Tag: Approved

AMERICA has bombed Syria, and its relations with Russia have deteriorated. North Korea is developing a long-range nuclear missile, a development which Donald Trump has vowed to stop, unilaterally if necessary. There is talk of a “reflation trade”, with tax cuts in America pepping up global growth.

All this ought to be good news for gold, the precious metal that usually gains at times of political uncertainty or rising inflation expectations. But as the chart shows, gold took a hit when Mr Trump was elected in November and is still well below its level of last July. As a watchdog, gold has failed to bark.

Bullion enjoyed a ten-year bull market from 2001 to 2011, when it peaked at $1,898 an ounce. This long upward run was bolstered in its later stages by two developments: first, the use of quantitative easing (QE) by central banks, which gold bugs argued would inevitably lead to high inflation; and second by the euro crisis, which caused nervousness about the potential for a break-up of the single currency and about the safety of European banks. By 2013, however, euro-zone worries were fading and, despite QE, no inflation had been seen. The gold…Continue reading

HOW much money should exist? The Federal Reserve must soon confront this deep question. The Fed has signalled that towards the end of 2017 it will probably begin to unwind quantitative easing (QE), the purchase of financial assets using newly created bank reserves. The central bank’s balance-sheet swelled from about $900bn on the eve of the financial crisis to about $4.5trn by 2015 as it bought mortgage-backed securities and government debt (see chart). If and when the Fed shrinks its balance-sheet, it will also retire the new money it created.

Economists such as Milton Friedman popularised the study of the quantity of money in the 1960s and 1970s. By the financial crisis, however, the subject had gone out of fashion. The interest rate, it was agreed, was what mattered for the economy. The Fed varied the supply of bank reserves, but only to keep rates in the market for interbank loans where it wanted them to be.

The Fed’s injection of emergency liquidity into financial markets in 2008, however, sent interest rates tumbling. To regain control, it started paying interest on excess reserves (ie, those reserves in excess of those required by regulation)….Continue reading

UNITED AIRLINES urges travellers to “Fly the Friendly Skies”. The company makes no promises about its customer service before take-off. When, on April 9th, a traveller in Chicago refused to give up his seat on an overcrowded flight to Louisville, Kentucky, police yanked him into the aisle and dragged him by his hands along the floor, bleeding after he cut his head on an armrest. Horrified fellow passengers took videos on their phones and posted them to social media.

The company’s initial response was possibly the worst bit of crisis-PR in history, noted one media commentator. As videos of the bloodied man quickly went viral, Oscar Munoz, the carrier’s boss, woodenly apologised for having to “re-accommodate” customers. In an internal letter to staff, Mr Munoz said crew had “no choice” in their action and blamed the flyer for not co-operating.

Overbooking, which is common at many carriers, was not the problem. Rather, it was late-arriving, off-duty airline employees who needed seats at the last moment. The usual way of persuading paying passengers not to fly—offering lots of cash—did not work. Such bargains are best struck before boarding the plane….Continue reading

UNITED AIRLINES urges travellers to “Fly the Friendly Skies”. The company makes no promises about its customer service before take-off. When, on April 9th, a traveller in Chicago refused to give up his seat on an overcrowded flight to Louisville, Kentucky, police yanked him into the aisle and dragged him by his hands along the floor, bleeding after he cut his head on an armrest. Horrified fellow passengers took videos on their phones and posted them to social media.

The company’s initial response was possibly the worst bit of crisis-PR in history, noted one media commentator. As videos of the bloodied man quickly went viral, Oscar Munoz, the carrier’s boss, woodenly apologised for having to “re-accommodate” customers. In an internal letter to staff, Mr Munoz said crew had “no choice” in their action and blamed the flyer for not co-operating.

Overbooking, which is common at many carriers, was not the problem. Rather, it was late-arriving, off-duty airline employees who needed seats at the last moment. The usual way of persuading paying passengers not to fly—offering lots of cash—did not work. Such bargains are best struck before boarding the…Continue reading

WERE it not for the graffiti on abandoned buildings, Bitterfeld-Wolfen, two towns north of Leipzig joined as one in 2007, would seem devoid of young people. Pharmacies, physiotherapy surgeries and shops selling garden gnomes line the sleepy streets. In its heyday the place had a booming chemical industry. Today “the air is much cleaner and we can finally hang out laundry,” says an elderly local out on a morning stroll. “But many jobs were lost and so few children are left.” He points out a building that was once a school; today it is one of many care homes.

Despite an influx of 1.2m refugees over the past two years, Germany’s population faces near-irreversible decline. According to predictions from the UN in 2015, two in five Germans will be over 60 by 2050 and Europe’s oldest country will have shrunk to 75m from 82m. Since the 1970s, more Germans have been dying than are born. Fewer births and longer lives are a problem for most rich countries. But the consequences are more acute for Germany, where birth rates are lower than in Britain and France.

