The MasterFeeds: March 2012

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March 30, 2012

Canada To Allow Wealth Funds To Invest In Its Financial Institutions - WSJ.com #SWF

Canada To Allow Wealth Funds To Invest In Its Financial Institutions - WSJ.com

OTTAWA (Dow Jones)--The Canadian government said Thursday it plans to introduce legislation to allow foreign and domestic sovereign-wealth funds to invest in Canadian financial institutions, a move which would allow banks and insurance companies to raise capital to meet new Basel banking rules.

Canada is believed to be the only G-7 country that explicitly bars sovereign-wealth funds from investing in its financial institutions, which puts lenders and insurers at a disadvantage when it comes to raising capital. The proposed legislation aims to level the playing field, and could attract investments ...

Seethe whole story here, subscription required: UPDATE: Canada To Allow Wealth Funds To Invest In Its Financial Institutions - WSJ.com

March 27, 2012

Hmmm… Holland - Outside the Box Investment Newsletter - John Mauldin

Hmmm… Holland

John Mauldin

March 26, 2012

For your Outside the Box today I treat you to another big, juicy slab of Grant Williams' Things That Make You Go Hmmm… I don't want to be all Grant all the time, but this is just so good I couldn't resist. This week, Grant is digging deep into the history and mystery of the European Union, taking us all the way back to the first inter-country treaty in April 1951 and then following the rather tortuous bureaucratic proceedings that led, by hook and by crook, to today's increasingly problematic eurozone.

Grant then zeroes in on the ever-stalwart Dutch, who, it now appears, are in something of a pickle. He notes that the Dutch "were signatories to the Treaties of Paris and Rome and to every major European Treaty since and are staunch supporters of a unified Europe as well as having a reputation for being amongst the more fiscally disciplined members of the EU." And in September of last year, the Dutch prime minister and his finance minister penned a rather incendiary little diatribe on eurozone behavior that built, with eminently sensible Dutch logic, to the conclusion that "Countries that do not want to submit to this [new, rigorous fiscal] regime can choose to leave the eurozone. Whoever wants to be part of the eurozone must adhere to the agreements and cannot systematically ignore the rules. In the future, the ultimate sanction can be to force countries to leave the euro."

How unfortunate, then, that a mere six months later – and just days after Spain's unilateral decision to favor its own budget projections over those dictated by Brussels, who did we find but the Dutch confessing that they too would violate, by a mile, the fiscal deficit limit imposed by the EU's new treaty. And to make matters worse, Geert Wilders, head of the far-right-wing Freedom Party and a key player in the right-of-center coalition that now governs Holland, has been making noises about a Dutch referendum on continued eurozone membership.

Grant then jumps right across the Channel to catch us up on the antics of the English government, whose much-ballyhooed austerity program appears to be anything but, depending as it does on some rather figmentary revenue assumptions and other fiscal legerdemain. I haven't included that portion of this issue of Hmmm…, because I want to keep the focus this week on eurozone woes (England is not in the euro and didn't sign the new EU treaty, arousing much Continental ire), and to mention that I'm in Paris, attending a very powerful conference on central-bank monetary policy and strategies for dealing with sovereign debt. Organized by the Global Interdependence Center (GIC), the conference could hardly be more timely. I'm here with good friend (and long-time GIC supporter) David Kotok, who mentions today in his own commentary that:

"Our private meetings here involve bankers, central bankers, investors, and money managers – the gamut of those interested in financial markets and economics. We find that one theme persists. All of them are watching the credit spreads involving Portugal and Spain. They realize the market is sending a message of concern. The market is saying that the episode with Greece is not over, and the contagion is spreading in spite of the massive liquidity injections of the European Central Bank. They observe and discuss the use of collective action clauses and how they have to adjust their portfolios now that a government has inserted itself in a retroactive forced alteration of a debt structure. In public, they are polite, but they dissect the risks strenuously. In private, the debates become fierce." (You can read David's whole piece on the Cumberland Advisors website.)

