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When Capitalism Converges With Resilience

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It is hard to argue against that fact that the U.S. and even "Communist" China, for that matter, have great influence in global markets and on health and human security -- for their own people as well as human populations world-wide. The power of capital within global, regional, national, and local markets has been transforming the world since the growth of the industrial revolution, which has only accelerated since the broad introduction of global communication and computing in the 20th century. That said, there has been growing criticism of the destructive nature of market fundamentalism and laissez faire economics in the face of a growing awareness of ecosystem carrying capacities, and the problems inherent in growth economies in decline.  So what happens when capitalists become aware of the destructive nature of growth economies, where populations are exceeding the carrying capacities of ecosystems and mass consumption economies begin to collapse?

One argument might be that capitalism is always indifferent to carrying capacities and human suffering.  Investors will simply exploit opportunities until they become toxic and then short those markets, industries, and businesses leaving economic ruin and social deterioration behind. There are, of course, lots of examples of this behavior over the past four decades, and especially during the first decade of the 21st Century.  One only needs to look at Detroit today with its economic and population collapses to understand the nature of socio-ecological collapse due to the decline of an industrial sector and the flight of its associated capital and markets.

That said, there appears to be new economic theories emerging as a countervailing force.  Emerging economic theorists argue that although unfettered growth economics in a time of the over-extension of carrying capacities will lead to its own demise, with huge social costs and catastrophic effects on health and human security -- there are clear alternatives for investors to become part of emerging solutions that can shelter and grow capital.  Some are arguing that a wave of socially and ecologically sound investment is growing rapidly attracting an exponential increase in capital that is inevitably rejecting the exploitation and financial coercion that is driving accelerating social and ecological collapse.  Kenneth Boulding in his prescient book,Beyond Economics, spoke about these alternatives as far back as 1980s.  

Boulding's "Evolutionary Economics," which linked economics and other social phenomenon into larger biological systems and general systems theory was an influential underpinning for a new generation of proponents exploring potential rules for "ecological economics." Ecological economics as a field does not try to hid the facts of issues such as global climate change, overpopulation, and human security in the face of social systems overextending carrying capacity, it tries to engage political economies that address them directly, but often these theorists fall short of the practicalities of capital markets and attracting investors in the solutions.  However, there is now a new thread within economics, as the traditional financial markets of the 20th Century and early 21st Century become more unstable and declining around the world, that shows promise of attracting the investment capital essential to the necessary economic, social, and ecosystem transformations underway that will lead to sustainability and resilient communities and societies globally.  

Increasing numbers of investors are now trying to understand the underlying trends, causes, and economic opportunities of resilient and sustainable solutions.  This type of investor is leading to a new trend in capitalism, which appears to be moving toward shifting capital investment and political influence toward resilience.  Some argue that the sheer volume and mass of capital investment in extractive, unhealthy, and socially destructive industries will continue to accelerate collapses, because our current political economy enables significant amounts of money to be made in negative exploitation of labor, fragile ecosystems, and passive, uninformed citizens and investors.  From this point of view, large, historically powerful industries merely need to externalize risks and costs with the support of government while they perpetuate current destructive behaviors without the costs and intelligence of social innovation.  

That said, the growth of these destructive industries are slowing.  Their costs of doing business are going up (e.g., BP and Deepwater Horizon), in spite of efforts to cripple legal and regulatory authorities by some of the most powerful destructive business sectors, new economic sectors utilizing the migration of savvy investment capital are exploding with the growth of socially and environmentally sound businesses and products, that are appropriately profitable and rewarding to investors (e.g., Apple computer becoming the world's largest company).  Increasing aware of the social and environmental consequences of business practices and policies, the savvy investor has an eye markets, businesses, products, and political leadership that are embracing sustainable practices that support the growth of capital within healthy, sustainable economic sectors.  

 

Please post evidence of these emerging economic markets, green technologies, and business sectors that are deserving of the investment capital that is now in flight from industries and political persuasions that have been externalizing risks and costs to the commons, or are fundamentally counter to sustainable health and human security of Americans, and the resilience of America's communities of interest globally, as well as domestically. 

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Where are the leaders who provide environmentally sustainable, or environmentally improving, social benefit while investing toward future efforts and still make a sustained, reasonable profit?

