The rally extends a record run for the blue-chip index this year. The Dow has gained 21% this year.
Here is a quick look at the run:
•The Dow has cross five millennial markers this year, the most on record.
• It took the Dow just 30 day to go from 23000 to 24000, the third fastest 1,000 point move in history.
• 3M drove the index’s rally over the past 30 days, contributing more that 170 points.
One key point on taxes and today’s rally: Lower corporate taxes might not bolster the earnings of S&P 500 companies that much. “The effective tax rate among S&P 500 companies is already 26 percent. A 20 percent corporate tax rate would help, but it would not be as big a boon to large companies as it would be to small companies,” Jack Ablin, chief investment officer at BMO Private Bank, told CNBC.
A better way to tax corporations?
A stated goal of the Republican tax overhaul was to prevent corporations from shifting profits to low-tax countries.
Several academic economists, legal scholars and the Coalition for a Prosperous America argued Wednesday that the Republican plan speeding its way through Congress does not sufficiently address this issue.
Daniel Alpert, founder of Westwood Capital and an adviser to the Coalition for a Prosperous America, writes that United States companies “will continue to face competition” from multinational corporations “that will continue to divert their taxable income to tax haven jurisdictions around the world.”
“The GOP congressional leadership and the White House could and should have embarked on real corporate tax reform, that is in the national interest and broadens the tax base while trimming marginal rates.”
In a letter to Congress, the group advocated for the adoption of sales factor apportionment:
“Redefining the source of income is, in our view, the key to correcting the current dysfunction. This is what the sales factor apportionment system, already in use by most US states, does. Corporations earn income from sales. Therefore income should be allocated based upon the destination of those sales. MNC income should no longer be allocated based upon the location of a subsidiary that allegedly earned it. The location of sales is much more difficult to manipulate than the “origin of income” under the current system.
“The US tax base for corporations would be calculated on the basis of a fraction of companies’ worldwide income. This fraction would be the share of each company’s worldwide sales that are destined for customers in the United States. The taxpayer, under SFA, is the whole unitary business, including all evasion-motivated subsidiaries over which the parent corporations exercise legal and economic control.”
“In effect, firms should be taxed on their access to a specific consumer market – from which they generate revenue – rather than on their cleverness at artificially allocating expenses and revenue in tax havens in which their subsidiaries ‘incorporate.’”
Aspen Institute has a new leader.
The Aspen Institute named the president of Franklin & Marshall College as its new leader on Thursday.
Daniel R. Porterfield will succeed Walter Isaacson as the Washington think tank’s president and chief executive officer. Mr. Isaacson had run the Aspen Institute since 2003. He announced his resignation in March.
Mr. Porterfield has served as president of Franklin & Marshall since 2011. In an interview with the Washington Post, Mr. Porterfield said:
“I think Aspen’s work is needed more than ever. We have to have a table that people can gather around, to share perspectives and ideas and to translate those ideas into action. It really matters that we commit ourselves to evidence-based argumentation, to respecting what has been established through science, building upon past knowledge. Part of what’s made this country great is a commitment to being reality based and to being factually grounded. Public policy has grown out of so much serious research.”
R.B.S. closes its bad bank.
The Royal Bank of Scotland told staff on Thursday that it was formally closing its internal bad bank, an important milestone as Chief Executive Ross McEwan works to turn around the British bank.
Since the division was started in 2008, the bank, based in Edinburgh, has exited 22 countries, cut its risk-weighted assets by more than half and shrunk its assets to 752 billion, or about $1 trillion. The bank held as much as £2.2 trillion in assets.
Closing the Capital Resolution unit is an important moment, but the bank’s turnaround is far from finished.
R.B.S. has not reported an annual profit in nine years. It is not expected to report an annual profit until 2018 despite reporting a profit in the first half of this year.
The bank passed a stress test by the Bank of England this year that measured the ability of lenders to weather another financial crisis, but remained among the weakest of the biggest British banks. (It was forced to bolster its capital last year after failing the regulatory test.)
R.B.S. also remains 72 percent owned by the British government following a bailout during the financial crisis. The government said this month that it plans to resume sales of its holdings by 2019 and hopes to sell some £15 billion of its stake by 2022.
That process will be helped if R.B.S. can continue to improve its profitability and its capital position. A return to paying a dividend next year also would be a welcome sign for shareholders.
The Bitcoin rocket has wobbled. Is a crash coming?
Even non-fanatics are getting in on the action. The WSJ found a 70-year-old grandmother, Rita Scott, who reaped what her grandson said was a 45 percent gain on her investment.
From the WSJ:
“Believe me, I didn’t have this much fun with T. Rowe Price, ” said the retired secretary and taxi driver Ms. Scott, referring to her mutual-fund investments.
Supporters say that there’s still plenty of room left for the digital currency to run, after technical glitches at some exchanges led to a 20 percent decline — and swift recovery — yesterday. But it highlights the mania over an asset whose price has climbed 69 percent in the past months.
Bloomberg outlines what could cut off Bitcoin’s ascent, from regulation to hackers to short-sellers.
Waiting for that Treasury analysis of the tax plan? It will be a while.
