Posts in category Business and finance


ApprovedBusinessBusiness and finance

Technology firms and the office of the future

FROM the 62nd floor of Salesforce Tower, 920 feet above the ground, San Francisco’s monuments look piddling. The Bay Bridge, Coit Tower and Palace of Fine Arts are dwarfed by the steel-and-glass headquarters that will house the software company when it is completed later this year. Subtle it is not. Salesforce plans to put on a light show every night; its new building will be visible from up to 30 miles away.

It is not the only technology company erecting a shrine to itself. Apple’s employees have just begun moving into their new headquarters in Cupertino, some 70 kilometres away, which was conceived by the firm’s late founder, Steve Jobs. The four-storey, circular building looks like the dial of an iPod (or a doughnut) and is the same size as the Pentagon. At a price tag of around $5bn, it will be the most expensive corporate headquarters ever constructed. Apple applied all its product perfectionism to it: the guidelines for the wood used inside it reportedly ran to 30 pages.

Throughout San Francisco and Silicon Valley, cash-rich technology firms have built or are erecting bold, futuristic headquarters that convey their brands to employees and customers….Continue reading

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ApprovedBusinessBusiness and finance

A Form 10-K for America’s government

WHEN he was running Microsoft, Steve Ballmer was famous for his energy. In a legendary clip of a company meeting that has received almost a million hits on YouTube, he charges onto the stage and launches into his “monkey dance”, before roaring into a microphone: “I love this company!” Mr Ballmer stood down from the software giant in 2014 and has new outlets for his drive. One is the LA Clippers, a basketball team he bought for $2bn. The other could not be more different: a project to create a Form 10-K, a type of corporate report, for America’s dysfunctional government. That is more revolutionary than it sounds.

In most walks of life, 10-K denotes a long-distance run or a sum of money. In the investment world it refers to the report that American regulators force all listed companies to publish once a year. Investors have a near-religious reverence for 10-Ks. They are the global gold standard of corporate disclosure: 300 or so warts-and-all pages that contain a firm’s financial accounts and describe its objectives, conflicts of interests, governance, risks and flaws. Fund managers scour the documents to ensure that firms’ executives are not fibbing. Bosses study…Continue reading

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ApprovedBusinessBusiness and finance

The boss of LafargeHolcim resigns over a scandal in Syria

KEEPING cool in the heat of war is not easy. That might help explain why LafargeHolcim, a French-Swiss cement-maker, blundered so badly while running operations in Syria as fighting raged. On April 24th the firm said that its chief executive, Eric Olsen, will go, a casualty of a growing scandal over its activities in the country.

The board of the world’s biggest cement producer stated only last month that Mr Olsen was not responsible for, nor aware of, wrongdoing by the firm in Syria. But public pressure has been increasing, notably after Jean-Luc Mélenchon, a left-wing candidate in France’s presidential election, attacked the firm and its “damned cement” in a television debate on April 4th. François Fillon, a pro-business rival, agreed the firm should be punished if allegations against it proved to be true.

At issue is the activity of Lafarge before the firm’s merger with its Swiss rival, Holcim, in 2015. In 2010 Lafarge had built a cement factory of 240 workers for $680m near Kobane, a north Syrian town. Operations there continued until 2014, long after the violence began in 2011. The firm evacuated foreigners in 2012; local workers fled in…Continue reading

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ApprovedBusinessBusiness and finance

Patanjali, an Indian consumer-goods giant

EXECUTIVES at firms selling consumer staples like to think of themselves as “marketing gurus”. But how many could actually contort themselves into the lotus position, let alone attempt a headstand? Such feats are nothing for the top brass at Patanjali, an Indian purveyor of toothpaste, cooking oil, herbal concoctions and much else. Fronted by a bona fide guru, the firm’s marketing strategy—play up the benefits of natural products, then paint foreign multinationals as latter-day imperialists—delivers over $1bn in annual sales, up tenfold in four years. Having dismissed the firm as a fad, the likes of Colgate-Palmolive and Unilever are emulating it.

