TIME Ukraine

Why Was MH17 Over Eastern Ukraine, Anyway?

UKRAINE-RUSSIA-CRISIS-AVIATION-MALAYSIA
A picture taken on July 17, 2014, shows the wreckages of the Malaysian airliner carrying 298 people from Amsterdam to Kuala Lumpur after it crashed, near the town of Shaktarsk, in rebel-held east Ukraine. Alexander Khudoteply—AFP/Getty Images

Some flight routes takes planes over dangerous places

Malaysia Airlines Flight 17 was hardly alone in the skies over eastern Ukraine when it was apparently shot down on a route from Amsterdam to Kuala Lumpur, Malaysia. Airline routes are like highways—there’s a lot of traffic on them. And there were other flights from other airlines in the Ukraine corridor, including an Aeroflot jet that was making its way from Sheremetyevo to Moscow on a route that sliced a south-north path across eastern Ukraine. Within hours, though, the air control radar over Ukraine looked empty.

No aircraft belonging to any American carriers seem to have been in the area. Earlier this year, the Federal Aviation Administration had issued a security advisory warning U.S. airlines against flying over Crimea, the scene of a Russian takeover in that country’s dispute with Ukraine. But the Malaysian flight was north of that zone. Still, some airlines are already voluntarily deciding it’s a good idea to stay away from the spot Flight 17 went down. “Out of an abundance of caution, Delta is not routing flights through Ukrainian airspace,” Delta said in a statement Thursday, for example.

But why were so many others in a hot area in the first place? Because it’s a conflicted, crowded and mobile world. With increasing numbers of ever longer long-distance flights, commercial airlines are constantly crossing contested borders and territories. It’s not just Ukraine that has border issues. It’s Georgia and South Ossetia, and Moldova and Transdniester. And that’s just in one region.

U.S. carriers can’t avoid the friction, either. The airlines, as a rule, don’t comment on the specifics of their security programs. But they rely on the State Department and the FAA for security information to make their choices. For instance, Baghdad was once on the flight path of some India-bound flights, a route that would be adjusted based on conditions on the ground. Today, Tel Aviv is another airport that is obviously near a conflict zone, and no U.S. airline has stopped serving that market, so rerouting is fairly common.

“Our dispatch and security people are constantly looking at the troubled areas we fly through,” one pilot told TIME.

The downing of an aircraft at 32,000 ft. is a dimension not considered since Korean Air Lines Flight 007 was shot out of the sky by a missile fired by a Russian fighter jet in 1983. After that tragedy, U.S. carriers purportedly tested missile avoidance technology, but it’s not clear that any of them have gone beyond that. Malaysia Flight 17 may put the issue back on the radar.

TIME mergers

Tobacco Mergers Are Creating a More Efficient Killing Machine

Several brands of cigarettes are arranged for a photograph in Tiskilwa, Illinois, U.S., on April 17, 2012.
Several brands of cigarettes are arranged for a photograph in Tiskilwa, Illinois, U.S., on April 17, 2012. Bloomberg/Getty Images

It’s been a year of colossal mergers or proposed mergers among some consumer goods and services companies. Comcast wants to take over Time Warner Cable (not affiliated with TIME) to form the nation’s largest cable company. AT&T and DirectTV want to combine to compete against them. The market also expects T-Mobile and Sprint to hook up, further reducing competition in mobile phone service.

Now add to that the tobacco industry. Reynolds American announced a deal to acquire Lorillard Inc. which it values at $27.4 billion. It’s a combination of the second and third largest cigarette makers after Altria Group, which owns Philip Morris USA. As part of the deal, British American Tobacco Plc retains its 42% stake in Reynolds by providing $4.7 billion in funding.

That’s a lot of dealmaking for the Federal Trade Commission and the antitrust division of the Justice Department to bless or deny. The goal of antitrust statutes is to preserve competition in any industry segment. Trustbusters don’t care who provides that competition, just as long as enough of it exists. That’s the ongoing debate in the proposed cable combination. It’s axiomatic that when two dominant players mergers prices rise and consumers suffer.

The proposed tobacco merger has a similar competitive profile. Combining the second and third largest companies will certainly reduce competition, giving Reynolds a 34.1% market share after divestitures. Unlike the media mergers, though, this one takes place in a shrinking market, as smoking continues to decline. Consolidation in a declining market certainly makes sense from an economic point of view. And there’s a clever wrinkle in this deal, in that Reynolds will sell off the KOOL, Salem, Winston, Maverick and blu brands to Imperial Tobacco for $7.1 billion—the idea is to create a stronger No. 3 competitor to keep the antitrust forces at bay.

