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Andrew Christian Underwear

Andrew Christian is based in Los Angeles, so it’s no surprise the clothing line has been designing and creating super-fashionable contemporary collections of urban menswear since 1997. The highlights of the Andrew Christian clothing collection are Andrew Christian underwear, swimwear for men, unique t-shirts, and accessories.

The Swimwear collection has board shorts and trunks. Last year, Andrew Christian underwear began making a line of super-hip men’s underwear in fun prints and bold fashion colors that featured their signature Show-It Technology™, which is a strap inside each pair of Andrew Christian underwear that raises and accentuates a guy’s genitalia to give him a more impressive profile in his clothes. Andrew Christian underwear comes in different themed lines, including the Sport, Fashion, Gothic and Basics lines, with each line featuring numerous styles of Andrew Christian underwear – low-cut briefs, boxer briefs, super-low-cut briefs and jock straps. The construction of each pair of Andrew Christian underwear includes intricate design details like nail head studs and sweet screen-printed graphics. The fabrication varies by style from basic micro-rib cotton to stretch cotton to sports mesh, sheer and even an uber-soft baby thermal.

Andrew Christian underwear is one of the “it” brands of men’s underwear. The company had a massive cross-country promotion to launch the brand in select fashion centers as New York, San Francisco, Los Angeles, San Diego and Washington, DC. Andrew Christian underwear was seen in fashion shows, underwear contests, large-scale events, meet-and-greets with the designers and model signings.

Andrew Christian underwear is a favorite of celebrities like the Logo top vocal artists Jason and deMarco, as well as many of the stars of the movie Eating Out 2, Sloppy Seconds.

Some of the most popular Andrew Christian underwear styles are the Andrew Christian Lifeguard trunk, a soft stretch cotton trunk with Show-It Technology and a paneled pouch. The Lifeguard series of Andrew Christian underwear all look like they were styled after an old pair of swim trunks you had when you worked for the summer as a lifeguard in Manhattan Beach. The Andrew Christian Italia Trunk has a similar cut but it offers more contrast coloring and shows your support for Italia, either as a country or for the soccer teams. The Andrew Christian Tricot Lycra Low Cut Swim Trunk is a sleek trunk designed for true lap swimming and lounging on the beach showing off your stuff. Andrew Christian underwear is great when it’s styled as a brief. The company makes some of the most unique brief styles on the market. A couple of those innovative styles are the Andrew Christian Lifeguard Brief, the Andrew Christian underwear Gothic Eagle Brief and the Andrew Christian Soccer Brief. For those who are Italy or Brazil loyalists, Andrew Christian underwear puts out the Andrew Christian Italia Jock Strap and the Andrew Christian Brasil Jock Strap so guys can get their game on while retaining their team allegiance. Another innovative style is the Andrew Christian Sheer Brief, which features sheer panels around the sides and back and keeps your prize covered in opaque material. Browse our collection of Andrew Christian underwear.

Mornington Peninsula, Victoria, Australia: Roast beetroot and goats’ curd salad

Mornington Peninsula is an hours drive east of Melbourne. It is bound on three sides by water and in addition to being the weekender destination for Melbournites, is also an agricultural and viticultural mecca.

Ben and Curtis find themselves at Herronswood, an historic property that propagates ancient herbs and vegetables that have previously been thought to have become extinct. Taste-filled tomatoes, purple carrots, golden cauliflower and so on. The seeds are then sold worldwide.

Here they meet the café chef, Gerard, who offers to take them surfing. Unbeknown to them, he means kite surfing!, which they have a go at and really fly.

The area is so beautiful that Ben decides that he and Curtis should create a special picnic for Ben's fiancé Dee and daughter Ruby. They start by visiting a cherry orchard then decide then, after meeting John Mitchell at his Montalto vineyard, they decide to go Barracouta fishing Off Leo Point in traditional gaff-rigged Couta Boats. In the 1850's many Couta Boats plied these waters, but these boats needed to be part fishing vessel and part racing boat as the first boat back to town got the best prices. Nowadays, these boats are experiencing a resurgence and fleets sail in races most weekends.

On their travels, Curtis notices a lavender farm and when he enquires, finds that they have culinary lavender which he picks for use later on plus a quick stop at the Red Hill Cheesery.

Dee Day for a picnic. Montalto Vineyard is where Ben and Curtis cook for the picnic. Dee and Ruby arrive and all of them pile into the vineyard's Morris Minor open tourer and head down to the duck pond near the olive trees to spread out a rug and have a picnic. Uncle Curtis takes Ruby for a walk so that Ben and Dee can share some quality time, and a glass of local bubbly, together.

Ben cooks Roasted Guinea Fowl with Goat Cheese, Lemon and Rosemary plus Roasted Beetroot and Goats Curd Salad. Curtis cooks Barracouta with a Citrus + Pepper rub plus Lavender Créme Brulé.

serves 4

12 small beetroot
2–3 tablespoons good olive oil
sea salt and freshly ground black pepper
leaves of 1/4 bunch of thyme
125 ml/41/2 fl oz balsamic vinegar
leaves of 1/4 bunch of dill
leaves of 1/4 bunch of tarragon
1 frisée, white part only
60 g/21/4 oz fresh goats’ curd or soft goats’ cheese, seasoned with salt and pepper and
a squeeze of lemon juice
1 lemon, to squeeze

1. Preheat the oven to 180°C/350°F/Gas Mark 4.

2. Scrub the beetroot and leave on the tops and tails so that they don’t bleed and lose flavour while cooking. Toss in a baking dish with the olive oil, salt, pepper, thyme and three-quarters of the balsamic vinegar. Cover with foil, place in the oven and cook for 1 hour or until tender. Uncover and roast until the beetroot starts to crisp in parts. Leave to cool. Remove any burnt bits and cut the beets into chunks — halves or quarters, depending on the size of the beet — to reveal the colour.

3. Arrange the beetroot on serving plates, scatter over the dill, tarragon and frisée leaves and crumble the goats’ curd over the top.

4. Drizzle the whole salad with the remaining balsamic vinegar, the beetroot juices from the roasting tray, a little extra olive oil and a squeeze of lemon juice and serve.

-
Ben O'Donoghue

Ningaloo Coast, Western Australia: Barbecued king prawns with dill and lemon butter

We open underwater on the magnificent Ningaloo Reef, Bender and Curtis swim with giant Manta Rays, colourful reef fish and giant snapper.

Ben and Curtis get a lift with Burke Maslin, outback station owner, pilot and guide. They cross the Tropic of Capricorn, drive to Quobba Station on the coast, visit a salt mine, surf at a beautiful secluded beach, visit the local blow-holes, travel outback to the Maslin family's Mardathuna Station where Burke teaches Ben to fly, they round up cattle and rangeland goats on motorbikes, visit vegetable market gardeners in Carnarvon, go aboard a Prawn Trawler and end up at the Annual Rodeo where Ben acts as a clown and Curtis enters the Barrel Race on a borrowed horse.

Ben cooks a Tagine of Goat plus a Watermelon Gaspacho. While Curtis cooks Steamed Snapper with Potage of Shellfish, BBQ King Prawns with Dill Butter.

serves 4

Dill and lemon butter
250 g/9 oz unsalted butter, softened
1 tablespoon finely chopped fresh dill
2 garlic cloves, crushed
1 small shallot (eschalot), finely chopped
1 tablespoon finely chopped flat leaf parsley
sea salt and freshly ground black pepper
juice of 1/2 lemon
1 tablespoon Pernod

12 extra large green king prawns
1 lemon, quartered, to garnish

1. To make the dill and lemon butter, combine the butter, dill, garlic, shallot, parsley, salt, pepper, lemon juice and Pernod in a bowl and mix well.

2. Butterfly the prawns by slicing along the belly, leaving the shell intact.

3. Evenly spread a heaped tablespoon of the dill and lemon butter onto the exposed prawn flesh.

4. Preheat the barbecue or, alternatively, a grill to high.

5. Place each prawn, flesh-side down, onto a hot chargrill for 1–2 minutes. Or transfer the prawns to a large baking tray and place under the grill for 2–3 minutes or until cooked through.

6. Divide the prawns between four warmed plates and serve, garnished with the lemon quarters.

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Curtis Stone

Cairns Queensland, Australia: Risotto of freshwater crayfish with green peas

Cairns is the gateway to the Great Barrier Reef and is situated on Australia's East Coast between Brisbane and Townsville.

Curtis and Ben arrive at Cairns Airport. they meet a Brazakka, a local who offers them a lift. Little do they know that Brazakka's form of transport is a helicopter.

In the chopper Bender and Curtis fly over the lush farmlands of the Atherton Tablelands, deep volcanic lakes and lush rainforests. Brazakka offers to take them fishing in a secret spot. Little do they know that the only access is by helicopter and through a twisting, swerving ancient volcanic ravine.

At the fishing spot, Bender and Curtis have a bet. Whoever loses has to do all the washing up, naked! Bender catches the fish, Ben wins. Curtis pays the price.

Brazakka also takes Ben and Curtis to a Banana Plantation and distillery and across vast sugar plantations to the historic Gordonvale Sugar Mill that grinds up cane to produce raw sugar. They also drop in on Mitchell who has a small herd of Buffalo for making Mozzarella and then onto the organic Mungali Dairy. Close by is a tea plantation where Ben and Curtis learn the art of blending teas. The growers show Ben and Curtis how to swill the tea noisily round their mouths like vignerons tasting wine. Ben also talks perfect scones with the local CWA scone champion.

Ben cooks Native Perch Baked in Banana Leaves plus Vanilla Tapioca with Tropical Fruit and Curtis prepares Tea Smoked Organic Duck Salad plus Risotto of Red Claw Fresh Water Crayfish.

serves 4

1 tablespoon olive oil
21/2 shallots (eschalots), finely diced
21/2 garlic cloves, finely chopped
3 sprigs of thyme
400 g/14 oz Vialone Nano rice
175ml/61/4 fl oz white wine
1.2 L/2 pints chicken or vegetable stock, warmed
125 g/41/2 oz small green peas
115 g/41/4 oz butter
flesh of 4 medium-sized freshwater crayfish, chopped
squeeze of lemon juice
40 g/11/2 oz Parmigiano-Reggiano cheese
40 g/11/2 oz mascarpone cheese
11/2 tablespoons finely chopped flat leaf parsley
sea salt and freshly ground black pepper
4 sprigs of chervil, to garnish

1. Heat the olive oil in a medium heavy-based saucepan over a medium heat. Add the shallots, garlic and thyme and sweat for 1 minute, without colouring. Add the rice and sweat for 30 seconds. Pour in the wine and cook until it is absorbed. Add 1 ladleful of stock and cook, stirring constantly, until absorbed. Continue adding the stock, ladle by ladle, until all has been absorbed. This should take about 20 minutes. Add the peas and continue to cook for 30–60 seconds. The rice should be cooked to the point of being al dente (the centre of each grain of rice should be slightly firm to the tooth).

2. Melt 25 g/1 oz of the butter in a separate saucepan, add the crayfish and toss the pan for 30 seconds. Add a squeeze of the lemon juice to taste.

3. Add half of the crayfish to the risotto, reserving the other half for the garnish, and stir. Remove from the heat, add the Parmigiano-Reggiano, the mascarpone and the remaining butter and stir until the butter has melted. Add the parsley and season.

4. Divide the risotto between four warmed serving bowls, garnish with the reserved crayfish and a sprig of chervil and serve.

-
Curtis Stone

Kakadu, Northern Territory, Australia: Whole poached Asian barramundi

Ben and Curtis are standing at the river crossing that divides Arnham Land from World Heritage Listed Kakadu and they are wondering how they're going to get across. Crocs cruise nearby. A Toyota 'troopie' comes splashing through and they have to jump to avoid getting wet. "This is how they meet Traditional Owner Natasha Nadji.

Tash introduces them to the poems of her grandfather Bill Naidji, then to her father Jonathon Nadji, the Senior Traditional Owner, who then takes them fishing for Barramundi on the family's Billabong where they not only catch a feed, under the watchful eyes of the resident crocodiles, but Tash also takes the boys on a tour of the river with her boyfriend Derek.

Jonathon explains the significance of ancient rock paintings at Ubirr and Trash takes them to her special dreaming place, Mushroom Rock. Then they meet the family and go hunting Magpie Geese for dinner. Ben and Curtis are not very good shots so the locals show them how it's done.

By a picturesque yet croc-infested Billabong, Curtis cooks Barramundi Fillet in foil with Asian Herbs while Ben cooked Whole Poached Barramundi plus Vietnamese Crispy Pancakes. Tash and her family show Bender and Curtis how to prepare and cook Magpie Goose on an open fire.

serves 4

1.5 kg/3lb 5 oz whole barramundi, scaled, gutted and gills removed

Marinade
250 ml/9 fl oz Shaoxing rice wine*
Thick, 3 cm/11/4 in piece ginger, peeled and julienned
1/2 bunch of spring onions, sliced finely on the diagonal
150 ml/51/2 fl oz light soy sauce

Sauce
2 teaspoons grated palm sugar
2 teaspoons light soy sauce
3 tablespoons yellow bean sauce or yellow bean paste
500 g/1 lb 2 oz wing beans, blanched
4 spring onions, chopped
1/2 teaspoon sesame oil

coriander leaves, to garnish

*Shaoxing rice wine is a traditional Chinese yellow rice wine. If unavailable, dry sherry or vermouth may be substituted.

1. Score diagonal cuts across the thickest part of the barramundi, down to the bone, and place in a large shallow ceramic dish.

2. To make the marinade, combine the rice wine, ginger, spring onions and soy sauce and pour over the fish. Cover and refrigerate for 2–3 hours.

3. Place the fish in a large fish kettle or frying pan and pour over the marinade and enough water to cover. Bring to a simmer and cook gently for 20 minutes or until the largest spine can be pulled out easily.

Transfer the fish, reserving the poaching liquid, to a serving platter.

4. To make the sauce, combine the palm sugar and a little of the poaching water in a wok over a medium heat. Add the soy sauce and yellow bean sauce and stir. Add the wing beans and 100 ml/31/2 fl oz of the poaching liquid and bring to the boil for 2–3 minutes. Stir in the spring onions and sesame oil and pour over the fish. Garnish with coriander and serve.

-
Ben O' Donoghue

Octopus salad with tomato, lime and chilli

serves 4

1 large octopus, weighing about
1.5 kg/3 lb 5 oz
2 carrots, finely chopped
1 onion, finely chopped
3 garlic cloves, peeled
1 teaspoon black peppercorns
1/4 bunch parsley, chopped
1 bay leaf
salt
large square of muslin

Dressing
500 g/1 lb 2 oz ripe tomatoes, peeled, seeded and chopped
4 red chillies, grilled, peeled, deseeded and chopped
juice and finely grated zest of 3 limes
250 ml/9 fl oz extra virgin olive oil
sea salt and freshly ground black pepper

1 iceberg lettuce, washed and finely sliced
lime juice and olive oil, for dressing
1/4 bunch of coriander, leaves picked and chopped

1. Remove the eyes and beak from the octopus and wash thoroughly. Place in a large saucepan with the carrots, onion, garlic, peppercorns, parsley and bay leaf. Cover with cold water and season with salt. Bring to the boil and simmer for about 2 hours or until the octopus is very tender.

2. Wearing rubber gloves, remove the octopus from the pan and place on muslin. Roll the octopus up into a ball so that all the legs fold inwards, then twist the muslin into a very tight ball and tie tightly with string. Place in a large bowl and refrigerate until cold. The octopus will set firm. The best results are after chilling for 24 hours.

3. To make the dressing, combine the tomatoes, chillies, lime juice and zest and olive oil in a bowl and season with salt and pepper.

4. Dress the lettuce with a squeeze of lime juice and some olive oil (or some of the liquid from the tomato dressing), and arrange it in a mound on a serving plate. Using a sharp knife, slice across the octopus and arrange the slices on the lettuce. Dress liberally with the tomato dressing and finish with the coriander.

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Ben O' Donoghue

BOND JARGON BUSTER!

Find out more about bond jargon in this report.

BOND

It's an IOU that's issued by a government or company. It promises to pay the bond holder a specified amount of interest over a specified period and return the amount borrowed.

PRINCIPAL

The amount of money that was lent to the government or the company.

MATURITY DATE

This is when the money that was borrowed has to be repaid to the bond holder.

TERM TO MATURITY

This refers to the period before the bond matures.

COUPON RATE

This is the interest rate that the bond issuer has promised to pay the bond holder until the bond matures.

PAR VALUE

Also known as face value, this refers to the amount of money that the issuer has agreed to pay the bond holder when the bond matures.

CREDIT RATING

A credit rating gives you an idea of the issuer's ability to make the payments on the loan. It's given by credit rating agencies such as Standard & Poor's Ratings Services, Moody's Investors Service and Fitch Ratings. These firms will each have their own method of assessing and rating the bond. They'll also monitor it and change the credit rating depending on whether the issuer's ability to pay the loan and the interest worsen or improve. According to the credit ratings from Standard & Poor's Ratings Services, for example, bonds that are rated BBB and above (i.e. BBB, A, AA and AAA) are considered investment grade and indicates that there's a high probability that the issuer will be able to pay the interest and the amount borrowed. Those that fall below the BBB rating (BB, B, CCC, CC, and C) however, are considered junk status (see Junk Bond). Bonds with a D rating indicate that the issuers have defaulted on their debt payments.

BOND PRICE

This is the amount of money you pay to buy the bond and may also be referred to as the bond's current market price. It's not to be confused with the principal nor the par value as it also takes into account prevailing interest rates. Bond prices and interest rates are inversely related - when interest rates rise, bond prices fall and vice versa.

BOND YIELD

This is the return you will get if you hold the bond right up to its maturity date. Bonds that carry a poor credit rating will tend to pay higher yields to compensate the bond holder for the greater default risk. And for bonds that have similar credit ratings, those that have a longer term to maturity will tend to have higher yields. That's to compensate the bond holder for the risk that inflation will rise during this period and make his money worth less than what it is originally.

YIELD CURVE

This is a graph that shows the relationship between the yields and the maturity dates of bonds with similar credit ratings. The yield curve gives fund managers an idea of where the market thinks interest rates are headed and help them make their portfolio allocations.

SOVEREIGN BOND

This is an another name for a government bond.

JUNK BOND

This refers to a bond that has a credit rating below BBB from S&P (BB, B, CCC, CC, C and D) or Baa from Moody's (Ba, B, Caa, Ca, and C). It has greater default risk and typically gives a higher yield than investment grade bonds (see Credit Rating).

-
Suryati Mahmud
September 3, 2002

Emerging Market Debt: An Alternative Asset Class

Due to its low correlation to global bonds and equities, Emerging Market debt is an alternative asset class that is worth considering.

(Fundsupermart.com) In thinking about asset allocation, an interesting but oft-overlooked category is that of Emerging Market debt. As it is more of a combination of two instruments - bonds and Emerging Markets - than a distinct instrument, many are less accustomed to seeing it as a separate asset class. Furthermore, the frequent association of high volatility with Emerging Markets also serves as a psychological barrier to some investors. However, Emerging Market debt, which is holding its own as a distinct asset class, has a role to play towards portfolio diversification due to its low correlation to global bonds and equities. In terms of volatility, using a spectrum with global bonds at one end and equities at the other, Emerging Market debt sits comfortably in the middle. And in terms of growth potential, Emerging Market debt offers more than standard global bonds.

In Singapore at least, the concept of an Emerging Market debt fund is relatively new. At the moment, there is only one of its kind here and that is the United Global Emerging Market Portfolios or GEMs in short, an offering by UOB Asset Management in a tie-up with UK-based sub-manager Ashmore Investment Management Ltd. This fund, launched in July 2001, is broadly based on the Emerging Markets Liquid Portfolio (EMLIP), which is also managed by Ashmore.

HOW AN EMERGING MARKET DEBT FUND WORKS

To raise funds to finance economic development, governments issue bonds and an Emerging Market debt fund typically invests in government bonds issued by developing economies. (In the case of GEMs, it is about three-quarters invested in sovereign bonds and the rest in corporate bonds.) Such a fund seeks to capitalise on the improving credit situation in developing countries. Compared to bonds issued by developed countries, those issued by developing countries usually has lower credit ratings, as those countries are perceived to be economically and politically less stable. (For a listing of bond ratings, look at the table below.)

TABLE 1

S&P	Moody's	Classification
AAA	Aaa	Highest quality
AA	Aa	High quality
A	A	Upper-medium quality
BBB	Baa	Medium-grade
BB	Ba	Somewhat speculative
B,CCC	B,Caa	Low-grade, speculative, default possible

With such ratings, the issuers have to set reasonably high interest rates in order to attract investors. Potential investors also attach a risk premium to these bonds. As a result, we are looking at high interest rate environments relative to the lower interest rates in developed economies. As these emerging economies improve, so do their credit ratings as they are able to generate more monies to service their debt. The improving credit trend in turn makes room for interest rates to come down, as there is less of a compelling need to keep interest rates high. As interest rates begin to slide, bond prices start to trend upwards and an Emerging Market debt fund that is able to capitalise on this scenario is in a good position to deliver returns.

GROWTH POTENTIAL OF EMERGING MARKETS

Notwithstanding, an improving credit trend is contingent on growth potential. According to Mark Coombs, Ashmore's Managing Director and lead fund manager for GEMs, emerging economies represent 84% of the world's population and this sheer size alone translates into huge growth potential. Coombs also says that global Emerging Market debt is worth US$1.2 trillion dollars. Relative to their developed counterparts, emerging markets like Asia, Latin America, Africa and Eastern Europe offer the potential of faster and clearer economic growth as they continue to restructure toward free markets.

This growth potential is clearly seen in emerging Asia, which staged a valiant comeback from the Asian Financial Crisis in 1997. According to the Asian Development Outlook 2002 (ADO), published by the Asian Development Bank (ADB), Asia's average gross domestic product (GDP) is forecast to rise to 4.8% in 2002 and 5.8% in 2003 from 3.7% recorded in 2001. Figures that are not in themselves spectacular but given the world economic slowdown, they represent significant progress.

LOW CORRELATION TO OTHER ASSET CLASSES

But most importantly, the rationale for considering an Emerging Market debt fund is its low correlation (do not rise or fall in tandem) to global bonds and equities. Emerging Market bonds are more acutely affected by factors that are less likely to impact global bonds and other markets and vice versa, the factors that influence the other asset classes have only a slight bearing on Emerging Market debt.

Primarily, the underlying countries that global bond funds and equity funds invest in are different from the countries that an Emerging Market debt fund holds. Global bonds and equity funds mostly invest in developed countries and are thus subject to the economic and stock market developments of these markets. Whereas for Emerging Market debt, we are looking at political risk, default risk, economic risk and the risk of currency devaluation; for mature economies, such risks are significantly lower.

The volatility in developing markets is mainly event and change driven. For example, Brazil's recent homegrown troubles; since April, investors have been jittery about the prospect of a victory by a candidate perceived as less market-friendly at the Brazilian presidential election slated in October this year. This has pushed the Brazilian currency to a record low, which greatly increased the cost of servicing the country's debt burden, igniting fears of default.

The crises in Brazil and similarly in Uruguay and Argentina (also in crisis mode) will at most spread to the region but will unlikely have much of an impact on the developed world. Another case in point is the Asian financial crisis of 1997, triggered by the devaluation of the Thai baht and the Indonesian rupiah. While Asia was in the doldrums, the United States, the world's largest economy, soared. Although the converse is less certain due to the sheer size and influence of the US economy, as reforms continue to push ahead and politics begin to stabilise in Asia, Asian markets are slowly decoupling themselves from the US.

THE QUESTION OF VOLATILITY

As mentioned, the risk factors of emerging markets are political, economic, currency and default. More often than not, one risk factor leads to another and it all culminates in a possible default situation. At this point, widespread panic and financial chaos at the street level start happening, which was the case in Argentina, and this naturally gives rise to the perception of huge volatility.

Certainly, default risk is very real and default has happened, in which case, the country's debt is waived. But this is rare and even if a country defaults, it does not then become insolvent, whereas if a corporate entity defaults, it faces the threat of bankruptcy. In most circumstances, the IMF (International Monetary Fund) and the United States (which has a veto in the ruling councils of the IMF and the World Bank) will intervene to bail out developing countries at risk of default through further financial aid and debt restructuring.

In fact, on 7 Aug 2002, the IMF threw a lifeline to Brazil by agreeing to loan the beleaguered country an extra $30 billion. In return for the cash, the IMF requires Brazil to meet a budget surplus target of at least 3.75% of economic output in 2003. A good fund manager of an Emerging Market debt fund may actually view the Brazilian crisis as an "opportunity" because he seeks to capitalise on these short to medium term fluctuations to add value - coming out just before things take a turn for the worse and going back in just as recovery starts to take place.

According to figures supplied by Coombs, within an 8 to 10 year period, Emerging Market debt using standard deviation as a measure of volatility, recorded an annualised rate of 17% compared to a volatility of 25% for Emerging Market equity whereas volatility for the S&P 500 Index is approximately 15-16%. In terms of volatility in relation to other asset classes, Emerging Market debt is only slightly more volatile than the S&P 500 and although riskier than a standard global bond fund, it also presents more upside potential.

For a gauge of the growth potential of GEMs, we looked at the performance (from 1997 to 2000) of the umbrella fund on which it is based in relation to the performances of its benchmarks (refer to table 2). The umbrella fund is the Emerging Markets Liquid Investment Portfolio (EMLIP) and it was launched in the UK in 1992. Table 3 shows the performance of GEMs.

TABLE 2

Year	1997	1998	1999	2000
EMLIP (%)	40.7	28	-23.9	46.2
Static Sector Median (%)	27.9	12.2	-14.5	16.1
Lehman Emerging Markets Index (%)	22.8	14.1	-7.2	17.2

Bid to bid, gross income reinvested
Source: Standard & Poor's

TABLE 3

Period	1-Week	1-Month	3-Month	6-Month	1-Year
Bid to bid Returns of GEMs (%)	2.44	-1.87	-6.67	-4.11	10.53

Performance figures were last updated on 8 Aug 2002 with prices as at 6 Aug 2002.
Source: www.fundsupermart.com

CONCLUSION

An Emerging Market debt fund, due to its low correlation to global bonds and equities, offers investors another form of diversification. It also has greater growth potential compared to a standard global bond fund. One such fund to consider is the United Global Emerging Market Portfolios (GEMs). It is diversified across 33 countries and 103 debt instruments.


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Maggie Ng & Wong Sui Jau
August 15, 2002

Asian Bonds A Separate Asset Class?

Consider Asian Bonds A Separate Asset Class
Some experts say you should consider Asian bonds as a separate asset class.

(Fundsupermart.com) Bonds have sustained their rally since the terrorist attacks a year ago. On the other hand, equities have been hard hit by one crisis after another - corporate accounting scandals in the US, a possible war with Iraq, and the shutdown of US ports along the West Coast. In 2002, risk-averse investors in the US flocked to bonds in droves, reports fund tracking specialist Lipper Inc. After drawing in a record US$28 billion in July 2002, bond funds attracted US$19 billion in August, Lipper estimates. Lipper adds that diversified US stock funds lost an average 15% in the third quarter of 2002, while taxable fixed-income funds on average gained 2.2% for the same period.

ASIAN BONDS HAVE DONE WELL THIS YEAR

Within the global fixed income sector, Asia ex-Japan bonds have performed particularly well, notes Robert Andrew, Head of Asia Pacific Fixed Income at ABN AMRO Asset Management. According to figures provided by Standard & Poor's, a performance comparison between Asia ex-Japan and global bond funds in the US shows the former outstripped the latter over 1-year and the 3-year time frames. As at 30 September 2002, Asia ex-Japan bond funds returned 19.44% and 47.07% 1 year and 3 years respectively, while Global bond funds only returned 9.51% and 9.69% (see table below).

PERFORMANCE* OF ASIAN AND GLOBAL FIXED INCOME FUNDS AS AT 30 SEPTEMBER 2002

CATEGORY	1-month	6-month	YTD	1-year	3-year
Fixed Income Far East & Pacific ex-Japan (%)	1.74	8.30	13.69	19.44	47.07
Fixed Income Global (%)	1.14	13.02	11.32	9.51	9.69

Source: Standard & Poor's Fund Services
*Cumulative returns of offshore funds based on bid-to-bid prices, returns re-invested, and in US dollars

ASIAN BONDS AS AN EMERGING ASSET CLASS

For global asset allocation purposes, Asian bonds are traditionally considered part of the Emerging Market bond family. Emerging Market bonds are considered a distinct asset class as they have different risk/return characteristics and low correlation with global bonds. Global bond funds tend to invest in top-grade debt instruments of developed economies such as the US and Eurozone countries, whereas Emerging Market bond funds typically invest in government and corporate debt of emerging economies in Asia, Africa, Latin America, the Middle East, the Caribbean, and Eastern Europe. The debt instruments of Emerging Market economies contain much higher credit risk than those of developed countries and are usually of a lower investment grade.

Of late, bond fund managers like ABN AMRO's Robert Andrew are pointing to a growing body of evidence that indicates Asian bonds to be uncorrelated (they don't move in tandem) with Emerging Market bonds. They increasingly think Asian bonds should be considered a separate asset class, and not a subset of Emerging Market bonds. One reason they cite is robust economic growth and domestic demand in Asia, which has helped Asian markets to de-couple from their troubled Latin American counterparts. In fact, Andrew believes that the performance of Asian bonds is increasingly similar to that of high-grade bonds, rather than Emerging Market bonds.

"If you look at the correlation between the HSBC ADBI (an Asian bond index) and the JPM EMBI Global (Emerging Market bond index) which has an Asian component of around 20%, the correlation has virtually completely broken down. There is virtually no correlation between that particular benchmark and Emerging Markets in general. What has happened instead is the correlation between Asian bonds and high-grade bonds has become stronger. In other words there has been a shift in the relationship of Asian bonds away from Emerging Markets towards high grade. It started since the Asian crisis but has become increasingly prevalent in the last year," says Andrew.

The table below which was presented at a recent forum in Singapore on Asian bonds, illustrates his point. It compares the annual returns of the JPM JACI and HSBC ADBI (Asian bond indices) against that of the JPM EMBI Global (Emerging Market bond index) and the ML US HY Master II (a High Yield bond index). It shows that from 1997 to 2001, the performance of the Asian bond indices (JPM JACI & HSBC ADBI) was mostly divergent from that of the Emerging Market bond index (JPM EMBI Global).

