Jul 26, 2018

Axios AM

By Mike Allen
Mike Allen

Good Thursday morning.

Situational awareness: "The government has seized more than 100 recordings that [Michael] Cohen made of his conversations with people discussing matters that could relate to Trump and his businesses and with Trump himself talking," per the WashPost:

  • "Cohen appeared to make some recordings with an iPhone — without telling anyone."
  • "A significant portion of the recordings is Cohen surreptitiously recording reporters."
1 big thing: Jared and Ivanka dig in for long haul

Illustration: Sarah Grillo/Axios

Friends of Jared Kushner and Ivanka Trump tell us they have the strong impression they are now preparing to stay in D.C. as long as the president does, meaning they'll outlast almost everyone in the West Wing.

  • A White House official with direct knowledge of the situation told Jonathan Swan that in recent months, Jared and Ivanka have spent a good deal of time with the president in the private dining room adjoining the Oval Office and in the residence.
  • West Wing watchers note that they weren't accompanied by White House Chief of Staff John Kelly, a rival power center to "Javanka."

Ivanka's announcement this week that she's shutting down her fashion brand — and the messaging that accompanied her decision — sent a clear signal they're not going anywhere.

  • These two children of real-estate moguls are liking Washington, according to friends.
  • And the president has become such a pariah in many Manhattan social circles that it's not as if a hero's welcome awaits them back home.

Why it matters: Javanka have had some epic internal fights — Steve Bannon and Rex Tillerson were their two most savage — but it's now clear it would take an event of extraordinarily damaging proportions to blow them out of this White House.

  • Jared getting his security clearance obviously helped. But it's also true that we in the media — in reporting their potential fates as a rollercoaster narrative — sometimes forgot perhaps the most stable truism of Trumpworld: It's a family business.

After a burst of publicity in the opening months of the administration, both have been working much more quietly on specific issues rather than serving as de facto Secretaries of Everything, as their rivals jabbed in the early days:

  • Jared wants to see through the Israeli-Palestinian deal and NAFTA negotiations, and is working on government tech modernization and prison reform.
  • Ivanka remains focused on promoting paid family leave and childcare development. She is an architect of workforce development plans, announced last week, that are designed to help employees and employers prepare for the coming wave of automation.
  • Given that the couple's policy passions include Democrat-friendly issues — especially prison reform and child care — the value of their portfolio could rise if voters choose divided government in November.

Both will also play roles in the midterms and re-elect:

  • Jared will continue his behind-the-scenes role working on politics with reelection campaign manager Brad Parscale, Republican National Committee Chair Ronna Romney McDaniel and Eric Trump.
  • Ivanka will likely be onstage at key moments and in strategic locations, such as the suburbs where Trump is vulnerable with college-educated women.

One thing about Jared and Ivanka that has deeply frustrated Kelly — as a general as well as chief of staff — is that they enjoy family privileges and live outside his chain of command, even though as staff they are technically under his authority.

  • Jared and Ivanka's internal opponents have largely either been fired (Bannon and former Secretary of State Tillerson being the prime examples), or have less sway these days (Kelly).
  • Javanka also have some powerful allies remaining in the administration's top ranks: Secretary of State Mike Pompeo, Treasury Secretary Stephen Mnuchin, Agriculture Secretary Sonny Perdue and Commerce Secretary Wilbur Ross.

Be smart: Whenever Kelly departs, Javanka will be further empowered. They have outlived their enemies, and have a firmer grip on power than ever. No wonder friends say they are feeling emboldened, and aren't going anywhere.

2. Facebook plunge endangers other stocks

Illustration: Lazaro Gamio/Axios

Facebook lost more than $125 billion in value after the markets closed, with shares plummeting more than 20%, following an earnings report that missed revenue and user growth estimates, Axios business editor Dan Primack tells me:

  • What happened: Facebook spent the quarter trying to fix its fake news problem, and it’s possible that these results show (perversely) that it’s beginning to work.
  • Mark Zuckerberg wrote that “we're investing so much in security that it will significantly impact our profitability.”
  • Thing is, profits were actually up. This is a top-line issue reflecting slowed growth, not a bottom-line issue about more money going out the door.