And where is national and corporate fiscal governance a help, rather than a hindrance, to good investing?

What might be recommendable US companies? They must overcome the unattractiveness of the US$ vs leading currencies. Any myths about US corporate governance, corporate oversight, and the value of current corporate annual and quarterly reports (and accounting blessings of same) can now be safely put into appropriate perspective. Read Warren Buffet on such stuff, if you still believe in typical US corporate governance.

I would be looking at growth-arenas in growth-markets. I would look to hedge against the long-term decline in the US$ over the past 5 decades against the Swiss Franc, the Singapore Dollar, the Malaysian Ringgit, the Yen, and some other strong currencies.

If I were younger and planning to increase my exposure to common stocks, I would still look this way. I would first look for leading companies, in leading industries, which have considerable growth potential in the most actively growing parts of the world such as certain segments in Asia (particularly in countries running current account surpluses). But I would also look for companies in industries which may have fallen out of favor in the USA, but which may still have considerable potential in their home markets (again, such as Asia).

For example, airlines. If I were investing in cyclicals, I would look at Skytrax 5-star airlines which I could invest in. In the USA, we may see the airline industry from the perspective of the mostly weak local actors – who seem driven to nudge this year's balance sheet a bit by squeezing customers yet more (while hoping against, yet potentially motivating, consumer revolts) rather than making strategic moves to improve their customers' and their futures. The result? Weak 3* Skytrax ratings and financials. Modest domestic revolts against the US legacy carriers exist, resulting in the relative growth of Southwest, JetBlue, and to a lesser degree Frontier and Virgin America. But the real threats are Singapore, Asiana, Qatar and the other 5* airlines which can manage to continue striving for an improved product. New aircraft, gracious service, great IFE, top-quality lounges, etc. All Skytrax 5* airlines are Asian. I had my only episode of airline stock ownership in the 1980s, having some Singapore Airlines ADRs (when SQ was a growth stock). If I were looking now, I would be watching Singapore Airlines, Asiana, possibly Swire Group or Swire Pacific (owners of Cathay Pacific), and would be watching for a possible IPO for Qatar Airways – watching their cycles for buying opportunities. I might also look a bit down the Skytrax rating scale at some 4* airlines – possibly at Lufthansa, but more particularly at EVA, or ANA, and watch for a possible IPO of Emirates (which is arguably 5* but for its hub airport's transit situation).

As I am getting older, and looking at evolving my investment model, I am even more keen to hedge against the falling US$.

It would be interesting to see started an investment e-journal [maybe written in Wiki mode] which focuses solely on opportunities outside the USA (but compares them to US firms, focused for American investors), to help overcome the current dearth of widely available information for such an audience. Something along the lines of the Value Line Investment Survey [or even Financial World for those who remember..], with sample portfolios of investments overseas, with coverage of the environmental and social aspects of such firms along with business model, management integrity and innovation, and other coverage. Wikinvest.com might seem a good idea, and the one independent review of it that I read notes its potential as a quickly-edited medium. But a August 30th 2011 read on airlines in Wikinvest spies Continental still listed as part of SkyTeam, and claims that the Continental-United merger idea had stalled, and was not moving forward. In short, important coverage is more than a year out of date on that Wikinvest page. Beyond that, Wikinvest still has USA blinders on, and seems to have little-no coverage on global opportunities.

There are probably newsletters for institutional investors. But what's needed is a major information source on global alternatives, to (1) give us more information, and (2) to help keep USA corporations accountable for keeping up with global standards of corporate governance. (We used to think that corporate governance was low overseas, and we can still find examples of such low corporate governance if we want to rant. But it's top-shelf corporate governance that we're looking for, and that also exists. Let's find what's available overseas in that arena.)

Commentary: 20 promising sectors for post-crash investors

By Paul B. Farrell, MarketWatch - August 23, 2011

SAN LUIS OBISPO, Calif. (MarketWatch) — There is a global economic boom coming, but unfortunately, that boom comes only after a systemic collapse of the global economy, markets and capitalism — a collapse that may well eliminate billions of people from the planet. Shocking? Cruel? Brutal? Yes.

But folks, that is the coded message in many recent warnings from environmental economists who finally realize that nothing will wake up the public. Nothing but a catastrophic system failure. Only then, a path to reform, recovery, a new boom.

