Showing posts with label The Finance 202. Show all posts
Showing posts with label The Finance 202. Show all posts

Feb 5, 2020

Analysis | The Finance 202: Trump claimed in the State of the Union address he rebooted a failing economy. The facts don't support him, but voters might.

By Tory Newmyer



THE TICKER
President Trump kicked off a rollicking, polarizing State of the Union address with a demonstrably false argument: That he inherited a failing economy from President Obama and executed a swift U-turn.
“In just three short years, we have shattered the mentality of American Decline and we have rejected the downsizing of America’s destiny,” Trump said. "We are moving forward at a pace that was unimaginable just a short time ago, and we are never going back!”
Trump’s fact-defying hyperbole sets up an arguably daunting case to make as he seeks to convince voters he delivered the nation from the “American carnage” he decried in his inaugural address to what his is now touting as the “great American comeback” just three years later.
And he drew boos from Democrats in the chamber when he said if his administration “had not reversed the failed economic policies of the previous administration, the world would not now be witness to America's great economic success.”
To the contrary, many key economic indicators — GDP growth, the unemployment rate, the stock market — show gains in the Trump era have simply continued along their trajectories from the Obama years. Witness GDP growth:

The unemployment rate:

And the S&P 500:

And, we we’ve noted here recently, economic expansion has been slowing. Growth registered at 2.3 percent last year, and the Congressional Budget Office projects it will further settle, to 2.2 percent this year — well below the rate Trump promised to deliver in his first run.
A roughly 2 percent rate of growth is… fine, but unremarkable, especially considering it merely maintains the trend Trump inherited, even after his $1.5 trillion tax cuts. That package, Trump’s signature domestic achievement, has failed to goose business investment, which the tax cuts’ proponents said would lead to productivity gains that spread new prosperity widely. The president’s trade war cast a pall of uncertainty over the economy the business leaders blame for sidelining corporate investments, as this chart from Deutsche Bank Securities demonstrates:

The tax cuts have helped add significantly to federal debt that Trump promised to eliminate entirely over the course of two terms. It’s now projected to rise to record levels as a percentage of gross domestic product in a decade, as the American Enterprise Institute’s Jim Pethokoukis notes:
— James Pethokoukis (@JimPethokoukis) February 5, 2020
Trump nevertheless is riding relatively high. A new Gallup poll shows his approval rating hitting a new high of 49 percent:

That finding is backed up by the latest Washington Post-ABC News poll, which put his approval rating at 44 percent, a high for that survey — buoyed by a 56 approval rating for his economic stewardship, another high watermark in the poll.
“Trump is still a president with an approval rating in the 40s, and that’s not ideal for a reelection campaign,” my colleague Aaron Blake notes, in a wider look at his recent polling. "But he’s also a president who won in 2016 despite only about 4 in 10 people liking him. It’s looking like he’s now objectively in better shape than he was on Election Day 2016. And impeachment appears to have galvanized his base, at least somewhat.”
Consumer confidence has gained steam in recent months, though it is registering a small dip on coronavirus fears, according to Morning Consult’s survey:

The uptick in American sentiment about the economy "comes from the fact that nearly 6.7 million more Americans are employed today than when Trump took office. Monthly job gains were stronger under Obama than Trump, but the labor market has tightened further in recent years, helping more people feel better off,” my colleague Heather Long writes. “A combination of higher wage gains in recent months and Trump’s tax cuts have helped most Americans feel richer, even though many still worry about how to pay for health care, child care and college.”
The gains have been spottier among the working class for whom Trump claimed in his speech to have delivered a “a blue collar boom.”
“Over the last year, the president’s economic policies have not delivered anything close to the miracle that he has promised to white working-class voters in the industrial Midwest. Combined employment in construction, manufacturing and mining grew more slowly last year than at almost any other point in the current expansion,” the New York Times’s Jim Tankersley writes. “Job growth has slowed sharply — from 2.6 percent at the start of 2019 to 1.3 percent at the end of the year — in so-called middle-wage sectors that include mining, construction and transportation, according to calculations by Nick Bunker, an economist at the Indeed Hiring Lab. That blue-collar slowdown is driving the deceleration of job growth across the United States economy.”
You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.
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MARKET MOVERS


Passengers wait at the departure area at an airport in the Philippines while wearing protective masks. (Reuters/Eloisa Lopez)
Coronavirus shows no sign of slowing in China. NYT: "The death toll from the monthlong coronavirus outbreak has continued to climb in China, rising to 490. New cases have surged by double-digit percentages in the past 11 days, with no sign of a slowdown. More people have now died in this epidemic than in the severe acute respiratory syndrome, or SARS, outbreak of 2002-3 in mainland China. During that outbreak, 349 people died in the mainland.
"The new figures from China’s Health Commission on Wednesday showed that 65 people died on Tuesday and that 3,887 more people had been infected. So far, 24,324 people are known to have been infected."
Hong Kong will quarantine travelers from mainland China. That includes "Hong Kong residents and visitors entering via its international airport, as authorities step up efforts to halt the spreading coronavirus outbreak," Bloomberg News's Iain Marlow and Stephen Tan report.
Global economic impact grows. Bloomberg News's Hannah Dormido and Adrian Leung: "Provinces accounting for almost 69% of Chinese GDP will remain closed for more than an extra week after the annual Lunar New Year holiday, shutting factories, shops and restaurants, leaving ships trapped at port, and slamming household spending... Hundreds of major manufacturers have had their links to the global supply chain severed. Robert Bosch GmbH, the world’s largest car-parts maker, had to shutter two factories employing a total of 800 people in Wuhan. Other auto part manufacturers, including Honda Motor Co. Ltd. and Nissan Motor Co. Ltd., have also closed their facilities in Wuhan."
But U.S. stocks keep rising. MarketWatch's Chris Matthews and Sunny Oh: "U.S. stocks finished sharply higher Tuesday as investors weighed stimulus efforts by the People’s Bank of China and actions by Beijing to combat the economic impact of a deadly Asian virus that has claimed hundreds of lives and infected more than 20,000 people.
"The tech-heavy Nasdaq benchmark carved out a new closing record, aided by a surge in shares of Tesla Inc., which have experienced a parabolic climb in the past few trading sessions." The Dow Jones industrial average rose 1.4 percent, and the S&P 500 gained 1.5 percent.
Bloomberg News's Luke Kawa notes the market has had an unusual run of days with major movement in both directions:
imo the big step-back for today isn't that stocks are up big but that stocks have put in 4 /-1% days in the last seven sessions after having not had one in forever
— Luke Kawa (@LJKawa) February 4, 2020

White House economic advisor Larry Kudlow. (Yuri Gripas/Reuters)
Kudlow says coronavirus will delay export "boom": "Trump’s economic advisor Larry Kudlow said ... that the deadly Chinese coronavirus outbreak will delay a surge in exports that is expected to flow from the first 'phase' of the U.S.-China trade deal signed last month," CNBC's Kevin Breuninger reports.
"'It is true the trade deal, the phase one trade deal, the export boom from that trade deal will take longer because of the Chinese virus. That is true,' Kudlow said in a Fox Business Network interview. But Kudlow noted that the Trump administration, which imposed travel restrictions and quarantines in response to the coronavirus last week, still projects 'minimal impact' from the fast-spreading disease."

