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Masa Son reportedly won’t speak at Saudi conference
Saudi Arabia’s investment conference opened today, with another big-name speaker taken off its agenda: Masayoshi Son of SoftBank has withdrawn from the conference, the NYT reports.
Mr. Son had been one of few big-name speakers still scheduled to attend the Future Investment Initiative event, after numerous high-profile C.E.O.s and politicians canceled amid concerns over the death of the Saudi journalist Jamal Khashoggi.
Mr. Son is in a difficult position. The Saudis are his biggest backers, providing $45 billion to the nearly $100 billion Vision Fund that is a big part of SoftBank’s future. But standing by them could alienate many of the start-ups that the Vision Fund is meant to invest in.
It appears that after weeks of internal deliberations, Mr. Son decided that snubbing the Saudis was the best course of action. An executive from the Vision Fund spoke at the conference as scheduled, the WSJ reports.
Many of those attending the Saudi conference will try to keep a low profile. One piece of advice from a banker who spoke to the FT: “Don’t get a photo with M.B.S.” (That refers to the Saudi crown prince, Mohammed bin Salman, who has been accused of playing a role in Mr. Khashoggi’s death.)
Governments also continue to struggle with how to navigate the controversy. Britain said it found Saudi explanations about Mr. Khashoggi’s death not “credible,” but it hasn’t taken further action. And while President Trump said he was “not satisfied” with the Saudi response, his Treasury secretary, Steven Mnuchin, met with Prince Mohammed yesterday, and a top adviser, Jared Kushner, sought to play down the tensions.
More Saudi news: President Recep Tayyip Erdogan of Turkey told members of his party gathered in Parliament this morning that a Saudi team had planned Mr. Khashoggi’s killing. Former Secretary of State Jim Baker, who helped lead the U.S. response to the Tiananmen Square massacre, outlined Mr. Trump’s hard choices. The Saudi conference’s website was apparently hacked yesterday. And the World Economic Forum doesn’t want the Saudi event to be described as “Davos in the Desert.”
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
BlackRock bets on sustainable investing
The firm is already the world’s biggest money manager, with more than $6 trillion under management. But its C.E.O., Larry Fink, says that the future of investment lies in sustainability, with a focus on environmental, social and governance criteria. His calculation: Assets held in exchange-traded funds that focus on these types of investments will grow over the next decade to $400 billion from $25 billion.
Mr. Fink isn’t the first Wall Street executive to promote the idea. But the power of BlackRock could help this approach catch on. Today alone, the firm unveiled seven new ESG funds in the U.S. and Europe.
And the firm has grand ambitions. Mark Wiedman, the head of its iShares unit, told the FT: “One day we’ll drop ‘sustainable’ because this lineup will just be the core of all great portfolios.”
Paul Volcker sees ‘a hell of a mess in every direction’
At 91, Paul Volcker has seen plenty of highs and lows in the U.S. But the former Fed chairman, whose memoir comes out this month, told Andrew in an interview that he was worried about the future of the country.
Looser regulations on banks may help usher in the next financial crisis, he says. Americans have little respect for the presidency, the Supreme Court or Congress. But Mr. Volcker’s biggest complaint is about the influence of money on how the country is run:
“The central issue is, we’re developing into a plutocracy,” he told me. “We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”
More earnings reports. Of interest are two companies that could be affected by tariffs: Caterpillar is expected to report higher third-quarter profit despite the trade fight between the U.S. and China, while Harley-Davidson will most likely post lackluster results.
The E.U. may reject Italy’s 2019 budget. European leaders are worried about the nation’s deficit ballooning as a result of proposals for tax cuts and a universal income. It would be the first time the E.U. asks a member state to adjust its spending plans.
Someone could become very rich. The record-breaking Mega Millions jackpot of over $1.6 billion could be won tonight. Good luck!
A Big Tech trade group proposes privacy regulations
The Information Technology Industry Council, which counts Google and Facebook as members, has published its vision of user privacy in a set of draft rules. Some of the main points:
• “Individuals should be informed about the collection and use of their personal data in a fashion that is meaningful, clear, conspicuous and useful to the individual.”
• “Individuals should have the right to exercise control over the use of their personal data where reasonable to the context surrounding the use of personal data.”
• “Companies should identify, monitor, and document uses of data they know to be personal and ensure that all identified uses of that personal data are legitimate.”
None of this is revolutionary, but the six-page document dives into more detail than many similar proposals. That’s not surprising: Lawmakers are still in the early stages of figuring out what new privacy rules should look like, so industry groups are doing what they can now to shape their thinking.
What’s causing slow wage growth?
