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While You Were Working – January 23

Day One in Davos

7 min read



Day One wrap-up from Davos (Fabrice Coffrini/AFP/Getty Images)

The first full day at the World Economic Forum kicked off with a pair of panels featuring titans from the realm of financial markets. Here are some of the highlights of those panels, along with other news from Davos.

Global Markets in a Fractured World

This panel covered a wide range of topics; from US tax reform and infrastructure plans to European economic policies and the global appetite for public listings.

Blackstone chairman, CEO and co-founder Stephen Schwarzman, who is an adviser to President Trump, lauded the direction things are heading in the US, adding that feedback he has gotten in many meetings is that companies around the world are now saying the US is the place to be. Schwarzman also said trades deals probably won’t slow the current momentum. He seemed confident a “good NAFTA deal” will be struck this year.

On the infrastructure front, Schwarzman touted the “Australian model” for finance, which sees the federal government sell projects for earnings assets like airports and toll roads to the private sector while offering a “tip” to the selling state/local government that must then be used to finance non-earnings assets like common roads and schools.

As an aside, Schwarzman was sporting a sweet watch band. It reminds me of something from Swatch that was all the rage circa 1986.

Nasdaq President and CEO Adena Friedman said there is a lot of pent-up demand around the world for companies looking to tap public markets. And while much of the hype is the rise in US stock markets, the types of companies looking to go public are very global in nature. Friedman said the market seems receptive to taking risks on public companies and that a big factor is that, thanks to the recent tax reform, the US no longer gets disadvantaged by tax policy.

Deutsche Post DHL boss Frank Appel expressed the most skepticism about how long all the economic fun can last. Appel said the tax reforms in the US will bring s short-term high, but not fix long-term problems the US is facing like budget deficits and crumbling infrastructure. On trade policy, Appel noted that if the US wants protectionism, consumers will buy products from other countries. Appel cautioned that the people who will pay the bill for tariffs and a possible a trade war are the employees of companies in the US.

Bank of America Chairman and CEO Brian Moynihan touted the prosperity world markets are enjoying and said central banks will be accommodative well into 2019 as they don’t want to do anything to slow things down.

In addition to the recent tax reforms, Moynihan expects policymakers in the US will spend much of 2018 focusing on how to make the US even more competitive. Moynihan revealed he had dinner recently with a group of non-American business leaders and the talk was all about how they can expand their production capabilities in the US. The idea is not to really shift trade numbers, but to produce goods for US consumers. However, given the current employment situation, Moynihan cautioned that the reality of such plans bringing a lot of new jobs to the US is uncertain because trained American workers just aren’t available.

It makes one wonder if the one thing that will ultimately stifle the peak of the Trump administration’s plan to bring jobs to the US is its own immigration reforms. Companies don’t move jobs to places where there are no available workers. And if your economy is at full employment and a staple of your immigration reform involves deporting a bunch of workers, well… then.

Credit Suisse CEO Tidjane Thiam got the best laugh line of the panel when he offered his analysis of the landscape for economic reforms in France.

“Macron only got elected because the French public decided to change,” explained Thiam, who holds Ivorian and French citizenship. “We are very good at immobilizing the economy. We know how to. The reason we didn’t is that everyone has recognized we must change.”

The if, when and how of the next financial crisis

The other morning panel spent a lot of time talking about if, when and how the next financial crisis will strike.

Barclays CEO Jes Staley says regulators, academics and market participants are working together much more cohesively than pre-crisis to try to avoid the next crisis. But Staley also added that the increased collaboration doesn’t mean the next crisis will actually be avoided.

Citigroup Chairman and CEO Michael Corbat expressed concern that investors have simply been conditioned to ignore bad news.

“We went through a government shutdown over the weekend and the market is up,” Corbat explained. “If you sold Brexit, you bought it back higher. If you sold President Trump’s election, you bought it back higher. I think people stopped selling, so there is a numbness out there. There’s an ambivalence out there that is concerning because when the next turn comes – and it will come – it’s likely to be more violent than it would have been if we had let some pressure off along the way”

Carlyle co-founder David Rubenstein sounded one of the more ominous warnings of the day, when he noted, “Generally, when people are happy and confident, something wrong happens.’’

Goldilocks syndrome

Speaking of people who are happy and confidant, apparently Ray Dalio is one of them.

“We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws,” Dalio said.

PayPal’s Schulman details continued rise of mobile payments

PayPal CEO Dan Schulman lauded the growth of mobile payments. For the first time ever during a holiday period, mobile payments constituted half of all e-commerce payments. That is a big deal because in another first, e-commerce was responsible for more than half of all retail purchases.

PayPal disrupted the payment industry. They have paved the way, but the big banks have been coming for them for a long time. Interestingly enough, the big banks play, known as Zelle, has been in the works for a while, but I have just started seeing mainstream ads for the service. We’ll see how prepared Schulman and the PayPal/Venmo team are to defend their turf.

Credit Suisse boss lauds timing of US tax reforms

Credit Suisse CEO Tidjane Thiam says the tax reform in the US was well-timed because quantitative easing had dwindled and the markets was ready for a new form of stimulus.

Private equity outlook

Carlyle’s Rubenstein also joined CNBC for a segment, where he revealed he wouldn’t have recommended certain aspects of the tax reforms that passed. He also added his voice to the cacophony of people saying infrastructure is long overdue. Rubenstein noted 90% of infrastructure must be done on state and local level and praised things being done to encourage public-private partnership. On GDP, Rubenstein said the US would be lucky to get to anywhere near 3% sustained growth.

My favorite two nuggets of that interview are how bullish Rubenstein is on the reception President Trump is likely to receive in Davos. Rubenstein predicts Trump and his message will be “reasonably well-received.”

The more hilarious nugget is how dismissive CNBC host Joe Kernan appears to be of Rubenstein. It borders on downright rude … especially how Kernan spends more time looking at his phone than looking at Rubenstein. Ouch!

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