Global Glance: February 8, 2016
A quick look at intriguing international stories
By John Bostwick, Managing Editor, Radius
Welcome back to Global Glance. This week we look at:
- How the strong US dollar is hurting — and helping — US businesses
- DraftKings' deals with three UK soccer teams
- A summary of important Zika information
How the Strong US Dollar is Hurting — and Helping — US Businesses
Last month’s Big Mac Index confirmed what most of us already knew: The US dollar is strong. And as a related Economist article explains, operating in a country with a strong domestic currency is a mixed bag. Last Monday, the Wall Street Journal reported that the US technology industry in particular is taking a major beating from the overvalued dollar: “Currency headwinds for more than a year have dogged the biggest names in the sector — including Apple Inc., Microsoft Corp. and International Business Machines Corp. — and once again loomed large in the current quarterly earnings season.”
The currency-related problems for US tech multinationals are compounded by the fact that they’ve been hugely successful abroad. The Journal notes for example that Apple derives an astonishing 66% of its revenue from customers based outside the US. As a result, The Journal continues, Apple recently declared “that the strong dollar had cost it nearly $5 billion in revenue in the quarter ended in December.” In addition, profits are shrinking in countries with relatively undervalued currencies, like Russia, Brazil and Turkey. The Journal reports that Apple at least will be raising prices in those and other countries to protect its margins, in addition to “taking customary hedging actions.”
Due to the dramatic rise of the dollar against virtually all other currencies, hedging has failed to provide meaningful protection for US tech giants these days. For a good look at the state of currency hedging, check out “Currency Hedging Buoyed by Strong Dollar,” published last November in The Financial Times. It explains: “When rates and differentials are low, the cost of currency hedging falls. This is nice for exporters and importers seeking to limit their risks. But it is an absolute boon for exchange traded fund providers in the US seeking to offer their clients a way to invest overseas without seeing the strong dollar gobble up too much of their returns.”
Of course, we haven’t discussed the benefits to US companies of current exchange-rates. One is, of course, purchasing power abroad. The Journal points out that Amazon.com has taken advantage of the strong dollar to build data centers abroad. No doubt other US multinationals will take advantage of low prices on imports and will enjoy the relatively low cost of employing local workers abroad. As for those of us whose paystubs show US dollars, April is coming and there’s no better time to book that trip to Paris.
DraftKings Strikes Deals with Three UK Soccer Teams
Last August, Boston-based daily fantasy sports company DraftKings announced its intention to open a new London-based office by the end of 2015. As I noted a few days later, the company also received a UK gaming license around that time. DraftKings CEO Jason Robins was quoted in the August press release as saying the UK expansion was a “milestone moment in the growth” of the company, and that the company welcomed “the opportunity to forge new partnerships with leagues, teams and media outlets internationally."
Last Wednesday, less than six months after that statement, DraftKings announced that it struck marketing deals with three Barclay’s Premier League teams, including globally renowned brands Liverpool and Arsenal. An article on the announcement in The Boston Globe points out that Liverpool is owned by the Fenway Sports Group (like DraftKings, based in Boston), which also owns the Globe. The paper reports that while no firm date has been set, DraftKings will likely begin offering UK fantasy sports games by the middle of this month.
One major reason for the company’s UK expansion is the jurisdiction’s permissive gambling laws. Here’s the Globe again: “Expanding to the UK gives DraftKings access to a large new pool of potential customers with fewer legal headaches than the company has faced back at home. In the United States, overlapping state and federal laws restrict gambling in various ways. But the UK permits many forms of gambling, including online betting on sports matches.”
The relative stringency of home- and host-country regulations is always a major factor when considering international expansion — or contraction — a fact that may not be as widely appreciated as it should be. Significantly, on the very same day that the Globe reported on DraftKings’ UK deals, it also ran a story titled “DraftKings Says It Will Withdraw from Hawaii.” Here’s an excerpt: “A person familiar with DraftKings’ thinking said the company decided to withdraw from the state in part because Hawaii is a small market, but also because [Hawaii Attorney General Douglas Chin’s recent ruling on fantasy sports games] insinuated that daily fantasy players, not just operators, could be held liable for breaking state law.”
A couple of weeks ago in this blog I quoted an American language expert as saying “there is a real puritanical streak in America” with regard to swearing, especially compared to the Brits. As DraftKings has discovered, that relatively puritanical US attitude extends to gambling.
A Summary of Important Zika Information
The Zika virus has replaced Ebola as the number one global-health-related news story. Here’s a random sample of sensational headlines from last Thursday alone: “Zika Virus Pregnancy Case Confirmed in Spain - First in Europe” (BBC.news); “Brazil Confirms Zika Infection from a Blood Transfusion” (Newsweek); “Zika Virus Raises New Worry about Paralysis” (CBS News); and “First Case of Sexually Transmitted Zika Virus Confirmed in US” (The Scotsman).
These and countless similar stories point to the fact that our collective knowledge of Zika — including how it’s transmitted and its effects — is sketchy but growing rapidly.
If you’re looking to satisfy morbid curiosity, click all the headlines you can. But if your main concern is to quickly learn what the world’s top scientists know about Zika now, and to keep track of related developments as they happen, I recommend the World Health Organization’s Zika Virus Factsheet and the Centers for Disease Control and Prevention’s Zika Virus page.
Both the WHO and CDC have a number of helpful resources about Zika on their websites, and they’re adding and updating information regularly. On February 1, for example, WHO Director-General Dr. Margaret Chan used the organization’s website to summarize an emergency committee meeting about the Zika virus, including the “observed increase in neurological disorders and neonatal malformations.” Dr. Chan is referring here to the apparent link between Zika and microcephaly, which the CDC describes as “a condition where a baby’s head is much smaller than expected.” For scientists and the general public alike, this apparent link is the most alarming aspect of Zika.
Here are some important facts about the virus, from the WHO’s Zika Virus Factsheet (quoted verbatim):
- Zika virus disease is caused by a virus transmitted by Aedes mosquitoes.
- People with Zika virus disease usually have a mild fever, skin rash (exanthema) and conjunctivitis. These symptoms normally last for 2-7 days.
- There is no specific treatment or vaccine currently available.
- The best form of prevention is protection against mosquito bites.
- The virus is known to circulate in Africa, the Americas, Asia and the Pacific.
And here is a list of some important points from Dr. Chan’s February 1 statement following the emergency committee meeting (quoted verbatim):
- A causal relationship between Zika infection during pregnancy and microcephaly is strongly suspected, though not yet scientifically proven.
- The Committee advised that the recent cluster of microcephaly cases and other neurological disorders reported in Brazil, following a similar cluster in French Polynesia in 2014, constitutes an “extraordinary event” and a public health threat to other parts of the world.
- The Committee found no public health justification for restrictions on travel or trade to prevent the spread of Zika virus.
Finally, here’s some additional information from the CDC’s Zika Virus Disease Q & A page (quoted verbatim):
- About 1 in 5 people infected with Zika will get sick. For people who get sick, the illness is usually mild. For this reason, many people might not realize they have been infected.
- Guillain-Barré syndrome (GBS) is a rare disorder where a person’s own immune system damages the nerve cells, causing muscle weakness and sometimes, paralysis. We do not know if Zika virus infection causes GBS. … CDC is collaborating with the Brazil MOH to determine if having Zika makes it more likely you will get GBS.
- With the recent outbreaks, the number of Zika virus disease cases among travelers visiting or returning to the United States will likely increase. These imported cases may result in local spread of the virus in some areas of the United States.
That CDC Q&A also has a good section — too long to be quoted here — on how to prevent becoming infected with Zika.