NYT : Coke and Einhorn Take Opposite Sides of Green Mountain Bet

Betraying its renowned jingle, Coca-Cola is singing in perfect disharmony with David Einhorn. To feel good paying nearly $1.3 billion for a minority stake in Green Mountain Coffee, the beverage giant must have answered some nagging questions posed by the hedge fund manager a few years ago. Investors seem to figure that Coke did its due diligence. Procter & Gamble and Hewlett-Packard have shown just how much that can matter.

For now, the many skeptics, including Mr. Einhorn’s Greenlight Capital, are getting burned. As of mid-January, a quarter of Green Mountain’s outstanding shares were being shorted, or roughly 14 days of average trading volume. As recently as October, Mr. Einhorn said he had been adding to his bet against the company. After Green Mountain, the maker of single-cup brewing systems, disclosed this week that Coke would invest and help it introduce a new cold drink machine, Green Mountain shares jumped more than 30 percent.

Mr. Einhorn, who rocketed to fame after presciently and publicly challenging management at Lehman Brothers, can’t be dismissed lightly. In fact, Green Mountain’s shares tumbled more than 80 percent in the months after he first raised questions about the company’s accounting practices and growth potential in October 2011. While they have recovered most of that value, there are lingering concerns. For one thing, the Securities and Exchange Commission is still investigating Green Mountain’s accounts and its relationships with distributors.

The blue chip endorsement may have helped allay some concerns. There must be some presumption that Coke gave its new partner in caffeine a comprehensive review before taking such a big step. Green Mountain’s boss, Brian Kelley, a former Coca-Cola executive, didn’t provide much detail but said the deal was subject to “thorough discussion with significant diligence on both sides.”

Even so, recent history should leave at least a shadow of doubt. Not long after sealing a $12 billion deal for the software maker Autonomy in 2011, HP took a charge of almost $9 billion, in part because of what it called dodgy bookkeeping at the target. And Procter & Gamble’s initial plan to sell Pringles the same year collapsed when an accounting scandal enveloped its intended partner, Diamond Foods. The imprimatur of a careful and calculated company like Coca-Cola is sweet, but investors would do well to keep their perspective.

(NY Post) E-cigs’ startups on fire as tobacco companies prepare to buy

E-cigarette startups are on fire this year.
Big tobacco companies are ready to inhale these innovative private companies — and venture capitalists are coughing up big money of their own to get in on the industry themselves.
Last week, Altria — formerly Philip Morris and the owner of the Marlboro brand — threw down about $110 million in cash to take over Green Smoke, an Israel-based e-cigarette company. That’s nearly three times the $40 million that the private company, which launched in 2008, earned in sales last year.
Altria’s acquisition is the first major deal since Lorillard’s acquisition of Blu e-cigarettes for $135 million in 2012. But analysts say others will likely follow suit this year.
Wells Fargo projects that in the next decade, e-cigarette consumption will “eclipse” that of traditional cigarettes. That’s why investors and big tobacco companies alike are zeroing in on e-cigarette companies as the key to bringing the lucrative, yet antiquated, tobacco industry into the digital age.
“What was years ago a cult fad is now more than doubling in sales annually the last three years,” noted Sam Hamadeh, CEO of research company PrivCo.
E-cigarettes are revolutionizing the centuries-old tobacco trade, which has largely depended on continuity. “God forbid you would ever change the recipe to the Marlboros, so there’s no innovation whatsoever,” Hamadeh explains.
According to Andries Verleur, a former venture capitalist who now is the CEO and co-founder of VMR, the parent company of V2 e-cigarettes, “Innovation has driven so many industries. We’ve taken a product and continue to innovate and make it better and better from a risk-profile perspective.”
NJoy, the leading startup, caught national attention last week with its “Friends Don’t Let Friends Smoke” commercial that aired during the Super Bowl.
“When the first e-cigarette TV ad ran on the Super Bowl last Sunday, that was the day e-cigarettes officially went mainstream,” said Hamadeh.
CVS’ announcement last week that it will stop selling tobacco products will likely result in a domino effect, predicts NJoy CEO Craig Weiss. Other drug chains may soon follow suit, but Weiss believes these companies, which distribute e-cigarettes in-store, will continue to do so, even if they halt the selling of tobacco products.
Walgreens released a carefully worded statement on the subject: “We have been evaluating this product category for some time. … We will continue to evaluate the choice of products our customers want, while also helping to educate them and providing smoking-cessation products and alternatives that help to reduce the demand for tobacco products.”

