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ApprovedBusinessBusiness and finance

Antoine Frérot is overhauling France’s water-and-waste champion

Bin there, done that

WALK along Sugar Road in Aubervilliers, north-east of Paris, and it is obvious how a formerly scruffy area is gentrifying. New office blocks, a shopping mall and bistros have appeared in recent years, filling spaces left after wrecking balls flattened warehouses. Along a canal previously used by barges, commuter ferries deliver workers from richer parts of the city. A district long known for slums, cheap housing and support for the Communist Party is becoming a business hub—Chanel, a fashion firm, as well as several film producers and studios, have moved in and big banks are expected next.

The district’s centrepiece is a U-shaped glass block, the headquarters of Veolia, the world’s largest water-and-waste group. The building opened in January, after the firm moved out of central Paris to save costs and concentrate 2,000 of its 163,000 staff in one spot. Moving to a rehabilitated area carries symbolism for Veolia, which is experiencing…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

America’s trade policy has a new face, Robert Lighthizer

AS IS well known, Donald Trump wants the press to focus not on what he calls “fake” news about himself, but on his administration’s achievements. On May 12th he helpfully tweeted an example: “China just agreed that the US will be allowed to sell beef, and other major products, into China once again. This is REAL news!”

His first trade deal was real, if short of the “Herculean accomplishment” touted by his commerce secretary, Wilbur Ross. It promised American credit-rating agencies, payment companies and beef exporters new access to the Chinese market, and set a deadline for progress, of July 16th.

Parts of the deal lack detail, so it may yet disappoint. China has been offering since 2006 to open its market to American beef, but with hefty restrictions. The World Trade Organisation (WTO) had already ruled that China’s restrictions on foreign payment-card companies broke its rules. And the Chinese incumbent is so entrenched that American cards may still struggle to compete.

Maybe Mr Trump picked the wrong “real” news. More important for his trade agenda was the Senate’s confirmation on May 11th of Robert Lighthizer as the new United States Trade Representative (USTR). He will matter much more for economic relations with China than a hasty mini-deal. And now that he is in place, renegotiation of the North American Free-Trade…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A surge in the value of crypto-currencies provokes alarm

IT IS hard to predict when bubbles will pop, in particular when they are nested within each other. It helps to keep this image in mind when considering one of the biggest surges in asset values of recent years: the market value of all the world’s crypto-currencies has trebled since the beginning of the year, and is now worth more than $60bn (see chart).

Bitcoin is the best known of these currencies, especially after hackers this month instructed victims to pay ransoms in the anonymous digital cash in order to get their computer files decrypted. Not that many bitcoins exist: there are about 16.3m of them, with only 1,800 new ones minted every day. But growing demand has pushed bitcoin’s price to a record recent high of about $1,830, up from $450 a year ago.

Problems abide. Earlier this year some of the biggest exchanges, such as Bitfinex, experienced problems with their correspondent banks and were unable to pay out real-world currencies to account-holders. To get their money…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Numismatics—acquiring old coins—outperforms other investments

A penny for your dreams

BEHIND the heavily fortified door of Stack’s Bowers, a gallery of rare coins in New York, smiling salesmen show off their precious wares neatly displayed in pristine glass cabinets. To the untutored eye, it looks like pocket change. Numismatists, who study the history and art of old money, see well-preserved coins as aesthetic masterpieces worth many times their face value. At an auction organised by Stack’s Bowers on March 31st, an American cent from 1793 (pictured) sold for $940,000, becoming the costliest penny ever.

An index of tangible alternative asset classes compiled by Knight Frank, a consultancy, shows that returns on rare coins over ten years to the end of 2016 were 195%, easily beating art (139%), stamps (133%), furniture (-31%) and the S&P 500 index (58%). Coins are more portable than paintings or furniture, and boast a higher value-to-volume ratio. Stamps may be lighter, but, come doomsday, cannot be melted…Continue reading

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ApprovedBusinessBusiness and finance

Dow Chemical shows how American industrials and globalisation mix

WHAT does it take for an American industrial champion to succeed in an age of globalisation and impatient investors? Some observers argue that it has become impossible. The world is just too nasty and unfair, they bleat. Perhaps they should take a look at Dow Chemical, a firm born in Michigan in 1897 that has hustled hard enough to be at the top of its industry 120 years later.

When Dow completes its planned $130bn merger with DuPont, a longtime rival, probably at the end of this year, it will become the largest chemical company in the world by sales. This new colossus will keep changing—in 2018-19 the plan is for it to split into three specialised firms. “New Dow” will focus on selling chemicals to the automotive, construction and packaging industries. The other two smaller companies will concentrate mainly on the agricultural and electronics industries.

