 100 coal and 100 oil-and-gas companies had a combined value in 2011 of $7.42 trillion, much of which was based on reserves that can never be used, according to a Carbon Tracker report that first made the case for “unburnable carbon.”

Yet, clean coal programs continue as policy makers prop-up the sector — even as the market sells off. Will this soon-to-be-past be prologue for oil? Statoil, a sustainability leader that Fund Balance has followed from some time, quoted in Bloomberg:

Statoil considers climate change a key corporate risk which will have industry-wide impact,” the company wrote to investors. ‘We consider our portfolio of assets to be fairly robust with respect to climate regulations.’

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As we see above fuel consumption is flat in the US and growing in the BRICs. Given that China and India in particular are investing heavily in renewables, how likely are their rates of consumption to accelerate? Looking out, prospects for revenue growth curves for Big Oil flatten at best due to higher projected carbon prices.

A carbon bubble and its twin risk vector climate change represent serious long term risk to a great many more citizens and their wealth, well being, and security than putative stimulus from Quantitative Easing (QE) and any attendant bubbles. So, what to make of the talk of equity asset bubbles? Currently, ~20% of US citizens own ~80% of the stock market and wages over the last 20 years have been flat to declining. This coupled with the decreasing  share of productivity to 90 percent plus of US workers beg the question: for whom are potential asset bubbles so dangerous?

Certainly many households are dependent on their comparatively minimal stakes in equity markets. For example, billionaires can buy low and sell when bubbles burst, but those living off dividends and capital gains to pay for food, medicine, and shelter cannot. Further, income inequality, long-term under- and unemployment mean fewer and fewer labor force participants accumulate enough monthly income to set aside sufficient savings through asset market participation. The great complexity and increasing lack of transparency as typified by LIBOR and ISDAfix insider trading shuts out the majority of non-professional investors and even many smaller scale professional ones. The ranks of Wal Mart associates and pizza-deliverers swells. Consequently, large swaths of laborers lack both the information and capital  to gain access to the phenomenal growth and opportunities afforded to the shrinking few within the hedge fund and luxury class.

Moreover, when QE ends this will signal uptrending inflation which in turn will mean rising demand, congruent with stronger earnings and prospects for large components of blue-chip indices. And, even if over-bought, new iwill arise in a sell off, long term positions won’t need to change all that much. After all, as superstar investor Henry Kravis points out consumer spending is 70% of the US economy which is the world’s largest. So very plausible demand-side scenarios exist whereby QE does not usher in a long-term bear market.

Are Major US Real Estate Markets Becoming Overvalued?

Housing Affordability Index. Source National Association of Realtors.
Housing Affordability Index. Source National Association of Realtors.

Looking at real estate, some see a bubble inflating among certain major urban markets. In aggregate though the real estate market has mostly trended sideways. Existing home sales are still below 2007 levels as are new home starts. More people are renting. So while property owners can command handsome rent appreciation the market for new homes is flat on a broad basis, so concerns of pockets of bubbles in real estate are basically marginalia.

One of the benefit of the Dot Com bubble was quite literally its network effect: the US economy developed its internet infrastructure which subsequently laid the foundation for Google, Facebook, Twitter along with an entire generation’s worth of capital formation for savers and investors. Its legacies include cloud computing, social media, big data, etc. And, even amid the irrational exuberance driven carnage of the Dot Con Bubble burst much essential research and development was performed weeding out many shibbolleths and flawed business models.

Housing prices have only now returned to historical levels. Click to Enlarge.
Housing prices have only now returned to historical levels. Click to Enlarge.

Are all bubbles are alike? Probably not.

On the other hand, what of the legacy of bursting of the housing bubble? So far, all we have is enormous gains for a handful of rentiers, the continued grind of the Lesser Depression and interest rates that remain low at the Zero Lower Bound, which will simply will not co-operate with those that would argue primarily from authority that they must be inflationary; consider again existing home sales:

z-existing1

Lastly, what were reality-based economists calling for to bring us out of the Lesser Depression: fiscal stimulus aimed at upgrading US infrastructure into an era of greater efficiency via renewable energy and less pollution, a pernicious form of inefficiency. Regulatory capture allows for its cost to be shifted onto the public accounts and thus obscured accounting of publicly trade firms.

