During Prime Minister’s Questions in a British House of Commons session on December 8, 2010, Labour Member of Parliament Jack Dromey caught the attention of the whole House with his question. “Is the Prime Minister aware that parliament may have been infiltrated by an imposter? The Deputy Prime Minister…” He was referring to Nick Clegg, leader of the Liberal Democrat Party. “…has said he would vote to treble tuition fees and abolish the educational maintenance allowance. Before the general election, the leader of the Liberal Democrats said that he would abolish tuition fees and keep the educational maintenance allowance. Can the Prime Minister tell the house: Are there two Nick Cleggs?” It would not be the first or the last time Clegg’s U-turn on tuition fees was scrutinized and mocked. To this very day, the tuition fiasco remains the biggest defining event of Clegg’s political career, likely to his regret.

In all fairness, we should have grown used to politicians making promises during election season, and never delivering them after being elected by now. Clegg’s broken promise, however, caused far more fury than normal in the United Kingdom because he had always kept the image of an earnest and honest man. Now that it has been announced he is the new Head of Global Affairs at Facebook, one cannot help but wonder if there are indeed two Nick Cleggs.

Those with a good memory will remember Clegg speaking out against Facebook less than two years ago. In a piece he wrote for the Evening Standard on the heels of the 2016 US election, though Clegg did not join the popular opinion that Facebook was to be blamed for an unfavorable result, he did not have much good to say about the company either. “I’m not especially bedazzled by Facebook. While I have good friends who work at the company, I actually find the of Facebook a little grating. Nor am I sure that companies such as Facebook really pay all the tax they could.” Now, he is planning to move his family across the pond to Silicon Valley, and live and work in the center of that grating, messianic Californian new-worldy-touchy-feely culture. The ironic nature of this career move is furthered by reports that Facebook was among the conglomerates guilty of tax avoidance earlier last month, while Clegg himself had vowed to stop these companies from abusing the system when he was in government.

Admittedly, circumstances have changed a great deal since Nick Clegg was riding high on “Cleggmania” as the darling and kingmaker of British politics. He has since resigned in 2015 as party leader, and lost his seat in parliament in the 2017 general election. Nevertheless, the fact he, for whatever reason, did not stand his ground against the Conservative Party in 2010 regarding tuition fees in their negotiations, or stayed true to what he had written about Facebook is an implication that he is not, and, possibly, never was the rare sincere politician he was thought to be. In essence, regardless of what his public image might suggest, this is a man who does not act the way he speaks through and through.

Sources:

https://www.c-span.org/video/?c4759335/2-nick-cleggs

https://www.bbc.com/news/technology-45913587

https://www.standard.co.uk/comment/comment/nick-clegg-are-liberals-to-blame-that-hoax-news-is-swinging-elections-a3400886.html

https://www.theguardian.com/technology/2018/oct/08/facebook-uk-tax-bill-sales-margaret-hodge

https://www.bbc.co.uk/news/uk-politics-16422437

Think of the Coca Cola bottle you saw on the beach in Santa Monica: after your encounter with each other, it was collected by an old man, then sent to some Southern California recycling center. Next, it went through several rounds of examination before it was put into a container, together with a Pepsi-Cola bottle and other less famous ones, to be shipped away. Two weeks later, it arrived in a coastal village in southern China.

In 2017, the United States exported 11 million tons of scrap materials with a value of 5,613 million dollars to China. (source: U.S. Department of Commerce/U.S. International Trade Commission) That is one third of the country’s total export of scrap materials.

Starting from this year, China banned the imports of most categories of recyclable plastics. The waste, parings and scrap of plastics exported to China have dropped 92% over the first eight months of 2018. The policy shift has impacted the United States on multiple levels.

California has banned plastic straws statewide. Sacramento cut back on which plastics it will pick up for recycling, and will send items like egg cartoons, medicine bottles and some yogurt containers to landfills instead. Brett Johns is the Director of Sales, Marketing, and Procurement of City Fibers, a recycling company in Los Angeles. He said they are feeling the effect of the ban: “We are shipping a lot less to China, and what we are shipping to China has to meet new requirements and specifications. Price has been drastically reduced. We’ve been shipping to a lot of other countries to offset the loss.”

The Institute of Scrap Recycling Industry (ISRI) estimated that recycling industry creates 51,139 jobs in California. In 2017, 4,275 jobs are supported by export activities. China’s restriction on the import of plastic waste put huge pressure on employers in the local businesses. Mr. Johns said his company would have to the eliminate probably ten to twenty percent of human jobs positions and replace them with atomized machineries.

