Posts in category Finance and economics


ApprovedBusiness and financeFINANCEFinance and economics

A decade after it hit, what was learnt from the Great Recession?

TEN years ago this month, America entered the “Great Recession”. A decade on, the recession occupies a strange space in public memory. Its toll was clearly large. America suffered a cumulative loss of output estimated at nearly $4trn, and its labour markets have yet to recover fully. But the recession was far less bad than it might have been, thanks to the successful application of lessons from the Depression. Paradoxically, that success spared governments from enacting bolder reforms of the sort that might make the Great Recession the once-a-century event economists thought such calamities should be.

Good crisis response treats its symptoms; the symptoms of a disease, after all, can kill you. On that score today’s policymakers did far better than those of the 1930s. Government budgets have become a much larger share of the economy, thanks partly to the rise of the modern social safety net. Consequently, public borrowing and spending on benefits did far more to stabilise the economy than they did during the Depression. Policymakers stepped in to prevent the extraordinary collapse in prices and incomes experienced in the 1930s. They also kept banking panics from spreading, which would have amplified the pain of the downturn. Though unpopular, the decision to bail out the financial system prevented the implosion of the global economy.

But the success…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Oil and gas supply disruptions ripple around the world

The Baumgarten blast

CALL it the hydrocarbon equivalent of the butterfly effect. As oil and gas supplies tighten during the northern winter, disruptions as remote as a hairline fracture on a piece of Scottish pipeline, and an explosion in an Austrian natural-gas plant, have repercussions felt around the world.

Start with the pipeline. After Ineos, a chemicals company, detected a growing crack on a piece of pipe near Aberdeen, on December 11th it said it would shut the main Forties pipeline carrying North Sea oil and gas to Britain for weeks. The suspension of a pipeline carrying 450,000 barrels a day (b/d) of crude, in a global market of almost 98m b/d, would not normally be disruptive. Yet Brent crude, the benchmark for pricing much of the world’s seaborne crude, is itself partly priced on the flow of crude from 80 fields that feed the Forties pipeline, magnifying the impact.

Futures prices for Brent crude delivered in February and…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Cars, jewels, wine and watches have been good investments

DIAMONDS, they say, are for ever. They can be pricey, too. On December 5th 173 lots of jewels auctioned by Sotheby’s raised $54m. They included several pieces belonging to Sean Connery, known for playing James Bond. The following day a car favoured by Bond, the Aston Martin DB5, was auctioned for $2.7m. It was among 24 classic vehicles that together fetched $45m. The sales in New York last week by the world’s two biggest auction houses, Sotheby’s and Christie’s, also involved fine wines, watches and other luxuries. Between them they sold $200m-worth.

The Economist has compiled price indices for many of these items—diamonds, classic cars, fine wine, art, watches and other curios—and grouped them in a “passion” index. The index is weighted according to the holdings of high-net-worth individuals (HNWI)—defined as people with more than $1m of investable assets—as reported by Barclays. Our passion index has dropped by 2% a year, on average, for the past…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

The markets’ apparent calm over Brexit is deceptive

FOR all the sound and fury of the Brexit negotiations, it has seemed at times as if the financial markets have been barely affected. But as with the swans that glide on the Thames, a serene surface conceals some frantic paddling underneath.

The pound is the most reliable indicator of the Brexit mood. A rule of thumb is that, if the headlines point to a “hard” Brexit (creating trade barriers with the EU), sterling will fall; signs of a “soft” Brexit (something that is close to the current relationship) will cause it to rise.

But some feedback processes are at work. The big fall in the pound in the immediate aftermath of the referendum has led to a gradual rise in imported inflation. The annual inflation rate hit 3.1% in November, requiring Mark Carney, governor of the Bank of England, to write to Philip Hammond, the chancellor, to explain why the target (of 2%) had been missed. The bank has already raised interest rates once. More rises may follow, and expectation of such rises supports the pound.

The need for monetary tightening is not simply a result of higher import costs, which might prove temporary. More worryingly, the Bank thinks that the trend rate of growth of the British economy has fallen (a view it shares with the Office for Budget Responsibility, the government’s forecasting arm). In part, this is because Britain faces a more…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

The WTO remains stuck in its rut

“THERE is life after Buenos Aires,” soothed Susana Malcorra, chair of the 11th ministerial meeting of the World Trade Organisation (WTO). Multilateralism may not be dead, but it has taken a kicking. Expectations were low as the meeting began in the Argentine capital. They sank even lower as it progressed. Delegates failed to agree on a joint statement, let alone on any new trade deals.