FT : Fidelity remains cautious on European stocks

Fidelity remains cautious on European stocks

Sam Morse, Fidelity’s cautious European fund manager, describes Europe as “ripe for a pullback”, after he missed out on some of the market’s rallies last year.
His £2.5bn Fidelity European fund lagged behind rival funds in 2013. The relatively defensive portfolio failed to capitalise on a mounting consensus that the worst of Europe’s economic woes were behind it.

A “pullback” in the region’s market rises would help to vindicate the manager’s stance, but he also stresses that his investors are not unsatisfied with his recent performance.
“It is ironic that I would describe 2013 as a nightmare year for me but our customers have been quite happy with the absolute returns during the year,” he says.
European shares rose by just under 23 per cent last year in sterling terms, according to index data from FE Analytics, while Fidelity European gained just 17.4 per cent.
The lacklustre year followed a stellar 2012 in which Mr Morse’s focus on income-generating stocks saw him outpace the market.
“Part of the [2013] underperformance is related to the market environment where lots of companies I own have delivered what we would expect in total shareholder returns but they did not enjoy the sort of re-rating other stocks did,” he says.
He cites BNP Paribas, the French bank, as an example of a positive performer that was outpaced by others he did not own, such as Crédit Agricole and Commerzbank. Swiss confectioner Nestlé also delivered a positive but not spectacular return, he says.
Mr Morse suffered setbacks in small, individual positions last year. Saipem, the Italian oil services company, issued a profit warning in January and cut its dividend, triggering a share price rout.
“I sold the stock but it had done quite a bit of damage to the portfolio,” Mr Morse says.
Fidelity European
Tobacco product group Swedish Match reported a fall in market share – something Mr Morse says is a “temporary phenomenon”. This contributed to a share price fall from $35 in January last year to $30 last month.
Overall, Mr Morse urges investors in European shares to remain cautious.
“My personal view is that the market is ripe for a pullback on the grounds of external shock, but the continent is a bit better placed now than it was 18 months ago as we have made progress on the economic front,” he says.
“Exuberance is difficult to measure but markets were very strong in 2013 even though we did not really see earnings or dividend growth.
“We tend to look at those fundamentals and the stock market tends to look forward, which means rising share prices might be an anticipation of growth and dividends, but I am a bit concerned the market may have got ahead of itself.”
He points to director share dealing – which companies are obliged to report to the stock market – as a potential sign the top of the market may be present.
“Something else I have picked up on recently, which is a bit disturbing, is that I have looked at director selling and buying, and selling picked up in December and January,” he says.
“They are not always right and not necessarily the best predictors of future earnings growth but lots of directors are saying people have become over-optimistic about earnings growth going forward, so the shares look a bit high.
“So it looks like a good time to cash some of that in.”

(Barron's) Calm After the Big Storm

Calm After the Big Storm

The worst is probably over, and some of Asia's markets are starting to leave more troubled emerging economies behind.

After a week of big selloffs, calm is returning to Asia. One silver lining: The region's markets were finally starting to distinguish themselves from other problem-plagued emerging economies as investors became more discriminating. "Though there might be more volatility in the coming weeks, I think the worst is probably over," says Gustavo Galindo, an emerging-markets portfolio manager for Russell Investments in New York.

"Asia has been highly correlated to moves in emerging-markets debt," says Christopher Wood, strategist for CLSA in Hong Kong. Last year, India and Indonesia, which have current-account deficits, got tangled up in the crisis even though their fundamentals weren't as bad as Turkey, Ukraine, or South Africa. "Over the past week we've seen more stresses in markets with big U.S. dollar-denominated debts—and all of those are outside Asia," he says. As the dollar appreciates, these debts become more onerous.

