- The Dow ousts GE
- Bloomberg backs Democrats
- Immigration reality check
- Trade-war preparations
- Democracy vs. authoritarianism
GE Is Free Now
(Bloomberg Opinion) -- As a stock index, the Dow Jones Industrial Average is dumb. It’s just 30 stocks, and it’s weighted by price, so companies with relatively small market valuations but high prices dominate. In the Dow’s Bizarro World, for example, Boeing (worth $200 billion) is nearly twice as important as Apple (worth $917 billion).
But as a signaling device, the Dow matters. Though the S&P 500 is a far more sensible representative of the U.S. stock market, the Dow is the one everybody knows. It's an exclusive club of America’s most “important” companies. General Electric Co. just got booted from that club, marking a dramatic fall from grace after years of mismanagement and losses.
And yet this embarrassment also lifts a burden from GE, points out Brooke Sutherland. No longer does it have to be the GE of legend, the last original Dow member since the index’s founding in 1896, the poster child for sprawling American capitalism. It’s just another face in the S&P 500 crowd now. Maybe this is what it takes for GE to finally do what it needs to do and break itself up into something leaner and more rational, Brooke suggests.
The Sorting Hat, or whatever at S&P Dow Jones Indices that picks the Dow’s components, made a mistake in replacing GE with Walgreens Boots Alliance Inc., argues Stephen Gandel. Walgreens may not be the best way to make the index more health-care-heavy, and GE (which has its own health-care business) seems intent on reshaping itself into more of a tech company, which might make it more Dow-worthy.
Anyway, GE investors can take take heart: Shares of companies that leave the Dow usually thrive after their removal. Getting tossed from that weird, exclusive club is often a sign the worst is over.
Why Mike Bloomberg Is Backing Democrats
Michael R. Bloomberg, founder and majority owner of Bloomberg LP, plans to spend $80 million this election cycle to help Democrats take back the House in November's midterm elections. In a statement, he explains why:
“I’ve never thought that the public is well-served when one party is entirely out of power, and I think the past year and half has been evidence of that.
“Republicans, who control both houses of Congress, have done little to reach across the aisle to craft bipartisan solutions – not only on guns and climate change, but also on jobs, immigration, health care and infrastructure. As a result, Congress has accomplished very little.
“In addition, and no less troubling, Congress has essentially stopped acting as a co-equal branch of government, by failing to engage in the kind of oversight of the law that the Constitution requires and the public expects.”
Trump’s Immigration Crackdown Doesn’t Add Up
In an uncharacteristic surrender after weeks of pressure, Trump has ordered that children of illegal immigrants seized at the border can’t be separated from their families. The order, though, mandates indefinite family detention, which is … still horrible, but at least is no longer straight-up child abuse. The order also contradicts the administration’s repeated protests that only Congress could do anything about the problem.
All of this is not only cruel but unnecessary. The “zero tolerance” policy that has led to family separations allegedly addresses a “crisis” of immigrants flooding the southern border. In fact, illegal entry is relatively quiet, near the lowest levels since the 1970s, writes James Gibney.
And relative to other big developed countries, the U.S. has long been a low-immigration nation, writes Justin Fox:
Trade War Watch
China has in many ways brought a U.S. trade war on itself, writes Michael Schuman, with unfair practices that take advantage of Western largesse. Still, President Donald Trump is absolutely the wrong change agent here. His “theory of trade is fundamentally wrong,” write Bloomberg’s editors. And his wild, punch-throwing approach is only making it harder to convince China to behave itself.
China, meanwhile, is helping its citizens prepare for war by cutting their taxes, writes David Fickling. And the cuts will be more widely distributed than the recent U.S. tax cuts, which were aimed mainly at high-earners.
Of course, Trump economic adviser Larry Kudlow says this isn’t a trade war but a trade “discussion.” Whatever it is, it has already shaken the global economy, notes Lionel Laurent. Anything more would only compound the damage.
Democracy Death Watch
What’s better for economic growth: democracy or authoritarianism? Democracies may sometimes grow more slowly than countries run by leaders who can order new airports built on a whim. But over time they also grow the right way, without as much waste and unhappiness, argues Mihir Sharma.
It’s the fourth part in Bloomberg Opinion’s series on democracy and economics. Here are the other three:
Domino’s and Facebook taking on infrastructure projects is an ominous sign for the U.S. economy, writes Noah Smith, a result of burgeoning inequality and government dysfunction.
Look beyond its recently announced, headline-grabbing store closures, and you’ll see Starbucks Corp. has many other problems, writes Sarah Halzack.
Walt Disney Co.’s latest salvo in the bidding war for 21st Century Fox Inc. assets is underwhelming. – Chris Hughes
The World Cup would be the perfect time for Russia to release some political dissidents. – Leonid Bershidsky
More competition won’t make auditors perform any better, as long as their consulting businesses keep creating conflicts of interest. – Chris Hughes
Atul Gawande is an odd, but possibly inspired, choice to run the joint health-care venture of Amazon.com Inc., Berkshire Hathaway Inc. and J.P. Morgan Chase & Co. – Max Nisen
With a few dumb words, Turkish President Recep Tayyip Erdogan just undid all the good Turkey’s central bank had done for the lira. – Marcus Ashworth
Note: Please send hogweed, suggestions and kicker ideas to Mark Gongloff at email@example.com.
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