CEO Daily: Monday, 3rd October

Good morning.

It looks increasingly likely that Donald Trump has paid little or no federal income tax in decades. Fortune’s clever Shawn Tully laid out the scenario by which this is possible in an analysis last week; the New York Times put meat on the bones yesterday with its report on some old Trump tax records it obtained.

The question for voters: assuming Trump used legal means to eliminate his tax liability, is that a bad thing or a good thing? Without confirming either the Fortune or New York Times stories, Trump yesterday tweeted: “I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them.”

In this respect, Trump is joining the likes of Apple and Google– which have used complicated tax structures in favorable jurisdictions like Ireland to escape billions in taxes – or even Mylan and Medtronic – which technically “moved” their headquarters outside the U.S. to do same. Should they be shunned for shirking their patriotic duties; or cheered for the cleverness of their tax lawyers?

We’ll be watching to see how this plays out with voters. But it seems to me this game-playing by rich and powerful people, as well as rich and powerful corporations, is exactly the sort of thing that has sowed the seeds of populist discontent that now threaten the social compact on which post-World-War II prosperity was built. Whether the result is a President Trump, pursuing an anti-globalization agenda, or a President Clinton, with a constituency clamoring for taxes and regulation, the future looks cloudy for business.

Meanwhile, Deloitte this morning is releasing its poll of U.S. CFOs in which they identified the top risks to their companies in the coming year. Number one on their list is the possibility of a global slowdown or recession; number two is the increase in burdensome regulation; and number three is the uncertainty around the U.S. election. A full 87% of those surveyed said the future performance of their company depends at least somewhat on the outcome of the U.S. presidential election; 17% cited a strong or significant dependence.

By the way, a full 71% of the CFOs also said U.S. equity markets are overvalued.

Enjoy the day.

Alan Murray
@alansmurray
alan.murray@fortune.com

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Top News

Firms Brace for Clinton Speech

Democratic presidential nominee Hillary Clinton is expected to unveil a plan to make it easier for consumers to sue “bad corporate actors” in a campaign speech later Monday. Clinton is due to speak in Ohio, and is expected to explain how she would, if elected, curb the prevalence of contractual clauses that require consumers, employees and other individuals to resolve legal disputes in private arbitration proceedings instead of in courts. She’s expected to mention Wells Fargo and EpiPen maker Mylan by name. The criticism will be part of a larger push to curb excessive market concentration and encourage competition that benefits consumers, Reuters cited her campaign as saying. Fortune

May Promises Brexit Trigger By End-March

U.K. Prime Minister Theresa May said she would formally trigger the process of leaving the EU by March next year. Under the EU’s treaty, a settlement needs to be completed within two years, or else trade between the two sides will revert to WTO rules, including tariffs and customs checks on both sides. May indicated, as expected, that the U.K. won’t try to remain in the EU Single Market, and thus subject to EU rules on immigration and to EU Court rulings. The timing also exposes the Brexit process to being a bone of contention in both the French presidential elections in May and the German Bundestag elections next September. The pound hit a three-year low against the euro and a seven-week low against the dollar on the news as markets opened in London. It staged a partial recovery later on the news that the U.K.’s manufacturing PMI hit an 11-month high in September.Fortune

Introducing the Googlephone

Google will launch its first branded smartphones this week in an effort to use the hardware market to keep its name uppermost in the minds of consumers, its first major foray into the segments since its ill-fated attempt experience with Motorola. The launch is expected on Tuesday at an event in San Francisco, according to the Financial Times. The move reflects, among other things, frustration at Apple’s continuing domination of the high-end smartphone market, which diverts the wealthiest customers away from the Google Play app store. The FT reported that Google also intends to launch a voice-activated device, Home, as a direct rival to Amazon’s Echo in the voice-based digital assistant space. Google’s AI tool Assistant is also expected to be embedded in the new branded phones, it said. Financial Times, metered access

