Thursday, 5 April 2018
Wednesday, 4 April 2018
Even After a Tumble, the Stock Market's Price Isn't Right
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China Targets Detroit, Hits Tesla and BMW Instead
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Airlines, Not Boeing, Will Feel China Tariff Threat First
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How Trump's Tariffs Could Really Hurt China
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At AT&T Trial, Government Sends a Message About Future Deals
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Spotify's High Valuation Is Bait For Other Tech Unicorns
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Black boys are the least likely of any group to escape poverty
THAT African Americans are poorer than the American average is well-established. In 2016, the median household income of black Americans was $39,500 compared to $65,000 for non-Hispanic white Americans. Lower parental income and education levels are often cited as reasons for this gap. But a new paper suggests that there is more to it than that. It finds that black men fare worse economically than white men even if they are raised in households with similar incomes and educated similarly. A black boy brought up in a wealthy family is as likely to become poor in adulthood as he is to remain prosperous.
The study, by Raj Chetty at NBER, Maggie Jones at the Census Bureau and two colleagues is notable for its size and sweep: it involves 20m people born between 1978 and 1983–about 94% of all of those born over that period now resident in America. The authors use a range of data on child, parental and neighborhood characteristics to look at the impact of race on economic mobility over a generation.
It finds that a black man born to...Continue reading
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Tuesday, 3 April 2018
Tesla's Model 3 Is no Model T
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Disney vs. Comcast: Stay Tuned for Sky Bidding
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Winnie Madikizela-Mandela leaves behind a complicated legacy
THE death of Winnie Madikizela-Mandela came as a shock to South Africans. At 81 she looked as radiant as ever, her taut skin and chic outfits belying her age. She still had the will to fight, taking the estate of her late ex-husband, Nelson Mandela, to court (she lost an appeal in January). Just last month she appeared at a voter-registration campaign for the ruling African National Congress (ANC), grinning alongside Cyril Ramaphosa, the president. But, unbeknown to many, she had long been ill. Ms Madikizela-Mandela died on April 2nd in Johannesburg. Outside her home in Soweto, mourners sang old struggle songs into the night. She will receive a state funeral on April 14th.
Ms Madikizela-Mandela was one of a shrinking number of heroes from South Africa’s struggle to end repressive white rule. She came from what is now Eastern Cape and, against the odds, became a social worker at a Soweto hospital. During that time she met Mr Mandela, whom she married in 1958. But they would spend only a...Continue reading
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Where Investors Find Refuge From Tech's Storm
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Why Consumer Spending Growth Is Slowing
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Ralph Northam pushes for Medicaid expansion in Virginia
RALPH NORTHAM, Virginia’s new Democratic governor, soundly beat his Republican rival, Ed Gillespie, by harnessing antipathy for Donald Trump. Virginia was the only Southern state that the president lost to Hillary Clinton in 2016. But Mr Northam's landslide win in November was also due to his promise to bring 300,000 uninsured Virginians under the umbrella of Medicaid, a federal health-care programme for the poor and disabled.
The governor's young administration now has a problem: there is no consensus in the Republican-controlled legislature for his chief policy goal. Under the Affordable Care Act, the federal government would pay 90% of the $2bn a year cost of expanding Medicaid; the state would raise the remaining 10% by taxing hospitals.
The low-key paediatric neurologist has moved closer in the first three months of his term to implementing this initiative than his predecessor, Terry McAuliffe, also a Democrat, did in four years. But Mr Northam has yet to close the deal—even with an unexpected boost from Republican...Continue reading
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Get Ready for Another LNG Boom
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Monday, 2 April 2018
Why Tumbling Stocks Didn't Tank Treasury Yields
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Why Trump Won't Touch Moonshine
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Saturday, 31 March 2018
Healthy Skepticism About Walmart and Humana
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Retailers' Tariff Troubles May Undo Recent Gains
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Can K-pop bring the two Koreas closer together?
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Friday, 30 March 2018
Israel has killed over a dozen Palestinians in Gaza
IT WAS billed as the “Great Return March”, the first step in the return of Palestinians in Gaza to the homes their grandparents lived in before Israel’s establishment in 1948. But there was little marching. Most of the estimated 30,000 Palestinians who showed up on March 30th set up tents about half a kilometre from a border fence erected by Israel. They remained there, on the Gaza side, listening to Palestinian politicians make impassioned speeches. Some protesters played football.