Why it matters for everyone else: Facebook is part of a small group of companies that has been keeping the overall stock markets afloat for much of 2018.

  • According to a Bank of America Merrill Lynch research note, the so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Alphabet (Google) —were single0handedly responsible for the S&P 500 being positive through the first half of 2018. Without them, the index’s first half performance would have been -0.73%.

Be smart: What we’ve seen in the past 12 hours is that these foundational stocks can fall very far, very fast, and very unexpectedly. Add in a recent subscriber growth hiccup from Netflix, which continues to trade at an astronomical multiple to earnings, and it shows just how thin the line has been between black and red.

3. Inside CEO pay
Expand chart
Data: Axios analysis of SEC filings. Chart: Andrew Witherspoon, Kerrie Vila, Lazaro Gamio/Axios

CEOs took home more last year than is normally highlighted, due to heavy stock ownership, Axios' Bob Herman reports:

  • The CEOs running S&P 500 companies cumulatively made $10 billion in 2017, 44% higher than usually reported, according to an Axios analysis of SEC filings.
  • The big reason: a surge in CEOs cashing in stock in a hot market. 

Be smart: 2017 was a bull year. Higher stock prices equal more lucrative payouts, especially if executives have been holding onto options for several years. In other words, some CEOs could have taken home less than the headline number in 2016, only to cash in last year.

4. Trump de-escalates trade war
President Trump and European Commission President Jean-Claude Juncker leave the Rose Garden. (Win McNamee/Getty Images)

President Trump took a victory lap in the Rose Garden after achieving at least a rhetorical de-escalation of his trade war during a visit by European Commission President Jean-Claude Juncker. Jonathan Swan reads between the lines:

  • Critics will say Trump was taking credit for solving a problem he caused.
  • But free traders were relieved that at least for now, there's a pause in new tariffs for the Continent.
  • And they hope that Trump has found an exit ramp — a face-saving way to back out of an escalating round of tit-for-tat sanctions that have already begun to hurt Trump Country farmers.

The vague agreement sets a goal of getting to zero tariffs and zero subsidies:

  • But it leaves many unsettled questions to be worked out during the pause.
  • And it doesn't get into detail on two of the thorniest trade categories between the U.S. and Europe: autos and agriculture.
  • Steel and aluminum tariffs remain in effect, as do Europe's retaliatory measures. But there's a freeze.
  • Some big problems still need to be worked through, including regulatory issues.
  • White House economic adviser Larry Kudlow and Commerce Secretary Wilbur Ross played major roles in the negotiations.

What Trump is thinking ... Trump has enlisted his ambassador to Germany, Richard Grenell, to seek zero tariffs from the Germans.

  • Associates say Trump is enraged by all the BMWs and Mercedes-Benzes he sees in the U.S. He wants to see more Chevrolets on the streets of Germany.
5. Tech execs expected back on Capitol Hill in fall

The Senate Intelligence Committee expects to host executives from Facebook, Twitter and Google for a hearing this fall on election interference, Axios' David McCabe reports.

  • Why it matters: Another hearing would put tech platforms back in the spotlight as they grapple with how to prevent election disruption ahead of the midterms.
6. The economics behind the strongmen

Illustration: Rebecca Zisser/Axios

Unforced by coup or war, one developed country after another has chosen an authoritarian style of democracy over the last two years, Axios future editor Steve LeVine writes:

  • Why it matters: A financial slide has eroded the association of democracy with rising living standards and upward mobility, while populists and partisan media have stoked resentment and promised better.
  • Giving the trend power are theatrically outsized personalities — Russia's Vladimir Putin, the Philippines' Rodrigo Duterte, Hungary's Viktor Orban, Turkey's Recep Tayyip Erdogan, and of course President Trump.