ANNUAL RETURNS OF ASIAN, EMERGING MARKET AND US HIGH YIELD INDICES

Index	1997	1998	1999	2000	2001
JPM JACI (%)	NA	NA	16.3	7.3	12.8
HSBC ADBI (%)	-8.2	11.2	14.5	8.8	14.0
JPM EMBI Global (%)	12.0	-11.5	24.2	14.4	1.4
ML US HY Master II (%)	13.3	3.0	2.5	-5.1	4.5

Source: Singapore Investment Forum, 2 August 2002
JPM JACI - JP Morgan Asian Credit Index (Date of inception, 31 December 1998)
HSBC ADBI - HSBC Asian Bond Index
JPM EMBI Global - JP Morgan Global Emerging Market Bond Index
ML US HY Master II - Merrill Lynch US High Yield Bond Index

During the Asian bond forum, panellists (comprising money managers and economists) agreed that a host of factors such as the different returns profile of Asian bonds, its low correlation with other assets, different investor base, and different credit cycle was feeding the argument that Asian bonds were emerging as a distinct asset class in their own right. For retail investors, if they find the argument convincing, they can consider Asian bond funds as one more diversification option for their portfolios.

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Bharathi Rajan
October 11, 2002

Terrine of blueberries and sweet wine

serves 6-8

750 ml/1 bottle sweet white wine (botrytis semillon)
7 leaves of gelatine
4 punnets of blueberries, washed
50 g/2 oz icing sugar, sifted, for dusting
200 ml/7 fl oz cream, lightly whipped

1. Pour the sweet wine into a large saucepan and bring to a simmer.

2. Soak the gelatine in a bowl of cold water until softened. Squeeze out the gelatine leaves and slowly add to the hot wine, stirring constantly.

3. Place the blueberries into a 31/2-cup capacity terrine mould. Pour over the wine, reserving 100 ml/31/2 fl oz and set in the fridge for 2 hours. (Keep the reserved wine at room temperature so that it doesn’t set.)

4. Once the terrine is set, pour the remaining 100 ml/31/2 fl oz of wine over the terrine, ensuring that none of the blueberries are above the surface. Return to the fridge for 1 hour.

5. Dip the base of the terrine mould into hot water to loosen the sides. Invert the terrine onto a platter and slice with a warm knife. Dust with the icing sugar and serve with the whipped cream.

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Curtis Stone

Bobby Boyd - Model Behavior

Humble. Down to earth. Intellectual. Not the first descriptors that generally come to mind when you think about fashion models. But, then again, this month’s cover guy, Bobby Boyd isn’t your typical male model. The handsome (humble, down to earth and intellectual) northern California native—who has experienced nearly every Zoolander-esque scenario imaginable—sits down with us to dispel stereotypes and demystify what it means to be one of the beautiful people.

INSTINCT: Okay, I’ll just get right down to it. You’re absolutely gorgeous. I bet you get that all the time.

BOBBY BOYD: Thank you, but no. In L.A. everyone is like ten times hotter.

How did you get into modeling?

I was just walking down the street and a scout approached me and asked if I wanted to model. I said no at first but after I met some of the other guys, I decided it would be a good way to help me pay for college.

What did you study?

International Business at San Francisco State.

Who is worse to deal with—male models or female models?

It’s 50/50. But I get along with female models better because the guys have too much ego.

But you’re not one of those self-centered male models, right?

I’m too humble for my own good. Not that I’m such a great person or anything, but I just don’t see myself as what some people might say.

Have you ever been in a model fight?

When I was 17, I did a Ralph Lauren show and this obnoxious guy threw a drink on me. I think he was jealous. He was older and one of the girls there was showing me more attention than him.

Wow, that’s straight up America’s Next Top Model-style. Speaking of, there are lots of reality shows out there that claim to expose the modeling industry for what it is. How accurate are they?

I’ve experienced everything from the worst to the best. I started at Elite when I was 16—until now. There have been the nasty photographers,cattiness and weird auditions. And I’ve also experienced the really reputable photographers who uphold their reputations, if that makes any sense. Some of them aren’t what they say that are. It’s dangerous out there. Especially for the young [models].

Tell me more about the less glamorous side of this industry.

The diet’s not glamorous. Waiting around isn’t either. And the food usually sucks on shoots. But I can’t complain because I’m working and happy to be doing so. Wait, the most unglamorous? The ego people. People with egos are horrible.

As glamorous as it seems from the outside looking in, there are lots of negative stereotypes about models. How have you dealt?

I kept it a secret in high school—the modeling, I mean. People think that it’s a girly job, that you’re anorexic and stupid and must not have a big brain if you’re doing it. I’ve faced every stereotype that you could face.

What would you say to other people who face issue like these—whether in the modeling industry, or the gay community, or just in their everyday lives?

Keep your head up. As long as you believe in yourself and are happy with yourself it’s going to shine through and make you successful. I know it sounds clichéd, but once I stopped caring what people thought about me, I started working a lot more. Keep focused, do what you love and things will work out.

I’m sure nobody had anything bad to say about your body.

Believe or not, they did. Even my agent used to call me “fatty.”

What were you were like in high school?

I hung out with everyone—the stoners, the geeky kids, the popular guys. I just fit in any group. I was in the Black Student Union and the Asian Pacific Islander Club. I was eclectic growing up. Probably went through every emotion that every other kid went through.

Are you single or taken?

I don’t know. Not either. [Laughs]

This is an exciting month for politics. Do you keep up with current events?

My dad is a huge politics freak so I’m always trying to keep up with him.

What are your thoughts on the upcoming presidential race?

America is ready for a woman. Who better to have than someone who has been there? Hillary has so much experience. We’re definitely ready. I’m looking forward to America getting back its reputation, instead of having everyone hate us.

On to another famous Hilary…Hilary Duff or Lindsay Lohan?

I love Lindsay. I’ve hung out with her. She’s such a smart person. I don’t know Hilary. Lindsay is deep down one of the smartest young girls out there. She’s just made some bad decisions. I would say Lindsay Lohan takes the win.

How about Rosie O’Donnell? Has she crossed the line yet?

No way! I love Rosie. I’ve loved her since her talk show. She speaks her mind. She says what mostcelebrities wouldn’t. I have so much respect. I would love to work with her. Call me, Rosie!

Do you have a day job?

I work in real estate and real estate development for Sotheby’s, mostly in Beverly Hills and Malibu.

Wow, that’s excellent. Have you sold lots of fabulous houses?

When I first started I had a listing for $6,000,000. At the same time I was selling a condo for $450,000. To me there wasn’t a difference. It was just about doing the best job, finding someone the right fit.

So you’re a working man. What’s a typical nonworking weekend look like for you?

I’m a homebody. I’ll cook a big dinner on Fridays. Hang out with friends, play board games, lie in bed with my animals, watch all my TiVoed shows. Saturday I jog on the beach, maybe breakfast in a small cafe, shopping, lunch, movie, dinner, dancing. Long brunches on Sunday, lots of champagne, catching up with friends after a hectic week.

I bet you get hit on in the clubs all the time.

Yeah, if people are drunk. I usually get the drunk people. [Laughs] And girls because they have more guts. My friends always tell me that I seem standoffish and stuck up and I’m like, ‘What? I’m the biggest dork! What are you talking about?’

So people shouldn’t be intimidated?

No way! I’m nice. Come say hi. Let’s do a shot! Unless I’m modeling that week. [Laughs]

INSTINCT INQUIRES - Get To Know Bobby Boyd

Guilty Pleasure?

Always chocolate.

Dogs or Cats?

I’ve had a cat since my third birthday. But recently I’ve started liking dogs more.

Whitney or Cher?

Music-wise I prefer Whitney. I relate a little more to her.

Sports car or SUV?

Definitely sports car. I like to be low to the ground.

Favorite American Idol?

Kelly Clarkson. She has it all.

Best Advice?

Love what you do and you’ll be successful at it.

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Written by Randall Shulman
Thursday, 01 March 2007

Jonathan Dayka - Built To Last

We figured that, naturally, Jonathan Dayka was going to be a bit different from the cover models Instinct has featured in the past. After all, no two handsome gents with zero-percent body fat are the same. But over coffee at a West Hollywood Starbucks one sunny April afternoon, Dayka explained that, during his adolescence, he had one goal. “My dream was to build this robot that would be something like an android that I could talk to,” he said. “It was almost a bit of a creationist thing that I was after—trying to create this thing that I could interact with myself.” Sigh. He had us at “robot.” As Jonathan continued with his story, he spoke of entering his first gay relationship at age 16—one that, when it ended, completely derailed his life for two years.

Jonathan grew up in the coastal California city of San Luis Obispo, which is located approximately halfway between Los Angeles and San Francisco. It’s where Jamba Juice was founded, and to us, the area sounds just charming.

“I grew up in the northern part of San Luis Obispo, in a town called Atascadero,” Dayka points out. “It’s very conservative, a little bit redneck-y. We had cow-branding parties.” Did we say charming?

The 23-year-old is currently deciding whether he wants to attend a university in Santa Barbara, San Francisco or San Diego. He’s already got a stint at Santa Barbara City College, a summer internship at New York City music PR firm Girlie Action and freelance marketing work for IMG Media under his belt.

But while Jonathan’s personal and professional life is now falling into place, it didn’t happen without hitting a low point during his teenage years; a time when his personal struggle with his sexuality knocked him full-force into the grip of depression.

“I’d been doing engineering all the way through school,” Dayka says as we sit down in the coffee shop. “It was late in high school that I started coming out of my shell a little bit more—not out of the closet, but out of my shell—and just being more social. Previously, I would come home and just start building robots.

“My dad is a landscape contractor, so we had pipes and wood and nails and stuff,” he continues. “We had things you could build.”

When Jonathan hit junior high, he became more and more interested in dating. “That was more about passing notes or whatever,” he recalls. “I had a couple girlfriends in junior high and in high school I had one or two pretty serious girlfriends.”

Dayka says he always knew he was gay. Around 16, he unsuccessfully went online to try to meet gay guys close to his own age through Yahoo Personals. “Maybe about six months later, I got an e-mail from someone I had sent a message to,” he explains. “It was from this kid, Chris, who was my age, who lived in San Diego. I was like, Whoa, this guy sounds really cool. He ended up coming up on the train all the way from San Diego. It was total love at first sight. We were crazy about each other.”

Neither of the teenagers was “out” at the time, and while the two were traveling back and forth to see each other regularly, Jonathan simply passed Chris off to his parents as a friend.

“My parents had been divorced since I was young, so it made it easy,” Dayka says. “It unfortunately led me to having to be a little disingenuous with my them, which I think a lot of gay kids have to be…especially when you’re trying to explore it and find out if it’s for you. Chris and I would meet up in Santa Barbara for a day and just run around. We went to Magic Mountain, stuff like that. We would see each other probably twice a month.”

Their long-distance relationship lasted a little over ten months. “We had started taking more trips to see each other and were getting more involved with each other’s lives,” Jonathan says. “He’d met my parents and all my friends, and it was getting more difficult to explain why this kid that nobody new was always popping up.” Then, one day, Jonathan says Chris just stopped talking to him.

“We had been in constant communications before,” he says. “For about a year and a half after [it stopped], we would still talk like once a month. He would be like ‘I still love you. I’m just really busy.’ I was just a naïve young kid was hoping he really was busy and that we’d still be able to be together.”

Jonathan only saw Chris one more time in that period. He jumped in his car to make the eight-hour drive to San Diego. That’s when both his parents began to realize what was going on. “Every other time I would be prepared and make sure that I thought of a reason why I was leaving,” he explains. “But this time I just started crying, jumped in the car and left.”

The depression Jonathan went through lasted two years. He felt he couldn’t turn to anyone to discuss the secret life he’d been leading, and he began seeing a therapist in San Luis Obispo. Eventually, Dayka worked through his confusion and was able to begin the process of coming out to the people in his life.

“What happened was I was aware that I lived in a small city,” Jonathan says, looking back, “so I was completely aware that it wasn’t the city to come out in. But once I started coming to big cities like L.A. and New York, I started seeing the gayborhoods where all these people own it and are fine with it.”

While taking a Psychology Of Sexuality class at Santa Barbara City College, the instructor noticed the comfort Jonathan displayed with being gay and asked him to be a guest speaker. “I’ve been doing it for two years,” he says. “I come in and give my brief history, then I answer questions. A lot of people [in the class] have come out now, but there still are a lot who haven’t.

“I do it, one, for the kids who haven’t come out, who may be depressed and may not realize that it’s somewhat universal,” he continues, “and also for the straight guys in the class who have never seen anything but Jack from Will & Grace. He’s hilarious, but he’s still a stereotype. In a class that’s mixed between male and female, I get most of my questions from men. A lot of time it’s the straight guys. They’ll ask, ‘What’s the difference between Jack from Will & Grace and you?’ Those types of questions are really why I do it.”

These days, Jonathan is single, although he says he dated someone for two years while attending SBCS who he describes as an “amazing guy and one of the best relationships.”

As for Chris, Jonathan says the two of them got together once after Dayka turned 18. “He said, ‘You know, you started getting so involved in my life, and I was so not ready to come out,’” Jonathan remembers, “‘I realized if I didn’t stop it, that’s what I would have to do.’”

And do the two keep in touch now? “We do,” he says as we finish our interview. “He lives in Temecula, which is off the beaten path. We keep missing each other, but we talk a lot about hanging out again.”

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Written by Robbie Daw - Photos by Stephanie Espinosa
Friday, 01 June 2007

Hot Fun in the Summertime

Break a sweat without the sweat breaking you. Some simple advice for steamy weather

One fine afternoon, three friends and I climbed a hill on a tropical island in Thailand. If you've been to that island, a vest-pocket paradise named Ko Samui, you've seen the unnamed hill. It's certainly no more than 500 feet high, and from the beach below, we guessed it to be a two-hour round trip to the summit. You'll know the lesson that's coming when I tell you that we brought one small canteen of water.

Some four hours after disappearing into the mountain's brushy lower slope, we were still struggling back down from the summit. The canteen was long since empty. In descending, we'd lost track of the rock ravine we'd come up, followed two others to cul-de-sacs, and were now working our sweaty way downhill on butts and elbows, grappling on a slope matted with vines that were abundantly fitted with king-size prickles. When a deer path finally led us out, we were bloody and abashed.

But above all, and most dangerously -- especially if we hadn't gotten down before night -- we were gawdamightily parched. Ours was a little universe of thirst, thirst that robbed our strength and made our brains swim sideways. But as we sat on the beach slurping down fruit drinks and watching the carmine sun drop into the Gulf of Thailand, one of our party muttered to me, "I don't think you were quite as miserable as the rest of us."

Right he was, for a couple of reasons. Although my three pals were basically in shape, I had two advantages. First, I'd gulped down an extra drink before we set out -- an impulse that arose from a nine-month spate of training for the New York City Marathon I'd recently completed. Although I'd since tapered down to easier, aimless training runs, I still had my wind, legs, stamina and attitude at near-peak form. But most important, my body knew how to sweat, thanks to a regimen of noontime training runs. I was processing only marginally more oxygen than my buddies, and my heart muscle was only marginally stronger, but in terms of surviving that baking-hot, fairly humid afternoon on Ko Samui, I was much better acclimatized.

Studies have shown that the only way to learn to endure heat is to work out in it. You don't have to do marathon runs to build up this kind of tolerance, by the way; you can do it by biking, in-line skating, playing vigorous shuffleboard. And the sign of accomplishment is plain old sweat. Why would you want to get acclimatized? If you've ever tried for a third set of tennis on a sweltering day, you'll know the answer. To paraphrase Cher, if it came in a bottle, everyone would be acclimatized. The only way to get there is to exert oneself in the appropriate temperature setting. You can achieve it in a few days, and you lose it in a couple of weeks, but what it means is that you're training yourself to put out diluted sweat -- relatively more water than salt. Retaining salt means retaining more muscle tone. Interestingly, you also tend to grow thirsty sooner, making you more likely to drink and stay hydrated.

The process of acclimatization can be well under way in the first week of hot-weather training (and 100 minutes of hot work per day is the maximum the body can exploit this way). To understand why that's such an important commodity, let's look at the mechanisms by which the body cools itself.

The cost of keeping cool

On a temperate day, up to 80 degrees, our bodies at rest are quite comfortable in their surroundings. Above 80, depending on the humidity, the skin's heat receptors send signals to the brain, which in turn begins to slow down the body's metabolism and other body systems that produce heat. One result is a dilation (widening) of blood vessels, which allows greater blood flow at the body's surface as the skin turns from insulator to heat-shedding device. This explains that reddened look pale-skinned people get in a hot environment, as the skin's normal 5 percent share of the blood rises toward 50 percent.

But as the air temperature heats up to the threshold of 86 degrees, air and body temperature are too close for this ordinary cooling process. Now the sweat glands get a signal to give up their water, usually bearing "solutes," mainly salt, of about 2 percent of their volume. As this water passes through the skin and evaporates, it draws off more heat.

Humans sweat more than any mammal, even the horse family. Fine adaptation though this is, perspiring freely is what the physiologists call a "costly" transaction. To walk away from a nightmare plane wreck in the Mojave, for example, you'd need 2 gallons for every 20 daytime miles (1 gallon if you walk at night).

Drink what water you have till thirst is gone

Rationing does no special good -- and for God's sake carry all you can. The sweat that carrying a given quantity of water costs you subtracts only 1 percent of the replenishment you gain in drinking it.

Cutting your losses

All right, maybe you're not planning on having to suck cactus to survive. That doesn't mean you don't have to be aware of the dangers of dehydration, especially if you're an athlete. If you're running at a typical training pace, you can sweat up to 2 quarts an hour. To keep up, you need to be drinking more than a quart an hour, says Col. John Gardner, M.D., a physician at the Uniformed Services University of the Health Sciences at Bethesda, Maryland -- the military medical school. "If you're thirsty, you're already down at least half a quart," says Dr. Gardner.

Warning signs to watch for

Interestingly, the first sign of dehydration is not the sensation of thirst but fatigue. In fact, that lassitude we associate with the tropics is a real, quantifiable phenomenon. Muscle strength decreases geometrically with every percentage point of dehydration. And that's just the problem: Thirst lags behind dehydration, so up to a point, we tend to forgo drinking when we need it most.

There are other symptoms to beware of: fatigue, headache, muscle aches and cramps, anxiety, nausea, diarrhea, lack of concentration, tunnel vision and more. Any combination of these means it's time to slow down and start drinking. The consequences of not doing so can be dire. "A third of all heat stroke is fatal," warns

New Orleans Saints athletic trainer Dean Kleinschmidt, a man with 25 years of fighting heat-related maladies. For reasons of safety, Kleinschmidt weighs his charges four times a day in summer training camp. Anyone who loses 3 percent or more of body weight is in danger of at least heat cramps (which arise when the muscles are sapped of salt). Four pounds, or 2 percent of body weight, is a typical and acceptable loss for 200-pounders, he says; 6 pounds, a warning sign.

One day he saw on his chart that defensive end Bob Pollard had dropped 21 pounds in a morning. He threw his clipboard down and ran for the cafeteria, where he found Pollard. "There he was in line, holding a tray with about two dozen cups of water and lemonade on it."

Problem solved. But nowadays, the Saints training room boasts two big, free vending machines, each holding 250 12-ounce cans of Gatorade. Players are told to drink a minimum of two before suiting up -- "To make sure the tank is topped off."

That's good advice, even if you're not trying to bulldog 300-pounders into the dust. And should you happen to be on the large side yourself, you might want to drink a little extra. Beefier types have almost one-fifth greater heat production.

The salt-tablet fiction

Remember those salt tablets your football coach made the trainer trowel down your throat during two-a-day practice sessions? Bad idea. They trigger reactions that ultimatel rob you of potassium and can cause kidney failure. The sports drinks that promise you potassium along with sodium and various other electrolytes are fine, if not crucial. If you're satisfied with plain old water, keep it chilled to around 50 degrees; it gets absorbed more quickly from the stomach.

Sun dress

A full-gear football uniform can be "a death trap," says one trainer's manual, but wearing loose-fitting clothes could actually be beneficial on hot days. The authors of one study found that in hot desert conditions, light clothes with long trousers and a long-sleeved shirt reduced radiant heat load by half and water loss by two thirds.

Another consideration is whether to wear a cap during exertion. The Ironmen seem to thrive with them, but not any cap will do. Make sure yours is light in color and weight and porous to breezes. For added cooling, soak it in water before you start exercising. Finally, if you ever walk up that unnamed hill on Ko Samui, drink one for the road, for me.

-

Fred Schruers

Muscle Mixology

7 supplements to accelerate your growth

Multivitamins

Why: Antioxidants protect against muscle damage and help you recover faster from workouts.

How much: One pill a day

When: Mealtime

Creatine

Why: Creatine helps muscles grow up to twice as fast, according to a study from Pennsylvania State University.

How much: Take small, consistent doses. Shoot for 0.03 grams (g) of powdered creatine monohydrate per pound of body weight.

When: After your workout, in a protein shake.

Caffeine

Why: Consuming it before exercise reduces the perception of pain. Less pain, more gain.

How much: Begin with a low-dose pill (50 to 100 milligrams) to assess your tolerance. Then increase the dose gradually until you reach 200 to 300 mg. And yes, the pill form is better than the varieties you drink.

When: About an hour before exercise. Skip it if you work out in the evening. You need sleep to grow muscle.

Whey Protein

Why: Whey is rich in glutamine, which can help your muscles repair themselves, and in other amino acids that trigger growth.

How much: Mix 30 to 40 g whey with 17 ounces of water. Don't take more than 8 g powder for every 3.4 ounces of water.

When: 10 minutes before your workout. There's no need to guzzle it before you lift--just keep sipping until it's gone.

Fish Oil

Why: Fish oil slows the loss of protein from muscle.

How much: About 1 to 2 g per day

When: Anytime, with meals or in between

L-Carnitine

Why: It can reduce muscle damage by up to 45 percent.

How much: 2 g a day

When: 1 g with breakfast and 1 g with lunch. Your body absorbs L-carnitine better in smaller doses.

HMB

Why: It's thought to prevent the breakdown of muscle tissue during exercise.

How much: 3 g a day

When: If you eat six small meals a day, take two 250 mg capsules with every meal. Like L-carnitine, HMB is better absorbed when you take it in small, frequent doses.

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Christian Finn, M.S.

Addition by Subtraction

10 overrated muscle-building strategies, and 15 ways to replace them

Standard crunches

Abs are all about body fat. Once you get your percentage into single digits, try doing planks (work up to holding the position for 2 to 3 minutes) and Swiss-ball crunches (start with 10 reps and work up to 30 to 40). "Both are better than the standard crunch for bringing out your abs," says Tom Seabourne, Ph.D., C.S.C.S., an exercise physiologist and sports psychologist at Northeast Texas Community College in Mount Pleasant.

Protein

Too much of a good thing can be, well, a bad thing. "Your body can use only so much protein, and then some of it is just converted into fat instead of going to your muscles," says Mike Bracko, Ph.D., C.S.C.S., an exercise physiologist at the Institute of Hockey Research in Calgary, Alberta. He recommends consuming no more than 0.5 to 1 gram of protein per pound of your body weight each day.

Calf Raises

"Squats work all those tiny muscles in and around the calves, so you don't need to use calf-raise machines," says Seabourne. He recommends doing three sets of eight to 12 squats with heel raises. Lower your body with your feet flat on the floor until your thighs are parallel to the floor. Pause, then stand back up and rise onto the balls of your feet.

Jogging

If you're devoting too much time to cardiovascular workouts, it could be compromising your muscle development. When you jog, you use mostly slow-twitch muscle fibers, and the constant pounding seems to have a shrinking effect on your upper-body muscles. It's best to do sprints for your cardio at a track or football field. On a treadmill, after a light 3-minute warmup jog, sprint for 30 seconds, then rest for a minute, and repeat this sequence for 10 minutes.

Curls

"Curls are a waste of time because they isolate a muscle group that's the size of an orange," says Juan Carlos Santana, M.Ed., C.S.C.S., director of the Institute of Human Performance in Boca Raton, Florida. Instead, work larger muscle groups with pulling exercises such as lat pulldowns and rows, both of which also work your biceps. Then do two or three sets of 12 to 15 repetitions of either barbell curls or standing dumbbell curls, says Santana.

Workout Streaks

"I've observed that when people finally take a day off in their weekly strength programs, they start to get stronger and bigger," says Seabourne. That's because muscles grow during rest. Two days a week of strength training per muscle group is all you need.

Rest Between Sets

"Less rest time can sometimes increase the amount of testosterone your body is producing," says Bracko. Try supersets--performing two exercises back to back without rest. For instance, do a set of bench presses immediately followed by a set of seated cable rows. Then rest for 90 to 180 seconds.

Leg Extensions

Switch to body-weight lunges instead. Leg extensions isolate only your quads, while lunges work your quadriceps and butt and force you to stabilize your abs, lower back, and hips.

Bench Presses

Do more pushups, which build core musculature and upper-body strength. Santana recommends limiting your bench presses to three to five sets per week and incorporating six to 12 sets of pushups, including three-point pushups and those in which you wear a weighted body vest, elevate your feet, or hold a medicine ball between your hands.

Chest Stretches Between Sets of Bench Presses

For up to 15 minutes following a static stretch, your muscles and tendons stay stretched and are temporarily weakened, says Bracko. "A doorway stretch done between sets of bench presses actually makes your muscles weaker, so you won't be able to lift as much," Bracko says. Save it for afterward, during your cooldown.

-
Mark Anders

Push Your Limits

Tap into your body's natural turbochargers with these three plans for swimming, cycling, and running

Conventional wisdom has long held that lactic acid is a metabolic scourge, bringing hard exercise stints to a screeching halt and causing next-day soreness. Recent research shows how wrong that rap is: Not only does lactate have nothing to do with "the burn," it's actually a secret source of fuel that can help anyone turbocharge his workout.

"When athletes are training to push up their lactate threshold (LT), what they're really doing is training their bodies to use lactate as fuel," says George Brooks, Ph.D., the study author and a lactate researcher at the University of California at Berkeley. "Improving that threshold is crucial," says Lance Armstrong. You heard the man. Here's how.

SWIMMING

Fast laps can sabotage form in the water, so the challenge is maintaining efficiency at high intensities, says Terry Laughlin, founder of Total Immersion Swimming (totalimmersion.net).

Find your threshold

Warm up for 5 minutes, then do this 500-meter test: Start off at a pace you can hold for more than 500 meters, but build gradually so that your last 100 is at 90 percent effort. Count your strokes per (pool) length (SPL) in the first and last 100 meters.

Improve your threshold

Swim 100-yard repeats for 20 to 30 minutes, resting after each for one-quarter of your swim time. Swim at the fastest pace that allows you to keep an SPL count one or two strokes below your count in the final 100 yards of your test.

CYCLING

"My philosophy was to push up LT by going just below it," says Armstrong. Here's how to follow his lead.

Find your threshold

Using a heart-rate monitor, perform two 3-mile time trials on flat roads, riding as fast as you can. Multiply the higher average heart rate by 0.92 and 0.95 to find the ideal range to boost your LT. So, if your average heart rate was 185, your LT training range is 170 to 176.

Improve your threshold

LT intervals below 6 minutes have less training benefit, says Jim Rutberg, a coach for Carmichael Training Systems. Start with three 6-minute stints, each followed by 6 minutes of active rest (relax, but keep moving). As you can, tack on 60-second blocks to each interval, eventually adding a fourth block. If you reach 10 minutes, retest.

RUNNING

A higher lactate threshold increases the pace you can sustain over short to midrange distances, powers you over hills, and adds kick to your sprint.

Find your threshold

Warm up, then run 5 kilometers at race pace. If you finish in 15 to 19 minutes, your threshold pace should be 25 to 30 seconds slower per mile than your 5-K pace; 20- to 24-minute finishes put your LT pace at 20 to 25 seconds slower; and 25 to 30 minutes -- or if you're a beginner -- 5 to 10 seconds per mile slower.

Improve your threshold

Run four 1-mile segments at LT training pace with 60 seconds' rest, suggests running coach Jason Karp, M.S. Perform the 5-K test again after 8 weeks.

START YOUR ENGINES...

Your body draws its fuel, ATP, from three energy systems at any given time. Pictured: the contribution, by percentage of total output, for each system during an 800-meter race.

Aerobic system

This slow-burning fuel system is your primary supply during regular exercise. ATP comes from the breakdown of fats, blood glucose, and glycogen, using oxygen as part of a chain reaction to clear waste.

Anaerobic system (ATP-CP)

This short-term, oxygen-free process fuels normal movement and sudden, intense bursts of strength. The boost from ATP and creatine phosphate (cp), which are stored in the muscles, lasts only 7 to 10 seconds.

Anaerobic lactate system

This high-intensity, oxygen-free process breaks down glucose. Lactate is formed from a by-product and can be used inside the mitochondria (the cells' energy producers) as an additional fuel source.

-
Scott Quill

Maximum Testosterone

It's the one chemical with the power to shape a man's destiny.

KICKOFF

As snowflakes mix with freezing rain, my 16-year-old son, Ben, and I clutch cryovials and get ready to spit into them. It's 4:04 p.m. Sunday, December 12. We're standing shoulder-to-shoulder with throngs of drunken Steelers fans high in the rarefied-oxygen section of Heinz Field. Far below, our beloved black-and-gold army is poised to decimate the green-and-white marauders, a.k.a. the Jets.

Ben and I are here today not just as die-hard fans but as test subjects as well, hoping to use saliva samples to note changes in our levels of testosterone. It may seem more stereotype than science, but the gridiron truly is a perfect laboratory for the study of masculine chemistry--an ideal place to witness this molecular force of nature and, perhaps, to learn how to harness it to our will.

That T levels fluctuate according to a team's fate is now well established. In recent years, endocrine researchers have learned that competitors in everything from tennis to chess are likely to see a small but significant rise in testosterone following a victory, and a commensurate decline after a loss. A similar pattern has also been demonstrated in a team's fans.

Consider: During one World Cup soccer final, researchers from Georgia State University collected before-and-after saliva samples from men watching the game at Brazilian and Italian sports bars. When Brazil won in the final second, the levels of testosterone in 11 of the 12 Brazilian men soared--and all of the Italians' levels plummeted.

I decide to run this finding past a 31-year-old man-beast we meet while tailgating. Tom, who sports a brass nose ring and a Jack Lambert tattoo on his massive deltoid, is blackening and gilding his chest beside a smoldering charcoal fire. "There's a theory that testosterone goes up if you win and down if you lose," I say, hoping he won't take offense and pummel me. "Do you believe that?"