How Asian markets do this year will depend on the strength of the recovery in Japan and growth in the region's trade flows. So far, U.S. recovery hasn't meant increased export orders for Asian manufacturers. Elsewhere, the end of the credit boom is likely to be a big part of this year's narrative.

Of course, "Asia has one other big issue," says Wood. That's because China's cyclical momentum is slowing. There was a similar slowdown last year when Chinese data turned down in the first half, only for its economy to rebound in the second. Galindo expects China's growth to pick up later in the year.

Some of the markets where strategists suggest investors could test the waters include Korea, Taiwan, the Philippines, India, and Japan.

Trading at 10.5 times this year's earning and expecting 14% earnings growth, Asian markets are now more attractively priced than most developed markets. Kevin Anderson, head of Asia Investments for State Street Global Advisors in Hong Kong, favors Korea and Taiwan because their export sectors will benefit from global growth. "As Americans and European consumers buy more gadgets and cars, their companies will be big beneficiaries," he says.

WOOD'S FAVORITE MARKETS in Asia: Japan, the Philippines, and India. Consumption growth is still strong, and investments are continuing to accelerate in the Philippines, the region's turnaround economy.

India had the biggest growth deceleration in Asia because of the downturn in its investment cycle. "The market is beginning to anticipate [opposition leader] Narendra Modi's victory, which is why India has outperformed in recent months despite all the emerging-market concerns," he notes. A turnaround in the investment cycle will boost stocks.

The CLSA strategist also likes Japan, where the asset-inflation story still has legs. While he concedes the yen could strengthen in the short term, which would hurt stocks, he argues that another powerful rally in Tokyo could come just as soon as the April sales-tax increases are out of the way.

Investors should load up on Asian tech stocks, particularly those exposed to smartphone, tablets, and mobile devices, says Galindo. "I like tech companies that are part of Apple's supply chain," he says. "I also like Samsung Electronics (5930.Korea), which has become a strong competitor to Apple (AAPL), and Taiwan Semiconductor (2330.Taiwan)." But given the Fed's tapering, higher rates, and the end of the credit boom, he would avoid banks and real-estate.

(Barron's) Mall Empire Builds a Foundation for growth (Unibail-Rodamco)

Mall Empire Builds a Foundation for growth
Rising rents and bigger malls are fueling gains at Unibail-Rodamco. Dividend shoppers will like the payout, too.

Unibail-Rodamco, Europe's largest listed commercial real-estate company, could provide investors with concrete returns in 2014 and beyond.

The property company's shares (ticker: UL.Netherlands) could climb as much as 20% in the next 12 months as it reaps the rewards of charging higher rents, delivering new developments to the market, and disposing of underperforming properties. In addition to any upside, Unibail-Rodamco pays investors a generous dividend, making it a solid cornerstone for any portfolio.

It wasn't quite like that in 2013. Unibail-Rodamco's performance over the past 12 months has been a little shaky, with shares rising only 4% at a time when the Stoxx Europe 600 real-estate sector added 10%. The stock closed Friday at €180.65 ($246), some 14% below its 52-week high of €209, giving the company a market value of €17.57 billion. Some analysts think Unibail-Rodamco shares could return to that 52-week high in the next year. (The company has unsponsored American depository receipts that trade in New York under the ticker UNRDY.)

At the current price, the Amsterdam-based company trades at about 16 times forecast 2014 earnings and 15 times 2015 projections, in line with its much larger U.S. rival, Simon Property Group (SPG).

Unibail-Rodamco, formed in 2007 from the merger of the two companies that make up its name, operates more than 80 shopping malls across Europe. Its portfolio, valued last year at more than €32 billion, includes offices and convention and exhibition venues, such as Paris Le Bourget, which hosts the Paris Air Show.

The company delivered solid results in 2013, despite the difficult economic environment in Europe and particularly in France, where more than half of its malls are located. It benefits from its concentration on larger malls, which attract more shoppers and allow it to command higher rents.

