Down Goes the Prophet of Jamahiriya

The first thing Muammar Gaddafi did after taking over as ruler of Libya over 40 years ago was to invent a word with which to name the new country: Jamahiriya.  It is based on the Arabic word meaning "state of the masses."  Apparently the state of the masses in Libya, er Jamahiriya, is... angry.  Again Al-Jazeera's coverage of the events is making Western media look foolish, as this time our "gatekeepers" are covering the 1,900 person royal wedding guest list (and speculating about Kate Middleton's gown!).

Here continues the series on the increase in food prices and its consequences.  It is worth noting that in his rambling, threatening communique on state television yesterday, Gaddafi's son perfectly described the economy of the country.  "How will you obtain flour," he asked, "when a civil war comes and the petrol is burned."  My previous post showed that Libya not only imports all of its wheat, but a large amount of wheat flour also.  The country has been so badly mismanaged that there is not even a viable milling industry.  Libya is the most extreme, but not nearly the only example of an absurd oil-for-food trade scheme that was destined for failure.  The rapid food price increase is the tipping point.

I am focusing on wheat in this series even though food price increases are being driven by the rise in all major food commodities except rice.  There are good reasons for this.  Wheat is mostly consumed by humans, and largely in the form of bread, in stark contrast to soybeans and corn, which are both increasingly used in transportation fuels and non-food products, and beef production.  When prices rise as fast as they have in the current period it makes sense to focus on the bare essentials.  This is not only practical; since bread can be stored and transported easily as the food of last resort, access to it is also psychological.  If a country cannot provide a steady and affordable supply of the absolute basics, is there any reason to leave its leaders in place?  We are seeing the answer to that question all across North Africa and the Middle East.

This first chart is the historic wheat price, not adjusted for dollar exchange trade value (that is coming), since 1981 (courtesy World Bank via Index Mundi).

In the chart below I used the historic wheat price and coded the peaks and troughs.  I then divided the negative or positive percent change by the number of months it took to get there.  As you can see from the chart above, the price for wheat in 2008 remains an all-time high.  But the price increase from it's trough in the current bull market has been more rapid.  This chart shows that in the current run-up, the average price increase per month is over 15%.

Many countries across the region had diminished wheat stocks at the end of last year, even though the US wheat stocks were three times larger than in 2007.  They must have believed that prices could not be sustained and were waiting for them to start declining in February (historically the beginning of the seasonal price down-trend).  These countries have recently been buying huge amounts of wheat at or above the current peak price.  At the end of last week the wheat price plummeted as traders noted that there simply were not any buyers.  So much for the "growth-led" exponential demand pressures and bad weather we keep hearing about.  It should be clearer by now, and will be by the end of this series, that wheat prices since the mid-90's have been driven by conditions in the equities, treasuries, and non-food commodity markets, not supply and demand fundamentals. 

We are in unchartered territory here.  When prices rise this fast, hoarding will take place and regimes will soon realize that their chances of remaining in power are better if they withhold food instead of giving it away.  The only prediction we can be confident about is that the increased volatility in the wheat markets since the mid-90's will continue.  As I will show, volatility, not price peaks is the root of the problem, and the culprit is obvious and identifiable.

Here Comes the Bad News

Today we'll look deeper at some numbers to understand why the current unrest in the Middle East and North Africa is food-based.  First, below are two maps from the FAO that present two important features of the food marketplace in the region.

The first titled "Dietary Energy Consumption" shows that per capita daily calorie intake in all of the countries in the region except Yemen is over 3,000.  That is on par with Australia and Spain, for example.  Egypt, specifically, is better off than the other countries in the neighborhood.  This makes sense if you look closer at the table of largest wheat importers from yesterday.  Third on the list was Egypt in dollar value, but in terms of total volume they are first.  They just get a really good per unit price on their wheat (I can't imagine how that happened).  In general, the people in these countries have enough to eat.  The situation is much different throughout the rest of Africa, India, and in parts of South America.

The next map entitled "Net Trade in Food" shows us the balance of food exports and imports divided by  consumption.  The dark green countries consume quite a bit, as the map above shows, but they are the production powerhouses that export huge amounts of food, especially staple commodities.  The orange areas in North Africa indicate a huge negative balance.  If we look at the map above again and recall that those countries have enough food to consume, the negative balance must mean that they are big food importers.  Egypt is better off than others in the region because they export a lot of high value fruit crops.

