Sunday, January 27, 2013

Social Networks, Global Risks and Another Annual Davos Gathering

Last week, the World Economic Forum hosted its annual gathering in Davos, Switzerland, an event known for its mix of panel discussions, photo opportunities and rapid-fire meetings among some of the world’s wealthiest and/or politically connected individuals.  In addition,  research publications such as “Global Risks 2013” and “Global Agenda 2013” are released.
  • In the areas of global risk, concerns and potential impacts that were highlighted included: 1) widening income disparity, 2) an unstable global economy, 3) chronic fiscal imbalances, 4) rising greenhouse gas emissions,5) natural resource shortages, 6) mismanagement of population ageing, 7)  economically driven social unrest and 8) diffusion of weapons of mass destruction.
  • Social network dynamics were addressed as well, and it was noted that “The scale and speed of information creation and transfer in today’s hyperconnected world are… historically unparalleled. Facebook has reached more than 1 billion active users in less than a decade of existence, while Twitter has attracted over 500 million active users in seven years Sina-Weibo, China’s dominant micro-blogging platform, passed 400 million active accounts in summer 2012. Every minute, 48 hours’ worth of content is uploaded to YouTube." 
  • A positive example of social networking’s transformative effects was “studies of Twitter and Facebook activity in Egypt and Tunisia leave no doubt about the role social media played in facilitating the Arab Spring.” A potentially troubling example was “as Hurricane Sandy battered New York in October 2012, an anonymous Twitter user tweeted that the New York Stock Exchange trading floor was flooded by three feet of water. Other Twitter users quickly corrected the false rumor, though not before it was reported on CNN.”
  • Regarding global risks - while most of these concerns have been documented elsewhere, these reports suggests there is a broadening consensus regarding these concerns among many global players.  At the same time, with many Davos attendees classified as ultra-rich, the topics of income disparity and economically driven unrest highlight the irony of the gathering.
  • Regarding social networking dynamics – while the commercial players in this market may change over time, the momentum of globally shared information and misinformation will likely continue to accelerate.  As a result, we should keep in mind a phrase popularized by U.S. President Ronald Reagan - “Trust, but verify.”

Sunday, January 20, 2013

A Week of Views from a Biker and a Banker, Some CEOs and a Fed President

  • From a Biker and a Banker: Lance Armstrong - “It was a mythic, perfect story and it wasn’t true,” he said. “All the blame and fault was on me . . . now the story is so bad and so toxic and a lot of it is true” and his partner, the Silicon Valley banker,; Thomas Weisel - “I did not know until very recently that Lance Armstrong had engaged in doping while riding for the team” and “any allegation that I was aware of or condoned or supported doping by any team rider is false.”
  • From Corporate Earnings Reports: General Electric CEO Jeff Immelt "The outlook for developed markets remains uncertain, but we are seeing growth in China and the resource rich countries";   Morgan Stanley CEO James Gorman -  "The U.S. economy is recovering. That's unmistakable. The speed of it still remains to be determined";  Johnson Controls CEO Steven Roell - "Uncertainties remain in our global markets and we expect earnings in the first half of fiscal 2013 to be significantly lower than 2012, consistent with our earlier forecast" and  Intel CEO Paul Otellini  - ”We are in the midst of a radical transformation of the computing experience with the blurring of form factors and adoption of new user interfaces. It's no longer necessary to choose between a PC and a tablet.”  
  • From the U.S Federal  Reserve: Kansas City Fed President Esther George - “Prices of assets such as bonds, agricultural land, and high-yield and leveraged loans are at historically high levels” and “We must not ignore the possibility that the low-interest rate policy may be creating incentives that lead to future financial imbalances”.
  •  Regarding the Biker and the Banker with both players as named defendants in former teammate Floyd Landis’ lawsuit (which alleges fraud against the team’s sponsor – the U.S. Government’s Postal Service), this and other related legal actions will likely reshape the business of sports and promotional sponsorship.
  • Regarding corporate earnings – In general, the comments from CEOs suggest an uneven global economic recovery, while Intel’s comments highlight that while the PC is not dead the major transition to mobile and touch screen devices continues.  
  • Regarding the Federal Reserve – it seems the time to unwind the Fed’s massive monetary stimulus effort is approaching, a process which may introduce some unexpected risks.

Sunday, January 13, 2013

Gadgets, Google and Clean Energy Investing

At last week’s Consumer Electronics Show (CES) in Las Vegas, companies introduced a broad mix of devices including faster, cheaper and cooler looking televisions, media recorders, computing/ mobile devices and auto technology as well as gadgets such as the HAPIfork, a digital fork that lights up and vibrates to tell its user to slow down. As some observers of this event speculated on the energy needed to power these devices, Google, on Wednesday, announced a $200 million equity investment in Spinning Spur Wind Ranch, a 70 turbine (161 megawatt) project near Vega, Texas.

