Saved German Grand Prix all set for new 2019 deal!

The German Grand Prix at Hockenheim will likely remain on the F1 calendar next year following conclusive talks between the event’s promoter and Liberty Media.

Earlier this year, it was feared that Germany – a country with a long history of F1 – would disappear once again from the schedule as both Hockenheim and the Nürburgring struggled with financial constraints.

However, the resounding success of this summer’s race justified a joint effort from both F1 and Hockenheim to ensure the event’s presence on the calendar for 2019.

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According to Motorsport.com, the new deal – that has yet to be signed but which was agreed upon in principal at Spa last weekend – is for a single year.

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It has also been suggested that the new contract includes a reduced franchise fee on the part of Formula One Management. However, to make ends meet financially, Hockenheim will still require outside funding from sponsors and commercial partners.

It is believed that Mercedes was also instrumental in securing the deal, having enjoyed a seat at the negotiation table according to team boss Toto Wolff.

“We have tried to facilitate a comeback, we’re involved in the discussions with the various parties, but I haven’t got visibility as of today whether the German GP will happen, or whether we’ll be involved,” Wolff said last weekend in Spa.

“That’s something that needs to be decided soon. I’m speaking about the next couple of days.”

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Scheckter: ‘Overrated’ Alonso not in the same category as Schumacher

One-time F1 world champion Jody Scheckter perceives Fernando Alonso as an overrated driver and a man who “upsets teams and everybody around” him.

Tributes poured in for the 37-year-old Spaniard who will be leaving F1 at the end of the year, with former teams, team mates and colleagues praising Alonso’s talent and achievements.

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Scheckter, who won the world title with Ferrari in 1979, was much less complimentary of the McLaren driver’s accomplishments and legacy.

“I like to just think how many championships somebody’s won,” the South African told BBC Radio 5Live.

“You can rate people that they had bad luck and bad cars. I think people overrate him. One of his problems is he seems to upset teams and everybody around him.

“That’s not the way to win world championships. You’ve got to work with your team and you’re nearly a leader [as a driver].”

Alonso’s former Ferrari team mate Felipe Massa recently put the Spaniard on the same level as seven-time world champion Michael Schumacher in terms of talent.

Once again, though, Scheckter begged to differ.

“For me, absolutely not,” said the man who now runs Laverstoke Park Farm, an organic farming enterprise in Hampshire, England.

“Schumacher has got to be rated as the best driver ever. Alonso I don’t think he’s in that category.

“[That’s] not to say he’s not a good driver. He’s one of the top drivers there now.”

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Grosjean: ‘The boys deserved a really good drive from me’

A charging Romain Grosjean made the most of a 10-lap mad dash in the closing stages of the German Grand Prix to deliver a sixth-place finish to Haas.

The French driver was in search of a redemptive performance following several recent mishaps, and Sunday’s race provided a good opportunity for him to regain his footing.

Both Grosjean and team mate Kevin Magnussen appeared on course for a double-points finish, but Hockenheim’s spotty showers in the latter part of the afternoon and the chaos it brought on proceedings denied the US outfit that achievement.

The Dane actually had the upper hand over Grosjean but the team’s decision to switch to intermediates during the safety car period that followed Sebastian Vettel’s crash, inversed the positions, with the Frenchman never looking back thereafter after the duo pitted again to revert to ultrasoft rubber.

“That was good fun. It was a good end to the race,” said a delighted Grosjean.

“Obviously, we didn’t quite get the right choice putting inters on, as the track dried really quickly for some reason.

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“It was a bit of luck, a gamble, but we came back on slicks, and I had amazing fun through those last laps.”

Indeed, Grosjean overhauled both Force Indias, but fifth-place man Nico Hulkenberg remained out of reach.

“I was just pushing it to the limit and going for it. I think we would’ve been quite happy to be where we were before the rain came, and then, obviously, it rained.

“The boys deserved a really good drive from me, and I had fun doing it.”

Unfortunately, Magnussen was unable to extricate himself from his position deep in the midfield. From P12 however, Kevin was elevated to P11 when Renault’s Carlos Sainz was hit with a 10-second time penalty for overtaking during the safety car period.

“Obviously, it wasn’t ideal to end up outside of the points after being P6 for the whole race,” said the Dane.

“We didn’t quite get the best out of the weather situation. We’ll just have to learn from that and do better next time.”

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Mercedes reveals the whopping cost of winning in F1

Mercedes has gained a dominant position in Formula 1 thanks to its engineering excellence, but putting together the resources to support its success involves a massive budget.

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The German outfit spent £309.7M to secure the world championship in 2017, a £45.9M increase over its previous year budget, justified by the R&D costs linked to the introduction of new rules in F1.

