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Nov 14, 2019

Analysis | The Finance 202: John Bolton takes heat for speaking to Morgan Stanley clients but not Congress

By Tory Newmyer



THE TICKER

Former national security adviser John Bolton. (AP Photo/Carolyn Kaster)
Former national security John Bolton is taking fire for sharing his views on President Trump's foreign policy — exclusively with deep-pocketed investors behind closed doors. 
Bolton, who has resisted a congressional subpoena to testify in the House's impeachment inquiry, is drawing renewed scrutiny to one of the financial industry's favored tools to gather Washington intel while impressing clients: Showering speaking fees on supposedly connected operatives.
Former Obama administration national security official Ned Price had this to say about Bolton's speech to a private audience at a Morgan Stanley investment conference last week:
Infuriating. Bolton discussed Trump's pattern of placing his personal interests ahead of the national interest in return for presumably tens of thousands of $ from Morgan Stanley. But he flouted a request from Congress to do the same behind closed doors? https://t.co/BpxfWKve80
— Ned Price (@nedprice) November 12, 2019
From The Post's Greg Miller:
Bolton fine discussing his concerns about Trump at Morgan Stanley conference -- just not House impeachment investigators. Amazing. https://t.co/FFWOazhS9C
— Greg Miller (@gregpmiller) November 12, 2019
From former Bush administration official Christian Vanderbrouk:
Something is deeply wrong if Bolton will say this to "Morgan Stanley's largest hedge fund clients" but refuses to comply with a congressional subpoena.https://t.co/eLjSCYsEPM pic.twitter.com/FLPSlTvpVS
— Christian Vanderbrouk (@UrbanAchievr) November 12, 2019
And at least one politician got spooked from a similar appearance as the sector looks primed again to become a bogeyman in the presidential election. Deval Patrick, the former Massachusetts governor eyeing jumping into the 2020 Democratic presidential race, canceled a planned appearance today at another investment conference after the event’s organizer’s advertised his speech.
From The Post’s Matt Viser:
Deval Patrick has backed out of an appearance tomorrow at an investors conference in Colorado Springs, hours after organizers sent an announcement touting a speech from Patrick, a Bain Capital managing director, a former Mass governor, and potentially a new presidential candidate
— Matt Viser (@mviser) November 13, 2019
While Trump slammed Hillary Clinton in the 2016 campaign for this practice — accusing her of being under the “total control” of Goldman Sachs after receiving hefty speaking fees from the bank — some of his former top officials have continued it. 
But only a handful of Trump alums are drawing offers for lucrative speaking gigs from Wall Street interests. That’s largely because finance industry heavies don’t want to associate themselves with those Trump figures they consider broadly toxic. 
“There is a small population of former Trump administration people — [former chief of staff] John Kelly, [Bolton predecessor H.R.] McMaster, [former U.N. ambassador] Nikki Haley — who have their own accreditations in life and exited more or less in one piece,” one plugged-in Wall Street consultant in Washington tells me. Add former defense secretary Jim Mattis to that list — and, possibly, Trump’s first chief of staff, Reince Priebus — and that probably rounds out the roster of former administration officials still pulling in five- and six-figure paydays to talk to Wall Streeters.
“What people are really looking for, which is tough to find, are people who can speak to Trump in an honest, authentic way,” the consultant tells me. “Most of the people who leave the administration, even if not on great terms, don’t want to face the wrath of Trump.”