He's right: the tension here, both behind closed doors where the "players" assemble and in public, between the European leadership and their increasingly disgruntled constituencies, is palpable.

And yet, after a tough winter, Paris is bursting with the hopeful energy of spring, and I'm very glad to be here.

Your learning a lot and loving it analyst,

John Mauldin, Editor
Outside the Box

JohnMauldin@2000wave.com

Things That Make You Go Hmmm…

Grant Williams
March 25, 2012

On March 25, 1957 in Rome, two representatives each from West Germany, Italy, the Netherlands, Belgium and Luxembourg sat around a large, fancy table, took out their large, fancy fountain pens and signed a rather large and fancy document that was rather grandly known as The Treaty of Rome. At a stroke the European Economic Community (or 'Common Market') was established (along with the European Atomic Energy Commission those...

See the whole article here: Hmmm… Holland - Outside the Box Investment Newsletter - John Mauldin

March 25, 2012

The Bats Affair: When Machines Humiliate Their Masters - Businessweek

By Brian Bremner
March 23, 2012 6:18 PM EDT

The spectacularly botched initial public offering of Bats Global Markets on March 23 is so rich in irony that it's difficult to know where to begin. What's far less amusing is the prospect that the current era of high-frequency trading, in which powerful computers sift through massive information flows in search of price discrepancies and split-second trades, will bring even more episodes of market mayhem far more costly to investors and the broader economy.

In the annals of business screw-ups, Bats has certainly made its mark. Bats stands for Better Alternative Trading System and the company runs two exchanges that collectively rank third in terms of U.S. share trading, behind New York Stock Exchange and Nasdaq. The Bats exchanges account for 11 percent to 12 percent of daily U.S. equity trading, according to its website. The company came of age with the expansion of high-frequency trading over the last decade and the proliferation of quant-jock-driven electronic firms that dominate the buying and selling of U.S. equities. Bats founder Dave Cummings is chairman and owner of high-frequency trading firm Tradebot Systems.

Today was supposed to be the Lenexa (Kan.)-based company's moment in the limelight as it tried to sell about 6.3 million shares in the $16 to $18 dollar per share range. Instead, something went terribly wrong. The company's shares somehow ended up trading for pennies per share early in the trading day on both the Bats bourse and Nasdaq, according to data reviewed in this Bloomberg story. Then tech investors and Apple fanboys the world over were dismayed when a single trade for 100 shares executed on the Bats market sent Apple's shares to $542 per share, down sharply from recent levels. (The company set a new 52-week high of $609 per share on March 21.) The stock temporarily halted trading and recovered.

It's far too early to know what went wrong, though Bats took the unusual step of withdrawing its IPO late in the trading day. "In the wake of today's technical issues, which affected the trading of certain stocks, including that of Bats, we believe withdrawing the IPO is the appropriate action to take for our company and our shareholders," said Joe Ratterman, chairman, president, and chief executive officer of Bats.

As it happens, the Securities and Exchange Commission has started reviewing whether the trading practices of high-frequency trading firms has given them an unfair advantage over other investors. More fundamentally, it's not clear that the SEC—or even experienced Wall Street traders—really have a handle as to whether computer driven trading is a good thing or a dangerously disruptive one. These days, about 55 percent of U.S. equity-trading volume comes from firms using high-frequency trading strategies, according to Bloomberg.

Stock trading circa 2012 is increasingly controlled by former computer scientists and mathematicians—and the computers at their disposal—that look at stocks not as traditional value investors looking at earnings and growth, but as streams of price data. When, say, the price of a futures contract strays from an underlying stock, the machines pounce and execute a trade. Back in May 2010, during the fabled flash crash, these digital networks temporarily went haywire and triggered a market panic.

High-frequency trading advocates say all this automation creates far more liquidity and makes the markets efficient. That may be true; there is no stuffing this genie back into the bottle. Yet regulators had better figure out whether or not we have the effective safeguards in place to prevent computerized trading system meltdowns from doing serious damage to investors.



