THE POLITICISATION OF SCIENCE: BACK TO THE 1970'S?

The 1970's seem a world away from 2014, especially for younger people. Those people will not remember that the politics of science then, and especially what was then the new discipline of ecology, was about Global Cooling. One of the leading exponents of the day was one Paul Ehrlich, author of the Malthusian "Population Bomb".

Recent reports from credible German scientists predict a return to global cooling to a point equivalent to the mid nineteenth century.

This analysis seems to be consistent with measured facts. These facts include increasing areas of Antarctic sea ice reported by the US National Snow and Ice Data Centre and NASA. There can be many reasons for this of course, but the fact that Antarctic ice is expanding is an inconvenient truth for those, like the ill-fated Spirit of Mawson expedition led by Professor Turney, who found themselves having to be rescued from previously ice free areas of the Southern Ocean.

Whatever the reason, the scientific community would gain much greater respect and credibility if it stuck to discovering and reporting facts, rather than following a political agenda and hoping that the facts will support it.

In Turneys' case, who boasted about being reported in Times Square NY, the facts on the ground (to be accurate, ice bound ocean), did not support his script. How inconvenient, and scientifically challenging, since climate modelling suggests that ice cover should be shrinking rather than growing.

Climate is infinitely variable, and climate science uncertain.

The costs of Professor Turney's rescue pale into insignificance against the costs of the political agendas supported by uncertain climate science.

Those costs are borne by people who do not have high paying academic or government jobs, and in Australia, are losing their jobs because of the destruction of industries caused by climate "science" driven policy.

Just how disreputable and ignored recent climate science has become, witness the reopening of lignite (brown coal) mines in Germany and elsewhere in Central Europe. These will vastly increase carbon emissions in Europe, and especially given the closure of the German non-carbon emitting nuclear power industry.

Perhaps these emissions will mitigate the suggested period of global cooling being predicted by some German scientists?

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

AUSTRALIA CAUGHT BETWEEN SHIFTING TECTONIC PLATES

My Ping Pong Pang blogs on this site generate a lot of interest. Here is my prognosis for how Australian industry is being trapped between the rapidly shifting tectonic plates of the United States, German-led Europe, and China. If this prognosis is correct, it will have profound implications for investors.

The US dollar is certain to rise against most major currencies. It is still the only safe haven currency in an increasingly volatile world and this will attract a premium. Federal budgets are becoming increasingly under control and much of the money printing replaces the money which evaporated since 2008. Hence no signs of inflation.

Add in near self sufficiency in energy, comparatively low energy costs, low unit labour costs in manufacturing, and the world's best technology base, and you have the ingredients for a strongly growing economy and a fiery US dollar rally.

US$ investments in emerging markets are likely to be repatriated with severe consequences for emerging market economies which might include the collapse of shadow banking systems in those countries. More on China in a minute.

The US today is probably at its most competitive since the 1950's consumer product revolution. It is sucking in talent and innovation from around the world, and can make and export products very competitively across multiple industries. These products include military equipment, the demand for which may supplant rapidly declining demand for mining equipment.

 

The US can also meet its own consumption of almost everything, so will not be as exposed as others to unfolding events elsewhere.

In German-led Europe, monetary policy is akin to a return to the Gold Standard of the 20th Century with a constrained supply of credit. For the moment, this is adding to the intrinsic competitiveness of German industrial exports. Unless there is a Damascene conversion of monetary policy in Frankfurt (unlikely), only rising bond yields in the US are likely to have an effect on the cost and availability of euro denominated credit.

German industry is in prime position to capitalise on the next wave of development in China: the move towards a consumer society. German vehicles, machine tools, pharmaceuticals and chemicals are sold as soon as they are made for Asian consumers with less regard to the price point than virtually any other country's exports. The value of the German brand: even in Australia, advertising for German cars includes German language. German industry captures not only manufacturing profits, but also brand profits.

 

These products are often produced by privately owned and run Mittelstand companies. These are small and medium sized enterprises often located in smaller towns and villages. Usually without external equity financing.

 

China is the big enigma. The war games are likely to generate an increase in armaments production in Japan, Sth Korea and the US. Perhaps 2014 reflects 1914, except that the players are different. Gunboats and sabre rattling to detract from major internal problems.

 

Chinese credit growth has been explosive and unprecedented. As any CEO and political leader will tell you, it is far harder to tell people to tighten their belts than it is to inflate an economy with cheap money. Many Americans have learned this lesson the hard way. Australians are about to learn.

 

So whereto for China? Probably managed devaluation of its currency. Competitively with Japan.

 

Where does this leave Australia, its industries and investors?

