Macro Dragon: Does the Amazon belong to Brazil or the World?
Summary: Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, think pieces, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
Macro Dragon: Does the Amazon belong to Brazil or the World?
Reflections of a Strategist…
- Was on the podcast of a good friend & one of the best clear thinkers that KVP has come across yet – will flag when the podcast [Insert: Human] has officially launched. Part of our esoteric conversation touched on many things – yet the central theme was just how flawed we are as a species once you get above c. 150 people. The basic premise behind that these is, above that – skin-in the game, accountability & transparency start to fall off a cliff. When your sub 150, its easy to see if Billy is pulling his weight for the tribe as a whole. When your above that, Bily can easily sneak off & snooze in some bushes.
- Point being, past a very small number of people (150 vs. the +7bn people on the planet), the incentives to work for the collective benefit of the group falls off a cliff. We are genetically wired to have our self-interests & out families self-interest first, then its relatives & friends, then its community/tribe, then maybe the village/town/city, then province/county/state then country. And obviously gender, ethnicity & other heritage factors also play a part in the complexity of trying to establish an equitable & egalitarian society.
- We just don’t have the bandwidth to deal with the complexities of our society, not even from a 1st order basis, let alone a 2nd & 3rd order basis. And here is an classic example, of how despite pockets of brilliances here & there across the globe (as well as across the history of humankind), generally speaking collectively as a species we tend to not focus on the true bottle necks & challenges that face the planet. If you want to be even more cynical, our focus & concerns are super trivial & selfish – “that’s for their generation to figure out”.
- Lets take the Amazon. If someone was to ask you, does it belong to the indigenous people who have historically roots there dating back 100s of years. Or does it belong to Brazil, which is the current country that houses the Amazon. Most people would say the country (especially Brazilians 😊), as well as likely alluding that more should be done to also make sure that the indigenous people have a stake or some kind of protected heritage rights to the land.
- Now what if someone told you, the Amazon produces 20% of the oxygen in the world & we know that as much as people can survive without food & water, the ability to breath clean air is the number one basic right for life on the entire planet earth – and further that rainforest is being systematically destroyed under the new Bolsonaro a.k.a. “Mr. Sniffles” Regime.
- Then in that case, does the Amazon really belong to Brazil or the World?
- The point here is not to debate whether its really 20% or 10% or 30% (lots of various debate whether these figures are true or not & with the fake news these days, no surprise that it is tough for the average person to discern the signal from the noise), but that there is an obviously viable win/win solution whereby collectively it is in the interest of the world to make sure that the Amazon or a similar potential choke point of global like is not being systematically destroyed.
- On one extreme, a peaceful & viable path would see the world, led by the likes of the Global Sovereign Wealth funds, UN, WB, AIIB & G7 paying the would be farmers on the grounds in Brazil to instead protect, nurture & grow an industry around protecting the Amazon & similar habits globally.
- On the other extreme, KVP can see a future where instead of fictitiously invading a country for weapons of mass destruction (Yep the perpetual stain of death, destruction & pain of millions that George Bush & Tony Blair will have stamped all over the legacy), a consortium of nations is invading a country on the basis of saving the planet.
- Interestingly enough, came across a recent Freaknomics podcast – The Simple Economics of Saving the Amazon Rainforest – that touches right on this issue & is a must listen for anyone serous about understanding skew, cost/benefit scenarios, potential trade construction & of course, social impact & sustainability investing.
- Among some interesting facts highlighted such as Costa Rica & China pioneering reforestation & habit protection through economic incentives (basically putting price of on the future cost of the consequences of a lot of habit & vegetation to tourism, bio diversity, flooding, etc), over half of the Amazon being protected (2/3 of the Amazon being Brazil), also the lower the structural supply of the Brazilian farmers, the better it is for the US farmers – the conclusion from various works on the Amazon is that the Brazilian Government should be willing to take +$2-3bn to protect the forest, where as rich countries should be willing to pay up to $30bn – suggesting massive room for a win / win across the board.
- So who’s with KVP for starting a SPAC called “Breathe & Live”, we’ll raise $1bn to 5bn – turn around to the likes of the Norwegian Sovereign Wealth fund, get them to commit to paying us an annual subsidy for every acre of rainforest that we purchase, protect, police – all with the help of local buy ins (similar to African Parks) & all under our B&L SPAC.
- We then leverage that $1-5bn by 5x (after all – we already have the offtake agreements in place & with SWFs at that), so now we are talking $5bn to $25bn of capital that we can put to work securing prime Amazon land that will be perpetually protected, along with that supply of oxygen, priceless biodiversity & one of a kind habitat.
- And again, this could be first done on a “micro” scale say $100m to protect rainforests in Ghana & other West African countries, then using that template/platform to scale up & extend across the world. This may sound paradoxical, yet the biggest viable exponential movers for mitigating to eliminating the climate crisis are likely to come from two sources, China & AI.
- The first has a class of one ability to focus nearly limitless resources & resourcefulness (capital, people, brilliant minds, scale & speed – that has likely never been seen in the history of our species), whilst the second is really humanities only sustainable hope to save us from ourselves (natural embed biases, DNA programing as well as inability to see the 2nd, 3rd & 4th order consequences of our actions on this planet), as well as more importantly to save the planet from ourselves.
- Lastly there are two very close people in KVP’s network who passions extend into conservation, eco-hacking & overall sustainability – both are super inspirational in their own paths & different ways that they contribute, one as an investor & philanthropist, the other as an entrepreneur. They have dedicated a good amount of their own families capital, time, expertise & resourcefulness in continuing to make a difference.
- Make some time to check out the great works from the two sites below & if keen, reach out to see how you can get some skin in what really should be the ultimate game that we should be playing as a species. The long-term viability of a sustainable high quality level of life, across the globe for all species & parts of our connected eco systems.
- Rainforest Trust – a bud in addition to being a principal sits on their board & is always keen on striking long-term partnerships & capital contributions. He also happens to be likely the most talented trader KVP has come across, a clear thinker & just a downright beautiful soul. Here is their twitter handle @RainforestTrust
- Lionheart Agrotech – a bud, is founder & pioneering CEO of the Company, always on the look out for strategic partnerships (think land & regulatory access) & more capital as there is a lot of scalability in what is already underway. He also happens to be one of the sharpest individuals KVP has come across (ex. Credit Derivs trader, who actually understood what he was trading) & gets super geeky on all kinds of eco/bio-diversity hacks & carbon footprints optimization. Getting him started on sustainability is like getting KVP started on Macro.
To Keep In Mind Today
- NZ: Inflation expectations
- UK: BoE – obviously KVP thinks that the new gov. comments last month were either taken out of context or he is off his rocker if he things QE Infinity is not here to stay for a LONG time
- EZ: GER Factory Orders, IT IP
- UK Construction PMI 57.0e 55.3p
- US: Challenger Job Cuts, Weekly Jobless Claims, Nat. Gas Storage
Start-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.
This is the wayKVP
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.