March 20, 2012

Jim Rogers Blog: My Advice To Young People: Get Into Agriculture

Jim Rogers with some handy advice for the younger ones among us.

Jim Rogers Blog: My Advice To Young People: Get Into Agriculture: My advice to young people would be to get into agriculture. If you want to make money over the next 20 years, agriculture is the way to go. ...

The MasterMetals Blog

Swiss Secrecy Besieged Makes Banks Fret World Money Lure Fading - Bloomberg

Switzerland is the biggest manager of offshore wealth in the world, with about a 27 percent share, according to the Boston Consulting Group's 2011 Global Wealth report. Clients fromGermanyItaly, Saudi Arabia, the U.S. and France make up about 42 percent of all offshore wealth managed in the country, the report said.

Should Switzerland abolish banking secrecy, it could risk losing as much as 700 billion francs ($768 billion) in the worst case, or about half of all money managed by Swiss banks on behalf of private clients not domiciled in the country, said Teodoro Cocca, a professor of wealth management at Johannes Kepler University in Linz, Austria. Such a shock would be enough to put the country into a recession, according to a study by Banu Simmons-Sueer at Zurich-based KOF Swiss Economic Institute.



Swiss Secrecy Besieged Makes Banks Fret World Money Lure Fading

Gianluca Colla/Bloomberg

A tram passes a UBS building in Zurich.

When UBS AG (UBSN) celebrated its 150th anniversary in Zurich last month with 600 guests dining on Ossetra caviar and Wagyu beef, there was no jubilation in the executives' speeches.

Trust "cannot be tied to a far-dated founding year; trust constantly has to be won anew," Chairman Kaspar Villiger told guests at the dinner prepared by Philippe Rochat, the Swiss chef whose restaurant is one of two in the country to earn three Michelin stars. "Reputation is the most important capital for a bank. It takes just a thoughtless action to lose it and the sweat of thousands to rebuild it."

Just about every UBS executive gathered in Hallenstadion, where sporting events, concerts and shareholder meetings are held, could relate to what Villiger was talking about. For almost three years he and former Chief Executive Officer Oswald Gruebel tried to rebuild the reputation of Switzerland's largest lender, damaged by a near bankruptcy in 2008 and the unprecedented delivery of data about affluent clients to the U.S. to avoid a criminal indictment.

UBS's image of solidity, based on conservative risk management and capital strength, was tarnished again last year when the Zurich-based bank discovered a $2.3 billion loss from unauthorized trading. Gruebel, 68, found himself a guest at the anniversary dinner rather than the host after he left his job in September. Villiger, 71, plans to step down in May.

Other guests included Marcel Ospel, who helped put UBS on the global map and whose ambitions in investment banking contributed to more than $57 billion in writedowns and losses related to mortgage-backed securities, and Eveline Widmer- Schlumpf, the Swiss minister who in 2008 had to bail out UBS.

Sullied Image

While the bank has recovered from near insolvency, its sullied image exemplifies a fall from grace of financial institutions that contributed almost one-third of the country's economic growth between 1990 and 2009. It's a transformation that resonates around the world as the banking industry struggles to overcome resentment for the excesses and opacity that led to the 2008 collapse of Lehman Brothers Holdings Inc.

Switzerland and its banks benefited from laws protecting secrecy. The inflow of foreign money seeking a haven in the country contributed for decades to lower interest rates, making borrowing and expansion cheaper for domestic companies and boosting household wealth. Now, what promises to be the biggest shake-up Swiss financial firms have seen in 80 years is bound to leave scars on the economy.

"The problem with any good thing is that it's too good to be true," Gruebel said in an interview this month. "If you have that for too long, there comes a day when it falls apart. And that's the case with bank secrecy."

'Historical Moment'

The pursuit of UBS by U.S. tax authorities has opened floodgates to attacks on other Swiss banks that threaten to tear down the bastion of secrecy. UBS and Credit Suisse Group AG (CSGN), the country's second-largest lender, also are facing stricter capital and liquidity rules forcing them to shrink more and faster than international rivals.

