Curious Quirks in How Credit Suisse Makes Money

Something unusual in Credit Suisse’s earnings deserves investors’ attention.

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Health-Care Investors Are Too Complacent

Investors should spare a thought for the conventional wisdom that dominated the market in 2010 when the Affordable Care Act was up for debate.

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Investors Need to Wake Up to Europe's Surprising Good Health

Europe is still a collection of “what-if” scenarios for investors in terms of politics. But the question investors need to weigh up is: what if the eurozone economy is really motoring?

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How a 'Low Volatility' Stock Plunged 85% in an Hour

Reading the label isn’t enough for picking funds. You may need to go into the ingredients list, too.

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Did a Dutch eurocrat call southern Europeans drunken womanisers?

IN PHILIP ROTH’S “The Human Stain”, a university professor finds himself accused of racial harassment after he jokingly asks whether two black students who fail to attend class are “spooks”. (He means “ghosts”; they hear a 1950s-era derogatory term for African-Americans.) It seems like a ludicrous case of political correctness run amok, until the reader discovers that the professor is himself a black man who is passing as white, and is racked by racial anxiety and guilt. His unfortunate word choice was not an innocent mistake but a sign of subconscious angst.

On March 20th Jeroen Dijsselbloem, the Dutch finance minister and current president of the Eurogroup (the council of euro-zone finance ministers), had a similar moment. In an interview with the Frankfurter Allgemeine Zeitung, a German daily, Mr Dijsselbloem said he was proud that during the euro crisis, northern European Union states had shown solidarity with southern ones (for example, by extending them billions in loans). But solidarity, he continued, entails obligations: “I cannot spend all my money on schnapps and women, and then ask for your support.” His point was that countries...Continue reading

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Why China's Latest Cash Crunch Is Scarier This Time

China’s short-term borrowing costs are surging again. This time round, the problem has become even more complex.

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How to Beat Tesla? Mercedes and BMW Take Different Roads

Mercedes-maker Daimler has outperformed BMW in recent years, but the companies’ contrasting electric-vehicle strategies could mark a new turning point

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Google Needs All the Clicks It Can Get

Big advertisers will likely return, but growth deceleration can still sting Google.

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Companies Are Finally Splashing the Cash

Friday’s durable-goods report should show business investment remains on an upswing.

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Bank Stock Party Isn't Over After Pullback

Fundamental drivers can still move bank shares higher.

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No trial is in sight for 17 alleged gang members in Louisiana

THE city of Abbeville, 20 miles south of Lafayette in the lush flatness of Acadiana, is known for a pretty Catholic church beside Bayou Vermilion and some slap-up oyster restaurants. It is the sort of small town in which the same surnames, many of them Cajun, recur among prominent business-owners and officeholders. It was also, until recently, home to a fearsome gang, known as the Gremlins—at least, so say the local prosecutors. That view of the group has yet to be endorsed by a trial, and, on current form, it seems unlikely to be. The Gremlins, and the limbo in which they are sunk, epitomise deep problems in the criminal-justice system of Louisiana, and not only Louisiana.

At first they instead seemed proof of the virtues of all-action policing. In February 2016, Clay Higgins, then spokesman for the sheriff of nearby St Landry Parish, denounced them in a Crime Stoppers video as “animals” and “heathens”. Sporting body armour and a rifle, and backed by a phalanx of officers, he told the Gremlins they would “be hunted”, railing in particular against one “uneducated 125-pound punk” whom he vowed to meet “any time, anywhere…You won’t walk away.” Such...Continue reading

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New York has record numbers of homeless people

SOME in Maspeth, a neighbourhood in New York City’s Queens, were not at all pleased when they heard last year that City Hall had decided to convert a local hotel into a 110-bed homeless shelter. For months they held nightly protests in front of the hotel. They demonstrated outside the homes of the hotel’s owner and of the city’s homelessness commissioner. Eventually they wore down City Hall, which backed down a bit from a total conversion. Only 30 homeless men are housed in the hotel now. All of them have jobs. This is not unusual: more than one in ten of New York’s homeless people are employed.

