We’ve gotten inured to this sort of thing, but the risks are high.
In possibly the most 2018 thing ever, the President of the United States threatened Iran with war, and the Internet responded… with a bunch of hilarious jokes.
But we still live in a world where President Donald Trump and Iranian President Hassan Rouhani exchanging threats is serious business. Both men are responding to pressures at home by lashing out at each other, write Bloomberg’s editors, but both have more constructive ways to spend their time: “The escalation in threatening language is dangerous: A single Iranian speedboat captain, overreacting to his president’s tough talk, could spark a crisis on the Strait of Hormuz. But even if things don’t go that far, neither leader is likely to profit from these outbursts.”
Former U. S. Navy Admiral James Stavridis, who patrolled the Strait of Hormuz during the Iran-Iraq War in 1987, warns Iran could clamp down on that waterway quickly, choking off the flow of about a third of the world’s oil shipments. The U. S. would respond, of course, but it wouldn’t be able to open the channel quickly. He warns Trump is mistaken if he thinks Rouhani will respond to threats the way North Korea’s Kim Jong Un did – with a showy rapprochement that boosts Trump’s ego: “Kim is a gangster leader who will respond to monetary incentives; the ayatollahs are religious zealots, many of whom are willing to die to defy the Great Satan.”
The shame of it is that Trump’s belligerence undermines Secretary of State Mike Pompeo, who has been saying the right things to encourage Iranians to pressure their government, writes Eli Lake. The risk, in Eli’s view, is that what Trump really wants is the aforementioned showy rapprochement, and that he’ll give away too much to get it.
Bonus Iran reading:
Bonus editorial:
Trump’s trade wars and stated preference for a lax central bank seem aimed at turning the clock back to the 1970s, when the U. S. produced more and consumed less, writes Conor Sen. That may or may not be a constructive goal, but it will be costly in any event, Conor warns: The Fed will lose its inflation-fighting credibility, consumer costs will rise, and a global economy built for a decades-old regime will face wrenching change.
If you want to see what life and economics are like under a president who cares nothing about central-bank independence, then have a look at Turkey. Under pressure from President Recep Tayyip Erdogan and his finance minister/son-in-law, Turkey’s central bank shocked markets today by deciding not to raise interest rates even a little bit, despite inflation pressures and a crumbling currency. Investors are right to give up hope that Erdogan will ever come to his senses, writes Marcus Ashworth.
Theresa May took control of Brexit negotiations today, possibly hoping to steer the UK toward a softer exit from the European Union than many in her government want. The hardest possible Brexit – one in which the UK and EU can’t come to terms – would be tremendously stupid and destructive. But such a “ no-deal” Brexit could still happen, warns Therese Raphael, bringing with it “a pileup of shipping containers at the border, grounded planes, hellish passport lines, medicine shortages, rising debt servicing costs and a nosediving currency.”
Bonus EU dismantling reading:
A record $2.5 trillion in mergers have been announced around the world in the first half of 2018. That sounds great, particularly for M&A bankers, but Stephen Mihm warns history suggests such deal frenzies usually herald economic disasters. We seem to be at or near the top of the sixth big merger wave since the 1890s, according to one study Stephen cites. And the other five had one big thing in common: “When these cycles end, they tend to end very badly.”
One company wisely sitting out the frenzy is Verizon Communications Inc., writes Tara Lachapelle. While rivals chase megadeals for entertainment assets and each other, Verizon’s “focus will remain where it’s always been – on its network technology – rather than jumping on the deal bandwagon or going all-in on a content bet.”
Bonus deals reading:
The late-cycle deal frenzy comes at the end of a decade-long bull run that has left the U. S. stock market unusually expensive. It’s tempting to write this off as a feature of over-loved tech stocks, but Stephen Gandel notes the FAANG stocks – Facebook Inc., Amazon Inc., Apple Inc., Netflix Inc., Google parent Alphabet Inc. – are not nearly as overpriced as some old-school offerings such as Hess Corp. and Under Armour Inc. So the market is just as expensive as it seems.
Bonus markets reading:
Trump seems “to be trying to harass skilled foreign workers out of the country … at a time when those workers are needed more than ever,” writes Noah Smith .
Let’s all pause for a moment to appreciate the spectacle of Google’s amazing growth, writes Shira Ovide .
Ivanka Trump’s clothing line suffered not from her absence but the deterioration of the Trump brand . – Tim O’Brien
Taking away Trump’s critics’ security clearances will only embolden them . – Eli Lake
Of course Russian meddling helped Trump win in 2016. – Al Hunt
The case for optimism, no matter what happens with the Mueller probe. – Jonathan Bernstein
Fake news is bad, but politicized trolling is worse. – Leonid Bershidsky
Stocks rallied . Trump will give farmers $12 billion to help them survive his trade war. Ryan Lochte is maybe not the slickest swimmer in the pool.
There may have been life on the moon 4 billion years ago. (h/t Barry Ritholtz ’s newsletter)
Scientists have found a new way to look for exoplanets .
A brief history of ketchup .
The legacy of Benihana, Rocky Aoki’s all-American empire .
Note: Please send ketchup, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.
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