Outrageous predictions: ‘2015 is a great year for employment’

World Finance: So putting aside your outrageous predictions for 2015, what do you think the year ahead will look like?
Steen Jakobsen: If you had three inputs, energy prices, interest rates and currency, what would be the path of least resistance? Clearly the world is not functioning well with a strong dollar, so the top line for next year in terms of currency is lower dollar.

In terms of energy, the world right now is battling out whether this is inflation impact from low energy, or the increase in discretionary spending is more important. The analysts think discretionary spending is more important, the market seems to think that the disflation is more important. Energy needs to stabilise to be slightly higher.

I think 2015 is a great year for employment, it’s a great year for productivity, it’s a great year where we’ll turn around

In terms of the interest rates, we know for a fact that debt to GDP is rising, certainly in Europe, but all over the world. So low interest rates. So if you take the path of least resistance, it means a slightly weaker dollar, unchanged interest rates and a slightly more stable to higher energy. I think that’s exactly what happens, because at the end of the day water flows to the lower point. Gravity isn’t resisted even in these financial markets.

But I think in asset terms, the big play next year is to realise that being in so-called safe high yield plays is not going to work. Next year it’s about the transition from the 20 percent of the economy which is the listed companies and governments, into the real economy.

I think 2015 is a great year for employment, it’s a great year for productivity, it’s a great year where we’ll turn around, but first we need to get to that bad point in Q1/Q2.

World Finance: So how do you think we should approach the year ahead?
Steen Jakobsen: Prepare, rest well, train well, because 2015 is guaranteed to be more volatile, and I think as we come into 2015 in the WQ1, that will be exactly nine months since oil prices and the Europ started to fall. My rule of thumb is always nine months is the time it takes for a macro-impulse to work.

So be as I am: long fixed income, conservatively long the equity you need to own, and then as you come into Q1/Q2 next year, you need to be buying when everybody else will be selling.

Philips to acquire US healthcare firm Volcano for $1.2bn

The deal marks Philips’ biggest healthcare buyout since it acquired sleep and respiratory product maker Respironics in 2008.

Volcano is the leading company in the image-therapy industry, which is worth around $400m according to Philips. The firm manufactures products such as catheters, which allow blood flow to be measured without the need for invasive surgery.

The company plans on boosting its spending on pharmaceuticals technology

Frans van Houten, Philips CEO, said the acquisition would boost the company’s R&D and “accelerate the revenue growth for our image-guided therapy business to a high single-digit rate by 2017”.

He added that non-invasive solutions offer wide-scale advantages. “Image-guided therapies provide significant benefits for healthcare systems and patients, including reduced patient trauma, shorter recovery times and hospital stays, and lower costs.”

Scott Huennekens, Volcano President and Chief Executive Officer said the deal would also help strengthen Volcano’s proposition. “This transaction will be beneficial for our shareholders, customers, partners and employees,” he said. “There is a large and growing global market opportunity for image-guided therapies, and as part of Philips, we gain the scale and resources needed to accelerate our goals.”

Philips has been expanding its healthcare sector over recent years, with revenues from the business hitting €9.58bn and accounting for 41 percent of all sales in 2013. The company plans on boosting its spending on pharmaceuticals technology, which currently only accounts for five percent of its healthcare business.

The firm is looking to further bolster the division as it shrinks its formerly diversified portfolio. It announced earlier in 2014 that its 123-year-old lighting arm would be spun off to form a separate business, putting an end to the conglomerate structure which has characterised the company for over 100 years.

China calculates the risks of cranking up shale gas production

Among China’s long list of feats is one that reads: host to the largest shale gas deposits in the world (see Fig. 1). And while at first glance the characteristic appears the perfect fit for the world’s number one consumer of energy, the process of tapping what precious resources sit beneath the surface is riddled with potentially damaging repercussions for those above ground.

Across the pond, shale gas development has fuelled a resurgent US energy market and sparked talk of self-sufficiency in the not-too-distant future – with the International Energy Agency (IEA) and BP agreed that energy independence is on the cards for 2035. Far more than an isolated finding or two, America’s vast shale gas reserves have allowed the country to break free of its dependence on fuel imports and made way for hundreds of thousands of additional jobs. Starting at 0.6 trillion cubic feet in 2004, shale gas production is forecast to tip the 17 trillion mark by 2040.

The transformative effect of the so-called ‘shale revolution’, therefore, is something Chinese authorities have been eyeing with interest, given that the country’s estimated recoverable reserves are 70 percent greater even than America’s. However, looking at the country’s headline figures in isolation is to ignore the many obstacles that stand in the way of extraction, namely complicated geology, inadequate technology, skills shortages and ground water contamination. And as China’s natural gas consumption continues to climb, 90 percent between now and 2019 according to the IEA, the country must weigh up the benefits of production against the risks associated with extraction.


of China’s rivers and lakes are unfit for human consumption

The importance of the dilemma was again made clear in August when Wu Xinxiong, Director of the country’s National Energy Administration, cut 2020 production capacity estimates in half. And although in 2012 the National Development and Reform Commission claimed production capacity would reach 60-80 billion cubic metres before 2020, Xinxiong’s revised figures pointed to the lesser sum of 30 billion cubic metres. What’s even more disconcerting is that the new estimates are equivalent to little over one percent of China’s total consumption, which begs the question of what sacrifices must necessarily be made for the country to meet demand.

“China’s energy security and battle with air pollution urgently require China to constantly develop shale gas projects,” says Xiaoliang Yang, Research Analyst at World Resources Institute China. “As China gains more and more experience with strong government support, it is possible that China would have its own shale gas revolution, eventually helping China decrease its reliance on coal. Before that, China needs to sort out the technical, political, and market challenges, which leaves a long way to go.”

Coal to gas
With an average annual GDP growth rate of 10 percent in the period through 2000 to 2011, China’s sky-high economic and social development came accompanied with an insatiable appetite for fossil fuels. Specifically, the country’s fixation on coal has shrouded its largest cities in smog and last year resulted in greater greenhouse gas emissions than the US and all 28 EU nations combined. Accounting for close to 65 percent of the nation’s total energy mix, China’s coal obsession has received severe criticism from inhabitants and environmentalists alike, and with good reason. Health Effect Institute figures show that the pollution emitted by its cars combined with its 3,000 plus coal-fired plants was responsible for 1.2 million premature deaths in 2010 alone.

