GLOBAL FORESIGHT - rockco.com · GLOBAL FORESIGHT ¼NS¦' ¥Ã ¦¼/¦ 201 8 3 In fact, the crude oil futures market proved remarkably prescient. Oil prices have stayed low since

G L O B A L F O R E S I G H T T H I R D Q U A R T E R 2 0 1 8 1

GLOBAL FORE SIGHT

Drilling Down on InnovationB Y B R A D L E Y M . H U N N E W E L L , C F A

pages 12-14

Water: Thirst for New SolutionsB Y R O L A N D O F. M O R I L L O

pages 15-19

Nothing Trumps the Dollar, Yet B Y J I M M Y C . C H A N G , C F A

pages 6-11

Oil & Water B Y D A V I D P . H A R R I S , C F A pages 2-5

T H I R D Q U A R T E R 2 0 1 8


Cover Story

DAVID P. HARRIS, CFAChief Investment Officer

212.549.5210

[email protected]

In addition to trade wars and rising geopolitical tension, two other issues have been a focus in the headlines: 1) resurgent oil prices, with crude reaching its highest level

since 2014 and 2) severe drinking water shortages in both South Africa and India. Oil and water are not only the two most abundant liquids on Earth but arguably the most important commodities impacting investment opportunities in the near-term and the long-term. In this issue of Global Foresight, we update our views from the First Quarter 2015 issue when we last featured our outlook for oil. Also in this edition, Jimmy Chang reviews the history of reserve currencies and the prospects for the U.S. dollar to remain in this powerful position, while Brad Hunnewell takes a deep dive into the technologies that have revolutionized the energy industry, and Rolando Morillo takes a closer look at water issues that could lead to long-term investment opportunities.

OilPetroleum products have been used for an estimated 6,000 years as oil that was naturally available in pits or on river banks was utilized as a building material. The earliest evidence of man-made exploration dates back nearly 2,500 years when the Chinese were believed to have drilled the first oil wells. It was not until 1859 when Colonel Edwin Drake successfully drilled for oil in Titusville, Pennsylvania that the commercial era for oil began, one that has lasted nearly 160 years and will likely be around for decades more. We can debate what year alternative forms of energy will finally cap the growth in the demand for oil — industry experts as well as energy producers forecast demand in oil to peak roughly 10 to 30 years from now. However, even with this wide range of scenarios, the petroleum industry is in the latter stages of its remarkable history of growth since Titusville. By contrast, fresh water has historically been in abundance and relatively costless — therefore, it has not created nearly the depth of investment interest or opportunities as the petroleum industry. With a warming planet, poor resource planning by authorities and growing global demand for

After the slow, steady gains in equity markets in 2017, this year has been markedly different with volatility spiking but returns flattening. The global economic picture is mixed but generally good, with the U.S. economy poised to produce its strongest quarterly growth since 2014 while the growth outlook for Europe has moderated. Although corporate profits remain quite healthy, investors have become more concerned about potential trade wars as well as rising geopolitical tension. Any potential trade war will be staged out over weeks and months to come, so it is too soon to know how this may fully develop. We believe that an all-out trade war remains unlikely as it would be very difficult to identify hundreds of billions of dollars of goods from China without punishing the U.S.-based multinational companies that produce them. Also, new tariffs would hurt American consumers who have come to depend on affordable goods manufactured in China, Mexico, Canada, etc.

Photo source: Getty Images

proteins (which are far more water-intensive to produce than carbohydrates) we are likely in the early days of fresh water as a potential source of investment opportunity as it gets increasingly viewed as a scarce commodity.

Oil 2015 to 2018 When we last featured oil, West Texas Intermediate (WTI) had plunged from $107 a barrel in June 2014 to $53 at the end of 2014. Our view in early 2015 was that the Organization of Petroleum Exporting Countries (OPEC) was becoming less influential, as U.S. production was slated to boom and U.S. relations with Iran were improving, creating a pathway for sanctions on Iran to be eased and for their production to grow. The futures market for oil at the end of 2014 priced oil to rebound to $65 by early 2017, which we viewed as a reasonable expectation, as we were not of the opinion that oil would rebound to $90, $100 or even $145 for which it sold in July 2008.


In fact, the crude oil futures market proved remarkably prescient. Oil prices have stayed low since 2015 and actually dipped, before ultimately rebounding to $65 in early 2018, about one year later than implied by the futures market back in the beginning of 2015 as shown in the green line in chart 1. The futures curve today as shown in the gold line has the price of oil moderating over the next several years.We believe a few fundamental changes in the oil markets since 2015 explain its recent strength: 1) 2017 was the first year that all major global economies were growing in sync since the financial crisis — helping support demand, 2) OPEC became more united and managed to agree to reduce supply in late 2016, marking the first OPEC production cut in eight years, 3) Venezuelan production had collapsed along with its economy, and 4) President Trump unilaterally withdrew from the deal with Iran (Joint Comprehensive Plan of Action or “JCPOA”) on its nuclear activities and imposed new sanctions, threatening their future supply.These developments have supported the rebound in crude prices and are worth a closer look. Venezuelan production has already deteriorated from 2.8 million barrels produced a day (bpd) to less than 1.4 million bpd. Further declines from the current small base will likely have a more muted impact on total global supply. When the U.S. announced its withdrawal from the Iran deal in May, oil prices rallied, yet the impact on Iran’s future production given the threat of U.S. sanctions is still unclear. The U.S. State Department has warned allies to cease buying Iranian oil by November 4, an earlier and stricter enforcement than was originally expected. As a result, estimates of lost Iranian supply from the global oil markets range from a few hundred thousand to over a million bpd. We

expect President Trump to continue to pressure other OPEC members to offset any loss of Iranian barrels. OPEC already responded in late June with an increase in production quotas of one million bpd, the group’s first increase since 2016. More than with other trade disputes, Trump has a lot of leverage with OPEC. With 665 million barrels of oil stored in the U.S Strategic Petroleum Reserve (SPR), the President has a credible threat to drive oil prices lower. Although the intention of the SPR was to stabilize supply in case of a major disruption, we expect it could be utilized as a bargaining chip by Trump to extract more supply from OPEC whenever he deems the price too high. WTI traded around $70 per barrel when he tweeted most recently to complain about high oil prices. A less likely but more potent weapon for Trump would be the passage of the No Oil Producing and Exporting Cartels Act (NOPEC) that would enable the U.S. government to sue OPEC for price manipulation. Trump has voiced support in the past for such legislation, but it is far from certain that it would make it through Congress. One other major factor as to why we believe oil prices will stay reasonably contained is the continued massive increase in U.S. production, especially from the Permian basin. In 2015, production in the Permian was 1.7 million bpd, and today, it is just over 3 million. The Permian alone produces about as much oil as Kuwait and, at current growth rates, could be as much as Iran in a year. The Permian has been such an abundant source of oil, that producers are constrained by insufficient pipeline capacity to move the oil to market. If we examine the difference in price that WTI commands compared to Brent (priced from production in the North Sea), it suggests that the U.S. is awash in oil. If we compare the price of WTI to oil from the Permian, it suggests