"Yes, sir!" Tom says, his voice already raspy from too much yelling and Iron City beer. "You can feel it."

Shivering in my parka, I ask if testosterone also keeps a person warm. "That and the booze," Tom says. I decide not to mention that chronic alcohol consumption eventually causes a man's T levels to convert to the female hormone estradiol. Over time, it's not unusual for alcoholic men to sprout enlarged breasts.

As we walk away, Ben asks, "Did you see that guy's other tat?"

I shake my head.

"He had written on his arm, 'Be careful what you wish for.' "

Testosterone Research

In 1929, University of Chicago professor Fred Koch and his coworkers mashed up several tons of bovine testicles, extracting in the process--for the first time in human history--a few ounces of pure testosterone. With this pioneering work, Koch and his long line of descendant researchers knew they had hit upon something preternaturally potent.

Soon after the initial extraction, another professor, W.C. Allee, injected a smidgen of testosterone into the bloodstreams of hens. Overnight, submissive egg-layers transmogrified into bombastic she-roosters prone not only to boisterous cockadoodling but also to aggressive courtship with other hens.

Flash forward to the modern day, and the genie unleashed from bull balls 76 years ago has become the most famous--and infamous --celebrity hormone on the face of the earth. Scientists know more than ever about how the T regularly released from human testicles moderates the minds, bodies, and spirits of men. As the substance circulates to every tissue within us, it binds to specialized cell receptors, or penetrates deep within the cells themselves and activates dormant genes in our DNA. Through such triggering mechanisms, T initiates complex biochemical chain reactions that temper everything from our will to dominate and mate, to our visual-spatial acuity, and even to the quality of our REM sleep.

"When testosterone first starts to surge in our bloodstreams at puberty, everything changes," says endocrinologist Richard Spark, M.D., an associate clinical professor of medicine at Harvard and the author of Sexual Health for Men: The Complete Guide. "You become interested in girls, you start getting erections, your body transforms--and all of this comes suddenly, without any warning. Testosterone is, by definition, a very sexy substance. It's not surprising that anything involved with testosterone seems to make headlines."

In the past year, the nation's sports pages were dominated (yet again) by accounts of high-profile athletes caught "P.U.I." (playing under the influence of too much T). "Testosterone, on some level, could have had an effect on last year's Pacers-Pistons 'basketbrawl' in Michigan," says Alan Booth, Ph.D., a professor of sociology and human development at Penn State and the author of more than 100 scientific publications on hormones and human behavior.

The even bigger scandal, to be sure, is the never-ending cat-and-mouse contest that pits athletes against authorities vested with keeping sports "clean" from the T analogs known as anabolic steroids. Revelations about hard-to-detect designer versions peddled by Victor Conte's BALCO, in particular, implicated stars from Jason Giambi to Barry Bonds, triggered a probe by the International Olympic Committee into possible doping by legions of former medalists, and practically guaranteed that the asterisk will become the most-often-used punctuation mark in the record books of modern sports.

Testosterone As You Age

Yet it's the use of "legal" steroids, in what's known as testosterone-replacement therapy (TRT), that remains most controversial.

A review in the New England Journal of Medicine found a 500 percent increase since 1993 in prescription sales of testosterone replacements for all manner of hypogonadal men (those whose levels of T fall below the normal range of 270 to 1,000 nanograms per deciliter, or ng/dl, of blood). And even though many of these men suffer from hypogonadism because of a medical problem, such as the genetic disorder Klinefelter's syndrome, the majority have low T due to a more common condition: advancing years.

In the course of a man's life, he will enjoy his highest average T levels somewhere in his early 20s. By age 30, T slowly begins to fall back, with levels declining by about 1 percent per year. By age 70, most healthy men will have T levels less than the 270 ng/dl cutoff for hypogonadism. Just as menopausal women have relied on estrogen-replacement therapy for years, so too are more and more "andropausal" men turning to TRT.

But while drug companies compete to meet the demand with a smorgasbord of T gels, pills, injections, skin patches, and even an experimental inhalable mist, there are those who believe that when it comes to hormonal tinkering, the law of unintended consequences should never be ignored.

"Men by and large stop fighting each other when they reach 30 or so," says evolutionary biologist Randy Thornhill, Ph.D., Regent's professor of biology at the University of New Mexico. "It will be interesting to see, among other things, what the rates of intermale aggression are in older men who receive supplemental testosterone."

Notwithstanding the specter of fisticuffs at early-bird specials nationwide, the biggest concern is testosterone's potential effect on prostate cancer, since the hormone may act like high-octane fuel for tumors, says Glenn Cunningham, M.D., a professor of medicine and molecular and cellular biology at Baylor College of Medicine.

"As we age," he explains, "there is a high prevalence of small prostate cancers in many men. Most of these never become clinically significant. But will giving supplements to men with low testosterone change the picture? We just don't know now."

HALFTIME

The Steelers' performance in the first half proves, at best, dispiriting for us fans. Granted, we are ahead 3-0, thanks to a field goal by Jeff Reed. But the paltry lead is primarily the result of numerous Jets penalties.

If Ben's and my T levels have miraculously risen, the only logical explanation is the Steelers' defense. Late in the first half, Jets QB Chad Pennington led a drive from their 4-yard line to the Steelers' 30. Just when it seemed as if we couldn't stop their advance, the Steelers' 2004 team MVP, James Farrior, intercepted a Pennington pass, killing the threat.

Such home-turf defensive stalwartness is not without its own hormonal overtones.

In a study published in the journal Physiology & Behavior, British researchers found that members of a soccer team experienced much higher increases in T before home games than away games--and these rises were more prominent in the defensive players. The highest increase of all was seen in the home team's goaltender.

As the Steelers prepare to receive the second-half kick, a trio of twentysomething guys who look like John Belushi triplets stand up behind us and begin cheering. They're all so drunk that they resemble swaying daffodils. One takes his eye momentarily off his beer cup, allowing the contents to splash onto Ben and me. Another sways too far, loses his balance, and falls on a fan two rows down.

He rights himself, then the three laugh and swear in unison.

I'm just starting to glare at the biggest of these mofos when his angry, red eyes focus in on mine. Almost immediately, and without a conscious decision to do so, I turn my eyes down. Who knows what effect such submission will have on my T levels? I'm stinking of spilled beer and disappointed in the pathetic play of the Steelers. But neither Ben nor I have yet been beaten to death by a drunk.

In accordance with the experiment, we quickly spit more samples into fresh cryovials.

T Time

Though many lunkhead guys, including me, have long subscribed to a "high T good, low T bad" theory of optimum testosterone, researchers and endocrinologists alike (not to mention suspended basketbrawlers) are starting to understand that this is a major fallacy.

In a landmark study, Booth and his colleagues looked at the physical, emotional, and sexual well-being of nearly 4,400 men whose testosterone levels fell across the normal spectrum. They found that the healthiest men were more milquetoasts than mansters, with T levels in the lower midrange. Conversely, men whose T bordered on 1,000 ng/dl endangered their lives more often.

"It was a very mixed picture," concedes Booth, who published the results in the Journal of Behavioral Medicine. "High testosterone was connected to a lot of risky behaviors: smoking, drinking, contracting STDs, getting into fights and accidents. On the other hand, it also seemed to correlate with lower blood pressure and reduced occurrence of heart attacks." (One theory is that high T reduces the arterial inflammation that can cause plaque to rupture.)

Testosterone, it would seem, could save you from some forms of demise while increasing your risk of others: Heart attacks may prove less likely, but a knife in the heart during a barroom brawl, probably more so.

There are many other "win some, lose some" ramifications of high-normal testosterone. Mayo Clinic researchers recently reported that elevated levels appear to weaken a man's immune function, most likely by impairing the action of his white blood cells. On the plus side, the Mayo researchers speculate, this may explain why men are less prone to autoimmune diseases, such as rheumatoid arthritis, than are women.

In terms of mood disorders, high-normal testosterone raises the risk of depression--an effect it shares, ironically, with low-normal T. (The mechanisms, however, are different: High-T men tend to indulge in behaviors, such as parole violations, that are rife with depressing consequences. Low-T men seem to produce less mood-enhancing serotonin, which requires testosterone as a building block.)

Better by far, it now appears, to wish for a hormonal ecology hovering around average but capable of a full range of expression--an adaptive T, if you will, capable of adjusting up or down by way of myriad feedback loops, depending on life's shifting circumstances.

Anne Storey, Ph.D., a parental-behavior researcher at Memorial University in St. John's, Newfoundland, recently demonstrated how changing T levels appear to help men adapt to one of our most important life roles: being a father. In a study of men before and after the birth of a child, Storey and her colleagues found that average T levels decreased shortly after the infant's arrival. "Based on what we know from the animal literature," she says, "we think it drops as a way of focusing dads on nurturing behavior."

Even the hour-by-hour T changes associated with sports victories and losses may help us adjust to new roles--steering us ever-so-slightly toward cockiness or submission. "The higher testosterone seen in winners prepares them for the difficulties of being dominant," Thornhill says. "In losers, the lowering of testosterone gets them out of the fray and lets them wait for better social circumstances to try being dominant again."

One landmark study of 2,100 male air-force veterans shows adaptive T at work in another way. Over a decade, the veterans received at least four medical checkups, during which their T levels were measured and marital status noted. "Their T levels did not remain constant," says Booth. "Instead, they fell and remained low with marriage, and they rose with divorce."

Having higher T before marriage, explains Douglas Granger, Ph.D., a behavioral endocrinologist at Pennsylvania State University, may give you the edge needed to attract a mate and compete for her affection. But once you've won her, a little dip in T to smooth out your nature may be just what you need to keep her.

GAME OVER

I can almost feel my T dipping now, but it isn't because I'm married.

Mere seconds into the second half, the Steelers fumble the kickoff. Miraculously, we manage to recover it. Not so miraculously, our subsequent offensive performance remains wretched. With 7:04 left in the third quarter, the Jets slash and pass the ball downfield, in the process committing none of the penalties we've come to depend on. They tie the game 3-3 with a field goal.

"I don't have a good feeling about this," I tell Ben.

"It's starting to snow again," he says.

I suspect we're both wondering the same thing: Are we and the Steelers alike going to be buried here?

A little later, the lone Jets fan in our bilious corner of the stadium shouts, "Go, Curtis!" God only knows what this brass-balled fan's testosterone levels must be--if I had a spare cryovial, I'd ask him for a spit sample. Several plays later, Jets running back Curtis Martin, a player who actually grew up in Pittsburgh, breaks the 13,000-yard career rushing mark. Feigning bafflement at the seething enmity all around, the Jets fan says, "What? You guys don't like Martin? He's a hometown boy!"

The biggest of the three Belushi look-alikes responds, "No, I hate him. Because he plays for the Jets, you f---!"

Just when it looks as if we're destined to see more offensive fireworks here in the stands than down on the field, the Steelers' own running game finally wakes up. Not long after the start of the fourth quarter, Jerome Bettis breaks the 13,000-yard milestone, too.

Three plays later, the Bus fakes a run, then flips a 10-yard pass to Jerame Tuman, who catches it in the end zone. This well-designed trick play completely fools the Jets' heretofore stalwart defense and gives the Steelers a 10-3 lead. Ben and I leap to our feet, high-fiving the drunken Belushi boys, hormonal delirium all around. Only the lone Jets fan seems deflated. Like a woebegone Grinch, he looks as if his cojones shrank two sizes during this play.

Bettis's TD pass proves to be all we need to earn our 12th victory of the year. As an insurance coup de grâce, Bettis also runs in for a touchdown in the dwindling moments of the fourth quarter, giving the Steelers a final 17-6 victory. When the clock expires, there's a fair amount of jubilation all around us. Ben seems to share in this effortlessly, but I find myself having to force a smile. Truth is, I'm cold, tired, and feeling like we've been much more lucky than dominant today.

What's the Right Level?

If average testosterone levels are the goal, then the question becomes how to attain--and maintain--this hormonal middle ground. The first step is to determine whether your T needs to be dialed back or ratcheted up, and this requires either doing a spit test or having blood drawn for a "total testosterone" assay (the more accurate method, and the one most doctors use). Ideally, you want to have two assays performed between 8 and 10 a.m. on consecutive days to ensure an accurate baseline T.

As mentioned earlier, the normal range for testosterone is 270 to 1,000 ng/dl. If your assays indicate that your T level is lurking somewhere below 270 ng/dl, you may be silently suffering from hypogonadism. Much less likely is the opposite scenario: a T score that tops 1,000 ng/dl. Outside of steroid abusers, overly high T is extremely rare and usually caused by certain forms of glandular cancer, says Granger. It's virtually always diagnosed because of other symptoms.

But what if you're one of those sub-1,000, high-normal men, the guy who doesn't have heart attacks but gives them with his daredevil driving and other wild-child behaviors? As unhealthy as high-normal?T behaviors can be, doctors don't consider these enough of a risk to require heavy-duty T-lowering drug, such as a low dose of Depo-Provera, the synthetic hormone used by women as an injectable contraceptive.

Not that high-T bad boys lack any options for hormonal moderation. Two of the best of these--marriage and higher education--fall under the general rubric of becoming civilized.

In terms of the ties that bind, researchers have long noted that married men not only are healthier but also live significantly longer than single men--a fact that is almost certainly related, among other factors, to changes in a guy's testosterone-mediated wilding.

In a paper presented in Washington, D.C., last summer by researchers with the Alfred P. Sloan Center for Parents, Children and Work, the authors noted that unmarried men drink nearly twice as much alcohol as their married peers. They're also more likely to drink and drive, get in fights, and take the kinds of risks that can lead to assorted mayhem.

"Marriage," the authors note, "tends to discourage these unhealthy behaviors." For those reluctant to tie the knot immediately, take heart: Even tentative steps in this general direction can bring benefits. The researchers found that men who are headed for the altar begin cutting down on their boozing a full year before the ceremony.

With regard to higher education, a study of 4,462 veterans by James M. Dabbs, Ph.D., of Georgia State University, did link higher T levels to a panoply of problem behaviors. However, when he factored in the veterans' educational achievement levels, he found that the longer the men with high T stayed in school, the less likely they were to create chaos in their lives. In a follow-up study of 400 college students, Dabbs found that high T had no relationship to the risk of delinquency or personality problems.

Men with low-normal T have more ways to tweak their testosterone, especially if they're willing to challenge commonly held assumptions about what constitutes a "healthy" lifestyle. For example, despite the antifat message we're bombarded with, it turns out that diets too low in dietary fat are actually harmful to healthy T levels.

"Our studies show that limiting fat to only 10 percent or less of your total calories can significantly reduce your testosterone levels," says William Kraemer, Ph.D., a kinesiology researcher at the University of Connecticut's human-performance laboratory.

In fact, many of the classic dietary commandments--restrict your overall calories, eat a lot of roughage, avoid animal flesh--are a virtual recipe for lowering T. "We've observed a direct relationship between caloric intake and testosterone level," says David Cumming, M.D., a researcher in reproductive physiology and exercise at the University of Alberta in Edmonton. "Perhaps the ideal diet to drop your testosterone is high fiber and vegetarianism--and the ideal way to raise it is the red-meat approach.

Maintain Your T-Levels

Note that this is not an endorsement for Atkins or any of the other carbophobic fad diets, but, rather, it's an admonition to avoid going to nutritional extremes. To that end, keep your consumption of calories from fat--preferably in the form of monounsaturates and omega-3s--up around 35 to 40 percent, the amount research shows to be optimal for robust T levels.

Also, aim to derive at least 35 percent of your calories from protein, with much of it from lean red meat, Dr. Cumming suggests; Dutch research shows that athletes had higher testosterone levels when eating meat-based protein, compared with other sources, such as dairy and eggs. (As for the recent Journal of the American Medical Association study linking red meat to an increased risk of colon cancer, the researchers didn't differentiate between flank steak and fast-food burgers, which means saturated fat, not meat per se, may be the key.)

Another stay-healthy strategy that can undermine your T is intense exercise. If you're a hard-core runner, swimmer, cyclist, or the like, you may well be suffering from mild to moderate "gonadopause"--the male equivalent of female athletes' failure to menstruate during periods of heavy workouts.

In a study of men who run 80 miles or more per week, Dr. Cumming found significantly lower-than-average testosterone levels--in the bottom 20 percent of the normal range. The study indicates that this drop was related not to any type of impaired testicular production, but rather to a decrease in the pituitary gland's ability to signal the testicles to make testosterone. "The signals in high-mileage runners were less frequent and less concentrated," says Dr. Cumming.

It probably doesn't take an Olympic-style effort to begin seeing a suppressive effect on T. Another study, says Kraemer, found that men can reduce their testosterone by running as little as 30 miles a week. Fortunately, he adds, aerobic enthusiasts can keep training for endurance without sacrificing testosterone. "They just need to incorporate a supplemental weight-training program into their regimens," he says. That's because weight lifting sets the stage for T to act as a muscle builder--almost as if you were injecting yourself with a natural, healthy dose of steroids.

"It's a very complicated story," Kraemer says, "but it appears that you need enough force and a high enough volume of work for testosterone to signal your body to build more protein during the postexercise recovery phase. Aerobic exercise won't do this. If you do just a few reps of weight lifting, that's probably not enough, either. In order to really trigger protein production, you need to do a multiexercise, multiset program that works a large amount of muscle mass."

Kraemer's prescription: three sets of at least eight exercises, targeting all the major muscle groups. Focus on squats, bench presses, deadlifts, and seated rows to stimulate the most muscle tissue. As time allows, add smaller-muscle-group exercises, such as leg curls, calf raises, shoulder presses, abdominal work, and arm curls.

In 2- to 3-week cycles, vary your weight load relative to the number of repetitions; i.e., train with a lot of weight for a few weeks (four sets of three to five reps), then do more repetitions with less weight (one set of 12 to 15 reps per exercise). Rest is also important, as overtraining causes the body to reduce testosterone output. Aim to rest 24 hours or so between workouts.

Still, nothing you lift in the gym or order at a restaurant will help your testosterone levels if you down too much booze. "Chemicals like alcohol wreak havoc with a man's sexual-response cycle," says Dr. Spark. Alcohol does this in many ways, including by inhibiting T production in the testes themselves.

In a study by the department of medicine of the New York Medical College, andrologists gave moderate amounts of alcohol--just one glass of wine or beer per day--to male volunteers with normal T. In only 4 weeks, this resulted in measurable reductions in the testosterone secreted from the testicles--and in a concurrent reduction of testosterone in the blood.

If a month of light drinking can cause a detectable dip, think about the nosedive your testosterone would take if you were to really tie one on. So when you decide to imbibe, try to at least set a two-drink limit. You'll help conserve the commodity your twins worked so hard to create.

EPILOGUE

It's 2 weeks after the game, and our faxed results are finally in.

To my unschooled eyes, Ben and I have both spit a confusing jumble of T readings, as measured in picograms per milliliter (this, not nanograms per deciliter, is the unit used for saliva samples). My own readings range from a high of 163.81 pg/ml, recorded during Sunday's breakfast, to a low of 46.87, at kickoff time. Ben's scores prove less extreme but more consistent--a high of 133.30 upon first waking and a low of 73.45 at lunch.

I fear our respective meandering hodgepodges of numbers suggest that the Steelers have had, at best, random influences on our hormones. But where I see a muddle, the infinitely better-informed salivary-testosterone expert Douglas Granger spies undeniable patterns that prove just how exquisitely reactive T is to shifting social and competitive circumstances.

In Ben, at least, the changes are textbook.

Granger begins his overall assessment by first assuring us that we're both robustly normal. "You have to realize," he explains, putting our numbers in a grander context, "that it's typical to see dramatic changes in testosterone over the course of an average day. All men, for instance, show a dramatic drop from awakening to lunchtime." The question thus becomes, how much do events like the Steelers game cause the normal curve to shift from its usual course?

In Ben's case, his T clearly leaped out of the expected groove and followed a pattern typical of a die-hard fan on a day of victory. Ben awoke, as usual, with high T, and though it dropped somewhat by lunchtime, the decline was much less than expected for an average day. "It looks," says Granger, "like he was getting himself pumped up psychologically throughout the morning hours."

Such psyching continued throughout the afternoon, until, by kickoff time at 4:05, his T had crested again--evidence of strong anticipation of an ass-whuppin' triumph to come. By halftime, however, the Steelers' less-than-stellar first-half play had proved disappointing enough to trigger a modest dip. But when the offensive renaissance late in the game finally assured the Steelers a victory, Ben's T enjoyed a similar resurrection.

My own pattern, alas, did not follow the same Hollywood script. Like Ben, I had a morning peak, but my T proceeded to plummet a whopping 57 percent by lunch. The free fall continued all afternoon, my level declining another 34 percent by kickoff. It remained flatlined there for the rest of the day--almost as if my testicles never got the message that the Steelers were playing.

Granger suggests a number of plausible reasons why my T levels fluctuated this way. Perhaps, he says, I'm not quite the rabid fan I thought I was. Or possibly my brain perceived the Steelers' win as dumb luck, hardly worthy of hormonal celebration. Maybe I was influenced by that perceived threat from the belligerent, drunken Belushi who spilled his beer on us. In this scenario, my T response was less attuned to the vicarious fight on the field than to the potentially real one I hoped to avoid in the stands.

"The truth is," Granger admits, "we don't always know what's going on with testosterone."

We might not always know, it's true, but I'm confident that, on some level, our bodies do. I've become, in short, a true believer in the essential wisdom of this compound.

I'm convinced that, when operating as nature intended it, the tide of T within us all shapes our journeys through life--in my case, steering me thus far toward a happy marriage, a great family, enough financial success to keep me out of debtor's prison, even the occasional athletic triumph of my own making.

I may never be able to explain exactly how testosterone has steered me to this blessed point. But this hardly diminishes my appreciation for the pilot.

-

Jim Thornton

Testosterone Under Attack

Cross your legs, men. A phenomenon called xenobiotic attack is meddling with your manhood, and your family jewels may never hang the same way again

In 2003 Professional golfer Shaun Micheel took his game to a new level. He won the PGA Championship on the 72nd hole with his 21st birdie of the tournament. Then everything seemed to fall apart.

"I lost my drive. I didn't enjoy practicing anymore. If I made a couple of bogeys, I just wanted to go home," he said at the time. It was more than a slump. He barely even showed up on the professional circuit the following year. At first he thought it was depression. "I seemed to be tired all the time, and irritable. I wasn't myself."

But in April 2005, a blood test showed that, at the age of 36, Micheel had the testosterone level of a 70-year-old. His doctor had him rub a hormone-replacement gel onto his biceps each morning. By September his testosterone level was back to normal.

It wasn't a miracle cure. He still hasn't won another major tournament, though he did manage a second place finish last year. But Micheel is working his way back up the list of money winners. More important, both he and his wife say testosterone has given him back his old, upbeat personality.

Good news for him, but what about the rest of us? Some scientists now wonder if a lot of other "walking, talking, normalish guys," as one urologist put it, are also experiencing a fading of the hormonal basis of masculinity, leaving them feeling less like the men they used to be, less than their fathers were in their time.

Most men can expect their testosterone levels to drop by about 1 percent a year beginning in their 50s. So a man in his 70s might have only half the testosterone he had when he was 25. But researchers behind the Massachusetts Male Aging Study--which has been tracking behavioral and physiological traits for 1,709 men born between 1916 and 1945--noticed something strange. Men born more recently had T levels that were surprisingly low. The 60-year-old in 2003 had about 15 percent less testosterone than the 60-year-old in 1988, according to Thomas G. Travison, Ph.D., lead author of the testosterone study. Sixty was looking like the new 70. Had something happened? Could we be in the middle of some broad biological or environmental change affecting all men simultaneously?

No one was suggesting that men rush out to get their testosterone levels checked (though, okay, I did), much less consider testosterone therapy (and, yes, I am considering it). As one endocrinologist put it, "You need to see more than one study from more than one laboratory before you start waving your arms and shouting alarm."

But the Massachusetts results marked a turning point: Testosterone is no longer just a hot topic for misguided weight lifters or baby boomers with delusions of eternal youth. It's something the average aging male will need to think about, starting with a few testosterone basics.

Testosterone is literally what makes us men. Delivery of the right amount at the critical moment shifts development of a fetus away from the basic human blueprint, which is female, and onto the path to masculinity. A surge in testosterone (from the testes---hence the name) in adolescence boosts us into manhood. And for the rest of our lives, testosterone, or the lack of it, seems to play a key role in muscle strength, lean body mass, bone density, mental sharpness, and sex drive--the things that often make us feel best about who we are.

Despite testosterone's explosive reputation, there's no solid evidence that it causes aggression or violence. On the contrary, heightened testosterone is often associated with self-confidence and social success. Testosterone levels typically increase to ready us for a challenge, whether it's a football game or a chess match. Testosterone also rises after a victory, causing an increase in confidence that often leads to even more victories, the so-called winner effect. Who would want less of a hormone like that?

And yet the quantity of the stuff, even in healthy young men, is astoundingly small. Most doctors measure total testosterone as the starting point, and for American men under the age of 40, the normal range is 300 to 1,000 nanograms per deciliter of blood. (That's what "ng/dl" means on your medical laboratory report.) A nanogram is a billionth of a gram, and a deciliter is a 10th of a liter. Or, to put it in layman's terms, not bloody much. If you somehow managed to collect all the testosterone from your entire body, it would barely fog the bottom of a shot glass.

But it gets more complicated. Testosterone occurs in the blood in three forms.

About 40 percent of total testosterone is tightly bound to sex hormone–binding globulin, or SHBG, meaning it's not readily available for use by the body. In fact, nobody knows for sure what function SHBG-bound testosterone performs.

"Free testosterone" isn't bound to other molecules. But it constitutes just 2 percent of total testosterone.

Fortunately, the balance of total testosterone is bound to albumin and other proteins, and those links are easily broken. So together with free testosterone, this "bioavailable" testosterone is there when the body needs it.

You could look at it this way: Your manhood is based on half of almost nothing. And there's less of it with each passing year.

Measuring testosterone is complicated, because the tests themselves aren't always reliable, and results can differ from one lab to the next. "Normal" levels can also vary dramatically from one man to the next. And they can vary from minute to minute in the same man; testicles seem to do everything in spurts. That's because testosterone levels fluctuate with the little wins and losses of daily life. So if a test suggests that you have a testosterone problem, do not despair: There's a one-in-three chance you'll be back to normal on a follow-up.

But none of this diminishes the mystery: Why would testosterone levels in the United States today be substantially lower than they were 15 years ago? When they saw their results, the Massachusetts researchers thought they'd made a mistake. "We'd used the same lab, the same assay, and the same analyst to gather the data over time," says Travison. "But even so, subtle changes in the way the assay was manufactured could have had some impact."

Then in the summer of 2006, Travison attended an Endocrine Society meeting where another researcher, Antti Perheentupa M.D., Ph.D., from the University of Turku, in Finland, presented evidence of a similar decline. The Finnish results suggested the change was happening among younger men, too. A man born in 1970 had about 20 percent less testosterone at age 35 than a man of his father's generation at the same age. "When I saw another group reproducing our results," says Travison, "that was convincing to me that we were seeing a true biological change over time, as opposed to just some measurement error."

One possible explanation for the decline is obvious: Men are fatter now. In the Massachusetts study, the average 60-year-old man in 1988 was already well past overweight (a body mass index, or BMI, of 25). But his 2003 counterpart was pushing obese (a BMI of 30). And obesity, says Travison, is "a very powerful predictor of low testosterone." Gain 10 percent in your BMI and you can expect your testosterone to drop by about the same amount. As a result, fat men typically have up to 25 percent less total testosterone than their trim counterparts do. (Fair warning: This doesn't make them girly men. SHBG--the stuff that locks up half your testosterone--also decreases with obesity. That means even a fat man with low total testosterone may have enough of the bioavailable stuff to crush you between his manboobs.)

Taking multiple medicines also tends to decrease testosterone, and a quarter of the Massachusetts test participants were practicing "polypharmacy"--taking six or more medicines at the same time. This was partly because the test group had aged. But in tandem with the obesity epidemic, participants also seemed to be experiencing an Rx epidemic. In 1988, 38 percent of the men were not taking regular medications. By 2003, not one man could make that claim.

Still, obesity and polypharmacy together weren't enough to explain the loss of testosterone. Nor was the dramatic decline in smoking among participants, though quitting can sometimes cause a decrease in testosterone. To filter out these effects, Travison's group looked at a subsample of 500 nonsmokers who were neither obese nor taking a large number of drugs. And even these apparently healthy men displayed the same exaggerated decrease in testosterone.

Scientists have been arguing for years about whether they are seeing a worrisome pattern in male reproductive-health problems around the world--and also about whether environmental factors are to blame. Fertility, which moves in tandem with testosterone, has dropped not only in industrialized nations like Sweden, but also in Sri Lanka, without any apparent change in contraception or abortion rates. Increasing numbers of boys are being born with genital abnormalities, including undescended testicles, and urethras that exit in odd places along the penis. In Denmark, 40 percent of young men have a subnormal sperm count, and the rate of testicular cancer is among the highest in the world. In the United States testicular cancer has recently become the most common malignancy among Caucasian men ages 15 to 35. Some researchers have grouped these developments together as "testicular dysgenesis syndrome," or TDS, with "dysgenesis" meaning abnormal development of the male organ.

There are plenty of experts who question the evidence of such a syndrome. But Mitch Harman M.D., Ph.D., an endocrinologist at the University of Arizona college of medicine and the director of the Kronos Longevity Research Institute, sees the shadow of Silent Spring. Back in 1962, when Rachel Carson published her environmental classic, estrogen-like substances in the insecticide DDT were making eggshells so thin that they were crushed by nesting parents; populations of eagles and other large birds plummeted. And today? Dr. Harman says, "I'm concerned that we're just pouring chemicals out into our environment that are endocrine-suppressing, estrogen-like compounds," possibly causing similar disruptions in human reproduction. The authors of a recent article in the Medical Journal of Australia likewise suggest that from early fetal life onward, male hormonal and reproductive functions are under "xenobiotic attack," meaning chemicals not naturally found in the body appear to be disrupting normal biological development.