For evidence of the inefficiencies wrought by pollution, just look at firms leaving China due to rampant pollution or at the points shaved off its GDP by endemic air and water pollution. On the positive side, China’s future generations will reap benefits from its investments in the clean and renewable energy now. The US needs to focus on those benefits for its future generations by borrowing cheaply while there is still time to build infrastructure and cultivate a new breed of social institutions. These steps will lead to a healthier and more prosperous future than cuts to food programs for those living in poverty now.

Comparison of the  GDP deflator (unused for policy indication by the Fed  Because it contains  grain and oil prices, which fluctuate a lot, making it an unstable measure that is highly unreliable as an indicator of underlying inflation vs. the consumption deflator excluding food and energy.  Click to enlarge.
Comparison of the GDP deflator (unused for policy indication by the Fed as it contains grain and oil prices, which fluctuate a lot, making it an unstable, unreliable measure  of underlying inflation) vs. the consumption deflator -excluding food and energy. Click to enlarge.

So again, for whom are equity and real estate bubbles forming? Put another way, are bubbles relative? Where is the inflation from QE thats been predicted for the last 5 years? Last word to economist and former treasury official Brad DeLong:

I see an economy in which the share of American adults who were employed was 63% in the mid-2000s, fell to 58.5% in 2009, and is still 58.5% today. We would have expected the natural aging of America’s population to have carried the share of adults at work from 63% down to 62% over

the past seven years or so–not to 58.5%. And we would have expected the collapse of people’s retirement savings either in housing or in stocks in 2008 to have led many Americans to postpone retirement. Given the collapse in the value of retirement savings and their impact on desired retirements, I see a healthy American economy today as one that would still have the same adult employment-to-population ratio of 63% as the economy of the mid-2000s.

From that perspective, we are not halfway back to health. We had a gap of 4.5% points between actual employment and full employment at the end of 2009. We have a gap of 4.5% points between actual employment and full employment today. We are flatlining. It is true that in late 2009 there were still real and rational fears that things might become worse very quickly, and that that possibility is no longer on the menu. But in my view our “recovery” has taken the form not of things getting better but of having successfully guarded against the possibility that things would get even worse. And that is a very feeble recovery indeed.

(h/t econintersect for the housing graphs)

Now Showing In Prime Time: Clean Energy Momentum Builds While Asset Managers Get Serious About Carbon Bubble

Microgrid
A local microgrid in Sendai, Japan. Source: NTT Facilities, Tokyo, 2006

By Walter Borden

ON the way to closing out 2013, renewable energy sectors quietly outperform the broader market. Notably, solar power and LED systems have entered prime-time in a big way.

Wal Mart has deployed, and is profiting on, the largest portfolio of solar panels of any retailer in the nation, just ahead of Apple. Costco runs 2nd  in the retail sector. Wal Mart’s implementation alone exceeds that of 38 US States combined. Meanwhile Dutch conglomerate Philips reports 33% profitability growth in its LED sales along with a presence in Home Depot stores. And residential solar has gone mainstream while distributed generation projects continue to increase exponentially, even as regulatory support scales down. Another intriguing development is Sunpower’s un-subsidized 70 MW plant in Chile that will sell solar directly on the spot market. This may well be the model of the future.

Corporate America profits on solar. Key facts:

  • GTM Research and SEIA report solar system costs decreases of 40% since the start of 2011 and 50% from 2010.
  • Commercial installation costs dropped 14.7% to $3.71 per watt for 2013.
  • Assuming a 10% return on investment and a 20% capacity factor, projected cost of this electricity are 8.5 cents per kW-hr, below grid prices  ex-ante tax benefits. 

