DealBook Briefing: Goldman Says Trump Could Squeak a Win in 2020

DealBook Briefing: Goldman Says Trump Could Squeak a Win in 2020

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Goldman makes an early 2020 call

Economists at Goldman Sachs wrote in a research note over the weekend that President Trump has a “narrow” advantage over his potential Democratic challenger next year, according to news reports.

• Prediction markets have suggested that a Democratic challenger is likely to win.

• But Bloomberg reported that the Goldman economists, Alec Phillips and Blake Taylor, argue that, “The advantage of first term incumbency and the relatively strong economic performance ahead of the presidential election suggest that President Trump is more likely to win a second term than the eventual Democratic candidate is to defeat him.”

• And polls that include Howard Schultz as a potential third-party candidate show him reducing the Democratic vote share by around 2 percentage points more than the Republican vote share.

• The Goldman economists acknowledged that Mr. Trump will face headwinds. Among them: “Groups that most strongly supported President Trump in 2016 made up a smaller share of total voters in 2018 than they did in 2014.”


Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.


Running the Fed is a tough gig right now

Jay Powell, the Fed chairman, must oversee the central bank while President Trump needles him in public and the markets are volatile. Jim Tankersley and Neil Irwin of the NYT take a look at how he’s responding.

• After a disastrous news conference in December, “Mr. Powell spent the holidays holed up at a family gathering in South Florida watching financial market swings, negative corporate news and shaky economic data — and plotted a way to correct the mistakes. He scratched out bullet points on a notepad and waited for an opportunity to publicly pivot.”

• “Publicly and privately, Mr. Powell rejects any suggestion that Mr. Trump has influenced his, or the Fed’s, actions. Mr. Powell said this year that he would not resign if the president asked him to.”

• “According to interviews with colleagues, friends and lawmakers, Mr. Powell has spent the past several months pushing the Fed toward more growth-oriented policies, not because Mr. Trump is demanding it, but because he believes economic data have given the Fed no other choice.”

• “Among colleagues, Mr. Powell has emphasized the importance of not letting political considerations cause the central bank to err in either of two directions. One risk would be to bend toward the will of elected officials, which could put the economy’s long-term stability at risk.”

• “He has also mentioned a more subtle risk: stubbornly insisting on doing the opposite of what a president seeks to prove independence, and in that way doing the wrong thing. That, too, could be viewed as political interference.”

But worries remain among former Fed officials and central bankers around the world about Mr. Trump’s attempts at pressure. “I’m certainly worried about central bank independence in other countries, especially … in the most important jurisdiction in the world,” Mario Draghi of the European Central Bank said over the weekend.

More: The Fed released transcripts of interviews with former U.S. presidents, detailing 50 years of the central bank’s history.

Apple and Qualcomm return to court

Apple’s long conflict with the wireless chip maker Qualcomm is headed for a crucial court showdown this week, Don Clark of the NYT reports:

• “Apple says Qualcomm should also repay $3.1 billion associated with patents whose rights Apple says are exhausted.”

• “Qualcomm, in return, estimates that Apple’s partners — Foxconn, Pegatron, Wistron and Compal Electronics — owe more than $7.5 billion in unpaid royalties.”

• “The action moves to a federal courtroom in San Diego, where jury selection is set to begin on Monday for a trial on an Apple lawsuit and Qualcomm’s counterclaims.”

• “Tim Cook, Apple’s chief executive; Philip Schiller, the company’s senior vice president of worldwide marketing; Qualcomm’s chief executive, Steven Mollenkopf; and its co-founder Irwin Jacobs could all be called to testify.”

• The case “touches on two crucial issues for the tech industry: What is the proper balance between patent rights and competition? And what is the proper role of the government in regulating tech giants?”

Trump’s 5G announcement ignores Huawei

There was a large elephant in the room when President Trump announced a push to build out America’s next-generation wireless networks, Julian E. Barnes and David E. Sanger of the NYT report.

The biggest auction to date of U.S. spectrum for 5G was announced by Mr. Trump on Friday. “Secure 5G networks will absolutely be a vital link to America’s prosperity and national security in the 21st century,” he said.

Not mentioned: Huawei. “Mr. Trump has so far remained silent on whether the United States would issue an order essentially banning Chinese firms like Huawei from building those networks,” Mr. Barnes and Mr. Sanger report. The Trump administration has expressed fear that Huawei’s inexpensive network hardware is a national security threat and could be used by Beijing for spying.

American attempts at a global ban on Huawei still aren’t working. Jochen Homann, the president of Germany’s telecommunications regulator, said that, in his agency’s view, “no equipment supplier, including Huawei, should, or may, be specifically excluded,” according to the FT. Politico reports that the British government is split over the same issue.

But security remains a U.S. concern. America’s 5G networks must be “guarded from the enemy — and we do have enemies out there,” Mr. Trump said. U.S. officials believe it is “essential for countries to set up screening systems for foreign investments in the 5G era,” according to Nikkei Asian Review.

An earnings recession looms over Wall Street

Companies are expected to report shrinking profits for the first half of 2019. How big a problem is that?

“Consensus forecasts now point to a 0.4 percent drop in earnings per share for the three months to June, compared to the same period last year, according to FactSet,” the FT reports. “That follows estimates of a 4.6 percent decline in the first quarter, which would round off two back-to-back quarters of falling profits to earn the label of an earnings recession.”

“The market has completely ignored predictions of declining earnings growth in the first quarter,” Axios reports. “There’s been an acceptance that earnings growth was bound to decelerate this year after getting a boost from the tax cut in 2018. Profits aren’t falling because of declining sales, but margins are shrinking thanks to higher labor and material costs.”