2020 WATCH


Senator Bernie Sanders (I-Vt.) reacts to Trump's State of the Union address during an event in Manchester, N.H. (Reuters/Brendan McDermid)
Sanders, Buttigieg lead in first Iowa returns. The Post: "In an early Iowa caucus vote count, Sen. Bernie Sanders (I-Vt.) held a slight popular-vote lead, while former South Bend, Ind., mayor Pete Buttigieg led in a measure of state delegates. With 62 percent of precincts counted, Sanders earned 26 percent of the popular vote; Buttigieg hit 25. By both measures, Sen. Elizabeth Warren (D-Mass.) was in third place with 20 percent of the vote, and former vice president Joe Biden placed fourth at 13 percent."
Wall Street might be ok with a Sanders win. Nick Colas, co-founder of DataTrek Research explains, via CNBC's Jeff Cox: "There is a lot of chatter that a Sanders nomination would roil markets, but there’s another way to consider that possibility. Investors may assume that Sanders’ platform of radically remaking American society/commerce will not resonate with voters during a time of relative economic prosperity. That would make [Trump’s] reelection more likely, preserving a market-friendly tone to government policy."
Bloomberg to double spending. The Post's Paul Schwartzman and Michael Scherer: "In the wake of an Iowa caucus debacle that has so far produced no winner, former New York mayor Mike Bloomberg authorized his advisers Tuesday morning to double television spending for his own presidential campaign, as his advisers have become more bullish on his odds of success. The increase represents a massive escalation of what is already the most costly campaign for the Democratic nomination in U.S. history...
"Since entering the race in November, Bloomberg has spent more than $300 million on television and digital advertising, according to Advertising Analytics, an ad-tracking firm."
Bloomberg's campaigning in California also produced this gem, in a back-and-forth with a reporter: 
— Downtown Josh Brown (@ReformedBroker) February 4, 2020

TRUMP TRACKER

TRADE FLY-AROUND:

A Chinese bank employee counts 100-yuan notes and U.S. dollar bills last year. (STR/AFP/Getty Images)
Trump gives OK for tariffs on currency manipulation: "The Trump administration says it will allow companies to pursue tariffs against foreign competitors if they can show those rivals have benefited from currency manipulation in their countries," the Wall Street Journal's Josh Zumbrun reports.
"Under a new regulation published in the Federal Register ... undervalued currencies would be treated as a subsidy that improperly benefits foreign businesses. That will enable U.S. companies to file a complaint seeking a type of remedy known as a countervailing duty. Companies will be able to pursue such tariffs as soon as April 6. The new rule from the Commerce Department would give the administration another tool to pressure foreign practices that it believes qualify as currency manipulation, giving companies a tool for redress. However, seeking countervailing duties can be a slow and arduous process, further complicated by the complexities of measuring whether a given currency is 'undervalued.'"
U.S. considers withdrawing from WTO's purchasing pact: "The U.S. is mulling a plan to withdraw from a global pact worth $1.7 trillion in government contracts, a person familiar with the matter said, in a move that may anger close allies during a delicate moment for trade," Bloomberg's Bryce Baschuk reports.
"Officials in [Trump’s] administration are circulating a draft executive order that would trigger a U.S. exit from the World Trade Organization’s Government Procurement Agreement, or GPA, if the pact isn’t reformed in line with American views, according to the person, who asked not to be identified because discussions are ongoing ... It could also pose problems for Canadian Prime Minister Justin Trudeau, who still needs to broker deals with his political rivals to ensure ratification of the U.S.-Mexico-Canada Agreement; Canada is the only signatory of the updated NAFTA deal that still needs to ratify the free-trade accord. Procurement was a contentious issue in USMCA."
Push to develop Huawei-less 5G is on: "Seeking to blunt the dominance of China’s Huawei Technologies Co., the White House is working with U.S. technology companies to create advanced software for next-generation 5G telecommunications networks," WSJ's Bob Davis and Drew FitzGerald report.
"The plan would build on efforts by some U.S. telecom and technology companies to agree on common engineering standards that would allow 5G software developers to run code on machines that come from nearly any hardware manufacturer. That would reduce, if not eliminate, reliance on Huawei equipment. Companies including Microsoft Corp., Dell Inc. and AT&T Inc. are part of the effort, White House economic adviser Larry Kudlow said."
There is a sense in the upper echelons of Wall Street that discussions within the Trump administration about limiting Americans’ investment in Chinese companies will ultimately lead to nothing.
Bloomberg News
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"Trump touts economy, immigration policies and foreign relations in State of the Union as Senate impeachment vote nears." By The Post's Felicia Sonmez, Colby Itkowitz, John Wagner and Mike DeBonis
"Democrats use State of the Union rebuttal to pivot from impeachment." By The Post's Rachael Bade

POCKET CHANGE


Shoppers cross a street near a Macy's department store in Columbus, Ohio, in 2017. (Luke Sharrett/Bloomberg)
Macy's to close 125 stores: "Macy’s Inc. plans to close 125 department stores over the next three years, an admission that a fifth of its locations cannot thrive as shoppers buy more online and make fewer trips to malls," WSJ's Suzanne Kapner reports.
"The company is also cutting roughly 2,000 corporate jobs, or 10% of corporate and support staff, and closing several offices. It will abandon a dual headquarters in Cincinnati—a structure Macy’s has kept since 1994 when it was still one of the country’s biggest retailers—and put all headquarters roles in New York. Macy’s, which will keep running about 400 of its namesake stores, is ramping up its restructuring efforts after a yearslong slump. Cobbled together from various regional chains, the company has struggled even as it left the weakest malls and boosted spending on e-commerce."
NYSE owner bids on eBay: "New York Stock Exchange owner Intercontinental Exchange Inc. has made a takeover offer for eBay Inc. that could value the sprawling online marketplace at more than $30 billion, according to people familiar with the matter," WSJ's Cara Lombardo and Corrie Driebusch report.
"Intercontinental Exchange, known as ICE, has approached eBay in the past and did so again recently, the people said. The companies aren’t currently in formal talks and there is no guarantee eBay would agree to a deal. Should there be one, it would be big, given eBay’s market value of more than $28 billion and the premium ICE would likely have to pay."

The Department of Justice Building in Washington. (Manuel Balce Ceneta/File/AP)
DOJ, state AGs discuss Google probe: "State attorneys general investigating Alphabet Inc’s Google unit met ... with U.S. Justice Department officials to coordinate efforts to probe the search and advertising giant, officials told Reuters," Diane Bartz reports.
"The attorneys general of Texas, Utah and Nebraska were among those in attendance. Utah Attorney General Sean Reyes said one goal of the gathering was to coordinate efforts, with the goal of wrapping up the probe by the end of the year."
Former Goldman exec banned from banking: "The Federal Reserve permanently banned former Goldman Sachs Group Inc. banker Andrea Vella from the industry over his alleged involvement in the 1MDB scandal as the fallout reaches higher into the firm’s ranks," Bloomberg's Jesse Hamilton and Max Abelson report.
"The Fed’s order announced ... said Vella, a former co-head of investment banking in Asia, failed to inform Goldman that a businessman who’s allegedly the fraud’s mastermind was involved in 1MDB bond offerings that the bank handled in 2012 and 2013. The U.S. Justice Department has criminally charged other former Goldman employees, including Tim Leissner, who pleaded guilty."

