REPOST: Take a Second to Read Draghi’s Minutes Is Lesson From Fed

Last June, on top of lowering interest rates to spur business lending and consumption, European Central Bank president Mario Draghi announced the public issuance of the bank’s policy meetings from January to the present. This article studies how Draghi’s push for transparency might affect the Eurozone, its investors, and the market.

Mario Draghi just handed investors a new way to make money. 

Image Source: Bloomberg.com

Catching up with major international counterparts, the European Central Bank president yesterday announced his institution will start issuing minutes of policy meetings from January as part of an overhaul that will reduce how often its Governing Council sets interest rates. 

Such publications give greater insight into the thinking of monetary authorities and make them more predictable, according to studies from central banks such as the U.S. Federal Reserve. In the ECB’s case, accounts of proceedings might leave investors less prone to being surprised by its actions while offering a new trading opportunity on the days when they are released. 

Minutes “enable central banks to better convey how they are analyzing economies and so the markets are better informed,” said Julian Callow, founder of London-based Catalyst Economics Ltd. 

This week’s pledge on minutes, which has been debated internally since at least 2012, marks the latest embrace of transparency by the euro area’s central bank as monetary officials try to support weak economies and avoid spikes in market borrowing costs by better guiding investors. 

The ECB previously vowed to keep minutes out of the public eye for 30 years for fear they would open officials to criticism in their home countries, of which the euro-area currently has 18. Former chief economist Otmar Issing told centralbanking.com last year that enough information was already provided and detailed minutes would be “absurd” by risking “an endless debate, which is very risky for the reputation and for the European approach.” 

More Nuance 

“There is a lot of fear of the ECB being a special animal, with doubts about the identification of governors and so on, but I think that is overstated,” said Anatoli Annenkov, an economist at Societe Generale SA in London. “It will provide further nuance and detail on what kind of focus there was during the meeting.” 

Draghi said yesterday that the Governing Council will now set monetary policy every six weeks rather than monthly, in part to quell market speculation ahead of each gathering. That echoes the timetable of the Fed, which has eight scheduled meetings a year and publishes an account three weeks later. 

“The issue is whether we should actually have, each and every month, the expectation for action,” said Draghi, noting the new agenda better enables the accounts of the meetings to be prepared and approved. What the minutes will look like is still being discussed. 

‘Precious Insights’ 

Investors may nevertheless be buoyed by the decision given the track record of minutes elsewhere. 

They “could provide precious insights into the debates on the Governing Council,” said Elga Bartsch, chief European economist at Morgan Stanley in London. 

The release of the Fed’s minutes last year had an average effect of 2.1 basis points on the 10-year Treasury yield, according to a March analysis by St. Louis-based Macroeconomic Advisers LLC. A study published in September by Carlo Rosa of the Fed Bank of New York found that volatility of two-year Treasury yields is roughly three times larger on days when the Fed posts such publications. 

The appeal of minutes lies in providing more insight into what policy makers are thinking about the economy and what indicators they’re monitoring. A 2012 study of the Swedish Riksbank’s minutes by economists Mikael Apel and Marianna Blix Grimaldi found they made it easier for investors to predict future policy decisions in Sweden. 

Transparency Score 

The same stands for the Bank of England, whose economists Rachel Reeves and Michael Sawicki wrote in 2005 that the U.K. central bank’s minutes “have a marked impact on short-run interest-rate expectations.” The BOE releases its account of proceedings 13 days after its Monetary Policy Committee meets. 

Failure to publish minutes has opened the ECB to criticism for a lack of transparency. A Barclays Plc (BARC) survey of 844 clients in April 2013 gave the central bank a score of 5.7 out of ten for its communications, compared with 7.1 for the Fed. Fifty nine percent of respondents considered minutes essential, up from 34 percent in 2008. 

Having led the way in transparency by holding monthly press conferences since its inception, the ECB has slipped behind its counterparts following the financial crisis as a desire to keep investors informed led others to hold their own media briefings and releasing more detailed economic forecasts. 

The minutes announcement follows Draghi’s decision a year ago to start committing to keep interest rates low for an “extended period.” He repeated such so-called forward guidance yesterday by saying the ECB borrowing costs “will remain at present levels for an extended period of time.”

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REPOST: Spreading the Nutella wealth: Italy's sweet success at 50

Nutella, the widely popular brand of hazelnut chocolate spread manufactured by Ferrero, celebrates its 50th anniversary. Philippe Ridet of The Guardian chronicles the recipes for fiscal and business success that brought Ferrero and Nutella to where they are today.

