jtrent238 test blog: DealBook: Vancenomics 101

July 16, 2024

Good morning. Just in: Morgan Stanley reported a rise in second-quarter profit, helped by a surge from its investment banking unit. Elsewhere, we look at J.D. Vance's ties to the libertarian wing of Silicon Valley, and his views on business and the economy. Also: Elon Musk may be preparing to give Donald Trump money as well as an endorsement, and the return of "the Trump trade." (Was this newsletter forwarded to you? Sign up here.)

Donald Trump chose Senator J.D. Vance of Ohio as his running mate despite Vance's history of sharp criticism of the former president. Doug Mills/The New York Times

A new wave Republican

Donald Trump picked J.D. Vance as his running mate and a possible successor to lead the "Make America Great Again" movement.

Much will be made of Vance's light political résumé — he was elected to the Senate only two years ago. He's also been scathing about Trump in the past, having called him an "idiot" and himself a "Never Trump guy." But Vance says he's a convert, becoming one of Trump's biggest backers and adopting a similarly populist approach to the economy and business.

Vance's biography appeals to left-behind voters — and investors. The 39-year-old served in Iraq and later went to Yale Law School, where he met his wife, Usha Vance. (She resigned from her role as a trial lawyer at Munger Tolles & Olson after Vance joined the ticket.) Vance rose to national prominence after publishing the best-selling memoir "Hillbilly Elegy." He worked at Mithril Capital Management, a venture capital firm co-founded by Peter Thiel, and Steve Case's Revolution. He also started his own fund with backing from Thiel, Eric Schmidt and Marc Andreessen.

Silicon Valley helped get him on the ticket. Vance is close to the libertarian wing of the tech industry. Thiel gave millions to his Ohio Senate campaign in 2022 and Vance is reportedly close to David Sacks, the venture capitalist who has hosted a Trump fund-raiser at his home and spoke at the Republican National Convention yesterday.

DealBook examined Vance's links to business, and his views on the economy and industry:

Vance has been tough on regulation, and has backed Lina Khan, the F.T.C. chair. Some tech investors celebrated having a former V.C. on the ticket. But Vance has said Big Tech is too powerful and called for Google to be broken up. He's also backed some of the Biden administration's efforts to constrain the industry. While many Republicans and business leaders have attacked Khan, Vance has said she is "one of the few people in the Biden administration who I think is doing a pretty good job."
Vance is pro labor. He says the postwar economy has relied too heavily on cheaper labor, a tactic that undercuts wages for American workers and has been exploited by big business. He's argued that employers' zeal for cheap labor has helped lead to a surge in unauthorized immigration to the U.S. and that consumers have become addicted to products made in low-wage countries. Those factors have aggravated America's foreign trade deficit and hit domestic manufacturing, he's said.
Vance isn't sold on the dollar's status as the world's reserve currency. Last year, during an exchange with Jay Powell, the Fed chairman, Vance said dollar dominance was good for Americans' purchasing power but a "tax on American producers." Like Trump, he is supportive of crypto and is reportedly working on legislation that would change how the U.S. regulates digital assets.
Vance is all in for Big Oil. He has expressed skepticism about the role of humans in causing climate change, and has attacked the Inflation Reduction Act, which provided incentives for the green transitions. Instead, he called for more drilling for shale oil in Ohio.

He's seen as another Republican who has distanced himself from the pro-globalization wing of the party. "Vance is a leader of the post-financial crisis Republican generation," Matt Stoller, research director at the American Economic Liberties Project, told DealBook, and is trying to reorient how the party thinks about economic policy.

Yet Vance's ideological approach, and his positive comments about Khan, worry some in business. "Trump populism and Vance populism are not the same," one big bank lobbyist told The Financial Times.

In other election news: The Democratic National Committee is moving to push President Biden toward the nomination, as he returns to campaigning and reiterated in an interview with NBC News that he wouldn't withdraw.

HERE'S WHAT'S HAPPENING

Markets grow hopeful for more rate cuts. Jay Powell, the Fed chair, indicated yesterday that the central bank could lower borrowing costs before inflation falls to a 2 percent target. The dovish signal comes as traders see room for the Fed to cut three times this year; Jan Hatzius, Goldman Sachs's chief economist, asked in an investor note whether that should start this month.

Macy's stock tumbles after the retailer calls off sale talks. Shares in the retailer fell nearly 12 percent yesterday after the company said it had broken off discussions with the investment firms Arkhouse Management and Brigade Capital Management, citing uncertainty over financing. That puts more focus on Macy's turnaround plan, which includes closing stores.

Sequoia is said to offer its investors a way to cash out of Stripe. The venture capital firm plans to buy up to $861 million worth of shares in the payment processor at a $70 billion valuation, Axios reports. The deal is meant to give investors more liquidity (a big issue for many private investment firms), given that Sequoia has been invested in Stripe for nearly 14 years and the payments company appears unlikely to go public anytime soon.

General Motors tamps down expectations for electric-vehicle production. Mary Barra, the car maker's C.E.O., said that the company wouldn't have the production capacity to make one million E.V.s at the end of 2025, an acknowledgment it will fall short of a stated target. It's the latest sign of a slowdown in the E.V. market's growth, though Barra added that demand will eventually pick up.

Musk offers money and words to back Trump

Days after Elon Musk publicly endorsed Donald Trump for president, it now appears that the tech billionaire is prepared to offer financial support as well.