"It's a really historical moment," Tobias Straumann, a lecturer in economic history at Zurich University, said in a phone interview. "It's the first time that we have an open discussion on both of the issues. We had two external shocks: one economic and one political."

Switzerland Bleeding

The blows already are bleeding through to the economy. The banking industry's contribution to economic output in the country shrank to 6.7 percent in 2010 from 8.7 percent in 2007, according to Swiss Bankers Association data. That's still a bigger share of gross domestic product from banks than in the U.K. or the U.S. More than 40 percent of that comes from wealth management, making it the industry's most important business.

Switzerland is the biggest manager of offshore wealth in the world, with about a 27 percent share, according to the Boston Consulting Group's 2011 Global Wealth report. Clients from GermanyItaly, Saudi Arabia, the U.S. and France make up about 42 percent of all offshore wealth managed in the country, the report said.

Should Switzerland abolish banking secrecy, it could risk losing as much as 700 billion francs ($768 billion) in the worst case, or about half of all money managed by Swiss banks on behalf of private clients not domiciled in the country, said Teodoro Cocca, a professor of wealth management at Johannes Kepler University in Linz, Austria. Such a shock would be enough to put the country into a recession, according to a study by Banu Simmons-Sueer at Zurich-based KOF Swiss Economic Institute.

"Looking at the last 12 months, the likelihood of such a worst-case outcome has increased," Cocca said in a phone interview. "The attacks on Swiss banking secrecy and the actions of the Swiss government clearly go in one direction, and that is toward weakening of Swiss banking secrecy."

Tax Evasion

The government has been in talks for more than a year with U.S. authorities, who after getting data on about 4,700 UBS clients are now investigating 11 other banks, including Credit Suisse, for alleged assistance in tax evasion.

Wegelin & Co., a 270-year-old Swiss bank, had to sell itself to save its non-U.S. business before the U.S. indicted the firm last month. Philipp Hildebrand, head of the Swiss central bank, had to step down in January after information about his wife's foreign-exchange transactions was leaked by a Bank Sarasin & Cie. AG employee. Bank secrecy has become a point of mockery: A photograph in Neue Luzerner Zeitung featured a masked man at a carnival last month offering "cheap" Swiss client-account data on a compact disc as a "special offer."

'Island of Bliss'

The Swiss financial industry has prospered from others' misfortunes. Two world wars involving neighboring countries made neutral Switzerland a refuge for people concerned that their governments and currencies weren't stable.

Secrecy laws were enacted in 1934 after French police arrested top bankers of Basler Handelsbank in Paris in October 1932 for aiding tax evasion by the bank's high-profile French clients. Police confiscated a list of clients and later seized more money of tax evaders at other private banks in Geneva.

A run on Swiss banks that followed threatened their existence, and stopping the money flight became a priority, historian Peter Hug wrote in a chapter on banking secrecy in a 2002 book, "Memory, Money and Law."

"Switzerland got rich through black money," Sergio Ermotti, 51, who took over as CEO of UBS after Gruebel resigned, said in an interview with SonntagsBlick in October. "That will change in the future."

Offshore Money

The flow of offshore money into Switzerland helped reduce interest rates in the country by more than 1 percentage point, benefiting private and corporate borrowers, Villiger, a former Swiss finance minister, said at UBS's anniversary dinner. Switzerland still is seen as "an island of bliss" by observers abroad, Villiger said, adding that both the government and companies have to work hard to preserve that.

Hans J. Baer, whose family founded the Swiss private bank Julius Baer Group Ltd. (BAER), said in his 2004 book, "Be Embraced, Millions," that banking secrecy "makes us fat but impotent" as it places Swiss banks outside of general competition.

The fat from wealth management helped fuel the expansion of investment banking and the balance sheets of UBS and Credit Suisse, so-called universal banks able to use cheap funding to boost leverage and profitability. Between 1998, when UBS was created through the merger of Union Bank of Switzerland and Swiss Bank Corp., and 2006, the combined assets of the two banks more than doubled to 3.65 trillion francs, more than seven times Swiss GDP that year.

