Archive for the ‘Finance’ Category

Working on my new book … The Fight For Freedom

May 9, 2014

Not much time for blogging, as I am writing, writing, writing. Here’s the book I am working on:

19.3.2014 cover FFF - iPad cover (3)

Financial Times “goes through Gutenberg moment”

March 5, 2014

FT logo

 

 

The Financial Times has just gone through its “Gutenberg moment,” with digital revenues for the first time outstripping print, according to managing editor James Lamont.

Setting up a paywall for its internet news site was its biggest decision of the past decade. “It was a good decision. It has guaranteed our survival. We are profitable and we can see our future,” he told journalists studying at the Reuters Institute in Oxford.

Highlights from his upbeat talk:

– Digital subscriptions have been rising at an annual rate of 31%.

– The move to digital meant profits grew 17% last year on a revenue increase of only 1%.

– Fastest growth is in mobile, which accounts for half of traffic to ft.com.

– Print circulation continues to decline (to around 240k), but is profitable because of cheaper print technology and rationalisation of distribution. “We want to keep print going.”

– The proportion of revenues earned from content grows – now 63% compared with 37% for ads. “There is a secular decline in advertising, but we can now survive on subscriptions.”

– Sales are predominantly in 1. Continental Europe 2. UK, 3. US. 4. Asia. “We are global.”

– Web analytics show a “long tail of stories nobody reads.” They are cutting down on those.

– Analytics show at what times readers in the main regions access its news. This led to changes in news schedules.

– The Financial Times increased its journalist staff from 450 to 611 between 2005 and 2011. Now there are 571. It hires five journalists a year from outside.

– It hires journalists on the expectation they will stay for 20 years and have five different jobs. One in four changed jobs last year.

– News stories on multiple platforms have become shorter. “Engagement,” “community” and “relevance” are the buzzwords.

Ukraine: more Russian than you may think

February 23, 2014

I published this blog in April 2010 after spending two weeks teaching journalism in Kirovograd, in central Ukraine 

Most East European countries which left the Soviet embrace in 1990 felt they were regaining their independence. Not so the Ukraine, where the desire to differentiate itself from Russia is not so obvious.

It depends which part of the country you are in. In the west, there is a long separatist tradition. There, the Ukrainian language is widespread, and Polish words are used too, since Poland used to rule there.

In Kirovograd in the centre however, Ukrainian and Russian are used almost equally. A teacher at the Institute where I have been teaching journalism told me she spoke Ukrainian with her students and Russian with her friends. Further east in the Ukraine, Russian is even more common.

Kirovograd was founded in the 18th century by the Russian Empress Elizabeth as a fortress defending Russia against Tartars and Turks. Two Russian generals who defeated Napoleon came from its military academy. It was named first after Elizabeth, then after an early Soviet Communist, Zinoviev (a local boy), and then after another top Soviet Communist, Kirov. Trotsky also came from here.

Local guides don’t mention that Stalin had all three murdered. Somehow that does not help the townsfolk’s sense of identity.

So what to call the city now? An Orthodox priest tells me it should be Elizavetgrad again. One of my young students snorts in indignation: too old-fashioned. For lack of agreement, it stays Kirovograd. Three streets remain named after Lenin, Marx and Dzerzhinksy, the head of the Soviet Cheka secret police. For these too, nobody can come up with anything more suitable. It is hard to find historical references which are appropriate.

So what IS the Ukraine’s cultural identity, and how close does it want to be to Russia? This is a tough question for a young country and it deserves respect. It is not just a question of democratic Western Europe versus autocratic Russia. Many Ukrainians feel so close to Russia they do not even consider it “abroad.”

But the European Union of the West is likely to help the Ukraine to modernize itself much more effectively than Russia. There is not really a choice.

SLOVENIA: FALLEN ANGEL OF EX-COMMUNIST EUROPE

December 21, 2013

Spik 2013

In the days of Communist Yugoslavia, Slovenes stood out for being in touch with the West and capable of generating a large proportion of the country’s GDP. Independent since 1991, Slovenia quickly qualified for the European Union, the euro and Schengen.

