Three arguments in favor of choice. Three arguments in favor of buying Aeroflot

Recently, amid the exchange of sanctions, there has been a lot of talk about the need to reduce Russia’s dependence on imports. But the focus on import substitution is not new for our country; it has been encouraged in a number of industries for many years.

At the beginning of 2011, long before the sanctions, the government adopted Resolution No. 56, developed at the initiative of the Ministry of Industry and Trade. It was later replaced by Resolution No. 1224. In accordance with them, Russian state-owned companies in the military-industrial complex cannot purchase, at the expense of the budget, those imported goods whose analogues are produced in Russia. And rightly so: why on earth should we spend our taxpayers' money to provide jobs for citizens of other countries? It would be better to spend them here, this will create new jobs, support domestic demand, and load not only manufacturers of final products with orders, but also enterprises in related industries. A similar approach is practiced in many developed countries.

But this does not mean that we should strive to produce absolutely everything ourselves. There are goods that fundamentally do not exist on domestic markets, because no domestic market is large enough to make the production of these goods worthwhile. For example, there are very expensive and super-productive machines. One such machine can completely provide a small country with some product in five shifts of work. Therefore, it is unreasonable to buy such a machine to produce these products only for ourselves: we simply will not be able to load it with work. It is not surprising that only two or three companies in the world can have such machines, but at the same time provide the entire planet with products in their niche.

According to Strategy Partners Group, the Russian market now and in the next 10-20 years for most positions will account for no more than 1-3% of the world market. That is why many projects in aircraft manufacturing or space can only pay off on the global market, due to economies of scale. Unfortunately, Russian airlines do not need many long-haul aircraft, so it makes sense to develop a competitive airliner of this class only with an eye on other markets.

So how can we understand which goods we should strive to produce ourselves, and in which industries to launch import substitution?

In my opinion, there are three groups of goods for which import substitution makes sense. The first includes goods for the production of which the country already has everything necessary: ​​raw materials, components, technologies, labor resources. As a rule, these goods were previously produced in Russia, but due to certain historical reasons they were replaced by imports. We need to bring back their production, providing jobs for our citizens, creating added value at home, saving on transport costs, and finally. After all, it’s not for nothing that they say: overseas a heifer is half a piece, but a ruble is transportable.

This first group includes food, a whole range of engineering products, and much more. This, for example, is scientific equipment that can be manufactured for a specific university for specific experiments. The main advantage of Russian manufacturers here is knowledge of consumer needs. In non-mass niches, Russian companies often already successfully compete with foreign ones, since they are in close contact with customers and can take into account almost any of their wishes. It’s like with tailoring: a suit made by a simple tailor may, in many respects, be inferior to expensive suits from foreign stores, but will have an important advantage - a perfect fit exactly to your figure.

The second group of products that could be subject to import substitution includes those products that are currently inferior to foreign analogues, but which can be made globally competitive in the foreseeable future. It is obvious that national companies, even with very high-quality management, cannot compete with international corporations on the world market, if only because of the lack of comparable budgets for promoting their products. Bringing them to the global market right away is like putting a promising newcomer in the ring against a world boxing champion. But if you protect them from competitors for some time, you can grow a powerful global player. And almost all countries resort to such measures, even if they declare their commitment to the principles of free trade. There are positive examples in Russia. For example, the NT-MDT company, a manufacturer of atomic microscopes from Zelenograd, has already exported more than 4 thousand complex instruments to the largest scientific centers in Europe, Asia and North America. The company now occupies 30% of the global market in its niche.

And the third group is goods that affect the sovereignty of the country, in particular, defense equipment. It is not safe to purchase them abroad, even from a very reliable source. In 2011, Russia ordered two Mistral helicopter carriers from France, thinking it would be a reliable supplier independent of politicians. But in early September, due to events in south-eastern Ukraine, Paris suspended the delivery of the first Mistral to Russia. It turns out that not a single foreign source can be considered absolutely reliable.

Let me emphasize: if import substitution in the first two groups of goods is economically feasible, then in the third group the criterion of economic feasibility fades into the background, the main thing here is the mission, the goal. And that is why there will be intense competition in this group; every manufacturer will be happy to enter it in order to receive a government order and get guaranteed sales.

All three groups can overlap. For example, anti-virus software from Kaspersky Lab, which is simultaneously successfully sold in local markets, competes with foreign analogues and, when installed on the servers of government agencies, ensures sovereignty.

But even if we correctly identify all three groups, this does not guarantee that the import substitution process will be flawless. Various difficulties may arise related to lack of technology, quality of infrastructure, personnel qualifications, etc. If we decide to create a product similar to what we previously bought abroad, we need to be completely sure that we can buy all the necessary components for it and that there are qualified specialists who can combine them into a complex product.