Musk is likely to donate a significant amount to America PAC, a pro-Trump group whose backers already include a number of Musk's Silicon Valley allies, The Times and others report. It's another sign that the Tesla chief intends to take a more active role in seeking Trump's victory.

Musk plans to give about $45 million a month, according to The Wall Street Journal. (Earlier this year, one leader of America PAC told a friend that an unnamed donor was likely to give as much as $160 million, The Times reports.) Musk had previously said that he wouldn't give to either Trump or Biden or a Republican super PAC.

Such a donation would shatter records, eclipsing the $50 million that the billionaire Timothy Mellon gave to a different pro-Trump super PAC.

That said, Musk responded to The Journal's story on his X social network with an illustration of wildebeests with human legs bearing the caption "FAKE GNUS."

America PAC has a bevy of high-profile backers. One key fund-raiser is Joe Lonsdale, the venture capitalist and co-founder of Palantir who is one of Musk's close friends, people close to the organization told The Times.

Others include Antonio Gracias, a director at SpaceX and a former board member at Tesla; Ken Howery, a former Musk ally at PayPal; Doug Leone and Shaun Maguire, investors at Sequoia Capital; the Winklevoss twins; and Joe Craft, a coal magnate.

The super PAC stands to become a major political force. It collected about $8.8 million in the second quarter alone, and spent $15 million in recent weeks. Being able to tap even a fraction of Musk's estimated $252 billion fortune could give it formidable resources to organize support for the Trump campaign.

In other donation news: The billionaire financier Ken Griffin gave $10 million to Republicans' Congressional Leadership Fund, bringing his total giving to G.O.P. super PACs in this cycle to $25 million.

"A French wealth tax would increase French export of good entrepreneurs to Silicon Valley! Please go for it!"

— Vinod Khosla, the venture capitalist, taking a swipe at speculation that French politicians will reinstate a wealth tax as part of negotiations to form a governing coalition in Parliament.

The Trump trade

The S&P 500 is up more than 18 percent this year, fueled by investor fervor for artificial intelligence and the hopes that the Fed will start cutting interest rates.

The calculation of a potential Donald Trump return to the White House could be another catalyst, analysts say.

Market watchers are calling it the return of "the Trump trade." This implies that Trump 2.0 would mean lower taxes, deregulation, increased oil drilling and more fiscal spending. "Equities saw a clear rotation into stocks that stand to benefit from Trump's policies," Jim Reid, a strategist at Deutsche Bank, wrote in a note this morning.

The big winners yesterday included crypto stocks — and digital assets like Bitcoin — and oil majors. Trump Media, the former president's social media company that seems to ride the wave of Trump's political fortunes, also rose more than 30 percent.

Here's where investors put their money:

GEO Group and CoreCivic, two of the nation's largest publicly traded private prison operators, had their strongest days this year. The former gained more than 9 percent as investors weigh whether Trump's tough-on-crime campaign messaging will turn into policy that would bolster the sector.
The best performing sectors in the S&P 500 yesterday were energy and financials. The former, which includes Chevron and Exxon Mobil, climbed nearly 1.6 percent even as oil prices fell.
Coinbase, the crypto exchange, had its best day since March, gaining more than 10 percent, and Bitcoin nearly hit $65,000 before sinking. Trump appears to be warming to crypto as the industry gives millions to his campaign. The Republican Party platform is bullish too, vowing: "We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control."

Climate-related stocks were among the losers. "Trump has been openly hostile to environmental and climate regulation and the companies that might benefit from them," Steve Sosnick, chief strategist at Interactive Brokers, told DealBook. "Investors in those more volatile companies did not wait around to assess the probabilities of a Trump victory."

Worth noting: The S&P 500 is up roughly 48 percent since President Biden's inauguration day, one of the best market runs of the past century. Investors have concerns about both candidates, including that Biden would raise taxes that might sap corporate profits, and Trumponomics could mean a raft of inflationary tariffs that could hamper growth.

THE SPEED READ

Deals

The activist investor Starboard Value is said to have built a more than 6.5 percent stake in Match Group, the parent company of Tinder, and wants a sale if a turnaround doesn't work out. (WSJ)
Lineage, a storage and logistics services specialist, is reportedly planning to go public, with a fund-raising goal of up to $3.85 billion. (Bloomberg)

Elections, politics and policy

The federal judge overseeing Donald Trump's classified documents case threw out all of the charges against him, ruling that the special counsel brought the case was appointed improperly. (NYT)
Mayor Eric Adams of New York City has raised more than $1 million for his re-election campaign from donors including Jonathan Kraft of the New England Patriots and relatives of Jim Dolan, as money flows into the 2025 race for Democratic challengers. (NYT)

Best of the rest

Salesforce plans to cut about 300 more jobs, as tech companies continue to focus on trimming costs to please investors. (Bloomberg)
"It's the Summer of the Quiet Vacation. Don't Tell the Boss." (WSJ)

Thanks for reading! We'll see you tomorrow.

We'd like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkin

Ravi Mattu, Managing Editor, London @ravmattu

Bernhard Warner, Senior Editor, Rome @BernhardWarner

Sarah Kessler, Deputy Editor, Chicago @sarahfkessler

Michael J. de la Merced, Reporter, London @m_delamerced

Lauren Hirsch, Reporter, New York @LaurenSHirsch

Ephrat Livni, Reporter, Washington D.C. @el72champs

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