Since 1979, when a homeless veteran of the Korean war successfully sued the city for failing to provide him with shelter, the city has had a legal duty to house those unable to afford a home. (New York’s state constitution says that “the aid, care and support of the needy are public concerns and shall be provided by the state and by such of its subdivisions.”) In recent years the number of homeless people has grown. Whereas rents increased by 18% between 2005 and 2015, incomes rose by 5%. When Rudy Giuliani entered City Hall in 1994, 24,000 people lived in shelters....Continue reading

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Neil Gorsuch’s conservatism is different from Antonin Scalia’s

CONFIRMATION hearings for Supreme Court justices have become frustrating affairs. Senators pontificate and probe while nominees utter bromides and dodge questions for hours on end. In his stint before the Judiciary Committee this week, Neil Gorsuch, Donald Trump’s pick for the court, has been especially tight-lipped. Senators have elicited only glimmers of what makes the 49-year-old judge with a decade on the Tenth Circuit Court of Appeals most interesting, or most worrisome: his affinity for a family of legal theories called “natural law”. Though Mr Trump promotes his nominee as drawn from the mould of Antonin Scalia, the conservative jurist Mr Gorsuch was tapped to replace, he represents a stark departure from a central feature of Mr Scalia’s jurisprudence.

Mr Scalia saw the constitution as “a practical and pragmatic charter of government” that neither requires nor permits “philosophising”. In a right-to-die case in 1990, he quipped that the nine justices were no better suited to make fine distinctions on the morality of life support than “nine people picked at random from the Kansas City telephone directory”. By contrast, Mr Gorsuch seems more ready to let...Continue reading

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Denver’s mayor is trying to save Democrats from a Trump trap

OUT in the savannah of American politics, the Democratic Party lacks big beasts. Republicans control the White House and Congress and, in the country at large, hold 33 governors’ mansions and almost as many state legislatures. Not since the 1920s have Democrats carried so little clout at the state and federal level. Just one Democratic pack moves with the swagger born of electoral success: big-city mayors. Democrats head 17 of the 20 largest cities, from New York to inland centres like Denver, a fast-growing, diverse spot at the foot of the Rockies, once known for cows, Coors beer and hydrocarbons, now abuzz with tech start-ups and millennials seeking jobs in finance and health care.

In a backhanded tribute to their power, President Donald Trump has prepared a trap for Democratic municipal leaders. It is built around immigration enforcement, and the reluctance of many urban leaders to work too closely with federal immigration authorities—notably the black-clad agents of Immigration and Customs Enforcement (ICE). One of Mr Trump’s first executive orders threatens to deny federal funds to so-called “sanctuary jurisdictions”, meaning local governments deemed to be...Continue reading

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Millennials may move less because fewer of them own homes

MILLENNIALS—the generation which roughly includes those born between 1980 and 1996—have a reputation for being footloose. But analysis by the Pew Research Centre released in February suggests American millennials are moving less than previous generations did when they were younger. In 2016 20% of those aged 25-35 changed addresses, compared with 26% of the generation above in 2000 and 27% of late baby-boomers in 1990. Frequent moving in search of opportunity has long been an ingredient in American exceptionalism. Economists such as Tyler Cowen, author of “The Complacent Class”, worry that its decline will dampen the nation’s dynamism.

Since the 1980s, Americans of all ages have become more rooted. Between 1980 and 1981, 17% of Americans moved house, according to William Frey, a demographer at the Brookings Institution, a think-tank. Between 2015 and 2016 only 11% did. Migration between states, which is often driven by professional choices, has fallen by half since 1990. Young people, who normally move around most, seem especially stuck.

This is strange. More millennials lack the anchors that have previously rooted people in place: they are...Continue reading

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The FBI says it is investigating the president’s campaign

Just another day in Washington

A “BIG grey cloud” hangs over President Donald Trump and his administration, following public confirmation by the head of the FBI that his agents are investigating Russian government efforts to interfere in the presidential election, and whether those efforts were co-ordinated with anyone linked to the Trump campaign. That was the verdict of the Republican chairman of the House Intelligence Committee, Representative Devin Nunes of California, at whose hearing the FBI director, James Comey, revealed the existence of the counter-intelligence probe, opened eight months ago. Thoughts of that cloud now hang over Washington, a town which remembers the FBI inquiries that haunted other administrations, even if criminal charges were not eventually laid.

Mr Trump threw up a fog of counterclaims. The president declared that the “real story” about Russia is that officials leaked classified information to reporters, and asked—in an early morning tweet unaccompanied by evidence—“What about all of the contact with the Clinton campaign and the Russians?” Taking their cue from the president, Republicans led by Mr Nunes...Continue reading

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The spread of cryotherapy

Journalist at work

NESTLED between a nail parlour and a tanning salon on Wilshire Avenue in Santa Monica, an upscale part of Los Angeles, is a newer kind of spa. Opened last year, CryoZone invites customers to spend $75 for three minutes in a cryogenic chamber cooled to -110°C for fledgling freezers and -132°C for chilling connoisseurs. The treatment is meant to calm inflammation and soothe muscle soreness, but Angelenos swear by it to solve all sorts of ills, from tennis elbow to the urgent need to lose a bit of weight before a daughter’s wedding.

