Why are stocks still rising?

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Record-setting markets, despite threats everywhere

Economic fears are climbing — but so are the markets, with the S&P 500 and the Dow Jones industrial average both setting records yesterday. As Stephen Grocer of the NYT explains, it’s because investors have nowhere else to go.

Investors should be worried. The continuing U.S.-China trade war, a slowing global economy and simmering geopolitical tensions are all huge causes for concern. The Fed is open to cutting interest rates because things look so bad.

But they feel that there is no alternative — TINA, in Wall Street speak — to investing in stocks. Lower interest rates mean that borrowing costs will be low, which means that investing in bonds is less attractive than in equities.

It’s not as if investors are popping champagne. “They are very aware of the signs that an economic slowdown is taking place,” JC O’Hara, the chief market technician at MKM Partners, told Mr. Grocer. “But in a TINA market, where are they going to put their money?”

Still, the rally could continue for a while. Research by Audrey Kaplan of the Wells Fargo Investment Institute shows that stock-market rallies after Fed rate cuts tended to last at least 12 months after the central bank acted.

Trump’s social media summit was a call for free speech (for conservatives) 

At a meeting at the White House yesterday, 200 people gathered to discuss the problems facing social media. Or one problem, at least: the alleged censorship of free speech.

In attendance were some Mr. Trump’s most ardent digital warriors, Katie Rogers of the NYT writes, including right-wing voices like James O’Keefe, Ali Alexander and Bill Mitchell. Not on the list: anyone from Twitter, Facebook or Google.

Mr. Trump congratulated them for “bypassing the corrupt establishment” and traditional media. Referring to the content that they produce, he said that “some of you guys are out there,” adding, “I mean, it’s genius, but it’s bad.”

“We have terrible bias,” Mr. Trump told the audience, referring to social media companies whom he has accused of censoring conservative views. “Big Tech must not censor the voices of the American people.”

• He added that he is directing his administration “to explore all regulatory and legislative solutions to protect free speech and the free speech rights of all Americans.”
• And he congratulated Senator Josh Hawley, Republican of Missouri, for working on “very important legislation.” Mr. Hawley has proposed that tech companies shouldn’t receive legal immunity for user content if they can’t prove they’re politically neutral.

Technology companies deny accusations of bias, and to date there has been no solid evidence that backs up Mr. Trump’s view.

“Thursday’s summit was a public embrace of a group” that Mr. Trump “thinks are powerful allies,” Charlie Warzel of the NYT opinion page writes. “The summit suggests that 2016’s meme army was just proof of concept for an information war in 2020.”

Amazon plans to retrain a third of its staff 

The e-commerce giant said yesterday that it will spend $700 million to retrain about a third of its American workers to do more high-tech tasks, Ben Casselman and Adam Satariano of the NYT write.

• It would be one of the world’s largest employee-retraining efforts, applying to about 100,000 workers — from corporate employees to warehouse laborers — by 2025.
• The hope is to “move a large swath of workers up one or two rungs on the skills ladder, turning warehouse floor workers into IT technicians and low-level coders into data scientists.”

“With unemployment low and workers scarce, companies like Amazon feel pressure to look internally to fill their labor needs,” Mr. Casselman and Mr. Satariano write.

This is “a large-scale experiment in whether companies can remake their existing work forces to fit a fast-changing technological world,” Mr. Casselman and Mr. Satariano write. So far, other government and corporate attempts have largely flopped.

Amazon’s effort could help answer a big question, Mr. Casselman and Mr. Satariano write: “Will automation be a solution for the great challenges of the 21st-century economy — low wages, rising inequality and anemic overall growth — or make those problems worse?”

U.S. executives are targets in the trade war 

Business executives and other frequent American visitors to China are being detained by Chinese officials more frequently, the NYT writes, revealing that an escalation in tensions between Washington and Beijing over their trade fight is having wider consequences.

• A Chinese-American executive at Koch Industries was told by Chinese authorities that he couldn’t leave the vicinity of his hotel room in southern China, the NYT reports, citing unnamed sources. He was detained and interrogated for days — until the State Department intervened.
• One American industry group recently told its members that it was developing a contingency plan for use if one of its offices was raided or its servers seized.
• The increase in detentions escalated after Canadian officials arrested the C.F.O. of Huawei at the behest of American officials late last year.
• It’s unclear how big the problem is — in part because companies may not speak publicly about the issue because they could face punishment in China’s politicized courts, boycotts from the state-run news media and more.
• “The Chinese government has upped the ante,” James Zimmerman, a partner in the Beijing office of the law firm Perkins Coie, told the NYT. The aim, he added, was to “send a message to the Trump administration that they can engage in hostage diplomacy if push comes to shove.”

France and Britain defy the U.S. with tech tax plans

The countries still intend to tax large technology companies, despite the Trump administration’s plans to investigate whether that could amount to an unfair singling out of American businesses.

• French lawmakers voted yesterday to impose a so-called digital tax of 3 percent on the revenue companies earn from providing digital services to French users.
• British leaders also unveiled draft legislation yesterday that outlines a similar tax, of 2 percent.

The Trump administration is examining whether the French plan counts as an unfair trade practice that should be punished with retaliatory tariffs.