Steven Mnuchin and other White House officials have argued that the Republican tax overhaul plans would pay for themselves through higher economic growth. And there were studies to prove that, even as critics say that tax cuts wouldn’t have such an effect.
Turns out, the Treasury Department doesn’t have the kind of analysis that Mr. Mnuchin has promised. From our colleague Alan Rappeport:
An economist at the Office of Tax Analysis, who spoke on the condition of anonymity so as not to jeopardize his job, said Treasury had not released a “dynamic” analysis showing that the tax plan would be paid for with economic growth because one did not exist.
Instead, Treasury staffers have done smaller analyses of individual provisions.
— Michael J. de la Merced
T. Boone Pickens begins to step back from public life.
Starting with putting his 65,000-acre Mesa Vista Ranch in Texas up for sale, with a price tag of $250 million.
From a LinkedIn post announcing the sale:
Slowly but inevitably, my fading vision and limited hearing have forced me to give up things I’ve loved and excelled at — golf and hunting, in particular. Although the beauty of Mesa Vista remains intact, the ranch roads I have driven thousands of times are now blurred. It’s time to embrace and accept that my life has changed.
It’s acknowledgment by the 89-year-old Mr. Pickens that he is in his twilight years, after having built a fortune as an oil magnate and then a financier who rose to fame during the corporate raider period of the 1980s.
Much of Mr. Pickens’s efforts in recent years have been focused on philanthropy. He has signed the Giving Pledge, and he has donated money to his alma mater, Oklahoma State University, and other nonprofit and charitable causes.
In selling the Mesa Vista Ranch, the mogul said that he wants to make sure that it ends up with a buyer who will carry on his conservation efforts.
— Michael J. de la Merced
The business costs for sexual misconduct keep rising.
The firing of Matt Lauer from NBC News for “inappropriate sexual behavior in the workplace” marks one of the highest-profile dismissals yet in business for misconduct and abuse. It also highlights the potential financial impact of those violations.
From Michael Grynbaum and John Koblin of the NYT:
Much of Mr. Lauer’s power stemmed from the bond he had forged with viewers as the longest tenured host in the program’s 65 years. The first two hours of “Today” — Mr. Lauer’s showcase — generated $508 million in revenue last year, more than the amount brought in by the other network morning shows, according to Kantar Media.
And while “Today” trails ABC’s “Good Morning America” in total viewers, it still leads in the coveted 25-to-54 advertising demographic.
Both the NYT and Variety reported on some of the accusations that Mr. Lauer faced.
Mr. Lauer is the latest star to be thrown out of a prominent media perch, following Harvey Weinstein, Charlie Rose, Mark Halperin, and an ever-growing list of others. His firing wasn’t even the only one to be announced yesterday: Garrison Keillor and a senior CNN producer were dismissed as well.
Among those who could replace for Mr. Lauer are Megyn Kelly and CNBC’s Carl Quintanilla, according to the WSJ.
And in tech: Andy Rubin, who spearheaded the creation of Google’s Android operating system, has taken a leave of absence from his new start-up following the revelation that he had an inappropriate relationship with a female subordinate while at Google. The Information, which first reported the news, also took a look at Google’s history of interoffice relationships.
The bigger picture
Tara Lachapelle of Gadfly writes:
At the end of the day, any company is better off — and I do mean financially better off — without someone who uses their power for inappropriate sexual behavior that makes the workplace a threatening place for colleagues and stymies women’s ability to climb the ranks.
Big business is a winner in the tax plan, but not all are happy.
A senior financial executive phoned Michael last night to complain about how the Senate tax plan would endanger the private equity industry because it limits the deductibility of corporate debt interest payments — and applies that even to existing investments. The provision could completely upend the private equity business model, this person asserted.
One example is Dell. A company executive explained to the WSJ:
Dell took on about $50 billion in debt for its merger with EMC Corp. At a roughly 5 percent interest rate, that means the company has about $2 billion in annual interest payments. The House and Senate bills would remove at least half those deductions, Mr. Vallone said in an interview Wednesday. At a 20 percent tax rate, that’s a $200 million hit each year.
But criticism of the Republican tax plan now appears focused on how much big business benefits compared with average Americans (even if that isn’t necessarily the case). For example, the NYT takes a look at the savings companies would enjoy from a lower tax rate from repatriating foreign profits.
It also isn’t clear that companies would spend their gains creating jobs. AT&T said that it could hire 7,000 new employees if the overhaul were passed. But executives at Coca-Cola and Pfizer said that they would pass most of the money onto their investors.
The state of play
The Senate could vote as soon as tomorrow on its tax plan. But there are plenty of unresolved matters:
• The Senate may need to cut the corporate tax rate a little less deeply, to 22 percent as opposed to 20 percent, to help raise much-needed federal revenue. Senators like John Cornyn of Texas aren’t in favor of that.
• A proposed fail-safe that would prevent the tax change from expanding the national deficit too much — it would automatically roll back some tax cuts — risks angering Charles Grassley of Iowa and John Kennedy of Louisiana.
A bad day for tech billionaires.