“The country’s consumption is expected to increase to 311 billion cubic meters by 2020. Of which only 200 billion cubic meters is expected to be met through conventional domestic production. The remainder of the demand has to be met through unconventional sources,” says Anshuman Bahuguna, Senior Research Analyst at Grand View Research.

A departure from coal is critical for a country keen to escape the consequences for its inhabitants, and the energy sector has found itself forced to reposition its strategy and focus instead on low-carbon alternatives to stave off what hazards a reliance on coal might bring.

Crucially, major industry names have taken pains to exploit the country’s vast shale gas reserves, and have already mapped out 54 shale gas blocks and drilled 400 wells, 130 of which are horizontal. State-owned China National Petroleum Corporation (CNPC), for example, has etched out plans to drill over 110 wells before the mid-point of 2015, building on the nine wells it runs currently.

Elsewhere, a transcript posted on the Ministry of Land and Resources website outlines what figures the market’s constituents hope to post in the years ahead – 1.5 billion cubic metres in 2014, 6.5 billion cubic metres in 2015 and 15 billion cubic metres in 2017. And while the country already accounts for 13 percent of world shale gas growth, according to the BP Statistical Review of World Energy 2014, the resource is not without its fair share of challenges.

Source: Reuters
Source: Reuters

Greater implications
Critical to China’s energy market inadequacies is how viable a solution shale gas will prove, coupled with the financial costs and the repercussions this could bring for the country’s dwindling fresh water supply. And though fracking is far from subject to the same scrutiny it has been in Europe, the fact remains that the implications of drilling are likely far larger on the Asian continent than they are elsewhere.

Whereas in the US, many of the better known shale gas deposits lie close to the surface, in China the ‘recoverable’ reserves are either buried far below ground or located in densely populated areas, both of which come with a premium price tag. Research conducted by Bloomberg New Energy Finance in May found that China’s shale gas production costs were double what they were in the US, and, despite superior reserves, the government’s 2015 target is short of what the US was producing in the late 1990s.

“Over the course of five years, China needs to train its personnel and equip them with the skills required for shale gas production. The government has to ease regulatory barriers and frame a light handed regulatory environment. Through technology sharing with US, China can offset the lack of technology,” says Bahuguna.

If China is to compete on costs with the US, the government must introduce both increased tariffs and subsidies; and for most residing in the region, not doing so would mean operating at a loss. Without additional stimulus, China’s fledgling natural gas industry will be hard pressed to replicate the success of its American counterpart. “There is no doubt that China’s central Government will continue to support shale gas development,” says Yang.

Water pollution
Ahead of China’s concerns regarding feasibility and competitiveness is the issue of water scarcity, which could rear its ugly head like never before – should leading industry names decide to increase shale gas production at quite the same rate they have been doing. And while economies of scale and infrastructural improvements have made the practice of exploiting shale gas more financially viable, the repercussions for the country’s already-short water supply could be dire.

The issue of water scarcity has already halted a number of plans to exploit shale deposits, namely at the Tarim Basin, a site that, while large, is without sufficient water supply to facilitate the fracking process. Home to 20 percent of the world’s population, the country is also home to only six percent of available fresh water reserves, and is losing what reserves it has fast, due to economic development, out-dated agricultural practices and climate change.

Ahead of China’s concerns regarding feasibility and competitiveness is the issue of water scarcity, which could rear its ugly head like never before

According to government findings, 70 percent of China’s rivers and lakes are unfit for human consumption, and last year, reports circulated about 28,000 of China’s 50,000 rivers having disappeared over a 20-year period. The mismanagement of the country’s fresh water reserves in years passed has given rise to growing concerns of chronic shortages in the near future. And whereas the overwhelming majority of demand today stems from agriculture, industry will represent a greater share of the total in the years ahead, owing primarily to the adoption of water-intensive processes such as fracking.

Aside from the amount of water required to tap shale gas, critics have posed the question of whether the process itself contaminates groundwater and, if so, whether the rewards are equal to the repercussions. One study undertaken by a research collective at the University of Texas found traces of methanol and ethanol as well as metals such as selenium, strontium, strontium and arsenic in wells located alongside extraction sites, though the exact reasons for are unclear.

Far from excluded to China, a report authored by the World Resources Institute in September found that 38 percent of the world’s known shale resources are situated in areas that are either arid or under extreme water stress. What’s more, approximately 386 million people live in shale rich regions, where public demand for water is likely to come to blows with industry demand, though China’s woes are among the worst, with 61 percent of its shale plays facing water shortages or located in arid conditions.

Should China decide to increase its shale production, the technical demands of doing so should be seen as secondary to the plight of those living in water scarce regions. Without the guarantee that fracking will not put the country’s already-stretched fresh water reserves at risk, China will be given little option but to rely on imports and focus instead on the transportation and storage of natural gas.

Baroness Nicholson: foreign aid has no economic benefit for Britain

World Finance: I just want to ask your opinion on foreign aid, because it’s very big in the news at the moment, especially following Osborne’s Autumn statement. So what do you make of the government dedicating so much money to this?
Baroness Nicholson: Aid is incredibly important when there is a real immediate crisis, but in the long run the golden thread of aid should lead rapidly through development, through trade and business. You want to stop people being victims as fast as possible, get them up on their feet again, get them competitive. Get them in a position where they can work and buy their own services, like you and I can.

[A]id is important, but it is by no means the end of the story

So, aid is important, but it is by no means the end of the story, and looking back on the past few decades, I think the weakness has been that people have taken aid as both the front and the back line of everything. What has that done? It’s enable millions of people to remain as refugees, in an utterly squalid, desperate existence.

I don’t like anybody to be a refugee or a displaced person. I want them to be up and running again, and to be as competitive, hopefully more successful than all the rest of us.

World Finance: Do you think foreign aid is of any benefit to Britain’s economy?
Baroness Nicholson: I’ve never seen foreign aid as benefitting the UK at all, except in terms of soft power. I believe that Britain gets a lot of credit from the United Nations for example, for being one of the biggest donors in the globe to UN funds. But I don’t think it benefits Britain in any other way.

Putin’s rules of attraction

Russian President Vladimir Putin’s covert aggression in Ukraine continues – and so do Western sanctions against his country. But the economy is not all that is under threat; Russia’s soft power is dwindling, with potentially devastating results.

