Posts in category Business and finance


ApprovedBusinessBusiness and finance

One year before the World Cup, FIFA is shunned by sponsors

AT THE World Football Museum in Zurich, run by FIFA, football’s global governing body, visitors take their photo with the World Cup trophy, try their hand at match commentary and gawk at artefacts ranging from the original handwritten set of the rules of the game to the yellow card famously shown to Paul Gascoigne, a lachrymose English footballer, in 1990. Those wanting a glimpse of the luxurious bedsheets that were used to shield FIFA officials as they were hustled out of a ritzy Swiss hotel in 2015 having been arrested on corruption charges may feel cheated—they are not on display.

If FIFA’s shrine to itself ignores this squalid period of its history, its balance-sheet bears the traces. FIFA lost $369m in 2016, triple the losses of the year before, and forecasts a loss of $489m in 2017. Reserves, which have been above $1bn since 2008, are predicted to fall to $605m next year.

The latest loss is partly because of higher development funding for member…Continue reading

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ApprovedBusinessBusiness and finance

A Swedish activist speaks softly and carries a big stick

Gardell, smiling butcher

“SCLEROTIC companies abound in Europe,” says Christer Gardell, co-founder and managing partner of Cevian Capital, an activist hedge fund based in Sweden. That is an uncommonly pugnacious statement for a firm that operates behind the scenes and uses public pressure as a last resort. Unlike its louder American peers, such as Bill Ackman’s Pershing Square, Paul Singer’s Elliott Management or Dan Loeb’s Third Point, Cevian has never written a pointed open letter to a chief executive or waged a proxy battle (although Carl Icahn, an activist who has been known to call bosses “morons”, is one of its investors).

Its calm approach seems to suit corporate Europe. Cevian is the region’s largest activist fund, and one of the world’s biggest, with over $15.4bn in assets. It was founded by Mr Gardell and Lars Forberg in Stockholm in 2002; both still run it. Its “constructive” activism, focusing on only a dozen companies at a…Continue reading

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ApprovedBusinessBusiness and finance

Tanzania’s firebrand leader takes on its largest gold miner

“IF THEY accept that they stole from us and seek forgiveness in front of God and the angels and all Tanzanians and enter into negotiations, we are ready to do business.” As conciliatory gestures go, that one by John Magufuli, Tanzania’s president, to Acacia Mining, the country’s largest foreign investor, could hardly have been more fork-tongued.

Nonetheless, two days later John Thornton, head of Barrick Gold, Acacia’s largest shareholder, met Mr Magufuli to start talks on ending a dispute that has halved Acacia’s market value since the government in March imposed a ban on the export of gold- and copper-concentrates. It is a mark of the seriousness of the stand-off that he is ready to negotiate on all points of contention between the two sides.

The context of the row is increasingly typical of Africa’s mining industry. The Tanzanian government is seeking more tax revenue from a foreign mining firm that was initially wooed into the country by generous tax…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Inflation has not yet followed lower unemployment in America

THAT central banks cannot endlessly reduce unemployment without sparking inflation is economic gospel. It follows from “a substantial body of theory, informed by considerable historical evidence”, according to Janet Yellen, chair of the Federal Reserve. Her conviction explains why, on June 14th, the Fed raised interest rates by a quarter of a percentage point, to a range of 1-1.25%.

Excluding food and energy, prices are only 1.5% higher than a year ago; the Fed’s inflation target is 2%. But Ms Yellen thinks unemployment is below its so-called “natural” rate, so inflation should soon rise. Is she right? Or has the relationship between unemployment and inflation, dubbed the Phillips curve, gone missing?

