| |1. The French government experiments with venture capitalismЧт., 18 янв.[−]
Don’t be coy, carp about the food
AS A boy, Antoine Hubert used to catch butterflies. These days, the agro-engineer has eyes only for meal worms. In a demonstration factory near Dole in eastern France, he shows how trayfuls of plump, half-grown worms are fed, left to grow in a darkened dormitory, and then—after two months—slaughtered and cleaned with a blast of steam. A machine divides the resulting mush into oil and protein powder.
Around 70% of a worm is protein, making it ideal for animal feed. Demand is soaring, notably at fish and shrimp farms. Mr Hubert predicts aquaculture businesses will need 70m tons of feed annually in ten years’ time, up from 40m now. The global market for animal feed, he reckons, is already worth €500bn ($610bn).
Ynsect, his firm, thus expects to grow once it opens a new factory this year. He dreams of annual output exceeding 1m tonnes, hinting at a hunger for scale often left unsatisfied in a French entrepreneur: local... Continue reading
|↑|2. The World Bank’s “ease of doing business” report faces tricky questionsЧт., 18 янв.[−]
HOW many days does it take to correct a misleading newspaper interview? Four, in the case of Paul Romer, the World Bank’s chief economist. On January 12th a surprising article in the Wall Street Journal alleged that one of the bank’s signature reports—on the ease of doing business around the world—may have been tainted by the political motivations of bank staff. The story was based on an interview with Mr Romer, who pointed out that Chile’s ranking in the yearly report had dropped sharply during the presidency of Michelle Bachelet, a left-leaning politician who took office for the second time in 2014. Chile sank so heavily not because doing business had become harder, but because the bank had repeatedly changed its method of assessment.
That method mostly entails answering measurable questions, such as how many days does it take to start a business, register a property or file taxes. The answers determine a country’s score (known as its “distance to... Continue reading
|↑|3. The hedge-fund delusion that grips pension-fund managersЧт., 18 янв.[−]
HEDGE-FUND managers may be feeling quietly smug about their performance in 2017. They returned 6.5% on average, according to Hedge Fund Research, a data provider, their best year since 2013.
But those returns do not really suggest that they are masters of the investing universe. The S&P 500 index, America’s main equity benchmark, returned 21.8%, including dividends, last year. More tellingly, a portfolio split 60-40 between the S&P 500 and a mixture of government and corporate bonds (an oft-used benchmark for institutional portfolios) would have returned 14.8%. Last year was the fifth in a row when hedge funds underperformed the 60/40 split (see chart).
That ought to be a salutary lesson for those institutions who think that backing hedge funds is the answer to their prayers. Despite the highs recorded by stockmarkets, many employers are struggling to fund their final-salary pension promises. In 2016 the average American public-sector plan was just 68%-funded, according to the Centre for... Continue reading
|↑|4. Why the oil price is so highЧт., 18 янв.[−]
PERHAPS the most vexing thing for those watching the oil industry is not the whipsawing price of a barrel. It is the constant updating of theories to explain what lies behind it. In March 2014, when the price of a barrel of Brent crude was in three figures, the then boss of Chevron, an oil giant, observed that the scarcity of cheap oil meant “$100 per barrel is becoming the new $20”. Two years later, when the oil price slumped below $28, the talk was of a global oil glut caused by the furious efforts of the OPEC cartel to regain market share. Now that oil prices have tested $70, analysts are again scratching their heads.
In “1984”, George Orwell coined the term “doublethink”, the ability to believe two contradictory things. Oil analysis seems to require similar cognitive gymnastics. Three big questions arise. First, why has the oil price more than doubled in the space of two years, against all expectation? Second, why has this surge been met with cheers from global stockmarkets and not... Continue reading
|↑|5. The threat of tough regulation in Asia sends crypto-currencies into a tailspinЧт., 18 янв.[−]
IT HAS been another week of vertiginous swings in the prices of bitcoin and other crypto-currencies. This time, the moves have mostly been downwards, with some days seeing falls of over 20%. Views on this were as divided as they were during the giddy climb: did it mark the definitive bursting of a bubble as rapidly inflated as any in history (see chart)?
Asia provides both an explanation of this week’s sell-off and a glimpse of crypto-currencies’ future. The threat of a ban in bitcoin-trading in South Korea was the proximate cause of the plunge. As to the future, the question is which Asia? At one end of the spectrum... Continue reading
|↑|6. Our Big Mac index shows fundamentals now matter more in currency marketsЧт., 18 янв.[−]
IT IS usually considered quaint to predict foreign-exchange movements by reference to whether currencies are dear or cheap. Metrics such as The Economist’s Big Mac index, a lighthearted guide to exchange rates, hint at how far currency values are out of whack. But they are often driven further out of kilter by capital flows, by fear and greed, by the interventions of policymakers, and so on.
Since our last look at the index in July, cheap currencies have narrowed the valuation gap against the dollar—almost completely in case of the Canadian dollar (see chart). Fundamentals, such as fair value, seem (at last) to have greater sway in the foreign-exchange market.
The index is based on the idea of purchasing-power parity, which says exchange rates should move towards the level that would make the price of a basket of goods the same in different countries. Our basket contains only one item, but it is found in around 120 countries: a Big Mac hamburger. If the local cost of... Continue reading
|↑|7. Why driverless cars may mean jams tomorrowЧт., 18 янв.[−]
THE most distractingly unrealistic feature of most science fiction—by some margin—is how the great soaring cities of the future never seem to struggle with traffic. Whatever dystopias lie ahead, futurists seem confident we can sort out congestion. If hope that technology will fix traffic springs eternal, history suggests something different. Transport innovation, from railways to cars, reshaped cities and drove economic advance. But it also brought crowded commutes. Now, as tech firms and carmakers aim to roll out fleets of driverless cars, it is worth asking: might this time be different? Alas, artificial intelligence (AI) is unlikely to succeed where steel rails and internal-combustion engines failed.
