Tag: Approved

Will they Passera?

FROM the mists of Italian banking, new shapes are emerging. One is at last becoming flesh: on October 15th the shareholders of two lenders, Banco Popolare and Banca Popolare di Milano, approved a merger that has been months in the making. The substance of another—Banca Monte dei Paschi di Siena, the world’s oldest bank as well as Italy’s most troubled—is still shrouded, but it is likely to become clearer at a meeting of Monte dei Paschi’s board on October 24th.

The merged bank, to be called Banco BPM, will surpass Monte dei Paschi to become Italy’s third-largest lender. Its creation is a small triumph for Matteo Renzi, the centre-left prime minister. Last year Mr Renzi introduced a reform obliging Italy’s ten biggest popolari, or co-operative banks, to become joint-stock companies by the end of 2016. The hope was that this would spur takeovers, yielding fewer, stronger, more efficient banks.

The Banco BPM deal, which promises annual savings of €290m ($318m), or 10% of the combined cost base, is Mr Renzi’s first result. Two awkward obstacles stood in its…Continue reading

All wood, few trees

WALK through the workshop of Vinayak Home, a furniture-making outfit based in the outskirts of Jodhpur in the state of Rajasthan in north-west India, and the results of globalisation are evident. Sleek hardwood furniture that would suit Scandinavian interiors is being readied for shipment; carpenters distress the paint on a newly-made chest of drawers to make it look as if it has come straight from a flea market in Brooklyn. But the company’s order book suggests that globalisation is fading. Vinayak Home is one of a cluster of Rajasthan furniture-makers that used to do nothing except export to Europe and America, but nearly all of what they make today they ship into Indian living rooms.

Jodhpur, on the edge of a desert with few trees to feed sawmills, is an unlikely woodworking hub. But when tourists came to survey the arid landscape and the 15th-century fort that overlooks the city, many also admired the hardwood carvings by skilled artisans (pictured). When India liberalised its economy in the early 1990s, a small group of European exporting agents encouraged independent furniture-makers. Then volumes…Continue reading

When you’ve eliminated the impossible…

JOINING “Hamilton”, a Broadway show, and concerts by Adele, a British soul diva, on the list of tickets-to-kill-for in New York is a screening in an ugly new office building that recently popped-up in the East Village, a place best known for offbeat culture. There is a ten-week-long queue to see simulations by Watson, IBM’s cognitive artificial-intelligence platform.

Initially known for stunts such as beating the world’s best chess player, Watson has been seeking a wider audience. It has found a vast potential one in the world of financial regulation. Rules have become so sprawling and mysterious that even regulators have begun asking for a map. In response, a market is springing up: for “regtech”, fintech’s nerdy new offspring.

On September 29th, IBM announced the purchase of Promontory, a 600-strong consultancy whose senior staff include former officials from the Federal Reserve, the World Bank, the Securities and Exchange Commission and other regulators. The hope is that person and machine will combine into a vast business. Promontory was founded in…Continue reading

IN THE pharma business, Juno Therapeutics, a small firm based in Seattle, is just a stripling. It is three years old, has not a single drug approval to its name but is nonetheless valued at $2.8 billion. That value is derived from the fact that it is on the forefront of the most promising area of cancer treatments in decades: immuno-oncology.

Juno’s edge comes from its attempts to master one of the most important parts of the immune system: the T-cell. It is developing a so-called CAR-T therapy, in which its scientists extract T-cells from a cancer patient, modify them with gene therapy so that they can recognise cancer cells, and then put them back in the patient’s body ready to attack. The process has a reputation for inducing rapid remissions in cancers of the blood for patients who have exhausted all other options.

Small, innovative biotech firms such as Juno are intriguing because nowadays they are the main engine of global drug innovation. Alexis Borisy, a partner in Third Rock Ventures, a venture-capital firm in Boston, notes that pharma companies now buy in three-quarters of their pipelines, and develop only…Continue reading

THE most striking battle in modern business pits the techno-optimists against the techno-pessimists. The first group argues that the world is in the middle of a technology-driven renaissance. Tech CEOs compete with each other for superlatives. Business professors say that our only problem will be what to do with the people when the machines become super-intelligent. The pessimists retort that this is froth: a few firms may be doing wonderfully but the economy is stuck. Larry Summers of Harvard University talks about secular stagnation. Tyler Cowen, of George Mason University, says that the American economy has eaten all the low-hanging fruits of modern history and got sick.

