Finance

Morgan Stanley promoted a tech executive in its wealth management division to become the bank’s first head of firm-wide Artificial Intelligence, CNBC has learned.
The bank is elevating Jeff McMillan, a veteran of the New York-based bank, to help guide its implementation of AI across the firm, according to a memo sent Thursday.
Morgan Stanley became the first major Wall Street firm to create a solution for employees based on OpenAI’s GPT-4, a project overseen by McMillan.

The Morgan Stanley digital sign is seen at the company’s Times Square headquarters in New York, U.S., on Friday, Jan. 12, 2016.
John Taggart | Bloomberg | Getty Images

Morgan Stanley promoted a tech executive in its wealth management division to become the bank’s first head of firm-wide artificial intelligence, CNBC has learned.
The bank is elevating Jeff McMillan, a veteran of the New York-based bank, to help guide its implementation of AI across the firm, according to a memo sent Thursday from co-presidents Andy Saperstein and Dan Simkowitz.

Last year, Morgan Stanley became the first major Wall Street firm to create a solution for employees based on OpenAI’s GPT-4, a project overseen by McMillan.
The move shows the rising importance of artificial intelligence in financial services, sparked by the meteoric rise of generative AI tools that create human-like responses to queries.
While Wall Street firms broadly pared back jobs last year, they competed to fill thousands of AI positions, poaching employees from one another.
In June, JPMorgan named Teresa Heitsenrether its chief data and analytics officer in charge of AI adoption. At Goldman Sachs, Chief Information Officer Marco Argenti is seen as the lead AI advocate.
Read the full Morgan Stanley memo announcing McMillan’s new role:

We are pleased to announce that Jeff McMillan has assumed a new position as Head of Firmwide Artificial Intelligence, co-reporting to us.
Jeff previously led Wealth Management’s Analytics, Data and Innovation organization where he played a key role in driving Wealth Management’s technological evolution, from our Modern Wealth Management platform to most recently our groundbreaking work with our exclusive partner, OpenAI.
In his new role, Jeff will coordinate across the Firm to ensure we have the appropriate AI strategy and governance in place. In doing so, he will partner with the business units and infrastructure areas to identify and prioritize AI opportunities; help position the Firm within the flow of AI development across the industry and ensure that Morgan Stanley continues to be a well-respected innovator in AI.
To execute on our AI strategy, Jeff will work closely Mike Pizzi, Head of U.S. Banks and Technology, Sid Visentini, Head of Firm Strategy and Katy Huberty, Head of Global Research. Katy and Jeff will co-chair the Firmwide AI Steering Group, comprised of business unit and infrastructure representatives.
Please join us in congratulating Jeff on his new role. More

Growth in China has been weighed down over the past year by a slump in the country’s traditional economic pillars of real estate, infrastructure and exports.
In response, Beijing has ramped up its efforts to bolster manufacturing and domestic tech in a bid to modernize its economy and remain globally competitive.

The Hong Kong observation wheel and the HSBC building in Victoria Harbour in Hong Kong.
Ucg | Universal Images Group | Getty Images

HSBC is “very positive” about the mid- to long-term outlook for the Chinese economy despite current headwinds, the British bank’s chief financial officer told CNBC.
Growth in China has been weighed down over the past year by a slump in the country’s traditional economic pillars of real estate, infrastructure and exports. This prompted Beijing to ramp up its efforts to bolster manufacturing and domestic tech in a bid to modernize its economy and remain globally competitive.

Speaking to CNBC’s Karen Tso on Wednesday, HSBC CFO Georges Elhedery said the lender — which is headquartered in London but does a lot of its business in Hong Kong and across the Asia-Pacific — was confident that the world’s second-largest economy would overcome its short-term headwinds.
“We’re looking at major economic transition, which is taking place, which gives us very strong grounds to be very positive about the medium- and long-term outlook,” Elhedery said.
He suggested that China’s economic maturity has reached such a stage that now is the “right time to transition into what more mature economies are.”
Elhedery characterized this maturity as being more heavily reliant on consumers, the services industry and high-value and sustainability-driven products, such as electric vehicles and batteries, aspirations he said were evidenced by the Chinese government’s recent massive push toward these sectors.

“That transition will mean that China will avoid falling in this middle income trap and be able to continue the growth pattern,” he added.

