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Business and financeGulliver

Donald Trump considers congestion pricing for American cities

DONALD TRUMP made a splash during the American presidential campaign when he called for a trillion-dollar investment in infrastructure. But when he actually released his first major budget proposal this week, funds for roads and bridges hardly attracted notice. Though the document does lay out a target of $200bn in direct federal spending, to be augmented by private investments, it provides only $5bn in 2018. “President Trump’s campaign promises on infrastructure are crumbling faster than our roads and bridges,” said one senior Democrat.

Yet tucked away in the proposal is one short paragraph that ought to intrigue the country’s city-dwellers, who overwhelmingly vote Democratic, as well as business travellers who often find themselves visiting American cities.

In a paragraph titled “Incentivize Innovative Approaches to Congestion Mitigation”, there is a proposal to “provide valuable incentives for localities to think outside of the box in solving long-standing congestion challenges,” modeled after…Continue reading

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ApprovedBusinessBusiness and finance

Netflix still gets booed at Cannes

THE rise of Netflix has been greeted frostily by some of the old guard at the Cannes film festival, where the American streaming giant’s disregard for releasing films in cinemas wins it few friends. It looked a bit more at home on May 21st, as the lights went up at the Louis Lumière theatre. The stars of its own film, “The Meyerowitz Stories (New and Selected)”, a comedy drama, accepted a standing ovation from the audience. Ted Sarandos, Netflix’s head of content, stood alongside Dustin Hoffman, Ben Stiller and other cast members. Festival-goers jostled for a word with him at a swanky after-party.

This is the first year that Netflix has been admitted into the festival’s competition, with two films, “The Meyerowitz Stories” and “Okja”, directed by Bong Joon-ho of South Korea. Still, cries of protest from French film-industry executives prompted Thierry Frémaux, the festival director, to declare that, in future, only films guaranteed a theatrical release in…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A trade deal between the EU and east Africa is in trouble

Magufuli advises Museveni on how to tilt at colonialism

THE winds that waft along the Swahili coast change direction with the seasons, a boon to traders in times past. Shifts in the political winds are harder to predict. Last July a proposed trade deal between five countries of the East African Community (EAC) and the EU was thrown into disarray when Tanzania backed out at the last minute. An EAC summit, scheduled for months ago, was meant to find a way forward. Held at last on May 20th in Dar es Salaam, after many postponements, only two presidents showed up. The deal is in the doldrums.

The pact is one of seven “Economic Partnership Agreements” (EPAs) the EU wants to sign with regional groups in Africa, the Caribbean and the Pacific. The first was agreed with the Caribbean in 2008; southern Africa followed suit last year. But progress in west Africa has also stalled, with Nigeria raising objections. The EPAs were promoted as a new breed of trade deal, and…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A new code aims to clean up the foreign-exchange market

FINANCIAL-MARKET traders have earned a pretty shocking reputation in recent years. From manipulating LIBOR, a benchmark interest rate, to rigging the daily fix of foreign-exchange (FX) rates, traders have shown themselves ready not just to stretch the rules, but to collude in outright illegality.

A global code of conduct for the FX market, unveiled on May 25th, aims to put things on a sounder footing. Drawn up over the past two years by a coalition of central bankers, known as the FX Working Group (FXWG), and supported by a panel of industry participants, the code’s 55 principles lay down international standards on a range of practices, from the handling of confidential information to the pricing and settlement of deals.

Such standards seem long overdue in the massive FX market. Roughly $5trn is traded every day (see chart). Many companies, pension funds and money managers depend on banks to hedge their exposure to currency fluctuations. Yet in the past traders colluded with one another…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

One bitcoin is worth twice as much as an ounce of gold

Fans of bitcoin, a crypto-currency, have long called it digital gold. Now this sounds like an insult: continuing its stellar rise, and adding more than 30% to its value in just a week, one bitcoin is worth more than $2,600, over twice as much as an ounce of gold. As The Economist went to press all bitcoins in circulation were worth over $43bn. A sum of $1,000 invested in bitcoins in 2010 would now be worth nearly $36m. Other crypto-currencies are also marching upward: together this week they were worth $87bn. But if the history of gold is any guide, what goes up will come down—and then go up again.

