Germany’s Merkel Reaches Out to EU Members Over Immigration Dispute

Date: 18-06-2018
Source: The Wall Street Journal

The German chancellor sounds out other countries’ willingness to readmit migrants

German Chancellor Angela Merkel has been reaching out to her European neighbors this weekend ahead of a Monday deadline to defuse an immigration dispute.

BERLIN—German Chancellor Angela Merkel turned to her European neighbors this weekend for help with a fierce domestic dispute over immigration that is threatening to topple her three-party coalition.

Aides to the chancellor reached out to the governments of several European Union members on the front line of the Continent’s immigration crisis to sound out their willingness to readmit migrants that try to cross from their territory into Germany, European officials said on Sunday.

Among those approached were the governments of Austria, Greece, Italy and Bulgaria, the officials said. Berlin also liaised with the European Commission, the EU’s executive body.

Ms. Merkel’s move came after her own interior minister, Horst Seehofer, handed the chancellor an ultimatum last week, warning that he could close the country’s borders to certain categories of illegal migrants as early as Monday.

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Economic Growth in U.S. Leaves World Behind

Date: 15-06-2018
Source: The Wall Street Journal

Second-quarter growth on track to exceed a 4% pace—the fastest of any quarter in almost four years

The Commerce Department reported Thursday that sales at U.S. retailers rose 0.8% in May from a month earlier.

The U.S. economy is revving up just as Europe and other major economies lose steam, jeopardizing a rare period in which the world’s largest economies have been accelerating in unison.

The European Central Bank on Thursday took another step toward ending the massive stimulus measures it has used in an effort to boost growth since 2015. But ECB officials also said they would hold interest rates steady through summer next year, a sign that they felt the eurozone economy remains fragile.

In an indication of growing economic vigor in the U.S., the Federal Reserve on Wednesday tapped the brakes again, raising the benchmark interest rate by a quarter of a percentage point and signaling it may quicken the pace of future rate increases because of a strengthening economy and tightening labor markets.

The economies’ diverging paths were expressed most prominently in the euro, which on Thursday suffered its worst day against the dollar in two years. The euro lost 1.88% against the U.S. currency, its biggest drop since the day after the U.K. voted to leave the European Union.

The central bank announcements over the past two days offered the latest evidence that heady growth expectations for Europe and other major economies outside the U.S. might not be achieved, defying analysts who began the year convinced that the world economy’s first synchronized expansion in years would continue.

The International Monetary Fund said in January that the world’s seven largest economies each grew more than 1.5% in 2017, and it predicted more solid growth this year. Global manufacturing was booming and the IHS Markit global purchasing managers index that month was its strongest in nearly seven years.

Many investors counted on a revitalized Europe to lead that growth in 2018. But recent labor strikes in France, political turmoil in Italy and softer economic data are causing investors to rethink that premise. Germany last week reported that factory orders dropped 2.5% in April, while eurozone growth was 0.4% in the first quarter, down from 0.7% in the final quarter of 2017. On Thursday, the ECB revised down its eurozone growth expectations for this year to 2.1%, from 2.4%.

The Ultimate Démarche: France Wants to Oust English From the EU

Date: 14-06-2018
Source: The Wall Street Journal

Prompted by Brexit, French President Emmanuel Macron wants to restore his language, the way it was before Britain joined

BRUSSELS—As if the European Union didn’t have enough to worry about, now it’s at odds over what should be its dominant language.

The Ultimate Démarche: France Wants to Oust English From the EU

The French president, Emmanuel Macron, wants to make French grand again and replace English as the default language in EU institutions, the way it was before Britain joined the bloc in 1973. With the U.K. negotiating to leave the EU next spring, he is eager to restore the linguistic ancien regime.

“English has probably never been so present in Brussels as when we’re talking about Brexit,” Mr. Macron said in March on the Day of Francophonie—a celebration of French language and culture observed in more than 70 countries. “This domination is not inevitable,” he declared.

The Unexpected Winner From the Trump-Kim Summit: China

Date: 14-06-2018
Source: The Wall Street Journal

Beijing had worried that its interests might get short-shrift in the Singapore summit

BEIJING—China is setting its sights on a key role in North Korea’s future, seeking to be part of any peace treaty, weapons inspections and economic assistance, after emerging as a surprise beneficiary of the summit between the U.S. and North Korean leaders.

Chinese officials are expected to stake out their positions for a post-summit North Korea when U.S. Secretary of State Mike Pompeo visits Beijing on Thursday to discuss the outcome of the talks between President Donald Trump and North Korean leader Kim Jong Un.

At the top of China’s agenda are an easing of the economic sanctions that pressured North Korea into negotiations and working on ways to provide security guarantees to give Pyongyang the confidence to dismantle its nuclear program.

Who Unraveled the New World Order?

Date: 13-06-2018
Source: The Wall Street Journal By David M. Smick

It wasn’t Trump. The global economic consensus began falling apart years before he entered politics.

European Council President Donald Tusk recently said that Donald Trump’s approach to trade, climate change and the Iran nuclear deal is undermining “the rules-based international order.” This is absurd. The global order began unraveling long before Mr. Trump’s debut on the world stage.

Start in 1989. That remarkable year saw the fall of the Berlin Wall, the collapse of the socialist model, and the rise of globalization. By the early 1990s, China, India, Eastern Europe and a host of commodity-producing countries had joined the global capitalist club.

That was the beginning of the so-called Washington Consensus—a new global order based on deregulating market access, liberalizing capital and trade flows, encouraging domestic competition, fortifying the rule of law, and reducing taxes, debt and market subsidies. By 1995, the leaders of this new world order established the World Trade Organization, which China joined six years later.