CHART 1: WTI OIL FUTURES CURVE COMPARISON

Source: Bloomberg

WTI Futures as of June 2018

WTI Futures as of January 2015


the Permian is drowning in oil (see chart 2). However, we believe these bottlenecks should prove temporary as substantial pipeline capacity is being added.The limiting forces for Permian growth may be labor and water. There is a nationwide shortage of truck drivers impacting a wide range of industries. Many companies began citing rising transport costs in quarterly earnings calls back in 2017. In west Texas, unemployment is virtually non-existent. Jobs advertising $100,000 salaries are not filled because increasing wages alone is not a sufficient remedy to alleviate the labor shortages. Workers need to be retrained, which takes time.

Trade WarsOne potential short-term casualty of rising trade rhetoric with China would be U.S. domestic oil production. The U.S. has gone from zero exports of oil to China in 2016 to now selling roughly 500,000 bpd. If the trade war escalates, these barrels would eventually find a new export market, but an import tariff from China would likely create some short-term dislocation.

WaterOne major input in the Permian is water, as shale oil requires a lot of it in its extraction process. We expect investment opportunities to develop for companies who can efficiently manage their water use. Databases like sourcewater.com demonstrate how robust the market is for the acquisition of water and disposal of waste in the Permian.

It is easy to criticize heavy industry for its water use; however, the resource has been severely mismanaged and mispriced by authorities. The New York Times published a story in 2015 that the average American consumes 300 gallons of water per week from California. Simply from the foods we eat that are grown there, the average American drives up California’s water use. Conservation efforts tend to focus on water used in swimming pools and showers, but 80% of California’s water consumption is from its farms. Yet California continues to heavily subsidize the cost of water to its farmers. The shortages in India and South Africa, although exacerbated by hot and dry weather, also have much to do with lack of planning and proper pricing. In the U.S. we have seen municipal water systems being privatized so state-of-the-art technology and best practices can be employed. The U.S. is a relative latecomer to having publicly-traded firms running water utilities. France, the United Kingdom, Japan, China and Brazil already have public companies managing water infrastructure. We expect this sector to grow and potentially thrive over time to deal with municipal water scarcity.

FoodWhile California’s water issues are largely self-inflicted, rising demand for protein, especially beef, will drive increased demand for water. A pound of chicken or pork requires multiple the amount of water than is required to produce the same amount of corn, wheat or rice. Beef requires about three times as much water as chicken or pork. As demand grows for proteins, especially from emerging markets, we should see continued demand for fresh water.

MAP: U.S. OIL PRODUCTION REGIONS

Map Source: U.S. Energy Information

Administration


New TechnologiesThere have been many instances, especially during the oil crises of the 1970s, when energy pundits would call for “peak oil” and suggest the world would eventually run out of oil in 10, 20 or 30 years. Invariably, new technologies would evolve to find incremental resources to the point that the term “peak oil” today usually refers to when demand will peak not supply. Many specialized industries have evolved to extract oil and gas from the farthest reaches of the globe or under oceans. This in turn spawned a wide range of investment opportunities in equity and debt markets that have grown dramatically since the early days of Colonel Drake.We expect the same will hold true for water. The world will not run out of fresh water. But cheap, abundant and reliable supplies will become a relic of the past because of misuse, poor infrastructure, changing diets and climate change. Severe water shortages will likely appear in different geographies, especially in those that are not surrounded by vast fresh water sources. We believe we are in the early days of fresh water as an investable opportunity. When we think about ideal long-term investment opportunities, we seek areas of unmet or growing need that can last for decades. Although the investable universe is small today, we believe capital, ingenuity, and market based-solutions will help offset the strains that have been showing up all over the world on reliable supplies of fresh water.

ConclusionWe may think of oil as expensive and water as free, but that notion may get flipped one day as we are still finding new sources of oil, while competing alternatives to petroleum continue to get cheaper over time. By contrast, fresh water is a finite resource for which demand is poised to accelerate over time. In a world awash in debt and aging demographics, finding sectors with sustainable long-term growth prospects is a challenge. Even more of a challenge is identifying them early enough before valuations fully reflect growth prospects.The technology sector has been its strongest since 1999-2000, when many stocks reached highs they never eclipsed. As an example, Cisco Systems is still 40% below where it sold in March 2000, when it was the world’s most highly-valued company. While valuations of technology companies today are not as stretched as they were in 2000, they are arguably the most expensive they have been in the last 18 years. The investment opportunities in water appear to be, in many ways, like the early days of technology or petroleum. We expect there will be many more ways in which to publicly invest in water-related businesses over the years to come. We do not believe the petroleum business is disappearing anytime soon, but recognize it is a maturing industry that has experienced some cyclical improvement in the last few years. Although oil can always spike higher, we believe prices will stay reasonably contained over the next few years. •

CHART 2: PRICE OF PERMIAN VERSUS PRICE OF WTI OIL

Source: Bloomberg

WTI OilPermian


Nothing Trumps the Dollar, Yet Petro-Yuan Won’t Dethrone the King Dollar, But Beware of Fed’s Tightening and Rising Budget Deficits

navigation, shipbuilding and armament made them the dominant world powers and their currencies became globally accepted.During the 15th century, the Portuguese real was the currency of global trade as the Kingdom of Portugal became the first global naval power with a colonial empire that spanned South America, Africa and the Indian Ocean. Portugal’s supremacy started to unravel in 1578 with the battlefield death of the young King Sebastian who had no descendants. Spain’s Philip II subsequently maneuvered to take over Portugal and made Spain the new superpower. The phrase “the empire on which the sun never sets” was originally coined for the 16th century Spanish Empire. The Spanish dollar went on to become the first global currency as it was a legal tender in not only Europe, but also in the Americas and in the Far East. Indeed, the Spanish dollar was widely used in the United States until the Coinage Act of 1857, which was the first step by the U.S. government to establish a monopoly on the country’s money supply.While the Spanish Empire was dominant, the cost of maintaining its hegemony was also high as it had to fight off constant challenges from the likes of English privateers as well as the Dutch resistance that led to the Eighty Years’ War from 1568 to 1648. Amazingly, King Philip had defaulted four times but never lost access to the capital market. The Dutch resistance eventually prevailed and the Dutch Empire evolved into the dominant global power for the first half of the 17th century.

