Tag: Approved
Most stockmarket returns come from a tiny fraction of shares
IN his book about the use of language, “The King’s English”, Kingsley Amis describes a tug-of-war. On one side are “berks”, careless and coarse, who would destroy the language by polluting it. On the other side are priggish “wankers”, who would destroy it by sterilisation.
The battle lines look similar in investment. The divide is not on points of grammar but on attitudes towards a handful of modish companies, known as FAANG. These stocks (Facebook, Amazon, Apple, Netflix and Google) have been the motor of the S&P 500 (see chart). All but Apple hit record highs on June 20th. Fill your boots is the attitude of coarse stockmarket berks. FAANG makes more sense than stocks in dying industries. For the prigs, the mania for FAANG stocks is as abhorrent as a split infinitive. The high-minded investor stands apart from the herd.
In matters of grammar, the unsure often follow the sticklers. They at least have rules. But they are often too rigid. Stockmarket sticklers can similarly lead others astray. For most investors, it is often a…Continue reading
China considers its response to Donald Trump’s proposed tariffs
FOR now, at least, when speaking of the trade dispute with America, China’s government is taking a more-in-sorrow-than-in-anger tone. That helps explain the Chinese public’s surprisingly measured views of Donald Trump, and gives the Chinese government some breathing room to consider its options.
The state media have so far taken the high ground. True, the Global Times, a chest-thumping tabloid, accused the American president of “gambling” that China will be cowed by his “capricious and obstinate attitude”. No country can isolate itself from globalisation, said the Xinhua news agency: “The wise man builds bridges, the fool builds walls.” A new Xinhua web page popped up on June 20th, tracking multilateral deals that Mr Trump has quit, including on trade, climate change and Iranian nuclear arms.
But China has yet to debate, publicly, how to handle an American president who is an avowed populist…Continue reading
A wave of new environmental laws is scaring shipowners
THE shipping industry has encountered rough seas over the past decade. Between 1985 and 2007 trade volumes shot up at around twice the rate of global GDP but since 2012 their rate of growth has barely kept pace, leaving the industry with overcapacity. Freight rates for containers have plunged by a third since 2008. Worse may be to come. The industry does not regard as good news President Donald Trump’s announcement on June 15th of tariffs of 25% on up to $50bn of Chinese goods, which will slow trade growth further. Now a veritable hurricane of new environmental laws is about to hit.
Shipping accounts for only around 2% of global carbon emissions, but is quite dirty. Burning heavy fuel oil, the industry produces 13% of the world’s sulphur emissions and 15% of its nitrogen oxides. And by 2050 ships will be producing 17% of all carbon emissions if left unregulated, according to research by the European Union.
The International Maritime Organisation (IMO), the…Continue reading
Hedge funds worry about the legal risks of using “alternative” data
“QUANT” (quantitative) hedge funds, which craft elaborate algorithms to make trading decisions, rely on access to information. That used to mean market data, such as prices and trading volume. But some now seek an edge in novel sources. An industry has sprung up to serve them with, and help them analyse, “alternative” data, such as those gleaned from satellite images or by scraping websites. Many of these data firms have been founded by entrepreneurs, but some quant funds themselves are getting involved. Winton, a large London-based fund, is spinning off Hivemind, a data-analysis unit. A full-time management team was announced on June 18th.
For funds making macroeconomic bets by trading in, say, currencies or government bonds, real-time measures of inflation (scraped from e-commerce sites) or trade flows (from shipping data) can be better and more timely than the output of national statistics agencies. Funds trading in individual firms’ shares can infer information on sales from satellite…Continue reading
A maverick French telecoms firm attempts Italian conquest
“CHOOSE truth. Choose Iliad,” entreats the voice-over of a television advertisement after images of President Donald Trump speechifying and footballers feigning injuries flash across the screen. That may seem pretentious for a mobile provider, but the advert is part of Iliad’s entry into Italy, which began on May 29th. The group, led by one of France’s most prominent businessmen, Xavier Niel (pictured), is credited with having shaken up the telecoms industry at home. He wants to have a similar impact in Italy.
Mr Niel started out with a porn-chat service for Minitel, a French antecedent to the internet. In 2002 he launched his Freebox, which combined cheap web access, TV and fixed-line telephony, and in 2012 started selling low-cost mobile telephony. Growth came easily for years, allowing Mr Niel to spend time on other things, such as launching Station F, the world’s largest startup incubator, in Paris, and free coding schools in…Continue reading
Giddy property prices are a test for Swedish policymakers
ULF DANIELSSON is thinking of buying a holiday home—or even a new house, so that he, his wife and two children can have a garden and more space than in their flat in Uppsala. He can afford either, he says, and as a professor of astrophysics is surely able to work that out. But he is hesitating, lest the giddy rise in Swedish property prices end in an ugly crash. “You risk having a big loan that’s worth more than the house,” he says.
