AT THE start of 2017, just before Donald Trump was inaugurated as president, a survey of fund managers by Bank of America Merrill Lynch (BAML) found they believed that being positive on the dollar was “the most crowded trade”. It turned out they were right to be cautious. On a trade-weighted basis, the currency has fallen by 9% against other major currencies in the past year.

It is not clear what the Trump administration thinks about this. At the recent World Economic Forum in Davos, Steven Mnuchin, the treasury secretary, said: “Obviously a weak dollar is good for us as it relates to trade and opportunities.” Although the rest of his statement was more nuanced, it is unusual for anyone in his position to depart from a “strong dollar” line. The greenback duly fell in price.

Mr Trump then followed up with a statement in favour of a strong dollar in the long term, which caused a rebound. Since it was only last April that he referred to the dollar as being “too...Continue reading
First published here: http://j.mp/2nptx8R

IN KEEPING with the trend for charging for things travellers used to get free, it should perhaps come as no surprise that sunbeds are the latest feature of a standard holiday on which travel agents are slapping extra fees. Thomas Cook, a British package-holiday firm, has announced that it will allow holidaymakers to pre-book poolside loungers for £22 ($31) per person. Six days before the start of a trip, travellers will get an email offering them the chance to reserve specific sunbeds. The booking tool will include a map that allows people to see where the sun will shine at various times of day. The experiment will start in late February at three hotels on the Canary Islands and will expand to 30 hotels this summer. 

To some holidaymakers, this will seem like yet another attempt by the travel industry to get money from every source possible. Airlines, for instance, made $82bn in add-on fees last year alone, according to IdeaWorksCompany, a research firm. Over the past few years, both full-service and low-cost airlines have introduced...Continue reading
First published here: http://j.mp/2DNEEP8

BACK in the days of the gold standard, central bankers were very concerned about the views of international investors. They believed that maintaining the value of their currencies would reassure creditors. That is why they were so resistant to the idea of floating currencies. Georges Bonnet, a French finance minister, put it best

Who would be prepared to lend with the fear of being paid in depreciated currencies always before his eyes?

This fear still shows up from time to time. Under the old exchange rate mechanism, countries like Italy would undergo periodic devaluations to restore their competitiveness*. As a result, investors would demand a higher bond yield to compensate for this risk. When the single currency was planned, bond yields slowly converged on the German level as the risk of devaluation disappeared. It popped up again in 2011 and 2012 as investors feared some countries might drop out of the euro and reintroduce domestic currencies; that would have required a partial default. (Of course,...Continue reading
First published here: http://j.mp/2E1Xplq

EARLIER this month a woman arrived at O’Hare International Airport in Chicago without a ticket, boarding pass, or passport and flew to London. Prosecutors claim she did this by sneaking past officials from the Transportation Security Administration, a government agency responsible for airport security, while they were inspecting other travellers’ boarding passes. She was briefly thwarted when she tried to do the same thing at the boarding gate for a flight to Connecticut. But the gate agent caught her and asked her to sit down. After spending the night in the airport, she took the shuttle to the international terminal—again without the required boarding pass and passport—and got on a British Airways flight to Heathrow, where she was arrested on arrival.

The woman, 66-year-old Marilyn Hartman of Illinois, has done this before. In fact, she has been convicted of criminal trespassing at O’Hare four times over the past few years. Ms Hartman’s lawyers have attributed her behaviour to mental-health issues. She has never appeared to pose...Continue reading
First published here: http://j.mp/2Ft4icq

THE “Miracle on the Hudson”—the successful ditching of a US Airways jetliner into New York’s Hudson River in 2009 after it hit a flock of geese—taught frequent flyers two things. First, it really is possible to land an aircraft on water, just as is shown on seat-back safety cards. Second, and more worryingly, the incident showed how dangerous birds can be to aircraft, particularly when they get sucked into engines. The machines are supposed to be designed to withstand an impact by the feathered creatures. Using big guns, chickens have been fired at aircraft engines in safety tests since the 1950s. But what about drones?

New research suggests that small unmanned aerial vehicles (UAVs) can actually be much more damaging than birds at the same impact speed, even if they are a similar weight. The study, published by the Alliance for System Safety of UAS through Research Excellence, a think-tank, used computer simulations to examine the impact of bird and UAV...Continue reading
First published here: http://j.mp/2rH3NJF

FOR a phenomenon with such predictably bad outcomes, a financial boom is strangely seductive. Not a decade after the most serious financial crisis since the Depression, the world watches soaring markets with a mixture of serenity and glee. Natural impulses make finance a neck-snappingly volatile affair. Governments, though, deserve heaps of blame for policies that amplify both boom and bust. As regulators begin picking apart reforms only just enacted, it is worth asking why that is so.