Unibail-Rodamco has increased its proportion of larger malls—which it defines as those that attract more than six million visitors annually—to 90% of its portfolio from 77% in 2009. The company isn't finished yet: it plans to accelerate the disposal of noncore assets with an anticipated €3.5 billion of sales in the next five years. That should further improve portfolio quality.

The company signed 1,378 leases last year, almost unchanged from a year earlier, although the rotation ratio, a measure of asset efficiency, was slightly lower at 12.6%. It signed 165 leases with international retailers, up from 48 in 2010, an indication of the appeal of Unibail-Rodamco's properties. Tenants include big retail names such as Nike (NKE), Starbucks (SBUX), and Abercrombie & Fitch's (ANF) Hollister brand.

Average rent last year rose 15%, though it was closer to 20% at larger malls. Vacancy rates edged up to 2.5% from 2.1%, although some space is left empty to allow for improvements to be made. Unibail-Rodamco refurbished or extended four properties last year, and added one new development at a cost of more than €1 billion. It has a development-project pipeline valued at €6.9 billion.

With €4.5 billion in undrawn credit lines, financing isn't a problem. Borrowings increased last year to €12.25 billion from €11 billion in 2012, but the average cost of the company's debt fell to 2.9% from 3.4%. It could drop further in 2014, especially if the European Central Bank lowers interest rates as soon as next month, as it hinted last week. Unibail-Rodamco's loan-to-value ratio is a comfortable 38%, and Standard & Poor's gives it a long-term A rating and says its outlook is stable.

Aided by an improving economic outlook in Europe, the company expects to grow earnings by at least 5.5% in 2014 and a compound 5% to 7% after that due to higher rents, low vacancy rates, disposals, and developments. It is forecast to earn €10.91 per share this year and €11.62 in 2015. Earnings per share in 2013 were €10.22.

Its dividend, typically, is 85% to 95% of recurring per-share earnings. The company recommended a dividend of €8.90 for 2013, for a yield of 5%. That's a healthy return even before any gains in the share price. The planned disposals have analysts talking about more generous payouts for shareholders, but that may be greedy. Either way, Unibail-Rodamco looks like a good investment bet.

THE BRAKES THAT HAVE HELD back shares of truck-maker Volvo (VOLVY) could come off in 2014. The stock could add about 20%, fueled by improving demand and operational efficiencies, include 4,000 job cuts. Gothenburg, Sweden-based Volvo could benefit from a soft landing in the European market and strong orders in North America. Its American depository receipts were trading Friday at $13.88, or just over 11 times forecast 2015 earnings of $1.23 per share, which looks cheap compared with rivals Navistar (NAV) and Paccar (PCAR) at more than 14 times.

FT : Commodities traders take aim at rule to limit speculation

Commodities traders take aim at rule to limit speculation

Grain Harvest As Spain Seen Harvesting Most Grain In Five Years
Some of the world’s biggest commodities traders will take a strong line against a new plan to limit market speculation, arguing it would derail the everyday business of buying and delivering shipments of grain, oil and metals.
A lobby group representing companies including Archer Daniels Midland, BP, Cargill and Louis Dreyfus Commodities intends to file a sweeping critique of the “position limits” rule proposed by the US Commodity Futures Trading Commission in formal comments due on Monday, according to a copy seen by the Financial Times.

The commission should “reconsider and revise” its proposal and “avoid any wholesale redesign of the current regime”, the Commodity Markets Council’s draft letter said.
The lobby group represents some of the largest global trading houses, which use futures markets to insure against a rise or fall in the price of inventories they buy and sell. It also includes futures exchanges and some proprietary trading groups and exchanges.
Its membership includes speculators targeted by the CFTC proposal and merchants that are supposed to be exempted from it. Some trading houses also manage in-house hedge funds for investors.
The CFTC rule aims to prevent “excessive speculation” from distorting commodity prices. Congress included it as part of the Dodd-Frank financial reforms in response to notorious spikes in oil and wheat prices in 2008.
Under the 164-page proposal, commodity merchants must certify they are holding large futures positions to hedge against physical inventories in order to claim the exemption from the limits. CMC members believe it will disallow positions opened ahead of pending purchases of commodities, such as yet-to-be harvested corn.
“Our main concern is that, if it is done poorly, this rule has the perverse effect of taking away risk management tools that we’ve used in the ag and energy sector for decades,” said Gregg Doud, CMC president.