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ApprovedBusiness and financeFINANCEFinance and economics

How becoming a Hong Kong pensioner can save you tax

Not dodging but shuffling

THE global war on tax evasion rumbles on. What began as an American onslaught, with the Foreign Account Tax Compliance Act (FATCA) of 2010, has been joined by more than 100 countries through an initiative called the Common Reporting Standard (CRS). Under this, governments will exchange tax information on their financial firms’ clients on a regular, “automatic” basis, without having to be asked for it, starting this year. Holdouts such as Panama, the Bahamas and Lebanon have, one by one, been frogmarched into line.

But tax-dodgers and their advisers are enterprising sorts, eager to clamber through the smallest loophole—and gaps in the CRS there are. One involves becoming a pensioner in Hong Kong.

The territory, home to a big financial centre, has a type of pension known as an ORS (for Occupational Retirement Scheme). The beauty of ORS from a tax evader’s point of view is that anyone can get one and they are not…Continue reading

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ApprovedBusinessBusiness and finance

Why companies in the chemicals industry are mixing

AS SPRING arrives, the hills of Languedoc in southern France turn green with the leaves of grapevines. This is helped along by chemicals—lots of them, confides a winemaker based near the town of Thuir in the Pyrenees. In their absence, vineyards would need natural fertilisers and to be weeded by hand, both costly. French farmers use more chemicals than anyone else in Europe: 65,000 tonnes of pesticides alone each year.

Even the smallest of vine-growers has an interest in a series of takeovers proposed between their chemicals suppliers. After a decade without any big deals, since 2015 three mega-mergers, collectively worth around $240bn, have been proposed. When they were first announced, many doubted that regulators would allow the mergers because of competition worries. If all three proceed, as now seems likely, four companies will produce 70% of the world’s pesticides instead of six today.

The first mega-merger, announced in December 2015, was between Dow Chemical and…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Machine-learning promises to shake up large swathes of finance

MACHINE-LEARNING is beginning to shake up finance. A subset of artificial intelligence (AI) that excels at finding patterns and making predictions, it used to be the preserve of technology firms. The financial industry has jumped on the bandwagon. To cite just a few examples, “heads of machine-learning” can be found at PwC, a consultancy and auditing firm, at JP Morgan Chase, a large bank, and at Man GLG, a hedge-fund manager. From 2019, anyone seeking to become a “chartered financial analyst”, a sought-after distinction in the industry, will need AI expertise to pass his exams.

Despite the scepticism of many, including, surprisingly, some “quant” hedge funds that specialise in algorithm-based trading, machine-learning is poised to have a big impact. Innovative fintech firms and a few nimble incumbents have started applying the technique to everything from fraud protection to finding new trading strategies—promising to up-end not just the humdrum drudgery of the back-office,…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Is efficient-market theory becoming more efficient?

BUILD a better mousetrap, the saying goes, and the world will beat a path to your door. Find a way to beat the stockmarket and they will construct a high-speed railway. As investors try to achieve this goal, they draw on the work of academics. But in doing so, they are both changing the markets and the way academics understand them.

The idea that financial markets are “efficient” became widespread among academics in the 1960s and 1970s. The hypothesis stated that all information relevant to an asset’s value would instantly be reflected in the price; little point, therefore, in trading on the basis of such data. What would move the price would be future information (news) which, by definition, could not be known in advance. Share prices would follow a “random walk”. Indeed, a book called “A Random Walk Down Wall Street” became a bestseller.

The idea helped inspire the creation of index-trackers—funds that simply buy all the shares in a benchmark like the S&P…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Noble Group, a big Asian commodities trader, is teetering

THE difficulties facing Noble Group, a beleaguered Hong Kong commodities trader, are multiplying. On May 23rd the firm was forced to suspend trading of its shares in Singapore after their value slumped by more than 28% in half an hour. The panicked selling came after S&P Global, a ratings agency, warned that Noble was at risk of defaulting on large debt repayments that are due within the next 12 months. Investors were also rattled by reports from Reuters and the Financial Times suggesting that Sinochem, a Chinese conglomerate at one time tipped to take a stake in Noble, had lost interest in a deal.

