Divestment as the Vehicle to Interlocking Globalized Capital [McKibben’s Divestment Tour – Brought to You by Wall Street: Part XV of an Investigative Report]

April 23, 2016

by Cory Morningstar

 

Part fifteen of an investigative series

 [Part I of this series, McKibben’s Divestment Tour – Brought to You by Wall Street, can be found here. Part II, Part III, Part IV, Part V, Part VI, Part VII, Part VIII, Part IX, Part X, Part XI, Part XII, Part XIII, Part XIV ]

 

“Sometimes people hold a core belief that is very strong. When they are presented with evidence that works against that belief, the new evidence cannot be accepted. It would create a feeling that is extremely uncomfortable, called cognitive dissonance. And because it is so important to protect the core belief, they will rationalize, ignore and even deny anything that doesn’t fit in with the core belief.” — Frantz Fanon, Black Skin, White Masks

 

The Power of Persuasion | The Confidence Men and their Strategies

 

“It is not every generation that witnesses capitalism give rise to an original and apparently vigorous new form. Private equity is one such new form…. Private equity represents one of 21st century capitalism’s most virulent new forms.” — Inside the Dark Box: Shedding Light on Private Equity, March 2007 [Emphasis added]

 

“The natural resources fundraising market has grown substantially over the past few years, reaching record levels in 2015. Energy-focused funds remain the driving force behind the increased activity, securing more investor capital than ever before despite falling commodity and oil prices.” — Preqin 2015 Fundraising Update

 

“Vendors of the bridge not only counted on the gullibility or greed of their targets; they also appealed to their vanity. Buyers could believe, as Mr. Sifakis put it, that “they had become real men of substance, great capitalists.” – For You, Half Price, NYT, November 27, 2005

What most people are happy to dismiss is the fact that the bourgeoisie do not fund and promote what they cannot control and manipulate for their own benefit. It’s incredible how millions of dollars in funding enables those who benefit (those of privilege) to not ask the obvious questions that follow such “philanthropic gifts” (ie. investments). If any person of sound mind truly believes that Rockefeller et al. are united in financing and promoting a global divestment campaign because they simply wish for a clean world, then this author has a bridge to sell them.

“Were divestment ever to succeed in lowering the valuations of fossil fuel companies, an unintended consequence could be a shift from public markets to private markets… Such a shift could hurt transparency; companies that go private have minimal reporting obligations and they typically become very opaque. This could limit everyone’s ability to engage the management of these companies in a discussion around climate change.” — Harvard Business Review, November 4, 2014

Divestment as the Vehicle to Interlocking Globalized Capital

“The mix of the energy will change with time, and it certainly will not be as dominated by oil and gas,” said BlackRock’s Steenberg. “But rest assured, oil and gas (are) not going away, certainly in this (25-year) time frame, if ever.” — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

 

“According to Palico, some $83 billion in capital has been committed to private equity funds year-to-date, 53 percent more than the amount raised in the same period last year.” — A Record Number of Private Equity Funds Seek Investor Capital, Often for Surprising Strategies, March 9, 2015

Buy low. Sell high. The demand is not going away. The purpose of the above meme is to highlight how irresponsible Exxon is for not investing in renewable energy research. However, it is critical to note the text outlined in blue:”Exxon spent 13.2 billion buying up its own stock in 2014.”

“Discursive monoculture is the result of investment in private equity media, university endowments, and NGOs. The energy industry understands production and consumption cycles, and makes just as much on low prices as high. When the glut from fracking is burned up by frolicking consumers, they’ll double the price again, and make a killing on the divested shares.” — Jay Taber

Hedge Funds

INVESTOPEDIA EXPLAINS ‘Hedge Fund’:

“For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.” [1]

Make no mistake. Capitalists, oligarchs, plutocrats, monopolies, and oligopolies will preserve and protect their market share and dominance—with every tool they have at their disposal—regardless of consequence. The unsurpassed instrument of choice to facilitate this ideology, has been, and remains today, the foundations (serving as a legal tax-evasion and money laundering apparatus for corporations), and the entities that foundations finance—those being the NGOs and institutions within the non-profit industrial complex, as well as the industrial media complex (both corporate and so-called “progressive”). [2]

“… the ultimate measure of success is the accumulation of capital.” — The Rise of Private Equity Media Ownership, 2009

 

“The capital will go wherever the best risk-return is.” — Ian Simm, founder and CEO of Impax Asset Management Group — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