Invented in Japan in 1978 as a remedy for rheumatoid arthritis, cryotherapy is not new. But it was not until European rugby and football teams started freezing themselves in the past decade that it became more popular. America, which boasts at least 400 cryotherapy spas, is the first place to offer wide access to it. Impact Cryotherapy, a group that manufactures cryosaunas, claims to have units in 38 states running more than 10,000 sessions a week. California, unsurprisingly, is in the vanguard: there are around 60 below-freezing-cold vats in the state.

On a sunny weekday in March,...Continue reading

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As Cuba’s economy flat-lines, retirement has become notional

NORBERTO MESA, a 66-year-old grandfather, stands in the hot sun 11 hours a day, six days a week, guiding cars in and out of the parking spaces in front of a bustling farm stand. The 4,000 Cuban pesos ($170 at the official exchange rate) he earns each month in tips is more than ten times his monthly old-age pension of 340 pesos. Without it, the retired animal geneticist could not afford fruit and meat, or help his children, who work for low salaries, to feed his four grandchildren.

Though revolutionary Cuba had one of the region’s earliest and most comprehensive pension systems, in recent years retirement has almost vanished. Without further economic reform, and the cheap oil that used to come from Venezuela, the economy has stalled. Pensions have been frozen, and their value eaten up by inflation. According to the most recent government statistics, from 2010, a third of men past retirement age are working. Three-fifths of older people say they often have to go without necessities.

The insular socialist paradise supposedly offers a social safety-net, cradle to grave. But it is full of holes. Medical care is free, but most medicine is not. Retirement homes are...Continue reading

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There has never been a better time for Latin American integration

IT IS Saturday lunchtime, and about 30 trucks are parked at each of the customs posts on either side of the bridge across the broad Uruguay river that marks the border between Argentina and Uruguay. Both countries are members of Mercosur, a would-be customs union that also embraces Brazil and Paraguay. In theory, internal borders should not exist in Mercosur. In practice, customs, sanitary inspections and other paperwork mean that the trucks are delayed for up to 24 hours, says Oscar Terzaghi, the mayor of Fray Bentos, on the Uruguayan side.

This represents an improvement. For three years before 2010, access to the bridge—the shortest land route between the two capitals, Buenos Aires and Montevideo—was blocked by Argentine environmentalists with the support of the country’s president, Cristina Fernández. They claimed that a planned paper mill at Fray Bentos would pollute the river. The dispute ended only when the mill was operating and the International Court of Justice ruled that there was no evidence of pollution.

For the past half-century, Latin American politicians have talked incessantly about regional integration. But they have struggled to make it...Continue reading

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Coca-growing in Colombia is at an all-time high

THE hills surrounding Sinaí, a village in south-west Colombia, are blanketed in a green patchwork, ranging from the bright chartreuse of coca-plant seedlings to a darker clover colour that indicates the leaves are ripe for picking and processing into cocaine. It is areas like this that have helped to boost Colombia’s estimated cocaine output 37% since 2015 to an all-time high of 710 tonnes in 2016, according to America’s government. Some 188,000 hectares of land is now planted with coca, up from a low of 78,000 in 2012.

One reason for the rise seems counter-intuitive: the signing last November of a peace deal between the government and the FARC rebel group. It was supposed to reduce coca cultivation; the FARC had extorted a tax on coca crops and trafficked cocaine, and under the peace deal it is to support the government’s eradication efforts. But the deal’s terms were years in the crafting, and many of its provisions were clear well in advance—including that there would be payments for coca-farmers who shifted to different crops. The government created a perverse incentive to plant more.

And as the peace talks progressed, the government scaled back aerial...Continue reading

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Floods in Peru are just the latest blow to its economy

Time for a clean-up

MORE than 75 people have been killed, and more than 100,000 left homeless, as Peru’s coast has been battered by the strongest rains seen in decades. Millions are without running water; more than 2,000km of roads and at least 175 bridges have been destroyed. The devastation has been caused by a “coastal El Niño”, a localised version of the global El Niño weather cycle that brings warm currents from Australia to the Pacific coast of the Americas. Peru had been braced for a big El Niño in 2016, but it did not arrive. It was not expecting a coastal version, especially of such magnitude.

