Don't Get Left Behind in Health-Care Deal Frenzy

Investors should expect health-care deal-making to continue in the wake of UnitedHealth’s move to acquire DaVita Medical Group, days after CVS Health agreed to buy Aetna.

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Accounting Blowup at Steinhoff Was Hiding in Plain Sight

Steinhoff had lumps in its mattress long before the 63% plunge in its stock price Wednesday. Lest they suffer another sleepless night, investors should stay up late studying the string of warning signs that preceded an admission of “accounting irregularities” by one of the world’s largest furniture retailers.

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Donald Trump’s administration is promoting democracy and human rights

IF DENIZENS of political Washington recall the commotion, way back on February 24th, when President Donald Trump’s press team excluded CNN, the New York Times and others from a White House briefing, most probably shrug at the memory. Editors lodged formal complaints at the time, not least because the snub came hours after Mr Trump told cheering conservative activists that the “fake news media” are “the enemy of the people”. But there have been many commotions since, and worse snubs.

Yet there are places where that kerfuffle in a White House corridor left a mark. Take Cambodia, the south-east Asian country whose autocratic government charged two ex-reporters in November with “espionage”, citing their previous work for Radio Free Asia (RFA), a news outlet funded by the American government. There is a direct connection between the detention of Yeang Sothearin and Uon Chhin, who face up to 15 years in prison, and that moment of early Trumpian bombast. Hun...Continue reading

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Roy Moore’s Senate race is almost impossible to poll accurately

ALABAMA has seldom been of much interest to pollsters. No Democrat has held statewide office since 2010, or been elected to the Senate since 1990. Expecting another snoozer, pollsters largely ignored the special election to replace Jeff Sessions, now the attorney-general, to be held on December 12th. That changed after the Republican nominee, Roy Moore, a Bible-thumping former judge, was accused by eight women (many of whom were teenagers at the time) of offences ranging from sexual harassment to assault. Mr Moore, who has strenuously denied the allegations, saw his polls plummet as prominent Republicans withdrew their endorsements and optimistic Democrats sent a flood of money to his opponent. Since then Mr Moore’s numbers have stabilised. Nearly 90% of Republicans in the state approve of the president, and support for Mr Moore in the primaries in Alabama’s 67 counties was strongly correlated with the Trump vote in 2016.

Still, Doug Jones, the Democratic candidate, has a...Continue reading

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A Trump Tax Victory Won't Be Celebrated in China

A more competitive investment environment—and rising inflation—in the U.S. could spell trouble for China.

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Asian Banking Gold Rush Might Yet Provide a Few Nuggets

Asia has long been seen as the next big market for the world’s megabanks. But in the past three years, more U.S. and European players have abandoned Asia-wide ambitions.

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Investors and the Gender-Equality Agenda

There are ways for investors to promote workplace fairness that go beyond calling for more women on boards.

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Pharma's Helping Hand May Pinch Investors

Scrutiny patient-assistance charities, of a key profit source for the drug industry, is increasing. That means it is getting harder for investors to forecast industry growth.

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Are Top-Managed Companies a Good Investment?

The Drucker Institute will launch an exchange-traded fund that aims to find out.

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Why Sexual Harassment Matters to Investors

There was a time when what happened inside a company stayed inside a company. Today, corporate culture and the behavior of top employees matter to profits, stock prices and to a company’s competitive position.

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The Supreme Court is divided in a gay wedding cake case

SPEAKING on the steps of the Supreme Court after a hearing that pit gay rights against freedom of expression, David Mullins, who was denied a wedding cake in 2012 by Jack Phillips, a conservative Christian baker, said LGBT people “deserve the right to live their lives in public without having that love turned into a weapon to harm us”. He said that he and his partner, Charlie Craig, had brought the case so that other couples could be protected from “the pain and humiliation” they experienced when Mr Phillips told them he does not “make cakes for same-sex weddings”. Masterpiece Cakeshop v Colorado Civil Rights Commission is “not about cake”, Mr Mullins said. “It’s about freedom.”  

Mr Phillips would agree with this characterisation of the case—but with an emphasis on his freedom not to participate in the celebration of a marriage he considers a “sacrilege”. In the oral argument, Kristen Waggoner, Mr Phillips’s lawyer, told the justices that asking her client to supply a “temporary...Continue reading

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Why Uranium Miners' Glow Is Temporary

Shares of Cameco and other miners soared after Kazakhstan said it would cut back exports of uranium, but it may take years to balance the market.

