Tag: Business and finance

WHAT a difference a year makes. When America’s big banks reported first-quarter earnings for 2016, the mood was glum. The Federal Reserve was proving tardier than hoped in raising interest rates, which held down lending margins. Jitters about the world economy meant rotten results for investment-banking units, in what is usually their best season of the year. Regulators added to the misery: last April the Fed rejected the “living wills”—plans for liquidating lenders that get into trouble—of five of the six largest banks.

This spring bankers are happier. Business perked up last year after that dismal start. Donald Trump’s election in November, accompanied by promises to ginger up the American economy, cut corporate taxes and roll back regulation of finance, gave banks’ shares a lift (see chart). The Fed raised rates in December and again in March and is likely to keep increasing them. And 2017’s first-quarter results have, mostly, seen an improvement—though the cheer was not evenly shared.

“Wall Street activities have performed better than Main Street ones,” says Mike Mayo, an independent bank analyst. Revenues from capital-market…Continue reading

EARLY spring is the main selling season for recreational vehicles (RVs) and the phone on Tom Troiano’s desk has been ringing incessantly. The owner of Continental RV, a dealership in Farmingdale, a village on Long Island, Mr Troiano is on track to sell more RVs this year than in any other since the early 2000s. Buoyed by cheap financing, rising wages and inexpensive gas, travellers are once again splurging on big-ticket camper vans.

RVs are a quintessentially American invention: more than two-thirds are made in the United States. Nationally, sales surged to 430,000 units last year, a 40-year high. At the inexpensive end they sell for as little as $5,000 for a caravan; deluxe versions cost up to $1m and are typically equipped with a bedroom, kitchen and bathroom that are bigger than in many European flats. The share prices of Thor Industries, the biggest RV-manufacturer in America, and Winnebago, the third-largest, have risen by 43% and 17%, respectively, in the past year.

That is a big change. During the 2008-09 recession, notes Mr Troiano, RV dealerships everywhere closed down, leaving his shop among the very few left serving the New York metropolitan area….Continue reading

IN 1853 the government of India, then directed by Britain’s East India Company, began construction of a vast rail network, continued by the British Raj, established in 1858. At the time, most inland transport in India was hauled by draught animals: with carts where roads existed and were passable; packed on animals’ backs when they were not, which was often. Moving goods across the great expanse of the subcontinent was costly and painfully slow. That changed with the arrival of the railway. Between 1853 and 1930 more than 67,000km (42,000 miles) of rail was laid across India, providing transport that was fast, cheap and reliable. A bullock could carry a pack 30km a day; an engine could haul freight 600km over the rails in the same time.

Working out the impact of this took Dave Donaldson (a PhD candidate at the London School of Economics when he started trying) nearly a decade. He dug through mountains of yellowed colonial-era records that had never before been collated and digitised. He found that eight different kinds of salt were sold across India, each sourced from just one region: this quirk allowed him to use local differences in the price of salt to calculate transport…Continue reading

THE VICTORY of Recep Tayyip Erdogan, Turkey’s president, in a referendum on April 16th is seen by many observers as a worrying step on the road to autocracy. The vote handed Mr Erdogan far-reaching new powers. But the Turkish lira, government bonds and stockmarket all gained ground as the results came in.

It was a reminder that the relationship between markets and democracy is not rock-solid. Like an errant husband, investors may proclaim their fidelity to democracy but are not averse to seeing someone else on the side.

In Turkey, investors may have feared turmoil if Mr Erdogan’s proposal had been defeated. It is an old, but fairly reliable, cliché that investors dislike uncertainty. And the early years of Mr Erdogan’s rule saw rapid economic growth; since he took office, the Istanbul market has gained 760% (see chart).

An authoritarian government can provide certainty, at least in the short term. When Mussolini took power in Italy in…Continue reading

THE VICTORY of Recep Tayyip Erdogan, Turkey’s president, in a referendum on April 16th is seen by many observers as a worrying step on the road to autocracy. The vote handed Mr Erdogan far-reaching new powers. But the Turkish lira, stockmarket and government bonds all gained ground as the results came in.

It was a reminder that the relationship between markets and democracy is not rock-solid. Like an errant husband, investors may proclaim their fidelity to democracy but are not averse to seeing someone else on the side.

In Turkey, investors may have feared turmoil if Mr Erdogan’s proposal had been defeated. It is an old, but fairly reliable, cliché that investors dislike uncertainty. And the early years of Mr Erdogan’s rule saw rapid economic growth; since he took office, the Istanbul market has gained 760% (see chart).

An authoritarian government can provide certainty, at least in the short term. When Mussolini took power in Italy…Continue reading

THE VICTORY of Recep Tayyip Erdogan, Turkey’s president, in a referendum on April 16th is seen by many observers as a worrying step on the road to autocracy. The vote handed Mr Erdogan far-reaching new powers. But the Turkish lira, government bonds and stockmarket all gained ground as the results came in.

It was a reminder that the relationship between markets and democracy is not rock-solid. Like an errant husband, investors may proclaim their fidelity to democracy but are not averse to seeing someone else on the side.

In Turkey investors may have feared turmoil if Mr Erdogan’s proposal had been defeated. It is an old, but fairly reliable, rule that investors dislike uncertainty. And the early years of Mr Erdogan’s tenure, when he was seen as a liberalising democrat, saw rapid economic growth; his transformation into an emerging autocrat has not put investors off. Since he took office, the Istanbul market has gained 760% (see chart).

An authoritarian government can provide certainty, at least in the short term. In 1922, when Mussolini took power in Italy, its equity market returned 29% and its government bonds 18%, according to…Continue reading

SOMETIMES the markets are genuinely surprised. On the morning of April 18th, news that the British prime minister was to make an announcement at 11.15am caused the pound to dip. What could the news be? Retirement due to ill health? Several pundits went on Twitter to proclaim their belief that it would not be an early election; after all, Theresa May, the prime minister, has said repeatedly that the poll would not occur until 2020. But the news was indeed that an election will happen on June 8th. The pound then stormed higher and is now more than $1.28, around its strongest level this year (but well below the $1.50 touched on the day of the Brexit referendum).

So what explains the switcharound? The hope is that the election will lead to a softer Brexit result and thus be better news for the British economy. Deutsche Bank, previously bearish on sterling, was the most prominent convert to this view.

First, it makes the deadline to deliver a “clean” Brexit, without a lengthy transitional arrangement, by 2019 far less pressing given that no general election will be due the year after. Second, it will dilute the influence of MPs pushing for hard Brexit, strengthening the government’s…Continue reading

UBER has many virtues. The ride-hailing app has disrupted the cosy taxi cartels that care little for customers; it has made travel around cities cheaper, more convenient and reliable; and it has called into question the notion that taxi drivers must be tipped simply for doing their job. Sadly, a proposal in New York might pose a serious threat to the last of these qualities.

Currently, Uber’s smartphone app, which charges users automatically at the end of a journey, does not give the option of adding a tip. But Uber drivers in New York are petitioning officials to force the firm to change this. The chance to add a tip is already standard among many of the firm’s competitors, including Lyft. The city’s Taxi and Limousine Commission is hoping to write this approach into law. It will put forward a formal proposal in July.

Any such change in the rules would be a step back. The New York Times writes that there has “long been confusion” whether or not customers are supposed to tip Uber…Continue reading