Bloomberg put the huge drop in the stock prices of “FANG” — that’s Facebook, Amazon, Netflix and what was once known as Google — into perspective:
While the 3.7 percent drop in an index tracking Facebook, Amazon, Netflix and Google was the biggest in 21 months, the amount of lost money exceeded any other single day on record. At about $60 billion, the decline in their combined market value is poised to eclipse any since Facebook arrived in public markets.
What’s behind the drop? It could be as simple as investors believing that the huge run-up in tech stocks this year has reached its natural end, and that changes to tax policy would provide a lift to other industries.
The tech and media flyaround
• Facebook has temporarily disabled a tool that could let advertisers exclude some races from seeing ads. The company president, Sheryl Sandberg, told the Congressional Black Caucus that Facebook “is determined to do better” in preventing discriminatory advertising. (Axios)
• Snapchat is redesigning its user interface, splitting content from users’ friends apart from that provided by media companies. (NYT, Snap)
• BuzzFeed plans to lay off 100 employees, or about 6 percent of its global work force, as it tries to maintain revenue growth. Derek Thompson of The Atlantic writes about the challenges for digital-media companies. (WSJ, Atlantic)
When being a Trump ally doesn’t help a C.E.O.
Speaking at the Economic Club of New York, Randall Stephenson of AT&T said that he had been one of Mr. Trump’s biggest defenders in the corporate world when it came to public policy. And then the Justice Department sued to block AT&T’s $85.4 billion takeover of Time Warner.
Mr. Stephenson described the lawsuit as “a big curveball,” according to Bloomberg.
Who’s not buying CNN: The Murdochs’ 21st Century Fox, at least according to co-executive chairman Lachlan Murdoch. “We wouldn’t be allowed to buy CNN and we would never be interested in buying CNN,” he said at Business Insider’s Ignition media conference, according to Reuters.
Will Don Blankenship go from being a former inmate to a senator?
The TV station WCHS of West Virginia reported that the former Massey Energy C.E.O. plans to run against Senator Joe Manchin next year. But how do West Virginians feel about the coal mogul who dominated their state’s business — and then went to prison for his role in the worst American mining disaster in decades?
Mr. Blankenship turned Massey into a giant of the coal mining industry. But the company was laid low after the Upper Big Branch explosion. The miner sold itself to a rival, Alpha Natural Resources, which later filed for bankruptcy. And Mr. Blankenship was eventually convicted of having deliberately skirted federal mining safety requirements.
There’s no guarantee that Mr. Blankenship would get the Republication nomination for the Senate seat. The WSJ notes that he faces two strong opponents for the position.
Uptake, a Midwestern unicorn, raises $117 million in new funds.
The company, which collects and analyzes data for industrial companies, got the money from a new investor, the British money manager Baillie Gifford, and the existing backers Revolution Growth and GreatPoint Ventures.
Co-founded and led by Brad Keywell, a co-founder of Groupon, Uptake partners not with Silicon Valley darlings but with more traditional corporate names. Think Caterpillar and Berkshire Hathaway Energy. But the business is becoming more competitive, with rivals like G.E. making it a bigger priority.
The start-up became a unicorn — that now-shopworn term for private start-ups valued at $1 billion or more — during its last financing round. Interestingly, while Caterpillar had previously invested in the company, Uptake has since bought back the industrial equipment giant’s stake, in part to be able to work with other heavy equipment companies.
Quote of the Day
“I have never seen a case where there were so many bad things done like Uber has done in this case.”
— Judge William Alsup, who is presiding over a trade secrets lawsuit against Uber and who upbraided the ride-hailing company for not producing evidence that may be relevant to the case.
The Speed Read
• President Trump nominated Marvin Goodfriend, a leading critic of the Federal Reserve, to serve on the Fed’s board of governors. (NYT)
• Janet L. Yellen said that the expansion of the economy had broadened and strengthened in the United States, in an upbeat assessment that is likely to reinforce expectations of a rate increase in next month. (NYT)
• Nokia denied reports that it was planning to bid for a smaller rival, Juniper Networks. (Axios)
• Gawker’s bankruptcy lawyers said that Peter Thiel shouldn’t be allowed to bid on its namesake blog unless the venture capitalist agrees to settle or otherwise end potential legal claims Gawker is pursuing against him related to its demise. (WSJ)
• Chipotle Mexican Grill said it was looking for a leader to replace Steve Ells, the chief executive and founder. (NYT)
• D.J.I., the maker of drones, is fighting a claim by a United States government office that its commercial drones and software may be sending to China sensitive information about American infrastructure. (NYT)
• The former Twitter contractor who briefly disabled Mr. Trump’s account has revealed himself: His name is Bahtiyar Duysak. (TechCrunch)
• Credit Suisse plans to return half of its net income to shareholders through buybacks or special dividends, as a reward to investors who stumped up billions of dollars in capital to finance its turnaround. (Bloomberg)
• General Motors will demonstrate its growing fleet of computer-operated, battery-powered Chevrolet Bolts in San Francisco on Thursday, allowing investment analysts to evaluate its self-driving cars. (NYT)
• Amazon boasted of its lead in cloud computing, revealing a deal with the National Football League that showed how it was moving beyond basic online storage. (NYT)
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