Nutella celebrates its 50th anniversary this year. Image source: guardian.co.uk

In Piedmont they have been making gianduiotto, a confectionery combining hazelnuts and cocoa sold in a pretty tinfoil wrapper, since the mid-18th century. They realised long ago that the nuts, which are plentiful in the surrounding hills, are a perfect match for chocolate. But no one had any idea that their union would prove so harmonious, lasting and fruitful. Only after the second world war was this historic marriage finally sealed.

Cocoa beans are harder to come by and, consequently, more expensive. Pietro Ferrero, an Alba-based pastry cook, decided to turn the problem upside down. Chocolate should not be allowed to dictate its terms. By using more nuts and less cocoa, one could obtain a product that was just as good and not as costly. What is more, it would be spread.

Nutella, one of the world's best-known brands, celebrated its 50th anniversary in Alba last month. In telling the story of this chocolate spread, it's difficult to avoid cliches: a success story emblematic of Italy's postwar recovery, the tale of a visionary entrepreneur and his perseverance, a business model driven by a single product.

The early years were spectacular. In 1946 the Ferrero brothers produced and sold 300kg of their speciality; nine months later output had reached 10 tonnes. Pietro stayed at home making the spread. Giovanni went to market across Italy in his little Fiat. In 1948 Ferrero, now a limited company, moved into a 5,000 sq metre factory equipped to produce 50 tonnes of gianduiotto a month.

By 1949 the process was nearing perfection, with the launch of the "supercrema" version, which was smoother and stuck more to the bread than the knife. It was also the year Pietro died. He did not live long enough to savour his triumph.

His son Michele was driven by the same obsession with greater spreadability. Under his leadership Ferrero became an empire. But it would take another 15 years of hard work and endless experiments before finally, in 1964, Nutella was born.

The firm now sells 365,000 tonnes of Nutella a year worldwide, the biggest consumers being the Germans, French, Italians and Americans. The anniversary was, of course, the occasion for a big promotional operation. At a gathering in Rome last month, attended by two government ministers, journalists received a 1kg jar marked with the date and a commemorative Italian postage stamp. It is an ideal opportunity for Ferrero – which also owns the Tic Tac, Ferrero Rocher, Kinder and Estathé brands, among others – to affirm its values and rehearse its well-established narrative.

There are no recent pictures of the patriarch Michele, who divides his time between Belgium and Monaco. According to Forbes magazine he was worth $9.5bn in 2009, making him the richest person in Italy. He avoids the media and making public appearances, even eschewing the boards of leading Italian firms.

His son Giovanni, who has managed the company on his own after the early death of his brother Pietro in 2011, only agreed to a short interview on Italy's main public TV channel. He abides by the same rule as his father: "Only on two occasions should the papers mention one's name – birth and death."

In contrast, Ferrero executives have plenty to say about both products and the company, with its 30,000-strong workforce at 14 locations, its €8bn ($10bn) revenue, 72% share of the chocolate-spreads market, 5 million friends on Facebook, 40m Google references, its hazelnut plantations in both hemispheres securing it a round-the-year supply of fresh ingredients and, of course, its knowhow.

"The recipe for Nutella is not a secret like Coca-Cola," says marketing manager Laurent Cremona. "Everyone can find out the ingredients. We simply know how to combine them better than other people."

Be that as it may, the factory in Alba is as closely guarded as Fort Knox and visits are not allowed. "It's not a company, it's an oasis of happiness," says Francesco Paolo Fulci, a former ambassador and president of the Ferrero foundation. "In 70 years, we haven't had a single day of industrial action."

It has to be said that life in Alba (population 31,300) would be less rosy without Ferrero, though it is also famous for its white truffles. The average wage is higher there than elsewhere in Italy, according to Cremona. The company takes charge of minding workers' children, sport and cultural activities, and health insurance for life for anyone who has worked in the firm for 30 years.

Alba residents can also heat their homes, at a competitive rate, by connecting to the company's power plant. In 2011, 30,000 people attended the funeral of Pietro Ferrero, including much of the country's political and business establishment. "A funeral reminiscent of the one for [the famous cyclist] Fausto Coppi and much more than just a ceremony to mark the passing of a job creator," La Stampa wrote in a special edition of the daily.

The virtues of family capitalism also feature largely in corporate communication. At a time when many Italian brands have been taken over by foreign companies or been forced to raise funds on the stock market, Ferrero is attached to its original model. When, in November 2009, it was reported that Ferrero was considering its options regarding the possible purchase of Cadbury, it was dismissed as blasphemy – as if a dead fly had been found in a Mon Cheri chocolate.

"Our identity is based on our independence," Fulci explains. "If we had shareholders they would ask us to increase turnover. But it takes time to make a good product." As well as cocoa and hazelnuts.

Attracting the most talented and ambitious candidates from over 150 countries worldwide, the London School of Business & Finance offers industry-focused programmes reflecting global market trends. Visit its website for more on its programmes.

