President Trump used a 30-minute address this morning to the global elite gathered in Davos to pitch what he called "America's extraordinary prosperity." And he credited his administration's focus on "improving the lives of everyday Americans."
But to the extent Trump received a polite welcome, he can thank the major victories he keeps handing the global financial elite gathered for this year’s World Economic Forum. The stock market keeps setting records. His 2017 tax cut is still delivering windfalls to the biggest banks, which posted record profits last year, as his regulators ease their federal oversight. And his phase-one trade agreement with China was packed with goodies for the financial services sector, though it fell short on addressing the administration’s core complaints.
Here's how The Post's Heather Long summed up the high notes of his address:
Trump just gave a 30 minute campaign speech at #Davos— Heather Long (@byHeatherLong) January 21, 2020
He touted the stock market, low unemployment & rising wages
He touted his trade deals, US energy and lower regulation.
His only message to the world: “The US is by far the strongest economic power” #WEF50
From the New York Times's Annie Karni:
Trump didn't mention impeachment in a 30-minute speech that was basically his rally speech without the red meat.— Annie Karni (@anniekarni) January 21, 2020
At home, though he campaigned in 2016 as a Wall Street scourge, he is now pointing out what a boon his presidency has been for the industry. “Mary Erdoes, JPMorgan Chase,” Trump said last week at the East Room signing ceremony for the trade truce with Beijing. “They just announced earnings, and they were incredible. … Will you say ‘thank you Mr. President,’ at least? Huh? I made a lot of bankers look very good.”
That event was packed with uber-rich financiers, several of whom will also be on hand in Davos this week. Besides Erdoes, the head of JPMorgan’s asset and wealth management division, they included Blackstone Group CEO Stephen Schwarzman, who has served as an unofficial go-between for the Trump administration in Beijing; casino magnate and major GOP donor Sheldon Adelson; former American International Group chief Hank Greenberg, billionaire investor Nelson Peltz; Ken Griffin, the billionaire CEO of Citadel; Mastercard CEO Ajay Banga; Visa CEO Al Kelly; Moody’s CEO Raymond McDaniel; and Alan MacDonald, a top executive at Citi.
Chief executives of a number of other Fortune 100 companies were also on hand — including those of Boeing, Honeywell, and UPS — though no labor leaders attended, as my colleague David Lynch noted over the weekend. AFL-CIO President Richard Trumka told Lynch the China agreement represented “another big giveaway to Wall Street and Big Pharma and prioritizes new protections for companies that move to China, creating even more incentives for outsourcing.”
Of seven chapters in the U. S-China trade deal, one is devoted to enumerating how Beijing will open access to its market to American financial services firms. “The deal contains detailed provisions governing treatment of banks, credit-rating agencies, electronic payment providers like Visa and Mastercard, insurers, and securities firms,” Lynch writes. “While China has often discussed plans to loosen restrictions on foreign financial institutions, it has never before committed to specific short-term deadlines. ‘So the banks are going to be doing great,’ Trump said shortly before signing the agreement. By April 1 — little more than 10 weeks from now — Chinese officials must allow foreign companies to take majority stakes in fund management companies, insurers, futures traders and other securities firms.”
The benefits for workers are harder to identify. "The fundamental question for the vast majority of Americans who are not looking to set up a corporate entity in China is whether this deal — or more broadly, the Trump administration’s trade policy in general — helps them,” Jared Bernstein, chief economist to former vice president Joe Biden, argues. “For our manufacturers, who were supposed to be the beneficiaries of all this, the answer is a hard no, and this deal, which leaves most of the tariffs in place, doesn’t change that.”
Sen. Marco Rubio (R-Fla.) agrees the deal delivers Wall Street a win at the expense of the national interest. “It’s no secret that Wall Street hated [Trump’s] aggressive trade tactics toward China. But its executives are very happy with the financial services section” of the agreement, the erstwhile Trump ally wrote in a New York Times opinion piece over the weekend. “This accord will result in American capital flowing to the government-owned companies that China props up to undermine our country. This is not a win.”
Meanwhile, the six biggest U.S. banks — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley — collectively saved $18 billion on their tax bills last year thanks to the Trump tax cuts, Bloomberg News’s Yalman Onaran finds: “The tax savings have spurred the banks to record profit. The six firms posted $120 billion in net income for 2019, inching past 2018’s mark. They had never surpassed $100 billion before the tax cuts.”
