Nov 13 2011: Boeing Hits it Big at the Dubai Air Show.

Andrew Parker reports from the Dubai airshow that Boeing has won its largest order (estimated at $26bn) in its 95 year history. (The video runs two  minutes and 20 seconds.) Emirates Airlines bordered 50 B777s.  This came on top of a big order on Monday.

From the show, Parker also analyses the ascent of Emirates, Qatar Airways and Etihad amid allegations of state subsidies.  (This video runs four  minutes and 17 seconds.)

Entrepreneurs Come in Many Shapes, Especially in the Emerging Economies.

In the U.S., eighty percent of job growth comes from small and medium sized businesses.  Forty years ago, when Antoine van Agtmael coined the phrase "emerging markets," there was plenty of reason to doubt their emergence.  But a combination of a revolution in ideas and the emergence of Schumpeter's prime mover of capitalism, the entrepreneur, has made the phrase more than a bit of public relations glitz.

The revolution came when intellectuals championed the market rather than the state as the engine of growth.  This led to financial and economic globalization.

Entrepreneurs come in many shapes, especially in the emerging economies.  Here are a few examples through the medium of Wall Street Journal videos:

Can you make money marketing to customers who live in the barrio?

Peru's new middle class give a whole new meaning to the phrase "living in the suburbs."  The neighborhoods surrounding most Latin American cities are shanty towns where families crowd into shacks made of tin, cardboard, and whatever else might be recycled from the society's discards.  Seeing the barrios around Lima with Guillermo Descalzi in 1967 set the course of my professional career.  Had I any doubt that economic development would be what I studied, it disappeared then and there.

The Flores family own a firm called Topitop.  It has become Peru's largest apparel maker with sales of about $200 million by focusing on the region's emerging middle class.  Topitop aspires to be another Zara (2010 worldwide sales of €2.5 billion.)  The Flores family grew up in the poverty of Huancavelica in the Andes.  Learn how the two brothers worked their way from street venders in WSJ's Matt Moffett's report:


11/14/2011

One Man Movie Production Company

And then, on the South American pampas, there is Daniel Burmeister, one of the world's most prolific directors. The WSJ's Matt Moffett reports from Coronel Suarez.




11/7/2011

India's Struggling Entrepreneurs

The government of Monmohan Singh has done little lately to make it easier to start and grow a business in India.  The Economist comments, "In the face of slowing growth, high inflation and awful corruption, the government is looking increasingly fossilised. No notable legislation has passed since the general election in 2009. Next year Mr Singh turns 80. He needs bright new talents to rediscover his sense of purpose."  WSJ's Amol Sharma' report from Mysore shows how difficult it is for a start-up.  Four years ago, Vishwaprashad Alva quit a high-paying job with GE's healthcare division in India to start his own company, Skanray Technologies. But getting the company off the ground has been a brutal process:


10/31/2011

Brooklyn Entrepreneurs Go to Madagascar for Cocoa

Madecasse, the Brooklyn-based gourmet food company, is going to great lengths to find sources of premium cocoa. WSJ's Peter Wonacott reports from Madagascar:

9/23/2011

The Birth of Arbitrage

Arbitrage is the simultaneous buying and selling of an asset in two separate markets to exploit a price difference.

The Benchmarks Aren't Speaking to Each Other!

For many years, Brent crude oil sold a a very similar price to West Texas Intermediate crude oil.  The former is the benchmark price for oil in Europe; the latter for the U.S.  In the early years of the Brent field (between Great Britain and Norway in the North Sea), Brent sold at a discount to WTI.  Thereafter they sold at parity.  In the last year, Brent has opened a big premium up over WTI, averaging $27 for one recent month.  What happened to arbitrage and the Law of One Price?  A glut of oil in cushing, OK where the market for  WTI is and a shortage in Europe.

That is about to change.

Chip Cummins reports in the Wall Street Journal that Entbridge of Canada is buying the recalcitrant half of Seaway pipeline and will reverse its flow south.   Let the arbitrage begin!

For Kansas:

This means lower margins for Kansas refiners, higher income for Kansas oil producers, and probably higher local gasoline prices.

WSJ's Liam Denning and Mean Street host Evan Newmark discuss WTI's price spike back over the $100 per barrel mark on news of a Canadian company's investment in a gulf coast-to-Oklahoma pipeline.

The Birth of a New Acronym

I know of an agency in Washington that thought its status diminished by having a FLA, so it used a TLA instead. ("What's that?" you ask. An FLA is a four letter acronym, while a TLA is a three letter acronym.)