Of course, if our country’s dependence on foreign supplies of some products or components decreases, additional sanctions cannot be ruled out that will make it difficult for us to purchase others. This means that the composition of the three groups described above will constantly change.

But even during the times of fierce confrontation between the Soviet and Western systems, economic interaction between them was quite active. The United States even bought titanium from the USSR for its military aircraft. I hope that this time things will not reach the level of Cold War confrontation, but I am convinced that in this case Russia will not find itself in complete economic isolation.

A good way to change the food system, making it focused on natural and high-quality local food, is to start with yourself. If you still don't have products from local farmers in your refrigerator, here are three reasons why you should add them there.

Support for agriculture and farmers

By ordering farm products on websites with home delivery or visiting stores and markets with local goods, you, firstly, help local farmers, and secondly, get delicious and fresh natural products.

Saving money and time

Let's start with the fact that you don't need to buy more than you can eat. A good way to save time and money is to create a sample menu for the week, and then, based on it, a shopping list. Then you won't buy too much. There is another option, the opposite of the first. It is suitable for those who can control themselves while shopping (there are few such heroes today). Pay attention to special offers in farm stores and markets, buy products and immediately decide what to cook with them during the week.

Of course, you must understand that the same meat - from animals raised on a farm, free range, without the use of hormones and antibiotics - will cost more than usual. However, with the right shopping approach, you can still save money.

Healthy food for the whole family

Unfortunately, the rhythm of life of many of us today does not allow us to spend evenings in the kitchen and create culinary masterpieces every day. And this is a big omission. Primarily for those who have children. Porridge from a bag and star-shaped cereal for breakfast, factory-made sausages and pasta for dinner are not the best food for a growing body. We encourage people to ditch processed and processed foods in favor of home-cooked, locally sourced meals. Cook at home more often and, if possible, involve your child in this process - then he will definitely want to try the fruits of his labors and he will begin to appreciate healthy eating. And one more thing - today you can prepare a simple and tasty dish from natural, unprocessed products very easily and quickly. This is confirmed by our beloved British chef Jamie Oliver - take his book “15 Minutes for Lunch”.

Pay more attention to your diet, because in many ways it determines our health. But we all want to be healthy, don’t we?

On July 20, Aeroflot Group published generally successful operating results for June and the first half of the year. Passenger traffic in the Group in June increased by 11.4%, to 5.2 million, and in the first half of the year, compared to the same period in 2017, it increased from 22.9 million to 24.8 million.

Source: company data.

Passenger turnover increased by 9.4% in June and by 7.7% in the first six months of 2018. An indicator such as the percentage of seat occupancy looked more convincing in June, decreasing by only 0.1 percentage points, to 85.5%. The improvement in operating performance was driven by increased demand for air travel due to the FIFA World Cup in Russia. Over six months, seat occupancy decreased by 0.6 percentage points, to 80.6%. I propose to compare the average occupancy of passenger seats for the past year in the world with the indicators of Aeroflot.

The percentage of seat occupancy in June is 4.3% higher than the average level for the past year, but does not reach the global level, based on data for the first half of 2018. Meanwhile, the holiday season is in full swing, so let's hope for improved results for the year as a whole.

The number of flights in June increased by 11.1% to 35,939 thousand, and in the 1st half of the year - by 9.2%, to 174,858 thousand. The volume of international traffic increased by 11.2% in June and by 10 .6% for six months of the current year. Domestic transportation showed an increase of 11% and 8.3%, respectively.

Taking into account the improvement in most of Aeroflot Group’s indicators, I believe that the trend towards accelerating operational development continues. The positive dynamics of operating results suggests an increase in revenue for the periods under review.

Let's analyze the company's performance for the 1st quarter according to IFRS in comparison with similar metrics for the same period in 2017.

Source: company data.

In the first three months of this year, Aeroflot’s revenue increased by 8.5%, to RUB 111,942 million, against an increase of 7.5% for the same period in 2017. The number of Aeroflot regular flights over the past year increased by 11.5% year-on-year.

Source: company data.

The most significant increase (+29.6%) is in the volume of transportation to the countries of the Middle East, where the leadership belongs to Turkey and Israel.

Aeroflot's EBITDAR for the 1st quarter fell by 21.6%. The reason for this was an increase of 24.3% in leasing costs due to the expansion of the aircraft fleet. Labor costs rose by 15.1%, and aviation fuel cost the company 24.1% more than a year earlier. Costs for servicing aircraft and passengers increased by 3.6%.