'Allergic to UBS'

That was followed by UBS's losses related to mortgage- backed securities and a government bailout providing 6 billion francs of capital to help the firm spin off $39 billion of risky assets into a central bank fund. Although the bailout was smaller than what other countries spent propping up their lenders, the realization that failure of a big bank could topple the country fueled a backlash against investment banking.

"In private wealth management, both the employees and the customers felt threatened by the investment banks because they thought we give the banks money and they turn around and use it for their own speculation," Peter Kurer, a former chairman of UBS, said in a phone interview.

Splitting off the investment banks -- undoing the universal model prized by global lenders including Citigroup Inc. (C) -- would help UBS and Credit Suisse regain the trust of shareholders and clients, Kurer has said.

Brand Damage

The negative image of investment banks in Switzerland remains strong, said Straumann, who wrote a report on UBS in the 2008 crisis. The loss from the unauthorized trading incident at UBS last year, which Straumann said could have happened at any bank, only added fuel to the fire.

"It's not rational anymore," Straumann said. "You just can't talk to people in a normal way when you talk about UBS. People are allergic to UBS."

Problems at home have taken a toll on the brands of UBS and Credit Suisse globally. UBS, which entered Interbrand's ranking of the world's top 100 brands at No. 45 in 2004 and rose to its highest ranking of 39 by 2007, slipped to 92nd last year. Credit Suisse entered the ranking at No. 80 in 2010 and fell to 82nd last year. JPMorgan Chase & Co. (JPM) rose from 30th in 2004 to 28th in 2011 and London-based HSBC Holdings Plc from 33rd to 32nd.

UBS and Credit Suisse also face capital requirements from Swiss regulators that go beyond demands on international rivals, making investment banking less profitable and pushing the banks to scale back. The firms said in November that they plan to shrink their total risk-weighted assets 33 percent to 270 billion francs and 23 percent to 285 billion francs, respectively, with most of the cuts in securities units.

'Too Big'

Gruebel, who has served as CEO of both banks, said they'll have to cut even more, to between 150 billion francs and 200 billion francs each, to be able to fulfill the new capital rules because retaining earnings won't be enough.

"To believe they can stay at 300 billion francs or more of risk-weighted assets over the next years is a dream," Gruebel said. "Both of their investment banks are too big today. The winner will be the one who will cut the most the quickest."

Credit Suisse said last month it has speeded up the reduction of assets and plans to reach the level targeted for the end of this year by the end of March. Still, the Zurich- based lender is six to 12 months behind UBS in restructuring and the performance of its investment bank is "extremely disappointing," Kian Abouhossein, a London-based analyst at JPMorgan, said in a Feb. 9 note.

Criminal Investigation

Credit Suisse, which had smaller writedowns from the subprime crisis than UBS, expanded its investment bank in 2010 to gain a bigger market share from competitors struggling with losses. The bank had added about 2,000 people to the securities unit since 2009 before announcing two rounds of job cuts last year. The expansion was wrong in retrospect, CEO Brady Dougan, 52, told SonntagsBlick in an interview last month.

The headcount at Credit Suisse's investment bank at the end of 2011 was 12 percent higher than at the end of 2006, while the unit's net revenue for the year was 44 percent lower than five years ago. UBS's investment bank cut staff by 21 percent over the same period as revenue slumped 56 percent.

Credit Suisse, unlike UBS, still faces a U.S. criminal investigation into tax evasion. UBS avoided prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed information on about 4,450 more. Credit Suisse is doing "everything" it can to help resolve the U.S. probe, Dougan said in an interview last month. The bank didn't take any clients from UBS as the latter was shutting down its business with Americans, he said.

UBS and Credit Suisse declined to make executives available to comment for this article.

White Money

Still, both firms are better prepared than smaller private banks for changes that may be coming with Switzerland's so- called white-money strategy of relying only on declared assets, Cocca said. UBS and Credit Suisse have through the years built out their onshore wealth-management businesses around the globe.