Well the would is "enriched" by a new acronym: "Sifi." Apparently one does not have to do it in all caps. (We really do need some regulation!) I read in the Financial Times, "Bank of China talks up its Sifi status."I was quite baffled. "Sifi?" I asked. The FT explained the acronym as “systemically important financial institutions.” (I caught it on the second reading.)

Nabors CEO Eugene Isenberg's $100 Million Severance-Type Paymen

MarketWatch asks "Is Shareholder Capitalism Working?"  MarketWatch columnist David Weidner and Mean Street host Evan Newmark discuss Nabors CEO Eugene Isenberg's $100 million severance-type payment and discuss whether shareholder capitalism is still working. WSJ.com video 10/31/2011

Act II of the Olympus Drama

From the Wall Street Journal, Olympus defends its deals, but the Chairman resigns and the Euro Zone Looks to Asia for bail out money. 

In this Asia Today video, we find that Japanese camera maker, Olympus, stands by four controversial acquisitions even as Chairman Tsuyoshi Kikukawa resigns.  The Journal's Isabella Steger and Mariko Sanchanta also discuss how the euro-zone leaders now look to Asia for money (we want your money but not your ethics):

4 minutes and 51 seconds, 10/27/2011

Act I

The first act of this drama was enacted a week ago when Olympus fired its CEO, Michael Woodford, who, in turn,  alerted the UK authorities of his findings about payments made by the Japanese camera maker in connection with the acquisitions. Mr. Woodford had hired an outside auditor to do a forensic investigation. In this October 18th interview, Mr. Woodford tells the FT's Louise Lucas why he has taken his concerns about the deal-making at his previous employer to the UK Serious Fraud Office.  Click through to view the FT video which is just over 10 minutes.

Tom Hoenig Nominated to Be the Vice Chair of the FDIC

Wow!

I do not know to what party Dr. Thomas Hoenig belongs, but he has been great on the FOMC (the Federal Open Market Committee that determines monetary policy.)  President Obama has nominated him to be the number two official at the Federal Deposit Insurance Corporation (FDIC) which guarantees bank deposits.  The FDIC also is one of the agencies that examines banks for soundness.

Tom Hoenig has been a staunch critic of the "Too Big to Fail" syndrome in American bank supervision.  He has been seemingly a Cassandra warning of the bubble in farmland prices.  Hopefully his arms will not be chained when he raises them to prays for policies to address the problem. 

On the FOMC, Hoenig has voted for raising rates.  Knowing that we are creating new bubbles rather than stimulating new investment in real projects creating real jobs, he has dissented from the prevailing majority.  What business owner in its right mind would invest in a risky business project when there is free money to lever up holdings of financial assets made risk free by the Bernanke put?  Why subsidize investment banking bonuses? And he has not kept quiet.  As Michelle Lucci pointed out over a year ago, "Kansas City Federal Reserve Bank President Thomas Hoenig has been recently speaking publicly about his desire for an increase in the federal funds rate, sooner rather than later, and also about his concern for community banks and the drag on earnings from commercial real estate loans."

Scott Canon at the Kansas City Star warns "Hoenig is ... a provocative selection to join [the FDIC's] board of directors."  Three cheers for President Obama on this one.  Even Ron Paul should be cheering. He would be available should a President Cain need a Fed Chairman.

Thomas J. Sargent and Christopher A. Sims Win the Nobel Prize for Economics

Rational Expectations and the Ability to Distinguish Cause and Effect Empirically

Macroeconomics has long been the theology of economics.  Sargent and Sims tried to take the common sense reality that it is what people expect in the future, not what we currently observe, that drives their decisions.  They developed a type of econometrics (the statistical modeling of economic reality) that would deal with expectations.  In the process they transformed macroeconomics, generally for the better.  This morning the Nobel Prize committee announced they won the Nobel Prize in Economics.

Today central bank credibility is central to economists' thinking about monetary policy.  Guess why.

One drawback of their revolution is that empirical and theoretical models became farther removed from what we can picture in our imagination.  The great oversimplification of the financial sector that Keynes introduced and Hicks the Younger systematized became more imbedded in economists mindset.  We need a revitalization of economists' imaginations to refertilize their mental pictures of the world.

Risks and opportunities for Brazil

Brazil's central Bank has cut interest rates from high levels.   Two weeks before Brazil's next interest rate decision it remains unclear whether the central bank will cut rates again.  In this FT video from October 7 2011, Zeina Latif, Latin America chief economist with RBS in São Paulo, explains to Jonathan Wheatley, deputy emerging markets editor, why although the crisis in Europe looks like an opportunity to cut rates there are multiple risks involved. (5m 24sec)