The outlook grows ever brighter when one factors in twinned developments in microgrid and microfinance. In the case of microgrids, or distributed generation, both Connecticut and New York are deploying microgrids in the aftermath of Hurricane Sandy. New firms like Mosaic lead the way with cash flow generation for retail investors via interest rate income from solar projects over its crowdsourcing platform.

For Dutch Design week 2013 Lucid created a base frame where visitors can add to, and manipulate, light formations.
For Dutch Design week 2013 Lucid created a base frame where visitors can add to, and manipulate, light formations.

So what is the signal here? Basically, its that in the US, clean and sustainable economic advancement presents with wide variability around the state by state valence, with the balance now tipping to uptake in a majority of US States. Some of the sunniest states are in the late adopter category, there is still a large pool of untapped markets. While plenty of noise was generated around the predictable yet minor growing pains in US green energy public programs, these programs has spurned free market opportunities for sustainable value creation — even as subsidies are scaled back far more sharply than they were for other sectors like fossil fuel extraction and industrial agriculture.

Investors then, should look past efforts to define complex problems from a single datapoint (Solyndra perhaps is the best known and most overstated example). Given these developments, which are strongly indicative of an upward sloping trend line, we think investors are well advised to focus on mid and long term possibilities. Additionally, investors would be wise to monitor the growing concern of asset managers about overvaluation in petroleum assets: 70 of the largest pension funds are already inquiring as to risk exposure to a Carbon-based Asset Bubble to the petro-product majors.

One thing is certain, extemporizing around the economic inefficiencies of pollution on the part of petroleum producers has long since outlived its persuasiveness for many institutional and individual market participants. More analysis on this is in the works at Fund Balance.

The McCovery: Can low wage jobs sustain US infrastructure and middle class culture?

By Walter Borden

Copyright: Cartoon Network
Copyright: Cartoon Network

Building an equitable work environment in our nation is not about ensuring equal outcomes for all, as often claimed. Its purpose is to create equal opportunities for all citizens. The financial press makes frequent note of the slow, steady increase in employment in the US as ex ante proof of a recovery and thus cautious optimism. Yet looking at the matter simply as aggregate jobs created is downright myopic. Attention to the low and stagnant wages paid to almost all of these new work force participants and taxpayers. Further, even in an era of low inflation, these low wages represent income losses when adjusted for inflation. Is this the context and function of a truly recovering, resilient and sustainable economy for all but rather only a precious few? For the vast majority of US labor force participants, here are the salient realities:

  • If the $7.25 federal minimum were had simply been adjusted with inflation since 1968, it would be  ~$10 an hour.
  • If linked to average U.S. productivity growth, it would be over $18 an hour.
  • Between 1948 and 1973, the productivity of U.S. workers  rose 96.8 percent and wages rose 93.7 percent.
  • Between 1973 and 2011, productivity rose 80.1 percent but wages rose only 4.2 percent.
  • Median household income today, adjusted for inflation, is at 1989 levels.
  • During that same time, union membership dropped from about 1/3 of the private sector workforce to about 6.5 percent today.
  • The majority of gains in our economy have thus almost all of the growth in income, has gone to the top 2 percent, and especially the top .1 percent.
  • We are richer as a country than ever — with these riches concentrated in amongst a .1% of us and to an extent not seen in a century or more.

The reality of this type of labor whether its temporary, part-time, or full time is that one can start minimum wage and work a decade to even gain an $1 more per hour. In the warehouses where Amazon and Wal-Mart fulfill their online sales employees are mostly temp, allowing these firms, that do not contribute to the communities in which the operate, to nonetheless take advantage of the local infrastructure and  the means-tested/public services most of the employees at these operations require.

What if more people earned wages that allowed them to live a bit beyond subsistence? Would these wages be more likely to spent in the community? Or would they export most their earnings to offshore investments as management does? Would the local and state tax bases not grow, enabling public funds for desperately needed infrastructure improvements and transitions to clean economies that don’t compromise air and water quality for its inhabitants? Many of these jobs are not easily easily replaced with automation and algorithms. One other thing we know, states and nations with higher minimum wages and unions have stronger economies and better health and education outcomes.

