Today marks the first anniversary of the murder of Washington Post columnist Jamal Khashoggi at the hands of agents of the Saudi crown prince. And what a difference a year makes: Finance industry executives and Trump administration officials who dropped out of the kingdom’s annual investment conference last year are preparing to stream back later this month.
Senior executives from JPMorgan Chase, Citigroup and BlackRock are all planning to attend the event — officially known as the Future Investment Initiative and informally dubbed “Davos in the desert” — according to an attendees list reviewed by my colleagues Reed Albergotti, Josh Dawsey and Kareem Fahim.
“More than 150 executives have confirmed their attendance, the list shows, including more than 40 executives representing U.S. companies,” they write. “The head of Russia’s sovereign wealth fund was attending, along with other executives who represent major banks, tech companies, business conglomerates and defense contractors from China, India, the United Arab Emirates and several European states.”
Among them are some Wall Street bigs who begged off last year’s conference as Saudi Crown Prince Mohammed bin Salman weathered a firestorm of international condemnation for his likely involvement ordering Khashoggi’s brutal killing and dismemberment. HSBC chief executive Noel Quinn will be making the trip, for example, a year after his predecessor, John Flint, backed out.
“Our participation reflects a 70-year presence in Saudi Arabia,” bank representative Robert Sherman told me in an email. “Through our strategic partnership with [the Saudi British Bank] we employ thousands of people and continue to support our customers as the country implements its economic reform and social development agenda.”
BlackRock CEO Larry Fink, who is also marking a return to the conference this year, likewise pointed to changes in the country as a reason to continue doing business there. “I believe greater economic integration and diversification will help Saudi Arabia build a more modern and sustainable economy and society for all of its citizens,” he said in a LinkedIn post earlier this year. “I also believe that corporate engagement and public dialogue can help with that evolution.”
They’ll be joined by a contingent from the Trump administration, which has worked to rehabilitate Mohammed on the world stage. Jared Kushner, President Trump’s son-in-law and senior adviser, is slated to lead a delegation of Trump officials to the event, per reporting by my colleagues Josh Dawsey and Ashley Parker. Kushner maintains close ties to Mohammed.
Treasury Secretary Steven Mnuchin, who pulled out of attending last year’s conference at the last minute, “may also attend the conference, said someone familiar with the planning,” Josh and Ashley reported. (Last year, he traveled to Riyadh anyway and met with Mohammed just before the conference.) A Treasury representative didn’t respond to a request for comment.
The conference — set to take place at the same Ritz-Carlton hotel in Riyadh where Mohammed jailed hundreds of Saudi leaders for months as he consolidated power — will highlight the intersecting interests of Western corporate executives and the crown prince. He wants their investments and their imprimatur as he seeks to continue rebuilding his tattered image. They want to compete for arms deals, banking fees, investments from the kingdom’s $320 billion sovereign wealth fund, and more.
Bankers have had “a powerful incentive to keep relations cordial with Saudi Arabia — namely, the hotly anticipated initial public offering by Aramco, the national oil company,” my colleagues write. “Analysts have estimated the company could have a valuation between $1.5 trillion and $2 trillion, and the crown prince has said he would like to list as much as 5 percent of Aramco, the world’s most profitable company.” The oil giant has chosen nine banks to underwrite the listing, “including JPMorgan Chase, Goldman Sachs and Citigroup, whose senior executives are expected to attend the investment conference, according to the list obtained by The Post.”
Not all finance industry heavyweights are beating a path back to Riyadh. Joe Landy, co-CEO of private equity firm Warburg Pincus, dropped out of last year’s event and isn’t planning to return this year, a firm spokeswoman tells me. Ditto for retired Gen. David Petraeus, who now chairs the KKR Global Institute — and a spokeswoman says none of the investment firm’s other senior leadership will be attending, either.
