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SNS Subscriber Edition • Volume 21, Issue 17 • Week of May 16, 2016

 THE STRATEGIC NEWS SERVICE ©
GLOBAL REPORT ON
TECHNOLOGY AND
THE ECONOMY
The SNS
Carbon Trifecta:
A Global Warming
Solution


 
 


 
 
 

 
 

SNS: The SNS Carbon Trifecta:

A Global Warming Solution

 

In This Issue
Week of 5/16/2016    Vol. 21 Issue 17

FEATURE:

 

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The SNS Carbon Trifecta:

            A Global Warming Solution

The world has a big problem. Well, actually, it has several.

The greatest  problem the planet faces today is global warming. And the greatest problem that humans face is their general inability to act together until just after a crisis hits.

America's behavior at the onset of World War II would be a good example. Understandably reluctant to get re-involved in Europe's self-destructive patterns of war, we ignored history's recent lessons and waited too long, while many of our industrialists secretly made money by helping Hitler - and British PM Neville Chamberlain famously chose appeasement over facing the truth.

I chose this example because at FiRe 2011, our Future in Review CTO Design Challenge team decided that the solution to global warming would have to include real leadership, as the planet faced yet another "Churchillian moment." More specifically, they found that:

1.      Every year wasted in starting a real response would result in many years of harm later;

2.      The response would have to be in phases, rather than a single immediate answer; and

3.      It was still (at that time) possible to avoid the massive economic, biological, and human "climate refugee" dislocations of a 2-degree Centigrade global temperature increase.

In other words, the problem of global warming could indeed be solved, if we had real leadership on the issue.

Surveys suggest that a strong majority of people today agree that global warming is a reality, that it is human-caused, and that it needs serious attention. Its prioritization among US voters, for example, has climbed over the last decade or so from near-last to near-first. Given the recent Paris Accord, it's also clear that global political leaders today at least pay lip service to solving the problem.

And yet there remains an almost palpable sense of hopelessness. With so much decisive science now in, there is no obvious excuse except to suggest that this behavior is driven by willful ignorance (i.e., greed, and/or fear of change). One imagines a lifeboat filling with water, sharks circling, with two survivors playing high-stakes poker. When their mate suggests bailing water before it's too late, one retorts, "Not now - I'm too busy making money."

Here's a NOAA chart of long-term atmospheric CO2 levels:

http://climate.nasa.gov/system/charts/15_14_co2_left.gif

And another showing the well-documented correlation between atmospheric CO2 and global warming:

http://www.worldviewofglobalwarming.org/images09/CO2Temp.jpg

One of the greatest risk factors today may be the Mad Magazine attitude of "What, me worry?" among the population, a normal reaction to "boiling the frog," or to slow or non-linear change. Humans do well with earthquake disasters - but not well at all with long-term, non-linear threats.

In this sense, even the charts can be misleading; after all, one might presume, whether it's a little warming (good for crops in the north) or a little sea-level rise (won't affect Kansas), who really cares? Let's get on with making money -

What's missed in this attitude (other than crop devastation and coastal destruction) is the certainty of higher-order non-linear change that warming has brought and will continue to bring at an ever-more-rapid pace.

 

Unexpected, Non-Linear Threats

Examples of unexpected, non-linear threats would include huge die-offs of plants and animals, caused by heat stress in traditional habitats and augmented by new bacterial blooms or pest population explosions. The devastation of nearly the entire starfish population along the US West Coast, now known to have been caused by water temperature increase and an accompanying bacterial infection, is indicative of how trouble in food chains can cause the sudden destructions of ecosystems.

The ongoing loss of Pacific Northwest fir forests to the mountain pine beetle is another.

There are many more, including but not limited to such enablers and events as:

Albido (solar absorption) change in polar waters: the more ice floes melt, the warmer the water gets, the more ice floes melt;

Dynamics of the Greenland ice sheet melting: the more onshore ice melts, the more under-ice rivers flow, the faster the ice melts;

Dynamics of particulate soot on Greenland: the more soot from Asian pollution falling on Greenland ice, the more ice melting (see above);

Ocean acidification: the more acidic the ocean, the less life it will contain, including phytoplankton; the less phytoplankton, the less CO2 absorption, which leads to more warming and acidification;

And so on.

At our recent FiRe Meeting of the Minds planning session, several advisory board members pointed out the unexpectedly rapid destruction of coral reefs, from Australia's Great Barrier reef (now, suddenly, 93% bleached or dying) to the sudden global coral reef loss of perhaps 50%. Here's a picture of what global warming, including warmer sea temperatures and increased ocean acidity, has done, when linked to a record "El Nino" event:

Damaged and Dying Coral Reefs

https://static01.nyt.com/newsgraphics/2016/04/04/coralmap/f591103f0be0ef1ccb31ad30ff65c5ecffe7e692/0404-for-CORALmap-720.png

Source: NOAA

Color Coding:

Yellow: Warning

Orange: Coral Bleaching Likely

Dark Red: Coral Mortality Likely

After a long run-up to this tragedy, most of the damage has occurred over the last two years or so.

Two years.

These are the kinds of non-linear events that will become commonplace in general, yet are unexpected in the particular, as we move forward up the global warming curve.

 

The Ice

For those who insist on making money while the lifeboat sinks, there is always the polar ice as a way of avoiding controversy. There are two aspects to this problem, and two poles to look at: basically, Greenland and Antarctica.

First, as noted above, non-linear effects have proven all Intergovernmental Panel on Climate Change (IPCC) projections of ice loss to be too conservative - meaning, too low. The faster the ice melts, the faster the ice melts, with current estimates showing huge increases in expected icemelt on both poles and very large jumps in sea-level rise estimates.

Here is one picture of what Greenland looks like today, from a flyover I did last week, showing the massive and accelerated flow of ice into the sea:

Of course, this is just a single photo, but backed by what we now know about revised estimates for icemelt, it is truly chilling.

From an email I received last week by another of our advisory board members:

" [A] couple of weeks ago in Boston [as you emailed me] I was leading a session for an engineering design firm, a firm that concentrates on eastern seaboard cities. One of the external SME's was Dr. Hans-Peter Plag, of Old Dominion in Norfolk. He blew me away, which is not easy to do. He fairly recently was on a commission in the Netherlands on whether to build the sea protections even more robustly. He made news by being the lone dissenter, saying sea level rise is game over, stop building dikes and prepare the nation to move inland. Quite a radical view. I'd love to interview him on stage at the next FiRe, if Sea Level Rise is on the agenda ---" [Emphasis ours]

Moving cities inland entails a cost beyond my understanding, but so does losing coastal real estate. The fact that an expert from the Low Countries is suggesting that we just abandon the fight against rising sea levels is perhaps a harbinger of things to come.

