Posts in category Business and finance


ApprovedBusiness and financeFINANCEFinance and economics

Venezuela seeks the restructuring of its massive foreign debts

Maduro has a cunning plan. Maybe

INVESTORS have long seen a default on Venezuelan sovereign debt as a question of when, not if. Its bonds have been priced at levels implying imminent bankruptcy, but somehow the cash-strapped oil exporter has stayed afloat. Until now. On November 2nd Nicolás Maduro, the country’s authoritarian president, announced that he would order a “refinancing and restructuring” of foreign debt worth about $105bn. The prices of government bonds fell by up to half. Markets braced themselves for one of history’s most complex sovereign-debt renegotiations.

Mr Maduro’s brief statement was cryptic as to the concrete steps he will take. He invited “everyone involved in foreign debt” to talks in Caracas, the capital, on November 13th. Many creditors want a neutral venue. Moreover, Mr Maduro appears to have pre-emptively dashed any hope of a voluntary agreement by naming his vice-president, Tareck El Aissami, as head of his debt-restructuring committee. America’s Treasury…Continue reading

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ApprovedBusiness and financeFinance and economics

The New York Fed’s president announces his retirement

APPLICATIONS sought for leading Wall Street post. Perks: lovely office in Italianate palace; large staff. Duties: important role in setting interest rates (some vaguely defined other responsibilities). Requirements: eligibility for highest-level security clearance; tacit support in Washington, DC. Desirable but optional: broad knowledge of banking.

This week the New York Federal Reserve Bank announced that its president, Bill Dudley, will retire next year. He will leave a mixed legacy. He is thought to have given important help to Janet Yellen, the outgoing chair of the Federal Reserve. But he also presided over a steep decline in his institution’s influence over the banks that used to revere and fear it.

Located in America’s financial centre, the New York Fed has powers not vested in the country’s 11 other reserve banks. Its president has a permanent seat on the Fed committee that sets interest rates. Its trading desk puts board policies into effect. And it is the regulator responsible for many of the world’s largest…Continue reading

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Business and financeGulliver

Why Qatar Airways has bought 9.6% of Cathay Pacific

THIS morning’s news that Qatar Airways, a national carrier with global ambitions, has bought nearly 10% of Cathay Pacific, Hong Kong’s flag-carrier, came as a shock for financial markets. Shares in Cathay Pacific dropped in value by around 5% in the minutes after trading resumed first thing today. But the idea that Qatar Airways was the market for another acquisition came as no surprise for analysts in the aviation industry. Since 2015 Qatar has acquired 20% of IAG, a European group of airlines that flies 100m passengers a year, 10% of LATAM, Latin America’s biggest carrier, and 49% of Meridiana, an Italian carrier. It has even been invited by the Indian government to start up a new airline there with 100 jets. So why has Akbar al-Baker, Qatar Airways’ outspoken chief executive, gone on a shopping spree worth billions of dollars? 

On the face…Continue reading

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ApprovedBusiness and financeFinance and economics

A massive trove of data on offshore transactions is leaked

IN APRIL 2016, the International Consortium of Investigative Journalists (ICIJ) dropped a bombshell. Its articles about the “Panama Papers”, a leaked trove of documents which had been stolen from Mossack Fonseca, a Panama-based law firm, sent shock waves round the world—felling the leaders of Pakistan and Iceland, leading to multiple arrests and pushing several countries to tighten laws related to offshore financial dealings. The revelations also caused a further hardening in public attitudes towards offshore finance, which had been souring since the global financial crisis.