There’s one other big difference, though: the merger will allow these two companies to be more efficient in killing people with their products. In its merger document, Reynolds says the deal would produce $800 million in cost savings and produce double digit profit gains by the second year. Not that Reynolds is a laggard. The company had already doubled its operating profit margin to 36.7% since 2004. And its 10–year return to shareholders of 542.2% has dwarfed the S&P’s return. This is a profit machine, even if a lethal one. According to the American Cancer Society, about 224,210 new cases of lung cancer will be diagnosed this year and 159,260 people will die from lung cancer—that’s more than colon, breast, and prostate cancers combined, says the ACS.

The new company will feature brands including Camel, one of the top premium smokes, and Vuse, a fast growing e-cigarette, but the prize in deal for Reynolds is Lorillard’s Newport, now the No. 1 menthol brand. Newport now owns a 12.6% share of the entire cigarette market in the U.S. and it’s growing —33.7 billion menthol “sticks” were sold last year. According to the Reynolds’ presentation, Newport has an “attractive demographic profile.” That profile, says smokefree.gov, includes blacks, women, Hispanics and younger people, all of whom are higher-than-average consumers of menthol cigarettes. These very characteristics have put menthol under the regulatory spotlight, leading to speculation that the Food and Drug Administration might ban menthol. But Reynolds clearly doesn’t believe that the feds will make any such move. “While cigarettes are dangerous there is not a significant difference between a menthol cigarette and a non menthol cigarette,” noted Murray Kessler, Lorillard’s CEO. “And ultimately the science will prevail.”

The same science holds the view, which none of these companies disputes, that tobacco use is deadly. And smoking costs our health care system billions of dollars annually to treat smokers. Should the FTC or Justice factor public health considerations into the deal? For instance, if the FTC believes that cigarette prices will increase, would it still bless the deal because rising prices might help ration demand—force more smokers to quit. Conversely, would blocking the deal, and keeping the competitors in place, have the opposite effect and lower prices, thus attracting more smokers?

That’s not necessarily an analysis that antitrust regulators are willing to make. Typically the antitrust agencies look only at the competition effects. As a former FTC official told me: “The traditional view has been that if the health and safety regulators wish to impose conditions, that’s their call entirely.” Expect the FTC to stick to the economics, which will be great for the tobacco companies, and their investors. The customers are on their own.

TIME World Cup

Germany’s Moment of Brilliance

Mario Goetze of Germany holds the World Cup trophy after winning the FIFA World Cup 2014 final soccer match between Germany and Argentina at the Estadio do Maracana in Rio de Janeiro on July 13, 2014.
Mario Goetze of Germany holds the World Cup trophy after winning the FIFA World Cup 2014 final soccer match between Germany and Argentina at the Estadio do Maracana in Rio de Janeiro on July 13, 2014. Action Press/Zuma Press

Late goal by Mario Götze lifts team over Argentina

It was always going to take a moment of brilliance or breakdown to decide the World Cup final between Argentina and Germany, clearly the two best teams in the tournament, both tactically watertight from beginning to end. That brilliant moment would come in the second period of extra time, at 122:22, when German substitute Mario Götze ghosted behind Argentina’s central defender Martín Demichelis to collect a cross from André Schürrle — a substitute for a substitute — and direct the ball into the net for a 1-0 German win. It was Germany’s fourth World Cup title, its first since 1990, and ample reward for a team that had been rebuilding for this moment since 2000. Watch out, world, there could be more to come.

There would be no magic moment from Argentine star Lionel Messi, the four-time world player of the year who had hoped to make this his ultimate trophy and raise his profile to equal that of Diego Maradona’s, Argentina’s soccer deity. But Messi could only drag the ball wide on the two best occasions he was in on goal. And his last-gasp free kick floated miles over the bar as time ran out. A disappointing game without question for such a great player.

There was never any question that Argentina was going to defend deep and in numbers against a German team that routinely pulled opponents apart with its passing and swift counterattacks. Safety first is never a bad idea, particularly in a final and Argentina went 450 minutes without surrendering a goal. The idea was to defend with six or eight players and then have Messi run at the bigger but slower German defenders.