It is not the first time the theory has failed. After the financial crisis unemployment soared to 10%. This surfeit of workers should have sent inflation tumbling. But prices held up well; in October 2009, when unemployment peaked, underlying inflation was 1.3%, only a little…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Death pools can bring financial security for the long-lived

Thinking inside the box

WHEN members of a private club in Manhattan suddenly start dropping dead at an alarming rate, Matt Scudder, a private detective, suspects more might be at play than bad luck to explain the bizarre series of suicides and violent accidents. If this sounds like the back-flap of a murder mystery, your deduction skills are as sharp as Mr Scudder’s. In Lawrence Block’s “A Long Line of Dead Men,” the cunning detective eventually uncovers the motive for the killing spree: the club of 31 men were all part of a tontine.

These ancient financial instruments are built on members paying money into a pool, which is invested and then pays out dividends once they reach a pre-agreed age. Those who live longest will see their income increase as others die; the last one standing receives the most. They are essentially a form of insurance against an unexpectedly long life.

Although most people will know them from the works of Agatha…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The perils of nationalisation

WHEN Jeremy Corbyn unveiled his Labour manifesto ahead of the recent British election, opponents gawked at pledges to renationalise the postal and rail systems. Such enthusiasm for state ownership smacks of a philosophy long since abandoned by leaders on both left and right. Despite Labour’s decent electoral performance, nationalisation is not everywhere on the march; on June 5th Donald Trump made public his desire to privatise air-traffic control. But the rise of Mr Corbyn and Bernie Sanders hints at a weakening of the rich-world consensus that the less of the economy owned by government, the better. That is a pity. Expanded state ownership is a poor way to cure economic ailments.

For much of the 20th century, economists were open to a bit of dirigisme. Maurice Allais, an (admittedly French) economist who won the Nobel prize in 1988, recommended that the government run a few firms in each industry, the better to observe the relative merits of public and private…Continue reading

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Business and financeGulliver

American Airlines reverses a pledge to squeeze legroom further

SOME rare good news for anyone planning to fly economy class on American Airlines: the carrier has scrapped plans to shrink the distance between rows on new planes it is purchasing. The Texas-based airline had said it would reduce the seat pitch on its new Boeing 737 Max planes to a knee-aching 29 inches in certain rows, down from its typical 30 inches (or 31 inches on its current 737-800 fleet). Now it says it will install those rows 30 inches apart.

An inch may not sound like much, but its significance is broader. The airline made the change in response to public outcry. American said it received copious feedback from customers and employees and that “it is clear that today, airline customers feel increasingly frustrated by their experiences and less valued when they fly.” People complained, and American listened.

In fact, the pressure came from more than just ordinary Joes. A member of Congress, bemoaning the ever-shrinking seat pitch, introduced Continue reading

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Business and financeGulliver

Sanctions in the Middle East are bad for airlines, worse for travellers

PEACE in the Middle East, Donald Trump announced last month, is “not as difficult as people have thought over the years”. History will have to judge the president’s geopolitical impact on the region, but when it comes to air travel his influence is already being felt. And many business travellers might find themselves flying on inferior airlines as a result.

Mr Trump recently took credit for efforts to isolate Qatar. Last week, Saudi Arabia and five other countries in the region cut diplomatic ties with the tiny nation, which wields disproportionate influence through its oil wealth and international aviation. As a result of the sanctions, much of the airspace surrounding Qatar was closed. That blow follows the Trump administration’s earlier actions to ban nationals of several majority-Muslim countries from entering the United States—an order that has been put on hold by the courts—and to prevent…Continue reading

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Business and financeButtonwood's notebook

The globalisation counter-reaction

WHEN the Archduke Franz Ferdinand (pictured right) was assassinated in 1914, there were few initial indications that world war would follow. In retrospect, many people have argued that the killing was a freak event that should not have resulted in the folly of war.

But was the subsequent war really an exogenous event? Or was it the near-inevitable consequence of the tensions resulting from the first great era of globalisation? If Franz Ferdinand had survived, maybe something else would have triggered the conflict. If the latter possibility is right, that may be a warning sign for the current era.