We know that the world's great cities, and most expensive real estate, are on the coasts. But what is the financial cost of losing it? Whatever the number, I have no doubt it is beyond the ability of any country to afford. Who is ready to pay for the replacement costs of LA, New York, San Francisco, Shanghai (Beijing will also be underwater), Hong Kong --- ?

From a paper published in Nature last week, documenting a doubling of the expected sea-level rise, to at least 3 feet by century's end:

"The Antarctic retreat could happen much faster and much more than we previously thought," said David Pollard, one of the lead authors and a researcher at Pennsylvania State University. "This is just the Antarctic contribution to future sea-level rise, but if there's anything to this, and if we really follow the business-as-usual [emissions] scenarios, then this contribution would exceed all other contributions over next years."

And a description of this research report from Scientific American:

The researchers stressed that a range of scenarios exist, based on how quickly the world cuts back on greenhouse gas emissions from burning fossil fuels. If emissions were rapidly decreased, Antarctica would cause sea levels to rise less than a foot by 2500.

In the worst-case scenario, sea levels could rise around 50 feet by 2500. Even in a moderate scenario in which emissions stop after 2500, the long "thermal memory" of the ocean would prevent the ice sheet from growing back for centuries.

And this brings us back to the FiRe CTO Challenge of 2011: our panel was clear in stating that reducing emissions of CO2 now, not later, was critical in avoiding catastrophe. Looks like they were right.

As we've mentioned before, just-re-elected Florida Governor Rick Scott was recently discovered to have put into place (through a now-retired head of the Department of Environmental Protection) an unwritten regulation against any state employee using the term "global warming." Wow. That's both self-delusional and self-destructive. But even more important: after half his state is gone (which it will be), how will he be viewed by his grandchildren, or by history? The guy who went on with his poker game while the lifeboat sank.

Here's the Miami Herald (March 18, 2015):

"We were told not to use the terms 'climate change,' 'global warming' or 'sustainability,'" said Christopher Byrd, an attorney with the DEP's Office of General Counsel in Tallahassee from 2008 to 2013. "That message was communicated to me and my colleagues by our superiors in the Office of General Counsel."

Kristina Trotta, another former DEP employee who worked in Miami, said her supervisor told her not to use the terms "climate change" and "global warming" in a 2014 staff meeting. "We were told that we were not allowed to discuss anything that was not a true fact," she said.

This unwritten policy went into effect after Gov. Rick Scott took office in 2011 and appointed Herschel Vinyard Jr. as the DEP's director, according to former DEP employees. Gov. Scott, who won a second term in November, has repeatedly said he is not convinced that climate change is caused by human activity, despite scientific evidence to the contrary.

So, not only is the problem one of planetary scale, and increasingly clear threat, but it's also politically still a "hot potato," at least in the retrograde US. In fact, as Americans know, although a clear majority of Republican party members recently surveyed agree that global warming is a major issue, and is caused by human beings, not a single GOP candidate for president has been "allowed" to say so.

I don't care which party wins the US presidency, but I do care about destroying the planet. At speeches recently, I've taken the position that "no person should be allowed near the White House who does not recognize the importance of addressing global warming." While my audiences are almost always majority Republican, they have uniformly responded with spontaneous applause for this suggestion.

 

Solving Simultaneous Equations

If we stand back and ask what needs to be done in order to find a safer path through these landmines, we can identify three major problems facing the world, all of which need solving:

o   Human-caused emissions of CO2 and methane are accelerating global warming;

o   Our global materials plan is currently based on serial resource exhaustion, and so is not sustainable over time or increased headcount;

o   Current manufacturing technology is suited to the above CO2 production and resource exhaustion; we need to develop new commercial demand and business solutions for making the planet's things without destroying it.

In addition, there are a few other related challenges, which can also be considered "simultaneous equation" contributors. These include:

o   Greenhouse gas emissions need to be curtailed immediately, and not on some distant promised future date safely beyond current profits;

o   Corporate control of government has led to gridlock, preventing rational discussion and decision-making on this issue - therefore, resolution needs to satisfy business as well as political demands;

o   Almost all decision-makers are operating on a short-term cycle (political re-election, CEO quarterly compensation), also preventing intelligent long-term planning;

o   3D printing, an alternative manufacturing process, remains a hobby, limited by a small number of jets, vs. the large number of materials in most objects.

Is there a solution set that satisfies all of these requirements?

Of course, or you wouldn't be reading this.

 

The SNS Carbon Trifecta

Over the last eight years, we have been working with a combination of leaders in technology, manufacturing, academia, and government to refine a proposal that would prevent planetary disaster while satisfying the requirements described above. As it has evolved, we have shared these ideas with the White House, the Department of Energy, the Graphene Stakeholders Association, participants at our FiRe conferences, SNS members, the SNS FiRe / Park City Institute Speaker Series, Forbes, and elsewhere.

Now, we are launching it as the latest SNS Global Initiative.

To start with, let's make this simple:

We need to take all of the CO2 out of smokestacks immediately. This is the Churchillian Moment issue: all companies, and all nations, need to stop emitting CO2 now. In reality, one could imagine a global agreement to stop emissions within, say, three years.

Since coal and gas plants have long-term cycle lives, returns on investment, owners, and users, we need a new approach. How can we turn CO2 from a waste product into a commercial good, and in so doing turn political opponents wasting time into business partners making money?

Today, there are an increasing number of companies working on the CO2 problem. Just burying CO2 seems doomed as a solution: it is a huge cost, with no return. Turning CO2 into biofuels seems outdated, insofar as re-burning the carbon puts CO2 back into the atmosphere.

But what if we could turn CO2 into the most valuable chemical on the planet? Well, what is that? It's graphene. And there is a company that we found - Graphene Technologies Inc. - which had anticipated this exact problem and has a patented system for catalyzing this reaction. In other words, this company's process uses less energy than otherwise to reduce carbon into a single-atom-thick sheet (or platelets).

Making money from waste is smart, and it aligns the interests of corporate owners, politicians, and environmentalists. Mission accomplished.