Steve Cohen’s $2.6 billion bid to buy the Mets is on life support — if alive at all. The billionaire hedge fund manager is reportedly ending negotiations with the Wilpons on his purchase of an 80 percent stake in the franchise.
NY Post

CHART TOPPER

Via Adam Tooze, while rich countries tend to have larger middle classes, the U.S. is an exception, with an income distribution more akin to that of China and Russia:
In general, higher median income -> larger middle class (i.e. share of population btw 75% and 200%). The exception is the US which has income distribution more like China, Russia & Turkey. @DeutscheBank via @SoberLook pic.twitter.com/Fw33kguPuI
— Adam Tooze (@adam_tooze) February 4, 2020

DAYBOOK

Today:
  • The Commerce Department releases the latest international trade figures
  • General Motors, Yum! China, Energizer, Merck, GrubHub, Spotify and GoPro are among the notable companies reporting their earnings.
  • The House Financial Services Committee hosts a hearing on efforts to "evade state consumer protections and interest rate caps."
  • The Financial Services Subcommittee on Housing hosts a hearing on Trump administration's "efforts to eliminate public housing."
  • The Urban Institute hosts an event on institutional investors role in the housing market
Thursday:
  • Uber, Kellogg, T-Mobile, Philip Morris International, Fiat Chrysler, Bristol-Myers Squibb, Skechers USA, Yum! Brands, Estee Lauder and the New York Times are among the notable companies reporting their earnings.
Friday:
  • The Labor Department releases the January jobs numbers
  • Honda Motor and AbbVie are among the notable companies reporting their earnings.

THE FUNNIES

And so the battle for the soul of America begins.....https://t.co/DYjVqGWvoA pic.twitter.com/Zk2DNbvfmG
— Matt Wuerker (@wuerker) February 4, 2020

BULL SESSION


Feb 4, 2020

Analysis | The Finance 202: Big city Democratic donors may end up influencing the 2020 contest more than the Iowa caucuses

By Tory Newmyer



THE TICKER

Presidential candidate Michael Bloomberg speaks at a campaign event at the Dollarhide Community Center in Compton, Calif., Monday. (Scott Varley/The Orange County Register via AP)
The chaotic finish in the Iowa Democratic caucuses is renewing the debate over the outsize power conferred on an oddball process in a small, overwhelmingly white state.
But new data from a shadow primary that is equally important — the race for campaign cash — reveal another geographic skew: Rich neighborhoods in major coastal cities remain the fundraising engines for most of the top-tier candidates.
And New York City is the runaway leader among these urban money centers. City residents gave $32 million to active candidates, with wealthy neighborhoods in Manhattan and Brooklyn giving the most, according to a study by the Center for Public Integrity:

Manhattan donors appear to be favoring Sen. Elizabeth Warren (D-Mass.) and former South Bend, Ind., mayor Pete Buttigieg, per a Washington Post analysis of census and campaign finance data — with the green representing Buttigieg, orange representing Warren and purple representing Sen. Bernie Sanders (I-Vt.):

And here's a closer look at Washington, D.C., donors, who break down similarly:

The data point to a divide between the relative wealth of those providing a critical resource for Democratic hopefuls and the voters they are seeking to convince. And perhaps not surprisingly, more moderate candidates — those proposing less-ambitious policy plans, requiring less new revenue from wealthier taxpayers — claim the wealthiest donor bases. “Donors in the highest-income neighborhoods preferred Sen. Amy Klobuchar (Minn.), [Buttigieg], and former vice president Joe Biden,” my Post colleagues Kevin Schaul, Anu NarayanswamyReuben Fischer-Baum and Michelle Ye Hee Lee report.

Conversely, the most liberal candidates in the field — Sen. Bernie Sanders (I-Vt.) and Warren — have sought to make a selling point of their commitment to eschewing traditional fundraising methods, focusing instead on fostering small-donor networks. And, indeed, Sanders built a nationwide base of 1.4 million contributors that catapulted him into 2020 with $18 million, more than any of his rivals who aren’t self-funding. The self-described democratic socialist has raised 38 percent of his money from Zip codes with a median household income of $50,000-$74,999, and, her Manhattan strength notwithstanding, the balance of Warren’s cash has come from similarly modest areas, per Public Integrity:

The fundraising distinctions between these candidates may soon be rendered quaint by another spending force coming out of Manhattan. Former New York City mayor Mike Bloomberg skipped the Iowa caucuses altogether and won’t contest the next three contests. Instead, he’s marshaling the effectively bottomless resources of his own wealth to mount a major stand on Super Tuesday.
Bloomberg has spent more than $300 million from his own deep pockets on his 2020 bid so far — more than lapping the outlays from Tom Steyer, another self-funding billionaire and the next biggest spender in the race. Bloomberg claims a fortune worth roughly $61.5 billion.
And the ex-mayor has indicated he plans to keep his campaign operation, which already numbers more than 1,000 people, up and running through the general election, regardless of whether he wins, to help defeat President Trump.
In the meantime, the longer more moderate Democratic voters fail to rally around a single candidate, the stronger the position Bloomberg will be in to claim that banner when the race hits a slew of big states, including California and Texas, on March 3.
You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.
Not a regular subscriber?

MARKET MOVERS

A mess in Iowa. The Post's Isaac Stanley-Becker: "Shortly before midnight, the Iowa caucuses were in a state of suspended confusion — with precincts unable to communicate results, state party officials huddling with aides to the top candidates and, above all, a blemish on the process held out by the state as a model of civic engagement.
"The state party predicted results would arrive sometime Tuesday, and there was no suggestion of malfeasance or a corrupted outcome, but the delay meant the global spotlight trained on Iowa illuminated yet another hiccup in the workings of American democracy... Meanwhile, with no results reported, Buttigieg effectively declared himself the winner — telling supporters during an overnight appearance that, in Iowa, “an improbable hope became and undeniable reality.”
Warren's supporters stayed on message, per the Post's Annie Linskey:
Amazingly the crowd at Warren’s event began chanting C-F-P-B!
— Annie Linskey (@AnnieLinskey) February 4, 2020
And there is an irony in this Warren's deputy policy director:
.@ewarren won the caucus held at the Wells Fargo Center in Des Moines. Appropriate.
— Bharat Ramamurti (@BharatRamamurti) February 4, 2020
Global stocks rally. Wall Street Journal's Caitlin Ostroff: "Stocks rose Tuesday on speculation that global economic growth will prove to be resilient as fiscal and monetary policies blunt the impact of the coronavirus outbreak on China’s economy. Futures linked to the S&P 500 index gained 1%. The pan-continental Stoxx Europe 600 rose over 1%, while the Shanghai Composite Index ended the day up 1.3%, following a steep selloff Monday.
"Fresh data in recent days showing that global manufacturing appeared to be steadying, along with the Chinese central bank’s moves to inject liquidity into its banking system this week, have allayed some of the most pressing concerns about global growth, investors said."
Manufacturing rebounds. Reuters's Lucia Mutikani: "U.S. factory activity unexpectedly rebounded in January after contracting for five straight months amid a surge in new orders, offering hope that a prolonged slump in business investment has probably bottomed out. A rebound in business investment is critical to keeping the longest economic expansion in history, now in its 11th year, on track amid signs of fatigue in consumer spending. The improvement in manufacturing reported by the Institute for Supply Management Monday likely reflected an ebb in trade tensions between the United States and China."