Founded in 1986 by Richard Elman, a former scrap-metal merchant from London, Noble grew from an initial investment of $100,000 to be worth more than $10bn at its peak in 2010. But investors took fright in 2015 when a previously unknown group called Iceberg Research began publishing reports questioning Noble’s accounting practices (Noble has vigorously defended its…Continue reading

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ApprovedBusinessBusiness and finance

The market for rare trainers

All star investments

WHEN Marty McFly donned his self-lacing Nike trainers in the distant future of 2015, he really should have kept them in the box. Almost 30 years on from “Back to the Future II”, Nike’s real-life version, released in 2016, is the most expensive training shoe on the planet, with an average resale price of $32,275. These rarest of shoes (only 89 pairs were made) are at the apex of a resale market that has been carefully nurtured by Nike and other trainer titans since the late 1980s.

Every Saturday morning across America, queues of “sneakerheads” form outside trainer shops. Many are adding to their hundred-pair collections, but the rest are seeking shoes to sell in the secondary market. As brands try to strike a balance between generating instant revenue and restricting supply (which creates demand, and more revenue later), the secondary trade thrives. In America it is worth an estimated $1.5bn a year, a tenth of the trainer…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

What the German economic model can teach Emmanuel Macron

IT IS heartening that the euro area has a knack for surviving near-fatal crises. Yet confidence in the durability of the single currency might be stronger if it suffered fewer of them. Europe dodged its latest bullet on May 7th in France, when Emmanuel Macron, a liberal-minded (by local standards) upstart centrist, defeated Marine Le Pen for the presidency. Even so, an avowed nationalist and Eurosceptic captured 34% of the vote, leaving Mr Macron with five years to assuage widespread frustration with the economic status quo. An obvious model lies just across the Rhine, where the unemployment rate—below 4%, down from over 11% in 2005—is testimony to the potential for swift, dramatic change. Yet Germany’s performance will not be easy to duplicate.

It would be unfair to call France the sick man of Europe; half the continent is wheezing or limping. Yet there is certainly room for French improvement. Real output per person has barely risen in the past decade. Government spending stands at 57% of GDP, outstripping the tax take; France’s budget deficit, at 3.4% of GDP, is among the largest in the euro area’s core. The biggest worry, however, is the labour market. The unemployment rate, now 10.1%, is stubbornly high. Nearly a quarter of French young adults are unemployed. Worklessness, especially among young people, is a source of rising social tension and a…Continue reading

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ApprovedBusinessBusiness and finance

Among private tech firms, Airbnb has pursued a distinct strategy

UNTIL recently “Uber envy” afflicted many top executives at Airbnb, a platform for booking overnight stays in other people’s homes. So admits a big investor in the firm. The two companies often raised money at the same time, and the ride-hailing giant reliably received more cash and closer attention. Uber is America’s most valuable private technology firm, with a valuation of close to $70bn at last count; Airbnb is still in second place with a value of around $30bn. But with Uber facing a series of setbacks, including allegations of intellectual-property theft, departures by senior executives and a consumer boycott, jealousy in Airbnb’s hallways has largely evaporated.

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ApprovedBusinessBusiness and finance

Masayoshi Son and Saudi Arabia launch a monster technology fund

“I HAVEN’T accomplished anything I can be proud of in my 60 years on Earth,” Masayoshi Son, the boss of SoftBank, a Japanese telecoms group, recently confided. Now he has enough money to make a dent in the universe: on May 20th SoftBank and Saudi Arabia’s Public Investment Fund (PIF), along with smaller investors including Apple and Sharp, launched the world’s largest technology-investment fund, worth nearly $100bn. How will Mr Son and his team deploy these riches?

He has a vision to match his vehicle. Within 30 years, he predicts, the world will be populated by billions of robots, many of them more intelligent than humans. Several of SoftBank’s recent acquisitions, most of which are expected to be part of the fund’s portfolio, should be seen in this light. ARM, a British chip firm acquired for a whopping $32bn last year, will design the brains for the robots. OneWeb, a satellite startup in which SoftBank acquired a 40% stake for $1bn in December, will connect them. Nvidia,…Continue reading

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ApprovedBusinessBusiness and finance

An abrupt change at the top at Ford

Fun comes to the blue oval

THE abrupt departure of Ford’s boss, Mark Fields, which the firm announced on May 22nd, has two explanations. Investors had become restive at its performance, particularly in the past year. But Mr Fields was also perceived to lack the drive of Alan Mulally, the man he succeeded. In replacing him with Jim Hackett (pictured), who ran an office-furniture company before joining Ford’s board in 2013 and more recently led the firm’s mobility unit, Ford hopes to conquer current problems and shore up its future strategy.