Yet now it counts with Greece, Cyprus and Spain among the eurozone’s worst financial miscreants. Its main state-owned banks are in dire need of bailouts. As auditors pick through the books, they discover loan after reckless loan for dud projects run by political cronies and personal business friends, secured by precious little.

Governance of the banks is revealed as irresponsible, slack and amateurish. Even the Catholic Church is saddled with large bankrupt businesses which are anything but spiritual. Pope Francis has removed the Archbishop of Ljubljana and the Bishop of Maribor. So much for Slovenes’ reputation for economic competence.

Now the government is starting to bail out the banks. Eager to cling to the independence gained only in 1991, it refused to apply for a bailout from the EU and the IMF, which would have meant foreign supervision. In order to preserve a minimum of international credibility, it reluctantly brought in foreign consultants to inspect the books.

As a result, it embarrassingly turns out that the government needs to put in 4.8 billion euro, four times the amount it originally calculated.

Moreover, EU rules on state aid oblige it to sell its number two and three banks, as well as 75% of the largest. The best hope that the Slovenian Central Bank governor could voice was that foreign buyers (there are no domestic candidates) will sort out the governance mess.

Slovenia has escaped bailout tutelage by the EU and the IMF, but the cost of going it alone will be huge for the Slovene people.

In hindsight, it is clear Slovenes were too complacent because of their success in Communist Yugoslavia. Their capabilities proved inadequate for an open modern economy. Whereas Poland privatised quickly in the earlier 1990s – and got through the recent financial crisis unscathed – in Slovenia, the state still owns half the economy.

So anxious were Slovenes to preserve their independence that they did their utmost to keep out foreign investors. This can now be seen as a damaging fantasy.

One exception is Lek, one of the country’s largest companies, which was bought by Novartis. Its procedures were radically overhauled at the insistence of the Swiss. Now it is solidly implanted in the group as a leading producer of generic pharmaceuticals. At a time when Slovenia’s GDP is falling precipitously, Lek is hiring not firing.

Moral number 1: ex-Communist states of Eastern Europe, even Slovenia, underestimated how much they need to change to adapt to the modern world.

Moral number 2: Slovenia now needs the national unity which won it independence in a 10-day war in 1991. In view of the vicious infighting which pervades its politics, this however seems unlikely.

Its outlook unfortunately is grim.

– Marcus Ferrar is co-author (with John Corsellis) of Slovenia 1945: Memories of Death And Survival After World War II.

Committed to journalism – the Reuters Institute’s 30th anniversary

September 11, 2013

by Monique Villa

Reproduced by kind permission of The Baron http://www.thebaron.info/

Spending a week-end in Oxford is always a treat, but spending it with the likes of Mark Thompson, CEO of The New York Times, Nathalie Nougayrede, Director of Le Monde, John Stackhouse, Editor-in-Chief of the Globe and Mail, and more than 100 fellows from the Reuters Institute for the Study of Journalism, was a real uplifting experience. Uplifting because a large degree of optimism in the future of journalism emerged from the two days’ celebrations and discussions.

The fellowship programme was the first launched by the then Reuters Foundation 30 years ago, and its anniversary was celebrated in style with almost 200 participants, mostly still journalists, coming from all around the world, with their suitcases full of memories and ideas. Seven years ago, the fellowship became the Reuters Institute, a partnership with the University of Oxford.

Mark Thompson kicked off the two-day event with the Reuters Memorial Lecture. And no, he didn’t talk about the BBC. Instead, he gave a fascinating insight into the complex dynamics of pay-per-read and digital advertising.

It is remarkable to see how the rise of social media is forcing long and well established publications such as The New York Times to re-think the entire business model, making video a key asset of their offering. “It’s one thing” – said Thompson – “when you compete with other newspapers in terms of digital impressions – it’s another when you compete with players such as Google and Facebook with their billions and billions of impressions”. He said the newspaper he manages leaves money on the table with advertisers because they don’t produce enough videos, the holy Grail of advertising online.

Mark Thompson stressed the importance of quality journalism, highlighting how time, accuracy and authority are even more precious at a time when everybody creates and circulates news via twitter. I agree with him, social media is not a substitute for journalism, and newspapers brands are surely not becoming obsolete.

What I found fascinating about this Oxford gathering was the palpable level of optimism shared by the executives of prestigious newspapers.

