What we’re reading (8/27)
“Walmart Joins Microsoft’s Pursuit of TikTok” (Wall Street Journal). TikTok is asking for $30 billion for its U.S. operations. Originally, one would’ve thought MSFT had a big-time negotiating advantage over the sellers, given the Trump administration’s order requiring TikTok’s Chinese owner to divest U.S. operations. But the introduction of another well-capitalized bidder into the process changes TikTok’s relative bargaining position considerably. The clock is ticking, however.
“Ford and Fiat Chrysler Remain Under Federal Investigation In Union Corruption Probe” (CNBC). “Ford Motor remains under federal investigation as part of a multi-year corruption probe into the United Auto Workers union, according to the lead prosecutor on the investigation. U.S. Attorney Matthew Schneider told CNBC that the automaker and the UAW’s Ford unit remain targets in the probe, which initially started with Fiat Chrysler and its union counterpart.”
“America’s Coming Double Dip” (Project Syndicate). Yale economist Stephen Roach argues “there is a compelling case for another double dip in the aftermath of America’s devastating COVID-19 shock.”
“Fed Prepared To Let Economy Run Hotter” (NPR). In a pretty extraordinary policy change, the Fed says it will adjust its long-term approach to fulfilling its dual inflation/employment mandate (which has historically meant targets in the range of (1) ~2 percent inflation a la the Taylor Rule and (2) “full” employment). Going forward, it seems, the Fed may not “tap the brakes” preemptively to prevent the economy from overheating. This isn’t altogether inconsistent with things we’ve heard from notable central bankers before. As former Fed Chair Bernanke famously once said, jacking up interest rates is a relatively blunt tool for popping “bubbles,” and sound supervision by the legion of regulators under the Fed’s watch of may be a better way to do it.
“Even Corporate America Thinks The Stock Market Is Overvalued” (CNN Business). “A stunning 84% of Fortune 500 CFOs say the US stock market is overvalued, according to a survey released Thursday by Deloitte. That's up from the 55% who felt that way a quarter ago. Just 2% of finance chiefs say US stocks are undervalued.” CNN proffers this adds to the “mounting evidence” that the market is overvalued. But its not remotely clear from the article if the CFOs were asked to opine on the market as a whole or their own stock. If the latter, it’s a highly credible take, in my view—the CFOs know what the landscape looks like for their business extremely well and can readily compare that to their stock’s market price. If the former, however, I’m not sure there’s really any story here. Exxon’s CEO’s take on whether Twitter is overvalued probably has about the same “standard error” as anyone else’s.