Baba Ramdev (pictured), an ascetic yogi who is the public face of the brand, makes for an unconventional capitalist symbol. But with Acharya Balkrishna, a devotee of his who serves as the firm’s boss and majority-owner, he has built a consumer-goods powerhouse that is vying with the business-school graduates at the multinationals. Starting out two decades ago as an apothecary of traditional Ayurvedic potions, Patanjali has expanded into personal care, home products, packaged food and more. Mr Ramdev’s beard and saffron…Continue reading

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ApprovedBusinessBusiness and finance

French business relishes the prospect of President Macron

THE likely election of Emmanuel Macron as France’s president, in a run-off vote on May 7th, has corporate leaders in a state of high anticipation. French politicians with business experience rarely prosper. It is nearly half a century since Georges Pompidou won office in 1969 on the back of a private-sector career partly at Rothschild, an investment bank. The sitting president, François Hollande, roused voters in 2012 by declaring that his “true enemy” was the world of finance. Mr Macron’s own stint at Rothschild, advising on mergers from 2008 to 2012, included handling a $12bn acquisition of a unit of Pfizer, a pharma firm, by Nestlé, a consumer-goods giant.

Markets rose and bond yields fell after Mr Macron won the first round on April 23rd. His second-round opponent, Marine Le Pen of the far right, dismays business—one investor admits re-registering his firm as European rather than French, the better to shift headquarters were she to win. But Mr Macron is favourite.

A chief of a big firm headquartered in Paris speaks of new optimism for France’s economy if Mr Macron wins. Business indicators are improving; measures of corporate confidence in…Continue reading

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ApprovedBusinessBusiness and finance

Steven Mnuchin gets started on tax reform but there is more to do

OF THE things that investors and bosses have come to like about Donald Trump, the most important is his promise to redraw America’s knackered corporate-tax system. On April 26th Steven Mnuchin, the treasury secretary, laid out a guide for reform. After weeks of anticipation, Wall Street will be relieved. The thrust of the plan is just what business folk want—a simpler system, with lower bills. But whether it helps the wider economy and ordinary citizens remains to be seen. And Mr Trump will have to push the reforms through a bitterly divided Congress.

The actual tax rate America’s businesses pay in aggregate, of 20-25%, is much lower than the high, headline federal tax rate, of 35%. But in the home of free enterprise the taxman’s treatment of business is a muddle. There are three distortions. First, the treatment of overseas profits. Unlike most countries America taxes them when they are remitted back home, at high rates. The result is that American firms refuse to repatriate all their earnings, and collectively stash some $1trn of cash abroad.

The second distortion is that loopholes encourage firms to change their legal status from ordinary…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The market in Initial Coin Offerings risks becoming a bubble

WOULD you care to invest in Gnosis, a prediction market where users can bet on outcomes of events such as elections? Or in ZrCoin, a project to produce zirconium dioxide, used to make heat-resistant alloys? How about an “immersive reality experience” called “Back to Earth”?

These are just three of a new wave of what are called Initial Coin Offerings (ICOs). Nearly $250m has already been invested in such offerings, of which $107m alone has flowed in this year, according to Smith+Crown, a research firm. But it was in April that ICOs, or “token sales”, as insiders prefer to call them, really took off. On April 24th Gnosis collected more than $12m in under 15 minutes, valuing the project, in theory, at nearly $300m.

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. Instead, they often serve as the currency for the project they finance: to pay users for a correct prediction, as does Gnosis; or for the content users contribute. Investors hope that…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Credit Suisse unveils another change of course

EUROPE’S most troubled big banks may at last be on the road to recovery. Not only is economic growth perking up; uncomfortable decisions, put off too long, are also being taken. In recent months UniCredit, Italy’s largest lender, has written down bad debt by €8.1bn ($8.7bn) and tapped shareholders for €13bn. Deutsche Bank, Germany’s biggest, has raised €8bn in equity and decided to keep a retail business it had hoped to sell. On April 27th it reported first-quarter net income of €575m, up from €236m a year earlier, although revenue fell.