Meanwhile, a spokesman for TPG Capital, the private equity giant, declined to comment on whether founding partner David Bonderman will be returning after backing out of last year’s event.
But tech executives are avoiding the conference “largely because an abundant flow of money already available in the tech industry has made funding from the kingdom unnecessary and not worth the public relations headache,” my colleagues write. A number of Wall Streeters evidently have made a different calculation.
PROGRAMMING NOTE: The Finance 202 will be publishing on a limited schedule while Congress is on recess this week and next week. We will not be publishing Oct. 4, 7 or 11. We will return to our normal schedule Oct. 14.
— Manufacturing hits 10-year low: “U.S. manufacturing fell deeper into a contraction last month, erasing hope of a quick turnaround for the industry and handing a blow to [Trump’s] promises that he would revive blue-collar jobs and companies,” my colleague Heather Long reports.
“September marked the worst month for U.S. manufacturing in more than a decade — since June 2009 — according to the closely watched Institute for Supply Management’s manufacturing index. Companies blamed Trump’s escalating trade war for many of their woes, putting pressure on the White House to show progress soon. Manufacturing remains a prominent industry in many swing states.”
- How the news played out on Wall Street: “Concerns are rising that the contraction in manufacturing could spill over into the rest of the U.S. economy. Stocks sold off quickly on the news that nearly every manufacturing sector reported trouble, with the Dow Jones industrial average ending the day with a 344-point loss.”
Global manufacturing doesn’t look much better: “The World Trade Organization has downgraded its forecast for global trade growth for this year and next as the repercussions of the U.S.-China trade war and a broader economic slowdown continue to play out,” my colleague Rachel Siegel reports.
“The darkening outlook for trade is discouraging but not unexpected,” WTO Director-General Roberto Azevêdo said in a statement. “Beyond their direct effects, trade conflicts heighten uncertainty. … Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”
- Why things could get worse: “The WTO further warned that additional rounds of tariffs — and retaliation against those levies — ‘could produce a destructive cycle of recrimination.’ Constantly shifting monetary and fiscal policy could destabilize volatile financial markets. A sharper slowdown of the global economy could produce an even larger downturn in trade. And complications from Brexit could have ripple effects throughout Europe, the WTO said.”
Trump responded by bashing the Fed:
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!— Donald J. Trump (@realDonaldTrump) October 1, 2019
As Bloomberg's Luke Kawa notes, Trump's view of the Fed as the bogeyman doesn't square with that of actual manufacturers, who blame his trade war:
fwiw, respondents to the ISM survey cited negative trade war effects in chemical products, food/beverage/tobacco, and electrical equipment/appliances/components.— Luke Kawa (@LJKawa) October 1, 2019
None of the featured comments referenced the U.S. dollar. https://t.co/YwT8oOVILd
Peter Navarro, the White House trade adviser, has also been denying the effects of the trade war on manufacturers. Via CNBC's Kayla Tausche:
Yesterday on @SquawkCNBC, I asked WH trade advisor Peter Navarro about weakening manufacturing data and job losses in Pennsylvania and Wisconsin.— Kayla Tausche (@kaylatausche) October 1, 2019
"I don't even know why you're going down this path" of questioning, Navarro said. "Manufacturing is strong as a rock." https://t.co/GauNapF86O
— Iowa farmers are feeling the pain, too. The Post's David Lynch reports that Trump administration waivers for small oil refiners, exempting them from the federal requirement to blend ethanol into their gasoline, is hurting Iowa corn growers already under strain from the trade war: "The trade war has cost farmers potential Chinese orders for the corn-based fuel as well as for a byproduct that is used as animal feed," he writes. "Now, the refinery exemptions are compounding the financial pain — and threatening political consequences for the president, who won this state and its six electoral votes in 2016...
"Democrats flipped two of the state’s congressional seats in the 2018 midterm election, and Barack Obama won Iowa twice, so Republicans are attentive to any signs of eroding support. In recent days, amid a rising impeachment furor, the White House has scrambled to midwife a compromise between ethanol advocates and the oil industry."