But this is only true if there is a market. What is graphene good for? While the EU spends $1B on graphene commercialization, and the UK another $500MM, finding answers that are as numerous as they are diverse, we need an answer on a planetary scale. What could consume enough CO2 to make a difference?

That would require mass manufacturing of most of the things we see around us today, from construction to tennis rackets, from clothing to glass, from cars to planes, chips to computers. Well, graphene can be all of these things. But how would that manufacture happen?

3D printers are uniquely positioned to do exactly that. Already, companies like LocalMotors are doing prep printing in plastic of entire cars. Why not print the wires, glass, and everything else in one pass? With graphene, it's possible. Not today, not tomorrow, but perhaps within a few years.

By solving all of these simultaneous equations - simultaneously - it's possible to solve all of the problems contained within the global warming challenge, satisfy all parties, and achieve everyone's goals.

Jon Myers, the CEO of GTI when we first met, is now an active member in this SNS initiative. After all, his catalysis reaction (see below) may be a key to making it all work. I asked Jon to create a document to share at our meeting with one of the national laboratories last week, which he was kind enough to do.

 

The Myers White Paper

Mark Anderson's SNS Carbon Trifecta attacks three problems in an elegant and inspirational model:

Problem 1:Carbon Dioxide Continues to Accumulate

Fossil-fuel combustion and carbon-dioxide production are inextricably tied to the basic services that drive the global economy. Efforts are underway to bring on new forms of energy production, but even if the growth rate of these efforts is accelerated, carbon-dioxide production will exceed the capacity of the planet to absorb the gas through photosynthesis for at least the next 100 years. If carbon-dioxide emissions to the atmosphere are to be reduced, they must first be captured and then either used (i.e., converted) or sequestered.

Carbon capture technology has advanced markedly, but carbon sequestration - the conventional model for disposing of captured carbon dioxide - is no closer to a scale solution today than it was at the beginning of the century. Thus it is imperative to consider a strategy for conversion of carbon dioxide from a potentially harmful industrial waste to a useful input.

Problem 2:The World Is Short of Materials

The globe is transitioning from one composed primarily of first- and third-world countries to one in which third-world countries are quickly, and across the globe, evolving into second-world countries with aspirations of becoming first-world. With more than 7 billion people on the planet, this is translating into a huge demand for resources which will be difficult to meet without significant environmental impact, including even more carbon-dioxide production and potentially damaging price inflation.

Problem 3: 3D Printing Needs a "Universal Material"

Manufacturing continues to be based on the Industrial Age concept of "One-size, mass-produced, fits all." Mass production dropped costs considerably when first introduced early in the 20th century; and global trade, which has increased markedly in the last 50 years, has allowed corporations to manipulate the cost of goods produced even more. But the impact of global trade is turning out to have major impacts in terms of energy use (and carbon-dioxide production).

Meanwhile, computing and software have enabled 3D printing technology to create an alternative to mass manufacturing that promises to turn the present global production and trade model on its head. 3D printing offers unprecedented design and performance efficiencies, unique customization capabilities, local production, and businesses, services, and local jobs at delivered price points that will soon be competitive with conventional mass-manufactured, imported goods.

The problem with 3D printing is that the plastics used today to make printed objects are neither complex nor strong enough to compete with conventional manufactured objects. More important, the printer technology itself is limited to a few jets, and almost all objects made from current materials are more complex in number of materials and their characteristics. Ultimately, 3D manufacturing will need a better solution set.

The SNS Carbon Trifecta

An inspirational and world-changing Trifecta approach would, Mark Anderson envisions, combine solutions for both the re-use of carbon dioxide and the need to support a global advanced economy with the transition from today's now-mature, and likely soon outmoded, mass-manufacturing and global-trade model to one that is driven by computing, software, and 3D printing.

As a launching point, the SNS Carbon Trifecta will require developing a viable methodology for converting carbon dioxide (and / or methane) to a useful material. Several years ago, and for this same purpose, Graphene Technologies (GT) developed what Mark Anderson believes is the technology the world needs to make this project viable.

(Graphene Technologies was founded in 2010 to pursue development of its patented process for manufacturing graphene - a potential base input for the Trifecta Initiative - from carbon dioxide. Graphene is a nano-carbon with exceptional properties, including strength. A Nobel Prize was issued in 2011 for groundbreaking work with graphene which identified a number of extraordinary properties.)

When graphene is integrated with plastics - a nontrivial exercise today, and one which GT has developed world-leading mastery of - the performance of plastics can be increased markedly. Leading 3D printing companies acknowledge that 3D printing needs stronger plastics to become a viable mass-market manufacturing technology.

If graphene, made by stripping carbon from carbon dioxide, can be used in large volumes to enable the production of the essential building blocks of a 21st-century global modern civilization, the vision of the Trifecta Initiative may be realized.

GT's (patented) process for graphene production from carbon dioxide is based on a high-energy reaction between magnesium and carbon dioxide. Chemically, the reaction can be stated as:

CO2 + 2Mg = Cgraphene + 2 MgO

This reaction is exothermic. The MgO can be recycled to Mg in a process identical to that used today in the production of Titanium (Ti), in which Mg from a companion Mg production plant is used to facilitate Ti production. MgO is returned to the plant and reduced to Mg for re-use in Ti production. Remarkably, at scale when coupled with Mg production, the economics of graphene production using the GT process and recycling the MgO are extremely supportive of the Trifecta Initiative vision.

Based on data directly acquired from a major Mg manufacturer, GT estimates that the cost of graphene production using the GT process will fall well below $5 per kilogram. This is less than one-fifth of the most optimistic estimates for graphene produced by exfoliation of graphite and is compatible with the requirement for mass-market 3D materials production.

Thus, the vision of the Trifecta can be realized by:

         Using carbon dioxide that would otherwise be contributing to global warming and ocean acidification, to:

         address the increasing burden on the world's base materials caused by a transition to an advanced global economy,

         by enabling the remarkable capabilities of computer software and 3D printing to deliver profoundly efficient, beautiful and locally made materials and products - and by introducing graphene into 3D printing as a path for converting this technology into a manufacturing platform capable of delivering complex materials despite a limited number of jets.