At the end of the year, Aeroflot Group's EBITDAR amounted to RUB 121.8 billion, falling by 11.5%, due to an increase in labor costs by 28%, increased investments in marketing campaigns, in particular to promote Aeroflot in key foreign markets, and increased aviation fuel costs by 20.8%.

As shown in the chart below, there is a direct relationship between the price of Brent and jet fuel. Today, the price of Brent fluctuates around $74, which is higher than the average for 2017. If the existing dynamics in prices for hydrocarbon raw materials continue or their consolidation at current levels, a further increase in prices for aviation fuel and lubricants is quite possible.

Aeroflot's EBITDA from January to March decreased by 6.8 times, and the loss over the same period increased by 2.2 times. I would like to note that the results for the 1st quarter are quite weak due to seasonality. The 2Q results should reflect increased demand for air travel during the World Cup, so I expect decent financial performance for the period.

The airline's EBITDA margin at the end of 2017 was 10.5%, and its net profit margin was 4.3%. The company's net profit over the past year dropped by 40.5% year-on-year, to RUB 23.1 billion.

Valuation of peers based on P/E multiplier

In terms of P/E, the leader of domestic air transportation is estimated at 5.25, while the industry average is 9.27. This means that Aeroflot shares have significant growth potential.

The company's operating results for the first half of the year were generally positive. High seasonal demand for air tickets in connection with the past World Cup allows us to count on decent financial reporting for the 2nd quarter. In this regard, I recommend buying Aeroflot shares with a target of 170 rubles.

It doesn't matter who you are, what you do, or where you are, one thing that all entrepreneurs have in common is the desire to be as productive and efficient as possible. You've probably heard a lot of advice or read a lot of articles about productivity and personal effectiveness and most likely ignored the most important one every time. What do you think I'm talking about?

Everything is right about good and quality sleep. It is quality sleep that gives you many benefits, for example, a good mood during the day, reduces stress, and maintains good health. All of these factors greatly affect your productivity throughout the day. Try to make it a rule to sleep 7-9 hours every day, get used to it and be very surprised at how your personal effectiveness will soar.

1. Good sleep makes you more attractive

There are a huge number of factors that determine a businessman, including: a great idea or product, high efficiency, and the presence of a luck factor.

Networking also plays an almost decisive role. As everyone knows, we are greeted by our clothes. Who do you think is easier to establish connections with, a fresh and energetic businessman or a businessman who has not slept for a long time, tired, run around, and a rumpled looking businessman?

I think the answer is obvious, because lack of sleep not only leads to a less than satisfactory appearance, but also significantly reduces emotional intelligence. It also becomes harder for you to respond correctly to the other person’s body language, which in turn makes it more difficult to establish rapport.

It doesn't matter how good your product is if the person you're trying to sell to doesn't like you.

2. Good sleep contributes to making quality and correct decisions.

You are your own boss, you are responsible for your personal success, life and decisions. During the day you make many micro decisions, how do you think sleep is related to the speed of decision-making and quality of decisions?

Lack of sleep has a strong destructive effect on a person’s cognitive capabilities. The aspect of decision-making speed and quality is maximally affected. People who lack sleep react much more slowly to necessary decisions and, often, their choices leave much to be desired. This is especially noticeable when the decision requires more than banal “Yes” or “No” answers.

I’m sure you often hear something like “Let’s discuss this tomorrow morning” or “The morning is wiser than the evening.” But it’s not without reason that they say this, because a rested person has many times more chances to make a high-quality and rational choice. Therefore, think about it next time, if you want to devote an extra hour to work or your favorite TV series, perhaps this very hour, taken away from sleep, will contribute to the beginning of the death of your business.

3. Good sleep is the path to good health

There’s probably no need to explain why good health is so important for a businessman. But for some reason, many people, in pursuit of income and statistics, completely forget about their well-being. And they suddenly remember the need to be healthy when they take off work for 1-2 weeks.

Hired employees have a clear understanding of when and how much they need to work, they have a fixed schedule, days off, allotted time for vacation and sick leave. As for entrepreneurs, very often they devote maximum time to their brainchild, forget about breaks and rest, and as a result, quit the race even before the business takes off.

No one denies the importance of the business owner’s participation in the business, especially in the first stages of the project’s formation, but if you start to forget that there is not only your project, but also your health and the world around you, you will think about it, because processing threatens the following problems: heart problems illness, heart attacks, diabetes, obesity, increased stress. Find your balance, you can still devote maximum of your time to your brainchild, but besides this, find the strength to devote to sleep at least 7-8 hours a day. And you yourself will be surprised that this is not a waste of time, but a worthy investment in the future.