Now the ICIJ and its 95 media partners around the world—including the BBC and the New York Times—are back with another cache of pilfered files, this time dubbed the “Paradise Papers”. This latest batch of revelations, the organisation’s sixth substantial leak investigation, began on November 6th and will be rolled out over a week. It shines light on offshore transactions linked to hundreds of wealthy clients of Appleby, a Bermuda-based law…Continue reading

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Business and financeGulliver

Southwest Airlines tries to bring music concerts to the skies

LAST week brought some good news for those who are fans of both flying and country music. Warner Music Nashville, a record label, and Southwest Airlines announced that they will be bringing concerts to the skies. The scheme is an expansion of the airline’s existing “Live at 35” series, in which bands surprise passengers by playing a few songs in the plane’s cabin. Devin Dawson (pictured), an artist on the label, marked the occasion with a performance on a flight from Nashville to Philadelphia. He told Billboard, a music publication, that:

Some people don’t really enjoy flying; some people get very nervous and don’t like it. I hope that something like this [performance] is just a cool surprise for some [passengers] that helps them forget about their everyday woes, and I’ll just play a couple of songs to make them smile.

However, Mr Dawson’s enthusiasm was not…Continue reading

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Business and financeGulliver

Smoking rooms are disappearing from hotels

TO THE list of endangered travel facilities—which includes pay phones, communal aeroplane screens and concierges—there is one more to add: smoking rooms. Even a few years ago, guests were routinely asked whether they would prefer a smoking room or not. But today fewer hotels are offering smoking rooms and those that do have a vanishingly small supply.

According to the latest report from the American Hotel and Lodging Association, a trade group, the share of hotel rooms that are non-smoking has steadily risen from 74% to 97% over the last decade. And the proportion of hotels that only offer non-smoking rooms has jumped from 38% in 2008 to 85% last year.

For a business traveller with a tobacco habit, then, there are few options. Those seeking a dash of glamour will struggle, as 97% of luxury hotels do not have smoking rooms. Only among budget-hotel category—the lowest price segment of five listed in the survey—do the majority of…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Asian households binge on debt

ONE of the more persistent beliefs about the global economy is that Asians are more frugal than others. Explanations have drawn on culture (the self-discipline of Confucianism), history (memories of privation) and public policy (flimsy social safety-nets forcing people to save). For Lee Kuan Yew, the founding father of Singapore, and other theorists of “Asian values”, thrift was one of them. Whatever the true reason, data long supported the basic claim that Asian households were indeed careful with their cash. But over the past few years consumers across the region have done their best to prove that prudence was perhaps just a passing phase.

Household debt in advanced economies has generally declined as a percentage of GDP since the 2008 global financial crisis, according to the Bank for International Settlements. In a number of Asian countries, however, it has been going in the opposite direction (see chart). The biggest increase has been in China, where households have borrowed about $4.5trn over the past decade. But Chinese…Continue reading

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Catalonia and the perils of fiscal redistribution

POPULISM is the weapon not just of the downtrodden. As the crisis in Catalonia demonstrates, the rich have economic anxieties of their own. Catalonia has an identity distinct, in important ways, from that of the rest of Spain. But the recent drive for independence has been energised by anger over the flow of fiscal redistribution from rich Catalans to their countrymen: people seen, in parts of the restless north-east, as thankless and lazy as well as alien. Paradoxically, globalisation has inflamed separatism around the world by raising the question Catalans now confront: to whom, exactly, do we owe a sense of social responsibility?

Every country or restive region has its own idiosyncratic history. Yet over the long run national borders are surprisingly malleable. Some circumstances offer better prospects for the small and newly independent than others. The smaller the country, the more easily its government can satisfy its people’s political preferences. A broadly satisfying compromise…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Investors call the end of the government-bond bull market (again)

FOR the umpteenth time in the past decade, a great turning-point has been declared in the government-bond market. Bond yields have risen across the world, including in China, where the yield on the ten-year bond has come close to 4% for the first time since 2014. The ten-year Treasury-bond yield, the most important benchmark, has risen from 2.05% in early September to 2.37%, though that is still below its level of early March (see chart).

