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Dec 26, 2018

The 10 Point: A Guide to the Day's Top News

The 
Wall Street Journal.
The 
10-Point.

Today's guide to the WSJ
Good Morning. In today’s edition, President Trump criticizes the Fed, the government shutdown continues, U.S. farmers and ranchers brace for losses in Japan, and more.
 
1.
President Trump criticized Federal Reserve rate increases, as signs of a global economic slowdown and unsteady U.S. politics contributed to a world-wide stock rout.
PHOTO: JACQUELYN MARTIN/ASSOCIATED PRESS
The Dow industrials’ performance Monday was the worst to date for a Christmas Eve trading session, breaking a record set in 1918. While U.S. markets were closed yesterday, Japan’s Nikkei Stock Average fell into a bear market
  • The month of December has been unstintingly bad for global markets, as the normally quiet holiday period has been jolted into alarm by the partial U.S. government shutdown that is in its fifth day.
     
  • Mr. Trump said yesterday the Fed is raising interest rates too fast—a practice he blames for volatile U.S. indexes. However, the president also said he had confidence in Treasury Secretary Steven Mnuchin, whose efforts to soothe investors last weekend have been criticized as counterproductive.
     
  • All three major U.S. stock indexes are on track to end the year with losses for the first time since 2008. That’s even as retailers are having one of the strongest holiday periods in years.
     
  • Behind the broad, swift market slide of 2018 is an underlying new reality: Roughly 85% of all trading is on autopilot—controlled by machines, models, or passive investing formulas, creating an unprecedented trading herd that moves in unison and blazingly fast.
  • Shareholder activists have had their busiest year to date as market declines make companies more affordable, and the investors and their tactics become more widely accepted. 
 
From reporter Michael Wursthorn:
The broad S&P 500 index is dangerously close to entering a bear market after a punishing Christmas Eve selloff. Analysts warn the benchmark could cross that threshold today in what is expected to be a light trading session due to the holiday-shortened week. While that would end the S&P 500’s long bull run since 2009, investors say that may be the bottom the market needs to hit to rebound higher.
michael.wursthorn@wsj.com
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2.
The government shutdown continued, disrupting tourists holiday plans and threatening to delay paychecks for thousands of federal workers. On Capitol Hill, negotiations have essentially been at a standstill since Saturday, when both the House and Senate adjourned until tomorrow. Federal departments affected by the shutdown include Justice, Homeland Security, State, Housing and Urban Development, Transportation, Treasury, Agriculture, Commerce and Interior.
  • President Trump yesterday showed no sign of changing course in the stalemate with congressional Democrats over his demands for border-wall funding. He said he could offer no timetable for reopening the parts of the government left without funding by the shutdown.
     
  • Mr. Trump said he would travel to the border next month. He said he hoped to have the wall completed “by election time.”
     
  • The president is pushing back on concerns that U.S. taxpayers ultimately will bear the burden of building the wall, which runs counter to a central promise Mr. Trump made during the 2016 campaign that Mexico would fund the project. 
3.
Investors have lost billions as cryptocurrencies plunged in recent months, but not all of the losses are because of bad timing. The Securities and Exchange Commission and state regulators have brought more than 90 crypto cases over the past two years, as bitcoin and other cryptocurrencies swung from highs to recent lows.
  • So far, the regulators have managed to claw back only about $36 million for duped investors.
     
  • One of the attractions of digital currency is its anonymity. That feature, compounded in some cases by front companies and fake owners, can also make it hard for investigators to trace funds.
4.
A downturn in China’s car market has hit some of the world’s biggest auto makers. It has saddled them with factories that they no longer need and that are costly to retool.
  • Ford, Peugeot and Hyundai especially mistimed recent expansions, opening new plants just as the seemingly unstoppable growth of China’s auto market went into reverse.
     
  • Now auto makers face a painful dilemma: Abandon those big investments, or invest even more to turn around dying plants at an uncertain time in a crucial market.
 
5.
After seeing exports to China fall, U.S. farmers and ranchers now are bracing for more losses in their next-biggest Asian market: Japan.

