Dec 24, 2018

Axios AM

🦌 Happy Christmas Eve!

NORAD's Santa tracker (877-HI-NORAD), now in its 63rd year, won't be affected by the government shutdown:

  • It is run by volunteers at Peterson Air Force Base in Colorado, and is funded by the Pentagon budget approved earlier this year, AP reports.
  • Last year, the Santa tracker drew 126,000 phone calls and 18 million website hits.
  • 160 phones handle the calls.
1 big thing: 2019 could be worst year for economy since '08

Illustration: Lazaro Gamio/Axios

A wide swath of market-watchers expect the U.S. economy in 2019 to be the worst since the depths of the 2008 financial crisis, potentially putting President Trump in a hole as he heads into his re-election race.

  • A year ago, Jim VandeHei and I wrote about a rare and enviable trend: synchronized global recovery.
  • Now, we have synchronized global retreat.

Last week was Wall Street's worst in 10 years. If the Dow and S&P 500 finish at their current levels, they'll have their worst December since 1931, during the Great Depression.

  • Bloomberg says the S&P 500 is "one bad session away" from ending the decade-long bull market.

Between the lines: Against that backdrop, many in the financial world were agape when Treasury Secretary Steve Mnuchin tweeted, with no real explanation, that yesterday he had "convened individual calls with the CEOs of the nation's six largest banks."

  • "The CEOs confirmed that they have ample liquidity available," the statement continued.
  • Justin Wolfers, a University of Michigan economics professor, tweeted: "If you wanted to create financial market volatility, this is how you would do it."
  • Bloomberg's headline: "Mnuchin Bid to Calm Markets Risks Making Bad Situation Worse."

The big picture: Almost everything going on in the world is bad for the economy, Felix Salmon and Dion Rabouin point out in Axios Edge, our weekly look ahead for business.

  • A partial list: Trump attacking the Fed ... the trade fight with China ... China's slowing growth ... a possible Brexit catastrophe ... German and Italian growth slowing ... the French presidency under siege.

Chris Krueger of Cowen Washington Research Group, one of the sharpest observers of the collision of Washington and Wall Street, tells me in an email with the subject line, "For the night is dark and full of terrors":

  • "2019 will begin with a partial government shutdown, fragile markets, and leadership vacuums at the White House, Pentagon, Justice Department, United Nations, and Interior Department — at a minimum."
  • "Some might call that American carnage. Nearly every hard policy catalyst in Q1 of 2019 carries significant downside risk."

Another worry, according to Dan Senor, a fund executive and former adviser to Speaker Paul Ryan and Senator-elect Mitt Romney: "If we were to face a real financial crisis in 2019, we will be in much choppier waters than 2008."

  • "In '08, sovereign governments could backstop the crisis in the markets with extraordinary fiscal and monetary measures, and their ability to do so was unquestioned," Senor added. "In 2019, different story."

And Krueger notes how different the U.S. administration is now:

  • "2008 had ... people minding the shop ... like Hank Paulson, Ben Bernanke, Josh Bolten, Steve Hadley, Condi Rice, Bob Gates, and real deputies who all had the implicit trust of both the president and the markets — and worked together to prevent disaster."

Most forecasts reflect the Washington chaos and global slowing:

  • Jon Hilsenrath, The Wall Street Journal's global economics editor, writes: "Most private economists expect U.S. growth to slow in 2019. ... Global economic growth accelerated in sync in 2017. In 2018, as the U.S. accelerated further, Europe, Japan and China all slowed."

Be smart, from Axios markets editor Dion Rabouin: "The market is looking for a hero because everything is terrible right now around the globe."

  • And he notes this dissonance: "Everything is terrible, but the U.S. data is still good so most traders and fund managers are seeing this as a buying opportunity. ... But the algos don't buy it."

P.S. A bit of perspective from Bloomberg: "Even with its 17 percent drop over the last three months, the S&P 500 has risen 18 percent since Election Day."

2. Trump shows Mattis who's boss
Patrick Shanahan, acting Defense secretary beginning Jan. 1, at a Cabinet meeting in April (Evan Vucci/AP)

With coverage of Defense Secretary Jim Mattis' departure painting President Trump in a bad light, he moved up the "departure by two months and tapped his deputy, Patrick Shanahan [a former Boeing SVP], to become acting defense secretary on Jan. 1," the WashPost's Paul Sonne and Missy Ryan write:

  • "Defense officials ... have repeatedly been blindsided by the president’s Twitter pronouncements: ending military aid to Pakistan, banning transgender troops, creating a Space Force."
  • "Most worrisome for some military leaders, however, is the fear that their tradition of partisan neutrality — fundamental to maintaining public support — could be under threat."

