New research reveals simmering misunderstanding under the tree

IS THERE any other time of year when good intentions and materialism converge so tightly? The caring, the artistic and the diligent spend their days before Christmas wrapping gifts. Whatever lies inside, their love for the recipients will also be expressed through paper, tape, bows and ribbon.

Then it all goes horribly wrong. New research* into the unwrapping of presents by two professors at the Yale School of Management and one at the University of Miami bravely applies rigour where sentimentality has long ruled. Their paper draws on a half-century of studies by scores of economists and psychologists as well as fresh field trials using hundreds of people from three universities.

The result is, for wrappers, a distressing discovery. Americans spend $3.2bn a year on wrapping paper. Yet their work not only fails to enhance joy, it creates unrealistic expectations that lead to discontent. Gift wrappers may think they are transforming the mundane into the magnificent; recipients seem...Continue reading

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America’s Department of Commerce imposes a tariff of 292% on Bombardier’s C-Series jets

Flying away from Boeing

A YEAR ago Dennis Muilenburg, the chief executive of Boeing, the American aerospace giant, had a big problem. Tweets written by Donald Trump, America’s newly elected president, were hitting Boeing’s share price. Their value was initially lifted by the new president’s promise of extra spending on defence. But in December last year Boeing’s shares fell after a tweet from Mr Trump suggested that an order for new presidential planes worth $4bn should be cancelled. The newly-elected president then picked a fight with its rival Lockheed Martin over its new fighter jet; Boeing’s executives were left in fear of being the next target in his gunsight.

And so, it seemed, Mr Muilenburg came up with a plan: snuggle up to Mr Trump’s “America First” agenda to avoid the flack. Boeing started to stress in its press releases how many American jobs it was creating; it asked to president to unveil the first 787-10 jet produced in February and in April it filed a trade case against Bombardier,...Continue reading

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Russia’s dysfunctional funeral business gets a makeover

Stiffer competition is coming

THE calls began shortly after Yulia’s grandmother died. The undertaker offered help arranging the funeral, for 47,000 roubles ($800) in cash. She then travelled to Moscow’s Khovanskoe Cemetery, where she was offered a discount on a gravesite—150,000 roubles off—if she could bring cash within three hours and sign a receipt saying she had paid half that amount. Yulia (whose name has been changed) and her family gave in. “We knew we were paying a bribe, but what else could we do?”

To bury a loved one in Russia often means entering an underworld of corruption and red tape. The myriad goods and services needed, from preparing the body for burial to funeral arrangements to carving a headstone, all represent opportunities for extortion in a largely informal market. “Instead of a funeral as a commercial service, the consumer is offered a strange sort of quest,” writes Sergei Mokhov, editor of The Archaeology of...Continue reading

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An experiment with in-home deliveries is under way

AFTER staying at home one afternoon for a delivery of discounted toilet disinfectant that never came, Valentin Romanov, a Stockholm IT manager, installed a special lock on his flat’s entrance. When no one is in, deliverymen unlock the door and slip packages inside. Four months on, Mr Romanov has doubled his spending online and says he cannot imagine life without in-home deliveries. These are sweet words for delivery firms and online retailers, Amazon included, that are setting up partnerships with lock manufacturers to overcome a big hurdle for e-commerce.

Conventional deliveries fail so often that a parcel is driven to a home an average of 1.5 times in the Nordic region, says Kenneth Verlage, head of business development at PostNord, a logistics giant operating in Denmark, Finland, Norway and Sweden. It is an expensive inefficiency made worse, he says, by the fact that recipients have still often had to wait for a failed delivery. Some couriers leave packages on doorsteps, but this invites theft....Continue reading

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Combustible cigarettes kill millions a year. Can Big Tobacco save them?

BESIDE a serene lake in Switzerland sits a modern glass building called the Cube. Wide-leafed tobacco plants grow in the lobby. In one room machines that can “smoke” more than a dozen cigarettes at a time dutifully puff away, measuring the chemicals that consumers would inhale. The research centre is run by Philip Morris International (PMI), which sells Marlboro and other brands around the world. The facility’s purpose is not to assess the risks of smoking, but to determine whether this huge cigarette-maker might get out of selling cigarettes altogether.

André Calantzopoulos, PMI’s chief executive, talks about moving to a “smoke-free future”, with the firm’s business comprised entirely of alternatives to cigarettes. “We are crystal clear where we are going as a company: we want to move out of cigarettes as soon as possible,” he says. Mr Calantzopoulos has the boldest goals in this regard, but he is not the only tobacco executive to tout a new direction. Nicandro Durante, chief...Continue reading

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A vote on “net neutrality” has intensified a battle over the internet’s future

A DAY before the Federal Communications Commission (FCC) voted to rescind “net neutrality” regulations designed to ensure that internet-service providers do nothing to favour some types of online content over others, Ajit Pai, its chairman, tweeted a short video reassuring Americans. “You can still post photos of cute animals,” he says in it, posing with a dog. He also wields a light sabre, which prompted Mark Hamill, the actor who portrays Luke Skywalker in the “Star Wars” films, to criticise Mr Pai on Twitter for siding with giant corporations. Ted Cruz, a Republican senator, then asserted in Mr Pai’s defence that Darth Vader supported government regulation of the web; further jabs followed.