However, that big number only covered the costs of developing and building its Silver Arrows and running its team, and excludes all the costs associated with its Brixworth HPP engine department.

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F1 has been a cost effective investment for parent company Daimler AG which supplied just £60M of the total 2017 budget, with the balance covered by the team’s prize money revenue and its commercial sponsors.

The outfit’s total revenue for 2017 amounted to £337.2M which represented a 16% increase year-over- year compared to 2016.

Mercedes has indicated that its revenue has increased by 194% since 2012.

The team’s headcount at its Brackley headquarters averaged 912 in 2017, a slight increase over the 849 number of workers that contributed to the team’s success in 2016.

With regard to TV exposure, Mercedes’ winning efforts garnered a 24.7% share of coverage in 2017, representing and advertising value equivalent (AER) of £3.4B for the team and its associated partners.

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The Stock Market Is Not the Economy

We are seeing the usual hysteria over the sharp drop in the markets in Asia, Europe, and perhaps the US. (Wall Street seems to be rallying as I write.) There are a few items worth noting as we enjoy the panic.

First and most importantly, the stock market is not the economy. The stock market has fluctuations all the time that have nothing to do with the real economy. The most famous was the 1987 crash, which did not correspond to any real-world bad event that anyone could identify.

Even over longer periods, there is no direct correlation between the stock market and GDP. In the decade of the 1970s, the stock market lost more than 40 percent of its value in real terms; in the decade of the 1980s it more than doubled. GDP growth averaged 3.3 percent from 1980 to 1990, compared to 3.2 percent from 1970 to 1980.

Apart from its erratic movements, the stock market is not even in principle supposed to be a measure of economic activity. It is supposed to represent the present value of future profits. This means that if people are expecting the economy to slow down, but also expect a big shift in income from wages to profits, then we should expect to see the market rise. So there is no sense in treating the stock market as a gauge of economic activity–it isn’t.

Turning to this specific downtown, it seems clear that the troubles in China are the immediate cause. I will claim zero expertise on China’s economy, but one thing seems very clear: It had a serious stock bubble. Its market rose by more than 60 percent from the start of the year to its peak in early June. At that point, it was more than 150 percent above its year-ago level. Even with the recent plunge, it is still more than 50 percent above the year-ago level.

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It was inevitable that this bubble would burst; the only question was when. The collapse undoubtedly hurt some Chinese investors, many of whom recently entered the market, often with large amounts of leverage. The direct impact on the Chinese economy is likely to be limited; these people would not in aggregate have enough wealth so that any reduction in spending would hit the economy in a big way. (Remember, people who were in the market last year are still way ahead.) There may be a political issue here for the Chinese government, which apparently encouraged people to buy into the market.

And, contrary to the children’s tales about the purpose of the stock market, firms rarely finance investment through issuing shares. (The Internet bubble was an exception.) Shares are more typically issued so that early investors can cash out. So China’s investment is not likely to take a hit because of the market crash.

There is a larger issue for the Chinese economy about its ability to convert from an investment- and trade-driven economy to one driven by consumption. This is not an easy task, and it would not be surprising if China finds it difficult. I’ll leave it to people who are more expert than me to give odds, but we can say a bit about the impact on this switch (or its failure) on the US.

From the standpoint of the US economy, the main impact of a failed transition in China will be an increase in its trade surplus. A lower-valued Chinese currency will mean that it exports more and imports less. Also, slower GDP growth will be a drag on its imports. Let’s say that this effect raises its trade surplus by $200 billion above its baseline path, an amount equal to 10 percent of current imports.

If we assume that this increase in trade surplus is shared evenly between the US, Europe and the rest of the world, this implies an increase in the US trade deficit of roughly $70 billion. If we assume a multiplier on 1.5, that will reduce GDP growth over the next year by $105 billion, or a bit less than 0.6 percent.

A 0.6 percentage point hit to GDP is hardly trivial, but not the sort of thing that gives us another recession. I suppose the shift in China’s trade surplus could be even larger, but it is hard to imagine it would be too much larger.

It is also worth making a point that should be obvious: This is all a story of inadequate demand. In other words, our big problem is that we are not spending enough money. I know it would be wonderful if companies went on an investment spree, but this is not likely to happen, even if a Republican president and Congress give them all of our money. We may want consumers to spend more, but with savings rates at historic lows, that will not likely to happen. (People do need to save for retirement.)

This leaves trade and government spending as potential sources for increased demand. The trick to improving our trade balance is a lower-valued dollar. That’s a good long-term story, but hard to see much in this direction at the moment, with most other countries’ economies looking weaker than ours.

That leaves the big bad government: If we want more demand, it will have to come from the government paying for evil things like infrastructure, education, healthcare and green energy. But we all know weak growth and more unemployment is the better way to go.