But even if it had known what was coming, it would not have been prepared. “This is not a natural disaster, but a natural phenomenon that has led to disaster because of the informal way this country has developed,” says Gilberto Romero, the head of the Centre for Disaster Research and Prevention, a local NGO. “We need to re-think and re-engineer our cities.”

Pedro Pablo Kuczynski, the newish president, has pledged to work with mayors to stop homes from being rebuilt in vulnerable areas, and wants hydrological studies along...Continue reading

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In France’s presidential race, Emmanuel Macron likes his chances

A BARNACLE has nothing on François Fillon. Neither scandals nor broken promises nor the defection of allies can prise the Republican candidate from his presidential campaign. Each week brings new details of his questionable practices as a businessman-politician. Last week a court put him under formal investigation for steering about €900,000 ($970,000) of public funds over 25 years to family members who it seems did little to earn it. Mr Fillon, despite a solemn vow to quit if this happened, decided to hang on.

In a televised debate on March 20th the candidate alluded to having made mistakes. One was surely his failure to declare gifts of nearly €50,000 since 2012 in the form of finely stitched suits from a Paris tailor. More damning was the news, leaked on March 21st, that investigators are looking into allegations of aggravated fraud and forgery. Reportedly these concern documents signed by Mr Fillon’s wife, Penelope, declaring the hours she claims to have worked.

The very next day Le Canard Enchaîné, an investigative weekly, reported that Mr Fillon had been paid $50,000 to lobby for a Lebanese billionaire, Fouad Makhzoumi, who...Continue reading

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With EU accession distant, Balkan countries find a substitute

TO JUDGE by the headlines, things are getting pretty hairy in the western Balkans. Newspapers have been running articles arguing that borders should be redrawn. Russia’s foreign ministry has accused Western officials of promoting a Greater Albania. Montenegro claims that Russia was behind an alleged coup attempt last November aimed at stalling its accession to NATO. Serbia has excoriated the president of Kosovo for suggesting that his demilitarised country might form an army, and Macedonia has lashed out against Kosovo and Albania for supposedly interfering in its domestic affairs.

Most of these clashes are empty posturing by leaders who are facing elections or other domestic challenges. But they have had one real consequence: Western governments have become alarmed enough to start paying attention again. Johannes Hahn, the European Union’s commissioner for enlargement, says that EU governments have been pushing him for ideas on how to keep the region stable. The result is a plan for a western Balkan common market, backed both by local leaders and by the EU itself.

On March 16th, at a summit in Sarajevo with the prime ministers of the six Balkan countries...Continue reading

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Spain’s greatest art museum gets a new director

Groovin’ on Rubens

AT THE turn of this century the Prado, Spain’s premier art museum, slumbered in neglect. Limited opening hours and an almost complete lack of information about its paintings seemed calculated to put off visitors. Deliverance came with a law in 2003 granting it autonomy from the civil service. Before that the museum’s staff ran the place in their own interest and the director had little power, says Eduardo Serra, a former defence minister who as chair of the Prado’s trustees pushed the law through. To implement it he hired Miguel Zugaza, a shrewd manager, as director.

Miguel Falomir, who was appointed as Mr Zugaza’s successor on March 21st, inherits a Prado that is flourishing. It attracts 3m visitors a year. It has weathered state funding cuts: about 70% of its budget of €45m ($49m) now comes from tickets, merchandising, fees from foreign exhibitions and sponsorship. Above all, the Prado has shed its provincialism.

“It was very introverted,” says Mr Falomir, an expert on Titian. It used to mount exhibitions only of Spanish painting. When it branched out, with shows on Rubens and Titian, colleagues across...Continue reading

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A Hindu priest takes charge of India’s most populous state

TO SOME he is both hero and saint: a shaven-headed, saffron-robed servant of the Lord Shiva who has been elected five times in a row to India’s national parliament and elevated, at just 44 years of age, to the highest political office in a state of 220m people. To others the choice of Yogi Adityanath as the chief minister of Uttar Pradesh (or UP as the state is often abbreviated) seems ominous. Pratap Bhanu Mehta, a columnist in the daily Indian Express who rarely uses such blunt language, describes the Hindu priest-turned-politician as “the single most divisive, abusive, polarising figure in UP politics”.

