|Bid||40.82 x 800|
|Ask||40.90 x 2900|
|Day's range||40.81 - 42.69|
|52-week range||26.19 - 43.48|
|Beta (3Y monthly)||0.19|
|PE ratio (TTM)||13.55|
|Earnings date||24 Oct 2019|
|Forward dividend & yield||N/A (N/A)|
|1y target est||41.99|
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The U.S. and Japan agreed in principle on a trade deal under which Tokyo would slash tariffs on American beef, pork and other agricultural products, while delaying for now the threat of additional levies on Japanese auto exports to the U.S.U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe announced the agreement Sunday on the sidelines of the Group of Seven summit in Biarritz, France, following a bilateral meeting earlier in the day. In announcing the deal, Trump also said Japan would purchase large quantities of U.S. wheat and corn.“If you say ‘win-win,’ it’s a capital letter ‘Win’ for the U.S. and a small-letter ‘win’ for Japan,” said Ichiro Fujisaki, a former Japanese ambassador to the U.S. “In Japan’s case, a small win plus non-negative assurance that no unilateral measures will be taken by the U.S., like on limiting car importations or some relations with security issues.”Spooked by Trump’s threats of punitive tariffs on Japanese auto exports, Abe agreed last September to start bilateral trade talks with the U.S. Trump has in turn come under pressure from U.S. farmers, reeling from the trade war with China, who have also been hobbled by a tariff disadvantage in the Japanese market compared with competitors from signatories of the Trans-Pacific Partnership regional trade deal he rejected.“We’ve agreed in principle,” Trump said. “We’ve agreed to every point.” He also referred to a “massive” purchase of wheat and a “very, very large order of corn” that he said would happen quickly. Trump said there would be no change to U.S. tariffs on Japanese cars.The countries have reached consensus on “core elements” and were aiming to sign a deal during United Nations meetings next month, Abe said. The prime minister said that agricultural product purchases were a possibility, adding that crop pests had resulted in the need for “emergency support” to enable the private sector buy American corn.“If we are to see the entry into force of this trade agreement, I’m quite sure that there will be the immense positive impact on both the Japanese as well as American economies,” Abe said.While the proposed deal may provide Trump with a fillip as he heads into his re-election campaign facing rising tensions with China, it remains to be seen how it will be received in Japan. Some officials in Tokyo have said the country shouldn’t give up its leverage over U.S. farmers without substantial concessions, and Japanese trade agreements generally require parliament approval.“As I expected, Japan gave ground on agriculture and didn’t win anything on autos,” former Japanese Prime Minister Yukio Hatoyama, an opponent of Abe’s long-ruling Liberal Democratic Party, said on Twitter. “This kind of obseqious diplomacy makes Abe happy, and hurts the people.”Japanese media reported earlier that the U.S. and Japan had agreed to an outline deal that would lower tariffs on U.S. beef to levels offered to members of the TPP. Japan and the U.S. agreed last year this would be the maximum possible level.Junichi Sugawara, a senior research officer for Mizuho Research Institute Ltd., said it was difficult to evaluate the agreement without an explanation on how it affects the U.S.’s threat to levy additional auto tariffs on Japan. “Without knowing that, it’s too early to say whether this will be a good agreement for Japan,” Sugawara said.U.S. Trade Representative Robert Lighthizer said the proposed deal would open markets to $7 billion of American products including ethanol, as well as beef, pork, dairy products and wine. He said tariffs on some Japanese industrial products would be reduced, but that these wouldn’t include cars. The proposed agreement also includes a clause on e-commerce, he said.Level FieldThe farming provisions of the deal won some early praise in the U.S., with the National Pork Producers Council and Senate Agriculture Committee Chairman Pat Roberts, of Kansas, among those welcoming a deal they said would put American agriculture on a level playing field with the 11 TPP-member nations.Agriculture Secretary Sonny Perdue said removing the trade barriers would allow greater sales of U.S. farm products in Japan. Some in Japan said that was an acceptable price to pay.“If we’re being realistic, the U.S. had been waving the 25% auto tariff card,” said Atsushi Takeda, chief economist at Itochu Research Institute Inc. “Japan’s managed to avoid that, there are probably no quotas, and for now there’s no comment on currencies. I think they’ve managed to end up with a passable result.”\--With assistance from Yuko Takeo and Emi Nobuhiro.To contact the reporters on this story: Jennifer Jacobs in Biarritz, France at email@example.com;Josh Wingrove in Biarritz, France at firstname.lastname@example.org;Isabel Reynolds in Tokyo at email@example.comTo contact the editors responsible for this story: Craig Gordon at firstname.lastname@example.org, Brendan Scott, Paul JacksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. U.S. companies are concerned about President Donald Trump’s threats to ban them from doing business in China, and they’re poised to halt new investments if the trade war escalates, the leader of group of top chief executive officers said.U.S. company executives get worried when they hear talk from Trump about invoking emergency powers on trade, said Josh Bolten, president and chief executive officer of the Business Roundtable and a former chief of staff to President George W. Bush.“He has a lot of authority through the national security statutes to disrupt trade and commerce in a way that would cause huge damage -- not just to the Chinese economy, but to the global economy and the U.S. economy,” Bolten said Sunday on CBS’s “Face the Nation.”Trump responded to the latest tit-for-tat retaliation from China on Friday by tweeting U.S. companies are “hereby ordered to immediately start looking for an alternative” to China. He also suggested he was looking at the International Emergency Economic Powers Act of 1977 in ordering U.S. companies to quit China. “Case closed!” Trump concluded in a tweet.‘Take a Look’White House economic director Larry Kudlow downplayed Trump’s China threat, saying on CBS that the president doesn’t intend to try to block investment in China right now and that “maybe the way it was phrased was a little tougher than usual.”“He’s asking American companies to take a look, take a fresh look at frankly moving out of China,” Kudlow said.Still, Bolten said the Dow Jones Industrial Average’s 623-point tumble on Friday in response to Trump’s threat -- while also increasing the tariff rate on $550 billion in Chinese goods -- was a sign of investors “tapping the brake lightly.” A lot of U.S. businesses are “poised right on top of the brake” on new spending if the trade war isn’t resolved, he said.“The risk is that everybody’s going to slam on the brake, and that would be a disaster — not just for the Chinese, but for the United States as well,” Bolten said.The Business Roundtable is an association of chief executive officers of large U.S. companies including Amazon.com Inc., Apple Inc. and General Motors Co. It’s chairman is JPMorgan Chase & Co. CEO Jamie Dimon.Bolten said the group supports Trump’s aim to address allegations of intellectual property theft and other trade issues with China, but it fears the trade war spiraling out of control -- and trying to de-couple completely from China “is not benign and certainly not helpful.”To contact the reporter on this story: Mark Niquette in Columbus at email@example.comTo contact the editors responsible for this story: Sara Forden at firstname.lastname@example.org, Steve GeimannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Group of Seven leaders have gathered in Biarritz, France and the host, French President Emmanuel Macron, has just pulled a massive surprise on his guests by inviting the Iranian Foreign Minister Javad Zarif.Merkel Defends Macron Decision to Fly in Zarif (6:39 p.m.)As news of Iranian Foreign Minister Javad Zarif’s lightning visit to Biarritz was still sinking in, German Chancellor Angela Merkel rode to Macron’s rescue. She espoused the French line that it is a meeting of two foreign ministers and therefore not part of the G-7. She told reporters that every attempt to solve the crisis in Iran was welcome. She later said she only knew Zarif was coming a short time before he arrived.The picture that is forming is that the French gave delegations a very short warning that this was happening. In any case, Zarif is leaving tonight. The turning point for flying Zarif over was the dinner last night. Merkel said that a "good talk about Iran will now be communicated to Zarif," in person, by his counterpart.That dinner is beginning to loom large in the G-7 storyline for 2019. All seem to agree it was tense, it was about both Iran and whether to let Russia’s Vladimir Putin back into the G-7 -- and that’s about it. Macron has said he believes the other leaders vested him with powers to deal directly with Iran at the dinner, though Trump has said Macron doesn’t speak for him.French Official Wants to See How Far Talks Can Go (4:43 p.m.)The French official was asked if there’s any chance Zarif could meet the U.S. delegation. He said that’s not planned at the moment. This is just a French-Iranian meeting at the moment. But they want to see how far those talks can go.French Won’t Say If Zarif Is Meeting Macron (4:05 p.m.)A French official said that Zarif hasn’t been invited to the G-7 talks. He’s instead meeting with French Foreign Minister Jean-Yves Le Drian. The official refused to say whether Zarif will also be seeing Macron.Zarif Confirmed as Iranian Dignitary in Biarritz (3:44 p.m)It appears Macron has thrown a curve ball at his fellow leaders by inviting Iran’s Foreign Minister Mohammad Javad Zarif to Biarritz. It’s unclear in what capacity as French organizers have point blank refused to confirm anything. Officials from other delegations were surprised. The Italians found out from French news wire AFP.Macron had wanted to rip the script, and he had already irritated the Americans who accused the French of trying to manipulate the agenda to embarrass the president. Zarif was in Paris only last week, meeting with Macron about the future of the landmark 2015 nuclear deal. Zarif described the talks as “constructive and good”, the semi-official Iranian Students’ News Agency reported.The Biggest Source of Tension Is Russia (2:26 p.m.)G-7 leaders just can’t seem to get on the same page about Russia’s Vladimir Putin, who was booted out of the club after ordering the annexation of Crimea in 2014. Whether to let him back in has become a sore point at the current gathering, according to an EU official briefed on the gala dinner Saturday night. The official described the mood as tense.Indeed, Trump described it as a” lively discussion” and Johnson agreed: “It was lively!” There are several reasons why the leaders are on the outs with Putin: from the festering conflict with Ukraine, the suspected meddling in their elections to its intervention in Syria.The U.K. holds Putin responsible for deploying a chemical weapon on British soil to poison a suspected Russia double agent and rallied international support to eject Russian diplomats. Trump went along with it but he’s always been of the view that it’s illogical not to have such an important global player at the table.Next year he will have the option to invite Putin as a guest.Johnson Goes Swimming (2:02 p.m.)Johnson has been switching from goofy Boris to serious statesman with some success. On arrival to the dinner on Saturday he struck a pose that saw his French hosts break out in laughter. And today he took a dip in the ocean before breakfast with Trump.While out on his swim, the prime minister said he had Brexit epiphany: “From here you cannot tell there is a gigantic hole in that rock. There is a way through. My point to the EU is that there is a way through, but you can’t find the way through if you just sit on the beach.”One local hotelier however suggested another interpretation of that symbolism. She warned that it’s not safe to swim out to the rock, because the waters can get choppy.No Coordinated Fiscal Stimulus (1:47 p.m.)In his midday update, Macron said there won’t be any coordinated stimulus for the global economy coming out of this meeting.