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Feb 3, 2020

DealBook: Why the New Coronavirus’s Economic Hit Could Be Worse Than SARS

10-12 minutes - Source: NYT




Credit...Alex Plavevski/EPA, via Shutterstock

As Chinese stocks plunged 8 percent this morning, governments around the globe are trying to prevent the Wuhan coronavirus outbreak from becoming an economic and public health disaster.
The latest:
• Beijing moved to inject $173 billion in additional liquidity into its financial markets.
• Leading health experts increasingly expect the coronavirus outbreak to become a full-fledged pandemic.
• China has reported 361 deaths nationwide, while the Philippines reported the first fatality outside China.
• The U.S. and other countries are temporarily barring visitors who have been to China recently.
The worldwide economic impact could be worse than that of the SARS outbreak, according to Peter Goodman of the NYT. “China has evolved into a principal element of the global economy, making the epidemic a substantially more potent threat to fortunes,” he writes.
The virus doesn’t yet pose a threat to the U.S. economy, James Areddy of the WSJ adds. “But that could change if the virus isn’t contained soon, or spreads more widely.”
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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced in London.
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Last night was a big win for the Chiefs and their quarterback, Patrick Mahomes. But let’s focus on the annual hot topic: the ads during the game.
Michael Sanchez, the brother of Lauren Sanchez, sued the Amazon billionaire in court on Friday for defamation.
  • Updated Jan. 31, 2020
    • There have been nine confirmed cases in the U.S., but no deaths. Anxiety is intense at airports.
    • The 195 Americans who were evacuated from Wuhan to California have been quarantined as one person tried to flee.
    • President Trump has temporarily suspended entry into the U.S. for any foreign nationals who have traveled to China.
Mr. Sanchez accused Mr. Bezos of peddling a “false narrative” that he had sold the story of his sister’s affair with the Amazon chief to The National Enquirer, according to Michael Rothfeld and Jim Rutenberg of the NYT.
Fact check:
• The Enquirer has said that Mr. Sanchez was its sole source.
• Mr. Bezos and his security team haven’t accused Mr. Sanchez of leaking the materials to the tabloid, instead hinting that it may have come from an apparent hack of the Amazon chief’s phone by the Saudis.
• Ms. Sanchez said, in a statement provided by her lawyer, that her brother had “secretly provided my most personal information to The National Enquirer.”
Mr. Sanchez acknowledged signing a contract with The Enquirer in which he “agreed to corroborate the existence of the relationship under conditions that would help Mr. Sanchez manage the timing of the story and the way in which the affair was portrayed.”
Private investors took control of Payless, the discounted shoe retailer, and ran it into the ground. It’s a sign of how private equity often isn’t the superior form of capitalism that supporters say it is, writes Neil Irwin of the Upshot.
The central questions of Mr. Irwin’s article:
Why hasn’t the finance-driven capitalism of the last few decades created faster growth? What if the masters of financial efficiency are making choices that don’t actually create the more dynamic, productive economy they promise?
Mr. Irwin’s thoughts on the topic:
• Middle-class Americans who have observed bad private equity deals up close are angry about what they’ve seen. “A lot of these folks are pro-business conservatives in their personal politics, but think that the variety of financial capitalism we have right now is destructive,” he says.
• Private equity faces a conundrum: The easy deals have been done, and corporate boards are increasingly adapting private equity tactics to fix themselves. “That combination means that a lot of deals happening now don’t really have a pathway to create value by making companies better,” he adds.

Mr. Dalio, the billionaire co-founder of Bridgewater Associates who has publicly complained about press coverage before, took up his megaphone once more after a WSJ report about his $160 billion hedge fund.
Highlights from the WSJ article by Rachael Levy and Rob Copeland:
• Mr. Dalio has put in place several plans for his succession, each failing to take hold.
• “His word nearly always wins out in debates at Bridgewater” on issues like investments and compensation, despite his philosophy of letting dissent flower at the firm, Ms. Levy and Mr. Copeland write.
• He once overruled employee concerns about meeting with President Vladimir Putin of Russia — and reportedly told one dissenter, “If you’re so smart, why aren’t you rich?”
Mr. Dalio took to LinkedIn to hit back at the WSJ and the news media:
• The writers “had a goal and story in mind long before there were any facts.”
• He denounced what he called a lack of an “objective quality control process,” in journalism, in which he said reporters gathered innuendo and ignored protestations from the company.
Some context: It’s not the first time Mr. Dalio has complained about the WSJ.
The arrival of Ben Smith, the founding editor of BuzzFeed News, as our newest colleague at the NYT casts a spotlight on BuzzFeed’s fortunes. The company is doing better financially, Ed Lee of the NYT reports — but that may lead to its being sold.
• “The site booked a profit for the second half of 2019,” Mr. Lee reports, citing unnamed sources. “For the year, the company generated around $320 million in revenue, or 6.6 percent above the previous year.”
• “The closer the company gets to achieving a year’s worth of profit, the more its backers are likely to agitate for a return on their investments, either through a sale or a public offering.”
Jonah Peretti, BuzzFeed’s founder and C.E.O., left the door open for a deal. “If being part of a larger company allowed us to grow our mission, I would be open to that,” he told Mr. Lee.
One possible merger partner: Group Nine, the publisher of sites like The Dodo and Now This.
Deals
• Last month was the slowest pace of M.&A. activity in a January over the past seven years. (FT)
• Why pro athletes are turning to venture capital for their second acts. (CNBC)
• Simon Property Group, Brookfield and Authentic Brands are reportedly teaming up to bid for the bankrupt retailer Forever 21. (WSJ)
Politics and policy
• The Iowa Democratic caucuses are tonight, and PredictIt forecasts a big win for Senator Bernie Sanders. (PredictIt)
• Independent voters think the U.S. economy has improved under President Trump, according to a new poll. That could bode well for his re-election. (NYT)
• But recent government data shows the economy is slowing. (Hill)
• Mike Bloomberg proposed $5 trillion in new taxes on the wealthy and corporations — more than Joe Biden, less than Bernie Sanders or Elizabeth Warren. (NYT)
• Talks to create a global tech tax are making progress. (Bloomberg)
Tech
• Senator Mark Warner was a telecom entrepreneur. Now he’s one of the top Democratic lawmakers calling for tighter regulation of the tech industry. (Wired)
• Mark Zuckerberg shouldn’t be allowed to run Facebook, George Soros argues. (NYT Opinion)
• Uber executives are reportedly weighing new ways to pay for a fleet of autonomous vehicles. (FT)
• Parents say that children named Alexa are increasingly facing bullying. (Business Insider)
Best of the rest
• Inside the misogynistic culture at Victoria’s Secret. (NYT)
• WeWork hired Sandeep Mathrani, an executive at the real estate firm Brookfield Properties, as its new C.E.O. (NYT)
• Tensions between the chairman and the C.E.O. of Credit Suisse are expected to come to a head this week. (Bloomberg)
• The far-right financial website Zero Hedge was banned from Twitter for spreading misinformation about the Wuhan coronavirus. (BuzzFeed)

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