M·CAM | mcam.admin
1
archive,paged,author,author-mcam-admin,author-1,paged-39,author-paged-39,ajax_fade,page_not_loaded,,select-theme-ver-4.1,wpb-js-composer js-comp-ver-7.9,vc_responsive

Pacific Islands have “abundance of wealth”, says intellectual property expert

Date:  Fri, 2008-10-24

Pacific Islands have “abundance of wealth”, says intellectual property expert

Nuku’alofa, Tonga − October 24, 2008 −−PACIFIC Island governments could change their view of their natural wealth, from one of being limited and based mainly on fisheries and agriculture, “to one that we have an abundance of wealth,” believes Dr David Martin an expert on intellectual property, who is visiting Tonga.

International Conventions and local Intellectual Property legislations are one-sided in favour of multinationals, and offer no protection for indigenous knowledge and creativity, he said in Nuku’alofa on October 20.

Dr Martin believed that the USA, the Europeans and Japan did not have the best interests of Tonga and the region in mind when they drafted their rules on Intellectual Property. “Their interest is for the advantage of the multinationals.”

Tonga Urged to Use Global Economic Crisis to its Advantage

Date:  Thu, 2008-10-23

Tonga Urged to Use Global Economic Crisis to its Advantage

Kingdom of Tonga − October 23, 2008 −− PACIFIC island nations are in a good position to take advantage of the current global economic crisis, according to Dr David E. Martin.

Dr Martin, an intellectual property and international finance specialist, said countries in this region were uniquely situated to integrate their industrial, natural and indigenous assets to form a banking and corporate sector that will weather the current crisis.

Instead of being overshadowed by the multinationals and bigger governments, the current economic game plan had put smaller nations on an even keel and as such they could now re-write the rules of how their intellectual property was used.

TCCI presents Tonga Moving Forward – A Fresh Perspective from Dr. David E. Martin

Date:  Sat, 2008-10-18

TCCI presents Tonga Moving Forward – A Fresh Perspective from Dr. David E. Martin

TCCI is pleased to have secured a visit from Dr. David E. Martin to Tonga from 18 Oct − 24 Oct 2008.

Kingdom of Tonga − October 18, 2008 −−Dr Martin is one of the world’s leading thinkers in intellectual property and has a great passion for the Pacific. He believes in enhancing development and growth through valuing the traditional knowledge and untapped intellectual property in the Pacific.

For more Information

Samoan Mamala Case Attracts Local Attention

Date:  Sat, 2008-10-18

Samoan Mamala Case Attracts Local Attention

Apia, Samoa − October 18, 2008 −− Following an address to the PIPSO Conference in Samoa, the Samoa Observer published an extensive article on the Mamala / Prostratin case of knowledge gained from indigenous healers which was used in patent filings in the United States and now in several other countries.

M·CAM Executive Chairman David Martin Addresses the PIPSO Conference in Samoa – Challenges Region to Reconsider Aid and Donor Support

Date:  Thu, 2008-10-16

M·CAM Executive Chairman David Martin Addresses the PIPSO Conference in Samoa − Challenges Region to Reconsider Aid and Donor Support

Apia, Samoa − October 16, 2008 −− In an impassioned plea to re-examine the unconsidered models imposed by industrialized countries, Dr. Martin provided a critique of the recent history of dependency and aid, the negative consequences that this had on the Pacific Island Nations, and proposals to explore alternative futures based on the richness of the region.

TAI Spring Side Chat Focuses on Intangible Collateral in Financial Crisis

Date:  Wed, 2008-10-01

TAI Spring Side Chat Focuses on Intangible Collateral in Financial Crisis

Berkeley Springs, WV and Charlottesville, VA &#8722 October 1, 2008 −− Eric Best of Best Partners wrote an opinion piece on Dr. David Martin’s Second TAI Spring Side Chat during which the current credit crisis was discussed in the context of the global financial system. His observations included:

Congress’ move to increase insurance is understandable, reflecting their desire to “Do something now!” to make the general public feel better about the credit crisis and its potential (impending?) impact on their bank accounts. If people wonder, “Hey, what have they done for me lately?” this might give some comfort.

But does it reflect an appropriate grip on reality and a sense of priorities? The FDIC at the end of the second quarter increased the number of problem banks on its watch list from 90 to 117. Others have predicted that over the next few years as many as 400 banks with assets of over $300 billion will fail. Against these potential losses the FDIC has only $45.2 billion in its insurance fund now against total insured deposits of $4.5 trillion.*

Making an adjustment in FDIC insurance to reflect inflation since 1980 seems to ignore the underfunding problem by multiplying it by 2.5. Is this comforting?

Everyone seems to be grappling with different pieces of the problem. Yesterday we drove to West Virginia for a meeting hosted by the Arlington Institute in which Dr. David Martin, chairman of M·CAM and a fellow at the University of Virginia, held forth in a 2-hour disquisition on the state of the markets and the near term future. Life ain’t gonna be like it used to be, according to Dr. Martin.

Complete Blog

U.S. Financial Crisis Speech

Google Video Part 1

Google Video Part 2

October 2007 Forecast

M·CAM and Vital4Life Launch Innovation4Life in the Netherlands

Date:  Wed, 2008-09-24

M·CAM and Vital4Life Launch Innovation4Life in the Netherlands

Leusden, Netherlands and Charlottesville, Virginia − September 24, 2008 −− On Friday the 19th of September 2008, M·CAM and Vital4Life Holding formed Innovation4Life − a collaboration linking Vital4Life’s market and strategy expertise with M·CAM’s ethical innovation finance and management programs.

Dr. David Martin Addresses Biosimilars 2008 Conference in Washington D.C.

Date:  Mon, 2008-09-22

Dr. David Martin Addresses Biosimilars 2008 Conference in Washington D.C.