Former U.N. ambassador Nikki Haley. (John Lamparski/Getty Images)
Plus, the industry has heard enough by now about the dynamics within the White House and is interested mostly in insights into Trump’s approach to foreign policy and trade. “Most — Haley, McMaster, Kelly — don’t give you anything insightful,” per the consultant. “They’re effectively saying nothing you couldn’t read in the paper.”
The Washington Speakers Bureau, which represents Bolton, Priebus, Haley and Mattis, did not respond to a request for comment.
“I get a solicitation email daily from the bureaus for these guys,” a source at a financial services trade group tells me. “We have not booked any of them I have heard that people are not interested in the few who have left on good terms, but are afraid of booking speakers like [short-lived White House communications director Anthony Scaramucci], who are no longer on good terms, because it will be viewed as a ‘statement.’"
Bolton's news-making speech to the Morgan Stanley conference, which included the firm’s largest hedge fund clients, suggests he could be breaking the mold of ho-hum talkers. The foreign policy hawk said he “believes there is a personal or business relationship dictating Trump’s position on Turkey because none of his advisers are aligned with him on the issue, the people present said,” per NBC’s Stephanie Ruhle and Carol E. Lee. And if Trump is reelected, Bolton told the crowd he “could go full isolationist… and could withdraw the U.S. from NATO and other international alliances.”
The industry, meanwhile, is bracing for rougher treatment from politicians as the presidential campaign kicks into gear. "The road to the White House in 2020 may entail a war against Wall Street and wealth itself, as polling results encourage more candidates to cast a jaundiced eye toward the financial world, Citi warned in a note to clients," Bloomberg's Felice Maranz reports. "Some candidates are prioritizing greater accountability for big corporations, while others are concerned that 'loosening the reins might foment another financial crisis,' a Citi team led by economist Dana Peterson wrote. Still others believe 'banks and their executives were not sufficiently penalized for the 2008-2009 crisis' and that big companies are anti-competitive and 'antagonistic towards consumer protection.'"
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MARKET MOVERS


Federal Reserve Chairman Jerome Powell. (AP Photo/Susan Walsh)
Stocks grind higher. CNBC's Fed Imbert: "Wall Street continued its run to record highs on Tuesday, led by strong gains in Disney and Facebook shares. The market was slightly higher amid remarks from President Donald Trump, who hinted at Chinese enthusiasm for a trade deal, while knocking them for cheating the U.S. in past agreements. The S&P 500 climbed 0.2% to 3,091.84, hitting a fresh intraday record. The Nasdaq Composite advanced 0.3% to 8,486.09, notching intraday and closing records. The Dow Jones Industrial Average, meanwhile, closed completely unchanged at 27,691.49 after coming within a whisker of hitting an all-time high."
Powell to the Hill. WSJ's Nick Timiraos: "Federal Reserve Chairman Jerome Powell heads to Capitol Hill for two days of congressional hearings beginning Wednesday, following an especially active stretch for monetary policy. The Fed has cut interest rates three times since he  testified on Capitol Hill in mid-July...
"The Fed chairman is often treated as a CEO of the U.S. economy in congressional appearances, and Mr. Powell could face a share of questions about a range of economic policies away from the Fed’s purview, including taxes, spending and trade... While recession fears have receded in recent weeks, the testimony offers Mr. Powell a venue to offer any suggestions about fiscal policy—though he has been careful in such appearances to avoid being drawn into partisan policy spats."
Corporations pile into bond market: “Floodgates have opened in the corporate bond market as issuers capitalize on some of the cheapest funding costs of the year,” Bloomberg News’s Molly Smith reports.
“Credit risk premiums have been tightening as investors pour money into corporate bond funds. That’s encouraging companies to borrow, with AbbVie Inc. looking to price the year’s largest sale Tuesday, and at least 10 new deals in the junk-bond market. It all adds to a bullish outlook as recession fears have abated amid stronger economic data and progress in U.S.-China trade talks, Bank of America Corp. strategists led by Hans Mikkelsen said in a report Friday.”