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The long battle for control of Virginia’s House

IT WAS no great surprise when Democrats held Virginia's governorship in November. The state had been comfortably carried by Hillary Clinton in 2016, auguring a Democratic victory for governor that was probably clinched by voters’ deep distaste for Donald Trump.

What was a surprise, however, was Democrats’ huge success in legislative elections. These are typically friends-and-neighbours affairs in which party affiliation can mean little and hyper-partisan gerrymandering all but snuffs out competition. But this time round Democrats, who had been outnumbered two-to-one in the House of Delegates before the election (many seats had been drawn to help the election of Republicans) surged to within two seats of a takeover. Except for a smattering of delegates in the Northern Virginia suburbs of Washington, DC, the Richmond area and in the defence-rich south-eastern corner of the state, Republicans are now largely confined to heavily rural, thinly populated, Trump-friendly House districts.

Indeed, nearly a month after voting a...Continue reading

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Is the Supreme Court softening on Donald Trump’s travel ban?

ON THE eve of two appeals court hearings on the third version of Donald Trump’s travel ban, the Supreme Court stepped in to give the Trump administration a major, if temporary, victory. In a pair of curtly worded orders released on December 4th, the justices granted the administration’s wish to allow Mr Trump’s September proclamation limiting foreign travel to America to take full effect pending the lower-court proceedings. But they urged each appeals court to “render its decision with appropriate dispatch” following this week’s hearings. The justices also hinted that if Mr Trump’s travel ban reaches their courtroom, a majority may be unreceptive to arguments it should be struck down as executive overreach or a violation of the constitution.

The order at issue followed two earlier attempts to ban travel from six majority-Muslim countries in January and March. Mr Trump’s first two orders encountered judicial resistance at district and circuit courts on both coasts. When the second order expired this autumn, Mr Trump...Continue reading

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Spotify, Like Google, Wants to Reinvent the Tech IPO

Spotify is next year expected to mount what is arguably the greatest challenge to the Wall Street IPO machine since Google went public in 2004. Silicon Valley’s startup giants will be watching closely.

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Childhood surroundings matter more than genes for would-be inventors

U.S. Tax Reform Could Be Big in Japan

Tokio Marine is typical of Japanese financial institutions with big U.S. businesses that could benefit from lower tax rates.

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The Great Tax Windfall Surprise

The biggest winners of the Republican tax plan are corporations. How they actually spend their windfall could jolt the economy and surprise markets.

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How China's Migrant Crisis Could Hit Alibaba

Despite all the talk about artificial intelligence and big data, the success of China’s e-commerce industry relies on something more dull: millions of workers willing to work cheaply to deliver parcels to customers’ doorsteps. The workers being evicted in Beijing have been vital to e-commerce giant Alibaba’s low-cost model.

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Analysing Juan Orlando Hernández’s disputed election victory in Honduras

ON DECEMBER 4th, eight days after Honduras held general elections, the country’s electoral commission (TSE) indicated which candidate it will declare the winner. With 99.98% of the vote counted, the country’s conservative president, Juan Orlando Hernández, leads the one-round election with 42.98% of the vote. Salvador Nasralla, a sports broadcaster, has 41.38%. Mr Hernández’s apparent victory comes after a weird and chaotic vote-counting process. The opposition believes that is evidence of systematic fraud. 

Those suspicions have thrown the country into disarray. On December 1st Mr Hernández announced a ten-day curfew, from 6pm to 6am. On the following days some of Mr Nasralla’s supporters defied the curfew; others banged pots in their homes and gated communities. Some protests have turned violent and looting has broken out. Several people have been killed and up to 40 have been injured, according to unconfirmed reports.

The Economist has...Continue reading

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Broadcom Plays the Long Game With Qualcomm

There are two things that Broadcom made very clear Monday morning: It is still very interested in buying Qualcomm, but it is in no particular hurry to do so.