Other Google clean tech investments include: 

  • $75 million in a wind power project in Rippey, Iowa
  • $94 million in solar photovoltaic projects near Sacramento, California
  • $75 million in Clean Power Finance,  a fund providing financing for rooftop solar systems; 
  • $280 million to  finance residential solar projects with the assistance of SolarCity, a solar systems provider; 
  • $178 million in Brightsource which develops solar thermal towers to collect heat and create steam which powers turbine generators in California’s Mojave Desert;  
  • a 37.5% equity stake in Atlantic Wind Connection which plans to install wind turbines 10-15 miles off-shore along the Atlantic Coast (between New Jersey and Virginia); 
  • $175 million in two wind projects in Southern California at the Alta Wind Energy Center,
  •  $100 million in the Shepherd’s Flat wind farm project in Arlington, Oregon
  • $38.8 million in the Peace Garden Wind Farms in North Dakota and 
  •  €3.5 million  for a 49%  equity stake in a solar facility in Brandenburg, Germany.
  • While large-scale power projects can present technological, bureaucratic and budgetary challenges, it is constructive that Google and other firms are increasingly engaged in financing these efforts.  It is also notable that, while Google and others use renewable energy sources to support the massive power needs of their data centers, the “cloud computing” industry in general operates in an inefficient fashion  (Power, Pollution and the Internet” The New York Times, September 23, 2012). 
  • Bottom line: 1) efforts by Google and others to expand and enhance the power grid are welcome news and 2) organizations with innovative products and services may benefit from improving the inefficiencies within our digital ecosystem.

Thursday, January 10, 2013

Gram Power – A Smart Start-up, with a Smart Microgrid Solution

Gram Power's focus is “To Electrify India – Intelligently”. The team has received $80,000 in grants from, Intel Corp, and UC Berkeley and $1million from an angel investor. Their solution was selected by (sponsored by NASA, USAID, Department of State, and NIKE) as a top 10 clean technology innovator.

They  believes there are 2.6 billion poor people who should have access to reliable, affordable power solutions. Within India, the dynamics supporting Gram Power’s solution include: 1) over 300 million people live off the power grid, many in remote rural areas where providing access is not economical, 2) the potential to reduce diesel subsidies (about $900 million) for telecom tower operations and 3) centralized electricity systems waste about 58% of its energy due to theft and heat loss in transmission lines and power stations (in the U.S., the loss rate is about 7%).

In the following video, co-founder Yashraj Khaitan  provides an overview of their efforts

Gram Power from LAUNCH on Vimeo.

Sunday, January 6, 2013

Surprises and Megatrends for 2013 and Beyond

As we begin the New Year and assess various market dynamics and probable outcomes, the following two sets of “possibilities” are among the many ideas under consideration by both investors and policy-makers.

Last week, Byron Wien, Vice Chairman, Blackstone Advisory Partners, published  the following list ofTen Surprises for 2013 (a process he started in 1986 as Morgan Stanley’s Chief U.S. Investment Strategist):
  1. Iran announces it has adequate enriched uranium to produce a nuclear-armed missile;
  2. a profit margin squeeze and limited revenue growth cause a decline in 2013 earnings and the SP 500 trades below 1300;
  3. financial stocks reverse their 2012 gains;  
  4. Democrats sponsor a program to make the United States independent of Middle East oil before 2020 and West Texas Intermediate crude falls to $70 a barrel;
  5. Republicans make a major effort to become leaders in immigration policy;
  6. China’s Shanghai Composite Index will increase by more than 20%;
  7. climate change contributes to  crop failures, driving significant increases in grain and livestock prices,
  8. inflation remains tame, but gold rises to $1,900;
  9. the Japanese economy remains lackluster, but the Nikkei 225 trades above 12,000 and
  10. with Europe’ s structural problems largely unresolved, European equities decline by 10% in sympathy with the U.S. market
Separately, in itsGlobal Trends 2030” (Dec.2012) report, the National Intelligence Council  (reporting to the U.S. Director of National Intelligence) presented several long-term Megatrends including: 
  1. increased empowerment of the individual (driven by reductions in poverty, a growing middle class, greater educational access, broader use of new communication and manufacturing technologies, and health-care advances)  to solve mounting global challenges,  but individuals will also have greater access to lethal and disruptive technologies;   
  2. a diffusion of global power as Asia’s growth in GDP, population, military spending and technological investment surpasses North America and Europe. In addition China, India, and Brazil, as well as Colombia, Indonesia, Nigeria, South Africa, and Turkey will become especially important to the global economy;  
  3. aging, migration, and growing urbanization will increasingly impact most countries’economic and political conditions as the world’s population approaches 8.3 billion people (up from 7.1 billion in 2012 and 
  4. increased demand for food, water and energy resources will require proactive action by policymakers and private sector leaders to avoid a world of scarcity.

Wednesday, January 2, 2013

"How to Read in 2013": Reach Out and Consider Alternative Views - from Ross Douthat

In his New York Times Op-Ed "How to Read in 2013", Ross Douthat shares his view on reading and encourages us to: ""make a special effort to read outside existing partisan categories entirely. Crucially, this doesn’t just mean reading reasonable-seeming types who split the left-right difference. It means seeking out more marginal and idiosyncratic voices, whose views are often worth pondering precisely because they have no real purchase on our political debates."

Given the often polarizing manner in which many topics are currently debated, reaching out broadly and considering alternative views seems like a good strategy as we start the New Year.