But it’s also scrambling to form an international agreement, Jim Tankersley and Alan Rappeport of the NYT write:

• “Administration officials have tried to shape an effort being led by the Organization for Economic Cooperation and Development to broker an international system for taxing digital profits.”
• Mr. Tankersley and Mr. Rappeport add that the administration is pushing the Senate to vote next week on long-foundering updates to international tax treaties, “which could demonstrate to allies that it is serious about leading the effort to broker a digital armistice.”

The stakes in the opioid fight are escalating

Reckitt Benckiser agreed yesterday to pay a $1.4 billion settlement over federal investigations into the sales of an opioid treatment. It was the biggest payout yet in the opioid crisis, and Hannah Kuchler of the FT writes that other pharmaceutical companies could face big bills, too.

Reckitt Benckiser was under investigation for sales of Suboxone, which isn’t an opioid but a drug used to treat opioid addiction, by a now-former subsidiary. Shares in the company rose yesterdaydespite the fine, as investors welcomed clarity on its legal outlook.

Other drug makers have paid far smaller amounts. Insys, which makes a fentanyl-based spray, reached a $225 million settlement last month. And Purdue Pharma, the creator of OxyContin, has paid out over $800 million in the past decade.

Pharmaceutical companies argue that they’re not responsible for the crisis, and some experts say there’s no clear line of responsibility.

But all bets are off in October, when a huge case against 22 opioid manufacturers, distributors and pharmacies goes to trial. New details on how those companies operated could come out, spurring them to consider sweeping settlements to avoid further legal headaches.

Trump is no fan of crypto

The president took to Twitter yesterday to air his views on cryptocurrency, and in particular Facebook’s Libra project:

• “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” he wrote.
• “Facebook Libra’s ‘virtual currency’ will have little standing or dependability,” he added. “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks.”

The attack follows criticism from the Fed chairman, Jay Powell, earlier this week, who said that “Libra raises a lot of serious concerns,” including the topics of privacy, money laundering, consumer protection and financial stability.

It also came as the president attacked Facebook and other tech companies as being biased against conservative viewpoints at the White House’s social media summit.

With the Fed, Mr. Trump and U.S. lawmakers piling on Libra, it will be interesting to see if the administration moves to crack down on the company’s project, or cryptocurrencies more broadly.

Revolving door

The consulting firm Accenture named Julie Sweet as its C.E.O.

Eric Lindblad is retiring as the head of Boeing’s 737 plane business, and will be replaced by Mark Jenks.

Bjorn Kjos will step down as C.E.O. of Norwegian Air.

The N.B.A. hired Kate Jhaveri, the head of marketing for Amazon’s Twitch streaming service, as its chief marketing officer.

Ryanair’s C.O.O., Peter Bellew, will leave at the end of the year.

The speed read

Deals

• Negotiations to complete T-Mobile’s purchase of Sprint are reportedly bogged down over conditions for the sale of some assets to Dish Network. (WSJ)
• Anadarko scheduled a shareholder vote on its sale to Occidental Petroleum for next month. (Reuters)
• Postmates is said to have considered selling itself to rivals like DoorDash and Uber Eats. (Recode)
• Volkswagen has reportedly agreed to invest $2.6 billion into Ford Motor’s self-driving car division. (WSJ)
• J. Crew is said to be planning an I.P.O. for its Madewell clothing business. (Reuters)

Jeffrey Epstein

• The financier has offered up his Manhattan mansion and private jet as collateral for bail, in exchange for being granted house arrest instead of jail. (NYT)
• Mr. Epstein had to register as a sex offender in New York and Florida — but not in New Mexico, where he owns a huge ranch. (NYT)
• The scandal has also focused attention on Mr. Epstein’s longtime associate, the British socialite Ghislaine Maxwell. (WSJ)

Politics and policy

• The Fed chairman, Jay Powell, warned of “unthinkable harm” if the White House and Congress fail to raise the debt ceiling. (Hill)
• President Trump is considering price controls for prescription drugs, even as he faced setbacks on two other efforts to cap the cost of treatments. (NYT)
• Mr. Trump unexpectedly abandoned his effort to add a citizenship question to the 2020 census. (NYT)
• The White House reportedly convened top officials yesterday to end infighting over 5G policy. (Axios)
• Congressional legislation could put new limits on the use of anonymous shell companies. (DealBook)

Tech

• Huawei claims to have increased first-half revenue despite a U.S. ban on its ability to purchase American components. The rest of 2019 could be a different story. (SCMP)
• Google confirmed that contractors listen to audio recordings of users’ interactions with its smart speaker devices. (WSJ)
• YouTube is giving its creators new ways to make money. (TechCrunch)
• British Airways’ $230 million fine over a data breach is good news for cybersecurity companies, which are enjoying a rush of interest off the news. (FT)
• The Japanese cryptocurrency exchange Bitpoint was hacked, losing about $32 million worth of digital tokens. (Bloomberg)

Best of the rest

• California’s political leaders have set up a fund to help compensate victims for losses from fires started by utilities’ equipment, in an effort to shore up investor confidence in the companies. (NYT)
• Harvey Weinstein’s legal team has fallen apart. Again. (Daily Beast)
• “How China can create its own Goldman Sachs.” (Bloomberg Opinion)
• A poker-playing A.I. system can now beat the world’s top humans at multiplayer no-limit Texas Hold ’Em. (NYT)

Thanks for reading! We’ll see you next week.

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