No one can argue with the word “polarising”. Since becoming India’s youngest MP in 1998, Mr Adityanath has championed a range of reactionary Hindu causes, from the banning of cow slaughter to the proposed construction of a temple to Lord Ram, protagonist of the ancient Ramayana epic, at the god’s supposed birthplace in the UP city of Ayodhya. Inconveniently, at the site selected for this honour, there stood a grand 16th-century mosque, at least until a mob of Hindu fanatics tore it down in 1992, sparking riots...Continue reading

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Italy is Europe’s leaden-toed boot

THE European Union may be a Franco-German construction, but when the project needs a dose of grandiosity it invariably turns to Italy. This weekend the leaders of 27 EU countries (all bar Britain) will convene in Rome’s glorious Palazzo dei Conservatori, beneath 17th-century frescoes and flanked by sculptures of sundry popes, to proclaim their unity—60 years after their forefathers signed the Treaty of Rome, the EU’s founding document, in the same room. In today’s fractious union the symbolism counts for something, even if the declaration the leaders will issue is crushingly bland. Yet there will be a note of irony to the proceedings, for if you ask officials in Brussels or Berlin which country keeps them up at night, the answer is always the same: Italy.

Very little changes here, sighs a local who emigrated as a child and recently returned to Rome. Sadly, that includes the size of the economy. The European Commission forecasts Italian growth at 0.9% this year, the slowest in the euro zone. Since 2008 Italy has been in recession as often as not. Real income per head is lower than when Italy joined the euro in 1999, and could soon be overtaken by zippy Spain. Youth...Continue reading

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Why China is wrong to be furious about THAAD

THE Chinese authorities are so angry with South Korea that they have cheered on boycotts of South Korean goods and culture, persecuted South Korean firms operating in China and discouraged Chinese tourists from visiting South Korea. China is South Korea’s biggest market for exports (it spent $137bn on South Korean goods in 2015, nearly twice as much as the next biggest taker, America), so the prospect of a prolonged dispute is alarming. It is also puzzling, given that the source of the row—the deployment of an American anti-missile system called THAAD (pictured)—does not seem nearly as objectionable as China suggests.

Earlier this month America began installing a THAAD system in South Korea. As if to confirm the rationale for deployment, the previous day North Korea had fired four missiles into the Sea of Japan, in what appeared to be a simulated attack on an American base. Last year North Korea conducted more than 20 ballistic-missile tests in defiance of UN Security Council resolutions. If anything, the tempo of missile launches has increased this year. This week saw the testing of a powerful new rocket engine and an abortive missile launch. Yet China’s foreign ministry...Continue reading

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The Thai junta’s 20-year plan omits the most urgent item

WHEN its tanks rolled into Bangkok in 2014—ousting an elected government that had been paralysed by protests—Thailand’s ruling junta promised that democracy would be back in a jiffy. Three years on, there is still no sign of the promised polls. Instead, in mid-March, the generals treated diplomats and foreign journalists to a briefing on their “20-Year National Strategy”, a programme which, they insist, all future governments will be legally obliged to follow. It is only the latest indication that the men in uniform are here to stay.

The junta’s right to impose its master plan on Thailand is enshrined in its new constitution, which it rammed though in a referendum last year after banning campaigners from criticising the text. That document allows for fresh elections, which, after multiple postponements, are now expected in 2018. But it also empowers a junta-stacked senate and several unusual committees to baby-sit incoming governments—which includes giving these bodies the right to intervene should elected politicians choose to pursue their own policies instead of sticking to the generals’ preordained plan.

Spin doctors had previously stated, to...Continue reading

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The governor of Tokyo declares war on her own party

Tokyoites first, LDP second

IT IS hard to exaggerate the gall of Yuriko Koike, the governor of Tokyo. She is a member of the Liberal Democratic Party (LDP), which dominates Japanese politics, and briefly served as minister of defence a decade ago. Yet last year she won her current job by running as an independent, against the LDP candidate. Last month she thumped the LDP again after backing a rival candidate for mayor of one of Tokyo’s 23 wards. She is now preparing to challenge the LDP’s control of the city assembly in elections to be held in July. Far from punishing this open rebellion, many in the party seem to be relishing it.

Ms Koike’s battering-ram in her war against the LDP is Kibo no Juku (School of Hope), a private academy for her political acolytes. The school has whittled down thousands of applicants to a few dozen graduates who will stand against LDP candidates in July. The charismatic governor’s new party, Tomin First no Kai (Tokyoites First Group) could end up the biggest in the assembly: a recent poll found that 84% of Tokyoites support her.

This run has been fuelled by...Continue reading

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How a Chinese fishing fleet creates facts on the water

ON A past visit to the little fishing port of Tanmen, on the island-province of Hainan in southern China, pigs were being driven onto the foredecks of wooden trawlers, while water butts were being lashed down at the stern. Farther down the quay, similar boats were about to unload their catch after a month at sea: not fish but giant clams, Tridacna gigas, up to a metre across, which required two or even four men to carry. The bivalves spilled out of the holds. Giant clams are one of Buddhism’s “seven treasures”, along with gold and lapis lazuli. China’s new rich prize their shells as showy ornaments. Each can fetch as much as $3,000, so each haul was worth a fortune. And it was all illegal.