Conclusion

The vision described by the SNS Carbon Trifecta may initially seem optimistic; however, we believe that it is attainable, perhaps even inevitable. The question for the U.S. and the world is: Will this profoundly new reality be realized by committed and funded efforts in advance of potential disruptions caused by inattention to the problems identified above, or will the new reality emerge as a consequence of inaction?

 

Summary

We are now on the cusp of building scientific, corporate, and political momentum behind a proposal that we think can actually avoid climate catastrophes, preventing temperature excursions from which it would be difficult to recover.

At stake are not only the financial and security futures of our grandchildren, cultures, and countries, but also the survival of a large fraction of the plant and animal species alive today. With widespread and rapid support for the SNS Carbon Trifecta, there is no reason we can't look forward to a future that we all prefer.

There is room at this proprietary and open-source table for every university, company, and country. In fact, without such wide-scale international cooperation, the plan won't work. Rich countries and poor; China and the US; the EU, UK, and Australia; companies in technology and finance, utilities and chemicals; universities, think tanks, governments, laboratories, and individuals, can all be productive parts of this new program.

To join the Carbon Trifecta, or to learn more as we build, just email mark@stratnews.com and we'll make sure to get you engaged.

 

Your comments are always welcome.

Sincerely,

Mark R. Anderson

Strategic News Service LLC
P.O. Box 1969
Friday Harbor, WA 98250 USA
Tel.: 360-378-3431
Fax: 360-378-7041
Email: mark@stratnews.com


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Quotes of the Week

 

   "Most organisations don't realise the full value of Cloud out of a single service. Instead, our customers are investing in sophisticated hybrid Cloud environments, which come with their own range of fragmented networking challenges. These include managing multiple vendors, portals and contracts, while trying to maintain a high level of security, performance and operational efficiency. We believe that just because these solutions are sophisticated, doesn't mean that they should also be complex. Cloud Gateway is Telstra's simple way to connect multiple Clouds, and create hybrid environments. ---

"Telstra is very well positioned to help customers with hybrid and multi-Cloud strategies, as we bring the Cloud and the network together. The network is the fundamental piece of the puzzle that helps provide a secure and reliable application experience. Having a single touchpoint also helps reduce IT complexity, enabling our customers to maximise the benefits of investing in Cloud." - Philip Jones, Executive Director of Global Products and Solutions, Telstra; quoted on CapacityMedia.com.

Australia's leading phone company (and SNS Alliance member) continues to innovate new business models, uniting private carriage with multi-cloud access.

 

   "What will happen now, there will a congress that will elect a new party leader from a list that will have only one candidate. The person will be the next PM and his sole task will be to ensure a referendum in support of Erdogan's rule as the sole ruler of Turkey until 2019 and probably beyond. Whether that will happen or not is any one's guess." -Kemal Kirisci, Director of the Center on the US and Europe's Turkey Project at Brookings Institute; quoted in VICE News.

Turkey's Putin takes the country back to pre-Ataturk days. Nice work.

 

   "A billion people around the world lack regular access to clean water, and that's expected to more than double in the next 25 years. Desalinated water costs five to 10 times more than regular municipal water, yet we're not investing nearly enough money into research. If we don't have clean energy we're in serious trouble, but if we don't have water we die. ---

   "We have shown that perforated graphene filters can handle the water pressures of desalination plants while offering hundreds of times better permeability. The process of pumping seawater through filters represents about half the operating costs of a desalination plant. With graphene, we could use 15 percent less energy for seawater and up to 50 percent less energy for brackish water." - Jeffrey Grossman, Professor at MIT's Department of Materials Science and Engineering (DMSE), after finding new low-cost de-sal solutions using graphene; quoted in MIT News.

 

   "We've been able to seal defects, at least on the lab scale, to realize molecular filtration across a macroscopic area of graphene, which has not been possible before. If we have better process control, maybe in the future we don't even need defect sealing. But I think it's very unlikely that we'll ever have perfect graphene - there will always be some need to control leakages. These two [techniques] are examples which enable filtration." - Rohit Karnik, Associate Professor of Mechanical Engineering at MIT, noting that his lab's results, published in the journal "Nano Letters," represent the first success in plugging graphene's leaks; ibid.

 

   "The current types of membranes that can produce freshwater from saltwater are fairly thick, on the order of 200 nanometers. The benefit of a graphene membrane is, instead of being hundreds of nanometers thick, we're on the order of three angstroms - 600 times thinner than existing membranes. This enables you to have a higher flow rate over the same area." -Sean O'Hern, former graduate research assistant at MIT, and the above paper's first author. Other contributors include MIT graduate student Doojoon Jang, former graduate student Suman Bose, and Professor Jing Kong; ibid.

 

   "The insight that I had was, well, rather than look at attribution as something we try to do after the crime has happened, why don't we become a little more proactive?" [The point is] to not only look at the bullets but also look at the weapon." - Angelos Keromytis, program lead at the Defense Advanced Research Projects Agency. The gun in the metaphor is a reference to hackers' IT resources. Angelos wants to pre-track vantage points into hackers, including the laptop they used to develop malware, their smartphones, and any other devices connected to the "Internet of Things" - many of which are traceable; quoted on DefenseOne.com.

 

   "Advanced Persistent Threat (APT) cyber actors continue to target sensitive information stored on U.S. commercial and government networks through cyber espionage." - From an FBI Flash alert on May 11; quoted on Freebeacon.com

 

   "The majority of the domains from the Flash FBI alert were associated with APT6 and one of their malware backdoors. Based on our visibility, APT6 targeted the US and UK defense industrial base." - Erica Eng, a threat intel analyst from FireEye; quoted in Motherboard. The FBI Flash claims that China's government continues to steal crown jewel IP from the US.

 

   "A group of malicious cyber actors [whom security experts believe to be the government-sponsored hacking group known as APT6] have compromised and stolen sensitive information from various government and commercial networks" since at least 2011; from the FBI Flash alert; quoted in Motherboard.

 

   "Looks like they were in for years before they were caught, god knows where they are. Anybody who's been in that network all this long, they could be anywhere and everywhere. --- [Re: the FBI Flash alert] "It's just flabbergasting. How many times can this keep happening before we finally realize we're screwed?" - Michael Adams, information security expert who served more than two decades in the US Special Operations Command, and who has reviewed the alert; ibid.

 

   "[China has stoked an] extremely rare and quite dangerous [debt boom]. They do not need more debt or more houses. They already have way too much of each." - US billionaire investor Stanley Druckenmiller, addressing the Sohn investment forum; quoted in The Telegraph. See the "Takeout Window" for more detail.

