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ApprovedBusinessBusiness and finance

Computer-game tournaments go mainstream

Neymar, watch out

FIREWORKS detonated, smoke wafted over the stage and confetti began to fall. Seventeen thousand fans cheered the European players of Team Liquid, with monikers like “MinD_ContRoL” and “MATUMBAMAN”, who had just triumphed over a Chinese side to win The International, a tournament held in Seattle’s KeyArena on August 7th-12th. In the stands Max Martinez, a 25-year-old bartender from Phoenix, was in a state of nirvana. “This is like my Super Bowl,” he said.

But the players in this tournament had no need to catch, throw or run. Their most important muscles are those in their fingers. MinD_ContRoL, a bespectacled Bulgarian named Ivan Ivanov, excels at a computer game called “Dota 2”. Valve Corporation is the producer of “Dota 2”. It has put on The International since 2011, offering more than $10m to this year’s winners. The prize money is particularly rich, but the tournament itself is not unusual. E-sports, in which computer…Continue reading

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A trade dispute threatens America’s booming solar industry

LAST year California Solar Systems (CSS), a small installer of residential solar panels, decided to “Buy American”. It turned to Suniva, a Chinese-owned firm that makes photovoltaic panels in Georgia and Michigan, rather than use cheap imports. But according to CSS’s boss, Bastel Wardak, Suniva was unable to deliver what it promised, leading to unacceptable delays. He then tried SolarWorld, a more expensive producer in Oregon whose panels could also be marketed as “Made in the USA”. But troubles at SolarWorld’s German parent put a stop to that. Now Suniva and SolarWorld are seeking new protections from America’s International Trade Commission (ITC). On August 15th Mr Wardak was one of many to testify that the two firms did not deserve them.

The case pits American solar-cell makers against solar-panel installers. It could have big implications. Solar was the biggest source of power-generating capacity built in America last year, thanks to falling prices (see…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Hedge funds try to promote sports betting as an asset class

Chasing the money

WHEN he was 12, Warwick Bartlett bought “100 Famous Greyhound Systems”, a guide for betting on dog races. After spending a year tracking every stratagem and picking the best two, he went to the races to take his first punts. He lost. Mr Bartlett, now the boss of GBGC, a betting consultancy, says it taught him a good lesson: “A system can win for a period of time. And then it’s had its day.”

Two trading companies are trying to prove him wrong. Melbourne-based Priomha Capital, which claims to be the “world’s premier sports hedge fund”, wagers on European football, cricket and golf. Founded in 2010, the firm manages about $20m. Stratagem, a rival based in Britain that styles itself as a technology business, wants to raise $25m from rich individuals.

Both argue that techniques imported from the investment world can help turn sports betting into an alternative asset class. By crunching data, they analyse the pricing…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The Catholic church becomes an impact investor

The pontiff makes an impact

“YOU cannot serve both God and money,” admonishes the Bible. But the church has always tried. In the Middle Ages monasteries were what would now be termed social enterprises. They would produce bread, books or other goods. A Franciscan monk is credited with codifying double-entry book-keeping.

These days the Catholic church and related institutions control many billions of dollars. Some is invested to earn income; some is given away for good works. The two activities have been seen as separate. But, in the pontificate of Pope Francis, that divide is blurring. “Impact” investing—intended to make money and do good at the same time—is growing in importance. It is also creating some controversy.

In 2014 the pope, speaking to a conference in the Vatican on impact investing, called on Christians to rediscover “this precious and primordial unity between profit and solidarity”. His church has responded. Some…Continue reading

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China modernises its monetary policy

QIN SHIHUANG was the emperor who first unified China, through bloody conquest more than two millennia ago. Known for starting the Great Wall and burying scholars alive, he has a new claim to fame: the central bank has drawn on his construction of a national road system to help explain its new monetary system. In a report on August 11th, the People’s Bank of China seized on an idiom derived from his road-building experience: it had “shaved off mountain peaks and filled valleys” in managing liquidity.