On Dec. 30, Tokyo will begin cutting tariffs and easing quotas on products sold by some of American agriculture’s biggest competitors—including Canada, Australia, New Zealand and Chile—as part of the new 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
  • Tokyo will follow up on Feb. 1 by implementing the European Union-Japan Economic Partnership Agreement offering similar breaks for the 28-country bloc’s agricultural products, aiding American rivals in France, Spain, Italy and the Netherlands.
     
  • Japan’s new free-trade push “threatens to cut into U.S. market share and depress profits for U.S. agricultural exporters by granting preferential access to … international competitors,” the Trump administration’s Agriculture Department warned in a May report.
6.
A hedge fund is making billions off Americans underwater mortgages. Fortunes were made on Wall Street betting against sketchy mortgages before the housing bust a decade ago. In its aftermath, Fir Tree has made billions taking the other side of that trade, scooping up battered home loans in a wager that plenty of Americans would keep paying them.
  • The payoff, years in the making, is $2.6 billion and counting, according to an investor letter reviewed by The Wall Street Journal.
7.
What Were Following
Child Migrant Death: An 8-year-old Guatemalan boy died in Border Patrol custody early Christmas morning, the second such death this month.
Carlos Ghosn Case: Former Nissan representative director Greg Kelly was released on bail, breaking Japanese prosecutors’ hold on one of the defendants in the case against Mr. Ghosn, the company’s former chairman.
Indonesia Disaster: Searchers hampered by incessant rain used helicopters and ships to scour isolated villages for victims of a powerful tsunami as the death toll climbed to 433.
8.
Trending Stories at WSJ.com
ILLUSTRATION: DANIEL DOWNEY
The science behind making your child smarter: We all have our assumptions about what works—here’s what the data really tells us. (Read)
Colleges are offering financial aid to entice admitted students to stay away for a gap year. (Read)
How Huawei took over the world: The Chinese company’s technology touches virtually every corner of the globe, yet it has long faced scrutiny in the U.S. (Read)
Japan will withdraw from the International Whaling Commission and start catching whales in its coastal waters after it failed to win approval for commercial whaling. (Read)
9.
What Else Were Reading
GoFundMe says it refunded those who contributed to a campaign involving a homeless veteran who prosecutors allege schemed with a New Jersey couple to scam donors. (Associated Press)
Thailand’s parliament voted to approve cannabis for medical use. (BBC News)
10.
Today’s Question and Answer
In response to our question about your thoughts on the government shutdown:
Andrea Hoxie from Texas shared: “Until there are real human beings who are mature AND concerned for the country more than their political agendas or personal gain occupying Congress AND 1600 Pennsylvania Avenue, government shutdowns will continue. There is no federal government, as there is no organization in the real sense of the word. Yes, there are agencies and departments and positions partially filled by cronies and opportunists who have scant knowledge of how the federal government works (including 45), and are more interested in keeping the country divided, but there are relatively few in those positions who work for the good of the country. The employees most affected by the shutdown are the ones for whom I am concerned.”
Joe Novitzki of Minnesota said: “It’s frustrating that this is an issue multiple times a year. On top of that, the result is never a balanced budget! When will we stop kicking the can down the road and find a way to pay for the government services we need, cut the rest, and begin correcting our debt issue?”
Dave Miller in Michigan said: “It is disgraceful that our highly paid politicians disrupt our nation and show the world how foolish they are by shutting down our government over border-wall funding. Mr. Trump promised in his campaign to have Mexico pay for his wall. Now he is ‘owning’ shutting down our government because we won’t pay for the incredibly expensive wall (which won't stop illegal immigration). I can only wonder what is in store in the new year.”
Bill Weber in California wrote: “The partial government shutdown simply proves what we’ve known all along: We are being governed by tribalists, whose goals are either self- or party-serving. Any decent business whose leadership repeatedly misses well-established deadlines would change that leadership without hesitation. The constant blame-game rhetoric, and lack of results, are clear indicators that politicians are not serving their constituents, but only themselves and their parties. No wonder politicians are held in such low regard.”
Question for tomorrow’s 10-Point: Going back to our article above, what are your thoughts on some colleges offering financial aid to entice students to take a gap year? Email us your comments, which we may edit before publication, to 10point@wsj.com, and make sure to include your name and location
 
The 10-Point was the name given to the news column that runs on the front page of The Wall Street Journal.