“We need boosters for global economy,” he said. Still, “it’s not at the G-7 level that we decided to make budgetary or tax cuts.”He said leaders discussed mechanisms for shoring up growth, which would involve a combination of tax cuts, deregulation and stimulus spending for different countries.Trump Pulls Macron Back Over Iran (12:34 p.m.)Macron is touting an agreement to send a joint message from the G-7 to Iran as one of his victories from last night’s dinner. “We’ve enacted a common communication, which in my view has a lot of value,” he said this morning in a French television interview.But Trump cast doubt on how much authority Macron will have. “We’ll do our own outreach,” he said. “But I can’t stop people from talking.”One person familiar with the situation says Trump does not agree that Macron can convey a message from the G-7 to Iran since the leaders didn’t all settle on what the message should be.Trump has pursued a “maximum pressure” campaign against Iran, using sanctions to cut off their sales of oil in a way that’s hurting that nation’s economy. White House officials say the G-7 countries agreed Trump’s pressure campaign on Iran is having an impact, and that it should continue.Macron Is Talking Up Progress on Iran (11:50 a.m.)The French president is trying to show that he’s achieved something on the geopolitical issues he’s raised. He told TF1 television Sunday that leaders agreed they need to stop Iran developing nuclear weapons and destabilizing the region -- which was the state of play before talks began.The G-7 also agreed on a common way of communicating over Iran and a decision on action that enables them to “reconcile their positions a bit,” he said.When Johnson Sees Tusk, It Could Get Tense (11:20 a.m.)Johnson took care of Brexit business with Macron and Merkel in the days just before the G-7 -- everyone made their position clear (no budging).But the U.K. prime minister is beginning to realize that getting a divorce deal done with the European Union by the Oct. 31 deadline was not going to be quite as easy as he might have thought. As for the Europeans, they too are starting to think about what they can do to avert a no-deal scenario that could be economically bad news for all countries involved.Ian Wishart sets out the stakes, and the mood, as Johnson meets Donald Tusk, the EU’s president who tends to speak on behalf of the bloc’s leaders on matters related to Brexit.What is Macron’s Plan for Iran? (11 a.m.)After their 3-hour informal Saturday dinner where they discussed matters including Iran, leaders of the G7 gave Macron -- as chair of the Group -- the authority to hold talks and pass on a message from them to the Persian state, according to a French official.The official added that the message, based on the content of leaders talks Saturday, hadn’t yet been passed on. The official didn’t respond to request for details on the content of the message and of last night’s talks content.Second Thoughts on Trade War? (10: 52 a.m.)Trump rarely displays doubt, so when shows even a glimmer of it, it grabs one’s attention. The president is feeling the heat at the G-7 from his aggressive trade stance against China. Leaders are being careful on how to bring it but they are bringing it up -- persistently.During a meeting with Boris Johnson , he was asked whether he had “any second thoughts on escalating the trade war” with China, after he announced higher tariffs late Friday.“Yeah, sure, why not?” Trump replied. Reporters asked again whether he had second thoughts. “Might as well, might as well,” he replied, before reporters asked again. “I have second thoughts about everything,” he said.Trump has seen his poll numbers sag ahead of his 2020 re-election bid and he is relying on a strong economy to stay in power for another term.Trump Says ‘Very Close’ To Japan Trade Deal (9:50 a.m.)The U.S. is close to reaching a trade deal with Japan, Donald Trump said, as his trade chief hinted an announcement could come within hours.“We’re very close to a major deal with Japan,” Trump said Sunday morning during a meeting with Prime Minister Boris Johnson at the Group of Seven summit, with Trump due to meet Japan’s Shinzo Abe later Sunday morning in France. “Prime Minister Abe and I are very good friends, really good friends. We’ve been working on it for five months.”Japanese media have reported that the U.S. and Japan have agreed on a trade deal that will keep U.S. tariffs on Japanese cars in place while removing barriers to U.S. beef and pork sales to Japan.Johnson Finds a Way to Raise Tariffs With Trump (9:30 a.m.)Part of Johnson’s balancing act at the G-7 is to strike a good relationship with Trump -- whom he needs post-Brexit for a trade deal with the U.S. -- but also speak truth to power. Back home, the perception of a U.K. prime minister being America’s poodle is a bad look, especially if you could be heading into an election.So at the breakfast with Trump, Johnson found a way to raise criticism, “sheep-like.”Here it was: “I congratulate the president on everything that the American economy is achieving. It’s fantastic to see that. But just to register a faint, sheep-like note of our view on the trade war -- we’re in favor of trade peace on the whole, dialing it down a beat.”Johnson said that “the U.K. has profited massively in the last 200 years from free trade and that’s what we want to see. So, we’re keen to see that. We don’t like tariffs on the whole.”Trump responded with a tongue-in-cheek question about how the U.K. had fared in the past three years.Would Trump Declare a National Emergency on China? (9 a.m.)Trump has said a 1977 law known as the Emergency Economic Powers Act would allow him to order companies to leave China, though experts say that was never the intent of the law. In addition, it would be massive disruption to ask companies to pull up stakes in China, or even to re-route supply chains located there.Asked about whether it was on the cards, here was the answer: “For many years this has been going on. In many ways it’s an emergency. I have no plan right now. Actually we’re getting along very well with China right now. We’re talking. I think they want to make a deal much more than I do. We’re getting a lot of money,”The law isn’t usually used to regulate international trade, but more regularly has been used to impose sanctions on countries resulting from national security threats. President Jimmy Carter invoked it in 1979 during the Iran hostage crisis.Johnson Doesn’t Need any Advice, Says Trump (8:45 a.m.)There were 18 people sitting in on the working breakfast between Trump and Johnson. The two men had been photographed on Saturday night walking and talking in the margins of the summit.Trump was asked if he had Brexit advice for Johnson: “He needs no advice, he’s the right man for the job. I’ve been saying that for a long time. It didn’t make your predecessor very happy.”Johnson: “You’re on message there, I’m very grateful... we’re looking forward to having some pretty comprehensive talks about how to take forward the relationship in all sorts of ways.... And we’re very excited about that.”Trump: “we’re going to do a very big trade deal, bigger than we’ve ever had with the U.K. and now at some point they won’t have the obstacle, they won’t have the anchor around their ankle because that’s what they have.”Putin at Next Year’s G-7? It’s possible (8:35 a.m.)U.S. President Donald Trump told reporters it’s “certainly possible” he will invite Vladimir Putin as a guest of next year’s Group of Seven summit. He’s said before how he thinks it makes no sense not to have the Russian president at the table. Putin was ejected from the G-8 in 2014 over Russia’s annexation of Crimea. His eventual return into the fold has been a topic of debate -- but Europeans have said the Ukraine crisis needs to be resolved first.Next year Trump is the host, and as such has the discretionary power to invited who he wants. Macron this year, for example, invited the leaders of India, Chile, Australia and Spain.The most-watched bilateral is about to start (8:15 a.m.)Donald Trump is up and tweeting that there have been some very good meetings and leaders are getting along. He is about to sit down with Boris Johnson, making his debut at the summit after replacing Theresa May as prime minister. The two men seem to get on famously, in stark contrast with the forced, strained relationship with May.For a run-down on what to expect, read this:Protesters Kept at Bay, Police Use Tear Gas (last night)French riot police deployed water cannons and tear gas to disperse a crowd of activists that included Yellow Vest protesters, environmentalists and even some Basque separatists. They have been largely kept at a safe distance from the leaders, who are in the heavily-guarded red zone.Earlier stories:Macron Rips Up Agenda for His G-7 in a Fit of Climate FuryMacron Riles Bolsonaro, Setting Up G-7 Fight Over Amazon FiresDonald Trump Is Coming for Europe’s Most Important Alliance\--With assistance from Josh Wingrove and Alex Morales.To contact the reporters on this story: Jennifer Jacobs in Biarritz, France at email@example.com;Helene Fouquet in Biarritz at firstname.lastname@example.org;Arne Delfs in Biarritz at email@example.comTo contact the editors responsible for this story: Ben Sills at firstname.lastname@example.org, Craig Gordon, Flavia Krause-JacksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Australia will establish a mechanism for internet providers to quickly and effectively block websites hosting terror attacks in the wake of the Christchurch shooting, according to an emailed statement.The government is also creating a center to rapidly detect and shut down the sharing and live-streaming of the violent material as an attack takes place, according to the statement. They are recommendations from an industry and government body established after a man in March live-streamed the killing of more than 40 people in two Christchurch mosques.“The shocking events that took place in Christchurch demonstrated how digital platforms and websites can be exploited to host extreme violent and terrorist content,” Prime Minister Scott Morrison said in the statement. “That type of abhorrent material has no place in Australia and we are doing everything we can to deny terrorists the opportunity to glorify their crimes, including taking action locally and globally.”Read More: Facebook, Twitter Pressed to Help Prevent Domestic TerrorismTo contact the reporter on this story: Matthew Burgess in Melbourne at email@example.comTo contact the editors responsible for this story: Shamim Adam at firstname.lastname@example.org, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Emmanuel Macron has gone off script.It took the French president less than 24 hours to wrong foot his closest partners and toss a curve ball into the buildup to the Group of Seven summit. His fellow leaders hadn’t even landed. And all this when Macron was supposed to be shoring up the European alliance for another confrontation with Donald Trump.When the summit begins Saturday in the French beach resort of Biarritz, the European contingent is supposed to be holding the line over Brexit, pushing for tougher action on climate change and addressing the trade tensions threatening global growth without provoking the U.S. leader. Now they are going to be distracted by a rift between Macron and Germany’s Angela Merkel over how to tackle the environmental threat posed by Brazil.For Macron, for the European Union, and for the transatlantic relationship, the consequences could be far-reaching.Preparations for the summit began to unravel on Thursday evening as Biarritz was about to go into lockdown. The strip of sand that will provide the backdrop for the family photo was still crammed with bathers taking their last swim. Even Macron’s close advisers had no idea about the bombshell the president (who is not a regular tweeter like Trump) was about to drop.Alarmed by the record number of fires ravaging the Amazon jungle, Macron announced that the “emergency” would be a central focus of his summit, abandoning months of careful choreography that even involves France’s most celebrated chef preparing meat for Trump and vegetarian fare for special guest Narendra Modi.Problem was he didn’t seem to have let key players in on his decision. Within two hours, his call to arms was met with a furious response from Brazilian President Jair Bolsonaro, who accused Macron of colonial posturing. Affairs relating to Brazil should not be discussed without Brazil at the table, Bolsonaro said.Read more: The Amazon Rainforest Is on Fire, and It’s Getting WorseMacron’s critics on social media pointed out that he’d used an outdated picture of an older blaze.Officials in the G-7 clan were waking up to the news along with the rest of the world. Concern about the environment is something shared by many Europeans, and the sense from officials was that they were willing to accept having the burning of the rainforest thrust onto the agenda at the last moment.A slow drip of benign responses began to come in. A spokesman for the U.K.’s Boris Johnson said the British leader would echo his call for action on the Amazon. Merkel’s spokesman backed Macron’s decision to involve the international community, siding with him against Bolsonaro.Trump, meanwhile, exchanged attacks with Beijing over trade. Markets tumbled as the president said he’d “ordered” the U.S. to disengage from China. But rather than seeking to capitalize, the French leader upped the ante.Another ShockerMaybe he took offense at the colonialist jibe, maybe it was headlines from Brazilian officials bringing up forest fires in Portugal and Siberia. Whatever it was, Macron had another shocker up his sleeve.In a terse statement from the Elysee palace, he branded Bolsonaro a liar and vowed to block the EU’s trade deal with South America’s biggest economies unless Brazil takes its environmental obligations seriously.Tearing up a summit agenda is one thing. But this was a whole other order of magnitude.The EU’s trade accord with Mercosur has been 20 years in the making, will ease tariffs on some $90 billion of annual commerce, and was Europe’s biggest riposte to Trump’s assault on the multilateral trading order. Spanish Prime Minister Pedro Sanchez, invited to the summit as Macron’s special guest, is set to be one of the biggest winners from the deal and invested time and political capital to get it over the line just eight weeks ago. Sanchez had no warning the announcement was coming, according to an official.In the OpenThe public slapdown in the end came from Merkel.Her spokesman told Bloomberg that the chancellor doesn’t believe shooting down the trade deal will achieve Macron’s aim of slowing deforestation in Brazil and actually contains binding commitments on climate protection. She doesn’t think threatening to block the accord is an appropriate response to what is happening in Brazil, he added.After Macron’s political maneuvering over talks with Washington, Merkel had already concluded that she couldn’t rely on France when it comes to trade. Now their split is out in the open.EU President Donald Tusk on Saturday backed Merkel’s stance, while seeking to calm the tensions."We, of course, stand by the EU-Mercosur agreement which is also about protecting the climate and environment," he said at a press conference ahead of the talks. All the same, "it is hard to imagine a harmonious process of ratification by the European countries as long as the Brazilian government allows the destruction of the green lungs of our planet, Earth."Merkel is due to land in Biarritz around 3:30 p.m. and will head straight into a bilateral meeting with her French counterpart.Johnson is seeking to divide them over Brexit. Trump is cranking up the pressure on a host of issues from trade to Iran and economic policy. Both are looking for encouragement that there are cracks in the EU’s essential alliance.Macron just handed it to them on a plate.