It could have worked. And it nearly did. Three times in the first half Messi unlocked the German defense with one pass, affording opportunities for Ezequiel Lavezzi and Gonzalo Higuaín to run on to. Higuaín even put the ball in the net in the 30th minute from a Messi-to-Lavezzi combination, but he foolishly charged ahead of the play and the goal was called back for offside. “The soccer gods gave them a bunch a gifts, which they squandered,” noted ESPN analyst Alexi Lalas. None was bigger than the one presented by German midfielder Toni Kroos, who put Higuaín alone on goal with a badly timed back pass. But Higuaín sliced the ball wide off his right foot, and Argentina’s best chance of the half went begging.

Germany would produce a great opportunity of its own at the stroke of halftime when Benedikt Höwedes slammed a header off a corner kick against goalkeeper Sergio Romero’s left post. The ricochet bounced off of Thomas Müller, but he was in an offside position. Danger avoided.

The game was full of intrigue even before it started, with Germany’s starting midfielder Sami Khedira pulling up lame in the warm-up. German coach Joachim Löw chose Christoph Kramer, who had played all of 12 minutes in the tournament, to replace him. In the biggest game of his life, Kramer would last 31 minutes, of which he was fully conscious for maybe 25. After taking a blow to the head from the shoulder of Ezequiel Garay, Kramer appeared wobbly but returned to the pitch — FIFA doesn’t have much in the way of a concussion protocol. Minutes later, Kramer looked as if he was on another planet and had to be helped off the field, to be replaced by Schürrle. For Argentina, its fleet winger Ángel di María, didn’t recover from a thigh injury, which surely changed the team’s tactical thinking.

Although Germany had come closest to scoring, Argentina had been the more dangerous side for the first 45. And Argentina coach Alejandro Sabella tried to increase the danger by withdrawing Lavezzi and introducing Kun Agüero at the half. Within two minutes, Messi had a golden opportunity with the ball on his favored left foot, but his chance for glory would go harmlessly wide. And in the 74th minute, running right to left, he unleashed another bending shot that also went wide.

As the game progressed, the space began closing down, and in the 88th minute, Löw brought Götze on for Miroslav Klose, who closed out his German career admirably. Argentina would once again have a chance to win the game in the 97th, when sub Rodrigo Palacio settled under a pass into the box, only to misplay it momentarily and then rush a lob wide of Manuel Neuer’s net.

Argentina’s moment had gone by. And Germany’s was about to present itself.

TIME World Cup

Will the Germany vs. Argentina World Cup Final Be Any Good?

Germany v Argentina: 2014 FIFA World Cup Brazil Final
From left to right: Thomas Mueller of Germany controls the ball during the 2014 FIFA World Cup Brazil Semi Final match between Brazil and Germany at Estadio Mineirao on July 8, 2014 in Belo Horizonte, Brazil; Lionel Messi of Argentina controls the ball during the 2014 FIFA World Cup Brazil Group F match between Argentina and Iran at Estadio Mineirao on June 21, 2014 in Belo Horizonte. Getty Images

Lionel Messi doesn’t take up much space on the field, given that he’s all of 5-ft.-7 in. tall, if that. Then again, he doesn’t need much. Messi is one of those performers who, like a sunbeam splitting through thickening clouds, produces a moment of brilliance when things are getting dark. He did it against Nigeria, Iran and Switzerland to keep Argentina marching toward the final.

Argentina is likely to need such a Messi moment to be able to win its third World Cup title in this, its third World Cup final against Germany. The Argentines won 3-2 in 1986 on the chubby legs of Diego Maradona, equal parts devil and delight in that tournament, delivering the pass that created his team’s winning goal, and enshrining himself in his nation’s history.

Four years later, a fading Maradona and Argentine team got rolled by a multitalented German team that included current U.S. coach Jürgen Klinsmann. It was a match widely considered to be one of the worst finals ever because Argentina went into a defensive shell, never to emerge. Too bad only one team came to play, noted the acerbic German coach Franz Beckenbauer after the game.

You couldn’t blame current Argentina coach Alejandro Sabella one bit if he were tempted by that approach this Sunday at the famed Maracanã stadium. Given the way Germany stormed past Brazil 7-1—with multiple scorers and multiple points of attack— taking shelter could prove the wiser strategy than throwing caution to the wind.

Please don’t, Alejandro. This World Cup final deserves both teams on full display at both ends of the pitch. We certainly know that Argentina can defend. Against the Netherlands in the semifinal, a Javier Mascherano-marshaled back line repelled Arjen Robben, Wesley Sneijder and Robin Van Persie as if they were tropical mosquitos, leaving Dirk Kuyt to launch clueless crosses to nowhere.

That was by design.