Investors have been expecting bond yields to rise for a while. A survey by JPMorgan Chase found that a record 70% of its clients with speculative accounts had “short” positions in Treasury bonds—ie, betting that prices would fall and that yields would rise. Meanwhile a poll of global fund managers by Bank of America Merrill Lynch (BAML) in October found that a net 85% thought bonds overvalued. In addition, 82% of the managers expected short-term interest rates to rise over the next 12 months—something that tends to push bond yields…Continue reading

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As the global economy picks up, inflation is oddly quiescent

A FEW years ago, the news about the euro-zone economy was uniformly bad to the point of tedium. These days, it is the humdrum diet of benign data that prompts a yawn. Figures this week show that GDP rose by 0.6% in the three months to the end of September (an annualised rate of 2.4%). The European Commission’s economic-sentiment index rose to its highest level in almost 17 years. Yet when the European Central Bank’s governing council gathered on October 26th, it decided to keep interest rates unchanged, at close to zero, and to extend its bond-buying programme (known as quantitative easing, or QE) for a further nine months.

The central bank said it would slow down the pace of bond purchases each month, to €30bn ($35bn) from January. But Mario Draghi, the bank’s boss, declined to set an end-date for QE. A hefty dose of easy money will be necessary, he argued, until inflation durably converges on the ECB’s target of just below 2%. It shows few signs of doing so, despite the…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Jerome Powell is poised to be named chairman of the Fed

Heir to the chair?

YOU could forgive Janet Yellen, the chair of the Federal Reserve, for feeling peeved. With unemployment at just 4.2%, and inflation at 1.6%, she is close to achieving the Fed’s two goals of curbing joblessness and pinning price rises at 2%. Ms Yellen is a Democrat appointed by Barack Obama in 2014. The tenures of past three Fed chairs were all extended by presidents from the other party. Yet as we went to press, President Donald Trump was expected to nominate Jerome Powell, a Republican on the Fed’s board, to replace Ms Yellen.

If picked, Mr Powell—also an Obama appointee—would stand out from recent incumbents. He would be the first Fed chairman since William Miller, who left office in 1979, with no formal economics training; and, according to the Washington Post, the richest since the 1940s.

Mr Powell, who is 64, is a lawyer-turned-banker. His first role in Washington was at the Treasury during the…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

October 30th marked the 70th birthday of the WTO’s precursor

Britain signs up

SUPERLATIVES surrounded the General Agreement on Tariffs and Trade (GATT) when it was signed on October 30th 1947. A press release heralded it as “the most far-reaching negotiation[s] ever undertaken in the history of world trade.” The Economist grumbled it was “one of the longest and most complicated public documents ever issued—and one of the hardest to comprehend.” The Daily Express, a British newspaper, growled: “The big bad bargain is sealed.”

The agreement’s complexity matched the tangle of global trade affairs. In the preceding decades a thicket of protectionism had strangled commerce and slowed recovery from the Depression of the 1930s. The GATT’s length matched its scope. It included both tariff cuts and promises to forswear new duties. Covering 23 countries responsible for 70% of world trade, it came to embody the rules-based multilateral system.

After 48…Continue reading

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ApprovedBusinessBusiness and finance

The airline industry’s most outspoken boss goes global

AIRLINE bosses are often household names due to their attention-seeking behaviour—from the foul-mouthed rants of Michael O’Leary, chief executive of Ryanair, to the model-flanked antics of Richard Branson of Virgin Atlantic. But even in an industry filled with characters, Akbar al-Baker, Qatar Airways’ chief executive, stands out. He is known in the industry for behaving unpredictably at press conferences and for his colourful attacks on rival airlines. The word “crap” often comes up, as a description for new jets from Airbus and Boeing, and also (in a quote from July): “there is no need to travel on these crap American carriers” on which “you will be served by grandmothers”.

Mr Baker could do with some allies just now. Since June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have imposed a blockade on Qatar, banning its flag carrier’s jets from their skies. That has resulted in the cancellation of over 50 daily flights to these countries,…Continue reading

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ApprovedBusinessBusiness and finance

Many Japanese-made cars enjoy an afterlife in Myanmar, but not for much longer

Gridlock in Yangon

THE Japanese make cars that last but replace them relatively quickly. The average car in Japan is three years younger than in America. This combination of durable manufacturing and dutiful consumption of a prized national product works out well for the rest of the world; many countries import older Japanese cars in bulk. Secondhand vehicles fill vast parking lots in Japan’s port cities, awaiting shipment to New Zealand, the United Arab Emirates and elsewhere.