A country can compel others to advance its interests in three main ways: through coercion, payment, or attraction. Putin has tried coercion – and been met with increasingly tough sanctions. German Chancellor Angela Merkel, Putin’s main European interlocutor, has been expressing her frustration with Russian policy toward Ukraine in increasingly harsh terms. Whatever short-term gains Putin’s actions in Ukraine provide will be more than offset in the long term, as Russia loses access to the Western technology it needs to modernize its industry and extend energy exploration into frontier Arctic regions.

Russia’s soft power is dwindling, with potentially devastating results

With Russia’s economy faltering, Putin is finding it increasingly difficult to employ the second tool of power: payment. Not even oil and gas, Russia’s most valuable resources, can save the economy, as Putin’s recent agreement to supply gas to China for 30 years at knockdown prices demonstrates.

This leaves attraction – a more potent source of power than one might expect. China, for example, has been attempting to use soft power to cultivate a less threatening image – one that it hopes will undermine, and even discourage, the coalitions that have been emerging to counterbalance its rising economic and military might.

A country’s soft power rests on three main resources: an appealing culture, political values that it reliably upholds, and foreign policy that is imbued with moral authority. The challenge lies in combining these resources with hard-power assets like economic and military power so that they reinforce one another.

The United States failed to strike this balance with respect to its 2003 invasion of Iraq. While America’s military power was sufficient to defeat Saddam Hussein’s forces quickly, it did so at the expense of its attractiveness in many countries. Likewise, though establishing a Confucius Institute in Manila to teach Filipino people about Chinese culture may help to cultivate China’s soft power, its impact will be severely constrained if China is simultaneously using its hard power to bully the Philippines in the territorial dispute over the Scarborough Shoal.

The problem for Russia is that it already has very little soft power with which to work. Indeed, as the political analyst Sergei Karaganov noted in 2009, Russia’s lack of soft power is precisely what is driving it to behave aggressively – such as in its war with Georgia the previous year.

To be sure, Russia has historically enjoyed considerable soft power, with its culture having made major contributions to art, music, and literature. Moreover, in the immediate aftermath of World War II, the Soviet Union was attractive to many Western Europeans, owing largely to its leadership in the fight against fascism.

But the Soviets squandered these soft-power gains by invading Hungary in 1956 and Czechoslovakia in 1968. By 1989, they had little soft power left. The Berlin Wall did not collapse under a barrage of NATO artillery, but under the impact of hammers and bulldozers wielded by people who had changed their minds about Soviet ideology.

Putin is now making the same mistake as his Soviet forebears. Despite his 2013 declaration that Russia should be focusing on the “literate use” of soft power, he failed to capitalize on the soft-power boost afforded to Russia by hosting the 2014 Winter Olympic Games in Sochi.

Instead, even as the Games were proceeding, Putin launched a semi-covert military intervention in Ukraine, which, together with his talk of Russian nationalism, has induced severe anxiety, particularly among ex-Soviet countries. This has undermined Putin’s own stated objective of establishing a Russia-led Eurasian Union to compete with the European Union.

With few foreigners watching Russian films, and only one Russian university ranked in the global top 100, Russia has few options for regaining its appeal. So Putin has turned to propaganda.

Last year, Putin reorganised the RIA Novosti news agency, firing 40% of its staff, including its relatively independent management. The agency’s new leader, Dmitry Kiselyov, announced in November the creation of “Sputnik,” a government-funded network of news hubs in 34 countries, with 1,000 staff members producing radio, social media, and news-wire content in local languages.

But one of the paradoxes of soft power is that propaganda is often counterproductive, owing to its lack of credibility. During the Cold War, open cultural exchanges – such as the Salzburg Seminar, which enabled young people to engage with one another – demonstrated that contact among populations is far more meaningful.

Today, much of America’s soft power is produced not by the government, but by civil society – including universities, foundations, and pop culture. Indeed, America’s uncensored civil society, and its willingness to criticize its political leaders, enables the country to preserve soft power even when other countries disagree with its government’s actions.

Similarly, in the United Kingdom, the BBC retains its credibility because it can bite the government hand that feeds it. Yet Putin remains bent on curtailing the role of non-governmental organisations and civil society.

Putin may understand that hard and soft power reinforce each other, but he remains seemingly incapable of applying that understanding to policy. As a result, Russia’s capacity to attract others, if not to coerce and pay them, will continue to decline.

Joseph S. Nye, Jr.is Chairman of the WEF’s Global Agenda Council on the Future of Government

© Project Syndicate 1995–2014

The return of currency wars

The recent decision by the Bank of Japan to increase the scope of its quantitative easing is a signal that another round of currency wars may be under way. The BOJ’s effort to weaken the yen is a beggar-thy-neighbor approach that is inducing policy reactions throughout Asia and around the world.

Central banks in China, South Korea, Taiwan, Singapore, and Thailand, fearful of losing competitiveness relative to Japan, are easing their own monetary policies – or will soon ease more. The European Central Bank and the central banks of Switzerland, Sweden, Norway, and a few Central European countries are likely to embrace quantitative easing or use other unconventional policies to prevent their currencies from appreciating.

All of this will lead to a strengthening of the US dollar, as growth in the United States is picking up and the Federal Reserve has signaled that it will begin raising interest rates next year. But, if global growth remains weak and the dollar becomes too strong, even the Fed may decide to raise interest rates later and more slowly to avoid excessive dollar appreciation.

The cause of the latest currency turmoil is clear: In an environment of private and public deleveraging from high debts, monetary policy has become the only available tool to boost demand and growth. Fiscal austerity has exacerbated the impact of deleveraging by exerting a direct and indirect drag on growth. Lower public spending reduces aggregate demand, while declining transfers and higher taxes reduce disposable income and thus private consumption.

Countries that were overspending, under-saving, and running current-account deficits have been forced by markets to spend less and save more

In the eurozone, a sudden stop of capital flows to the periphery and the fiscal restraints imposed, with Germany’s backing, by the European Union, the International Monetary Fund, and the ECB have been a massive impediment to growth. In Japan, an excessively front-loaded consumption-tax increase killed the recovery achieved this year. In the US, a budget sequester and other tax and spending policies led to a sharp fiscal drag in 2012-2014. And in the United Kingdom, self-imposed fiscal consolidation weakened growth until this year.