In 1953, a group of Chinese archaeologists were excavating the tomb of a high-ranking official from the Sui Dynasty (581-618 AD) in a village near the ancient capital of Xian.

They found a small gold coin that looked nothing like traditional Chinese coins, which had a hole in the center for ease of being strung together. Upon further examination, it was identified as a solidus coin of the Eastern Roman Emperor Justin II, who reigned from 565 to 574 AD. In subsequent years, nearly 50 Byzantine gold coins and their imitations were unearthed from ancient tombs across China’s northwestern Xinjiang region, Inner Mongolia to the northeastern province of Liaoning. It indicated that the solidus, issued in Constantinople as far back as 1,400 years ago, was indeed a reserve currency that facilitated trades from the Mediterranean Sea to the Middle Kingdom.

A Brief History of Reserve CurrencyA reserve currency is a currency widely accepted as a means of international payment and held in large quantities by governments and institutions around the world. Historically, the reserve currency status tended to reside with countries having the most dominant regional economy as well as military might — the Greek drachma, the Roman denarii, the aforementioned Byzantine solidus, the Islamic dinar during the Middle Ages, etc. Starting with the Age of Discovery, European countries’ superior technology in cartography,

J I M M Y C . C H A N G , C F A Chief Investment Strategist

212.549.5218

[email protected]

Photo source:Wikimedia Commons


The Exorbitant PrivilegeThe U.S. dollar’s global reserve currency status under the Bretton Woods framework immediately created a shortage of U.S. dollars outside the U.S. As the world’s most dominant manufacturing power at the time, the U.S. was running huge trade surpluses and the rest of the world did not have sufficient dollars to buy our products. To help the rest of the world grow, the U.S. had to run up current account deficits to create U.S. dollar liquidity for the rest of the world. The initial solution was the Marshall Plan, which provided large-scale economic aid, or U.S. dollar liquidity, to rebuild Europe, Japan and many other parts of Asia. Over time, the U.S. started to run increasingly greater trade deficits with the rest of the world, which provided them with U.S. dollar liquidity. The reserve currency status gives the U.S. a significant advantage in handling its finances. American economist

Barry Eichengreen observed that it cost only a few cents for the U.S. to print a $100 bill, but other countries would need to produce $100 of actual goods or services to obtain that $100 bill. The world’s need for the greenback allows the U.S. to issue debt in its own currency at very low interest rates. French Finance Minister Valéry Giscard d’Estaing, who later became the president, coined the term exorbitant privilege to describe America’s advantage. In 1965, sensing that the growing supply of the U.S. dollar had made it overvalued versus gold, French

President Charles de Gaulle demanded to convert France’s holding of the greenback into gold. The increased outflow of gold from the U.S. put much strain on the fixed exchange rate system which President Nixon eventually abolished in 1971.

The Dutch’s rise on the global stage was enabled by the establishment of the world’s first truly transnational and publicly-listed corporation, the Dutch East India Company (VOC), in 1602. It forcibly established trading posts in modern-day Indonesia and soon dominated the spice trade in the region and beyond. It even waged war with the Ming Dynasty of China and had colonized the island of Taiwan from 1624 to 1662. It had a monopoly on a trading post on the island of Dejima in the bay of Nagasaki, which was Japan’s sole trading access to the western world from 1640 to 1854. By 1669, the Dutch East India Company commanded over 150 merchant ships, 50,000 employees, 40 warships and a private army of 10,000 soldiers. The Dutch West India Company was also created to colonize the Americas and participate in the slave trade that spanned West Africa, the Caribbean, Brazil and North America. This amazing global dominance by a country of less than two million people at the time naturally made the Dutch guilder a premier global reserve currency.However, history once again proved that a country’s global dominance was not to be permanent. Three Anglo-Dutch wars over trade and colonies in the second half of the 17th century took a toll on the Dutch Empire, which eventually lost out to a new rising star, Louis XIV’s France.It’s debatable what the leading reserve currency was during the 18th century, as France’s military power was not matched by its fiscal soundness. Louis XIV’s war efforts essentially bankrupted the country, and the Mississippi Bubble fiasco in 1720 further stressed the country’s finance and credit-worthiness. In fact, the British Empire, backed by the riches from its North American colonies, was poised to become the new superpower. While the American Revolution was a setback for the British Empire, its embrace of the industrial revolution and the expansion of its colonial power in Asia, Africa and the Pacific made its ascendancy inevitable. Upon defeating Napoleon Bonaparte in 1815, the British Empire became the preeminent global superpower for the ensuing 100 plus years.The two world wars in the 20th century sapped the British Empire’s strength and gave rise to Pax Americana. The U.S. possessed all the attributes of earlier empires — military might across the globe, powerful transnational corporations, leading technologies — and also attracted talent from around the world. In 1944, the U.S. dollar was made the world’s reference currency in the Bretton Woods Agreement. The primary goal of the agreement was exchange rate stability. The fixed foreign exchange system pegged each currency to the U.S. dollar at a predefined exchange rate, and the U.S. dollar could be converted into gold at $35 per ounce. It essentially made the U.S. dollar the new gold standard.