Israel warned the Palestinians not to get within 300 metres of the fence and said that it would see any attempt to cut through it as an act of violence. Small groups of Palestinians nevertheless moved closer. When some tried to dart all the way to the fence, the Israeli army dropped tear-gas grenades from small drones and Israeli snipers opened fire. According to the Palestinian health ministry in Gaza, at least 13 people were killed and hundreds hurt.
This was meant to be the first in a series of marches over the next six and a half weeks. They are...Continue reading
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Why Advertisers Won't Rush to Unfriend Facebook
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Why 2018's Profits May Disappoint
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Thursday, 29 March 2018
Why Investors Are Too Negative on Banks
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Barclays Gets Penalty It Can Live With
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Why Banks Will Cheer CME Snapping Up NEX
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The Supreme Court struggles with partisan redistricting
THE toughest part of being a Supreme Court justice is not deciding who wins. It is writing the opinion explaining why the winning party should prevail. And since Supreme Court decisions serve as guides to courts in future cases, a majority opinion needs to do more than provide a justification for why A wins over B. It must anticipate similar cases that could arise and draw lines showing how those ought to be resolved.
On March 28th, in a case contesting Maryland map from 2011 that painted a solidly red congressional district blue, the justices seemed to feel a particularly heavy burden. This is not surprising. Benisek v Lamone marks the second time the court has stepped into an electoral politics minefield this term, and in three months’ time, the justices must decide whether to try to put the brakes on partisan gerrymandering—a scourge of American democracy whereby politicians rig elections in their own favour. The problem is, defusing some mines risks tripping others.
Benisek concerns a rather brazen move by Maryland...Continue reading
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Donald Trump ousts David Shulkin as VA secretary
“WE’LL never have to use those words on our David" said Donald Trump last June. He was referring to his reality-television catchphrase, “You’re fired”, and David Shulkin, his secretary of veterans affairs. But on March 28th Mr Shulkin was fired, by tweet, and Mr Trump announced that Ronny Jackson (pictured), his personal doctor and a career naval officer, would succeed him. Mr Shulkin, the lone member of Barack Obama’s cabinet still in the job, had been in a precarious position since news emerged in February of a luxurious trip to Europe last year, taken on the taxpayer’s dime. The ensuing controversy revealed a VA department in a state of revolt. Staffers were disobeying Mr Shulkin’s direct orders and were, in his telling, scheming to subvert him. But veteran affairs groups, which exert an unusual degree of influence in Washington, DC, supported Mr Shulkin because they considered him a bulwark against the creeping privatisation of veterans’ health-care services (which are currently operated through a single purchaser which owns its...Continue reading
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There's Much to Fear As Brexit Nears
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Uruguay’s record-setting economic growth streak
AFTER long recessions, Brazil and Argentina still cheer when good economic news comes out. In tiny Uruguay, sandwiched between them, it is old hat. On March 22nd the central bank reported that GDP grew by 2.7% in 2017, bringing the country’s growth streak to 15 years, the longest expansion in its history. Uruguay’s growth since 2011, when global prices of commodities started to fall, puts its neighbours to shame (see chart). Its success shows the value of openness, strong institutions and investment in know-how.
Uruguay’s most recent economic disaster was in 2002, after Argentina defaulted on its debt. Argentines pulled their money out of banks in Uruguay, triggering a bank run there. Thanks to a bail-out from the IMF, it avoided default. That won it a lot of trust with investors, says Jesko Hentschel, the World Bank’s director for Argentina, Paraguay and Uruguay.
Thereafter, Uruguay’s leaders realised that the economy needed to diversify. The Broad Front (FA), a leftist coalition that has governed since 2005, began an...Continue reading
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How AMLO could win Mexico’s election
WHEN campaigning for Mexico’s general election officially begins on March 30th, Andrés Manuel López Obrador, a left-wing populist, will be the clear front-runner for the presidency. His two main challengers are political moderates, but their rivalry is no less bitter for that. One is backed by the government. The other is feeling heat from the federal prosecutor. To many Mexicans, that smacks of political bias. It also increases the chances that Mr López Obrador will win the presidency—a prospect that terrifies markets and puts economic reforms in jeopardy.