TRUMP TRACKER

TRADE FLY-AROUND:
Trump talks China, goes political in economic address: Trump “offered a lengthy public defense of his economic record, saying his ‘America First’ policies and the radical views of his potential Democratic opponents should guarantee his reelection,” my colleagues David J. Lynch and David Nakamura report of the president’s address to the New York Economic Club.
“The roughly hour-long speech was a ‘greatest hits’ of Trump’s economic record. In the president’s telling, he rescued the nation from a ‘slow inevitable decline’ that would have decimated the struggling middle class with ‘a new economic policy that finally puts America first.’”
  • On trade: Trump “insisted he was ‘close’ to a partial trade deal with China. But in response to a question, he said that he was prepared to punish Beijing with still higher tariffs if the talks stalled. ‘If we don’t make a deal, we’re going to substantially raise those tariffs,’ he said.”
  • On the 2020 election. “You have no choice because the people we’re running against are crazy. They’re crazy,” the president said.
  • On Ivanka. Trump claimed his daughter Ivanka, a senior White House advisor, has created 14 million jobs. As New York's Jonathan Chait notes, "The entire U.S. economy has created fewer than 6 million new jobs since Trump took office. So Trump is crediting his daughter with having personally created more than 200 percent of all new jobs in the United States."
He told some other whoppers, too. From Georgetown Law professor Jennifer Hillmann:
The number of falsehoods in economic club speech by Trump is mind boggling. Just said we are winning WTO cases "for the first time" ever--never won before. Only winning because "they know I'll do tough things." What about 84% of affirmative cases US won before Trump?
— Jennifer Hillman (@J_A_Hillman) November 12, 2019
Tariffs remain major impediment. WSJ's William Mauldin and Josh Zumbrun: "Tariffs are emerging as the main stumbling block in efforts by the U.S. and China to come to a limited trade deal, a month after the two countries called a truce in their trade war. The logjam centers on whether the U.S. has agreed to remove existing tariffs in the so-called 'phase one' deal that the two countries have been working toward—or whether the U.S. would only cancel tariffs set to take effect Dec. 15, according to people familiar with the talks. 'The U.S. negotiators will try to exact the maximum they can before doing anything' on tariff relief, one of the people said."
— Trump team weighs blocking WTO budget. Bloomberg's Bryce Baschuk: "The Trump administration ratcheted up its pressure on the World Trade Organization by raising the possibility of blocking the approval of the institution’s biennial budget and effectively halting its work starting next year... Because WTO decisions must be made by a consensus among all 164 members, the U.S.’s blocking maneuver would threaten the proper functioning of the organization responsible for overseeing the rules of global commerce."
Senate Dems blast farm bailout. Bloomberg's Mike Dorning: "Senate Democrats attacked [Trump’s] $28 billion farm trade aid program for “vast inequities” favoring Southern farmers at the expense of their counterparts in the Midwest and Northern Plains, growers of cotton over soybeans, and large producers over smaller ones.
“'The Trump administration is using a flawed formula that helps big, wealthy farms and billion-dollar foreign-owned companies, while small farms get left behind,' said Senate Democratic Leader Chuck Schumer of New York. 'The USDA must stop picking winners and losers, and ensure all of America’s farmers get the help they need -- not just a lucky few.'"
Cook, Trump to tour Apple facility in Texas: “Trump and Apple CEO Tim Cook are expected to tour facilities in Texas where Apple products are made as soon as next week to showcase companies that keep jobs in America, according to two people familiar with the matter,” Reuters’s Alexandra Alper and David Shepardson report.
“The trip, which has not yet been announced, would highlight Cook’s strong relationship with Trump as he seeks further relief for Apple from U.S. tariffs on imports from China. The tariffs are part of a prolonged, tit-for-tat trade war between the world’s largest economies.”
TRUMP WATCH:

Larry Kudlow, director of the U.S. National Economic Council. (Andrew Harrer/Bloomberg News)
White House exploring middle-class tax cut: “Trump’s economic advisers are exploring whether the president should campaign for reelection proposing a 15 percent tax rate for the American middle class, with some seeing the idea as a simple way of selling Republicans’ economic agenda as not merely beneficial to the rich, according to multiple people involved in the White House’s internal deliberations over ‘tax cut 2.0,’ ” my colleague Jeff Stein reports.
“Larry Kudlow, director of the White House National Economic Council, is spearheading the effort behind Trump’s second tax cut package and is widely seen as a leading proponent of the new 15 percent rate. It is unclear if Trump has approved the idea, but the president has pushed aides to develop a simple tax message for 2020 focused on middle class tax relief.”
  • More details: “Reducing the tax rate to 15 percent for middle-class taxpayers would lower taxes by hundreds of billions of dollars, according to budget experts, although precise estimates are impossible given that details remain vague. Doing so would free up much more money for Americans to spend, but it would also dramatically add to the deficit unless the cuts were offset by major spending reductions to federal programs.”
  • Other ideas are also on the table: They include “a payroll tax cut, revamping how capital gains are taxed, exempting savings from taxes, and reducing the number of tax brackets from seven to somewhere around three or four, according to Stephen Moore, a conservative tax expert at the Heritage Foundation who has worked with the White House on tax policy.”
  • … And possible major changes to capital gains: “Moore, the Heritage economist, said he is also pushing for a change that would allow capital gains to ‘roll-over’ tax-free if they are reinvested in a different stock. Under this plan, an investor could sell stock in General Electric and reinvest it in Uber without paying a tax on the realized stock gains, as the investor would under current law.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment inquiry.