Many arrived with a culprit already in mind. Robert Lighthizer, the United States Trade Representative, was the face of an administration that is both questioning the benefits of multilateralism and jamming the WTO’s process of settling disputes. As negotiations progressed, some delegates groused that American leadership was lacking. Some even speculated that the Americans might be happy if multilateral talks foundered. What better proof, after all, that the system is broken?

Ms Malcorra, without mentioning the Americans by name, warned against creating scapegoats out of those…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

The markets believe in Goldilocks

ANOTHER week, another record. The repeated surge of share prices on Wall Street is getting monotonous. The Dow Jones Industrial Average has passed another milestone—24,000—and the more statistically robust S&P 500 index is up by 17% so far this year. Emerging markets have performed even better, as have European shares in dollar terms (see chart).

Political worries about trade disputes, the potential for war with North Korea and the repeated upheavals in President Donald Trump’s White House: all have caused only temporary setbacks to investors’ confidence. No wonder the latest quarterly report of the Bank for International Settlements asked whether markets are complacent, noting that “according to traditional valuation gauges that take a long-term view, some stockmarkets did look frothy”, and pointing out that “some froth was also present in corporate-credit markets”.

The authors of the BIS report are not the only ones to worry that markets look expensive. The…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

A full-scale Venezuelan default could push up oil prices

Who believes in Nicolás?

ON NOVEMBER 30th, as oil tsars from the Organisation of the Petroleum Exporting Countries (OPEC) and Russia met in Vienna, Venezuela’s former oil minister, Eulogio del Pino, once one of their number, was seized by armed guards at dawn in Caracas, and taken to jail. His arrest was not publicly acknowledged in Vienna. His replacement, Manuel Quevedo, a general in the national guard, attended OPEC and was received with the usual deference.

Also unmentioned was how Venezuela, embroiled in a massive, messy debt default, is doing plenty of OPEC’s dirty work. Since November 2016, when OPEC first agreed with Russia to cut output to push up oil prices, Venezuela’s has fallen by 203,000 barrels a day (b/d), to 1.86m b/d in October. That is more than twice the cut it agreed with OPEC of 95,000 b/d.

If its production continues to fall—some analysts say it could be down to 1.6m b/d in 2018—it could either drive up…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Hedge funds embrace machine learning—up to a point

ARTIFICIAL intelligence (AI) has already changed some activities, including parts of finance like fraud prevention, but not yet fund management and stock-picking. That seems odd: machine learning, a subset of AI that excels at finding patterns and making predictions using reams of data, looks like an ideal tool for the business. Yet well-established “quant” hedge funds in London or New York are often sniffy about its potential. In San Francisco, however, where machine learning is so much part of the furniture the term features unexplained on roadside billboards, a cluster of upstart hedge funds has sprung up in order to exploit these techniques.

These new hedgies are modest enough to concede some of their competitors’ points. Babak Hodjat, co-founder of Sentient Technologies, an AI startup with a hedge-fund arm, says that, left to their own devices, machine-learning techniques are prone to “overfit”, ie, to finding peculiar patterns in the specific data they are trained on that…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Europe is seeing more collective lawsuits from shareholders

LIKE the ghosts that haunted Ebenezer Scrooge, the scandals of years past—summoned up by angry shareholders—will not let companies rest. In Britain this year, the Royal Bank of Scotland (RBS) paid £900m ($1.2bn) to settle a long-running investor lawsuit related to the bank’s behaviour at the time of the financial crisis of 2007-08. Also in Britain, Lloyds Banking Group faces litigation. And it is not just banks. Investors in Britain sued Tesco, a supermarket chain, for losses caused by an accounting scandal in 2014. In Germany and the Netherlands investors are seeking compensation from Volkswagen (VW), a carmaker, for failing to disclose its manipulation of diesel-emissions tests.

Securities litigation is on the rise in Europe for two main reasons. The first is that America is less hospitable than it was to such cases. Until 2010 harm suffered by foreign investors could be included in American lawsuits. That changed with a Supreme Court ruling on Morrison v…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

African countries are building a giant free-trade area

“AFRICA must unite,” wrote Kwame Nkrumah, Ghana’s first president, in 1963, lamenting that African countries sold raw materials to their former colonisers rather than trading among themselves. His pan-African dream never became reality. Even today, African countries still trade twice as much with Europe as they do with each other (see chart). But that spirit of unity now animates a push for a Continental Free-Trade Area (CFTA), involving all 55 countries in the region. Negotiations began in 2015, aimed at forming the CFTA by the end of this year. In contrast to the WTO, African trade talks are making progress.

