President Trump signed a sweeping executive order Tuesday to eliminate or streamline permitting regulations to speed construction of roads, bridges, pipelines and other infrastructure projects. It’s an action welcomed and advocated by many business groups. But the announcement was quickly forgotten after the president veered off script and again blamed “both sides” for the race-tinged violence in Charlottesville this weekend.
For long-time government watchers, this is part of what’s so perplexing about President Trump’s use of his bully pulpit. He has an historic opportunity to work with a Republican Congress and make serious progress on important economic issues, like failing infrastructure and tax reform. And he has the most powerful platform in the world from which to advocate for those policies. But time and again, he allows his economic message to be muddled by diverging from script and wading into controversy—then attacking the press for focusing on the wrong story. He may not like the way the press dances, but he controls the music.
His equivocation over who’s to blame for events in Charlottesville continues to pose a dilemma for business leaders. Wal-Mart CEO Doug McMillon wrote a note to employees yesterday saying the president “missed an opportunity to help bring our country together by unequivocally rejecting the appalling action of white supremacists.” McMillon did not resign from the president’s advisory panels—as did the CEOs of Merck, Intel and Under Armour—but his letter is particularly noteworthy given his business depends on shoppers in areas where support for the president remains strong. Trump continues to attack the departing CEOs, calling them “grandstanders,” while Trump critics have launched social media campaigns against the CEOs—like Campbell’s Denise Morrison—who chose to stay on.
As I mentioned yesterday, the willingness of CEOs to weigh in on divisive political issues represents a sea change in how business leaders think about their jobs. That’s driven in some degree by the expectations of their employees—particularly millennials. The folks at Weber Shandwick yesterday sent me the results of a poll that found that roughly half of millennials believe CEOs “have a responsibility to speak up on issues important to society”—compared to only 28% of Gen Xers and Baby Boomers.
More news below.
• Fed’s Fischer Still Jumps at Shadows
Federal Reserve Vice Chairman Stanley Fischer put a dampener on the financial sector’s celebrations of the rollback of post-2008 regulations. The veteran central banker told the Financial Times that it was “very, very dangerous” to call for an easing of the Fed’s regular stress tests, and warned that the risks of the “shadow banking system” of often complex liabilities held off bank balance sheets had still not been addressed. “I am worried that the U.S. political system may be taking us in a direction that is very dangerous,” Fischer said.
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• Markets Return to Risk-On After Retail Sales, North Korea
Risk appetite has returned to markets after North Korean leader Kim Jong Un toned down his threats of a missile attack on Guam. A strong U.S. retail sales report and corroborating Q2 figures from Home Depot and TJ Maxx owner TJX Cos also supported the move and boosted the dollar. By contrast Dick’s Sporting Goods fell 19%, hit by a sharp drop in gun sales after the election of Donald Trump, while Coach’s shares also slumped after putting out a disappointing forecast for its new fiscal year.
• Elliott Makes Peace With Akzo, Renews War on BHP
Paul Singer’s Elliott Advisors patched up its differences with Dutch paints and coatings group Akzo Nobel, and sharpened its focus on mining giant BHP Billiton. Elliott will suspend all litigation against Akzo for at least three months and support the appointment of new CEO Thierry Vanlancker to the board. Akzo in return has agreed to sell its specialty chemicals business outright, rather than IPO it. Elsewhere, Elliott raised its stake in BHP’s London-listed shares to 5%, enabling it to call an extraordinary shareholder meeting if it wants.
• FTC Puts Uber on the Naughty Step for 20 Years
Uber will face 20 years of audits mandated by the Federal Trade Commission to ensure that it takes adequate care of its customers’ and drivers’ data. “Uber failed consumers in two key ways: first by misrepresenting the extent to which it monitored its employees’ access to personal information about users and drivers, and second by misrepresenting that it took reasonable steps to secure that data,” acting FTC chair Maureen K. Ohlhausen said. There was no financial penalty.
Around the Water Cooler
• Air Berlin: A Slow-Motion Crash-Landing
Etihad Airways’ strategic plan continues to unravel. Air Berlin, Germany’s second-largest airline, filed for insolvency Tuesday after Etihad, its largest shareholder with a 29% stake, refused to approve any more cash injections. It’s the second loss-making affiliate on which Etihad has pulled the plug: Alitalia had suffered a similar fate in May. The German government extended a 150 million euro bridging loan to avoid the embarrassment of thousands of tourists being stranded abroad during an election campaign. Lufthansa is in talks to salvage the most attractive parts of the business, to howls of complaint from competitors who were looking forward to excess capacity leaving the market.
• Marchionne Comes to His Sensors
Sergio Marchionne’s busy week continued. Two days after Fiat Chrysler was linked with a Chinese buyer, the company joined the alliance of BMW, Intel and sensor firm Mobileye to develop an autonomous driving platform. The news sent the shares up another 3.2%, making it 11% for the week to date. They retraced a bit after Geely, the Chinese firm, said it had no plans to buy the company.
• Amazon Disrupts the Credit Markets
Amazon asked the bond markets for $16 billion in unsecured debt to fund its $13.7 billion purchase of Whole Foods and some other smaller projects. The market said: “Here’s $49 billion. Call us if you need any more.” It’s the fourth-biggest corporate bond issue of the year, and one that will add to the pressure on other companies’ credit spreads, given that few other issuers have the same buzz around them (and given that Amazon has been away from the bond markets for three years). The company priced the 10-year tranche to yield 3.17%, some 90 basis points over the benchmark Treasury bond. Neither Moody’s nor S&P expect the increase in debt to damage its credit rating, which is comfortably in the investment grade bracket. In other news, President Trump renewed his tirades against Amazon’s tax practices in his morning tweetstorm.
• Shale Ascendant
Oil output from U.S. shale plays is poised to reach a fresh record next month, according to the Energy Information Administration. The EIA said output from the Permian basin alone will rise by 64,000 barrels a day to a record 2.6 million barrels a day. Other recent data have suggested that the rise in U.S. oil production is topping out though, with a sharp rise in the number of wells drilled but not completed (i.e., readied for production, but not brought on line). Crude prices have fallen some 4% this week on oversupply fears, despite a bigger-than-expected drawdown in U.S. stocks.
Summaries by Geoffrey Smith firstname.lastname@example.org