Good morning. We report from Saudi Arabia's big investment event in Miami; look at what some of Nikki Haley's donors could do next as they stop backing her; explain why social media is under scrutiny in the Supreme Court; and read between the lines of Warren Buffett's latest annual letter. (Was this newsletter forwarded to you? Sign up here.)
Toeing the line in Miami BeachAmerica's corporate elite were everywhere in Miami at the Future Investment Initiative conference, Saudi Arabia's latest bid to showcase its extensive wealth and deepen ties with Western business. The event last week showed how far the Saudis have shifted the narrative after murdering the journalist Jamal Khashoggi — and how willing executives are to kiss the ring of Crown Prince Mohammed bin Salman, the kingdom's de facto ruler, in return for cash. DealBook's Lauren Hirsch was on hand to report on the financiers and Hollywood A-listers who made the trip. Everyone wanted everything to look normal. The Saudis are using their vast oil wealth to become one the world's biggest investors and forge closer relationships with Wall Street, Silicon Valley and more. Lots of big names showed up: Steve Schwarzman of Blackstone, Barry Sternlicht of Starwood, Alex Karp of Palantir and Hollywood royalty like Brian Grazer and Gwyneth Paltrow. (So too did former Trump officials including Steven Mnuchin, the former Treasury secretary; Mike Pompeo, a previous secretary of state; and Jared Kushner, Trump's son-in-law.) Attendees mingled over wine, which is banned in Saudi Arabia, and Carbone's spicy rigatoni. But everything isn't entirely normal. One guest who works with a Saudi family office told DealBook he couldn't invest in an artificial intelligence company because its owners were wary of being connected to the kingdom. Another said that the real test of Saudi's makeover is the level of her family's concern when she visits the country.
Saudi demands that its partners set foot in the kingdom in return for cash. Some guests whispered that the Saudis expect private equity firms to set up offices there and make sure their C.E.O. makes at least one annual visit as part of any deal. And there's another unwritten rule: Saudi's rivalry with the United Arab Emirates means that U.S. businesses can't open offices in both countries on the same day. Panelists praised Prince Mohammed and avoided controversy. Tough questions were rare and speakers were often interviewed by their colleagues or employees. "As the kingdom brings forward gender equality, what are the things you think we can teach the kingdom about what we've learned about parity and how that's working out for us?" Moj Mahdara, the managing partner of Paltrow's Kinship Ventures, asked the actress and investor.
Inflation and earnings top this week's agenda. Wall Street will scrutinize Thursday's release of Personal Consumption Expenditures data, a report closely watched by the Fed. On the corporate earnings front, Lowe's and Macy's report tomorrow; Salesforce and Paramount Global on Wednesday and AB InBev on Thursday. Also, artificial intelligence and C.E.O. compensation will be on the agenda at Apple's annual meeting on Wednesday.
Ant Group is said to have bid the most for Credit Suisse's China joint venture. The Alibaba-affiliated financial giant has made a higher offer than Citadel for the investment banking business, according to Bloomberg. That creates a dilemma for UBS, which acquired Credit Suisse last year: Citadel's bid is more likely to win government approval, but the local partner in the joint venture will probably favor Ant's offer. Israel plans to increase borrowing and raise taxes to fund its war against Hamas. The country intends to sell $60 billion worth of debt, increase its value-added tax and freeze government hiring this year, an official told The Financial Times. The move comes after Moody's downgraded Israel's credit rating this month.