“In response to our trading partners’ shock at the U.S. dollar’s devaluation, John

Connally, Nixon’s Secretary of Treasury, famously quipped

at a G-10 meeting in 1971 that ‘the dollar is our currency, but

it’s your problem.’ ”

Photo source: Wikimedia Commons


One could argue that, over the past few centuries, there was a transition in reserve currency roughly every 100 years. By pegging the 1944 Bretton Woods Conference as the starting point of the U.S. dollar hegemony, one could say that the greenback is about three-quarters of the way through the 100-year reign. Indeed, many pundits have predicted the decline of the U.S. dollar hegemony over the years. A 2011 survey of central bank reserve managers around the globe reportedly had more than half of them predicting that the U.S. dollar would lose the global reserve currency status over the coming 25 years. For another currency to dethrone the U.S. dollar, however, the currency-issuing country would need to possess the economic, political and social stability, as well as military might to rival the U.S. Today, there are really only two viable competitors — the euro and the Chinese renminbi. The euro may have already enjoyed its moment in the sun during its relentless appreciation against the U.S. dollar from $0.86/euro in early 2002 to $1.60/euro by April 2008. During that period, there were indeed talks of the euro giving the greenback a run for its money, but the euro’s structural weaknesses were later exposed by several rounds of sovereign debt crises starting with Greece in 2010. Given the rise of divisive populism and the diverging fiscal discipline between the north and the south, it is hard to imagine the euro supplanting the U.S. dollar as the new global reserve currency.The renminbi, on the other hand, has the potential to dethrone the King Dollar in the long run as the Chinese economy is likely to surpass the U.S. in size by around 2030. President Xi Jinping of China has also set a goal of transforming China into a leading global power by 2050. While not stated explicitly, China as a leading global power would most likely prefer to see the influence of the U.S. dollar diminished. As far back as

In response to our trading partners’ shock at the U.S. dollar’s devaluation, John Connally, Nixon’s Secretary of Treasury, famously quipped at a G-10 meeting in 1971 that “the dollar is our currency, but it’s your problem.”Another privilege the U.S. has enjoyed is the ability to turn the U.S. dollar into a tool of economic sanction. Since practically all commodities are priced in the U.S. dollar, all countries will inexorably need to have access to the greenback. The U.S. can thereby deprive a sanction target of U.S. dollar access by threatening to punish any banks that dare to transact with it. Lastly, the greenback’s reserve currency status essentially made the Federal Reserve the de facto central bank to the world, especially to emerging market countries that needed external funding. While the Fed is focused solely on the U.S. domestic economy, its policy impact nevertheless reverberates across the globe. Many foreign economies are simply at the mercy of the Fed’s policy. As discussed in June 2018 Monthly Market Review, the Fed’s tightening policy has already created headwinds for many emerging market countries.

Petro-Yuan Rising?Just like the empires of the past on which the sun never sets, the cost of maintaining America’s hegemony is exorbitant; the U.S. spends more on defense than the next seven countries — China, Russia, Saudi Arabia, India, France, UK and Japan — combined. The military campaigns in Iraq and Afghanistan, along with generous entitlement programs, have added to the country’s financial burden. Some have questioned if the days of American hegemony are numbered. If history is any guide, no country has ever managed to maintain a permanent grip on the reserve currency status.

Photo source: Shutterstock


March 2009, during the depth of the Great Financial Crisis, China’s central bank has proposed the use of a basket of currencies — the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) — to replace the U.S. dollar as the global reserve currency. However, the SDRs, which now consist of five currencies including the renminbi, have many practical limitations. One way for China to gradually chip away at the U.S. dollar supremacy is to leverage China’s large domestic market to insist on buying things with the renminbi. As the world’s largest importer of oil, China certainly wields a lot of influence on the market. In March 2018, China successfully launched yuan-denominated crude oil futures contracts on the Shanghai International Energy Exchange, paving the way for Chinese entities to purchase crude oil priced in yuan. Some interpreted the move as the beginning of the petro-yuan’s long march to replace the petrodollar. Given China’s size, it could conceivably negotiate to purchase other commodities in yuan, thereby increasing the currency’s share of global commerce. While the renminbi will account for a greater share of global trade, there is still the question of whether China’s trading partners would choose to hold on to the yuan. Energy-producing countries such as Saudi Arabia, the United Arab Emirates and Bahrain have their currencies pegged to the U.S. dollar, so holding a large quantity of the yuan would create an exchange rate risk for them. For the renminbi to gain wider acceptance as a reserve currency, China needs to make its capital markets, especially the fixed-income market, more attractive to foreign investors looking to generate a return on their yuan holdings. Then there is the question over the renminbi’s convertibility — when will the yuan become fully convertible so that it can be traded without limitations? Given increased restriction on capital outflow to stem the decline in China’s foreign currency reserves in recent years, full convertibility of the yuan remains years — if not decades — away. In short, while the petro-yuan news generated some sensational headlines, it would take a very long time for the renminbi to become a viable alternative to the U.S. dollar. The greenback has remained by far the most widely held reserve currency, and no one comes close. According to the IMF, at the end of 2017, the U.S. dollar accounted for 62.7% of all reported global central bank reserves; the euro had a 20.2% share, and the Chinese yuan captured a mere 1.2% share. The lion’s share of international finance remains U.S. dollar denominated. According to the Bank for International Settlements, the U.S. dollar-denominated debt outside the U.S. as a percent of non-U.S. GDP has actually grown from 12% in early 2008 to over 18% by 2017. It is still the U.S. dollar that drives the global economy.

Crypto Reserve CurrencyIn an age of artificial intelligence, autonomous driving cars and “FANG”tastic stocks, we’d be remiss not to touch on the subject of cryptocurrencies. Many cryptocurrency advocates have argued that something akin to Bitcoin will one day replace the U.S. dollar as a reserve currency. Even Christine Lagarde, the IMF Managing Director, has acknowledged that “virtual currencies might just give existing currencies and monetary policy a run for their money.”

Conceptually, Madame Lagarde observed that virtual currencies could be issued “one-for-one for dollars, or a stable basket of currencies” based on a credible, predefined rule. She argued that the issues with today’s cryptocurrencies — volatility, lack of stability, etc. — are technological challenges

that could be addressed over time. We would also surmise that the French and many others would love to see the U.S. losing its exorbitant privilege. Cryptocurrencies’ anonymity and peer-to-peer model would also render U.S. economic sanctions as well as central bank monetary policies impotent.

These salient qualities of cryptocurrencies, ironically, are also reasons why sovereign countries would use various regulatory and legal means to suppress their wider adoption. After al l, why would any sovereignties tolerate unfettered transfer of money and lose control over their monetary policies? That said, an organization such as the IMF could conceivably develop a virtual currency based on the aforementioned SDRs to make it a viable medium of

exchange. Many countries may just support such an initiative as a way to reduce America’s influence on the global stage. As the CEO of a prominent global financial institution recently opined, the Trump Administration’s “unilateral foreign policy and unilateral trade policy” may be tempting the world to find an alternative. Still, it would be a multi-year process, and the U.S. is unlikely to give up its exorbitant privilege without a fight — literally and figuratively.