"Other players in Switzerland, some of the smaller banks, have a more backward-looking strategy," said Cocca. "They believe that they can stay a bit under the radar. Wegelin is an absolute clear example for that."

Wegelin, the St. Gallen-based private bank, last month became the first Swiss lender to face criminal charges in the U.S. crackdown on offshore firms suspected of abetting tax evasion. Wegelin helped Americans hide more than $1.2 billion in assets and evade taxes, wooing clients fleeing UBS, according to an indictment filed in federal court in New York.

The bank said last month it will "make every effort to resolve this matter within the boundaries of respectful cooperation with the U.S. and obedience to Swiss law."

Negotiation or Enforcement

While most private banks now say they accept only money declared to tax authorities, they disagree about how to make sure customers actually pay taxes, weakening Switzerland's position in negotiations with the U.S. and other countries, Cocca said. Kurer, UBS's general counsel and then chairman during the U.S. investigation, said talks with Washington probably will "drag on for a while."

Reaching an agreement on a governmental level, as Switzerland is trying to do, "will be extremely difficult because it will require on the American side also a view that this should be solved politically rather than by enforcement actions," Kurer said. "And I just don't see that."

The U.S. has successfully challenged Swiss banks before. In 1998, firms led by Credit Suisse and UBS reached a $1.25 billion settlement with Jewish groups that accused them of holding on to the assets of Holocaust victims. The accord came after U.S. local governments threatened to boycott the banks and divest Swiss investments. This century, countries including Germany and the U.K. also sought to pierce Swiss bank secrecy.

Information Exchange

Last year's agreements to collect taxes on money held by German and U.K. clients in Switzerland while keeping their identities secret are awaiting approval amid criticism by the European Union and Germany's Social Democratic Party opposition, which says the deals let tax evaders off too easy.

"The Europeans want automatic information exchange from us," UBS's Villiger said yesterday at an event organized by the Zurich Economics Society, referring to the collection of data by governments from financial institutions on income paid to non- residents for transmission to their countries of residence. "Actually, it's not very efficient."

People should be given time to legalize assets, some of which might have come from a long time ago, he said.

Asset Decline

Banks in Switzerland are "likely to experience a significant decline in assets owned by Western European clients" in the coming years, according to the Boston Consulting report. The German and U.K. deals alone may cause Swiss wealth managers to lose about 47 billion francs in assets, a study by consulting firm Booz & Co. said in November.

That's adding pressure on profit margins at private banks as managing offshore money has been more profitable and new rules are raising compliance costs. The Swiss regulator also is planning an overhaul of rules governing the sale of financial products to individuals after bank customers suffered billions of dollars of losses from Lehman Brothers structured notes and Bernard Madoff's fraud.

The average cost-to-income ratio of Swiss offshore private banks rose by 5 percentage points in 2010 to 72 percent, Boston Consulting said. In 2007, that ratio stood at 54 percent.

Tax Treaties

Implementing bilateral tax treaties may be more costly for many banks than agreeing to an automatic information exchange, which some politicians and bankers are advocating. In 20 years, Switzerland probably will have information exchange, Villiger said yesterday.

Meanwhile, with tax deals in flux and banking secrecy under attack, wealth managers must persuade clients that holding their money in Switzerland still has advantages. That will be challenging, Gruebel, the former CEO of UBS, said.

"How can we convince somebody outside of Switzerland to bring their money into Switzerland and pay taxes?" he said. "If we really want this white-money strategy, we have to come up with something which is cleverer than anything else in the world. And we don't have much time to figure it out."

To contact the reporter on this story: Elena Logutenkova in Zurich atelogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly atfconnelly@bloomberg.net


March 9, 2012

Guest post: Joseph Kony is not in Uganda (and other complicated things) - By Michael Wilkerson | FP Passport

Guest post: Joseph Kony is not in Uganda (and other complicated things)


Thanks to an incredibly effective social media effort, #StopKony is trending on Twitter today. The campaign coincides with a new awareness-raising documentary by the group Invisible Children. Former FP intern Michael Wilkerson, now a freelance journalist and Ph.D. candidate at Oxford -- who has lived and reported from Uganda -- contributed this guest post on the campaign. -JK

By Michael Wilkerson:

"Joseph Kony is basically Adolf Hitler. He has an army of 30 000 mindless children who slaughter innocent people in Uganda."