Globally, the asymmetric adjustment of creditor and debtor economies has exacerbated this recessionary and deflationary spiral. Countries that were overspending, under-saving, and running current-account deficits have been forced by markets to spend less and save more. Not surprisingly, their trade deficits have been shrinking. But most countries that were over-saving and under-spending have not saved less and spent more; their current-account surpluses have been growing, aggravating the weakness of global demand and thus undermining growth.

As fiscal austerity and asymmetric adjustment have taken their toll on economic performance, monetary policy has borne the burden of supporting faltering growth via weaker currencies and higher net exports. But the resulting currency wars are partly a zero-sum game: If one currency is weaker, another currency must be stronger; and if one country’s trade balance improves, another’s must worsen.

Of course, monetary easing is not purely zero-sum. Easing can boost growth by lifting asset prices (equities and housing), reducing private and public borrowing costs, and limiting the risk of a fall in actual and expected inflation. Given fiscal drag and private deleveraging, lack of sufficient monetary easing in recent years would have led to double and triple dip recession (as occurred, for example, in the eurozone).

But the overall policy mix has been sub-optimal, with too much front-loaded fiscal consolidation and too much unconventional monetary policy (which has become less effective over time). A better approach in advanced economies would have comprised less fiscal consolidation in the short run and more investment in productive infrastructure, combined with a more credible commitment to medium- and long-term fiscal adjustment – and less aggressive monetary easing.

You can lead a horse to liquidity, but you can’t make it drink. In a world where private aggregate demand is weak and unconventional monetary policy eventually becomes like pushing on a string, the case for slower fiscal consolidation and productive public infrastructure spending is compelling.

Such spending offers returns that are certainly higher than the low interest rates that most advanced economies face today, and infrastructure needs are massive in both advanced and emerging economies (with the exception of China, which has overinvested in infrastructure). Moreover, public investment works on both the demand and supply sides. It not only boosts aggregate demand directly; it also expands potential output by increasing the stock of productivity-boosting capital.

Unfortunately, the political economy of austerity has led to sub-optimal outcomes. In a fiscal crunch, the first spending cuts hit productive public investments, because governments prefer to protect current – and often inefficient – spending on public-sector jobs and transfer payments to the private sector. As a result, the global recovery remains anemic in most advanced economies (with the partial exception of the US and the UK) and now also in the major emerging countries, where growth has slowed sharply in the last two years.

The right policies – less fiscal austerity in the short run, more public investment spending, and less reliance on monetary easing – are the opposite of those that have been pursued by the world’s major economies. No wonder global growth keeps on disappointing. In a sense, we are all Japanese now.

Nouriel Roubini is Chairman of Roubini Global Economics and Professor of Economics at NYU’s Stern School of Business.

© Project Syndicate 1995–2014

2015: the year of sustainable development

The year 2015 will be our generation’s greatest opportunity to move the world toward sustainable development. Three high-level negotiations between July and December can reshape the global development agenda, and give an important push to vital changes in the workings of the global economy. With United Nations Secretary-General Ban Ki-moon’s call to action in his report The Path to Dignity, the Year of Sustainable Development has begun.

In July 2015, world leaders will meet in Addis Ababa, Ethiopia, to chart reforms of the global financial system. In September 2015, they will meet again to approve Sustainable Development Goals (SDGs) to guide national and global policies to 2030. And in December 2015, leaders will assemble in Paris to adopt a global agreement to head off the growing dangers of human-induced climate change.

The fundamental goal of these summits is to put the world on a course toward sustainable development

The fundamental goal of these summits is to put the world on a course toward sustainable development, or inclusive and sustainable growth. This means growth that raises average living standards; benefits society across the income distribution, rather than just the rich; and protects, rather than wrecks, the natural environment.

The world economy is reasonably good at achieving economic growth, but it fails to ensure that prosperity is equitably shared and environmentally sustainable. The reason is simple: The world’s largest companies relentlessly – and rather successfully – pursue their own profits, all too often at the expense of economic fairness and the environment.

Profit maximization does not guarantee a reasonable distribution of income or a safe planet. On the contrary, the global economy is leaving vast numbers of people behind, including in the richest countries, while planet Earth itself is under unprecedented threat, owing to human-caused climate change, pollution, water depletion, and the extinction of countless species.

The SDGs are premised on the need for rapid far-reaching change. As John F. Kennedy put it a half-century ago: “By defining our goal more clearly, by making it seem more manageable and less remote, we can help all people to see it, to draw hope from it, and to move irresistibly toward it.” This is, in essence, Ban’s message to the UN member states: Let us define the SDGs clearly, and thereby inspire citizens, businesses, governments, scientists, and civil society around the world to move toward them.

The main objectives of the SDGs have already been agreed. A committee of the UN General Assembly identified 17 target areas, including the eradication of extreme poverty, ensuring education and health for all, and fighting human-induced climate change. The General Assembly as a whole has spoken in favor of these priorities. The key remaining step is to turn them into a workable set of goals. When the SDGs were first proposed in 2012, the UN’s member said that they “should be action-oriented,” “easy to communicate,” and “limited in number,” with many governments favoring a total of perhaps 10-12 goals encompassing the 17 priority areas.

Achieving the SDGs will require deep reform of the global financial system, the key purpose of July’s Conference on Financing for Development. Resources need to be channeled away from armed conflict, tax loopholes for the rich, and wasteful outlays on new oil, gas, and coal development toward priorities such as health, education, and low-carbon energy, as well as stronger efforts to combat corruption and capital flight.

The July summit will seek to elicit from the world’s governments a commitment to allocate more funds to social needs. It will also identify better ways to ensure that development aid reaches the poor, taking lessons from successful programs such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria. One such innovation should be a new Global Fund for Education, to ensure that children everywhere can afford to attend school at least through the secondary level. We also need better ways to channel private money toward sustainable infrastructure, such as wind and solar power.

These goals are within reach. Indeed, they are the only way for us to stop wasting trillions of dollars on financial bubbles, useless wars, and environmentally destructive forms of energy.

Success in July and September will give momentum to the decisive climate-change negotiations in Paris next December. Debate over human-induced global warming has been seemingly endless. In the 22 years since the world signed the UN Framework Convention on Climate Change at the Rio Earth Summit, there has been far too little progress toward real action. As a result, 2014 is now likely to be the warmest year in recorded history, a year that has also brought devastating droughts, floods, high-impact storms, and heat waves.