Even as OPEC and Russia consider an emergency production cut, oil is tanking and the outlook for prices is getting dimmer.
CNBC

The Super Bowl, Groundhog Day and the stock market are prime targets for predictions that turn out not to be terribly reliable.
Allan Sloan

TRUMP TRACKER

TRADE FLY-AROUND:

Workers assemble engines at the GM manufacturing plant in Spring Hill, Tenn., last August. (Harrison McClary/Reuters)
Trade fight brewing across the pond: The European Union and Britain clashed over a post-Brexit trade deal ... with the two sides setting out very different visions of a future relationship that could result in the most distant of ties,” Reuters's Elizabeth Piper and John Chalmers report.
“Almost three days since Britain officially left the EU, both sides presented their aims, with the question of whether London will sign up to EU rules to ensure frictionless trade shaping up to be the defining argument of the negotiations.”
Trump to tout trade in State of the Union. The Post's Philip Rucker and Seung Min Kim: "In a briefing with reporters to preview the speech, a senior administration official said Trump would focus on five issue areas: a 'blue-collar boom' for which he credits his trade negotiations with China, Mexico and Canada; domestic policies to help working families, including paid family leave; health care; illegal immigration; and national security."
TRUMP WATCH:

Treasury Secretary Steven Mnuchin. (Jabin Botsford/The Washington Post)
Mnuchin and top Democrat are talking infrastructure: “Treasury Secretary Steven Mnuchin and a senior congressional Democrat have stepped up their efforts to craft a bipartisan deal on improving the nation’s infrastructure, but both congressional lawmakers and White House officials remain skeptical that the effort will lead to a deal, according to four people familiar with internal discussions,” my colleagues Jeff Stein, Erica Werner and Josh Dawsey report.
“The talks between Mnuchin and House Ways and Means Committee Chairman Richard E. Neal (D-Mass.) have so far failed to break ground on how to pay for a package that could cost more than $1 trillion, leaving perhaps the most important roadblock to a deal in place. Complicating matters further is that the White House has publicly thrown its support behind a bipartisan separate push in the Senate to approve a more limited infrastructure package that would fall far short of what Trump promoted as a presidential candidate in 2016.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"In addressing Congress during impeachment, Trump to sound the starting gun toward November." By The Post's Philip Rucker and Seung Min Kim
"House prosecutors, Trump’s team offer competing arguments to Senate that has largely decided on the verdict." By The Post's Elise Viebeck, Mike DeBonis and Robert Costa
"Manchin calls for censuring Trump over pressuring Ukraine to investigate a domestic political rival." By The Post's Robert Costa and Mike DeBonis

POCKET CHANGE


The brand logo of Alphabet Inc.'s Google. (Thomas Peter/Reuters)
Alphabet reports disappointing earnings: “Alphabet Inc. reported revenue from the key holiday quarter that missed Wall Street estimates, suggesting the company’s Google advertising business is struggling to maintain growth in the face of rising competition,” Bloomberg News's Gerrit De Vynck reports.
“Revenue, excluding payments to partners, was $37.6 billion in the fourth quarter, less than analysts’ projections of $38.4 billion, according to data compiled by Bloomberg. Ad revenue in the quarter rose 17 percent, slower than the 20 percent year-over-year growth from in the same quarter a year earlier. Shares fell about 4 percent in after-market trading. The stock jumped about 16 percent in the past three months, hitting a record late last month. That set a high bar for Monday’s results.”
  • Amazon is making things difficult: “Amazon.com Inc. has become a major digital advertising rival in recent years, grabbing more valuable shopping-related searches from Google. The e-commerce giant saw a surge in revenue from its ads business during the holiday quarter.” (Amazon CEO Jeff Bezos owns The Washington Post.)
  • More trouble ahead?: “Justice Department officials will meet [today] with representatives of state attorneys general to discuss their investigations of search and advertising giant Google, according to sources familiar with the plans,” Reuters's Diane Bartz reports.
Tesla had its biggest jump in years: “Shares of Tesla soared 19.9 percent ... after Argus Research raised its price target to $808 from $556 and short-sellers scrambled to catch up to the stock,” CNBC's Jessica Bursztynsky reports.
“The moves was the biggest one-day jump since May, 2013. The firm’s analysts cited Tesla’s strong fourth-quarter financials, which exceeded Wall Street’s expectations last week. It also raised its earnings per share estimate to $8.01 from $5.96 and expects that to double by 2021.”

Goldman Sachs headquarters, left. (Michael Nagle/Bloomberg)
Goldman loses star trader. WSJ's Liz Hoffman: "Goldman Sachs Group Inc.’s 'straders,' the hybrid trader-coder whose star has been on the rise inside the Wall Street firm, are losing their ringleader. Adam Korn, who represented a new kind of Wall Street trader—one reared on computer code, not instinct—is leaving the firm, people familiar with the matter said Monday. His departure follows that of Martin Chavez, a technologist and trading executive who left at the end of last year. More resignations are expected across the firm in the coming weeks, as 2019 bonuses are paid out.
"An 18-year Goldman veteran, Mr. Korn most recently supervised 5,000 engineers working to electronify the trading floor and build new software for clients. The most ambitious, called Marquee, is laying digital pipelines to replace a trading flow that still relies on phone calls and paper tickets."
Fallout from Airbus scandal spreads: “The Airbus bribery scandal reverberated around the world ... as the head of one of its top buyers temporarily stood down and investigations were launched in countries aggrieved at being dragged into the increasingly political row,” Reuters's Tim Hepher and Laurence Frost report.
“Airbus agreed on Friday to pay a record $4 billion in fines after reaching a plea bargain with prosecutors in Britain, France and United States over alleged bribery and corruption stretching back at least 15 years. Now, it is bracing for a rocky period with airlines and foreign governments, some of which have complained they were not forewarned about the charges and claimed little knowledge of the sums of money swirling around their fleet purchases.”
Ford's failed efforts to broker a deal on auto emissions standards: "The call was part of a nearly yearlong push to fend off the expense and delays of competing fuel standards, but Ford miscalculated the White House’s appetite for a deal. Its efforts ultimately backfired, putting it at odds with the administration and other big car makers,” the Wall Street Journal's Mike Colias, Ben Foldy and Andrew Restuccia report of a call last spring between Bill Ford Jr., the automaker's executive chairman, and Trump, in which the president essentially said the company was on its own.
"When Ford eventually made its own deal with California last summer, it drew an antitrust inquiry and spurred the administration to speed up efforts to strip California’s authority to set its own tailpipe standards. It also irritated Ford’s biggest rivals, including General Motors Co. and Toyota Motor Corp., which have since sided with the Trump administration on the issue. The industry — more polarized than ever — is now facing a confrontation that could last for years, leaving it in a costly limbo.”

Former WorldCom CEO Bernard Ebbers exits a Manhattan federal court in 2006. (Louis Lanzano/AP)
Former WorldCom CEO dies at 78: “Bernard J. Ebbers, a telecom executive who grew a small Mississippi firm into the Wall Street juggernaut WorldCom, only for its gains to be unmasked in an $11 billion corporate accounting scandal that landed him in prison and sent shock waves through the U.S. economy, died Feb. 2 at his home in Brookhaven, Miss. He was 78,” my colleague Harrison Smith reports.

Junk-bond trader Paras Shah allegedly took food repeatedly from office cafeteria without paying.
WSJ

THE REGULATORS

Fannie, Freddie inch toward privatization. WSJ's Andrew Ackerman: "A federal regulator has hired an adviser to help recapitalize Fannie Mae and Freddie Mac, the mortgage-finance giants at the heart of the 2008 financial crisis. The Federal Housing Finance Agency said Monday it tapped investment bank Houlihan Lokey Inc. as it moves toward returning the mortgage companies to private ownership after their $190 billion government bailout.
"The contract for the Los Angeles-based firm, which does a lot of restructuring and merger work in the mortgage industry, is valued at up to $45 million over about five years, according to the FHFA. The firm declined to comment."