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Ali Abdullah Saleh’s death will shake up the war in Yemen

IT WAS an unceremonious end for an Arab leader who had dominated his country for decades. On December 4th Ali Abdullah Saleh, Yemen’s former dictator, was killed outside the capital Sana’a, which has been paralysed by a week of fighting. A video circulated online showed his bloodied body wrapped in a blanket, surrounded by militiamen. State television called the former president “the leader of the traitors”. His death is likely to escalate a three-year civil war that has laid waste to the country. It was also a microcosm of Yemen’s complexity: Mr Saleh was killed by former foes who had become allies, only to become enemies again.

Mr Saleh, 75, was a military man who took control of North Yemen in 1978, then led the civil war that reunified the divided country in 1994. During a rule of over two decades, he and his allies were accused of plundering billions from the Arab world’s poorest state. He also fought a vicious war against the Houthis, a group including a large...Continue reading

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CVS-Aetna Is More Tortoise Than Hare

Investor reaction was lukewarm Monday to CVS’s agreement to buy Aetna for $69 billion, but investors shouldn’t lose sight of the deal’s rationale.

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Why Central Banks Continue to Put Asset Prices Out of Whack

Even as the world’s central banks edge away from the extraordinary policies of the past decade, huge market distortions remain. The unwinding of years of easy money will continue to puzzle investors.

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Plummeting Prices Make Batteries a Tough Investment

Low prices aren’t a problem for battery makers if they kick-start electric-car sales—but for production costs to go that low may require new technologies.

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Rio Tinto's New Chairman Needs Tech Savvy and Iron Discipline

Rio’s choice as chairman—boardroom veteran Simon Thompson—will placate investors worried about a return to risky deal making. Driving growth, however, will be trickier.

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CVS Aetna Deal Tests Positive

A significant potential to re-energize the pharmacy business justifies the $69 billion price tag.

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Does refusing to bake a wedding cake count as speech?

ON DECEMBER 5th the Supreme Court takes up its first major gay-rights battle since the landmark 2015 decision opening marriage laws nationwide to gay and lesbian couples. The case, Masterpiece Cakeshop v Colorado Civil Rights Commission, has spurred ample media coverage, more than 90 amicus or “friend of-the-court” briefs (evenly split between the two sides) and a queue snaking around 1 First Street, NE of people hoping to claim one of the few dozen public seats in the courtroom. 

This attention is not surprising. As your blogger’s first preview of the oral argument explained, two sides of a cultural battle are colliding before a court that is fractured along ideological lines. Four conservative justices are expected to incline toward Jack Phillips, a Christian baker who declines to create cakes for wedding ceremonies he considers...Continue reading

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Economy Has Room To Grow, Here's Why

Recent reports overstate how fast the U.S. economy is growing, but strength overseas and the tax plan should give it a boost

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The Senate passes a tax bill

WHAT are Republican lawmakers in politics to achieve? Not many years ago, at the peak of their outrage over Barack Obama’s economic stimulus package, “balanced budgets” might have featured in the answer. But the frenzied passage of the Tax Cuts and Jobs Act through Congress has revealed the insincerity of the party’s fiscal moralising. Republicans in Congress do not oppose government borrowing when it suits them. Rather, the overarching policy objective that unifies them is cutting taxes—and damn the fiscal consequences. Following the passage of the tax bill through the Senate in the early hours of December 2nd, Republicans are on the brink of achieving their goal.

On November 30th budget scorekeepers unveiled a forecast for how much extra economic growth the tax bill might spark: enough to pay for about one third of its $1.5trn cost. Previously, Republicans might have viewed this projection as a triumph.  They have long pressed for budget forecasts to include such “dynamic” effects (see blog). But the score briefly...Continue reading

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Hipsters Go Glamping, and RV Makers Soar

Recreation vehicle manufacturers like Thor Industries and Winnebago are riding a boom fueled by younger buyers, but their share prices have rallied too far.

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Surprise! Why Economists Can't Be Optimistic Enough

The current bout of more synchronized growth around the world offers economists more reasons to be cheerful. But they find their habitual pessimism is hard to shake.

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When Memory Fades for Chips

Fresh off another yearlong rally, semiconductor stocks are more vulnerable to fears that memory prices have peaked.

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General Motors Tries on the Language of Silicon Valley

Silicon Valley isn’t just prodding General Motors into making electric cars—and soon driverless ones. It has also steered it toward a more audacious approach to setting goals.

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Value Is in the Eye of the Beholder at Ulta

That may have to do with the fact that investors are overwhelmingly men.