REPOST: Marks & Spencer back in vogue as clothing sales rise

U.K. retailer Marks & Spencer has sustained middling apparel sales in recent years. This article on The Independent discusses how the numbers have been picking up over the last month, and what operational changes will further increase retail sales.  

Image Source: independent.co.uk

Marks & Spencer has finally managed to stop the rot in its clothing division, but still reported that non-food sales had fallen for the 11th consecutive quarter.

Chief executive Marc Bolland — who has been under pressure to turn around clothing sales — defended his “step-by-step” strategy and said shareholders and the board were backing him. Splitting clothing off from the whole of general merchandise for the first time, M&S said like-for-like sales for the division rose 0.6% in the 13 weeks to the end of March.

“This is a step-by-step improvement,” said Bolland, who recently unveiled the second Leading Ladies advertising campaign for its womenswear. The ads show such luminaries as singer Annie Lennox, actress Emma Thompson and campaigner Baroness Lawrence, photographed by Annie Leibovitz.

He added: “We have improved and increased the style and trend credentials and the higher-quality products are selling well.” However, its homewares division dragged down general merchandise where like-for-like sales were off 0.6%.

There were also concerns that M&S has been heavily discounting in order to shift its wares in an ever more competitive High Street and online retail market. Bolland, who has been at the retailer for nearly four years, said it “didn’t buy sales with promotions” but admitted it had to increase its discounting to keep up with rivals. This meant its group margins will be hit and it warned UK gross margin for the full year will be down by about 20 basis points.

Shares in M&S jumped more than 3% in early trading today, but quickly dropped back to 451.9p — a fall on the day of 4.1p.

Sales at its food division were up 0.1% — the 18th straight quarter of growth — and group sales ticked up 1.9%.

“Our food business had another great quarter, especially considering the later timing of Easter,” said Bolland.

“We continued to outperform the market with record sales around key events including Valentine’s Day and Mother’s Day.”

A newly relaunched website has prompted an increase in traffic, M&S said, and it will step up marketing of its website next month.

The company will reveal its full-year results — expected to produce pre-tax profit of between £615 million and £620 million — in May.

Clive Black at Shore Capital said: “The heartbeat of the retailer is apparel — and ladieswear at that — and M&S needs to deliver stronger trade. Despite distinctly dull trade, we do see progress in the proposition, its merchandising and execution. But there is clearly a lot more to do for M&S to stem market share decline in ladieswear in the UK on a sustained basis.”

Neil Saunders, managing director consultant Conlumino, said: “Without more radical change the latest results could prove to be cough and splutter rather than the sound of an engine being finely tuned to deliver a winning performance.”

The London School of Business and Finance (LSBF) has been grooming future movers and shakers in the retail, marketing, finance, and business. Learn more about the institution’s master’s degree in fashion retail and luxury management on this website.

REPOST: London School of Business and Finance opens new CBD campus

London School of Business and Finance has opened another campus in Singapore. Read this article from The Sunday Times for more information.

From left: LSBF in Singapore's Managing Director Rathakrishnan Govind, British High Commisioner to Singapore H.E. Antony Phillipson, and LSBF Executive Chairman and Founder Arkady Etingen official opens LSBF's new Singapore campus during a ribbon cutting ceremony held at the Springleaf Tower on Feb 26, 2014. -- ST PHOTO: NEO XIAOBIN. Image Source: www.straitstimes.com

The London School of Business and Finance (LSBF) opened its new main campus on Wednesday. Located in Springleaf Tower in Anson Road, the business school's new space is slightly bigger than two basketball courts, and can hold about 300 students at a time.

It has another campus located in GB Building in Cecil Street. Over 6,000 students have received their accounting and finance qualifications at LSBF since the business school set up its Singapore branch over two years ago.

The school's managing director, Mr Rathakrishnan Govind, said there was a need to expand the school's space as plans are under way to bring in new programmes, which will likely drive up student intake. He added that the business school intends to start business, accounting and finance undergraduate and postgraduate courses, including a Master of Business Administration programme later this year.

Additionally, the school also started offering levels two and three of the Chartered Financial Analyst (CFA) programme this year, since introducing level one of the CFA course late last year.

London School of Business and Finance (LSBF) offers industry-focused programmes that allow students to take full advantage of a uniquely global education experience.  Visit this website for more information.

REPOST: How the Feds Can Take Even Legally Earned Bitcoins

People are actively searching for new and viable alternatives to the dollar or to any other currency. Alex Daley, a Microsoft (MSFT) veteran and chief technology strategist at Casey Research, said that the Bitcoin is a potential candidate. However, with the current technologies not yet ready for a completely secure online monetary environment, it is only a good thing in principle. It is a non-government-backed currency. In fact, it is not officially backed by anything.