Like Deutsche, Credit Suisse is freer to make plans after a recent settlement with American authorities over mis-selling mortgage-backed securities before the financial crisis. On April 26th Switzerland’s second-biggest bank reported first-quarter net income of SFr596m ($594m), far better than forecast, reversing a SFr302m loss a year before. Along with most of Wall Street, which published earnings earlier in the month, and Deutsche it benefited from a good quarter for fixed-income trading. It expects to wind up a unit in which it has dumped unwanted assets by the end of 2018, a year ahead of schedule.

Credit…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The threat of war can bring much-needed investment

PONDER the dire state of infrastructure in America and some other advanced economies, and their governments’ fecklessness boggles the mind. Time was when they were able to make badly needed investments; the roads and the universities were a priority. What changed? Not for nothing do pundits cite the hustling governments of China and Singapore as evidence that liberal democracies are no longer fit for purpose. But democracy is not the problem; rather, governments may lack motivation in what is, despite appearances, an unusually peaceful world.

War is hell; the less of it the better. Yet it has also been a near-constant feature of human history, and a constant stimulus to political evolution. Defence is a textbook example of a public good. Security benefits all residents of a country, and cannot be denied to citizens who prefer not to pay for it. There is little incentive for private forces to provide defence—unless by doing so they can take over the right to extract compensation from the society they protect. Throughout history, the legitimate government is the one that can best defend its people.

As populations have grown and technology has advanced, the job of…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Exchange-traded funds become too specialised

THERE comes a time when every financial innovation is taken a bit too far—when, in television terms, it “jumps the shark” and sacrifices plausibility in search of popularity. That may have happened in the exchange-traded fund (ETF) industry. The latest ETF to be launched is a fund that invests in the shares of ETF providers.

The notion has a certain logic. The ETF industry has been growing fast, thanks to its ability to offer investors a diversified portfolio at low cost. The assets under management in these funds passed $3trn last year, up from $715bn in 2008. Some investors might well want to take advantage of that rapid expansion.

But by no stretch of the imagination would this be a well-diversified portfolio; it would be a focused bet on the financial sector. And many of the companies in the portfolio, such as BlackRock, a huge fund manager, and NASDAQ, a stock exchange, are involved in a lot more than just ETFs. Even if the ETF industry keeps growing, the bet could still go wrong.

The new fund (with the catchy title of the ETF Industry Exposure and Financial Services ETF) is just the latest example of the industry’s drive to specialisation. The…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Protecting American steel from imports makes no sense

AS AN example of all that is wrong with Donald Trump’s view of trade, the probe he has ordered into the steel industry is particularly hard to beat. If it results, as seems to be the plan, in blanket punitive tariffs slapped on steel imports, the consequences would be dire: the American economy would be hurt by a rise in the price of an essential material; it would invite retaliation that would cost American jobs, not save them; and the underlying problem—massive global steel overcapacity—would persist.

For Trumpists, steel is an emblem of their country’s descent from greatness. Ever since the 1960s, when production peaked at 168m tonnes a year, the industry has been in decline. Today it makes half as much as 50 years ago and employs just a third of the workers. Steelmakers have long blamed foreign rivals for their woes and lobbied hard for protection. So Mr Trump is not the first president to try to shield the industry from foreign competition. In the 1980s Ronald Reagan signed a series of agreements to limit imports. In 2002 George W. Bush imposed tariffs of up to 30%. Back then the bogeymen were steelmakers in Europe and Japan; now it is China, where a glut of steel has squashed prices.

Cheap steel, however, is a boon to many producers as well as to consumers. Higher prices would hit firms that use the metal, such as carmakers. Mr Bush’s…Continue reading

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Business and financeButtonwood's notebook

Markets uninspired by Trump tax plan

REMEMBER why the “Trump bump” began, all the way back in November? The rationale for the surge in stockmarkets was that the new administration would cut taxes and allow American growth to accelerate. And so we waited for the details. When they came yesterday, it was only a one-page set of bullet points, containing around 200 words. If, as one expert pointed out, it had really taken 100 experts to come up with the plan, they averaged two words each.

The response from the markets was a yawn. Analysts at Clear Treasury said that

Much of yesterday was a non-event, markets were waiting to hear what came of Trump’s tax plans but there was certainly an air of disappointment when finally released.