“Some of the Western economies have gone through those transitions in the past, [and] China is going through a transition today. That gives us a lot of positive outlook for the medium- to long-term for China.”
The more immediate economic challenges may last “a few quarters to a couple of years,” Elhedery said, but expressed confidence that China will be in a better position for the long run, as the country puts itself on a “materially better forward-looking track.”
HSBC missed its full-year 2023 pretax profit forecasts on the back of a $3 billion write-down on its 19% stake in China’s Bank of Communications, while the lender cut its overall exposure to Chinese commercial real estate by $4.6 billion year on year.
Yet, Elhedery on Thursday insisted that most of the challenges related to the ailing Chinese property market were “behind us,” even as he said the sector is not “out of the woods” so far.
“We think the trough of that sector is behind us. We think in our case, our exposure and our ECL (expected credit losses) covers the bulk of the charges behind us, but that still means there will be lingering effects as the sector continues to adjust, and we may continue to see some impact but not to the tune that we’ve seen last year on our credit charges,” he said. More

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President Joe Biden and former President Donald Trump are set for a rematch in the 2024 general election.
Politics have become “increasingly more emotional,” said Moira McLachlan, senior investment strategist with AllianceBernstein’s wealth strategies group.
It’s important to stay invested during the 2024 election year and avoid making knee-jerk reactions, strategists said.

Video of former President Donald Trump and President Joe Biden is played during a hearing by the Select Committee to investigate the Jan. 6 attack on the U.S. Capitol, in Washington, D.C., on June 13, 2022.
Chip Somodevilla | Getty Images News | Getty Images

WEST PALM BEACH, Fla. — Investors’ emotions may run high in 2024, especially in the realm of politics as President Joe Biden and former President Donald Trump are poised for a rematch in this year’s election.
“Politics have become increasingly more emotional,” Moira McLachlan, senior investment strategist with AllianceBernstein’s wealth strategies group, said Wednesday at Financial Advisor Magazine’s Invest in Women conference in West Palm Beach, Florida.

However, investors should avoid knee-jerk reactions by setting and sticking to an investment plan, strategists said.
“It’s so important to stay invested, and you have to try to take the emotion out of investing” to keep from doing something “detrimental” to your goals, said Kristina Hooper, chief global market strategist at Invesco.

More from Women and Wealth:

Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase income, save and make the most of opportunities.

Trying to time the stock market and predict its movements are largely a loser’s game. For example, over the past 30 years, the S&P 500 stock index had an 8% average annual return, according to a recent Wells Fargo Investment Institute analysis. Missing the 30 best days would have reduced average gains to 1.83%, for example, it found.
There are “a lot of geopolitical issues, a lot of things, that can spook us,” Hooper said.
Over the past four years, the world has witnessed a global pandemic and two wars, for example, said Jenny Johnson, president and CEO of Franklin Templeton.

It has taught investors they can’t predict what’s going to happen, she said.  
“So, diversify that portfolio,” Johnson added.
Whichever party wins the presidential contest, Republican or Democrat, history shows that the winner has hardly had a bearing on stock market returns, said McLachlan.
“We tend to think politics drives everything, but that’s certainly not the case,” she said. More