Ford’s shares have declined by nearly 40% since Mr Fields took over (see chart). Though it made record profits in 2015 and had strong results in 2016, investors reckoned a booming North American market, on which it relies for nearly two-thirds of revenues, would slow. They also disliked the fact that Mr Fields had to invest heavily in new technologies. Ford suffered the ignominy of its market capitalisation being…Continue reading

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Business and financeFree exchange

Donald Trump’s budget ignores what is actually ailing American workers

PRESIDENTIAL budget requests, all of them, are worth exactly nothing. They carry no force of legislation. They land, heavy, bound and shrink-wrapped, so they can be immediately binned as Congress continues its now yearly stumble toward a “continuing resolution”—a supposedly temporary legislative act that in recent decades has almost entirely replaced the statutory budget process. The request from the President is the least consequential part of something that is completely broken. It functions like a bumper sticker on an old car. It only tells you about the person who’s driving. 

Mick Mulvaney, a former congressman from South Carolina who won his seat in the Tea-Party wave of 2010, runs Donald Trump’s Office of Management and Budget. Mr Mulvaney has created the budget his wing of the Republican party always wanted: government as a service, paid for by its clients, the taxpayers. If you receive more than you pay, the system has failed, and must be fixed. The marketing copy that accompanied the budget calls this…Continue reading

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Business and financeButtonwood's notebook

The “I’ve paid in all my life” fallacy

SOCIAL security is often described as the “third rail” of American politics—touch it and you die. Britain’s prime minister has just tied herself into a tangle over the way to fund long-term care for the elderly.

The problem is made more difficult because of the way that such benefit schemes were established and marketed to the public—as insurance schemes in which what you receive in benefits relates to what you put in. When pension schemes were set up by Franklin Roosevelt (pictured left) in the 1930s or in Britain, by David Lloyd George (pictured, right) in the Edwardian era, the insurance notion was something people could easily grasp (private schemes already existed) and could be seen as fair. 

This was fine in the early years of such schemes when the number of people contributing was far greater than the number of people taking benefits. But as our societies age, the costs rise and the inadequacy of…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

America’s trade policy has a new face, Robert Lighthizer

AS IS well known, Donald Trump wants the press to focus not on what he calls “fake” news about himself, but on his administration’s achievements. On May 12th he helpfully tweeted an example: “China just agreed that the US will be allowed to sell beef, and other major products, into China once again. This is REAL news!”

His first trade deal was real, if short of the “Herculean accomplishment” touted by his commerce secretary, Wilbur Ross. It promised American credit-rating agencies, payment companies and beef exporters new access to the Chinese market, and set a deadline for progress, of July 16th.

Parts of the deal lack detail, so it may yet disappoint. China has been offering since 2006 to open its market to American beef, but with hefty restrictions. The World Trade Organisation (WTO) had already ruled that China’s restrictions on foreign payment-card companies broke its rules. And the Chinese incumbent is so entrenched that American cards may still struggle to compete.

Maybe Mr Trump picked the wrong “real” news. More important for his trade agenda was the Senate’s confirmation on May 11th of Robert Lighthizer as the new United States Trade Representative (USTR). He will matter much more for economic relations with China than a hasty mini-deal. And now that he is in place, renegotiation of the North American Free-Trade…Continue reading

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Antoine Frérot is overhauling France’s water-and-waste champion

Bin there, done that

WALK along Sugar Road in Aubervilliers, north-east of Paris, and it is obvious how a formerly scruffy area is gentrifying. New office blocks, a shopping mall and bistros have appeared in recent years, filling spaces left after wrecking balls flattened warehouses. Along a canal previously used by barges, commuter ferries deliver workers from richer parts of the city. A district long known for slums, cheap housing and support for the Communist Party is becoming a business hub—Chanel, a fashion firm, as well as several film producers and studios, have moved in and big banks are expected next.

The district’s centrepiece is a U-shaped glass block, the headquarters of Veolia, the world’s largest water-and-waste group. The building opened in January, after the firm moved out of central Paris to save costs and concentrate 2,000 of its 163,000 staff in one spot. Moving to a rehabilitated area carries symbolism for Veolia, which is experiencing…Continue reading

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ApprovedBusinessBusiness and finance

Dow Chemical shows how American industrials and globalisation mix

WHAT does it take for an American industrial champion to succeed in an age of globalisation and impatient investors? Some observers argue that it has become impossible. The world is just too nasty and unfair, they bleat. Perhaps they should take a look at Dow Chemical, a firm born in Michigan in 1897 that has hustled hard enough to be at the top of its industry 120 years later.