This is a good moment, before the three-way split, to take stock. Being in the chemicals business is like swimming in a…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Insurers get a new global accounting regime

LISTED firms in over 120 countries, including all large economies bar America, issue financial statements according to international financial reporting standards (IFRS) set by the International Accounting Standards Board (IASB). One industry, however, has been in practice free to keep using divergent national standards: insurance. That, too, is about to change. IFRS 17, issued on May 18th and coming into force in 2021, is the first standard for insurers to require consistent accounting across all countries using IASB rules (ie, again excluding America).

It has a wide gulf to bridge. In one example, looking at identical financial results reported under two countries’ standards, revenue differed by a quarter and net income by nearly two-fifths. Some places, such as the EU, require insurers to use updated discount rates to value future cashflows. Others, including America and many parts of Asia, allow the use of historical discount rates and assumptions valid at the time the policy was…Continue reading

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ApprovedBusinessBusiness and finance

Embattled Toshiba tries to sell its flash-memory unit

ONCE an electronics and nuclear-power empire that was the pride of corporate Japan, Toshiba is threatened with a stockmarket delisting. It missed a deadline to file its annual results, on May 15th, for the third time this year. In earnings estimates (auditors are refusing to sign off on its results), it warned of a loss close to ¥1trn ($9bn) for the financial year that ended in March. That is the steepest loss on record for a Japanese manufacturer.

To make things worse, Western Digital, an American joint-venture partner in its semiconductor unit, last week took legal action to block Toshiba’s plan to shed their flash-memory business. The case could drag on, but Toshiba needs a sale. That would help cover a write-down of billions of dollars from Westinghouse Electric, its bankrupt American nuclear-power unit.

The group’s chip business accounted for almost one-fifth of revenue in the nine months to December 2016; together, Toshiba and SanDisk, a subsidiary of Western Digital,…Continue reading

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ApprovedBusinessBusiness and finance

Hunger for vinyl means a chronic shortage of pressing machines

Well under 45

FOR young hipsters and middle-aged sentimentalists alike, the resurgence of vinyl is cause for celebration. Since 2010 sales of vinyl records in America have tripled. Britain’s vinyl industry saw its biggest gains for 25 years in 2016. Big supermarkets are extending the amount of space that they allocate to the discs and even the turntables that twirl them have found a place on Amazon’s best-seller lists.

Meeting this demand has been tricky. Vinyl accounted for 76% of total album sales in 1973; by 1994 this had dropped to 1.5% as compact discs (CDs) took over. By then the bulk of the world’s vinyl-pressing plants had closed and most of their cumbersome machines had gone to the scrapyard. Only a very few plants that could diversify into new areas of printing and production stayed open. But they did so without any further investment in vinyl, so the few machines that kept on producing often date back to the 1960s.

GZ Media, a Czech…Continue reading

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ApprovedBusinessBusiness and finance

Coca-Cola’s new boss tries to move beyond its core product

FEW companies are as defined by a single product as Coca-Cola. The firm has sold the sweet dark soda since 1886. At its headquarters in Atlanta, archives house the advertisements that sowed Coke in the world’s consciousness: posters urging consumers to “Have a Coke and a Smile”; Norman Rockwell’s 1935 painting of a boy fishing, Coke bottle in hand; a Coca-Cola record with tunes sung by Ray Charles, Aretha Franklin and The Who; advertisements with a red-coated, bearded Santa Claus—it was Coca-Cola that popularised the image of Santa in the 20th century.

Today Coca-Cola has $42bn in revenue and is available “within an arm’s reach of desire”, as the firm puts it, in every country but Cuba and North Korea. Its distribution is so broad, its marketing so expert that the Gates Foundation has urged vaccine campaigns to mimic its strategy. The question for James Quincey, an insider who took over as CEO this month, is whether Coca-Cola can move beyond Coke.

The company…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The markets are quiet. Too quiet?

HAN SOLO, a hero from the Star Wars movies, has a habit of saying, at tense moments, “I have a bad feeling about this.” Many commentators are echoing this sentiment after a recent fall in the Volatility Index, or Vix, below ten. Their fears deepened on May 17th, when the Vix lurched above 15 and American stockmarkets had their worst day in eight months. Incessant turmoil in the White House at last seemed to take its toll.

A low Vix reading is usually seen as a sign of investor complacency. The previous two occasions on which the index fell below ten were in 1993 and early 2007 (see chart). One preceded the bond market sell-off of 1994 and the other occurred just before the first stages of the credit crisis.