Back in 2009 and 2010, the world’s governments agreed to keep the rise in global temperature to below 2° Celsius relative to the pre-industrial era. Yet warming is currently on course to reach 4-6 degrees by the end of the century – high enough to devastate global food production and dramatically increase the frequency of extreme weather events.

To stay below the two-degree limit, the world’s governments must embrace a core concept: “deep decarbonization” of the world’s energy system. That means a decisive shift from carbon-emitting energy sources like coal, oil, and gas, toward wind, solar, nuclear, and hydroelectric power, as well as the adoption of carbon capture and storage technologies when fossil fuels continue to be used. Dirty high-carbon energy must give way to clean low- and zero-carbon energy, and all energy must be used much more efficiently.

A successful climate agreement next December should reaffirm the two-degree cap on warming; include national “decarbonization” commitments up to 2030 and deep-decarbonization “pathways” (or plans) up to 2050; launch a massive global effort by both governments and businesses to improve the operating performance of low-carbon energy technologies; and provide large-scale and reliable financial help to poorer countries as they face climate challenges. The United States, China, the European Union’s members, and other countries are already signaling their intention to move in the right direction.

The SDGs can create a path toward economic development that is technologically advanced, socially fair, and environmentally sustainable. Agreements at next year’s three summits will not guarantee the success of sustainable development, but they can certainly orient the global economy in the right direction. The chance will not come along again in our generation.

Jeffrey D. Sachs is Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University. He is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals.

© Project Syndicate 1995–2014

Outrageous predictions 2015: ‘I still see Germany reaching recession, and pretty soon’

Cocoa prices going through the roof and internet armageddon. Could that be where we’re headed in 2015? According to Saxo Bank’s annual outrageous predictions, they’re certainly possibilities worth considering. World Finance speaks to Steen Jakobsen, Saxo Bank’s Chief Executive, to find out more.

World Finance: Well Steen, there is a reason your predictions are called ‘outrageous’ – how much of a success rate have you had with them? What have you successfully predicted?
Steen Jakobsen: We don’t set out to do 10 calls that become right. We are setting out to say, these are 10 things that will upset you. But the ratio is we get two, two and a half calls right every year. But not always necessarily in the following year! But 20-25 percent of our calls become over the next 24 months, in the last 12 years, correct.

World Finance: Why do you compile this list each year if they’re so unlikely to happen?
Steen Jakobsen: We have in today’s markets so much consensus – I receive research from my brilliant colleagues at 25 institutions, I would not be able to tell you the difference between any of the 25. We are so one-sided, we have only one instrument we can buy: equities.

So we are saying simply, ‘Why don’t we just ask the question, what can go wrong with this?’ To have a negative prediction, but a positive or constructive discussion on why or why not an idea should happen. I actually want you to say to me: it is very very unlikely to happen.

Maybe the world is so outrageous and always surprising that it’s impossible to make an outrageous call!

The funny thing is, what people hate the most about the outrageous predictions, the one they hate the most, is the most likely to happen.

World Finance: Now Steen, a number of your predictions actually don’t seem that outrageous at all: UKIP for example is doing surprisingly well, and cocoa demand is already outweighing supply. So are you playing it a bit safe this year?
Steen Jakobsen: Maybe the world is so outrageous and always surprising that it’s impossible to make an outrageous call!

Of course, some of these calls are likely. I mean, I think you’re underestimating for instance the volcano activity in Iceland. If that happens it will have a material impact, not only on agriculture prices, but unfortunately, it will probably take the summer away from your personally.

The cocoa call is probably the least controversial here; but again, a 100 percent increase is still 100 percent, right?

World Finance: Looking at your 2015 predictions in more detail now, and why do you think China will devalue the Yuan? Why is 2015 the year for this?
Steen Jakobsen: Because their capital balance is negative if you take away the amount of dollars they’ve borrowed.

The Chinese have become the single biggest issuer of dollar debt. As dollar is increasingly strong, it puts a heavy burden on their ability to repay into a context where they are moving from nominal growth to quality growth, China is basically going from 10 percent to 2.5, 3 percent growth over the next 10 years, into an environment where they have no ability to do what a planned economy’s supposed to do: to create jobs.

The only lever left is the one that everybody else is using, and of course their main enemy always being Japan, that will be the one they want to focus on, they will move their currency significantly higher to rebalance their capital account and to create the jobs needed in a planned economy.

World Finance: Well last year you mentioned oil prices, and this year you haven’t made any predictions. Why is this?
Steen Jakobsen: We totally know that having got the oil call right last year will make it impossible for us to make a call on oil. And if we had made an oil call this year, people would have thought it was our forecast. So I like the fact we are getting a lot of credit for calling the oil market right, but it was an outrageous call! It wasn’t necessarily our forecast.

So, it would be a total waste of time for us to predict what will happen next year.

I think, personally, that the contango shows you the market is yet to re-price the full impact of low energy. The contango is $8 between January oil next year, and 17. That needs to come down to two to three when this is over. But I will be buying oil before I sell it.

I would say that Japanese inflation going to five percent is very unlikely

World Finance: You’re also fairly negative in 2014’s predictions about Germany, and the country hasn’t had a great year, and has been called the ‘sick man of Europe.’ So who do you think will be the ‘sick man of Europe’ for 2015?
Steen Jakobsen: France and Germany again. But I have good news for you: I think that the second half of next year will be the first time since the introduction of the euro where the Club Med, the peripheral countries, will be more competitive in labour costs than Germany. I think eastern Europe – certainly Poland and other countries – will contribute to a more brave, bold pace, better economic growth scenario for all of Europe.

So I still see Germany reaching recession, and pretty soon. I mean, they’re already there – they’re 0.1 of a percentage point in the last quarter away from a true recession. But the point is that Europe is changing. And that is the whole point of all these calls.

People need to understand, over the next two to three years, Europe will be stronger in southern Europe than in northern Europe, simply because we had no reforms; no reforms led to an internal devaluation in the wages and disposable income in southern Europe. Now if you want to open a factory, I would advise you go to Portugal. Great infrastructure, great people, and extremely cheap living and labour costs.

World Finance: What would you say is the most outrageous prediction you’ve made for 2015?
Steen Jakobsen: I would say that Japanese inflation going to five percent is very unlikely. But on the other hand, why would believe if they get a little bit of, if they get inflation is only going to be two percent, I think if inflation comes back to Japan it will not be two percent, it will probably not even be five. It will probably be seven or eight.