But wait, you ask: If the consequences are worse than an asteroid slamming into Earth, why don’t we just plan ahead? Avoid the Black Swan? Why wait for some “creative destruction” to wipe out capitalism, reduce the global population to 5 billion? Why? Because our human genes are not good at planning ahead for catastrophes. Our brains are designed for fight-or-flight. Otherwise we procrastinate. We respond best when our backs are against the wall. Then we rally the troops, go to war, so to speak.

Until we reach that point, we focus on everyday stuff, like jobs, the kids, short-term buy-sells and ideological stuff like today’s anti-science, anti-intellectual political rhetoric. Free-market capitalism. Don’t tread on me. Stuff like that keeps us in denial about the future. No, we don’t plan, don’t act until a crisis. Not till the asteroid is about to hit. Even then, we pray for divine intervention to rescue us. Or a Churchill to emerge, take charge of the impossible challenge, get people energized and focused on a common cause. Then we’ll charge ahead, solve the problem. Until then, our brains can only think short-term.

Massive denial of global catastrophe dead ahead

And yet, the facts about the coming catastrophe are so obvious. Just apply a little grade-school math and economic common sense: Our planet’s natural resources can reasonably support about 5 billion people. That’s a fact. Another: Today we have 7 billion. That’s a problem, 2 billion too many. We’re consuming commodities and natural resources at a rate of 1.5 Earths, according to estimates by the Global Footprint Network of scientists and economists.

Flash forward: This scenario gets scarier than a horror film, very fast. United Nations demographers warn the Earth’s population will reach 10 billion in just one generation, around 2050. That’s two times the 5 billion the Earth can reasonably support. But the equation gets even scarier: Those 10 billion people will demand lifestyle improvements. That increases their consumption of scarce resources by 300% per person. Bottom line: 10 billion people will be consuming the equivalent of six Earths. Very bad news.

“You really do have to wonder whether a few years from now we’ll look back at the first decade of the 21st century,” writes Thomas Friedman, a New York Times columnist and author of “Hot, Flat, Crowded,” “when food prices spiked, energy prices soared, world population surged, tornados plowed through cities, floods and droughts set records, populations were displaced and governments were threatened by the confluence of it all — and ask ourselves: What were we thinking? How did we not panic when the evidence was so obvious that we’d crossed some growth/climate/natural-resource/population redlines all at once?”

Friedman quotes Paul Gilding, the veteran Australian environmentalist-entrepreneur, who described this moment in a new book called “The Great Disruption: Why the Climate Crisis Will Bring On the End of Shopping and the Birth of a New World.”

“The only answer can be denial,” says Gilding. “When you are surrounded by something so big that requires you to change everything about the way you think and see the world, then denial is the natural response. But the longer we wait, the bigger the response required.”

Forget global warming — it’s too late

Gilding’s “Great Disruption” is an eye-opener. But have no illusions that his or any book will be the wake-up call that will force us to plan ahead for a catastrophe. A former chief executive of Greenpeace, he admits screaming for 30 years to get the public’s attention. He now confesses that his efforts had little impact. Why? The world is too deep in denial.

So, finally, he gave up. Nothing was working: “We tried. We failed.” Today his message is simple and blunt: “It’s time to stop worrying about climate change. Instead we need to brace for impact.” Yes, an economic asteroid is closing fast.

What will trigger “The Crash” he sees coming? “If you grow an economy or any system up against its limits, it then stops growing and either changes form or breaks down … As our system hits its limits, the following pressures will combine, in varied and unpredictable ways, to trigger a system breakdown and a major economic crisis (or series of smaller crises) that will see us slide into a sustained economic downturn and a global emergency lasting decades.”

As Gilding sees it, the coming crash is “not a doom and gloom prediction, but an inevitable physical reality.” And yet, paradoxically, while the faint-hearted panic, this “perfect storm” also signals sell and buy opportunities for savvy investors.

  1. Shocks. “A series of ecological, social and economic shocks driven by climate change, particularly melting polar regions, extreme weather events…changes to agricultural output…severe economic stresses…deep concern [among] the public and the global elites…government intervention… a sense of global crisis.”

  2. Food. “Increasing demand and lower agricultural output driven by climate change ...sustained increases in food prices…economic and geopolitical instability and tension…developing countries blaming the West for causing climate change.”