At a meeting on December 1st and 2nd in Niamey, the capital of Niger, African trade ministers agreed on final tweaks to the text. Heads of state will probably sign it in March, once an accompanying protocol on goods has been concluded (agreement on services has already been reached). But trade barriers will not tumble overnight. The CFTA will come into force only when 15 countries…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

As WTO members meet in Argentina, the organisation is in trouble

“EVERYBODY meets in Buenos Aires,” said Cecilia Malmstrom, the European Union’s trade commissioner, days before heading there for the World Trade Organisation’s (WTO) biennial gathering of ministers, which opens on December 10th. Some non-governmental organisations have been blocked by the protest-averse Argentine authorities, but a meeting of people will indeed take place. One of minds is another matter.

Most participants can agree on one thing. The WTO, which codifies the multilateral rules-based trading system, needs help. President Donald Trump has railed against it and threatened to pull America out. Without American leadership, there is little hope of reaching new deals. And even as the WTO’s dealmaking arm is paralysed, the Trump administration is weakening its judicial one by starving it of judges.

Despite Mr Trump’s threats, America does not seem on the verge of crashing out of a system it helped to construct, to rely entirely on bilateral trade deals and…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Are digital distractions harming labour productivity?

FOR many it is a reflex as unconscious as breathing. Hit a stumbling-block during an important task (like, say, writing a column)? The hand reaches for the phone and opens the social network of choice. A blur of time passes, and half an hour or more of what ought to have been productive effort is gone. A feeling of regret is quickly displaced by the urge to see what has happened on Twitter in the past 15 seconds. Some time after the deadline, the editor asks when exactly to expect the promised copy. Distraction is a constant these days; supplying it is the business model of some of the world’s most powerful firms. As economists search for explanations for sagging productivity, some are asking whether the inability to focus for longer than a minute is to blame.

Continue reading
Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Contraception does even more good in poor countries than thought

Happier families

FEW tasks in developing countries are as tricky—or as important—as convincing parents to keep their daughters in school longer. One way of doing so is to make contraceptives available, concludes a new working paper by Kimberly Singer Babiarz at Stanford University and four other researchers.

Conducted in Malaysia, the study used a happy coincidence of surveys going back decades and family-planning programmes rolled out in a way that made it possible to measure their effect. Starting in the 1960s, these programmes were introduced in some areas a few years earlier than in others. So researchers could compare what happened to girls in areas where contraceptives became available when they were very young with girls from the same cohorts in areas with no contraceptives.

The girls in places with contraceptives stayed in school six months longer, or about a year longer if they were born after the programmes began. Similar effects have…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFinance and economics

Marijuana businesses, excluded from finance, face unusual risks

MANY marijuana growers in northern California, America’s biggest source of the stuff, had expected this autumn’s harvest to be the largest ever. After all, recreational marijuana becomes legal in the state in January. Instead, wildfires in October—spreading so fast they killed 43 people—burned up half the marijuana growing in the area’s tri-county “Emerald Triangle” alone. Some reckon the fires set a record not just for burnt pot, but also for the value of banknotes turned to ash.

Although 29 American states allow sales of marijuana for medical use (or medical and recreational use), federal law still classifies it as a “schedule 1” drug like heroin. Firms handling marijuana proceeds can be prosecuted for money laundering. Ned Fussell of CannaCraft, a maker of marijuana products, says that a few firms open a bank account under an alternative identity. But banks almost always find out. So cannabis businesses operate almost exclusively in cash. Many pot farmers…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

A flattening yield curve argues against higher interest rates

CENTRAL bankers may control short-term interest rates, but long-term ones are mostly free to wander. They do not always behave. When Alan Greenspan, then chairman of the Federal Reserve, was raising short rates in 2005, he described a simultaneous decline in long rates as a “conundrum”. His successor-to-be, Ben Bernanke, blamed foreign investments in American assets because of a “global saving glut”.

Janet Yellen, today’s (outgoing) Fed chair, faces a similar puzzle. Ms Yellen’s Fed has raised rates twice this year, and will probably make it three times in December. In October the Fed began to reverse quantitative easing (QE), purchases of financial assets with newly created money. Despite all this monetary tightening, yields on ten-year Treasury bonds have fallen from around 2.5% at the start of 2017 to about 2.3% today. As a result, the “yield curve” is flattening. The difference between ten-year and two-year interest rates is at its lowest since November 2007 (see chart).