The modernisation of monetary policy is in its own way a monumental project for China. Over the past two decades, the central bank’s conduct of policy had two defining features. It focused on the quantity, not the price, of money. And it relied on inflows of foreign cash to generate new money. Both features are now slowly changing, bringing China closer to the norm in developed markets, an essential transition for an increasingly complex economy.

Start with interest rates. These used to be of secondary importance in China. Regulators instead used quotas to dictate how much banks lent and in effect fixed their deposit and lending rates. This made sense when China was in the early stages of moving away from a planned economy. Crude targets were still needed. But as a bigger, rowdier financial system took shape, these targets became less relevant. With the…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The Trump administration is investigating Chinese trade practices

BEING tough on China was a constant theme of President Donald Trump’s election campaign. On August 14th he had another chance to wield his presidential pen to show that he is making good on his promises—in this case of a “zero-tolerance policy on intellectual-property theft and forced technology transfer”. With the cameras rolling, he formally instructed Robert Lighthizer, the United States Trade Representative, to consider launching an investigation into China’s alleged crimes. “This is just the beginning,” was Mr Trump’s final flourish for the news bulletins.

His record of translating signatures into policies is patchy. Two others, launching investigations into whether imports of steel and aluminium threaten America’s national security, seem to have fizzled. But whereas proposals for import restrictions on these commodities met fierce resistance from consumers and America’s allies, China’s trade practices provoke much more agreement. It is one of the few…Continue reading

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Marine contractors have made huge leaps in productivity

Ship shape

THE Innovation, a 147-metre ship docked in Rotterdam, looks like a cross between an oil rig and a robot from a “Transformers” film. Her crane has been loading on giant pipes throughout the night. Soon the ship will travel to sea, where an automated hammer will drive the pipes into the ocean floor to support wind turbines. “Everything in our industry has become larger,” says Koen Vanderbeke of DEME, a Belgian dredging firm that owns the ship. “But we’ve become smarter, too.”

Unlike their counterparts on dry land, marine contractors have made big leaps in productivity in recent years. From dredging and land reclamation to offshore construction of oil platforms, costs have dropped even as the speed and quality of work have increased. In Belgium, home to two of the world’s five biggest dredgers, efficiency gains have been so large that they have skewed productivity figures for the entire building…Continue reading

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Efficiency eludes the construction industry

NINE years ago the first concrete was poured for Berlin Brandenburg airport. It was expected to open in 2012, to cost €1.2bn ($1.8bn) and to welcome 34m passengers each year. Today the only people in its terminals are those with hard hats. Six times over budget, the project has had 66,500 building errors in need of fixing. Last year its spokesman was sacked after calling the project a “shit-show” and saying no manager who was not “addicted to pills” could guarantee an opening date.

Berlin’s airport is an extreme example of a broader problem. Superficially, the construction industry would seem healthy enough. The global market is worth $10trn. Euler Hermes, an insurer, expects 3.5% growth this year. Yet more than 90% of the world’s infrastructure projects are either late or over-budget, says Bent Flyvbjerg of Saïd Business School at Oxford University. Even the sharpest of tech firms suffer. Apple’s new headquarters in Silicon Valley opened two years behind schedule and cost…Continue reading

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China’s digital-payments giant keeps bank chiefs up at night

IN WESTERN countries it is common to talk about American technology being dominant. From an Asian perspective that seems off. Fresh from visiting the region, where buskers and kerbside fishmongers can be paid by presenting a phone, Schumpeter has found it a shock being back in New York. There, buying most things involves signing bits of paper and PIN numbers are viewed as dangerously transgressive. Only 2% of credit- and debit-card transactions in America are authenticated with PIN numbers; 19bn cheques are written in the country every year.

