Good Thursday. (Want this by email? Sign up here.)
‘My trust in him was grossly misplaced’
Les Wexner, the billionaire who controls Victoria’s Secret, was Jeffrey Epstein’s most prominent client. Now the retail executive has accused the financier of misappropriating “vast sums of money,” Steve Eder and Emily Steel of the NYT write.
The most detailed account yet of their relationship is a 564-word letter that Mr. Wexner sent to his foundation yesterday. It sheds some light on how his life became intertwined with Mr. Epstein, who is accused of abusing underage girls.
Mr. Wexner discovered misuse of his money in 2007, when he began to distance himself from Mr. Epstein. By that point, the Florida authorities had charged Mr. Epstein with molestation and unlawful sexual activity with a minor.
The billionaire defended giving Mr. Epstein power of attorney, which let the financier hire people, sign checks and buy property on his behalf. Mr. Wexner said the move was “common in that context.”
Some of the “misappropriated” money has since been recovered, Mr. Wexner said, including about $46 million worth of securities from two entities controlled by Mr. Epstein.
Scrutiny of Mr. Wexner is set to continue. His company, L Brands, has hired outside lawyers to review any relationship that it had with Mr. Epstein.
ImageCreditJeenah Moon for The New York TimesChina’s currency could weaken further
China signaled today that it might continue to weaken its currency, Alexandra Stevenson of the NYT reports.
• “China’s central bank on Thursday set the midpoint of the renminbi’s daily trading range above 7 to the American dollar for the first time in more than a decade.”
• “The move in effect tells financial markets that Beijing expects the renminbi to continue to weaken versus the dollar, perhaps well past the 7-to-the-dollar level.”
This doesn’t drastically change trade dynamics. There’s little difference between the currency’s midpoint being set at 7.0039 to the dollar, as it is today, and the 6.9996 point at which it was set yesterday.
But the move is “likely to provoke more ire from the Trump administration,” Ms. Stevenson writes. A weaker currency helps Chinese factories offset the costs of American tariffs when selling goods to the U.S., and setting the midpoint above 7 suggests that the renminbi could weaken further.
If the currency slides to 7.5 or 8 to the dollar, it could significantly undercut the impact of American tariffs.
More: Could the trade and currency decisions of President Trump and his economic adviser Peter Navarro lead to recession?
ImageCreditJosh Edelson/Agence France-Presse — Getty ImagesThe White House’s wrestle with social media
The Trump administration continues to rail against what it says is bias against conservatives on social media. But as it also tries to police extremism in the wake of last weekend’s shootings, it could find itself in a tough spot.
• The White House is reportedly drafting an “order that would address allegations of anti-conservative bias by social media companies,” according to Politico. It’s not clear what the contents of that order might be.
• At the same time, it has invited tech companies to discuss the rise of violent online extremism, the WaPo reports, as the role of social media platforms and message boards in online radicalization becomes prominent.
Those could be in conflict, according to Adi Robertson of The Verge:
• “One shooting was apparently an act of far-right terrorism, based on an anti-immigrant screed posted online.”
• “Preemptively flagging the shooter — or one of several far-right killers before him — could have looked like egregious anti-conservative bias.”
An unnamed White House official played down that idea, telling Politico that tech companies have “a role, if not a responsibility” to “provide a platform that protects and cherishes freedom and free speech, but at the same time does not allow it to descend into a platform for hate.” The person didn’t elaborate on what that might look like, or how it would avoid violating the First Amendment.
More: Here’s one take on how sites like 8chan and Reddit could be forced to clean up. And the owner of 8chan will travel to the U.S. to meet with Congress.
There’s trouble in the bond markets
All corners of the bond markets — from government debt to commercial bonds — are flashing warning signs that could foreshadow potentially huge problems for the economy.
• The yield on the 10-year Treasury note fell briefly to under 1.6 percent yesterday, while yields on the 30-year note approached a record low of 2.106 percent.
• That means the yield curve’s inversion, where yields on longer-term Treasury notes fall below those of shorter-term ones, has widened. That’s usually considered a strong predictor of recession.
• Evidence is emerging that inflated ratings for commercial bonds — which were one cause of the 2008 financial crisis — persist, according to the WSJ. “We don’t trust the ratings,” one bond investor said.
• “It is at least possible that this is the moment when the three-decade-long bull market in bonds has at last reached an untenable extreme, ready to snap back,” John Authers of Bloomberg Opinion writes.
ImageCreditDivyakant Solanki/EPA, via ShutterstockCountries are slashing interest rates
Central banks in India, Thailand and New Zealand unexpectedly cut interest rates yesterday. They were all spurred by worries that the trade war between the U.S. and China will wreak havoc worldwide, Alexandra Stevenson of the NYT writes.
• The Reserve Bank of India cut its benchmark rate 0.35 percent, instead of 0.25 percent as expected.
• New Zealand’s central bank cut its rate 0.5 percent.
• Thailand’s cut its rate 0.25 percent, its first reduction since 2015.
More countries could follow suit if Beijing continues to weaken its renminbi, “leading to a damaging currency war that could revive inflation and even further fray the bonds of global trade,” Ms. Stevenson writes.