(Updates with comment from Donald Tusk in fourth to last paragraph.)To contact the reporters on this story: Arne Delfs in Biarritz, France at email@example.com;Helene Fouquet in Biarritz, France at firstname.lastname@example.orgTo contact the editors responsible for this story: Ben Sills at email@example.com, ;Flavia Krause-Jackson at firstname.lastname@example.org, Robert JamesonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Central bankers from around the world are gathering in Jackson Hole, Wyoming, for the Kansas City Federal Reserve’s annual retreat.This year’s meeting occurs against a backdrop of volatile financial markets, rising fears of recession and global trade tensions. On Friday, the trade war between the world’s biggest economies escalated further as China announced that it would levy retaliatory tariffs on another $75 billion of U.S. goods. President Donald Trump quickly tweeted that he’ll respond later in the day.Markets gyrated as the U.S.-China news unfolded and as comments emerged from Jackson Hole, headlined by Federal Reserve Chairman Jerome Powell who said the U.S. economy was in a favorable place but faced “significant risks.”Here’s a running summary of news and commentary from the gathering.Fed’s Clarida: 4:25 p.m.Federal Reserve Vice Chairman Richard Clarida says the U.S. economy is in a good place, but the global outlook has worsened and policy makers will take that into account when they meet next month.“We adjusted policy at our July meeting. We take our policy decisions one meeting at a time,” he tells CNBC in an interview at Jackson Hole. “But as we’ve indicated, we will do what we need to, to put in place the appropriate policies and we’ll act as appropriate to keep the economy in a good place.”“We run monetary policy for the U.S., but we have to take into account global developments,” he said. “They impact exports, they impact inflation, and we are going to factor that in.”BOE’s Carney: 3 p.m.A collapse of Brexit talks resulting in the U.K. leaving the European Union without a transition agreement would likely prompt the Bank of England to loosen monetary policy, Governor Mark Carney said in a speech at the symposium.Carney, who is a few months away from stepping down as BOE governor, also laid out a proposal for an overhaul of the global financial system that would eventually replace the dollar as a reserve currency with some form of global digital currency -- similar to Facebook Inc.’s proposed Libra.Read more about Carney’s remarks here.Choose a Rule: 12:55 p.m.Former Federal Reserve Economist and European Central Bank policy maker Athanasios Orphanides renewed the argument for central bankers to set interest rates by following a formulaic policy rule.“Monetary policy is most effective when it is formulated in a systematic manner, following a clearly communicated monetary policy rule,” Orphanides wrote in the third paper presented Friday at Jackson Hole.A long-time proponent of policy formulas, Orphanides argued that choosing a simple rule as a benchmark would help the Fed communicate its reasons for interest-rate movements and shield it from the perception that it was influenced by political pressure. That’s a timely point as the Fed has been under relentless pressure from Trump to slash rates.Orphanides, who is now an economics professor at MIT, recommended a so-called first-difference rule, which would adjust the benchmark interest rate according to changes in near-term projections for inflation and growth. He and New York Fed President John Williams co-authored a paper on the concept in 2002.World’s Central Bank: 11:55 a.m.Powell and his colleagues don’t want the Fed to be viewed as the world’s central bank, but their monetary policy has huge ripple effects on economies in Europe and Asia, according to the second paper presented Friday at Jackson Hole.University of Maryland economist Sebnem Kalemli-Ozcan, in a review of policy implications, found that Fed interest rate changes have “large spillover effects” on emerging markets, affecting capital flows, domestic borrowing and exchange rates.Developing countries can mitigate the impact of U.S. rate change in part by having a flexible exchange rate and by strengthening institutions to reduce corruption and ensure the rule of law, the economist wrote in the paper “U.S. Monetary Policy and International Risk Spillovers.”Riders on the Storm: 10:30 a.m.Central bankers are like “riders on the storm,” their policies buffeted by global forces beyond their control. That was the argument made in a paper by that name which was the first presented Friday at Jackson Hole.In it, economists Oscar Jorda of the San Francisco Fed and Alan Taylor of the University of California, Davis argue that central banks that ignore global interest rate trends risk generating imbalances and credit dislocations in their own economies.The research has some relevance for Fed officials today, as they struggle over what policy changes, if any, to make in response to weakening economies and falling interest rates overseas, and a rising dollar.Much of the paper deals with the so-called neutral interest rate that neither spurs nor restricts a nation’s economy.Powell Speaks: 10 a.m.Fed Chairman Jerome Powell says the U.S. economy is in a favorable place but faces “significant risks” as growth abroad slows amid trade uncertainty, keeping another rate cut on the table when officials meet next month.“We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective,” Powell said in the text of his remarks to the conference.“We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government,” he said.Fed’s Harker: 9:45 a.m.Philadelphia Fed President Patrick Harker weighed in with the hawks in a Jackson Hole interview, saying lower rates wouldn’t boost the economy when the concern is a trade war.“Right now, we are where we need to be,” Harker told Bloomberg Television. “There are clearly downside risks to the economy. We would have to act as appropriate if those look like they are coming to fruition.”“If business investment is not being held back by the cost of capital, us reducing interest rates will have no effect,” he said. “What is holding you back is uncertainty around policy, particularly trade policy.”Fed’s Mester: 9 a.m.Federal Reserve Bank of Cleveland President Loretta Mester says she will probably favor keeping rates on hold when policy makers gather in September, but she has an “open mind” about the argument for further cuts.“At this point, if the economy continues where it is, I would probably say we should keep things where they are, but I am very attuned to the downside risks of the economy,” Mester said in interview Friday with CNBC television.Mester isn’t a voter on the Federal Open Market Committee this year. Several of the Fed’s policy makers have voiced their resistance this week to the notion that the U.S. economy needs lower interest rates.The Cleveland official told Bloomberg’s Michael McKee Friday that China’s latest plan to impose additional tariffs against the U.S. just adds to the uncertainty surrounding businesses’ plans.“If we were ever data-dependent before, we have to be uber-data dependent now,” she said.As Mester spoke from Jackson Hole, U.S. President Donald Trump resumed his tweets pressuring the Fed. He’s repeatedly called for the central bank to slash rates more aggressively.Fed’s Kaplan: 8:40 a.m.Dallas Fed President Robert Kaplan, who is not an FOMC voter this year, also sounded hesitant about cutting at the next Fed meeting, set for Sept. 17-18.“Even though I am open to an adjustment either in September or the next few meetings, I prefer not to have to make an adjustment,” he said in an interview with Bloomberg Television Friday, because it encourages risk taking.“The fulcrum or center of gravity of U.S. economic today policy is not monetary policy. It is trade uncertainty, it is probably immigration policy to some extent, it is policies that relate to improved skills training, infrastructure spending,” he said. “That is the center of gravity.”Fed’s Bullard: 8 a.m.Federal Reserve Bank of St. Louis President James Bullard said Friday that the central bank needs to take out additional “insurance” in lowering interest rates, and hinted he might be willing to support a cut larger than a quarter point.“I think there will be a robust debate about 50, so I think it’s creeping on to the table here, but obviously the markets have a base case of 25 basis points,” Bullard said in a Bloomberg TV interview with Michael McKee from Jackson Hole.Bullard said the Fed needs to be cushioning against the impact of a global manufacturing slowdown and U.S. trade war with China. He compared the situation to the mid-1990s, when a Fed led by Alan Greenspan reduced rates 75 basis points to keep the expansion going.“That’s what they did in the 1990s, I don’t know where we will end up,” Bullard said.Insurance Cut: 7:30 a.m.“How much risk are we facing from the fact that we’ve got a global manufacturing contraction going on?,” Bullard asked in an earlier interview Friday with CNBC television. “There is some downside risk, and I would like to take out more insurance against the downside risks.”One of the most dovish members of the Federal Open Market committee, Bullard said low inflation and the unusual dynamic in the U.S. Treasuries market also provide policy makers justifications to cut.“The yield curve has inverted,” he said, referring to the fact that yields on longer-dated debt have fallen below yields on short-term securities. He also noted that the federal funds rate is high relative to Treasury yields. “We have one of the higher rates on the yield curve. That is not a good place to be.”\--With assistance from Vince Golle, Michael McKee, Christopher Condon, Steve Matthews and Brian Swint.To contact the reporters on this story: Rich Miller in Jackson Hole at email@example.com;Craig Torres in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Margaret Collins at email@example.com, Alister BullFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Federal Reserve Chairman Jerome Powell said the U.S. economy is in a favorable place but faces “significant risks,” reinforcing bets for another interest-rate cut next month though the remarks failed to mollify President Donald Trump.“Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said Friday in a speech to the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, minutes after China announced it would impose additional tariffs on $75 billion of American goods.“We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective,” the chairman said.Treasury yields fell after Powell’s remarks and traders of fed funds futures extended slightly the amount of easing they expect from the U.S. central bank this year. That trend increased after Trump said he would respond to the latest Chinese tariff news, with U.S. stock prices dropping over 1%. Fed officials next meet Sept. 17-18.Powell “is trying to set the record straight,” said Priya Misra, head of global rates strategy at TD Securities USA. “They are aware of higher risks since July 31, and they are saying they can ease while not ringing any alarm bells.”Trump TweetsTrump, who has been repeatedly calling on the Fed to cut rates to support the economy during his trade war, immediately criticized Powell after the speech, tweeting “as usual the Fed did NOTHING.”It would be unusual for Fed officials to cut rates at Jackson Hole -- outside of a normally scheduled policy meeting -- unless there were signs of a sharp downturn or a financial panic. Trump added that the U.S. has a strong dollar and a “very weak Fed,” and said he would “work ‘brilliantly’ with both.”Citing slowing global growth and muted inflation, the Fed cut interest rates last month for the first time in more than a decade, reducing its target range by a quarter-percentage point to 2%-2.25%. Powell described the rate reduction at the time as “a mid-cycle adjustment to policy,” telling reporters on July 31 that it wasn’t the beginning of a long series of cuts.But in his remarks Friday, Powell didn’t use that characterization and noted that events since that meeting “have been eventful.”Global Risks“We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government,” Powell said, also mentioning one of the running salvos in Trump’s trade war with China.The chairman also stressed that the Fed had a limited ability to cushion the headwinds from uncertainty stemming from the escalating trade war.“In principle, anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy,” Powell said. “There are, however, no recent precedents to guide any policy response to the current situation.”“He certainly didn’t lean against the September ease, which the markets have priced in,” said William English, a professor at Yale University and former senior Fed economist. “If he thought they were priced in the wrong place I think he would have put in a bit more protest, and this didn’t feel to me like he was protesting.”Investors have fully priced in another quarter point reduction at next month’s meeting and Powell’s remarks suggest the committee remains on alert for risks in the economy.“We are carefully watching developments as we assess their implications for the U.S. outlook and the path of monetary policy,” Powell said.Powell’s remarks examined U.S. monetary policy since World War II. He broke the analysis into three long-run questions: Can the central bank restrain inflation? Can the central bank buffer inevitable financial excess? Can the central bank still provide stimulus and counter-cyclical policy in a time of very low interest rates?He answered the first two positively, saying that the Fed has the tools to quell inflation, while the post-crisis financial system is more resilient and monitoring has improved. Answers on the third question are a work in progress, he said.