“They think about what they’re doing and they’re not easy to break down,” noted the French great Bixente Lizarazu, a World Cup winning defender about the Albiceleste. “Their forwards’ speed, liveliness and technical ability are impressive, but what has struck me the most about them is the way they break up their opponents’ rhythm.”

Without Angel di Maria in the lineup against the Netherlands due to injury, Argentina clearly lost some of its own rhythm. The Dutch supplied Messi with a pair of escorts whenever he got on the ball and Germany will pay similar attention. DiMaria’s ability to exploit defenders with his speed down the flank has to be respected–which could yield the little man a little more breathing room. If di Maria isn’t available, the return of a fully Sergio Agüero will also make things easier for Messi.

“But we can’t burden him with all that responsibility,” said Argentina’s Maxi Rodriguez. “We know he’s a game changer, but we have to support him. The upside is that the group is well drilled: everyone knows their role, “

Argentina might profit by considering the two teams that gave Germany fits in this World Cup: Ghana, which drew 2-2 with them in the group stage, and Algeria, which went out 2-1 in extra time in the round of 16. Both teams shared a go-flat-out philosophy of pressuring the Germans all over the park, and attacking wide and furiously. It worked so well that Germany coach Joachim Low had to change formations and move Philipp Lahm back into defense from midfield.

This approach for Argentina would not be without risk. “The German outside wingers will track defensively for the entire match,” says former Iranian assistant coach Dan Gaspar, whose team lost 1-0 to Argentina. “My concern about Argentina is that when they fly forward their tendency is not to have the same willingness to recover as the Germans. As a result, Argentina may find itself down in numbers defensively.”

And that, notes Gaspar, is a very bad thing.

In scoring four goals against Portugal and seven more against Brazil, Germany’s midfield trio of Mesut Özil, Thomas Müller and Toni Kroos demonstrated how quickly it converts defense into attack. At the same time Miroslav Klose was able to set the World Cup career scoring record. Germany is about options, all of them good.

“I think Germany can and will contain Messi,” notes Gaspar. “And they will be able to pierce the Argentina midfield and defense through the middle unlike the Dutch, who only seemed to play from the wings in the semifinal”

But like a lot of fans, he’s also pulling for La Pulga, the flea, as Messi is known. The four-time world player of the year will always be one of the greatest players the game has known. But there’s nothing like a World Cup trophy to confirm it.

MONEY

UPDATE: Why World Cup Bettors Are Smarter Than Bond Buyers

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AP (Soccer); Getty (Stock Exchange)

Update: Two weeks ago, TIME’s Bill Saporito used the lens of the global bond market to accurately predict that Germany (arguably the world’s best-run economy) would be facing off this weekend against Argentina (one of the worst) in the final of the World Cup. We’re resurfacing his piece in the belief that readers would want another look at Saporito’s prognostication prowess. Here it is:

In soccer, Argentina is a global power. Ranked 5th in the world and featuring among its host of stars the world’s best player, Lionel Messi, it is one of the teams that can threaten Brazil’s march to the World Cup title.

In financial circles, on the other hand, Argentina is to a functioning economy what the Faroe Islands are to football. A bit of a joke. A doormat. Indeed, last week the U.S. Supreme Court slide tackled Argentina as it tried to dribble past some American investors who are demanding to be paid, in full, the interest due on their Argentine bonds. Having convinced other creditors to go along with a deal—part of a broader effort to right the economy after years of mismanagement–the Argentinians wanted to force the American investors to eat some losses as well. The Supremes blew the whistle on that.

This raises a question, albeit one more likely to be debated in bars off Wall Street than on the beaches of Rio: Are you better off betting on a country’s bonds, or on its soccer team? With Argentina, the answer seems clear: The country’s chances of paying off its sovereign debt in full appear to be inversely proportional to the odds of its football team winning the World Cup, where it was a 4-to-1 pre-tournament favorite in Las Vegas. Argentinian debt, meanwhile, has a yield of about 13%, reflecting a risk premium that only Nigeria approaches among World Cup finalists. In short, betting on Messi may be the saner play.

With global interest rates so low in a world awash in liquidity, you’d think more global investors would reach a similar conclusion — but in many cases you’d be wrong. Investors ought to be yellow-carded: Their quest for yield is leading to crazier behavior in the market than on the pitch. Italy is a prime example. Punters pegged Italy, one of footballing’s great nations, as a 20-to-1 long-shot to win the World Cup. They got it right, too, considering Italy’s early exit after a controversial loss to Uruguay. But the Italian economy is a lot worse than the Azzurri. It’s still mired in its economic past, and where young people are stifled in finding work. Still, Italy’s bonds offer a measly 2.92%, only about 30 basis points higher than the 2.61% for U.S. Treasuries.