On February 21st the office of the acting attorney-general, Alberto ElÃas Beltrán, confirmed that it was investigating a property deal involving Ricardo Anaya, the brainy presidential candidate of the centre-right National Action Party (PAN). This has shaken up a campaign in which the main issues are crime and corruption.
Few voters think that José Antonio Meade, the nominee of the ruling Institutional Revolutionary Party (PRI), is the best candidate to tackle these...Continue reading
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Peru’s President Pedro Pablo the Brief
EVER since it began in July 2016 the presidency of Pedro Pablo Kuczynski in Peru looked like an accident waiting to happen. He squeaked into a run-off election only after his supporters in Peru’s media and business establishment helped to press the electoral authority to disqualify a more popular rival, Julio Guzmán. After he unexpectedly defeated Keiko Fujimori, a conservative populist, in the run-off by just 0.2% of the vote, she exercised her pique by using the congressional majority gained by her Popular Force (FP) party to harass Mr Kuczynski’s government. After narrowly surviving one impeachment attempt in December last year, PPK (as Peruvians know him) resigned on March 21st when defeat in another became inevitable. Having served just 20 months, he became the 19th elected president in Latin America in the past 30 years to fail to complete his term.
Many of these were victims of the instability inherent in Latin America’s unique combination of directly elected presidents and legislatures chosen by proportional representation. This...Continue reading
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Wednesday, 28 March 2018
Nvidia Feels the Pain of Tech's Great Success
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Fifteen bloody years after America’s invasion, Iraq is getting back on its feet
WHISKY is back on the tables in Mosul, one of Iraq’s biggest cities. Until last year, boozing was punishable with 80 lashes. These days a refurbished hotel with a nightclub on the roof, set in a wood that had sheltered the high command of the so-called Islamic State (IS), is fully booked. Shops around the ruins of Mosul’s university have new fronts. Families queue at restaurants on the banks of the Tigris. There is not a niqab, or face-veil, in sight.
The revival of Mosul is a metaphor for Iraq as a whole. When IS captured the city in 2014, Iraq seemed a lost cause. Its armed forces had fled. The government controlled less than half the country and the jihadists stood primed to march into Baghdad. With the collapse of oil prices in 2015, the government was broke. Iraq was a byword for civil war, sectarianism and the implosion of the Arab state order established at the end of the first world war.
Now Iraq, home to nearly 40m people, is righting itself. Its forces have routed the...Continue reading
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Europe is sending African migrants home. Will they stay?
ONCE considered the smartest hangout in town, the Benin Plaza motel in southern Nigeria’s Benin City has seen better days. Its chalet-style rooms are normally empty, and the Moat Bar, which promises “groovy nights and exotic cocktails”, has fallen into disrepair.
For the Plaza’s recent influx of guests, though, the motel is the first comfortable night they have had in rather a long time. Requisitioned by the government for migrants repatriated from Libya, it offers new arrivals free accommodation for a few days while they find their feet.
The repatriation programme is part of a joint UN and EU effort to stem the flow of migrants to Europe. It encourages those who have made it to Libya to go home voluntarily, rather than risk a rickety boat across the Mediterranean. People who turn back get a free flight—cutting out the need for a perilous return journey across the Sahara.
The programme, launched in December 2016, repatriated some 15,000 migrants to various west African countries in its first year. Most of them were in...Continue reading
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How illegal charcoal fuels war and harms the environment
DRESSED in a faded T-shirt bearing the face of the American rapper 50 Cent, Samson Okenye leans on a shovel in Nyakweri forest in south-western Kenya. A 62-year-old from the Rift Valley, he has a new gig for his retirement. Having worked in a factory for most of his life, he is now chopping down trees and burning them for charcoal. He sells each bag he produces from his crude earthen kilns for 400 Kenyan shillings (about $4). Men carry it off on motorbikes to Nairobi, the capital, and Kisumu, Kenya’s third-largest city.