Position limits have been among the most contentious of the dozens of derivatives rules the CFTC has unveiled in the past three years. The current proposal is the regulator’s second attempt after a federal court rejected the initial version in response to a lawsuit brought by Wall Street.
The EU is developing its own set of commodity position limits.
The CFTC’s proposed rule invokes the Hunt brothers’ attempt to corner the silver market in the late 1970s and the spectacular collapse of hedge fund Amaranth over natural gas bets in 2006 to explain the need for the new limits, which apply to all futures and swaps linked to a list of 28 commodities.
The CMC letter said the proposal would “exceed the mandate of Congress”, though Mr Doud said the group was not interested in litigating the issue.
Brian Dierlam, director of federal government affairs at Cargill, said: “We want the final rule to reflect the needs and concerns of the commercial marketplace”.

FT : US Biotech IPO fever stokes bubble fears

US Biotech IPO fever stokes bubble fears

The fastest start to a year for US biotech initial public offerings is stoking fears of a bubble amid fears investors are taking increasing risks on companies at the earliest stage of medical research.
Another eight biotech companies raised a combined $502m in US listings last week, setting a weekly record for the sector and continuing a boom that has seen the Nasdaq biotech index rise by more than two-thirds in the past year.

However, fears of overheating are growing as companies come to market at an early stage of drug development when failures are high – and in one case without the usual restrictions that bar existing owners making a quick profit on IPOs.
The recent listing of Dicerna Pharmaceuticals, which raised $90m in late January and saw its shares surge 207 per cent on its first day of trading, is becoming a focal point for concerns.
The Massachusetts-based company has yet to enter clinical trials for the liver disease and cancers it seeks to treat, which typically means it has a less than 5 per cent chance of one day getting a drug to market, according to industry analysts.
In its prospectus, the company said that it would not subject majority shareholders from agreeing to long-term restrictions on their entire holdings – a common feature of almost all IPOs designed to align the interests of existing and new investors.
“I’ve never seen an IPO in my career where the existing [majority] shareholders . . . were not subject to a lock-up,” said one senior capital markets expert, who added that other companies planning IPOs have since inquired about following Dicerna’s example.
Michael Zeidel, a partner at Skadden Arps, said: “A 180-day lock-up is one of those check-the-box provisions for investors.”
Shares in Dicerna have dropped by 30 per cent from its first-day closing price though it is not clear if its main investors, including the venture capital arm of GlaxoSmithKline, have sold eligible portions of their holdings.
The prospectus warned that about 7 per cent of existing shares could be immediately sold and 93 per cent within 90 days. “The sale of a significant number of our shares may cause the market price of our common stock to drop significantly,” it said.
A person close to the transaction, which was underwritten by Jefferies, Baird and Stifel, defended the arrangement: “What makes this situation unique is that insiders ended up buying about 50 per cent of the offering, so there was a real shortage of stock to go around and we figured not having a lock-up would facilitate after-market liquidity.”
Investors have been attracted to the biotech sector by a fresh wave of scientific innovation and hopes that some of the latest market entrants can emulate the success of companies such as Biogen Idec, Gilead and Amgen, which have grown into multibillion-dollar drugmakers.
But while new IPOs have kept coming at a ferocious pace, there are signs that investor appetite may be weakening. Of the 14 companies to list this year, six are currently trading below their issue price. “I think the IPOs are a little stretched,” said Brian Skorney, an analyst at Baird.
John Carroll, editor of industry newsletter FierceBiotech, said: “The investment community still has enough appetite for risk to send a select group of these new IPOs over the range, but . . . they’re getting choosy.
“Inevitably, you’ll see more high-risk IPOs without a good story to tell come along to see if they can make it through this window, and it will get harder. When the inevitable crunch comes, it will be painful.”
The boom has so far been concentrated in the US, with several European companies, including Oxford Immunotec and GW Pharmaceuticals of the UK, crossing the Atlantic to join Nasdaq. UniQure, a Dutch gene therapy specialist, was among last week’s crop of US IPOs, raising $81.9m.
However, European markets could be about to catch the biotech bug. Circassia, a UK company developing allergy cures, last week announced London’s biggest IPO in the sector for years.