The U.S. team, on the other hand, went off as a 100-to-1 shot; ironically, we’re still considered a third-world nation on the soccer field, despite advancing to the knockout round of the World Cup again. With its strong (if heartbreakingly inconsistent) play so far, the U.S. team’s odds are now down to 40-to-1 to win the Cup. Still, the market is telling us to bet the bonds, not the team, and it’s probably right.
Soccer bettors seem to have longer memories than investors do. When the latter look at the histories of Italy, Spain, Greece, Portugal and even France, it’s as though these nations have never defaulted, devalued, or restructured over the last couple of centuries. Compare Spain and Brazil, for example. Brazil’s bonds are yielding 4.22% while Spain’s offer a relatively paltry 2.76%, even though Spain’s economy is a shambles. True, Brazil has also struggled of late, but it has oil, youth, and seemingly higher growth prospects. And unlike Spain, it has major export industries in agriculture and aerospace — not to mention soccer players.

The place where the football bettors and investors correlate more closely is Germany: The former had 5-to-1 odds early on, the latter a 1.38% yield. True, German economic history is not untroubled, but today it is Europe’s champion economy — the strength of which goes a long way toward explaining why European bond rates in general have remained so low. Germany is, in effect, propping up the rest of the European economy. After today’s shutout against the U.S., however, it looks clear that die Mannschaft won’t do anything of the sort on the soccer pitch. If the form plays out, one of the world’s best-run economies will face off with one its worst.

 

TIME stocks

Why a Portuguese Bank’s Problem Is Costing You Money

Explaining the Banco Espirito Santo SA problem

You don’t have money deposited at Banco Espirito Santo SA. You probably don’t own its bonds, or its stock. Or stock in Espírito Santo Financial Group SA, which apparently controls the bank or in Espirito Santo International SA, the Luxembourg holding company that issued the now-faltering commercial paper that is at the center of all this. You probably have never even heard of Banco Espirito Santo, which has been described as one of Portugal’s leading financial institutions, which would be significant if Portugal’s economy was significant. But that nation’s GDP of $220 billion makes it bit player in the European zone. Even Greece is bigger.

Still, troubles at Banco Espirito Santo have spread to other segments of the European banking system and then reverberated across the pond to Wall Street, sending the Dow down 180 points in Thursday morning trading. So even if you owned the bluest of blue chip stock with no exposure to European banking, you still lost money.

How does that work? It’s just another reminder that everything financial in the world is connected in one way or the other. So a seemingly containable problem in a Portuguese bank can quickly find a way into your pocketbook. “The event has hit European financials like a torpedo and has revived investors’ darkest nightmares about Europe,” the Financial Times quoted one equity strategist as saying.

The issue for investors is to decide whether this is a one-off problem or a hint of bigger troubles in Europe, whose economic recovery has lagged that of the U.S. While some are looking for other evidence, others aren’t waiting to find out. They headed for the exits, pushing gold higher and the yield on ultra-secure German bonds lower. Portugal’s stock market took a hit as Banco Espirito Santo’s shares tumbled 17%. Shares of Spanish and Italian banks fell sharply, too. Spain and Italy are bigger economies than Portugal but they’ve had similar problems. So bond yields on Italian and Spanish debt rose and Greece, not surprisingly, finds the market for its own bonds shrinking.

And if a trader for an institution held a long position on Spanish and Italian debt, say, he might forced to sell some other assets to cover that position. Those other assets might be U.S. stocks.

It’s a Portuguese problem, but it’s now your loss too.

TIME World Cup

Argentina Beats Holland, And Completely Ruins Brazil’s World Cup

Argentina players celebrate defeating the Netherlands in a shootout at Arena de Sao Paulo on July 9, 2014 in Sao Paulo.
Argentinian team celebrates defeating the Netherlands in a shootout at Arena de Sao Paulo on July 9, 2014 in Sao Paulo. Julian Finney—Getty Images

It'll be even worse if they win the final against Germany

If the Germany vs. Brazil World Cup seminfinal game was no contest, with the Germans crushing the hosts 7-1, then the Netherlands-Argentina semifinal clash was the opposite: a contest of wills. A chess match and a cage fight masquerading as a football game. The Argentines were determined to put the brakes on the freewheeling Dutch footballing machine led by Arjen Robben. The Dutch were determined to make someone other than Lionel Messi beat them. He didn’t. At least not during the run of play.

