CEO Daily is a business newsletter, and with the exception of Tory Newmyer’s regular Saturday note, we have tried not to dwell on the silliness of the early campaign season.
But it is no longer early, it is no longer silly, and it is increasingly clear that this election is very much about business. There’s a good chance the New Hampshire primaries on Tuesday will be won by one candidate who is an avowed socialist and another who is a protectionist and a nativist. Both are running against the establishment, and that certainly includes business – particularly big business, and even more particularly, Wall Street.
Sanders and Trump may not win in the end. The path to the nomination is long, with many more twists and turns ahead. Moreover, if they do prevail, expect Michael Bloomberg to join the fray as an independent, further mixing the pot.
But regardless of the outcome, this year’s early primaries have sent a clear message. Americans aren’t happy with either the political or the economic status quo, and their frustration isn’t going away. Business should beware.
After the financial crisis hit in 2008, I looked at the history of previous financial crises and concluded that the economic ramifications last longer than financial ramifications, and the political ramifications last longer than both. That’s proven true again. Even as the economy reaches full employment, political dissatisfaction is boiling over.
Business will pay a steep price for this unrest. That’s why the decisions of companies like Pfizer to move their domiciles overseas – which may seem a rational response to irrational U.S. tax laws – or companies like Valeant to jack up drug prices – also a rational response to the vagaries of the U.S. health care system – are so damaging. Public trust in business and free markets is on the wane. Businesses that care about the future need to focus on ways to rebuild it.
More news below.
• Credit Suisse CEO asks for bonus cut
Tidjane Thiam, the chief executive of Credit Suisse, has asked the Swiss bank's board to reduce his bonus just days after the company reported a multibillion-dollar loss in the fourth quarter. The loss Credit Suisse reported on Thursday was greater than analysts had expected, sending shares down as much as 12%. Thiam joined the bank in July. And while he didn't indicate the size of the reduction in his bonus, he said his was the largest reduction within the management team. New York Times (subscription required)
• Super Bowl ads go for lighter tone
It isn't always easy to deem a winner among the many ads that run during the Super Bowl, though the consensus seems to be that advertisers this year wanted to aim for a lighter tone after treating viewers to a lot of emotional spots in 2015. Bud Light's politically themed "Bud Light Party" ad won high praise, as did a funny spot by PepsiCo's Doritos, and an ad by the National Football League that showed babies, children and adults born nine months after their parents' favorite teams won the Super Bowl. Wall Street Journal (subscription required)
• Tech stocks are suffering in 2016
USA Today has reported that the 462 information technology stocks in the broad Russell 3000 index have shed a total $529 billion this year in value, due to their average decline of 14%. Meanwhile, the tech-heavy Nasdaq composite index is the worst hit major index, dropping 13% this year while the broader Standard & Poor's 500 is down 8%. What's happening? Investors are nervous about growth, with woes centered on LinkedIn, Apple, and Salesforce.com (among many others). USA Today
• VW planning generous offers
Volkswagen is planning to offer generous compensation packages to the roughly 600,000 U.S. owners of diesel vehicles whose emissions are over the legal limit, said Kenneth Feinberg, who is head of the German auto company's claims fund. Volkswagen has still not yet determined whether car owners will be offered cash, car buy-backs, repairs or replacement cars. On Friday, the company postponed the publication of its 2015 results and delayed a shareholder meeting as it struggles to come up with a price on its emissions scandal. Reuters
Around the Water Cooler
• Chipotle shutdown to occur today
Chipotle will today shut down all locations for a period of time in order to conduct a nationwide meeting that is meant to show consumers the fast-casual restaurant chain is very serious about correcting several food poisoning episodes since October. The meeting is intended to ensure all of the Mexican food purveyor's employees are up to speed on the latest efforts to guarantee food safety. Meanwhile, other chains, including Freshii and On the Border, are opting to launch promotions that just happen to coincide with Chipotle's shut down. Money
• Investors are piling into oil
The U.S. benchmark for crude has moved more than 1% each day in the past three weeks and one analyst has described the scene fairly succinctly: “We’re seeing a battle royal between those who think a bottom has been put in and those who think we have lower to go.” Bloomberg reports that total wagers on the price of crude climbed to the highest since the U.S. Commodity Futures Trading Commission began tracking the data in 2006. So while money manager don't know which direction oil is headed, they are very busy placing their bets. Bloomberg
• Manning gives Bud free air time
Peyton Manning, who steered the Denver Broncos to a win at last night's Super Bowl 50, gave Anheuser-Busch InBev free airtime last night when he told a CBS sideline reporter that his postgame plan was to "drink a lot of Budweiser." While standing on the winner's podium, he said "what's weighing on my mind is how soon I can get a Bud Light in my mouth." Manning reportedly wasn't paid to mention the brand, though media outlets were quick to point out he owned a pair of AB InBev distributors as recently as two years ago. Still, any spontaneous mention of a brand during a high-profile occasion like the Super Bowl is sure to be viewed as a win. Bloomberg