For instance, 90 percent of American men have evidence of chlorpyrifos in their urine. This shouldn't be surprising, since up to 19 million pounds of the stuff was distributed across the United States in 1999 alone, much of it in household products like tick-and-flea powder for pets, lawn treatments, and common insecticides. Though residential use is now restricted, chlorpyrifos is still common in agriculture, as well as in some professional applications; for most people, diet is now the main source of exposure. In a recent Harvard study, men with the highest chlorpyrifos exposure typically had 20 percent less testosterone than those with the lowest exposure.

Carbaryl is another possible culprit. Detectable levels turn up in 75 percent of American men, and having it in your urine appears to be associated with reduced sperm count and liveliness, or motility, as well as increased DNA damage. And yet we still apply carbaryl to lawns and gardens at a rate of up to 4 million pounds a year, mostly by way of an insecticide known as Sevin. There should be a bumper sticker: Honey, the lawn shrunk my testicles.

Phthalates are also everywhere, almost certainly including your own body. Manufacturers use them in colognes and cosmetics and as softeners in plastics. Baby bottles now come "phthalate-free," but hospital intravenous bags generally don't. And yet some phthalates seem to have all of carbaryl's unpleasant associations with reproductive health. And not just in men: Last year Greenpeace issued a warning against the danger of phthalates in your girlfriend's sex toys. Then the Danish Environmental Protection Agency came riding to the rescue, declaring such toys safe--as long as she keeps it to an hour or less a day.

Scientists can't say that any of the suspect chemicals actually cause the reproductive effects that are occurring. They can only point out troubling associations. But these associations seem to be proliferating. About 50 new chemicals come onto the market weekly, says Dr. Harman, and while testing for carcinogenicity is required, "there's no systematized testing for subtle endocrine effects."

We're not likely to have good answers anytime soon. The reproductive problems of human males will remain understudied, says Dr. Harman, in part because federal research dollars are being diverted to issues like biological warfare and terrorism. "We might just wind up disappearing from the planet quietly," he says, "because we were too busy fighting wars to figure out that our reproductive systems were going south."

All this could Make testosterone therapy a more likely part of your life as you age. Demand is already booming. Last year, according to IMS, a pharmaceutical information company, U.S. doctors wrote more than 2.5 million testosterone prescriptions, and the market was worth more than $500 million to pharmaceutical companies. That's double what it was 5 years ago. If the decline in testosterone levels turns out to be real, the market could easily double again, with 6 to 12 percent of men in some age groups likely to qualify as "hypogonadal," to use the medical profession's distinctly depressing term. (Loosely translated, it means "tiny testicles.")

Misuse of testosterone-based steroids to build muscle is booming. It's already twice as common as heroin abuse among U.S. 12th graders. Baby boomers have also latched onto testosterone therapy as an anti-aging remedy, despite a dearth of supporting evidence.

At the same time, Australian andrologist David Handelsman, Ph.D., worries that doctors are failing to diagnose cases of genuine testosterone deficiency, resulting in "lifelong consequences" for younger men. As a result, testosterone therapy "suffers simultaneously from both overuse and underuse." And yet evidence about whether such therapy is safe or effective is "shockingly weak," says the Mayo Clinic's Victor M. Montori, M.D. "There is no way for physicians to be certain when prescribing testosterone that, on average, it's doing more good than harm."

So is it safe to use testosterone therapy, even under a doctor's care? Does it cause prostate cancer, as some suggest? Here's where the debate stands now: First, the fear isn't that testosterone will cause prostate cancer. It's a natural product of the human body, and no evidence anywhere has ever shown it to be a carcinogen. Scientists worry instead that adding testosterone may fuel the growth of small cancers that already exist, undetected and harmless, in the prostates of many older men.

The only reliable way to gather scientific evidence on the prostate-cancer question would be the sort of large-scale, long-term study endocrinologists have tried and failed to get the government to undertake since 1999. That's roughly the same period in which testosterone use doubled in this country. So men are, in effect, undertaking the same experiment themselves, on their own bodies--haphazardly, and with no way to track the results.

The debate over testosterone levels was kind of a parlor game for me when I started researching this article. I'm married, a father of three, and neither overweight nor a smoker. I lift weights, and I row crew 6 miles a day in season. My appetites and my outlook on life have always seemed healthy. It never occurred to me that my testosterone levels might be low. Using testosterone therapy to prolong the illusion of youth made about as much sense to me as hair plugs.

Then I had a blood test, and my total-testosterone level came back way low. It looked like the batting average of an okay hitter in a bad month near the end of his career. Suddenly, I listened a little more sympathetically when Abraham Morgentaler, M.D., an associate clinical professor of urology at Harvard, started making the case for test-osterone-replacement therapy. "What's amazing to me is the passion this testosterone issue generates in people," he was saying. "There are a couple of issues that come up. 'Why can't we just age normally? Why do we have to have 70-year-old men chasing their wives like they did when they were 25? Why can't they just be 70?' And I think it's the most ridiculous argument. Bad vision is age related, as are bad hearing, bad joints, bad hearts, bad blood vessels. Even cancer is age related. We treat all these things so we can live longer or happier. And the change in hormonal levels? If it's treatable and the therapy is safe, reasonably speaking, why would we want to withhold treatment from somebody?"

The case for considering testosterone therapy became even more compelling this past summer, when researchers at the University of California at San Diego released results from their long-term study of men over 50. Participants whose testosterone levels tested low in the early 1980s but who were otherwise healthy had a 33 percent higher risk of death over the following 2 decades. Another study, from the University of Washington, looked at men over 40 who already had health problems, and found that low testosterone dramatically increased their risk of death.

But I didn't immediately try to alter my T levels. (See "Become Mr. T" for natural ways to do it.) The standard medical guidelines for treatment are strict. I qualified on the first count: "unequivocally low serum testosterone levels." But I didn't have "consistent symptoms and signs" of low testosterone.

For doctors who take the conservative approach, the symptoms that matter most are physical changes, such as shrinking of the testicles, development of breasts, a decrease in spontaneous erections, or a loss of muscle bulk and strength. Doctors who take a looser approach often recommend therapy to men with the sort of complaints almost everyone experiences at some point: "Do you tire more easily? Is it more difficult to get and stay in shape? Is there less desire to exercise? Have you lost some of the zest for life?" I didn't fit either set of symptoms.

Given the nuances involved, anybody thinking about testosterone therapy needs to consult a specialist. My doctor, an endocrinologist, pointed out that, despite the low total testosterone, my free testosterone was normal. He also discovered a slight thyroid hormone deficiency, a potential cause of low testosterone. So while he wasn't ruling anything out, it didn't look like T-time just yet.

Those are the kind of judgments a lot more men will be making over the coming years, as the population ages and further evidence comes in on health and reproductive issues. For some men, both young and old, testosterone therapy will seem like a miracle, a second chance at life as a man. But the effects can also vary dramatically from one person to the next. So for other men, it won't make much difference at all. "I'll be 64 in April," says one endocrinologist, whose total testosterone is "sky high" at 640, "and I don't feel the same as I did when I was 44. There's more to aging than hormones."

So which are you? And what should you do? A good doctor is the place to start, but even doctors have no certain answers, and your government has guaranteed doctors won't get answers for decades to come. So when it comes to doing the right thing about testosterone, the truth is that you're pretty much on your own.

The question remains: Are you man enough right now? Will you be, 10 years from now?

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Richard Conniff

5 Easy Ways to Increase Your Manpower

How to tap into your secret source of sexual stamina, energy, and drive

A testosterone shortage could cost you your life. As if losing muscle mass, bone density, and your sex drive to low T levels wasn't bad enough, new research shows the decline can also increase your risk of prostate cancer, heart disease, and even death. Follow these steps to lift your levels and lengthen your life.

1. Uncover Your Abs

As your waist size goes up, your testosterone goes down. In fact, a 4-point increase in your body mass index -- about 30 extra pounds on a 5'10" guy -- can accelerate your age-related T decline by 10 years.

2. Build Your Biceps

Finnish researchers recently found that men who lifted weights regularly experienced a 49 percent boost in their free testosterone levels. "As you strengthen your muscles, the amount of testosterone your body produces increases," says David Zava, Ph.D., CEO of ZRT Laboratory. You need to push iron only twice a week to see the benefit.

3. Fill Up On Fat

Trimming lard from your diet can help you stay lean, but eliminating all fat can cause your T levels to plummet. A study published in the International Journal of Sports Medicine reveals that men who consumed the most fat also had the highest T levels. To protect your heart and preserve your T, eat foods high in monounsaturated fats -- food such as fish and nuts.

4. Push Away From The Bar

Happy hour can wreak havoc on your manly hormones. In a recent Dutch study, men who drank moderate amounts of alcohol daily for 3 weeks experienced a 7 percent decrease in their testosterone levels. Limit your drinking to one or two glasses of beer or wine a night to avoid a drop in T.

5. Stop Stress

Mental or physical stress can quickly depress your T levels. Stress causes cortisol to surge, which "suppresses the body's ability to make testosterone and utilize it within tissues," says Zava. Cardio can be a great tension tamer, unless you overdo it. Injuries and fatigue are signs that your workout is more likely to lower T than raise it.

Oil rises on Tropical Storm Erin

NEW YORK (Reuters) - Oil rose on Wednesday after a large drop in U.S. crude stockpiles and on concerns a Gulf of Mexico tropical storm could disrupt oil and natural gas output in the world's largest energy consumer.

U.S. crude futures (CLc1: Quote, Profile, Research) settled up 95 cents at $73.33 a barrel after trading as high as $74.23 earlier. London Brent crude (LCOc1: Quote, Profile, Research) climbed $1.13 to $71.64 a barrel.

U.S. crude stocks fell 5.2 million barrels last week in part due to lower imports, the Energy Information Administration said, surpassing forecasts for a 2.3 million barrel decline.

"Crude is rallying here because of the large draw and because of the tropical storm in the Gulf of Mexico," said Mark Waggoner, president of Excel Futures.

A tropical depression in the Gulf of Mexico strengthened into Tropical Storm Erin and was expected to make landfall Thursday evening south of the refining hub at Corpus Christi, Texas, the U.S. National Hurricane Center said.

Shell (RDSa.L: Quote, Profile, Research) shut down a small natural gas production facility in the path of the storm on Tuesday and began evacuating nonessential personnel.

Other companies operating in the Gulf, home to a third of U.S. oil and gas production, were monitoring the situation.

Expectations that Tropical Storm Dean, currently in the mid-Atlantic Ocean, would strengthen into a hurricane this week further supported prices.

CREDIT WOES

Oil markets remain on edge over the U.S. subprime mortgage crisis, which has rattled equity and other financial markets.

"The fallout from credit markets is not yet over," Harry Tchilinguirian, oil analyst at BNP Paribas, said in a report.

"The more prolonged the weakness in equities is, the more negative market sentiment can turn. And, in the short run for oil, this could prompt a further liquidation of net long positions built up by noncommercial players."

U.S. and European stock markets steadied on Wednesday, while bond prices rose, pushing the two-year Treasury note's yield down to 18-month lows as investors sought refuge from the credit sector's troubles in government debt.

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Wed Aug 15, 2007 3:36PM EDT

Japanese financial firm Uni-Asia offers 65.4m IPO shares

SINGAPORE : Singapore investors looking to get exposure to the shipping sector has a new option.

Japanese financial firm Uni-Asia Finance has launched its IPO here.

The company earns more than half of its revenue from ship investments and is offering 65.4 million shares for sale at 55 cents each.

The share sale is expected to raise up to S$41 million.

Uni-Asia is looking to grow its ship investment and fund management business in Singapore.

Michio Tanamoto, Managing Director, Uni-Asia Capital (Singapore), said: "The Singapore government introduced a tax incentive called maritime finance incentive. We would like to grow the ship investment business in Singapore, taking advantage of the tax incentive.

"And Singapore is well known as a centre of fund management industry, (as well as) a shipping hub. So that gives us a very ideal platform for developing this business in Singapore."

Besides brokering deals and structuring the financing or charters for ships, Uni-Asia also invests in budget hotels and distressed assets in Japan.

But the bulk of its business revenue - nearly 57 percent - comes from its ship investment business.

Of the S$41 million worth of proceeds raised, Uni-Asia aims to inject about half into its flagship, US$300 million Akebono ship investment fund, which was launched in Singapore in April.

It is also looking to acquire two new container ships set to be delivered in 2008.

Uni-Asia says it sees tremendous demand for ship financing in Asia as new vessels are being delivered.

Kazuhiko Yoshida, CEO, Uni-Asia Finance, said: "The market is very, very large. And demand is huge. For example, shipyards going forward are very, very full until year 2011.

"So we cannot make any new order at this moment until 2011. So it means the market is huge and the demand is big. All the shipping companies who make such a big order to the shipyards need money. So we're able to give them good solutions for raising funds."

Uni-Asia's IPO closes on August 15, with trading scheduled to begin two days later.

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By Jeana Wong, Channel NewsAsia | Posted: 08 August 2007 2253 hrs

CapitaLand in JV to develop residential project in Vietnam

SINGAPORE: CapitaLand has set up a joint venture to develop a 12-hectare site in Vietnam's Ho Chi Minh City.

It will inject S$48 million for a 75 percent stake in the joint venture with Vietnamese infrastructure and property developer, Azure City Company.

CapitaLand plans to build 300 luxury villas on the site which belongs to its partner.

The development is expected to be ready for launch by September next year.

This will be the third residential project in Ho Chi Minh City for the Singapore developer.

It will bring CapitaLand's pipeline of homes in the city to 1,600.

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Hong Leong Finance books 29% growth in H1 earnings to S$58m

SINGAPORE: Hong Leong Finance has booked profits of nearly S$58 million for the first half of the year.

This was a 29 percent improvement from the same period last year.

Second quarter earnings showed a better growth of 41 percent to over S$31 million.

The finance company said the better showing was due to the strength of its core business groups.

It expects to grow organically through a better performance of its motor vehicle loans, as well as through the recent acquisition of a S$405 million portfolio of hire purchase agreements.

Hong Leong Finance said it does not hold any collateralised debt obligations or asset-backed securities.

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By Loh Kim Chin, Channel NewsAsia | Posted: 13 August 2007 1930 hrs

ComfortDelgro's H1 profit rises 10.5% to S$113.9m

SINGAPORE: Public transport operator ComfortDelgro said its first half profit rose 10.5 percent to S$113.9 million, compared to the same period last year.

This was boosted by a two percentage point cut in the corporate tax rate.

Earnings for the six months to June were also lifted by strong contributions from its overseas operations in the United Kingdom, China and Australia.

Together, they account for nearly half of total turnover.

In the second quarter, ComfortDelgro's income rose 22 percent to S$58.5 million.

The rail, bus and taxi operator expects its overseas operations to continue to drive growth.

Its subsidiary, SBS Transit, reported a 20 percent rise in first half profit to S$31.6 million.

For the second quarter alone, it booked a 25 percent increase to S$14.5 million.


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By Loh Kim Chin, Channel NewsAsia | Posted: 13 August 2007 1912 hrs

Singapore, Vietnam form a unique investment proposition: minister

SINGAPORE: Singapore and Vietnam form a unique proposition for investors because of their complementary advantages, said Trade and Industry Minister Lim Hng Kiang, who was speaking at a Singapore-Vietnam business lunch on Monday.

He said Vietnam's phenomenal growth story has been a natural magnet for local, regional and international investors alike.

Mr Lim said: "We easily complement each other for investments, be it in manufacturing, HQ activities, logistics or research and development. I would like to encourage the Singapore business community to consider this unique complementary proposition in your business strategies.

"I would also like to welcome the Vietnamese business community to internationalise through Singapore and use Singapore as your hub of operation."

Singapore is the second largest foreign investor in Vietnam with some US$9.6 billion in cumulative investments as at July – second only to South Korea.

And Vietnam is also planning to take advantage of international capital.

Apart from attracting investments, Vietnamese Prime Minister Nguyen Tan Dung said his country also plans to issue a US$1 billion bond in September, pending right market conditions.

He added that a plan to sell shares in Vietnam's five main state banks by 2010 remains on track.

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By Ng Baoying, Channel NewsAsia | Posted: 13 August 2007 2011 hrs

Henderson sees 10-12% upside for Singapore property stocks

SINGAPORE: Henderson Global Investors believes that despite the current market volatility, there is still underlying strength to Singapore property stocks.

The asset management firm says that fundamentals in the property market remain healthy and is projecting a further 10 to 12% upside for property counters in the next 12 months.

Investors have been selling Singapore-listed property stocks during the current market volatility.

But beyond the short-term fluctuations, property counters have not done too badly, according to Henderson.

"They had a very strong start to the year, so by April or May, they were up 30%... Now, from the peak they've lost about 10 to 15%. Those which are more exposed to certain parts of the market have regressed further," says Chris Reilly, Henderson Global Investors' director of property (Asia).

Blue-chips like Keppel Land and CapitaLand have been among the star performers, rising some 15% since January.

Before the current round of correction, most analysts had cautioned that valuations appeared stretched in the property sector.

However, with prices having eased from their April peak, analysts say investors are looking for opportunities to buy cheap.

"We have been fans of the office sector. Stocks like Keppel Land were well-positioned to benefit from growth. We've been less favourable of the luxury-end of the residential market, which may be peaking out. For example, we won't hold the likes of Wing Tai any further. And we continue to support good quality trusts, such as CapitaMall Trust. We have also looked at the new emerging trusts like Ascendas India," says Henderson's Chris Reilly.

Henderson projects another 10 to 12% upside for Singapore property stocks in the next 12 months, citing potential growth in asset value and the current discount to asset value.

Other factors for Henderson's optimistic outlook on Singapore property stocks include major infrastructure projects, positive capital flows into the Asian real estate market, and the emergence of new REIT classes.

Henderson believes that infrastructure projects like the integrated resorts and the Formula 1 Singapore Grand Prix circuit are poised to fuel the hospitality and logistics sectors.

It also dubs Singapore the next big player in REITs in Asia, projecting significant new REIT listings here this year.

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By Tung Shing Yi, Channel NewsAsia | Posted: 13 August 2007 2004 hrs

SingTel posts 10.4% rise in Q1 profit to S$927m

SINGAPORE : Singapore Telecommunications said on Tuesday that net profit in the first quarter to June rose an annual 10.4 percent to S$927 million (US$609 million), boosted by strong showings in its home turf and regional markets.

The telecommunications firm's first quarter net profit exceeded analysts' expectations of projected earnings of S$856 million to S$877 million.

Operating revenues increased 10.5 percent year-on-year to S$3.57 billion on strong growth in the Singapore market and from wholly-owned Australian unit, SingTel Optus, the telecoms operator said.

"We have made an excellent start to the new financial year with all our key businesses delivering strong earnings growth," said chief executive officer Chua Sock Koong.

"I am extremely pleased to note that growth is broad-based and involves almost every aspect of our business," she said, pointing out the exceptional showing in Singapore and Australia.

Revenues from the Singapore market increased 10 percent to S$1.16 billion, boosted by strong spending amid the city-state's strong economic growth, SingTel said.

Pre-tax contributions from SingTel's regional associates grew 32 percent or S$157 million to S$652 million.

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Posted: 14 August 2007 0811 hrs

Yellow Pages books S$2.7m loss in first quarter

SINGAPORE : Yellow Pages has booked a first quarter loss of S$2.7 million.

This is slightly better than the S$2.8 million loss it recorded for the same period last year.

The telephone directories publisher blamed the loss on the way it recognises revenues.

Revenue for print directories is recognised according to the rate of distribution.

Therefore, the bulk of its revenue is typically recognised in the second and third quarters of the financial year when distribution of directories takes place.

As a result, the first quarter of the financial year typically registers a low level of revenue and a small loss.

For the first quarter, revenue increased 71 percent to S$2 million.

This was mainly driven by increased revenue from Internet Yellow Pages and niche publications.

Expenses rose 13 percent to S$6.6 million due to a number of factors, including higher printing and material costs and an increase in employee benefits.

For the financial year 2008, Yellow Pages has signed sales contracts worth S$49 million, down from the S$52 million in the previous year.

It is hoping to offset the downtrend in advertising in its print directories from its Internet edition.

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By Loh Kim Chin, Channel NewsAsis | Posted: 14 August 2007 1559 hrs

City Developments H1 earnings quadruple to S$321m

SINGAPORE : City Developments (CDL) has reported a first half net profit of S$321 million.

This was nearly four times more than a year ago, as property firms continued to benefit from a booming real estate sector.

Sales rose 35% to more than S$1.5 billion.

The company is proposing a special interim dividend of 10 cents per share.

CDL's property development arm posted the strongest growth of nearly 200% in the first half of this year, contributing S$469 million in revenue.

Hotels remained its biggest contributor, with S$952 million sales in the period, up a milder 8%.

While CDL expects price growth to slow for luxury properties, other market segments are likely to catch up.

Kwek Leng Beng, executive chairman of City Developments, said: "The high-end segment is slowing down, simply because it has gone in a straight line. I think it has increased more than maybe 100%, from the low in 1996 when the market crashed.

As for the mid- and low-end, we are still below the peak of 1996 before the crash. So I think there is room for these mid- to low-end to catch up."

The company is also considering a new strategy of retaining some of its high-end residential properties for lease to take advantage of the demand for rental homes.

Said Kwek: "I have analysed the scenario in Singapore. Literally if not all developers, they build and then they sell off everything. Why? Because this is very capital intensive, and developers require working capital, cash flow, and so on.

"(But) I want to be the pioneer of this - I want to own it. And when I own it, say 15 years down the road, there could be an en bloc sale. I don't have to buy land again. I can just pull down and redevelop."

One likely candidate is its 110-unit Cliveden at Grange project, which the developer is considering retaining two out of five blocks.

CDL said it is also very keen on the hotly contested Beach Road commercial site, for which it has submitted a bid with the Istithmar Group and Elad Properties.

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By Loh Kim Chin, Channel NewsAsia | Posted: 14 August 2007 1815 hrs

Yanlord reports H1 loss of S$19.5m, blames revenue recognition method

SINGAPORE : Yanlord Land swung into the red with a first half loss of S$19.5 million, compared with a profit of S$84 million last year.

It blamed this on the way it recognises sales - upon transfer of the legal title to the buyer.

Revenue for the six months to June fell 71 percent to S$111 million.

Yanlord said its growth potential remains strong, with the bulk of contracted pre-sales progressively recognised in the second half.

This is expected to significantly boost its performance in the coming quarters and drive its full year performance.

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By Loh Kim Chin, Channel NewsAsia | Posted: 14 August 2007 1815 hrs

CAO reports US$140m in Q2 net profit, up from US$8.2m a year ago

SINGAPORE : Jet fuel supplier China Aviation Oil (CAO) posted a net profit of US$140 million for the three months ended in June.

This is up from US$8.2 million a year earlier boosted by a one-off divestment.

Excluding the one-off gain, net profit would have fallen 34 percent to US$5.4 million.

Revenue though rose 850% to US$598 million due to an accounting change.

The company now books its jet fuel contracts using their underlying value as opposed to using commission income received.

In terms of volume, the group supplied nearly 20% less jet fuel on year.

It said although jet fuel demand in China is expected to grow, a rise in domestic jet fuel production is limiting the amount it can sell.

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Posted: 14 August 2007 2327 hrs

SingTel to swap stake in Taiwan telco for share in mobile carrier

SINGAPORE - Singapore Telecommunications (SingTel) said Wednesday it will exchange its 24.51 percent share in Taiwan's fixed-line operator New Century InfoComm Tech for a stake in a Taiwanese mobile phone carrier.

The Singapore telco will have a stake of almost 4.0 percent in Far EasTone Telecommunications as part of the share swap in a transaction valued at 6.09 billion Taiwan dollars (185 million US), it said in a statement.

Under the terms of the transaction, Far EasTone will issue 160.37 million new shares to SingTel in exchange for the 24.51 percent stake in New Century Infocomm Tech.

The transaction is expected to be completed by December 31.

SingTel, Singapore's dominant telecommunications operator, has the largest mobile phone user base in Asia outside of China, totalling 136.35 million subscribers.

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Posted: 15 August 2007 2025 hrs

Hyflux's H1 earnings halved to S$6.6m

INGAPORE: Water treatment firm Hyflux has almost halved its earnings to $6.6 million at half time.

Revenue dropped 27% to S$52 million because of lower municipal sales due to a partial divestment of the SingSpring desalination plant.

But it was a better showing on a quarterly basis.

Hyflux said its second-quarter net profit rose by 113% to S$5.2 million as its industrial sales increased by 23% quarter-on-quarter due to the completion of projects.

Hyflux has been applying its membrane technologies to industries in the pharmaceutical, biotechnology and petrochemical sectors.

Its industrial sales in China continued to be the main revenue driver, contributing 74% of the first-half revenue.

Looking ahead, Hyflux remains optimistic about the prospects of the water treatment and wastewater and used oil recovery sectors, especially in Asia and the Middle East region.

It expects a S$205 million seawater desalination plant in Algeria - a deal signed in March - to contribute to earnings in the coming quarters.

It also aims to grow its industrial business in its key overseas markets in India, Middle East and Northern African regions.

"We're very excited about the industrial sales and how they actually contributed to our quarterly earnings... Throughout the next six months, we believe that the industrial sales will continue to be a key contributor to our revenue and our profits."

On the Singapore Exchange, Hyflux shares ended down 6.4% to S$2.62, after falling 11% on expectations of weaker earnings.

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By Jeana Wong, Channel NewsAsia | Posted: 14 August 2007 2301 hrs

South Africa increasingly seen as investment site for S'pore firms

SINGAPORE : South Africa is being increasingly seen as a potential investment site for Singapore companies.

This is according to the Singapore Business Federation (SBF), which launched the first of a series of information sessions to encourage local companies to venture into new emerging markets.

Singaporean Christina Tan runs a small and medium-sized enterprise out of Johannesburg, South Africa.

Her company, GMT Investcorp, distributes luxury goods like Gucci and Bally to affluent South Africans, and has been growing at an impressive compound annual growth rate of 30%.

"The reason why we went in there was because there were no luxury brands there at the time. We saw that as an opportunity and that's how it all started. It was not easy at the beginning, but we built it up," said Tan, MD of GMT Investcorp.

Christina was among those who went on a Singapore Business Federation mission with 20 other Singapore firms to South Africa in April.

Business deals worth an estimated S$100,000 were concluded, while about S$70 million worth of deals are still under negotiation.

Currently, Singapore firms such as SembCorp Industries and ST Engineering are doing business in South Africa, in areas like logistics and arms procurement.

But the South African high commissioner said Singapore firms should also consider investing in other sectors.

"From steel to mineral, down to petroleum related products, the opportunities are vast. It will always work in terms of what Singapore demands in terms of opportunity," said South African High Commissioner H.E. Zanele Makina.

But SBF warned the high cost of labour in South Africa could be an issue to companies.

"Wages there are tightly regulated, there is a very high minimum wage regime there, and the unions are strong. So you have to worry about getting a proper wage regime in place, before investing in a labour-intensive industry," said M Rajaram, Vice-Chairman of Singapore Business Federation.

Total trade between Singapore and South Africa amounted to more than S$2.4 billion in 2006, a significant increase of 50.2% from the previous year.

Most of the increase in bilateral trade was driven by the increase in exports of petroleum and products.

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By Tung Shing Yi, Channel NewsAsia | Posted: 15 August 2007 1845 hrs

Britain: Electric cars - Charging around the city

How green and safe are they?

SANDWICHED between a large BMW and an even larger Mercedes in the heart of London's theatre district is a parking meter glowing with a surreal blue light. The yellow-painted bay next to it is one of the first in London for recharging electric cars. Its futuristic look is intentional.

Electric cars are the fastest-growing form of transport in Britain's crowded capital. In June 2003 just 49 electric cars slid silently around its streets. A survey in March 2005 found 1,278, and they may have doubled since then. Altogether, London has some 14,000 alternatively fuelled cars, up from 1,800 in 2003.

The most ubiquitous is the tiny plastic G-Wiz, designed in California and built in Bangalore. Economics accounts for most of its growing charm. With a starting price of about £7,000—the hybrid Toyota Prius costs nearly £18,000—it allows Britain's middle classes to make an affordable statement on climate change. Such cars are exempt from London's congestion charge as well as national road taxes. Westminster—Britain's sootiest borough—offers free parking and recharging too.

Whether electric cars help solve the problems of pollution or global warming is a moot point. London's dirtiest vehicles are diesel-powered lorries and buses; removing a few passenger cars will do little for air quality. Exempting them from the congestion charge seems odd: they still take up space on the roads, and Britain's eye-watering petrol taxes give a strong boost to greener cars already.

But they caught the green imagination, and now the G-Wiz, at any rate, may be in trouble. Electric cars have been humming around the roads lightly regulated as quadricycles. When the transport department put one of them through a crash test earlier this year, test dummies were severely injured at impact speeds as low as 35 miles an hour. Importers argue that the tests are absurd for small light cars designed to travel slowly in cities. Nevertheless Stephen Ladyman, the roads minister, wants more tests and tighter regulations.

The market may bring a speedier response. Makers of the rival French-made Mega City electric car point out that their cars are routinely and successfully crash-tested. That has not gone unnoticed by some of the mums on a G-Wiz owners' website. “I bought mine to do the school run,” writes one. “Should I be driving my children in it?”

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May 31st 2007
From The Economist print edition

Britain: Farm payments - Mucked up

Unpaid subsidies provoke calls for blood

ONE of Labour's successes in office has been its management of Britain's economy. But when it comes to more prosaic administrative matters, its record is muckier. A string of procurement disasters, diligently catalogued by spending watchdogs and parliamentary committees, give the impression of chronic incompetence in project management. More evidence came on March 29th, when a committee of MPs issued a scathing report on the Rural Payments Agency (RPA), which is meant to distribute £1.5 billion of European Common Agricultural Policy (CAP) subsidies to British farmers.

The mess was some time in the making. In 2003 the European Commission reformed the CAP, replacing production subsidies with a single payment based on farm size, leaving the RPA in need of a new payment system. Officials at the Department for Environment, Food and Rural Affairs (DEFRA), decided to merge the new system with an existing programme of cost-cutting, begun in 2001 and carried out with the help of Accenture, a consultancy.

Chaos followed. The government missed its own payment deadline of December 2005, as well as a later commitment to pay 96% of the outstanding claims by March 2006. As recently as last December, around 500 farmers were still waiting for their money. Suddenly and unexpectedly deprived of a large chunk of their income, many struggled to cope. “This saga has cost farmers £20m of their own money, and untold stress,” says Peter Kendall, head of the National Farmers' Union.