The Model-Detroit: Bail Ins For Main Street, Bail Outs for Wall Street

Corporate Profits as a share GDP. Grey bars indicate recessions. Source: St. Louis Fed.
Corporate Profits as a share GDP. Grey bars indicate recessions. Source: St. Louis Federal Reserve.

By Walter Borden

MANY US cities like Detroit face pension and general service funding shortfalls. Yet for over 5 years the corporate sector has recorded historic profits as a share of GDP. In none of these years however, did they choose to undertake the simple, incremental steps that would have met pension reserve requirements. Even the debt ratings, presented as legitimate third party analysis in support of more pain for retirees and the working poor, are in fact made by firms owned and beholden to Wall Street titans, and as such are dubious. For example, some downgrades appear suspiciously right after a heavyweight firm has taken a position which would gain on a downgrade. Other cities in the US may soon follow as targets for the Model-Detroit. How to help main street? Continue reading The Model-Detroit: Bail Ins For Main Street, Bail Outs for Wall Street

Whither Generational Theft? A Tale of Two Decouplings: Profits and Pensions, Investment and Productivity

By Walter Borden

Does it make sense to tell someone that doesn’t have health insurance to go to the doctor? Does it make sense to expect jobless and underemployed citizens to save more? Many of the most profitable corporations across the US perennially underfund their pensions while simultaneously funding campaigns for privatization of social security paired with cuts to the program.

Pension shortfalls. Click to enlarge.
Pension shortfalls. Click to enlarge.

Yet, these same corporations oppose raising the cap on payroll taxes or asking Wall Street financiers to sacrifice via minimal financial transaction taxes common in the US during many a bull market and still common in the EU and Asia. All of this set against a backdrop of historically high corporate profits, S&P record highs, and stratospheric ratios of CEO pay to that of middle management and wage earners.  The term generational theft is popular argot for corporate bureaucrats and their funding recipients in Washington, DC. Many of the CEO’s and hedge fund managers recommend pain of the majority and none for themselves. Yet, US taxpayers currently fund corporations at an historical scale via low interest rate loans and subsidies. This is the real generational theft: draining the the US middle class so financial speculators can ship away jobs, keep cash in tax havens, and speculate on Asian markets.

Gillian Tett writing in the Financial Times makes notes of a statement by a top executive of a consumer goods conglomerate:

We see a pronounced difference between how people are shopping today and before the recession,” the executive explained. “Consumers are living pay cheque by pay cheque, and they tend to spend accordingly. Then you have 50 million people on food stamps and that has cycles too. So for our business it has become critical to understand the cycle –when pay [and benefit] cheques are arriving.

Hence, the mostly austerity driven so-called recovery further reveals another deteriorating economic indicator for the middle class. Compare and contrast this with austerity champion the Walton Family and its Walmart. Without accounting for its massive local and federal tax breaks and subsidies, Walmart receives even more welfare from US taxpayers by paying its workers so little that they cannot afford healthcare and so must utilize social programs funded by their neighbors and fellow Walmart customers. In short, the world’s largest employer, after the US Department of Defense and the Chinese Military, relies on taxpayers rather than participation in the general welfare of the communities in which it operates and generates huge profits for its small group of majority shareholders (5% of of its owners possess 50% of its shares). Is this an example of good corporate citizenship?

Click to Enlarge.
US Profits and Investment 1929 — 2012. Click to Enlarge.

Nevertheless, the most economically secure in our society mostly talk of deficits and are enabled by our nation’s highly consolidated media to dominate the public debate thereby granting them disproportionate exposure. Yet, their arguments that austerity and fiscal contraction will resolve the unemployment crisis fail logical and evidentiary tests time and again. Sequestration is projected to shave a point off GDP this year. As GDP shrinks consumers have less money to spend and consequently labor demands falls. Further, low-paying and low-to-no benefit jobs, which are the bulk of jobs now being created in the US, threaten a generation’s retirement security and access healthcare (health services as opposed to health insurance need disintermediation). Furthermore, corporations and the super affluent pay lower taxes than ever.  Supporters for this program argue that it frees up capital to be reinvested in the economy. But, this not the pattern of the past 30 years. In the last decade the pace of reinvesting these perquisites into the economy or funding pensions has all but completely lapsed. Rather, these windfalls are shipped to hedge funds and tax havens. Additional study finds deeper problems.