From 1870 to 1914, the first great era of globalisation saw rapid economic growth, trade grow faster than GDP, mass migration from Europe to the New World and convergence of real wages between the old and new worlds. In Europe, GDP per capita grew more than 70%; in the new world, (Argentina, Australia, Brazil, Continue reading

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Business and financeGulliver

Younger business travellers are more likely to extend trips for fun

ACCENTURE, advertorial, jeggings. The competition for ugliest portmanteau is fierce. Few constructions, though, can match “bleisure” for barbarousness. For the uninitiated, the word is a blend of business and leisure. But ugly as it is, it exists for a reason: the practice of adding a few days of pleasure to a work trip is becoming increasingly popular.

The latest research to bear this out was released this week by the Global Business Travel Association. Its survey of North American business travellers found that 37% had extended a work trip to include some leisure within the past year. This, typically, might mean stetching a break in a city into the weekend, possibly shipping in the family to join the fun. Often, such travellers will stay in the same hotel for the duration, making up the extra cost themselves.

Interestingly, the older the travellers…Continue reading

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ApprovedBusinessBusiness and finance

General Electric picks a new boss

JEFF IMMELT looks like he was born to be a chief executive. Tall, affable and energetic, he was selected to run General Electric (GE) in 2001 after an interminable and mildly sadistic selection process run by GE’s then CEO Jack Welch, at the time America’s most celebrated boss. After 16 years at the top, on June 12th Mr Immelt said he would retire, to be replaced by John Flannery, who runs the firm’s health-care arm. The departing boss has reshaped GE radically but his legacy as the boss of the world’s most important industrial company is a mixed one.

Part of that reflects what he inherited. GE was not in nearly as good shape as Mr Welch liked to pretend. Its share price was significantly overvalued, pumped up by hype about Mr Welch’s talents, while its profits were inflated by gains from its pension scheme and its financial arm,…Continue reading

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Business and financeFree exchange

A new paper rekindles a tiresome debate on immigration and wages

WHAT effect do immigrants have on native wages? It’s perhaps one of the most important questions of labour economics. It’s also one that is largely unanswerable. The problem is that it’s almost impossible to separate cause and effect. If a country with high rates of immigration also sees strong wage growth, we can’t assume that immigrants are boosting wages—it may well be the case that the migrants are choosing to move to places with stronger economies.

One approach to getting around this problem is to find a natural experiment in which either the supply of or demand for labour changes exogenously. Perhaps the most famous example of such an event in labour economics is the Mariel Boatlift. In 1980, Fidel Castro, then president of Cuba, eased emmigration restrictions. Some 125,000 Cubans moved to the United States that year. Almost instantaneously, the labour supply of Miami increased by 55,000.

The Mariel migrants were overwhelmingly low-skilled workers—less than half had high-school degrees. In 1990, David Card, now an…Continue reading

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Business and financeButtonwood's notebook

Britain’s political outlook seems toxic to investors

SUDDENLY Britain looks a lot less attractive as a home for international investors. The Conservative party under Theresa May gambled on a snap election to deliver a “mandate for Brexit”. It unveiled a muddled manifesto that alienated voters and was out-campaigned by the veteran left-winger Jeremy Corbyn. The party lost its overall majority and will now be propped up by the very odd ducks in Ulster’s Democratic Unionist party.

The markets reacted less severely than might have been expected. That seems to be based on the view that a “soft Brexit” looks more likely. But it is far from clear that this is the case. David Davis, Britain’s Brexit minister, seems to be ploughing ahead with plans to leave the single market and the Continue reading

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Business and financeGulliver

Should animals be allowed to roam freely on jets?

FLYING can be a stressful and nerve-wracking experience. For those with mental-health issues it must be doubly so. One way in which vulnerable travellers deal with their anxiety on a plane is to take on board an “emotional support animal” (ESA). Such creatures provide succour for their owners. Unlike guide dogs, they “do not require any kind of specialised training,”  according to CertaPet, an organisation that provides such services. “In fact,” reckons CertaPet, “very little training is required at all, provided that the animal in question is reasonably well behaved by normal standards.”