The S&P 500 and Dow Jones Industrial Average were slightly lower on the day, and the European markets have fallen today. Of course that could be related to the other story floating around yesterday – that the US might withdraw from Nafta. With the US also reviving its trade complaints about Canadian lumber and imported steel, Citigroup has taken to issuing a “US Protectionism Round-Up”. But this is only a reminder that, in market terms, there has always been a “Trump lite”…Continue reading

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Business and financeGulliver

Alitalia is bankrupt again. This time perhaps it’s terminal

WHEN employees of Alitalia were offered the chance on April 25th to vote for pay cuts and redundancies to save the troubled airline, they spurned the opportunity. In some ways it is difficult to blame them. After all, in the past they have been able to rely on the Italian government to come to the rescue of the country’s flag carrier. 

That may not happen this time. Alitalia has lost billions of euros over the past decade. (Indeed, over its 70-year history its accountants have barely had need for a black pen.) The firm had pinned its hopes on a €2bn ($2.2bn) capatilisation plan. But that had been dependent workers accepting cuts that were negotiated by the government and agreed with trade unions. With the workers’ no vote, that cash is now off the table.

Alitalia has been here many times before. In 2008 it was placed into bankruptcy after the government blocked plans for a sell-off. In 2014, with the airline on the verge of failing yet again, the government helped broker a deal with Etihad, a Middle Eastern superconnector, which took a 49% stake. A plan to make Alitalia Continue reading

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ApprovedBusinessBusiness and finance

Small flying “cars” come a bit closer to reality

“YOU may smile, but it will come,” said Henry Ford in 1940, predicting the arrival of a machine that was part-automobile and part-aeroplane. For decades flying cars have obsessed technologists but eluded their mastery. Finally there is reason to believe. Several firms have offered hope that flying people in small pods for short trips might become a reality in the next decade. These are not cars, as most are not fit to drive on land, but rather small vehicles, which can rise and land vertically, like quiet helicopters.

A prototype of a small electric plane capable of flying up to 300 kilometres per hour, made by Lilium, a German startup, completed a successful test over Bavaria on April 20th. Lilium is starting work on a five-seat vehicle and hopes to offer a ride-hailing service. Another German firm, e-volo, has been testing a flying vehicle for several years. It recently showed off the second version of its electric Volocopter (pictured), which could be certified for flight as soon as next year.

There are at least a dozen firms experimenting with making small flying vehicles in different guises, including Airbus, an aerospace giant, in partnership with…Continue reading

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Business and financeFree exchange

Reducing rates for “pass-through” businesses will be tough to justify

THERE are two main reasons for a country to paw around in its tax code: to create more economic growth, or to repair a structural deficit. Any politician who wishes to quietly give money to friends or kill a troublesome programme will supply one of them. He will either say “businesses need tax certainty to grow” (meaning: “certainty that they will like the tax code”), or “we don’t have the money”. So as the Trump administration releases its tax plan on April 26th, there are only two questions to ask: whether it will speed up America’s current economic recovery, and whether it will begin to fill in the country’s long-term deficits. If the early leaks from the White House are any guide, it will do neither.

According to the Wall Street Journal, the White House wants to reduce the top tax rate on pass-through businesses to 15%. “Pass through” means the business itself has no…Continue reading

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Business and financeButtonwood's notebook

Reports of populism’s death are premature

MONDAY was a day when, in the latest jargon, the markets went “risk on”. Equities rose, the spread between the yields of French and German bonds narrowed and the euro rebounded. The reason was the first round of the French presidential election. As the results emerged on Sunday night, it was clear that a) the nightmare of a second round between Marine Le Pen and Jean-Luc Mélenchon had been avoided and b) Ms Le Pen’s vote was no better than her poll rating, indicating there was no reservoir of shy, far-right voters. The centrist Emmanuel Marcon (pictured) topped the poll and is predicted to get more than 60% of the vote in the second round, far outside the pollsters’ margin of error.

So France will not follow the US and Britain down the path that led to the election of Donald Trump and the Brexit referendum. But it is way too early to say, as some do, that populism is in retreat. First, France has a much greater tradition of support for the far left…Continue reading

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Business and financeGulliver

An air marshal leaves her loaded gun in a plane toilet

PEOPLE often enter a public toilet with a sense of trepidation; after all, who knows what horror might await behind the cubicle door. Even so, a passenger on a service between Manchester, Britain, and New York got a nasty surprise. 