From a recent blog post by James Kwak:

That was my goal in my first law review article, “Improving Retirement Options for Employees”, which recently came out in the University of Pennsylvania Journal of Business Law. The general problem is one I’ve touched on several times: many Americans are woefully underprepared for retirement, in part because of a deeply flawed “system” of employment-based retirement plans that shifts risk onto individuals and brings out the worse of everyone’s behavioral irrationalities. The specific problem I address in the article is the fact that most defined-contribution retirement plans (of which the 401(k) is the most prominent example) are stocked with expensive, actively managed mutual funds that, depending on your viewpoint, either (a) logically cannot beat the market on an expected, risk-adjusted basis or (b) overwhelmingly fail to beat the market on a risk-adjusted basis.

Furthermore, how can someone that works full time outside of Wall Street understand the complexity of 21st century markets? For example, this animation shows what happens inside of the one half-second of trading in Johnson and Johnson shares: more than 1,200 orders and 215 actual trades occur again, in a half a second. (The colored boxes in the video represent exchanges, and the dots that go flying represent individual orders.) Such behavior takes place roughly 100,000 times a day according the animation’s creator, Nanex. Many professionals in the industry within the financial industry understand its mushrooming supercomplexity:

Could this meltdown have been avoided? Should rating agencies have spotted it? Well, this is how it would work with the rating agencies when we were building a new CDO. They would tell us their parameters and criteria; if you meet this requirement, you get that rating and so on. And they gave out a free model so we could test our product and tweak our portfolio for the CDO until it fit, I mean get the rating that we wanted. We would do a lot of stress-testing ourselves too, of course we would. We’d pretend the market changed and run the models to see how our products would hold.

But what happened during the financial crisis was like a perfect storm. In our tests we would assume the market moved, say, 10% – while in reality it rarely moved more than 1%. Now the crisis happens and suddenly the market moves 30%. Our models were based on what we saw as normal. Now we saw numbers behave in ways barely conceived possible.

Consequentially, a quartet of corporate sector driven storm clouds hang on the horizon:

 Nanex ~ Order Routing Animation ~ 02-May-2013 ~ JNJ .Click to Enlarge.
Nanex ~ Order Routing Animation ~ 02-May-2013 ~ JNJ .Click to Enlarge.
  • Underfunded pensions from corporations with record amounts of cash and an investment climate skewed towards insiders and Wall Street
  • Their ongoing failure to hire new employees and consistent blockage of publicly funded programs to fund infrastructure investment
  • A largely fossil fuel derived economy that requires large scale degradation of  our present and next generations air and water resources
  • Over-priced/under-performing privatized healthcare drives healthcare inflation at unsustainable rates all the while forcing the good neighbors in US society to pick up the tab for the uninsured, many of whom are employed by highly profitable firms

Whats going on?

Why are record profits and CEO pay more and more divergent from the economic well being of the society’s whose labor and resources they use?

Continue reading Whither Generational Theft? A Tale of Two Decouplings: Profits and Pensions, Investment and Productivity

The Road To Serfdom Is Paved With Austerity OR The Interest Rate Bubble That Isn’t Yet

By Walter Borden

Have low interest rates formed an economic bubble? They are significantly lower than their 10 year average measured against similar conditions. Stephen Schwarzman of the Blackstone Group thinks so. He and others predict the next great fortunes will arise from precise timing of its bursting. Yet, fortunes and reputations have diminished over the past four years or so as a consequence of betting on its collapse ex ante. The markets continue to signal low, unchanging default risk for U.S. debt in both Credit Default Spreads (CDS) and the Exchange Traded Funds (ETFs) which short US debt.  Economist and housing market expert Robert Schiller sees a cloudy outlook for mortgage rate increases. Paul Krugman, who correctly called the housing bubble in 2005, doesn’t see any evidence for a rate rise in the short and mid-runs.