That sounds like an easy and effective way to help sufferers. It was distressing to read, therefore, of the emotional support dog that mauled a passenger on Delta flight from Atlanta to San Diego earlier this week. Reports suggest that the dog, a labrador-pointer cross-breed, was accompanying a military…Continue reading

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Business and financeButtonwood's notebook

Markets struggle to make sense of the election chaos

THERESA MAY decided to call a snap election on a walking holiday in Wales. History will regard it as the most disastrous ramble since Captain Oates wandered out of the Antarctic tent in 1912. Having failed to anticipate the result, investors (like everybody else) are struggling to understand what will happen next. 

It looks as if the Conservatives can carry on in power, with the support of the Democratic Unionists in Northern Ireland. This would give them a bare majority. But Mrs May’s position has been severely weakened ahead of Brexit negotiations. Another election later this year is possible.

For the markets, two factors are offsetting each other. On the one hand, there is uncertainty and the possibility that a left-wing Corbyn government could still take power in the near future. On the other hand, this result may change calculations about a hard Brexit. The Unionists backed Brexit but they will not want a hard border with the rest of Ireland; something that may require Britain to make concessions to the EU….Continue reading

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Business and financeButtonwood's notebook

Britain’s vote catches out the markets—again

SO AN election that was called to give Theresa May a mandate to negotiate Brexit looks like it has done anything but. The exit poll suggested that the Conservatives would have the most seats, but short of a majority with 314. Add in the Ulster Unionists and allow for the fact that Sinn Fein MPs don’t take their seats and Parliament would be a virtual tie.

This would lead to enormous uncertainty. Just before the polls closed, the pound was trading at $1.2950, while the euro was worth £0.866. Within minutes of the exit poll, the pound had dropped nearly two cents to $1.2768, while the euro was up to £0.8791.

If this poll is borne out by the results (and it was pretty close to the mark in 2015), there will be turmoil in the markets in the morning. The FTSE 100 index closed on Thursday down 0.3% at 7,449.98. Ten-year gilt yields rose three basis points to 1.03%. That left share prices close to a record high, and gilt yields close to a record low. That leaves plenty of scope for disappointment.

On the plus side, this…Continue reading

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ApprovedBusinessBusiness and finance

How sham food became big business in Japan

GUESTS to the factory of Tsuyoshi Iwasaki are presented with a rasher of bacon. The succulent marbled sliver is branded with his name, title and e-mail address—an apt introduction to the owner of Japan’s biggest manufacturer of replica food. At the headquarters of Iwasaki Co on the outskirts of Tokyo, racks of golden-brown gyoza jostle for attention with boat-shaped dishes of lustrous raw tuna, bowls of creamy ramen and a dozen pinkish scallops in iridescent shells. The acrid smell of resin and paints is the only hint that everything on show is utterly tasteless.

Most of these Japanese sampuru, from the word “sample”, will go on display in restaurant windows, from fast-food outlets to izakaya (bars), throughout the east of the country, in the hope of luring hungry customers. A sister company, managed by Mr Iwasaki’s brother, covers the western half of Japan. Together they make over ¥5bn ($46m) in annual…Continue reading

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ApprovedBusinessBusiness and finance

How retailers are watching shoppers’ emotions

In the mood for buying?

FOR eight months up to this April, a French bookstore chain had video in a Paris shop fed to software that scrutinises shoppers’ movements and facial expressions for surprise, dissatisfaction, confusion or hesitation. When a shopper walked to the end of an aisle only to return with a frown to a bookshelf, the software discreetly messaged clerks, who went to help. Sales rose by a tenth.

The bookseller wants to keep its name quiet for now. Other French clients of the Paris startup behind the technology, Angus.ai, are testing it in research shops that are not open to the public. They include Aéroports de Paris, an airport owner; LVMH, a luxury conglomerate; and Carrefour, a chain of hypermarkets. In a test at a Mothercare shop in Tallinn, Estonia, software from Realeyes, an emotion-detection firm based in London, showed that shoppers who entered smiling spent a third more than others.