Have you seen something like that fly across your Twitter or Facebook feed today? Or perhaps this?:

"#TweetToSave the Invisible Children of Uganda! #Kony2012 Make Joseph Kony Famous!!"

"Kony 2012," a video posted by advocacy group Invisible Children to raise awareness about the pernicious evil of Lord's Risistance Army (LRA) leader Joseph Kony,  has already been viewed over 8 million times on Vimeo and more than 9 million times on YouTube (and surely more by the time you read this) since its release this week.

It would be great to get rid of Kony.  He and his forces have left a path of abductions and mass murder in their wake for over 20 years.  But let's get two things straight: 1) Joseph Kony is not in Uganda and hasn't been for 6 years; 2) the LRA now numbers at most in the hundreds, and while it is still causing immense suffering, it is unclear how millions of well-meaning but misinformed people are going to help deal with the more complicated reality.

First, the facts. Following a successful campaign by the Ugandan military and failed peace talks in 2006, the LRA was pushed out of Uganda and has been operating in extremely remote areas of the DRC, South Sudan, and the Central African Republic -- where Kony himself is believed to be now. The Ugandan military has been pursuing the LRA since then but had little success (and several big screw-ups). In October last year, President Obama authorized the deployment of 100 U.S. Army advisors to help the Ugandan military track down Kony, with no results disclosed to date.

Additionally, the LRA (thankfully!) does not have 30,000 mindless child soldiers. This grim figure, cited by Invisible Children in the film (and by others) refers to the total number of kids abducted by the LRA over nearly 30 years. Eerily, it is also the same number estimated for the total killed in the more than 20 years of conflict in Northern Uganda.

As I wrote for FP in 2010, the small remaining LRA forces are still wreaking havoc and very hard to catch, but Northern Uganda has had tremendous recovery in the 6 years of peace since the LRA left.

So why is "Uganda" trending on Twitter?

Unfortunately, it looks like meddlesome details like where Kony actually is aren't important enough for Invisible Children to make sure its audience understands. The video, narrated by Invisible Children co-founder Jason Russell, says its purpose is to intensify pressure on the U.S. government to make sure Kony is brought to justice this year, and as the message broadcast throughout says, what is important is simple: Stop Kony.

Among other emotive shots, the video features Russell's attempt to explain the LRA to his toddler son, enthusiastic (and mostly white) volunteers putting up posters and wearing Kony 2012 bracelets, and some heart-wrenching footage of children who walked for miles to sleep in a safe place at the height of the LRA's power in Northern Uganda. The latter comprised much of Invisible Children's namesake first film and brought the organization to prominence.

But in the new film, Invisible Children has made virtually no effort to inform. Only once, at 15:01 in the movie, over an image of a red blob on a map leaving Northern Uganda and heading West, is the fact that the LRA is no longer in Uganda mentioned, and only in passing:

"As the LRA begain to move into other countries, Jacob [one of the children filmed in Northern Uganda in 2003] and other Ugandans came to the US to speak on behalf of all people suffering because of Kony. Even though Uganda was relatively safe they felt compelled to tell the world that Kony was still out there and had to be stopped."

That's it, in a 30-minute movie. And with both the graphic and reiteration of how awful the LRA is, you might think reasonably "move into other countries" meant expanding rather than fleeing. In any case, the focus, seconds later,  is on Invisible Children's activities in the U.S. at the time, not what was happening back in Africa. I can see why some of P. Diddy's followers might be confused.