Nowadays Tanmen is transformed. The harbour is still crammed with fishing boats—calling on the spirit world for luck, one exuberant crew let off strings of firecrackers and threw joss paper up in the air as their vessel steamed out of the harbour. But the clam boats have gone, and some of the piratical air too. The quay has had a makeover, with new awnings under which fishermen’s wives grill squid for day-tripping tourists. “It’s over,” one of the women...Continue reading

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An earthquake in European banking

IN BRITAIN alone millions of people make formal complaints each year about their banks. For them, Sebastian Siemiatkowski, founder of Klarna, a Swedish payments startup, brings good news. New European rules, he says, will open the door to a host of innovative services that analyse transactions, so “an app could tell you there’s a cheaper mortgage available and start the switching process for you.” Apps could warn account-holders if they spend more than a predetermined amount or are about to become overdrawn, or even nudge them to save more. Customers need barely ever interact with their bank.

To date, despite dire warnings, European retail banking has been remarkably unscathed by technology-driven disruption. Customers stay loyal, and banks still do the most of the lending. Financial-technology (“fintech”) companies are beginning to mount a challenge, most conspicuously in the online-payments industry in northern Europe: Sofort, iDEAL and other fintech firms conduct over half of online transactions in Germany and the Netherlands, for example. But their reach is more limited elsewhere in Europe. Physical payments are still overwhelmingly made with cash or bank...Continue reading

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The Trump administration will review all of America’s trade deals

ACCORDING to a document crafted by the Trump administration, a model trade agreement has 24 elements. Second on the list is “trade-deficit reduction”, giving a hint as to why Mr Trump wants to review America’s existing agreements. In January Sean Spicer, his press secretary, said the administration would “re-examine all of the current trade deals.” A presidential order to do just that is reported to be in the offing.

America boasts 14 bilateral and regional free-trade agreements (FTAs). Mr Trump seems to blame these agreements for America’s large trade deficit. Most economists disagree, seeing it as reflecting macroeconomic imbalances. The FTAs are in any case with countries representing just two-fifths of America’s two-way trade in goods, and less than 10% of its goods-trade deficit (see chart). Most (77%) of America’s deficit stems from trade with China, the European Union and Japan. None has an American FTA.

A focus on trade deficits means that tiddly deals such as those with Jordan and Oman will not face much heat. NAFTA (an agreement with Mexico and Canada), and KORUS (South Korea), will face more scrutiny because of chunky...Continue reading

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China’s growing clout in international economic affairs

THE IMF “systematically impoverishes foreigners”, and the World Bank’s advice has “negative value to its best clients”. These harsh words were voiced not by lefty critics of the Washington Consensus, but by two men (David Malpass and Adam Lerrick, respectively) whom Donald Trump has picked to lead his Treasury’s dealings with the rest of the world, including the international financial institutions (IFIs), such as the World Bank and IMF, and the G20 group of leading economies.

Their future boss, Steven Mnuchin, America’s treasury secretary, is not much more reassuring to the global financial establishment. At his first G20 meeting, in Baden-Baden in Germany on March 17th-18th (pictured), he vetoed a long-standing pledge to “resist all forms of protectionism”. It had often been breached. But hypocrisy is the tribute vice pays to virtue.

To veterans of international economic affairs, this combative stance is baffling. America’s government now seems to disdain a set of institutions it nurtured into life—institutions that are more commonly criticised for following America’s will too closely. “The United States is just handing the leadership over...Continue reading

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The unusual gap between American and European bond yields

AMERICA may be the world’s largest economy, but these days its government pays more than many others to borrow money. Its ten-year bond yields are higher than those in Britain, France, Singapore and even Italy.

The gap between American and German ten-year yields has been above two percentage points. For much of the past 25 years, it was very rare for the difference to exceed a single percentage point. On occasions, American yields fell below German levels (see chart).

Go back a generation and you might have expected the country with the higher bond yields to be the one with the weaker currency; investors would demand a higher yield to compensate for the risk of future depreciation. But that is not the case today. The dollar has been strong, relative to the euro, and many people expect it to strengthen further. Indeed, the higher yield on American government debt is one reason why investors might want to buy the dollar.