Simple video yields a lot of insight. But…Continue reading

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ApprovedBusinessBusiness and finance

President Trump wants to privatise air-traffic control

IN JUNE 1956 a TWA Constellation collided with a United Air Lines DC-7 over the Grand Canyon in Arizona, killing all 128 people on both aircraft. At the time it was the worst ever airline disaster. Struggling with outdated technology and a post-war boom in air travel, overworked air-traffic controllers failed to spot that the planes were on a collision course.

That crash led to the creation of a new body, which became the Federal Aviation Administration (FAA), in charge of running and modernising the world’s biggest air-transport system. With that system again struggling to keep pace with demand, Donald Trump thinks it is time to privatise America’s air-traffic control service. This week the president outlined a plan to turn air-traffic control into a separate non-profit entity financed by user fees, instead of the present patchwork of taxes and grants. Shorn of its air-traffic responsibility, the FAA would become a safety body.

America’s air-traffic system…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A state bail-out of Monte dei Paschi draws near

Not the world’s oldest customer

HELP is at hand for the world’s oldest bank. On June 1st the European Commission said it had agreed in principle to a bail-out by the Italian government of Monte dei Paschi di Siena, founded in 1472. For years Monte dei Paschi, Italy’s fourth-biggest bank by assets, has lurched from crisis to crisis. Last July it flunked a test by European supervisors of its capital strength. In December a private-sector restructuring scheme came to naught and the state decided to step in.

The details, including the size of the bail-out, have yet to be hammered out. In December the European Central Bank (ECB) estimated that Monte dei Paschi would need €8.8bn ($9.2bn) in capital to withstand the “adverse scenario” in last summer’s test. The Bank of Italy reckoned that the state’s share would be €6.6bn.

That included €2bn to compensate retail investors in the bank’s junior bonds, many of them ordinary customers….Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Banco Popular fails and is bought by Santander

EVEN a bank failure can be presented as a triumph. This week Banco Popular, a big Spanish lender, endured a run. Depositors were said to be withdrawing €2bn ($2.2bn) a day. The bank lost half its stockmarket value in four days, as a self-imposed deadline to find a saviour loomed. On June 6th, it was declared by the Single Resolution Board (SRB), an independent agency of the European Central Bank formed in 2015 and charged with winding down banks, to be “failing or likely to fail”. The next morning, Santander, Spain’s biggest bank, announced its purchase for the symbolic sum of €1 ($1.10). It is to raise €7bn in capital to help absorb Popular’s property-related losses.

Spain’s government, the European Commission and Santander all cheered the outcome as a model European response to a bank crisis. Shareholders and junior bondholders in Popular have been wiped out. Spanish ministers pointed out that taxpayers would not have to pay for a rescue of the sort arranged for Bankia, a giant savings bank nearing collapse, when…Continue reading

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ApprovedBusinessBusiness and finance

America’s number two ride-hailing firm

ONE firm’s bad news is often another’s good fortune. For years Lyft, an app that offers on-demand rides, was outdone by its seemingly unstoppable rival, Uber, which zoomed into new markets and grabbed a near-$70bn valuation, the largest of any private American tech firm in history. Uber does not report a share price that would register its recent troubles, which include one investigation into alleged intellectual-property theft and another into its workplace culture. But that Lyft’s market share in America has risen from 18% five months ago to 25% now (according to TXN Solutions, a data provider) is a gauge of the larger firm’s crisis.

Lyft is far from a typical Silicon Valley company. Unlike Uber, it does not lust for world domination and it operates only in America. Nor does it take itself especially seriously. For years it identified its drivers by pink, fuzzy moustaches fastened to the front of cars, and encouraged riders to fist-bump their drivers and sit in the front seat…Continue reading

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