CDS Spreads US.Brazil, Russia, China, Source:  Deutsche Bank Feb. 2013
CDS Spreads US, Brazil, Russia, China, Source: Deutsche Bank Feb. 2013. Click to Enlarge.

Keynes famously said that in the long run we’re all dead. And, this is not only an Apres Moi, la Deluge argument. Time scales for ending our employment crisis matter to our children and grandchildren as well. History shows that economic policy and social policy timescales are often not commensurate. In policy circles and television talking head broadcasts, conventional wisdom categorically assumes sans empirics, interest rate trajectories with a strong upward bias. Yet, this bias distracts us from the real problem: the national U.S. employment problem and the long term damage of which seriously threatens our economy, our infrastructure, and our children’s future. How to bend this curve downward?

Further, ample evidence shows that debt stabilization comes more surely from economic growth at ~4%. Unemployment will definitely come down, as will the federal debt, if we grow the economy by this 4% benchmark just as we did in the last four years of the Clinton Administration. For example, in 2000 the unemployment rate averaged 4% per month and the U.S. had a budget surplus.

Two caveats–first, a contemporary growth path must be a sustainable one focused on infrastructure investment, education investment, and clean energy. Growth need not require a trade-off between pollution and high carbon emissions. Much is made of the high growth in India and China and their resultant carbon emissions. Less oft mentioned is that both have nascent Cap and Trade programs to offset their rampant pollution of vital natural, economic resources. Financial deregulation, fossil fuel extraction subsidies, and privatization schemes — such as selling our roads to Australian speculators — need to be put on hold because we have no evidence that they create sustainable jobs. Secondly, health care costs are driving our deficit, and while the ACA, or Obamacare is already bringing healthcare inflation down, more needs to be done such as preventing rampant regulatory capture that leads to $28,000 per vial drugs to reworking Medicare Part D to allow US taxpayers to negotiate with drug makers on price just like the VA and Medicaid. An NIH study states:

Extension of existing price setting mechanisms to Medicare could save tens of billions of dollars if prices similar to those already achieved by other federal programs could be reached. Whether or not this is a political or economic possibility, the magnitude of these savings cannot be ignored.

Low unemployment and reasonable wage growth will signal the time for focusing on national debt.

Logic dictates that simply because two things can happen, their probabilities aren’t equal. And, key economic and social indicators signal little inflation and interest pressure on the horizon, even if low rates can lead to bubbles. So the government can borrow now at historically low interest rates and invest the money in an infrastructure for a clean economy with a low probability of inflating a bubble in the short to mid runs. This in one of the ways a government that controls the world’s reserve currency is significantly unlike a household budget.

Prediction markets probability of US Recession in 2013. Source: PredictWise. Click To Enlarge.
Prediction markets probability of US Recession in 2013. Source: PredictWise. Click To Enlarge.

Many observers point to how Federal Reserve policies have kept interest rates low since 2008.  However, the Federal Reserve announced during their December meeting that it will begin reversing its easing policies when the job market improves substantially, when the unemployment rate falls to 6.5%, or when inflation exceeds 2.5% per year. Current forecasts call for ~2% growth in the US in 2013 and ~15% chance of a recession — admittedly not an immaterial probability. So here again, 2013 likely will not vindicate interest rate speculators and bond short sellers.

In 1946 the debt was 120% of the GDP. It went straight down to about 32% in 1973. We had increased spending and deficits almost every year. The debt in dollars almost doubled. Real median household income surged 74% while CEO’s earned 50 times what their workers earned; it is 500 times today. The GDP averaged 3.8% growth. The U.S. resolved a debt crisis with more debt. Interest rates will rise eventually. That is not all bad. This would likely mean the unleashing of pent-up demand.  And, the resultant weak dollar would boost exports of solar panels and the produce of sustainable agriculture for which there is strong demand in Europe and Japan. So, household books balance and run surpluses while the government takes on debt as the lender, consumer, and with QE, even borrower, of last resort.