Finance is hopelessly prone to wild cycles. When an economy is purring, profits go up, as do asset values. Rising asset prices flatter borrowers’ creditworthiness. When credit is easier to obtain, spending goes up and the boom intensifies. Eventually perceptions of risk shift, and tales of a “new normal” gain credence: new technologies mean profits can grow for ever, or financial innovation makes credit risk a thing of the past. But when the mood turns, the feedback loop reverses direction. As asset prices fall, banks grow stingier with their loans. Firms feel the pinch from falling sales, get behind on their debts and sack workers, who get behind on theirs. The desperate sell what they can, so asset prices tumble, worsening the crash. Mania turns to panic.

The pattern is an ancient one. In their book “This Time is Different”, Carmen Reinhart and Kenneth Rogoff,...Continue reading
First published here: http://j.mp/2FfQ1j8

MORGAN STANLEY emerged in 1935 out of a global financial disaster, as one of Wall Street’s leading firms. In a rare shred of consistency in America’s turbulent markets, history has repeated itself. But it was a close call. An ill-timed infatuation with debt ahead of the 2007-08 financial crisis threatened to add it to the industry’s towering funeral pyre, which consumed all its big competitors with the exception of Goldman Sachs.

Of the two, Morgan Stanley came out of the crisis the more tarnished, less for what it did than for what it was: less profitable; less connected, through its former employees, to political power; and less respected for having evaded disaster. But after the release of financial results from the fourth quarter of 2017, Morgan Stanley’s valuation has surpassed Goldman Sachs’s. This reflects not only the improvement in its profitability but also investors’ greater confidence in how it is managed.

Goldman, with some justice, finds the comparison unfair....Continue reading
First published here: http://j.mp/2DMBjTA

“THERE’S too much sensationalism, misinformation and polarisation in the world today,” lamented Mark Zuckerberg, the boss of Facebook, recently. To improve things, the world’s largest social network will cut the amount of news in users’ feeds by a fifth and attempt to make the remainder more reliable by prioritising information from sources which users think are trustworthy.

Many publishers are complaining: they worry that their content will show up less in users’ newsfeeds, reducing clicks and advertising revenues. But the bigger problem with Facebook’s latest moves may be that they are unlikely to achieve much—at least if the flourishing of fake news on WhatsApp, the messaging app which Facebook bought in 2014 for $19bn, is any guide.

In more ways than one, WhatsApp is the opposite of Facebook. Whereas posts on Facebook can be seen by all of a user’s friends, WhatsApp’s messages are encrypted. Whereas Facebook’s newsfeeds are curated by algorithms that try to maximise the time users spend on the service, WhatsApp’s stream of messages is solely generated by users. And whereas Facebook requires a fast connection, WhatsApp is not very data-hungry.

WHEN Caronte & Tourist, a Sicilian ferry company, needs a new ship, it is cheap and easy to borrow from a bank. But in 2016, when Caronte’s controlling families wanted to buy back the minority stake held by a private-equity firm, banks balked at the loan’s unusual purpose. Edoardo Bonanno, the chief financial officer, also worried that the €30m ($33m) in extra bank debt might make shipping loans harder to obtain from them in future. So he turned instead to a direct-lending fund run by Muzinich & Co, an asset manager.

Such funds are only about a decade old in Europe (and not much older in America, where they started). Assets under management at Europe-focused funds increased from a mere $330m at the end of 2006 to $73.3bn by mid-2017, which includes $27.9bn of “dry powder”, or funds yet to be lent out (see chart). In 2017 alone 24 direct-lending funds raised a record $22.2bn. Such funds do what they say on the tin: lend directly to firms, usually in the form of big, multi-year loans. The borrowers are often either companies that are too small to raise equity or debt on capital markets, or private-equity funds buying such firms.

Small pots of liquidity

BOTH, in different ways, worry about liquidity. And global warming may, indeed, be bringing meteorologists and financiers together. On January 18th, VisionFund, a microlending charity, and Global Parametrics, a venture that crunches climate and seismic data, launched what they billed as the “world’s largest non-governmental climate-insurance programme”. The scheme will offer microfinance to about 4m people across six countries in Asia and Africa affected by climate-change-related calamities.

Natural disasters are becoming more frequent and severe. They disproportionately affect poor countries, where many eke livings from vulnerable agricultural land. Yet it is often in the aftermath of disaster that credit is hardest to obtain. As non-performing loans rise and the perception of risk increases, microfinance institutions (MFIs) rein in lending; they receive little support from donors and relief programmes, which tend to favour humanitarian aid....Continue reading
First published here: http://j.mp/2Ff2un9