Charlottesville, VA − September 22, 2008 −−M·CAM’s Executive Chairman Dr. David Martin will join an international group of intellectual property experts in discussing the changing face of intellectual property in the fields of biotechnology and pharmaceutical development. In his presentation, Dr. Martin will focus on the changing economic conditions in the global pharmaceutical industry closely examining the sustainability of the “merchant bank” models that have been adopted by global dominant brands. With innovation pipelines at all time lows for many global players, new innovations and new business models will add significant volatility in both finance and IP policy.

Conference Details

David Martin Addresses EU Parliament on Future of Proprietary Economic Models

Date:  Wed, 2008-09-17

David Martin Addresses EU Parliament on Future of Proprietary Economic Models

September 17, 2008 − Brussels, Belgium −−At the invitation of The Greens European Free Alliance in the European Parliament, Dr. Martin is providing a critique of the role of proprietary and intellectual property based economic models as they impact the challenges facing humanity. This address provides an alternative future scenario and action plan to that presented by the EU and EPO sponsored conference on patents and the environmental challenges facing the world held this spring in Slovenia.

Global Financial Risk Management leader, M·CAM, Explains Fannie Mae and Freddie Mac intervention consequences

Date:  Tue, 2008-09-09

Global Financial Risk Management leader, M·CAM, Explains Fannie Mae and Freddie Mac intervention consequences

TAI Alert: 16 – The Next Step in the Unwinding of the Economy

Berkeley Springs, WV − September 9, 2008 −−Yesterdays allegations of US regulator intervention with Freddie and Fannie were reported to be necessary to avert a worsening of the credit market instability. Traders on all the major exchanges alleged to have seen this intervention as a positive indicator of the global financial markets. However, consistent with Dr. David Martin’s scenarios/reports (click on each date for corresponding report), July 2006, November 2007, December 2007, May/July 2008, a greater threat now looms, further destabilizing the global financial markets.

In the last 52 weeks these mortgage industry giants have lost a collective $161 Billion in investor value (Freddie Mac $59.7 B, Fannie May $101.2 B) affecting over 1,500 mutual funds and over 1,300 institutional and capital investors (e.g. banks and insurance companies). A woeful inadequacy on the part of the federal government is the failure to report to the American people and the global markets the actual consequences of the market capital erosion which has already adversely impacted pension funds, retirement funds, insurance and bank liquidity reserves and international sovereign investments. Similar to the Nixon administration’s removal of the Gold Standard, based on international liquidity demands, the erosion of this market value has both economic and political consequence as international investments in these corporations now have significant altered capital stability around the world.

Islands Business journal turns spotlight on Intellectual Property Rights and the WTO / WIPO Regional Impact

Date:  Sun, 2008-09-07

Islands Business journal turns spotlight on Intellectual Property Rights and the WTO / WIPO Regional Impact

LESSEN OBSESSION WITH WTO AND TRIPS

September 7, 2008 − Suva, Fiji &#8722−If a country like India with all its financial resources cannot defend its own basmati rice from being patented by a US company in 2000, then how can one expect countries in the Pacific to defend their innovation, asks Dr David Martin, founding CEO of US-based M·Cam Inc.

The point he was trying to make, as he spoke to ISLANDS BUSINESS, was that there was a misconception in the Pacific region that if all legal systems and right ministers were in place to ensure a healthy, workable Intellectual Property Rights regime, the economy would flourish.

Countries like India and Denmark, he continued, were finding out just how much that belief was costing them. And the Pacific, instead of blindly adopting international trade rules dished out through mechanisms like the WTO’s Trade Related Aspects of Intellectual Property Rights (TRIPs) and the UN’s WIPO (World Intellectual Property Organisation), might want to change its approach to the issue of Intellectual Property Rights (IPR).

Complete Story

M·CAM Partners with the Center for Human Emergence in proposing the Creation of The Hague Center for Global Governance, Innovation and Emergence.

Date:  Wed, 2008-08-27

M·CAM Partners with the Center for Human Emergence in proposing the Creation of The Hague Center for Global Governance, Innovation and Emergence.

Den Hagg, The Netherlands − Charlottesville, VA −− August 27, 2008 −− M·CAM has joined a team of global emergence leaders in proposing the creation of The Hague Center for Global Governance, Innovation and Emergence. The “Hague Center for Global Governance, Innovation and Emergence” identifies partnerships and aligns initiatives towards a common goal within the wide field of International Development. It will incorporate initiatives from the different thematic policy intentions. It supports the philosophy behind the MFS of a multifaceted, integrated repertoire of complementary strategic interventions by government and civil society, and can make a contribution to its realization. The proposal’s principal author, Peter Merry, stated that, “Through our partnership with M·CAM, we are able to tap into the capacity of the corporate world to provide key technologies without getting caught up in traditional struggles and paralysis around intellectual property. Even more than that, we can access Global Innovation Commons where an alignment of the best knowledge and solutions is made accessible for the public good.”

An opportunity for open comment on the proposal is available at the following website below:

M-CAM Releases Final Reports on Pacific Island Ethical Innovation Commons

Date:  Fri, 2008-08-08

M·CAM Releases Final Reports on Pacific Island Ethical Innovation Commons

Charlottesville, VA − Apia, Samoa − Kokopo, Papua New Guinea −− August 8, 2008 −−M·CAM has formally presented two reports to the governments and private sector organizations representing the Pacific Island Nations with regard to two immediate opportunities to restore ethical frameworks to the financial and innovation futures of the Pacific. The first project is focused on the indigenous knowledge of traditional healers in Samoa whose knowledge was expropriated and has languished for years. This knowledge relates to a possible treatment for HIV/AIDS as well as other anti-viral and anti-cancer therapies. The second report is focused on the undersea mineral exploitation proposals being launched first in Papua New Guinea and scheduled for further activity in Fiji, Solomon Islands, Tonga, and New Zealand. This report is being distributed with the full support of the Komgi village leaders who have attempted to communicate their desire to preserve their environment and their ecosystem but have been unable to attract global attention to these vital issues.