Until recently the prize for the most gloom-laden book on the modern economy has gone to Robert Gordon of Northwestern University. In “The Rise and Fall of American Growth”, published in January, Mr Gordon argues that the IT revolution is a minor diversion compared with the inventions that accompanied the second industrial one—electricity, motor cars and aeroplanes—which changed lives profoundly. The current information upheaval, by contrast, is merely altering a narrow range of…Continue reading

JAMES CARVILLE, political adviser to Bill Clinton, the former president, famously said that he wanted to be reincarnated as the bond market so he could “intimidate everybody”. He was frustrated by the administration’s inability to push through an economic stimulus for fear of spooking investors and pushing bond yields higher.

More than 20 years later, the world looks very different. Many developed countries have been running budget deficits ever since the global financial crisis of 2008; their government debt-to-GDP ratios are far higher than they were in the early 1990s. Yet the bond market looks about as intimidating as a chihuahua in a handbag; in general, yields are close to historic lows.

In the 1990s “bond-market vigilantes” sold their holdings when they feared that countries were pursuing irresponsible fiscal or monetary policies. In Britain even fear of a “hard Brexit” is only now being reflected in rising gilt yields—and they are still below the (very low) levels seen before the vote to leave the EU in June. Even developing countries with big budget deficits can borrow easily. This week, for example, Saudi Arabia…Continue reading

AMERICANS who want a comfortable retirement, and who work in the private sector, have to look after their own interests these days. No longer can most rely on their employer to pay a pension linked to their final salary; such defined-benefit promises are too expensive.

Instead, workers are promised something called a defined-contribution (DC) pension which, truth be told, isn’t a pension at all. It is a savings pot to which employers and employees contribute, with some tax advantages. How big that pot will be, and what kind of income it will provide, is unknown.

Most of those savings will probably be invested in mutual funds. Yet as William Birdthistle, an academic lawyer, writes in an entertaining new book*, small investors need to become better informed about the way mutual funds work.

One might think, for example, that all investors in a fund are treated equally. But Mr Birdthistle cites a set of JPMorgan equity funds which have seven different types of shares, with opaque names such as Class R5. The main difference tends to be the fees that funds charge. Small investors usually pay most, even those in some DC schemes. These fees…Continue reading

AMERICA’S presidential contest offers voters a stark choice. Hillary Clinton represents continuity with the Obama administration—not a bad pitch to voters, given low unemployment, steady job growth and a recent upturn in the rate of increase of real incomes. In the opposite corner is Donald Trump, standing on a radical platform of protectionism, draconian immigration restrictions, massive defence spending and construction of a big, beautiful wall along the Mexican border. Mr Trump’s dangerous economic nationalism demands an explanation. Is he the predictable consequence of years of hardship for many Americans?

Two broad theories vie to explain Mr Trump’s ascent. One camp sees him as an inevitable backlash against economic-policy priorities that have left many Americans behind. As America and the world have grown more economically integrated, growth in household incomes has stagnated and inequality soared. The costs of freer trade were borne most acutely in Southern and Mid-Western manufacturing towns exposed to competition from cheap Chinese imports. A series of recent papers shows that the most affected labour markets have…Continue reading

Hot property

AS HIS chances of making it to the White House have narrowed in recent weeks, another avenue has opened for Donald Trump. The notion that he might start his own media network has been the subject of speculation for months. Now industry executives are discussing the possibility in some detail.

In September the Republican candidate’s son-in-law, Jared Kushner, owner of the New York Observer, asked his friend Aryeh Bourkoff, a banker who has been a dealmaker in the media industry, for advice. (A spokeswoman for Mr Bourkoff said he personally had no interest in such a project). Mr Trump himself has denied any intention to start a network. But a look at the numbers suggests that Trump TV could be a success, media folk say—far from a juggernaut like Fox News, which has revenues of more than $2 billion a year, but lucrative nonetheless.

Such a product would have a good shot at going mainstream because Mr Trump could sell it directly to consumers over the internet, as a subscription streaming service. The Trump brand may now be too toxic for a publicly-owned media company to go…Continue reading

LATE of an evening, Japan’s black-suited salarymen let their hair down in the streets of Shimbashi, a district of Tokyo. Shirts untucked, ties off, liquor flowing, they stagger around before heading home, or directly back to the office via a konbini (convenience store) to buy a clean shirt.

This is the harmless outlet for their stress: karoshi, or death by overwork, is the darker, and until recently, more overlooked one. This month the first ever government report into the scale of karoshi found that employees put in over 80 hours of overtime a month at almost a quarter of companies surveyed. At 12% of those firms the figure rose to a whopping 100 hours. These numbers may underestimate the problem; under a fifth of 10,000 companies contacted responded, which is a normal response rate, but firms with still worse overtime figures may have kept out of the study.

Little wonder that 93 people committed or attempted to commit suicide in the year to the end of March 2015 because of overwork. These are the cases where the government has officially recognised that families are owed compensation;…Continue reading