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Bets on low market volatility went spectacularly wrong

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THE Cboe Volatility Index, or Vix, known as the “fear gauge”, spikes when markets are most jittery. When Sandy Rattray, now at Man Group, an asset manager, worked on the Vix in the early 2000s, he and his team considered launching an exchange-traded product (ETP) linked to it, but concluded that it would be a “horror show” because of poor returns. Now, however, Vix-linked ETPs are a big industry, with around $8bn in assets. Formerly niche investments, they served vastly to exacerbate this week’s market turmoil, which saw the Vix’s largest ever one-day move, when it more than doubled on February 5th.The Vix was always intended as a basis for financial products as well as a gauge. Vix futures were launched in 2004 and options in 2006. “Long” Vix products, which Mr Rattray looked into, seek t

Central banks should gamble on productivity-improving technology

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IN 1996 Alan Greenspan began asking why the flashy information technology spreading across America seemed not to be lifting productivity. He was not the first to wonder. A decade earlier Robert Solow, a Nobel prizewinner, famously remarked that computers were everywhere but in the statistics. But Mr Greenspan was uniquely positioned, as the chairman of the Federal Reserve, to experiment on the American economy. As the unemployment rate dropped to levels that might normally trigger a phalanx of interest-rate rises, Mr Greenspan’s Fed moved cautiously, betting that efficiencies from new IT would keep price pressures in check. The result was the longest period of rapid growth since the early 1960s. Despite his success, few central bankers seem eager to repeat the experiment and many remain bl

How to interpret a market plunge

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FOR much of the past two years, market watchers have had little to write about, apart from the passing of one stock-index milestone after another. The events of the past week, however, have shaken the financial world awake. A recent, upward zag in bond yields seemed to signal the arrival of a new theme in market movements. Stock prices confirmed it, and then some. Over the past week, American stocks have dropped about 7%, punctuated by a breathtaking, record-setting plunge on Monday. The Dow Jones stock index recorded its largest ever one-day drop, of more than 1,000 points. In percentage terms the decline, of more than 4%, was the biggest since 2011.The swoon set tongues to wagging, about its cause and likely effect. There can be no knowing about the former. Markets may have worried that ...

Sexual misconduct allegations against Steve Wynn hurt his empire

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Rien ne va plusEVEN in a business where the house always wins, Steve Wynn is used to winning more than anyone else. The casinos that the billionaire has built, from The Mirage and Bellagio to Wynn Macau and Wynn Palace, helped transform Las Vegas and Macau from seedy gambling joints into luxury high-roller destinations. His fiercest rivals heaped praise on him as a visionary and perfectionist. His company, Wynn Resorts, enjoyed a “Wynn premium” from analysts and investors.Now he could lose control of his empire. On January 26th the Wall Street Journal published an investigation detailing numerous allegations that would amount to a decades-long pattern of sexual misconduct by Mr Wynn. The board of Wynn Resorts has announced an inquiry by a special committee into the reports, the veracity of

Apple and Amazon’s moves in health signal a coming transformation

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THE past decade has seen the smartphone become a portal for managing daily life. Consumers use their pocket computers to bank, buy and befriend. Now this array of activities is expanding into an even more vital sphere. Apple has spent three years preparing its devices and software to process medical data, offering products to researchers and clinical-care teams. On January 24th it announced the result. The next big software update for its iPhone will include a feature, Health Records, to allow users to view, manage and share their medical records. Embedded in Apple’s Health app, the new feature will bring together medical data from participating hospitals and clinics, as well as from the iPhone itself, giving millions of Americans direct digital control of their own health information for

What a takeover of Dr Pepper says about a secretive family’s plans

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EUROPE is home to some extraordinary wealth creators who often try to hide their success. Ingvar Kamprad, a Swedish farmer’s son, constructed IKEA, a seller of flat-pack furniture that became a global giant with annual revenues of €38bn ($47bn). He died at the age of 91 on January 27th, after a famously frugal life. Amancio Ortega, the Spanish son of a railway worker, founded Inditex, a fast-fashion giant, and shuns any media attention. Then there is the reclusive Reimann family of Germany, members of which reportedly take a vow at the age of 18 not to talk publicly about their business, JAB Holding, a Luxembourg-based investment group.Yet JAB’s habit of gulping down big, famous firms at a frenetic pace is making it hard for it to stay in the shadows. On January 29th it said it will pay $1

A big Blackstone deal shows how private equity has changed

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THE financial crisis a decade ago brought the glory days of private equity to a screeching halt. The debt-fuelled megadeals on which the industry had built its fame (or notoriety) seemed over. But on January 30th a group of investors led by Blackstone, the world’s largest private-equity firm, announced a $17bn deal to carve out Thomson Reuters’ financial and risk business (F&R), a financial-data provider. The deal would be Blackstone’s largest since the crisis. But if the megadeal is making a comeback, it is in a new guise.In the mid-2000s, huge transactions abounded. Deals from 2006 and 2007 alone account for nine of the ten largest ever. But, looking purely at value, the only true drought in big deals was from 2008-12. Every year since 2013 has seen at least one buy-out of more than $10b

Pakistan’s biggest private-sector firm bets on a fabled coal mine

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Engro’s national missionPAKISTAN’s enormous mineral wealth has long lain untapped. Since a 1992 geological survey spotted one of the world’s largest coal reserves in Thar, a scrubby desert in the southern province of Sindh, prospectors have hardly dug up a lump. Among those to flounder is a national hero. Samar Mubarakmand, feted for his role in Pakistan’s nuclear-weapons programme, has just shut the coal-gasification company he founded in 2010, when he vowed on live television to crack Thar.Environmentalists, many from abroad, argue the reserve’s 175bn-ton bounty should remain underground. They point out the coal is lignite—dirty, poor-quality stuff that, in adding to carbon emissions, increases the risk of climate change for Pakistan. Other critics note that by locking itself into coal,

A new sort of health app can do the job of drugs

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LUANN STOTTLEMYER has had diabetes for 23 years, but it was only in 2016 that her doctor prescribed a treatment that changed her life. It has allowed her to bring her blood-sugar levels under control and lose weight. Yet this miracle of modern science is not a new pill. It is a smartphone app called BlueStar.The program is one of a growing number of apps that America’s Food and Drug Administration (FDA) has approved to treat everything from diabetes to substance abuse. The FDA has encouraged firms to join a scheme that aims to streamline the regulatory process for such treatments. There are many candidates: at least 150 firms globally are developing some form of “digital therapeutic” (“digiceutical” in the lingo), says Mark Sluijs, who advises Merck, a big American drugmaker.Unlike other s