The catalogue of failures will be familiar to anyone who has followed the dolorous saga of British government procurement. Contracts were changed after being signed, communication between DEFRA, the RPA and Accenture was poor, systems were overly complicated and oversight was lax. More unusual is the fact that the MPs are so very cross. “If accountability is to mean anything at all,” they say rather pompously, “then all those responsible for the RPA failure should consider their positions.” One scalp has already been claimed: Johnston McNeill, the RPA's boss, was forced out in March 2006. Others, however, have so far escaped punishment. Margaret Beckett, in charge of DEFRA at the time, is now the foreign secretary; Sir Brian Bender, DEFRA's most senior civil servant, has moved over to the Department for Trade and Industry.

This fuss may seem overdone given the fact that farming now makes up only around 1% of Britain's economy. But the rest of the country may come to rue DEFRA's incompetence. The EU seems likely to fine Britain for its late payments, and the Treasury has set aside £300m to cover it.

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Mar 29th 2007
From The Economist print edition

Britain: Foot-and-mouth disease - Own goal

Vaccines may prevent an epidemic. They may also have caused this outbreak

BRITONS' most searing memories of their encounter with foot-and-mouth disease in 2001 are of the piles of animals slaughtered to try to stop its spread. Such a draconian policy might have been accepted had the disease been controlled quickly. But its ineffectiveness—more than 6m cows, sheep and pigs were culled before the disease was eradicated—led to widespread revulsion and a government rethink.

Just as in 2001, if an animal is thought to be infected, its herd will be culled and a quarantine zone set up (see map). But this time, unless the disease is stamped out quickly, animals nearby will also be vaccinated to create a “fire-break” across which it is unlikely to travel. Already 300,000 doses of vaccine have been ordered, so that if government vets decide that slaughter alone is unlikely to be effective, they can start vaccinating straight away.

Humans almost never catch foot-and-mouth and it rarely kills the cloven-hooved beasts it affects. But animals produce less milk and meat, so its economic effects are severe. It is also highly contagious: infected livestock produce the virus that causes it in large quantities, and transmit it through saliva, mucus, milk, faeces and even droplets in their breath.

Even so, only countries where foot-and-mouth is endemic, as in parts of Latin America, vaccinate all animals. One reason is cost: the disease is caused by a virus with seven main types and tens of sub-types, with a targeted vaccine needed for each strain and shots repeated, perhaps as often as twice a year. It is also because vaccinating damages exports. Places that are free from foot-and-mouth are unwilling to import vaccinated beasts, or fresh meat from them, because they may still carry the disease.

The fear of being shut out of foreign markets led to the British government's disastrous foot-dragging over vaccination in 2001. But that same year an outbreak in the Netherlands involving 26 farms was brought under control in just one month by vaccinating 200,000 animals. Though healthy, these beasts then had to be culled so that farmers could return to exporting without restrictions as soon as possible.

Not even eternal vigilance on imports can keep a country free of foot-and-mouth disease: the latest outbreak was apparently caused by a breach of bio-security at the Pirbright laboratory complex in Surrey, where government researchers keep the live virus for vaccine research and Merial, an American animal-health company, manufactures vaccine for export. Human action, accidental or deliberate, seems likely to have been involved.

Ironically, one reason for eschewing vaccination is that although it provides the best hope of dealing with outbreaks, maintaining the capacity to produce vaccine is itself a risky business. Many earlier episodes of foot-and-mouth in countries normally free from the disease have been caused by laboratory escapes; in 1970 a leak from Pirbright's isolation facilities was fortunately contained.

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Aug 9th 2007
From The Economist print edition

Europe: Denmark's bridges - Crossing the waters

The Danes' enthusiasm for more bridges just keeps growing

A LOVE of bridges is understandable in a country with 400 islands. Denmark boasts two of the world's most impressive: the Great Belt bridge linking east and west Denmark, and the Oresund bridge spanning the strait between Sweden and Denmark. Bridge-lovers are rejoicing after the government announced plans for the biggest bridge yet: a 19-kilometre (12-mile) colossus across the Fehmarn strait between Denmark and Germany.

The hope is that the bridge, with four motorway lanes and two rail tracks, will be a fast artery linking Copenhagen with Hamburg. Construction is expected to start in 2011 and finish in 2018. Yet the plan has triggered worry and envy. Worriers, notably the far-right Danish People's Party (DPP), are miffed that Denmark is to pay the €4.7 billion ($6.5 billion) cost alone. The government says taking sole financial responsibility (and ownership) was the only way to win German agreement. Envy is seen in calls for a new Kattegat bridge to cut the three-hour train journey between Copenhagen and Aarhus, Denmark's second city, to 30 minutes. This would cost twice as much as the Fehmarn link. Yet politicians are making encouraging noises.

The enthusiasm has a simple explanation: big bridges have been huge successes. The Oresund gets rave reviews and lots of traffic. Higher toll revenues have cut the bridge's debt-repayment schedule from 35 to 33 years. Yet even this bridge has enemies. Earlier this year the DPP grumbled that it was a conduit for immigrants, undermining Denmark's strict controls. In 2006 Sweden gave out 47,500 permanent residence permits to refugees and immigrants; Denmark gave out only 5,300. The DPP argues that, once the foreigners are in Sweden, they may flood over the bridge.

In fact, it is Sweden, not Denmark, that is being invaded. Since 1999, before the bridge opened, the number of Danes going to live in southern Sweden has risen sevenfold. One forecast suggests that southern Sweden's population of resident Danes may rise from today's 20,000 to over 150,000 in 20 years' time. This has two causes: houses and cars, which are both much cheaper in Sweden. Traffic the other way also has an economic cause: Swedes who commute to jobs in Copenhagen can earn 20% more disposable income, despite the tolls. Benefits for commuters and migrants leave Swedes unworried by tales of Danish ghettos in Malmo.

Local politicians applaud an outperforming economy. Copenhagen's growth is expected to be 3% in 2007, compared with a national average of 2.3%. The Malmo region may grow by 4.2%, against a Swedish average of 3.7%. The DPP's carping thus strikes a discordant note. Anders Olshov, chief executive of the Swedish-based Oresund Institute, a think-tank, says dismissively that it is sad that Denmark has a party bent on isolating the country “like a Nordic Albania”.

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Aug 9th 2007 | COPENHAGEN AND MALMO
From The Economist print edition

Stock Focus: Global 2000 Winners And Losers

Mainland China continues to secure its place as a global economic force, claming 44 spots in the Forbes Global 2000, our annual tabulation of the world's largest public companies. In 2006, China had 28 companies on our list. Such explosive growth is not without its risks. In late February, the Chinese market slipped 10%, pushing down exchanges worldwide, but Chinese stocks quickly rebounded and drove the market to new highs. Out of the 10 best-performing stocks in the Forbes Global 2000 over the past year, six hail from China.

For the year ended Feb. 28, 2007, the Global 2000 shows an average price gain of 17%, compared with an increase of 10% for the Standard & Poor's 500. The six winners from China have an average gain of 241%; all 28 Chinese stocks from last year are up an average of 38%.

Chinese investment trust Citic Securities, up 481%, leads the list of Global 2000 stock market stars. Based on our Global 2000 composite ranking for sales, profits, assets and market value, Citic, a newcomer to the list, ranks 1740 in its Global 2000 debut. Security analysts expect the $14.3 billion (market value) investment company to increase profits by 75% in 2007. Despite the expected growth, shares of Citic look pricey, currently trading for 33 times estimated 2007 profits of $0.21 per share.

Over the past year, shares of Shanghai Automotive (No. 1841) and Wuhan Iron & Steel (No. 1062) are up 270% and 196%, respectively. Shanghai Automotive has yet to report 2006 results, but security analysts reporting to Thomson IBES are looking for a 33% increase in profits in 2007 for the Chinese automaker, and for annual earnings growth at a 25% clip over the next three to five years. Analysts are less optimistic about the earnings prospects of Wuhan Steel, where they expect to see a 25% dip in profits this year.

Among other winners, Spain's Grupo Inmocaral (No. 1346) and Singapore's Golden-Agri Resources (No. 1868) finished second and third in terms of 52-week price change, up 312% and 280%, respectively. Golden-Agri Resources, which cultivates, refines and distributes palm oil used for cooking, recently reported 2006 sales of $1.2 billion, a 42% year-over-year increase. Golden’s net profits jumped to $485 million, over six times 2005 net earnings.

The biggest Global 2000 losers? Scottish Re Group (No. 1956), headquartered in Bermuda, saw its shares drop 85% in 2006. After six consecutive years of annual revenue growth in excess of 50%, reinsurance provider Scottish Re's revenue slipped 5%, to $1.9 billion, and the company had to address liquidity concerns after posting a net loss of $367 million in 2006. In March, shareholders approved a $600 million equity investment by MassMutual Capital Partners and private equity firm Cerberus Capital, which, when finalized, will give the two companies a controlling equity stake. Other losers include Doral Financial (No. 1942) and Saudi Electricity (No. 706), which lost 81% and 70%, respectively.

Global 2000 Stock Market Winners

Rank	Company	Industry	Country	Price	52-Week Price Change	Market Value ($mil)
1740	Citic Securities	Diversified financials	China	$4.79	481%	$14,294
1346	Grupo Inmocaral	Food drink & tobacco	Spain	7.05	312	9,559
1868	Golden Agri-Resources	Food drink & tobacco	Singapore	1.14	280	3,838
1841	Shanghai Automotive	Consumer durables	China	1.69	270	11,104
1062	Wuhan Iron & Steel	Materials	China	1.10	196	8,648
805	Minmetals Development	Trading companies	China	1.82	181	1,501
1465	Shenzhen Development Bank	Banking	China	2.46	179	4,789
1877	IntercontinentalExchange	Diversified financials	U.S.	150.77	175	10,381
1411	Charter Communications	Media	U.S.	3.01	162	1,285
604	China Merchants Bank	Banking	China	2.08	141	33,187

All figures in U.S. dollars, as of Feb. 28.

Sources: FT Interactive Data, Reuters Fundamentals and Worldscope via FactSet Research Systems; Bloomberg Financial Markets; Forbes.

Global 2000 Stock Market Losers

Rank	Company	Industry	Country	Price	52-Week Price Change	Market Value ($mil)
1956	Scottish Re Group	Insurance	Bermuda	$3.68	-1%	$223
1942	Doral Financial	Banking	U.S.	2.17	-81	234
706	Saudi Electricity	Utilities	Saudi Arabia	3.53	-70	14,721
1995	Fremont General	Diversified financials	U.S.	8.81	-63	686
1109	Advanced Micro Devices	Semiconductors	U.S.	15.07	-61	8,267
853	Riyad Bank	Banking	Saudi Arabia	16.13	-61	10,083
640	Al Rajhi Bank	Banking	Saudi Arabia	27.86	-60	37,617
973	Aiful	Diversified financials	Japan	27.18	-59	3,849
1290	Sumitomo Mitsui Construction	Construction	Japan	2.34	-57	194
1550	Orient	Diversified financials	Japan	1.59	-55	1,373

All figures in U.S. dollars, as of Feb. 28.

Sources: FT Interactive Data, Reuters Fundamentals and Worldscope via FactSet Research Systems; Bloomberg Financial Markets; Forbes.

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Paul M. Murdock, 04.05.07, 8:30 AM ET

International Investing Guide: Nomura's Shailesh Jaitly And Chitra Gopal

Analyst: Shailesh Jaitly and Chitra Gopal
Firm: Nomura
Industry: Information Technology
Rank: 2

In 2005, StarMine ranked Shailesh Jaitly and Chitra Gopal the number-one stock pickers in information technology in Singapore and Malaysia. Singapore's Unisteel Technology, which makes fasteners and other precision components for technology equipment and provides surface treatments for metal and plastic components, is the only stock Shailesh Jaitly is recommending this year. (Fifth-ranked Anuj Sehgal also picked this stock.) Last year, Jaitly maintained a "buy" on Unisteel Technology throughout the year, and the stock gained 29%.

Jaitly also had a "strong buy" recommendation on Singapore electronics-manufacturing company GES International for the first 11 months of 2005, as the stock rose 39% during that period. Another lucrative call by Jaitly last year was his year-long "buy" rating on another Singapore electronics manufacturer Jurong Technologies, which posted a 34% gain.

Top Pick:

Unisteel Technology

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Kate DuBose Tomassi, 07.06.06, 6:00 PM ET

Yahoo edges Google in US user satisfaction survey

NEW YORK, Aug 14 (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research) may be struggling to convince Wall Street of its future prospects, but for the first time its users gave its services overall a better rating than what Google Inc (GOOG.O: Quote, Profile, Research) received, according to a study released on Tuesday.

Data from the University of Michigan American Consumer Satisfaction Index (ACSI) showed Yahoo had seen its customer satisfaction score rise 3.9 percent from a year ago to 79 out of 100 points, while Google's rating fell about 3.7 percent to 78 points.

While Google remains the dominant Web search engine, Yahoo's Internet presence is gaining user approval for its network of Web sites, e-mail, social networks and other features, according to the survey.

The positive perception of Yahoo stems from a relaunch of the main site and its various offshoots which are now gaining ground, said Larry Freed, chief executive of ForeSee Results, which sponsored the ACSI report.

"People have gotten comfortable with the (Yahoo) interface," he said. "They've also done a good job in continuing to be dominant in communities and sub-functions of the portal. That's always been Yahoo's strength."

While Google's search functions remain strong, when it comes to the Web, customers look for marked improvements from year to year to say they are more satisfied, he said.

"For the average consumer, what you see with Google is what you saw three years ago," Freed told Reuters. While Google has developed its own e-mail, desktop office and chat applications, among other features, they have not drawn enough attention to them among regular users, he said.

"Google needs to figure out a way to take advantage of those great applications they've developed," Freed said. "Not necessarily through advertising, but better marketing."

Smaller rivals vary in their appeal to Web users.

IAC/InterActiveCorp.'s (IACI.O: Quote, Profile, Research) Ask.com search engine rose markedly in customer satisfaction ratings, up 5.6 percent to 75 points as it improved its search technology and embarked on an ambitious advertising campaign rare for the sector.

Time Warner Inc.'s (TWX.N: Quote, Profile, Research) AOL, which has moved its focus from Internet access services to become an ad-supported source of e-mail and entertainment, slipped more than 9 percent to a score of 67 points.

ForeSee said AOL's score was only slightly higher than the customer satisfaction levels earned by some U.S. government agencies also measured by ACSI, most notably the Internal Revenue Service tax authority.

The ACSI method uses data from interviews of nearly 70,000 customers to measure satisfaction with more than 200 companies in 45 industries. The Internet business data was compiled in the second quarter with at least 250 respondents for each company studied.

((Editing by Braden Reddall; Reuters Messaging: michele.gershberg.reuters.com@reuters.net; +1-646-223-6185)) Keywords: INTERNET STUDY/

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Tue Aug 14, 2007 1:00AM EDT
By Michele Gershberg

RBS group builds 3.25 pct stake in ABN AMRO

(adds detail, background)

LONDON/AMSTERDAM, Aug 14 (Reuters) - A consortium of European banks seeking to win a bid battle for ABN AMRO (AAH.AS: Quote, Profile, Research) against Britain's Barclays (BARC.L: Quote, Profile, Research) said on Tuesday it had built up a 3.25 percent stake in the Dutch bank.

The consortium -- Royal Bank of Scotland (RBS.L: Quote, Profile, Research), Spain's Santander (SAN.MC: Quote, Profile, Research) and Belgian-Dutch group Fortis (FOR.BR: Quote, Profile, Research) -- said it had bought 40.76 million ABN AMRO shares on Friday and Monday at an average price of 33.81 euros.

That is below the value of both its own 71 billion euro ($97 billion) bid for ABN AMRO and a rival offer, currently worth about 64 billion euros or 34 euros a share, from Barclays.

ABN AMRO shares closed on Monday at 34.48 euros after a steep fall last week amid fears that recent market turmoil might lead the consortium to withdraw its largely cash bid. The Barclays offer includes a larger proportion of equity.

Either bid for ABN AMRO would be the world's biggest ever bank takeover. Barclays received regulatory approval to buy ABN from the Dutch Finance Ministry on Monday. The RBS-led consortium expects a decision from the ministry by mid-September.

((Reporting by Reed Stevenson and Mark Potter; Editing by David Cowell; Reuters Messaging: reed.stevenson.reuters.com@reuters.net; +31 20 504 5002))

($1=.7301 Euro) Keywords: ABNAMRO TAKEOVER/

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Tue Aug 14, 2007 2:45AM EDT

Barclays gets Dutch approval to buy ABN

(Adds comment from Dutch finance minister paragraph 5)

AMSTERDAM, Aug 13 (Reuters) - British bank Barclays (BARC.L: Quote, Profile, Research) received Dutch regulatory approval to buy rival ABN AMRO (AAH.AS: Quote, Profile, Research), it said on Monday, as ABN's share price showed little signs of recovery after Friday's beating.

Barclays is offering about 64 billion euros ($87.7 billion) for the Netherlands' biggest bank, while Royal Bank of Scotland (RBS.L: Quote, Profile, Research), together with Belgian-Dutch Fortis (FOR.BR: Quote, Profile, Research) and Spain's Santander (SAN.MC: Quote, Profile, Research), has made a mostly cash 71 billion euros bid for ABN.

Barclays said it had received a "declaration of no objection" from the Dutch Finance Ministry, in conjunction with the country's central bank.

"A possible merger of Barclays and ABN AMRO raises no objections from Finance Minister Wouter Bos," the Dutch Finance Ministry said in a statement.

Bos said he had concluded a merger would not endanger financial stability in the country. A decision on the consortium's plans was a "separate matter" but he hoped to give a ruling shortly, he said, according to Dutch news agency ANP.

The RBS-led consortium expects a decision from the Dutch Finance Ministry by mid-September.

Shares in ABN AMRO rebounded 1.9 percent to 34.48 euros on Monday after closing down 3.5 percent in Friday's stock market sell-off, but they are still almost 10 percent below the value of the offer from the RBS-led consortium, which is widely expected to win the takeover battle.

Barclays' bid is currently worth about 34 euros per ABN share. The consortium's offer is worth just over 38 euros.

"The consortium's offer is still uncertain. If something happens to the consortium, you fall back to Barclays' bid," said AEK analyst Carlo Ponfoort, adding there was uncertainty over the consortium obtaining regulatory approval and getting funds.

ABN shares fell as much as 11 percent on Friday amid worries Fortis might not be able to obtain 24 billion in financing it needs for its part of the deal, but Fortis said it was confident about its financing plans.

Analysts said Fortis' financing concerns kept ABN shares close to Barclays' bid value, but believed Fortis and the consortium would still be able to fund the deal despite current fears of a credit squeeze.

"There's a lot of money to be raised, but it would need things to get a lot worse for people to think they can't do this. It shouldn't be an issue, just a bit more expensive," said an analyst, who declined to be named.

The gap between the consortium's offer and ABN's share price could also reflect problems that may surface during due diligence, analysts said.

"It seems the market feels there is more, that some party knows something. Based on public information I see no reason why the shares should be so much lower," Theodoor Gilissen analyst Gert-Jaap Kraan said.

(Reporting by Gilbert Kreijger, additional reporting by Steve Slater in London)

((Editing by Erica Billingham, Paul Bolding, Leslie Gevirtz, Phil Berlowitz; gilbert.kreijger@reuters.com; Reuters Messaging: gilbert.kreijger.reuters.com@reuters.net; +31 20 504 5007))

($1=.7301 Euro) Keywords: ABNAMRO TAKEOVER/BARCLAYS

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Mon Aug 13, 2007 4:38PM EDT

Investors beginning to scent buying opportunities

LONDON (Reuters) - With world stocks have fallen more than 7 percent in a month and some indexes down more than 10 percent from their highs, some market players are saying the time is near to buy.

Investment bank Morgan Stanley said on Monday, for example, that it was recommending a move into equities now.

"Time to buy equities again," it said in a note to clients. "The risk-reward of buying equities on a 6-12 month view is much better now than a few months ago."

Similar themes are being sounded by others.

Wealth manager Brewin Dolphin said last week that stocks were oversold and that it was time to buy, while Henderson Global Investors said on Monday that last week's falls in equity markets had created value for long-term investors.

MSCI's main world stock index was up on Monday but has fallen nearly 7.2 percent from an all-time high less than a month ago on July 20. Its emerging markets counterpart (.MSCIEF: Quote, Profile, Research) has lost 9.8 percent since July 24.

The losses have been driven by worries that credit is drying up as a result of problems in the U.S. mortgage sector. Central banks have had to step in to pump money into banking systems.

But one result of the falls has been to make equities cheaper and to begin to attract interest accordingly.

So investors who believe that the credit crisis will ultimately be manageable are at least thinking about looking to find bargains even if they are far from certain that recent volatility is over.

"During periods such as this investors cannot afford to be complacent," Paul Niven, head of asset allocation at F&C Investments, said in a note.

He added, however: "We may well see some further downside in equity markets in coming days and weeks but upside risks to the end of the year, from current levels, lead to interest in adding to equity positions at current levels."

Peter Toogood, chief investment officer at Forsyth Partners, noting that stock valuations are "compelling," echoed the sentiment in a note.

"We are not blase about the risks, but opportunities never present themselves in the good times," he said.

(Additional reporting by Natsuko Waki)

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Mon Aug 13, 2007 9:04AM EDT
By Jeremy Gaunt, European Investment Correspondent

Starbucks aims high for its consumer products brand

SEATTLE (Reuters) - Starbucks Corp. (SBUX.O: Quote, Profile, Research) sees ample room for growth in selling Starbucks-branded products such as coffee beans, ice cream and chocolate in supermarkets and convenience stores, a company executive said on Monday.

Gerry Lopez, president of Starbucks' consumer products group, said the company is still far from maximizing its opportunities to sell the coffee chain's branded goods to outside retailers.

Lopez's challenge is to expand the Starbucks brand, already seen by many as ubiquitous, to areas outside of its stores without diluting a brand strong enough to drive people to pay a hefty premium for a cup of coffee.

The main opportunity, according to Lopez, comes from the sales of Starbucks coffee beans, or packaged coffee, to supermarkets where sales of premium coffee are growing at more than 10 percent a year in the face of flat to lower overall coffee sales.

"We are far from hitting the limit on this thing," said Lopez in an interview with Reuters. "Clearly, there is a lot of runway down there."

Starbucks sold 56 million lbs (25.4 million kg) of packaged coffee at supermarkets and other retailers last year. It sells packaged coffee with joint venture partner Kraft Foods Inc. (KFT.N: Quote, Profile, Research), accounting for about 4 percent of U.S. market share.

Packaged coffees account for about two-thirds of the consumer products group's revenue, which reported a 24 percent increase in net revenue to $87.1 million in the quarter ended July 1. The segment accounts for nearly 20 percent of Starbucks' total operating profit.

The coffee chain said mainstream U.S. coffee brands like Folgers, manufactured by Procter & Gamble (PG.N: Quote, Profile, Research), and Maxwell House from Kraft account for about 50 percent of supermarket coffee sales.

However, as consumers become more educated about a product category like coffee or wine, they often consume more premium brands. Starbucks said it can sell its coffee beans at more than three times the price of mainstream brands.

"Given the option for quality, people will exercise it. We are proof of that," said Lopez.

In line with that strategy, Starbucks said it plans to start selling "Limited Reserve" coffees in U.S. supermarkets. It will offer bags of rare coffee beans from high-end farms in Asia, Latin America and Africa.

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Mon Aug 13, 2007 10:57PM EDT
By Daisuke Wakabayashi

Economist Intelligence Unit Briefing: Rising investment

Why is Indonesia is attracting investors?

Foreign investment in Indonesia has risen sharply, but there are renewed concerns about the country's investor-friendliness following the release in June of revised foreign ownership limits. Although the new rules aim to provide greater clarity over the permitted levels of foreign participation in different sectors, the reforms send a mixed signal to investors regarding the future direction of investment policy.

Realised foreign direct investment (FDI) in the first half of the year rose to US$3.5bn, up by 17% year on year, according to the Investment Co-ordinating Board (BKPM). Domestic investment rose to Rp28.4trn (US$3bn) in the same period, up from Rp11.2trn in the year-earlier period.

The combined value of approved foreign and domestic investment projects rose by nearly 53% year on year in the first six months of 2007. The data offer encouraging signs of an upturn in new investment, although this has not yet been corroborated by other measures, such as direct investment flows in the capital account and imports of capital goods.

A revised "negative investment list", published in June, sets out those industries that are subject to limits on foreign investment. In total, the list specifies 338 industrial subsectors, but in the main serves to clarify existing restrictions rather than impose new ones, and more industries have been opened to greater foreign investment than have been closed. Important industries that remain open to foreign investment include banking, where foreign investors are allowed to hold a controlling stake of up to 99%; power generation, oil and gas, toll-road operation, water, agriculture and plantations (all of which are subject to a ceiling of 95%); insurance (80%); pharmaceuticals (75%); health services (65%); and construction (55%).

However, tighter restrictions have been introduced in the telecommunications sector. Under the new regulations, foreign investors can own up to 65% of mobile-telephone operators (compared with a previous limit of 95%) and 49% of fixed-line phone companies, down from 95%. There had been fears of even tighter restrictions, largely as a result of growing nationalist ire at Singaporean interests in the local telecoms industry

In addition, 25 industries are closed to foreign investment, up from 11 previously, although this reflects a more detailed specification rather than the introduction of additional restrictions. Closed industries include public health, culture and the environment. The new rules will not be applied retroactively.

In many cases, the varying limits on holdings are likely to make little practical difference to foreign investors as long as foreign majority ownership is permitted. Nonetheless, the new restrictions could deter foreigners in two ways. First, the changes generate uncertainty over the future direction of investment policy. Second, to the extent that foreign investment in the telecommunications and transport sectors (two weak points in Indonesia's poor infrastructure network) is deterred, improvement in Indonesia's infrastructure will be retarded, making foreigners more reluctant to invest in other sectors.

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Aug 13th 2007
From the Economist Intelligence Unit ViewsWire

Sticking With Sweden's Strength

Sweden, which has been a constitutional monarchy since 1809, is ranked as having the best creativity in Europe for business and is a talent magnet for the world’s most educated workers.

The book The Flight of the Creative Class by Richard Florida includes an index to measure the kind of creativity most useful to business--talent, technology and flexibility--and it found Sweden to be the No. 1 spot in Europe and the world. The top 10 countries, in descending order, are: Sweden, Japan, Finland, the United States, Switzerland, Denmark, Iceland, the Netherlands, Norway and Germany.

The Kingdom of Sweden, with a population of 9 million people and an area exceeding that of California, has many attributes that investors should appreciate. King Carl Gustav has reigned since 1973 over a well educated citizenry. It is blessed with ample natural resources like iron ore, copper, gold, timber, lead, zinc and hydro power, but 70% of its economy is driven by services. Sweden’s per capita gross domestic product is $30,000, and it has a government budget surplus, current account surplus, and it opted out of participation in the euro in 2003.

While Sweden's industry is primarily in private hands, the recently elected center-right coalition led by Prime Minister Fredrik Reinfeldt is moving ahead with promises to privatize up to 47 companies that may collectively fetch as much as $100 billion. This, in addition to Sweden’s fiscal discipline, tradition of craftsmanship and ample natural resources, adds to the allure of this market.

The strength and stability of the Swedish Krona is another big attraction. The Swedish Riksbank, the oldest central bank in the world, this week raised its benchmark interest rate to 3.25% and is currently focusing on price stability with an inflation target of 2%.

We have had the Swedish exchange-traded fund, the iShares MSCI Sweden Index, and from time to time the CurrencyShares Swedish Krona Trust in some portfolios with positive results. The EWD is up 37.6% over the last 12 months. LM Ericsson Telephone accounts for 21% of the basket, with quality companies like Svenska, Sandvik, Volvo AB and Atlas Copco all top-10 holdings that readers might be familiar with. Capital goods, technology and banking each contribute about 20% of sector exposure for good balance and diversification. Plus, while the main Copenhagen and Swiss indexes are trading at 19.5 earnings, Sweden is trading at 14 times earnings.

Here are some point and figure charts from my partner Don Smith for EWD and FXS.

A quick review of EWD paints a story of demand. As you can clearly see from the above point & figure chart, all but just a few months since the inception of this ETF have been in demand. A hundred shares of this ETF would have cost you $2,296 back on Jan. 3, 2006. Today that investment would be worth $3,285 for a growth of 43.07%.

FXS is a new issue that seeks to track the price of the Swedish Krona, net of trust expenses. The green shade line above represents the cost basis of one share at the issue date of June 6, 2006. One obvious pattern of this FXS is its volatility. There have been 17 reversals in nine short months with an overall gain of 4.28%.

Carl Delfeld is leading a trip to Stockholm and Copenhagen during the third week of June 2007. Organized by luxury travel company Abercrombie & Kent, participants will visit major companies like LM Ericsson and Volvo, stock exchanges in Copenhagen and Stockholm, and will receive briefings on investment opportunities in both countries.

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Carl Delfeld, Chartwell ETF Advisor 02.23.07, 11:30 AM ET

Adviser Soapbox: Betting On An Oracle Breakout

Given the strong bull run in the equity markets over the past year, there is no doubt that some of the recent sell-off over the past week was due to profit taking. Shares of Oracle provided no shelter from the sell-off in the equity markets over the past week or so, falling about 7% in the last five trading days of July.

Yet the company's impressive growth in recent periods, bright near-term outlook and dominant (and growing) market position suggest that the stock should not be so easily dismissed. Indeed, the quantitative model we employ for the Forbes Growth Investor concurs, indicating that the stock is set to rebound from its recent dip and continue on its upward path.

Oracle is the leading global provider of enterprise software, which is used to improve productivity and efficiency by managing information on an organization-wide level. Typically, this is done through a suite of programs that can be tailored to each customer's unique requirements.

The software also helps ensure the proper flow, management and integration of all kinds of data and functions including inventory, product fulfillment, billing and payment processing.

Almost 80% of Oracle's revenues come from its software business. About 41% of these software revenues are derived from the issuance of new software licenses, which grant customers the right to use the company's software products. Offerings consist of scalable database and middleware grid products, which manage and support Oracle-developed and competing infrastructure products and applications.

Oracle also offers applications software that enables the efficient management of core business functions. Products include customer relationship management (CRM) applications that manage billing, delivery, sales and services solutions, and enterprise resource planning (ERP) applications that automate and integrate important global business processes such as manufacturing, accounts receivable, purchasing, transportation and human resources.