"From his first week in office, Trump’s style and choices have grated on many among the military brass":

  • "Some of it has been about style. For many senior officers brought up in an organization that stresses discipline and honor, it has been jarring to see a commander in chief insulting allied leaders or wading into personal feuds."
  • "It has also been about substance. Current Pentagon leaders rose through the ranks in the post-Sept. 11, 2001, era, when NATO nations sent thousands of troops to fight alongside the United States. Trump ... voiced doubts about the value of the alliance, threatened to abandon the partnership with South Korea and questioned whether the military should remain in the Middle East."
Courtesy N.Y. Post

The WashPost’s David Ignatius said on “Morning Joe” that allies around the world are asking: "What’s happening to you? We’re worried. We’re frightened about America’s direction."

3. How plastic helps enable mass shootings

The N.Y. Times' Andrew Ross Sorkin writes that a review of "hundreds of documents including police reports, bank records and investigator notes from a decade of mass shootings" found that "many of the killers built their stockpiles of high-powered weapons with the convenience of credit."

  • "There have been 13 shootings that killed 10 or more people in the last decade, and in at least eight of them, the killers financed their attacks using credit cards. Some used credit to acquire firearms they could not otherwise have afforded."
  • "The investigations undertaken in their aftermath uncovered a rich trove of information about the killers’ spending. There were plenty of red flags, if only someone were able to look for them, law enforcement experts say."
  • "If banks required retailers to transmit details on sales of guns and ammunition, they would be able to make more informed decisions about transactions."

"Over the last several months," Sorkin writes, "I have spoken to senior executives at the country’s largest banks and credit card companies who were taken aback when I presented them with the list of shootings that involved their cards."

  • "While some executives expressed grief and were open to discussing possible solutions, virtually none were willing to speak about them on the record for fear of upsetting gun-rights advocates and politicians invoking the Second Amendment."
  • "Some raised the prospect that by trying to help they would be held responsible if the system failed. Others made a slippery-slope argument: If they were to police gun sales, should they do the same for alcohol in an effort to prevent drunk-driving deaths?"

Go deeper.

4. Shutdown likely to last into new year
Mark Wilson/Getty Images

In Washington, the National Christmas Tree is closed to the public due to the partial government shutdown that moves into Day 3 today.

  • "I don't think things are going to move very quickly here the next couple of days," incoming White House chief of staff Mick Mulvaney told Chris Wallace on "Fox News Sunday."
  • "[I]t's very possible that the shutdown will go beyond the 28th and into the new Congress," which begins Jan. 3.
  • Go deeper: Highlights from Mulvaney's Sunday show tour
5. Women’s march hit by accusations of anti-Semitism

The Women’s March movement, which organized massive protests after President Trump's inauguration, is being roiled by charges of anti-Semitism, the N.Y. Times' Farah Stockman reports:

  • "Tensions around identity have swirled around the Women’s March from its earliest days. Black and Latina women complained on Facebook that white women were planning a march without their input, and that mainstream feminists had long ignored their needs."
  • Another issue is the use of private security for marches that likely includes members of the Nation of Islam, led by Louis Farrakhan.

The controversy is "overshadowing plans for more marches next month."

  • "The rift is now so dire that there will be two marches on the same day next month on the streets of New York: one led by the Women’s March group, which is billed as being led by women of color, and another by a group affiliated with March On that is stressing its denunciation of anti-Semitism."

Go deeper: "The accusations of anti-Semitism ... were outlined in an article this month in Tablet, an online Jewish magazine."

6. Surprise tsunami kills 281
Aerial photo view of Carita Beach, Indonesia (Azwar Ipank/AFP/Getty Images)

In Indonesia, "waves that swept terrified locals and tourists into the sea Saturday night ... followed an eruption and apparent landslide on Anak Krakatau, or 'Child of Krakatoa,' one of the world's most infamous volcanic islands," AP reports.

  • "[T]he ground did not shake to alert people before the waves ripped buildings from their foundations and swept terrified concertgoers celebrating on a resort beach into the sea."

"Dramatic video posted on social media showed the Indonesian pop band Seventeen performing under a tent on Tanjung Lesung beach."

  • "Seconds later, ... the stage suddenly heaved forward and buckled under the force of the water, tossing the band and its equipment into the audience."
  • The bass player, guitarist and road manager were killed.
  • "The tide rose to the surface and dragged all the people on site," the group said in a statement. "Unfortunately, when the current receded, our members were unable to save themselves while some did not find a place to hold on."
7. Facebook made another offer for Snap

After Mark Zuckerberg's famous $3 billion offer for Snapchat in 2013, Facebook tried again three years later, The Wall Street Journal's Georgia Wells and Maureen Farrell report in the 14th paragraph of a front-page opus about Snap Inc. CEO Evan Spiegel's "imperious" style (subscription):

  • "In mid 2016, [Spiegel] dismissed approaches from Mark Zuckerberg about the Facebook CEO’s interest in buying Snap, say people familiar with the overtures, which haven’t previously been disclosed and which Mr. Spiegel didn’t report to the entire board."
  • "Separately, Facebook Chief Operating Officer Sheryl Sandberg reached out to members of Snap’s board to gauge their interest. The Facebook executives never specified prices."