More’s the pity. In America alone, traffic congestion brings economic losses estimated in the hundreds of billions of dollars each year. Such costs will rise unless existing transport systems receive badly needed investment. For example, fixing New York’s beleaguered, overcrowded subway will... Continue reading
|↑|8. The rise and fall of bitcoinСр., 17 янв.[−]
THE great Sir Isaac Newton may have revolutionised our knowledge of the world but he still had his blind spots. He was sucked into the great mania of his day, the South Sea Bubble (pictured) and lost a lot of money. “I can calculate the motion of heavenly bodies but not the madness of people,” he ruefully reflected. In retrospect, he should have pondered the popular saying that was used to define his law of gravity: “What goes up, must come down.”
Investors in bitcoin are learning this old truth. The price of the cryptocurrency peaked last month at somewhere over $19,000 (there is a very wide spread, a problem in itself) but, at the time of writing (around 11am GMT), some exchanges now show a price below $10,000.
Perhaps the best way of understanding bitcoin is through a model of how bubbles operate. The classic model, developed by Hyman Minsky and elaborated by Charles Kindleberger, a historian who studied bubbles, has five... Continue reading
|↑|9. How China won the battle of the yuanЧт., 11 янв.[−]
“THE horse may be out of the proverbial barn.” So wrote Ben Bernanke, a former chairman of the Federal Reserve, in early 2016, arguing that capital controls might be powerless to save China from a run on its currency. He was far from alone at the time. As cash rushed out of the country, analysts debated whether the yuan would collapse, and some hedge funds bet that day was coming fast. But two years on, the horse is back in the barn: the government’s defence of the yuan has succeeded, in part through tighter capital controls.
The latest evidence was an 11th consecutive monthly increase in foreign-exchange reserves in December. During that time China’s stockpile of official reserves, the world’s biggest, climbed by $142bn, reaching $3.14trn, roughly double the cushion usually regarded as needed to ensure financial stability. Another sign of China’s success is the yuan itself. At the start of 2017 the consensus of forecasters was that the currency would continue to weaken; it finished the year up by 6% against the dollar.
Investors and analysts were not wrong in viewing Chinese capital controls as porous. Enterprising types had—and have—umpteen ways to sneak money out, from overpaying for imports to smuggling cash across the border in luggage. But there is a wide spectrum between a fully open and fully closed capital account, and China has... Continue reading
|↑|10. Donald Trump’s difficult decision on steel importsЧт., 11 янв.[−]
EVERY Tuesday, senior members of the administration gather in the White House to discuss trade. They are divided between hawks, who argue that America needs to be tougher in its defence against what they see as economic warfare waged by China, and doves, who worry about the costs of conflict. So far, against all expectations when President Donald Trump entered the White House, the doves have prevailed. The first of a series of legal deadlines could soon unleash the hawks.
Last April Wilbur Ross, the commerce secretary, initiated a probe into whether steel imports were a threat to America’s national security. His department pointed to a “dramatic” increase in steel imports over the previous year and to the idling of nearly 30% of America’s steel-production capacity, as imports feed a quarter of its consumption. If the report, due by January 15th, finds imports are a threat, Mr Trump, under Section 232 of the Trade Expansion Act of 1962, will have 90 days to respond.
The... Continue reading
|↑|11. Natural disasters made 2017 a year of record insurance lossesЧт., 11 янв.[−]
THAT 2017 suffered from more than its fair share of natural catastrophes was known at the time. In the wake of Hurricane Harvey, the streets of Houston, Texas, were submerged under brown floodwater; Hurricane Irma razed buildings to the ground on some Caribbean islands. That the destruction was great enough for insurance losses to reach record levels has only just been confirmed. According to figures released on January 4th by Munich Re, a reinsurer, global, inflation-adjusted insured catastrophe losses reached an all-time high of $135bn in 2017 (see chart). Total losses (including uninsured ones) reached $330bn, second only to losses of $354bn in 2011.
A large portion of the losses in 2011 was caused by one catastrophe: the earthquake and tsunami in Japan. Losses in 2017 were largely traceable to extreme weather. Fully 97% were weather-related, well above the average since 1980 of 85%. If climate change brings more frequent extreme weather, as Munich Re and others expect, last year’s loss levels may... Continue reading
|↑|12. Bitcoin is no longer the only game in crypto-currency townЧт., 11 янв.[−]
IT STARTED as a joke. Dogecoin was launched in 2013 as a bitcoin parody, using as its mascot a Japanese shiba inu dog, a popular internet meme. The crypto-currency was never really used, except for tipping online, and one of its founders has called it quits. But recently its price has soared: on January 7th the dollar value of all Dogecoins in circulation reached $2bn, a sign of how crazy crypto-currency markets have become. It is also a reminder that, for all the focus on bitcoin, it is no longer the only game in town. Its market capitalisation now amounts to only about one-third of the crypto-market (see chart).
A new crypto-currency is born almost daily, often through an “initial coin offering” (ICO), a form of online crowdfunding. CoinMarketCap, a website, lists about 1,400 digital coins or tokens, including PutinCoin, Sexcoin and InsaneCoin (worth $7m). Most are no more than curiosities, but by January 10th, around 40 had a market capitalisation of more than... Continue reading