Asian firms have leapfrogged ahead, offering a new model of financial technology. Exhibit A is Ant Financial, a payments company affiliated with Alibaba, one of China’s two giant internet firms (the other is Tencent, whose WeChat messaging app is ubiquitous and supports payments). Ant is popular in China and has ambitions outside it. Already the world’s most valuable “fintech” firm, worth $60bn, it has 520m payments customers at home and its…Continue reading

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American business leaders break with Donald Trump

“I’VE never known it to be an embarrassment for a business leader to be associated with an American president,” declares Max Bazerman of Harvard Business School. Donald Trump, in particular, has positioned himself as a businessman-president, whose corporate acumen would unleash a new era for American business. Investors seemed to believe him—his election prompted a giddy “Trump bump” in the stockmarket—and corporate bosses flocked to his side. This week they fled. For many, it seems as much a clear-eyed business calculation as a moral awakening.

Some distanced themselves more quickly than others. The trigger was Mr Trump’s reluctance to condemn neo-Nazis and white supremacists who staged violent protests in Virginia on August 12th. Kenneth Frazier (pictured), chief executive of Merck, a big pharmaceutical firm, was the first to leave Mr Trump’s advisory council on manufacturing. On August 14th Mr Trump denounced racist groups in a scripted statement. But the bosses of Under Armour, a sporting-goods outfit, and Intel, a computer-chip giant, defected, too.

On August 15th Mr Trump appeared once again to equate white supremacists with demonstrators opposing them. As word leaked the next day that chief executives might resign en masse, Mr Trump swiftly tweeted that he was disbanding his manufacturing council and his strategic and policy forum,…Continue reading

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ApprovedBusiness and financeFinance and economics

A firm that shares a name with its founder earns higher profits

A GOOD business name can be pricey. An entrepreneur looking for the perfect one can hire a naming agency to offer ideas, but that can cost tens of thousands of dollars. That may explain why many founders follow the example set by the American president and name their businesses after themselves. A recent article* by academics from the Fuqua School of Business at Duke University in North Carolina suggests that doing so does not just save money—it can also boost profits.

The study looked at small businesses in western Europe. It relied on a sample of almost 2m firms, data for which are contained in a commercial database called Amadeus. The database includes information about owners, managers and financial performance from 2002 to 2012. Firms in the sample tended to be, on average, fairly young, with few shareholders and employees. Checking against the surnames of the largest shareholders, the authors found…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Australia’s CommBank is accused of abetting money-laundering

WHEN the Commonwealth Bank of Australia on August 9th reported its profit for the year to June—above forecasts and just shy of A$10bn ($7.9bn)—it faced questions about cashflows of another sort. Six days earlier the Australian Transaction Reports and Analysis Centre (AUSTRAC), a regulator charged with gathering financial intelligence to combat money-laundering and terrorism, had launched proceedings against it for “serious and systemic non-compliance”. Citing “collective responsibility” for the bank’s reputation, Catherine Livingstone, its chairwoman, has announced cuts to bonuses for Ian Narev, the chief executive, and others.

Founded 106 years ago, CommBank, as it is known, is one of Australia’s biggest banks. AUSTRAC traces its case to 2012, when the bank started installing “intelligent deposit machines”. They accept cash, let depositors stay anonymous and allow money to be switched to other accounts in Australia and overseas straight away. CommBank sets…Continue reading

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An Israeli pharma champion sickens

National pride and joy

THE headlong plunge of shares in Teva, a pharmaceutical giant—down by over 40% since August 2nd—is causing consternation beyond the firm’s shareholders and employees. The company was founded in Jerusalem in 1901, is the largest in Israel and is the country’s only multinational with its headquarters still at home. Since beginning its rapid expansion abroad in the early 1980s it has been called “the nation’s share” by Israelis, whose pension funds have invested heavily in its success.