“Our economy is now in a favorable place, and I will describe how we are working to sustain these conditions in the face of significant risks we have been monitoring,” he said.Hawks vs DovesThe chairman may face opposition from some of his colleagues at next month’s meeting. The July rate cut drew two dissents in favor of holding policy steady, from Kansas City Fed chief Esther George and Boston’s Eric Rosengren, and both reiterated this week that they want to see more evidence of a U.S. slowdown before moving rates again.Philadelphia Fed President Patrick Harker and Cleveland’s Loretta Mester made similar arguments on Friday. “Right now, we are where we need to be,” Harker said in a Bloomberg Television interview. “There are clearly downside risks to the economy. We would have to act as appropriate if those look like they are coming to fruition.” Neither of them are voters this year on the rate-setting Federal Open Market Committee.(Updates with Fed presidents pushing back on need for cuts in final two paragraphs.)\--With assistance from Christopher Condon.To contact the reporters on this story: Craig Torres in Washington at firstname.lastname@example.org;Rich Miller in Washington at email@example.comTo contact the editors responsible for this story: Margaret Collins at firstname.lastname@example.org, Sarah McGregorFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- It’s kinda, sorta funny, I suppose, that Patrick Byrne resigned Thursday as chief executive of Overstock.com Inc. a week after issuing a bizarre press release bragging about his romantic entanglement with a Russian spy while also being involved with the “deep state” and the “Men in Black.” Just as it’s kinda, sorta funny that President Donald Trump canceled a state visit to Denmark because its prime minister told him she wouldn’t discuss his “absurd” idea of selling Greenland to the U.S.Except that Byrne (like Trump) has been prone to saying and doing unhinged things since at least the mid-2000s. What’s more, as Bloomberg Opinion’s Barry Ritholtz pointed out Thursday on Twitter, “He was a terrible CEO of a not very good company.”I began paying attention to Byrne in 2005, six years after he took over an online retailer and renamed it Overstock. That year, he held the looniest conference call I’ve ever heard. He claimed that there was a vast conspiracy to drive down Overstock’s shares orchestrated by someone he called the “Sith Lord.” He wouldn’t name the Sith Lord, but described him as “one of the master criminals of the 1980s.” He titled the conspiracy “the Miscreants Ball.”(1)At the same time — and this is what caught my attention — Overstock filed a lawsuit against Gradient Analytics, a research firm, and Rocker Partners, a hedge fund run by David Rocker and Marc Cohodes — yes, the very same Marc Cohodes who was the subject of my columns this week about MiMedx Group Inc. — that specialized in short-selling. Byrne claimed in the lawsuit (as I wrote at the time) “that they were acting in concert to hurt the company and manipulate its stock price.”It wasn’t long before Byrne was including certain financial journalists in the conspiracy. When a television interviewer asked him if he was accusing Herb Greenberg,(2) the great former MarketWatch reporter, of “helping others front-run” the company’s stock, he replied, “That’s correct.” His “thesis” was that Greenberg was taking orders from Rocker.That wasn’t the worst of it. Byrne became convinced that an illegal practice called “naked short-selling”(3) was Wall Street’s dirty little secret, and he devoted himself to rooting it out and exposing it. (Barron’s once described naked short-selling, rather aptly, as “the grassy knoll of the equity markets, denounced by crackpots, devotees of penny stocks, and troubled companies eager to divert attention from their failings.”)Overstock’s director of communications, Judd Bagley, would “friend” Byrne’s critics on Facebook, then publish the names of their friends on a website, especially those friends who could serve as “evidence” of a conspiracy. (I’m one of the journalists this happened to.) Byrne started a conspiracy-minded website called Deep Capture, the purpose of which was to smear his critics, myself included.If the purpose of all this was to silence us, it worked. I wrote three columns about Byrne, and then moved on. So did most of the other journalists who had once covered him and Overstock. Rocker, the rare short-seller willing to talk to reporters on the record, stopped giving interviews. The journalist (and my friend and former co-author) Bethany McLean once told an interviewer that in effect, Byrne had won, because his tactics had caused his critics to stop writing about him.Since his Deep Capture days, Byrne has found a different means to distract people from Overstock’s lousy performance: In 2015, he announced the formation of a company that would issue a cryptocurrency called tZero. For a while, at least, it worked. Between July 2017 and January 2018, the Overstock share price went from around $20 to almost $87. But it couldn’t last. With the company’s free cash flow negative $168 million in 2018, and its net income negative $169 million,(4) the stock sank back down to earth, bottoming out at $9.40 a share in June.Yet when he finally stepped down, it wasn’t because the company was losing money, or because the tZero effort was faltering, or because, as usual, Byrne was too busy with his side ventures to focus on the company he was supposed to be running. It was because he wrote a bonkers press release.On Thursday evening, Byrne was interviewed by CNN’s Chris Cuomo. Byrne claimed that FBI agents — including James Comey! — had instructed him to “rekindle” his relationship with the Russian spy, Maria Butina. Later that evening, as Cuomo discussed the interview with another CNN host, Don Lemon, he defended Byrne. “He’s not some lunatic or something like that,” he said.Clearly, Cuomo should have had a seat on the Overstock board.(1) Byrne later told me that his Sith Lord conference call was “one of the 10 proudest moments of my life.”(2) Alas, Greenberg has since left financial journalism and now runs his own investment research firm, Pacific Square Research.(3) Don’t ask.(4) According to Bloomberg data.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Stacey Shick at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Google said yesterday that it would be shutting down 210 YouTube channels pumping out misinformation about the Hong Kong protests.
(Bloomberg Opinion) -- Federal Reserve Chair Jerome Powell doesn’t like how President Donald Trump’s trade war is impacting the U.S. economy. To make matters worse, the central bank has no playbook for how to deal with the current situation, he said in prepared remarks at the Kansas City Fed’s Economic Policy Symposium in Jackson Hole, Wyoming.He had no idea the starkest example would come about an hour after he delivered his speech when Trump announced he would have an afternoon response to China’s threat to impose additional tariffs on $75 billion of American goods. The stock market, which had been up after Powell spoke, immediately reversed course and was down 1.7% just before noon. So he and other Fed officials have to draw up their own plan of attack. His suggestion? More interest-rate cuts.Noticeably missing from his remarks was the phrase “mid-cycle adjustment,” which he and other officials used last month to describe their potentially one-off rate reduction. Instead, he chose to emphasize that the Fed would “act as appropriate to sustain the expansion.” Bond traders read between the lines to take that as openness to as many cuts as the data justifies. Two-year Treasury yields fell about 9 basis points, reversing Thursday’s move after a flurry of regional Fed presidents sounded hawkish and gave Powell cover to push back on market expectations.What can’t go ignored is that Powell’s speech came amid heavy fire from Trump, who has criticized the central bank for not lowering interest rates faster and sooner. The president, of course, has long been fixated on the Fed, clearly viewing it as an easy scapegoat for any economic weakness. But his derision was especially apparent this week:On Monday, he tweeted about “the horrendous lack of vision by Jay Powell and the Fed” and said officials should cut rates by 100 basis points. On Wednesday, he lamented that “the only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt.” He again called for a “BIG CUT,” and then asked “WHERE IS THE FEDERAL RESERVE?” On Thursday, after seeing Germany issue negative-yielding 30-year bonds, he complained that “our Federal Reserve does not allow us to do what we must do. They put us at a disadvantage against our competition.” On Friday, just about an hour before Powell was scheduled to speak, Trump flipped to encouragement: “Now the Fed can show their stuff!” he tweeted.The symposium’s theme in 2019 is “Challenges for Monetary Policy,” though the organizers probably didn’t think the U.S. president’s Twitter feed would be such a glaring obstacle. Trump wasted little time analyzing Powell’s remarks:Then he couldn’t resist a potshot, comparing the Fed chief with President Xi Jinping of China.Powell did somewhat push back against Trump, in a telling passage about how much he and other policy makers are struggling to get their hands around his trade policy. Remember the context here — the Fed cut interest rates for the first time in more than a decade on July 31, and a day later, Trump announced additional tariffs on Chinese goods and sent markets into a tizzy. He wasted even less time on Friday, declaring on Twitter “I will be responding to China’s Tariffs this afternoon.” Here’s the central bank’s thinking about trade in its entirety:“We have much experience in addressing typical macroeconomic developments under this framework. But fitting trade policy uncertainty into this framework is a new challenge. Setting trade policy is the business of Congress and the Administration, not that of the Fed. Our assignment is to use monetary policy to foster our statutory goals. In principle, anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy. There are, however, no recent precedents to guide any policy response to the current situation. Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade. We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.”All told, though, it comes off as rather meek, and an implicit acknowledgment that the central bank will err on the side of easing as long as trade tensions remain heated. “It will at times be appropriate for us to tilt policy one way or the other because of prominent risks,” Powell said. Further interest-rate cuts are not a consensus view. Regional Fed presidents including Boston’s Eric Rosengren, Kansas City’s Esther George, Philadelphia’s Patrick Harker, Dallas’s Robert Kaplan and Cleveland’s Loretta Mester all expressed stronger reluctance to further easy monetary policy, given their respective views of the U.S. economy.Powell is going to have to bridge the divide between that contingent and those who side more with St. Louis Fed President James Bullard. He said on Friday that he expects a “robust debate” on a half-point rate cut among the Federal Open Market Committee voters, adding that “our job is to get the yield curve uninverted.”At least for today, it’s mission accomplished. The yield curve from two to 10 years, which closed with a negative spread on Thursday for the first time since 2007, is back to positive as short-term yields fell the most on renewed expectations for persistent Fed easing. Ahead of Powell’s remarks, Kaplan commented that he was open to cutting interest rates, but he’d prefer not to. I’d wager that’s Powell’s line of thinking as well. But clearly, he feels the Trump administration’s policies have boxed him in. The path forward, as long as the U.S.-China trade war wages on, appears to be ever-lower interest rates. To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China threatened to impose additional tariffs on $75 billion of American goods including soybeans, automobiles and oil, in retaliation for President Donald Trump’s latest planned levies on Chinese imports that pushed U.S. stocks and farm commodities lower.Some of the countermeasures will take effect starting Sept. 1, while the rest will come into effect from Dec. 15, according to the announcement Friday from the Finance Ministry. This mirrors the timetable the U.S. has laid out for 10% tariffs on nearly $300 billion of Chinese shipments.An extra 5% tariff will be put on American soybeans and crude-oil imports starting next month. The resumption of a suspended extra 25% duty on U.S. cars will resume Dec. 15, with another 10% on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on U.S. made cars would be as high as 50%.China’s tariff threats take aim at the heart of Trump’s political support -- factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down. Soybean prices sank to a two-week low.The move drew a sharp reaction from Trump that sent stocks tumbling further on concern the talks are falling apart. “We don’t need China and, frankly, would be far better off without them,” he tweeted. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”Among automakers, Tesla Inc. and Germany’s Daimler AG and BMW AG are the most vulnerable to the additional levies. Shares of the two German companies fell more than 2% in Frankfurt, while Tesla dropped 2.2% in New York.BMW and Daimler ship large numbers of sport utility vehicles from plants in South Carolina and Alabama to China, while Tesla doesn’t yet make its electric cars in the country. Six of the top 10 vehicles exported from the U.S. to the world’s biggest car market are from the two German brands, according to forecaster LMC Automotive.U.S. stocks dropped along with Treasury yields and oil prices. Emerging-market currencies also declined, while havens such as the yen and gold gained.The tariffs beginning in September include 10% on pork, beef, and chicken, and various other agricultural goods, while soybeans will have the extra 5% tariff on top of the existing 25%. Starting in December, wheat, sorghum, and cotton will also get a 10% tariff.While China will impose a new 5% levy on oil, there was no new tariff on liquefied natural gas.In Washington, the initial reaction from the White House was aimed at easing concerns about the fallout. “The amount of money being tariffed is not material in terms of macro growth,” Trump adviser Peter Navarro said on Fox Business Network. The retaliation will “absolutely not” slow growth, he said.China’s announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole, Wyoming, to discuss issues such as the global slowdown. The Chinese announcement was foreshadowed by a tweet from Hu Xijin, the editor-in-chief of the Global Times, a newspaper controlled by the ruling Communist Party.China promised earlier this week that any new tariffs from the U.S. would lead to escalation and retaliation. The U.S. has said it will put 10% tariffs on some $110 billion of Chinese goods starting Sept. 1 and the same levy on another $160 billion on Dec. 15, a staggered approach aimed at ease the impact on the American economy.After Trump gave the go-ahead earlier this month for tariffs on the nearly $300 billion in Chinese imports that haven’t been hit by higher duties, China halted purchases of agricultural goods and allowed the yuan to weaken.Since then, negotiators have spoken by phone and are planning another call in coming days. People familiar with their intentions previously said that the Chinese delegation is sticking to their plan to travel to the U.S. in September for face-to-face meetings, which may offer a chance for further reprieve.The U.S. side is still hoping for that visit to happen, with Trump’s economic adviser Larry Kudlow telling Fox Business Network that “hopefully we are still planning on having the Chinese team come here to Washington D.C. to continue the negotiations.”“I don’t want to predict, but we will see,” Kudlow said on Thursday in Washington.(Updates with Trump’s tweet in fifth paragraph. An earlier version corrected source of statement in second paragraph.)\--With assistance from Anthony Palazzo.To contact the reporters on this story: Natalie Lung in Hong Kong at email@example.com;James Mayger in Beijing at firstname.lastname@example.org;Miao Han in Beijing at email@example.comTo contact the editors responsible for this story: Jeffrey Black at firstname.lastname@example.org, Brendan MurrayFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Outraged over the Amazon fires, Emmanuel Macron branded Brazil’s president a liar and threatened to block the European Union’s trade deal with the Mercosur countries as he prepares to whip the Group of Seven leaders into climate action.The French president’s office said that it has become clear that Jair Bolsonaro wasn’t serious about his commitments on tackling climate change when he spoke to world leaders at the Group of 20 summit in Osaka earlier this year."The president can only conclude that President Bolsonaro lied to him in Osaka," at the G-20, the statement said. "Under these conditions, France is opposed to the Mercosur deal."A day before he’s due to welcome G-7 leaders to Biarritz, Macron said he would make the burning of the Amazon jungle a priority at the summit. That provoked an angry response from Bolsonaro, who accused him of acting like a colonialist."The news is really worrisome, but we need to lower the temperature, there are fires in Brazil every year," Brazilian Agriculture Minister Tereza Cristina Dias told reporters in Brasilia. "There were fires in Portugal, in Siberia, there were fires all over the world and Brazil wasn’t questioning them."Trade, ClimateThe way that an environmental dispute escalated so quickly into a new front in the global trade tensions shows the growing importance of climate as a fundamental plank of geopolitics. Even before Macron’s announcement, Ireland said it could not vote for the Mercosur agreement and Finland wants the EU to consider a ban on Brazilian beef.The EU has sought to leverage the size of its market to pressure trading partners into doing more to reduce emissions and is also concerned that its companies will be undercut by rivals operating in places with looser restrictions.But the configuration of the G-7 right now will make it difficult for Macron to make a lot headway beyond some token words. Donald Trump famously ripped up last year’s communique and does not want to be cornered. U.K.’s Boris Johnson is eager to tighten his bond with the U.S. president and at odds with European allies over Brexit. Italy is mired in a messy political crisis at home and has no prime minister. Japan is unlikely to stick its neck out -- it is more concerned about the potential fallout from the U.S. trade war with China.In fact, the run-up to the G-7 was overshadowed by China whacking the U.S. with higher tariffs on soybeans, cars and oil in retaliation for Trump’s latest planned levies.And Trump himself has signaled where his priorities lie. On waking up he began tweeting against the Federal Reserve Chairman Jerome Powell and China’s Xi Jinping -- not on the Amazon fires. A U.S. official said that the U.S. are deeply concerned about the impact of the fires while indicating the administration did not see it as part of the broader climate issue.The EU wrapped up 20 years of negotiations to seal an accord with South America’s leading customs union just weeks ago, in what was then seen as a major retort toTrump’s attacks on the global system of free trade. The deal could affect almost 90 billion euros ($100 billion) of goods and Brazil expects to see its economy increased by about $90 billion over the next 15 years.Officials on both sides are still fine-tuning the agreement and it still needs to be approved by EU governments before it can enter into force. A Brazilian official, with direct knowledge of the government’s position, said that the EU-Mercosur deal is not ready to be signed yet, and that while the deal could be rejected or put to one side, it could not be changed.The official added that France stood to lose a lot if the agreement didn’t go through, citing the presence of supermarket chain Casino Guichard-Perrachon SA and carmakers such as Renault SA and Peugeot SA.Another senior government official however said that France’s position is a cause of concern and that the Bolsonaro administration needed to change the narrative. There are signs that the president is already poised to do that.Speaking on Friday morning in Brasilia, Bolsonaro said the government is considering declaring a state of emergency in the region, allowing the president to deploy armed forces and extra funding to the region: “We discussed a lot of things and whatever is within our reach we will do. The problem is resources.”(Adds Johnson’s tweet.)\--With assistance from Arne Delfs, Alex Morales, Kati Pohjanpalo, Peter Flanagan, Rachel Gamarski, Mario Sergio Lima and Josh Wingrove.To contact the reporters on this story: Helene Fouquet in Bairritz, France at email@example.com;Simone Iglesias in Brasília at firstname.lastname@example.orgTo contact the editors responsible for this story: Flavia Krause-Jackson at email@example.com, Ben SillsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Blank-check company Legacy Acquisition Corp. has agreed to purchase a global digital marketing company to be renamed Blue Impact Inc., clearing the way to grow organically and through M&A. Legacy, which raised $300 million almost two years ago, is led by former Procter & Gamble executive Edwin Rigaud but the new company will be […]
(Bloomberg) -- President Donald Trump wants America’s closest allies to ratchet up the pressure on Iran. But this weekend in France he’ll find they’re still reluctant to join him.Divisions over Iran will be on full display when Trump meets his European peers at a Group of Seven meeting starting Saturday in the coastal city of Biarritz. While the agenda will focus on the global economy, the most pressing security challenge will be navigating the wreckage of Trump’s decision last year to abandon the 2015 deal constraining Tehran’s nuclear program.Even with Iran downing an American drone and being accused of a spate of tanker attacks in the Persian Gulf, European nations want to preserve the Joint Comprehensive Plan of Action they say kept a rein on Iran’s nuclear program. But they’ve failed to find a way to help Tehran get the economic benefits promised under the deal. Iran is desperate to get its oil back on world markets, but that’s a non-starter for the U.S.No compromise has emerged.The Iran debate -- and the distrust it has fueled -- reflects the strains between the U.S. and Europe in the Trump era: displeasure over his maximalist approach, umbrage over his scorn for allies and, beneath it all, wariness about his intentions. In the case of Iran, allies can’t shake the suspicion that Trump, or his more hawkish advisers, want to provoke a war, no matter his insistence otherwise.Read More: Multilateralism Is Dead. Long Live the G-7“I’ve heard several folks in Europe say, ‘Look, all of us were serving as diplomats during the Iraq War, so we’ve seen the beginnings of this movie before and we’re not going to get dragged into it again,”’ said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations. “The Europeans will not want to side with the administration on issues that could lead to military conflict.”The president hasn’t laid the groundwork for a productive summit. He’s arriving in France on the warpath over trade, allied contributions to NATO and a self-inflicted feud with Denmark over what appeared at first to be a joke: a suggestion the U.S. buy Greenland.Trump’s best shot at winning some European support will come by working his personal rapport with U.K. Prime Minister Boris Johnson. The two unconventional leaders will meet for breakfast on Sunday, and Johnson may want to straddle European backing for the JCPOA with the need to keep Trump on his side for an eventual trade deal following Brexit.A U.S. official, who asked not to be identified discussing internal deliberations, said the administration is “optimistic” that Johnson could bring the U.K. closer to the U.S. position on isolating Iran.A U.K. official, speaking on condition of anonymity, pushed back on expectations that Johnson could be swayed. The new prime minister doesn’t want to rock the boat for French President Emmanuel Macron, who is the host of the G-7, the official said. The U.K. is sticking to its support for the nuclear deal.Read More: Johnson’s G-7 Goal is to Be Serious and Get Something From EveryoneBut that too has its dangers. One person familiar with the White House thinking on the matter, who also asked not to be identified, said the administration realizes it needs to be careful calibrating its attitude toward Johnson, who may be wary of being seen as too close to Trump ahead of a possible election later this year.“The president wants to give Boris Johnson a big boost -- he sees Johnson as Britain’s Trump, a like-minded model,” said Heather Conley, director of the Europe Program at the Center for Strategic and International Studies in Washington. “The challenge is Boris Johnson is winding up for an election and he’s got to walk a very fine line on what the domestic instinct is toward Trump.”U.S. officials are playing down the disagreements between Washington and European capitals, arguing that all sides agree on the threat posed by Iran’s sponsorship of terrorist groups, its development of ballistic missiles and its attacks on tanker traffic around the Strait of Hormuz.‘Tactical Disagreements’“We have had tactical disagreements but there isn’t any disagreement on end states,” Brian Hook, the State Department’s Iran envoy, told Bloomberg TV on Aug. 21. “We share the same threat assessment. The Islamic Republic of Iran is the principle driver of instability in today’s Middle East.”Anxiety is growing in Europe about a growing list of Iranian violations of the 2015 nuclear accord, which the Islamic Republic had obeyed until Trump quit the deal. Angry that the Europeans haven’t been able to deliver economic benefits in defiance of Trump’s sanctions, Iran now has exceeded enriched-uranium limits set by the agreement and is threatening further violations if Europe doesn’t find a way around the American restrictions.Zarif’s DiplomacyIranian Foreign Minister Javad Zarif -- who was recently sanctioned by the U.S. -- will be in France ahead of the summit on Friday to urge the Europeans to stick to the nuclear deal.According to press reports and a person familiar with Emmanuel Macron’s thinking, the French president is also circulating a proposal under which the U.S. would ease some restrictions on Iranian oil exports in exchange for the start of a diplomatic dialogue.U.S. officials say Iran would need to make far bigger concessions for them to entertain such an offer. The idea flies in the face of the administration’s approach, which is to keep ramping up its “maximum pressure” campaign, under the belief that sanctions will so ruin Iran’s economy that its leaders will have no choice but to negotiate.Two recent cases show just how different the U.S. and European approaches to Iran have become, and how wary U.S. allies are in being associated with the Trump administration’s stance.Gibraltar CourtThe U.K. rebuffed a demand from the White House to keep holding an Iranian oil tanker laden with $130 million in crude allegedly bound for Syria in Gibraltar. A court in the territory deemed it could no longer keep the ship after Iran offered assurances it wouldn’t go to Syria.Senior U.S. officials had conveyed “grave disappointment” over the decision to let the tanker go, even raising the possibility that an eventual U.S.