Continue reading
Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

India’s new bankruptcy code takes aim at delinquent tycoons

A SMOOTH bankruptcy process is akin to reincarnation: a company at death’s door gets to shuffle off its old debts, often gain new owners, and start a new life. Might the idea catch on in India? A first wave of cadaverous firms are seeking rebirth under a bankruptcy code adopted in December 2016. In a hopeful development, tycoons once able to hold on to “their” businesses even as banks got stiffed seem likely to be forced to cede control.

India badly needs a fresh approach to insolvent businesses. Its banks’ balance-sheets sag under 8.4trn rupees ($130bn) of loans that will probably not be repaid—over 10% of their outstanding loans. But foreclosure is fiddly: it currently takes over four years to process an insolvency, and recovery rates are a lousy 26%. Partly as a result, bankers have often turned a blind eye to firms they ought to have foreclosed on.

This is bad for the banks and worse for the economy, which has slowed markedly, in part as credit to companies has dried up. The problem festered for years, not…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

The euro zone’s boom masks problems that will return to haunt it

“WHAT does not kill me makes me stronger,” wrote Nietzsche in “Götzen-Dämmerung”, or “Twilight of the Idols”. Alternatively, it leaves the body dangerously weakened, as did the illnesses that plagued the German philosopher all his life. The euro area survived a hellish decade, and is now enjoying an unlikely boom. The OECD, a club of mostly rich countries, reckons that the euro zone will have grown faster in 2017 than America, Britain or Japan. But, sadly, although the currency bloc has undoubtedly proven more resilient than many economists expected, it is only a little better equipped to survive its next recession than it was the previous one.

Europe’s crisis was brutal. Euro-area GDP is roughly €1.4trn ($1.7trn)—an Italy, give or take—below the level it would have reached had it grown at 2% per year since 2007. Parts of the periphery have yet to regain the output levels they enjoyed a decade ago (see chart). The damage was exacerbated by deep flaws within Europe’s monetary union. Three shortcomings loomed particularly large. First, the union centralised money-creation but left national governments responsible for their own fiscal solvency. So markets came to understand that governments could no longer bail themselves out by printing money to pay off creditors. The risk of default made markets panic in response to bad news, pushing up…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

What cheese can tell you about international barriers to trade

Slicely does it

BEN SKAILES, a British cheesemaker, is busy as Christmas ripens demand for his Stilton. Foreigners make up a third of demand for his dairy, Cropwell Bishop Creamery. This exporting achievement is not to be sniffed at when one considers the barriers to the cheese trade.

Some are natural. Perishable food goes better with wine than long journeys. At least Mr Skailes’s Stilton can survive the three-week trip to America. (His is best eaten within 16 weeks.) Softer cheeses struggle, giving American producers an advantage.

Other hurdles are man-made. Tariffs and quotas are supposed to support domestic dairy industries, and are more onerous than in other sectors. The European Union protects its dairy industry with a 34% average duty, compared with an overall average of 5%. In America it is 17%, compared with 3.5%. Stilton escapes American quotas, but full “loaves” are taxed at a 12.8% rate, or 17% if they arrive sliced. (Unprocessed…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

As bitcoin’s price passes $10,000, its rise seems unstoppable

MOST money these days is electronic—a series of ones and zeros on a computer. So it is rather neat that bitcoin, a privately created electronic currency, has lurched from $1,000 to above $10,000 this year (see chart), an epic journey to add an extra zero.

On the way, the currency has been controversial. Jamie Dimon, the boss of JPMorgan Chase, has called it a fraud. Nouriel Roubini, an economist, plumped for “gigantic speculative bubble”. Ordinary investors are being tempted into bitcoin by its rapid rise—a phenomenon dubbed FOMO (fear of missing out). Both the Chicago Mercantile Exchange, America’s largest futures market, and the NASDAQ stock exchange have seemingly added their imprimaturs by planning to offer bitcoin-futures contracts.