A shopkeeper’s son smashes a window, causing a crowd to gather. Its members tell the shopkeeper not to be angry: in fact, the broken window is a reason to celebrate, since it will create work for the glazier. In the story, the crowd envisions the work involved in repairing the window, but not that involved in everything else on which the shopkeeper could have spent his money—unseen possibilities that would have brought him greater happiness. The parable, written by Frédéric Bastiat, a 19th-century economist, sought to draw attention to a common form of argument, which has come to be known as the broken-window fallacy.If the window were to be broken today, the crowd might have a different reaction, especially if they were nimbys who oppose local construction. Their concern might be with the “embodied carbon” the shopkeeper’s son had released when breaking the window. The production of a pane of glass can require temperatures of more than 1,000°C. If the furnace is fuelled by, say, coal, the replacement window would carry a sizeable carbon cost. Similarly, the bricks, concrete and glass in a building are relics of past emissions. They are, the logic goes, lumps of embodied carbon.Conserving what already exists, rather than adding to the building stock, will avoid increasing these embodied emissions—or so NIMBYs often suggest. The argument is proving to be an effective one. On March 12th the EU passed a directive requiring buildings constructed after 2030 to produce zero emissions over their lifetime. The city of San Francisco directs would-be builders towards an “embodied-carbon-reduction-strategies checklist”, which starts with the suggestion that they should “build less, reuse more”. Last month the British government attempted to quash proposals from Marks & Spencer, a department store, that would involve rebuilding its flagship shop in London, on the grounds demolition would release 40,000 tonnes of embodied carbon.At their worst, such rulings are based on a warped logic. Greenhouse gases that have been released by the construction of an existing building will heat the planet whether the building becomes derelict, is refurbished or is knocked down. The emissions have been taken out of the world’s “carbon budget”, so treating them as a new debit means double counting. Even when avoiding this error, embodied emissions must be treated carefully. The right question to ask is a simpler one: is it worth using the remaining carbon budget to refurbish a building or is it better to knock it down?Choosing between these possibilities requires thinking about the unseen. It used to be said that construction emitted two types of emissions. As well as the embodied sort in concrete, glass and metal, there were operational ones from cooling, heating and providing electricity to residents. The extra embodied-carbon cost of refurbishing a building to make it more energy-efficient can be justified on the grounds of savings from lower operational-carbon costs. Around the world, buildings account for 39% of annual emissions, according to the World Green Building Council, a charity, of which 28 percentage points come from operational carbon.These two types of emissions might be enough for the architects designing an individual building. But when it comes to broader questions, economists ought also to consider how the placement of buildings affects the manner in which people work, shop and, especially, travel. The built environment shapes an economy, and therefore its emissions. In the same way as the emissions from foot-dragging over the green transition are in part the responsibility of climate-change deniers, so NIMBYs are in part responsible for the emissions of residents who are forced to live farther from their work in sprawling suburbs.To most NIMBYs, the residents who are prevented from living in new housing are an afterthought. Yet wherever else they live, they still have a carbon footprint, which would be lower if they could move to a city. Density lowers the per-person cost of public transport, and this reduces car use. It also means that more land elsewhere can be given over to nature. Research by Green Alliance, a pressure group, suggests that in Britain a policy of “demolish and densify”—replacing semi-detached housing near public transport with blocks of flats—would save substantial emissions over the 60-year lifespan of a typical building. Without such demolition, potential residents would typically have to move to the suburbs instead, saving money on rent but consuming more energy, even if the government succeeds in getting more drivers into electric vehicles. Although green infrastructure, pylons and wind turbines all come with embodied carbon, not building them comes with emissions, too, from the continued use of fossil fuels.Compromising on qualityDeciding such choices on a case-by-case basis makes little sense. Britain’s planning system, in which the government considers whether one particular department store will derail the national target to reach net-zero emissions, is especially foolish. The more sensible approach is to use a carbon price, rather than a central planner’s judgment. Putting a price on the remaining carbon budget that can be used for new physical infrastructure, as well as the services that people use in their homes, means that the true climate cost of each approach has to be taken into account. Under such a regime, energy-efficient homes close to public transport would be worth more. Those with less embodied carbon would be cheaper to build. Developers that demolished and densified would therefore often be rewarded with larger profits.Targeted subsidies, especially for research and development into construction materials, as well as minimum-efficiency standards, could bolster the impact of carbon pricing, speeding up the pace at which the built environment decarbonises. What will never work, however, is allowing the loudest voices to decide how to use land and ignoring the carbon emissions of their would-be neighbours once they are out of sight. ■Read more from Free exchange, our column on economics:An economist’s guide to the luxury-handbag market (Mar 7th)What do you do with 191bn frozen euros owned by Russia? (Feb 28th)Trump wants to whack Chinese firms. How badly could he hurt them? (Feb 22nd)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter More