Please see the Samoa − Mamala − Prostratin report here: Samoa Document

Please see the Undersea Mining Report on Nautilus here: Nautilus Paper

M·CAM Special Report in Saigon Times

Date:  Sat, 2008-08-02

M·CAM Special Report in Saigon Times

Ho Chi Minh, Vietnam −− August 2, 2008 −− Executive Chairman David Martin’s policy recommendations have been included in the August 2, 2008 issue of the Saigon Times. Encouraging development of a national innovation policy that rewards domestic consumption of internally generated gross innovative output, M·CAM has promoted a unique financial paradigm for the country of Vietnam which could become a model for many other countries.

Cover Story

Pacific Island Nations Conclude Historic Framework for Ethical Innovation Financial Future

Date:  Thu, 2008-07-24

Pacific Island Nations Conclude Historic Framework for Ethical Innovation Financial Future

Nadi, Fiji −− July 24, 2008 −− Representatives from the Cook Islands, Fiji, Kiribati, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga and Tuvalu arrived at an unprecedented and historical agreement today seeking to integrate a regional policy on intellectual property and traditional knowledge into the financial well-being of the region. Rather than adopting models from industrial countries without considering local consequence, the adopted resolution includes the first formal recognition of a regional policy on the use of IP and TK as collateral for financial transactions including sovereign finance.

Resolutions

M·CAM Proposes Innovation Literacy and Pacific Island Innovation Financial Development Policy

Date:  Sun, 2008-07-20

M·CAM Proposes Innovation Literacy and Pacific Island Innovation Financial Developmet Policy

Nadi, Fiji −− July 20, 2008 −− M·CAM is continuing to expand its global call for ethical innovation financial systems and policy deployment in the growing recognition that national financial stability for countries around the world will be increasingly dependent on Gross Innovation Output. In an expansion to existing work launched in New Zealand and Western Samoa earlier this year, M·CAM is serving as the primary resource for public and private sector Pacific Islands Forum Secrtatiat and the Pacific Islands Private Sector Organization (PIPSO) organized conferences this week in Nadi, Fiji.

Pacific Private Sector Group To Hold Annual Talks In Fiji

David Martin Leads Innovation and Technology Transfer Workshop in Ho Chi Minh City

Date:  Tue, 2008-07-15

David Martin Leads Innovation and Technology Transfer Workshop in Ho Chi Minh City

Ho Chi Minh City, Vietnam – July 15-16, 2008 – David Martin, Executive Chairman of M·CAM, is providing technical input and planning in cooperation with the Saigon Hi Tech Park to expand the commercial reach for the growing technical innovation coming from Vietnam’s leading institutions and government-sponsored technology parks. In a two day workshop and roundtable discussion, issues including innovation policy, the integration of public/private partnerships for funding and acquisition of technology, and technology transfer and finance best practices are being presented.

Saigon Hi-Tech Park announcement

Where Did This Financial Turbulence Come From?