Messi was one of four perfect penalty takers as Argentina bested the Netherlands 4-2 on PKs after 120 minutes of slug-it-out soccer yielded no goals, few shots and strangulation defense. “We didn’t create very much. In all the other matches we created more opportunities than we did today. That says something about Argentina, ” Dutch coach Louis Van Gaal said after the match. And the fact that Messi was bottled up for most of the game also spoke to the tactical scheme that Van Gaal had set up to thwart Argentina’s ace.

Argentina’s keeper Sergio Romero, who was once coached by Van Gaal, looked a bit shaky during the game, on several occasions punching the ball clear when he could have easily caught it. But in the penalty shootout, he got down to block Ron Vlaar’s first kick going to his left; then after Messi and Robben coolly made their kicks, he dove high to his right to deny Wesley Sneijder.

The match was now clearly in Argentina’s hands. Ezequiel Garay then smashed one down the center preserve the Argentina lead. After Dirk Kuyt kept Dutch hopes alive by making the fourth kick, Maxi Rodriguez ended them—keeper Jasper Cillessen got a glove on the ball but couldn’t keep it out. Van Gaal didn’t get a chance to use his PK blocking specialist Tim Krul, because he’d used up his last sub in replacing the weakening Robin Van Persie. The striker had been fighting off flu systems, and he was never a match for Argentina’s defenders.

Argentina now has the opportunity to make Brazil’s World Cup a complete disaster by winning the final against Germany.

For the first half hour of the match, it became quickly apparent that both teams’ strategies were working. Robben barely got an introduction to the ball and when he did Javier Mascherano, Argentina’s designated butcher, was there to make sure he didn’t get any momentum going. And Messi had a two-man Orange escort anytime the ball was on his foot. Bruno Martins Indi spent most of the first half trying to bite Messi’s leg, which finally earned him a yellow card and then a seat on the bench. He was replaced at the half because Van Gaal knew that Messi would toy with him in the second 45.

The only hint of an Argentine advantage was the deep runs being made by Ezequiel Lavezzi and Gonzalo Higuain. But at the end those runs stood Vlaar, Holland’s giant defender, who had a magnificent game until his penalty kick troubles.

The second half and extra time had very little to offer in terms of offense. Robben finally broke through the Argentine line in the 91st minute but Mascherano was there once again to save his team. In the 106th minute, he was leveled by a shoulder from Kuyt, but played the rest of the game clutching cotton wadding between his teeth to contain bleeding from a cut inside his mouth. It was an enormous performance. Meanwhile, in the 117th minute, Messi finally outran Vlaar in the corner, but his cross back across goal to Rodriguez was hacked into the ground. That miss would allow “Maxi” to become the hero a few minutes later in the PKs.

TIME World Cup

Germany Crushes Catastrophic Brazil 7-1

APTOPIX Brazil Soccer WCup Brazil Germany
A Brazil soccer fan cries as Germany scores against her team at a semifinal World Cup match as she watches the game on a live telecast in Belo Horizonte, Brazil, July 8, 2014. Bruno Magalhaes—AP

The host country's fans went from stunned to comatose, like they were stuck in a bad dream

Brazil’s World Cup dream didn’t just end in the semifinal; it was shattered spectacularly into tiny yellow pieces. A fast and tactical German team shredded Brazil’s largely absent defense five times in 18 amazing first-half minutes to walk into the finals.

Brazil entered the game without its leading scorer, Neymar, and its defensive captain Thiago Silva but with the backing of its passionate crowd. But the Seleção went out of the game with its reputation as soccer’s most creative force in tatters. A team that hadn’t lost at home since 1975 suffered a defeat that was almost unthinkable.

The hammering began 11 minutes into the game when Brazil failed to mark Thomas Mueller on a corner kick—a criminal lapse against any German team— and Mueller took his time to sweep the ball past goalie Julio Cesar. The goal silenced the roaring home crowd but it was hardly a disaster. Croatia had scored first against Brazil in the opening game. Until that time, Brazil had held its own, even starting by brightly bringing its attack into Germany’s end.

But the Seleção was also ceding massive amounts of space on the field, as it had done against Colombia. But Germany is certainly not Colombia and soon began running into gaps in the Brazilian lines with menace. That menace turned to 2-0 when Miroslav Klose collected Mueller’s pass deep in the Brazil box and after Cesar blocked his initial shot he had an easy time pushing the rebound past the hapless keeper. The goal made Klose the all time leading World Cup scorer with 16.

