Tag: Business and finance

AT A glitzy party in Toulouse on July 10th Airbus, Europe’s aerospace giant, revealed its “newest” plane. But many aviation buffs might find it familiar. It was a repainted C-Series aircraft—originally developed by Bombardier of Canada—a project in which Airbus bought a 50.01% stake on July 1st. Airbus welcomed the aircraft into its family of planes by renaming the CS-100 as the A220-100 and the CS-300 as the A220-300. The message was clear: it is now an Airbus plane. But with Airbus and Bombardier’s arch rivals, Boeing of America and Embraer of Brazil, announcing their own joint venture last week, the skies are running out of competition.

The tie-up between Airbus and Bombardier, originally signed last October, initially came as good news for many airlines. Before Airbus swooped, the C-Series project was financially on its knees following an attempt by Boeing, Airbus’s arch-rival, to get tariffs slapped on imports of the planes into America. That would have decimated its order book and pushed Bombardier to the brink of bankruptcy….Continue reading

FOR years, online retailers in America have enjoyed an unfair advantage over their bricks-and-mortar competitors. Unless they were physically located in the same state as a shopper, they were not obliged to collect state and local sales taxes. Shoppers were still legally required to pay taxes on their online purchases, but not everyone did in practice. Many instead to chose to treat the internet as a place to find discounts. Given that state and local taxes can add up to as much as 12% of a product’s prices, the potential savings were substantial. This practice is now coming to an end. On June 21st America’s Supreme Court ruled that online retailers would finally have to start collecting sales tax themselves.

The company that has benefited most from this loophole is probably Amazon, America’s biggest online retailer. When it started out, it collected sales taxes only from customers who lived in its home state of Washington. In recent years, however, Amazon has built distribution…Continue reading

Jeff dispenses more disruption

FOR roughly a year speculation has been feverish: would Amazon, an online retail giant, muscle into America’s prescription-drugs market? On June 28th that uncertainty ended when it bought a small online pharmacy, PillPack, based in Manchester, New Hampshire, for about $1bn. When the deal is completed later this year, Amazon will be able to sell prescription drugs to customers in the 50 states where PillPack has licenses.

The news of Amazon’s entry had a predictable effect on incumbent firms. Shares of three large bricks-and-mortar pharmacy chains, Walgreens Boots Alliance, Rite Aid and CVS Health, lost $11bn in value. Drug distributors such as Cardinal Health and AmerisourceBergen were also hit. Amazon gained $19.8bn. Michael Rea, boss of Rx Savings Solutions, a health-technology firm, says the purchase increased the speed with which Amazon can get into the prescription-drug market, making slimmer profit margins…Continue reading

IT IS rare to see the words “Canada” and “world domination” in the same sentence. The country’s cannabis producers want to change that. With an eye on October 17th, the date on which recreational marijuana will become legal, medical-cannabis firms have been expanding at home and talking up their global ambitions in a most un-Canadian way. Lots of joint ventures—in the legal sense—are being signed abroad. The hope is that having a base in the first large country to make pot legal for adults (Uruguay legalised cannabis in 2017) will give them an unbeatable lead.

To date firms have financed their expansion plans largely by selling shares, supplemented by funding from smaller investment banks and credit unions. Enthusiastic investors have pushed share prices to stratospheric levels (see chart)—many warn of a bubble. But the biggest banks, without whom nothing substantial is financed in Canada, have been wary. That changed on June 26th when the Bank of Montreal agreed to loan Aurora Cannabis up…Continue reading

Straight outta South Carolina

THE menace to Americans from immigration of the wrong sort is immense, according to President Donald Trump. The list of items he wants to deter from crossing the border includes objects as well as people, and one in particular holds his attention. In trade terms, he told Fox News on July 1st, “the cars are the big one.” With good reason, he views auto tariffs as a far deadlier weapon than the duties already imposed on steel and aluminium when it comes to extracting trade concessions from other countries.

That is dire news for all carmakers, which are among the world’s most globalised firms. But Germany’s are the most dependent on exports. Most well-off Americans long ago traded in Lincolns and Cadillacs for the refinement of Teutonic marques. A tweet from Mr Trump on June 22nd reaffirming his tariff plans sent the shares of Daimler, which makes Mercedes, and of BMW into a nosedive.