Considering that foundations such as Rockefeller, et. al. strategize for the protection/expansion of hegemonic power years and, more often, decades in advance:

“In the sixty-five years since they began, we’ve funded the work of Golden Rice’s engineers, Dr. Peter Beyer, Dr. Ingo Potrykus, and others for more than fifteen of them… I’m delighted to announce, today, that we will be providing funding to the International Rice Research Institute – which we helped establish almost fifty years ago – to shepherd Golden Rice through national, regulatory approval processes in Bangladesh, India, Indonesia, and the Philippines. And we hope this is just the beginning.”— Judith Rodin, Rockefeller Foundation, Keynote speech 2008

Thus, one could reasonably hypothesize that divestment has been both developed and incremented as a deliberate stop-gap measure to buy back and seize control of all the planet’s last remaining fossil fuels. Divest publicly and then in turn, invest privately via alternative institutions and hedge funds under the control of elite individuals. Shares could be purchased utilizing private transactions and hedge funds to avoid public trading rules. In a populace which has fully succumbed to celebrity fetish layered upon relentless, irrelevant nonsense, no one is watching. Organizations and those of wealth and power that do not appear on the divestment frontlines, such as the corporations that entities like the non-profit organization Ceres caters to, can openly acquire these shares and further expand on finance capital and monopoly finance capitalism. Although a goal to seize control of all the worlds’ remaining fossil fuels may seem absurd to some, consider that the “new economy” underway is unequivocally carbon based and carbon dependent from cradle to grave. Pretending otherwise does not make this fact any less real.

“PE [Private equity] is barely making a dent given the trillions of dollars the energy industry needs to transform itself,” — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

 

“Wood Mackenzie, the energy consultancy, told the Financial Times private equity funds have currently around $40 billion worth of funds to invest in exploration and production deals.” — Private Equity Fund To Buy Oil and Gas Assets Worldwide, June 10, 2015

Recognizing that the goal to seize control all the worlds’ remaining fresh water is now well underway, makes the aforementioned hypothesis that much more worthy of one’s consideration, when one contemplates all the evidence at hand. For those in need of further evidence demonstrating the race for and capture of Earth’s final remaining resources, consider the Blackstone Group, a key water baron and world’s largest private equity firm. Its private capital fundraising has surpassed phenomenal and unprecedented levels. (Blackstone Capital Partners VII closed in Q4 on $18bn making it the biggest private capital fund closed in 2015 and the fifth largest buyout fund ever. Blackstone Real Estate Partners VIII closed in September 2015 on $15.8bn, making it the largest closed-end private real estate fund of all time. [Source] Blackstone has raised $4.5 billion for an energy focussed private equity fund, crossing its initial goals of $4 billion in February 2015, whereas the Carlyle Group LP has raised $2.5 billion for an international energy fund, surpassing a $1.5 billion fundraising target. In 2014, 52 private equity funds raised $39bn for investments in the oil and energy sector, a jump of 20 percent over previous year. [Source] As the oil glut tightens around the throats of producers, private equity managers circle like vultures over their prey. On February 11, 2016, Blackstone announced the formation of Clarion Offshore Partners LLC (“Clarion”), “a new platform to provide strategic solutions to the offshore oil and gas drilling and services sector, with a financial commitment from private equity funds managed by Blackstone.”

“I think this (oil prices falling) is going to be a wonderful, wonderful opportunity for us. It’s going to be one of the best opportunities we’ve had in many-many years.” — Stephen A Schwarzman, Chief Executive of the Blackstone Group, Growing Opportunities for Private Equity in Oil and Gas, April 1, 2015

 

“This trend in media ownership correlates with a larger rise of private equity activity in the economy as a whole since the turn of the century, which itself can be contextualized as a component of the increased prominence of organized finance capital within evolving neoliberal capitalism. The term ‘finance capital’ is employed here, as characterized by Dumenil and Levy (2004), to indicate the elite class of investors and financial institutions that are ‘major owners . . . free from direct management but often still active in the institutions that come to embody ownership’ (p. 208). Finance capital employs investment resources to maximize accumulation via instruments and markets that are detached from the actual production of goods and services. In basic terms, finance capital creates wealth by its own devices, making money from money rather than from direct investment in production.” — The Rise of Private Equity Media Ownership, 2009

 

“The world of private equity investment is a specialized and fairly restricted realm of knowledge. While the term itself may bear a certain degree of familiarity, what these companies actually do is, to a considerable extent, obscured from public view. Fundamentally, private equity firms are exclusive highstakes investment groups that manage and deploy massive amounts of private capital.” — The Rise of Private Equity Media Ownership, 2009

As Jay Taber notes in the February 19, 2015 article Illuminating Private Equity, “Corporate media rarely discussed the American aristocracy and how their agenda affects society. Consumers blame banks [765], but they have no idea how financial institutions are used by private equity traders to constantly replenish aristocratic wealth at our expense.”