The third-most-popular destination is Myanmar, which imported over 80,000 used Japanese vehicles in the first nine months of this year, according to Japan’s International Auto Trade Association. Drivers believe that Toyotas, Hondas and Nissans can stand up to the country’s pockmarked roads, a faith not yet shown in South Korean and Chinese cars.

There is only one problem, which is that Japan drives on the left, Myanmar on the right. As a consequence, most of Myanmar’s…Continue reading

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ApprovedBusinessBusiness and finance

IKEA undertakes some home improvements

You snooze, you lose

ON A Sunday afternoon, just beyond London’s M25 ring road, shoppers participate in the ritual that is a trip to IKEA. Fuelled by a lunch of Swedish meatballs, they negotiate their way around the 400,000-square-foot maze of a store, past children playing hide and seek and couples arguing over the merits of a PAX over a HEMNES wardrobe. Hours later, they emerge, wearily pushing trolleys loaded with flat-pack furniture and far more tea lights than they had intended to buy. The joy of assembly still awaits them.

This experience has changed remarkably little since the late 1950s, when IKEA, which is still privately owned, set up its first store in southern Sweden and found that people would travel long distances for low-cost, self-assembled goods. IKEA has become the world’s largest seller of furniture, with over 400 shops around the world and €38bn ($42bn) of revenue.

But now it is acknowledging that customers might want to…Continue reading

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ApprovedBusinessBusiness and finance

A merger between CVS Health and Aetna could be what the doctor ordered

STANLEY and Sidney Goldstein would scarcely recognise their creation. In 1963 the brothers opened a humble storefront in Lowell, Massachusetts, selling health and beauty products. Determined to put customers first, they named their enterprise Consumer Value Stores. Today the Goldsteins’ startup, soon afterwards sold to a bigger firm, is nothing short of a health-care Goliath.

Revenues at CVS Health reached $177bn last year, riches which come from 9,700 retail pharmacies and from its operations in mail-order drugs and sales of more expensive speciality medicines. The firm commands nearly a quarter of the American market for prescription drug sales (see chart). It is also the biggest pharmacy-benefit manager (PBM) in America, a type of middleman that negotiates bulk discounts on drugs with large pharmaceutical firms on behalf of employers and insurers.

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Japan Inc gingerly embraces more foreigners

MICHAEL WOODFORD, the first non-Japanese president of Olympus, likened the camera-maker’s board members who sacked him in 2011 to “children in a classroom”. Mr Woodford had confronted Tsuyoshi Kikukawa, the company’s imperious chairman, over a $1.7bn hole in its finances. Mr Kikukawa responded by orchestrating a show of hands in a boardroom coup that sent the Englishman packing. It all fitted a cliché of Japan’s boardrooms as an all-Japanese, all-male club where wizened bosses ruthlessly enforce wa, or harmony.

Gradually, the serenity is being disrupted. Nearly 15% of companies in the Nikkei 225 stock index now have at least one non-Japanese on their boards. That is still less than half the share in Britain’s FTSE 100, but it is up from 12% in 2013 and the trajectory seems set. Japan’s biggest bank, Mitsubishi UFJ Financial Group, and Takeda, its largest pharmaceuticals company (which in 2015 appointed its first foreign chief executive, a Frenchman) announced the appointment of foreign directors…Continue reading

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Dark tourism spooks its way into the mainstream

ONE recent morning in Salem in the state of Massachusetts, a witch ran out of wands. Teri Kalgren, the owner of Artemisia Botanicals, an apothecary and magic shop, attributed the shortage to a witch-inspired boom. People have long flocked to Salem to learn about the infamous witch trials of 1692, in which Puritan hysteria led to the executions of 20 people (and two dogs). But since 1982 when the city introduced Haunted Happenings, a daylong Halloween festival for local families, the event has expanded to a commercial celebration lasting a month that attracts 500,000 tourists.