Farmer sentiment darkens more broadly. "Farmers grew much more pessimistic about current conditions on their own farms and in the U.S. agricultural economy in late summer," according to the latest installment of the Purdue University/CME Group Ag Economy Barometer, a monthly survey of the sector. Farmers' outlook for making large investments such as machinery or buildings also dropped, for the second month in a row, according to a release desribing results of the survey.
— Trump reportedly ordered the U.S.-Mexican border closed: “The Oval Office meeting this past March began, as so many had, with [Trump] fuming about migrants. But this time he had a solution. As White House advisers listened astonished, he ordered them to shut down the entire 2,000-mile border with Mexico — by noon the next day,” the New York Times’s Michael D. Shear and Julie Hirschfeld Davis report.
“Mr. Trump’s order to close the border was a decision point that touched off a frenzied week of presidential rages, around-the-clock staff panic and far more White House turmoil than was known at the time. By the end of the week, the seat-of-the-pants president had backed off his threat but had retaliated with the beginning of a purge of the aides who had tried to contain him.”
- More inside the effort to change Trump’s mind: “White House advisers encouraged a stream of corporate executives, Republican lawmakers and officials from the U.S. Chamber of Commerce to tell Mr. Trump how damaging a border closure would be.”
— GM temporarily lays off Mexican workers as strike continues: “General Motors Co. said a parts shortage stemming from a United Auto Workers strike in the U.S. led it to idle a pickup-truck factory in Mexico, cutting off the supply of GM’s most-profitable vehicles and further threatening to dent its bottom line,” the Wall Street Journal's Mike Colias reports.
“GM has temporarily let go about 6,000 workers at its truck plant in Silao, Mexico, along with a transmission plant nearby, a company spokesman confirmed. The auto maker closed the facilities because parts shipments from the U.S., where factory workers remain on strike, have dried up, he said. Plant workers affected by the work stoppage will receive some pay or take vacation while the factory is idled, he said.”
- The key takeaway: “The move is the latest sign that the UAW strike is having a broader ripple effect on the company’s North American operations and the auto-parts suppliers and firms dependent on GM’s U.S. factory production for business. The strike, which began 16 days ago, has halted manufacturing lines at more than 30 GM factories in the U.S. and suspended work at company-owned parts warehouses and distribution centers also staffed with UAW-represented workers.”
— Amazon sellers say retail giant puts itself first: “Amazon has become a powerful marketplace alongside its role as an online retailer, with more than 2.5 million third-party sellers who have become global businesses on its platform,” my colleague Jay Greene reports.
“Early on, Amazon compelled sellers to use its warehouses to guarantee speedy Prime shipping, in addition to other programs that largely benefited consumers. But now, sellers and former employees familiar with Amazon’s internal strategy say the company is increasingly focused on boosting its profits on the backs of its sellers — often without any clear upside for customers … Amazon says its success is dependent on those sellers and insists it always prioritizes shoppers.” (Amazon CEO Jeff Bezos also owns The Washington Post)
— UPS gets approval for drone airline: “United Parcel Service Inc on said it won the U.S. government’s first full approval to operate a drone airline, which gave it a lead in the nascent U.S. drone delivery business over rivals Amazon.com Inc and Alphabet Inc.,” Reuters’s Lisa Baertlein reports.
“The company said the certificate allows it to expand its delivery service in campus settings such as hospitals and universities, but added that residential deliveries are years away.”
— Uber and Lyft close at record lows: “Shares of Uber and Lyft fell to fresh lows ... posting their lowest close ever, as the ride-hailing firms join a string of recently public companies facing fresh criticism from investors,” CNBC’s Annie Palmer reports.