Nowhere is this more evident than 350.org’s Naomi Klein in her reference to the orchestrated financial crisis of 2008:

“In 2009, when the financial crisis was in full swing, the massive response from governments around the world showed what was possible when our elites decided to declare a crisis.”

Indeed they did. The United States Government gave Wall Street the keys to the Treasury. Ironically, it was noted at the time, that this “bank bailout” was larger in sum than all the previous government programs combined over our 200-year history, including World War II and the Marshall Plan. And the most egregious irony of all, is that today’s environmental movement, choreographed by the likes of McKibben and Klein,  have given Wall Street the keys to the Treasury again. This time, the Treasury is that which holds our most precious treasures, that being the Earth herself.

Climate change, having accelerated with globalization, has presented the opportunity to restructure capitalism under the guise of corporate responsibility: the ultimate goal being the expansion of and maximization of private gain, via carbon market schemes and the commodification of the commons, at the expense of all life on Earth.

From The Rise of Private Equity Media Ownership, 2009:

• “Investment minimums are typically set in terms of millions of dollars, which has the dual effect of creating immense blocks of mobile capital while also limiting investment opportunities to elite groups of ultra-wealthy individuals and large institutional investors such as insurance groups, pension funds, and university endowments.”

 

• “Private equity funds are not openly traded in any public stock exchange system and therefore face considerably less regulatory oversight from institutions such as the Securities and Exchange Commission than their publicly traded counterparts.”

 

• “Although rates of return fluctuate, private equity firms typically seek to return at least 20%, a considerably higher profit margin than the average rate of return on publicly traded stocks.” “Private equity in the 21st century has wholly eclipsed its lineage in terms of aggregate fundraising power, total number and value of acquisitions, and size of individual transactions. The figures are awe-inspiring. The total number of active buyout firms worldwide has more than doubled in less than five years. In 2006, private equity accumulated a record $459 billion of investment capital worldwide. Fifteen years prior, they raised less than $10 billion. Given the ability to borrow against their current resources, private equity firms in aggregate command an estimated $1 trillion in spending power.

 

• In the United States, the world private equity leader, a record $215.4 billion entered private equity investment coffers in 2006. Of that, nearly $150 billion was specifically earmarked for buyout purposes, representing a 33% increase over corresponding funds from 2005, the previous record year. One-third of all merger and acquisition deals brokered in the U.S. in 2006 were funded in some capacity by private equity; five years ago this figure was just 3%.”

 

Akin to Emma Goldman’s observation that “If voting changed anything, they’d make it illegal”, the same logic applies to the divestment campaign: if it were a legitimate threat it would have been stopped at inception. Instead, we see the exact opposite. We witness the campaign being embraced and empowered by corporate capital. Yet why would this be surprising when it was in fact 350.org’s “friends on wall street” that developed the campaign at its inception. The only surprises here are why self-proclaimed environmentalists/leftists are more than eager to follow a path laid out by the very people they blame for our accelerating environmental crisis—the very people who oppress us—the same people and corporations that will reap the rewards from the divest-invest campaigns. The major form of authority that needs challenging, that being the system of private control over public resources, is successfully avoided via multiple and strategically useless discourses orchestrated by the NPIC with 350 at the helm of public influence.