All of a sudden, the once invisible garbage became an eyesore. Recycling centers are now seeing stocks of trash packages. Containers filled with “trash” need to be either taken by another country or buried and burnt. Vietnam, India and Korea has become new destinations for the giant ships. After China’s ban, these regions and countries would only take in the recycling materials with lower price. “China is the biggest buyer before. When the biggest buyer put on the brake, the price is bound to be affected.” Said Mr. Johns.

source: U.S. Department of Commerce/U.S. International Trade Commission (created with Infogram)

Situation here is distressing enough. What makes it worse is the fact that no countries really have the capacity to digest the scrap and waste we have produced. The piles of wastes never disappeared no matter how much money people pay, or where they were shipped to. The reality of recycling industry is much less pleasant than it sounds. China had no magic to resolve the issue.

Back to the Coca Cola bottle again – what it saw in that Chinese village were smelly, dirty trash mountains populated by files. Villagers run household-recycling workshops there, right in the piles of plastic and alloy. This is recorded in the documentary Plastic China. There is a sharp contrast between these recycling centers and the ones in the U.S., which are populated by organized assembly line, tall machines and workers with masks and uniforms. Jiuliang Wang, director of the documentary Plastic China, describe the place as “a city of global wastes”.

“I was shocked the first time I was there” said Wang. “You could literally find all kinds of daily garbage from any developed countries in a corner of the village.” In the piles of plastics and mixed papers, there are Starbucks, Lay’s and any number of brands seen in on a supermarket shelf in the United States.

Wang intends to raise awareness among the domestic audience in China, particularly policymakers too: “Here what boosted the economy are industries with low added-value and high environmental as well as societal cost.” The award-winning film was banned for its criticism of local government’s chase for a good-looking balance sheet at the cost of people’s quality of life.

In 2017, China passed the National Sword policy banning plastic waste from being imported. Officials stated that this was for the protection of the environment and people’s health. Adam Minter, the author of Junkyard Planet, argued that China implemented this policy primarily to crack down on competitors against the virgin materials industry — the virgin materials industry and the big mining and steel companies are state-owned entities, and the recycling industry is largely private. This means the villages that once relied heavily on recycling business will be hit by this policy as well. It can get worse when the polluted village could not support other businesses such as tourism and farming activities.

The world is all in this together, and the issues do not go away by changing time and location. It remains to be seen how the new importers are processing recycling scrap. Environmental and societal costs of engaging in the business is not yet tracked. “This movie is really made for audience outside China.” Wang said: “People hardly realized that their daily wastes were transferred to the other side of the sea and that they were processed by another group of people in such an unexpected way.”

The city of Seattle reports that while people who need straws for medical use are allowed, businesses in Seattle must adhere to the new law, or else face a $250 fine. As Seattle becomes the first major city in America to ban plastic straws and utensils, there has been a momentous movement catching up with the American public. Companies such as Bon Appetit who bought 16.8 million straws in a year, but have also joined in on banning plastic straws. Since then, Starbucks announced that they intended to go “strawless.” McDonalds, Dunkin’ Donuts, Alaska Airlines, and American Airlines are just a few of the long list of companies that jumped on the bandwagon. From there, California became the first state to regulate the distribution of straws in bars and restaurants as a “straws-upon-request” policy.  

Image Courtesy of Starbucks Newsroom. 

In the past, the widespread use of plastic, one-time use straws was actually to ensure public health was regulated. Straws were implemented for its use as good hygiene and public health and combat the “common cup,” a cup many people drank from and people dying from uncleanliness. In fact, cities began issuing ordinances that wrapped drinking straws were essential in public eating places. The straw was a symbol of good hygiene and a good thing.

So how did this movement suddenly pick up momentum?

Many believe the catalyst to the awareness of plastic straws is this viral video of a Texas A&M PhD student extracting a plastic straw from a sea turtle. In a painfully long 8 minute long video, what was believed to be a parasite is pulled from the nostril. With blood dripping down and sorrowful moans from the sea turtle, the researchers angrily exclaim “don’t tell me it’s a freaking straw.” This impactful video started a change in attitude, ultimately pointing towards a change in consumer perception of straws. It started a trend that everyone is now following.

As the demand of straws starts to dwindle for environmental concern, it becomes clearer to economists and behavioral psychologists on how to track the rationale on how consumers are making decisions and what motivates them.  For example, customers have personally started campaigns of signatures to call companies to change their plastic straw policies: McDonalds had over 50,000 signatures, Disney had over 35,000 signatures, and Subway had 100,000 signatures.