>>> Barron’s summary: positive on NLSN, TXI and Samsung; cautious on T,

Barron’s Saturday summary: positive on NLSN, TXI and Samsung; cautious on T, TWTR, SKX

- Cover story: Special report on the Best Mutual Funds Families; list is topped by Natixis Global Asset Management, followed by Putnam Investment Management, GE Asset Management, Lord Abbett & Co., and Waddell & Reed Investment Management. 
- Tech Trader: Tiernan ray says on Wall Street, metrics such as user growth and engagement have become equally or more important than earnings results for companies such as TWTR, LNKD, YELP, and NFLX, since much of their value is fully reflected in their share prices, and the market needs justification beyond quarterly earnings to keep buying. 
- Trader: David Kotok of Cumberland Advisors says jobs data is neither encouraging or discouraging, noting that the longer view is that some 150,000 to 200,000 jobs are being created monthly, on average; inflation is low; the Fed remains accommodative; and the quality of earnings is good; Cautious on T: Companys nearly 6% stock dividend yield is significantly higher than its bond yield, suggesting that the equity market thinks the company has zero growth prospects or that its dividend is imperiled, or both; Cautious on SKX: Once high-flying stock has made important changes that are bearing fruit, including improving its cost structure and carving out a fashion niche in footwear, but lack of a dividend and two classes of stock, as well as potential volatility, may give investors pause. 

Features: 
1) Positive on Samsung: Investors have been worried about Korean giants short-term growth, but with a huge memory-chip and display manufacturing business, it has cost advantages other smartphone makers cant match; shares are deeply discounted and have a potential 30% upside, but lack of a U.S. listing makes the stock hard for Americans to buy. 
2) Interview with Jane Mendillo, CEO, Harvard Management, who says endowment is looking at emerging markets over a five-to-10-year time frame, in which context they are attractively priced today. 
3) Positive on NLSN: Company has a near monopoly on measuring the market share of various media outlets, and with a new growth plan, expanding top line, and a strong financial position, shares could rise 40% to about $62 in two years. 
4) Cautious on AFSI: Companys expenses appear lower than those of rivals, which could be due to a more aggressive approach to deferring costs; on earnings call this week, it will need to persuade investors its profits actually result from smart management. 

- Follow-Up: Negative on TWTR: Companys massive stock grants to employees have resulted in significantly understated expenses and overstated earnings, and shares are likely to head lower, perhaps into the $30 range; Positive on TXI: Company, that last pure-play cement maker in the U.S., will be acquired by MLM, but investors shouldnt rush for the exits, since the latters stock could climb to $128 from $106 after the deal. 

- Mutual Funds: Interview with Robert Mancuso, Portfolio Manager, Glenmede Small-Cap Equity (top picks: TGI, MMS, SGY, THO, ENS, MDAS, PL, MTZ, ATW, WAL). 

- European Trader: Positive on Unibail-Rodamco: Europes largest listed commercial real estate company could provide investors with concrete returns in 2014 and beyond, with a 20% climb possible in the next 12 months as it raises rents, delivers new properties, and cuts under-performing ones. 

- Asian Trader: The performance of Asian markets this year will depend on the strength of the recovery in Japan and growth in the regions trade flows; strategists suggest investors test the waters in Korea, Taiwan, the Philippines, India, and Japan. 

- Emerging Markets: As a bigger chunk of Chinas shadow-banking trusts come due this year, more default headlines could further hurt confidence in China just as its growth prospects dim. 

- Commodities: Frigid temperatures in parts of the U.S. have boosted demand for natural gas, propane, and heating oil, but prices of the latter are likely to stay high even as the weather grows warmer because of low distillate stockpiles. 