Both Nathalie Nougayrede and John Stackhouse depicted a future where newspapers will become more and more competitive, both commercially and editorially. It was refreshing to see an outspoken French woman outlining – in flawless English – the challenges and the opportunities ahead of the French media landscape. And it was captivating to find out how the Globe and Mail had shut down its print edition for a day – this past Labor Day – to drive users to a new, and enhanced online edition. The risk is part of a wider and bolder strategy at the Canadian newspaper that gives editors a financial premium if their audience online grows. The move, so far, has paid off, but it has also raised eyebrows among those who fear the red line between editorial and commercial could be blurred.

The role of women in journalism was also on the agenda. I was the moderator of an interesting panel which included: Suzanne Franks, Professor of Journalism at City University, Sue Lloyd Roberts, Special Correspondent at the BBC, and Laura Saarikoski, Sunday Editor at the Helsingin Sanomat, the biggest Finnish newspaper. Despite the recent boom in the number of female students enrolled in journalism courses around the world (in some cases up to 90 per cent of the students are in fact women), only a tiny percentage makes it to the very top. Why? The panelists were unanimous: childcare and family responsibilities. Even in Finland, where the government has a clearly progressive agenda when it comes to equal opportunities, maternity and paternity leave, a good number of women make it to middle management positions, but not to the role of Editor-in-Chief. According to Laura Saarikoski, this is due to the fact that women have an embedded guilt complex, which prevents them from putting career at the very top of their priorities. I don’t fully agree with such view, and the fact that two women are leading the editorial teams at The New York Times or at Le Monde is there to prove that things are changing fast.

I agree more with Suzanne Franks when she says that the career of most female TV presenters ends at 45. Sue Lloyd Roberts puts it in a very powerful way: successful female journalists are seen as a “third sex”. “They simply don’t know what to make of you”, says Sue – admitting that while reporting from tribal Afghanistan she was allowed to drink tea in the company of local men, while their wives remained segregated to the kitchen.

Seeing over 100 fellows from more than 40 countries in Oxford this weekend is direct evidence of the great success of the Reuters Institute that the Foundation partly funds. Great credit goes to David Levy, its Director, who has in four years succeeded to transform the Institute into a global player, with its trusted publications massively downloaded around the world. The Institute is today at the forefront of providing trusted information and data for media and policymakers adapting to the new challenges of the profession.

As Mark Thompson puts it: “Why did Jeff Bezos buy the Washington Post? Has he seen anything that the rest of us haven’t?” We don’t have the answer. And that’s why we need the Reuters Institute to pursue its mission of shedding light and provide analysis in the fast evolving media landscape.

The Thomson Reuters Foundation is fully committed to journalism and to supporting the RISJ. Our Chairman, David Binet, came all the way from Toronto just for the event, as a testimony of this lasting bond. ■

Monique Villa is a French journalist, business leader and women’s rights advocate who joined Reuters in 2001 as managing director of media after a career as an Agence France-Presse correspondent and manager. She became chief executive of the Thomson Reuters Foundation following the acquisition of Reuters by Thomson Corporation in 2008.

Will The Economist’s phenomenal success feed through to Reuters?

August 26, 2013

(This article first appeared on 24.8.2013 on The Baron, a web site covering media trends http://thebaron.info/.)

In appointing a senior manager of The Economist as “chief executive, Reuters, running news and media business from London,” Thomson Reuters has picked talent from one of the world’s most successful news businesses.

Instead of turning to another wizard from America, the company is looking towards a UK-based organisation which has built a powerful readership worldwide including the U.S. The Economist boasts playfully that it is the Voice of God: read its content once a week, and you know all you need about the world.

So what are the keys to success that Thomson Reuters must surely be eyeing in choosing Andrew Rashbass? Some of his colleagues recently briefed journalists attending the Reuters Institute in Oxford:

– The Economist has a circulation of 1.5 million, making 70% of its revenue from subscriptions and 30% from advertising. It is profitable on subscriptions alone. In five years, the ratio is expected to move to 80:20 or more. So much for the myth that nobody pays for news in the digital era.

– Digital publishing grows rapidly, but The Economist finds that print is far from dead. In fact, it tends to be more profitable.