Instead of a conclusion

Good sleep will increase your immunity to various ailments such as flu, colds and so on. Boost your immunity. Imagine how you will feel, realizing that your competitors are lying in hospital beds, feverish in their beds, languishing, working with all their might while you are cheerfully and with fresh thoughts steering your project! I really hope the three reasons above have convinced you to add some really good quality sleep to your routine.

Keynes apparently tried to deny that bank credit plays any role in distorting the relationship between saving and investment. By the time he published The General Theory, he had spent enough time debating Hayek to understand his central argument: that credit expansion creates a temporary, unstable separation between the investments of entrepreneurs and the real voluntary saving of society.

If Hayek's thesis is correct, this deals a death blow to Keynes's entire theory. It was therefore vital for Keynes to undermine Hayek's argument. However, Keynes's discussion of bank credit was too confusing to refute Hayek's theory. Let's look at Keynes's arguments one by one.

First, Keynes argues that bank credit has no expansionary effect on aggregate investment. He substantiates this statement with the help of an absurd accounting argument, according to which the positions of the creditor and the debtor completely balance each other: “We must, of course, make allowances for the conclusion of loans and repayment of debts (including changes in the volume of credit or the volume of money circulation). But since, for society as a whole, an increase or decrease in the total amount of monetary obligations held by creditors always exactly corresponds to a change in the total debt of borrowers, these values ​​also cancel each other out when we consider the total amount of investment.”456

However, statements such as this cannot disguise the fact that credit expansion has a distorting effect on investment. It is true that a person receiving a loan from a bank is a debtor to the bank in the amount of the loan and a creditor in the amount of the deposit. However, as B. Anderson points out, the debt of the borrower is not money, while the credit received by him in the form of a demand deposit clearly represents money (or, to be more precise, perfect substitutes for money, as Mises established) . When the borrower decides to invest the funds lent to him in capital goods and factor services, he uses the money (created by the bank ex nihilo) to increase investment without any corresponding increase in voluntary saving. He makes these investments without changing the nominal debt to the bank457.

Secondly, Keynes, realizing the weakness of his accounting argument, puts forward the following, even more ridiculous argument. He insists that new funds created in the form of loans that the bank issues to its clients are not used to finance new investments beyond voluntary savings, since the newly created money received by the borrower can be spent on purchasing consumer goods. Keynes believes that to the extent that new money is not used to purchase consumer goods and services, it is implicitly “saved,” and thus, when it is invested, its amount exactly corresponds to what is “genuinely prior” saved.

This is how Keynes himself puts his argument: “The [additional] savings resulting from such decisions are no less “genuine” in nature than any other savings. Of course, no one can be forced to hold the additional funds corresponding to the new bank loan in the form of cash, unless he himself, at his own discretion, prefers to store money rather than wealth in another form.

Here Keynes apparently relies on the ex post facto equivalence of saving and investment in order to avoid considering the disastrous consequences that credit expansion has on investment and the productive structure. However, any savings always require abstinence and prior renunciation of the consumption of goods and services, and not simply the renunciation of potential consumption when receiving new monetary units ex nihilo. Otherwise, any increase in the money supply through credit expansion would be tantamount to an “increase in savings,” which is complete nonsense. Even if we assume that all the investments that were financed with the new money were instantly and simultaneously “saved,” the problem still remains. Let's assume that the new money reaches the final holders (workers and owners of capital goods and primary factors of production). If these people decide to spend all or part of this money on consumer goods and services, the fact that the production structure is too skewed toward capital goods will immediately become apparent, and a recession will break out. For all his sophistication, Keynes could not refute the obvious fact that artificial credit expansion does not guarantee that economic agents will be forced to save and invest on a larger scale than they would under normal conditions62. Further, Keynes paradoxically insists that voluntary saving does not guarantee additional investment, and at the same time argues that all investment presupposes the existence of previous savings. If we take into account the fact that savers are not the same as those who invest, and that the lack of coordination in their actions may not allow a state of equilibrium to occur, then it must be recognized that such a mismatch may occur not only for voluntary savings (saving without investing), but also for investment (additional investment without previous savings). In the first case, there is an increase in the demand for money. As was shown in the previous chapter, such an increase gives rise to several consequences that are realized simultaneously: both characteristic of voluntary savings (changes in the structure of relative prices leading to a lengthening of investment processes) and caused by an increase in the purchasing power of money63. In the second case (additional investments without preliminary savings), an artificially long production structure is created, i.e. one that cannot be maintained indefinitely, since economic agents 62