The fact that you can issue and use bazookas I think as the economists call it. It is the most imprecise weapon in the arsenal of the military, and so is their monetary policy.

World Finance: Finally, what would the economic landscape look like if all your predictions proved true?
Steen Jakobsen: Like 2008! In 2008 I think it was the best year we ever had. I think we had eight or nine out of 10 right. And we were not celebrating, by the way, the fact we had so many right.

But you know, if it’s a real bummer year. And maybe you should apply also the rule of seven. 2015 is seven years away from 2008, 2007 is seven years away from 2000. Maybe the most outrageous call is that the world is so simple, every seven years we have a crisis.

Hatten Group’s bold move sees it soar higher in Malaysia

Melaka is known as the ‘Historical State’ in Malaysia. The town, located to the south east of Kuala Lumpur’s towering skyscrapers, has been a UNESCO World Heritage Site since 2008, because of its 16th century colonial fortifications, churches and buildings. Today it is a popular tourist destination, and one that Hatten Group, Malaysia’s fastest growing property developer, took a chance on.

Back in 2004 Hatten Group was still a budding property developer, eager to establish itself in a competitive market. That is why it decided to take on an abandoned development located in the heart of Melaka, a high-potential, yet untapped market. As a flagship venture, many were sceptical about this bold move. But it paid off.

The project, known as Dataran Pahlawan Melaka Megamall (DPMM), is the largest global retail destination in the region, measuring an astounding two million square feet with an average of 11 million visitors every year. As the first developer to recognise the potential in Melaka’s property and commercial-tourism industry, Hatten Group is now widely acclaimed for its pioneering philosophy and innovative quality standards.

DPMM in numbers


Retail lots


Visitors per year


Year opened

With over 750 retail lots, DPMM is the most diverse shopping destination in the region, but it is its mesmerising historic features that truly set the development apart. The group wanted to ensure that it made the most of what is now Melaka’s UNESCO World Heritage Site.

“DPMM is designed to preserve the historic ‘Padang Pahlawan’ while cultural features are tastefully incorporated into the design of the mall,” says Colin Tan, Group Managing Director of the Hatten Group.

Sustainable ventures
Following the success of DPMM, Hatten Group has grown to dominate Melaka’s retail arena with an ever-expanding portfolio of retail projects. Hatten Square Suites and Shoppes, launched in 2011, offer over 200 retail lots, including the first H&M, MST Golf and Braun Buffel flagship megastores in Melaka.

“By the end of 2014, Hatten Group will have completed yet another outstanding development, Terminal Pahlawan,” says Tan. “This mixed retail project incorporates four floors of vibrant retail with an international coach bay, a travel hub and a boutique hotel. Featuring the first indoor ‘Baba Nyonya Heritage Street’ themed shopping experience, Terminal Pahlawan is set to conquer the local commercial tourism industry.”

As the Hatten Group continues its meteoric rise to the top of the Malaysian property development market, Tan insists that all this success is due to the group’s commitment to more than just quality construction and unique designs.

“Hatten Group ensures the viability of its projects with an outstanding leasing team that has brought in some of the most coveted brands to Melaka. With a central management in place to control the operations of all retail developments, Hatten’s high-standards are consistent and efficiency is increased for higher profitability on investments.”

Future projects
Recently, the Hatten Group has chosen to ensure it is offering the best possible services by incorporating a brand management division that will take responsibility for securing the licensing for international brand franchising. To date, the team has successfully secured famous Hong Kong labels SEMK and Pacific Coffee.

“More excitingly, the team is set to launch Hatten Group’s very own ‘Teddie Bear’ brand in Elements Mall,” says Tan. “The first of its kind in Malaysia, the Teddie Bear themed floors in Elements Mall will feature the first Teddie Bear Museum, children’s theme park and a luxury Teddie Bear themed hotel. According to plan, Hatten Group will successfully incorporate eight more international franchises under its brand management sector within the next five years.”

Hatten Group has expertly developed its retail development business over the years, and is now reaping the rewards of such hard work, and will continue to do so into the near future. “By 2025, Hatten Group will have developed over five million square feet of retail space, managing over 5,000 hotel rooms and offer over 5,000 residential units, effecting major commercial-economic control over south-western Malaysia,” says Tan.

The company now has a considerable amount of projects across Malaysia. These include the Capital 21 development at Capital City, which has transformed the Iskandar Johor region with world-themed floors that feature 21 famous cities. There is also the Unicity development that offers shopping, dining and ‘edutainment’ next to a bustling university campus.

With these goals firmly in sight, the group will secure its base in the booming state of Melaka, Malaysia, as the sole largest retail and property developer, as well as hotelier, in the city. Hatten Group will be the catalyst, the main entry point for international brands, businesses and corporations looking to capitalise on Melaka’s highly profitable economy. And from this distinctive base, it grows and develops as a leading Malaysian property behemoth.

Oil and gas in 2015 will be survival of the richest

In recent years, key oil producers across the globe have been churning out black gold at such a rate that prices have fallen to near unmanageable extremes. And though most consumers would hardly bat an eyelid at a new sub-60 asking price, the sacrifice, in terms of failed projects, could number in the hundreds of billions of dollars.

On December 10, the price of oil fell to a new five-year low of little over $64, in step with reports of a bloated global supply and the decline of the OPEC oil cartel. What’s more, global demand is shrinking and the price of crude alone has buckled by over 40 percent in five months; circumstances that have forced affected parties to rethink their strategies and shy away from ambitious projects. Put another way, 2015 will be the year in which last year’s break-even oil projects will die a death.

According to data compiled by Rystad Energy, $150bn in oil and gas projects will be shelved in 2015, as companies struggle to adapt to a climate much-changed from that of 12 months ago. ConocoPhillips, for example, announced in December that it would be trimming 20 percent from its 2015 budget, and several major players aside have reduced their budgets by similar, if not greater, degrees. In the six-month lead-up to December, ConocoPhillips’ share price suffered a 16 percent slip, and the decision to hold fire on future plans shows how much rock bottom prices have impacted even the industry’s leading names.