That prosperity came chiefly thanks to the firm’s most popular proprietary drug, a bestselling medication for multiple sclerosis called Copaxone. Over the past two decades its sales paid for a global spree of buying generic-drugs competitors. Last year Teva completed its most ambitious purchase, of Actavis Generics, an American generics manufacturer, for $40.5bn; financing the deal took its debt to $35bn. But Teva’s transformation into the…Continue reading

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Rupert Murdoch’s bid for Sky hits more obstacles

RUPERT MURDOCH’S penchant for mass-market media has made him billions of dollars. It also gets in the way of empire-building. In 2011 News Corp’s bid to take full ownership of Sky, a European pay-TV giant, fell apart amid public rancour over phone hacking by journalists at the News of the World, one of his tabloids (since closed). Now a renewed Murdoch family takeover attempt for Sky, a bid of £11.7bn ($15.2bn) by 21st Century Fox, faces yet more scrutiny over concerns about alleged scurrilous reporting at Fox News, Mr Murdoch’s American cable-news channel.

On August 8th Karen Bradley, Britain’s culture secretary, asked Ofcom, the media regulator which had already reviewed the bid, to take another look to determine whether 21st Century Fox meets Britain’s broadcasting standards. Ms Bradley’s request followed fresh complaints about Fox News from members of parliament, including Ed Miliband, the former leader of the opposition Labour Party, and from…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Who will be the next chair of the Federal Reserve?

LOOK only at unemployment and inflation, says Peter Conti-Brown, a historian of the Federal Reserve, and Janet Yellen is the Fed’s most successful boss of all time. The second indicator may be below target, but that is a blip compared with the recessions most Fed chairmen have endured. So it is perhaps not surprising that President Donald Trump is openly considering retaining Ms Yellen, a Democrat installed by Barack Obama, after her term ends in February 2018. Nor by historical standards is it odd: the Fed’s past three leaders were all reappointed by presidents from the other party. Yet Ms Yellen, whom Mr Trump criticised on the campaign trail, is not the leading candidate. PredictIt, a betting site, gives her a 28% chance of staying put. In front of her, with a 36% chance of appointment, is someone else Mr Trump is publicly weighing up: Gary Cohn (on the left above).

Mr Cohn was until January the chief operating officer and president of Goldman Sachs. He left that role to become the…Continue reading

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Mistrust in America could sink the economy

AMERICA is a grumpy and confused place. For an overarching explanation of what has gone wrong, a decline in trust is a good place to start. Trust can be defined as the expectation that other people, or organisations, will act in ways that are fair to you. In the White House and beyond there is precious little of it about. People increasingly view institutions as corrupt, strangers as suspicious, rivals as illegitimate and facts as negotiable.

The share of Americans who say “most people can be trusted” fell from 44% in 1976 to 32% in 2016, according to a survey from the University of Chicago. In a new book, “The Retreat of Western Liberalism”, Edward Luce, a commentator for the Financial Times in Washington, argues that distrust will contribute to America’s decline and eventually, even, to autocracy. Lack of faith is chewed over in boardrooms, too. In his latest letter to shareholders, Jamie Dimon, JPMorgan Chase’s boss, describes trust as America’s…Continue reading

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A Google employee inflames a debate about sexism and free speech

SILICON VALLEY’S leading firms celebrate disruption, but not disruptive employees. Google has found itself at the centre of controversy after an anonymous software engineer, later revealed to be a young Harvard graduate called James Damore, published a ten-page memo on two internal company networks explaining why there are so few women in the upper echelons of the technology industry.

Instead of sexism, he pointed to “biological” factors, such as women’s supposedly greater interest in people and their predisposition to anxiety and stress at work. In promoting gender diversity, he charged, Google silences those people whose political views differ from California’s liberal mainstream.

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ApprovedBusiness and financeFINANCEFinance and economics

Investors are not great at predicting politics

FINANCIAL markets are supposed to be the font of all wisdom, weighing up the information available and condensing it into a set of prices. Investors are presumed to have an insight into the future—falling bond yields are seen as a sign that the economy is slowing, for example.