Date:  Sun, 2008-07-13

SpringSide Chats: No. 1Where did this financial turbulence come from?  How the subprime debacle got started and where it might end up.A Discussion at The Arlington Institute in Berkeley Springs, WVAnalysis by Dr. David Martin Edited by Ken Dabkowski and Dr. David MartinEditors Note:  Welcome to Spring Side Chats.  One of the new resources we hope to facilitate in reaction to our current economic situation is a program at The Arlington Institute known as SpringSide Chats.  These chats, reminiscent of FDR’s Fireside Chats, hope to be a beacon of hope shining through the shoals of collapse.  Discussion topics will serve as welcoming open tables, psychological refreshers and invigoration instigators.   Our office is located in the town of Berkeley Springs, WV, USA, just up the hill from a local water spring.  We posit that water, not just fire, will be a cause for gathering and fostering of community spirit as we progress into the 21st century and beyond.  As the source of all life on this planet, we value it highly, and feel it is important metaphor for our mission.  In times of cyclical downturn, we are confronted with our dependency on the attachments to which we had been accustomed in the good times. Currently we face an economic downturn.  The ideals of free market thinking combined with Western consumerism have been supplying a sense of stability and growth.  Our attachments to this system have brought many progresses but are now are showing signs of weakness.  As our markets have declined over the past several months, all involved have been trying to do two things: diagnose the problems and propose system fixes or entirely new systems of operation.  We offer these chats as a scenario generation tool.  We believe scenarios are an important for preparedness and often use the logic, “If you haven’t thought about it, you haven’t thought about it.  What you haven’t thought about is, by definition, a surprise.  Negative surprises in combination with a lack of preparedness are hard to respond to.  Significant thought and active planning however can reduce the severity and negative effects and costs of negative surprises.”While scenarios are important to think through, we must also note: SCENARIOS ARE NOT PREDICTIONS!  Scenarios are possible future outcomes.  In considering a scenario, we may be led down possibility paths we had never imagined.  Some possibilities will be useful, others will not.  We do not ascribe probability to our scenarios, only possibility.  To the extent we can, we leave no stone unturned in order to give you the largest array of decision making information possible.  This information may be from sources credible in some circles and not so in others.  In the world of possibility, there is only possibility.  As we embark on the next leg of humanity’s journey, we wish you luck, success, and resilience.The discussion to follow is an annotated recording of our first SpringSide Chat which took place at our office in Berkeley Springs, WV, attended by a group of community members.  The ideas have been clarified from the original discussion and elaborated upon.    The most recent iteration of America’s economic system has its roots in a small meeting in Bretton Woods, NH, in 1944.  The hope – and assumption – that developed during that meeting was that out of the victory of World War II, a single global trade and economic supremacy (potentially a nation state) would emerge, ending fascism and all other “isms”.  In this meeting, there was an assent to certain financial dynamics, particularly an assent to the gold standard. Fast forward to August, 1971.  Facing many new economic hardships, the emergence of credible international technical and industrial competition, and unprecedented capital calls on the U.S. Treasury, the United Stated decided to supplant its previously established economic ground rules.  Today, we have forgotten what happened in 1971. Off the gold standard, on to fiat On Friday, August 13, 1971, the Nixon administration called an emergency session of the Federal Reserve.  The French Government had indicated that they were planning to redeem a large amount of its U.S. paper dollars for gold.  The U.S. Treasury did not have enough gold to redeem France’s treasury call, rendering that money impaired.  Due to this rush of call options, it became clear to the administration that if, on August 15th, the United States did not go off the gold standard, the country would  be insolvent because there was not  enough gold in the U.S. Treasury to fulfill the request of the French government.   A plan had to be devised and sold in two short days if the U.S. economy was to stay afloat.  Chairman of the Federal Reserve, Arthur F. Burns encouraged Richard M. Nixon to give this speech on Sunday the 15th. (Text)(Video)  With this initiative the seeds of our current subprime mortgage bubble were planted.  The speech explained that the government was going to pump cash into the hands of the American consumer, place restricted tariffs on imports and reprice the minimum wage.  It authorized spending up to 25% of GDP on the finance of infrastructure on non-market rate conditions using debt.    A series of national infrastructure building projects were initiated and someone had to bear the financial risk.  The Fed created long term investment vehicles that allowed government to finance the debt.  A significant amount of the cost was financed in bonds with very long (most at 30 years) horizons.   At this time we also started allowing foreign investors to buy U.S. debt, although the amounts were capped.  In 1971, Europe was not interested in buying US debt; however the Chinese central government did show interest and started purchasing it.  Repeatedly, the Chinese government reached its capped limit.  Each administration since has consistently revised the upper limit of the debt the U.S. would issue the Chinese.  Over the years, the limit was raised so much that China eventually achieved a controlling minority interest in the U.S. Treasury.  At that point, reached in the third quarter of 2007, they effectively stopped buying.  When a company sells interest in its stock, and sells a veto proof minority interest, it has subordinated its majority control because the minority interest vote can block the majority vote.  China now owns enough of the treasury to vote “no” and have their no carry a compelling consequence.  Their ‘no’ vote now has power to influence the market dynamics and price of our Treasury reserves.  In the past year, each time Congress or the White House sought to alter the Chinese monetary policy, China’s ability to maintain intransigence is evidence of their Treasury power.  Regardless of U.S. pressure, China can operate with an autonomy that they purchased since 1971. Immediately after gaining voting power, the Chinese discounted the treasuries’ value by 30% by stating, in October 2007, that they would modify their imputed value of their currency and treasury reserves.  They did this, knowing full well that by doing so they were putting their own asset in jeopardy since the only way they could realize value for it was to sell it.  Nonetheless, in essence they told the market that their asset was worth less than they bought it for.  Why?  By shorting the US treasuries they held, they invited the U.S. Congress to buy them back and the U.S. demonstrated that it couldn’t afford to.  In October of last year, the U.S. threatened trade sanctions against China for coupling the RMB to the dollar.  Why did our legislature stop?  Why did none of these threats ever get to a committee vote or floor vote? The simple explanation is that the Chinese elegantly reminded the U.S. government that they have both the economic lever (in their Treasury holdings) and the fulcrum (in their export imbalance) to handle their currency as they deem in their best interests.  If the Congress or White House elects to impose their will, China has two compelling economic weapons that it can unilaterally use – both of which will profoundly add to the economic instability that the U.S. economy already faces.  Add to this that the  Chinese government has supported a  policy of both invited and mandatory technology  transfer for most  of their largest contracts with U.S. corporations (thereby holding critical and sensitive competitive technology) and  one quickly  realizes that the U.S. has sold its control and influence a long time ago without considering the  consequences. The Chinese have put $1.3 trillion worth of U.S. Treasuries into an effective “junk bond” rated status.  When you change the rating of capital in a central bank position to that of “junk rated”, you increase cost of reserve capital by 625%. For example, if you are a local bank and want to issue a $100 loan, somewhere in the books, you must have $8 backing the $100 loan because you need to hold a loss reserve.  There must be enough residual liquidity so that, in the aggregate, you have the liquidity to backstop the loan.  