– The Economist employs only a handful of staff journalists. But it draws on a powerful array of expert writers who produce dauntingly thorough series on subjects such as the U.S., China, India, international finance, technology and science.

– It surprises readers by writing about topics they had no idea mattered.

– The Economist does not try to be impartial. It believes readers accept an openly expressed point of view. It is liberal, socially and economically, and sees this predictability as a strength.

– Its journalists don’t write just for the weekly edition. They keep the news flowing in between in the form of blogs. They use feedback from the blogs to adapt followups.

– They see apps delivering news to tablets and smartphones as a more promising business model than web sites with paywalls, because consumers feel they are getting the whole news, not bits and pieces.

Some of The Economist’s lessons will not apply, and Reuters brand already carries authority. But Reuters does not quite have The Economist’s intellectual firepower. It has introduced comment, but it is varied and unfocused. Reuters avoids having “a line,” and in The Economist’s experience that is not a plus.

Look at Reuters web pages, and you see a disparate array of stories – some financial, some global, others lightweight and local. While Reuters has more experience of running 24-hour news, it has struggled to make it profitable. Its web sites have no paywalls.

By refocusing on the name “Reuters,” Thomson Reuters is signalling that it wants to make serious money from news. This has been the Holy Grail for Reuters throughout the ages.

Rashbass, who has been guiding a highly profitable global news brand, has been brought in to deliver.

Swiss people make handsome profit from bailing out their biggest bank

August 6, 2013

In 2008, the Swiss people had pay out massive sums to save the country’s largest bank from collapse due to the toxic assets it had foolishly amassed in the U.S.

The Government bought most of UBS, so that it was in effect nationalised. The Swiss National Bank granted it a large loan and created a “bad bank” into which the toxic assets were dumped. As a result, the Swiss people took on the sizeable risk that the bank would never recover and all their investment would go down the drain.

Yet in 2010, the Government was able to sell its share in the bank at a modest profit. Now UBS has almost repaid the loan from the National Bank, which moreover has agreed to the bank taking back all the assets dumped in the “bad bank.” These have regained considerable value as a result of the recovery of the U.S. housing market.

Neue Zuercher Zeitung worked out that what the people have earned through the substantial interest charged on the loan and the National Bank’s share of the profits on the resurrected toxic assets will by year-end reach 6.5 billion Swiss francs ($7 billion).

Since 2011, the Swiss National Bank also bought huge amounts of foreign currency to prevent the Swiss franc appreciating too much – it had firmed from 1.55 to the euro in 2008 to 1.05. It set a base of 1.20 and announced it would sell any amount of Swiss francs to prevent further appreciation. After nearly a year bumping along the floor, the currency has eased to 1.23, and so when the National Bank decides to mop up the Swiss francs, it will repurchase them at less than it sold them for.

Together with the profit on re-privatising the bank, this would take the earnings of the people in this affair to around 10 billion francs ($11 billion) or more.

So a bank bailout can be profitable, not just a drain on the people’s wealth for the benefit of reckless banks. Why has it worked out this way for Switzerland, while in other countries such as Spain, Portugal and Greece, bailouts caused investors to lose faith in the solvency of the governments themselves?

In Switzerland, public finances were solid, and so foreign investors never doubted the capability of the state to assume the bailout burden. Secondly, Swiss companies are geared to high-quality and precision goods, which are not particularly price-sensitive. A liberal policy on immigration enabled it to import highly-qualified labour to keep standards high.

Not rocket science, but a focus on prudence and quality which has paid off.

German economy fuelled by nearly one million immigrants in 2012

May 9, 2013

Figures reported in the German newspaper Die Zeit give an interesting insight into immigration in Europe’s most powerful economy. Massive immigration is compensating the demographic effects of a falling birth rate. Key points:

965,908 foreigners immigrated into Germany in 2012, mostly from Poland, Romania, Bulgaria and also southern European countries such as Italy, Spain, Portugal and Greece, which have been hard hit by their local banking crises. That’s the equivalent of the population of Cologne.

However 578,759 foreigners also left Germany, leaving net immigration of 387,149.

Turks used to flood into Germany, but last year more Turks left Germany than entered, since the thriving Turkish economy offers opportunities at home. Immigration from Islamic countries has become insignificant.