The crowd went from stunned to comatose but they were soon to be shaken out of this bad dream by something even worse. Hardly a minute later, Dante, in for Silva, fed a hospital ball to Fernandinho 40 yards in front of his own goal. Fernandinho was dispossessed and Germany was down Brazil’s throat again. Kroos easily slotted home a couple of passes later. Barely two minutes after that, Brazil failed to clear a rolling ball delivered across its own 18 yard box and Toni Kroos smacked a left footer past Cesar. By the time that Sami Khedira collected Germany’s fifth goal in the 29th minute after exchanging passes with Mesut Oezil, Brazil’s defense had been reduced to numb spectators who looked as if they had just watched a horrific car crash.

The Brazilians were whistled off the pitch by the crowd that loved them at the start of the game. “It looks as if it’s 11 against 9,” noted television commentator Steve McManaman. It looked worse than that.

At the half, Brazil benched the execrable Hulk and replaced him with Ramires and took Fernandinho out for Paulinho. The changes, if way too late, injected some life into Brazil, and within the first 10 minutes of the second half produced three great goal scoring chances. But Manuel Nueur’s twin, point-blank saves against Paulinho signaled that there would be no miracle comeback. Instead, with Brazil taking increasing risks, Germany piled on more goals. Substitute Andre

Schuerrle added two well-taken goals before Oscar managed a hardly-a-consolation goal in the 90th minute. The Brazilians walked off the field in tears; history will not be kind to them.

TIME wall street

Wall Street Killed the Cupcake

Store Operations At Crumbs, Largest U.S. Retailer Of Cupcakes
JB Reed—Bloomberg/Getty Images

The Crumbs cupcake shop in my neighborhood just shut down. It’s a sad day for the entire sugar industry: Crumbs, a once-growing collection of shops with visions of becoming a national bakery chain, abruptly folded its 65-store operation in 12 states, putting hundreds of people out of work. The company had been delisted from NASDAQ last week, its stock trading for pennies from a high near $14. Sales were falling, Crumbs was losing money and unlikely to become profitable anytime soon. As of its last quarterly filing, the company had just $300,000 in cash on hand, and its liabilities included $244,000 in gift cards outstanding. Hope you didn’t own any of them. Crumbs lost $5 million in its last quarter.

Was Crumbs a victim of Americans turning toward eating healthier, especially among children, as the First Lady has encouraged? Fat chance. We are as plump and pleased as ever, and our appetite for donuts, cronuts, deep-fried Oreos and Baconators will not be reposing anytime soon. Long live junk food, if maybe not us.

But you could see this one crumbing long before it happened. Crumbs made good cupcakes—one of those sweet bombs could keep an 8-year old wired for about three days—but its failure isn’t so much about the product so much as the way Wall Street works to bake new companies. The recipe almost guarantees trouble in the future for many firms. Crumbs joins the long list of once hot food franchises that couldn’t resist the smell of growth and ultimately had difficulty managing it: David’s Cookies, Krispy Kreme, Einstein Bagels, World Coffee, just to name a few. They can survive, but generally after massive restructuring. Crumbs ran out of time and money.

The pattern is similar: a good product or idea becomes increasingly popular, and investors get moon-eyed about the prospects. At the same time, other operators and investors will swear to you that there’s plenty of room for more than one brand—or that if there isn’t much room, their concept is superior.

In the mid-90s, it was the humble bagel’s turn for the national spotlight. The players included Bruegger’s Bagel Bakery, Einstein Bros. Bagels, Chesapeake Bagel Bakery, Manhattan Bagel, Noah’s New York Bagels, Big Apple Bagels and the Great American Bagel among others. Several of them went public, which funded overexpansion. They dreamed big. “What happened to the pizza in the ’40s and ’50s is happening to the bagel today,” said the ceo of Manhattan Bagel at the time. “Soon there will be bagel shops on every street corner.” Except in Manhattan, where there are no Manhattan Bagel shops. Einstein, Noah, Chesapeake and Manhattan would eventually become part of one company, as the craze subsided and the industry consolidated. Then it was doughnuts. Krispy Kreme also got creamed by massive overexpansion funded by its very popular IPO. Even in the U.S., we can only eat so many doughnuts.

Cupcakes are now repeating the pattern, with predictable results. In the cupcake game, Crumbs competitors include Magnolia Bakery, Sprinkles, and any number of hipster-preneurs in major cities not to mention the likes of Duncan Donuts and Starbucks, which flanked the cupcake shops with offerings of their own. If cupcakes were that hard to make, your mom wouldn’t have churned them out on demand.