Charcoal is one of the biggest informal businesses in Africa. It is the fuel of choice for the continent’s fast-growing urban poor, who, in the absence of electricity or gas, use it to cook and heat water. According to the UN, Africa accounted for three-fifths of the world’s production in 2012—and this is the only region where the business is growing. It is, however, a slow-burning environmental disaster.
In Nyakweri, the trees are ancient and rare. Samwel Naikada, a local activist, points at a blackened stump...Continue reading
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The success of “Black Panther” is spurring demand for African comics
SINCE the release of “Black Panther”, a film based on a Marvel comic, internet searches for African travel have spiked. But those seeking the African kingdom over which the titular superhero reigns will be disappointed. Wakanda does not exist, unless one counts a water park of that name in Wisconsin.
Africa has been affected in more tangible ways by “Black Panther”, which has a predominantly black cast and is one of the highest-grossing superhero movies of all time. Its popularity extends to the continent, where filmgoers from Lagos to Nairobi dress in Afro-futurist garb for screenings. Fashion designers have received a boost from the film’s distinctive mix of traditional and contemporary African styles.
African comic-book artists are perhaps the biggest beneficiaries. Take “Kwezi”, a comic by Loyiso Mkize about a South African superhero who battles baddies in Gold City, a proxy for Johannesburg. Kwezi is a cocky teenager, but as his powers grow he draws closer to his ancestors and embraces his heritage. South Africans love it; bookshops sell out fast. At one in Johannesburg, customers demand versions in Zulu and Xhosa (which, incidentally, is what Wakandans speak in the film). “Our superhero”, says a display box.
Bill Masuku, the Zimbabwean creator of a comic about a vigilante superhero called Razor-Man, says “Black Panther”...Continue reading
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Banking System Alarm Bell That Doesn't Signal Danger
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Appalled by a chemical attack on Britain, western governments expel Russian diplomats
IT IS one thing to stand defiant and aloof on the world stage, another to be a pariah. That is the message that Western governments hope President Vladimir Putin will absorb as he digests the co-ordinated expulsion of over 130 Russian diplomats by more than two dozen countries, in response to a nerve-agent attack in Britain. America’s decision to throw out 60 Russian officials accused of spying under diplomatic cover was that country’s largest such action, exceeding even expulsions in the chilliest years of the cold war. President Donald Trump’s government also ordered the Russian consulate in Seattle to close, citing its proximity to a nuclear submarine base and to the headquarters of Boeing, an aircraft maker.
Foreign leaders, notably those from Britain, France and Germany, used a European Union summit and a flurry of telephone diplomacy to urge allies to act in concert. Suspected spooks were given their marching orders from Oslo to Ottawa, and from Copenhagen to Canberra. New Zealand shyly admitted it knew of no undeclared...Continue reading
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Catalonia’s separatist leader is arrested in Germany
SPAIN’S intelligence service was humiliated last year when it failed to stop supporters of Carles Puigdemont’s separatist Catalan government from smuggling in ballot boxes for an unconstitutional independence referendum. The spies got their revenge on March 25th when they tipped off German police, who arrested Mr Puigdemont after he drove across the border from Denmark. He was remanded to prison and is likely to be extradited to Spain within two months.
Mr Puigdemont’s arrest ended five months of self-imposed exile, mostly in Belgium, after he organised a post-referendum declaration of independence on October 27th. It came two days after a judge of the supreme court in Madrid charged Mr Puigdemont and 24 other separatist leaders with crimes ranging from rebellion to disobedience. He sent five to prison (four more were already there) and ordered European arrest warrants against six, including Mr Puigdemont.
Tens of thousands demonstrated in Barcelona to denounce what they see as repression of a peaceful, democratic cause. A...Continue reading
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Noroc (cheers) for Moldovan wine
“LET’S try this!” Victor Bostan selects a 1984 red from the cellar of his Purcari winery. He is in a bullish mood. Last month Purcari shares began trading on the Bucharest stock exchange. In 2017 sales from his four wineries were up 35% on 2016. Bad weather in the big western European winemaking countries caused production to plummet to its lowest level in 60 years. But in Moldova, where the weather was good, producers can scarcely contain their excitement at how well things are going.