Assuming that you maintain the 8% loss reserve you are on very thin ice as default rates are becoming considerably higher and their volatility is altering from historical levels with considerable amplitude.  The U.S. Treasury is no different than the commercial banks.  If the Treasury fails to retain adequate loss reserve controls, its underlying influence and value suffer. While Chinese were shorting the U.S. currency, the FDIC stopped reporting its loss reserves.  The FDIC was supposed to be, in essence, an insurance policy which allegedly insured deposits in federally chartered banks.  An insurance company has lower loss reserve than a bank.  Unfortunately, a large amount of the FDIC’s balance sheet is sitting in reinsurance products, collateralized loan obligations, and default swaps.  Many of those financial vehicles have lost a significant portion of the value in the last six months.  The American citizen who thinks that their individual deposits are guaranteed secure would find, on close examination, that neither the Federal Reserve (supporting inter-bank lending), nor the FDIC (insuring institutional liquidity guarantees) are sound. If you read the FDIC charter, you will notice that it does not insure any depositors, but only the deposits made by the approved financial institutions.  The role of the FDIC is to protect a lending institution, NOT its depositors.  Most people think that they are insured up to $100,000 when depositing in an accredited bank.  When it becomes apparent that an insurance policy doesn’t insure what the public believes it’s insuring, confidence falls. Why did the FDIC fail to report their loss reserves?  In its 2nd quarter report of 2007, the FDIC showed that it had, as its secondary loss reserve investment holdings, a considerable holding of Collateralized Debt Obligations.  At no point has the public had a transparent accounting of the effect of the CDO and CMO market devaluation on the loss reserves of the FDIC or the Treasury. Remember the emergency meeting of the Fed a few months ago?  What we think we know is that the Fed saved Bear Stearns from going bankrupt.  What really happened was that the American taxpayer got saddled with a huge burden of debt.  Bear Stearns couldn’t be saved and they couldn’t go bankrupt because the federal government owned the debt.  In a bankruptcy situation, a U.S. trustee is appointed to review the assets.  When you review the assets of a bankrupt corporation, you find out who the counterparties are.  Since, under bankruptcy law, the disclosure would have been public and the effects of it devastating to the economic system, it was essentially impossible for them to go bankrupt without bankrupting the entire system.  JP Morgan is the principal shareholder in the Federal Reserve Bank.   JP Morgan, acting on its own behalf, turned the Federal Reserve Bank into an off balance sheet holding company.  The U.S. Central Bank ended up with $40B of junk assets by the primary asset holder of the primary bank.  No one could afford the disclosure of the illiquidity of Bear Stearns because the real challenge would have undermined the Federally chartered institutions which are essential to maintain the illusion of economic soundness.Where are we now? Collateralized Mortgage Obligations (CMO’s) appear to be failing not because they are CMO’s, but because they are second mortgages on consumer credit.  We have only just seen the tip of the iceberg here.  The fallout will continue because consumer credit does not default, foreclose or liquidate at the same rate as traditional CMO’s.  With 30 year real estate loans, on average, the 17th year is the trouble spot.    However, in consumer credit, the trouble spot is at 18 months.  If you were like most Americans, sometime after 9/11/2001, you might have taken out a second mortgage and bought durable goods, e.g. high priced products such as cars and refrigerators.  That second mortgage didn’t get spent in the real estate market; it got spent in the consumer credit market for home remodeling or expansion.    All of that purchasing made the economy look good.  The problem is, we rolled consumer credit into mortgage credit.  Historical consumer credit default rates have been getting worse.  Consumer credit is now highly unstable. While US consumers default and shuffle their way to figuring out how to repay their bills, the global banking system is moving or has moved to the Basel II standard and the US decided to forgo a seat at the international banking table.  International banks may choose to value US partners much less highly in the future.ICAP – Who are they and why they are an important monitor?  Why might they might be the canary in the coal mine In October, 2007, all of the major indicators pointed toward an economic downturn.  The most significant question behind that trend was:  Where does the real counterparty risk sit?  The bank is the originating broker of things. Most banks make the majority of their income from services rather than from the extension of credit. When a mortgage is sold, credit is instantly rolled into a packaged form and sold.  The bank has simply become an origination house that moves the risk somewhere else.  That “somewhere else” turns the loans into 3rd party investment vehicles and eventually they roll into a variety of securities that require both credit enhancements and are supported by complex risk transfer products.  At the extreme of counterparty risk management, you find the trading of default swaps and other financial products and you find entities like ICAP. ICAP trades more value in one week than the entire GDP of most countries – trading the equivalent value of the U.S. GDP every 10 days.  They trade $1.3-$1.5 trillion per day in counterparty risk.  They are an indicator or the “governor” on top of the system, trading contracts which cover the exposure of counterparty risk.  The profitability of ICAP depends on dynamic management.  They provide a place to buy on the direction of the market.    The net effect of the offsets is a constant.  There is a finite amount of liquidity in the market.  Bundled loans are sitting in 3rd party investment vehicles here.  They have giant consolidations of portfolio holds. In the tertiary markets such as ICAP’s brokerage space, large banks and sovereign funds are generally the investors.  An early indicator of systemic unraveling is visible here as the first movers will set market direction.    Large revenue movements up or down means unraveling is starting to occur.  Look for a change in the reported revenue and profitability of ICAP.  If the market appetite is saying the system is OK, ICAP’s net income should be flat but profitable.   The worst piece of news you can get is news of ICAP’s revenue having significantly changed.   If the contract values are down, then there are lots of sellers, but no buyers.  If contract values are up, there are lots of buyers and people don’t want to sell or are unable to alter their positions.  Look at how much ICAP’s income changed in the first quarter of this year.  It might be calm in the eye of the storm at the moment, but keep an eye on the fundamentals of what moves ICAP’s revenue.    The Problem While US Treasuries have not been a particularly desirable buy because of excessive US debt loads, default swaps and derivate products – the counterparty risk management surrogates on the market – have been purchased by foreign interests.  Why would someone buy the excess of the overconsumption of our economy?  For the same reason the Chinese were buying US Treasuries: to gain a controlling minority position.  By August 13th of 2008, we will have lost the ability to control our excessive exposure to our risk management credit exposure at the non-governmental level; in short, we will have sold our economy. By selling off our Treasuries, by imbalancing our production/consumption behavior and now by selling our ability to manage non-sovereign financial risk management, we have invited outside interests to enjoy the benefit of being significant minority shareholders.  We no longer maintain the autonomy of our destiny because we’ve invited others to acquire both fulcrum and lever control. What actions have sovereign wealth funds (China in this example) already taken?  They’ve shorted the value of U.S. currency 30%.  We are having our currency shorted to the extent that in the very near future it could trigger the risk of runaway inflation.  In the past the U.S. would have solved the problem by saying “We’ll get domestic production back up.”  However, domestic production takes years to get back online, many experts say upwards of 8 years or more. Pieces of a Wild Card Scenario At the end of the Olympics, China could dump a significant amount of its holdings of US Treasury bonds. China could choose to be free to totally decouple the RMB from the Dollar.  Chinese purchasing has already shifted to India, Central Asia, Persia, Africa and Europe. Because there are no buyers able to absorb anything approaching the quantities of U.S. Treasuries held by China, it is using its holdings to collateralize purchasing contracts which it then pays for in other currencies.  