DAYBOOK

Today:
  • The Bipartisan Policy Center hosts an event featuring former Fed Chair Janet Yellen and World Bank President David Malpass.
  • Disney, Sony, Ford, BP, ConocoPhillips, Snap, Ralph Lauren and Match Group are among the notable companies reporting their earnings.
Wednesday:
  • The Commerce Department releases the latest international trade figures
  • General Motors, Yum! China, Energizer, Merck, GrubHub, Spotify and GoPro are among the notable companies reporting their earnings.
  • The House Financial Services Committee hosts a hearing on efforts to "evade state consumer protections and interest rate caps."
  • The Financial Services Subcommittee on Housing hosts a hearing on Trump administration's "efforts to eliminate public housing."
  • The Urban Institute hosts an event on institutional investors role in the housing market
Thursday:
  • Uber, Kellogg, T-Mobile, Philip Morris International, Fiat Chrysler, Bristol-Myers Squibb, Skechers USA, Yum! Brands, Estee Lauder and the New York Times are among the notable companies reporting their earnings.
Friday:
  • The Labor Department releases the January jobs numbers
  • Honda Motor and AbbVie are among the notable companies reporting their earnings.

THE FUNNIES

BULL SESSION

Jan 29, 2020

Analysis | The Finance 202: President Trump and 2020 Democrats aren't interested in tackling a soaring budget deficit

By Tory Newmyer




THE TICKER

President Trump, flanked by Treasury Secretary Steven Mnuchin, speaks at the World Economic Forum. (Simon Dawson/Bloomberg)
The federal budget deficit is exploding, blowing up one of President Trump’s core campaign promises along with it. But there’s no evidence policymakers overseeing the rising tide of red ink are moving to do anything about it — and voters appear disinclined to force the issue.
The latest warning flare over yawning federal borrowing comes from the Congressional Budget Office, which projects the government’s shortfall from spending more than it brings in will top $1 trillion this year for the first time since the aftermath of the financial crisis.
And the deficit will continue to surpass that mark every year for the future. Put another way, the deficit will top 4 percent of GDP every year for the next decade, the longest such stretch in a century.
By 2030, the CBO predicts, publicly held debt will reach 98 percent of GDP, up from 81 percent this year. In dollar terms, the government’s tab is expected to grow from about $18 trillion this year to $31 trillion in a decade, despite Trump’s campaign pledge to eliminate the debt altogether within eight years of taking office.

The trend line is all the more remarkable given the strength of the economy. Boom times typically shrink the deficit, as tax collections swell and the federal government can dial back safety-net spending.
Trump’s $1.5 trillion tax cuts own part of the blame, though the administration rejects it. “The CBO report shows that tax collections are weaker than they would be without the 2017 Republican tax law, which permanently locked in lower rates for many corporations while creating temporary reductions for households,” my colleague Jeff Stein reports. “Tax revenue remained roughly flat the first year the law was in effect, despite economic growth of nearly 3 percent. It rose slightly in 2019 but not enough to compensate for flatlining the year before.”

The U.S. Capitol dome. (AP Photo/Patrick Semansky)
The CBO sees growth now skidding along at a level substantially below its 2018 clip: It projects 2.2 percent growth this year, slowing further from there to average 1.7 percent for the rest of the decade. Nevertheless, Treasury Secretary Steven Mnuchin told CNBC the tax cuts will pay for themselves by lifting growth, even as he touted a second round of cuts he says the administration is preparing “for the middle class, and we’ll also be looking at other incentives to stimulate economic growth.”
The GOP’s abandonment of the deficit hawkishness the party claimed as a first principle during the Obama era has helped clear space for Democrats to propose their own ambitious spending plans. The Democratic presidential candidates are coupling them with proposals to raise taxes to cover the costs. But even the most moderate figure in the field, former vice president Joe Biden, wants to raise taxes by at least $3.4 trillion over a decade — more than twice what 2016 nominee Hillary Clinton proposed. And the point of raising that revenue isn’t to pay down the U.S. debt pile but to fund long-deferred liberal priorities, including expanded health-care coverage and student debt relief.
Indeed, Sen. Bernie Sanders (I-Vt.) lately has attacked Biden’s past willingness to work with Republicans on deficit reduction, charging the former vice president with entertaining Social Security cuts in those talks. The critique forced Biden onto the defensive. With neither party focusing on the issue, perhaps it should come as no surprise that voters aren’t prioritizing it either. Polls show deficit reduction does not rank as a top voter concern. To the contrary, the urgency of addressing it has dropped even as the deficit has grown.
Via Pew Research Center:

The result all but assures policymakers will put off indefinitely the politically painful debate necessary to tame the deficit.
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MARKET MOVERS


Federal Reserve Board Chair Jerome Powell. (Jose Luis Magana/File/AP)
— What to expect from the Fed today: "The pressure is off the Federal Reserve this week. On Wall Street, the assumption is that Wednesday’s meeting will be boring. The Fed is not expected to change interest rates, and Chair Jerome H. Powell is widely expected to stick to the same script he used in December that the U.S. economy is doing pretty well and interest rates are in a 'good place,'" my colleague Heather Long reports.
"In many ways, the Fed can take a victory lap. Recession fears have faded, unemployment is at a 50-year low, inflation is tame and the stock market remains high. There are obvious risks. [Trump] is threatening a trade war with Europe now that tensions have subsided with China. Inequality remains high. And no one knows how deadly the coronavirus outbreak will be for the United States — or anywhere else in the world."
And yet, Heather writes, the Fed still has a long to-do list for the year, and Powell is likely to face questions about the central bank's asset purchases, election-year pressures; its inflation target; and its recession-fighting capabilities, among others. 
(Meanwhile, the New York Times's Jeanna Smialek takes a closer look at Powell's unassuming style.)

Apple CEO Tim Cook presents the new iPhone 11 at an event in Sept. 2019. (Stephen Lam/File/Reuters)
— Apple rises: "Apple reported revenue and profit significantly higher than what Wall Street analysts expected and spiked as much as 3 percent before settling down up around 1 percent in after-hours trading," CNBC's Kif Leswing reports.
"Apple’s revenue was up 9 percent to $91.8 billion, which beat its own guidance. That’s a significant change from the same quarter last year when it had to revise its revenue guidance down mid-quarter based on weakness in China. Apple’s earnings were partially powered by iPhone revenue, which was up 8 percent on the strength of new iPhone models to $55.96 billion."
  • Key quote: "It was sort of a blockbuster quarter all the way around,” Apple CEO Tim Cook told CNBC’s Josh Lipton.
Stocks rally. Apple's results helped fuel a rebound from Monday's selloff, the worst since October. Reuters's Chuck Mikolajczak: "Markets across the world stabilized as the head of the World Health Organization said he was confident in China’s ability to stem the virus outbreak, which has killed 106 people in the country, prompted businesses to close operations and curbed travel... The Dow Jones Industrial Average rose 186.3 points, or 0.65%."
— Starbucks makes massive closings over coronavirus: "Starbucks Corp "became the first major U.S. company to warn of a financial hit from the new coronavirus outbreak in China, as it closed thousands of restaurants and adjusted operating hours in its biggest growth market," Reuters's Uday Sampath Kumar reports.
"The world’s largest coffee chain delayed a planned update - based on strong quarterly earnings results - to its 2020 financial forecast because of the outbreak, which has caused over 100 deaths and over 4,000 confirmed cases in China ... The company expects the financial impact to be material but temporary, and it will depend on the number of stores it has to close and for how long. Currently about half of its stores are shuttered in China, which makes up about 10 percent of global revenue. It will not know until March at the earliest what the financial impact will be, but its long-term double-digit growth expectations are intact, executives said."
— Business investment, consumer confidence diverge: New orders for key U.S.-made capital goods dropped by the most in eight months in December and shipments were weak, suggesting business investment contracted further in the fourth quarter and remained a drag on economic growth,” Reuters's Lucia Mutikani reports.
“For now, however, the longest economic expansion on record looks set to continue, with other data ... showing consumer confidence surged to a five-month high in January amid optimism over the labor market. That suggests consumer spending could stay fairly strong in the near term and blunt some of the hit on the economy from weak business investment.”