In Soviet days almost all Moldovan wine went to the rest of the Soviet Union. In the 1980s its vineyards were uprooted when Mikhail Gorbachev began his anti-alcoholism campaign. With the collapse of the Soviet Union much of Moldova’s industry also collapsed; but the wine and brandy businesses did not. Indeed, says Mr Bostan, these were the best times ever. Russia, to which 80% of the country’s booze went, had an unslakable thirst for it. “It was like pumping oil from the...Continue reading
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How the Dutch will take Britain’s place in Europe
“ALL the North Sea’s people are connected to each other,” muses Hans de Boer, president of VNO-NCW, the Dutch business lobby, as he gazes from his 12th-floor office in The Hague. It is not a bad place for a Dutchman to consider the consequences of Brexit. The port of Rotterdam, Europe’s busiest, is just visible in the morning haze. Eighty thousand Dutch firms trade with Britain; 162,000 lorries thunder between the two countries each year. Rabobank, a Dutch lender, calculates that even a soft Brexit could lop 3% off GDP by 2030. Bar Ireland, no country will suffer more. “Brexit was not our preferred option,” offers Mr de Boer, drily.
Dutch governments spent the 1950s and 1960s trying to get their British friends into the European club; when Britain voted to leave, in June 2016, some wondered if they might drag the Dutch out with them. The EU’s economic and migration traumas had tested the patience of voters for years, and Mark Rutte, prime minister since 2010, seemed unwilling to make the...Continue reading
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How “identitarian” politics is changing Europe
THE Flemish city of Ghent is so packed with medieval antiquities that it is in no danger of forgetting its history. Nonetheless, cultural identity is a burning political issue there. On March 22nd marchers led by a conservative Flemish student group, the Nationalist Student Union (NSV), filed into the square of the Cathedral of St Bavo. The march was a protest over the large number of murders of white South African farmers by blacks. It was also part of a growing movement led by young European activists aimed at reshaping identity politics, long the province of the left, into a right-wing cause.
White Afrikaners, like Flemings, speak a form of Dutch, so there is a cultural bond. The NSV, founded in 1976 as part of the Flemish independence movement, wanted to show solidarity with them, said Bavo Janssens, one of the group’s leaders. Behind him flew flags bearing the Flemish lion and a banner reading “ANC murderers”. In a jab at multiculturalism everywhere, Mr Janssens said the Belgian media were too politically correct to admit that “the...Continue reading
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Asia’s small open economies may suffer in America’s trade war
CHINA is the stated adversary in Donald Trump’s incipient trade war. But 30% of the value of the goods China exports to America is added elsewhere. If the row escalates, countries entwined in Chinese supply chains will suffer.
In absolute terms, Japanese suppliers will fare worst. Japan is the country that exports most to firms in China that export onwards to America. But relative to economic size, such suppliers are a bigger part of several small, open Asian economies (see chart). Between 1% and 2% of some countries’ total output is shipped first to China and then on to America. If Chinese exports to America were to fall by 10%—an extreme but not impossible scenario—it could knock 0.1-0.2 percentage points off their economic growth.
China’s competitors in industries that have been threatened with tariffs, namely aerospace, machinery and IT, however, would benefit. There are many of these in Mexico, Germany and Japan. Tariffs also encourage companies to switch their investment plans....Continue reading
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Wakandanomics
“THIS will require a quick lesson in global economics…bear with me,” says Erik Killmonger, the muscular villain in “Black Panther”, a long-running Marvel Comics series. In that saga and the recent film it inspired, Killmonger and the Black Panther vie for the throne of Wakanda, a fictional African kingdom little known to the outside world. A land of great wealth and technological sophistication, it lends itself to several quick lessons in economics. Bear with us.
The source of Wakanda’s riches is its “great mound” of vibranium, a versatile ore left behind by a meteor strike, which can absorb sound and motion. Like other deposits of natural treasure, Wakanda’s vibranium attracts some vicious intruders. But unlike some other resource-rich countries, Wakanda has never succumbed to outside foes.
That has helped it escape the “resource curse”, in which natural riches keep a country poor by crowding out manufacturing or ushering in predatory government. The curse is...Continue reading
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America’s trade strategy has many risks and few upsides
AMERICA’S president claims to view China as a friend. But the friendship is going through a rocky patch, to say the least. America’s trade deficit with China, “the largest deficit in the history of our world”, is “out of control”, Donald Trump groused on March 22nd. “A tremendous intellectual-property theft situation” also irks him. And so, after laying out his concerns, he announced plans for some tough love. Litigation against China at the World Trade Organisation (WTO), investment restrictions and tariffs are all on the cards.