While the European Central Bank could not directly absorb a dollar to euro conversion for the Chinese, the Chinese have effectively begun such a conversion by effectively using dollar denominated collateral for euro priced purchasing.  The Chinese have recently collateralized the Iranian oil pipeline deal in US dollars.  So US Treasuries are collateralizing the development of critical infrastructure in Iran – via China. Immediate impact this summer: Foreign Direct Investment has been coming in to finance our infrastructure in bonds and increasing involvement to support our banking loss reserves.  The U.S. Economy isn’t financing its own infrastructure.  For example, most of the bonds for oil desulfurization refining capabilities of the US expire this year (starting in 1971 or later).  It is the end of the fixed income market for building out infrastructure, in order to retrofit refining capacity.  The new infrastructure investments and bonds will not be originated in the US because we can’t afford it.  We needed those bonds to fund our infrastructure going forward.  ·         As price at the pump goes up, the value of the dollar is going to decrease.  As the dollar decreases in purchasing power due to oil’s price increase, it is getting a second hit in value from sovereign wealth funds shorting it.  These two trends in combination are not usually being considered together when calculating inflation trends.  ·         There could be a spike of inflation in the summer in August, post Olympics.  ·         The Chinese may not perturbate the system until after the Olympics because of national pride.  ·         China will likely be the wild card that has the most compelling consequence to domestic U.S. economic and international commercial policy.  ·         China may begin to activate and leverage its decade long mandatory technology transfer which involved the importation of vast intellectual property from U.S. and European firms.  Every sovereign contract issued inside of China must operate under the mandatory Technology Transfer policy of China.   That policy states that China has the right of full access to all of the technology, secrets and know-how of the research and development integrated into products sold by U.S. and European companies in China integral in critical infrastructure to the Chinese government.  It will be a big wakeup call to the companies who have represented to their shareholders that they hold exclusive control of their intellectual property.    People invested in companies like Siemens, ABB, Alstom, GE, Fujitsu, DuPont, or any other major global corporation, need to be aware of the underlying technology options that have been sold to China in support of the large contracts that have been announced over the past 8 years.  The nature of commoditization that will ensue from the Chinese use of the technology that they’ve purchased is a major economic wild card that the U.S. and European markets have not priced into current volatility. ·         Many competitors may emerge to each of the Western Industries represented in China as their intellectual property may be increasingly exposed to more commoditization pressures.  ·         These companies (from the U.S. and E.U.) may file grievances in international court and trade arbitration bodies.  However, China will be able to show compelling evidence of ownership of interest based on contract terms that have been somewhat opaque to most corporate reporting interests.  ·         The U.S. and E.U. companies sold much of their future IP control to be able to work in China.  Even if they won their legal arguments and attempted to repatriate portions of their intellectual property, they would likely be forced to pay China rebates for the booked value of the assets they (China) thought they were getting. ·         If the Chinese dumped U.S. Treasuries it could cause at least 1/3 of the current Dow component to be expressly negative.  This is due to the combined effect of the degree to which Dow components report profit from their Asian business together with the impact on the cash holdings on the balance sheets of the same interests.  Significant downward guidance will come in at end of year and early fiscal ’09.  ·         Currently the electorate base is still heavily influenced by organized labor; however this may be the last election season where organized labor will play a role in the U.S. elections.  This is a consequence of the fact that the industrial base that supports the largest organized labor units will likely suffer the further downsizing pressures of an activation of a Chinese initiative to use and expand the technical capabilities that they have purchased over the past decade. ·         After August, 2008 there could be civil unrest because of unemployment and because of the erosion of the dollar’s purchasing power.  ·         In this scenario, poor Americans may not be the ones acting out.   Poor people will experience a more difficult situation to be sure, however the middle class will feel their entitlements slipping away and this erosion of perceived status quo could cause the middle class to lead the civil disobedience.  This has been seen already in Europe.  The middle class are connected with internet and mobile phones.  They can coordinate differently.  ·         The emotional response of the middle class will be one of the loss of entitlement.  We will have had something and someone would have taken it away.  This is going to be perceived as injustice. ·         We cannot sustain the current diversity of consumer products.  Companies that are manufacturing them won’t be able to access the market anymore.    ·         No U.S. financial institution warrants an AA rating under the Basel II guidelines.  Instead, U.S. banks said that Basel II doesn’t apply to us.  We will be excluded or will pay a premium to bank with the world community. ·         Internationally it is suggested that there will be a drift to the Euro, Pound, and Norwegian monetary products.  What happens or is happening elsewhere? If the US market collapses or goes into depression, what happens to the rest of the world? China: China’s only way forward would be to slow down growth, avoid internal uprising in the process and become an internal consumption engine.  If you are a Chinese policy maker, a major problem is a largely male-heavy population (estimated 40% more males than females), i.e. unmarried men entering 30’s and 40’s (135 million people – equal to almost half the population of the U.S.).  If you are going to be single for your whole life – a direct consequence of the one-child policy – you are likely to spend your disposable income on consumables.  The global economy has never seen the dynamic that is emerging in China where the notion of building value for posterity will be nothing more than a theoretical value as a huge segment of the population will have no progeny.  The Chinese government will need to respond to this by focusing considerable attention on domestic production for domestic consumption turning inward rather than rushing for greater export dynamics.  If China can control their growth, they might be ok.  They have huge capacity problems in terms of energy, telecommunications, bandwidth, shipping, etc.  By cooling off their economy, actually they would do themselves a favor in the long haul.  Whether or not the “5th generation” leadership will be able to deal with the complexities of the next 20 years is unknown.  The National Development Reform Commission as of two years ago started a planned migration plan.  This plan envisioned and initiated the urbanization and net migration of 200 million people.  The reasoning was that this centralization would allow central service access to be available to a larger population, i.e. better schools, water, etc.  However, the gender problem was not accounted for and there is a cultural problem in two ways.  One: in China, family is not just important; it is the point of life.  If 135 million men can’t continue their family line, it will start to spark outrage.  Next, all the migrants will have left their home property which was where they had their identity.  Once these men realize they no longer have family, home, or identity, they will realize they don’t have a future.  People without a future tend to act in undesirable ways.  This challenge will need to be managed without any historical precedent to inform the dynamic.India: India has built a primary service economy, not a production market.  India’s service economy depends on the US and Western consumption market and the services attendant thereto.  As our consumption drops off, they may experience a shortfall in demand for all the services they currently provide.  As one Indian entrepreneur put it, “We are already in the late phase in terms of the maturation of the call center industry.”  India is now going after higher value service options.  