Tag: Business and finance

GULLIVER’S regular readers might be interested in an article in this week’s print edition about Boeing’s partial victory in a case at the World Trade Organisation, brought in retaliation for subsidies that the European Union is alleged to have given Airbus, its European planemaking rival. 

On May 15th the WTO’s final appeals body upheld parts of a previous ruling, finding that the European Union wrongly provided subsidies to Airbus to develop new aircraft. That, it concluded, had hit sales of Boeing’s jets. As soon as the WTO gives the go-ahead America will have the right to impose retaliatory tariffs on EU imports. Trade experts warn they could be the highest in the WTO’s history.

But this could have unintended consequences for Boeing, which now receives 55% of its revenues from outside its home territory of America:

The administrations…Continue reading

MOBSTERS, gangsters and bent cops have all been tried under America’s Racketeer Influenced and Corrupt Organisations (RICO) Act. Might consultants be next? McKinsey, a management consultancy, is being sued under the law by Jay Alix, the founder of AlixPartners, a competitor in the field of bankruptcy advice. Mr Alix alleges that McKinsey knowingly misled courts in order to land clients. The firm denies any wrongdoing.

Bankruptcy is lucrative, for those doling out the advice. According to Debtwire, a data provider, corporate bankruptcies generated $1.3bn in fees in 2016, with lawyers taking home over half, and the rest going to consultants, accountants and financiers. McKinsey is a relative newcomer: it set up its restructuring arm, which turns around companies in financial distress, in 2010. Though its share of the market is smaller than those of the top players, AlixPartners and Alvarez & Marsal, its entry has stiffened competition. Its clients have included American Airlines,…Continue reading

Intrepid data gatherers

UBER’s fleet of autonomous vehicles has been parked up since one of its self-driving cars struck and killed a woman in Tempe, Arizona in March. That death highlighted once again the industry’s rush to develop self-driving cars. Waymo, a sister company of Google, plans to launch a robotaxi service in Arizona this year. General Motors says it will launch a fully autonomous taxi service, using cars with no steering wheel or pedals, in an American city in 2019. Volkswagen will make autonomous vehicles available through its new ride-hailing service, Moia, in 2021. Ford says it will be mass-producing fully autonomous cars by then, too.

But not every carmaker is going at the same speed. Toyota, one of only three car companies that sells over 10m vehicles a year, has made no equivalent commitments. The Japanese firm is instead concentrating on using artificial intelligence (AI) and automation to make conventional cars safer and more enjoyable to…Continue reading

LIFE insurance is among the oldest financial products. The Amicable Society, founded in London in 1706, charged members a set contribution and paid out annually to widows and children of those who had died in the previous 12 months. Today it is a vast industry: life and health insurers employ over 800,000 people in America alone. It protects hundreds of millions against the risk of dying early, through death benefits, or the risk of living longer than expected, for example through annuities. According to Allianz, a German insurer, total life-insurance premiums are above 5% of GDP in many rich countries, including Britain, France, Italy and Japan. In America, the world’s biggest market, annual premiums total more than $550bn.

But life insurers are struggling as never before. Those parts of the industry that have not evolved fast enough, says Clive Bannister, the head of Phoenix Group, a “closed” life insurer that buys and manages old policies but issues no new ones, have experienced a…Continue reading

On May 16th Callum Williams, our Britain economics correspondent, was named joint winner of the Young Financial Journalist of the Year at the Wincott Awards, an annual set of prizes for British journalists.

IN A recent video Jeremy Sciarappa, a YouTuber, flips the lid off a red box in his living room to reveal a silver machine the size of a shoebox, whining noisily. The contraption is an Antminer S9, sold by Bitmain, a Chinese firm. Its job is to help validate transactions conducted in bitcoin, the world’s best-known crypto-currency. Because bitcoin has no central authority, it relies on its users to keep things humming along. Those who help out are granted bitcoins, in a process called mining. The Antminer s9 is beloved of hobbyist miners worldwide. Nestled inside are 189 application-specific integrated-circuit (ASIC) chips, designed by Bitmain to solve bitcoin’s cryptographic puzzles as quickly as possible. They were made by TSMC, a giant Taiwanese semiconductor firm.

Mr Sciarappa and his fellow enthusiasts are a 21st-century version of the “49ers”, the young men who rushed to California in 1849 to try their luck digging and panning for gold. Few hit it rich, but the businesses that helped them…Continue reading

SHOULD Europeans worry that China Three Gorges (CTG), a state-owned firm, wants to buy EDP, a utility that is Portugal’s biggest company? It is three years since one local banker, Fernando Ulrich, called Portugal “a Chinese aircraft-carrier in Europe”—back then, Chinese buyers were already snapping up stakes in “strategic” local companies as quickly as the government could privatise them. CTG’s offer of €9.1bn ($10.8bn) for EDP, which was made on May 11th, will further unsettle those suspicious of China’s desire to snap up European assets.

The country is unusually welcoming to investors from the east. Its national airline, TAP Air Portugal, and Redes Energéticas Nacionais, the monopoly power transmitter, both have Chinese investors. CTG is already EDP’s largest owner, with a stake of 23%, after a €2.7bn investment in 2012. Now the Chinese want outright control.

To get that, CTG will probably have to raise its offer; EDP’s board rejected the price…Continue reading

IN 2011 Kathleen started work at an insurance-and-benefits consultancy in Boston. A couple of years later the firm gave her an ultimatum: sign a “non-compete” agreement within 30 days or wave goodbye. She signed, which meant that, if she left, she would be barred for three years from working for a rival or any firm that had been contacted as a potential client, and from starting a competing business. In 2015, when she accepted a new job in a different industry at an unrelated company, her former bosses threatened to sue. The job offer was withdrawn, and reinstated only when she offered to pay any legal costs that resulted. The matter never came to court, but the fear of legal action has kept her out of her old industry ever since.

Non-compete agreements are widely used to stop ex-employees walking out of the door with valuable know-how, or poaching suppliers and customers when they move jobs. Sometimes a great deal of money and intellectual property is at stake. When Paul English, an entrepreneur,…Continue reading

IN 2017 the global economy broke out of a rut. It grew by 3.8%, the fastest pace since 2011. Surging animal spirits accompanied a rebound in business investment across the rich world. Global trade growth rose to 4.9%, also the fastest rate since 2011. Emerging-market currencies appreciated against the dollar, keeping inflation low and debts affordable. Financial markets wobbled in February, but only after reaching all-time highs. In April the IMF said that the global economic upswing had become “broader and stronger”.

Since then that healthy glow has begun to fade. First, economic surveys in Europe took a turn for the worse (presaging…Continue reading

MANY of the most famous hedge-fund trades have been bets that things were about to go wrong. Think of Enron’s bankruptcy or the souring of subprime mortgage bonds in America. The best trade made by “the Professor” was very different. It was a bet that something was starting to go right.

A visit almost 20 years ago convinced him that Turkey was serious about fixing its economy. The yield on its one-year Treasury bills was then above 100%. “It was a serious mispricing,” he tells Steven Drobny in “The Invisible Hands”, a book of interviews with pseudonymous hedge-fund managers. The IMF gave its approval to Turkey’s reforms soon afterwards. The price of T-bills surged. The one-year interest rate fell to 40%.

The wheel has since turned almost full circle for Turkey, which now seems to attract more sellers than buyers. The lira is sinking. S&P has cut the country’s credit rating from junk to junkier, partly because of concerns about its reliance on foreign capital. The…Continue reading