“Uber, which had a private valuation of $76 billion ahead of its IPO in May, has seen its valuation drop steeply as its stock price has dwindled. The company now has a market cap of roughly $49 billion. Similarly, Lyft’s market cap is hovering around $11.6 billion, compared to its last private valuation of roughly $15 billion.”
— What we learned from the early 2020 Q3 fundraising numbers: We’ll note that these numbers are also self-reported, but the official reports are due Oct. 15. Former vice president Joe Biden and Sen. Elizabeth Warren (D-Mass.) have not yet announced their totals.
- Trump and the RNC remain in a class of their own: “[Trump’s] reelection campaign and the Republican National Committee raised $125 million in the third quarter of the year, a presidential fundraising record,” the Associated Press’s Zeke Miller reports. “The pro-Trump effort said … that it has raised more than $308 million in 2019 and has more than $156 million in the bank. Republicans aim to use the fundraising haul to fight off Democrats’ impeachment effort.”
- Bernie continues to dwarf the field with small-dollar donations: “Sen. Bernie Sanders (I-Vt.) raised $25.3 million during the past three months for his White House bid, his campaign said,” my colleagues Michelle Ye Hee Lee, Sean Sullivan and Amy B Wang report, “fueled by an army of low-dollar donors to post the largest quarterly haul so far this year among the Democratic presidential contenders.”
- Harris remains consistent: Sen. Kamala Harris (D-Calif.) raised $11.6 million on pace with her previous quarter --- she ended it with $10 million cash on hand.
- Buttigieg drops off just a bit, but remains strong: South Bend, Ind., Mayor Pete Buttigieg raised more than $19.1 million, less than Q2 when he led the entire field with $24.8 million, but still far beyond his Q1 number ($7.1 million). His numbers continue to surpass initial expectations one might have had for the mayor of Indiana’s fourth-largest city.
- Booker’s Hail Mary gambit paid off: Sen. Cory Booker (D-N.J.) told the world that unless his campaign raised $1.7 million in 10 days, a pace he had not previously met, then Booker would drop out. Even by modern standards, the gambit was stark. But as CNN’s Rebecca Buck reports, it has paid off for now. The campaign said it raised $6 million for Q3, its best haul so far.
— Zuckerberg promises legal fight if Warren wins: “You have someone like Elizabeth Warren who thinks that the right answer is to break up the companies ... if she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge,” Facebook CEO Mark Zuckerberg told employees, according to a leaked recording published by the Verge.
— Better Markets lands a top Fed official. The non-profit dedicated to pursuing tougher regulation of the financial services industry has hired a big fish from the Fed: Timothy Clark, who retired earlier this year after serving as the central bank’s staffer in charge of banking supervision. As such, the 23-year Fed veteran was the chief architect of the capital and liquidity stress tests. Better Markets president Dennis Kelleher said Clark will serve as “distinguished senior banking adviser” for the group.
Daniel Tarullo, the former Fed governor who stood up the central bank’s post-crisis regulatory regime, said in an email that Clark “has seen a lot of sound bank risk management practice and a lot of deficient practices. Often the public debate on banking regulation focuses only on the regulations. Tim will bring to the public debate an acute understanding of how a robust supervisory program complements regulatory rules, which can never anticipate all the ways in which risky bank behavior may develop over time.”
- Philadelphia Fed President Patrick Harker speaks at the conference on community banking in St. Louis.
- Bed Bath & Beyond, Lennar and Paychex are among the notable companies reporting their earnings, per Kiplinger.
- PepsiCo and Costco are among the notable companies reporting their earnings on Thursday, per Kiplinger.
- Fed Vice Chair Richard Clarida speaks at a WSJ event about the future of global markets on Thursday.
- The Brookings Institution holds an event on why inflation hasn’t behaved as predicted, featuring remarks from former Fed chair Janet Yellen on Thursday.
- Powell speaks at a Fed event focused on maximum employment and price stability on Friday.
From The Post's Tom Toles: (We wanted to include this to mark today's anniversary)