 

More than 40% of Australian exports go to China, and most of this is iron ore. Australia, and its governments, are massively exposed to events in China. There used to be a saying that if the US catches cold, then Australia gets the flu. Today, if China reduces Australian iron ore and coal imports, (volume and/or price) the Australian economy and its tax base will suffer enormous consequences. A heart attack, not the flu.

 

This is at a time when Australian industry has been damaged for a decade by the destruction its previous major comparative advantage (cheap and abundant energy). This destruction is a direct result of the Labour-Green government of 2007-13. Energy costs are unprecedented in Australia and are now a negative factor when companies determine whether or not to invest in new projects or continue with their present ones.

 

Recent examples including the scaling down of production of aluminium from its raw material in Gladstone, Queensland, and the likely closure of aluminium production by Alcoa at is Geelong, Victoria factory.

 

Australia will not process its raw materials any longer: raw commodities will be exported for processing. This is happening across all industries, including the recycling of plastics wastes.

 

The worlds' highest energy costs are being replicated in the LNG industry, to the point where there is uncertainty not only about high prices but also about domestic availability to industry.

 

This is leading to a downwards spiral where reduced energy consumption (industrial and household) generates further prices rises to accommodate fixed costs structures.

 

Energy costs impacts and China are likely to have profound impacts on Australia's industrial and tax bases in the near to medium term, and thence to its housing markets and banks. These impacts will include more company closures, less employment (skilled and unskilled), government fiscal problems, and increasing housing unaffordability at todays' price points. In short, no, low, or slow growth in an environment where the US and Germany will do well. Or even a contraction, depending on China. All of this suggests a markedly lower Australian dollar.

 

The tragedy is that Australian industry makes many world leading manufactures: its doesn't capture the brand value (yet) that the German brand captures, but it can. It can also compete (as Germany does) with high unit labour costs and a strong currency. The Australian Mittelstanden are the unsung heroes of the economy and its likely medium term saviour.

 

However, what will be required is a weaning of the whole country off China, and an end to the Australian complacency, including in Canberra. The country needs its "Margaret Thatcher moment" and it is likely to be painful.  Whether the new government in Canberra is up to the policy challenge will be a recurring theme in 2014.

 

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

 

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

HOW GOVERNMENTS DESTROY INDUSTRIES

The world is a globalised place and much of it already knows that Qantas, GM Holden, and other Australian businesses are in deep financial strife. They don't understand how Australian governments have contributed to it.

There are tens of thousands of small and medium sized enterprises in Australia facing similar issues,  but without the political or union power to do much about it.

This struck home to me last weekend on a visit to Noosa, a much loved holiday village north of Brisbane. In the 1980's, some people proposed a fee to walk on the beach there. Beach visits have been an Australian icon since time immemorial and have been free.

Not any more.

Do you know where Australia's most expensive toll road is? It is not in Sydney, Melbourne, or Brisbane, or on any freeway connecting them. It is at Noosa. Why?

The previous Queensland Government, addicted as it was to Forms and Fees, decided to levy Australia's most expensive toll to drive on a gazetted road which in part uses a wide sandy beach.

The traffic jam was caused by the present need to pay the toll for which you spend 30 minutes filling in a form in a government office so that the government can exact the toll. Not only does a pleasant day at the beach become an exercise in useless form filling (the government does not need most of the information required), but the toll at A$11.50, for which the government provides nothing, is the most expensive in Australia. By far.

If you are really lucky, you can seek the assistance of one of the government officers to assist in the form filling. The catch is that the toll rises to A$16.00. For that premium, you also get a large dose of Attitude with a capital A. How inconvenient for a customer to drag someone from an airconditioned desk just so that you can pay a premium price for something which provides nothing that wasn't previously available for free.

This little example is just one of thousands which make Australia the uncompetitive and costly place it is today. Hence the swathes of empty shops, factories and offices in which people used to work. Much of it an outcome of deliberate government policy, in this case, an addiction to form filling which serves little purpose.

The Great Australian Complacency is coming to an end. Governments should lead the way by reducing their Forms and Fees, eliminate policies and procedures which reduce demand, and stop destroying industries.


David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

IS AUSTRALIA THE NEW SOUTHERN EUROPE?

Most of the world thinks Australia is a quarry and a farm. A nice place to visit, albeit expensive. The country also manufactures things. And often does so well, but receives little credit internally and for the most part externally.

Internal criticism is normally directed at the futility of endless public subsidies for commoditised industries in a globalised world. Passenger cars are a prime example. Australians' don't buy many Australian built cars. They prefer European or Asian models, even if they are ridiculously expensive by world standards. Cars would be much cheaper in Australia if there were no domestic car manufacturing industry.

Interesting then that the examples of very high value adding manufacturing in Australia are lost in international perception and domestic Australian politics. And a great pity, because this is where the future lies and would stimulate a venture capital industry if government policy was as smart as the manufacturers.

