CEO Daily: Monday, September 28
If you follow the movements of Xi Jinping and Nahendra Modi over the last few days, they will lead you to this conclusion: America’s political influence in the world may be in decline, but its commercial influence is as great as ever.
President Xi started his visit Wednesday in Seattle, where he met with tech leaders and posed for this extraordinary class photo. It is reminiscent of G-20 portraits, but instead of heads of state, the Chinese leader is flanked by the leaders of the tech world: Zuckerberg, Chambers, Rometty, Nadella, Cook and Bezos.
Prime Minister Modi posed for an eerily similar class photo at Fortune’s Thursday dinner in New York, flanked by the CEOs of Merck, Lockheed, Ford, Pepsi, Cisco, DuPont, Dow, and more. (Kudos to IBM’s Rometty for making both photos.)
Apple’s Tim Cook not only greeted Xi in Seattle, but then flew across the country to sit next to him at the state dinner Friday in Washington. (President Obama sat on the other side.) Facebook’s Mark Zuckerberg practiced his Mandarin skills in a 30 minute talk with Xi, then interviewed Modi at a Sunday town hall meeting at Facebook headquarters. Among the topics: Modi’s love of social media (he has 15 million Twitter followers and 30 million “likes” on his Facebook page) and the sacrifices made by his mother in raising him. Modi also visited Sundar Pichai at Google and Elon Musk at Tesla.
Oh yes, the two leaders also saved some time for President Obama – who, like them, heads one of what the IMF considers to be the three largest economies in the world. Xi’s visit to Washington, however, was overshadowed by the resignation of House Speaker John Boehner – a powerful demonstration of the capital’s current state of dysfunction. Modi meets the President today.
Also today, Fortune’s Brainstorm E conference – focusing on energy, tech and sustainability – gets underway in Austin, Texas. You can see the full agenda here, and follow the sessions on Fortune.com. First up, I’ll be moderating a panel titled: “Where is Washington?”
More news below.
• Trump plans to target hedge funds
Republican presidential candidate Donald Trump is expected to unveil a tax plan on Monday, and intends to propose raising rates only on hedge fund and private equity profits. He also wants to cut taxes for corporates, the middle class and the poor. Fortune reports it would be the first time in recent memory a major Republican candidate has called for a significant tax increase on any segment of the population. Bloomberg
• Shell halts Arctic drilling
Royal Dutch Shell has stopped drilling for oil off the Alaskan coast after initial expectations failed to meet expectations. The company had already plowed $7 billion into the strategy that was a high return bet, but also came with high risks. Shell also said it plans to record financial charges as a result of the announcement, but didn't say how much of the project it would need to write off. Fortune
• Uber rival also investing in India
China's Didi Kuaidi – Uber's big rival in that key market abroad – is again placing a savvy investment on another rival in the revved up battle among ride-sharing services. Didi Kuaidi already invested in U.S.-based Lyft earlier this year, the company that is Uber's main U.S. rival. Now, it has been revealed that Didi Kuaidi has invested in Ola, the biggest ride-hailing company in India. China and India are particularly important to ride-hailing firms as both have large populations and low car ownership rates. Fortune
• VW staff, supplier warned of cheating
Two German newspapers are reporting that Volkswagen's own staff and one of its suppliers warned years ago about software designed to thwart emissions tests, as the automaker tried to determine whether its executives knew about the cheating. Meanwhile, countries around the world are launching their own investigations after the company was caught cheating on tests in the U.S. Volkswagen has so far admitted that the software affected engines in 11 million cars, most of which were sold in Europe. The company is likely looking into which executives were responsible for the cheating and how long they were aware of it. Reuters
• Third quarter earnings look grim
Forecasts for third-quarter S&P 500 earnings call for a 3.9% drop from a year ago, based on Thomson Reuters data, with half of the S&P sectors estimated to post lower profits due to weak oil prices, a strong U.S. dollar and muted global demand. Reuters reports that expectations for future quarters are falling as well, giving investors another reason to worry since market multiples are still above historic levels despite the recent sell-off. Already, the S&P 500 is down about 5% from its May 21 closing high. A poor earnings outlook can add to the woes. Reuters
Around the Water Cooler
• Frackers face extinction
As many as a third of fracking companies could go bust by the end of the year, an energy industry analyst warns, as months of low activity due to a huge drop in oil prices have left many either insolvent or close to it. The catalyst? Banks only audit the value of oil exploration reserves every October, and given how much oil prices have doubled, analysts expect banks will greatly reduce how much they are willing to lend pressured oil and gas companies. Fortune
• How some investors get access
This stat really says it at: Investors reportedly pay $1.4 billion a year for face time with executives. Interestingly, those private meetings are still allowed under current U.S. securities rules, though selective disclosure is prohibited. But as WSJ points out, investors can pick up on clues – eye contact, hints about sales results or M&A action, especially when the tone by a company subtly shifts. For a small group of investors, this access can be really crucial. WSJ (subscription required)
5 things to know this week
September jobs, Congress' deadline, and Trevor Noah — 5 things to know this week. This week's story can be found here.