Investment ImplicationsWith the U.S. dollar firmly entrenched as the global reserve currency, it will be an interesting balancing act for the Fed to pull off interest rate hikes and quantitative tightening without triggering some negative repercussions around the world.Dr. Urjit Patel, the Governor of the Reserve Bank of India, recently penned an op-ed in the Financial Times calling on the Fed to “recalibrate its normalisation plan” or run the risk of creating a “sudden stop” for the global economic recovery.

“While the petro-yuan news generated some sensational headlines,

it would take a very long time for the renminbi

to become a viable alternative to the U.S. dollar. The greenback

has remained by far the most widely held reserve

currency, and no one comes close.”

G L O B A L F O R E S I G H T T H I R D Q U A R T E R 2 0 1 8 1 0

He astutely noted the “unintended coincidence” of both Fed tightening and increased debt issuance by the U.S. Treasury could be potentially destabilizing.During the tightening cycles of the last two decades, the U.S. federal budget deficits as a percent of nominal GDP were shrinking (chart 1). In fact, during the late 1990s hiking cycle, the U.S. even achieved several years of budget surplus. In the current hiking cycle, which started in December 2015, the U.S. federal budget deficit has steadily increased from the early 2016’s 2.2% of nominal GDP to the latest figure of 3.7%. Trump’s tax cuts will further increase the deficit in the years ahead.

Higher federal budget deficit means increased U.S. Treasury issuance. It has the effect of draining U.S. dollar liquidity from the rest of the world, as the growing U.S. debt supply competes against other borrowers for capital. This development, coupled with rising interest rates and a shrinking Federal Reserve balance sheet, portends a challenging funding environment for emerging market countries that depend on foreign capital for growth. As a result, the price of the U.S. dollar would rise for these countries, meaning that their currency would depreciate against the greenback. To stem the tide of depreciation, they would need to raise interest rates, which unfortunately would impede their growth.

CHART 1: FED FUNDS RATE VERSUS U.S. FEDERAL BUDGET SURPLUS AS A PERCENTAGE OF NOMINAL GDP

Source: Bloomberg

Photo source: Wikimedia Commons

U.S. Treasury Federal Budget Deficit or Surplus as a Percentage of Nominal GDP (left side) U.S. Federal Funds Effective Rate (right side)


Another headwind for emerging markets is that China’s clampdown on their shadow banking system has created a liquidity crunch. During the first five months of the year, China’s off-balance-sheet lending has dropped by 567 billion yuan compared to the 2.26 trillion yuan increase during the same period in 2017. As shown in chart 2, China’s M2 money supply growth has slowed to the lowest levels since at least the mid-1990s. Coincidentally, the U.S. M2 growth has also declined to a multi-year low of 3.7%. The slowing credit growth in China would not only pressure its domestic demand but also emerging markets that depend on Chinese imports for growth. The situation would deteriorate further if a trade war really breaks out, as it could potentially create a stagflationary shock rippling across the globe. While not our base case, some emerging markets could be hit with a self-fulfilling negative feedback loop of capital outflow, devaluation and liquidity crunch. The odds of such a scenario would diminish if China, as we suspect it will, loosens its monetary and fiscal policies in the near future. The Fed, however, is unlikely to turn dovish with U.S. economic growth re-accelerating and unemployment hitting 18-year lows. Ironically, the contagion risk from an emerging market dislocation, should it materialize, may eventually force the Fed to pause its tightening, similar to what happened in 1998. Such an outcome would likely trigger a rally in risk assets, though investors would have to stomach much higher volatility getting to that point.

In summary, after years of loose money, the global economy and financial markets now need to adjust to the concurrent tightening by the world’s two largest economies. The European Central Bank may also initiate its tightening measures starting in 2019. It’s part of the inevitable normalization process in the context of continued global economic expansion, but the most vulnerable economies, emerging market countries that depend on external financing, are likely to bear the brunt of the liquidity crunch. As for the King Dollar, its short-term outlook appears robust, buoyed by a solid U.S. economy and a more hawkish Fed in comparison to other major central banks. However, the prospect of widening budget deficits will likely pressure the greenback in the intermediate term. One can make a bearish long-term prognosis for the U.S. dollar given the country’s daunting fiscal challenges — the Medicare and Social Security programs are projected to be insolvent by 2026 and 2034, respectively. Some tough medicine will need to be prescribed to turn things around. However, the currency market is a relative world — other major currencies also have their share of structural challenges. It’s a race to be the least bad, and do not count the greenback out. •

CHART 2: CHINA’S SLOWING M2 GROWTH

Source: Bloomberg


a seemingly impermeable shale rock layer between two known reservoirs. Other energy companies, including Chevron, tested the shale rock only to abandon the idea after failing to economically produce natural gas.A fateful mistake resulted in an abnormal mixture of drilling fluid — the normal gel-like consistency resembled water. A 31-year old engineer, Nicholas Steinsberger, discovered this mistake but also cautiously noted early success in high natural gas well flow rates from wells using this mixture. “Slickwater” became the term for this mixture; fracking wells with this new watery solution created larger, more effective fractures in shale rock to extract more natural gas reserves from each well. By late 1998, a year after this accidental experiment, Mitchell Energy was drilling the Barnett basin’s best natural gas wells from a rock layer that was widely dismissed by the industry only months earlier.Two decades later, today’s U.S. oil shale revolution shares

similarities with its natural gas revolution predecessor. In the early 2000s, a boom in oil demand shifted industry focus from natural gas to oil. Yet, shale oil drilling was dismissed as an impossible task. Oil is more viscous than gas molecules, so releasing fluid from rock layer was a non-starter for the industry. EOG Resources, under the leadership of Mark Papa, took a calculated risk in south Texas and debunked this view. In March 2009, the Milton #1H shale oil well revealed initial production of 112 barrels of

oil production per day. EOG Resources expanded on Mitchell’s shale extraction methodology layering in their geological modeling expertise; this first well sparked a frenzied land grab among oil companies. In 2009, EOG Resources published an estimate that it would eventually recover roughly 3% of the original oil in place, about 900 million barrels, across the company’s 505,000 net acre position. Since those early days of U.S. shale oil, the industry ’s technological advances show up in striking operational improvements. An oil well drilled in the Eagle Ford during those early shale oil days in 2010 took 45 days to drill on average.