-U.K. trade deal might be in jeopardy. The Justice Department filed a complaint aimed at blocking the ruling. But the Grace 1 -- renamed the Adrian Darya 1 -- left as planned.Even more embarrassing to the U.S. has been Europe’s shunning of the plan the Americans call Project Sentinel -- a bid to protect ships passing through the Strait of Hormuz. In July, the U.K. signed up but was careful to portray its participation as a European-led initiative that was getting help from -- and not being led by -- the U.S. France and Germany flatly refused to join, leaving the U.S. with two partners: Australia and the U.A.E.“It’s absolutely necessary to keep the Gulf open, but the fact that they won’t do it tells you something about how toxic President Trump is in European politics,” said Nicholas Burns, a former senior State Department official and professor at the Harvard Kennedy School. “The Europeans don’t trust that Trump will keep his word that he won’t attack Iran.”\--With assistance from Kevin Cirilli and Helene Fouquet.To contact the reporter on this story: Nick Wadhams in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Bill Faries at email@example.com, Larry LiebertFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- U.K. Prime Minister Boris Johnson is barreling through Europe’s capitals with nothing concrete to say on Brexit beyond an unappealing offer of “new deal or no deal.” With Angela Merkel offering a response so cryptic that Germany was still explaining it a day later, France’s Emmanuel Macron was on hand to clarify: The European Union’s red lines, including upholding the single market and peace in Ireland, won’t shift.The French president was also sending a more subtle message to his fellow EU leaders: I told you so.It was Macron after all who predicted that the Brits would try to delay and renegotiate Brexit rather than jump over the cliff of a no-deal withdrawal back in March – something that duly happened. It was Macron who then guessed correctly that anything longer than a technical extension to that original March Brexit day would be seen by London as a chance for a do-over of the agreed deal. And it was Macron who angered his fellow member states after rejecting talk of pushing back Brexit until 2020 – a softer position supported by Merkel – in favor of an Oct. 31 deadline.The hard-Brexit antics of Johnson since he took power from Theresa May and Nigel Farage’s Brussels-baiting after his recent success in the European Parliament elections have vindicated Macron’s realism. Merkel’s “good cop” will probably have less sway at the next EU summit.Yet it’s hard to see this confirmation of Macron’s perspicacity as anything other than bittersweet. There was nothing from Johnson that promised viable alternatives to the thorny Irish backstop (the guarantee of no hard border between north and south) that would let him go home with a new deal. Failing some 11th-hour miracle, such as a successful U.K. parliamentary revolt blocking no deal and delivering an impasse-breaking general election or second referendum, Britain is on its way out. That leaves some big questions for Macron, Merkel and the rest of the EU about what they should do next.Most attention is usually given to putting out immediate economic fires. How can Brussels ease the estimated hit of losing up to 1.5% of the EU’s annual output post-Brexit, especially as recession looms on the continent? And how can Macron avoid political blowback if French fishing fleets find themselves barred from British waters and blame the Elysee Palace? The answers might involve some sticking plasters to make sure no-deal contingency plans work, more public spending to support business, and even more European Central Bank stimulus.But Brexit isn’t just about trade and money, it’s about geopolitics too. The U.K. is a nuclear power with a permanent seat at the UN Security Council, and Johnson took care to remind Macron that British helicopters were transporting French troops in Mali. Although Macron has been making enthusiastic noises about multilateral problem-solving ahead of this weekend’s G7 summit in Biarritz, a U.K. that’s shifting its focus back across the Atlantic toward Washington adds to the long list of reasons for the EU to feel isolated in a hostile world.U.S. President Donald Trump is openly anti-EU. This week he lobbed Twitter bombs at the German economy, Europe’s reliance on the NATO umbrella and ECB policy. The G7 has been disrupted by Trump in the past, and having his pal Johnson there will up the ante. Meanwhile, China is exploiting European divisions to try to deepen its presence in EU member states such as Italy.Ideally the EU would rise to the challenge of what Sciences Po Professor Zaki Laidi calls its “De Gaulle” moment – the realization that it must defend its interests alone. That requires more support for the federalist ambitions sketched out by Macron, especially from Merkel and her successor.There are glimpses of hope. France and Germany are planning to build a fighter plane together, while the continent appears to be taking a common stand against Trump’s trade threat. Christine Lagarde’s imminent coronation at the ECB gives heart to those who believe the euro zone needs to develop a common fiscal policy, rather than always depending on ineffective quantitative easing. The former Polish deputy prime minister Jacek Rostowski thinks Germany’s economic struggles will give Macron the upper hand in trying to pursue deeper ties.Nevertheless, crises have a habit of creating disunity. The combination of Brexit, the recession threat, trade spats and disputes with Italy could easily push things further apart. Macron will be perfectly aware of that.To contact the author of this story: Lionel Laurent at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Germany getting paid to borrow for three decades will reassure Chancellor Angela Merkel’s government as it looks at contingency plans for a crisis.Merkel’s coalition is mulling reviving the economy by boosting expenditure. If she should tap bonds to help stoke growth, she’d find the cost far better than a decade ago when borrowing hit a postwar record during the international bank crisis.“With investors paying the government to buy bonds the temptation to suspend budget discipline and borrow is very strong,” said Frank Schaeffler, a lawmaker with the opposition Free Democrats. “Negative rates are sweet poison for the economy, for investors, for savers but I expect that won’t stop the government from going ahead and tapping the well of cheap debt.”The country’s debt agency conceded it may have tried to sell too many bonds in a 30-year auction paying investors nothing Wednesday, as market demand faltered. Yet the government is confident it can place a sizeable amount of fresh short-term debt in case a recession warrants it, said a person familiar with planning, who asked not to be named as the discussions were private.So far, the government has said it’s sticking to its zero-deficit principle and hasn’t said how it would finance as much 50 billion euros ($55 billion) extra spending. Germany’s central bank doesn’t see a need for fiscal stimulus at this time, even though it expects the economy to shrink again this quarter, according to two people familiar with the Bundesbank’s stance.Budget spending limits are in focus for European bond investors after a battle between Rome and Brussels roiled Italian bonds in the past year. Germany’s public sector is running a large budget surplus and has a relatively low debt burden, while France’s was just under 100% of gross domestic in the first quarter and Italy’s is over 130%.Across Europe, borrowing for governments and companies has never been so cheap. Bond yields have fallen to record lows, with Germany’s entire curve now in negative territory. The stock of negative-yielding debt globally has climbed to a record of more than $16 trillion as policy makers begin to restart stimulus in a frantic effort to revive slowing growth.Germany’s “debt brake” has helped the federal government keep net new borrowing at zero over the last five years. For now, no net deficit is envisaged before 2023 at the earliest, according to the Finance Ministry’s medium-term plan. A constitutional clamp on runaway spending limits leeway for raising debt -- except in the event of exogenous shocks like natural disasters or a plunging economy.In the midst of the financial crisis in 2009, Merkel’s government raised borrowing to a record, relying on placing a large amount of 12-month and nine-month bills into the market, a step that it could repeat, paying off the debt quickly when the economy recovers.Between 2008 and 2017, the government budgeted about 450 billion euros in all in interest payments on fresh debt. It ultimately paid just 288 billion euros, the Handelsblatt newspaper reported in April last year, citing the Finance Ministry.German 10-year yields are currently near a record low at around -0.65%, compared with a yield of near 3.5% at the end of 2009. Given it would take a recession to spur any emergency debt issuance, that would likely be soaked up by investors looking for safety, leaving this week’s poor auction as little more than a “hiccup” toward even lower yields, according to Rabobank.“The notion that a loosening of German fiscal policy will trigger an upward adjustment of yields threatens a tactical correction at best in our view,” wrote Rabobank strategists led by Richard McGuire in a note to clients. “The economic distress necessary to prompt such a policy adjustment is also likely to be accompanied by yet higher demand for euro-zone safe haven debt.”\--With assistance from Birgit Jennen.To contact the reporters on this story: Brian Parkin in Berlin at firstname.lastname@example.org;John Ainger in London at email@example.comTo contact the editors responsible for this story: Ven Ram at firstname.lastname@example.org, Neil Chatterjee, Raymond ColittFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- In the past, emerging markets looked to the Federal Reserve for cues about monetary policy. Increasingly, they’re turning to the yield curve. Chairman Jerome Powell must regain control of the narrative at Jackson Hole this weekend before his equivocation leads to deeper turmoil in developing economies.On Thursday, Bank Indonesia cut its benchmark policy rate by 25 basis points to 5.5%, the second consecutive maneuver after starting an easing cycle in July. Most economists polled by Bloomberg had expected the central bank would hold. This was no easy decision for Jakarta. Indonesia – a so-called twin deficit nation, with fiscal and current-account shortfalls – is one of the most vulnerable emerging markets. Foreigners hold roughly 40% of the country’s sovereign bonds, so the economy is sensitive to outflows: Investors abroad yanked roughly $430 million from Indonesia’s high-yielding bonds this month alone, even as yields in other parts of the world sank below zero. The rupiah has weakened 1.5% against the dollar in the first three weeks of August.Textbook economics would say that another rate cut would accelerate that slide. And yet Bank Indonesia is braving the storm. Indonesia’s central bankers aren’t simply reckless. Rather, like the rest of the market, they’re looking past the Fed’s July meeting minutes – which indicated its cut was merely to “insure against” slower growth and inflation. A more reliable indicator has become the bets Fed funds futures traders are making. That metric implies almost 65 basis points of reductions this year, after a closely watched part of the yield curve this month inverted for the first time since 2007, an occurrence that has reliably predicted past recessions.Can you blame Jakarta for deviating from the Fed’s official narrative? The central bank “can’t put a back-to-back consistent message together. It is different at every single meeting,” Jeffrey Gundlach, the chief executive of DoubleLine Capital LP, said this week. As recently as late December, the Fed was still in the midst of tightening. By July, Powell was talking about a “mid-cycle adjustment.” Meanwhile, U.S. President Donald Trump has been busy bullying the Fed into faster and deeper rate cuts on Twitter, putting blame for a stronger dollar, the inverted yield curve, and the possibility of a recession at the Fed’s feet. While Americans may still believe in the independence of their central bank, emerging-market central bankers may start to think otherwise. The president surely seems to be getting what he wants. Compared with many emerging markets, the U.S. economy isn’t doing that badly. It’s like a Christmas tree – some lights are flashing red but plenty are flashing green, as former Fed official Nathan Sheets put it recently. At this weekend’s Jackson Hole, Powell needs to pick a color. If emerging-market central banks begin to trust fickle markets over the Fed, we’re in for a volatile holiday season. To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Google said it disabled 210 YouTube channels involved in “coordinate influence operations” around the Hong Kong protests, following similar measures earlier this week by social media companies Facebook Inc. and Twitter Inc.The Alphabet Inc. unit didn’t specify which channels were shut down in Thursday’s blog post announcing the decision. But the post said the company discovered accounts “consistent with recent observations and actions related to China” from Facebook and Twitter.The social media companies said earlier this week that they had removed hundreds of accounts linked to the Chinese government that were pushing messages meant to undermine the legitimacy of the protests in Hong Kong. Twitter also blocked advertising from state-controlled media. Facebook and Google have not made similar moves on advertising.YouTube, like Google search and other social media services, does not operate in China.To contact the reporter on this story: Mark Bergen in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew Pollack, Robin AjelloFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Facebook (FB) and Twitter (TWTR) are yet again the center of attention over claims of propagating disinformation, this time for the Hong Kong protests.
