Last night’s debate was the last big event in what’s been an exceptionally difficult election year for anyone who cares about the future of American business or the prospects for American prosperity.
On one side, the Democratic Party has turned increasingly antagonistic toward business. The clearest evidence of that is the strangling entanglement of new regulations that has built up since 2008 and is the subject of the cover story in the November issue of Fortune magazine, which you can read this morning here. Clinton’s true attitude toward business remains a matter of contradictory evidence, but she has adopted much of the fiery language of her former opponent, socialist Bernie Sanders, and if elected she will have to deal with Sanders’ fierce supporters.
On the other side, Donald Trump has built his campaign on an attack on the very principles of globalization that fueled post–World War II prosperity. Moreover, he has catered to the public’s basest instincts. His promotion of conspiracy theories, his fomenting of racist sentiment, his abusive comments and behavior toward women, his open adulation of authoritarian leaders, and his determination to trust gut over evidence all make him the least temperamentally suited candidate that either major party has put forward to lead the nation in modern times.
Some business optimists hope a post-election truce between a President Clinton and House Speaker Ryan could lead to productive legislation. But the prospects for that outcome may founder on the final legacy that Trump threatens to leave the nation: discrediting the legitimacy of the outcome by claiming the election is “rigged.” (You can read my full editor’s note on this topic in the November issue here.)
Speaking yesterday at the end of Fortune’s Most Powerful Women Summit, Ivanka Trump said she expected her father will “accept the outcome either way.”
Also this morning, we’re publishing the inside story of hedge fund billionaire Steve Cohen’s remarkable comeback, which also will be in our November magazine.
Enjoy the day. More below.
• Kroger Throws a Wrench in the Walgreens/Rite Aid Deal
Walgreens’ bid for Rite Aid is looking shakier than ever after reports that Kroger has lost interest in buying 650 Rite Aid stores that it would likely have to hive off to satisfy antitrust regulators’ concerns about the deal. Reuters reported that the Federal Trade Commission had told Kroger it wouldn’t be allowed to close Rite Aid stores that are near Kroger ones, reducing the scope for cutting overlap between the chains. Walgreens Boots Alliance had argued at the time of the deal that it would give it greater clout with pharma companies to keep drug prices low. The most recent reports suggest that the FTC is more concerned that the benefits of that are more likely to be pocketed by Stefano Pessina and his crew than passed on to consumers. Fortune
• Nestlé: Another Quarter, Another Downgrade
Swiss-based giant Nestle forecast its slowest full-year sales growth in more than a decade, citing consumer resistance worldwide to any increase in food prices. That’s going to hurt margins in a world where prices for many agricultural commodities, the key input for many Nestlé products, appear to be rising. The company abandoned its target of a 4.2% rise in organic revenues for 2016, cutting it to 3.5%. The news drove its stock down 2% in Zurich Thursday morning. CFO Francois-Xavier Roger said that consumer demand “was really much softer than expected “ from the U.S. and Europe to Brazil and China. The disappointing figures may increase investor calls on the company to look at disposing under-performing units, notably the confectionary arm that is short of global brands beyond KitKat chocolate bars. Bloomberg
• Netflix Hits Back at Fox Over Poaching
Two months after 21st Century Fox sued Netflix for poaching two of its program developers, the streaming giant countersued, accusing Fox of using illegal non-compete clauses to deprive workers of their rights to sell their labor freely. Netflix said clauses in Fox’s (notionally) fixed-term labor contracts that stop workers from working for competitors, and reserve the right to extend the contracts indefinitely, “create a form of involuntary servitude.” It’s another unwelcome spotlight on contracting practices at Fox, after allegations that contracts at the Fox News Channel unduly restricted avenues for legal redress against gender discrimination. The tapestry of lawsuits over non-competes in Hollywood is, however, a rich one. DreamWorks Animation paid $50 million earlier this week to settle similar claims that it had unfairly colluded with competitors to keep wages down. That leaves Disney as the only major animation house still fighting the litigants. Fortune
• Draghi Expected to Stall for Time at ECB Meeting
The European Central Bank’s governing council meets today, as the euro tests a three-month low against the dollar. The receding risk of a major policy shock after the presidential election, and the diverging rate paths of the U.S. and European central banks, is tending to push the dollar higher. However, the euro is supported by an increasingly wide current account surplus, a consequence of Germany’s enforcement of demand-choking austerity on its neighbors during the euro crisis. Today’s main focus is likely to be on the ECB’s quantitative easing policy, and whether Draghi can convincingly argue that he can use monetary policy to support growth beyond the scheduled March 2017 expiry of that program. Reuters
Around the Water Cooler
• Tesla Raises The Self-Driving Stakes
Elon Musk announced a big step forward in the self-driving capabilities of Tesla’s cars, saying that all of the models it’s now making will have eight cameras embedded to produce 360 degree vision and “a super computer” at the heart of each car to manage them. Musk said the improvements would raise the computing power in the car by “a factor of 40,” essentially delivering the Holy Grail of ‘Level 5’ autonomy—that is, a car that can reliably drive itself in all situations. The current self-driving technology that Tesla has unwisely marketed under the “Autopilot” label is essentially only capable of parking, changing lanes and steering. Musk said he expects that a Tesla will be able to drive from New York to Los Angeles by itself by the end of next year. Fortune
• NYT Keeps it in the Family
The New York Times anointed Arthur Gregg Sulzberger (known familiarly as AG) as heir apparent to his father, confirming him as deputy publisher of the newspaper. The announcement ends lengthy speculation over the company’s succession plan and keeps the Sulzberger family firmly at the paper’s helm for the foreseeable future. Fortune’s Matt Ingram notes that AG was widely seen as the most forward-thinking of the likely candidates: a digital native who co-authored the digital manifesto issued by the NYT in 2014, which analyzed the threat from new types of competition like Buzzfeed. “The idea that someone other than a Sulzberger should run the New York Times doesn’t seem to have even entered into the conversation,” Ingram writes. Fortune
• EBay Sees Tough Times Ahead
EBay’s shares fell 5.7% in after-hours trading, after it forecast a weaker holiday season for itself than analysts had expected. The forecast reflects intensifying competition from the likes of Amazon.com and, as of last month, Facebook. It still managed to book a third straight quarter of revenue gains, which ought—all other things being equal—bolster confidence in a post-Paypal strategy that is trying to upgrade its old image as a marketplace primarily for used goods. The company’s StubHub unit also put in another solid set of figures, increasing sales 31% year-on-year to $261 million. But the number of active buyers on its main site only edged up 0.6% from the second quarter to 165 million.Fortune
• California Opens Criminal Investigation Into Wells Fargo
The California Attorney General's Office has launched a criminal investigation into Wells Fargo over allegations it opened millions of unauthorized customer accounts and credit cards, according to a seizure warrant seen by Reuters. Attorney General Kamala Harris authorized a seizure warrant against the bank that seeks customer records and other documents, saying there is probable cause to believe the bank committed felonies. It’s the latest setback for the bank after the abrupt retirement of its CEO John Stumpf, and further evidence that we could still be closer to the start of the scandal than its end. Federal prosecutors are also reportedly looking into the matter. Reuters
Summaries by Geoffrey Smith