So we know that the countries in the region have plenty of access to food, but that they are highly reliant on imports to meet those needs.  Why does this matter?  Think about it this way.  Joe lives in a relatively modern country with plenty of access to food even though he is poor and spends a large percentage of his income on it.  Nancy lives in a developing country where food scarcity is common, she is also poor and spends a lot of her income on food.  In both countries wheat prices have led to significant disruption in food distribution and huge retail prices increases.  If you are a dictator, which country would you rather rule?  My answer: the country where technology does not make organizing protests really easy, and where people are accustomed to being hungry.

Below is a chart showing percentage expenditures on food in various countries, sorted by percent expenditure on cereals, like wheat and corn.  This is not a comprehensive list, rather representative countries that illustrate the trade imbalance in staple foods between Western countries and those in the subject region. 

First note the difference in percent food expenditures between countries like Egypt and Morocco, and Germany and Australia.  The yellow hi-lighted countries spend a relatively small percentage of expenditures on food, and we see that the types of food they import are items like wine and cheese, not staple foods.

This data was compiled by the USDA's Economic Research Service, and it is based on a 1996 survey.  I added to it the 2008 top three food imports from the FAO database, and the last column on the right is the percentage of wheat consumption that was produced in the subject country.  Those percentages only appear for countries where wheat was the number one import (also hi-lighted in green).  All of the green hi-lighted countries are in the subject region, wheat is their number one import, and they spend a large percentage of income on both cereals and all foods.  The countries with red hi-lighted text are those that spend over 1/3 of their income on food, and import over 1/2 of their wheat.

Turkey and Iran are very close to that threshold, and Spain and Italy should be on the watch list as all their numbers are creeping up, and they import a lot of soybeans and wheat, respectively.  They are also two of the Mediterranean countries having major financial problems.

All of the countries hi-lighted in green have experienced recent protests or revolutions sparked by sharp increases in food prices.  Algeria, with its very large wheat imports, could be next.  Even if countries subsidize bread and other basic foodstuffs, they can only maintain those emergency measures for so long.  What we saw last year was pure speculation, but what we'll see now will be actual hoarding.  Prices will continue to rise with scarcity, and unrest will continue.  Of course, most of the countries on this list also import large amounts of corn and soybeans.  The prices of those two commodities has risen sharply, but those increases began a few months after wheat.  Just wait until those increases begin to affect retail prices.

Policy makers can wring their hands about who will take over in these countries in the near term, but it won't matter.  Tunisia set off a food-based economic death spiral in the region that will not end with current leaders being deposed.  Anybody who wants to step forward and occupy the palace had better sleep with one eye open.

Suicide's Easy, What Happened to the Revolution?*

As talking heads debate the future political power structure of Egypt, one constant remains as it did before the crisis began (hint: it is not the Muslim Brotherhood).  As I have noted in this blog many times, the staple foods commodity markets are experiencing an artificial bubble (yes, I am disagreeing with Ben Bernanke) that will have serious consequences.

The most stark examples of this are the revolutions in Tunisia and Egypt.  But if this is an economic phenomenon, we need to ask some important questions.  First, what other countries are experiencing problems due to rapidly rising food prices?  Second, where are they?  Third, in the context of their broader economy, does it matter?  Fourth, what are the long-term implications?

In the series of maps and tables I present over the next several days, I will try to answer all of these questions.  Instead of putting myself in the position of arguing an obvious point with a trained economist who is probably a genius, I will present straightforward data from the UN Food & Agriculture Organization (FAO) which both shows how Tunisia and Egypt arrived at this place, and how several other countries in the region are likely to suffer the same fate.

First up, the most recent data (2008) for wheat imports.  Look who's 3rd.