Among German nationals, more left the country than returned.

Because of the declining birth rate, Germany needs net immigration of between 250,000 and 400,000 yearly in order to prevent the population from declining, which would depress economic growth and lead to an ageing population. 200,000 more people die in Germany than are born.

The moral, say Die Zeit, is that this huge immigration is beneficial despite resulting social strains, and Germany should do more to make immigrants welcome.

Meanwhile, in Britain, new legislation is under preparation to make it harder for foreigners to immigrate. We shall see which policy is right …

Malaysia: Elections? What elections?

May 6, 2013

The ruling UMNO-led coalition has again won Malaysia’s “elections,” but after 57 years in power the process has become something of a charade. The government was declared to have won 133 seats and the anti-corruption opposition led by Anwar Ibrahim 89.

Despite its confidence beforehand, it is hard to see how the opposition could have succeeded. The government monopolises the mainstream media, which refused access to the opposition. Rather than an election campaign, there was thus a monolithic advertising campaign on behalf of the government.

The opposition was reduced to using social media and holding rallies. The latter were constantly disrupted by police mounting road-blocks to delay participants or interrupting proceedings on the grounds there was no “permit.” The opposition campaign bus, fitted out with a collapsible stage because halls were denied to them, was repeatedly vandalised. Under such circumstances, it is hard to see how they could have come out on top.

After 57 years in power, the ruling coalition has inevitably become financially corrupt. Its supporters are those who benefit from the sleaze and the ill-educated in the countryside: a coalition of the corrupt and the ignorant. The opposition has its power base among the well-educated in the major urban centres.

The government’s “election” result is nevertheless its worst ever, and Anwar claimed widespread fraud. There are even suggestions the government won less than half the popular vote. But there seems little for the educated and the open-minded to do except continue biting their nails in frustration. Many opposition supporters blacked out their profiles on Facebook after the results were announced.

Anwar, aged 65, and imprisoned for six years on a spurious pretext, was once a rising star of Malaysia, representing his country as Deputy Premier at the Davos World Economic Forum. Before this latest poll he said he would leave politics if he did not win. Malaysia will be the worse off if he does.

Is a new bubble in risky investments on the way?

January 23, 2013

As I used to report on the Bank for International Settlements (BIS) as a financial journalist in Switzerland, I remain interested in certain clients it has (they’re all central banks).  Take Argentina for example. It holds nearly all its reserves at the BIS, which is unusual – most other central banks keep about 4%.

Argentina does this because at the BIS its money is protected from attachment by unpaid creditors. I’ll return to this in a later blog.  It’s the subject of arcane arguments in American courts at present. If you look at http://blogs.reuters.com/felix-salmon/tag/argentina/, you’ll see what I mean.

Paraguay is another case, and it’s more topical – see my two recent blogs. It holds all its reserves at the BIS, also to protect them from creditors it decided not to pay.

Last week that did not deter a good number of investors from subscribing to Paraguay’s first-ever public international bond issue.  The risk is theirs, you may say. However it does uncannily remind me of the years leading up to the crash of 2008, when banks sold little-explained investment vehicles to gullible investors who did not understand them and asked no questions because of their greed for high yields.

In Paraguay’s case, lead manager Citibank did not inform subscribers in the prospectus that the country keeps all its reserves at the BIS, let alone why. So if the next Paraguayan government repudiates the debt – this has happened several times in the past and the next election is in April – investors were not made aware that a key means of legal redress is blocked.

The ratings agencies were not much put out by this. S&P’s BB- rating and Moody’s Ba3 seem not too bad.

A week before the bond was launched, I myself asked the Paraguayan Finance Minister: “How will you convince potential bondholders that a future Paraguayan Government will not repudiate the bond issue transaction and protect itself from claims by accumulating further funds at the BIS?”

I received no answer, even though the Central Bank had been communicating with me before. Towards the end of last year, Paraguayan ministers were saying in the local media the bond would be launched in mid-February. Now it has popped out just after the New Year. Looks like a rushed job.

Are we at the start of a new cycle of peddling dubious assets which nobody can quite fathom? History shows repentance never lasts more than a few years. I sense the first puffs into a new bubble.


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