In a much-read April article in Foreign Affairs, Roberto Stefan Foa and Yascha Mounk correlated the success of the new politics with a shift in global wealth away from the democracies that fought the Cold War against Moscow.

  • Within five years, they forecast, non-democratic nations such as China, Russia and Saudi Arabia will be richer as a group than the Western liberal democracies.

Go deeper.

7. New signs of Mars life
Mars on May 12, 2016 (NASA/ESA/Hubble Heritage Team — Space Science Institute via AP)

N.Y. Times Quotation of the Day, "A Watery Lake Is Detected on Mars, Raising the Potential for Alien Life"... Enrico Flamini, who oversaw the research that detected a large, watery lake beneath an ice cap on Mars:

  • “Water is there. ... It is liquid, and it’s salty, and it’s in contact with rocks. There are all the ingredients for thinking that life can be there, or can be maintained there if life once existed on Mars.”
8. Putin's soccer ball may have microchip
Putin gives Trump the ball in Helsinki. (Alexander Zemlianichenko/AP)

"The soccer ball that Vladimir Putin gave President Donald Trump may have had a bug after all. Though it’s not what you’re thinking," AP's Darlene Superville teases:

  • "Adidas says that particular ball is embedded with a microchip that accesses Adidas content for display on smartphones."
  • "After the Russian leader tossed it to Trump following their Finland summit, Sen. Lindsey Graham [R-S.C.] ... tweeted that he’d have it checked for listening devices."
  • "That’s exactly what the U.S. Secret Service has done. A security screening is standard for all gifts to the president."

"Trump said he would give the red-and-white ball to his 12-year-old son, Barron, a soccer fan."

  • "Graham said he’d 'never allow it in the White House.' The White House had no update [yesterday] on the ball’s status."
9. Why Lance Armstrong picked up the tab

Lance Armstrong, the cycling champion disgraced for doping, tells Stephen J. Dubner of the Freakonomics Radio podcast about a scene in Denver last summer, when he was in town for the Colorado Classic cycling race:

"I walked out of my Airbnb and there’s all these little cool brewpubs. ... [M]y Uber is on the other side of the street, in front of the bar. ... I’m getting in my Uber and there’s one guy goes, 'Hey Lance,' and I fully expected him to go, ... 'Right on man, love you,' you know? ... He goes: '[Eff] you.' ...
"And the next thing you know, the entire patio is screaming '[Eff] you.' ... I got in the car ... I’m saying to myself, 'You’re Lance Armstrong. You have to do something. You’re not — you can’t take that.' So I called the bar. I said, 'Put the manager on the phone.' ... I said, 'Here’s my credit card number. ... I want you to walk out there and you buy everything they’re eating and drinking. And tell them ... that I understand. ... Look, I get it.'"

Listen to the podcast.

10. 1 ⚾️ thing: All-black team wins Little League title
Mamie Johnson Little League

"Baseball history is made in D.C. Thank the kids ... [R]e-establishing the relationship between baseball and parts of the city where it’s supposedly 'dying'" — WashPost sports columnist Barry Svrluga, writing on the front page:

  • Mamie "Peanut" Johnson Little League "beat Capitol Hill to win the District’s Little League championship."
  • "The tournament has been held annually for 31 years. ... Next stop for the 12 boys from Mamie Johnson: Bristol, Conn., for regionals, with the Little League World Series in sight beyond that."
  • "That result ... is enormously important not just for those kids and coaches but for baseball in Washington and beyond, too. This is the first all-African American team to win this tournament."

"Five years ago, there was no Little League program in the District’s Ward 7, which is almost entirely east of the Anacostia River. ... [B]aseball not only had almost no participation here, it really had no presence."

  • Why it matters: "This is about a community-wide commitment to use baseball not just for baseball’s sake but to develop youth [who] might not otherwise be developed."

Worthy of your time.

Mike Allen

Thanks for reading. Updates all day on Axios.com.