2015 will be the year in which last year’s break-even oil projects will die a death

What’s important for oil companies in surviving the slump is on which side of the supply dilemma OPEC will fall. It’s clear that the organisation has – and still is – guilty of mass overproduction, and, without cutting supply, the price of oil will continue to slide. However, whereas reducing supply would bring increased revenues for member nations, doing so could afford the US a larger slice of the pie, which bloc is clearly unwilling to relinquish. “Without any adjustments to supply, oil inventories would implicitly build by an average 1.8 million barrels per day until 2020, which in reality is impossible,” says Bjørnar Tonhaugen, VP of Oil and Gas Markets at Rystad Energy. “Markets must adjust.”

With OPEC nations choosing to plough on with unsustainable levels of production, any smaller operations will be priced out of the market, whereas major names will find themselves hard pressed to meet soaring development costs. The worry for oil companies is that the price per barrel is set to reach a lowly $50 in 2015, which will test the viability of unconventional extraction methods and the willingness to invest in uncertain finds.

As opposed to the oil industry of years passed, where major names have pumped often-colossal sums of money into production, only those with the deepest pockets will survive 2015 – and with very little in the way of development to show for it. As volatile price shifts and overproduction push margins to breaking point, the winners will be those with money in the bank and those that can produce on the cheap.

Russia’s unsustainable currency fix

The Russian public were treated to an all-too-familiar news item on December 16 after the rouble sank to yet another record low. Hit by a deadly combination of harsh sanctions and sinking oil prices, the 75-against-the-dollar rate has capped a dismal year for a currency that has shed almost 50 percent of its value against the dollar.

After locals dumped $20bn in 2014 and international investors are due to pull another $240bn in this and the coming year, the outlook for the currency is hazy at best. Even more worrying, however, is that the record low came after the central bank’s mammoth 6.5 percent interest rate hike. At 17 percent, the bank’s exorbitant benchmark rate shows just how hard policymakers are working to steady the currency’s slide. And with annual consumer price growth running at over twice the bank’s four percent target and inflation fast approaching unmanageable extremes, the country has been left with no option but to offload its foreign currency reserves to reduce the damage.

The bank’s exorbitant benchmark rate shows just how hard policymakers are working to steady the currency’s slide

The central bank revealed on December 12 that it had, two days earlier, intervened with $200m worth of reserves, adding to the $348m it had already committed on December 9 and the previous week’s total of $4.5bn. And while the $5bn-plus blowout means that the rouble’s losses have been slightly less, the policy shows the short-sightedness with which the central bank is attempting to stem the decline.

In the aftermath of the 2008 crash, the central bank all but crippled the economy after shelling out $200bn in foreign currency reserves, and, years earlier, the bank was forced to abandon ship after spending $10bn in the lead up to a 1998 default. Clearly, the lessons learned in years passed have been forgotten insofar as currency interventions are concerned, and authorities must now take care to avoid any repeat mistakes.

A cursory glance at Russia’s shrinking reserves shows exactly how costly the interventions have proven thus far, and with oil prices at record lows and western sanctions hurting trade, replenishing the account will be no easy task. Worryingly, foreign currency reserves have fallen by over 20 percent since the summer of 2013, and without a buoyant oil trade to pick up the slack, more intervention could expose the country to losses on multiple fronts.

The country’s central bank has said on numerous occasions that it will allow the rouble to float freely at the turn of the year, though promises made in recent months to take a step back have come to nothing. When the central bank said in November that it would turn tail on a 15-year policy of unlimited intervention and interfere only in the event of a crisis, it took the institution less than a month to dip into its reserves.

Record low oil prices will bring turmoil the rouble’s way in the months ahead, as they will do for any number of oil currencies, but allowing the currency to float freely will give a clearer indication of its true market value and protect against any more speculative attacks.

It’s clear that turning away from the bank’s interfering ways will trigger currency losses in the short-term, though plugging the hole with reserves runs the risk of exasperating the issue further still. The timing of the bank’s new loose touch policy is less than ideal and the institution cannot idly stand by while the country teeters on the brink of recession. Still, the central bank’s go-to response is too reactive, and for the institution to ward off any lasting damage it must first rise above the temptation to hold the currency at any one rate and instead let markets dictate the price.

Bank of Russia raises interest rate to 17 percent

The Russian central bank has opted to hike its benchmark interest rate to 17 percent, up from 10.5 percent previously, to stem the currency’s decline and restore a measure of stability to its stumbling economy. Sparked in large part by plunging oil prices and, to a lesser extent, western sanctions, the bank will be hoping that the increased rate will bring a greater number of investors to the fold.

The bank will be hoping that the increased rate will bring a greater number of investors to the fold

The increase of 6.5 percent, effective December 16, proves that the country’s central monetary authority is committed to protecting its currency; even it means emergency action must be taken. “This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” said the central bank in a brief statement. An interest rate spike of a single percentage point failed to impress on December 11, which left the Bank of Russia with no option but to take drastic action a week down the line.

The bank has so far spent over $70bn this year and over $6bn in the past month protecting the rouble, and to little avail, with the currency’s exchange rate against the dollar having fallen close to 50 percent since December last year. It appears that the rate rise has worked, at least in the short-term, as the currency’s value against the dollar moved to 58, from 67 previously, on hearing of the move. However, the decision to raise interest rates comes accompanied with its fair share of risks, namely slower growth.

The central bank will be looking first and foremost to ward off the risk of deflation and stop any more investors from pulling their money from Russia. Still, the country is not yet out of the woods, and a weak outlook for oil prices will continue to pile pressure on what is an oil-dependent currency.

Rupiah falls to lowest level in 16 years

The rupiah dropped 1.9 percent against the dollar in Jakarta to 12,698, according to Bloomberg, indicating a 16-year low and marking the biggest fall since the start of August. It’s down 10 percent from its rate against the dollar in July.

The Indonesian currency is feeling the effects of a stronger dollar, which has been boosted in anticipation of the Federal Reserve’s likely decision to raise interest rates in the US in 2015. 

The rising interest rates next year could mean further bad news for Indonesia

The rupiah has been further weakened by local firms buying dollars to pay back foreign loans and a slump in holiday trading, the FT reports.

“Year-end dollar demand from local corporations as well as flows related to recent selling of bonds seem to be weighing on the currency,” Shigehisa Shiroki of Mizuho Bank in Tokyo told Bloomberg. 10.09trn rupiah ($795m) in foreign investment was withdrawn in early December, the site reports.

