Larry Fink Remains Confident About Stocks: DealBook Briefing
But for all the turmoil and noise, the market is about flat for the year, he pointed out.
The investment giant reported first-quarter earnings Thursday. Helped by continuing inflows into the firm’s passive funds, better performance by its actively managed funds and a more favorable tax rate, earnings per share grew 28 percent compared with a year ago.
“This quarter validates us institutionally,” Mr. Fink said, making the point that BlackRock could attract money even when investors are in a jittery mood.
Even though many investors yanked money out of the market over the past two months, BlackRock had $55 billion of net inflows for the quarter, with its fast-growing exchange-traded funds comprising $34 billion of that figure.
Assets under management grew by 17 percent annually and now stand at a record high of $6.3 trillion.
— Landon Thomas Jr.
Tom Buerkle of Breakingviews writes: “Like other asset managers, BlackRock is hoping the return of volatility to markets will push investors back into active funds, on which it charges higher fees. But such a shift has yet to happen. Fully 90 percent of long-term asset inflows in the quarter went into index and exchange-traded funds, and BlackRock has been shaving fees on many of those products to keep pace with Vanguard and others. This race is not for the weak.”
How serious was Bob Iger about a presidential run?
It would seem pretty serious.
Rob Haskell profiled the Disney chief executive for Vogue, and here is what Mr. Iger had to say about a White House run in 2020. (Mr. Iger is married to Willow Bay.):
“Willow initially not only hated the idea but put her foot down because she thought it would be highly destructive to our family and to our lives.”
The idea kept nagging at him and his wife gave her reluctant permission.
“The thought I had was coming from the patriot in me, growing up at a time when we respected our politicians not only for what they stood for but because of what they accomplished. I am horrified at the state of politics in America today, and I will throw stones in multiple directions. Dialogue has given way to disdain. I, maybe a bit naively, believed that there was a need for someone in high elected office to be more open-minded and willing to not only govern from the middle but to try to shame everyone else into going to the middle.”
Also from the piece, Oprah Winfrey thought he would have been the ideal candidate.
“Bob is one of the people I respect most in the world. That’s a very short list. He is infinitely capable of multiple categories of expertise, and he has created an environment where you can disagree with him—and that’s not just because I’m Oprah. I really, really pushed him to run for president, so much so that I said to him, ‘Gee, if you ever decide to run for office, I will go door to door carrying leaflets. I will go sit and have tea with people.’”
Of course, Disney’s deal to buy most of 21st Century Fox for $52.4 billion has scuttled those plans.
In related Disney news: A British regulator says Disney must bid for all of Sky if its deal with 21st Century Fox goes through.
It seems Warren Buffett has chosen his side in USG vs. Knauf.
Mr. Buffett’s Berkshire Hathaway plans to oppose board nominees proposed by USG in an upcoming shareholder vote, Reuters reports.
“Berkshire’s present intention is to vote against the four directors proposed by management,” Mr. Buffett’s assistant, Debbie Bosanek, said in an email.
Two weeks ago USG rejected Knauf’s $5.9 billion, or $42-a-share, offer. The rejection came despite Berkshire, which controls more than 30 percent of USG, saying it would take Knauf’s offer if the German company agreed to buy the rest of USG for at least $42 a share.
Knauf had called on USG shareholders to withhold support for USG’s board nominees in an effort to bring USG to the table.
Shares of USG rose 2.8 percent on the news.
How should Facebook be regulated?
After two days of Congress grilling Mark Zuckerberg, lawmakers seem to have a consensus that Washington needs to regulate social media. (Exhibit A: “I think it is time to ask whether Facebook may have moved too fast and broken too many things,” said Representative Greg Walden, Republican of Oregon and chair of the Energy and Commerce Committee.)
Investors appeared relieved by Mr. Zuckerberg’s Day 2 performance, with analysts like Ali Mogharabi of Morningstar welcoming the Facebook chief’s apparent willingness to work on new rules. (He has a lot of homework.)
But no one knows what they should look like. Lawmakers don’t want to infringe first amendment rights or hold back innovation. And then is Facebook a tech company, as Mr. Zuckerberg says? Or is it a utility or a publisher, to be watched by the F.C.C.?
The biggest unanswered question, according to Kevin Roose of the NYT, is this: Does Congress have the political will to regulate tech companies?
Elsewhere in Facebook news: Elon Musk thinks social media needs regulations. Brian Chen’s reaction to what data Facebook had collected about him: “Yikes.” How the company targets you for advertising. Craig Newman argues in Another View that companies should be graded on their data security. And Cambridge Analytica’s interim C.E.O. is stepping down.
Businesses will miss Paul Ryan in Washington
The House speaker’s unexpected plan to retire has upended Republican politics in many ways, as the midterm elections approach. But it will also remove a voice for the business community in D.C.
Mr. Ryan has long been a champion for the kind of tax cuts favored by corporate chieftains like the Kochs, who in turn have donated to his efforts. Mr. Ryan was one of the biggest fund-raisers in the G.O.P., amassing $54 million for this year’s midterms alone. It’s unclear whether the claimants to his position can match that.
Jack Ma on what a trade war would cost the U.S.
The Alibaba Group co-founder asserted in a WSJ op-ed today that the U.S. risked throwing away a huge opportunity to make money in China, because his home country may soon become an enormous consumer. From his piece:
“It is therefore ironic that the U.S. administration is waging a trade war at a time when the largest potential consumer market in the world is open for business.”
Yet economists point out that China is still an offender on intellectual-property theft and restricting its market to foreign companies — even as they worry that tariffs will backfire. (The Fed is worried, too.) But Larry Kudlow has urged calm, even as he didn’t rule out tariffs coming before negotiations with Beijing.