Why is spurring demand and high employment more critical than deficit

Federal Minimum Wage. Source New York Times. Click To Enlarge.
Federal Minimum Wage. Source New York Times. Click To Enlarge.

reduction in 2013?

Most Baby Boomers will be hard pressed to fund retirement either by both having saved too little and suffered poor investment advice, or perhaps simply needing to draw down funds in a prolonged down market. A cursory look at the math gives us numbers that seem to fall into place like a game of Tetris. By 2030,

Taking these numbers into consideration with the fact the consistent austerian policies very likely mean the U.S. faces a multi-decadal drop in aggregate demand — the main driver of growth which is in turn the most tried and true process for debt reduction — serious policy challenges face the US.  This underscores the need to create jobs first and build a strong revenue base around a clean economy so that pollution does not eat away the gains via increased healthcare costs and decreased land values. Austerity mostly leads to more lay-offs, comparatively weak job creation (with low wages and benefit packages requiring taxpayers to pick up the costs, and a environment where wages stagnate or fall. Stunted wage growth may bode in the short run for the Oligarchy, but not the well being of the the majority of U.S. citizens whose labor and tax-dollars are used to finance its mighty military and Too-Big To-Fail-or-Jail banks.

Continue reading The Road To Serfdom Is Paved With Austerity OR The Interest Rate Bubble That Isn’t Yet

Fund Balance Recommends: The Social Change Film Festival (SCFF)

The partners at Fund Balance are delighted to recommend to our friends and subscribers the Social Change Film Festival (SCFF). SCFF is led-up by economist Cynthia Phillips and her Global Change Media initiative.

The event features Robert Redford’s new movie Watershed, the new movie about climate change called Chasing Ice, the new fracking film, Dear Governor Cuomo, along with Angelina Jolie’s film In the Land of Blood and Honey, among many fine entries.

Additional highlists of the event include:

SCFF, New Orleans, La, 2012
  • 8 Feature-length world-class social change films (plus
  • Shorts) at multiple venues
  • 4 days of workshops led by our international faculty of
  • filmmakers and industry professionals
  • Town Hall: Communities of Resilience – Sharing and supporting ideas, dialogue, and action in the face of crisis
  • Activist Awards Gala – A Celebration of Local and
  • Global Activism
  • Filmmaker “Behind the Scenes” & “The Making Of” discussions
  • Crowd-sourced social action ideas related to film topics
  • Global Online Screening Room
  • Television Distribution available to over 20 million households
  • Awards ceremony honoring the world’s most poignant and
  • inspiring social change films
  • Lively networking events with industry professionals
  • broadcasters and distributors
  • Multicultural relationship building and global networking

Both the SCFF app and screening room are up on the web.

The Festival is happening now in New Orleans. The gala event is Friday November 30, 2012, and the festival wraps Sunday December 2, 2012. The content is going out on LiveStream and is being recorded for the launch of a new satellite and LiveStream channel in January. If you are in the area stop and participate. Or for $25 in the U.S. and $10 for international, you can engage and enjoy the SCFF activities and content online.

This is a great opportunity for anyone at the intersection of culture and social change, impact investing, cleantech and social enterprise.

 

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We design and manifest healthy and thriving planetary civilizations.

We provide research, analysis, capital introduction, product design, and public relations solutions for investors, policy makers and social entrepreneurs in all asset classes. We holistically envision and design portfolios with a focus on quality of life, balancing recognition for different cultural values and return profiles.

Clients and collaborators include Credit Suisse | Nura Health | Hip Hop for Humanity  | Slow Money | Inflection Point Capital  | E3 Bank | Like Minds | Instiglio | Sourcemap | Startup NectarMission Markets | FarmlandLP.com | Greenmede CSA, and more.  Read our story.