But are investors that clever when it comes to politics? Gambling markets show how they assess political risk. They expected the Remain campaign to win the Brexit referendum and Hillary Clinton to become America’s president, and were proved wrong. Indeed, on Brexit, the mass of gamblers (the general public, in other words) backed Leave, but the odds were skewed by some wealthy punters who favoured Remain. Those rich gamblers were probably people who trade in financial markets; the plunge in the pound after the result suggests that most investors were caught on the hop.

Before the presidential election, most people on Wall Street to whom Buttonwood spoke thought that a victory for Donald Trump would be…Continue reading

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Why the world’s best footballers are cheaper than they seem

A head for figures

FOR football clubs, August is often the costliest month, when they make vast bids for each other’s players. This year has been particularly lavish. On August 3rd Paris Saint-Germain (PSG), a French team, signed Neymar da Silva Santos Júnior, a Brazilian forward, from Barcelona for €222m ($264m), more than double the previous record price for a footballer.

With three weeks of the transfer “window” left, teams in Europe’s “big five” leagues—the top divisions in England, Spain, Germany, Italy and France—have paid €3.2bn, just short of the record of €3.4bn set last year. The €179m splurged by Manchester City, an English club, on defenders outstrips 47 countries’ defence budgets. Arsène Wenger, a veteran manager of Arsenal, a London team, and an economics graduate, describes the modern transfer market as “beyond calculation and beyond rationality”.

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Investment in American infrastructure is falling

IT IS not a number to tweet about. President Donald Trump plans to plough $1trn of spending into America’s crumbling infrastructure. And a dearth of capital is not a problem: investors are keen on such assets. But investment seems to be falling.

Government infrastructure spending in the second quarter fell to 1.4% of GDP, the lowest share on record (see chart). According to Thomson Reuters, investment by American municipalities in the first seven months of this year, at $50.7bn, was nearly 20% below the same period in 2016. Private-sector infrastructure funds show a similar trend, according to Preqin, another data provider: deal volume in the first half of 2017 fell by 7.5%, year on year, to $36.6bn; the number of deals fell by a quarter.

Not long ago optimists were expecting an infrastructure-spending boom. In May Blackstone, a private-equity firm, announced with much fanfare a new $40bn fund for American infrastructure, with a $20bn investment from one of Saudi Arabia’s…Continue reading

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Chasing higher yields, investors pile into risky countries

WHERE can you find a 7% interest rate on a sovereign dollar-bond? You would have to take a time-machine to the mid-1990s to find such a yield on a ten-year American Treasury. Alternatively, you could slip back a few days to August 2nd and bid for the $1bn of five-year bonds sold by the government of Iraq. The yield was expected to be 7%, but it was trimmed to 6.75% once orders rose above $6bn.

Such eagerness for hard-currency debt from a country still reeling from a civil war shows just how far bond investors will now go to get a decent yield. Oversubscribed issues for risky sovereign bonds have become almost normal. The Iraqi sale came just a week after Greece (whose privately held debt was partly written off in 2012) raised €3bn ($3.5bn) in its first bond sale for three years. In June Argentina was inundated with bids for its 100-year eurobond, as dollar-denominated bonds are known. Sceptics noted that Argentina had defaulted on its debts six times in the previous century, with the most…Continue reading

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Airline profits: ready to depart

WHEN Heathrow airport opened, in 1946, the only retail facilities were a bar with chintz armchairs and a small newsagent’s. The first terminal was a tent, a far cry from the four halls, resembling vast shopping malls, at the London airport today. Retail spending per passenger is the highest of any airport. This summer’s consumer crazes include Harry Potter wands and cactus-shaped lilos.

Heathrow’s journey from waiting room to retail paradise is the story of many airports. Before the 1980s, most income came from airlines’ landing and passenger-handling charges. Then “non-aeronautical” revenue—from shops, airport parking, car rental and so on—rose to around two-fifths of their revenues, of $152bn worldwide in 2015. But amid signs that non-aeronautical income is peaking, especially in mature aviation markets such as North America and Europe, the industry fears for its business model.