White House Trade Official Apologizes for Insulting Canada’s Trudeau

Date: 13-06-2018
Source: The Wall Street Journal

Peter Navarro says he was wrong to say there was ‘special place in hell’ for leaders like Justin Trudeau who cross Trump

National Trade Council adviser Peter Navarro.

WASHINGTON—President Donald Trump’s senior trade adviser apologized Tuesday for making comments attacking Canadian Prime Minister Justin Trudeau, saying they were inappropriate.

Peter Navarro had said on Sunday there was a “special place in hell for any foreign leader that engages in bad-faith diplomacy” with Mr. Trump “and then tries to stab him in the back on the way out the door. That’s what bad-faith Justin Trudeau did.”

On Tuesday, Mr. Navarro said he had been trying to use strong words to back Mr. Trump’s trade stance but went too far.

“In conveying that message I used language that was inappropriate and basically lost the power of that message,” he said. “I own that, that was my mistake, those were my words.”

He made the comments Tuesday at an event of The Wall Street Journal CFO Network in Washington. When asked by the Journal interviewer if he was apologizing, Mr. Navarro said, “Yes, absolutely.”

Bitcoin Falls Sharply After Another Cryptocurrency Exchange Is Hacked

Date: 11-06-2018

Source: The Wall Street Journal

The largest cryptocurrency has lost more than half its value this year

Since 2014, cryptocurrency exchange hacks have cost investors at least $1.4 billion, according to an analysis by The Wall Street Journal.

A South Korean cryptocurrency exchange said it suffered a “cyberintrusion,” prompting bitcoin prices to fall sharply toward year lows.

Bitcoin dropped more than 10% over the weekend, falling below $6,700, according to research site CoinDesk. The largest cryptocurrency has lost more than half its value this year, falling by nearly two thirds from its record high near $20,000 in December. Its low for the year came in February at less than $6,000.

The Age of Tech Superheroes Must End

Date: 08-06-2018
Source: The Wall Street Journal

Silicon Valley has an accountability crisis, and at its root is the idolatry of its founder-CEOs

Elon Musk, shown in 2017, holds 22% of Tesla but effectively has full control of the auto maker. A shareholder bid to oust him from the chairman’s seat failed this past week, but he faces a shareholder lawsuit.

Whether it’s Theranos Chief Executive Elizabeth Holmes or ousted Uber CEO Travis Kalanick, or the heads of currently troubled public companies like Evan Spiegel of Snap and Elon Musk of Tesla, powerful founder-CEOs who were once lauded for flouting convention are facing a new reality: They aren’t superheroes, after all.

Treating them as if they were has been bad for their companies and investors alike.

It’s understandable how we got here—the genius tech founder mythology has its roots in the pantheon of real-world demigods widely credited with revolutionizing industry, from Thomas Edison and Gordon Moore to Steve Jobs and Jeff Bezos. Investors and experts in corporate governance say the problem is that building corporations and stock-market valuations on the notion that every tech CEO is potentially building another Apple is ridiculous and counterproductive.

“If your only argument is Steve Jobs or Jeff Bezos, you don’t have an argument—you have a couple of exceptions,” says Paul Kedrosky, a partner at early-stage investment firm SK Ventures.

It’s high time for a two speed Europe

Date: 05-06-2018
Source: The Wall Street Journal
Subject: Italy’s Euroskeptic Agenda Reflects Weakening Public Support for the EU

In his inaugural speech, Prime Minister Giuseppe Conte says his government will challenge eurozone rules

ROME—Italy’s new government is laying the groundwork to challenge Europe’s financial orthodoxy and immigration rules, setting out a euroskeptic policy agenda in a country where public frustration with the European Union has supplanted once-broad support.

In his inaugural speech to Parliament on Tuesday, Prime Minister Giuseppe Conte said his government would push for a change of the rules underpinning the eurozone to spur growth and cut the country’s massive debt, which he said austerity policies helped worsen.

“A new wind” is blowing in Italy, said Mr. Conte, who heads a government supported by the maverick 5 Star Movement and the hard-right League, which have come out strongly against the eurozone’s limits on public spending.

A Decade Later, U.S. Stocks Behave Like Lehman Never Happened

Date: 05-06-2018
Source: The Wall Street Journal

The world’s financial system had its worst crisis in generations a decade ago, but U.S. stock-market returns belie that fact

If all you had to go on was the return on U.S. stocks over the past decade, you’d never guess that the world’s financial system had its worst crisis in generations, let alone that stocks had their biggest crash since World War II. The U.S. market has had a vintage 10 years, and returns—even including the calamity that was just appearing on the horizon in the summer of 2008—have been far better than the long-run norm.

An investor who simply bought the S&P 500 in June 2008 and ignored the market carnage that followed has scored gains of more than 9% annualized, including reinvested dividends, only fractionally below the average nominal return since 1900. But because inflation has been so low, real returns after inflation of 7.8% have been well above the long-term average for the U.S. market of 6.5% calculated by London Business School academics Elroy Dimson, Paul Marsh and Mike Staunton.

The result is far different from what followed deep recessions and financial crashes in the 1930s and 1970s, when it took a decade or more for stocks just to recover to precrash levels in real terms, let alone make money. The question for investors is whether the speedy recovery from 2009 is an optimistic sign that things are better in the U.S. than generally believed, a demonstration of the ability of investors to ignore reality for extended periods, or a happy illusion created by the Federal Reserve.

The evidence provides partial support for each view.