Rank	Area	Quantity (tonnes)	Flag	Value (1000 $)	Flag	Unit value ($/tonne)
1	Japan	5780710		3291570		569
2	Algeria	6913570	R	3055210	R	442
3	Egypt	8327790	R	2461720	R	296
4	Italy	5443040		2277540		418
5	Indonesia	4497190		1975480		439
6	Brazil	6032700		1873590		311
7	Iran (Islamic Republic of)	5197370	R	1801340	R	347
8	Morocco	4083580		1609100		394
9	Turkey	3708000		1483190		400
10	Spain	4655980		1430390		307
11	Netherlands	4304570		1389950		323
12	Republic of Korea	2682310		1274360		475
13	Mexico	3217030		1246900		388
14	Iraq	2963320	R	1242860	R	419
15	Belgium	3114540		1151470		370
16	United States of America	2516500		1080410		429
17	Yemen	2126630		956364		450
18	Philippines	2251970	R	936905	R	416
19	Germany	2582770		910089		352
20	Tunisia	1762440		811114		460

FAO Stat Wheat Imports 2008

*Black Rebel Motorcycle Club

Song: Berlin

Album: Baby 81

Intersection

The regime in Egypt probably has about 24 hours before forced to flee.  The president has already sent away his family.  Live coverage from the Egyptian street via CNN International, Al Jazeera, and others, shows two very important aspects of this revolt that makes a leadership change inevitable.  First, the protesters have been taking time to say their prayers in the middle of the protests.  One might think that means the protesters are religious extremists.  Quite the opposite.  These people are mostly unarmed and praying as usual, they are regular people.  Extremists see injuring riot police during prayer time as a better way to praise God than praying.  Of course so do labor leaders, who have been unsuccessful in their efforts at revolt throughout the region over the past two weeks.  Like in Tunisia, this is a revolution, characterized by the participation of the general population, and not a revolt organized by extremists on either side.  The second important aspect is the behavior of the country's highly respected military.  They are out among the people, doing nothing.  The riot police, completely loyal to the regime, are on their own.  Either the regime is unwilling to ask the military for help, or the military has been asked and declined.  Whichever is the case, this signals the beginning of the end.

The rapid development of the revolution in Tunisia was a huge surprise, and caused quite a bit of angst in France, where support of the monarchy was designed to support stability and repression of extremists. The United States has long been in a similar position respecting Egypt.  Three days ago when he expressed support of the movement in Tunisia, could the president have possibly known that we would be here today, dealing with an Egyptian revolution?

Most of the reporting on this issue deals with the political repression in these countries.  But then we must ask the question: "If political repression has actually lessened over many years (especially in Egypt), why are the people rising up now?"  The answer is that economics has triggered this revolution, the same way economics triggered riots in Greece last year, and large protests in Jordan last week, on and on.  The opening lines of "All Quiet on the Western Front" are instructive:

Yesterday we were relieved, and now our bellies are full of beef and haricot beans. We are satisfied and at peace. Each man has another mess-tin full for the evening; and, what is more, there is a double ration of sausage and bread. That puts a man in fine trim.

In this scene the narrator's German army unit has returned from a fortnight of battle at the front, with half their men left dead on the field.  The cook was shocked at the heavy losses, and had prepared rations for twice the number, which means the survivors enjoyed double.

Staple commodities like wheat have doubled since last June, and many countries like Algeria and Jordan allowed their supplies to tighten to wait for the prices to decline.  Where the average person pays half their income for food (contrasted with around 10% in the US and Canada), governments must play this dangerous game.  They naively believed that prices must retreat since world food supplies are tightening but still plentiful, and demand cannot increase where 20% of the population is unemployed.  They didn't learn the lesson of 2008: The Banksters are in charge, and the only number that matters is their profit margin.  Prices have surged in the past two weeks as several governments have placed huge grain orders from U.S. exporters in order to build their stocks.

The U.S. GDP number reported today was largely influenced by agricultural exports.  The saving grace of our economy in the past quarter was capitalizing on the rising prices of commodities, which has led to revolution in places where the government has encouraged stability for decades.

Where bellies are full, a few will rule.

Actions Have Consequences

According to this Reuters article, the FAO report of record food prices that I wrote about yesterday is no big deal.  The article notes that in Kenya the population has changed its diet from corn and wheat products to rice, potatoes, and amaranth.  This was inevitable, and a phenomenon that I don't think western traders will understand.  When I was in Brazil this past month I heard the same thing, locally grown cassava flour is being blended with bread products due to the high wheat price.  Some African countries are now mandating a 10% cassava blend in bread.

The current food commodities bubble is able to account for some varying inventories reports, because there is always a short-term future fear to counter with, like this year's La Nina weather pattern.  If production in the wheat market, for example, outstrips demand by 10-15% more than what is already priced into the desired trading range, because millions of people have shifted their diets since the last bubble, hold onto your hat.

