Market Confidence Is Bulletproof, Until It Isn’t

Today’s Agenda

Market Confidence Is Bulletproof, Until It Isn’t

Not to Worry, Just a Little Emerging Market Contagion

(Bloomberg Opinion) -- U.S. stocks closed today near record highs, continuing a bull market that began, oh, let’s call it 400 years ago. Many people are starting to believe it will never end, meaning we can finally put to rest such passé concepts as “business cycles” and “bear markets.” The rest of the world isn’t so lucky.

Take Argentina; its currency collapsed yesterday and kept collapsing even after its central bank raised its key interest rate to a dumbfounding 60 percent. An IMF statement of support stopped the bleeding today – but then the IMF had already promised $50 billion in aid before the collapse, so it’s hard to have a lot of faith the pause will last. Bloomberg’s editors call this scary moment a reminder of just how fast things can get out of control in markets. “[F]inancial confidence is always more fragile than it looks, and … worst-case scenarios have an infuriating habit of coming true.” Read the whole thing. Thank goodness this warning doesn’t apply to the U.S., where everything is fine!

But the rest of the world – sheesh. Marcus Ashworth takes a tour of other emerging markets from Turkey to Brazil, and observes  how contagion-y it all feels.

Market Confidence Is Bulletproof, Until It Isn’t

One huge problem for all of these countries is that the Federal Reserve and other developed-world central banks are steadily leaching oxygen from developing-world investments by raising interest rates and taking away quantitative easing. That means this market infection may just be getting started. “Each of these countries has serious problems, with no obvious solution – or savior,” Marcus writes. Read the whole thing.

This helps explain why an index of global investor confidence fell in August to its lowest level since December 2016, notes Robert Burgess. But surely America has nothing to worry about. Right?

Trade Wars: The Farce Awakens

One thing that did briefly send a small shiver of doubt up the market’s spine today was ongoing global trade tension – which President Donald Trump keeps finding creative, new ways to elevate. He threatened to pull out of the WTO and rejected a European offer to do away with car tariffs. And he reportedly told Bloomberg reporters that he has Canada over a barrel in Nafta renegotiations, vowing not to compromise – inspiring a predictable response from Canada. The two sides apparently won’t meet a self-imposed deadline to cut a deal today.

Most troublingly, he could slap tariffs on $200 billion in Chinese goods next week. Bloomberg’s editors write that China and the U.S. need to stop messing around and compromise quickly. Trump has legitimate beefs with China, but crushing the Chinese economy won’t help anybody. The longer this drags on and the nastier it gets, the less room Xi Jinping will have to reach an accord, the editors write. Read the whole thing.

Bonus China reading:

An Economic Boom, But Not For You

Americans will spend Monday drinking beer and eating hot dogs in celebration of the vague concept of “labor.” Sadly, Labor Day is about the best thing “labor” has going for it these days. Union membership has plunged from about a quarter of the workforce to less than 11 percent (less than 7 percent if you exclude public-sector unions), notes Joe Nocera. Not only does this help explain the rise in income inequality, but it also helps solve the mystery of why wage growth has been so pitiful despite the seemingly never-ending economic boom. “The decline of unions has robbed employees of the thing they most need to wrest wage hikes from companies: leverage.” Read the whole thing.

Bonus economic-boom reading: Just why the heck is the economy booming, anyway? – Noah Smith 

Coke’s Pricey Cup of Coffee

Here at Bloomberg Opinion we like our caffeine, but this is ridiculous: Coca-Cola Co. this morning said it was buying the Costa coffee chain for $5.1 billion. This deal sort of makes sense for Coke, which needs to lessen its reliance on sugary drinks, write Sarah Halzack and Brooke Sutherland. But it also saddles Coke with thousands of retail stores – not exactly the beverage-maker’s area of expertise. And industry trends are brutal for brick-and-mortar retail, as you may have heard. Oh, and Costa’s parent company, Whitbread, extracted a really good price, notes Andrea Felsted.  Otherwise, uh, great deal? “[T]here may be a better way to get a cup of coffee than buying the whole coffee shop,” write Sarah and Brooke. Read the whole thing

Chart Attack

Andrea Felsted takes a closer look at French grocer Casino Guichard Perrachon SA, which has become short-seller Muddy Waters Capital’s latest target.

Market Confidence Is Bulletproof, Until It Isn’t

When electric cars hit, they could hit big, writes Nathaniel Bullard.

Market Confidence Is Bulletproof, Until It Isn’t

Quick Hits

SEC Chairman Jay Clayton’s plan to let small investors buy into private companies is a bad idea. – Stephen Gandel

There may not be quite as much gold in Indian retail as Jeff Bezos and Warren Buffett expect. – Mihir Sharma 

Iran’s fake-news operation is not a threat. – Eli Lake 

New transcripts of Clinton-Yeltsin calls hint at the dynamic that still hurts U.S.-Russia relations. – Leonid Bershidsky

Doing away with Iowa’s Ames straw poll might have helped elect Trump. – Jonathan Bernstein 

Yes, the National Enquirer and other news outlets have a right to buy and quash stories, but not if they are doing it to help out a campaign. – Noah Feldman 

Scientists now have more insight into how poppies turned into addiction machines. – Faye Flam

Making tampons free can help make them safer. – Laura Strausfeld 

ICYMI

A Paul Manafort associate cut a plea deal. Ford canceled a Chinese import. Jeff Sessions will keep his job until November, at least (one headline from Bloomberg News’ Oval Office interview with Trump).

Kickers

Note to TV shows: Endings are good.

In 500 million years or so, Earth will be in real trouble.

Dataviz: How much countries invest in R&D.

To the rescue of coral reefs: sea-star-killing robots.

Cookie Monster ask: Is me really monster?

Note: The newsletter will take the day off Monday for Labor Day. Please enjoy. Please also send sea-star-killing robots, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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

Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.

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