Earlier this month an American air marshal accidentally left her loaded gun in the loo of a Delta Air Lines plane bound for JFK. According to the New York Times, the weapon was found by a passenger, who handed it over the to the flight’s crew. The crew then returned it to the officer. The Times says that the air marshal did not report her oversight to authorities for several days, as is required, and had been assigned to other planes in the meantime. Using unimpeachable logic, one former air marshal explained to the paper: “You can’t have inept people leaving weapons in a lavatory. If someone with ill intent gets hold of that weapon on an aircraft, they are now armed.”

The idea of placing armed air marshals on commercial flights is a divisive one. We have discussed the issue on this blog…Continue reading

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Business and financeButtonwood's notebook

A market-related twist to the Dortmund bombing

WHEN three explosive devices hit a bus carrying the Borussia Dortmund football team on April 11th, it was immediately assumed that it was another Islamist attack. Notes were found at the scene of the crime alleging that Islam was the motivation, with the author claiming a link to the terrorist group Islamic State. But prosecutors in Germany allege a completely different rationale. They say that the suspect, a 28-year-old man, had borrowed money and taken out put options, which would benefit from a decline in Borussia Dortmund shares (which fell 3% on the day after the attack). 

As yet, the suspect has not been convicted. But if true, the story would seem to come straight out of Hollywood. In the film “Casino Royale”, James Bond (as played by Daniel Craig) foils a plot to blow up an airliner owned by the fictional firm Skyfleet, after villain Hugo le Chiffre had sold the company’s shares short (ie, bet on their price to fall). In “The Fear index”, a Robert Harris novel, a hedge fund’s trading programme shorts an airline’s stock just before a fatal crash. It was rumoured, after the September 11…Continue reading

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Business and financeGulliver

Is Tom Stuker the world’s most frequent flyer?

“AFTER entering a competition a lucky punter wins first prize: a week’s holiday in Skegness. Second prize is two weeks there.”

For some reason this most ancient of British jokes came to Gulliver’s mind when he read about Tom Stuker in the International Business Times. Mr Stuker, it is claimed, is the world’s most frequent flyer. He is about to clock up his 18-millionth mile on United Airlines. And as the Boarding Area blog points out, 18m miles with United means just that:

United calculates million miler status based on your “butt in seat” revenue miles flown on United. That’s right, we’re not talking about 10 million award miles, or even 10 million miles taking into account elite bonuses for flying first or business class.

Mr Stuker is president of a firm that trains sales staff at car dealerships around the world. He has flown to Australia over 300 times for business and pleasure; he travels to Hawaii “three…Continue reading

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Business and financeGulliver

Emirates cuts services to America as Donald Trump’s actions bite

WHEN American officials announced last month that laptops and tablets would be banned from aeroplane cabins on flights from certain Muslim countries, many questioned the administration’s motive. Was it a proportionate response to specific intelligence about a terrorist threat? Or had the government taken the opportunity to clobber swanky foreign operators that compete with the country’s own woeful airlines?

If the latter view is too cynical, we can at least say that, for America’s carriers, it has been a serendipitous byproduct. On April 19th, Emirates announced that it is cutting its services to the United States by 20%. The United Arab Emirates (UAE), the airline’s home, was one of ten Muslim countries covered by the laptop ban. By happy coincidence, no American carriers served airports that were affected.

The restrictions on electronic devices are a particular problem for Emirates and the other Middle Eastern “superconnectors”, Etihad, also of the UAE, and Qatar Airways. Direct traffic between America and these airlines’ hubs is modest: most passengers use them to connect to or from other…Continue reading

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ApprovedBusinessBusiness and finance

Japanese fast-food chains feel a squeeze

Three-star service

SHIMMERING spreads of raw fish sashimi, succulent beef from massaged cows, and, for a decade, the capital with the most Michelin-starred restaurants: few nations rival Japan for fine dining. Its fast-food scene has also thrived for centuries. From the 1700s bowls of cold soba noodles, made from buckwheat, were cycled to wealthy clients on towering trays. Sushi began to glide past customers in 1958, when the first conveyor belt was installed. In 1970 its first homegrown hamburger chain opened, a year before McDonald’s entered the market.