It is easy to muddle two separate issues. One is whether the “blockchain” technology that underpins bitcoin becomes more widely adopted. Blockchains, distributed ledgers that record transactions securely, may prove very useful in…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Italy’s new savings accounts fuel a boom in stockmarket listings

ITALY seems an unlikely place to be enjoying a boom in new listings on the stockmarket. It is full of family-run small and medium-sized enterprises (SMEs) that mostly rely for their finance on banks; and Italy’s banks are notorious for the bad debts still lingering on their balance-sheets. But Borsa Italiana, Milan’s stock exchange, has already seen 33 share issues so far this year, of which 24 have been full-fledged initial public offerings (IPOs). The number of listings so far already equals that seen in previous boom years in 2007 or 2015. With more expected before January, the exchange is likely to achieve the highest number of listings since the height of the dotcom bubble in 2000 (see chart).

A big reason for the surge is the Italian government’s roll-out in February of new individual savings accounts, known as PIRs, which offer favourable tax treatment. These have done better than expected. Asset managers have amassed €7.5bn ($8.3bn) in new PIR funds in the first three quarters of…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

A purge of Russia’s banks is not finished yet

Elvira’s mad again

WHEN Elvira Nabiullina took over the governorship of the Russian Central Bank (CBR) in 2013, she faced a bloated and leaky finance sector with over 900 banks. Since then, more than 340 have lost their licences. Another 35 have been rescued, including, in recent months, Otkritie, once the country’s biggest private lender by assets, and B&N Bank, its 12th largest. The costs have been steep. According to Fitch, a ratings agency, over 2.7trn roubles ($46bn, some 3.2% of GDP in 2016) have been spent on loans to rescued banks and payments to insured depositors. Fitch reckons another few hundred banks could go before the clean-up concludes. More large private banks are whispered to be among them.

The CBR has rightly been praised for preventing a wider crisis and undertaking a clean-up during a punishing recession. Non-performing loans are at a manageable level, of around 10%. Bringing Otkritie and B&N under CBR stewardship calmed panicked markets. Yet nationalisation also raises…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Wealth inequality has been widening for millennia

THE one-percenters are now gobbling up more of the pie in America—that much is well known. This trend, though disconcerting, is not unique to the modern era. A new study, by Timothy Kohler of Washington State University and 17 others, finds that inequality may well have been rising for several thousand years, at least in some parts of the world. The scholars examined 63 archaeological sites and estimated the levels of wealth inequality in the societies whose remains were dug up, by studying the distributions of house sizes.

As a measure they used the Gini coefficient (a perfectly equal society would have a Gini coefficient of zero). It rose from about 0.2 around 8000BC in Jerf el-Ahmar, on the Euphrates in modern-day Syria, to 0.5 in around 79AD in Pompeii. Data on burial goods, though sparse, point to similar trends.

The researchers suggest agriculture is to blame. The nomadic lifestyle is not conducive to wealth accumulation. Only when humans switched to farming did people…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Sustainable investment joins the mainstream

IN 2008, when she was in her mid-20s and sitting on a $500m inheritance, Liesel Pritzker Simmons asked her bankers about “impact investing”. They fobbed her off. “They didn’t understand what I meant and offered to screen out tobacco,” recalls the Hyatt Hotels descendant, philanthropist and former child film star. So she fired her bankers and advisers and set up her own family office, Blue Haven Initiative. It seeks investments that both offer market-rate returns and have a positive impact on society and the environment. “Financially it’s sensible risk mitigation,” she says. “Our philanthropy becomes far more efficient if we don’t need to undo damage done in our investment management.”

Such ideas are gaining ground, particularly among the young. Fans of “socially responsible investment” (SRI) hope that millennials, the generation born in the 1980s and 1990s, will drag these concepts into the investment mainstream. SRI is a broad-brush term, that can be used to…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Does Hong Kong’s Octopus card have too many tentacles?

Your extensible friend

IN 1997, two months after Hong Kong reverted to Chinese sovereignty, it acquired a cutting-edge payment technology. People could rush through turnstiles with a wave of their colourful Octopus cards—stored-value cards pre-loaded with cash. Its latest advance, however, is risibly low-tech. On October 30th Octopus launched an extensible pole with a plastic hand to help drivers pay at toll booths. Critics of Hong Kong’s cautious approach to fintech snorted in derision. Meanwhile, a government official was quoted as blaming Octopus for stifling the city’s shift to cashlessness. Both criticisms are unfair. Hong Kongers enthusiastically embrace electronic payments and do well from the fierce competition between different platforms.