- CEO Spotlight: Profile of ICE chief executive Jeffrey Sprecher, who early on while building firm established close relations with GS and MS, giving the banks an ownership stake in order to get their order flow. 

- Streetwise: Following the biggest weekly investor pullout from mutual funds and ETFs, along with a dip in the DJIA, social media darlings from TWTR to FB are correcting.

FT : How to save France

How to save France

‘As a Briton married to an American, I know about national decline. The key is to embrace it’
Proposals for France illustration©Luis Grañena
France has lots going for it. I’ve been here 12 years, and it’s a beautiful, fairly well-off country with good food and a life expectancy of 82. Yet as the therapists would say, it’s “not in a good place right now”. Only 30 per cent of French people polled by Ifop in January felt “optimistic” about the future. This is the worst level in 19 years and represents decline from a low base. The French were already less optimistic than Iraqis and Afghans.
At this point it’s conventional for us “Anglo-Saxon” pundits to tell the French to slash the state, face up to globalisation, etc. But obviously that’s not going to happen. Here instead is a realistic set of proposals.
Interview – Carlo Ancelotti
1. Accept that you are a small country. As a Briton married to an American, I know about national decline. The key is to embrace it. French speakers at international meetings should say things like, “You may not have heard of my country. It’s near Belgium and has almost three-quarters the population of Ethiopia. Our language is very like Spanish.” Once the French absorb the fact that France is just an ordinary country, hardly better than Britain, then its role in the world will suddenly make sense and feelings of lost grandeur will go away.
2. Move the capital south. The French ruling class lives in small gardenless flats in a cold, snobbish, overpriced city. Cramming the political, business and intellectual elites into the same few neighbourhoods has encouraged harmful groupthink. Paris damages France through its effects both on French policy and happiness.
Meanwhile the country’s sunny southern expanses are mostly left to the peasantry. This is madness. If the government moved to Provence, the political elite could live the delightful rustic existence it now gets only in August. Paris could be sold off to African dictators, Chinese party members and London commuters – a trend that’s happening anyway. The city could become a tourist site like nearby Disneyland Paris.
This suggestion goes with the French grain. In both world wars the government briefly moved to Bordeaux, enabling the elite to discover the excellent Chapon Fin restaurant.
3. Meanwhile crack down on rudeness in Paris. Parisian rudeness has reached epidemic proportions, due to growing French “morosité” and overcrowding in Paris as ever more residents and tourists pack in. Anne Hidalgo, Socialist party candidate for mayor, really shouldn’t boast about high visitor numbers.
Even new resident Scarlett Johansson complains about “terribly rude” Parisians. If she is snubbed, what chance do humans have? The government should proclaim Paris a crisis zone for rudeness, and use emergency powers to intervene. France’s security services already intercept French emails and phone calls. Anyone overheard greeting a customer with a reprimand (the characteristic Parisian interaction) could be punished with ritual humiliation. This might mean being sent out to dinner in a sweatsuit that reads, “Property of Ohio State Athletics Department”. Once in Provence the Parisians will cheer up anyway.
4. Formal modes of address – “monsieur”, “madame”, “vous” etc – should be banned. Their main function isn’t politeness but the creation of human distance. “Vous” could fade like “Usted” in Spanish. Again, there’s a good French precedent: the French Revolution banned “monsieur” and “madame” too.
5. Pay school teachers to compliment pupils. “You sound less stupid today, Fabrice,” could qualify for a €1 bonus, for instance. Currently, French people are taught the critical view – of themselves and of everyone else – from their first school day when the teacher greets them with a reprimand. Praise from teachers would have long-term transformational effects on national character. That would help lift the gloom. The French tend to think they are morose because the situation is terrible. In fact the situation seems terrible because they are morose.
6. All schooling should be in English. The French can speak French or they can shape the global debate but they can’t do both. French can survive as a “kitchen language”. It probably won’t be altogether forgotten, as it’s increasingly taught as an accomplishment in high-end New York schools, like Latin.
7. Donate the French army to the United Nations, to serve as the UN’s permanent peacekeeping force. The French “defence” budget last year was €31.4bn, more than five times the UN’s peacekeeping budget. That’s because France (like certain other well-known countries) still likes to meddle in foreign conflicts in the name of grandeur. Meddling while wearing blue UN helmets would scratch that national itch, but would raise the chances of doing something useful.
8. Replace the “First Lady” with a rotating team of First Ladies. There should always be a stock of seven or so for the president to choose from for different functions. An actress might be perfect for one event, a journalist for another, and a gay male (I’m presuming French presidents will for ever be men) could accompany the chief to places like Sochi. Alternatively, France could restore the monarchy again and let people obsess over royal sex scandals instead.
French readers are invited to submit suggestions for Britain.