TRUMP TRACKER

TRADE FLY-AROUND:

Pedestrians walk past an advertisement promoting the 5G data network in London. (Toby Melville/Reuters)
— Britain bucks Trump on Huawei: “The British government Tuesday handed the U.S. government a major defeat in its months-long campaign against the Chinese tech giant Huawei by agreeing to use Huawei equipment in part of its telecommunications network," my colleagues William Booth, Jeanne Whalen and Ellen Nakashima report.
“The decision marked a rare split between the transatlantic allies and a blow to Washington as it battles China for dominance over the installation of the new communications technology known as 5G. The United States has put Huawei at the forefront of that battle, arguing that installing the company's telecommunications equipment would leave allied countries vulnerable to Chinese espionage."
What the decision says about the special relationship: “For the United States, Boris Johnson’s embrace of Huawei is a potential tipping point in Washington’s faltering struggle with Beijing for global technological and economic dominance. For the United Kingdom, Tuesday’s decision is a pragmatic choice born of economic necessity,” Politico's Ryan Heath and Nancy Scola report.
“Given that the decision is guaranteed to anger Britain’s closest ally — the United States — the decision demonstrates the wider tensions in the country’s post-Brexit “Global Britain” policy. Expect more of those tensions if Britain pushes ahead with a 2 percent levy on big tech firms, an action that [Mnuchin] warned British Chancellor Sajid Javid against implementing in a Saturday meeting. On their own, these two transatlantic fights would be a significant nuisance for Britain, but hardly a crisis. But the problem for Britain is they can’t be separated from London’s wish for a quick trade deal with the United States.”
  • More on what this means for a potential trade deal: "... Johnson’s Huawei decision threatens to set off a cascade of complications for that strategy, especially since it alarmed senior Republican lawmakers who would may have to approve any trade deal. EU trade negotiators also scoff at the idea of Britain using U.S. trade negotiation as leverage in EU-U.K. talks.”
The arrest amounts to an escalation of U.S. efforts to counter what officials say is a plot by Beijing to raid U.S. universities to transform China into a scientific superpower.
WSJ
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"McConnell tells senators he doesn’t yet have votes to block witnesses in Trump impeachment trial." By The Post's Erica Werner, Seung Min Kim and Rachael Bade
"Senate Republicans seize on Dershowitz argument, say Trump’s actions aren’t impeachable." By The Post's Rachael Bade, Karoun Demirjian, Mike DeBonis and Ann E. Marimow
"Who’s talking the most during Trump’s impeachment trial." By The Post's Harry Stevens and Amber Phillips

POCKET CHANGE


Goldman Sachs headquarters. (Michael Nagle/Bloomberg)
Goldman Sachs is holding its first-ever "investor day" today. NYT's Kate Kelly: "The chief executive, David M. Solomon, is hoping that the event will be an opportunity to show that this isn’t the Goldman Sachs of yore — attempting a makeover of an institution that became known as an adrenaline-fueled sales-and-trading juggernaut but little more than that. Now the firm is angling to handle more mundane services like managing cash for big companies. It has also jumped into retail banking and credit cards.
"Attendees are likely to encounter a bit of chest-thumping about Goldman’s historic strengths, namely investment banking and trading, but also a lot of talk about making the firm less opaque. And expect Mr. Solomon, who is active on social media and has a side gig as a DJ (he’ll be spinning at Sports Illustrated’s Super Bowl party in Florida this weekend) to try to humanize the aloof institution, which he took over in the fall of 2018."
A critical view. In advance of the event, Better Markets, the Washington-based advocate for stricter rules on the financial services industry, is highlighting what it calls the bank's "wide-ranging, predatory, recidivist lawbreaking" over the last two decades. Per the group: "In the last two decades, while receiving more than $874 billion in bailouts, Goldman Sachs has been subject to 36 major legal actions that have resulted in over $9.8 billion in fines and settlements.  This pattern of illegal conduct appears to have increased after the 2008 crash."

An Airbus A380 is seen in 2015. (Francois Mori/AP)
— Airbus faces nearly $4 billion in fines: “ Airbus has agreed to pay penalties of €3.6 billion ($3.96 billion) to settle corruption probes by U.S., U.K. and French authorities into contract dealings, lifting a reputational and legal cloud that has hung over the company for years,” the Wall Street Journal's Benjamin Katz reports.
“The European plane maker said it had come to terms with prosecutors in a preliminary court ruling in the U.K. ... paving the way for a so-called deferred prosecution agreement, which would allow the company to avoid formal charges. The settlement remains subject to review by courts in each jurisdiction, Airbus said, with hearings expected on Jan. 31. With approval, the penalties would be booked as a provision in the company’s 2019 financial accounts.”
— Facebook's new oversight rules leave company in control: Facebook “unveiled its proposed bylaws for the company’s oversight board — a sort of 'supreme court' that can theoretically overturn content moderation decisions — but it’s filled with loopholes and binds Facebook to very little concrete action,” CNBC's Salvador Rodriguez reports.
“Facebook CEO Mark Zuckerberg first announced the oversight board in November 2018 as the company weathered numerous scandals and criticism regarding its privacy and content moderation practices. During the run-up to the 2016 election, for instance, conservatives criticized the company for de-emphasizing certain news sources in its 'trending' news section.”

A sign welcomes visitors to the General Motors Lordstown Complex, in Warren, Ohio, seen here in 2018. (Alan Freed/AP)
— Former GM Lordstown plant looks to retool: Electric pickup truck start-up Lordstown Motors is pursuing a $200 million loan from a U.S. Energy Department program to retool a former General Motors factory in northeast Ohio, Chief Executive Steve Burns told Reuters,” David Shepardson reports.
“Burns met with Energy Secretary Dan Brouillette on Monday for about an hour and the company was holding additional talks with officials on Tuesday from the Energy Department’s Loan Program Office ... Burns disclosed the company plans to unveil a drivable version of its electric truck at the Detroit auto show in June. It hopes to begin production by year-end.”
— Nike sells out of Kobe merchandise: “Nike Inc.’s website sold out of Kobe Bryant merchandise in the wake of the basketball superstar’s sudden death, the sportswear giant said, rebutting media reports it had pulled the products,” the WSJ's Khadeeja Safdar reports.
“A Nike spokesman said on Tuesday that the merchandise had sold out and clarified the company didn’t remove Kobe Bryant products or ask retailers to send them back. Several media outlets earlier reported Nike pulled the items to thwart buyers seeking to resell them at higher prices.”
— FDA tells Purell to stop its Ebola claims: “The makers of Purell are pruning their marketing strategy after the Food and Drug Administration slapped the company with a warning letter that told it to knock off unproven claims that the hand sanitizer can prevent diseases like Ebola, norovirus and MRSA,” my colleague Kim Bellware reports.
“The letter came as the United States is bracing for one of its worst flu seasons in decades and worldwide concerns grow amid a coronavirus outbreak that has killed at least 100 people in China, where the outbreak originated.”
Delta acknowledges that the cases “could have been handled differently” but contends it did not discriminate.
Taylor Telford

MONEY ON THE HILL


Charles Koch is seen in 2015. (Patrick T. Fallon for The Washington Post)
— Koch donors worried Trump could lose: “Libertarian and conservative donors who attended the annual Koch network summit over the weekend discussed the need to defend the GOP majority in the Senate as a backstop in case a Democrat defeats [Trump] in November,” CNBC's Brian Schwartz reports.
“People at the meeting in Palm Springs, California, didn’t just fret about progressive candidates Sens. Bernie Sanders and Elizabeth Warren winning — they were also concerned about the moderate former Vice President Joe Biden, according to attendees who declined to be named since the conversations were deemed private ... In addition to airing concerns about tax hikes and universal health coverage, the Koch network donors also stressed what they consider the need to preserve pro-business gains made under Trump’s tenure. The donors view maintaining a Republican majority in the Senate as a key part of this strategy.”