Tesla Meets 3Q Sales Target, But Not How Musk Wanted

Tesla’s deliveries of vehicles in the third quarter beat expectations, rising 70% from the previous quarter’s 14,402 to 24,500. That puts it on course to meet its second-half target of 50,000 (a target it repeated Sunday). Tesla says it only counts deliveries if the car has actually been transferred to the customer, which pre-empts any suspicion of there being a marked difference between ‘deliveries’ and the more relevant ‘sales’. However, reports last week of Elon Musk venting in an e-mail to staff about unsanctioned discounting suggest that those who plotted Tesla’s path to profitability based on official sticker prices may still be in for a bit of a disappointment. Bloomberg

Around the Water Cooler

Bill Gross Has Some New Partners

Janus Capital, the fund manager propelled into the spotlight last year by Bill Gross’s arrival after an acrimonious departure from PIMCO, is merging with publicly traded Henderson Group Plc, creating an investment house with over $320 billion in assets under management. The deal is being billed as a ‘merger of equals’ although the valuation is decidedly favorable to the smaller Anglo-Australian group, whose shareholders get 57% of the new company despite bringing less than 40% of the AUM. Henderson’s shares rose nearly 20% on the news in London. Janus’ biggest shareholder, Daiichi Life, has given its approval. The deal reflects the ongoing margin squeeze on funds managing assets in public markets as technology bolsters the spread of (generally) passive, algorithmic-based investing. Companies that still rely on human fund managers for outperformance are having to be more ruthless in stripping out other costs. Fortune

Germans Unite in Distaste for Deutsche 

For a long time this year, it looked as though the annual German Unity Day holiday (local markets are closed today) would be overshadowed by increasingly bitter divisions over Angela Merkel’s immigrant policy. However, the country has been brought together at the last moment by a more visceral indignation at the thought of bailing out Deutsche Bank. Vice-Chancellor Sigmar Gabriel lashed out at CEO John Cryan over the weekend for trying to blame speculators for the bank’s problems, having itself “turned speculation into a business model.” The report on Friday that sent the bank’s shares sharply higher by saying it was close to a much-reduced $5.4 billion fine from the DoJ still hasn’t been substantiated by any of the heavier-hitting financial publications, which is an ominous sign for when Deutsche's shares resume trading on Tuesday. Cryan is expected in Washington this week at the fall meetings of the IMF and World Bank, and is expected to meet high-ranking U.S. officials while there. Fortune

But Europe’s Banks Have Plenty of Other Bad News

Just because Germany is on holiday doesn’t mean that the flow of bad news from the banking sector ends, though. In Milan on Saturday, a judge charged 13 current and former bank executives (including some from Deutsche) with various financial crimes relating to the troubled Banca Monte dei Paschi di Siena. This morning, Portugal’s central bank chief Carlos Costa said the country’s banks face a “critical” need for more capital and need radical changes to their business model to survive in a low interest rate environment. ING, the Netherlands’ biggest bank, has worked as much out for itself: it said Monday it will cut 7,000 jobs—just under 12% of its workforce—and invest 800 million euros ($900 million) in its digital platforms to cut over $1 billion of costs out of its business over the next five years. ING has been conspicuously successful in rolling out a largely online-banking model outside its home markets, and now wants to roll it out to more countries. Established markets like the Benelux, where it still has extensive branch networks, will be where most jobs are shed. Reuters

After 8 Long Years, a Ryder Cup Win at Last

The U.S. ended an eight-year losing streak in the Ryder Cup at the Hazeltine National course with a thumping 17-11 victory. The triumph was a true team effort, with egos firmly muzzled and with none of the sniping and finger-pointing that accompanied the fractious defeat in 2014, and with every player contributing at least one point for the first time since 1975 (when a certain Arnold Palmer was captain). The Europeans never recovered from a poor start overshadowed by some timid captaincy by Darren Clarke, which in turn followed some ill-judged comments about crowd behavior by the brother of one of the team members. Will victory be enough to breathe new life into Donald Trump’s favorite sport? Sports Illustrated, Golf.com

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