The Octopus card, designed for journeys on Hong Kong’s trains, buses, trams and ferries, soon stretched its tentacles into shops. In 2016 the company generated revenues of HK$956m ($122m) for its owners (mostly…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Timelier provisions may make banks’ profits and lending choppier

IN THE first quarter of 2018 thousands of banks will look a little less profitable. A new international accounting standard, IFRS 9, will oblige lenders in more than 120 countries, including the European Union’s members, to increase provisions for credit losses. In America, which has its own standard-setter, IFRS 9 will not be applied—but by 2019 banks there will also have to follow a slightly different regime.

The new rule has its roots in the financial crisis of 2007-08, in the wake of which the leaders of the G20 countries declared that accounting standards needed an overhaul. Among their other shortcomings, banks had done too little, too late, to recognise losses on wobbly assets. Under existing standards they make provisions only when losses are incurred, even if they see trouble coming. IFRS 9, which comes into force on January 1st, obliges them to provide for expected losses instead.

Under IFRS 9 bank loans are classified in one of three “stages”. When a loan is made—stage one—banks must make a…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

What annual reports say, or do not, about competition

What explains the remarkable strength of corporate profits and the sluggish growth of real wages in recent years? One explanation is that industries are getting less competitive. Work by The Economist found that two-thirds of American industries were more concentrated in the hands of a few firms in 2012 than in 1997.

Research by AXA Investment Managers Rosenberg Equities into the language used in American annual reports points in the same direction. Sherlock Holmes famously talked of the significance of the dog that did not bark in the night. It may be similarly important that companies refer to rivals much less than they did; usage of the word “competition” in annual reports has declined by three-quarters since the turn of the century. Business is less cut-throat than it used to be.

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

The rich get richer, and millennials miss out

Early contender for the 2047 list

BUOYANT financial markets meant that global wealth rose by 6.4% in the 12 months to June, the fastest pace since 2012. And the ranks of the rich expanded again, with 2.3m new millionaires added to the total, according to the Credit Suisse Research Institute’s global wealth report.

The report underlines the sharp divide between the wealthy and the rest. If the world’s wealth were divided equally, each household would have $56,540. Instead, the top 1% own more than half of all global wealth. The median wealth per household is just $3,582; if you own more than that, you are in the richest 50% of the world’s population.

America continues to dominate the ranks of millionaires with 43% of the global total. Both Japan and Britain had fewer dollar millionaires than they did in June 2016, thanks to declines in the yen and sterling. Emerging economies have been catching up in the millionaire stakes; they now have 8.4%…Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Fuelled by Middle East tension, the oil market has got ahead of itself

ONLY one thing spooks the oil market as much as hot-headed despots in the Middle East, and that is hot-headed hedge-fund managers. For the second time this year, record speculative bets on rising oil prices in American and European futures have made the market vulnerable to a sell-off. “You don’t want to be the last man standing,” says Ole Hansen of Saxo Bank.

On November 15th, the widely traded Brent crude futures benchmark, which had hit a two-year high of $64 a barrel on November 7th, fell below $62. America’s West Texas Intermediate also fell. The declines coincided with a sharp drop across global metals markets, owing to concern about slowing demand in China, which has clobbered prices of nickel and other metals that had hit multi-year highs. (In a sign of investor nervousness after a sharp rally this year in global stock and bond markets, high-yield corporate bonds also weakened significantly this week.)

The reversal in the oil markets put a swift end to talk of crude shooting above $70 a barrel, which had gained strength after the detention in Saudi Arabia of dozens of princes and other members of the elite, and increasing tension between the Gulf states and Iran over Yemen and Lebanon. The International Energy Agency (IEA), which forecasts supply and demand, said on November 14th that it doubted $60 a barrel had become a new floor for oil….Continue reading

Read more 0 Comments
ApprovedBusiness and financeFINANCEFinance and economics

Who needs America?

REVIVING the original Trans-Pacific Partnership (TPP), a trade deal between 12 countries around the Pacific Rim, is technically impossible. To go into force, members making up at least 85% of their combined GDP had to ratify it. Three days into his presidency, Donald Trump announced that America was out. With 60% of members’ GDP gone, that deal was doomed.

But on November 11th, another began to rise in its place, crowned with a tongue-twisting new name: the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP). Ministers from its 11 members issued a joint statement saying that they had agreed on its core elements, and that it demonstrated their “firm commitment to open markets”. The political symbolism was powerful. As America retreats, others will lead instead.

The CPTPP is still far from finished, however. This inconvenient truth is unsurprising. Resuscitating the deal without its biggest member was always going to be hard. Without America, uncomfortable concessions made in the old TPP…Continue reading

Read more 0 Comments