Fast-food chains continued to be a rare bright spot for Japan during its two-decade-long economic slump. Since 2008 the size of the market has increased from $35bn to $45bn (those figures include convenience stores, or konbini); that of restaurants has declined every year in that period. But fast food is now being squeezed: by a combination of higher wages and still-tepid consumption, and by foreign rivals winning over more Japanese stomachs.

Tomoaki Ikeda, president of Yudetaro, a soba chain in the greater Tokyo…Continue reading

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ApprovedBusinessBusiness and finance

AkzoNobel, under siege, makes unrealistic promises about growth

THE future for AkzoNobel is dazzling—if you believe Ton Büchner, its chief executive. The boss of the Dutch paint-and-coatings firm reported a solid set of quarterly earnings on April 19th, then promised a new era of rapid growth and investments. Shareholders are to get lavish dividends this year. The firm will break up its ungainly conglomerate structure. A speciality-chemicals part of the business will be sold or listed separately next year.

Mr Büchner has no choice but to talk things up, if he is to justify rebuffing two recent takeover offers from a similar-sized American rival, PPG. Its latest bid, of €22.5bn ($24bn) in cash and shares, represented a 40% premium over Akzo’s market value before the first bid. An activist fund, Elliott Management, which has a 3% stake in Akzo, is pushing other shareholders to demand discussion of the bid.

Akzo’s promises were welcome. But like a newly opened tin of paint, they made some heads spin. After years of eking out smallish gains mostly through cost-cutting, the firm is suddenly to boom. Akzo had previously forecast that returns on sales would be 11% by 2018, already well over its average of less than 9%…Continue reading

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ApprovedBusinessBusiness and finance

How Donald Trump affects America’s tourist business

TRUMP Tower, in midtown Manhattan, has become a modern-day Mount Vernon. Tourists have long visited George Washington’s homestead. Now they venture through Trump Tower’s brass doors to ogle the decor—“it’s so gold,” said a German teenager standing near the lobby’s waterfall on a recent afternoon—or buy souvenirs. The Choi family, visiting from South Korea, wandered the marble expanse with their new “Make America Great” hats (three for $50).

The question for America’s hoteliers and airlines is whether such visitors are just anomalies. A strong dollar is one reason for foreigners to avoid visiting America. Donald Trump may prove another, suggests a growing collection of data. Yet measuring the precise impact of Mr Trump’s presidency on travel is difficult. In addition to the currency effect, many trips currently being taken to America were booked before his election. Marriott, a big hotel company, reported an overall increase, compared with a year earlier, in foreign bookings in America in February.

But Arne Sorenson, Marriott’s boss, has voiced concern about a potential slump in tourism. In February, ForwardKeys, a travel-data…Continue reading

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ApprovedBusinessBusiness and finance

Another debate about net neutrality in America

THE details around network neutrality, the principle that internet-service providers (ISPs) must treat all sorts of web traffic equally, can be mind-numbingly abstruse. But they fuel passion, nonetheless. After Tom Wheeler, a former chairman of America’s Federal Communications Commission (FCC), proposed unpopular net-neutrality rules in late 2014, for instance, protesters blocked his driveway, forcing him to walk to work. Their action was meant to illustrate the threat of big ISPs erecting toll-booths and other choke-points that would relegate less well-off consumers to digital slow lanes.

Now it is the turn of Ajit Pai (pictured), Mr Wheeler’s successor, to stir the hornets’ nest. In the coming days Mr Pai is expected to unveil a proposal for new rules on net neutrality. His plan is anticipated to be a testament both to his deregulatory agenda and to the big ISPs’ lobbying power. It would essentially take the FCC out of the equation when it comes to policing the smooth running of the internet.