Elsewhere in trade: While the U.S. wants a Nafta deal by next month, Mexican negotiators are still balking at some Washington demands.
The political flyaround
• Robert Mueller corner: President Trump discussed firing Rod Rosenstein, who as deputy attorney general is the special counsel’s boss, again yesterday. Steve Bannon is urging the White House to do so. The Senate Judiciary Committee plans to vote on a bill to protect the special counsel in coming weeks.
• The Fed and the Office of the Comptroller of Currency have proposed loosening the “supplemental leverage” ratio for big banks, potentially letting them hold less capital in reserve, but regulators were divided. (WSJ)
• Mike Pompeo, nominated for secretary of state, didn’t disclose last year that he owned a Kansas business that imported equipment from China. (McClatchy)
• Something must have mellowed John Boehner’s opposition to marijuana legalization: He’s joining the board of Acreage, a cannabis producer. (Bloomberg)
Is Les Moonves’s job in danger if CBS resists a Viacom deal?
CBS shares fell yesterday after CNBC reported that Shari Redstone has considered replacing the company’s much-lauded C.E.O. if merger talks with his corporate siblings collapse.
She seems to be trying to dial back that threat: National Amusements, the Redstone family holding company that controls CBS and Viacom, said in a statement that it has “tremendous respect” for Mr. Moonves, “and it has always been our intention that he run a combined company.”
But in a deal process that is playing out unusually publicly, consider the gantlet thrown.
Elsewhere in Viacom: John Paulson’s hedge fund has become a top-25 shareholder there.
Elsewhere in media: As Fusion Media Group faces steep budget cuts, Penske Media and IAC are reportedly circling some of its properties. AT&T pushed back on the Justice Department’s star witness at the Time Warner deal trial. Netflix withdrew from the Cannes film festival, after a rule change penalizing streaming films, and was sued by a shareholder over bonuses.
Is SoftBank playing soccer?
After the NYT reported that a group of Middle Eastern and Asian investors has sought to essentially buy two new soccer tournaments from FIFA, the FT reports that one of the potential investors is Masa Son’s Japanese tech giant. What?
Through its $100 billion Vision Fund, SoftBank has pushed into businesses as wide-ranging as augmented reality, online commerce and dog walking. But the rationale for an investment like this one appears more elusive, other than being a play for lucrative sports content.
In other SoftBank news: Reuters points out that Mr. Son doesn’t have long to complete new merger talks between Sprint, which he controls, and T-Mobile USA — a wireless spectrum auction begins in November.
Elsewhere in deals: Starboard Value criticized Carl Icahn’s settlement with Newell Brands and touted its own board candidates. The parent of British Airways may bid for all of Norwegian Air Shuttle. Toys “R” Us has gotten several bids of more than $1 billion each for its Asian business. MuleSoft investors have sued to block the company’s $6.9 billion sale to Salesforce. FirstGroup, the owner of the Greyhound bus service, has rejected a takeover bid by Apollo Global Management. Zuora, a billing software maker, raised $154 million in its I.P.O.
The tech flyaround
• WeWork’s purchase of Naked Hub, a Chinese co-working space start-up, signals its ambitions to expand in China. (Bloomberg)
• Tesla faced criticism for blaming the driver of a Model X that crashed last month while its driver-assistance program was on. (Bloomberg)
• The S.E.C. is reportedly preparing a crackdown on initial coin offerings. (Fox Business)
• Why Chinese ecommerce companies are building physical stores. Pinduoduo, a Chinese group-buying discount site, has reportedly raised $1 billion from existing investors like Sequoia Capital China at a $15 billion valuation. And the NYT Magazine’s Letter of Recommendation extols the pleasures of AliExpress.
• Revolut, a popular payments app, has reportedly raised money from DST Global at a $1.4 billion valuation. (Recode)
• JPMorgan Chase has invested in AccessFintech, a start-up offering software to improve banks’ trading. And OneChronos, whose founders include a former Goldman Sachs trader, wants to use A.I. to create complex trades more cheaply.
• Japan has a new source of rare earth metals, used in batteries and electric vehicles: deposits in its waters. (WSJ)
• Reddit’s C.E.O. said that racist posts weren’t against the company’s rules. Outcry ensued. (The Verge)
• HNA Group has hired Israel Hernandez, a former Commerce Department official in the Trump administration, as its head of international corporate affairs. (FT)
• Andrew Tyrie, a former British lawmaker, has been appointed the head of the Competition and Markets Authority. (FT)
Quote of the day
“It is safe to say it is one of the largest tax bills on earned income in history.”
— Henry Bregstein of the law firm Katten Muchin Rosenman, on the $1 billion John Paulson owes the I.R.S. for his hugely profitable bet against subprime mortgages.
The speed read
• China is emerging as a world leader in cell therapies, which could help its biotechnology industry challenge the U.S. (FT)
• Elizabeth Holmes has written to Theranos shareholders asking for more money and saying the company may have to default on a $100 million loan from Fortress Investment Group. (BuzzFeed)
• Fidelity Investments is making its advice fees more transparent. (WSJ)
• Trading in volatility may be creating a feedback loop that makes markets more unstable. (FT)
• A start-up, Truework, aims to take on Equifax in the business of answering verification requests on behalf of employers. (NYT)
• A California court has awarded a woman $6.4 million in a revenge porn case, one of the biggest such judgments ever. (NYT)
• The $105 billion blunder at Samsung Securities continues to rock markets in South Korea and the government has been petitioned to ban short selling after employees sold the so-called “ghost stock” they were issued. (Bloomberg)
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News credit : Nytimes