Business

➚ BUY: The dip. The market has steadied after Tuesday’s drop, and interest-rate cuts (outside of emergency measures) are generally good for stocks. A big test for the Inverse Jim Cramer ETF.

➘ SELL: Chips. Bloomberg reports that Intel is at odds with the US government over $20 billion in approved — but not yet disbursed — grants and loans for new semiconductor factories, amid mounting financial troubles at the faded tech titan.

Musk would be Trump’s deregulation czar… Nobody wants UK’s top finance post… Deutsche Bank CEO says Germans are slackers... Another auto giant retreats from EVs… US Steel plays chicken with White House… OpenAI co-founder snags $1 billion from VCs… Disney hack… Celebrity crowdfunding…

We’ve had a lot of data points in the past few weeks, some of them contradictory. How do you weigh them?

Jason Furman: It’s a weird economic situation right now, because GDP and consumers and business investment are all booming, just fantastic, 3% growth. But you have the forward-looking signals about manufacturing and concerns about consumer balance sheets, things like delinquencies, going the other direction. The hard data is mostly very strong, and a lot of the soft data reflects expectations about the future being weak. So it’s this sense of foreboding.

Isn’t the forward-looking stuff more meaningful? Like the turkey-in-the-oven problem?

I’m nervous about it, but I believe what businesses and people do with their dollars more than what they do with their words. And businesses are continuing to invest. Manufacturers are continuing to build structures. Consumers are still buying both goods and services. So when people have a choice to make, they are acting in a confident way.

Why does it seem like the revisions to the jobs numbers are always down, not up?

One possibility is that the revisions are wrong. That’s what Goldman Sachs is saying, that tax data doesn’t capture all immigrants. But historically, when you have an economy that is slowing, you get a lot of serial negative revisions and when it’s speeding up you get a lot of serial positive revisions. I remember talking to President Obama in 2015 or so and we’d had, I think, 24 straight months of positive revisions, and he asked ‘Why can’t we have the great number the day we announce it? Why do we wait two months when nobody is paying attention?’

What do you think about the idea of taxing unrealized capital gains?

The tax nerd in me likes it. There are practical implementation issues, but there are also a lot of issues like tax avoidance and distortion that are caused by tying capital gains to realization. But boy, do people hate the idea, and I think it is way less central to [Kamala Harris’] campaign and economic plans than it is to the magnitude of discussion. [Harris rolled back Biden’s plan yesterday but appears to still be supporting a minimum tax on billionaires that would include unrealized capital gains.]

On the other end of the labor market, what about untaxing tips?

I don’t know any economist who thinks that’s a good idea. One, it treats different types of income differently. Two, a lot of low- and middle-income workers aren’t paying taxes, so it’s not going to do anything for them. And three, in the long run it will encourage more tipping, which I don’t think anyone wants.

Verizon is buying fiber-optic network Frontier for $20 billion, thus officially ending a strange chapter in American business. A decade ago, big telecoms tried to become media companies, a project that ended with humiliation — medium-scale for Verizon, but catastrophic for AT&T. Verizon spent billions of dollars on AOL, Yahoo, Tumblr, Huffington Post, and the short-lived “social entertainment company” Go90, only to sell it all for a fraction of that in 2021 to Apollo. AT&T’s turn as a Hollywood player needs no retread, though if you’re interested here are 10,000 words from Jim Stewart.

A deal for Frontier shows Verizon’s M&A sights are squarely back in telecom land. It may be boring, but it’s better to own the tracks than the trains.

Interestingly, both companies have found new niches in the media world without spending a dime on content — as key bundlers. Verizon is perhaps the only place you can get a bundled Netflix & Max package.

There’s a money story in the Arabian Peninsula. Take one look at the news, and you’ll see headlines about Saudi Arabia’s rapidly changing economy, Qatar’s investment in mass infrastructure, and the UAE’s transformation into a global tech hub. To follow it all, check out Semafor Gulf, launching later this month. Get early access here — subscribe for free.

Lessons in leverage: UK financial regulators are scrutinizing how banks are helping private-equity firms layer on debt, Bloomberg reports. In recent years, Wall Street has slapped new loans on top of investment portfolios, sometimes to juice profits and sometimes to generate cash until the M&A and IPO markets come back. Fund investors hate this practice, which adds risk and makes otherwise middling returns look better. “They think it’s leverage on leverage,” Advent’s managing partner, John Maldonado, told me recently. (It is.) It seems regulators don’t love the practice either.

The big question hanging over the explosion in private investments over the past decade is whether there is debt we can’t see. Private investment funds don’t have to disclose much about how much they borrow. Asking the banks doing the lending is one way to find out.

Under wraps: Economic data that’s supposed to be secret has been getting out. It started in February, when an employee at the Bureau of Labor Statistics emailed a group of “super users” to explain a technical discrepancy in a measure of rent inflation that had some analysts puzzled. Then in May, the agency accidentally published monthly inflation data early, on a corner of its website frequented only by professional investors and economists. The July jobs report was also handed out to a select few earlier as the result of another technical glitch. “A statistical agency lives or dies by trust,” a former BLS commissioner told The New York Times. Elsewhere in financial fat fingers, Gap last week accidentally posted its quarterly earnings early, causing its shares to pop. This kind of thing used to happen occasionally, before IR departments had fully figured out internet security. But with markets extra twitchy these days, it’s particularly risky.

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