Instead, the gap may reflect differences in both monetary and fiscal policy. In America the Federal Reserve stopped buying Treasury bonds a while ago and has raised interest rates three times since December 2015; the European...Continue reading

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A philanthropic boom: “donor-advised funds”

…and remember to claim the tax deduction

JEFF POWERS was raised as “a good Catholic boy”. So when he sold his wall-fastener business in 2012 for $225m, he wanted to give back. And, like many philanthropists, he started close to home. He donated to the hospital where his son had spent months recovering from a car accident. He helped pay for a swimming pool at his children’s school. Today he supports all sorts of causes, from scholarships in Florida to soup kitchens in New York.

The way Mr Powers finances these projects would strike old-school charitable types as odd. Traditionally, a budding philanthropist would either give directly to a charity or set up a foundation. But Mr Powers uses a donor-advised fund (DAF), a type of account held by a non-profit entity, in this case Bank of America Charitable Gift Fund, an arm of the bank. DAFs are taking root in Britain and Canada, but they are primarily an American phenomenon.

DAFs are way-stations for donor dollars. Mr Powers deposits some money into his DAF and, while he ponders where it should go, Bank of America invests it for him. At some point he will suggest a beneficiary and, as...Continue reading

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The investigation into the Bangladesh Bank heist continues

A YEAR after one of the most spectacular robberies of modern times, the authorities in Bangladesh are still trying to crack the case. Hackers into the country’s central bank sent instructions through SWIFT, a messaging network for cross-border payments, to transfer funds from the bank’s account with the New York Federal Reserve to private accounts in Sri Lanka and the Philippines. Much of the stolen $101m has yet to be retrieved; the masterminds are yet to be identified. But the probe reveals the strikingly sophisticated, and international, nature of the crime.

After sifting 60 hard drives and thousands of pieces of paper, and interviewing dozens of people, investigators, talking anonymously in Dhaka, say they are confident about some details of the heist. They believe foreign hackers acted with inside help. The attackers’ coding style has raised suspicions of involvement by North Korea. This week the New York Times reported that American federal prosecutors were examining this possibility.

Egregious violations of the bank’s security procedures have also been uncovered. On the day of the robbery, its security cameras were...Continue reading

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Fewer Immigrants, Higher Prices, Lower Profits

President Donald Trump’s tough stance on immigration may be about to put many American companies in a pinch.

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Giant 'Bad Bank' Won't Solve Europe's Problems

The European Central Bank is demanding lenders deal with their bad loans. But a proposal for a continentwide bad bank seems unlikely to be the solution.

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How Republicans in Iowa are using their new strength

TERRY BRANSTAD, the governor of Iowa, is sitting on a vault full of political capital, thanks to his early, ardent support of Donald Trump. Before he moves to Beijing as ambassador to China in the spring he seems to be wasting no time spending it. The governor and the Republican legislature he helped elect have moved at rapidly in recent weeks to enact policies that are moving the once reliably moderate state in a sharply conservative direction.

The longest-serving governor in American history, Mr Branstad oversaw a near-total Republican victory in his state in 2016. Besides embracing Mr Trump’s presidential candidacy, he poured his energy into supporting Republican candidates for the state Senate. Mr Trump won Iowa handily; down-ballot Republican candidates also prevailed. Republicans in the state now hold both legislative chambers and the governor’s office for the first time in two decades, allowing them to enact an agenda with virtually no opposition.

Last month, they flexed their new muscle by enacting perhaps the most sweeping public policy change in recent memory: a top-to-bottom rewrite of the law governing collective bargaining for public-sector workers. That was just the start:...Continue reading

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WH Group: The Pork Giant Who May Win From Brazilian Beef Ban

American meat exporters such as Tyson and Cargill may be licking their chops in the face of Brazil’s meat scandal. But WH Group, the biggest seller of pork in China, looks especially well positioned.

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Economic shocks are more likely to be lethal in America

AMERICAN workers without college degrees have suffered financially for decades—as has been known for decades. More recent is the discovery that their woes might be deadly. In 2015 Anne Case and Angus Deaton, two (married) scholars, reported that in the 20 years to 1998, the mortality rate of middle-aged white Americans fell by about 2% a year. But between 1999 and 2013, deaths rose. The reversal was all the more striking because, in Europe, overall middle-age mortality continued to fall at the same 2% pace. By 2013 middle-aged white Americans were dying at twice the rate of similarly aged Swedes of all races (see chart). Suicide, drug overdoses and alcohol abuse were to blame.