FT : UK immigration minister resigns over cleaner’s visa

UK immigration minister resigns over cleaner’s visa

Immigration minister Mark Harper has resigned after being told that his cleaner did not have permission to work in the UK, in a blow to the government’s credibility.
There was “no suggestion” the Forest of Dean MP had “knowingly employed an illegal immigrant”, according to a statement published on the Downing Street website.

But the episode is deeply embarrassing for a government which has made it a political priority to crack down on immigration levels into the UK.
Mr Harper’s letter of resignation was accepted by David Cameron, the prime minister, on Friday.
“Mark Harper offered his resignation after he was informed that his cleaner did not have indefinite leave to remain in the United Kingdom, despite having shown him documents claiming she did”, the Downing Street statement said.
The telegenic and capable Mr Harper had been one of the rising stars of the Tory ranks, having been promoted to the Home Office a year and a half ago. In his previous role as Cabinet Office minister he had deftly handled controversial issues such as he “AV” referendum on voting reform and the broader issue of House of Lords reform.
In his letter to the prime minister, Mr Harper said he had employed the cleaner for his London flat in April 2007. At the time, he had had taken a copy of the cleaner’s passport and a letter from the Home Office incidating that she had the right to work in Britain.
When he became immigration minister in September 2012 he considered making further checks, but concluded that this was unnecessary, according to the letter.
Last month, however, Mr Harper asked the cleaner for further copies of the Home Office letter. After his office attempted to confirm the document with the Home Office, immigration officials informed him that the cleaner did not, in fact have indefinite leave to remain.
“Although I complied with the law at all times, I consider that as Immigration Minister, who is taking legislation through Parliament which will toughen up our immigration laws, I should hold myself to a higher standard than expected of others,” Mr Harper wrote to the prime minister.
Mr Cameron called it “an honourable decision” and praised Mr Harper‘s effectiveness as a minister.
Junior Home Office minister James Brokenshire has replaced Mr Harper as immigration minister.
Home Secretary Theresa May said: “Mark has been an excellent minister and he can be proud of the role he has played in sharply reducing immigration to Britain.”
Immigration has been a flashpoint of British politics in recent months, particularly since work restrictions on Romanians and Bulgarians were lifted on January 1.
With the anti-immigration UK Independence Party set to perform strongly in the May European elections, the Tories are anxious to improve their credentials on the issue.
Conservative backbenchers have sought tighter controls on migrants from Romania and Bulgaria, along with measures to make it easier to deport convicted criminals.
The rebellion from within the Prime Minister’s own party has focused on the immigration bill, a measure intended to reassure the public, and Tory MPs, that Mr Cameron was cracking down on supposed abuses of Britain’s welfare system by migrant workers.
At the start of the decade, the Tories had pledged to bring net migration down to the “tens of thousands” a year. They remain a way off that target despite reducing the number of annual incomers to 182,000 in the year to June 2013, a 28 per cent reduction since 2010.
Labour issued a sympathetic press release with shadow immigration minister David Hanson saying Mr Harper had done the right thing.
“He has however shown himself to be a decent man in his resignation and I wish him well for the future but perhaps once again the government need to think very carefully about how they approach this issue as it is clear there are limits to the effectiveness of relying on employer and landlord checks to address illegal immigration.”