Award-winning Ugandan journalist Angelo Izama is among those not thrilled:

"To call the campaign a misrepresentation is an understatement. While it draws attention to the fact that Kony, indicted for war crimes by the International Criminal Court in 2005, is still on the loose, its portrayal of his alleged crimes in Northern Uganda are from a bygone era. At the height of the war between especially 1999 and 2004, large hordes of children took refuge on the streets of Gulu town to escape the horrors of abduction and brutal conscription to the ranks of the LRA. Today most of these children are semi-adults. Many are still on the streets unemployed. Gulu has the highest numbers of child prostitutes in Uganda. It also has one of the highest rates of HIV/AIDS and Hepatitis.

If six years ago children in Uganda would have feared the hell of being part of the LRA, a well documented reality already, today the real invisible children are those suffering from "Nodding Disease". Over 4000 children are victims of this incurable debilitating condition. It's a neurological disease that has baffled world scientists and attacks mainly children from the most war affected districts of Kitgum, Pader and Gulu."

Along with sharing the movie online, Invisible Children's call to action is to do three things: 1) sign its pledge, 2) get the Kony 2012 bracelet and action kit (only $30!), and 3) sign up to donate.

There is intense criticism out there over Invisible Children's finances, including that it spends too much money on administration and filmmaking, while still touting its on the ground NGO-style projects. Also, apparently it's never been externally audited. I'm going to stay out of that, other than to say you can check out IC's own financial disclosure information here.

What worries me more is that it's unclear what exactly Invisible Children wants to do, other than raise a lot of money and attention. Here's Russell in the video (21:40):

"We know what to do. Here it is, ready? In order for Kony to be arrested this year, the Ugandan military has to find him. In order to find him, they need the technology and training to track him in the vast jungle. That's where the American advisors come in. But in order for the American advisors to be there, the American government has to deploy them. They've done that, but if the government doesn't believe the people care about Kony, the mission will be cancelled. In order for the people to care, they have to know. And they will only know if Kony's name is everywhere.

So the goal is to make sure that President Obama doesn't withdraw the advisors he deployed until Kony is captured or killed. That seems noble enough, except that there has been no mention by the government of withdrawing those forces -- at least any I can find. Does anyone else have any evidence about this urgent threat of cancellation? One that justifies such a massive production campaign and surely lucrative donation drive?

There are many reasons uninformed and oversimplified advocacy can cause trouble, and Siena Antsis catalogues some of them here, noting that Invisible Children expertly "commodifies white man's burden on the African continent."  Buy a bracelet, soothe some guilt.

But as researcher Mark Kersten notes, after "stopping Kony", then what? Or what if the activism just results the the 100 U.S. advisors staying but no Kony?

One of the biggest issues with a simplistic "Stop Kony" message is that discussions of Navy Seals or drone strikes are inevitable when patience runs out with Ugandan-led efforts . But what about the dozens or hundreds of abducted and brainwashed kids? Should we bomb everyone? Will they actually stop fighting after Kony is gone? What if they shoot back?

Coming back to the "Kony 2012" video and its celebrity endorsements, what are the consequences of unleashing so many exuberant activists armed with so few facts? Defining Uganda in the international conversation by issues that are either geographical misfires (Save northern Uganda!) or an intentional attempt to distract the international community (Death to the gays!), do a disservice to the many critical problems Uganda has.

In addition to the problems of poverty and nodding disease Izama highlights, Uganda is barely (if at all) democratic, and the president Yoweri Museveni ushered himself to a 4th term last year, taking him to over 25 years in power. Corruption is rampant, social services are minimal, and human rights abuses by the government common and well documented. Oh, and oil is on the way.

Stopping Kony won't change any of these things, and if more hardware and money flow to Museveni's military, Invisible Children's campaign may even worsen some problems.

Here's to hoping Kony hands himself in tomorrow and that the fear of the U.S. "cancelling" its LRA-hunt support is misplaced. But if the most impactful the result of Invisible Children's campaign is to cause millions of viewers to think Northern Uganda is a war zone, even if it's not their intent, it's hard to defend.

See the article online here: Guest post: Joseph Kony is not in Uganda (and other complicated things) - By Michael Wilkerson | FP Passport

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