When airports were state-owned, and run not for profit but for the benefit of the…Continue reading

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A Google employee inflames a debate about sexism and free speech

“DON’T be evil” is Google’s corporate motto. If only it were so simple. The online-search giant is in a tricky spot after an employee published a long, anonymous memo online about why women are under-represented in the technology industry. The main reason may not be sexism, asserted James Damore, the young Harvard-educated software engineer later revealed to be the memo’s author, but biological factors. Women are more interested in people and emotions, he wrote, and tend towards “neuroticism”, meaning they are more anxious than men and worse at handling high-stress jobs.

The ten-page memo also lamented liberal Silicon Valley’s new willingness to “discriminate to create equal representation” and its reluctance to hear opinions that clash with the mainstream view on diversity. On August 7th Mr Damore told Bloomberg, a news service, that he had been fired by Google. Sundar Pichai, the company’s boss, said that portions of the memo violated its code of conduct…Continue reading

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Western firms are coining it along China’s One Belt, One Road

“MUTUAL benefit, joint responsibility and shared destiny,” sings a choir of enthusiastic schoolgirls in a music video called “The Belt and Road, Sing Along” from Xinhua, a news service run by the Chinese government, that mixes shots of cranes and shipping containers with people enjoying foreign landmarks. Western firms are scarcely less optimistic. Launched by China in 2013, the One Belt, One Road policy, known as OBOR, has two parts. There is a land-based “belt” from China to Europe, evoking old Silk Road trade paths, then a “road” referring to ancient maritime routes.

OBOR will span 65 countries (see map), and China has so far invested over $900bn in projects ranging from highways in Pakistan to railway lines in Thailand. Western multinationals, spotting a bonanza, are selling billions of dollars of equipment, technology and services to Chinese firms building along it.

America’s General Electric (GE) made sales of $2.3bn in equipment orders from OBOR projects in 2016,…Continue reading

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Europe’s no business as usual summer

“DON’T you know about our summer?” asks a spokesperson of a Swedish multinational, himself presumably on holiday as kids chirp in the background. Almost everyone is gone until September, he says. At a German multinational, “the whole board is away for August,” admits a spokesperson. Faced with a slew of out-of-office messages across corporate Europe, there seems little choice for a business correspondent but to report on the phenomenon itself.

The practice of collectively taking July or August off dates from the Industrial Revolution, when it made sense to send off all assembly-line workers simultaneously. In England’s north entire factories used to descend on the same resorts. As any tourist who has found themselves in front of an cream shop that is closed during a sizzling southern European summer will know, it has spread beyond factory jobs.

Until 2015 France had a rule that mandated some bakeries to stay open in August, so that Parisians—or rather…Continue reading

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A crucial interest-rate benchmark faces a murky future

EVERY working day, shortly before noon, British time, the London Interbank Offered Rate, or LIBOR, is published. For five currencies and seven maturities, from overnight to 12 months, it is the average, trimmed of outliers, of up to 20 banks’ estimates of the interest rate at which they can borrow from other banks. It is also the benchmark for financial contracts reckoned to be worth $350trn. Derivatives depend on it most. But plenty of asset-management products, as well as corporate loans and mortgages, are based on LIBOR and similar rates, notably EURIBOR, an interbank rate for euros.

Yet LIBOR’s days may be numbered. Regulators are promoting other benchmarks. On July 27th Andrew Bailey, the head of Britain’s Financial Conduct Authority, said that the FCA had spoken to banks about sustaining LIBOR until the end of 2021, but no longer. In April a working group set up by the Bank of England concluded that SONIA (the Sterling Overnight Interbank Average Rate), which the central bank…Continue reading

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A rush for immunotherapy cancer drugs means new bedfellows

THE modern pharmaceutical firm lives or dies on the strength of its drug portfolio. As patents expire on lucrative medicines, they must replace the income that has been lost by inventing new drugs, or buying them in from outside. Both paths are expensive. But the costs of failure are greater, and this is how it was possible for a large and successful firm—such as British-based AstraZeneca—to shed 15% of its market value in a single day last week. Around £10bn ($13.2bn) was lost on news of disappointing results in one of its clinical trials (its shares have since rebounded by 4%).