Indonesia was already dealt a blow in 2013 when investors began withdrawing money from the country following the Fed’s warning that it would start to pull back from its aggressive quantitative easing policy. The rising interest rates next year could mean further bad news for Indonesia – largely reliant on overseas investment – as more funds are pulled.

“The impact on the bond and equity markets and the real economy will be negative,” Standard Chartered economist Fuazi Ichsan told the FT, adding that Indonesia’s central bank must either “intervene more aggressively in the foreign exchange market and shrink its reserves” or increase the overnight deposit rate, which currenty lies at 5.75 percent. Lending rates have been risen to 7.75 percent.

President of Indonesia, Joko Widodo, is set to reduce subsidies for fuel, which were boosted by over 30 percent earlier in the year. It’s hoped Widodo will bring in other economic reforms to boost the economy and protect it from a further battering.

CWG uses technology to empower MSMEs in Nigeria

The promotion and development of a structured and efficient micro, small and medium enterprises (MSME) sector in Nigeria has been considered a key focus by the government in recent years, in the hopes that this will further enhance sustainable economic development in the country. One of the key protagonists for the resuscitation and growth of such MSMEs is the Computer Warehouse Group (CWG).

The firm provides ‘software-as-a-service’ to customers through cloud computing, which is becoming increasingly important as a facilitator for growth. The initiative was specifically designed to empower MSMEs to take advantage of technology to grow their businesses and is tagged CWG2.0. Nigeria is one of the fastest growing economies in the continent and has a sizeable, yet largely unemployed, population. The idea of CWG2.0 is to enable each of the 17.7 million MSMEs in Nigeria to build sufficient capacity to add at least one more employee. By doing so, the firm is helping to foster inclusive growth by creating an additional 17 million jobs.

Strong growth
Smaller enterprises are globally acknowledged as the oil required to lubricate the engine of socio-economic transformation of any nation. The MSME sector is strategically positioned to absorb up to 80 percent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings and step up capacity utilisation in key industries. Such enterprises are also important in other key sectors, including agriculture, mining and quarrying, building and construction and manufacturing, and therefore have strong linkages with the entire range of economic activities in a country such as Nigeria.

“The uptake of our premier cloud product for microfinance banks in Ghana, after a successful launch in Nigeria with MTN, proves that our emerging business model of providing cloud services on a subscription basis for SMEs tagged CWG 2.0 is scalable, repeatable and transferable, as it is relatively more sustainable and profitable,” says Founder and CEO of the Computer Warehouse Group, Austin Okere.

“We could inadvertently create 17.7 million additional jobs, enough to absorb all the 16 million unemployed youths with a generous surplus to spare. While this may seem like a dream where reality is far-fetched, it is precisely what CWG2.0 is all about; the freedom to dream and the passion to execute. CWG2.0 defines the future direction of our company. It is a social impact investment initiative directed towards empowering the African Entrepreneur,” says Okere.

Largest economy
Last year marked a significant milestone for CWG as the firm listed its shares on the Nigerian Stock Exchange, lifting the exchange by about NGN14bn ($85.3bn), and becoming the largest ICT security on the NSE. The success of the firm was largely consolidated by launching two additional, high-profile cloud products: SMERP, an enterprise resource planning application for SME’s on a subscription basis, and the ‘Diamond Yello Account’, in conjunction with MTN and Ericsson, that allows the 57 million MTN subscribers to be mobile money enabled.

Smaller enterprises are globally acknowledged as the oil required to lubricate the engine of socio-economic transformation

Such growth is expected to continue now that Nigeria is considered the largest economy in Africa, with a GDP of $510bn. In particular, the services sector is the most significant contributor, with about 53 percent of GDP and ICT telecoms accounting for eight percent, and targeted to grow to $50bn by 2015.

This is largely driven by the development of an undersea fibre optic network; favourable demographics; a booming telecom industry; inclusive growth pushing SMEs and large corporations efficiency demands; privatisation of the Nigerian power industry and cashless initiatives. These drivers will create opportunities in business process outsourcing, cloud computing, IT services, and enterprise communication and resource systems.

“The major trend in driving cost effectiveness is for industries to stick to their core knitting and outsource their non-core functions, especially IT. We see a significant shift to cloud computing on a subscription model. This is why we took the decision to take our company to the cloud as far back as 2010. We have since honed our craft and are set to become the leading cloud company in Africa by 2015. We believe that the biggest growth shall come from Sub-Saharan Africa, fuelled by the higher returns on investment, and the significant commitment of resources by governments to upgrade infrastructure,” says Okere, looking ahead.

In this respect, the development of strong MSMEs in Africa is allowing for companies like CWG to take advantage of growing technology demands and create value for customers, as well as generate additional sustainable revenue streams.

BC Partners buys PetSmart for $8.7bn

Investors led by London-based private equity firm BC Partners have acquired Phoenix-based retailer PetSmart for $8.7bn, in a last-minute move to outbid front-runners Apollo Global Management. The deal marks the end of an auction process that has lasted weeks and seen bids made from Kohlberg Kravis Roberts & Co. and Clayton Dubilier & Rice.

BC Partners, former owner of major UK brands Foxtons and Phones4U, will pay $83 per share for PetSmart

BC Partners, former owner of major UK brands Foxtons and Phones4U, will pay $83 per share for PetSmart, according to a press release – a whopping 46.2 percent mark-up from May this year, before the option of acquisition was being explored. PetSmart employs 54,000 employees in 1,387 stores across the US, Canada and Puerto Rico, and last month, it reported third-quarter net income of $92.2m and a sales rise of 2.6 percent, to $1.7bn.

Investors Longview Asset Management and activist fund Jana Partners, the latter of which bought a stake in the company earlier this year, had been pushing for a sale as the company struggles against increased competition from larger-scale retailers, namely Amazon and Wal-Mart. Jana Partners had allegedly threatened to overthrow management and elect its own board of directors if the deal was deemed unsatisfactory; an unlikely move now, considering the closing price.

“We are pleased to have reached this agreement with BC Partners, which maximizes value for all of our shareholders and best positions PetSmart to continue to meet the needs of pet parents,” read a statement from Gregory P. Josefowicz, chairman of PetSmart, within the release. “This transaction represents the successful conclusion of our extensive review of strategic alternatives.”

In a year defined by huge mergers, this is the biggest private equity deal announced globally in 2014, eclipsing Blackstone’s acquisition of Gates Global for $5.4bn in June by a long shot.