Image source: coindesk.com

If you are paid in cash for mowing the lawn of a notorious drug dealer, the money is yours to keep even if the dealer obtained it illegally. But if the dealer pays you in Bitcoins, the government may seize them from you someday when you least expect it.

This is Bitcoin’s nemo dat quod non habet problem, that being Latin for an old principle of English common law: “No one gives what he does not have.” If the drug lord didn’t legitimately own the Bitcoins in question because he got them via crime, then he can’t legitimately give them to you. You must give them up even if you’re not at fault. The same principle is at play when certain unwitting art buyers are forced to surrender works that were seized by the Nazis in World War II.

Alex Daley, a Microsoft (MSFT) veteran and chief technology strategist at Casey Research, covered nemo dat in a wide-ranging recent essay, which attacked a boosterish piece by Bitcoin investor Marc Andreessen that appeared in the New York Times last month. “What’s to stop the government from attempting to seize all those ill-gotten coins, even multiple stages down the line?” Daley wrote. This is a good thing if your main concern is cracking down on crime, but not so good if you want Bitcoin to be a reliable means of payment.

Daley doesn’t really believe the feds will go after innocent gardeners. But he does think the FBI will seize Bitcoins directly involved in crime, which could quickly add up to a big share of the digital currency. “The FBI already owns 5 to 10 percent of them, which are now out of circulation,” Daley said in an interview.

Bitcoins, like bearer bonds, belong to whoever has possession. But the government can still trace them—and will if theft and fraud become big enough problems, according to Daley. Even Bitcoins that have been run through a tumbler to erase their identity have been successfully traced in a computer science experiment, he says.

There is a legal niche for a technology like Bitcoin, but Daley says he’s not sure that Bitcoin itself will end up filling it. “Bitcoin has gotten too popular, too fast,” he says. “It has exposed its warts, scaring a lot of people.” Zerocoin, a competitor to Bitcoin, is more anonymous so likely to be more popular with criminals. But Daley sees limits there, too: “Zerocoin isn’t going to be the thing to knock it out. It will be driven out by something legitimate.”

The London School of Business and Finance (LSBF) is a global center for excellence for aspirants wishing to become successful entrepreneurs in the future. Learn about investing, fraud avoidance, and portfolio diversification by visiting this website.

REPOST: 5 Things Every MBA Student Should Do Before Graduating

So, you're finally receiving that MBA diploma this year. It's been a tough journey to graduation. But do you know that it's not just your degree that counts? What you do in school can also affect your career success down the road. This article from Business Insider provides the explanation. 

Image Source: businessinsider.com

Whether you're looking to enhance your business savvy, increase your career flexibility, or just get a fatter paycheck, the benefits of obtaining an MBA are numerous.

But it's not just having the degree that counts. What you do with your time and energy while in school can make a critical difference to how your career unfolds after graduation. It's advice Care.com CEO Sheila Marcelo gives to all business school students, whether they're getting ready to matriculate or are a semester away from graduation.

In a recent interview with Fortune Magazine, Marcelo outlines five ways students should take advantage of the resources and connections provided by MBA programs in order to set themselves up for greater financial and career success down the road:

1. Step outside your comfort zone. "People fear finance courses or marketing courses or anything they're not already exposed to," Marcelo says. But the key to surviving market crashes or a company restructuring is having an array of skills to draw on so you can adapt and be effective in a variety of roles. "Embrace being a generalist," Marcelo urges. "Don't underestimate the value of skills learned in those classes."

2. Go to a lot of cocktail parties. While it may feel awkward and forced at first, networking is essential to building a strong foundation of long-term mutually beneficial relationships. "Be comfortable with networking and selling," Marcelo says. "Try not to think of them as bad words."

3. Join a study group. Being able to work with and lead a team with diverse personalities, opinions, and work styles is a critical skill, especially in client-facing roles. "Study groups outweigh classroom participation," Marcelo says. "Learn to work with a team."

4. Find a mentor. Actively reach out to alumni in your field and begin to cultivate mentors who can help you navigate job offers, salary negotiations, and unforeseen academic and career setbacks. "It's better to do this as a student because when you're out in the real world, there's a sense that you have an agenda," says Marcelo. "As a student, your agenda is to ask for help and advice."

5. Let go of your default perception of success. "I offer this advice all the time," says Marcelo, "but it's especially true in a tough job market: Set goals and create plans that work for you and what you want from your life, not what someone else dictates."


The London School of Business and Finance (LBSF) teaches students effective and modern business strategies and ethics for business fraud avoidance. Learn how to succeed with a business degree on this website.