The trial was to find out if a pair of drugs would treat a form of lung cancer. The drug, Imfinzi, and the experimental drug tremelimumab, belong to a new category of immunotherapy medicines called “checkpoint inhibitors”. Similar drugs are made by Bristol Myers Squibb (BMS), by Merck in America and Roche, a Swiss firm. In an interim finding, it was reported that Astra’s combination did not offer an…Continue reading

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Is Emmanuel Macron serious about privatisation?

ONE reason for Italian anger over the decision on July 27th by Emmanuel Macron, France’s president, to stop Fincantieri, a shipbuilder from Trieste, winning control of a French shipyard at Saint-Nazaire, was that recent cross-border deals have mostly gone France’s way. Italian businesspeople have grown nervous about French firms’ “colonisation” by means of acquisitions in luxury goods, media and telecoms, including the €46bn ($55bn) merger between Luxottica, an Italian maker of spectacles, and France’s Essilor, announced in January (the group’s headquarters will be in Paris). The bad taste will linger even if the two governments strike a deal over Saint-Nazaire by the autumn, as they have pledged.

Yet Mr Macron’s move has been even more dismaying for those at home who want the state to get on with privatisation. During his presidential run Mr Macron promised to raise €10bn from sales of some of the state’s sprawling portfolio of holdings in firms. The aim was to pay…Continue reading

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Shark Week meets Worst Cooks in America

Another fat bundle

FORGET your subscription to Netflix. Would you pay $5 a month for a collection of TV channels that gave you programmes such as “90 Day Fiancé”, “Pit Bulls and Parolees”, “My Cat from Hell”, “Worst Cooks in America” and “Shark Week”? Irresistible as this may seem, it is not yet on offer. But many believe that it has come closer. Discovery, a cable-network group, agreed on July 31st to buy another: Scripps Networks Interactive, owner of Food Network and HGTV, among other channels, in a $14.6bn deal. The combined firm will have 19 lifestyle- and reality-television-oriented channels including Animal Planet, DIY Network, Travel Channel and the flagship Discovery Channel (home of “Shark Week”).

The impetus for the combination is the declining market in America for expensive pay-TV bundles of 200 channels, which can cost close to $100 a month. In the past few years millions of consumers have spurned such bloated packages for…Continue reading

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Hong Kong, the global capital of hustle, is gripped by self doubt

OF THE world’s three great commercial centres—New York, London and Hong Kong—two are on the defensive. London faces a rupture with the European Union, which wants to seize the City’s euro-related activities and shift them inside the currency zone. In Hong Kong the fear is of deeper assimilation by mainland China, followed by irrelevance.

Entrepots, after all, can become obsolete. Venice once teemed with merchants, not tourists. Yet while London’s problem is complacency, Hong Kong’s pessimism seems overdone. It remains vital both to China and to the country’s trading partners—the adaptor that converts the mainland’s financial and legal voltage into the one used by the rest of the world.

Today’s gloom partly reflects a fear of Chinese autocracy. During Schumpeter’s recent visit, Xi Jinping, China’s president, in town for the 20th anniversary of the resumption of mainland rule, warned that, while the constitutional structure of “one country, two…Continue reading

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Genetic testing threatens the insurance industry

The knowledge premium

IF A genetic test could tell whether you are at increased risk of getting cancer or Alzheimer’s, would you take it? As such tests become more accessible, more and more people are saying “yes”. The insurance industry faces a few headaches as a result.

Once used only for medical reasons, basic predictive genetic tests can now be ordered online for a few hundred dollars. One company, 23andMe, in California, has collected some 4,000 litres of sputum since 2007, enlightening 2m people on their ancestry, health risks and what they may pass on to offspring. In April it received regulatory approval to screen for risk factors connected to ten diseases and genetic conditions, including late-onset Alzheimer’s and Parkinson’s. The ruling could open the floodgates for others to sell direct to consumers.