Wheat plantings are up 10% in the US since last year.  A 10-15% supply-demand difference could turn out to be extremely conservative.  The USDA is likely selling its insurance at somewhere around the $7.50 per bushel range.  This market has the potential to freefall by late summer, which would nearly bankrupt the crop insurance program.

The Dynamic Duo: Sarko and Dilma

Most of the work conducted during the G20 summit of the most powerful twenty economies in the world takes place behind the scenes.  The actual meeting marks more of a deadline for identifying major topics and assembling coalitions.  It appears that food insecurity is so far dominating the agenda for the next summit.  However, there are a few worrying signs that we may not get to June before this issue reaches crisis levels.

As this Marketwatch article reports, the UN's Food and Agricultural Organization (FAO) says world food prices reached a record in December.  The relevant comparison here is the price shock of 2008, which saw $12/bushel wheat (recently $8), for example.  One worrying aspect of this story is the nugget that the previous record of 2008 was partially influenced by crude oil commodities prices (a component of the FAO's agricultural commodities price index), which peaked at around $140 per barrel.  Crude oil has risen recently and has been trading for the past few weeks around $90 per barrel.  It should be noted that the US Dollar has strengthened against the Euro since that time.

This Washington Post article suggests that there is room for prices to rise further.  Looking at the charts presented in this Globe and Mail investor article, that is absolutely true.  It appears that in 2011 continuing price rises will be supported by a combination of fear about the weather and previous market highs that were outrageously unsupported outliers, with lip service given to supply and demand fundamentals, just like last year and 2008.

This issue may reach crisis levels far ahead of the summit, in part as food riots spread from North Africa to other third world countries, and also due to the influence of two powerful G20 players.  French President Nicolas Sarkozy, as head of the G20 in 2011 has put this issue front and center.  Meanwhile, newly installed Brazilian President Dilma Rouseff's administration has warned of a looming trade war over currency manipulation, which hurts Brazilian agricultural exports.

Rouseff (pron. Hoo-SEFF-ee) is an economist, whose domestic agenda is to continue former president Lula's efforts to increase economic opportunities for the roughly 40% of the Brazilian population that lives in poverty.  Despite her past affiliations with radical leftists, she is also a pragmatist who knows that this agenda will halt if the relative gains being enjoyed by the new Brazilian middle class are wiped out by external financial pressures.

In addition, Dilma campaigned on maintaining Lula's economic agenda in total, which is very popular with the Brazilian people.  It is generally viewed as pro-free market.  However, as the first female Brazilian president, Dilma must be able to lead on the economic issues which are her strength, or risk her legacy being only symbolic.  Lula was a social politician who wisely embraced economic pragmatism.  Dilma is an economic pragmatist who will become a social politician only if she is successful at managing a looming financial crisis.  Trade war saber-rattling is her first shot across the bow (even though this language is similar to recent pronouncements by Lula).  How her administration handles this issue in the coming months may well define her presidency.

Sarkozy is extremely ambitious, and a legacy that includes solving the world's food insecurity issue would suit him.  He is a controversial figure in France for many things other than the financial expertise that has characterized his long career.  The G20 summit of 2011 is for Sarko a great opportunity.

Brazil and France have enjoyed a healthy relationship in recent years.  While Brazil's membership in the BRIC (Brazil-Russia-India-China) trade and security coalition has been the western media's focus of late, the dynamic duo of Sarko and Dilma may be the big story of 2011.

Farm Aid 25

This Saturday in Milwaukee is the twenty-fifth annual Farm Aid concert.  Farm Aid has become much more than just a concert.  It is now an organization that promotes sustainable family farming, serving as a resource to link local and family farming organizations throughout the country.

The lineup looks great.  Old standbys Willie Nelson and Mellencamp will be there, as will headliners Dave Mathews and Norah O'Donnell.  Further down the line, Jeff Tweedy does excellent solo sets, and Band of Horses has been a favorite since I saw them at the Granada in Lawrence, KS, when me and about nine other people knew they existed.  Two years later they opened for The Killers in a much bigger venue in Kansas City.  That was an odd pairing.

You can catch the concert on DirectTV or stream it from the Farm Aid website.