Last year tourism pumped $104m into Salem and funded some 800 jobs. The revenues have been increasing by 5-6% every year, says Kate Fox of Destination Salem, the city’s marketing arm. Tourists can buy a spell kit, visit a witch museum, take a walking tour (ghostly, feminist or literary-themed) and have their fortune told. On the opposite coast, Scott Michaels has watched his…Continue reading

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Business and financeGulliver

A black-rights group warns would-be passengers about American Airlines

TRAVEL advisory notices, which alert passengers to the risks of going to certain places, are standard business for frequent flyers. But last week brought an unusual one. The National Association for the Advancement of Coloured People (NAACP), America’s oldest civil-rights organisation, warned black flyers about the dangers of travelling with American Airlines.

The NAACP says that  “a pattern of disturbing incidents” has been reported by black passengers specifically about American Airlines. Such incidents “suggest a corporate culture of racial insensitivity and possible racial bias”. Of the four incidents that the NAACP cite, two involved prominent black activists, PR Lockhart notes at Vox, a news site. Although the NAACP does not mention them by name, one is thought to be Rev William Barber, a former NAACP leader in North Carolina. He was removed from a flight from Washington, DC, after he responded to rude comments…Continue reading

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Business and financeGulliver

Military and civil-aviation bosses are stepping up their efforts to recruit new pilots

FOR MANY people, the Hollywood blockbuster “Top Gun” captures the allure of becoming a pilot. In it, fighter-pilot trainees don aviator sunglasses and flight suits, and zipp about the skies to a soaring 1980s soundtrack. But despite such pop-culture appeal, America’s Air Force is struggling to capture the imagination of would-be recruits. This year it will be short of around 900 new airmen.

To counter this, the Air Force is stepping up its efforts to recruit new cadets. This month they introduced a $35,000 signing-on bonus for newly hired military airmen, the first new incentive of its kinds since 1999. Commercial carriers, too, are trying to entice more newcomers with better financial rewards. The average pay for new pilots in that sector has nearly tripled from $20,000 to $59,000 in the past three years.

One of the main barriers for would-be pilots is training. To become a pilot requires an investment of $200,000, often more than student loans will cover. In addition trainees are required by law to fly 1,500 hours…Continue reading

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Will corporate tax cuts boost workers’ wages?

THE president’s tax promise has always been clear: he will reduce the amount middle-earners, but not rich Americans, must pay. Yet every time Donald Trump releases a plan, analysts say it does almost the opposite. The Tax Policy Centre, a think-tank, recently filled in the blanks in the latest Republican tax proposals and concluded that more than half of its giveaways would go to the top 1% of earners. Their incomes would rise by an average of $130,000; middle-earners would get just $660. The White House maintains that tax reform will deliver a much heftier boost to workers’ pay packets. Who is right?

The disagreement boils down to who benefits when taxes on corporations fall. The Tax Policy Centre says it is mainly rich investors. But in a report released on October 16th, Mr Trump’s Council of Economic Advisers (CEA) claimed that cutting the corporate-tax rate from 35% to 20%, as Republicans propose, would eventually boost annual wages by a staggering $4,000-9,000 for the average household.

The claim has sparked a debate among economists that is as ill-tempered as it is geeky. Left-leaning economists are incredulous. Writing in the Wall Street Journal, Jason Furman, who led the CEA under Barack Obama, pointed out that if the report is right, wage increases would total about three to six times the cost of the tax cut. Larry…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

India recapitalises its state-owned banks

Pillars to be reinforced

ONE of the perks of owning a bank is the ability to tap it when you need money. The Indian government, which has majority stakes in 21 lenders, is no exception. As it happens, it needs to finance a bail-out of the banks it owns, most of which are in trouble. So under a cunning plan unveiled on October 24th, the ailing banks will lend the government 1.35trn rupees ($21bn), about a third of their combined market value. The government will reinvest this money in bank shares, thus ensuring they no longer need a bail-out.