The remainder of software revenues comes from software license updates and product support services, which entitle customers to upgrades, maintenance releases and patches that are made available during the support period.

The rest of the company's revenues are derived from software support services. These consist of consulting services that help customers deploy Oracle's software products and applications; on-demand services, which provide multi-feature software and hardware management, and maintenance services for customers deploying software products from a data center facility; and training, education and certification programs.

As companies grow larger, their need for enterprise software expands and becomes more critical. Over the past three years, ORCL has turned to acquisitions to help satisfy this growth. It acquired PeopleSoft for $11.1 billion in 2005 in a well-publicized hostile takeover. It paid $6.1 billion in 2006 for Siebel Systems. Last quarter it paid $3.3 billion to acquire Hyperion Solutions.

The revenue contribution from these acquisitions is substantial, yet their true value lies in the breadth they provide. For example, PeopleSoft significantly augmented Oracle's ERP offerings. Siebel Systems instantly made ORCL a market leader in CRM software.

In addition, by acquiring companies with established expertise and brand awareness in key opportunistic areas, ORCL has been able to speed its entry and growth into new or under-tapped markets. The numerous cross-selling opportunities have led to market share gains at the cost of rivals such as SAP, IBM and Microsoft.

The success of this acquisition strategy is apparent in ORCL's operating performance. Fiscal 2007 total revenues rose 25% year-over-year to $18 billion. The software and services segments gained 23% and 33%, respectively. The pro forma operating profit margin improved 39 basis points from the prior year to 40.76%. Pro forma net income jumped 25% to $5.31 billion, or $1.01 per share. GAAP net income climbed 26% to $4.28 billion, or 81 cents per share.

Oracle's recent success has largely been the result of its successful integration of acquisitions and realization of synergies. We expect this to continue. Indeed, ORCL very recently acquired Agile Software, a provider of product lifecycle management (PLM) solutions, and it plans to acquire anti-online identity theft and fraud software developer Bharosa soon.

The company also continues to improve existing products. For example, it recently introduced the next generation Oracle Fusion Middleware and it launched Oracle Database 11g, the latest version of its leading database software.

Taesik Yoon is senior equity analyst and associate editor of Forbes Growth Investor and Forbes Special Situation Survey. Click here for details on model portfolio holdings and recent buys and sells.

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Taesik Yoon, Forbes Growth Investor 08.03.07, 10:06 AM ET

Adviser SoapboxEnergy Stocks With A Full Tank

David Wright, Upside 08.09.07, 12:16 PM ET

Guru Screen: Five Steady Eddies From The Market Legends

Feeling a little market-wary? A lot of investors seem to be lately.

From July 19 to Aug. 7, the Dow Jones industrial average shed 3.5%. But if you're thinking of pulling money out of the market, I'd advise you to think again.

Sure, the Dow as a whole has taken some hits over the past few weeks, but the index had generated a total return of 9.7% so far in 2007 (through the close of trading on Aug. 7).

There are also plenty of stocks that have held or increased their value through the recent volatility, including some within the Dow itself. What's more, some of these Dow components get approval from my "guru strategies" I run on my investment research Web site, Validea.com.

These large-cap, well-known firms have the size, market share and name recognition that offer stability in tough times (and they aren't the type of firms that would be affected directly by the current credit worries).

Here's a look at some of the strong Dow performers that could offer you stability if you're getting skittish and help you reduce the volatility of your portfolio.

Verizon Communications: Formed in 2000 when Bell Atlantic and GTE merged, Verizon co-owns Verizon Wireless, one of the nation's largest cellular phone service providers; Vodafone is the other co-owner. In addition, the New York-based telecommunications giant offers broadband, wireless and wireline communications for customers that range from private citizens to businesses to government agencies.

During the period in which the Dow dropped about 3.5%, Verizon managed to gain about 2%, and my guru-based models think the firm is headed for further gains. The company gets approval from two of my strategies, those that I base on the writings of James O'Shaughnessy and Peter Lynch.

When looking for value stocks, O'Shaughnessy targets large companies because they have solid and stable earnings--just the kind of investment that can provide stability in volatile times--so the strategy I base on his writings requires stocks to have a market cap of at least $1 billion. With a $125.1 billion cap, Verizon is one of the biggest companies in the world, easily meeting this criterion.

O'Shaughnessy also compares stocks to the market average in a number of ways when looking for value buys, including cash flow per share. My O'Shaughnessy-based model requires companies to have a cash flow per share greater than the market mean, and Verizon's cash flow, at $7.38 per share, more than quadruples the market mean of $1.56.

Another way O'Shaughnessy looks for large, stable companies is by requiring a firm's trailing 12-month sales to be 1.5 times the market average. Verizon, with sales of $90.9 billion, easily exceeds 1.5 times the market mean ($17.8 billion), passing this test.

One more reason Verizon gets high marks from my O'Shaughnessy-based model: its 3.76% dividend yield.

It's interesting to note that, while my O'Shaughnessy model sees Verizon as a value stock, my Lynch-based strategy views it not just as a growth stock but as a "fast-grower" because of its 24.15% earnings-per-share growth rate (based on the average of the three-, four- and five-year EPS figures). The company has the size and stability that O'Shaughnessy likes in value stocks, and the strong growth that Lynch likes in fast-growers, a distinction that only about two-dozen other companies can currently claim.

To identify growth stocks that are still selling at a good price, Lynch uses the P/E/growth ratio, which divides a stock's price-to-earnings ratio by its growth rate. P/E/G ratios below 1.0 are acceptable, with those under 0.5 the best case. With a P/E ratio of 20.54 and that 24.15% growth rate, Verizon sports a 0.85 P/E/G, passing my Lynch-based model's most important test.

Lynch also doesn't like companies with a lot of debt, and the model I base on his writings requires companies to have debt-to-equity ratios no higher than 80%. At 65.27%, Verizon's debt/equity ratio isn't great, but it is good enough to pass this test.

Johnson & Johnson: At $180 billion, Johnson & Johnson has the largest market capitalization of any major drug firm. The New Jersey-based giant has more than 250 operating companies that make a myriad of drugs and other health care products, with brands that include Tylenol, Band-Aid and Neutrogena, to name just a few. The company has posted 73 consecutive years of sales increases and 44 consecutive years of dividend increases, according to its Web site, and employs approximately 116,200 people worldwide.

Johnson & Johnson, which has remained about flat since the July 19 downturn, also gets approval from my O'Shaughnessy- and Lynch-based strategies. My O'Shaughnessy-based model likes that $179.8 billion market cap, which easily exceeds the strategy's $1 billion minimum and shows that the firm has the kind of size that can offer stability in tough times.

In addition, Johnson & Johnson stacks up well using my O'Shaughnessy-based market comparisons. The firm's cash flow, $4.57 per share, nearly triples the current market mean of $1.56, while its trailing 12-month sales of $57.1 billion far exceed 1.5 times the $17.8 billion market mean, passing two of this model's tests.

My Lynch-based model, meanwhile, considers Johnson & Johnson a "stalwart" because of its moderate growth rate (15.16%, based on the average of the three-, four- and five-year EPS figures) and multibillion-dollar sales ($57.1 billion). Lynch usually keeps a few stalwarts in his portfolio because their stability offers protection during hard times.

For dividend-paying stalwarts like JNJ, Lynch still looks for P/E/G ratios below 1.0, adjusting for yield. With a yield-adjusted P/E/G of 0.97, JNJ passes the test.

In addition, Johnson & Johnson's debt/equity ratio of 17.03% indicates that the firm is in good financial condition, according to this method.

AT&T: Headquartered in San Antonio, AT&T is the largest communications holding company in the world, based on its $90 billion in trailing 12-month revenues. It provides landline and cellular telephone service, with its recent merger with Cingular giving it almost 64 million cellphone subscribers. AT&T also provides broadband and wi-fi Internet access, and is one of the world's largest providers of Internet Protocol-based communications services for businesses. In addition, it is the country's largest telephone directory publisher, delivering more 178 million directories a year.

AT&T, which has posted small gains during the most recent bout of market volatility, is another stock that gets approval from my O'Shaughnessy-based value model. Its $246 billion market cap is a harbinger of strong and stable earnings, while its $90 billion in trailing 12-month sales is another indication of stability.

AT&T's cash flow per share, $4.23, more than doubles the market mean, another reason it gets approval from my O'Shaughnessy-based strategy. In addition, the firm has a strong dividend yield (3.51%), which this model likes.

The Walt Disney Co.: What began as a small film studio located in the rear of a Los Angeles realty office some 84 years ago has grown into an entertainment empire, and one of the most recognizable corporations in the world. Disney, which has a market cap of $67.1 billion and is now based in Burbank, Calif., today distributes an array of motion pictures and music, produces Broadway musicals and other live performances, creates a myriad of children's toys and owns the ABC and ESPN television networks, And, of course, it runs Disney World, Disneyland and other theme parks and cruise lines around the globe.

Disney has stayed about flat over the past couple volatile weeks, and my Lynch-based strategy is high on its future. With a P/E ratio of 16.05 and a growth rate of 45.32% (based on the average of the three-, four- and five-year EPS figures), Disney has a 0.35 P/E/G ratio, which falls into the best-case category on this model's most important test. (I should note that that growth rate will be tough to maintain over the long haul, but even if Disney grows at half that 45.32% rate, it should be well off.)

With a 43.33% debt/equity ratio, Disney also has the kind of financing that my Lynch-based model likes.

Hewlett-Packard: Founded in 1939, this California-based technology firm offers a variety of products, including computers and software, mobile-computing devices, printers, and storage and servers. It has a market cap of $130 billion.

One interesting note: One of Hewlett-Packard's first customers was Walt Disney Studios, which purchased equipment from HP that it used to create and test an innovative sound system for the movie Fantasia.

Hewlett-Packard, which is in the black since the July 19 downturn, is another fast-grower that my Lynch-based strategy likes. The company's P/E ratio (21.16) and growth rate (40.68%, based on the average of the three- and five-year EPS figures) make for a strong 0.52 P/E/G ratio, which indicates that the stock is still selling at a good price. (Again, such a high growth rate is probably unsustainable over the long term, but even if the company continues to grow at half that rate, it should be well off.)

Another reason my Lynch-based model is high on Hewlett-Packard: The firm has a 22.85% debt/equity ratio, which easily comes in under this method's 80% maximum.

While some investors have gotten a bit weary in the past couple weeks, I frankly am not all that concerned about the market's recent volatility. Keep in mind that the Dow has risen to such high levels in recent years that a 300-point swing now amounts to only about 2% of the index's value. These are the types of dips and surges that come with investing in stocks; if we wanted a smooth ride with small returns, we could buy Treasury bills.

But whether you share my feelings or you're getting a little bearish, you'd be wise to consider the stocks I've discussed. Size, name recognition, strong cash flows, a history of strong earnings or high dividends--these are qualities that can lead to success in a variety of market conditions, both good and bad.

John P. Reese is founder and CEO of Validea.com and Validea Capital Management. He is also co-author of The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Click here for more of Reese's insights and analysis, and to learn about subscribing to the Validea Hot List. At the time of publication, Reese and his clients were long on AT&T, Johnson & Johnson and Verizon.

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John Reese, Validea Hot List 08.09.07, 5:36 PM ET

Economics focus: Momentous modelling

When terrorists strike, what happens to investment and jobs?

When terrorists strike, what happens to investment and jobs?

ECONOMICS is a shocking profession. No, no: it's not that economists are incompetent, work in squalor or have unsavoury personal habits. Shocking is what economists do. They start with a model of the economy, administer a “shock” to it—a sudden rise in the oil price, say, or some technological advance, or a cut in tariffs—and work out what happens to output, prices, employment and so forth. Suppose oil prices jump: output goes down, the price level goes up; depending on inflationary expectations and the response of the central bank, a persistent bout of inflation may follow. Plug in plausible numbers in the right places, using some fancy statistics and a dose of computing power, and you can estimate how big the effects might be.

Almost all these exercises deal, in effect, with changes in a number's mean or expected value (in statisticians' language, the “first moment” of its probability distribution): what if the oil price doubles? Economists have spent remarkably little time working out what will happen if the world becomes less certain: what if the oil price is likely to range between, say, $20 and $100 rather than between $50 and $60? Questions of this sort (about the “second moment”) are certainly more difficult to answer—the maths is harder, for one thing—but important nonetheless.

They are important partly for the simple reason that people's behaviour may change if the world suddenly becomes a less (or more) certain place. Moreover, points out Nick Bloom, a British economist at Stanford University, events that increase uncertainty, measured by the volatility of American share prices, are fairly frequent. The most obvious recent example of a big second-moment shock is the terrorist attacks of September 11th 2001; but there have been plenty of others in the past few decades, from the assassination of John Kennedy to the collapse of Long-Term Capital Management and Enron (see chart).

Economists have not shied away from second-moment shocks altogether. Indeed, in 1983 a young American economist named Ben Bernanke published a paper* analysing how investment would be affected by uncertainty. Uncertainty, he argued, could increase the return to firms from waiting rather than making irreversible investments. Mr Bloom has revisited the subject, with the fuller treatment that modern modelling and computing tools allow. In a paper† presented at last month's annual meeting of the American Economic Association in Chicago, he builds a model in which firms choose how much to invest and how many workers to employ. The world in which they operate is uncertain, in that their revenues can vary. He introduces an “uncertainty shock” into the model by supposing that the variability of firms' revenues suddenly rises: using data from shocks over the past 45 years, he supposes that the standard deviation, a common measure of variability, doubles before returning to its old level within a few months.

Wait a moment

The model predicts, as does Mr Bernanke's, that firms wait and see what happens. Because the future is less certain, the probability that demand will be very low (or very high) is higher. The value of waiting thus increases. Firms that would otherwise have increased investment or taken on more workers postpone their plans. Meanwhile, shrinking firms hold off sacking people, but the net effect is that investment and employment fall. Productivity also drops: because hiring and firing have been put off, workers are no longer being shuffled from less productive to more productive firms. As uncertainty returns to normal levels, investment, employment and productivity bounce back.

Mr Bloom thinks that this model fits the aftermath of the September 11th attacks reasonably well. Net employment growth in America fell sharply in the three months following the attacks—judging by forecasts made by economists in mid-August, there were 1m fewer jobs than expected by the end of the year—but rebounded in the first quarter of 2002. Investment also dipped and recovered. The perception that uncertainty increased also shows up in central banks' minutes of the time. One central banker spoke of some households and businesses entering “a wait-and-see mode...They are putting capital-spending plans on hold.”

For policymakers, says Mr Bloom, it is important to tell second-moment shocks, which seem not to last long, from the first-moment variety, where the effects endure for longer. If central bankers mistake a temporary rise in uncertainty for a permanent shock, they may, say, cut interest rates by more than they need to, with inflationary results. To make matters harder, first- and second-moment shocks are likely to come at the same time.

Mr Bloom thinks that the Federal Reserve and other central banks reacted wisely to the attacks of September 11th. Still, he suggests a couple of bits of information that may help distinguish the two types of shock. First, a spike in stockmarket volatility is a sign of increased uncertainty. Second, the different types of shock should have different effects on firms. A bad first-moment shock will reduce activity across the board. But a rise in uncertainty that causes all firms to put their plans on hold will stop (or slow) growing firms, but bolster shrinking ones.

Are uncertainty shocks always transitory? Almost. None of the examples in the chart lasted long. Looking back over the past century, Mr Bloom can point to only one such episode: the Great Depression. Between 1929 and 1932, average stockmarket volatility was 30% greater than after the 2001 attacks. A prolonged bout of uncertainty—compounded by bad policy—dampened the “animal spirits” by which John Maynard Keynes set such store, with catastrophic effects on investment and jobs. The direct macroeconomic consequences of September 11th, for all the deadly terror of that day, were much briefer.

*“Irreversibility, Uncertainty and Cyclical Investment.” Quarterly Journal of Economics, February 1983.

†“The Impact of Uncertainty Shocks: Firm Level Estimation and a 9/11 Simulation”

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Feb 1st 2007
From The Economist print edition

Globalisation and the rise of inequality: Rich man, poor man

A poisonous mix of inequality and sluggish wages threatens globalisation

GLUERS and sawyers from the furniture factories in Galax near the mountains of Virginia lost their jobs last year when American retailers decided they could find a better supplier in China. At the other end of the furniture industry Robert Nardelli lost his job this month when Home Depot decided it could find a better chief executive in his deputy. But any likeness ends there. Mr Nardelli's exit was as extravagantly rewarded as his occupation of the corner office had been. Next to his $210m severance pay, the redundant woodworkers' packages were mean to the point of provocation.

That's the way it goes all over the rich world. Since 2001 the pay of the typical worker in the United States has been stuck, with real wages growing less than half as fast as productivity. By contrast, the executive types gathering for the World Economic Forum in Davos in Switzerland next week have enjoyed a Beckhamesque bonanza. If you look back 20 years, the total pay of the typical top American manager has increased from roughly 40 times the average—the level for four decades—to 110 times the average now.

These are the glory days of global capitalism. The mix of technology and economic integration transforming the world has created unparalleled prosperity. In the past five years the world has seen faster growth than at any time since the early 1970s. In China each person now produces four times as much as in the early 1990s. Having joined the global labour force, hundreds of millions of people in developing countries have won the chance to escape squalor and poverty. Hundreds of millions more stand to join them.

That promises to improve the lot of humanity as a whole incalculably. But in the rich world labour's share of GDP has fallen to historic lows, while profits are soaring. A clamour is abroad that Mr Nardelli and his friends among the top hundredth—or even the top thousandth—of the population are seizing the lion's share of globalisation's gains. Meanwhile everyone else—not just blue-collar factory workers but also the wider office-working middle class—shuffles along, grimly waiting for the next round of cost-cuts. They are not happy.

Fear and clothing

Signs of a backlash abound. Stephen Roach, the chief economist at Morgan Stanley, has counted 27 pieces of anti-China legislation in Congress since early 2005. The German Marshall Fund found last year that, although most people still say they favour trade, more than half of Americans want to protect companies from foreign competition even if that slows growth. In a hint of labour's possible resurgence, the House of Representatives has just voted to raise the federal minimum wage for the first time in a decade. Even Japan is alarmed about inequality, stagnant wages and jobs going to China. Europe has tied itself in knots trying to “manage” trade in Chinese textiles. The Doha round of trade talks is dying.

What is to be done about this poisonous mix? If globalisation depends upon voters who, as workers, no longer think they gain from it, how long before democracies start to put up barriers to trade? If all the riches go to the summit of society and that summit seems beyond everybody else's reach, are the wealth-creators under threat?

Should you blame China or your computer?

The panic comes in part from a rush to lump all the blame on globalisation. Technology—an even less resistible force—is also destroying white- and blue-collar tasks in a puff of automation and may play a bigger role in explaining rising wage inequality and the sluggish growth of middling wages. The distinctions between technology and globalisation count, if only because people tend to welcome computers but condemn foreigners (whether as competitors or immigrants). That makes technology easier to defend.

For economists, the debate about whether technology or globalisation is responsible for capital's rewards outpacing those of labour is crucial, complicated and unresolved. One school, which blames globalisation, argues that the rocketing profits and sluggish middling wages of the past few years are the long-lasting results of trade, as all those new developing-country workers enter the labour market. This school says that technology helps workers by increasing their productivity and eventually their wages. The opposing school retorts that technology does not increase wages immediately, and some sorts of information technology seem to boost the returns to capital instead (think of how much more a dollar's worth of computing power can do these days). And it questions whether Western incomes will remain flat: recent wage rises in America and pay claims in Europe and Japan may start to reverse the balance back away from capital.

In practice, it is hard to parcel out the blame between technology and globalisation, because the two are so intertwined. Ask IBM, which is hastily shipping bits of its services arm to India; or the call-centre worker who sees off the threat of his job going abroad by settling for only a tiny pay rise. And from a policymaker's point of view, it matters little what is causing the pain: the remedies are broadly the same.

The first rule is to avoid harming the very miracle that generates so much wealth. Take for instance the arguments about high executive pay. Some say this is simply a matter of governance—and forcing company boards to work better. If only it were that simple. High pay is, by and large, the price needed to attract and motivate gifted managers, as our special report argues in this issue. The abuses of companies such as Home Depot obscure how most high pay has been caused not by powerful bosses fixing their own wages, but by the changing job of the chief executive, the growth of large companies and the competitive market for talent. Executive-pay restrictions would not put that horse back in its box, but they would harm companies.

If the winners are difficult to curb without doing damage to your economy, the losers are tough to help. Doling out aid for the victims of trade makes sense in theory; but in practice it is increasingly hard to do (see article). When the jobs going abroad are not whole assembly lines, but bits of departments, how exactly do you pick out the person who has lost his job to globalisation from the millions of people changing jobs for other reasons? And, hardhearted though it may sound, most of the gains from trade and technology alike come from the way they redeploy investment and labour to activities that create more wealth. That, like all change, can be painful; but it is what makes a country richer. A policy locking people into jobs that could be better done elsewhere is self-defeating.

The same goes for protectionism—especially now that the victims of globalisation are so scattered throughout the rich world, not camped in embattled industries. Trade has always created losers and it has always been in their narrow interest to seek protection (even if it hurts everyone else). But if many workers across many different industries were to demand protection at once, the selfish appeal of such a shield would fade.

Because hardship from globalisation is so difficult to distinguish from hardship in general, it would be open season to put up trade barriers in industry after industry. Widespread protection would surely meet with retaliation from abroad. Even if people gained as workers they would lose as consumers, investors and future pensioners. Moreover, the protection of jobs and pay would be short-term, because it would gradually lead to companies losing competitiveness as rivals in India and China innovated (see article). Paradoxically, therefore, the greater the number of people threatened by globalisation, the less each of them is likely to gain from getting their governments to stand in its way.

The limits of redistribution

If protectionism will not help the losers, what about using the tax system? Some argue that redistributing more cash from the Nardellis to the Galaxians would not just make society less unequal; it would also buy middle-class support for globalisation. In fact the two arguments should be kept separate.

This newspaper has long argued that a mobile society is better than an equal one: disparities are tolerable if combined with meritocracy and general economic advance. For decades America has shown how dynamic economies are better than equality-driven ones at generating overall prosperity. That still leaves plenty of room to debate how progressive to make taxation (some of George Bush's tax cuts were needlessly regressive), or how lavish to make public services (American welfare is hardly generous). But a society would want compelling evidence that the social contract had been torn up before flexing the tax system to offset what may turn out to be only temporary fluctuations in relative incomes. And it makes little sense for free-traders to use taxes to buy off people from voting for protectionism, when doing so would in any case be against their interests.

Active, not reactive

Instead, the way to ease globalisation is the same as the way to ease other sorts of economic change, including the impact of technology. The aim is to help people to move jobs as comparative advantage shifts rapidly from one activity to the next. That means less friction in labour markets and a regulatory system that helps investment. It means an education system that equips people with general skills that make them mobile. It means detaching health care and pensions from employment, so that every time you move your job, you are not risking an awful lot else besides. And for those who lose their jobs—from whatever cause—it means beefing up assistance: generous training and active policies to help them find work.

None of that comes cheap—and much of it takes years to work. But an economy that gains from globalisation can more easily find the money to pay for it all. The businesspeople and politicians gathering on their Swiss Alp next week should certainly spend more time worrying about the citizens of Galax; but they also need to be far more courageous about defending a process that can do so much good even if its impact can sometimes appear so cruel.

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Jan 18th 2007
From The Economist print edition

Economics focus: The great unbundling

Does economics need a new theory of offshoring?

GLOBALISATION is a big word but an old idea, most economists will say, with a jaded air. The phenomenon has kept the profession's number-crunchers busy, counting the spoils and how they are divided. But it has left the blackboard theorists with relatively little to do. They are confident their traditional models of trade can handle it, even in its latest manifestations. For example, Greg Mankiw, of Harvard University, has concluded that “services offshoring fits comfortably within the intellectual framework of comparative advantage built on the insights of Adam Smith and David Ricardo.”

Ricardo illustrated his insights with the example of Portuguese wine trading for English cloth. But some trade theorists think this metaphor will no longer do. Indeed, two of them—Gene Grossman and Esteban Rossi-Hansberg, of Princeton University—published a paper* last year subtitled “It's not wine for cloth anymore” (see “On the hiking trail”, August 31st 2006).

Ricardo, it seems, did only half the job. He described the first of two “great unbundlings”—as Richard Baldwin, of the Graduate Institute of International Studies in Geneva, has put it in a recent guide†. Trade in wine, cloth and other goods allows production to be distanced from consumption. Countries do not need to grow grapes to enjoy the fruit of the vine; thanks to trade, they can transform cloth into wine instead.

But in Ricardo's world, a country must still take care of all of the separate tasks required to finish the goods it makes. In a country of pinmakers, to take Adam Smith's seminal example, someone must still cut, draw and straighten the wire; fashion and affix the head; then whiten and sheath the finished product, if any pins are to be made at all.

In the second great unbundling, production is spliced and diced into separate fragments that can be spread around the globe. Pin-whitening is done in one country; wire-cutting in another. Some theorists call this the “vertical disintegration of production across borders”. Thankfully, Messrs Grossman and Rossi-Hansberg have a more felicitous phrase: “trade in tasks”.

As globalisation has advanced, it has become easier to move some of these tasks offshore. For the workers who once carried them out, this has three possible consequences, two bad, one good. Start with the good news. Offshoring makes firms more productive. The tasks that are best kept close to home remain onshore; other tasks can be taken care of in cheaper places abroad. Everyone benefits from this gain in productivity, including the workers who have fewer tasks to perform. For example, Japanese electronics companies continue to flourish in American markets precisely because they have moved their assembly lines to China.

The second potential consequence of offshoring might be called the “Lou Dobbs effect”, after America's most prominent television mercantilist. When some tasks are taken overseas, that leaves less work for patriotic Americans to do, right? Well, maybe. If a whole industry leaves America's shores, demand for labour will ebb, and wages will fall. But in less extreme cases, relieving workers of some of their tasks (wire-cutting for example), allows the domestic industry to expand—and a bigger industry might find room for the displaced wire-cutters, at the same wage, albeit on different tasks.

Offshoring, it is clear, enables companies to make more stuff. But this can be a mixed blessing. If the home industry makes too much, it will depress the price of its exports on world markets, damaging the country's terms of trade, and hurting workers. This result is sometimes called the “terms of trade effect”.

Messrs Grossman and Rossi-Hansberg describe this as a “new paradigm”, a phrase guaranteed to raise the hackles of more cautious scholars. Their model may not be quite that, but nor does it sit altogether comfortably within trade economists' established way of thinking. That tradition painted in bold strokes, and identified clear winners and losers from globalisation. Economists felt sure they could predict what would be traded and who would get hurt. As Mr Baldwin points out, they made pronouncements about entire “sectors” of the economy (heralding the dawn of some industries; the twilight of others) and whole classes of workers (the college-educated versus the rest) whose fortunes were tied to them.

A bundle of results

The new breed of models paint globalisation with a much finer brush. (It is high-resolution globalisation, Mr Baldwin says.) International competition plays out not just at the level of the industry, or even the firm, but right down at the level of individual tasks—assembly, packaging, data entry—that cut across whole sectors of the economy. Moreover, in a break with most traditional models, the new theories do not take the tradability of things as a given. For Messrs Grossman and Rossi-Hansberg, the ease of trading a particular task is a matter of degree not kind; and it is a variable, not a constant. Hence tasks that seem safe from foreign competition today may not be so tomorrow. Finally, the tradability of a task might bear no relation to the amount of skill it requires. As a result, the victims of globalisation are harder to identify and the salves harder to apply.

So is globalisation to blame for the rich world's recent anxieties or not? Unfortunately, the new theories of offshoring can deliver opposite verdicts depending on precisely how they are set up. As James Markusen, of the University of Colorado, mischievously puts it, “I am confident that I can concoct a model to generate any result desired by a reader with a deep pocketbook.” If only every worker were as versatile.

* “The Rise of Offshoring”

† “Globalisation: The Great Unbundling(s)”

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Jan 18th 2007
From The Economist print edition

Trade's victims: In the shadow of prosperity

Hard truths about helping the losers from globalisation

NESTLED among the wooded Blue Ridge mountains in Virginia's far south-west, Galax is a town of bluegrass music, barbecue and hardscrabble living. It is home to an annual fiddlers' convention and, less happily, a huddle of textile and furniture factories. Over the past few years, globalisation has hit hard.

Unable to compete with Mexican and then Chinese competition, the town's old industries have withered, taking thousands of jobs with them. Last year brought the biggest single blow. Three big factories closed their doors within months. More than 1,000 people, around one-sixth of the town's workforce, lost their jobs.

Galax then acquired an “Economic Crisis Strike Force” for displaced workers, sent in by Virginia's governor, Tim Kaine. Housed behind a liquor store in an old strip mall, the Strike Force helps people apply for Trade Adjustment Assistance (TAA), the government support America offers to those deemed to have lost their jobs to global competition. TAA includes up to two years of unemployment benefits while retraining, temporary subsidies to help pay medical insurance and, for those over 50, a short-term top-up to any lower-paying new job. The centre also co-ordinates more basic help, from child care to food banks run by private charities.

Thousands of people have walked through its doors in the past nine months, many several times. Around one-third of those laid off last year are being retrained. Many others have found new jobs. At 6%, Galax's unemployment rate is twice Virginia's average, but no higher than it was a year ago.

For some, particularly those in their 50s, the future looks bleak. At 59, Paul Rotan sees little chance of finding another job with health insurance, but he is still six years away from qualifying for Medicare, the government health plan for the old. He is terrified of what will happen in June when the temporary public subsidies for his health insurance end.

But other, mainly younger, workers are already better off. After 19 years in a textile factory, Bobby Edwards has retrained as a radiologist. Brian Deaton has set up a thriving picture-framing business and has started selling gourmet coffee. Few of these people are enthusiastic about globalisation. “No one trusts China around here,” is a common refrain. But government help has cushioned the shock. “I'd be lost if they weren't here,” says Mr Rotan, nodding towards the centre's staff.

In the neat world of economics text-books the downside of globalisation looks much like Galax. Low-skilled workers in a rich country, such as America, suffer when trade expands with a poorer country with plenty of much cheaper low-skilled workers, such as China.

If labour markets are efficient in the rich country the displaced workers should find new jobs, but their wages will probably fall. Although the country overall gains handsomely, these people are often worse off. Hence the case for redistributing some of trade's gains and compensating the low-skilled losers. Traditionally, trade-displaced workers have also tended to be older and less educated than typical workers, and to have worked in only one industry. They take longer than average to find another job and, when they find one, are more likely to see their wages fall.