Mr Trump fumes that American cars exported…Continue reading

Here’s to carbon capture

IN THEORY, the world has too much carbon dioxide. In 2015 the Paris climate agreement set limits on emissions of the gas to prevent global temperatures rising by more than two degrees Celsius above those of pre-industrial times. But in practice, makers of food and drink in Europe have found that they cannot find enough of the gas. And this unlikely shortage is likely to get worse in future.

Food-grade CO₂ is a vital ingredient: it puts the fizz in carbonated drinks and beer, knocks out animals before slaughter and, as one of the gases inside packaging, delays meat and salad from going off. A shortage of the stuff has therefore created havoc in foodmakers’ supply chains. Heineken, a Dutch brewer, and Coca-Cola, an American drinks giant, have been forced to close some of their European plants. JD Wetherspoon, a British pub chain, ran out of some beers. Scotland’s largest pig slaughterhouse was forced to shut. On June 29th Warburtons,…Continue reading

IT EMERGED on July 2nd that Hollywood may make “The King of Oil”, a film about Marc Rich, an American-Swiss commodities trader who became a fabulously rich fugitive from American justice. On July 3rd Glencore, the firm founded by Mr Rich, said America’s Department of Justice (DoJ) had requested documents regarding its compliance with corruption and money-laundering laws. Depending on the outcome, the film may have a good sequel.

It has been a year of pain for Glencore, a mining and trading giant. News that the DoJ wanted over ten years of documents related to activities in three countries, the Democratic Republic of Congo (DRC), Nigeria and Venezuela, knocked its market value by 8.5%, or $4.3bn (on July 5th it announced a $1bn share buyback). Its shares had already lagged its peers this year because of its exposure to the DRC and Russia, where it has suffered collateral damage from American sanctions.

Glencore, whose boss, Ivan Glasenberg, is its second-biggest…Continue reading

THE story of China Merchants Group began in the 1870s. After its defeats in the Opium wars, the Qing government tried to learn from the West by adopting foreign technology and encouraging new commercial ventures, including China Merchants. The banking-to-shipping conglomerate, based in Hong Kong, has since evolved into one of China’s largest state-owned enterprises, with $1.1trn in assets.

Fittingly, its latest endeavour again involves looking westward for new technologies. On July 1st it announced that its investment arm and other China-based investors would put 40bn yuan ($6bn) into a 100bn yuan venture-capital (VC) fund, the China New Era Technology Fund.

That total pot is a nod to the much larger project that it aims to replicate: the $100bn Vision Fund, formed by Masayoshi Son, founder of SoftBank, a Japanese telecoms and internet firm, to invest in flashy startups. It borrows a little of its aura by partnering with Centricus, a British investment company that helped Mr…Continue reading

IN THE autumn of 1974 Paul Samuelson, a prominent economist and Nobel prizewinner, issued a challenge. Most stockpickers should go out of business, he argued. Even the best of them could not always beat the market average. But there was a snag. “If this advice to drop dead is good advice, it is obviously not counsel that will be eagerly followed.” An alternative was needed to set an example. Someone should set up a low-cost, low-turnover fund that simply tracked the S&P 500 index of stocks.

The following year Vanguard, then a fledgling firm, took up Samuelson’s challenge and launched an index fund for retail investors. It was not eagerly received. Denounced on Wall Street as “un-American”, the index fund raised a mere $17m in the half-decade after its launch. It has been only in the past two decades that index investing has prospered. Indexed funds have grown around six times faster than those tended by active fund managers who select stocks to buy. Lots of investors now get the average…Continue reading

“Our people crave, more than anything else, to know the extent of the nation,” says the narrator in “Do You Love Me?”, a short story by Peter Carey set on an imaginary world that lionises cartographers. To satisfy that craving, the country carries out a regular, exhaustive census: a “total inventory of the contents of the nation”. Helpful householders even move their possessions—furniture, appliances, utensils, heirlooms—into the street for easier counting.

China, like many countries, is keen to know its own extent. This year it is preparing its latest economic census, a twice-a-decade undertaking. Like the census in Mr Carey’s fable, it is a “mammoth task”. The most recent one employed 3m people, counted more than 8m enterprises and estimated a GDP of almost 59trn yuan ($9.5trn at the time). This year’s census may find that GDP per person has exceeded $10,000, enough to form a tidy pile of possessions on the street.

But why, many people will ask,…Continue reading