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Republicans grouse about tax models they once supported

THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called “dynamic scoring”. Bills, they said, should be evaluated using the predictive power of macroeconomic models. If the model predicts more GDP growth, then it could be inferred that the growth would produce more tax revenue. During the hearings, however, came an awkward moment. Alan Greenspan, then in charge of the Federal Reserve, told Congress that macroeconomic models were “deficient”. That is, their predictive power, though interesting, was not good enough to rely on. Last year, after the election of Donald Trump, your blogger contacted Mr Greenspan to see whether the models were good enough yet. Mr Greenspan, his office responded, had not yet changed his opinion.

Neither have Republicans. Over the past two decades, in and out of control of Congress, the party has nudged dynamic scoring successively closer to the official policy process until we arrived, yesterday evening, at as dramatic a moment...Continue reading

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Michael Flynn pleads guilty to lying to the FBI over Russia contacts

LAST week reports emerged that lawyers for Michael Flynn, Donald Trump’s former national-security advisor, had stopped speaking to Mr Trump’s legal team—hinting that Mr Flynn was negotiating a deal with Robert Mueller’s team of special prosecutors. On the morning of December 1st the other shoe dropped: in a federal court in Washington, DC Mr Flynn pleaded guilty to one count of making false statements to FBI agents; the crime carries a maximum penalty of five years imprisonment. He was, he said, co-operating with the investigation, a decision he had taken, “in the best interests of my family and of our country.”

Mr Flynn lasted just 24 days as national-security advisor; he resigned after admitting that he lied to White House officials about conversations with Russia’s ambassador. He joined Mr Trump’s campaign early, enthusiastically leading crowds to chant “Lock her up!” (referring to his opponent, Hillary Clinton) on the campaign trail, even as he was engaging in lobbying work for Turkish interests, apparently...Continue reading

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Jordan’s water crisis is made worse by a feud with Israel

THE Dead Sea is dying. Half a century ago its hyper-salty, super-pungent waters stretched 80km from north to south. That has shrunk to just 48km at its longest point. The water level is falling by more than a metre per year. All but a trickle from its source, the Jordan River, is now used up before it reaches the sea. “It will never disappear, because it has underground supplies, but it will be like a small pond in a very big hole,” says Munqeth Mehyar of EcoPeace, an NGO.

Until this summer Israel and Jordan, which share the sea, were trying to slow the decline. The “Red-Dead project”, as it is called, would desalinate seawater at the Jordanian port of Aqaba and pump 200m cubic metres of leftover brine into the Dead Sea each year. That would not be enough to stabilise the sea, which needs at least 800m cubic metres to stay at current levels. Still, it would help—and the project has a much more important benefit.

The World Bank defines water scarcity as less than 1,000 cubic metres per person annually. Jordan can...Continue reading

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Why Nigeria produces Scrabble champions

IN THE hot, golden light of an Abuja afternoon two men spin a rotating Scrabble board, oblivious to the flies buzzing around them. The opening moves in the word-building game are relatively low-scoring: “writer” for 26 points, followed by “pool”, “ow”, “or” and “li”. But the scores soon stack up, including two 50-point bonuses for getting rid of all seven letters for “mediant” (the third note of a diatonic musical scale) and “deracine” (from déraciné, a French noun and adjective for someone who has been uprooted). In less than 20 minutes, the time allowed for a professional game, Eta Karo beats Ben Quickpen by 461 points to 410.

Both men are members of the triumphant Nigerian team that last month won the World English-language Scrabble Players Association championship for the second time running. Four of the team’s eight players made the top ten, out of 118 competitors.

Scrabble found fans in Nigeria in the 1980s. It was...Continue reading

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Will Emmerson Mnangagwa be better than Robert Mugabe?

HAVING promised at his inauguration on November 24th to “hit the ground running”, Emmerson Mnangagwa has no time to lose. Somehow, he must persuade Zimbabweans that he can improve their lives after 37 years of despotism and decline under Robert Mugabe. Already people have been chuffed by one striking change: the police are almost nowhere to be seen on the streets of Harare, the capital, whereas previously they were ubiquitous, shaking down drivers for minor or fictitious traffic offences. That is no small matter. It used to cost $10-20 to make a cop go away, when a blue-collar urban wage is perhaps $250 a month.