“Figures from Dealogic, a capital markets research company, shows that the total deal value of UK private equity deals has risen fourfold since 2001, jumping from $16.3bn in that year to $68.4bn last year although the number of deals only rose by 66 per cent. The biggest single sector last year was utilities and energy where just four deals were worth $13.9bn. — Inside the Dark Box: Shedding Light on Private Equity, March 2007 [Emphasis added]

 

“There are incredible numbers of ripples that go out from the splash,” the head of BlackRock’s $18.8 billion Private Equity Partners said in a recent interview. “Well the energy revolution right now is the rock. The ripples are all of the things in the economy that support the energy revolution … that provide all kinds of investment opportunity.” — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

 

“Regardless of the exact mix, private equity is excited by the massive amounts of investment needed to keep up with growing global demand. An estimated $40 trillion will be required to satisfy energy needs through 2035…” — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

Thus, more than the divestment campaign simply providing a super highway to the “new economy” (as part of the third industrial revolution, the so-called “climate wealth opportunity”), and serving as a bridge to the ultimate coup, the commodification/privatization of the commons/natural capital is providing an effective discourse to allow economic growth to continue unabated while appearing to be a mitigation tool for climate change. This is nothing more than simply a tool of illusionary revitalization of a stagnant global economy in a  futile attempt to facilitate global carbon trading and carbon taxes (via promotion of the a so-called carbon “budget – even though in reality no budget still exists).  Other than acquiring the means to raise 4 trillion in capital required for the “new economy” (and 90 trillion for infrastructure), it must be considered that the ultimate goal is the capture of all remaining fossil fuels as the world spins into climate chaos. The idea that the pathological corporate entities behind the capture of land, water, forests, and all nature’s remaining wealth, are no longer interested in fossil fuels, which without, there is no “third industrial revolution” would appear to defy all logic—a third revolution which is mystically not carbon based or dependent. A true fairy tale if there ever was one.

“Even though the actual sums of capital put forth by private equity firms may reach billions of dollars, major leveraged buyouts can rely on multiple billions of dollars of debt financing. The result is that private equity firms are able to make phenomenally large acquisitions without committing proportionate amounts of capital. In addition, groups of individual private equity concerns commonly join forces in socalled “club deals” (Sweeney, 2007, p. 34). This collaboration allows consortiums of buyers to pool their resources and borrowing power so that all but the largest of companies are within range of acquisition.” — The Rise of Private Equity Media Ownership, 2009

 

“Regardless of the exact mix, private equity is excited by the massive amounts of investment needed to keep up with growing global demand. An estimated $40 trillion will be required to satisfy energy needs through 2035…” — Private equity bets on energy ‘revolution’—in oil and gas, November 17, 2014

In the 2003 Federal Communications Commission report, Commissioner Michael J. Copps made the statement that we cannot afford to “treat the media like any other big business, trusting that in the unforgiving environment of the market, the public interest will somehow magically trump the urge to build power and profit for a privileged few.” [Source] One could similarly surmise that we cannot afford to believe in the illusion of a “new economy” (designed by the establishment)”trusting that in the unforgiving environment of the market, the public interest will somehow magically trump the urge to build power and profit for a privileged few.”

Dry Powder: Utilizing Non-transparent Trading Entities

“Already, buyout groups’ activity in the oil and gas sector has picked up significantly. They poured US$31-billion into the oil and gas sector in 2014, clearly outstripping the US$8-billion in investments that sponsors have invested in the sector over the five prior years, according to ThomsonReuters data.”— February 24, 2014, New oil rush? Private equity starts to buy into energy assets

Further, via private-equity firms, it is standard that “oil-patch loans” are secured/backed by the debtors’ energy reserves, meaning, that in the event of a default, the creditors actually seize and obtain the valuable fossil fuels. [Source] If this practise lends itself to utilities, land and other “environmental markets” we can assume that these assets too have, can and will also be seized.

“In such a situation, the private equity investor tends to win in almost any scenario. If the company performs, the investor receives attractive loan yields and, if the stock price rises, also realizes additional returns on its warrants. If, on the other hand, the company struggles and ends up in bankruptcy, the investor may be still able to acquire ownership of the company (either in a 363 sale or a plan of reorganization) unless its loans are repaid or otherwise left unimpaired.” — John Sirico, analyst at independent credit research firm Covenant Review [Source: Axial Forum – Grow Companies – Close Deals, March 31, 2016]

Consider that over the past decade within a financial landscape designed, manipulated and controlled by the elites, private equity firms and hedge funds have flourished:

“… as of January 2012, private equity players had raised $186 billion through 276 infrastructure funds and were seeking another $93 billion to take over infrastructure worldwide.” — Private Equity, Public Inequity: The Public Cost of Private Equity Takeovers of US Water Infrastructure, August 22, 2012

 

“North America-focused funds increased their prominence in the private capital industry in 2015, accounting for 60% of total capital raised, up from 56% in 2014.” — Preqin 2015 Fundraising Update

Note that Generation Investment (Blood & Gore) is itself a hedge fund (“In May, Generation Investment Management, a hedge fund co-managed by David Blood and former Vice President Al Gore, filed its 13F for the first quarter of 2013 with the SEC.”). Elite investor portfolios (i.e. Goldman Sachs Capital Partners is the private equity arm of Goldman Sachs) wield an immense amount of political influence.