DAYBOOK

Today:
  • Trump is expected to sign the USMCA
  • Boeing, Tesla, Facebook, Microsoft, McDonald's, General Electric and AT&T are among the notable companies reporting their earnings
  • The House Budget Committee holds a hearing on the CBO's economic outlook
  • The Ways and Means Committee holds a hearing on future infrastructure investments
Thursday:

THE FUNNIES

BULL SESSION


Jan 22, 2020

Analysis | The Finance 202: Have Trump's economic promises been fulfilled?

By Tory Newmyer



THE TICKER

President Donald Trump. (Kevin Lamarque/Reuters)
Just over three years ago, President Trump gazed beyond the west front of the Capitol and pronounced a nation in a state of “carnage.” It struck many both then and now as odd. At the time, the United States was in the middle of an economic recovery that was leading to steady job growth, lower unemployment and slightly smaller annual budget deficits.
Trump has often boasted that his economic record is a result of his actions alone. In his address to the World Economic Forum in Davos on Tuesday, the president contrasted the dismal state of his predecessor with “an economic boom the likes of which the world has never seen before.”
The president is correct that as of this point in his tenure, some economic indicators are at or near record highs, or improving for some people after remaining stagnant. The Dow Jones has posted record numbers, unemployment has continued its downward trajectory to a half-century low, and wages are starting to increase for the middle class. (Though as our colleagues and others have noted, Trump often exaggerates the unemployment rate for African Americans and Latinos).
But that’s not the full story. The upward trajectory of many economic metrics -- ranging from unemployment to the stock market --began under President Barack Obama. As our colleague Heather Long wrote last year, the “data shows a mixed picture in terms of whether the [Trump] economy is any better than it was in Obama’s final years.”
Trump will head into his reelection effort with a modernized North American Free Trade Agreement and an introductory deal with China. But to get there, “Tariff Mantook Wall Street on a dizzying ride, imposing tariffs on multiple U.S. allies and asking Congress, and therefore the American people, to foot the bill for a bailout of American farmers larger than the amount provided to save the auto industry. Even some of the president’s allies admit the trade wars smothered some of the gains from the Republican-led rewrite of the tax code, which as Tory has pointed out also failed to live up to its hype.
So on the heels of his Davos address and at the start of his fourth year in office, we decided to see how the Trump economy stacks up to the 2016 candidate’s promises, such as that he “alone could fix it.” (For our purposes, we are squarely focused on Trump’s economic record — though our colleague Glenn Kessler found that overall Trump has broken more key promises than he's kept).
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JOBS:
Promise: Create 25 million new jobs over the next decade. (This was this core of candidate Trump’s economic plan unveiled in September 2016).
Status: In progress, but unlikely to happen over the next decade based on the current trajectory. There have been almost 6.7 million jobs created since Trump took office, according to the Bureau of Labor Statistics (we used the agency’s preliminary numbers for December 2019 as the endpoint). That puts Trump off pace to create 25 million jobs by 2026, but also, as FactCheck.org pointed out, trailing the average monthly jobs gain from Obama’s second term.
The good news is experts say job gains, as Heather noted, remain surprisingly robust given the large number of baby boomers retiring and the difficulty business owners have in filling new jobs.

TRADE: 
Promise: Pull out of the Trans-Pacific Partnership on Day 1. Renegotiate the North American Free Trade Agreement (NAFTA) or leave the accord. As part of his “America First” approach, Trump also vowed to get a better deal for American consumers by toeing a tougher line with major world markets he says are routinely ripping off the United States, including China. Trump initially promised to impose a 45 percent tariff on Chinese imports.
Status: The president withdrew from the TPP on Day 3 of his presidency. He threatened repeatedly to end U.S. participation in NAFTA, but instead renegotiated what he said was a better deal with Mexico and Canada. The Senate passed the U.S.-Mexico-Canada Agreement last week in a sweeping bipartisan vote, which could help the president’s reelection chances.
On China: Trump never imposed a 45 percent tariff on imports, but he has repeatedly used, and imposed, tariffs against Chinese imports in a bid to stop what he views as discriminatory trade practices.
For now, the administration’s goal of a sweeping trade accord with China has remained elusive. Instead, both sides signed a limited phase one deal maintaining many tariffs as high as 25 percent. Some of Beijing's retaliatory tariffs remain in place, but the phase 1 deal does include a Chinese pledge to purchase tens of billions in U.S. agricultural products over the next two years.
GROWTH:
Promise: “Over the next 10 years, our economic team estimates that under our plan the economy will average 3.5 percent growth,” Trump told the New York Economic Club in September 2016, before adding the 25 million new jobs line that we already addressed.
Status: Very unlikely given that current average yearly economic growth is nowhere close. The GDP has failed to increase at an average of even 3 percent in any of Trump’s first three years in office. The latest estimate for 2019 calls for 2.2 percent growth, which would be the lowest so far during his administration. When Trump originally made the promise, economists, journalists, commentators and pretty much everyone pointed out the United States hadn’t reached 3.5 percent annual growth since 2004. Bill Clinton was the last president to post more than one year above that threshold.
In a press conference from Davos Wednesday morning, Trump economic adviser Larry Kudlow said trade deals like the USMCA and phase one China deal would inspire "a half point growth in GDP" in the year ahead.

DEBT
Promise: Reduce the federal debt by $19 trillion over eight years.
Status: Extremely unlikely as the debt is actually increasing. Trump has done the exact opposite of what he promised in this category, as the gross federal debt has risen about 16 percent since he’s taken office, according to PolitiFact. Under Trump’s watch, the annual increase in the national debt has continued to surpass the growth in the nation’s GDP. A big reason for the growing gap is the $1.5 trillion in tax cuts spread out across the next decade as part of the president’s tax overhaul, and the president's continued endorsement of huge spending plans for the government.
Not surprisingly, Trump has reportedly scoffed at torching the nation’s balance sheet. “Yeah, but I won’t be here, Trump said during a meeting last year, according to the Daily Beast’s Asawin Suebsaen and Lachlan Markay, referring to a spike he was shown in the debt following a possible second term in office.