Financial markets were shaken. The S&P 500 dropped as much as 2 percent yesterday before closing up slightly. Crude oil prices fell more than 3 percent.
President Trump urged the Fed to cut rates, too. “Our problem is not China,” he tweeted yesterday. “Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!).”
ImageCreditJeff Chiu/Associated PressElderly bankruptcy is growing in America
Patti Waldmeir of the FT takes a look at the rising number of American baby boomers declaring bankruptcy.
• “Baby boomers aged 65 and older are racking up far higher levels of debt than their parents, who were raised during the Great Depression, and a growing minority are finding themselves tipping over from desperate financial trouble into bankruptcy.”
• “In 1991, over-65s made up only 2 percent of bankruptcy filers, but by 2016 that had risen to more than 12 percent.”
• “Over the same period, elders grew as a percentage of the U.S. adult population too, but only from 17 percent to 19.3 percent.”
• “The culprits are vanishing pensions, soaring health care costs and tens of thousands of dollars in unpaid student loans for themselves, their children and even their grandchildren.”
• “The baby boomer attitude to debt has not turned out to be as frugal as you would think,” Kevin Leicht, the head of the University of Illinois sociology department, told the FT. He cites jobs that don’t keep up with inflation and insufficient pensions as potential reasons behind the rising debt.
Jim Mattis is rejoining the board of General Dynamics, having resigned when he became Defense Secretary.
Wanda Vázquez was sworn in as Puerto Rico’s governor, becoming the third person to hold the post in a week.
Kimberly Breier, the State Department official who oversaw diplomatic affairs in the Western Hemisphere, is stepping down.
Karen Simon, a veteran investment banker at JPMorgan Chase who most recently led a team that helps clients find board members, is retiring.
The speed read
• SoftBank said it could start investing from its second Vision Fund as soon as next month. It also disclosed that its first Vision Fund experienced gains from investment in DoorDash, but a drop in the value of its stake in Uber. (WSJ, CNBC, Bloomberg)
• Broadcom is reportedly near a deal to buy Symantec’s enterprise division, after failing to acquire the entire cybersecurity company. (WSJ)
• Crown Prince Mohammed bin Salman of Saudi Arabia is reportedly still insisting on a $2 trillion I.P.O. valuation for Aramco. Advisers recommend a lower target. (Reuters)
• WeWork has reportedly changed its corporate structure ahead of its I.P.O. to increase tax breaks for its co-founder, Adam Neumann, and early investors. (FT)
• CBS and Viacom will report earnings today — but don’t expect them to announce their merger. (FT)
Politics and policy
• Visa’s C.E.O. said the payments giant would not block gun purchases. (CNBC)
• President Trump said he supported more background checks for gun purchases, but rejected a ban on assault-style weapons. (Bloomberg)
• Stephen Ross, who owns the Miami Dolphins N.F.L. team, defended plans to hold a fund-raiser for Mr. Trump. (Bloomberg)
• The House Judiciary Committee sued to compel the testimony of Don McGahn, the former White House counsel. (NYT)
• Mr. Trump said he was considering commuting the prison sentence of Rod Blagojevich, the former Illinois governor. (NYT)
• Secretary of State Mike Pompeo said the U.S. would be waiting “pen in hand” to sign a new trade deal with Britain when it leaves the E.U. (WSJ)
• Chinese exports increased last month, despite the trade war with America. (FT)
• Warehouses on America’s West Coast are bursting with imports that companies have stored to beat tariffs. (Bloomberg)
• American soybean farmers are trying to find new markets now that sales to China have fallen and remain unpredictable at best. (CNBC)
• “Instagram’s lax privacy practices let a trusted partner track millions of users’ physical locations, secretly save their stories and flout its rules.” (Business Insider)
• Facebook reportedly plans to take a first step toward increased integration of its services by rebuilding Instagram’s chat feature using Facebook Messenger’s technology. (Bloomberg)
• The U.S. released a long-anticipated rule that restricts government agencies from doing business with Huawei. (NYT)
• FedEx will stop domestic ground deliveries for Amazon packages at the end of August. (NYT)
• Samsung struck a deal with Microsoft to make its smartphones work seamlessly with Windows PCs. (FT)
• Microsoft contractors reportedly listen in on some Skype call recordings. (Business Insider)
Best of the rest
• Carlos Ghosn hasn’t seen his wife in months. That’s how Japanese prosecutors want it. (NYT)
• Several European banks warned yesterday that they will continue to struggle as interest rates sink further. (WSJ)
• How Walmart employees in El Paso used their active shooter training during last weekend’s attack. (NYT)
• New state rules would make hundreds of thousands of additional people eligible for overtime pay. (WSJ)
• Why it matters what kind of person your fund manager is. (Institutional Investor)
Thanks for reading! We’ll see you tomorrow.
We’d love your feedback. Please email thoughts and suggestions to [email protected]
SOURCE : https://www.nytimes.com/2019/08/08/business/dealbook/les-wexner-jeffrey-epstein.html