(Bloomberg Opinion) -- This is the second of two columns about MiMedx and the short-sellers. Read the first here.Most of the time, Eiad Asbahi, the 40-year-old founder of Prescience Point Capital Management, is a short-seller.According to its website, the firm, based in Baton Rouge, Louisiana, specializes “in extensive investigations of difficult-to-analyze public companies in order to uncover significant elements of the business that have been overlooked or ignored by others.” Such investigations usually lead to the discovery of problems that will cause the stock to fall once they become known.“But every now and then,” Asbahi says, “we find a company that is incredibly hated and where the shorts have it wrong.” SeaWorld Entertainment Inc., which has been hammered for its treatment of its whales and dolphins, was one such company. Two years ago, Asbahi bought the stock, believing that “the mispricing was extreme.” He was right. Since it bottomed out in November 2017, SeaWorld’s shares have more than tripled.On Jan. 8 of this year, Prescience Point released a report about its latest big investment idea: MiMedx Group Inc., a company that was under siege by Marc Cohodes and a handful of other short-sellers. After six months of research, Asbahi concluded that the thesis developed by the shorts — which had helped push the stock from $18 to $1.15 — was wrong.Contrary to what Cohodes et al were claiming, Prescience Point’s research suggested that MiMedx products were “legitimate and sustainable”; that it had positive cash flow; and that, while “channel stuffing” to improperly boost revenue at the end of the quarter had taken place, the company’s critics had “failed to produce any smoking guns to support their claims of massive fraud.”“In our view MDXG is one of the largest mispricings we have ever identified,” the report concluded. At the time it was issued, MiMedx stock was at $2.16. Prescience Point predicted that it would quadruple.When I spoke to Asbahi a few weeks ago — by which time the stock had topped $5 — he went further in his criticism of Cohodes and the other short-sellers. In his view, MiMedx’s stock had tanked in 2018 as much because of what the shorts had gotten wrong as what they had gotten right.“What we found,” Asbahi said, “is that they had some credible channel stuffing allegations” — and then they made a series of additional, less credible accusations. There was never any bribery or Medicare fraud, Asbahi said. And MiMedx’s products, often maligned by the shorts, were considered “best in class” by many doctors. “It is not a short activist campaign they’re running,” Asbahi concluded. “It is a smear campaign.”Cohodes’s initial allegations were serious enough that the MiMedx board hired a law firm to investigate. That investigation led to the discovery of the channel stuffing and the dismissal of several top MiMedx executives, including chief executive Parker Petit. But as I noted Monday, even after Petit and the others resigned, Cohodes kept MiMedx in his crosshairs, vowing to take down the company “if it’s the last thing I do.” Once Asbahi released his MiMedx report, Cohodes added Prescience Point to his list of targets.Within days of the report’s release, Cohodes was tweeting that it was “false & misleading” and that Prescience Point “will be ruined.” He has kept up a steady drumbeat of criticism ever since. Just a few weeks ago, he called Prescience Point a “pump-and-dump operation,” a charge he’s made several times before.This last allegation is ludicrous. Prescience Point is MiMedx’s largest shareholder, with 7.7% of the stock. In May, it launched a proxy fight that led to the company agreeing to add six new board members. Three of them were Prescience Point’s nominees.When I asked Cohodes what proof he had to back up the pump-and-dump charge, he replied (via email) that it was his understanding that Prescience Point had purchased the stock at between $6 and $10 a share — and was now “obviously attempting to generate positive interest to make back its investment.” He also said that Prescience Point had sold MiMedx stock after publishing “glowing information about the company.”In truth, Prescience Point bought the stock at an average price of about $2.60 a share, a fact that can be easily found in government disclosure documents. Although the firm sold some stock, it did so only to avoid triggering the company’s poison pill. Once the proxy fight ended — and the poison pill was a nonissue — Prescience Point bought more stock. “We set up a single-idea fund to invest in MiMedx with a two-year lockup,” Asbahi told me. “Does that sounds like a pump-and-dump scheme?”Today, MiMedx is a very different company from when Petit was running it. Of Petit’s 16 top executives, 13 are gone. Its new chief executive, Timothy Wright, has been a top level executive at a number of biotech and pharmaceutical companies, including Teva Pharmaceutical Industries Ltd, the big generics manufacturer.Among the new directors is Richard Barry, a respected health-care investor. He is so bullish about MiMedx’s prospects that he bought 3% the stock. All of this information is readily available. Yet Cohodes and his allies refuse to acknowledge that MiMedx has changed. Instead they are making the same allegations they’ve been making all along — except louder and more insistently.Why?Cohodes gave me two reasons. The first, he said, was that the company was still engaged in “criminal activity.” “Doctors have been bribed by MiMedx. And all the perps who carried out the fraud are still there doing it,” he told me.The second reason, he said, was that MiMedx’s products are deeply flawed. “This is a public health deal. This stuff is so bad, and they are taking advantage(1) of veterans. I have to speak out.”Let’s examine the bribery issue first. One doctor the shorts have targeted — including online — is Brandon Hawkins, a podiatrist in Bakersfield, California. He is a major buyer of MiMedx’s primary product, a wound graft made from placental tissue called EpiFix. Indeed, Hawkins told me he is probably the fourth or fifth biggest user of EpiFix in California. He has been paid by MiMedx to give occasional lectures, a common practice in medicine, which he discloses. His brother-in-law is a MiMedx salesman. And he lives quite well, something one can glean from the family’s Facebook page.The MiMedx critics have linked these facts to claim that Hawkins is on the take. But Hawkins says he uses EpiFix for a perfectly sensible reason: It works better than competing wound grafts. “Wounds that would normally heal in 12 to 20 weeks sometimes heal in four weeks with EpiFix,” he said. He added that there is a high incidence of diabetes in Bakersfield, and EpiFix has been an important tool in healing the foot ulcers that often develop in diabetics.Matthew Garoufalis,(2) a Chicago podiatrist, explained that diabetics are often “so immunocompromised” that their ulcers don’t heal. Studies show that some 20% of diabetics who develop foot ulcers will eventually have part or all of a leg amputated below the knee. But the placental-cell formula used in EpiFix “stimulates the wound healing cycle” even with ulcers that are not responding to other healing products, Garoufalis said. He also told me there are lots of good data affirming the efficacy of EpiFix. A 2016 study published in the International Wound Journal concluded that the technology used by EpiFix “is superior to standard care” in healing foot ulcers. After my first MiMedx column was published Monday, several of Cohodes’s short-selling allies took to Twitter, saying they had proof that MiMedx was guilty of bribing doctors. As Bloomberg News reported last year, three employees of a South Carolina Veterans Affairs hospital were indicted for accepting payments and other inducements from the company that resulted in “excessive use of MiMedx products.” One of the three was a doctor. The indictment, however, does not allege any wrongdoing by MiMedx. You see, MiMedx had contracts with the three VA employees — just as it has contracts with doctors all over the country. And MiMedx itself didn’t play a part in the conduct that got the VA employees into hot water. The employees were supposed to get the contracts approved by the hospital. But apparently that didn’t happen. The case wasn’t about bribery; it was about violating government rules. Within five months of the indictments, prosecutors had concluded that the case wasn’t worth going to trial over. The three employees agreed to “pretrial diversion,” meaning that if they paid the money back — about $3,500 in two cases, and about $20,000 in the third — the indictments would be dismissed. That happened in April. What about Cohodes’s charge that MiMedx’s products are creating a public health hazard? This should also raise an eyebrow (or two). The product he is primarily criticizing is AmnioFix. It also uses placental tissue, but it’s processed in such a way that it can be injected. AmnioFix’s primary purpose is to relieve degenerative joint and tendon pain — pain that is currently difficult to treat. It’s a relatively new product, and many of those who are long MiMedx stock think it has blockbuster potential.Cohodes, however, says that AmnioFix has never been proved effective for anything, and that it hasn’t been approved by the Food and Drug Administration. “MiMedx was and is selling unapproved products to an unsuspecting and vulnerable public,” he said in an email. “People in pain often search for solutions in the unapproved drug world when they have run out of options. MiMedx has exploited that vulnerability and that is tragic.”Let me offer an alternate take. In December 2017, the FDA issued new guidelines for injectable tissue — and gave companies three years to come into compliance and get approved indications for their products. With a year and a half to go, MiMedx is in the middle of a Phase III trial for the use of AmnioFix to relieve plantar fasciitis, and a Phase II trial for osteoarthritis. MiMedx bulls think it will have the indications approved by the December 2020 deadline.Studies indicate that the technique MiMedx is pioneering with AmnioFix works: One showed that three months after an injection, 91 percent of patients felt significant pain relief. And the FDA is on record as saying that AmnioFix “has the potential to address unmet medical needs.” My exchanges with Cohodes left me with the distinct impression that he views AmnioFix as some kind of rogue drug, operating outside the FDA system. Based on everything I've learned, it’s not.Digging into Cohodes’s claims, I concluded that Asbahi is probably right: The short-seller and his allies are conducting a smear campaign intended to damage the company. I say this with a heavy heart. I’ve written in the past about companies Cohodes and his former partner David Rocker exposed, and I’m a big believer in the importance of short-sellers. Investors need to listen to skeptical voices as well as bullish ones. As a general rule, those who bet against companies are performing a service for all investors.But it’s also important that short-sellers tell the truth about what they find and have an open mind if a company, say, changes its tactics and its senior management. Stretching the facts to push a stock down is as bad as stretching them to push a stock up. And flogging a misguided narrative about products that could help millions of patients is just wrong. Campaigns like Cohodes’s against MiMedx give short-sellers a bad name.In an email, I asked Cohodes why he remained so obsessed with MiMedx. “You call it ‘obsessed,’ he replied, “but that’s the wrong word. I am committed to truth and always have been.”There was a time when I would have believed him. Not anymore.*****A postscript: On Monday afternoon, Bloomberg and I received a lengthy letter from Cohodes’s lawyer, David Shapiro, claiming that my first MiMedx column was “false and defamatory” and demanding a retraction. The letter reminded me of how this all started for Cohodes: with a presentation at a 2017 investment conference in which he denounced MiMedx and its then-CEO Petit for having sued three of the company’s critics. “Quit intimidating the shorts, the critics, the free speakers,” Cohodes said then. “It has to stop.”Apparently, Petit isn’t the only one willing to use intimidation tactics to quiet his critics.(1) Bloomberg’s standards regarding foul language prevent me from repeating his actual words.(2) I spoke to a third doctor, Raymond Otto of Boise, Idaho, who also praised EpiFix as a superior wound product. I should note that all three doctors have given lectures on MiMedx’s behalf. Garoufalis told me that the typical lecture fee is $1,500 or less.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Stacey Shick at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Growth is sputtering all over the world. Germany and the U.K. have both reported that their economies shrank in the second quarter, and signs of a slowdown are apparent in lots of other places. But as central bankers gather in Jackson Hole, Wyoming, and government leaders in Biarritz, France, to discuss what to do, it seems worth pointing out how slow growth already was in most rich countries even before the recent bad news. Historically slow, in the case of the U.K.:These statistics (most of them, at least) are from the Maddison Project at the University of Groningen in the Netherlands, which maintains the database of long-run per-capita gross domestic product estimates originally compiled by the late economist Angus Maddison and updated in 2018 by Jutta Bolt, Robert Inklaar, Herman de Jong, and Jan Luiten van Zanden. I had been looking through it because I was curious when exactly economic growth had accelerated in Britain during the Industrial Revolution,(1) and I calculated ten-year moving averages (using the compound-annual-growth-rate formula) to cut through the year-to-year noise.(5)As soon as I’d made the chart, the deceleration since about 2006 caught my eye. The Maddison Project numbers end in 2016, so I added in World Bank data for 2017 and 2018.(4) Those improved the picture a teeny bit, but still show the U.K. going through the worst slowdown since the demobilization after World War II. That slowdown was followed by a rapid return to high growth rates. The 1920s depression in the U.K. was much worse, and lasted for a while. But again it was eventually followed by per-capita real growth of more than 2% a year, which sure doesn’t seem to be in the cards for the near future.How about in the U.S.?The spectacular GDP increases of the World War II years give the chart a different scale, and the recent numbers are a little more encouraging, but the same basic story repeats. After decades of strong growth in real per-capita GDP, the post-global-financial-crisis period has been anomalously bad.With Germany and Japan, which I put together because I figured they might display some similar patterns (they did not disappoint), the picture is more of a long deceleration after the spectacular growth of the postwar decades, although Germany did bounce back in the 2000s from a post-reunification growth slump.The Maddison Project has per-capita GDP estimates for 14 countries for the year 1 A.D. (Italy was the richest, followed by Greece and Egypt), a smattering of other estimates over the next 13 centuries and lot of really old numbers for the England and Holland, which are now both part of larger nations (the U.K. and the Netherlands). But the only entire countries for which there are annual estimates going back to the Middle Ages are France and Sweden. Here’s Sweden:The pre-1800 numbers are pretty noisy, which is why I decided to calculate the annual growth rate from 1300 to 1800; at 0.04% a year, it really wasn’t much. I did something similar for France, where there are no estimates for the three decades following the Revolution of 1789 but there are numbers going back all the way to 1280.What’s most striking here is how close Sweden’s and especially France’s current per-capita growth numbers now are to those that prevailed before 1800. This is partly just because the 2008 global financial crisis and the recession that followed were especially awful and the 10-year rolling window I’ve chosen for my charts is going to keep reflecting that awfulness for a couple more years, and partly because the percentages involved are so tiny that they look more similar than they really are — France’s dismal 2006-2016 average annual growth rate of 0.2% was still more than three times higher than the annual rate from 1280 to 1789. We aren’t really back in the Middle Ages. But per-capita GDP growth in wealthy countries does seem to have slowed to a much slower pace than in the 20th century, and possibly at any time since the dawn of the Industrial Revolution. Add to this the fact that population isn’t growing much in these countries, and in some cases is actually shrinking, and you have at least part of the explanation for why interest rates are so low and politics so weird these days. The growth that we’ve gotten used to over the past two centuries or so just hasn’t been there lately.Now it’s worth pointing out that some economists worried in the 1930s and again after World War II that the age of rapid growth might be coming to an end. “We are passing, so to speak, over a divide which separates the great era of growth and expansion of the nineteenth century from an era which no man, unwilling to embark on pure conjecture, can as yet characterize with clarity or precision,” Harvard’s Alvin H. Hansen said in his presidential address to the American Economic Association in 1938. It might turn out to be an era, he went on, of “secular stagnation — sick recoveries which die in their infancy and depressions which feed on themselves.”Turns out it was instead an era of even-more-rapid growth and expansion. But maybe that was just a lucky break (or inadvertently smart fiscal policy). Harvard economist and former Treasury Secretary Lawrence Summers — this era’s leading worrier about secular stagnation — tweeted as part of a long thread this morning about slowing growth and what central banks and governments can do about it:There are other ways of looking at the growth slowdown: University of Houston economist Dietrich Vollrath has a book coming out in January(3) called “Fully Grown: Why a Stagnant Economy Is a Sign of Success,” in which he argues that with their material needs more than satisfied, many people in rich countries are simply shifting their focus to activities that don’t generate as much growth in productivity or GDP. Could be! But it would still mean that we have entered a new era that none of us are really prepared to navigate.