The stock markets hit a record high

Good Wednesday morning, and welcome to today's DealBook Briefing. (Want this by email? Sign up here.)

Stock investors ignore the risks

The inverted yield curve? Forget it. An earnings recession? Not a problem. The trade war? So what?

Stock investors looked beyond those threats as they pushed the markets to record highs yesterday, Matt Phillips of the NYT reports.

• “The S&P 500 rose to a record on Tuesday, surpassing a high last set in September. The day’s gains topped off a rally that has pushed the stock benchmark up 17 percent this year.”
• “That’s the index’s best start to a year since 1987, and one that has confounded those who anticipated that 2019 would be a difficult time for stocks.”
• “The technology-focused Nasdaq index also rose to a record on Tuesday.”

There is a clear reason for the upturn: the Fed. The rally began after the central bank “all but promised investors that it wouldn’t raise interest rates further and risk tipping the economy into a recession,” Mr. Phillips writes.

• “Such ‘easy’ monetary policy, to use the jargon of the markets, provides a helping hand to the economy and caps returns on bonds, the main investment alternative to stocks.”
• “Both help buoy stock prices.”
• “It has also helped that the earnings slowdown isn’t coming as a surprise.”

Analysts don’t expect all this to last. “Even if the earnings picture improves significantly, a cooling-off period is overdue,” Mr. Phillips writes.

Elliott’s new target: SAP

SAP, the German technology giant, is promising a sweeping review of its businesses. The company’s announcement today was partly a response to the activist hedge fund Elliott Management.

It’s one of Elliott’s biggest targets in a 42-year history. Elliott holds a stake in SAP worth 1.2 billion euros, or about $1.3 billion. The investment is being overseen by Jesse Cohn, the partner who led activist campaigns at EMC and Citrix.

SAP will form a review committee made up of board members who will attempt to “accelerate operational excellence.” It also set new financial performance targets, including 75 percent gross margins for its cloud business, and will consider buying back shares.

Elliott supports the move. “The company’s stock has been consistently undervalued relative to its revenue growth, and today’s announcement lays the groundwork for substantial value realization,” Mr. Cohn and Jason Genrich, an Elliott portfolio manager, said in a statement.

But it may not remain friendly. There was no mention of a standstill agreement or public nondisparagement clause — meaning the hedge fund could still amass more shares and start a fight if it doesn’t think SAP is doing enough.

Private equity’s part in Hollywood’s civil war

As writers feud with their agents over compensation, some claim that investment giants played a role in turning talent agencies into businesses that squeeze their clients’ earnings, Noam Scheiber of the NYT writes.

Firms like TPG Capital and Silver Lake took big stakes in talent agencies. TPG bought a majority stake in Creative Artists Agency, while Silver Lake invested in Endeavor, the parent company of WME.

And they helped transform the agencies’ business models, with a move from representing talent toward producing content. They also encouraged “packaging” deals, where agencies bundle multiple clients into a single production.

Those practices are problematic, writers argue. Agencies or their parent companies are now “in the position of simultaneously negotiating on behalf of writers and hiring them, a dynamic that could hurt their pay,” Mr. Scheiber writes.

Some agents concede that they have been “too aggressive” in seeking packaging fees. But they deny that private-equity investments fueled the practices.

Trump bemoaned his Twitter follower count to Jack Dorsey

Twitter’s C.E.O. met President Trump at the White House yesterday, ostensibly to discuss protecting the public from the ills of social media — but the meeting reportedly veered off-topic, according to the WaPo.

The official focus was “protecting the health of the public conversation ahead of the 2020 U.S. elections and efforts underway to respond to the opioid crisis,” Twitter said in a statement. Mr. Trump reportedly initiated the meeting.

But Mr. Trump complained about his falling follower count, according to the WaPo. A “significant portion” of the meeting was reportedly spent on Mr. Trump’s concerns that “Twitter quietly, and deliberately, has limited or removed some of his followers,” according to an unnamed source.

Mr. Trump had tweeted that Twitter doesn’t “treat me well as a Republican” earlier in the day, adding that the platform is “very discriminatory” and “constantly taking people off list.” Mr. Dorsey reportedly reassured the president that follower numbers fluctuate when the company removes fraudulent accounts.

Inside the fall of Kleiner Perkins

For decades, Kleiner Perkins Caufield and Byers was the best-known venture capital firm around, having invested early in Amazon and Google. Polina Marinova of Fortune traces how the onetime giant lost its way.

• “Kleiner had sat out on another generation of technology investments, the crop of so-called Web 2.0 companies, including Facebook in the 2000s. Now, in the 2010s, it was failing again to make early-stage investments — the traditional meat of venture capital investing — in the most sought-after start-ups of the day.”
• “Kleiner also became known as a firm full of highly pedigreed young investors who stayed for a number of years but left without being given a shot at ascending to the top ranks.”
• And it was bloodied by a court battle with Ellen Pao, an executive who accused the firm of gender discrimination.
• While Kleiner’s early-stage investment team struggled, the firm had found success by investing in older start-ups that needed cash to grow, a strategy led by Mary Meeker.
• But the hiring of Mamoon Hamid as Kleiner’s heir apparent chafed Ms. Meeker, who left the firm in September along with her entire team.
• One former insider told Fortune, “Mamoon comes in and thinks he’s the new sheriff in a place where Mary thinks she’s the sheriff. Why wouldn’t she leave?”