“According to one report, leading British private equity partners have paid tax of no more than 4 to 5 per cent on multi-million incomes. Executives and partners in private equity funds are able to gain a huge tax break by the treatment of their profits as capital gains rather than income” — Inside the Dark Box: Shedding Light on Private Equity, March 2007

The interlocking directorate, as found thriving in the NPIC is also flourishing in private equity:

“More than half the 83 lobbyists registered last year to work for the industries’ two trade groups, the Private Equity Council and the Managed Funds Association, have served in government — from Capitol Hill to the Treasury Department.” — Hedge Funds Get Free Ride, May 3, 2010

To understand the power wielded by private equity firms which serve the personal financial interests of the elites, private equity transactions are largely exempt from the registration requirement in the Senate bill passed to discontinue the bailouts that have been administered to financial institutions deemed “too big to fail”. Like hedge funds (and foundations), private equity firms invested their money in the nurturing of personal relationships with political sway and influence, ensuring their ability to shape/manage and even control the debate. [Source] Consider four of the past eight U.S. Treasury Secretaries have worked in private equity.

“Since the start of 2013, private-equity firms have locked up $92.4 billion in energy-specific funds, by far the most of any comparable stretch, according to data provider Preqin.” — Feb 22, 2015, Blackstone Brings New Fund to Oil Patch

 

“…private equity raised close to $34 billion for oil and gas funds in 2015—a 94% rise from three years ago—as new transactions continue to be executed.” — PE Increasingly Eyes Distressed Oil and Gas Investments: Here’s Why, Axial Forum – Grow Companies – Close Deals, March 31, 2016 [Emphasis added]

Why We Have to Kiss Off The Non-profit Industrial Complex

In the January 14, 2015 Rolling Stone article, The Logic of Divestment Why We Have to Kiss Off Big Carbon, the author writes that “This past October, the head of England’s central bank, Mark Carney, declared that “the vast majority of reserves are unburnable.” Carney warned that fossil-fuel investors, focused on short-term profits, were not pricing in this reality – a phenomenon he called a “tragedy of horizons.” No person with a shred of decency would disagree that the vast majority of reserves should not be burned. But you can’t have it both ways. If it cannot be burned for the industrialized “fossil fuel” economy, it cannot be burned for an industrialized, and more importantly, illusory “clean energy” economy either. Illusory as the fantastical infrastructure is fossil fuel based, fossil fuel dependent. Possible only by exhausting Earth’s natural resources that scientists warn will be depleted in their entirety by 2030, even without incorporating a third industrial revolution.

A global infrastructure and the copious technology that comprises it, is designed to become obsolete. The oligarchs wish for nothing more than to have what they’ve always had. That is, to have their cake – and eat it too. That is, full control of Earth’s remaining fossil fuels, as well as the trillions of dollars required to jumpstart the vacuous “new economy” which they pray to their white, blue-eyed God, will save the industrialized capitalist economic system now “flying close to stall speed”. To believe that the oligarchs have lost or will lose their interest in fossil fuels, as illegal wars, invasions and occupations accelerate at an unprecedented velocity in the race for what’s left, is to dismiss the fact we are living under a corporatrocracy, that would never straightjacket itself, or impose any kinds of restrictions or limitations on its own domination or power. This must be considered perhaps the greatest  “tragedy of horizons” of all.

 

End Notes:

[1] “It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally can’t enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn’t accurate to say that hedge funds just “hedge risk”. In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.” [Source] [2] “Foundations such as Ford, Rockefeller and Carnegie were considered the best and most plausible kind of CIA funding cover. A CIA study of 1966 argued that this technique was `particularly effective for democratically run membership organizations, which need to assure their own unwitting members and collaborators, as well as their hostile critics, that they have genuine, respectable, private sources of income.’ Certainly, it allowed the CIA to fund a seemingly limitless range of covert action programs affecting youth groups, labor unions, universities, publishing houses, and other private institutions from the early 1950s.” — Frances Stoner Saunders from her book “The Cultural Cold War”