In America, where labour markets are flexible, the impact is felt on wages more than employment. In Europe fewer trade-displaced workers find new jobs quickly, but those who do take less of a pay cut. One study suggests that, during the 1980s-90s, 65% of manufacturing workers in America who lost their jobs to freer trade were employed two years later, but most took a pay cut. A quarter suffered pay losses of more than 30%. In Europe during the 1990s, in contrast, less than 60% of workers in the same situation had found a new job, but only 7% saw their pay fall more than 30%.

How much to spend?

Nonetheless, help for displaced workers has always been modest compared with the gains from trade. In America, where the social safety net is thinner than in other rich countries, those officially deemed hurt by trade are singled out. Their unemployment assistance lasts four times longer than ordinary workers', and they get more retraining. The United States spends around $1 billion a year on helping trade-displaced workers. But the economy overall, by one estimate, gains $1 trillion a year from freer trade.

In Europe overall public safety nets are far more generous, although in many countries they are being scaled back. European governments also spend much more money than America's on training and other “active” help for all workers. In this more comfortable environment, globalisation's losers have never been singled out.

That may be changing. Public scepticism about trade is rising in both rich countries and poor. A host of big economic shifts, such as rising income inequality, are blamed on global integration. The Doha round of trade talks has long been stalled. America's elections last November brought in a clutch of lawmakers deeply opposed to freer trade. To control this backlash, globalisation's champions are keen to appear more sensitive to the losers.

Already, some shifts are evident. One of the first bills introduced in the Democrat-controlled Senate is a big expansion of TAA, covering not merely manufacturing workers but also service workers whose jobs have been “offshored”, and offering help not just to individual factories, but to whole industries.

Introduced by President Kennedy in 1962 to shore up support for tariff cuts, TAA has long been used to buy congressional support for trade deals. It was expanded as part of the North American Free Trade Agreement in 1993 and again in 2002 when George Bush asked Congress for special negotiating authority to pursue trade deals. The fate of the current bill is uncertain, but the Democrats have stressed that their support for future trade agreements depends on more help for workers who lose out.

In Europe the political pressure is similar. As Italy's shoemakers protest about Chinese competition and Germany's car-workers worry about “offshoring” to cheaper eastern Europe, the European Union has recently created a €500m ($650m) Globalisation Adjustment Fund to offer job counselling, training and other help when more than 1,000 people in a firm or industry lose their jobs because of “structural changes in world trade patterns”.

But cause and effect may not be so obvious. People filter in and out of employment in huge numbers all the time. In America around 20m jobs, or about one in seven, are lost involuntarily every year. Only a small fraction of those, some 2m-3m a year or 2% of all jobs, are permanent “displacements”, where workers have little or no prospect of returning to their old industry. The displacement rates for Europe are broadly similar. And only a small share of these permanent job losses can be directly attributed to globalisation, rather than, say, to technological change.

One study by Lori Kletzer of the University of California, Santa Cruz found that only 14% of displaced manufacturing workers are in industries facing intense international competition. To judge by the number of people receiving TAA, the figure is even lower: fewer than 120,000 workers were deemed eligible for it in 2005. In the much bigger services sector, the share is lower still. For all the hoopla about offshoring, the best estimates suggest that only about 1m American service-sector jobs have actually moved overseas. In short, trade's role in job losses is much smaller than the public angst suggests.

Most economists have long held that technology, rather than globalisation, is the main cause of the rising gap between the pay of the high- and low-skilled. But some argue that the distinctions between trade and technology are increasingly irrelevant. Progress in information and communication technology means that traditional trade models, and their predictions of winners and losers by skill level, are becoming outdated.

In the 21st century competition between firms and industries, such as Galax's furniture factories and their Chinese rivals, is becoming less important than competition between individual tasks within firms in different countries. Whether he is employed in a furniture company or a hospital, the American data-processor will be competing against someone from Bangalore. Rather than affecting entire industries, or whole factories, global competition will affect individual jobs—skilled as much as unskilled.

Such a shift helps explain the popular nervousness about globalisation. Many more workers are worried that their jobs will be at risk. That, in turn, increases the political appeal of assisting trade's losers. But it also makes those losers even harder to identify. And it undermines at least one reason for offering them special help. When trade-displaced workers were older, less educated and hence less easily re-employable than others, helping to retrain them improved the economy's efficiency. But as potential job losses from trade shift up the skill ladder and across industries, those displaced by trade will look much like the rest of the workforce.

An alluring Danish model

As a result, it may be better to focus on policies which improve job prospects for all workers. In Europe, Denmark has led the way. The Danish system of “flexicurity” appears to offer the best of both worlds: dynamic labour markets and low unemployment coupled with generous support for those who lose their jobs.

Denmark has a long history of weak job protection. Employers hire and dismiss people at will. Around a quarter of the workforce is unemployed at some point in any year. But the jobless enjoy generous welfare benefits while they look for work, around 80% of their previous wage on average. To ensure this does not deter people from finding new jobs, the Danes oblige the unemployed to be trained and to look diligently for work.

The European Union is urging its members to follow the “flexicurity” model. Democratic wonks in America enthuse about it too. But Denmark's approach has evolved over decades and cannot easily be copied. Besides, it is extremely expensive. Although Denmark has an unemployment rate of under 5%, it spends more than 5% of GDP on the unemployed, including almost 2% of GDP on its “active” training and job-search programmes. It pays for it with one of the highest tax rates on labour income in the world—one many other European countries, with much higher unemployment rates, could not afford.

For America, which currently spends a mere 0.16% of GDP on such “active” labour-market policies, the idea of Danish-style “flexicurity” is more a slogan than a serious suggestion. Academics agree that employers are far better at training workers than the state. Few politicians in either party support a dramatic expansion of government training programmes.

An alternative approach is to give displaced workers a subsidy if they are forced into a lower-paying job. Such “wage insurance” already exists in a modest form on both sides of the Atlantic. Since 2003 Germany has a scheme where the government makes up 50% of the wages lost by people over 50 who are forced into a lower-paying job. France has a similar scheme with no age qualifications, but limits the subsidy to two years. Since 2002 America's TAA has offered wage insurance to any trade-displaced worker over 50: the government pays half the difference between the old and new wage for two years, up to a maximum of $10,000.

Getting other things right

These experiments are too new to evaluate. But in theory wage insurance is appealing. It helps soothe workers' fears that they will suddenly lose income, but also keeps labour markets flexible by encouraging people to find a new job quickly. Many on America's centre-left see it as the key to maintaining political support for trade.

The proposed expansion of TAA would make any trade-displaced worker over 40 eligible for wage insurance. And more ideas are floating around Washington's think-tanks. One would restructure America's system of unemployment insurance so that the government focused less on smoothing the earnings of the temporarily unemployed and more on helping those who face a longer-term loss of wages. Another would simply expand the type of insurance in today's TAA to displaced workers. The cost, according to Howard Rosen of the Peterson Institute for International Economics, would be $4 billion a year: still far less than the gains from trade.

As public fears of globalisation rise, so will the political appeal of these schemes. But they will have less impact than getting other, more basic, policies right. Globalisation underscores the need for a flexible, dynamic labour market and a well-educated, adaptable workforce. And a worker whose health care is not tied to his job will be less worried about trade than one for whom job loss also spells the loss of medical insurance. The tasks of freeing up labour markets (in Europe), reforming health care (in America) and improving education (everywhere) are far more important than any amount of experimentation with wage insurance or retraining schemes. If politicians really want to respond to the worries caused by globalisation, those are still the best places to start.

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Jan 18th 2007 | GALAX, VIRGINIA
From The Economist print edition

Globalisation and health: The maladies of affluence

The poor world is getting the rich world's diseases

IN 1619 an English captain sailing past Cape Cod reported that the Massachusetts shore was “utterly void”. The Indians “died in heapes as they lay in their houses” confirmed an English merchant. By killing much of the population of the Wampanoag confederacy, the epidemic that raged from 1616-19 made possible the first permanent European settlement in north America, that of the Pilgrim Fathers in 1620. The Indians had caught the illness, thought to have been viral hepatitis, from prior contact with Europeans, probably captured French sailors.

Europeans have been exporting their maladies throughout history. They seem to be doing it again, but in a new way. In the past, the problem was infection. Now, illnesses associated with Western living standards are the fastest growing killers in poor and middle-income countries. Chronic disease has become the poor world's greatest health problem.

For many in the West, diseases are a bit like birds: everyone gets them but poor countries have more exotic species. Rich-country maladies are things like heart disease, cancer and diabetes: “chronic” conditions often resulting from diet or physical inactivity. Developing countries suffer more lurid and acute infections: malaria, tuberculosis, measles, cholera. HIV/AIDS is unusual in that it affects rich and poor alike. But otherwise, poor countries are presumed to have their own health problems. The sixth of the United Nations' millennium development goals (a sort of ten commandments of poverty reduction adopted in 2000) is concerned with infections only—the ailments of poverty. The progress report issued last month half way through the millennium programme's 15-year course tracks HIV/AIDS, malaria and tuberculosis. Combating chronic disease is not part of what the UN calls its “universal framework for development”.

Yet the distinction between illnesses of affluence and illnesses of poverty is misleading as a description of the world and doubtful as a guide to policy. Heart disease—supposedly an illness of affluence—is by far and away the biggest cause of global mortality. It was responsible for 17.5m deaths worldwide in 2005. Next comes cancer, another non-infectious sickness, which caused more deaths than HIV/AIDS, tuberculosis and malaria put together (see chart 1). Chronic conditions such as heart disease took the lives of 35m people in 2005, according to the World Health Organisation (WHO)—twice as many as all infectious diseases.

If you look at lower-middle income countries, such as China, or upper-middle income ones, like Argentina, you find that what kills people there is the same as in the West (see chart 2). Four-fifths of all deaths in China are from chronic sicknesses. That is also true of countries as varied as Egypt, Jamaica and Sri Lanka.

The main difference between these countries and rich ones is that chronic illnesses are more deadly there. Five times as many people die of heart disease in Brazil as in Britain, though Brazil is not five times as populous. Rich countries have become better at dealing with chronic conditions: death rates from heart disease among men over 30 have fallen by more than half in the past generation, from 600-800 per 100,000 in 1970 to 200-300 per 100,000 now.

This has not happened in middle-income countries. In 1980 the death rate for Brazilian men was below the rich-country average (300 compared with 500-600). Its death rate has not changed—and is now higher than all but a few rich countries. Russia is worse off. In 1980 its death rate was 750 per 100,000. Now it is 900, about four times as high as most rich countries.

It may not seem surprising that upper-middle income places such as Russia suffer from “Western” ailments. But chronic diseases are mass killers in the poorest nations, too. Indeed, the only unusual thing about these countries is that they suffer from infections as well as chronic disease: a double burden. Chronic diseases were responsible for over 12m deaths in countries with annual incomes below $750 a head in 2005—almost as many as were caused by communicable ones. Africa is the only continent where infectious illnesses cause more deaths than the non-communicable kinds.

Chronic diseases are becoming deadlier and more burdensome to the poor. By 2015, says the World Bank, these ailments will be the leading cause of death in low-income countries. They already account for almost half of all illnesses there and impose substantial economic costs.

People in poor countries get chronic diseases younger than in the West. There, chronic conditions bear heavily upon the old. Not so in poor and middle-income nations. Death rates for those between 30 and 69 years of age in India, Russia and Brazil are two or three times higher than in Canada and Britain. Almost half of deaths from chronic problems in developing countries occur in people below 70.

As a result, the poor suffer from chronic illnesses longer and are more likely to die of them. The death rate from chronic disease in poor countries is obviously higher than in rich countries; more surprisingly, it is often higher than the death rate from infections. India, Pakistan, Nigeria and Tanzania all have roughly the same death rate for cardiovascular disease: 400 per 100,000. That is at least twice as high as the Western norm and, at least in India and Pakistan, more than four times the average death rate from infections (in Nigeria and Tanzania, HIV/AIDS, malaria and tuberculosis are still deadlier).

Chronic disease bears down especially hard on working adults, imposing a heavy economic burden. Families in poor countries are much more likely than in the West to spend their savings looking after a chronically ill relative, or to pull children out of school to act as nursemaids.

In short, developing countries suffer more from “rich world maladies” than the rich world itself. Overall in 2005, only a fifth of deaths attributable to “illnesses of affluence” (chronic conditions) actually took place in the most affluent nations. Three-quarters happened in poor or lower-middle-income ones.

Death eaters

Why are poor countries so vulnerable to the diseases of the rich? And why does public attention and aid money ignore them and focus on infections?

The simplest explanation for chronic diseases' increasing importance is that people in poor countries now live long enough to suffer them. Thanks to better sanitation, more food and improved public health, average life expectancy in low and middle-income countries has risen from 50 in 1965 to 65 in 2005. The increase in the poorest countries was proportionately greater: from 47 to 63. There are now more old people around to be vulnerable to chronic maladies.

At the same time, because of increased health spending and safer water, infectious diseases have declined relative to chronic ones. International financing for malaria control has increased more than tenfold in the past decade. The Bill and Melinda Gates Foundation, with its $33 billion endowment, concentrates largely on infections. As a result, the incidence of tuberculosis, measured by the number of new cases per 100,000, has fallen slightly. In Africa fatal malaria cases among children under five (the main victims) fell between 1960 and 1995, though the decline has since levelled off. The WHO reckons that deaths from infections will decline by 3% over the next ten years. So more people in poor places will survive infections in their dangerous childhoods to reach an age when they are susceptible to heart attacks and cancer.

Since chronic disease among the poor is not the preserve of old age, another part of the explanation for its increasing importance must lie in the harmful things middle-aged folk do. Of these, smoking and unhealthy eating are most important.

Around 300m Chinese men smoke. In China, Egypt, Indonesia and Russia, people spend 5-6% of their household income on cigarettes—far more than the share in rich countries. Smoking and its associated ailments are still rising in poor countries, even while they fall in rich ones.

Middle-income countries are also experiencing extraordinary levels of obesity. According to one study, half of all households in Brazil contain at least one obese person; the share is three-quarters in Russia. According to another, Mexico is the second fattest nation among the 30 (mostly rich) countries of the Organisation for Economic Co-operation and Development, after America. It has the highest rate of diabetes among large countries, with 6.5m diabetics in a population of 100m. Not coincidentally, Mexicans are among the biggest swiggers of fizzy drinks in the world. Coke and tacos, anyone?

Obesity affects rich countries, of course: it is a symptom of affluence and urbanisation. But it is occurring much earlier than anyone had expected in middle-income places. Obesity among children there used to be unheard of. Last year China's vice-minister for health, Wang Longde, said more than a fifth of Chinese children between seven and 17 who live in cities are overweight—a proportion that presumably reflects not only the wealth of China's urban elite but the amount of money they lavish on their “little emperors” (the single children they are limited to by China's one-child policy).

Yet despite all the evidence that chronic disease is the world's biggest health problem, most poor countries focus on infectious disease and their health policies are usually based on the idea that infections should be controlled before chronic conditions. These choices no doubt partly reflect bureaucratic inertia at health ministries and investment in fighting infections by medical charities and drugs firms.

Not just statistics

It is true that there are better reasons why poor countries might want to concentrate on infections despite the growth of chronic disease. Infectious illnesses are usually simpler to deal with than chronic ones, requiring inoculation campaigns rather than long-term care, changes of lifestyle and the uphill work of public education. Moreover, if you inoculate a child against malaria, you considerably reduce his or her chances of dying from that disease, since most deaths from malaria occur among children under ten. If you lower someone's risk of getting a heart condition at 50, you might well find they get it at 60. The disease can only be managed.

Still, it can be managed better: the contrast between death rates from heart attacks (falling in the West, rising elsewhere) shows that. Stalin said a single death is a tragedy, a million deaths, a statistic. But millions of avoidable deaths are millions of tragedies. Chronic disease is already the biggest problem for poor and middle-income countries. To concentrate so much on infections is to add to the health burden of the next generation in what are already the world's poorest, unhealthiest places.

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Aug 9th 2007
From The Economist print edition

Technology Monitor: Fishing and the environment - Shellfish desires

How to make trawling for fish less harmful to the seabed

TASTY species live at the bottom of the sea. Plucking these morsels from their habitat, however, is often a violent affair that destroys other denizens of the deep. Now researchers have developed a more benign way to fish.

Trawling is the most widespread form of fishing. But bottom trawling is brutal. It uses an enormous, toothed bar mounted on a device called a dredge to scrape the seabed. Dredging throws the intended catch up into a cloud that is captured by a net trailing behind. Unfortunately, the cloud contains a lot of other stuff. Anything at or just below the surface of the seabed—the benthic zone, in fishery parlance—gets dragged up. The result is that a lot of other types of fish, crustaceans and molluscs are caught unintentionally.

More worryingly, sponges, seaweeds and centuries-old coral are destroyed. This is serious because such sessile creatures are not merely part of the ecosystem. In a sense, they are the ecosystem—in the way that it is plants rather than animals that define a forest. Indeed, trawling has been compared to clear-cutting trees. Moreover, from a practical point of view, this destruction of habitat contributes to the dwindling of fish stocks worldwide.

However, in one case—scallop trawling—Cliff Goudey of the Massachusetts Institute of Technology reckons he has a solution. He and his team have designed a dredge that can dislodge scallops without touching the seafloor.

The dredge has several hemispheric scoops in place of the toothed bar. As it is pulled along, the scoops direct water downward. That creates a series of gentle jets that can shuffle the scallops from their resting places—but the streams of water are not powerful enough to damage the benthic zone’s long-term tenants. Also, the scoops swivel out of the way if they encounter anything solid, so the dredge does not destroy such protuberances. Best of all, from the fisherman’s point of view, it takes less effort to float a dredge on water jets than to drag it across the uneven surface of the seabed. That makes Dr Goudey’s device a more fuel-efficient way to fish than the traditional method.

Having assessed a prototype both in a laboratory tank and in the sea off the coast of Massachusetts, Dr Goudey was recently invited by the University of Wales to test his invention against a traditional dredge. New and old were dropped from the stern of a trawler and towed across the seabed off the Isle of Man. They each caught the same number of scallops. The new dredge, though, damaged the catch less than the traditional one.

Further tests will take the dredge over the regulatory hurdles toward commercial use. Visserijcooperatie Urk, a Dutch fisheries-equipment firm, has already expressed an interest in using the new device to catch sole, another bottom-dwelling species. A humble start—but it may yet be worth keeping an eye out for coral-safe scallops next to the dolphin-friendly tuna.

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Aug 7th 2007
From Economist.com

Economist Intelligence Unit Briefing: From crisis to crisis in Brazil

A woeful aviation industry exposes wider regulatory troubles

The government of President Luiz Inácio Lula da Silva is scrambling to dodge the fallout from Brazil's worsening aviation crisis following the second major airplane disaster in less than a year. Besides its immediate political repercussions, the crisis underscores serious shortcomings in the regulatory area and in the state of Brazil’s infrastructure that cross many sectors of the economy. These problems will have to be addressed if the country’s recent acceleration in economic growth is to be sustained.

Mr da Silva took to the airwaves on July 20th, three days after the nation’s worst plane crash ever at São Paulo’s Congonhas airport, the busiest in Brazil and in all of South America, in which nearly 200 people died. This followed another airline accident in September, when 154 people died in the mid-air collision of two aircraft. In the earlier crash, four air-traffic controllers, as well as the two American pilots of one of the jets, face criminal charges.

Both accidents have revealed inefficiencies and problems at all levels of the aviation industry: insufficient airport capacity, too few air-traffic controllers, antiquated air-traffic equipment, inadequate runways, unclear regulatory authority, etc. The Air Force that runs air-traffic control and the government have failed to keep up with booming air traffic, which has grown at 15% a year or more since 2004. The government has ignored repeated calls for more air-traffic controllers and investment. While control towers lack essential equipment, airport terminals have received expensive facelifts.

The problems have triggered several strikes and work slowdowns by protesting air controllers over the last year. This, in turn, has stranded thousands of passengers and led to extended periods of chaos at the nation’s airports.

Stop-gap measures

Responding to allegations of government negligence (including from the political opposition, the air-traffic controllers’ union and the International Air Traffic Controllers’ Association), Mr da Silva on June 20th announced emergency changes in the civil aviation system designed to improve safety until more permanent solutions can be put in place. Among the short-term moves, the number of flights entering and leaving Congonhas will be cut (it will no longer be an airline hub) and restrictions will be placed on charter flights and private jets. An investigation into the July 17th crash is also under way. The government has also promised to build a new airport for São Paulo, a megalopolis of 20m people, but has ruled out shutting Congonhas airport.

These stop-gap measures, along with Mr da Silva’s attempted show of leadership to bolster shattered public confidence, may be insufficient to appease his critics and lessen the anger evident both within Congress (a leading congressman was among the dead) and more broadly among the public.

Brazilians are demanding more sweeping measures to ensure adequate supervision of and safety in the aviation industry. More airport capacity will have to be built and more air controllers hired and trained. Existing infrastructure will have to be upgraded. Furthermore, responsibility for civil aviation may have to shift. It is currently split between the Air Force and two government agencies that deal with aviation, and they seem to be pushing the blame for the latest accidents onto others. Most controllers are non-commissioned officers with low salaries and difficult working conditions, and are demanding demilitarisation of air-traffic control and better pay. (Brazil is one of the last countries in Latin America where air control is still in the hands of the military.)

Lagging infrastructure

The aviation situation is a serious problem in and of itself, damaging to the economy, the government’s credibility and to Brazil’s image abroad. Beyond that, it highlights the wider issues of inadequate infrastructure and problematic regulatory environments that affect other areas of the economy.

Infrastructure has long been Brazil’s Achilles’ heel and a major impediment to growth. Persistent shortage of investment has been reflected in a worsening of an already deficient transport infrastructure, in particular. In spite of isolated progress in railways and some private port terminals, transport logistics still account for a large share of the infamous Custo Brasil (the increased operational costs associated with doing business with Brazil compared to other countries). In the context of a deteriorated network for domestic shipping and the underdevelopment of Brazil's abundant waterways, companies depend mostly on costly road haulage.

A fresh dispute over road concessions erupted in early 2007 amidst accusations of cartel practices and price abuses by private operators. The government has responded by suspending its federal highways concession programme, a move that will further delay significant improvement to road infrastructure.

An additional problem is the quality and efficiency of public spending on infrastructure, which is generally deemed to be poor. Although the da Silva government this year launched a multi-billion dollar economic growth acceleration package (Programa de Aceleração do Crescimento, or PAC) focussed mainly on infrastructure development, much of the planned spending has fallen behind schedule. It is now generally accepted that the targets proposed for the current year will not be met.

Growth and bottlenecks

Even without the PAC, Brazil’s economy has been growing at a faster pace recently than it has in many years—it grew by 3.7% in 2006 and we expect it to expand by 4.3% in 2007—and this is exacerbating the problems by generating more transport and other bottlenecks. Although GDP growth has been boosted by macroeconomic measures such as a reduction in interest rates, sustainable expansion over the long term will require micro level reforms as well. Among these, the regulatory climate will have to be streamlined and road, port and other infrastructure modernised and expanded.

Meanwhile, the initial signals regarding how quickly Brazil can resolve its aviation woes are not promising. There was much foot-dragging and political finger-pointing after the September aircraft collision. Now, just days after the July 17th crash, a radar outage over the Amazon caused new troubles, forcing Brazil’s air-traffic controllers to close Brazilian air space for several hours. This spurred the cancellation or diversion of more than 20 international flights and caused ripple effects in six US airports. Aviation officials attributed the radar outage to an electrical failure, but also said they would investigate whether there was any sabotage. It appears that, at least in the short term, there will be more problems in Brazilian aviation before there will be solutions.

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Jul 24th 2007
From the Economist Intelligence Unit ViewsWire

Business: Cultural filtering - The flavour of cool

Can e-mail newsletters recommending cultural events in the world's big cities maintain their credibility as they grow?

THIS Monday in New York, those so inclined could have toured Brooklyn's pizzerias, sweated to “outer-planetary” dub or attended a modern recasting of “Eurydice”. But which was worth your time? Deciding what to do in any big city can be difficult, making it tempting to stay in and catch up on e-mail instead. But that might in fact be the answer. Two companies—Flavorpill in America and le cool in Europe, acting separately—publish free, weekly e-mails that narrow the torrent down to the two dozen very best events.

There are plenty of places to look for reviews and recommendations, but they can be unreliable or prone to manipulation. And they do little to address the problem of volume: Time Out New York, a listings magazine, listed nearly 500 options for Monday alone. That is why Flavorpill and le cool have opted to provide “filtered cultural stimuli”, as Sascha Lewis, one of Flavorpill's founders, puts it. A stable of unpaid contributors selects events and writes recommendations. Part-time staff editors then assemble the listings. “It's about understanding quality within genres, not about specific genres,” says Lisa Hix, the editor of Flavorpill San Francisco. The result is an eclectic, catholic style that, its editors believe, does its best to distil excellence from cultural chaos.

Subscribers would appear to agree. Mr Lewis started Flavorpill informally in the wake of the failure, in 2000, of a dotcom start-up. It has since accumulated 560,000 subscribers across 11 weekly publications, including editions in six cities. New York, at 85,000, is the largest. For its part, le cool was founded in 2003 after René Lönngren, who was working in advertising at the time, encountered Flavorpill on a trip to New York. Based in Barcelona, it now reaches 110,000 readers in eight cities. For now, the two overlap only in London.

Flavorpill San Francisco recently recommended a play in which the audience works with a cast of “homeless and disabled individuals”, a collection of carnivorous plants and a musical that “channels the drama of suburban ennui and teen angst into lively song”. Any of these could be dismal. Yet the reviewers manage to find events that appeal to young, culturally influential urban dwellers.

Such people are highly attuned to the inauthenticity of culture manufactured in the pursuit of sales, so both Flavorpill and le cool say they are careful to separate advertising from editorial material, and to avoid promotional events. “Our readers can smell PR,” says Ms Hix. But Mr Lewis says that by selecting events that conform to the ineffable tastes of his audience, he has been able to aggregate this elusive group in a form that is attractive to advertisers. Advertisements from the likes of Budweiser, JetBlue and Nokia provide the bulk of Flavorpill's revenues.

The companies' operations are marked by a commendable looseness—nobody in le cool's head office, for example, can read the Istanbul edition, which is in Turkish. This means that advertisers must put an unaccustomed level of trust in the process, and have the stomach to place their brands in unpredictable contexts.

Flavorpill's London list recently described a performance “that re-enacts Prince William's conception with the help of two actors wearing cardboard boxes depicting Charles and Diana on their heads” and involved a live, on-stage sex act. Is this really an effective new way to sell beer? “We believe in what they're doing,” says Rudy Beltran, director of Budweiser Select, an American beer brand that is one of Flavorpill's biggest advertisers. Flavorpill, he says, lends his brand credibility among young professionals who guide the tastes of their peers.

With low overheads, limited marginal costs and eager advertisers, both companies have been able to expand without significant outside investment. Le cool's Spanish revenues could support the entire company, says Andrew Losowsky, le cool's editorial director, and advance advertising sales meant the London list was profitable months before it launched at the start of this year. Mr Lewis expects Flavorpill's revenues to be $4.2m in this, its fourth profitable year. Both companies plan editions in more cities soon.

It would seem a calculated risk, depending as it does on the continued enthusiasm of volunteers. There is also a danger that overexposure could damage the firms' underground credentials. But both are forging ahead: le cool has started publishing city guidebooks and produces an in-flight magazine for Vueling, a Spanish low-cost airline. Flavorpill now organises events and produces branded e-mails for corporate clients. They started out as mailing lists, but both firms are acquiring the flavour of media companies.

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Jul 26th 2007
From The Economist print edition

Business: China's new labour law - Red flag

Businesses in China seem not to have noticed that they face tough new rules

FOR the 2008 Olympics in Beijing, big foreign companies are planning to add swarms of temporary employees. They had better think again. A sweeping new labour law passed on June 29th intended to enhance workers' rights makes this and many other common practices illegal. The change has received little notice so far, possibly because it does not go into effect until January 1st 2008; possibly because firms do not realise that retroactive provisions in the law mean it has already begun to apply; but probably because companies do not realise how much the Chinese government is willing to change the legal standing of workers to advance the political mantra of a more “harmonious society”.

The new law replaces one put into place in 1995, when early efforts at economic reform in southern China were bearing fruit and the country was eager to attract foreign companies. Since then China has emerged as an attractive manufacturing base, but concerns have grown over poor labour conditions. Hence the new law that, on its face at least, dramatically changes the balance of power between workers and employers, says Lesli Ligorner, a lawyer in Beijing with Paul Hastings, a big law firm.

Companies will need written contracts with all full-time employees, and anyone who works for more than four hours a day is likely to be considered a full-time employee. Once they are full-time, employees who are laid off must be bought out at a multiple of their average monthly salary. Making more than 20 employees or 10% of the workforce redundant is allowed, but must be done on the basis of seniority not merit.

China's trade unions could be transformed by the law. Previously they focused on social welfare; now they will be able to act more like Western trade unions, weighing in on discipline, safety, remuneration and working hours. The new law also grants them the right to litigate.

If that did not give companies enough to think about, businesses will also have to cope with a law that is full of inconsistencies. It does not, for example, apply to foreign representative offices, yet since these offices must hire their workers through official staffing agencies, it will apply to their employees. Worse, since foreign firms cannot hire directly, they are required to offer the kind of short-term contracts the new law bars. And although the new law should standardise practices throughout the country, it will inevitably be interpreted differently in every region.

Perhaps the best aspect of the new law is that it provides protection for people on the bottom rung of the ladder. That is good news not only for workers, but also for firms with high (or at least modest) standards which put them at a competitive disadvantage to more ruthless operators. But the law also imposes burdens on companies, and so increases the incentive to bribe corrupt officials to look the other way.

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Jul 26th 2007 | HONG KONG
From The Economist print edition

Business: Japanese companies in China - Questioning the Middle Kingdom

As Japanese firms move into China, some are having second thoughts

WHEN China's tallest skyscraper is completed next spring it will symbolise both the country's economic might and the importance of its ties with Japan. Over a decade in the making, the 101-storey Shanghai World Financial Centre is being built by Mori, a Japanese developer. The $1.1 billion construction project is perhaps the most visible sign of how deeply rooted Japanese firms are in China. They were among the first to move in when China opened its doors 30 years ago. Today Japan is the third-biggest source of foreign direct investment after Hong Kong and the Virgin Islands, a tax haven. Mainland China recently surpassed America as Japan's largest trading partner.