In other words, although ex post facto all invested resources were saved (S = I), Keynes overlooked the fact that, speaking in microeconomic terms, saved resources can be invested either wisely or foolishly. In reality, credit expansion confuses entrepreneurs, misleading them about the real rate of voluntary savings. The small amount of savings available in society is thoughtlessly invested in production processes that, due to the excessive intensity of capital consumption, cannot be completed or continued, as a result of which society becomes poorer (see above, pp. 284-291). 63

Jacques Rueff found that in an economy with a pure gold standard, an increase in the demand for money (or "hoarding") does not increase unemployment at all. In reality, this increase, in accordance with the price system, directs an increasing part of society's productive resources (labor, capital and primary factors of production) into the extraction of mineral raw materials, the production and distribution of more monetary units (gold). This is a natural, spontaneous reaction of the market to the emergence of the desire of economic agents to have large cash balances. There is therefore no need to initiate public works programs (which are supposedly needed even if, as Keynes ironically notes, they amount to digging ditches that are then dug back in), since society will spontaneously use its productive resources to deepen mines and extract gold, better satisfying the desire of consumers and economic agents to have large cash balances. Consequently, an increased “liquidity preference” cannot, in principle, lead to a situation of permanent combination of equilibrium and unemployment. The persistence of the combination of equilibrium and unemployment can only arise due to the rigidity of the labor market, in which the flexibility of wages and other parameters of labor contracts and conditions is blocked by government intervention, trade unions, or both. See Jacques Rueff, "The Fallacies of Lord Keynes' General Theory," in The Critics of Keynesian Economics, Henry Hazlitt, ed. (New York: Arlington House, 1977), pp. 239-263, esp. p. 244 .

do not want to save at a sufficient level. This also explains the crises and recessions that follow periods of credit expansion.

Trying to refute the position of the Austrian school about the harmful consequences of credit expansion, Keynes gives a third (and final) argument. He argues that credit expansion can be used to finance investments that will lead to increased income

and thus ultimately also drive savings growth. Thus, Keynes believes that entrepreneurs are unable to invest funds received in the form of loans at a rate faster than the rate at which the public decides to increase savings. In Keynes’s own words, “the idea that the creation of credit by the banking system makes possible investments for which “no true saving” corresponds arises only as a result of artificially isolating one of the consequences of the increase in bank credit and ignoring all other results of this process. Indeed, let's say that, in addition to existing loans, the entrepreneur will be able to obtain a new loan from the bank and this will allow him to make additional current investments for which he otherwise would not have enough money; in this case, income will inevitably increase, and the latter, as a rule, will increase by the amount , greater than the amount of additional investment. In such a situation (if we ignore the case characterized by full employment), there will be an increase not only in monetary, but also in real income. In this case, the population will be given a “free choice” of how to distribute this increase in income between saving and spending; and it is inconceivable that an entrepreneur who borrowed money with the intention of increasing investment could actually expand it at a faster rate than the population increases its savings...”461

Keynes explicitly says here that the rate of investment cannot exceed the rate of saving. This statement is justified using a tautological position, according to which investments and savings are always equal to each other, i.e. with a concept that does not allow him to recognize the distorting effect that investments financed by newly created loans have on the productive structure. However, even if the increase in investment does, as is expected, lead to an increase in income in real terms, we may still wonder whether or not such an increase in income will be able to generate an increase in saving sufficient to permanently support the new investment originally financed by credit expansion.

It will be recalled that Hayek showed the practical impracticability of such an increase in the return on investment financed by a new expansion of credit that would provide a sufficient level of voluntary saving to maintain the initial investment. Indeed, even if such investments were supported by a subsequent increase in voluntary saving, economic agents would ultimately have to save in full all the cash income received from the newly made investments. In other words, when that part of the gross income that corresponds to the shaded area in Fig. 5-6, will reach the pockets of consumers, they will have to save its entire volume (the shaded part shows the artificial lengthening and expansion of the production structure, i.e., it reflects the modifying effect of new loans created by the bank out of nothing). Obviously, consumers will almost never save all of this income, since they will spend at least some (usually most) of the money income created by banks on consumer goods and services. According to the theory, set out in detail in the last two chapters, such expenditure will necessarily turn the investment process, which has a monetary origin, in the opposite direction and a crisis and recession will break out. As Hayek writes: “As long as some part of the additional income thus created is spent on consumer goods (i.e., until all such income is saved), the prices of consumer goods - in comparison with prices for various elements of [production] costs - must constantly increase. But this process, as will now become apparent, cannot continue for long without affecting the relative prices of the various types of inputs and the methods of production considered profitable."462