The world’s information technology capabilities continue to expand at a staggering rate. We see this change reflected every day in our personal lives. Billions of

people communicate and #engage with the world around us via social media platforms that barely existed a decade ago. Modern technologies are now impacting mature industries as well; in this article, we explore the impact of technology on the North American oil industry.Fears of “peak oil” first emerged in the early 1970s. ExxonMobil, at the time Esso, and the United Nations separately forecasted that crude oil production would peak around the year 2000. In the 1980s, the World Bank jumped on the bandwagon predicting peak oil by 2000. As recently as 1998, the International Energy Agency published the view that the world would reach peak oil by 2014. And, each prediction has been wrong.Technology has been at the heart of the oil industry’s continued success in economically unlocking more and larger oil reserves across the globe. The United States oil shale revolution entered the spotlight in the first half of this decade as oil companies successful ly introduced new wel l completion technologies to sleepy, mature reservoirs. U.S. oil production’s rapid rise depicts the success of new technology in a mature industry. From 2008 to today, U.S. oil production grew by roughly six million barrels per day, more than 6% of global supply and about half of all new oil production growth globally. Today’s U.S. shale oil industry owes its early success to the ambitious and innovative efforts of Mitchell Energy and founder George Mitchell more than two decades ago. Oil exploration, or “wildcatting”, is a notoriously fickle business characterized by the highest highs and lowest lows aligning with each new well result. Mitchell Energy took a 17-year gamble on the Barnett shale in the 1980s and 1990s, combining existing technologies to target drilling a rock layer in Texas in ways never before proved economically viable. The team combined hydraulic fracturing or “fracking” with horizontal drilling in an attempt to unlock natural gas reserves trapped in

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Drilling Down on Innovation

“Technology has been at the heart of the oil industry’s continued

success in economically unlocking more and

larger oil reserves across the globe.”



Large crews worked in highly manual processes to move section after section of 30-foot drill pipe into place as the well bit bore deeper into the ground. Today, the industry’s new drilling rigs automate this process. Piece after piece of drill pipe is slotted into place with remotely controlled equipment and computer systems. Bits are outfitted with small sensors to detect changing conditions throughout the drilling process. The sensors alert employees to potential problems in the process and offer predictive warnings allowing for timely replacement of worn-out equipment. Improved bits, automated processes and bigger rigs have reduced drill times to less than 10 days among leading U.S. shale operators. The magnitude of the improvement, however, is much larger when layering in the increased size of the wells drilled.The quest for shale drilling efficiency has created landscape altering solutions — literally. Next time you drive through Texas, North Dakota or Oklahoma, do not be surprised if you spot a 150-foot tall oil rig slowly ‘walking’ from one well to the next on a 20-acre well pad. This hydraulic process known as “skidding” limits time-consuming rig demobilization and contributes an extra three to seven days of uptime usually associated with moving a drilling rig to its next well site. As oil shale well drilling times have fallen to a mid-single digit number of days, skidding technology translates to a near

doubling of wells per year from a “walking rig”. This technology is only one of many surface improvements that helps explain why U.S. oil production has grown faster today than in 2014 with half the number of oil rigs in operation.The technological advances above ground improve efficiency and lower the cycle time between oil wells, but subterranean oil shale extraction technologies have fundamentally lowered the marginal cost of U.S. shale oil in recent years. Geosteering sounds like a term that belongs with driverless cars and artificial intelligence. In fact an oilfield breakthrough, geosteering allows oilfield engineers and drilling teams to precisely target and locate a well to within feet in a shale reservoir. This technology catalyzed major improvements in the number of successful stages or fracture touch points in a shale oil reservoir. In the early part of the decade, shale oil wells stayed “in-zone” perhaps half of the time. Going in and out of the reservoir created additional complications that caused some wells to fail altogether. New technology allows oil companies to precisely drill the horizontal wellbore thousands of feet underground using 2D and 3D imaging. With geosteering, the result is better shale oil wells and improved capital efficiency for U.S. shale oil businesses targeting this challenging rock.


Digital reservoir imaging and other newly-developed sub-surface technologies dramatically improved the industry’s understanding of shale oil source rock. These learnings catalyzed a step change in traditional shale well inputs. Sand and water are injected in shale wells in a process called pressure pumping to open, and keep open, rock fissures that allow oil to escape to the wellbore. Industry experiments in the last five years led producers to increase sand injection from 500 pounds per lateral foot drilled to over 3,000 pounds of sand per lateral foot drilled in some larger wells. Wa t e r i n j e c t i o n h a s i n c r e a s e d proportionally. To demonstrate the magnitude of this increase, a standard 5,000-foot horizontal well in the early 2010s required on average 2.5 million pounds of sand — about 11 rail cars worth. Today, lateral lengths have grown to 10,000 feet; higher sand per foot means a well today would require 30 million pounds of sand or 136 rail cars — an entire unit train! At the core of this change in basic material inputs is a tectonic shift in oilfield technology.Stepping back from the nitty gritty details, shale oil extraction is a much more economic source of oil production today. The industry was awed in 2010 by EOG’s 3% recovery rate from shale oil source rock. By most industry estimates, new shale oil wells expect to recover 8-12% of the original oil in place. Industry leaders talk about 15-20% potential recovery rates depending on the pace of future technological advances. EOG

Resources touted 112 barrels of oil production in 2009. By 2013, a single EOG well produced over 7,500 barrels of oil per day in a 24-hour production test. This success has been replicated most notably in the Permian basin, and better oilfield technology has been at the heart of this movement.

Technological advances in U.S. shale oil ironically owe thanks to the OPEC cartel. OPEC’s decision not to alter its oil supply in late 2014 led to a global oil price collapse; the price of U.S. WTI oil fell from over $100 in mid-2014 to a low of $26 per barrel in February 2016. Inefficient and over-leveraged shale oil producers were weeded out of the market. The remaining shale producers refocused efforts on improving recovery factors and increasing production rates by integrating new innovative technologies into their drilling and completion processes. Shale oil production

in the United States is a disparate collection of different regions, but the effect of sustained low oil prices from late 2014 to 2017 fostered an environment of innovation where U.S. shale oil producers utilized technology to drive down their cost. U.S. shale oil production moved from the highest marginal cost barrel in the early 2010s to a competitive, middle-of-the-pack position today. U.S. shale oil could add decades of supply, alleviating global peak oil concerns. The shale oil industry demonstrates American ingenuity at its best and offers a fascinating case study on the implementation of technology in a mature industry. •


“OPEC’s decision not to alter its oil supply in late

2014 led to a global oil price collapse; the price of U.S. WTI oil fell from

over $100 in mid-2014 to a low of $26 per barrel in

February 2016.”


the U.S. intelligence assessment report unfortunately are becoming realized mainly due to water mismanagement and the threat of climate change that has led to political upheaval, economic loss and even mass migration. A quick glance at the World Resource Institute Aqueduct map on water stress by country illustrates where we can possibly expect future water stress events.