If Germany is a warning for others, its eastern part is a warning for its west. If it were still a country,…Continue reading

WERE it not for the graffiti on abandoned buildings, Bitterfeld-Wolfen, two towns north of Leipzig joined as one in 2007, would seem devoid of young people. Pharmacies, physiotherapy surgeries and shops selling garden gnomes line the sleepy streets. In its heyday the place had a booming chemical industry. Today “the air is much cleaner and we can finally hang out laundry,” says an elderly local out on a morning stroll. “But many jobs were lost and so few children are left.” He points out a building that was once a school; today it is one of many care homes.

Despite an influx of 1.2m refugees over the past two years, Germany’s population faces near-irreversible decline. According to predictions from the UN in 2015, two in five Germans will be over 60 by 2050 and Europe’s oldest country will have shrunk to 75m from 82m. Since the 1970s, more Germans have been dying than are born. Fewer births and longer lives are a problem for most rich countries. But the consequences are more acute for Germany, where birth rates are lower than in Britain and France.

If Germany is a warning for others, its eastern part is a warning for its west. If it were still a country,…Continue reading

THE launch of the world’s first cannabis-focused exchange-traded fund (ETF), on the Toronto Stock Exchange on April 5th, is welcome news to aficionados of marijuana. As with any ETF, the fund spares would-be investors the need to pick out their own favourite stocks, or indeed weed out dodgy ones, as it will simply replicate and track an index, in this case the North American Medical Marijuana Index.

The fund’s home in Canada is no accident. Medical marijuana has been legal there since 2001, with growing and selling outsourced to licensed firms since 2013. (Justin Trudeau’s administration has also announced plans to legalise recreational use by 2018.) In America, despite state-level legalisation, marijuana is still illegal under federal law, making it nigh-impossible for pot firms to even access the banking system, let alone seek a proper public listing.

As a result, the index itself ends up having a strong Canadian bent. Eleven of its 16 companies are based there, and all but three are licensed suppliers of medical marijuana in Canada, though a few also have American operations. Three of the others are American, though none of them deal directly with…Continue reading

THERE is a hawk in Central Park that sometimes dismembers its prey on the balcony outside Jeff Bewkes’s office. Guts are splattered around in the kind of Darwinian spectacle that any self-respecting media baron should appreciate as he plots plans for future world domination. Mr Bewkes, however, only manages a laconic shrug when he mentions the feathered predator.

The boss of Time Warner is an anti-mogul in more ways than one. In an industry long-dominated by imperious tycoons intent on amassing power—think of Rupert Murdoch, or Viacom’s Sumner Redstone in his heyday—Mr Bewkes has shrunk a content empire, not expanded it. He is about to sell it to AT&T for $109bn in the fifth-biggest takeover of all time. If the deal goes through shareholders will have made a 341% return during his tenure (including spin-offs and dividends), making Time Warner one of the best-performing big firms in America during that time.

Beneath his laid-back surfer persona, Mr Bewkes has been ruthless but in the rational pursuit of his owners’ interests, not his own vanity. His tenure can be split into three parts—culling, defending and preparing to exit on a high.

Back in…Continue reading

“YOU are either part of the solution or part of the problem,” it says in painted letters on a wall. “Stay hungry, stay foolish,” says the wall opposite. An old rickshaw sits among beanbags and a vase of flowers rests on an ancient oil barrel in the corner. “We wanted the space to feel like Google,” says Eleni Gabre-Madhin, the founder of blueMoon, a new agribusiness incubator that opened in Addis Ababa in February, without a trace of irony.

Incubators and their cousins, accelerators, provide hands-on training and mentoring, and often a physical space, to help early-stage business ideas develop. In Silicon Valley they find capital for startups and take a slice of equity in return for their services. Ms Gabre-Madhin says that blueMoon draws inspiration from Y Combinator, an American accelerator founded in 2005 whose investees include Dropbox and Airbnb. The new firm’s first cohort of startups will train at the office for four months, and it will give each a small cash injection in exchange for a 10% stake.

That is a rarity in Africa’s startup scene. A simpler and more common model is for “tech hubs” to provide office space, some networking…Continue reading

THOMAS DE LA RUE set up shop more than 200 years ago, printing newspapers, then playing cards and stamps. In 1860 a contract to print banknotes for Mauritius started a transformation. Today De La Rue is the largest commercial banknote and passport printer, involved in aspects of the production of currencies for 140 countries, and passports for over 40.

The British firm’s chief executive, Martin Sutherland, is relatively relaxed about the much-heralded death of cash. Despite advances in payments technology, and a shift to cards in Europe, the total demand for cash has proven remarkably resilient. Transaction values are rising rapidly in emerging economies, where hard currency is still the norm. De La Rue expects world demand for banknotes to grow by 3-4% a year for the foreseeable future.

But there are problems nonetheless. Even at the best of times, note production, which accounts for over 70% of the company’s revenues, is a volatile business. Contracts are lumpy. State-owned printers often call in commercial printers at short notice to manage spikes in demand, which are unpredictable. On top of that, national authorities are demanding better value. They are…Continue reading