How much money are your private-equity investments making? The question is easy to answer for other asset classes, such as bonds or publicly traded stocks. All that is required is the price paid at purchase, the price now and the time that has elapsed between the two. It is less obvious how returns for private-equity investments should be calculated. Capital is earmarked for such investments, but it is only “called” once the investment firm has found a project. There is little information about value once invested. Cash is returned in lump sums at irregular intervals.An alphabet soup of measures are supplied to investors, which are known as “limited partners”. There is irr (the internal rate of return, calculated from returns to a specific project), mom (the estimated value of a fund, as a “multiple of money” paid in) and a dozen more besides. All have flaws. Some rely on private valuations of assets, which might be flattering; others do not take into account the cost of capital. But nitpicking seems pedantic so long as one measure stays high: cash distributions measured as a share of paid-in capital, known as “dpi”. This concerns the money that private-equity firms wire to the pension funds and university endowments that invest in them each year, as a share of the cash those investors have paid in. Unlike irr or mom it is hard to game and takes into account the meaty fees charged for access to funds.Over the past quarter of a century, private-equity firms have churned out distributions worth around 25% of fund values each year. But according to Raymond James, an investment bank, distributions in 2022 plunged to just 14.6%. They fell even further in 2023 to just 11.2%, their lowest since 2009. Investors are growing impatient. It is now possible to buy jumpers and t-shirts emblazoned with the slogan “dpi is the new irr” on Amazon, an online retailer. According to Bloomberg, a news service, an investor recently showed up to a private-equity firm’s annual meeting wearing one.It is understandable that dpi has fallen. As interest rates climbed, equity valuations dropped. Private-equity managers get to choose when to sell their portfolio companies. Why would they sell in a down market? Possible paths for them to exit investments, such as taking a firm public or selling it to another company, have been all but shut off. In the years following the dotcom bubble, which popped in 2000, and the global financial crisis of 2007-09, distributions from private investments dropped similarly.Still, this slump might prove more damaging than previous ones, for a couple of reasons. First, allocations to private equity have risen. Pension funds rely on income streams—dividends from companies that they own, coupon payments from bonds and, now, distributions from private equity—to make payments to retirees. A decade or two ago, a lean year from private equity might not have mattered much. Now things are different.Second, previous lean periods coincided with there being few other investment opportunities for pension funds and university endowments, and plentiful ones for private-equity managers. Some of the best returns private equity has posted have come after crises or the popping of bubbles, when managers could pick up firms for a song. But the past two years have offered few such opportunities. With interest rates high, arranging financing has been difficult; although valuations fell, they did not plummet. The result is that firms are sitting on a record $2.6trn-worth of “dry powder”—capital committed by investors, but not yet invested. At the same time, pension funds are itching to buy more bonds, owing to the high yields that are now on offer.How might this situation resolve itself? Stockmarkets are reaching all-time highs, and valuations in private markets tend to follow those in public ones. The initial-public-offering pipeline is filling up nicely. Exits are becoming possible. If all this carries on, distributions might well begin to flow. Yet this is just one future scenario. Much of the market’s recent strength reflects the success of the biggest technology firms, which have been pumped up by excitement about what artificial intelligence will do to profits. And private-equity funds tend to own health-care and home-maintenance firms, rather than software ones. Moreover, American inflation looks worryingly stubborn, auguring higher rates. Investors in private equity will only be able to relax when they have their cash in hand once again. ■Read more from Buttonwood, our columnist on financial markets: How investors get risk wrong (Mar 7th)Uranium prices are soaring. Investors should be careful (Feb 28th)Should you put all your savings into stocks? (Feb 19th)Also: How the Buttonwood column got its name More

If America’s economy begins to deteriorate, people in Ningbo will be among the first to know. The eastern Chinese port, home to 9.6m residents, contains a sprawling industrial district. Its goods are prepared for export, and are shipped abroad via a deepwater harbour, which is one of the world’s busiest. The coast of Zhejiang province is dotted with similar entrepôts, where thousands of mostly family-owned firms have built up a diverse manufacturing base over the past 40 years. They make everything from textiles and car parts to electronics and machine components.Ningbo is also a city of political importance. Although private industry, rather than state-backed enterprise, has thrived in the region, it has nevertheless been held up as a model of “common prosperity”—Xi Jinping’s way of dealing with wealth inequality. And amid a gloomy overall outlook, with much of the country mired in a property crisis and suffering from weak consumer demand, surprisingly strong exports and fading fears of a recession in America have combined to make Ningbo one of China’s most optimistic cities.Official data released on March 7th showed that China’s exports surged by 7.1% year on year in the first two months of 2024. This is especially impressive given that some analysts had expected growth of less than 1%. Even exports to America climbed 5% year on year, after having tumbled by nearly 7% in December. The figures were sufficiently encouraging that policymakers at China’s annual congress in Beijing disclosed a version of them a day ahead of the expected release date.Little surprise, then, that the atmosphere in Ningbo is more cheerful than in other Chinese cities. Part of this, locals say, can be attributed to its relatively easy covid-19 years. In 2022 many large Chinese cities were locked down for months on end. Ningbo, perhaps by dint of luck, avoided a full-city lockdown and closed few factories. When Shanghai was shut down in April and May that year, halting lorries bound for its port, some traffic was rerouted to Ningbo’s busy harbour.The good cheer has limits, though, which suggests that cities such as Ningbo may not drive China’s recovery. A downturn in foreign demand would be devastating for the region. Local factories experienced a brief taste of this as China reopened in early 2023. Empty containers began stacking up in Ningbo’s port, indicating a lack of overseas purchases. An official who visited the city last March says he anticipated a disaster for the city and other export hubs. Fortunately, part of the phenomenon was explained by excess shipping containers returning to China for the first time since the start of the pandemic. The drop in demand was a blip.Ningbonese factory bosses have other concerns. The family-controlled nature of their firms makes financing from banks more difficult to secure. As larger manufacturers in southern cities such as Shenzhen enjoy government support for technology upgrades—involving robotics and the internet of things—local companies are finding it tough to keep pace.And although the most recent export data beat expectations across the board, things improved from a very low base. Analysts at HSBC, a bank, expect trade uncertainty to persist. Meanwhile, demand is shifting: that from poorer markets, such as Africa and South America, is surging, according to the most recent data; that from America remains strong; but that from Australia, the EU and Japan is falling.How well will Ningbo adapt? Many manufacturers got their start supplying foreign brands. More recently, they have begun selling directly to customers in the rich world through Amazon, an online marketplace, and Temu and Shein, two Chinese e-commerce sites, notes Hing Kai Chan of the University of Nottingham Ningbo China. They are unlikely to have developed similar channels in the markets now growing strongly. If rich-world demand fizzles out, Ningbo’s happy days could come to an end. Instead of developing a new path to prosperity, China’s optimistic city is riding on the coat-tails of the country’s geopolitical rivals. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

