The human and economic cost of Hurricane Harvey continues to mount. The death toll from the storm is now over 30 and may rise further after the storm made a second landfall Wednesday morning in Louisiana. The financial cost, for those who have to worry about such things, is spiralling. Risk modeler Chuck Watson of Enki Research lifted his projection for economic losses to $42 billion Tuesday. The country’s energy complex is being severely disrupted, as refineries are knocked out of action, making them unable to accept crude oil shipments and deliver fuel to customers. Airlines, too, are under the cosh: United Airlines alone faces a $265 million hit, according to one analyst.
In economic terms, the damage to the country’s fourth-biggest city and its surrounding area will likely make a noticeable dent in third-quarter GDP, making any more interest rate increases from the Federal Reserve this year even more unlikely. Normally, the economy bounces back reasonably quickly from such hits. But the length and severity of this storm suggest that could be a taller order this time around.
In other news—competition in the digital assistant space just got more interesting. The New York Times reports today that Amazon and Microsoft have been working for a year on making their Alexa and Cortana products capable of talking to one another. The two companies are hoping that making their systems interoperable will expand their reach. That, one might suspect, will help them defend their turf against Apple’s Siri and the Google Assistant.
Alexa and Cortana are—at least for now—more tightly tied to fixed spaces, such as an Echo home speaker or a PC running Windows. That is a strategic limitation in a world that is increasingly mobile. By contrast, Siri and Google Assistant are woven first and foremost into mobile devices that can easily double up as a hub for a smart home system. The quest for interoperability is, simultaneously, an admission that dominance is out of reach. That’s an admission that Apple and Google aren’t (yet) ready to make.
More news below.
• A Jumbo Deal in Aerospace
United Technologies is preparing to buy Rockwell Collins for over $20 billion, according to The Wall Street Journal. The deal would be the biggest-ever in the aerospace sector, and would allow the two companies more pricing power vis-à-vis their two key customers, Airbus and Boeing. There are few overlaps in their businesses, which should reduce antitrust concerns. It could also sets UTC up for a decision on whether it wants to be a pure aerospace play, by spinning off its buildings division. That division currently accounts for half of of UTC’s sales.
WSJ, subscription required
• Punters Prefer Predictable Presidential Posturing
The dollar and global stock markets rebounded, after the shock of North Korea’s latest missile test. Analysts said President Trump’s more measured language (“all options are on the table” rather than “fire and fury”) and his use of official channels rather than Twitter had the effect of reassuring markets about the predictability of U.S. policy. However, Treasury bond yields stayed close to two-month lows and gold hit a one-year high, against a background of continued caution. North Korea, meanwhile, has renewed its threats against the U.S. territory of Guam.
• Khosrowshahi’s Legal Inbox Runneth Over
Expedia CEO Dara Khosrowshahi confirmed he will take over at the helm of Uber, although his contract is still being finalized. The backlog of legal cases against the company originating from its wild ride under Travis Kalanick continues to grow, however. The Wall Street Journal reported that the Justice Department is looking into whether it violated the Foreign Corrupt Practices Act, which bans irregular payments to foreign officials. It’s not clear which country or countries the DOJ is looking at.
• Google Sends Its Shopping Fixes to EU
Google filed proposed changes to its shopping service to the European Union’s antitrust authorities. The company is contesting the EU’s $2.9 billion fine for rigging its search results to the detriment of rival shopping services. Concerns have been raised recently that Google’s search results for flights are similarly geared to its own financial interest rather than consumers’. An investigation into alleged discrimination against rival app developers in Android is also still pending.
Around the Water Cooler
• There’s No Money Left, Here Are the Keys
The Central Bank of Russia bailed out the country’s biggest privately-owned bank, Otkritie, in a deal that could eat up another $14 billion of the country’s reserves. The bank was on the CBR’s list of 10 systemically important institutions and had extensive cross-exposures to three other large banks also suspected of carrying heavy hidden losses on their books. The bank’s existing shareholders, who have taken over a billion dollars out of the bank through related-party transactions at inflated levels, will be allowed to keep a 25% stake, in an episode that speaks volumes about the country’s enduring governance problems—and the price that Vladimir Putin is prepared to pay to keep a semblance of financial stability as he prepares for re-election next spring.
FT, metered access
• Hollywood’s Summer Season Is a Bust
With Labor Day in sight, Hollywood is counting the cost of a disappointing summer box office season. Few of the action movies, sequels and franchise reboots have lived up to expectations, with Universal’s Despicable Me 3 and Warner’s Wonder Woman being honorable exceptions. North American receipts are down 16% from last summer, meaning that studios have relied more than usual on the international box office, where revenue is still–just barely–ahead. Studio bosses face an anxious few months working out whether all that simply reflects a high base effect and a couple of inevitable failures, or something more sinister in viewing trends.
• Payday for Tim Cook
Apple CEO Tim Cook collected $89.2 million worth of shares under the company’s long-term compensation program, reward for the company outperforming at least two-thirds of the S&P500 index over the last three years. It’s the fourth year in a row that Cook has collected the maximum available under the sliding pay scale. The time when critics were comparing him unfavorably to Steve Jobs seem a long time ago now.
• Best Buy’s Best Quarter in Years Can’t Banish the Blues
Best Buy shares fell nearly 12% despite the company reporting its biggest comparable sales increase in nearly seven years. The hefty 5.4% annual gain was driven by strong demand for wearable devices, appliances, and smart homes systems. Most of all though, it was helped by the closure of rivals’ stores—so it was no surprise that CEO Hubert Joly warned that the good times may not last. One of Joly’s short-term concerns may be negative publicity from its seemingly predatory pricing of water in Houston this week.
Summaries by Geoffrey Smith; firstname.lastname@example.org