Tag: Business and finance

ONE of Gulliver’s stranger flying experiences came in 2011, when he was preparing to board a domestic flight from Panama City to the beaches of Bocas del Toro. An airline employee motioned to a scale, and Gulliver dutifully placed his bag on it. “No,” she said, and in a conversation combining her broken English with his broken Spanish, communicated that, in fact, he himself was the item she wanted to weigh. The plane, it turned out, had only about six seats, and it was crucial to achieve a weight balance.

Now an American airline is in trouble for a similar practice on a, well, much larger scale.

The problem for Hawaiian Airlines began when the carrier discovered it was burning through more fuel than anticipated on its route between Honolulu and the small Pacific island territory of American Samoa, according to reporting by the Associated Press. The airline ruled out explanations like strong winds and decided to conduct a voluntary survey among its passengers on the route. The results were clear:…Continue reading

IT IS an accepted fact that Ukraine suffers from a high level of «capital flight». The term refers to a process by which people pull money out of a country and buy foreign assets instead. Ukraine is highly corrupt. If you make money in Ukraine, you often want to get it out of there, lest someone else steal it from you. Ukrainian oligarchs are big fans of London property, where their capital is safe. 

So we suspect there is capital flight from Ukraine, but how much? The problem is that the term «capital flight» has a variety of definitions. This means that there are no easy-to-find statistics on capital flight for most countries. 

Therefore, we have tried to estimate capital flight for Ukraine. The details should not concern the casual reader, but we have used the methodology shown in Continue reading

PUNDITS, journalists, campaign hands and others spend an awesome amount of time during election season trying to work out what factors will swing the vote one way or another. Could it be a candidate’s likeability? Differences in policy? Her ad strategy? His habit of insulting large swathes of the electorate?

Campaign choices matter, but political science research suggests that the lay of the electoral land is largely shaped by factors beyond candidates’ control. People vote retrospectively, based on their perception of how things are going for them and those around them. But their perceptions are shaped by all sorts of things. As Christopher Achen, of Princeton University, and Larry Bartels, of Vanderbilt University, describe in Democracy for Realists, a book published earlier this year, voters sometimes punish politicians for bad weather, random misfortunes—an outbreak of shark attacks appears to have cost Woodrow Wilson votes in the 1916 election—and the performance of the local American football team.

Perhaps more importantly, voters are extremely myopic. They care about their economic welfare, and especially about whether or not their…Continue reading

TRILLIONS of dollars of consumer spending have, historically, depended on a few steps. A shopper learns about a product, considers whether to buy it, decides to do so, goes to a shop. If he likes it, he may buy it again. Marketers have long obsessed over each step, and consultants have written treatises on how to nudge people along. E-commerce is already changing the process, but now retailing gurus are imagining a future in which shopping becomes fully automatic.

The idea is that a combination of smart gadgets and predictive data analytics could decide exactly what goods are delivered when, to which household. The most advanced version might resemble Spotify, a music-streaming service, but for stuff. This future is inching closer, thanks to initiatives from Amazon, lots of startup firms and also from big consumer companies such as Procter & Gamble (P&G).

Buying experiments so far fall into two categories. The first is exploratory. A service helps a shopper try new things, choosing products on his or her behalf. Birchbox, founded in 2010, sends beauty samples to subscribers for $10 each month. Imitators have proliferated, offering everything from dog…Continue reading

TO MOST investors, Venezuela looks less like a market than a mess. The IMF expects output to shrink by 10% this year and inflation to exceed 700%. As the bolívar’s value has plunged, multinational firms have announced billions of dollars of write-downs. For much of this year, however, some strong-stomached investors have scented an opportunity. They rushed to buy bonds issued by the government and by the state-owned oil company, PDVSA.

They have been rewarded handsomely. Venezuelan government bonds have outperformed other emerging-market sovereign bonds tracked by JPMorgan (see chart). The government, led by Nicolás Maduro, boasts it has never missed a debt payment. Indeed he has given priority to debt service over other urgent needs, such as importing food. Mr Maduro is keen not to scare off the foreign creditors sorely needed by PDVSA.

However, Venezuela looks increasingly stretched. Two big PDVSA payments, of $1 billion and $2 billion, are due on October 28th and November 2nd. Last month the company proposed a bond swap to ease a looming payments crunch: investors holding PDVSA bonds maturing in 2017 (which are not…Continue reading

LIKE most technology tycoons, Elon Musk exudes disdain for finance. Convertible bonds and lease accounting are problems for Wall Street, while the visionaries in California focus on driverless cars and space travel. Yet while he might be loth to admit it, Mr Musk has become America’s most audacious corporate financier as well as its best-known entrepreneur. In just over a decade he has created an empire valued at a cool $44 billion despite its heavy losses (see chart). A blend of financial laboratory, corporate labyrinth and buttock-clenching thrill ride, Musk Inc has pushed the boundary of what was thought possible.

As has been the case for a decade, Mr Musk’s businesses face a difficult struggle to sustain their market valuations over the next 18 months, and to bolster confidence he is expected to unveil new financial measures and also new products over the next few weeks. Mr Musk has repeatedly defied the odds. But…Continue reading

INSIDE the atrium of a gleaming new building on the outskirts of Addis Ababa, trainee air stewards flit between the classrooms and aeroplane simulators that surround a large indoor swimming pool. The expensive aviation academy belongs to Ethiopian Airlines, and seems a world away from the unrest that on October 9th prompted the government to declare a national state of emergency. The firm’s CEO, Tewolde Gebremariam, brushes off the idea that the airline will be affected. “We are not concerned,” he shrugs.

He has reason to be confident about the business. Ethiopian is Africa’s largest and most profitable airline, earning more than its rivals on the continent combined. Its expansion has been rapid: by 2015 it served 82 international destinations, with 13 more added this year. According to unaudited figures, it nearly doubled its profits in the last financial year (see chart). And that is amid national turmoil.

It helps that its regional rivals are competing only feebly on routes in Africa. According to the International Air Transport Association, African carriers are likely collectively to record a net loss of $500m this year….Continue reading

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