The U.S. labor market is in its best shape in decades, with unemployment averaging about 4 percent this year. But wage growth has stagnated, puzzling economists.
Ernie Tedeschi of the research business Evercore ISI analyzed the conundrum for the Upshot. He ruled out as factors inflation and nonwage benefits, because neither has changed enough since 2001 to have a major effect. Among his guesses:
• More slack in the labor market could mean that the economy can support more work than is actually being created.
• A slowdown in productivity gains, so that the value of what workers produce is growing more slowly than in the past.
• Rising inequality, which could reduce upward mobility and weaken the bargaining power of unions to negotiate raises.
Mr. Tedeschi’s conclusion: “Although the unemployment rate may look the way it did in boom times in 2000, for many Americans, wage growth has much further to go.”
The risk in relying on commercial space stations
The Trump administration wants NASA to focus on ambitious challenges like sending astronauts to Mars. Some of the money to make that happen is supposed to come from handing off parts of space exploration to the private sector. The federal government, for instance, plans to cut direct financing of the International Space Station after 2024.
But Kenneth Chang of the NYT points out that giving commercial operations just six years to take the reins could come with problems:
Companies like Bigelow are years from launching their space stations, and such expensive, cutting-edge projects often slip behind schedule. Critics worry that the International Space Station might be discarded before its successors are ready. A gap without space stations would disrupt NASA’s studies, as well as emerging commercial endeavors. Nouveau space station companies could go belly up if the hoped-for customers are slow to show up.
Cameron Poetzscher resigned as Uber’s top deal maker after allegations of sexual misconduct against him. The company’s C.E.O., Dara Khosrowshahi, said yesterday that its culture still needed improvement.
Brendan Iribe, a co-founder of Oculus VR, plans to leave Facebook.
Thomas Falk is retiring as C.E.O. of Kimberly-Clark. He’ll be succeeded by Michael Hsu, the company’s C.O.O.
Richard Branson is stepping down as chairman of Virgin Hyperloop One.
The speed read
• Blackstone should be worried about the future of its Saudi-backed infrastructure fund. (Bloomberg Opinion)
• Joshua Kushner’s Thrive Capital raised $1 billion for its latest venture capital fund. (Medium)
• Shares in Salvatore Ferragamo rose yesterday amid speculation that the recent death of its longtime leader, Wanda Ferragamo, could open the door to a sale of the shoemaker. (FT)
• Carl Icahn agreed to sell American Railcar to ITE Rail, making him $757.2 million in profit. (CNBC)
• Silver Lake said that it had transferred its Dell holdings to two newer investment funds, to give it the ability to hold onto its stake longer. (Silver Lake)
Politics and policy
• The Trump administration is letting states offer less-comprehensive health plans while still qualifying for federal subsidies. (WSJ)
• The Supreme Court ruled that the Commerce Secretary, Wilbur Ross, won’t have to testify in a lawsuit over the U.S. census. (WSJ)
• The Trump administration is calling on tech workers to do stints in the federal government. (WaPo)
• Prime Minister Theresa May of Britain says she has a four-point plan for fixing Brexit talks. (FT)
• The steel industry persuaded the Trump administration to drop half of the tariffs on goods, mainly raw materials, that would have raised its costs. (WSJ)
• The automaker Aston Martin would consider flying in parts to avoid delays at clogged ports after Brexit. (CNBC)
• Foreign investment in China rose by 6 percent to $70 billion in the first half of 2018. (WSJ)
• The latest trade war victims? China’s coddled cats and dogs. (NYT)
• Twitter banned more accounts affiliated with the right-wing media organization Infowars. (CNN)
• Google used more contract workers than salaried employees for the first time this year. (CNBC)
• Can Germany’s carmakers survive the reboot of the auto sector? (FT)
• Nearly 90 percent of Android apps can share data directly with Google. (FT)
Best of the rest
• An explosive device was found in a mailbox at George Soros’s Westchester County home. (NYT)
• Asian and European stocks slumped overnight, and U.S. futures suggest American markets could follow. (Bloomberg)
• Customers are moving money out of low-interest bank accounts to find better yields, undercutting a valuable resource for lenders. (WSJ)
• But Goldman Sachs plans to offer investment management services to Main Street. (FT)
• UBS lifted a warning to staff on China travel, but Citigroup has introduced one. (Bloomberg)
• Cannabis stocks may be in bear territory. (Fortune)
Thanks for reading! We’ll see you tomorrow.
In yesterday’s email, we misstated the circumstances under which McKinsey prepared a report measuring reaction within Saudi Arabia to government austerity policies. The report was prepared for internal use, not for the Saudi government.
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