 

   "Chancellor George Osborne - who wants China to be the UK's second-largest trading partner by 2025 - has urged Chinese rail companies to bid for seven contracts worth £11.8bn covering the first phase of HS2, the planned high-speed rail line between London and Birmingham." - From The Telegraph.

Poor George - someone forgot to tell him that China's high-speed railway technology was stolen directly from Siemens and Hitachi. One of the thefts - of prized Western maglev tech under lock and key - was even caught on camera.

C'mon, George, pick up your game a bit. Stop abetting China's top international crimes.

 

   "But I think it's entirely unclear today whether people are going to get the experience right. And that's not a knock at anybody, it's just that we're at a stage where things are unclear. The hardware is too expensive, it looks a little goofy, you've got to have a couple of different machines... it's just not simple enough. Hardcore gamers will get it, that's fine, but if you want to get beyond that audience the experience has to improve dramatically. --- So I think I think it's a platform that's going to come. I don't think it's going to happen this year or next year, I think it's two, three years out. But I think when we get there, there's real meat there, there's real opportunity." - Robbie Bach, past Chief Xbox Officer at Microsoft, speaking at the GamesBeat Summit on VR; quoted on gamesindustry.com.

 

   "We are currently experiencing the longest global coral bleaching event ever observed. We are going to lose a lot of the world's reefs during this event." - C. Mark Eakin, Coral Reef Watch coordinator at the National Oceanic and Atmospheric Administration in Maryland; quoted in the New York Times.

 

   "We've never seen anything like this scale of bleaching before. Our estimate at the moment is that close to 50 percent of the coral is already dead or dying." - Terry Hughes, convener of the National Coral Bleaching Taskforce; quoted in DeutscheWelle.

 

Takeout Window

 

Global Warming: The Data

We can start with global temperature rise:

 

- And then look at CO2:

http://4.bp.blogspot.com/-ojSd4on2SyU/VpZTxM1-azI/AAAAAAAAThI/LEe-h-T89r0/s640/co2_800k_zoom.png

Adding that methane, as well as CO2, has just gone off the high end of the charts:

http://4.bp.blogspot.com/-VY482b7kWY0/VF8_p83XgAI/AAAAAAAAPUc/gmkoWO3GUec/s1600/Vostok3.png

 

With another close look at the CO2 story:

http://climate.nasa.gov/system/charts/15_14_co2_left.gif

Which correlates tightly with human population growth:

http://investorintel.com/wp-content/uploads/2016/01/2016-1-12-Petersen-1024x653.png

And while emissions in the US decline, China's continue to grow dramatically:

http://thf_media.s3.amazonaws.com/infographics/2010/07/wm-china-us-co2-emissions-chart-1_732.jpg

And then there is the problem of China's difficulty with "truth in numbers." An under-reporting, "discovered" just before the Paris Accord, added a huge amount to the base figures from which China could then negotiate down, ending with little change from the status quo, but with great headlines. The same system has worked for crooked retailers for years: jack up prices, then knock them down for the sale.

https://edmhdotme.files.wordpress.com/2015/03/screen-shot-2015-11-09-at-18-42-03.png

 

The Great Barrier Reef has just become the latest of many large-scale casualties caused by global warming:

Australien Meeresschutzgebiet Great Barrier Reef Luftaufnahme

After extensive aerial and underwater surveys, researchers at James Cook University said only seven percent of the huge [Great Barrier] reef had escaped the whitening triggered by warmer water temperatures. [DeutscheWelle]

But there is lots of good news to share as well. This week the new Hewlett-Packard announced two new Multi Jet Fusion 3D Printing Solution printers, billed by the company as "the first 3D printer for large-scale manufacturing." If this sounds familiar, SNS members can go back to past issues of the Global Report to find our exhortations to HP to do exactly that. So, now we have a first move into a manufacturing revolution.

With Nike printing new shoes and BMW printing new car parts, we are really on the way to making this happen. (Our congratulations to SNS member Shane Wall, CTO at HP, and his team.)

 

Phase Two of the SNS Carbon Trifecta

The SNS Carbon Trifecta assumes that we need a 20- to 30-year transition period during which coal and gas plants can be wound down (without emitting more C02) and alternative energies geared up. What happens then? While wind energy is a strong growth story today, it seems likely that the ultimate answer will be, à la Elon Musk's vision, solar.

On that score, it is great news that the cost is dropping faster than almost any outside analysts predicted. SNSers will recall our suggestion that, in the long run, energy ought to be "free," or close to it. Here is a chart that everyone, except coal and gas companies, ought to love:

https://assets.bwbx.io/images/iLvF5WjbVozA/v2/-1x-1.png

 

Upgrades & Numbers

 

China's Debt

In what we are now calling the "Dead Panda Bounce," we're seeing that the massive amounts of new debt-based spending by the Chinese government, intended to "goose" the domestic economy, already sputtered out by March / April.

Here is the debt, now approaching "house of cards" levels on a historical and international basis. Note China's startling buildup of $26 trillion in public and private debt:

debt

Credit: The Telegraph

And here is an image showing those most exposed through trade to China's current collapse:

https://static01.nyt.com/newsgraphics/2015/08/26/china-explainer/5343578fdf424dd5e8d04f115e2bbcac11da0e1a/trade-Artboard_3.png

China's 2013 trade with each country

The current result is a blow-up in commodities pricing, as money flees the stock markets and searches for a home in bonds and commodities.

Some went into cotton, for example, just now starting to collapse:

https://assets.bwbx.io/images/ib.enIjKnepM/v2/-1x-1.png

 

While lots of others went into rebar steel, before it also collapsed again:

https://assets.bwbx.io/images/iWPesUSliMI0/v2/-1x-1.png

 

Eggs, like steel, beat the stock markets:

https://assets.bwbx.io/images/iXu2AAGc3u0Q/v4/-1x-1.png

- While cold-rolled steel dived and was dumped worldwide, destroying jobs and steel companies around the planet, before domestic funds flooded from stocks into steel, too, for just a little while - oops, looks like that spike is collapsing, too -

https://assets.bwbx.io/images/iFxbdm24GHvw/v2/-1x-1.png

 

Clearly, the funds have flown out of stocks -

https://assets.bwbx.io/images/iTs9eJua9Ph8/v2/-1x-1.png

Chinese investors obviously are asking the question: Where do you run when the whole structure is collapsing?