 

Haiti: Culture, Sustainability & Social Enterprise – “In the Eye of the Spiral” Preview Screening June 14th

Fund Balance is pleased to present this event as part of of our ongoing demonstration that culture, sustainability and social enterprise provide a better organizing principle than predatory debt finance and unrestricted globalization.

In the Eye of the Spiral

Private Preview Screening

Thursday June 14, 6PM-8PM

@ The Olivia, A Stonehenge Property

315 West 33rd Street (between 8th & 9th Ave.)

COCKTAIL RECEPTION • STORYTELLING WITH SPECIAL GUESTS • DANCE
BY PENIEL GUERRIER • SCREENING • PANEL DISCUSSION

 

In the Eye of the Spiral is a documentary film project featuring seven of Haiti’s most prominent living artists.Taking as its point of departure the notion of dynamic chaos incarnated by the incomparable writer-painter-philosopher Frankétienne, this film proposes anew narrative for the embattled Haitian Republic – a narrative steeped in the vitality, the mysticism and, ultimately, the hopefulness of artistic creation.

We sincerely hope you will join in our efforts to finish this film and to bring an amazing community of artists and visionaries to the attention of the world. It is our aim to raise $250,000 to complete the documentary. We look to you for help in reaching this goal.

Panel Discussion: Raynald Leconte (Exec Producer and Co-Director In the Eye of the Spiral), Michael Stern (Creative Director, Stonehenge), Eve Blouin (Co-Director and writer In the Eye of the Spiral), Linda Mellon (Friends of FOKAL), Leland Lehman (Partner, Fund Balance)

Gratitude to FOKAL (OSI Soros / Haiti) for their generous support.

With dignity, profundity and clear sighted visionary power
and wisdom, the Haitian artists we encounter in In the Eye of the Spiral uphold the cultural, spiritual identity of an incredible country
.”
– Annie Lennox

Please RSVP to raynald@haitianculturalfoundation.org 

Annie Lennox has confirmed to be the Principal Narrator for In the Eye of the Spiral film.

Linda Saetre is coming onboard as Executive Producer. Her credits include: (March of the Penguins, A Jihad for Love, The Beauty Academy of Kabul, Tarnation)

For more info visit www.haitianculturalfoundation.org

 

Sponsored by Stonehenge, the Manhattan-based real estate company with 2,500+ apts in their luxury rental buildings.

Learn more
at www.StonehengeNYC.com

Press Release:

Screening to Preview Acclaimed Haitian Documentary

“In the Eye of the Spiral” Previews Thursday Evening

NEW YORK, N.Y.  (June 11, 2012) The Haitian Cultural Foundation will host a special preview of the powerful, moving and inspiring documentary film In the Eye of the Spiral Thursday night at The Olivia – a Stonehenge Property – allowing viewers a rare opportunity to dialogue with the creative team after watching the trailer.

The captivating film, which features seven of Haiti’s most prominent living artists proposes a new narrative for embattled Haiti – a country steeped in vitality and mysticism and the video ultimately seeks to provide hopefulness for a country built upon great artistry and talent.

“If the film is only half as brilliant as the trailer, Haitian art will finally find its seat at the international table of culture where it belongs,” said Jim Luce in The Huffington Post. The nine-minute trailer has also received interest from Rolling Stone. The movie will feature Annie Lennox as the Principal Narrator.

Featured in the film is the incomparable writer, painter and philosopher Franketienne, who was a candidate for the Nobel Prize for Literature in 2009.

Five UN Ambassadors have already RSVP’d to the event as well as Executive Producer Linda Saetre (whose work includes March of the Penguins, A Jihad for Love and A Beauty Academy of Kabul). In addition to the screening, the evening includes a cocktail reception, storytelling with the guests, a dance by Peniel Guerrier and a panel discussion.

Raynald Leconte, CEO and Chairman of the Haitian Cultural Foundation is serving as Executive Producer and Co-Director of the Film. He brings over 20 years of experience in media and technology to the project, which has garnered significant support from Art Basel Miami and FOKAL (OSI Soros/Haiti).

For more information, please visit www.haitianculturalfoundation.org

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