GDP Is Great Again, For One Quarter Anyway

Mark Gongloff

28 Jul 2018, 02:23 AM IST

Today’s Agenda

The economy just had a great quarter, but it won’t last.
Tech investors are going to have to get used to slower growth.
Trump’s not in charge of his own White House — and his Mueller problem just got worse.
Les Moonves’s troubles could change the tide of the CBS-Viacom battle.

GDP Is Great Again, For One Quarter Anyway

Good, But Not Good Enough

(Bloomberg Opinion) -- Pop quiz: The U.S. economy today turned in its strongest quarterly GDP growth in four years. Did stock prices:

a – SOAR, baby
b – fall
c – take off for the Hamptons

If you answered “b,” then you could be a money manager. Stocks fell despite the good economic news. Who knows why stocks do what they do, but there are many possible explanations for this wet-firecracker reaction. First, the market is not the economy. Second, strong numbers make the Federal Reserve more likely to raise interest rates, Tim Duy argues, and that is generally no bueno por el stocko.

A third possible explanation, though, is that stock investors got ahead of themselves on just how Great Again they think President Donald Trump’s economic policies will Make America’s economy, write Stephen Gandel and Brian Chappatta. Stocks SOARED, baby, after Trump’s election, partly on hopes that slashing regulations and taxes would be a triple espresso for the economy and corporate profits. But they’ve been more like a Keurig pod so far, with worries about Trump’s trade and other potential wars working against them. Even the latest quarter’s strength was partly driven by exporters hurrying shipments to avoid tariffs. That and other growth engines will likely vanish in the third quarter.

To be sure, this GDP report will be revised repeatedly in the years ahead as new information trickles in. The Bureau of Economic Analysis today released a bunch of re-crunched GDP numbers for the past several years, in fact, and found some big changes. But Justin Fox notes it doesn’t change the overall picture of a grinding recovery from the crisis that still hasn’t been strong enough to make everybody else nearly as excited as the stock market is.

Good, But Not Good Enough: Tech Edition

One corner of the market where expectations have been freakishly high is technology — particularly the massive FAANG (or FAAMG) companies. A lot of air has leaked out of them in the past 48 hours, though, after Facebook Inc. — the “F” in FAANG — reported quarterly results that, while gobsmackingly great for any other company, did not meet investors’ hopes. Amazon.com Inc. came to the rescue last night with a report of relatively decent profits — but even that behemoth showed signs of the kind of growth slowdown that hurt Facebook, notes Shira Ovide.

And the respite didn’t last long: Twitter Inc. reported its own dramatic growth deceleration this morning, and its stock tanked just as badly as Facebook’s. Like Facebook, Twitter is taking some short-term hits to make its user experience slightly less toxic. But investors would really freak out if the two companies truly cracked down on fake accounts, writes Leonid Bershidsky. In any event, slower growth may well be the new normal for Twitter, Shira warns. Investors should adjust their enthusiasm accordingly.

Who’s Driving This White House Anyway?

The House GOP’s drive to impeach Deputy Attorney General Rod Rosenstein — a thinly veiled effort to protect Trump from the special counsel’s investigation of Russian election interference — is troubling in many ways. But it’s also pointless! Because Trump, after all, could fire Rosenstein at any time, points out Ramesh Ponnuru. Rosenstein is part of the executive branch, and the executive is none other than Trump himself. This is just the latest example of how Trump apparently lacks control over his own government, Ramesh writes: “It is as though he views his role as being the commenter in chief.”

Speaking of gestures, Trump’s threat to strip security clearances from former intelligence officials who criticize him may be futile, Bloomberg’s editors write. They’re really not using their clearances anyway — especially as Trump isn’t asking them for advice the way presidents usually do. The threat also has a darker aspect, if it intimidates current intelligence officials trying to investigate Trump. All that said, it could have a happy effect, if it leads to a broader re-thinking of clearances and classification.

And speaking of those investigations: The subpoena of Trump Organization CFO Allen Weisselberg is a watershed moment “because it potentially brings the probe right into Trump’s wallet,” writes Tim O’Brien.

Move Over, Moonves?

The New Yorker is reportedly about to publish an explosive article accusing CBS Corp. CEO Les Moonves of inappropriate behavior of the #MeToo variety. This is bad news for CBS, which said it was investigating as its stock price tumbled. But it could be a turning point for Shari Redstone’s long crusade to merge CBS with Viacom Inc., notes Tara Lachapelle. Moonves has long resisted such a union, but Redstone (and Tara) argue it could be the only way the two companies can survive in today’s brutal media environment.

Chart Attack

Exxon Mobil Corp. used to be the king of Big Oil, but its lead is slipping rapidly, writes Liam Denning:

Believe it or not, Chipotle Mexican Grill Inc. is outdoing Starbucks Corp. right now, writes Brooke Sutherland:

Weekend Reading

China isn’t using the yuan to fight tariffs; in fact, the currency is arguably a little stronger than it should be. – Christopher Balding

Reasonable people, including Brett Kavanaugh, can disagree about whether the Supreme Court’s decision on Nixon’s Watergate tapes was proper. – Stephen L. Carter

No, Connecticut is not Greece, and yes, other states should help bail it out, if necessary; Connecticut has certainly paid more than its fair share in taxes. – Conor Sen

Rather than an example of bad corporate governance, Sergio Marchionne hiding his illness from investors is another example of CEOs thinking they have all the answers. – Lionel Laurent

The Korean armistice was signed 65 years ago today, and it still matters. – Thomas Byrne

America has too many parking spaces (except for when I need one – MG). – Nathaniel Bullard

ICYMI

Welcome to the new Space Age.

Kickers

Proposed logos for Trump’s Space Force.

Look at all the things satellites can see from space now.

Welcome to McMansion Hell.

Here’s what it was like to hit Mr. Rogers up for a donation.

Area burglar just wants your Wi-Fi password.

Kids these days are debating politics on Instagram “flop” accounts.

Reading books makes you more social.

Here are Thrillist’s 25 best albums of 2018 so far.

Note: Please send Wi-Fi passwords, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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To contact the editor responsible for this story: Brooke Sample at bsample1@bloomberg.net

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.