 

Ethermail

 

RE: "SNS: Special Letter: Technology Is Changing How We View Industry, ValueCompanies, and Develop Strategy"

Mark,

Great article on new business models. I have two concerns: first, the condensed version seems to have "buried the lead" in the final paragraph, which is:

 "There is no single solution to winning the Great Race. In the end, it's about using today's technology to build businesses that meet customers' needs. The businesses that dominate tomorrow's landscape will be those that blend the physical and virtual to win the Great Race - while those that remain one-dimensional are likely to struggle."

The second concern is related to the first -- it strikes me that these new business models follow the pattern that Marshall McLuhan noted for new forms of media -- they almost never entirely REPLACE the old version, but fit in, around, and on top of the old. After all, along with social media, TV, and radio, we still have oral storytellers - most often called stand-up comedians.

The authors appear to make this point, but again only in the final paragraph. If a lot of the future will not be "pure plays" of even the latest model, but really the best blends, a lot more examples come to mind. What the auto companies are doing with OnStar, Starlink, et al.; what Nest is doing with its thermostats; what IBM is doing with mainframes; what health insurance is doing with "provider networks" all seem to be prototypes of what a blended model might look like.

This reminds me of your argument that we need to move from an accounting of stocks to an accounting of flows. In the paper's context, I suspect it is some form of tracking relationships / lifetime customer or product value versus tracking one-off transactions / one-time revenue. At the moment, we have many fewer tools to do this kind of tracking, and much less understanding of how and why our tools mismeasure (over and under) from time to time.

A ready example comes to mind - the flattening of some computer sales (desktop, notebook, tablet, smartphone), as the willingness to buy the latest and greatest when one had something already declined. Yet this same pattern does not seem to obtain in cars or fashion clothing. Similarly, some IP (think apps in app store) gets sold over and over again; some seemingly very similar IP (the next app over) sells very little. Part of the reason we do not track flows or relationships is that it appears much harder to do than tracking stocks or transactions.

Rollie Cole

[Co-Founder, Wholesale Economic Development; and

Author, Wholesale Economic Development Vol. I

http://preview.tinyurl.com/wholesaleeconomics 

Austin, TX]

Rollie,

I think you are right throughout: the flows never lie, and flows of technology often are part of a longer, larger, multi-technology history. They may well flow from pads to phones to earbuds to the cloud, and what are continuous (and often conserved) are the flows of basic technologies involved, and the flows of customer needs.

Brands flow across generations as well, and so do use cases. And our need for storytellers, for many of the same reasons.

Mark Anderson

 

Re: "SNS Special Alert: The Manipulation Economy"

Mark,

That's a good place to start. There is a surplus of credit (when I get my hands on it, I'll call it money), but a shortage of questions. What is the ratio of digital credit to physical money, and is it important? Could demand for cash crash the system? Why is national debt not measured in terms of interest coverage?

Where is the limit to demand for low, zero or negative interest rate bonds if profits and equity prices go sideways or down for the next five years? Why do we tend to apply absolute measures to a system of relative values?

If the entire global financial edifice collapses, as it almost did last time around, who is least exposed?

And one more: SWIFT based bank robberies - criminals exploiting loopholes or retaliation against the US Dept. of Financial War?

Scott Foster

[Author, Stealth Japan;

Private Equity Analyst;

and SNS Ambassador for Asia Research

Tokyo]

Scott,

I agree, and I hope we did a reasonably early and credible job with the question of exposures to China in our issue "SNS: The China Short." I'd refer Premium members to go to the archives to look at this again, given the extreme damage already resulting from the China Collapse in global businesses and country GDPs. For non members, or for Standard-level members who want new copies, we also have a store with all past issues, available à la carte, at:

https://store.stratnews.com/

Mark Anderson

 

RE: Rocket Science

Subject: BE-4 Combustion Simulation

Mark,

In the BE-4 preburner, a very small portion of the engine's liquefied natural gas (LNG) fuel mixes and burns with all of the engine's liquid oxygen to produce hot gaseous oxygen, which is used to drive the turbine and spin the turbopumps. Oxygen and LNG burn stoichiometrically above 6,000 degrees Fahrenheit, and temperatures of about 3,000 degrees Fahrenheit or more are needed to reliably ignite and sustain the reaction. No practical turbine materials would survive at that temperature, especially in a reusable application. To resolve this, the BE-4 preburner mixes unburned oxygen into the burned gas stream to dilute the combustion gases and reduce the overall temperature to about 700 degrees Fahrenheit. If this mixing process isn't meticulously designed, hot spots can persist in the stream and limit turbine life.

To design the preburner to provide uniform temperature, we use 3-D Computational Fluid Dynamics (CFD) to model the LNG and liquid oxygen combustion process. CFD predicts fluid behavior by solving the Navier-Stokes equations to describe how the velocity, pressure, temperature, and density of a moving fluid relate. CFD of reacting flows, especially those that also involve a phase change, is much, much harder because it must also solve chemistry along with state equations. Combusting CFD has only become practical with recent advances in chemical physics models and computing power.

https://gallery.mailchimp.com/ca4c14684ac1af3f1219b4382/images/88c7212c-7b0e-45fd-ade5-49301c7e1f3e.png
Combusting CFD modeling of the BE-4 preburner shows temperature distribution of hot gaseous oxygen entering the turbine.

To date, we've completed several million core hours of CFD modeling of BE-4 combustion processes. Modeling of the preburner shows good mixing and temperature uniformity upstream of the turbine. The combustion and temperature data we've gathered in our subscale testing correlate with our CFD predictions and show that our preburner sizing and injector element design meet design requirements. The ability to do combusting CFD simulations doesn't eliminate the need for rigorous testing, but it will significantly shorten the test-fail-fix loop on the test stand. We'll keep you updated.

Gradatim Ferociter!

Jeff Bezos

[CEO

Amazon.com and Blue Origin

Seattle, WA]

Jeff,

First, I want to congratulate you on the incredible successes you've had to date with the New Shepherd and the BE-series engines. When I first heard that Boeing, et al., were contracting new engines from an untried startup, I thought they'd swapped their pinstripes for tie-dyes. But so far you've proven that you and the Kent team are more than up to the task.

In an era when space exploration is moving rapidly from the public to the private sector, your contributions are clearly going to make a real impact. So, please keep it up.