When Dow completes its planned $130bn merger with DuPont, a longtime rival, probably at the end of this year, it will become the largest chemical company in the world by sales. This new colossus will keep changing—in 2018-19 the plan is for it to split into three specialised firms. “New Dow” will focus on selling chemicals to the automotive, construction and packaging industries. The other two smaller companies will concentrate mainly on the agricultural and electronics industries.

This is a good moment, before the three-way split, to take stock. Being in the chemicals business is like swimming in a…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Insurers get a new global accounting regime

LISTED firms in over 120 countries, including all large economies bar America, issue financial statements according to international financial reporting standards (IFRS) set by the International Accounting Standards Board (IASB). One industry, however, has been in practice free to keep using divergent national standards: insurance. That, too, is about to change. IFRS 17, issued on May 18th and coming into force in 2021, is the first standard for insurers to require consistent accounting across all countries using IASB rules (ie, again excluding America).

It has a wide gulf to bridge. In one example, looking at identical financial results reported under two countries’ standards, revenue differed by a quarter and net income by nearly two-fifths. Some places, such as the EU, require insurers to use updated discount rates to value future cashflows. Others, including America and many parts of Asia, allow the use of historical discount rates and assumptions valid at the time the policy was…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A surge in the value of crypto-currencies provokes alarm

IT IS hard to predict when bubbles will pop, in particular when they are nested within each other. It helps to keep this image in mind when considering one of the biggest surges in asset values of recent years: the market value of all the world’s crypto-currencies has trebled since the beginning of the year, and is now worth more than $60bn (see chart).

Bitcoin is the best known of these currencies, especially after hackers this month instructed victims to pay ransoms in the anonymous digital cash in order to get their computer files decrypted. Not that many bitcoins exist: there are about 16.3m of them, with only 1,800 new ones minted every day. But growing demand has pushed bitcoin’s price to a record recent high of about $1,830, up from $450 a year ago.

Problems abide. Earlier this year some of the biggest exchanges, such as Bitfinex, experienced problems with their correspondent banks and were unable to pay out real-world currencies to account-holders. To get their money…Continue reading

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ApprovedBusinessBusiness and finance

Embattled Toshiba tries to sell its flash-memory unit

ONCE an electronics and nuclear-power empire that was the pride of corporate Japan, Toshiba is threatened with a stockmarket delisting. It missed a deadline to file its annual results, on May 15th, for the third time this year. In earnings estimates (auditors are refusing to sign off on its results), it warned of a loss close to ¥1trn ($9bn) for the financial year that ended in March. That is the steepest loss on record for a Japanese manufacturer.

To make things worse, Western Digital, an American joint-venture partner in its semiconductor unit, last week took legal action to block Toshiba’s plan to shed their flash-memory business. The case could drag on, but Toshiba needs a sale. That would help cover a write-down of billions of dollars from Westinghouse Electric, its bankrupt American nuclear-power unit.

The group’s chip business accounted for almost one-fifth of revenue in the nine months to December 2016; together, Toshiba and SanDisk, a subsidiary of Western Digital,…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Numismatics—acquiring old coins—outperforms other investments

A penny for your dreams

BEHIND the heavily fortified door of Stack’s Bowers, a gallery of rare coins in New York, smiling salesmen show off their precious wares neatly displayed in pristine glass cabinets. To the untutored eye, it looks like pocket change. Numismatists, who study the history and art of old money, see well-preserved coins as aesthetic masterpieces worth many times their face value. At an auction organised by Stack’s Bowers on March 31st, an American cent from 1793 (pictured) sold for $940,000, becoming the costliest penny ever.

An index of tangible alternative asset classes compiled by Knight Frank, a consultancy, shows that returns on rare coins over ten years to the end of 2016 were 195%, easily beating art (139%), stamps (133%), furniture (-31%) and the S&P 500 index (58%). Coins are more portable than paintings or furniture, and boast a higher value-to-volume ratio. Stamps may be lighter, but, come doomsday, cannot be melted…Continue reading

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ApprovedBusinessBusiness and finance

Hunger for vinyl means a chronic shortage of pressing machines

Well under 45

FOR young hipsters and middle-aged sentimentalists alike, the resurgence of vinyl is cause for celebration. Since 2010 sales of vinyl records in America have tripled. Britain’s vinyl industry saw its biggest gains for 25 years in 2016. Big supermarkets are extending the amount of space that they allocate to the discs and even the turntables that twirl them have found a place on Amazon’s best-seller lists.