The property market has fallen a little closer to Earth: prices dropped by 9% between September and January, largely because of a surfeit of pricey new flats. They then steadied, and are around 5% below the peak—and 50% higher than at the start of 2013, calculates Valueguard, a data provider. As Swedes have borrowed to buy, their debts have risen. Finansinspektionen (FI), the financial-stability supervisor, estimates that borrowers’ debts rose by 36% between 2012 and 2017, while disposable incomes went up by 13%. Almost a fifth of households with new mortgages owe more than six times net income.
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Glencore dodges American sanctions rather than spurn its friends
AMONG Africa’s many foreign fixers and mining tycoons, few are more colourful than Dan Gertler, an Israeli diamond trader. Just over 20 years ago at the age of 23 he took a punt on Laurent Kabila, the rebel who in 1997 had just seized the Democratic Republic of Congo (then Zaire) from Mobutu Sese Seko, its dictator for the previous 32 years. Having met him through his son, Joseph, he lent the president $20m to buy weapons. He could have lost everything, but instead made it back a hundredfold. By the time Joseph Kabila took over from his father, after the latter’s murder in 2001, he had become the man largely in charge of distributing Congo’s mining licences to international mining companies.
Two decades on, Mr Gertler’s clout in Congo is undiminished. That was proved on June 15th when Glencore, the world’s largest commodities trader, decided it would rather evade sanctions than not pay the billionaire the royalties he was owed from a Glencore-owned mine. The American government…Continue reading
France and Germany finally have a common position on euro-zone reform
THE president of the European Commission, Jean-Claude Juncker, likes to compare the euro zone to a house in need of repair. Fix the roof, he counsels, while the economic weather is favourable. Leaders from across the European Union will have the opportunity to take that advice when the European Council meets in Brussels on June 28th-29th.
In preparation Emmanuel Macron, France’s president, and Angela Merkel, Germany’s chancellor, laid out joint proposals for reforms on June 19th. The result of weeks of ministerial negotiation, they reconciled long-standing differences on the future of the currency bloc and set the scene for discussion at the wider summit. In a victory for Mr Macron, the Germans have consented to a euro-zone budget. In other areas, notably banking reform, progress is likely to be halting.
The reforms aspire to mend the institutional weaknesses revealed during the years following the financial crisis. Lacking control…Continue reading
How two-wheelers are weaving their way into urban transport
THE streets of Beijing are thronged with two-wheeled contraptions. Some appear to be conventional petrol mopeds but as they zoom through red lights at pedestrian crossings their eerie silence and lack of exhaust reveals them as electric. Executives in suits cruise by on electric kick-scooters, looking like big kids on their way to school, though travelling much more enthusiastically. Electric bicycles, hacked together with a battery strapped to the frame and wired to a back-wheel hub containing a motor, crowd the edges of roads.
China’s cities are at the forefront of a quiet swarm of electric two-wheeled vehicles. Millions now roam their centres. This transformation of urban mobility is also happening in the West, albeit with a notable addition that has yet to take off in China: firms that rent out electric kick-scooters. These are taking many American cities by storm and are arriving in Europe.
In the bike-mad Netherlands nearly one in three newly bought bikes last year was electric,…Continue reading
Why countries like Argentina and Turkey fret about exchange rates
IMAGINE if Milton Friedman had been put in charge of a central bank, only to lose his job for expanding the money supply too quickly. Or if Robert Shiller, the Nobel-prizewinning author of “Irrational Exuberance”, were given a similar post, only to depart having allowed a stockmarket bubble to inflate. That is the kind of irony that attended the resignation under pressure of Federico Sturzenegger as governor of Argentina’s central bank on June 14th, a casualty of deepening turmoil in emerging markets.
Mr Sturzenegger was a former professor at Universidad Torcuato Di Tella in Buenos Aires. His most-cited paper showed that stated currency policy was often a poor guide to actual policy. Many countries claim to let their currencies float freely but in fact “intervene recurrently to stabilise their exchange rates”. Their deeds often belie their words.
Mr Sturzenegger lost his job for much the same thing. Financial markets struggled to reconcile his statements on the currency with his…Continue reading