The Short Answer: Ethics

"When you are young, ethics is what happens after you get caught.  But when you get older, ethics is what passes for forethought to make sure you don't have to get caught."

As I read this article entitled "The Fairway Test" in the September issue of the Rotarian, its relevance to the topics I discuss in this blog was very apparent.  Author Jack Hitt recounts the time he and his siblings were caught hiding the peas in dinner napkins.  His father caught on and their sister, as the mastermind of the plan, was forced to eat five servings.  They eventually came to realize that had they suggested a vegetable other than peas their father would have compromised.

Most of us can probably remember trying to hide the peas at dinner.  Much work has been done to improve the quality of the peas that we eat in this country, but the negative image no doubt holds.  I'll bet every day I think about something Pete Klaiber, marketing director of the Pea & Lentil Council, said last year in a class.  As I mentioned in the first post to this blog, the industry is now competing on quality.  Surely that is not only a response to global market mechanics, but also due to the realization that they must confront their image problem directly.  Trying to compete with third world countries in the bulk pea market is probably a loser, but changing a long-held perception about your product can't be easy either.

Competing on quality necessarily leads to a shift in how you interact with your customers.  In a need-based market, the buyer-beware ethic is more commonplace.  There is no expectation of reasonableness, honesty, or compromise.  Proponents of the need-based marketing outlook are correct to point out that in the marketplace, trade is always need-based.  

There are two reasons that the need-based outlook doesn't completely hold sway.  First, smaller competitors, or those at some other disadvantage must bring something else to the table.  A senior partner at a big New York law firm is probably not any better than one in Kansas City.  That won't counter the perception held by corporate executives that a New York lawyer is better.  Often times they are willing to pay a premium for that perception.  So how does the Kansas City lawyer compete?  Sometimes luck, sometimes a corporate counsel is a friend from college.  Or they can focus very heavily on their relationship with their client, never take anything for granted, and work every day to renew their client's trust in them.  

For five years I had the pleasure of working for one of the best lawyers around at relationship marketing.  As a proponent of the need-based strategy, it took me a while to come around.  Eventually I realized that it wasn't just a strategy this Kansas City lawyer employed to compete with New York lawyers.  It's not just his living, it's what he does for most of his waking hours.  He chooses the personal relationship marketing strategy because that is how he wants to do business.  There are companies here in Moscow, Idaho that employ the same strategy.  It would probably be easier to just move, but they choose the "hard way" because they choose a different way to live.

Pete Klaiber and the Pea & Lentil Council have identified an essential reality that will eventually pervade the U.S. agricultural industry.  It is exemplified in a Newsweek article  about why China will never be the world economic superpower.  The article describes a number of instances where China's need-based strategy has alienated countries like Angola and South Africa.  It is no coincidence that Angola, with its rich oil reserves, is embracing U.S. efforts to rebuild the long war-torn country.  

What the Newsweek article says in essence is that the U.S. economic position in the world is not just about resource domination.  It's about culture and dare I say... ethics.  The Pea & Lentil Council and the rest of the U.S. agricultural sector will succeed because when you compete on quality, you make a promise that is not required in the need-based paradigm.  A promise is not a contract, it's a bond of trust between people who have expectations of one another.

The Pea & Lentil Council's marketing strategy is largely focused internationally, but it may be the local foods initiative that leads this ethical revolution (with all due respect to Pete).  Some very important American companies are thriving by taking a stand for quality and sustainability.  Chipotle's slogan is "Food With Integrity".  Watch this Nightline segment as founder Steve Ells explains his philosophy.

Jack Hitt finishes his Rotarian article with some advice from his brother to a reader who inquires about playing golf with a friend who likes to take do-overs.  "I wouldn't do business with him," his brother said.  He then recounted something Ben Hogan said about  the game:

... golf is a game of recovery.  It's about what you're going to do when you get into trouble.  It's about shooting out of the woods or a sand trap. 

Hitt adds, "If one cheats over the very essence of the game, what does that say about your friend?"

A game of recovery.  So ethics is about not just not getting caught, it's about demonstrating to yourself that you can recover.  It's also about demonstrating to those around you that you welcome the challenge, when the chips are down you won't take the easy way out.

So when a client is really looking at trouble, do you think they call the New York lawyer, who relies on superficial marketing characteristics, or the Kansas City lawyer, who he or she knows will respond the same way that they live?  Take a deep breath, relax, and punch it back into the fairway, walk straight to your ball and be ready to make the next shot when you get there.