Now, for preburners:

I am very glad to see you harking back to Navier-Stokes equations, because, as you no doubt are aware, the major theme for our FiRe 2016 conference is "The Power of Flows," and N-S is one of the most basic flow equations.

I will suggest that you might want to come join us personally at FiRe in September, not only to take Elon's place (it's your turn, after his last seven appearances) as you move Blue Origin into the mainstream, but also because we will be revealing a new fundamental interpretation of Chaos mathematics that would apply directly to eddy states and burn efficiency in rocket engines.

And FiRe will be the only place in the world where you will be able to learn about this new discovery, first-hand.

Thanks for writing, and I hope you'll join us.

Mark Anderson

P.S. Gradually Ferocious? How about "Perseverance Furthers"?

 

RE: China's Steel Dumping

Mark and Evan,

Here's a detailed article on Chinese steel dumping that you may have already seen. This, as you have been saying, is a war.

What is at risk is not "free trade" but the survival of European and American industry. Any politician or bureaucrat or economist who debates the issue based on the "principles" of free trade doesn't get it and should be put out of a job for a few years to drive the point home. Donald Trump gets it, so this is just willful stupidity on the part of comfortable elites. Not knowing what to do about a very large country with a highly aggressive and competitive economic and foreign policy is one thing, but if the level of misunderstanding is as low as not getting why tens of thousands of people show up at Trump rallies, it's the suicide of the Republican party writ large.

Comfortable elitism is what they are really trying to defend. The non-strategic legalistic mindset is another major problem. "Calculating costs in China is tricky." This is intellectual sloth and political gutlessness masquerading as responsibility. As the Economist points out this week, calculating GDP in the UK is tricky, but that doesn't paralyse policy makers.

The level of nonsense rivals that of "Osama bin Laden was taken out - but was it legal?" People this stupid should not be allowed to make policy. During your campaign against Huawei, it came to light that the Chinese took over the European telecom equipment market largely because procurement was decided solely on price. The bureaucrats and economists and politicians took a five minute view and sacrificed their own industry to their inability to manage a budget.

They have created record structural unemployment, too, which means they are sabotaging not just industry but the whole society. If this happens again with steel, they will deserve whatever happens next.

China's Steel Makers Undercut Rivals as Economy Slows

CARDIFF, Wales - With thunderous roars and flashes of blue light, an electric arc furnace at a steel mill in this industrial city melts 170 tons of scrap metal at a time, which is made into reinforcing bars for construction projects across Britain.

The furnace, decked out with all the latest gear, helps keep costs down by relying on local scrap instead of imported materials. It was part of a broad $500 million investment plan to make the steel mill competitive and profitable.

But China has stymied the strategy.

The steel mill, owned by the privately held Celsa Group of Spain, just cannot compete with Chinese rivals, which offered products at 20 percent below prevailing rates in Britain. Celsa estimates that Chinese companies at one point accounted for about half of the region's sales in a certain type of reinforcing bar, up from essentially nothing just four years ago.

"It's nice to have free trade, but it has to be fair," said Luis Sanz, the managing director for British operations at Celsa.

The steel industry sits at the crux of a major debate playing out across the world economy, one that could soon be intensified by a looming change in the global trade rules.

Scott Foster

[Author, Stealth Japan;

Private Equity Analyst;

and SNS Ambassador for Asia Research

Tokyo]

Mark and Scott,

The steel industry is currently the most egregious example of a lack of comprehensive response on the part of the West. With the UK pressuring the EU not to put tariffs on Chinese steel, one wonders whether they have simply been bribed, and are traitors by definition. Meanwhile about 30k jobs are hanging in the balance, with many more in supply chain and related activities surely at risk, plus all of mainland Europe. And China is bleeding money by the day and upping production.

Dark days.

Evan Anderson

[Director of Marketing and Research,

Strategic News Service; and

Director of Research, INVNT/IP

Seattle, WA]

Mark and Evan,

Ah, the T [traitor] word. I didn't want to put that in a note that Mark might publish. But that's exactly what it is - corrupt and incompetent elites selling the people down the river. The problem is, they think they're making sensible decisions, doing the right thing.

Scott Foster

 

Re: China Stock Manipulations


Subject: Bloomberg: China's Stock Suspensions Seen as Obstacle to MSCI Inclusion

Mark,

From Bloomberg, May 3, 2016, 4:00:01 PM

If anything stops MSCI Inc. from including Chinese shares to benchmark indexes in its review, it will be the overuse of trading halts.

To read the entire article, go to http://bloom.bg/1SKLKaz

[And, later]

The wild ride in China's commodity futures is making the nation's $5.9 trillion stock market look docile.

To read the entire article, go to http://bloom.bg/23mjIUC


John Petote

[Angel Investor, Tech Coast Angels, and

SNS Ambassador for Angel Investing

Santa Barbara, CA]

 

Subject: Re: Bloomberg: China's Improbable Commodities Frenzy

   Leaves Stocks  in the Dust

Mark,

Inveterate gamblers. Too much money chasing too few financial instruments. Sounds familiar. 

By the way, Japan's current account surplus is 3.7% of GDP vs. 2.8% for China, -2.6% for the US and -4.2% for the UK. So the Yen should be going up, and it is.

The figure is 7.7% for Germany and 7.7% and 9.7% for the Netherlands. If they don't keep Spain, Italy and Greece in the Eurozone, they face currency appreciation of t 30% - 50%.

The untold story - particularly untold by the Economist and needless to say unmentioned by Mr. Osborne and Mr. Cameron - is that the UK economy is on the ropes. 

Data from the Economist.

Scott Foster

 

Re: Apple's China Payoff

Mark,

Apple is transitioning from the world's top innovation company to becoming the deal making company. If not for their giant cash hoard they'd be in an unstoppable, and perhaps, accelerated, decline.  They have to make these types of deals now as a way of attaining time and hope to reignite future growth. The problem is, this puts them in a weakened positioned as they are now forced to relinquish their previous 'follow the leader' advantage.

Now time to try and figure out who will be the new US-based global tech leadership companies of the future and how will they protect themselves from having to kow-tow to China (i.e. Assuming they learned from their predecessors' mistakes)??

From Bloomberg, May 13, 2016, 10:37:05 AM

Apple Inc.'s $1 billion investment in China's largest ride-hailing service could help accelerate growth in the world's most populous country - and earn goodwill with Beijing.