When the chief of police, Augustine Chihuri, swore allegiance to the new president at the inauguration ceremony, a roar of boos erupted across the stadium. Mr Mnangagwa would earn easy plaudits if he sacked a man who failed utterly to curb corruption within the police. Mr Chihuri is also reviled for his ties to Mr Mugabe’s unpopular wife, Grace, who had Mr Mnangagwa chased...Continue reading

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Angola’s new president flushes out his predecessor’s wealthy clan

WHEN João Lourenço said on the eve of Angola’s election in August that, as president, he would have “all the power”, few took him seriously. The former defence minister had been hand-picked by José Eduardo dos Santos, Angola’s president for 38 years, seemingly as part of a deal to protect his interests. The opposition dubbed him “the chauffeur”, since Mr dos Santos would tell him where to go.

Two months into his presidency, though, the chauffeur seems not to be taking directions. On November 15th he suddenly sacked Mr dos Santos’s flamboyant and ultra-wealthy elder daughter, Isabel dos Santos, from her job at the head of Sonangol, the national oil company. That was followed by the cancellation of a lucrative contract between the state television company and a media company owned by two of Mr dos Santos’s younger children.

Then, on November 20th, in defiance of a law introduced by his predecessor, Mr Lourenço fired the police chief and the head of the intelligence agency. In Luanda, the fabulously...Continue reading

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Evo Morales finds a way to run for re-election

IN FEBRUARY 2016 Bolivia’s left-wing president, Evo Morales, asked voters through a referendum whether he should be allowed to run for a fourth term in office in 2019. They said no. But on November 28th this year the country’s constitutional court gave him what the voters would not, ruling that a clause in the constitution limiting presidents (and other directly elected officials) to two terms can be ignored. (He had argued successfully that his first term, under an earlier constitution, didn’t count.)

Mr Morales, who has been president since 2006, solemnly declared that the decision “guarantees democratic continuity”, forgetting that too much continuity subverts democracy. The term limit was part of a constitution adopted in 2009 at Mr Morales’s behest. As Bolivia’s first president of indigenous origin, he wanted to re-found the country as a “plurinational” state and expand the role of indigenous groups and civil-society organisations. An elected constituent...Continue reading

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Chinese Battery Champion Has Fully Charged IPO

China has the world’s largest market for electric cars and wants its companies to dominate globally when it comes to the batteries that power these vehicles. That makes the initial public offering of a turbocharged player at the center of that effort well worth watching.

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Why is Berlin so dysfunctional?

German inefficiency

AT A crossroads in the middle of Tegeler Forst, a wooded part of north-west Berlin, visitors can admire the city’s longest-serving provisional traffic light. Erected in 2013 after a burning car had destroyed the pillar on which the lights were mounted, it was meant to be replaced by a more permanent structure within a few weeks. When a city lawmaker asked the government why, four years later, the lights still had not been fixed, he received an interesting response: owing to changed regulations, calculating whether or not the new structure would fall down had become “very laborious and difficult”. The government would not specify how much longer it would take.

The traffic-light saga illuminates a wider problem. Berlin, the capital of Europe’s most successful economy, is surprisingly badly governed. The new airport, the city’s biggest flagship project, missed its seventh opening date earlier this year and may not open until 2021, ten...Continue reading

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Italy’s aid puzzle

AS ITALY’S budget for 2018 wends its way through parliament, the European Union and the Italian government have been trading barbs in what has become an annual ritual. The Commission’s vice-president, Jyrki Katainen, recently in effect accused Prime Minister Paolo Gentiloni’s coalition of lying about the true state of the economy; its finance minister, Pier Carlo Padoan, called that “intolerable”.

True, Italy’s new budget is mildly expansionary: it aims for a deficit of 1.6% of GDP whereas the government had estimated that, if nothing were changed, it would shrink to 1.0%. But Italian ministers stress that the revised figure is still well below the EU’s ceiling of 3%. The Commission, though, worries that Italy is not doing enough to cut its huge public debt (133% of GDP at the end of last year).

Curiously, while protesting at Brussels’ refusal to let them spend more of their taxpayers’ money, the Italian authorities persistently fail to claim billions of...Continue reading

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The roots of Ireland’s property crisis

Dublin down and out

DUBLIN has long been a popular destination for foreign tourists, who enjoy its warm pubs, silky beer, Georgian streetscapes and leisurely approach to life. But lately it seems that longer-term visitors have been falling out of love with Ireland’s lively capital.