Because of the protests in 2014 and because of a court decision that year suggesting that the FCC needed the jurisdiction to be able to mandate net-neutrality…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Managing financial risk on London’s massive Crossrail project

THE eastbound platform on the Elizabeth line at Farringdon Station in central London is 30 metres below ground. Its length is as striking as its depth. At more than 200 metres, it is almost twice as long as the typical platform on the Tube. When service begins in December 2018, it will increase rail capacity in central London by 10%, thanks to the longer trains. Travellers nearest to the terminal stations at Reading and Heathrow, to the west of the city, and Shenfield and Abbey Wood, to the east, have a shot at the acme of commuter luxury: a seat.

Crossrail, as the £14.8bn ($19bn) infrastructure project is known, is on track to deliver other small miracles. With 85% of the work completed, the project is on-budget and on-time, in spite of its size and complexity. The programme required ten new stations, some with passenger tunnels linking them to existing Tube lines. The Elizabeth line itself will snake through 13 miles (21km) of twinned tunnels, including a section under the Thames. Tunnelling is a risky business. You never can tell if you’ll run into a hold-up. The Crossrail dig has yielded 10,000 items of interest to archaeologists. At Farringdon the diggers found 25…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The IMF nudges up its forecast for global growth

APRIL is the cruellest month, breeding lilacs out of the dead land, and, in Washington, chirpy forecasts from the IMF that often prove a bit too chirpy. On April 18th the fund released its semi-annual World Economic Outlook (WEO), raising its forecast for global growth in 2017 to 3.5%.

Growth forecasts for the emerging world have not changed. The IMF’s global optimism is based instead on hopes of increased growth in the rich world. The fund takes a rosy view of the American economy, citing both high levels of consumer confidence and Donald Trump’s plans for more government spending. In Britain the IMF now reckons GDP will grow by 2.0% in 2017, up from earlier estimates of 1.5% (issued in January) and 1.1% (last October). The IMF has also raised its forecasts for Japan and the euro area.

Snipers point out that IMF forecasts have been far from perfect. Some glitches are excusable. In the spring of 1990, it predicted that Kuwait’s economy would grow by 0.8% that year. It actually fell by 26%. The IMF’s model did not allow for an Iraqi invasion. But other errors are less easily explained: between 1990 and 2007, the IMF’s spring forecasts…Continue reading

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ApprovedBusinessBusiness and finance

Why the decline in the number of listed American firms matters

LAST month Schumpeter attended an event at the New York Stock Exchange held in honour of Brian Chesky, the co-founder of Airbnb, a room-sharing website that private investors value at $31bn. Glittering tables were laid out not far from where George Washington was inaugurated in 1789. The well-heeled members of the Economic Club of New York watched as Thomas Farley, the NYSE’s president, hailed Airbnb as an exemplar of American enterprise. Mr Chesky recounted his journey from sleeping on couches in San Francisco to being a billionaire. His mum, a former social worker, looked on. Only one thing was missing. When Mr Chesky was asked if he would list Airbnb on the NYSE, he hesitated. He said there was no pressing need.

Airbnb is not alone. A big trend in American business is the collapse in the number of listed companies. There were 7,322 in 1996; today there are 3,671. It is important not to confuse this with a shrinking of the stockmarket: the value of listed firms has risen from 105% of GDP in 1996 to 136% now. But a smaller number of older, bigger firms dominate bourses. The average listed firm has a lifespan of 18 years, up from 12 years two decades ago, and is worth four times…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

How and when to use private money in infrastructure projects

WHEN the Indiana Toll Road was opened in 1956, there were eight pairs of travel plazas, or rest stops, along the 156-mile (250km) stretch linking Chicago to Ohio and points eastward. As cars became faster and less thirsty, travellers had less reason to stop regularly for petrol or snacks. Three of the travel plazas closed in the 1970s. Restaurants shuttered, even if offered free rent. The remaining plazas, dwindling in number, fell into disrepair. The abiding memory some road users had of Indiana was of grubby toilets along the toll road.

Those rest-stops are at last getting a makeover. IFM, an Australian infrastructure fund, is investing $34m in the toll-road’s plazas, part of a $200m-plus upgrade. Half of the road’s length, with 57 bridges, is being resurfaced, using a treatment known as “crack-and-feed”, which lasts longer than simply patching the top. IFM, which acquired a 66-year lease on the road in a $5.8bn deal in 2015, says a private-sector operator has the right incentives to invest for the long term. Fewer tyre blowouts mean less gridlock, more road users and more revenue.