MARKET MOVERS

— Trump hit a lot of economic notes in an impromptu news conference this morning from the WEF in Davos. Here are some of the highlights.
  • Trump said he would be negotiating a "whole new structure" for the WTO, and the trade organization head would soon be coming to Washington. "The WTO has been very, very unfair to the United States for many years," Trump complained, adding China wouldn't have certain economic advantages without it.
  • Trump said he has a date in mind as to when he would place heavy new tariffs on European cars, but didn't share it. "They are actually more difficult to do business with than China, just ask [UK leader] Boris Johnson," the president said, referring to the European Union.
  • When asked about whether human rights and Hong Kong protests would factor into dealings with China, Trump said this: "We would like to see if we can do something, but again we're doing a trade deal."
  • The president also said his administration would soon announce additional countries to be added to the U.S. travel ban.

Nokia CEO Rajeev Suri at the World Economic Forum. (Jonathan Ernst/Reuters)
— CEOs remain optimistic at Davos: “Chief executives converged here hopeful that easing trade tensions around the world could give the economy a boost, despite some early dismal forecasts for global growth and business sentiment,” the Wall Street Journal’s Chip Cummins and Marie Beaudette report.
“A closely followed survey of CEO sentiment kicked off this year’s World Economic Forum on a somber note. Consulting firm PwC found that 53 percent of those it surveyed predict a slowdown in economic growth in 2020, up sharply from 29 percent in 2019 and 5 percent in 2018. It was the highest level of pessimism since 2012, the first year of the survey, PwC said. The OECD predicts global growth of 3 percent this year, up only slightly from its 2.9 percent forecast for 2019 — the weakest growth rate since the financial crisis.”
— Netflix shares rise despite some weak performance: “Shares of Netflix climbed as much as 2.3% in after-hours trading … after the company reported fourth-quarter results. The company beat on the top and bottom lines for the quarter, but gave disappointing guidance for the first quarter,” CNBC’s Annie Palmer reports.
“For the first quarter of 2020, Netflix expects to report earnings of $1.66 per share on revenue of $5.73 billion. That’s compared to analyst expectations for earnings of $1.20 per share and $5.76 billion in revenue. The company also expects to add 7 million paid customers in the first quarter, which fell short of analysts expectations for 7.86 million subscribers.”

TRUMP TRACKER

TRADE FLY-AROUND:

European Commission President Ursula von der Leyen and President Trump at the World Economic Forum on Tuesday in Davos. (Evan Vucci/AP)
— New year, new trade wars?: “Trump renewed his threat to put hefty tariffs on European cars Tuesday at the World Economic Forum, promising hardball tactics if trade negotiations do not go his way,” our colleague Heather Long reports from Davos.
“Just days after Trump scored wins with China, Mexico and Canada, the move highlighted how Trump is quickly pivoting to make Europe the next front in his protectionist trade war. As part of this push Tuesday, Treasury Secretary Steven Mnuchin warned Italy and Britain could face U.S. tariffs if they pursue taxes on large technology companies such as Facebook and Alphabet’s Google. French President Emmanuel Macron agreed in recent days to delay a similar tax to avoid Trump’s tariffs.”
  • An ocean apart: “After 70 years of being largely hand in hand in promoting democracy and capitalism around the world, the United States and Europe are now at odds over trade, climate change, taxation, privacy, Iran and defense funding,” Heather writes.
TRUMP WATCH:

Jared Kushner, left, Ivanka Trump, in green, and President Trump at the World Economic Forum. (Michael Probst/AP)
— Trump brags about himself at Davos: “Trump’s speech Tuesday at one of the financial world’s biggest events focused on his presidential accomplishments, in stark contrast with pretty much every other world leader at Davos who emphasized global cooperation and an urgent need to address climate change,” our colleague Heather reports.
“The president’s remarks were a noticeable break from key European leaders who spoke on the main stage minutes before Trump. They all urged global cooperation to tackle the world’s biggest challenges, especially climate change.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"Senate adopts ground rules for impeachment trial, delaying a decision on witnesses until after much of the proceedings." By The Post's Seung Min Kim, Felicia Sonmez and Mike DeBonis
"Chief Justice Roberts admonishes impeachment lawyers, telling them to ‘remember where they are.'" By The Post's Paul Kane and Elise Viebeck
"Collins and Romney hold the keys in the impeachment trial. Here’s what they signaled on Day One." By The Post's Aaron Blake

POCKET CHANGE


The Boeing logo. (Richard Drew/AP)
— 737 Max’s return delayed again: “In another setback in its effort to get its best-selling jet back in the air, Boeing on Tuesday said it does not expect U.S. regulators to begin ungrounding the 737 Max until mid-2020,” our colleague Lori Aratani reports.
“Company officials, however, said they remain confident the plane will fly again. … Boeing is scheduled to report its quarterly earnings Jan. 29. Trading of the company’s stock was briefly halted Tuesday for the company’s announcement. The company declined to be more specific about when it expected the Federal Aviation Administration to recertify the jets. Boeing had originally expected the Max to be cleared by U.S. regulators in December.”
— Apple dropped encryption plan: “Apple Inc dropped plans to let iPhone users fully encrypt backups of their devices in the company’s iCloud service after the FBI complained that the move would harm investigations, six sources familiar with the matter told Reuters,” Reuters’s Joseph Menn reports.
“The tech giant’s reversal, about two years ago, has not previously been reported. It shows how much Apple has been willing to help U.S. law enforcement and intelligence agencies, despite taking a harder line in high-profile legal disputes with the government and casting itself as a defender of its customers’ information.”
— Delta workers to receive payouts: “Delta Air Lines’ banner year — propelled by lower fuel prices, higher travel demand and no sidelined Boeing 737 Max planes in its fleet — led the carrier to beat earnings estimates and notch its 10th consecutive profitable year,” our colleague Jena McGregor reports.
“But those results won’t just pay off for shareholders: The carrier said last week that employees are set to receive $1.6 billion in cash payouts, its largest employee profit-sharing pool on record and one that handily tops what many other companies offer their employees.”

Former Nissan chairman Carlos Ghosn and his wife Carole Ghosn. (Mohamed Azakir/Reuters)
— Carole Ghosn against Japan’s legal system: “Carlos Ghosn’s arrest in November 2018 thrust his wife, Carole Ghosn, into battles she wasn’t expecting to fight: against Nissan Motor Co., the company her husband ran, and the Japanese justice system,” the Wall Street Journal’s Nick Kostov and Sean McLain report.
“It was Mrs. Ghosn, 53 years old, who visited the auto executive in a Tokyo jail, bringing him tangerines and reporting back on Japan’s spartan prison conditions. She lobbied world leaders, from President Trump to Emmanuel Macron of France, to demand her husband’s release. And when Mr. Ghosn made his daring escape from Japan last month, Mrs. Ghosn was there for his arrival in Beirut, ignoring an order from a Japanese court to have no contact with her husband.”
— Will people still call London after Brexit?: “Britain’s hulking financial sector presents a serious dilemma for both sides in the U.K.’s coming trade negotiations with the European Union. Whatever the outcome, British-based financial institutions are preparing to see their access to the trade bloc heavily curtailed after Brexit,” the Wall Street Journal’s Anna Isaac and Max Colchester report.
“EU governments have sought to lure financial business from London almost from the moment the U.K. voted to leave the bloc in 2016. But some worry that if they cut off London too abruptly, they may lose access to services that only London can currently provide, while increasing their vulnerability to financial shock.”

DAYBOOK

Today:
  • Johnson & Johnson, Fifth Third Bancorp, Kinder Morgan and Las Vegas Sands are among the notable companies reporting their earnings.
Thursday:
  • Procter & Gamble, Comcast, American Airlines, Discover Financial Services, JetBlue Airways, Southwest Airlines and Union Pacific are among the notable companies reporting their earnings.
Friday:



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