To parallel the sudden change in consumer demand for plastic straws, CNN Money reports that instead, the demand for paper straws (Aardvark, maker of premium disposable tableware) sales increased by 5000% from last year. The company is struggling to keep up, sometimes delaying shipments of straws for up to 12 weeks to some customers.

This plastic straw phenomena exhibits economic consumer behavior. In the sense of economics, a consumer is simply someone who makes demands in the market. A producer is try to tailor its production to ensure it sells, and thus creates supply to respond to the consumer’s wants (or demand). Because consumption is based on satisfying the human wants, when the consumer wants something different— in this case, a different material straw for personal and environmental ethical reasons— then the consumption and demand reflects what the “human want” is. Additionally, Claire Sprouse, a consultant for the beverage industry in conservation education, states that “If you think about the greater picture of carbon footprint, straws are a kind of a small component, not like the most engaging way for us to be engaging with the environmental issues as a community. But I think it does have a benefit.” Consumers are active participants in this strawless movement due to personal perception and want, suggesting that their behavior is not always the most logical.

The paradox of value, also known as the diamond-water paradox, highlights the contradictory price disparity between life essentials and luxury goods. Despite being crucial to life, the price of water is way lower than diamond, which has no bearing on human survival.

Economists base this observation on the law of demand and supply. The abundant supply of water pushes its price down, while the scarcity of diamond makes it relatively expensive in the market.

However, can human beings continue to take the access to drinkable water for granted in the next few decades? In the face of the ever-growing population, the problem of water shortage has become a front-and-center issue across the globe. According to the United Nations, 1.8 billion people are expected to suffer from absolute water scarcity by 2025, while two-thirds of the world population will be exposed to water stress conditions. Different cities are currently wrestling with water crisis: Cape Town is counting down to Day Zero in 2019, where the city will be completely running out of water, California is under massive wildfire threats brought by long and severe drought, and 40% of water in Beijing was too contaminated for agricultural or industrial use in 2015.

While demand for drinkable water is expected to escalate in the near future, asset managers are seeing opportunities in water investment. Unlike other commodities such as oil and gold, water investing does not take into account the price of water. Instead, it focuses on companies that develop new infrastructures to conserve and purify water, or invest in cutting-edge technologies to achieve sustainable water solutions.

Source: Allianz Global Investors

If an investor allocated USD 1,000 in the S&P Global Water Index, MSCI All Country World Index and S&P 500 respectively on November 16, 2001, the return he or she received on June 30, 2018 would have significantly outperformed the other two indices. The performance demonstrates that the growth potential of water businesses should not be overlooked.

Investors can get started by looking into different exchange-traded funds (ETFs) that track the companies involving water-related businesses. For example, the S&P Global Water Index ETF consists of 50 companies with the focus on water utilities and water equipment, and the PowerShares Global Water Portfolio provides international exposure to water-management-related corporations.

Seeing the demand for water as an ongoing societal need, water investing is being used as a long-term and defensive investment strategy to shield portfolios from market turbulence. With less dependence on political happenings and economic cycles, it also plays a less-volatile role in investment portfolios.

Sources:
http://unesdoc.unesco.org/images/0021/002156/215644e.pdf
https://www.bbc.com/news/world-42982959
https://www.forbes.com/sites/toddmillay/2016/11/28/investing-in-water/#6996aeaa5948
https://money.usnews.com/investing/articles/2016-06-22/how-to-invest-in-water-etfs
https://us.allianzgi.com/en-us/insights/investment-themes/water-an-essential-and-investable-asset
https://us.allianzgi.com/en-us/insights/investment-themes/jump-into-clean-water-investing
https://commodityhq.com/commodity/agriculture/water/#etfs

We are all familiar with the story by now: on September 1, 2016, Colin Kaepernick, a quarterback for the San Francisco 49ers at the time, took a knee during the National Anthem to protest racial injustice in the United States. But, while that action and those that followed have been talked about endlessly in the media in the context of politics and sports, much less has been discussed about Kaepernick’s complex impact on the stock market and the American economy.

Kaepernick kneels during the National Anthem. Source: Boston Globe.

Although the movement began as an unnoticed protest, with Kaepernick sitting on the bench during the National Anthem, his actions eventually turned into a full-fledged movement. Not long after he began, players across the National Football League sat, kneeled, or showed a fist of solidarity during the patriotic song. While the American public was busy discussing whether Kaepernick was un-American and team owners and coaches were determining how to react, the NFL was experiencing an additional layer of complications, which only revealed itself later: a drop in ratings. In October of 2016, JPMorgan announced that ratings for the NFL had decreased 6% in Week 6 compared to ratings from the same time the previous season. Immediately, some football enthusiasts pointed to the retirement of long-time favorites like Peyton Manning and the injuries of other star players to explain the drop. Despite those arguments, Wall Street experts reduced their projected profits for the owners of major TV networks, and a Credit Sussie analyst lowered his forecasts for both Twenty-First Century Fox and CBS. To top it all off, in the summer of 2017 CBS released a study which showed that average TV viewership during the 2016 season dropped 8% from the previous year and that national anthem protests were “a factor” in the decline.