Cape Town, South AfricaIt is inconceivable that a city of four million people is on the brink of running out of water, but this is exactly the scenario unfolding in Cape Town, South Africa. The confluence of population growth, overdevelopment and climate change has led to an underestimation of future water use. Officials in Cape Town assumed future rainfall patterns would continue to mirror the past and did not take into account drier, hotter weather and less rainfall, even though warning signs began to appear a decade ago.3 In addition, South Africa was victimized by corruption that depleted funds allocated for water infrastructure. News outlets around the world have focused on the dramatic inevitability of Cape Town’s “day zero” as the day when its water supply is shut off. At the time of writing, “day zero” has been moved back to 2019 from a combination of heavier rainfall and an ambitious water conservation effort. Cape Town residents have been asked to consume just 50 liters or less per day, less than one-sixth of what an average American consumes.4

Many of the most violent conflicts of the last few decades have been to protect the disruption of the world’s oil supply and foster energy security. In 1973,

the Organization of Petroleum Exporting Countries (OPEC) used oil as a weapon through an oil embargo that sparked an oil crisis that has influenced geopolitics to this day. Today, we see the potential for an emerging water crisis that could have profound social, environmental and economic consequences since water is finite and more critical a resource than oil. The Office of National Intelligence stated in 2012, “The impact of water scarcity and declining supplies of freshwater, exacerbated by climate change, could not only be far reaching but will have adverse economic implications, pose a risk to global food markets that can lead to instability, state failure and increased regional tensions.” In this article, we explore issues on water stress that align with our view that investing in water has multiple drivers that can support a long-term, multi-decade opportunity.Over the past 50 years, the world’s population has doubled, global GDP has increased tenfold with approximately 70% of global water consumption tied to agriculture and the food value chain. These trends have placed water resources under severe strain with potentially dire consequences for the world’s population as water scarcity affects more than 40% of the global population and is projected to rise.1 The warnings on an impending global water crisis is not new and has been highlighted as a top risk in terms of impact for the past four years by the World Economic Forum2 (table 1). The ranking is based on the views of a thousand leaders from business, academia, international organizations and civil society. This year alone has seen an increasing number of water stress events around the world, in particular Cape Town, South Africa and India, which is elevating the discussion on the sustainability and security of water. Since the Office of National Intelligence assessment was published, global attention on water stress events can almost be seen daily in headline news around the world, particularly in developing countries. The warnings from

Water: Thirst for New Solutions

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R O L A N D O F . M O R I L L O

1 World Bank Group – The 2030 Water Resources Group Annual Report 2017

2 World Economic Forum – World Risks Report 2018

3 Western Cape Water Supply System: Reconciliation Strategy Study, June 2007

4 https://water.usgs.gov/edu/qa-home-percapita.html Photo source: Shutterstock


Although Cape Town’s reservoir levels have recently increased, four new desalination plants are under construction, new wells are being drilled and conservation efforts are now becoming normalized into everyday life. Today, Cape Town is consuming approximately 500 million liters of water per day, which is a sharp decline from over 1.1 billion liters consumed in January 2016.5 This water crisis event could eventually be viewed as a lesson in climate change adaptation and may lead Cape Town to emerge as one of the most water-resilient cities in the world.

IndiaUnfortunately, Cape Town is not unique and should serve as a warning for other cities and countries facing water stress.

India is currently suffering from the worst water crisis in its history with 600 million Indians facing high to extreme water stress due to inadequate access to safe water. A recent report by an Indian government think tank points to 40% of the population that will have no access to drinking water by 2030 6, a startling projection that should be viewed as a ticking time bomb. Near term, 21 cities, including New Delhi, are expected to run out of groundwater by 2020, affecting as many as 100 million people. Remarkably, the expected degree of water scarcity could account for a 6% loss in India’s gross domestic product by 2050. Similar to other recent water crisis events, the sub-continent is facing a rapid increase in water demand that is outstripping available supply. Across the country, rising annual temperatures, dwindling rain and snowfall have factored heavily in constraining water supply. In 2017 alone, India experienced the country’s fourth hottest year and has seen rainfall decline 6% from the previous year.

TABLE 1: TOP 5 GLOBAL RISKS IN TERMS OF IMPACT

5 https://www.reuters.com/article/us-safrica-drought-capetown/drought-hit-cape-town- at-point-of-no-return-tightens-water-targets-idUSKBN1F71Y4

6 Composite Water Resources Management: Performance of States, June 2018

Data source: World Economic Forum 2008-2018, Global Risks Report ECONOMIC SOCIALGEOPOLITICALENVIRONMENTAL

2015 2016 2017 2018

Water Crises

Water Crises Water Crises

Water Crises


The report also highlights the rise in interstate disagreements pointing to the inadequate structure in place for water management and governance. Uncovering the reasons for the current state of water in India highlights underpriced tariffs leading most water utilities in the country to be financially unsustainable, making it difficult to maintain existing coverage and expand service. Additionally, utility and state governments lack the capacity and statutes to be able to make the appropriate decisions in addressing water scarcity issues notwithstanding

the populist measures from local politicians to keep tariffs deliberately low. 7 As the water crisis in India evolves, migration from water-scarce regions to the large cities is expected to force 50 to 70 million people to the large cities leading to increased social disruption and placing greater stress on urban water resources.8

Drivers for Long-Term OpportunityWe have seen political barriers, lack of awareness and misaligned incentives stand in the way of needed water infrastructure implementation in both public and private sectors around the world. However, there are many reasons to believe that we are seeing the early stages of change underway in viewing water as an important investment theme for the coming decades. For a long time, water has been taken for granted until it becomes unavailable and forces attention and action to address water scarcity and water quality needs. Current constraints on supply and quality could potentially draw new investment in water technology and prompt policies to increase cost-effective solutions. This should help to meet the growing requirements implied by economic and population growth. Estimates by the Organization for Economic Cooperation and Development (OECD) point to water spending exceeding $1 trillion by 2025 and making up the majority of global infrastructure investment. Developing countries alone are estimated to need $103 billion (USD) per year to finance needed

MAP: WATER STRESS BY COUNTRY

7 The Global Value of Water – GWI – Global Water Tariff Survey 2017

8 Strategic Foresight Group in Mumbai


Data source:World Resources Institute Aqueduct, Gassert et al. 2013

The map shows the average exposure of water users in each country to water stress, the ratio of total withdrawals to total renewable supply in a given area. A higher percentage means more water users are competing for limited supplies.