It made for a silly treatment of an arcane subject. But net neutrality is a serious business. The state of New York’s attorney-general said he would lead a multi-state suit against the FCC; in Congress Democrats and Republicans are expected to propose competing bills on the subject in 2018. Broadband and wireless companies such as AT&T responded to fears about their increased power by questioning whether internet firms like Google have too much. Google, Facebook, Amazon and other platform companies in turn put out statements in support of an open internet. So rather than end the struggle over how the internet is regulated in America, the FCC’s vote has...Continue reading

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Hard lines

Have yourself a dismal Christmas

ONLY an economist would think to ask whether Christmas is efficient. In 1993 Joel Waldfogel, then a professor at Yale University, turned a lunchtime conversation with colleagues into a paper entitled “The deadweight loss of Christmas”, which argued that, no, it is not. That gift-giving might actually be bad is the kind of opinion which breeds a deep mistrust of economists—loathing is perhaps too strong—among those not schooled in the dismal science. It is also just the sort of analytical insight on which economists pride themselves: counterintuitive, irreverent and interesting. But they should perhaps be less pleased with themselves. The way they think about the most festive time of the year reveals something important about the shortcomings of the field’s approach to human behaviour.

Mr Waldfogel’s notion was a clever one. Massive amounts of money are spent on holiday presents; it makes sense to ask whether such spending leaves the world better off. In buying gifts, people do their best...Continue reading

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Countries rarely default on their debts

VENEZUELA is an unusual country. It is home to the world’s largest reserves of oil and its highest rate of inflation. It is known for its unusual number of beauty queens and its frightening rate of murders. Its bitterest foe, America, is also its biggest customer, buying a third of its exports.

In defaulting on its sovereign bonds last month (it failed to pay interest on two dollar-denominated bonds by the end of a grace period on November 13th), Venezuela is also increasingly unusual. The number of governments in default to private creditors fell last year to its lowest level since 1977, according to the Bank of Canada’s database. Of the 131 sovereigns tracked by S&P Global, a rating agency, Mozambique is the only other country in default, having missed payments on its Eurobond (and failed to make good on guaranteed loans to two state-owned enterprises). Walter Wriston, a former chairman of Citibank, earned ridicule for once declaring that “countries don’t go bust”. But they don’t...Continue reading

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Intangible assets are changing investment

WHEN you work as an equity analyst at an investment bank, your task is clear. It is to comb all the statements made by corporate executives, to scour the industry trends and arrive at an accurate forecast of the company’s profits. Achieve this and your clients will be happy and your bonus cheque will have many digits.

But is all this effort worthwhile? Not as much as it used to be, according to Feng Gu and Baruch Lev, writing in a recent issue of Financial Analysts Journal*. The authors imagined that investors could perfectly forecast the next quarter’s earnings for all companies. They then assumed that investors bought all the stocks that they expected to meet or beat the consensus of analysts’ forecasts; and that investors could short (ie, bet on a declining price) the stocks of those that were predicted not to reach their estimates. They made their investment two months before the end of a quarterly reporting period and got out of their positions one month after the...Continue reading

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Ryanair stops Christmas strikes, but at a cost

AIRLINES respond to greater demand for travel around Christmas by increasing fares. But this year, Ryanair has found that it is not the only one taking advantage of the desire to be home for the holidays. To avert proposed strikes by pilots across Europe, the Dublin-based carrier offered on December 15th to recognise pilot unions for the first time in its history. The offer came just in time to avert a four-hour strike by Italian pilots scheduled that afternoon. Pilots in Ireland and Portugal also called off a strike they had planned for December 18th. Ryanair may have saved Christmas, but its stock price fell by 8% on the day of the announcement.

Michael O’Leary, Ryanair’s chief executive, acknowledged that union recognition marked a “significant change” for the company. During a dispute with baggage handlers in 1998, Mr O’Leary said that Ryanair would recognise unions “when a majority of our people wishes to do so.” Nonetheless, Ryanair has strongly resisted attempts by its employees to join independent unions, preferring to...Continue reading

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The China syndrome

WHAT is in store for economies and markets in 2018? Around this time of year, a large number of analysts and fund managers are giving their views. Among the most interesting and thoughtful approaches can be found at Absolute Strategy Research (ASR), an independent group founded by David Bowers and Ian Harnett.

ASR adds extra depth to its analysis by contrasting its own views with those of the consensus. To do so, the group polled 229 asset allocators, managing around $6trn of assets, for their views on the outlook for economies and markets. They found a groundswell of optimism; the probability of equities being higher by the end of 2018 was 61%, and that shares will beat bonds is 70%. The allocators think there is only a 27% chance of a global recession. And they are not worried about the prospect of the Federal Reserve pushing up interest rates.

There are some disconnects within the consensus view. The first is that investors expect volatility (as measured by the Vix) to rise next year. Usually, equities struggle in...Continue reading

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Donald Trump holds off hitting the Gulf carriers with sanctions

WHEN Donald Trump became America’s president nearly a year ago, lobbyists campaigning for protection for the country’s airlines against competition from the Middle East were overjoyed. But they were less happy on December 13th when it was revealed that Donald Trump has decided to hold off on imposing sanctions against the three big Gulf carriers—Emirates of Dubai, Etihad of Abu Dhabi, and Qatar Airways—for what America’s big airlines allege are unfair subsidies that they receive from their governments. For now, the administration will continue discussions with the UAE and Qatar, the trio’s home countries. But it has not taken off the table the possibility in the future of amending or terminating its Open Skies agreements that allow the Gulf carriers to fly to any American airport they want. A document from an administration meeting in September, obtained by Politico, a news website, states that “additional...Continue reading

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