Meeting this demand has been tricky. Vinyl accounted for 76% of total album sales in 1973; by 1994 this had dropped to 1.5% as compact discs (CDs) took over. By then the bulk of the world’s vinyl-pressing plants had closed and most of their cumbersome machines had gone to the scrapyard. Only a very few plants that could diversify into new areas of printing and production stayed open. But they did so without any further investment in vinyl, so the few machines that kept on producing often date back to the 1960s.

GZ Media, a Czech…Continue reading

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ApprovedBusinessBusiness and finance

Coca-Cola’s new boss tries to move beyond its core product

FEW companies are as defined by a single product as Coca-Cola. The firm has sold the sweet dark soda since 1886. At its headquarters in Atlanta, archives house the advertisements that sowed Coke in the world’s consciousness: posters urging consumers to “Have a Coke and a Smile”; Norman Rockwell’s 1935 painting of a boy fishing, Coke bottle in hand; a Coca-Cola record with tunes sung by Ray Charles, Aretha Franklin and The Who; advertisements with a red-coated, bearded Santa Claus—it was Coca-Cola that popularised the image of Santa in the 20th century.

Today Coca-Cola has $42bn in revenue and is available “within an arm’s reach of desire”, as the firm puts it, in every country but Cuba and North Korea. Its distribution is so broad, its marketing so expert that the Gates Foundation has urged vaccine campaigns to mimic its strategy. The question for James Quincey, an insider who took over as CEO this month, is whether Coca-Cola can move beyond Coke.

The company…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The markets are quiet. Too quiet?

HAN SOLO, a hero from the Star Wars movies, has a habit of saying, at tense moments, “I have a bad feeling about this.” Many commentators are echoing this sentiment after a recent fall in the Volatility Index, or Vix, below ten. Their fears deepened on May 17th, when the Vix lurched above 15 and American stockmarkets had their worst day in eight months. Incessant turmoil in the White House at last seemed to take its toll.

A low Vix reading is usually seen as a sign of investor complacency. The previous two occasions on which the index fell below ten were in 1993 and early 2007 (see chart). One preceded the bond market sell-off of 1994 and the other occurred just before the first stages of the credit crisis.

The value of the Vix relates to the cost of insuring against asset-price movements via the options market. An option gives the purchaser the right, but not the obligation, to buy (a call) or sell (a put) an asset at a given price before a given date. In return, like…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The British government sells its last shares in Lloyds bank

IN OCTOBER 2008, amid post-Lehman pandemonium, Britain’s Treasury said it would pump £37bn (then $64.4bn) into three big banks: £20bn into the stricken Royal Bank of Scotland (RBS); the rest into Lloyds TSB and HBOS, a sickly rival that ministers had cajoled Lloyds into buying. After rights issues in 2009, in all the state paid £20.3bn for 43.4% of the merged Lloyds Banking Group. On May 17th Lloyds said the last state shares had been sold.

The government has recouped £21.2bn, including £400m-plus in dividends, since it started to unload its stake in 2013. The return may sound slim, but had big lenders imploded the costs of the financial crisis would surely have been far greater even than they were. (Not surprisingly, anyone holding Lloyds TSB or HBOS shares since before the crisis has made a heavy loss.)

The group is Britain’s biggest retail bank. Its brands—Lloyds Bank, with its “black horse” logo, Halifax and Bank of Scotland—boast around…Continue reading

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Business and financeButtonwood's notebook

Not Maggie May, but muddled May

THE Conservative election campaign so far has been duller than an afternoon looking at Jeremy Corbyn’s collection of pictures of manhole covers. Blessed by an extremist opposition and a big opinion poll lead, the government is coasting, muttering platitudes like “strong and stable” and emphasising its newish prime minister, Theresa May, rather than its party name.

The odd thing is that the Conservatives are trying to develop a personality cult based on someone who (to put it politely) does not have a particularly fascinating personality. Perhaps that’s the point; people are looking for someone calm and competent.  Labour tried something similar with Gordon Brown—“Not flash, just Gordon” was the slogan—with little success. The Conservative strategy seems to be working for now but one…Continue reading

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ApprovedBusiness and financeFinance and economics

A British firm plans a secondary market for crowd-funded shares

EVERYONE would like a piece of the next Google or Facebook. But the big venture-capital (VC) firms do not usually raise money from small investors. And some entrepreneurs complain that it is hard to get noticed by the hotshots in the VC industry. Hence the enthusiasm for crowd-funding, where small investors can buy a stake in startup companies.