"A person familiar with Mr. Spiegel’s thinking says there was never a formal offer to take to the full board and he doesn’t regret turning down the overtures."

8. School bus driver shortage
School bus parking lot in Omaha, Neb. (Nati Harnik/AP)

"School districts throughout the U.S. are struggling to find school bus drivers, a challenge that has worsened with low unemployment and a strong economy," AP's Grant Schulte reports:

  • "The problem has become so severe that some districts are offering sign-up bonuses for new drivers, while others rely on mechanics, custodians and other school employees to fill the gap."
  • "In Lincoln, Nebraska, some positions remain unfilled even after the local school district offered $1,000 signing bonuses for new hires and a guaranteed six-hour day for all drivers."
  • "[M]any districts require split morning and afternoon shifts for their drivers, which some consider a hassle. Keeping an eye on noisy children while facing away from them can be difficult as well."

Why it matters: "For parents and students, the shortage can mean longer waits for a ride to school and more crowded buses."

  • "Even with administrators and bus mechanics filling in, the shortage has ... resulted in fewer routes, more children waiting at each stop, and crowded buses."

"Drivers generally need a commercial driver's license, which requires training, sometimes without pay."

  • Iowa’s Southeast Polk Community School District is considering a "monthly rodeo" where potential drivers could test-drive a bus in a school parking lot.
9. Inside the Saudi killing

In an investigation of the final 18th months of Jamal Khashoggi, the WashPost's Souad Mekhennet and Greg Miller write that the paper's contributing columnist "was a writer of modest influence beyond the Middle East when he was alive."

  • "In death, he has become a symbol of a broader struggle for human rights, as well as a chilling example of the savagery with which autocratic regimes silence voices of dissent."
  • "Khashoggi’s life and work ... were inevitably more complicated than can be captured in that idealized frame."

A key revelation in the article: Khashoggi's "connections to an organization funded by Saudi Arabia’s regional nemesis, Qatar":

  • "Text messages between Khashoggi and an executive at Qatar Foundation International show that the executive, Maggie Mitchell Salem, at times shaped the columns he submitted to The Washington Post, proposing topics, drafting material and prodding him to take a harder line against the Saudi government."
  • "Khashoggi appears to have used some of Salem’s suggestions [in an Aug. 7 column], though it largely tracks ideas that he expressed in their exchange over the encrypted app WhatsApp."
  • "It is not clear that the Saudi government knew of Khashoggi’s ties to the Qatar foundation, although the kingdom routinely engages in surveillance of dissidents abroad."

"Editors at The Post’s opinion section ... said they were unaware of these arrangements, or his effort to secure Saudi funding for a think tank."

  • Editorial page editor Fred Hiatt: "The proof of Jamal’s independence is in his journalism ... Jamal had every opportunity to curry favor and to make life more comfortable for himself, but he chose exile and — as anyone reading his work can see — could not be tempted or corrupted."

Worthy of your time.

10. 1 film thing
Jimmy Stewart stands in the cashier's cubicle next to a black crow in "It's a Wonderful Life." (Hulton Archive/Getty Images)

"Most classic Christmas movies are secular, celebrating love and personal redemption, but a handful have managed to bring the divine into the picture," Wall Street Journal drama critic Terry Teachout writes (subscription):

  • "Christmas movies ... are typically at bottom secular tales driven by the tireless engine of romance."
  • But "It’s a Wonderful Life" (1946), which in recent years has become the best known of all Christmas movies, is "unapologetically religious."
  • While Charles Dickens ("A Christmas Carol," 1843) went out of his way to call his angels "ghosts," director Frank Capra, who was Catholic, dispenses with that transparent disguise in "A Wonderful Life": "Clarence is clearly identified at the beginning of the film as an angel who is dispatched from heaven to stop George from 'throwing away God’s greatest gift.'"

"To be sure, Capra’s Christianity is the all-purpose Hollywood kind, denuded of divisive doctrinal specifics: George even makes a point of mentioning that he’s 'not a praying man,' the obligatory disclaimer whenever a Hollywood star dares to pray on screen."

  • "Be that as it may, he asks and God delivers, and one never doubts for a moment that, unlike Scrooge, he’ll be heading straight for the nearest church come Christmas morning."