What next for Haley's deep-pocketed donors?After getting drubbed by Donald Trump in her home state of South Carolina, Nikki Haley insisted that she would continue her campaign for the Republican presidential nomination through Super Tuesday next week. But she will have to do so without the support of her most prominent backer, the Koch-affiliated Americans for Prosperity Action, a super PAC — raising questions about whether other G.O.P. donors who had stuck by her were rethinking their support. "We don't believe any outside group can make a material difference to widen her path to victory," Emily Seidel, the C.E.O. of Americans for Prosperity Action, wrote in an internal memo. The network, which had spent tens of millions backing Haley in an effort to derail Trump's march to the G.O.P. nomination, now plans to focus on supporting Republicans in congressional races. By any measure, the delegate math is rough for Haley. She's expected to lose Michigan's primary tomorrow, as well as virtually every contest through Super Tuesday. Moreover, South Carolina and many upcoming primaries will award most or all of their delegates to the winner, which means Trump. But Haley still has money in the bank, enough for a half-million-dollar ad buy in Michigan. What will Haley's other major donors do? They have included Stanley Druckenmiller, Henry Kravis and Ken Langone — who have stayed largely quiet since her defeat on Saturday. Many of them had hoped to prop her up as a Trump alternative, but also had been looking for some sign that their efforts wouldn't be in vain. There are signs that some donors are sticking with Haley. Her campaign announced that it had raised $1 million within 24 hours of losing South Carolina. (Haley's campaign said those were from "grass-roots conservatives.") The hedge fund mogul Cliff Asness, a Haley supporter, sees trouble ahead for Trump: In a defiant electoral analysis on X yesterday, he noted that at least 40 percent of voters in the South Carolina and New Hampshire primaries voted against him. Notably, however, Asness didn't say whether he'd continue to give Haley money. Social media in the dockThe Supreme Court will hear two closely watched cases today that could dictate the future of social media and inflict big financial and regulatory changes on companies like Facebook, YouTube and X. What are the cases about? Florida and Texas passed laws in 2021 that accused tech companies of having a liberal bias in censoring conservative views following the Jan. 6 attacks on the Capitol. Big Tech is fighting back. The trade groups NetChoice and the Computer & Communications Industry Association sued to prevent the laws from taking effect. They say the First Amendment gives companies the right to remove content in accordance with their editorial policies. Section 230 of the Community Decency Act also mandates that social media companies aren't liable for most of the content their users publish. The justices upheld that protection last year. The fight comes against a broader battle over information online. The left and right have assailed tech companies for not doing enough to police disinformation, hate speech and harassment on their platforms. Critics say the Texas and Florida laws could allow users to publish extremist content — from neo-Nazis, say — more easily. Yet even some liberal legal experts say the Supreme Court must tread carefully. Zephyr Teachout at Fordham and others urged the justices not to treat the platforms like news outlets in a brief filed to the court. "This case threatens to be another expansion of corporate speech rights," Teachout told the Times. "It may end up in fact being a Trojan horse, because the sponsors of the legislation are so distasteful. We should be really wary of expanding corporate speech rights just because we don't like particular laws."
ICYMI: A cheat sheet for Buffett's investor letterThis past weekend, Warren Buffett published the message his millions of followers wait for every year: his annual letter to Berkshire Hathaway's investors, outlining his thoughts on the company and its prospects, the economy and more. A few things popped out to DealBook as especially noteworthy. The era of "eye-popping performance" at Berkshire is over, Buffett wrote: There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can't. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance. Berkshire reported its best-ever annual earnings on Saturday, yet Buffett conceded that it's nearly impossible to strike a transformational megadeal now. That means Berkshire's enormous cash hoard, what Buffett has called his "elephant gun," will only grow bigger. That said, if Buffett wanted to use that cash — which stood at about $163 billion — he could buy an array of prominent businesses that fit at least some of his investment criteria. Think Starbucks, Lowe's or Lockheed Martin. Buffett blames regulators for some underperformance. From his description of Berkshire Hathaway Energy's results: The regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy (an actual outcome at California's largest utility and a current threat in Hawaii). In such jurisdictions, it is difficult to project both earnings and asset values in what was once regarded as among the most stable industries in America. And from his discussion of the BNSF railroad's higher labor costs: "Wage increases, promulgated in Washington, were far beyond the country's inflation goals." Both were unusual examples of Buffett — who has spoken out in favor of Democratic efforts like raising taxes on the wealthy — decrying government regulations. (DealBook reviewed his annual letters dating back to 1978; he has rarely talked about regulation at length, and usually did so in neutral or positive terms.) The regulatory challenges undercut a message Buffett has written several times about BNSF and the power business: Governments and those industries essentially struck a bargain in which predictable regulation would beget predictable profit. As he put it in his 2011 letter, "Wise regulation and wise investment are two sides of the same coin." Buffett's letter suggested he may rethink that, and instead curtail Berkshire business in certain states. "We will not knowingly throw good money after bad," he wrote. We hope you've enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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Monday, February 26, 2024
DealBook: Kissing the ring
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