In international agricultural trade or local food production, it's about gaining and keeping the trust of your customers.  That's the point for Steve Ells, and I predict it will be for most agricultural trade groups in the future, not just the Pea & Lentil Council.

This ethical, personal relationship strategy is not something we employ just to compete, it's a way of life.  Let the re-set begin.

On Speculation

In last week's issue of The Economist, Sir Richard Branson and others wrote to the Letters section with their take on speculation in commodities markets.  They rebut two main points from the original article.  Here is the second, most salient point:

... the article shares the common misconception that futures prices cannot affect spot prices because speculators do not take delivery of physical commodities, and therefore do not "hoard" in the traditional sense.  The reality, however, is that spot prices of many consumable commodities, including oil, and corn, are set by long-term contracts that are based on futures prices, allowing the tail to wag the dog.

Essentially what they are saying is that disinterested parties who only care about a price distort the market.  The Economist article Branson, et al. are responding to suggests that those who "hoard" commodities are the ones who affect the price and should therefore be held to account for any problems that occur within that market.

Hoarding is a component of the producer's ability to impact supply in order to achieve a better price, but this is essentially a longer-term position than speculation.  So is taking land out of production, which is what an influential group of potato producers did last year.  Speculators are doing no such thing.  They have no place whatsoever in the supply chain.  They are not "investing" in farmers or processors.  With globalization, food demand is going to remain relatively strong, and parties who are part of the supply chain will continue to find usefulness in commodities markets.  Speculator involvement in this market is absolutely unnecessary.  Branson summarizes it best:

There is strong evidence that speculation exacerbated the last oil and food bubble.  Speculation will fuel the next one too, unless meaningful speculative position limits are established.

Commoditization and futures contracts are meant to allow farmers to reduce risk.  Reduced risk and a long-term outlook encourage better, more environmentally friendly practices, development of alternative food markets, economically stable communities.  That's not what is happening here.  Let us hope change is not forced upon us by what Branson alludes to.

Commodity Supply "Scares"

This week a new fallacy showed up in the commodities markets.  Having taken their profits by creating a wheat supply shortage "scare" from thin air, hedge funds and brokerages houses decided to jump to coffee, driving the futures price to near a 13-year high.  Somehow they have convinced the folks at Marketwatch and a number of other mainstream publications that the "perception" of a supply problem is the exact same thing as an actual supply problem.  Actually, in principle their logic is good, since we're talking about the futures price, which can only be estimated and therefore perceptions are reasonably taken into account.  The problem is that futures prices for two, three, or even six months down the road are not going up.

This is a transparent policy of pumping commodities for short term gain in a flight to safety.  If there was real fear of an actual worldwide commodity shortage, which some have predicted will cause food riots, wouldn't savvy investors like those who run hedge funds have long positions in March wheat contracts, for example?  I guess we'll never know, because today they took their coffee profits, a week or so after taking their wheat profits, as noted in a previous post.

Meanwhile, some brilliant analysis over at Marketwatch suggests that the recent wheat supply scare-that-wasn't should cause thinking folks to realize "just how fragile the global grain market really is."  This article is a true classic and you should take the time to read all of it.  One of the main reasons cited for "fragility" in the global grain markets: weather.  Of course, weather is always in play in pricing commodities futures, and it was cited as one of the main reasons for the run-up in coffee futures.  But here they are grasping at straws.

After writing last week that the hedge funds drove up the futures price based on nothing but their need for a safe haven, Marketwatch has trotted out a straw man.  Even though there wasn't a supply problem, the futures price rose, and there was "fear"... and so that means the market is fragile... so next time there is "fear", or weather "issues"... the price might rise again... because the market it fragile.  So much for supply and demand.  This is  fantasyland.  Feel free to play, but only if somebody gives you free tokens.

Here's the bottom line.  There is no wheat shortage.  The very same article that rationalizes a market response to pretend supply shortages notes that the USDA claims U.S. ending stocks are "three times larger than a few years ago."  The U.S. has more than enough wheat to cover what was not that big of a shortage caused by the Russian drought.

You will be paying higher prices for coffee very soon.  How will it feel when you see an article breathlessly reporting that Brazil's harvest was just dandy, despite all the "fear"?