The banks have even more Washington wind in their sales, as Trump’s regulators continue their push to roll back post-crisis strictures on the industry. Randal Quarles, a Trump pick serving as the Federal Reserve’s vice chairman for supervision, just outlined a lighter-touch approach to oversight. Among other goals, he discussed making annual bank stress tests easier to understand and giving the banks longer to review the results; and he pitched giving Congress a greater role in setting regulatory guidance for the industry.
“Virtually all of the proposed changes would weaken the Fed’s supervision of the country’s banks and come straight off the wish list of Wall Street’s biggest banks,” Better Markets chief Dennis Kelleher said in a statement.
— Panic as Chinese mystery virus spreads. The Post's Anna Fifield, reporting from Beijing: "Chinese health authorities sought to impose a quasi-quarantine Tuesday around Wuhan, a city of 11 million people, as they stepped up efforts to stop the spread of a mystery virus that has now claimed six lives.
"With confirmation that the pneumonialike coronavirus can be transmitted from person to person, and with hundreds of millions of Chinese packing onto public transport to make their annual pilgrimages home for the Lunar New Year, a new sense of panic has erupted here...
"The Geneva-based World Health Organization said it would call an emergency meeting Wednesday to decide whether to designate the outbreak as an international public health emergency. Australia and the Philippines are the latest countries with suspected cases of infection."
The outbreak is sending fear through global markets. Bloomberg News: "A deadly virus emanating from China helped bring this year’s global risk rally to a halt on Tuesday, hammering Asian equities and helping drag both European stocks and U.S. futures lower.
"Traders closing out positions in the run-up to Lunar New Year holidays may have accelerated moves in Asia, where Hong Kong equities slumped 2.8% and the MSCI Asia-Pacific Index dropped more than 1%. Luxury stocks in Europe, many heavily exposed to the Chinese market, slid on concern the outbreak will disrupt travel and spending in the key holiday period."
— IMF sees modest global rebound. WSJ's Josh Zumbrun: "Global gross domestic product will expand by 3.3% in 2020, up from 2.9% in 2019, the International Monetary Fund predicted in a quarterly update to its World Economic Outlook, released Monday in Davos, Switzerland. The improved outlook is driven by a combination of aggressive monetary policy easing in 2019 and detente in America’s nearly two-year trade war with China."
But foreign investment is down as globalization slows, WSJ's Paul Hannon writes: "New overseas investment by businesses around the world fell for the fourth-straight year in 2019 to its lowest level in almost a decade, pointing to a slowdown in globalization as the world-wide economy cooled. The United Nations Conference on Trade and Development said foreign direct investment, or FDI, last year fell to $1.39 trillion from $1.41 trillion. The 1% drop puts global FDI at its lowest level since 2010...
"Many economists say globalization provided a triple boost to global economic growth: locating production where labor is cheapest; supercharging competition; and disseminating new technologies and know-how across the world. But globalization’s critics say the benefits of the process haven’t been shared equally, with low-skilled workers in developed economies seeing their incomes stagnate."
— U.S.-France pause tech/tariff fight: “France and the U.S. have struck a truce on the divisive issue of taxing digital giants like Google parent Alphabet Inc., averting a trade war on the matter — at least for now,” the Wall Street Journal’s Bojan Pancevski and Sam Schechner report.
“The detente comes after the French President Emmanuel Macron reached out by phone to [Trump] on Sunday seeking a way to end the threat of tariffs while they work out a broader accord on digital taxation, according to U.S. and French officials. As part of the truce, Macron agreed to postpone until the end of 2020 a tax that France levied on big tech companies last year, one U.S. official said. In return, the U.S. will postpone retaliatory tariffs this year, the official said. The U.S. official said Macron had buckled under pressure from Trump.”
— Where the U.S. and China are headed on tech: “In terms of technology, the world had been unifying for years. Now it is reverting back to the likes of the VHS-versus-Betamax era, with much bigger consequences,” the WSJ’s Stu Woo and Asa Fitch report.
“Imagine two countries with completely different sets of hardware and software for the internet, electronic devices, telecommunications, and even social media and dating apps. That is the direction the U.S. and China are headed in — a world where the two global powers have mutually exclusive technology systems. The wedge being driven between the two countries alarms tech’s biggest names, with the likes of Microsoft Corp. co-founder Bill Gates and Alibaba Group Holding Ltd. co-founder Jack Ma calling it counterproductive for both sides. While this month’s signing of a phase-one trade deal between the U.S. and China may have eased broad, short-term economic concerns, deeply held suspicions in both countries suggest the technology gap will only widen in the coming decade.”
That could leave U.S. tech firms worse off in the long run, the NYT's Ana Swanson and Cecilia Kang write.