The (tax) joys of being a property investor

Property investors in the U.S. get a host of tax breaks not available to others. Patrick Clark and Ben Stupples of Bloomberg Businessweek have taken a look at these perks:

• Harry Macklowe, a New York City developer, “hasn’t paid income tax since the 1980s, according to a court opinion in his divorce proceedings” that split more than $650 million between him and his ex-wife, Linda.
• Mr. Macklowe didn’t do anything wrong. It’s just that “real estate moguls have a range of strategies available to reduce or postpone their tax liabilities.”
• “The U.S. tax code is designed to measure profitability over time, allowing businesses to write off losses in one year against income in the next.”
• “There’s a general rule that you’re not supposed to be able to claim losses for more than you put into a deal,” Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy, a left-leaning think tank, told Businessweek. “Real estate is the exception.”
• “The value of central business district office buildings in the U.S. more than doubled from the fourth quarter of 2000 to the same period of 2018, according to a commercial property price index compiled by Real Capital Analytics. A property owner might write off about half of a building’s value over the same period using a standard depreciation schedule.”
• Since becoming president, Donald Trump, himself a property tycoon, has introduced “several new benefits for the real estate industry.”

Revolving door

Julia Angwin was ousted as editor in chief of The Markup, an investigative journalism start-up, amid a clash with a fellow founder, Sue Gardner.

CBS extended the contract of its interim chief executive, Joseph Ianniello, through the end of the year and called off its search for a permanent C.E.O.

Lucid Motors, the electric carmaker, promoted Peter Rawlinson, its chief technical officer, to C.E.O. after Sam Weng left the position.

The brokerage firm CLSA named Richard Gould as its C.E.O.

Facebook hired Kevin Bankston, the director of the privacy-focused think tank Open Technology Institute, as a director of public policy.

The speed read

Deals

• Deutsche Bank is reportedly considering hiving off its troubled assets into a “bad bank” as it holds merger talks with Commerzbank. Deutsche Bank is also reportedly in discussions to merge its asset-management arm with UBS’s. (WSJ, FT)
• Netflix plans to sell $2 billion in bonds to fund more content. (CNBC)
• SoftBank agreed to invest about $1 billion in Wirecard, the troubled German payments company. (Bloomberg)
• Wall Street bankers are using A.I. to streamline stock and bond offerings. (FT)
• Four of the major tech I.P.O.s this year, including Uber’s, are overvalued, according to the N.Y.U. professor Aswath Damodaran. (CNBC)

Politics and policy

• The Treasury Department won’t decide whether to turn over President Trump’s tax returns until May 6, missing another House deadline. (NYT)
• Joe Biden plans to officially declare his candidacy for the 2020 race tomorrow. (NYT)
• Speaker Nancy Pelosi plans to meet Mr. Trump next week to discuss infrastructure investments. (CNBC)
• Mr. Trump said he thought aides and former aides need not testify before Congress in the wake of Robert Mueller’s report. (WaPo)
• Mr. Mueller didn’t say whether Mr. Trump obstructed justice, but left clues to help others decide. And obstruction of justice has historically been an impeachable offense. (NYT)
• The British government is trying again to restart its Brexit efforts ahead of European elections next month. (WSJ)

Trade

• The U.S. will reportedly send a high-level delegation to Beijing next week for trade talks. (CNBC)
• American tariffs aren’t hurting Europe, the European Central Bank says. (NYT)
• A leading European industrialist has promised to bring back jobs from China. (FT)
• U.S. authorities charged an American engineer and a Chinese businessman with stealing trade secrets from G.E. (WaPo)

Tech

• China’s police and military are reportedly using a fleet of U.S.-built satellites. (WSJ)
• Alphabet’s drone company, Wing, has been granted the first approval for drone deliveries in U.S. Also: A start-up called Zipline is using drones to deliver medicines to 12 million people in Ghana. (NYT, FT)
• U.S. lawmakers wrote to Google, demanding more details about how law enforcement agencies use the company’s data to identify suspects. (Reuters)
• Tesla is reintroducing cheaper versions of its Model S and Model X. (Reuters)
• Foxconn reportedly wants to amend its deal with Wisconsin. (Verge)

Best of the rest

• The battle between Steven Spielberg and Netflix has fizzled out. (NYT)
• PG&E has asked California officials to let it raise electricity rates to fund safety improvements. (NYT)
• Walgreens will stop selling tobacco to customers under 21. (NYT)
• More financiers are returning to Saudi Arabia in the wake of the Jamal Khashoggi killing. (Bloomberg)
• The day before it announced a $33 billion deal with Chevron, Anadarko increased the payouts its top executives could receive in the event of a sale. (WSJ)
• SoftBank’s Masayoshi Son reportedly lost $130 million on Bitcoin. (WSJ)

Thanks for reading! We’ll see you tomorrow.

You can find live updates throughout the day at nytimes.com/dealbook.

We’d love your feedback. Please email thoughts and suggestions to [email protected].