Politicians across the spectrum agree on the need to upgrade America’s…Continue reading

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ApprovedBusinessBusiness and finance

New types of driver embrace the recreational vehicle

EARLY spring is the main selling season for recreational vehicles (RVs) and the phone on Tom Troiano’s desk has been ringing incessantly. The owner of Continental RV, a dealership in Farmingdale, a village on Long Island, Mr Troiano is on track to sell more RVs this year than in any other since the early 2000s. Buoyed by cheap financing, rising wages and inexpensive gas, travellers are once again splurging on big-ticket camper vans.

RVs are a quintessentially American invention: more than two-thirds are made in the United States. Nationally, sales surged to 430,000 units last year, a 40-year high. At the inexpensive end they sell for as little as $5,000 for a caravan; deluxe versions cost up to $1m and are typically equipped with a bedroom, kitchen and bathroom that are bigger than in many European flats. The share prices of Thor Industries, the biggest RV-manufacturer in America, and Winnebago, the third-largest, have risen by 43% and 17%, respectively, in the past year.

That is a big change. During the 2008-09 recession, notes Mr Troiano, RV dealerships everywhere closed down, leaving his shop among the very few left serving the New York metropolitan area….Continue reading

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ApprovedBusiness and financeFinance and economics

Markets cheer Turkey’s referendum result

THE VICTORY of Recep Tayyip Erdogan, Turkey’s president, in a referendum on April 16th is seen by many observers as a worrying step on the road to autocracy. The vote handed Mr Erdogan far-reaching new powers. But the Turkish lira, government bonds and stockmarket all gained ground as the results came in.

It was a reminder that the relationship between markets and democracy is not rock-solid. Like an errant husband, investors may proclaim their fidelity to democracy but are not averse to seeing someone else on the side.

In Turkey, investors may have feared turmoil if Mr Erdogan’s proposal had been defeated. It is an old, but fairly reliable, cliché that investors dislike uncertainty. And the early years of Mr Erdogan’s rule saw rapid economic growth; since he took office, the Istanbul market has gained 760% (see chart).

An authoritarian government can provide certainty, at least in the short term. When Mussolini took power in Italy in…Continue reading

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Business and financeButtonwood's notebook

The markets adjust their Brexit calculations

SOMETIMES the markets are genuinely surprised. On the morning of April 18th, news that the British prime minister was to make an announcement at 11.15am caused the pound to dip. What could the news be? Retirement due to ill health? Several pundits went on Twitter to proclaim their belief that it would not be an early election; after all, Theresa May, the prime minister, has said repeatedly that the poll would not occur until 2020. But the news was indeed that an election will happen on June 8th. The pound then stormed higher and is now more than $1.28, around its strongest level this year (but well below the $1.50 touched on the day of the Brexit referendum).

So what explains the switcharound? The hope is that the election will lead to a softer Brexit result and thus be better news for the British economy. Deutsche Bank, previously bearish on sterling, was the most prominent convert to this view.

First, it makes the deadline to deliver a “clean” Brexit, without a lengthy transitional arrangement, by 2019 far less pressing given that no general election will be due the year after. Second, it will dilute the influence of MPs pushing for hard Brexit, strengthening the government’s…Continue reading

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Business and financeGulliver

New York may require Uber to provide an option to leave a tip

UBER has many virtues. The ride-hailing app has disrupted the cosy taxi cartels that care little for customers; it has made travel around cities cheaper, more convenient and reliable; and it has called into question the notion that taxi drivers must be tipped simply for doing their job. Sadly, a proposal in New York might pose a serious threat to the last of these qualities.

Currently, Uber’s smartphone app, which charges users automatically at the end of a journey, does not give the option of adding a tip. But Uber drivers in New York are petitioning officials to force the firm to change this. The chance to add a tip is already standard among many of the firm’s competitors, including Lyft. The city’s Taxi and Limousine Commission is hoping to write this approach into law. It will put forward a formal proposal in July.

Any such change in the rules would be a step back. The New York Times writes that there has “long been confusion” whether or not customers are supposed to tip Uber…Continue reading

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