But the appeal of China as a manufacturing hub and a huge new market is not universally shared among Japanese businesses. Some companies are moving operations to other countries instead, and others are keeping business back home. Japanese companies poured $4.5 billion into China in 2006—a 30% drop from the $6.5 billion invested in 2005, according to China's Ministry of Commerce.

Japanese electronics firms all have operations in China, for example, but mostly for low-end assembly work rather than high-end production. The reason has little to do with protecting the jobs of Japanese workers (most of whom are actually part-time staff who lack the generous perks provided to full-timers). Instead, it is to prevent intellectual-property theft and boost innovation by keeping development and manufacturing close together—at home.

As competitiveness increasingly comes from manufacturing efficiency and more intellectual property is applied to the production process, it makes sense to keep operations at home. Besides, sophisticated manufacturing tends to be less labour-intensive, reducing the appeal of low-wage countries. And regional governments are offering generous incentives for firms to open new factories in Japan.

Ricoh, an office-equipment company, makes low-tech parts in China but keeps advanced technology in Japan. This month Canon said it would build a $450m optical-sensor factory in Japan. Sharp's sophisticated LCD flat-panel televisions are made at two factories in central Japan, and the company will announce plans for a new factory in Japan this summer.

As for carmakers, Toyota, Honda and Nissan have built big factories in Guangzhou to build vehicles for Chinese customers. But because of the weak yen, which makes exports cheaper, car firms are building more vehicles at home. Honda is even opening a new factory in Japan, its first in almost 30 years, despite falling domestic sales. Likewise, Toyota says it plans to build more cars in Japan for export.

Even for Japanese firms that are investing overseas, surveys show a shift away from China in favour of other Asian countries. In 2004 around 86% of Japanese firms planned to expand in China; last year the figure dropped to 77%, and 2% said they were actually scaling back their Chinese operations. In another survey, which asked Japanese firms to rate which countries they regarded as the best places to invest in the next three years, the proportion opting for China dropped from 91% in 2004 to 77% last year, while the appeal of Vietnam and India rose substantially (see chart). This is partly because China has become expensive compared with elsewhere in Asia. There is also concern over anti-Japanese sentiment.

Yet part of the problem for Japanese firms is that their business practices do not work well in China. Managers are invariably Japanese and are promoted on the basis of seniority rather than merit, so prospects for local staff are poor. (Chinese executives joke that if you want to learn about communism, work for a Japanese firm.) Worse, Japanese companies are used to dealing with a few long-standing partners. Mori's Yoshimitsu Isoi says his firm found it hard to put everything into a written contract in China, rather than relying on verbal agreements as in Japan.

As for the Shanghai building itself, a giant circular opening at the top had to be changed to a rectangle in 2005 after the Chinese public objected that it looked like the rising sun of Japan's imperial flag. The reality, however, is that Japanese firms are starting to look elsewhere.

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Jul 26th 2007 | TOKYO
From The Economist print edition

Business: Business in China - Dirty dealing

Despite a clampdown, corruption remains a formidable problem

THE announcement on July 26th that Chen Liangyu is to be prosecuted for corruption came as little surprise. The former chief of the Communist Party in Shanghai had been the subject of a well-publicised investigation since a 3 billion yuan ($390m) hole was found in the city's pension fund last year. Mr Chen's is the highest-profile corruption case for a decade, and although his prosecution is suspected of having political motivations too, it is a signal that the government is serious about clamping down on corruption.

This week several top media officials in Guangzhou were arrested for allegedly selling advertising slots privately. The stockmarket has also suffered from a rash of dodgy dealing, with 11 firms blacklisted and almost 300 people penalised in the past six months for activities including publishing fake company reports and false auditing. Every week, it seems, the local press has stories about people who have illicitly squirrelled away huge sums.

The fact that these crimes are now reported is itself a step forward. As in many countries the mentality of graft is deeply ingrained in China. But Chinese graft has particular characteristics: the dishonesty often takes place at very senior levels and frequently involves groups rather than individuals. There were more than 20 people involved in Shanghai's pensions scandal, and ten in this week's media case.

Within businesses, the most likely areas for graft are the purchasing or finance departments, where staff are given kickbacks from suppliers, or the personnel department, where employees are bribed to arrange interviews or jobs. The problem has become so bad that many foreign executives claim to be “overwhelmed by the business of kickbacks,” says Stephan Rothlin of the Centre for International Business Ethics (CIBE) in Beijing.

But he says it is a mistake simply to translate or impose Western ethical standards. Although much of the corruption is driven by greed, it is also the result of a different set of beliefs. Confucianism puts loyalty to family and friends first. Then comes “face”, and finally compliance with the law. Even then, the law is seen as malleable rather than absolute. Mr Rothlin argues that foreign firms need to strike a balance between imposing their own ethical codes and understanding the local culture.

It is even harder to deal with lower-level shadiness, such as a secretary booking a flight for her boss and then getting a payment from the travel agent, or a receptionist getting paid to refer new enquiries to a rival firm. Such cases usually involve relatively small sums and are often regarded as a socially acceptable way for employees to prepare for retirement or keep up with the spending of their peers.

Dane Chamorro, the regional manager for China at Control Risks, a consultancy, says the law against commercial corruption is rarely enforced—and when it is, prosecutions usually have additional motives. He suggests that foreign firms start their operations from scratch and impose their ethical standards from day one. They also need to avoid hiring “tribes”—groups of workers from the same region, or who speak the same dialect. Such groups are known to move systematically between businesses, especially foreign ones. Training is important too, as are regular audits.

But even though there is a growing push for a clampdown, the resistance to change is strong. Fu ze ren bu zai, “the man with the key is not here”, is a common way of asking for a bribe. Alas, the man with the key to solving China's corruption problem is nowhere to be found, either.

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Aug 2nd 2007
From The Economist print edition

Business: Cross-border shopping - You'd be a loonie not to

The strong Canadian dollar means bargain prices south of the border

VISIT the Ralph Lauren outlet in North Conway, New Hampshire, this summer and you may hear as much French being spoken as English. With the Canadian dollar hovering close to parity with the American dollar for the first time in 30 years—it touched $0.96 in the last week of July—Canadians are rushing to the United States to shop. Buy $180 in clothes and it costs just C$191, plus C$11 in federal sales tax paid at the border. In 2002, when the Canadian dollar was trading around $0.64, the same bag of clothes would have cost C$281.

The loonie—a nickname derived from the northern bird depicted on the one-dollar coin—has appreciated in value against the greenback by more than 10% since January. This is due to a combination of the American dollar's weakness, higher interest rates in Canada, and the high prices of Canadian exports such as oil, nickel, copper and zinc.

It is not only preppy clothes that are drawing Canadians south. In the first half of this year Canadians imported 64,096 vehicles from America, up 29% from the same period in 2006. In May, when the Canadian dollar was trading at $0.92, a lawyer in Toronto who wanted a top-end Mercedes S63 AMG was quoted a price of C$171,000 by Mercedes Canada. He threatened to cross the border and buy it for $127,000, so Mercedes dropped the price to C$149,500.

Similarly, a Porsche Cayenne Turbo costs $98,000 in the United States but C$125,000 ($118,000) in Canada. Some dealers say sales have declined by a quarter thanks to cross-border shopping. They are begging carmakers to cut their list prices, but so far most have not.

In once-booming shopping towns on the Canadian side, meanwhile, shops are closing. Knowlton, in southern Quebec, a 20-minute drive from the border with Vermont, used to attract droves of American shoppers when the Canadian dollar was worth $0.66. Now many shops sit vacant. In Bromont, a nearby ski town, rows of shops are being converted into expensive apartments.

The provincial government in Quebec is running advertisements asking people to shop at home. But New Hampshire has no sales tax, whereas Quebec's is 14%. Quebeckers, the biggest wine drinkers in Canada, are also driving south to buy wine. Michael Serra, a wine dealer in Plattsburgh, New York, an hour south of Montreal, says sales to Canadians are up 30% from last year. The biggest sellers are the wine-boxes that he sells for $16—half the price in Canada.

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Aug 2nd 2007 | NORTH CONWAY, NEW HAMPSHIRE, AND TORONTO
From The Economist print edition

Tesco: Fresh, but far from easy

Armed with powerful retailing science, Britain's most successful supermarket is making an audacious bid to change the way America shops and eats

A FORLORN shop facing a dusty car park in one of the poorest parts of Phoenix, Arizona, is an inauspicious place to start a closely watched experiment in global retailing. Yet this is where Tesco, Britain's biggest supermarket group, will seek to establish its beachhead in the world's richest grocery market.

Later this year Tesco will open at least 21 stores in this arid city and plenty more—it will not say how many—in Las Vegas, San Diego and Los Angeles. It plans to pepper some of America's fastest-growing states with Fresh & Easy local groceries at a rate of three a week. Tesco has identified as many as 100 sites to begin its £250m a year ($500m) campaign. Rumour has it that a new warehouse just east of Los Angeles could alone supply some 400 stores.

By American retailing standards, Tesco is merely dipping a toe in the ocean. Even so, the consequences could be enormous. Tesco is a formidable retailer, having transformed itself from Britain's third-ranked supermarket by sales to the third-largest in the world, after America's Wal-Mart and France's Carrefour (see table). As it has done so, Tesco's share of the grocery market in Britain has climbed above 30% and, like Wal-Mart in America, it has begun to face criticism of its market power.

That is one reason why Tesco has to venture abroad. Another became clear this week, when the company reported how sales growth at its British stores slowed sharply in the first quarter, because of subdued consumer spending and increased competition. It shares fell by almost 5% on the news. But this was compensated for by international sales, which grew by 25%. Tesco is expanding in places like eastern Europe and China, where it tailors supermarkets to local conditions.

In America it is trying something completely different. The operation is veiled in secrecy and furtiveness—Tesco is anxious not to tip its hand to competitors. When it tested the layout of a mock store in Santa Monica, it did so hidden from view in a warehouse. It stocked the shelves with food shipped in from America's East Coast and people were told it was just a film set.

The secrecy and the speed with which Tesco is expected to open its new stores points to the risks. If Tesco gambles small and wins, competitors will have time to copy it before it reaches critical mass. Placing a big bet is more dangerous, but it may be the best way to exploit a model that can be scaled up rapidly into thousands of stores across a market that rewards innovation like no other. “In retailing there aren't huge barriers to entry,” says Sir Terry Leahy, Tesco's chief executive. “That's one of the reasons you can't hang around and trial this thing. You have to launch and go.”

Some people have already decided to bet on Tesco's success. Last year Warren Buffett, one of America's most successful investors, revealed that his Berkshire Hathaway company had bought almost 3% of Tesco to become one of its largest shareholders. Mr Buffett admires careful planning and Tesco has done plenty of that.

Into their cupboards

The company has spent years gathering detailed information on every aspect of American life. Most retailers would think they had done their homework after the usual focus groups and surveys, but Tesco went much further. Researchers, including a small cohort of top executives, spent two weeks living with 60 American families. They poked around in their kitchen cupboards, watched them cook and followed them as they shopped. “They'd been studying the city for about a year before they came to us,” says Scott Motley, who works for the city of Phoenix, which with the Greater Phoenix Economic Council helped Tesco find places to put stores.

Even the stores seem part of a grander plan to keep gathering data. Take the patchwork of districts where Tesco plans to build some of the first. In central Phoenix it has chosen some of the poorest parts of town. Families living within a mile of one store have a median annual income of just $37,500 (against about $44,000 for America as a whole). In nearby Chandler, a middle-class area, it will be building its stores within reach of the city's richest inhabitants. There, median incomes run to about $93,000. This torrent of comparative data is central to the plan: Tesco is setting out to change the way Americans shop and eat.

As in most retail markets, American stores are splitting into those that sell luxury goods and those that sell cheap ones. Both Whole Foods Market (luxury) and Wal-Mart (cheap) are among America's fastest-growing stores (although they have slowed down a bit recently). Retailers catering to the mid-market such as Kroger, Safeway and Albertson, three of America's biggest grocers, have been squeezed. They come under pressure to cut prices and margins when Wal-Mart moves into the area. And they are simultaneously pressed to invest in swanky wood-effect polished floors and sumptuous fresh-produce displays to stop their richer customers decamping for posher places.

Social shoppers

Tesco's offering in America will swim against this tide. It is aiming Fresh & Easy squarely at the middle market. The firm is hoping to repeat its success in attracting shoppers from all the main social groups in Britain, where social class until recently played at least as big a role in determining where people shopped as price and convenience did. Tesco will also be a pioneer in two other important ways: the size of its stores and their range of goods.

Most Fresh & Easy outlets will be relatively small, at about 10,000 square feet. Although about the same sales-floor size as the average Walgreen's, a chain of drugstores, most food retailers in America are either much bigger (six Fresh & Easy's would fit into a typical supermarket and ten into the average Wal-Mart), or much smaller (each is about three times the size of a 7-Eleven convenience store).

Does size matter? In America's lightly regulated supermarket industry, most shoppers in all but the deepest backwoods live just a few minutes' drive from a large supermarket. The chances are the store has acres of parking, is open all night and has a good selection of whatever you might need: prescription medicines, dog food and piping-hot meals that have been cooked in the store.

Convenience, however, has many dimensions. Tesco is betting that there is demand for smaller stores closer to home with fewer products, making it easier to find things. People in too much of a rush to stop at a supermarket use tiny outlets such as 7-Eleven, of which there are close to 1,200 in California alone. But their range is limited. Retail Forward, an American consultancy, reckons nearly 40% of convenience sales come from cigarettes and tobacco, followed closely by beer and wine. As for nutrition, most offer little more than snacks and frozen pizza. “The typical American convenience-store consumer would be Homer Simpson,” says Ira Kalish, a retailing expert at Deloitte, an accounting firm. “No one has done convenience and quality food together.”

As for products, Tesco's second innovation will be a range of preservative-free “ready meals” that are familiar to British consumers yet barely exist in large parts of America. “There's a big hole in the American market,” says Rajiv Lal, of Harvard Business School. “American supermarkets have not been innovative with prepared foods. You can't eat them more than three days in the week without eating the same stuff. But I suspect there are people in Britain who live off prepared meals from Marks & Spencer for three weeks on end.”

So why have British supermarkets led America's in easy meals? Generals like to say that amateurs study tactics and professionals study logistics. The same is true for retailing. In trying to compete with discount retailers such as Wal-Mart and Costco in a large country with good roads and cheap land that lends itself to big-box retailing, America's supermarkets have concentrated mainly on trying to take costs out of their supply chains. Labour is also cheaper in America. This has encouraged supermarkets to make two sorts of food: that which lasts long because it has been dried, canned, frozen or otherwise preserved, and that which is prepared from raw ingredients on site.

Sandwiches to ready meals

British supermarkets, in contrast, operate on a small, crowded island with restrictive planning laws. Whereas American stores are good at moving goods hundreds of miles and keeping them cheap, British retailers specialise in regular, frequent deliveries to heaving city-centre stores. Their supply chains are more sophisticated because they have to be. Stores can be so small that they have to switch from selling sandwiches at lunchtime to selling ready-made suppers in the afternoon.

Expensive labour and a shortage of space have encouraged British retailers to seek economies of scale from centralised food preparation. Rather than cooking on site, they make a wide range of meals that can last for a couple of days. These are not just staples such as macaroni cheese or lasagne. A typical London supermarket now stocks more than 50 different meals, including treats such as organic beef in wine, Keralan prawn curry and Asian noodles with vegetables.

Although some British supermarkets have done a better job at seizing the top of the market and others the bottom, none has surpassed Tesco at concocting a wide enough range of meals to suit every taste. Once, Tesco was stuck downmarket selling cheap fodder to working-class mums. Now its market share is almost as large as the combined share of its two closest rivals: Asda, which is owned by Wal-Mart, and J. Sainsbury.

Tesco's rise is at least partly thanks to its knack of quickly responding to trends. It was the first of Britain's big supermarkets to embrace convenience stores. And it has been a clever innovator with its supply chain. Take, for example, its introduction of trucks with internal partitions for frozen, chilled and ordinary goods. As simple as the idea sounds, Tesco could thus replace three deliveries with one, which made it possible to sell groceries profitably in small stores at supermarket prices.

But Tesco's biggest innovation has been in the way it collects and uses customer data from its Clubcard, a loyalty programme. Many retailers use clubs to provide nothing more sophisticated than a discount to customers as they pay for their goods. Because rivals can easily match this, it reduces profit margins for all, says Deloitte's Mr Kalish.

The Tesco scheme mails discount vouchers to customers to encourage them to return. More importantly, it tracks every purchase to build one of the world's largest databases. This finds correlations between purchases, allowing Tesco to finely tune the product range in each store. Sales of pickled vegetables, for instance, may suggest Polish immigrants have moved in, prompting it to stock barszcz, meatballs and sauerkraut.

As a result, its stores in Asian areas of Britain offer Bollywood movies, curry spices and large sacks of rice and flour. Its stores in London's wealthiest parts, meanwhile, are stocked with ripe organic avocados, dainty packs of mange tout and steaks in fancy sauces.

Tesco's database also provides insights into how customers see the company. When it revealed that families were not buying nappies or other baby supplies in their weekly shop, further research showed they were instead paying some 20% more to buy these items at nearby Boots pharmacies because they trusted the Boots brand when it came to looking after their babies. So Tesco began a baby club, offering advice on pregnancy and mothering. Within two years almost four of every ten expectant parents in Britain were members and the firm had seized almost a quarter of the mother and baby market, according to “Scoring Points”, a book on the Clubcard scheme.

Some quirky correlations also pop out of the data. Take the fact that families buying baby wipes also buy more beer, mainly because fathers of young children have less time to go to the pub. Tesco's response: mailing families with infants discount coupons for toys and beer.

Tesco's entry into America will be “a wake-up call to the rest of the supermarket industry, including us,” says David Lannon, president of the North Atlantic Region for Whole Foods Market. “Tesco is better than the major supermarkets in the US. They're cleverer and more efficiently run.”

That does not mean that the British model will be easy to transfer. At least one reason behind the success of Tesco's convenience stores is public transport. Many are near, or sometimes even inside, underground and railway stations, making it easy for commuters to pop into a store to grab a meal on their way home.

Public transport also seems to shape consumer behaviour in two other ways. The first is that it encourages many small shopping trips, because purchases have to be carried. This in turn prompts consumers to favour perishable produce over frozen. The second is that it discourages the purchase of hot meals, either of the sort sold in many American supermarkets or fast-food outlets. Some, however, worry that this accident of British geography may have coloured Tesco's view of the ready meals it is proposing to sell through its Fresh & Easy stores in America.

Feeding the kids

Will America's soccer moms be as willing to stop their cars to grab a ready meal on the way home as British mums are when they jump off the Tube? Tesco thinks they will. For a start, worries about obesity have spawned more interest in healthy eating in America. Demand for organic products is soaring—even Wal-Mart has introduced them. Whole Foods Market has revolutionised the way fresh produce is sold in America, partly by stealing some merchandising tactics from the clothing industry, such as the use of stage lighting and arranging fresh fruit and vegetables into complementary blocks of colour.

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...to build a giant database

Tesco is also reacting to environmentalism by presenting itself as both healthy and green. Its distribution centre will have the largest solar-panel roof in California, its stores will use low-energy LED lighting and its refrigerated trucks are designed to use less fuel.

Tesco is optimistic that shopping habits in America point its way. “When you look at Americans, they shop more frequently than British people and they have to shop around many more retailers, because no one retailer gives them what they want,” says Sir Terry. “The opportunity [for us] is that they will shop less often if they get more of what they want in one place.”

Yet for all Tesco's confidence, few retailers have successfully broken into a mature grocery market in a developed country. Sainsbury's, Marks & Spencer and Carrefour are among the many European retailers that have tried their luck in America and walked away in frustration. This is in part because food retailing, with a few exceptions, is still a local industry. Laxman Narasimhan and Tim McGuire, of McKinsey, a consulting firm, reckon that economies of scale in grocery retailing, such as distribution and advertising, are mostly local. “A 40% market share in one market is far more profitable than 10% shares in four markets,” says Mr McGuire.

And unlike the world of clothing, where a global consumer culture has created global brands such as Zara, Gap and H&M each with thousands of stores across the world, the internationalisation of grocery retailing is constrained by the way that food tastes and shopping habits differ vastly from country to country.

Until recently few retailers had been good at changing their offering to take account of so many foreign quirks while still enjoying the benefits and efficiencies of being big. This is especially true of American retailers, which have grown fast at home by finding a format that works and then rapidly cloning it. But they too have often stumbled abroad: for instance, Wal-Mart had to give up in Germany. “Europeans are better at this because they benefit from their history of colonisation,” reckons Harvard's Mr Lal. “They have learned the lesson that you have to let the local people run the local business; that you can collect the taxes but you don't run the local administration.”

Even if Tesco has read the American market correctly, it will still face stiff competition from two sources. The first is from American supermarkets which will try to copy Tesco's ideas, despite having supply chains that are poorly configured for doing so. Some are already trying to get ahead: Ralphs, a chain owned by Kroger, recently opened a new store in Irvine, California, as part of a concept it calls Fresh Fare. The other source of competition is the thousands of fast-food outlets dotted across the areas it is trying to enter. As convenient as the new Fresh & Easy outlets will be, it is still hard to beat a drive-through window if you want a quick meal.

“Clearly it's high risk,” agrees Sir Terry. “But we've carefully balanced the risk. If it fails it's embarrassing. It might show up in my career [and] it'll cost an amount of money that's easily affordable by Tesco—call it £1 billion if you like. If it succeeds then it's transformational.”

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Jun 21st 2007 | LONDON AND PHOENIX
From The Economist print edition

British manufacturing: In praise of shopkeepers and sellers

In the contrasting stories of Tesco and ICI, Britain offers a lesson to the world

NAPOLEON was wrong when he dismissed the British as a nation of shopkeepers (and hence unfit to defeat France in war). Compared with France, Britain in the 1790s already had a bigger manufacturing base, a higher income per head and hence a tax base wide enough to pay for 22 years of conflict that led to the emperor's Waterloo. Indeed, the demand for ships and munitions, created by the long war against France, boosted British industry.

Two centuries later, however, the little Corsican may have a point. This week ICI, the company that once symbolised British industry, became the target of a takeover bid from Akzo Nobel, a Dutch competitor. Meanwhile, Britain's Tesco supermarket group is boldly expanding into America and other foreign markets in a bid to overtake France's Carrefour (sorry, Monsieur l'Empereur) to become the world's second-biggest retailer behind Wal-Mart. Britain has a much more open economy than America, measured by foreign trade or capital flows. Indeed, there could be no greater testimony to its health than the unsentimental ability to let one-time national champions float quietly off into another's embrace.

Imperial Chemical Industries was born on the liner Aquitania in the mid-Atlantic when four British chemical barons of the 1920s agreed to combine forces. But the company started coming apart in the 1990s. It balked at buying Glaxo to become a world-class drugs company. Funking as predator, it became prey itself. Prodded by the threat of a hostile break-up bid from Lord Hanson, a corporate raider at the height of his powers, ICI floated off its drugs division, now AstraZeneca.

As it moved upmarket, ICI became progressively less imperial, less chemical and less industrial. It paid too much for Unilever's specialty chemicals business and struggled to pay down the debt it incurred by selling its commodity petrochemicals operations at just the wrong point in the cycle. Its giant petrochemicals complex on Teesside—once the very symbol of British manufacturing strength—was sold to some Americans and now belongs to a Saudi company.

Such sell-offs go almost without comment now in Britain. When investors from Dubai snapped up P&O, another commercial relic of the British empire, Britons shrugged, even as nationalistic opposition in America forced the Arab buyers to find someone more trustworthy to take on the ports it owned there. German and French firms have snapped up British water and electricity companies, and London's airports belong to a Spanish construction company. First the Dutch, then the Indians walked off with Britain's steel industry. The Chinese bought Rover, the rump of Britain's car industry, and shipped its machine tools back home. It may only be a matter of time before BT (conveniently, no longer called British Telecom) becomes the first “national” telecoms incumbent in foreign hands; its mobile arm has already been taken by Spain's Telefónica. Likewise BAE Systems (no longer British Aerospace) sees its future in America, perhaps in the belly of a beast named Boeing, Northrop Grumman or Lockheed Martin.

A nation of industrial antiques dealers

In most countries that would count as a litany of failure. But just as Britain led the world into industrialisation, so now Britain is leading it out. Today you can still find a few British engineers and scientists making jet engines and pharmaceuticals—and doing rather well at it. But many more are cooking up algorithms for hedge funds and investment banks—where in many cases they add more value. The economy has boomed these past 15 years, as manufacturing has been left behind and London has become the world's leading international financial centre. Britain's deficit in manufactured goods is hitting record highs. But so are the capital inflows.

All those foreign investors have brought a lot, too. Nissan's car factory in Sunderland, for instance, is one of its finest anywhere. If foreigners think they can manage British factories or finances better than the natives can, they are welcome.

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Jun 21st 2007
From The Economist print edition

Business: Europe's railways - A high-speed revolution

European railways form an alliance to promote swifter international travel

AS THE fastest train in Europe reaches its top speed of 320kph (200mph) the glasses of wine on the bar barely wobble. Champagne country is a blur as the train tears along Europe's newest high-speed line—the first to link France and Germany. France's Train à Grande Vitesse (TGV) can now travel between Stuttgart and Paris in only three hours 40 minutes instead of six hours. The latest generation of Germany's Inter-City Express (ICE) trains has similarly shrunk the journey time between Frankfurt and Paris.

This week high-speed railways in France, Germany, Belgium, the Netherlands, Austria and Switzerland joined with existing international services, such as the cross-channel Eurostar and the Paris-Brussels Thalys, to form Railteam, a new marketing alliance. The aim by the end of next year is to have one website that will allow travellers to view timetables and prices and, with one or two clicks, book tickets from one end of Europe to another. At the European Commission's insistence, Railteam members will compete on prices, though there could be some tricky moments as some of them team up to take on airlines.

Europe is in the grip of a high-speed rail revolution. Four new lines are opening this year and next, with trains running up to 320kph (see map). The eastern France TGV line is the first, to be followed in November by a new link from the Channel Tunnel to a new rail hub at London St Pancras, connecting Britain's first really fast line to the rest of the network. Paris will be only two hours 20 minutes away, and Brussels less than two hours. By 2008 Brussels will have new high-speed links to Amsterdam and Cologne. Railteam's aim is to increase high-speed passengers from 15m a year today to 25m by 2010.

The opening of the TGV-Est last month marked a huge change of heart for France. Its high-speed rail network has been spinning a web from Paris to the corners of the French hexagon since the mid-1970s. But now the TGV-Est wires France into the heart of its biggest neighbour, Germany, and gives birth to a joint venture between the French and German state-owned railways, SNCF and Deutsche Bahn (DB).

Although joint ventures between state-owned rail champions and a grand Railteam marketing alliance might not seem an ideal way of introducing a new level of competition into an industry long regarded as rusty, it is an important start. International passenger-rail services in Europe will be opened up to competition from January 2010. It could lead to a dramatic liberalisation of Europe's railways, akin to that of its airlines. Europe's open skies led to more privatisation of state airlines and the emergence of new, low-cost carriers such as easyJet and Ryanair. If Europe's railway revolution stays on track, an easyTrain or Ryanrail could emerge.

The prospects for Europe's trains have hardly been better since the great age of steam. For decades planes, cars and lorries have been quicker, more convenient and usually more reliable ways to transport people and goods throughout much of Europe. But concern over climate change, hassles at overcrowded airports, delayed flights and congested roads have conspired with better high-speed rail technology to make the train an increasingly attractive alternative, and an especially green one: a full high-speed electric train emits between a tenth and a quarter of the carbon dioxide of a plane, according to the bosses of Eurostar.

Signalling problems

Nevertheless, running railways is an expensive business and integration across national borders is painful and fraught with technical and political obstacles. Much of the expense is shouldered by taxpayers, who pay for the dedicated high-speed tracks, but the train services that run on them mostly make a profit (though Eurostar has been dogged by losses relating to the Channel Tunnel).

Then there are the technical difficulties. Brussels has been piling up directives on inter-operability for the past 16 years. Yet apart from a few services such as Eurostar and Thalys, rail travel has remained national, with locomotives and drivers changing at borders and little in the way of through tickets or co-ordinated timetables. Harmonising high-speed train control systems is an expensive nightmare. Eurostar trains have four different power systems for France, Belgium, the Channel Tunnel and the London commuter lines they had to use while waiting for the high-speed link to open.

Another obstacle to change is that governments and trade unions regard railways as providers of stable jobs that are shielded from competition. So there has been much resistance to opening up the market, particularly in France and Germany. The hope is that a grand alliance, and joint ventures under its umbrella, stand more chance of breaking free from old constraints than attempts to strike separate deals on particular routes.

Vorsprung durch DB

There is no doubt that Germany's state-owned railway is at the forefront of Europe's rail revolution. Hartmut Mehdorn, chief executive of DB, has turned a chronic loss-making railway into a powerful international business which plans to float some 30% of its shares next year. It is already a world-class logistics company, with a global business based on its international rail-freight activity. That could prove to be a useful hedge against greater competition in passenger rail.

DB carries twice as much freight and three times as many passengers as SNCF and owns and operates more than 90% of Germany's rail network. Over 200 competitors, mostly small firms that bid for franchises to run local services subsidised by regional authorities, run trains on its tracks. But DB still dominates the long-distance and inter-city traffic. Only two rivals compete on long-distance passenger services: Veolia on the Leipzig-Berlin-Rostock route, and Georg Verkehrsorganisation, which runs night trains between Berlin and Malmo in Sweden.

State rail firms have the ability to foil smaller rivals and new entrants. One way DB does this is with access to its tracks: InterConnex, owned by Veolia (a French group), fought a losing battle to run a passenger service between Frankfurt and Cologne. It was only offered a track on the right bank of the Rhine, which is winding and subject to delays. Some believe this is why DB will not be allowed to retain full ownership of the rail network in its pending privatisation. But Mr Mehdorn more or less made keeping the tracks a condition for staying when his contract was renewed for three years last month. Britain showed what can go wrong when track and train companies are separated: after the shambolic privatisation of British Rail the network company, Railtrack, collapsed and in effect had to be renationalised. Not surprisingly, there is little appetite to try anyth