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CEO Daily: Wednesday 7th September

Good morning.


World stocks hit their highest in more than a year this morning, according to the MSCI all-country index. The latest stock moves were fueled by expectations that the Federal Reserve won’t raise interest rates after Friday’s week employment report.


With corporate profits trending downward for the past year, I’m not sure what the party is about. Donald Trump’s comment Monday that the Fed is creating a “false economy” — which sparked another firestorm of criticism — doesn’t sound far off to me. Hillary Clinton lectured him, saying “you should not be commenting on Fed actions when you are either running for president or you are president.” Really? And the pundit class, which has grown accustomed to jumping on Trump’s misstatements, quickly piled on. “Predictably absurd,” said the usually sober Ben White of Politico.


But on this one, Trump’s got it about right. At the very least, the Fed’s easy money policies have contributed to a false stock market. It’s time for the free money experiment to end.


More news below.



Alan Murray

Top News

Apple’s Low-Key iPhone Launch 

Apple will launch the latest iteration of the iPhone into an increasingly saturated global market. The new product is expected to be thinner (but not bendier), to feature a better camera – and, to relieved sighs from the chronically inept across the globe – to offer better water resistance. It’s also likely to come without a headphone jack, creating new opportunities for low-level grumbling about customers being milked for expensive branded doo-hickeys (or ‘adapters’, if you prefer) to make their current earbuds fungible. Rumors of a new Apple Watch also gatecrashing the launch party have also gained strength, due to signs of existing models selling out and not being replaced by fresh inventory. That development comes as data suggest it has lost significant ground in the wearables market. Fortune Fortune

Fox Settles With Gretchen Carlson

Fox News paid an estimated $20 million to settle claims of sexual harassment from former anchor Gretchen Carlson against ousted CEO Roger Ailes. It also offered her a public apology. Carlson said she was ‘gratified’. Ailes himself will not be contributing to the payout. It wasn’t clear whether Fox would be adjusting the $40 million severance package that Ailes was reportedly in line for. If it does, that will reduce the ammunition at Ailes’s disposal for suing New York magazine over its in-depth report into harassment during Ailes’s rule at Fox. Gabriel Sherman, the author of that article, tweeted yesterday that Fox’s total bill for settling with former female executives has topped $40 million—a figure that Fox hasn’t confirmed. Fortune

Allergan CEO: I’m Not Like Those Others

Allergan CEO Brent Saunders promised a “social contract” with patients, undertaking not to raise life-saving drug prices unreasonably and to balance the profit motive with legitimate investments in researching and developing new drugs. In a blog post, he condemned the price-gouging behavior of some rivals that he himself chose not to name, and said Allergan wouldn’t raise the price of branded medication by more than once a year, and by no more than 10%. Strikingly, Saunders also said that Allergan wouldn’t increase the price of branded drugs whose patents are on the cusp of expiring without corresponding increases in the price of actually making those treatments–a common tactic among big pharma.  Fortune

Rumors of Coherent Brexit Policy Greatly Exaggerated

The British government convincingly swept aside rumors that it would soon adopt a coherent strategy in negotiating the terms of its divorce settlement with the EU. Because the EU considers free trade and the free movement of people as inseparable, the key trade-off for London is between restricting immigration and retaining full access to the EU’s Single Market. Prime Minister Theresa May had hinted at the G20 that control of immigration would take priority. But when David Davis, the head of a new government department for Exiting the European Union, took the logical next step of saying that it would be “very improbable” that the U.K. would stay in the Single Market, May’s office distanced itself from the comments, saying they were “not government policy.” In separate news, Ford Motor said it was cutting in half a planned $350 million investment at its engine plant in Bridgend, Wales, although it said its decision was more to do with the European market in general than with the Brexit decision. FT, metered access


Around the Water Cooler

Goldman Bans Partner Donations to Trump Campaign

Goldman Sachs has enacted a set of rules that bans the firm’s top employees from contributing to certain campaigns, including the Trump-Pence ticket. The rules kicked in Sept. 1 and will apply only to partners of the firm. The firm says the rules were meant to remove any implication of so-called “pay to play.” Four years ago, the bank paid $12 million to settle charges that a former Boston-based banker had picked up bond underwriting business in the state while working for and contributing funds to the campaign of a then Massachusetts state treasurer and governor-hopeful, Tim Cahill. But the people in the Trump campaign are sure to question the timing. That’s because the rules ban donations to politicians running for state or local offices, as well as donations to state officials who are seeking federal office. That makes campaign contributions to the Trump-Pence ticket a no-no. Pence is the current governor of Indiana. Fortune

Ackman Takes a Bite of Chipotle

Chipotle Mexican Grill has a potentially big new problem on its hands: Activist investor William Ackman said in a filing on Tuesday that his firm has taken a big stake in the burrito chain and plans to talk to management about its poor stock performance. The shares have fallen by nearly half from their highs of last year, but rose 5.5% in after-hours trading. In a filing with the U.S. Securities and Exchange Commission, Ackman’s Pershing Square Capital Management disclosed it has bought 9.9% of Chipotle’s shares and would to enter into discussions with the chain’s top management. Chipotle “has a strong brand, differentiated offering, enormous growth opportunity, and visionary leadership,” Pershing said. The hedge fund added: Chipotle’s stock is “undervalued and is an attractive investment.” The bespoke burrito chain has been badly hit by a number of food safety disasters, notably an E.Coli outbreak in late 2015, which have weighed heavily on sales and profit this year. Fortune

VW Goes Electric in China

After its $15 billion settlement with federal authorities over the diesel emissions scandal behind it, Volkswagen is stepping up the pace of strategic initiatives to secure itself a future. Hot on the heels of yesterday’s investment in truckmaker Navistar, VW signed a preliminary deal with Anhui Jianghuai Automobile (JAC) to make electric vehicles in China. China is, famously, the place to be in the EV sector, with the state backing a myriad of schemes to wean the transportation sector off the internal combustion engine and cut acute urban pollution (although it won’t get very far if it doesn’t clean up its electric power plants at the same time). Sales of battery electric and plug-in hybrid cars more than quadrupled last year and rapid growth continued this year. JAC is the country’s ninth-largest automaker by sales. Fortune

The More-Than-Lucky Country

Australia reached a notable milestone of 25 years without a recession—100 straight quarters of economic expansion—in the three months to June. Australians like to think of their homeland as “The Lucky Country”, and there’s no denying that accidents of geography and geology have made it China’s preferred source of inputs for its decades-long transformation. But the record is down to more than just luck: South Africa, Russia and Brazil all have comparable natural resources, but none has come close to matching Australia’s governance in the last 25 years, anchored in functioning democratic institutions and restrained by regular changes of power. Oz has plenty of strategic challenges ahead—the commodity boom may not survive China’s own economic transformation, and its inflated house prices are a clear and present danger to the banking system—but most other countries would swap their problems for Oz’s in a heartbeat. Fortune