About a decade ago, a flashy, deep-pocketed investor made an appearance. Saudi Arabia’s Public Investment Fund (PIF) had a mandate to go big, and was ready to: it picked up a $3.5bn stake in Uber, placed $45bn in the world’s largest technology-investment fund, SoftBank’s Vision Fund, and provided half the capital for a $40bn infrastructure fund run by Blackstone, a private-equity giant. It has since bought stakes in everything from Heathrow Airport and Nintendo to Hollywood studios and French hotels. Last year it deployed more than $30bn of fresh capital, making it the highest-spending wealth fund in the world (see chart).image: The EconomistYet even as the PIF splurges abroad, its mandate at home is becoming more important. That is because of crown prince Muhammad bin Salman’s plan to transform Saudi Arabia’s economy, known as “Vision 2030”, in which the PIF is expected to play a vital role. It has been instructed to invest at least 150bn riyals ($40bn) at home each year. The intention is also to raise its holdings from 3.5trn riyals to 7.5trn riyals by the end of the decade, with luck creating millions of jobs as the economy moves away from oil. After a strong 2022, the kingdom’s gdp fell by 0.9% last year—its worst performance since 2002, aside from years of pandemic or financial crisis—making the task more urgent.The PIF’s role as a fulcrum of the Saudi economy means it is unlike any other sovereign-wealth or public-pension fund. Norges Bank Investment Management, Norway’s sovereign-wealth fund, has tasks and governance that are distinct from the country’s pension fund and finance ministry. Singapore’s GIC has to replenish its government’s budget, but its investments are focused on profits. In Qatar the state fund mainly invests abroad. As the PIF attempts to meet the ambitions of its political masters, it faces three challenges.The first concerns funding. The PIF currently receives most of its capital through asset transfers and capital injections from the government. On March 7th the Saudi government revealed that 8% of Saudi Aramco’s equity, worth about $164bn, had been transferred to the fund, doubling its stake in the state oil giant. The fund also receives dividends from investments and holdings, and can tap debt markets. It raised $11bn by issuing bonds on international capital markets last year, and has already raised another $5bn this year. On top of this, the fund borrowed at least $12bn in long-term loans last year. In the past, the central bank’s foreign-currency reserves have been transferred to it, too.Many of these sources will come under pressure. Not only is the fund expected to keep spending more, but as demand for oil slows the Saudi government will become less munificent. By 2030 millions more Saudis will have entered the workforce. The state employs many locals on higher wages than the private sector, with salaries counting for 40% of its total spending, meaning this will strain its budget. Bosses at domestic firms, many part-owned by the PIF, now talk of cost-cutting. And since the fund has eagerly tapped debt markets, interest payments are growing. Its cash dropped to $15bn at the end of September, from around $50bn at the end of 2022.The PIF’s desire to boost growth across the Saudi economy also means it invests in firms at various stages of evolution, complicating efforts to sustain consistent returns. Over the past five years the fund has established 93 companies. Over the 13 “strategic” sectors that the PIF has been tasked with developing, from health to sports and tourism, returns vary widely. Portfolio companies range from ROSHN, a property developer, to NEOM, a vast smart-city under construction, and Riyadh Air, an airline yet to become operational.All of this leads to the PIF’s second challenge: boosting returns. Since 2017, when the fund was tasked with implementing Vision 2030, its investments have returned about 8% a year. This is just above its minimum target of 7%, but far below the private-equity-style returns it really aims to achieve, admits one executive. Such ambitions are loftier than those pursued by most sovereign-wealth funds, which are more reserved owing to the difficulties of making big returns with diversified holdings and such large pools of money. So far the PIF has been able to pick assets that promise both economic development and strong returns, while tapping dividends from these holdings. As its role expands, that will become increasingly difficult.Moreover, private-equity-style valuation methods, which depend on past performance and projections of future cash flows, are tough to apply to many of the companies and projects in which the PIF is now investing. NEOM, for instance, is expected to cost around $500bn. But how and when it will begin to offer