On September 5, Nike shared its ‘Dream Crazy’ ad campaign for the first time, featuring Colin Kaepernick. After a short immediate downturn, the stock has since been continually climbing. Source: Market Watch.

Fast forward a bit, and stop on Labor Day of this year. On that day, Kaepernick tweeted about his ad partnership with Nike for their campaign ‘Dream Crazy’, and his announcement was immediately met with harsh criticism and demands for a boycott of the company’s products. Although Nike’s stock price did take a fall when markets re-opened after the holiday, as of September 19, the stock is up to $84.43 a piece, or a 5.28% increase over 2 weeks. Additionally, Nike recently reported selling 61% more merchandise since airing the campaign, which shows that customers are actually broadly supportive of the brand’s advertisement decision.

How did Nike pull this off, given that not long ago Kaepernick was seen as so divisive some Americans chose not to occupy their time with something other than football? One major factor may be a different customer base for Nike than the NFL’s viewership. But, some have also pointed out that Nike’s controversial ad actually falls in line with the company’s values and history. One analyst from Piper Jaffray noted that Nike is “known for ‘pushing the boundaries of social and cultural norms,’” describing past campaigns featuring Lance Armstrong or tackling HIV/AIDS. Thus, although the decision was a bold step for Nike, the company had a history of success in the area.

The ‘Dream Crazy’ advertisement revealed by Nike across the country in September. Source: ABC15 Arizona.

So, at what cost does Colin Kaepernick come? For the NFL, team owners, and broadcast companies, it was not an indiscernible one in 2016. Kaepernick’s actions unleashed a chain of events that ended in clear economic impact, with less viewers watching NFL games leading analysts and investors to pull back. But today, Nike has stood to benefit from its intentional alliance with Kaepernick, showing that when the moment and the context are both right, embracing a complicated situation rather than avoiding it can pay off (quite literally).

As the economic crisis in Turkey hit emerging markets in the last few months, the Indian currency dropped to an all-time low against the dollar. At present, $1 is equivalent to nearly 72 INR. Five years ago, a report by Morgan Stanley, placed India in a club dubbed the “Fragile Five” – the emerging markets most vulnerable to ripple effects and external shocks. Although the country’s economy is perhaps not as fragile at present, the rupee’s fall shows that it is still vulnerable in many ways.

One of the major reasons for the fall is the incessant outflow of dollarsfrom the Indian market, which in turn was caused by the hike in interest rates by the United States Federal Reserve. The rate hikes make dollar assets more appealing to investors than the Indian market whose “emerging” status also means that it is more risky.

Moreover, India is extremely dependent on imports from other countries, especially when it comes to oil. According to The World Factbook published by the Central Intelligence Agency, India is the third largest importer of crude oil in the world. A steady devaluation of the rupee against the dollar would result in greater cost for India to buy fuel.

President Trump’s embargo on Iran also does not help matters. India is among the biggest buyers of Iranian oil, second only to China. With Washington adopting a tough stance, Indian refiners have already decided to reduce their crude oil imports for the next month.

All sectors will be affected because India’s economy is heavily dependent on fossil fuels and it is likely that the oil industry will transfer their cost over-runs to consumers. The devaluation of the rupee will also have an impact on the cost of other imports, making it harder to control inflation.

While the Reserve Bank of India (RBI), the central bank which controls the country’s monetary policy, has steadied the decline in value of the rupee, so far it has done nothing to stop it. The RBI’s last few efforts at intervening have not really helped the Indian economy and some commentators say that this time around the RBI should do nothing. This is perhaps because a devaluation of currency also has a few advantages – like short-term domestic growth.

For starters, with increase in the prices of imported goods, consumers are more likely to switch to products made in the country, giving a much-needed boost to the domestic sector. This in turn might have an effect on the Chinese economy – China is India’s biggest trading partner with the latter’s trade deficit to China reaching a staggering $51 billion.

Exports also tend to benefit from a falling exchange rate. A relatively stronger foreign currency will have more purchasing power to buy products made in India, boosting the low growth in exports in recent years. Many Indian exporters believe that this devaluation will not only help India compete with Chinese products abroad but also open up the Chinese market itself.