(1) I have strange hobbies.(2) It might seem odd to measure early-1700s U.K. growth inU.S. dollars adjusted for purchasing-power parity, but the Maddison Project does that so you can easily compare incomes in different countries at different times.(3) That is, I calculated annual growth rates over moving 10-year periods starting with 1990 using the World Bank data, checked that the growth rates matched up pretty closely with those from the Maddison database for 2000-2016, and then plugged in the 2017 and 2018 numbers.(4) I just got a galley, and I haven't read it yet but I did peek.To contact the author of this story: Justin Fox at email@example.comTo contact the editor responsible for this story: Sarah Green Carmichael at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. President Donald Trump resumed his assault on the U.S. central bank Thursday, turning Germany’s sale of negative-yield bonds into a criticism of the Federal Reserve.“Germany sells 30 year bonds offering negative yields,” Trump tweeted. “Germany competes with the USA. Our Federal Reserve does not allow us to do what we must do. They put us at a disadvantage against our competition.”Germany on Wednesday attempted to sell 2 billion euros of zero-coupon bonds in an auction. It failed to generate the expected demand with investors purchasing 824 million euros worth of the securities at an average yield of -0.11%, a record low.The sale represents cheap financing for the German government, but more importantly demonstrates how weak the European economy is. Some investors are so skeptical over growth prospects they are willing to pay for the safety of government bonds.Though the Fed cut rates in the U.S. by a quarter-point on July 31 to guard against a potential downturn made more likely by Trump’s ongoing trade disputes, the president has repeatedly called for the central bank to slash rates more aggressively.“They move like quicksand,” Trump said in his tweet. “Fight or go home!”To contact the reporter on this story: Christopher Condon in Washington at email@example.comTo contact the editors responsible for this story: Alister Bull at firstname.lastname@example.org, Jeff KearnsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- While talking to reporters on the White House lawn Wednesday about his plans for prosecuting a trade war with China, the president of the United States looked up briefly toward the heavens.“I am the chosen one,” Donald Trump allowed.Others had given the president gentle nudges toward divinity even before that. Wayne Allyn Root, a conservative extremist, conspiracy theorist and self-described “capitalist evangelist” who believes Jesus was the “CEO of the Christian religion,” described Trump the day before as the “second coming of God.” Trump gratefully tweeted Root’s blessings on Wednesday morning, several hours before his White House epiphany.Yes, of course you need a certain kind of appalling narcissism to be comfy promoting yourself as heaven-sent in a televised press briefing and as a deity on Twitter. It’s doubly unhinged when you’re doing this as president, commander-in-chief and the man who swore on Inauguration Day to “preserve, protect and defend” the country. When it follows a crazy, distracting public flirtation with a Greenland buyout and a dizzying flip-flop on gun control, it can convince people that your underlying behavior has moved beyond the routinely nutty and delinquent into something more profoundly ruptured.Trump, however, has been self-absorbed, self-deluded and wildly self-aggrandizing for decades. New Yorkers who had ringside seats to much of this know how much of a sociopath he can be when he wants his way (a useful case study is his failed effort to develop Manhattan’s West Side Yards years ago). They’re now watching the rest of the country and the world acquaint themselves with a Trump whom many either didn’t understand or willfully overlooked prior to his ascent to the White House.The Trump of the past few weeks is the same disordered figure of the past several decades with, I suspect, a big dollop of something new blended in: unbridled and unmanageable panic.When Trump has panicked in his business and public life in the past he’s latched on to the zany to try to dig his way out. For example, after larding his Atlantic City casino companies with too much debt, and overspending to build the biggest of them, the Taj Mahal, Trump needed the Taj to rake in impossible sums to avoid bankruptcy. That didn’t happen and in some of the earliest interviews about the mega-casino’s prospects, Trump lied – in deliciously outré ways – about what ailed it as he tried to stave off the inevitable financial catastrophe.Trump told a TV interviewer, Larry King, that slot machines at the Taj weren’t taking in as much money as expected because overly enthusiastic gamblers had jammed too many quarters in them too quickly and had broken them.“So what, it blew out the slots, literally?” King asked.“They blew apart,” Trump responded.“It would be, like, too much use?”“They were virtually on fire.”That was funny. It was also untrue and it was nutty. But Trump was operating on smaller stages back then: the gambling world, New York real estate and politics, and then reality television. Now he’s on a global stage with unimaginable power at his fingertips and the possible consequences of acting out are far more severe.Trump must believe that his decision to toy with the idea that he’s an anointed savior – “the chosen one” – has a grotesque rationale, despite its ham-handedness and hypocrisy. To be sure, somewhere deep inside the president harbors a belief in God and the afterlife, which he discussed with me once as we drove together to one of his New Jersey golf courses.“There has to be a reason we are here,” Trump told me. “What are we doing? You know there is an expression: ‘Life is what you do while you’re waiting to die.’ There has to be a reason that we’re going through this. There has to be a reason for everything. I do believe in God. I think there just has to be something that’s far greater than us.”My sense is that essentially Trump sees faith as an insurance policy. He would like to live forever and he thinks a belief in God is one way to get there. He’s never been much of a traditional churchgoer or Bible-reader and by at least one common definition of Christianity (“Love thy neighbor as thyself”) he comes up exceedingly short.The president grew up in a family that embraced Norman Vincent Peale’s controversial “prosperity gospel,” which focused on personal happiness and wealth. He has followed a similar path in his adult life, aligning himself with churches or ministers that tout the same dollar-based values. Although Trump had never been involved in traditional Christian churches (many of which look askance at the prosperity gospel), white evangelicals supported his presidential candidacy en masse in 2016. Trump sees that voting bloc – which has forgiven his extramarital affairs, his racism and incivility, his foul mouth and his lack of generosity in exchange for legislative advocacy meaningful to them – as one of his firewalls in the upcoming 2020 campaign.So when Trump gazes into the sky at the White House and says that he’s the chosen one, he’s not the type who thinks he can actually walk on water. He’s the type who’s hoping that droves of evangelical voters might keep falling for his shtick.And Trump is willing to playact in this extraordinary way, I think, because he’s mired in fear. The clock is ticking as the countdown to 2020 grows shorter and Trump has spent the past few weeks making sure his own words and actions involving migrants at the southern border and global communities of color will leave him branded permanently as a racist. His poll numbers are weakening, perilously so. Most glaringly, there are warning signs of a U.S. recession on the horizon, which, if it arrives, will have everything to do with Trump’s bungled global trade policies and not the Federal Reserve’s stance on interest rates.Trump is flailing, trying to find boutique tax cuts he can implement unilaterally as a way to stimulate the economy but which are unlikely to deliver the outcome he hopes for, especially if he doesn’t reverse course on trade. Meanwhile, the federal deficit is soaring, markets are skittish, and farmers across the Midwest are growing angrier about the hurdles they face.The president has tied his standing to jobs, the economy and the securities markets and in the face of sustained problems the odds for his reelection worsen. Trump, understandably, has started to panic and his attempt to convince people that he’s the second coming shows how deeply worried he is about things he can’t control – and how increasingly reckless he might become.To contact the author of this story: Timothy L. O'Brien at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Timothy L. O’Brien is the executive editor of Bloomberg Opinion. He has been an editor and writer for the New York Times, the Wall Street Journal, HuffPost and Talk magazine. His books include “TrumpNation: The Art of Being The Donald.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Three years ago this month, Hollywood executive Peter Chernin and AT&T Inc. CEO Randall Stephenson shared a dinner on Martha’s Vineyard. Stephenson is still waiting for his dessert to arrive. It was the meal that sparked the idea for Stephenson, a practically lifelong member of the staid telephone industry, to enter the TV and film business by acquiring Time Warner, a then-$60 billion giant of the media world. After Stephenson struck the deal, he told Bloomberg News that it was Chernin who “first got me to appreciate the library that this company owns.” That library includes HBO, with hits like “Game of Thrones” and “Succession;” the Warner Bros. studio, which that year had an almost 17% share of the box office; and the rights to “Friends,” a sitcom that hasn’t aired fresh episodes in more than 15 years but has taken on new life as the Holy Grail of the streaming-TV market.In June of last year, 601 days after the companies agreed to merge, Time Warner officially became part of the Dallas-based wireless-phone carrier, defeating an attempt by the U.S. Justice Department to block the transaction. AT&T’s WarnerMedia division, as the Time Warner assets are now called, is seen as one of the biggest threats to Netflix Inc., though it doesn’t yet have a competing product to show for it. In fact, little more has come out of the WarnerMedia acquisition so far than reports of culture clashes, differing visions and high-profile personnel exits.According to the New York Post this week, some HBO staffers have been put off by the brusque management style of their new WarnerMedia boss John Stankey, a longtime AT&T executive. The Dallas-based C-suite is putting pressure on its Hollywood employees to ramp up HBO’s production slate as they coalesce around building a new streaming app named HBO Max, the strategy for which is still nebulous and seems to keep changing. They have a deadline to unveil the product to investors on Oct. 29. Later in the year, HBO Max will officially join the alphabet soup of video services already offered by AT&T:The subscription on-demand product sounds akin to Walt Disney Co.’s Disney+ and Apple Inc.’s Apple TV+, which are both launching within the next three months and gunning for Netflix Inc.’s subscriber base. They’re spending billions of dollars to fill out their apps with HBO-quality content. In theory, AT&T is sitting on a set of assets best suited to draw a wide streaming audience, with HBO’s high-quality programming, plus news, sports, comedy, cartoons and popular films. But merger integration issues and AT&T’s lack of experience in the content business pose major challenges.The price could also turn off subscribers. HBO Max is expected to charge a few dollars more than the stand-alone HBO Now app, which at $15 a month is higher than Netflix’s $13 monthly fee and more than double the $7 that Disney+ will charge. In fact, bundling Disney+, Hulu and ESPN+ will be just $13. The irony is that while Stephenson tries to transform AT&T into a media conglomerate, the wireless business that’s effectively been overshadowed by the merger is improving. It's the healthiest area of the company. Wireless accounted for 37% of AT&T’s revenue in the last 12 months, but it was nearly 50% of Ebitda, according to data compiled by Bloomberg. That cash flow is helping AT&T contend with a heavy debt load, which stood at $194 billion as of June. Wireless network performance has gotten better as new spectrum has been deployed, boosting AT&T’s image as the carriers transition to 5G service. Based on scoring by various outlets that track wireless connections, AT&T was able to crown itself America’s “fastest, best and most reliable network,” which are useful bragging rights for TV ads as the industry battles for customers. More important, AT&T is saving money through a public-private contract it won to build FirstNet, a network for first responders. Put simply, while AT&T’s workers climb towers to set up FirstNet, they’re also prepping its airwaves for 5G.These improvements haven’t yet reduced churn, or the rate at which customers are leaving AT&T, but that could be next should the wireless business stay on track. And if T-Mobile US Inc.’s takeover of Sprint Corp. overcomes state opposition (16 attorneys general have sued to block the deal), there will be one less competitor for AT&T and a chance to raise prices.AT&T’s DirecTV satellite business continues to shrink, with the company losing 946,000 video subscribers in the second quarter, including DirecTV Now customers who canceled in the wake of price hikes. That streaming service was recently renamed AT&T TV Now as the company moves away from the fading DirecTV brand. It also introduced a new service this week in certain markets called AT&T TV, which is a similar live-TV and on-demand app with various package options, but also involves using a streaming box where users can access other services they may subscribe to, such as Netflix. It became clear this week that AT&T TV and HBO Max together are at the center of Stephenson’s vision for the new AT&T.The idea must have seemed so sweet three years ago. But peering into the kitchen, it’s all still a bit hectic. He'll have to keep waiting for that dessert.To contact the author of this story: Tara Lachapelle at email@example.comTo contact the editor responsible for this story: Beth Williams at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.