Areas like the Maintenance, Repair and Overhaul (MRO) sector in aircraft, or low cost automobile production (Tata).  They are rapidly moving into the manufacturing sectors. Middle East: The Middle East may have strong pockets of stability.  There are many NGO’s and Multi-nationals who are establishing a business presence on the road from Cairo to Alexandria.  Tech parks in the desert might be the new trend. Brazil: Stability may emerge in Brazil and they have an outside chance of solving their poverty problem.  Brazil could be the good news story here.  They are now energy independent, net energy exporters, their automobile fleet runs almost exclusively free of fossil fuels, and they have recently discovered what might be the third largest oil reserve in the world off their coast.  Their financial institutions, long shunned by many developed economy financial institutions, are showing the prospect of emerging as one of the Western Hemisphere’s strongest national infrastructures. Russia: Russia is very similar to Japan in the 1980’s.  Their spending pattern reflects more of the trophy property and trophy ownership desires that value the perceived value of identity rather than the actual value of long-term economic vision.  Russia needs to focus its investments on areas of strategic, long-term technological value rather than supporting the inflation of real estate and legacy public equities with diminishing market relevance. Future scenarios in the US:U.S. in two years: ·         The collective emotional sense suggests that “things are miserable”.  ·         Employees want jobs that probably won’t be there.  ·         States may have liquidity problems as the tax bases based on real estate will be pushed into insolvency.  What do you do with a bankrupt state?  What do you do with a work force that needs comprehensive retraining for jobs that don’t exist? ·         Gross receipts suggest fall off within 2 years.  ·         More US imports may come from Vietnam and Honduras.  ·         Wild card risk of an Indonesian rice crisis.  Indonesia went from having 3,000 cultivars of rice to 5 cultivars now.  A single viral outbreak could kill it all.  Take Indonesian rice production out of global market, food prices destabilize quickly.  If you don’t have protein, you don’t live.Within 4 years: We see an emergence of a non-nation state solution.  The emerging solution will show that social networks will not be defined by nationality.  If you ask someone in most parts of the world, “Who are you?,” they define themselves by culture, employer, nationality, etc.  In the Muslim world, people define themselves by their religion first, geographic/tribal identity second and national identity third. We must account for these identity differences.  We should learn that we need to rely on old social network logic.  In short, we need to remember that long-term economic and social sustainability is predicated on mutual beneficial engagement, not hegemony.  If we want a seat at the table going forward we need a lot less proprietary thinking and more emphasis on cooperation and networked collaboration.  In the United States, we need to decide what to do with returning troops from Iraq.  We have trained and socialized a large segment of society to live in a constant state of stress and conflict readiness, to kick down doors and shoot things.  We’ve trained them to function in hostile environments with little clarity of the rationale for this violence.  They have risked their lives for the cause of the United States and many will return with post traumatic stress syndromes and other injuries that may alter their ability to seamlessly integrate into the work-force.  They expect that their sacrifice will mean something and that their country will take care of them.  We need an economically stable country to which these people may return home.  If they cannot get meaningful work or if their country shows signs of recession or depression and they cannot be integrated and socialized, we will have a problem on our hands.  We must give the returning troops jobs, even if this means sacrificing our personal incomes to ensure this need is met. Investment considerations The Arlington Institute and its members, affiliates, and friends are not licensed financial advisors.  Therefore, while we will offer our considerations with respect to various market segments, we do not make any investment suggestions based on the possible scenarios we foresee.Water: We start by looking at the basic necessities of life, the first being water.  Research utilities that allow you to deal with the production of clean water for drinking and irrigation.  Who controls water will control the flow of value.  Water is a long bet.  Look for private equity opportunities in low energy membranes and reverse osmosis. Oil: In the immediate future, demand for oil and its components will only reduce slightly.  Overall demand is still increasing with minimal increases in supply.  Until alternatives come along, oil (barring excessive speculation or reduced consumption) doesn’t suggest huge decreases in price.  Any carbon that we use, whether coal or oil, etc., has increasingly higher sulfur content.   Desulfurization enterprises and technology will become necessary to produce the end product.    The technologies to tap alternative energy sources are still not cost effective enough to compete with oil at this time.  Producing a kilowatt with less environmental impact for less money than oil has been claimed, however these claims have not been market tested and none of them takes into account the infrastructure needed to support the new technology.  Most analysts quote commodity prices rather than the holistic, “all-in” price.  Consider buying at the utility side of the all in cost.  Food: There are multiple logistical steps for getting food from point A to point B.  When transporting it, find out who can move the product without biologics or chemicals in it.  Observe the quality of the food supply rather than just food.  Also, look at underlying food security. Logistics: The way we move things will change.  We may have bigger quantities in fewer containers.  We might be talking about people in this scenario as mass migrations might need to occur, moving people to areas with water and food.  In an economic downturn scenario, people will probably not drive 20 miles to buy $15 worth of merchandise from a big box retailer.  They will make fewer trips with a higher expenditure per trip.   In this scenario, we could see the re-emergence of the corner store which will be good for local employment.     Currencies: Long:  Euro, Pound and Swiss Franc. Short: Dollar and RMBGold: Gold is a nostalgic thing which at present is hard to argue with because of its rapid increase in value.  However, we suggest considering commodities that have critical industrial uses such as titanium, tungsten, and copper.  Metals and commodities have experienced huge price increases in the last year and particularly in the past few months.  However, commodities markets are highly volatile; as always consider buying low and selling high.Dow Jones Industrials: We are not optimistic about the current Dow Jones Industrial companies.  On April 14th, 2008 a major event occurred in the stock market.  For the first time, it was clearly evident that automated trading and heuristic driven trading moved the market based on statistical volatility requirements that were uncorrelated to any alteration in actual corporate value or fundamentals.  The interplay between human emotions, technical fundamentals and, quant funds drove market volatility up until that day when there was an interesting transition.  On all the financial news networks, there was a question about how the Fed decisions would come out.  All the major financials prior to the market opening said, “the market is set to open higher” but it should have gone negative based on all the indicators.  What happened on the 14th was that someone, some agency, or something bought into a flat market.  There was a market drag along effect as we were responding to volatility which is not emotionally programmed.  We know what the program is and we know that the notion of fundamentals-based investing on the merits of book or balance sheet value have been abandoned in favor of moving liquidity based on statistical variance parameterization.  By automated purchasing into markets that are lacking volatility spreads, traders are not investing in value, but feeding liquidity into volatility.  We believe that the market left the human factors on the 14th because model based heuristics can make more money on volatility than value. Scenario concluding thoughts: We hope you find these explorations of possible scenarios of use.  We hope to evaluate other elements of proposed downturns over the coming weeks.  If you see major flaws or would like to posit alternative solutions, please send them to ken@arlingtoninstitute.org.  As evidenced in our newsletter, we publish well thought through solutions when sent.  We look forward to our next discussion at SpringSide Chats. 

