The $2 Trillion Mistake

Today’s Agenda

The $2 Trillion Mistake

How About Never? Is Never Good for You?

(Bloomberg Opinion) -- Saudi Arabia has explanations for why a long-discussed stock sale by its state-owned oil company is now indefinitely on hold — or perhaps just fashionably late, depending on what you believe. Oil prices are too cheap. Saudi Aramco officials are waiting for exactly the right time for what was once billed as an IPO that could value the oil company at $2 trillion — the most valuable public company in history.

Liam Denning doesn’t buy it, and says the concept of a Saudi Aramco IPO was the wrong idea at the wrong time. For Saudi Arabia’s de factor ruler, Crown Prince Mohammed bin Salman, the proposed stock sale was a shiny bauble to draw attention to his mission to profoundly diversify the economy. But he had it backward, Liam notes. It was always going to be tough to sell investors on buying a chunk of the state-owned oil giant until Saudi Arabia can show traction in its economic reforms, including attempts to cut back the country’s vast welfare state. 

Efforts to wean Saudi Arabia off its dependence on oil always should have been the first priority. It’s “the thing that will make or break the country as oil’s prospects start to dim,” Liam writes. Read the whole thing here. 

A Metaphorical Border Wall 

A proposal by the Donald Trump administration that would effectively punish legal immigrants for arriving in the U.S. without ample wealth “runs counter to American history and values,” and threatens U.S. prosperity, Bloomberg’s editors write.

An early version of a proposed rule change would make it far tougher for immigrants to obtain green cards for residency or temporary visa extensions if they or their dependents use an array of noncash public benefits including food stamps and Medicaid. The editors say the president should not act by executive fiat to deny temporary assistance to the immigrants the country needs to power the economy. 

Related: Francis Wilkinson asks: Who will be held accountable for the Trump administration’s mistreatment of young migrants? 

You Can’t Put a Multiple on Feelings

Buying and selling public companies is math, in theory. Cash flow projections and stock market valuations of comparable companies slot into spreadsheets and generate bloodless assessments of what a company is worth. But increasingly, Tara Lachapelle writes, the right price for an acquisition is whatever it takes to win. 

Sale negotiations of more companies, particularly those with big personalities at the helm such as Tesla Inc.’s Elon Musk and Rupert Murdoch of 21st Century Fox, are less about dollars and cents than “faith in one person’s vision, whether the numbers precisely check out or not,” Tara says. Many recent corporate combinations including Walt Disney Co.’s pending takeover of Fox are sound strategies for both companies and their investors, but it’s risky if companies overpay or take on too much debt for acquisitions, she cautions.

Bonus Elon Musk Reading: The Tesla chief is in over his head, and needs to hire an experienced CEO to fix the company and the culture, Joe Nocera writes. He has a candidate in mind: Alan Mulally, who replaced an in-over-his-head CEO at Ford in the 2000s and salvaged the automaker. 

Let’s Hear It for the Olds

The Democratic Party is getting attention for a slew of young political novices vying for public office. Al Hunt says the Democrats also need candidates like 77-year-old Donna Shalala, the former Bill Clinton administration official and university president running for a U.S. House of Representatives seat in Miami. Shalala’s track record has blemishes, but Al notes that her experience in the executive-branch and working with Republicans are needed skills in the Democratic caucus.

Chart Attack

Investors are worried enough about Italy’s political chaos, Marcus Ashworth writes, to spend August beach time protecting their investments in the country by snapping up bond futures.

The $2 Trillion Mistake

New York City is failing so badly that jobs and employment are booming, life expectancy has increased sharply, and the poverty rate is down (but still high), Justin Fox writes. 

The $2 Trillion Mistake

Alibaba sure had a bunch of excuses and exceptions in its latest earnings report, Tim Culpan says. 

The $2 Trillion Mistake

Quick Hits

Gyrations in Turkey and Italy have a common cause: The U.S. dollar still rules the world. – Daniel Moss 

China’s proposal to goose bank lending betrays government divisions in dealing with a weakening economy and a debt burden. – Shuli Ren

A stock market crash would create the conditions to impeach Trump. – Conor Sen 

A turnaround is looking less likely for the parent company of retailers Victoria’s Secret and Pink. – Sarah Halzack

If the U.K. wants to help local newspapers, it shouldn’t tax Facebook and Google to fund the BBC. – Alex Webb

Snapchat CEO’s self-improvement plan may not be improving anything. – Shira Ovide

Debate time! Is this the longest bull market ever for U.S. stocks? And when will it end? – Nir Kaissar vs. Barry Ritholtz

Qantas Airways’s monopoly riches may lure competitors. – David Fickling

Stocks of midsized companies aren’t as great as Elizabeth Banks. – Nir Kaissar

Trump’s explanation for those campaign finance violations may not absolve him. – Noah Feldman

ICYMI

Stress testing Trump’s predictions that the stock market would crash if he were impeached. These are the key lieutenants to Apple Inc. CEO Tim Cook. The U.S. and China talk trade.  

Kickers

That paragon of youth culture, Procter & Gamble, is trying to trademark texting terms such as “LOL” and “NBD.” 

If you give artificial intelligence a dose of human qualities, then AI will surf television all day

Americans can soon buy Sony’s creepy robot dog for nearly $3,000.

Which chain restaurant are you?

Burning Man is the worst. Here’s how the desert festival became a lifestyle. 

Note: I’m pretending to be Mark Gongloff this week. Please send sunscreen for the Burning Man playa, suggestions and kicker ideas to Shira Ovide at sovide@bloomberg.net.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.

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