  3. Water. “A deeply degraded global ecosystem will further reduce the capacity of key ecosystem services, water, fisheries and agricultural land … impact food and water supply … political stability … global security.”

  4. Energy. “Rapid increases in oil prices as peak oil is breached. …The trend will be clear… enormous, system-wide economic and political pressure…great conflict.”

  5. Surprises. “For example, a serious global terrorist attack wiping out a major city...or a pandemic shutting down global travel...shocks upon shocks upon shocks.”

  6. Fear. “As this unfolds, our deeply intertwined and complex global financial market, prone to panic, driven by fear and uncertainty, will suddenly wake up to the long-term implications of all of this…Perhaps driven by a series of major corporate collapses or national economic crises, they will then simply re-price risk in global share markets…This will lead to a dramatic drop in global share markets and a tightening of capital supply.” Markets and economies will crash.

Oddly, in all this, Gilding is an eternal optimist. He believes that mankind will follow this “Great Disruption” with a period of great cooperation where all nations of the world will come together to save the planet. What’s unspoken, however, is how this great disruption will stop population from growing to 10 billion. And even more significantly: How the crash will scale Earth’s existing population of 7 billion back to a sustainable 5 billion. Yet, that must happen to make the “new equation” work. Unfortunately, what’s unspoken will probably include new global wars, pandemics, famines, starvation and other cataclysmic events, all before the boom.

20 investment opportunities before and after the collapse

A couple of years ago Gilding and Jorgen Randers of Norway detailed 14 market-oriented ways to “get serious about combating climate gas emissions by 50% over a 5-year long focused plan.”

Their “One Degree War Plan” would “keep global warming below plus-one degree Centigrade over pre-industrial levels.” These policies may not fit with today’s traditional free-market capitalists and conservative politicians. But after the coming crash, after a great realignment of the economic, political and environmental systems of the world, Gilding and Randers see these as essential policies for a new sustained global economy.

You can also see these as investment opportunities for entrepreneurs and financiers even today, certainly all forward-thinkers who are planning ahead. Yes, while the rest of the world is trapped in denial and fear of a coming crash, some adventurous few will plan ahead for the boom coming after the world community downsizes to create a new, sustainable lifestyle.

Here’s how Gilding and Randers describe these key sectors:

  1. Forests: Cut deforestation and other logging by 50%.

  2. Coal: Close 1,000 dirty coal power plants within 5 years.

  3. Electricity: Ration electricity, and rapidly drive new efficiency.

  4. Carbon Capture Storage: Retrofit 1,000 coal power plants with Carbon Capture Storage.

  5. Wind/solar: Erect a wind turbine or solar plant in every town.

  6. Deserts. Create huge wind and solar farms in suitable deserts.

  7. Waste: Let no waste go to waste; recycle and reuse by-products.

  8. Autos: Ration use of dirty cars to cut transport emissions by 50%.

  9. Biofulels: Prepare for biofuels power stations using CCS technology.

  10. Travel: Strand half of the world’s aircraft.

  11. Methane: Capture or burn methane from agriculture and landfills.

  12. Food: Move society away from diets of climate-unfriendly protein.

  13. Farming: New methods reduce gas emissions, maximize soil carbon.

Add these 13 key sectors to the six listed earlier, you get 19. Then, No. 20, their final policy idea for the coming mega-boom era is cultural as well as economic: “Launch a government- and community-led shop-less-live-more campaign.” A new world focusing less on unlimited consumption, more on personal happiness. These policies may not be fashionable in today’s world. But in the post-crash New World, economic theory will change, because growth economics no longer works and the survival of civilization demands a fundamental rethinking of economic theory. So these 20 tips will be gold mines for savvy investors, entrepreneurs and financiers.

All investors searching for long-term opportunities in today’s world of uncertainty and extreme volatility should read Gilding’s “The Great Disruption: Why the Climate Crisis Will Bring On the End of Shopping and the Birth of a New World.” Whether liberal or conservative, right- or left-brainer, agree or not, this book will engage you, get you thinking very differently about how to protect the future for you and your family. And fortunately, Gilding’s such an upbeat optimist about global challenges you’ll enjoy being drawn into his new mindset.

http://www.marketwatch.com/story/a-no-growth-boom-will-follow-2012-global-crash-2011-08-23

howdy folks