M·CAM Internship Projects Expand Ethical Innovation, Information Sciences, and Structured Finance

Date:  Mon, 2008-07-07

M·CAM Internship Projects Expand Ethical Innovation, Information Sciences, and Structured Finance. Charlottesville, VA – July 7, 2008 – Four M·CAM Interns have completed their summer projects and presented their work in Charlottesville Virginia today. For the first year, M·CAM included a Senior High School Honors student in the Graduate Internship Class. Mr. Conor Pratt researched the adequacy of keyword based search algorithms for accessing relevant patent and technical literature and showed the considerable limitations of systems including those offered by patent offices and commercial endeavors such as Google Patent. Mr. Brice Stay, a Masters of Public Policy student from Brigham Young University in Utah, presented his work on repatriation and manifestation of ethical innovation economic development. Mr. Stay reported on his ground-breaking policy recommendations for the international recognition of traditional medicinal knowledge regarding anti-viral treatment for HIV/AIDS and Hepatitis originating in Savai’i Western Samoa. He also discussed the innovation and ecological policy challenges of the undersea vent mining being proposed by Australia-based Nautilus Minerals Inc. and possible means by which the environmental threats associated therewith could be mediated by informed innovation deployment. View presentation slides. Mr. Francis Godwin, a Masters of Business Administration student from Georgetown University, presented modeling of equity markets investment hedging strategies using innovation data optimization. In addition to this quantitative modeling project, Mr. Godwin played a principal role in providing technical support to M·CAM’s on-going collaboration with an international aggregator of desulfurization technology for polishing and finishing petrochemical and other fossil fuel feedstocks. View presentation slides. Mr. Saul Yeaton, a 2008 graduate of the University of Virginia’s Darden Graduate School of Business Administration, reported on his work with M·CAM CEO Yoav Millet. Mr. Yeaton created a standardized internal underwriting reporting system, streamlining the diligence process for the M·CAM Royalty Partners Fund. Using a combination of M·CAM’s proven intellectual property underwriting platform and industry standard financial analysis techniques, the creation of this reporting standard enabled effective and accurate review of potential investments. As part of an eight-week internship at M·CAM, Mr. Yeaton was responsible for the diligence process and company research on over thirty companies. This research involved review of intellectual property, financial data and market dynamics providing clear details for appropriate valuation and selection of investment approach. Mr. Yeaton will remain with M·CAM and provide leadership in M·CAM Financial’s investments initiatives.

M·CAM Announces Management Team Expansion and new CEO

Date:  Thu, 2008-05-08

M·CAM Announces Management Team Expansion and new CEO

Charlottesville, VA — May 8, 2008 — Dr. David Martin, Executive Chairman of M·CAM Inc., has announced the appointment of three new senior executives to lead the strategic expansion of M·CAM Inc. and the new M·CAM Royalty Partners Fund. Mr. Yoav Millet joined M·CAM as CEO and Managing General Partner of M·CAM Financial from alseT-IP Structured Finance LLC, a New York based investment fund focused on large intellectual property investments. Dr. Martin explained at the recent annual corporate shareholders meeting that, “Yoav Millet is one of the most experienced transactional experts in the growing intellectual property sector and we are very pleased to welcome his leadership and commitment to M·CAM and our proven underwriting platform.”

Mr. Jeremy Boccabello joined M·CAM in February in the new role of Executive Vice President, Global Markets. Mr. Boccabello is an experienced management consultant and entrepreneur who has served in leadership roles in three successful startup ventures. He also has extensive experience in national organizational resilience, sustainability and infrastructure finance. M·CAM’s continued commitment to global sustainability is reinforced through the creation of Mr. Boccabello’s leadership position.

The role of Chief Financial Officer will be filled by Mr. James Hoffmann who brings many years of global strategic business development experience and cross-cultural management skill to M·CAM. Mr. Hoffmann will work very closely with Colleen Martin who will now assume the role of Controller and Mr. David Pratt who continues in the role of Executive Vice President and executive member of the Board of Directors after nearly ten years of exceptional service to the company.

“These new executives are another example of M·CAM’s continued leadership in the global market for the financial risk management of innovation.” according to Dr. Martin. “Our commitment to ethical global financial leadership in the current economic transition – legacy incumbencies giving way to a more diverse economic mosaic – is reinforced with this internationally unique team.”

For more information, info.m-cam.com.