Steadying a tottering financial system is never a graceful exercise, as American and European authorities discovered after the financial crisis. India’s lenders withstood the meltdown of 2007-08 well, but then embarked on an ill-advised lending spree, backing lots of infrastructure projects that got snarled in bureaucracy. Bad loans piled up. State-owned lenders, which account for around two-thirds of the sector, now have…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Millennials are doing better than the baby-boomers did at their age

ALL men are created equal, but they do not stay that way for long. That is one message of a report this month by the OECD, a club of 35 mostly rich democracies. Many studies show how income gaps have evolved over time or between countries. The OECD’s report looks instead at how inequality evolves with age.

As people build their careers, or don’t, their incomes tend to diverge. This inequality peaks when a generation reaches its late 50s. But it tends to fall thereafter, as people draw redistributive public pensions and quit the rat race, a contest that tends to give more unto every one that hath. Old age, the OECD notes, is a “leveller”.

Will it remain so? Retirement, after all, flattens incomes not by redistributing from rich seniors to poor, but by transferring money to old people from younger, working taxpayers. There will be fewer of them around in the future for every retired person, reducing the role of redistributive public pensions.

One logical response to the diminishing number of workers per pensioner is to raise the retirement age. But that will exacerbate old-age inequality, if mildly. Longer careers will give richer workers more time to compound their advantages. And when retirement eventually arrives, the poor, who die earlier, will have less time to enjoy their pensions.

Today’s youngsters may resent having to provide…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Italy’s fourth-biggest bank returns to the stockmarket

A TELEVISION advertisement for Monte dei Paschi di Siena begins with a toddler tumbling and a gymnast stumbling. “Falling is the first thing we learn,” declares the voice-over. “The second is getting up again.” Italy’s fourth-biggest bank and the world’s oldest, which was bailed out by the Italian government in July, has had several bruising falls over the years. On October 25th it returned to the stockmarket after a ten-month hiatus—the latest stage of its plan to get back on its feet. The shares closed higher on the day, at €4.55 ($5.37), but still far below the €6.49 the government paid.

Trading was suspended last December, after a failed private-sector attempt to save the bank through a share issue. The government said it would get involved. In July the European Commission approved a €8.1bn “precautionary recapitalisation”. European rules say banks receiving such aid must be solvent, the capital injection must not distort competition and the capital…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Firms should make more information about salaries public

SWEDES discuss their incomes with a frankness that would horrify Britons or Americans. They have little reason to be coy; in Sweden you can learn a stranger’s salary simply by ringing the tax authorities and asking. Pay transparency can be a potent weapon against persistent inequities. When hackers published e-mails from executives at Sony Pictures, a film studio, the world learned that some of Hollywood’s most bankable female stars earned less than their male co-stars. The revelation has since helped women in the industry drive harder bargains. Yet outside Nordic countries transparency faces fierce resistance. Donald Trump recently cancelled a rule set by Barack Obama requiring large firms to provide more pay data to anti-discrimination regulators. Even those less temperamentally averse to sunlight than Mr Trump balk at what can seem an intrusion into a private matter. That is a shame. Despite the discomfort that transparency can cause, it would be better to publish more…Continue reading

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ApprovedBusinessBusiness and finance

How leading American newspapers got people to pay for news

Past …

SOMETIMES it feels like the 1970s in the New York Times and Washington Post newsrooms: reporters battling each other to break news about scandals that threaten to envelop the White House and the presidency of Donald Trump. Only now their scoops come not in the morning edition but in a tweet or iPhone alert near the end of the day.

It is like old times in another way: both newspapers are getting readers to pay, offsetting advertising revenue relinquished to the internet. After years of giving away scoops for nothing online, and cutting staff, the Times and Post are focusing on subscriptions—mostly digital ones—which now rake in more money than ads do.

Their experiences offer lessons for the industry in America, although only a handful of newspapers have a chance at matching their success. A subscription-first approach relies on tapping a…Continue reading

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