RATIO OF WITHDRAWALS TO SUPPLY

Low stress [<10%]

Low to medium stress [10-20%]

Medium to high stress [20-40%]

High stress [40-80%]

Extremely high stress [>80%]


water infrastructure in sanitation and wastewater treatment. Companies involved in the water supply chain have indicated that the adoption of technologies such as advanced water meters, predictive analytics, satellite imagery and sensors have the ability to transform traditional centralized water operations and expand into a more solution-oriented format that incorporates new concepts such as the circular economy and resiliency. The main drivers we see as persistent themes underpinning water investment opportunities involve population growth, regulatory support and infrastructure investment.9

Population GrowthThe global population is growing at approximately 80 million people annually and is expected to increase to roughly 9.3 billion people by 2050.10 Most of that population growth is occurring in the developing world, where water infrastructure is most deficient. This projects an additional 2.3 billion people will live in water-stressed regions and be concentrated in urban areas within developing countries. We expect this will lead to new infrastructure for clean-water and wastewater equipment and new technologies that will help enable higher quality water for a growing, aspirational middle class. As water-scarce cities and countries face a Cape Town, South Africa scenario, the demand for water conservation, water reuse technologies and desalination will require considerable investment. This growth can be accessed mostly through U.S.- and European-domiciled companies that have the expertise and growing exposure to end markets in water-scarce regions.

Regulatory SupportWater pollution has emerged as a serious ecological and human health threat from the discharge of city sewage, industrial waste and agricultural runoff entering rivers and oceans. As an example, China’s water pollution problems are severe and widespread with numerous pollution incidents making national headlines that have helped shape public opinion for greater environmental controls. Prioritizing growth at all cost has ended in China, and the concept of “Beautiful China” has been promoted by President Xi Jinping. This important

CHART 1: GLOBAL DISPARITY IN THE PRICE OF WATER *AVERAGE COMBINED WATER & WASTEWATER TARIFF ($/M3)

Source: The Global Value of Water – GWI Global Water Tariff Survey 2017

9 https://waterfm.com/water-utility-digital-world

10 https://en.wikipedia.org/wiki/Population_growth



11 https://www.reuters.com/article/us-usa-municipals-water/u-s-water-systems-capital-spending-to-rise-11-percent-by-2027-report-idUSKCN1HA2NJ

12 https://www.epa.gov/sites/production/files/2015-07/documents/epa816r13006.pdf

13 The Global Value of Water – GWI Global Water Tariff Survey 2017

14 https://www.wateronline.com/doc/water-tariffs-achieve-sustainable-development-goals-new-gwi-report-finds-0001

development seeks to augment and enforce environmental regulations and support increased investment in environmental protection and water treatment solutions for polluted water, water scarcity and water safety. The essential need for clean water and modern wastewater systems continue to also be supported in the developed world with regulatory support. Regulations such as the U.S. Safe Drinking Water Act or the European Union’s Water Framework continue to be a cornerstone for water standards and investment in water infrastructure. Given the growing concerns on climate change, regulations are expected to become increasingly progressive to attract capital but also become more robust to take into account resiliency measures.

Water InfrastructureIn the developed world, the need to upgrade and modernize existing water infrastructure is imperative as aging and deteriorating infrastructure is an important issue tied to water quality, safety and resilience. The U.S. municipal water sector’s total capital expenditure is projected to exceed $683 billion by the next two decades, approximately $72.2 billion annually mainly due to growing concerns on water quality, environmental mandates and deficient systems,11 a substantial boost from the 2011, 20-year national projection of $384.2 billion from the EPA.12 This implies a substantial increase in demand for

industrial goods such as pumps, pipes, valves, meters and other technology that enable water and energy efficiency. Water tariffs will also be an important determinant for future capital expenditure in water infrastructure. Annual growth from July 2016 to July 2017 of both wastewater and water tariffs reveal an increase of more than two times the global inflation rate at 3.91%.13 The reason behind the increase points to the need to pass on rising operating costs, expand infrastructure and to drive conservation efforts to mitigate the effect of droughts. However, a new report argues that in order to achieve the United Nations Sustainable Development Goal #6 (Clean Water and Sanitation), tariffs will need to increase by 5.9% each year to generate $449 billion in annual global investment.14 To meet these demands, the funding model for water infrastructure will likely have to evolve to incorporate more private and commercial financing sources and encourage public-private partnerships in order to close the water tariff gap in developing countries (chart 1). The long-term drivers of investments in water due to population growth, regulation support and infrastructure investment will be supported by the growing impact of climate change and water scarcity. We believe this space is ripe for innovation and has the potential to provide strong returns over the long-term. Only 1% of the earth’s water is available for use and, unlike any other commodity, there is no substitute.•

Photo source: STR/AFP/Getty Images


Cover image: Getty Images

Certain information contained in this document may constitute “forward-looking statements.” No representations or warranties are made as to the accuracy or completeness of such statements, and actual events or results may differ materially from those reflected or contemplated. This document is provided for informational purposes only and is not intended, and should not be construed, as investment, tax or legal advice. This document does not purport to be a complete statement of approaches, which may vary due to individual factors and circumstances. Although the information provided is carefully reviewed, Rockefeller Capital Management is not responsible for any direct or incidental loss resulting from applying any of the information provided. Past performance is no guarantee of future results and no investment or financial planning strategy can guarantee profit or protection against losses. These materials may not be reproduced or distributed without Rockefeller Capital Management’s prior written consent. Rockefeller Capital Management is the marketing name for Rockefeller Capital Management L.P. and its affiliates. Investment advisory, asset management and fiduciary activities are performed by the following affiliates of Rockefeller Capital Management: Rockefeller & Co. LLC, Rockefeller Trust Company, N.A. and The Rockefeller Trust Company (Delaware), as the case may be.

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GLOBAL FORESIGHT - rockco.com · GLOBAL FORESIGHT ¼NS¦' ¥Ã ¦¼/¦ 201 8 3 In fact, the crude oil futures market proved remarkably prescient. Oil prices have stayed low since