“Information is power”, argue many who take such tests. But insurers fear that without equal access to such information, they…Continue reading

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Why national accounts might be like corporate balance-sheets

THE easiest way to get an economist to laugh sardonically is to compare a country’s finances to those of a family. It is both simplistic and wrong, they will argue, for politicians to say that a country “must live within its means”.

But in a new working paper* from the National Bureau of Economic Research, Patrick Bolton and Haizhou Huang make a different comparison; between the finances of a government and those of a company. A business can finance itself in three ways: through internal funds (its revenues); through borrowing; and through equity (the issuance of new shares). In the first two cases, it is easy to see the analogy with a nation state; governments can raise money from taxes or borrow in the form of government bonds.

But the paper’s most striking idea is that the national equivalent of equity is fiat money. Governments are able to issue money that can be used to settle debts and pay taxes—the term “fiat” comes from the Latin for “let it be done”….Continue reading

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The private-equity business learns to be more flexible

THE private-equity business presents a paradox. Its barons like to boast of revamping the companies they buy. But they themselves have been steadfast to their own business model, centred on funds with a ten-year life. Within this time span, fund managers, known as “general partners” (GPs), commit to buy, manage and sell a clutch of companies; investors commit to lock up their money for the duration. Sometimes GPs or investors chafe at the time constraint. A new segment of the secondary market, “GP-led” deals, has sprung up to help them.

Investors wanting to exit a fund early need to find a buyer for their stake in the secondary market. But sometimes none will offer an attractive price. Sometimes also, a fund nearing its expiry date may find itself still holding a large number of its investments. GP-led deals place the onus on fund managers to find buyers.

Such transactions have quickly grown from just 10% of the secondary market in 2012 to over one-third this year, according…Continue reading

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ApprovedBusiness and financeFinance and economics

Bitcoin divides to rule

COMPARED with Brexit, Bitexit seems a piece of cake. On August 1st, without much agonising or awkward negotiation, a group of Bitcoin activists and entrepreneurs managed to create a second version of the crypto-currency. It immediately gained a following: in less than a day of existence, the value of a unit of “Bitcoin Cash” jumped to over $600, and tokens worth more than $10bn were in circulation (although that is still much smaller than Bitcoin classic, which stood at about $2,700 and nearly $45bn).

This “fork”, as such events are called, came earlier than foreseen. But it is broadly how insiders had expected a two-year-old conflict over the future of Bitcoin to end. At the heart of this “civil war” was the question of how to increase the capacity of the system, which can only handle up to seven transactions per second. The new version is able to process 56 per second, but otherwise works much like the original one.

Will Bitcoin Cash be more than just another “altcoin”, as the many existing clones of the crypto-currency are called? It is backed by Chinese “miners”, firms that provide the computing power to confirm payments and mint new digital coins. They have been unhappy with how the original system has been managed by its developers—and made some further technical tweaks to ensure that the new Bitcoin survives. The followers of…Continue reading

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Making Bitcoin work better

IN DIFFERENT circumstances the two people could be good friends. Each is rather shy and very smart. And each is passionate about bitcoin, a digital currency. One invented hashcash, which foreshadowed components of the crypto-currency; the other is the author of the first Chinese translation of the white paper in which Satoshi Nakamoto, the elusive creator of bitcoin, first described its inner workings.

Adam Back is the chief executive of Blockstream, a British startup, which employs some of the main developers of the software that defines bitcoin’s inner workings. Jihan Wu is the boss of Bitmain, a Chinese firm, which makes about 80% of the chips that power “miners”, specialised computers that keep the bitcoin network secure, confirm payments and mint new digital coins. But far from being fellow-travellers, each represents one of the two main camps in what has come to be called a “bitcoin civil war”, fought over how, if at all, the system should grow.

The worst seems…Continue reading

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