POCKET CHANGE


Jugs of McArthur Dairy Pure milk, a Dean Foods brand, are shown at a grocery store. (Wilfredo Lee/AP)
Biggest U.S. milk company files for Chapter 11: “ Dean Foods Co., the biggest U.S. milk company, filed for bankruptcy protection, a fresh setback to a U.S. dairy industry struggling against declining U.S. milk consumption and rising competition,” the Wall Street Journal’s Jacob Bunge reports.
“Dean and dairy farmers for years have grappled with consumers’ decadeslong move away from traditional cow’s milk, as beverage sales shift toward bottled water, fruit juices and milk alternatives made from soy and oats. Within the milk business, Dallas-based Dean’s brands have struggled as grocery chains push low-price store brands and in some cases build their own milk plants, reducing their reliance on Dean.”
SCOTUS won’t hear gunmaker challenge to Sandy Hook suit: The Supreme Court “turned down a request from the gun industry intended to block a lawsuit from families of the Sandy Hook Elementary School shooting victims,” my colleague Ann E. Marimow reports.
“The decision lets stand a groundbreaking ruling from the Connecticut Supreme Court that said the manufacturer of the Bushmaster AR-15-style semiautomatic rifle can be sued and potentially held liable for the 2012 massacre in Newtown, Conn … The lawsuit was brought by the estates of nine victims killed by Adam Lanza, who was armed with the high-powered rifle, made by Remington Arms Co., during his assault that left 28 dead, including 20 young children.”
Overstock shares hit seven-year low: “Overstock.com Inc. shares hit a seven-year low Tuesday after the online retailer disclosed that a government investigation has widened to focus on the stock plans of some of its executives,” the WSJ’s Paul Vigna reports.
“In conjunction with its third-quarter earnings report, Overstock said it received a subpoena on Oct. 7 from the SEC’s enforcement division related to a dividend unveiled in June. The agency also demanded information about the stock-trading, or 10b5-1, plans of certain officers and directors. It is the latest challenge for a company that has bet its future on blockchain technology and has suffered nearly four years of losses stemming from that bet and a flagging retail business.”

SoftBank poured money into start-ups that use armies of contractors. That has upended the lives of drivers, hotel operators and real estate agents around the world.
NYT

MONEY ON THE HILL


The U.S. Capitol dome. (AP Photo/Patrick Semansky)
Congress moves to avert shutdown. The Post's Erica Werner: "Congress plans to avert a government shutdown Nov. 21 by passing another short-term spending bill into December, setting up a collision with House votes on articles of impeachment against [Trump].
"The new stopgap spending bill, expected to come up for votes next week, would last through Dec. 20, House Appropriations Chairwoman Nita M. Lowey (D-N.Y.) said Tuesday after meeting with Senate Appropriations Chairman Richard C. Shelby (R-Ala.). Both lawmakers expressed the hope that the extension would give them more time to come up with a deal that would fund all government operations through Sept. 30, 2020, which is the end of this fiscal year. But key issues remain unresolved, including how much money will go to Trump’s U.S.-Mexico border wall."

DAYBOOK

Today:
  • The Joint Economic Committee holds a hearing featuring testimony from Fed Chair Jerome Powell
  • Cisco Systems, Energizer and Canada Goose are among the notable companies reporting their earnings, per Kiplinger.
Thursday:
  • Powell continues his testimony on the Hill with an appearance before the House Budget Committee.
  • Walmart, Nvidia, Dillard’s, Viacom, Shoe Carnival and Williams-Sonoma are among the notable companies reporting their earnings, per Kiplinger.
  • The Cato Institute holds its 37th Annual Monetary Conference entitled “Fed Policy: A shadow review"
  • The American Enterprise Institute holds an event focused on the Fed’s ability to manage the next crisis
Friday:

THE FUNNIES

From The Post's Tom Toles:

BULL SESSION

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