What happens next is unclear. If global growth and trade tensions continue to trouble investors, a sell-off could rear its head. But better-than-expected results from JPMorgan Chase and PNC Financial last week suggest that, if wider economic conditions don’t become any gloomier, things could keep humming along for a little while yet.

Hollywood’s civil war

The Writers Guild of America told its 13,000 members on Friday to fire their agents, throwing Hollywood into chaos over a mounting dispute over pay.

The W.G.A. has two big issues with talent agencies like Endeavor and C.A.A.:

• A practice known as “packaging,” where agencies put together clients as a package for a given project, taking a lump-sum fee from studios. The guild says that this shortchanges writers.

• Agencies increasingly produce content themselves, which means that executives who should fight for their writers instead sit across the negotiating table from their clients.

Top writers like Stephen King and Damon Lindelof have fired their agents, and posted the letters to social media.

“Agencies have called the writers’ claims preposterous, arguing that their services are needed more than ever in a changing media environment in which Netflix, Amazon and Apple are on the rise,” John Koblin of the NYT reports.

It’s an awkward time for a feud: The TV industry is heading into “staffing season,” where networks finalize their fall lineups and hire writers to work on shows.

Next year’s tax day could be worse than today

As you stand in line at the post office waiting to mail your tax return today, here is something to consider: Next year may be even tougher.

You probably got a tax cut this year. Only about 40 percent of Americans believed that they benefited from the Trump tax cuts, a new poll by SurveyMonkey for the NYT finds. But data show that about 65 percent of Americans owe less under the new law.

But act now for next year. Tara Siegel Bernard of the NYT notes that changes to the tax code mean that many taxpayers probably aren’t withholding enough from their paychecks — leading to a bigger bill next year:

• “New guidance from the Internal Revenue Service prompted employers to adjust workers’ paychecks last March in an attempt to match up what they would owe under the new tax plan.”

• “And in some cases — if taxpayers didn’t update the relevant withholding forms — they ended up owing money, even if their total tax liability dropped.”

Revolving door

Foxconn’s founder and chairman, Terry Gou, said that he planned to step down in the next several months.

Facebook plans to appoint Peggy Alford, a PayPal executive, as its first African-American board member. Two current directors, Reed Hasting and Erskine Bowles, will step down.

Caesars Entertainment reportedly plans to hire Anthony Rodio, the chief executive of Affinity Gaming, as its new C.E.O.

The speed read


• Bristol-Myers Squibb shareholders approved the company’s $74 billion acquisition of Celgene. (Bloomberg)

• Analysts applauded Chevron’s $33 billion deal for Anadarko as “something of a steal,” but investors sent Chevron’s shares down 6 percent on Friday. (Bloomberg)

• Purdue Pharma reportedly tried to buy Reckitt Benckiser’s opioid addiction treatment business. (FT)

• Publicis agreed to buy Alliance Data’s Epsilon marketing services unit for $4.4 billion. (WSJ)

• European regulators reportedly want Deutsche Bank to scale back its investment bank, regardless of any deal with Commerzbank. (FT)

Politics and policy

• Senator Kamala Harris released 15 years’ worth of her tax returns. Related: An argument for why everyone’s tax returns should be public. (CNBC, NYT Op-Ed)

• Gov. Gavin Newsom of California urged the state’s legislature to protect utilities like PG&E from the cost of wildfires. (NYT)

• The White House is reportedly considering further restrictions on immigration for students and investors. (WSJ)

• President Trump raised $30 million for his re-election campaign in the first quarter, far outstripping Democratic rivals. (NYT)

• Here’s how Mr. Trump’s team plans to tackle the release of Robert Mueller’s report, despite not knowing what the full document says. (Axios, NYT)


• American and Southwest extended flight cancellations into August as the Boeing 737 Max jetliners remain grounded. (WSJ)

• Concerns about Boeing’s anti-stall software are roiling industries focused on autonomous machines. (FT)


• The British financial sector seems to have failed in its Brexit lobbying campaign. (FT)

• The departure from the E.U. could make it harder for the Bank of England to find its next governor. (Reuters)

• British companies are hoarding cash over fears of an economic downturn. (Reuters)


• Treasury Secretary Steven Mnuchin said that he believed the U.S. and China were nearing the final stage of trade negotiations. (NYT)

• In the talks, U.S. negotiators have reportedly backed away from demands that China curb its industrial subsidies. (Reuters)

• How President Trump is undercutting his own trade deals. (NYT)


• China is using A.I. to profile members of a largely Muslim minority group. (NYT)

• Citi Bike was forced to pull electric cycles off the streets after complaints about the brakes, another black eye for its parent company, Lyft. (Business Insider)

• Google’s huge stash of location data about users is being used by investigators to find suspects and witnesses near crimes — but it sometimes snares the innocent. (NYT)

• Google is disbanding a second A.I. ethics panel, this one based in Britain and charged with reviewing its work in health care. (WSJ)

• Do Alphabet’s smart-city plans for Toronto face a backlash similar to that against Amazon’s HQ2 plans in New York? (Business Insider)

• Jack Ma called a 72-hour workweek a “huge blessing.” (Bloomberg)

Best of the rest

• Germany is under pressure from the I.M.F. to stimulate economic growth. (WSJ)

• The Indian airline Jet Airways is on the brink of shutting down. (NYT)

• Rite Aid will stop selling e-cigarettes and vaping products. (NYT)

• A 10-day trading break in Japan for national holidays is spooking global markets. (Bloomberg)

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