Seedrs, a British crowd-funding firm, was set up in 2012, and has backed 500 firms so far, raising a total of £210m ($271m) from more than 200,000 users. But there are two big problems with crowd-funding. First, it is risky: most startups fail. Second, investments tend to be illiquid—shareholders have to wait for a takeover or a stockmarket flotation to recoup their investment.

Seedrs is trying to solve the illiquidity problem by setting up a secondary market, where buyers and sellers can exchange shares. The new market will start operating this summer, and will allow trading for a week every month, starting on the first…Continue reading

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Business and financeButtonwood's notebook

Old McDonnell has a plan. He eyes IOUs

WITH the Labour Party 17 percentage points behind in the opinion polls, it may not be worth analysing the tax and economic aspects of its manifesto. The belief that the party will lose is so widespread that you can get odds as high as 20/1 on a victory for the party; market indifference is such that its plans to nationalise the water industry have caused shares in the biggest provider, United Utilities, to fall just 1.6%. Still, the manifesto is such a mishmash of ideas that it is worth a look at the ideas of Jeremy Corbyn and John McDonnell (pictured), the shadow chancellor of th exchequer.

One eye-catching proposal is for a £250bn “National Transformation Fund”, spread over ten years, to invest in:

infrastructure—transport, energy systems, communications—scientific research and housing fit for the 21st century

There is an argument for borrowing to fund…Continue reading

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Business and financeGulliver

Who owns the space between reclining airline seats?

TO WHOM does the legroom on an aeroplane belong? More specifically, who owns the four inches of knee-space into which a passenger can recline his seat?

The accepted notion is that such territory belongs to the person seated in front. That flyer has, after all, paid for a reclining chair and thus believes it is his “right” to occupy the space behind. If he remains upright, magnanimously bequeathing extra inches to the person behind, it is on the understanding that he can move the border whenever he likes. 

But, in common with many borders, disputes are inevitable. Sometimes the newly squished passenger will wage a guerilla war, perhaps by wedging his knees into the back of the seat in front, ensuring that the price of territorial expansion is discomfort. Weapons may also be deployed. The Knee Defender, a device that can be attached to the chair in front to render it rigid, is banned by many airlines, but that does not deter desperate flyers from using them. All too often, real warfare ensues….Continue reading

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Business and financeGulliver

Airport terminals for the super-rich might be best for everyone

ON MAY 7th a fist-fight broke out on a Southwest Airlines flight that had just landed at Bob Hope Airport in Burbank, California. The violence began when a passenger accused another of “messing with his chair”. It was, inevitably, captured on video and quickly spread on social media.

Twenty miles down the road, Los Angeles International Airport unveiled a new $22m terminal. The facility, called the Private Suite at Los Angeles International Airport, will be the first of its kind in America when it opens on May 15th: an exclusive hideaway for Hollywood types who want to avoid the masses (and the paparazzi) en route to their flights. For an annual membership of $7,500, plus $2,700 to $3,000 per flight, a group of up to four travellers can enjoy luxury suites before being screened by a dedicated security team and transported directly to the plane in a BMW. Once there, they can board using a separate staircase,…Continue reading

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The super-connector airlines face a world of troubles

WHEN a video of a passenger being dragged off a United Airlines flight went viral last month, the American carrier’s Middle Eastern rivals were quick to mock its customer service. Qatar Airways updated its smartphone app to say it “doesn’t support drag and drop”. The ribbing was justified. Over a decade of expansion, Qatar Airways, along with Emirates of Dubai, the world’s largest airline by international passenger miles travelled, and Etihad Airways of Abu Dhabi, wowed customers with superior service and better-value fares.

Passengers joined them in droves, abandoning hub airports in America and Europe as well as the airlines that use them. Over the past decade the big three Gulf carriers and Turkish Airlines trebled their passenger numbers, to 155m in 2015 (see chart). They went a long way to dominating long-haul routes between Europe and Asia. Most international airlines rely on travellers going from or to their home countries, but customers of the four “super-connectors”,…Continue reading

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