In one more exhibit on the problems with the privatisation of utilities, early this month, Kemble Water Finance, part of the complex financial structure constructed by Macquarie at Thames Water, the largest British water utility serving a quarter of the population and one that provides water to London, announced that it was defaulting on its £400mn bond repayments. This follows its shareholders refusing to make the promised £500mn equity infusion because Ofwat refused to agree to their demands for higher bills and in turn demanded that the shareholders reduce the company’s debt pile ..read more

1. The Times has an interesting story that points to the problems with phasing out plastics in food packaging. Plastic works well to slow the decay of vegetables and fruit. That means less produce is tossed into the garbage, where it creates almost 60 percent of landfill methane emissions, according to a 2023 report by the Environmental Protection Agency. A Swiss study in 2021 showed that each rotting cucumber thrown away has the equivalent environmental impact of 93 plastic cucumber wrappers. Food is the most common material in landfills. Ultimately the problem with such transitions lies in t ..read more

The US consumer price inflation for March came up at 3.5% year-on-year up from February and slightly higher than the forecast of 3.4%. On the same lines core inflation came up at 3.8%, up from the forecast of 3.7%. Bond yields rose and stocks fell as the likelihood of three rate cuts this year starting from June is now very unlikely. Traders had also previously seen a July cut as a near certainty, but halved their bets on that timing from about 98 per cent to 50 per cent after Wednesday’s report was released. While the markets still give a very high probability to rate cuts by September ..read more

1. Interesting analysis of foundation-owned companies. Denmark’s weight loss drugmaker Novo Nordisk is the best known example. Support from a foundation holding 77 per cent of its voting rights allowed it to invest in the then-unfashionable area of obesity research in the 1990s. It is now Europe’s most valuable company, having made its owner the world’s biggest charitable foundation. Foundation-owned firms’ financial results are comparable to those of their other corporate peers, according to research by Steen Thomsen of the Center for Corporate Governance at Copenhagen Business School. They a ..read more

I have written on multiple occasions arguing that developing countries have to navigate a development trajectory that has to constantly reconcile the often conflicting imperatives of promoting economic growth and limiting climate change.  Gaiutra Bahadur in the NYT has an excellent long read on how Guyana is forced to confront this challenge. Before oil, outsiders mostly came to Guyana for eco-tourism, lured by rainforests that cover 87 percent of its land. In 2009, the effort to combat global warming turned this into a new kind of currency when Guyana sold carbon credits ..read more

I have blogged here and here about the strong likelihood of a general trend of secular decline and stagnation of interest rates. This raises questions about the investment strategies of pension funds, which had taken a big hit from the long period of ultra-low interest rates.  A recent FT article points to multiple interesting links on the issue. A paper by academics from US universities looked at how a typical couple starting to save at 25 can hit three critical targets - amassing as much money as possible for retirement at 65, providing financial security t ..read more

1. Is the stock market boom peaking? It may be so if insider share sales are any indication. Many of the biggest sales this quarter have come from technology executives. Thiel, co-founder of data analytics group Palantir, sold $175mn this month, according to regulatory disclosures, his biggest sale since offloading $504.8mn of the company’s stock in February 2021. Amazon founder Bezos sold 50mn shares worth $8.5bn in the ecommerce group in February. Andy Jassy, Amazon’s chief executive, sold $21.1mn of stock this year, compared to $23.6mn in 2023 and 2022 combined. Zuckerberg, Meta’s chief ex ..read more

In a revealing mea culpa published in the IMF’s F&D Blog, Angus Deaton has set the cat amongst the pigeons by questioning several settled wisdom in economics.  He has sought to revise his views on labour unions, trade, and immigration. Like most of my age cohort, I long regarded unions as a nuisance that interfered with economic (and often personal) efficiency and welcomed their slow demise. But today large corporations have too much power over working conditions, wages, and decisions in Washington, where unions currently have little say compared with corporate lobbyists. Unions ..read more

The European Union’s Carbon Border Adjustment Mechanism (CBAM) seeks to put a fair price on carbon emissions during the production of carbon-intensive goods entering the EU, to encourage green manufacturing in non-EU countries.  By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU's climate objectives are not undermined… CBAM will apply in its definitive regime from 2026, while ..read more

1. Animal spirits contribute to inflation One recent academic paper argued that animal spirits or bubbles in markets can themselves be responsible for as much as an additional 0.8 percentage points on US inflation rates.  2. Apple joins the list of Google, Amazon, and Meta which are currently under various stages of anti-trust actions by US competition regulators. Apple with a net income in 2023 of $97 bn, more than the GDP of over 100 countries, and with a services revenue of $85 billion, has been accused of using its market power in the smartphone market to quash competition and limit c ..read more