consistent cash flow is up for debate, making the investment more akin to a venture-capital one. In other areas, such as health and infrastructure, the fund’s role has the air of impact investing, where the goal is to achieve certain social ends as well as secure profits. This sort of investment is normally characterised by returns that deteriorate with scale and perform better when held for a long time, according to researchers from Harvard Business School and the International Finance Corporation, part of the World Bank. As the PIF expands, another problem is emerging: portfolio firms often overlap and compete with one another, cannibalising returns. In effect, this means taking money from your left pocket to put in your right, the executive sighs.The final challenge is attracting foreign investment into Saudi Arabia. As the fund grows bigger, foreign money would assist its ambitions. It would also enable domestic firms to expand their horizons and access new markets, thereby reducing the chances of ending up in competition with one another. And it would allow the PIF to exit some of its investments, which would push the private sector to fend for itself.But last year, after an IMF-approved data revision, Saudi Arabia attracted just 53bn riyals in foreign direct investment in the first three quarters, an amount equivalent to 2% of GDP. The aim is to entice over double that by 2030. “We can wait for investors but it will take time, so let’s go and do it [ourselves],” says a Saudi minister, “while being inviting to others.” It could be a very long wait. So far, global investors seem happier to take Saudi Arabia’s money than to put their own money into the country. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Sand is everywhere. Yet only a certain sort can be used to make the ultra-clear glass required for smartphones and solar panels. It must have a silica concentration of more than 99.9%, against less than 80% for construction material. This high-quality sand is scarce: of the 50bn or so tonnes extracted each year, less than 1% can be used to produce regular glass. A tiny fraction of that is pure enough for solar panels.As China’s leaders seek to revive the country’s economy, and to rebalance it away from property, they are throwing cash at manufacturing firms. The result is likely to be a surge in production, especially in sectors that Xi Jinping sees as important to China’s future, such as lithium-ion batteries, electric cars and solar panels, many of which require vast amounts of sand. As a result, demand will probably rise higher still. Prices are already hovering near record highs; last year they came to around $55 a tonne.The market is opaque and fragmented. But Crux Investor, a data firm, notes that the price of high-quality sand has risen twice as much as that of lower-quality stuff over the past five years, owing to the expansion of green manufacturing and the growing popularity of smartphones. Prices are buoyed by the fact that most Asian countries control exports so as to prevent environmental degradation. In America, where fine sand is mostly found in freshwater rivers, tough regulation makes extraction hard.Some manufacturers are now looking for alternatives. One option is to refine sand used for regular glass, which tends to be 99.5% silica. The problem is that doing so is itself expensive.Miners, both legitimate and otherwise, therefore spy an opportunity. The black market, estimated to be worth hundreds of billions of dollars a year, is likely to grow. Australia and Brazil are perhaps best placed to profit from the legal boom, according to Brian Leeners of Homerun Resources, a miner. Although these countries are best known for their sparkling white beaches, they also have significant reserves of industrial sand. These reserves are often farther from human settlements than those elsewhere, making extraction simpler. Mining companies report that until recently the price of sand was not high enough to cover shipping costs. Soaring prices have changed the equation.Neither country is in China’s sphere of influence. As such, they may help make Western supply chains more resilient. Mr Leeners points out that Brazil’s shipping lanes are also less prone to disruption, since they avoid the drought-hit Panama Canal and the Red Sea, which is under bombardment by Houthi rebels. Other commodities essential for the green transition, including cobalt, nickel and lithium, have seen prices jump, only to fall subsequently when new supplies or cheaper alternatives are discovered. Once permits have been acquired for extraction, high-quality sand could be the next to follow this path. The wait will, however, be an uncomfortable one for many manufacturers.■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More