The announcement early in March of tariffs on steel and aluminium imports to America was chaotic, even prompting the resignation of Gary Cohn, the head of Mr Trump’s National Economic Council. The latest targeting of China, by contrast, is the culmination of months of planning and commands broader support. It was masterminded by Robert Lighthizer, the United States Trade Representative (USTR) and a seasoned trade lawyer. As a deputy USTR under Ronald Reagan...Continue reading
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China wants to reshape the global oil market
TRADITIONALLY, to count as an oil power a country had to be a big producer of the black stuff. China is the world’s biggest importer but still wants to break into that exclusive club. On March 26th it launched a crude futures contract in a bid to gain more clout in the global market. Some think that, if successful, the yuan could start to displace the dollar in oil trading. For now, though, that is fanciful.
A previous attempt by China to introduce oil futures, in the early 1990s, failed because of unstable pricing. This time regulators prepared methodically. To ward off speculators, notorious in Chinese markets, they made the storage of oil very expensive. Volumes were light in the first few days of trading—less than a tenth of the averages for similar contracts in New York and London. But all went smoothly. It was a good, if modest, start.
China has two goals. The basic one is to help its companies hedge against volatility. Chinese refiners and traders have struggled to...Continue reading
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India’s economy is back on track. Can it pick up speed?
IT IS easy to be awed by the Indian railway network. The 23m passengers it carries daily travel, in total, over ten times the distance to the sun and back. It is just as easy to find it unimpressive. Delays are frequent and trains antiquated. It takes 14 hours to get from India’s capital, Delhi, to its commercial hub, Mumbai. The equivalent trip in China—from Beijing to Shanghai, a similar distance—takes just over four hours.
Similarly, India’s economy can be seen in two lights. Its long-term growth rate of 7% a year has proved far more dependable than the rail timetable. GDP has doubled twice in the past two decades. Yet deep poverty still lingers and jobs are scarce. And Indian growth has been left in the dust by the Chinese express (see chart).
After slow running for much of 2017, India is now near to full throttle. Growth of 7.2% in the three months to December put it ahead of China (which grew at a relatively leisurely 6.8%) and...Continue reading
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The average American is much better off now than four decades ago
JUST how bad have the past four decades been for ordinary Americans? One much-cited figure suggests they have been pretty bad. The Census Bureau estimates that for the median household, halfway along the distribution, income has barely grown in real terms since 1979. But a recent report by the Congressional Budget Office (CBO), a non-partisan think-tank, gives a cheerier rise of 51% for median household income between 1979 and 2014. Which is nearer to reality?
The gap between the two is accounted for by three methodological differences (see chart). First, the CBO takes demography into account. This seems sensible: more Americans are living alone and American women are having fewer children, so households have fewer mouths to feed.
The second is that the CBO uses the personal-consumption expenditures (PCE) index to measure inflation, whereas the Census Bureau uses the consumer-price index (CPI). These differ in two main ways. The CPI includes only what consumers spend on themselves, whereas the...Continue reading
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Insurers and undertakers profit as people prepay their last bill
“WHEN are you thinking of dying?” asks John Cleese, a British comedian, in a recent television ad. Dressed as the Grim Reaper, he addresses the viewer as he prepares a cup of tea. “Your loved ones could be left all alone and distressed and facing a whacking great bill,” he warns. His advice? Phone in and buy a funeral plan.
As populations age, ads of this sort, imploring people to make financial preparations for their demise, are appearing on both sides of the Atlantic. Some 1.3m Britons now have a pre-paid funeral plan, up from just over 400,000 in 2005. An estimated 2.5m more have a funeral-insurance policy. Millions of Americans prepay some or all of their funeral costs.
The average American funeral now costs nearly $9,000, according to the National Funeral Directors Association (NFDA). In Britain prices have risen by 5.5% on average each year over the past decade, faster than inflation. Add to that stories in the press of...Continue reading
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