— Huawei CFO blasts charges: “Huawei Technologies Co. Chief Financial Officer Meng Wanzhou shouldn’t be dispatched to the U.S. because her alleged crimes don’t meet Canada’s legal tests for extradition, her defense lawyers said at the opening of hearings,” News's Natalie Obiko Pearson reports.
“At issue in a legal battle that has severely strained Canada-China relations is whether her extradition request meets the crucial test of double criminality: Would her alleged crime have also been a crime in Canada? If the judge rules it doesn’t meet that standard, she could be discharged, according to Canada’s extradition rules … The hearings that began Monday offer Meng’s first opportunity to avoid handover to the U.S., which accuses her of fraud, saying she lied to HSBC Holdings Plc and tricked it into transactions that violated U.S. sanctions on Iran.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"White House calls for Trump acquittal in ‘rigged’ impeachment as Senate prepares for swift trial." By The Post's Seung Min Kim and Karoun Demirjian
"Trump’s lawyers, Senate GOP allies work privately to ensure Bolton does not testify publicly." By The Post's Robert Costa and Rachael Bade
"Lawyer for Lev Parnas says Barr has a conflict of interest and should recuse himself from criminal case." By The Post's Shayna Jacobs
— Boeing looking for $10 billion loan: “Boeing is in talks with banks to secure a loan of $10 billion or more, according to people familiar with the matter, as the company faces rising costs stemming from two fatal 737 Max crashes,” CNBC’s Leslie Josephs reports.
“The company has secured at least $6 billion from banks so far, the people said, and is talking to other lenders for more contributions. The total amount could rise if there is additional demand from banks, one person familiar with the matter said. Liquidity isn’t an immediate concern, analysts have said, but the new debt shows Boeing is shoring up its finances amid the cash-sapping fallout of the two crashes …”
— Investors clash over Telsa’s valuation: Tesla “shares have soared 22% in just the first few weeks of 2020 alone, catapulting the company’s market capitalization to more than $90 billion in a rally that had made it the most valuable U.S. auto maker,” the WSJ’s Gunjan Banerji and Julia-Ambra Verlaine report.
“The leap has turbocharged a long-running war over the proper value of Tesla stock. This has split investors large and small into warring camps — both sides digging in with quasi-religious fervor. Trading volumes have skyrocketed, with shares and options changing hands at a level not seen in at least five years. For many investors, Tesla marks a test case for the broader stock-market rally that has sent shares to records and driven the Dow Jones Industrial Average toward 30000 in recent sessions. Fears of recession have abated, eased by a series of interest-rate cuts by the Federal Reserve and a trade truce between the U.S. and China.”
- There are still skeptics, though: “The company has never posted an annual profit, carries more than a $10 billion debt load and hasn’t manufactured cars at the scale of competitors.”
— Cook says global tax overhaul needed: “Everyone knows that the global corporate tax system needs to be overhauled, Apple Chief Executive Tim Cook said … backing changes to global rules that are currently under consideration,” Reuters’s Padraic Halpin reports.
“The reforms being examined center around the booking of profits by multinational firms in low-tax countries such as Ireland where they have bases — and where Cook was speaking on — … rather than where most of their customers are. ‘I think logically everybody knows it needs to be rehauled, I would certainly be the last person to say that the current system or the past system was the perfect system. I’m hopeful and optimistic that they (the OECD) will find something,’ Cook said.”
MONEY ON THE HILL
— Combined 2020 Democrats are outraising Trump: “The president has blown past individual Democratic presidential campaigns in fundraising for his 2020 reelection bid. But the crowded primary field together more than tripled his 2019 cash haul, according to a CNBC analysis of Federal Election Commission filings and campaign statements,” CNBC’s Jacob Pramuk reports.
“No incumbent president this century has been so thoroughly outraised by a field of challengers in the year before a reelection contest. The main Republican challengers to President Barack Obama in 2012 barely took in more than the incumbent in 2011. Meanwhile, President George W. Bush narrowly topped his challengers in fundraising in 2003, the year before he won reelection in 2004.”
- Trump gives an address in Davos
- Netflix, United Airlines, Halliburton and Capital One Financial are among the notable companies reporting their earnings, per Kiplinger.
- Johnson & Johnson, Fifth Third Bancorp, Kinder Morgan and Las Vegas Sands are among the notable companies reporting their earnings.
- Procter & Gamble, Comcast, American Airlines, Discover Financial Services, JetBlue Airways, Southwest Airlines and Union Pacific are among the notable companies reporting their earnings.
- American Express is among the notable companies reporting its earnings.