Last month a survey of 13,000 expatriates put Dublin fifth from bottom of a list of 51 global cities, ranked by quality of life. Their main gripe (as with Paris, which finished two places lower, sandwiched between Riyadh and Jeddah) was not a sudden collapse in the city’s charm, safety or amenity but its high cost of living, and in particular the difficulty of finding somewhere to stay.

According to a recent report by WorldFirst, an international-payments firm, Luxembourg is now the only European country where renting a home is pricier than it is in Ireland. Daft.ie, an Irish property website, reported last month that the average monthly rent in central Dublin is now...Continue reading

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Turkey’s $2bn arms deal with Russia faces hurdles, and possible sanctions

TO NATO officials, it must have seemed like a bad joke. Earlier this autumn, Turkey’s state-run news agency published an infographic on the S-400 missile-defence system, which President Recep Tayyip Erdogan’s government is buying from Russia. After praising the system’s prowess, including its ability to intercept enemy fighter jets and incoming missiles at a range of up to 400km, the graphic cited examples of planes the S-400 could knock down. Every single one was an American aircraft.

Turkey’s allies have learned to ignore such needling, examples of which often pop up in the pro-government press. But they are following the missile deal itself with increasing unease. NATO officials say Mr Erdogan’s government is free to shop for military hardware wherever it pleases, but take a dim view of its decision to do so in Russia. Analysts point out that the S-400 would not be interoperable with NATO’s air-defence system. The chairman of NATO’s military committee, Petr Pavel, recently...Continue reading

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Some Europeans fear a surge of Chinese investment. Others can’t get enough of it

TO THIS day the trained eye can still spot the occasional boxy Chinese tractor lumbering around rural Albania, a reminder of the time when this Balkan backwater was China’s biggest champion in Europe. In the 1960s Chinese aid and capital propped up Enver Hoxha’s dire regime in return for its support at the UN, where Taiwan still held the Chinese seat. Now some fear that what comes around goes around. Chinese money is pouring into Europe’s heart and its periphery. It sometimes seems to have a political edge.

Public investment in the European Union is at its lowest for 20 years. Little wonder some are looking east. The stock of Chinese investment in Europe is low compared with America’s or Japan’s, but it is shooting up. According to one study, in 2016 its new FDI in the EU was over 77% above that the year before, at €35bn ($41bn). These days China’s attention is on the innovation hubs of northern Europe as much as on infrastructure, but crisis-hit southern economies have...Continue reading

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France’s budget is less bold than Emmanuel Macron makes it sound

FOR those seeking evidence that Emmanuel Macron is set on a radical overhaul of the economy, France’s new budget, now being debated in the Senate, offers mixed evidence. For all his bold talk of “transforming” France, some measures—notably on public spending—so far look tentative.

Undoubtedly there has been much to cheer. Mr Macron had already signed off on reforms to boost flexibility in the labour market earlier this autumn. Assessing the full impact of these is tricky, because implementation takes time and an upturn in the economic cycle means unemployment should drift down from 9.7% in any case. A big unknown is whether unions will keep their de facto power to set some national terms on pay and conditions, limiting firms’ flexibility no matter what the laws may say. Economists will be scratching their heads over this for years.

The budget is easier to assess. Two measures stand out. The president talks of a France that encourages wealth creation rather than...Continue reading

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New thinking on the armed forces after Argentina loses a submarine

ARGENTINES have given up hope of finding alive the 44 crew aboard the ARA San Juan, the most modern of the navy’s three submarines, which disappeared on November 15th. On November 23rd the navy said an explosion had been detected in the area where the submarine is thought to have been.

The apparent tragedy has started a debate about the role of Argentina’s 105,000-strong armed forces and the money spent on them. Since the end of the military dictatorship in 1983, a year after Argentina’s failed attempt to wrest the Falkland Islands from Britain by force, successive governments have reduced military spending. It has dropped from 3.5% of GDP in 1978 to less than 1% last year. Argentina spends a lower share of GDP than any of its neighbours on its armed forces (see chart).

Little of the money goes towards arms and equipment. The defence ministry spends about 70% of its budget on salaries and pensions (about a third of the United States’ defence spending is on...Continue reading

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