To read the entire article, go to http://bloom.bg/1Wvf6MB


John Petote

 

Subject: Re: Bloomberg: Apple's China Foothold Comes Cheap at $1 Billion

Mark and John,


You're probably right. What does the world need aside from not more cell phones? Infrastructure - water, transport, industrial parks, housing - Japanese, Korean, European and Chinese specialties. And what does America need aside from not more iPads? Upgraded infrastructure and competitive manufacturing, both of which it can build if it wants to. But Apple seems to be more interested in making the Chinese happy.

I like how Bloomberg phrased it - "help accelerate growth," but not in America, and "earn goodwill with Beijing," not with Americans. Obviously, the only path to growth they see is selling more of the same stuff to more Chinese. They have done a good job of maximizing Steve Jobs' vision, but that has to end sometime.

Scott

 

Mark, John and Scott,

I think the most ominous quote in there is this:

"We will be the last one standing," Stephen Zhu, vice president of strategy, said in April.

"Why is our competitor consistently 20 to 30 percent cheaper but still failing to gain market share? It's because the customer experience is not as good, their network is much less than ours."

Something tells me it isn't the customer experience alone... with Alibaba and Tencent (read government) behind Didi, I can only imagine what Uber is going through. I don't know why they made the strategic decision to get into a price war with the Chinese government (aside from desperation).

This looks like the classic divide-and-conquer style approach: screw Apple with Xiaomi and Huawei until they're losing share, then coopt them in their desperation to help screw Uber in the hopes that you might throw them a bone for it. It isn't even clear that there's a real benefit in this investment to Apple's strategic goals, just "please the party."

Evan Anderson

 

Subject: Bloomberg: Apple's Cook Struck $1 Billion Deal With China's Didi in 22 Days

Mark, Scott and Evan,


Wonderful - China is now using the money of "desperate to please China" American companies to kill serious competition of other American companies. I'm losing all respect for Apple. One has to wonder who Facebook will be enticed to "invest" in (read: sacrifice) so that they can open up more China business for themselves.

I also find it interesting that the owner / founder of Uber's largest China competitor is the daughter of Lenovo's founder.

I hate to say it, but as much as I am not a Trump supporter, this is the kind of "US shooting themselves in the long-term head shenanigans" that he is the most likely candidate to attack (no, I have zero intentions of voting for Trump but I'm hoping that the few good qualifications that he has will be absorbed by Hillary).  - JP

From Bloomberg, May 13, 2016, 3:50:07 AM

May 13 -- Apple is investing $1B into China's Uber rival, Didi. It is the largest single payment that the ride hailing service has ever received. Bloomberg's Selina Wang reports on "Asia Edge."

The tie-up between Apple Inc. and Chinese car hailing app Didi started off with a joke.

To read the entire article, go to http://bloom.bg/24VjUAj


John Petote

 

Subject: Mr. Cook & China

Mark, Evan and John,

Apple invests $1 billion in Chinese ride-hailing service Didi Chuxing

So this is the big deal. Apple vs. Uber.

Scott Foster

 

Subject: Tim Cook set to meet with the Chinese Gov't end of May...

Mark,

Uh, oh. The Chinese Premier must really be enjoying Cook, Zuckerberg, and whoever else, kissing his butt. All we're doing is giving the Chinese more leverage to use against the U.S.  Really hypocritical for Apple / Cook to stand steadfast in the name of protecting privacy of U.S. citizens but not do the same for all other countries including China (especially so since Cook attributes his position to being one of principal).

<http://www.reuters.com/article/us-apple-china-exclusive-idUSKCN0XX0NY>

Apple's stock is a rudderless ship without China - or without some incredibly great new innovation(s).  It will be interesting to see what [further] concessions he ends up making in order to try and stop the bleeding.

So sad.

[And, later]

 

Subject: CNBC - Icahn: We're out of Apple, and it's China's fault

His comments came as the tech giant continued to shed value in the wake of disappointing earnings.

http://www.cnbc.com/id/103589316


John Petote

 

Subject: The debt bomb

Mark, John and Scott,

<http://seekingalpha.com/article/3975363-chinas-debt-bomb-keeps-ticking-will-explode?auth_param=1d9ci9:1bjjvm7:756c39681e254d41dd719ad4b1a1cf1c&uprof=52&dr=1#alt2>

Interesting article. So far, we're looking at a prediction from CLSA that 19% of debt is nonperforming (I would guess it's higher, more like 35). Macquerie thinks 350% of GDP (high end) while IIF comes in at 295 and McKinsey themselves think 282.

China claimed roughly 11 trillion in GDP last year, while I would guess that it's actually lower by about a trillion, having (I believe) decreased by a few percentage points negative growth, rather than ~7% positive. That would put us at a better case estimate from McKinsey of 31 trillion in debt at 19% nonperforming for 5.89 trillion in bad debt with an 11 trillion GDP. Personally I think it's more like 10 trillion GDP (at best, perhaps) at 350% (35 trillion) with non performing at 35% (if not more) and 12.25 trillion in bad debt in a 10 trillion $ economy.

More Dutch boys needed, I think, to plug this dike for another few months...

Evan Anderson

 

Subject: China cracks down in foreign NGOs

Mark,

<http://www.nytimes.com/2016/04/29/world/asia/china-foreign-ngo-law.html>

[And, later]

 

Subject: corporate debt in china

Borrowing money to pay dividends and buy back stock. What could possibly go wrong? A global problem:

"The IIF said the ratio of net debt to earnings (EBITDA) for US companies has doubled to 1.4 from 0.7 at the top of the subprime bubble in 2007.  Firms continued to borrow as if there were no tomorrow even after their profits began to crumble in 2014. 

"'For the most part, this very significant amount of debt has been used to pay dividends, buy back shares and fund M&A transactions, rather than financing capital spending, which has been on a declining trend since 2012 (and fell 3.5pc in the first quarter on 2016),' it said."

But particularly in China:

"Excesses in emerging markets are even greater, concentrated in Turkey, Brazil, Russia, and Indonesia, and above all in China where [corporate debt] has reached 175pc of GDP "This is the highest ratio in the world," said the IIF."

<http://www.telegraph.co.uk/business/2016/05/06/warnings-mount-on-worlds-corporate-debt-china-crisis/>

Russell Daggatt

[Founding General Partner

Denny Hill Capital

Seattle, WA]

 

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