The value of the Vix relates to the cost of insuring against asset-price movements via the options market. An option gives the purchaser the right, but not the obligation, to buy (a call) or sell (a put) an asset at a given price before a given date. In return, like…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The British government sells its last shares in Lloyds bank

IN OCTOBER 2008, amid post-Lehman pandemonium, Britain’s Treasury said it would pump £37bn (then $64.4bn) into three big banks: £20bn into the stricken Royal Bank of Scotland (RBS); the rest into Lloyds TSB and HBOS, a sickly rival that ministers had cajoled Lloyds into buying. After rights issues in 2009, in all the state paid £20.3bn for 43.4% of the merged Lloyds Banking Group. On May 17th Lloyds said the last state shares had been sold.

The government has recouped £21.2bn, including £400m-plus in dividends, since it started to unload its stake in 2013. The return may sound slim, but had big lenders imploded the costs of the financial crisis would surely have been far greater even than they were. (Not surprisingly, anyone holding Lloyds TSB or HBOS shares since before the crisis has made a heavy loss.)

The group is Britain’s biggest retail bank. Its brands—Lloyds Bank, with its “black horse” logo, Halifax and Bank of Scotland—boast around…Continue reading

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ApprovedBusiness and financeFinance and economics

A British firm plans a secondary market for crowd-funded shares

EVERYONE would like a piece of the next Google or Facebook. But the big venture-capital (VC) firms do not usually raise money from small investors. And some entrepreneurs complain that it is hard to get noticed by the hotshots in the VC industry. Hence the enthusiasm for crowd-funding, where small investors can buy a stake in startup companies.

Seedrs, a British crowd-funding firm, was set up in 2012, and has backed 500 firms so far, raising a total of £210m ($271m) from more than 200,000 users. But there are two big problems with crowd-funding. First, it is risky: most startups fail. Second, investments tend to be illiquid—shareholders have to wait for a takeover or a stockmarket flotation to recoup their investment.

Seedrs is trying to solve the illiquidity problem by setting up a secondary market, where buyers and sellers can exchange shares. The new market will start operating this summer, and will allow trading for a week every month, starting on the first…Continue reading

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Sinclair Broadcast buys Tribune Media

AT A time when ever fewer people are watching television, it may seem improbable that the owners of local TV stations in America want to expand their empires. It turns out that they can hardly wait. On May 8th, just 18 days after a change in federal rules made the deal possible, Sinclair Broadcast Group announced that it would buy Tribune Media in a transaction worth $6.6bn, beating out interest from others including 21st Century Fox, which is owned by Rupert Murdoch. Sinclair will become America’s dominant owner of local TV stations.

The deal signals a broader interest in expanding what has been a surprisingly decent business in recent years. In America local TV stations tend to affiliate themselves with a national broadcast network, transmitting its content, including live sports. In exchange the stations make substantial payments. Despite falling viewership of network TV, the economics of local-station ownership have remained robust for two reasons.

First is the resilience of local TV advertising, especially in election years, says Mark Fratrik of BIA/Kelsey, a media consultancy. The ability of small TV stations to reach specific areas for local political races has proved difficult to match.

Second, TV stations have tapped a new vein of cash: retransmission fees, the payments they command from cable- and satellite-TV providers for their consent…Continue reading

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ApprovedBusinessBusiness and finance

The super-connector airlines face a world of troubles

WHEN a video of a passenger being dragged off a United Airlines flight went viral last month, the American carrier’s Middle Eastern rivals were quick to mock its customer service. Qatar Airways updated its smartphone app to say it “doesn’t support drag and drop”. The ribbing was justified. Over a decade of expansion, Qatar Airways, along with Emirates of Dubai, the world’s largest airline by international passenger miles travelled, and Etihad Airways of Abu Dhabi, wowed customers with superior service and better-value fares.

Passengers joined them in droves, abandoning hub airports in America and Europe as well as the airlines that use them. Over the past decade the big three Gulf carriers and Turkish Airlines trebled their passenger numbers, to 155m in 2015 (see chart). They went a long way to dominating long-haul routes between Europe and Asia. Most international airlines rely on travellers going from or to their home countries, but customers of the four “super-connectors”,…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Africa’s informal economy is receding faster than Latin America’s

COMMON to all men, according to Adam Smith, is “the propensity to truck, barter and exchange”. Less common is a willingness to report all of this enterprise to the authorities (which have a propensity to register, regulate and tax). South Africa’s spaza shops (convenience stores often run from people’s homes), Kenya’s jua kali (a Swahili term referring to the “hot sun” under which craftsmen traditionally made and sold their wares) or Senegal’s tight-knit networks of Mouride street peddlers—all contribute to the informal economy. This shadow economy, which includes unregistered enterprises and off-the-books activity by registered firms, is difficult to measure, almost by definition. But this week the IMF released new estimates of its size.

The fund’s economists inferred the size of the informal economy indirectly, based on more visible indicators that either cause informality (heavy taxes, high unemployment and patchy rule of…Continue reading

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