Why isn’t there more caution? Because that’s not Wall Street’s real concern. The investment industry’s mission is to throw money at enough startups—from cupcakes to social media—and hope to land on a winner. Failure is built in, the only question being who is going to take the losses. A lot of time it’s overeager shareholders who pile in these stocks because all they see is unlimited growth. In food, the best case scenario is Starbucks, whose original store still operates on Pike Street in Seattle along with thousands of others around the world. An IPO allowed Starbucks to enjoy rapid growth and made a lot of investors rich. But part of Starbucks strategy was to be capitalized enough to blow other rivals out of the water by grabbing the best locations. That left everyone else to scramble to remain competitive—and why there’s really no No. 2 in premium coffee.

Fortunately, the U.S. is not going to run out of cupcakes anytime soon. This is basically a mom and pop business that is still best run by mom and pop. Cupcakes may have had their run for now, but investors are always going to be hungry to find the next new food style to fund. And grilled cheese is waiting in the (chicken) wings.

TIME world cup 2014

5 Reasons Brazil Will Lose to Germany (and 3 Reasons It Won’t)

Brazil v Colombia: Quarter Final - 2014 FIFA World Cup Brazil
Neymar lies injured while Marcelo shows concern looking over him during the 2014 FIFA World Cup Brazil Quarter Final match between Brazil and Colombia at Estadio Castelao in Fortaleza, Brazil on July 4, 2014. Lars Baron—FIFA/Getty Images

The pre-tournament favorite Brazil isn't playing much like it at the moment. Here's why Brazil could lose the in the World Cup 2014 semifinals to Germany.

The World Cup reaches the semifinals this week, starting with Germany taking on host Brazil. A day later, Argentina faces the Netherlands. Although the pre-tournament favorite, Brazil hasn’t done much to back up that designation. Here’s why it could be the end of the road for the Seleção.

1) No-Mar
With Neymar out of the World Cup with a fractured vertebra, the Brazilians not only have lost their best scorer, they’ve lost their talisman, and to some degree their hope. Neymar was willing to put Brazil on his back and carry it. He’s a player whose value extends beyond his incredible skills. And with Thiago Silva suspended because of his own stupidity in getting a second yellow card, Brazil has lost its defensive anchor, too.

2) Brazil’s strikers need to add a syllable (and some goals)
Fred. Hulk. Jo. Brazilian players often go by one name—Pele, Ronaldo, Ronaldinho—but its current crop of monosyllabic frontrunners have come up short on goals. Buy a vowel. That’s why players such as Willian and Ramires need to step in Neymar’s absence.

3) The team is mediocre
It may be the worst thing you can say about Brazil, but it’s what Colombia’s players remarked after the game against them—which Colombia lost 2-1 on two set pieces rather than from the run of play. Mexico players were likewise unimpressed after El Tri’s scoreless draw with the Seleção. The magic that marked great Brazilian teams—when three or four players could each do amazing things— is missing from this outfit. Even worse: teams no longer fear Brazil. Germany certainly won’t be intimidated.

4) Brazil is playing like a team that’s afraid of losing
There’s more pressure on this team than any team in the history of football. How could it not get to them? In fact, it has. Neymar’s loss gives Brazil’s team a soul-saving excuse should it lose to Germany, not exactly a motivating thought.

5) Germany isn’t Colombia
Or even Mexico, and that’s not a good thing. Brazil thrives in a wide-open, up-and-down game. Germany is not likely to allow that kind of freedom, as it showed against France. If the Germans cut down on the space, Brazil is going to find it awfully tough going. So are the spectators.

And here, three reasons not to give up on Brazil

1) It got to the semis, didn’t it?
Brazil has won 4 games and tied one, and although none of those results have been pretty to watch, the team has managed to find a way to progress. Against Colombia, it found a way through a corner kick and a piece of powerful artistry from David Luiz on a magnificent free kick.

2) Again, Germany isn’t Colombia.
Or even Mexico, and that’s a good thing. The Germans have looked less impressive with each subsequent game after pole-axing a weak Portuguese team in their opening match. Against France, it reverted to a circa 1986 model of play, with lots of possession in the back and little going forward. And the winning goal? A header by one of its giant backs after winning a free kick. Boring old Germany.

3) It’s the World Cup and it’s in Brazil.
The script has been written, and Brazil just has to play to play its part. Certainly, the crowd at the Estadio Mineirao in Belo Horizonte is going to turn the joint into a noise avalanche. Brazil’s players just need to ride it to victory.

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