Bizwatch

Where There's A Fad, There's A Market
Markets are perfectly rational instruments, according to some economists. But others have their doubts. It's not just the unexplained ups and downs of particular stocks or indices. Even something as sober as how stock markets are organized is as susceptible to fads as a teenage consumer. Just a few years ago, several big West European countries felt the need to reproduce their own versions of the U.S.'s tech-heavy NASDAQ exchange. After a few lackluster years, some, like Germany's Neuer Markt, fell out of favor and the survivors are lightly traded. More recently, market mergers have been all the rage — witness the so-far fruitless attempts by pan-European Euronext and Deutsche Börse to take over the London Stock Exchange (LSE).

Now a new craze seems to be catching on as quickly as the latest mobile ringtone: small-cap markets. Euronext last week launched Alternext, its junior, Paris-based market for small firms, just a month after the Irish Stock

	INDICATOR Can monetary policymakers learn from soccer players? Bank of England governor Mervyn King thinks so. Evoking a 1986 Diego Maradona goal — the Argentine star darted through England's defense in a straight line — King said the expectation that Maradona would swerve cleared his path. The point? Market interest rates, moving in expectation of a change in official rates, can curb inflation without official rates changing. Nice goal.

Exchange opened its new market for growing businesses, the Irish Enterprise Exchange. Even Deutsche Börse has reportedly eyed a copycat exchange. What's the rush? Alternext is seeking to mirror the success of the LSE's Alternative Investment Market (AIM). Ten years after it opened, AIM now boasts more than 1,100 listings; last year alone, more than 300 companies were quoted, twice as many as in the previous year.

The attraction for cash-hungry minnows is obvious. Firms don't need to produce a trading record, and benefit from lighter regulation. But while AIM makes raising capital easy, investors are having to tread carefully. Many companies floated on AIM are shells — listed businesses with no physical operation — or mining and exploration firms aiming to capitalize on booming energy prices, but with no income. So as long as small-cap exchanges are in vogue, fashion victims are inevitable. — By Adam Smith

Getting In The Picture
Move over, Hollywood — here comes Hungary. That's the hope of flamboyant Budapest real estate tycoon Sandor Demjan, chairman of TriGranit Development Corporation. With a government go-ahead expected "very soon," according to TriGranit, work is set to begin on a $188-million, state-of-the-art film complex to be built 15 km outside Budapest, due for completion next year. The 34-hectare Korda Studios plans to lure big-budget productions from neighboring film centers such as Prague, where blockbuster Mission: Impossible was shot; even staunchly British characters like James Bond and Harry Potter may soon be eastward bound. Should British studios be worried? Generous tax breaks for film producers in Hungary mean "U.K. studios have suddenly become much more expensive" in comparison, says London filmmaker Jonathan Schutz. "Hollywood is looking elsewhere." But does Bond like goulash? — By John Nadler

The Bottom Line
	We don't have a good reason to stay in Italy except that the food is good
		RICCARDO MATTEINI, co-owner of Tuscan textile firm Gruppo Colle, on Italy's inflexible labor environment and competition from Chinese exports