Ms Case and Mr Deaton have now updated their work on these so-called “deaths of despair”. The results, presented this week at the Brookings Institution, a think-tank, are no happier. White middle-age mortality continued to rise in 2014 and 2015, contributing to a fall in life expectancy among the population as a whole. The trend transcends geography. It is found in almost every state, and in both cities and rural areas. The problem seems to be getting worse over time. Deaths from...Continue reading

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GameStop's Weak Holiday Season Might Just Be the Beginning

Videogame retailer’s difficult holiday season likely isn’t an anomaly, which should keep pressuring its stock price

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In the Middle East, Russia is blocking regime change and reasserting its power

THE black fur hat looked odd on a Libyan warlord. But fur is essential in wintertime Moscow, which has become an essential stop for Middle Eastern leaders like Khalifa Haftar, who visited twice in 2016. This month his rival, Fayez al-Sarraj, the head of Libya’s UN-backed government in Tripoli, dropped by. Jordan’s King Abdullah, Turkey’s Recep Tayyip Erdogan and Israel’s Binyamin Netanyahu have all stopped at the Kremlin for audiences with Vladimir Putin this year.

The visitors are a sign of Russia’s growing activity in the Middle East. “The policy is wider than just Syria,” says Andrei Kortunov of the Russian International Affairs Council, a think-tank. Russia’s interests in the region include security, arms sales and oil. But most important, the Middle East offers a platform to reinforce Russia’s status as a global power. “Those who have strong positions there will have strong positions in the world,” says Fyodor Lukyanov of the Council on Foreign and Defence Policy, a government advisory body.

Serving as a powerbroker in Syria has helped cultivate relationships. “Russia’s co-operation with the Arab world is on the rise,” declares Mikhail...Continue reading

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Nike's Best Defense Is a Good Offense

Nike’s scale gives it a long-term competitive advantage, which should help it win back market share.

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A Brazilian meat scandal damages the country’s two global producers

EVEN amid Brazil’s pungent stew of recent big corporate scandals, the latest is particularly stomach-turning. On Friday March 17th, in time for a traditional weekend churrasco, or barbecue, the federal police accused some of the country’s biggest meat producers of bribing health inspectors to turn a blind eye to grubby practices. These include repackaging beef past its sell-by date, making turkey ham out of soyabeans rather than actual birds and overuse of potentially harmful additives. The police operation, dubbed Weak Flesh, could reduce Brazil’s meat exports, worth $13bn a year, and damage its two big global meat producers, JBS and BRF.

Two days later the president, Michel Temer, treated 27 diplomats from the country’s main export markets to prime Brazilian cuts at a steakhouse (pictured) in the capital, Brasília. Nevertheless, straight after that China, the European Union, Chile and South Korea, which together consume a third of Brazilian meat sold abroad, said they would ban some or all imports from Brazil until it can allay misgivings about its inspection regime. The reactions from China and Chile provoked particular anguish. Unlike the EU, which has...Continue reading

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Rare Discovery: A Value in the Biotech World

Falling hepatitis C revenue has dented giants such as AbbVie and Gilead but created a rare bargain in biotech Enanta

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Deal or No Deal, Akzo Shareholders Can Win From PPG Bid

Will PPG mount a third and final bid for AkzoNobel or walk away? For some investors, it doesn’t matter: they can win either way.

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New Zealand declares a river a person

IT SOUNDS, admits Chris Finlayson, like a “pretty nutty” idea. Yet the new law that designates the Whanganui River, New Zealand’s third-longest, a legal person, in the sense that it can own property, incur debts and petition the courts, is not unprecedented. Te Urewera, an area of forested hills in the north-east that used to be a national park, became a person for legal purposes in 2014. And around the world companies, foundations and assorted units of government have legal rights and responsibilities independent of the people who staff them. All the same, New Zealanders have been joking about whether the Whanganui might now vote, buy a few beers (how old is it?) or be charged with murder if a swimmer drowns.

The law, which was approved on March 15th, stems from disputes over the Treaty of Waitangi, by which New Zealand’s indigenous Maori ceded sovereignty to British colonialists in 1840. The treaty was supposed to have protected Maori rights and property; it was observed mainly in the breach. In recent years the government has tried to negotiate settlements for breaches of the treaty with different Maori iwi, or tribes. For the Whanganui iwi, the...Continue reading

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U.S. Stocks Overvalued? Time to Look at Europe

The U.S. now needs to live up to investor expectations, while Europe needs to avoid political pitfalls.

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Tencent: Raising the Bar for China's Most Valuable Company

Whether China’s most valuable company can keep getting bigger depends on whether it can sell advertising as effectively as Facebook. So far it is progressing well, but expectations are also rising fast.

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