I have provided examples before of high value adding firms which employ lots of people. A recent reported standout is CEA Technologies, based in Canberra. CEA has "designed, manufactured and marketed a naval defensive system more advanced than anything else on the world market" (Australian Special Report Defence 2nd November 2013). This protects naval surface ships from incoming very high speed missiles which have been almost impossible to destroy. "Like shooting a bullet with a bullet". And at very high closing speeds with unlimited manoeuvreability.

CEA has done it and major units of the Royal Australian Navy are being equipped with it. There are other examples in the defence sector where Australian engineering innovation and technology outstrips the rest of the world.

The strategic commercial basis is a customer with special needs and a budget to match. Just as post World War 1&2 economies were driven by the commercial application of military technology innovated at taxpayer expense, so can companies like CEA export their products to the rest of the world, provided regulations permit.

Just think what else could have been achieved had the subsidies provided to the motor industry been invested in manufacturing firms producing high value add products, not commoditised consumer products.

Anyone in government heard of the concept of opportunity cost? The alternative is the Southern European outcome, already underway in Australian cities and regional towns.

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

A TALE OF THREE CITIES (PLUS TWO)

I have been on business in three vibrant cities recently: London, Berlin, and Paris. You might think from media reports in Australia that these places are closed for business and all is doom and gloom.

Not so. Far from it. There is a building boom in London, both in the City and in the Westend. There is an air of confidence. New found I was told, but there nonetheless. London is open for business. To a large extent, London is its own economy, and is not a proxy for the rest of the UK.

Berlin, more sedate, provincial even (especially the airport), but since I was there to observe the elections to the Bundestag, and call on old friends, it didn't matter. What struck me about Berlin (I had not been there for several years) was the amount of building and the style of the building. In Berlin Mitte, Prussian Berlin is being reconstructed from original materials stone by recovered stone. The communist demolishers recorded where they sent the post-war rubble. In Potsdam, the Stadtschloss is finished and looks just like the original. In West Berlin, the style of the late 19th/early 20th century, complete with ornamentation and gold leaf, is making a comeback. So is Albert Speer if you look at one the new hotels.

Paris, frenetic, and in deal making mode. Which we did. Similarly Singapore.

There are two things that struck me back here in Brisbane: the clear air and the number of properties for lease, rent and sale.  I did not see this anywhere else in the parts of the cities where I was (perhaps the air was not as clear!).

My first read of the Weekend Australian told me why (5-6th October, p.16). John Black is an insightful statistician and demographer. He concludes : "Our labour market is now increasingly unemployed, under-employed, under-utilised or discouraged, and vulnerable....." I have written before that Australia was following the European road. That reality will dawn over the next few months as truth comes out. Australia is likely to enter a period of low growth just as the major Northern European economies are regaining confidence.

As John Black writes: "Cheers, Tony, It's all yours."


David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

THE POLITICISATION OF SCIENCE

I have written extensively on the impact that political views have on science and how scientific viewpoints then feed into public policy like a feedback loop. All well oiled by copious quantities of taxpayers cash.

The assumption that carbon dioxide is a poison of course is a fallacy. Carbon has been demonised. Television pictures of clouds of gases being emitted from electricity generation cooling towers have impact. Its a pity therefore that the television journalists do not inform their readers that those emissions are largely water vapour.

They also don't tell you that water vapour is a very potent greenhouse gas, far more so than carbon dioxide.

European forests have increased in area by some 5,000 sq. kilometres in recent decades. Some of this is "direct action" in the form of man made plantings, and some is the reversion of former agricultural land into forest. If you travel to western Poland you can see it.

Increases in water vapour and carbon dioxide should (are) sustaining increased vegetation growth, both in density and in geographic spread. There have been recent scientific publications, including satellite photography which illustrates the point. How rich the earth was in former geologic times, the evidence for which is found in an abundant fossil record. These were times when the atmosphere contained far more water vapour and carbon dioxide than it does today. Plants and animals thrived.

How interesting it would be then, if instead of this constant "we are all going to be ruined" harping from the green-politicised scientific community, we could envisage a world where northern Canada, Siberia, Saharan Africa, and Australia became the food bowls of the world. All it takes is water, warmth, and plant food: carbon dioxide.

For my readers who are interested in pursuing these themes, Ian Plimers' excellent book, Heaven and Earth is a good start. So is Taxing Air:Facts and Fallacies about Climate Change, but Messrs Carter & Spooner.

Taxing Air is challenging: it tolls the bell on what the so-called climate change is really about: extending the tax base for green-left governments. What next: a royalty on rainwater falling in your garden? Don't think it can' happen, especially now the government knows who has rainwater tanks.

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844