fortune--2020-09-10--5 revelations from ‘Rage,’ Bob Woodward’s new book about Trump

Pfizer ’ s CEO is still hopeful for COVID vaccine progress by October—and says a sense of purpose is fueling @

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Bob Woodward has done it again. The legendary journalist who (along with former Washington Post colleague Carl Bernstein) broke the Watergate scandal that brought down the Nixon presidency—and has since become a prolific author of books documenting presidential administrations—is set to release Rage, his second volume on the Trump White House. (The first, Fear: Trump in the White House, was published in 2018.)
And this one looks to be a doozy—with revelations that could potentially influence public opinion of the president ahead of November’s election.
Excerpts from Rage have emerged today ahead of the book’s publication on Sept. 15, and they offer fascinating—and, in some cases, extraordinary—details from 18 interviews that Woodward conducted with the President, as well as conversations with administration sources. Among the revelations to emerge include a startling admission from Trump about his handling of the coronavirus pandemic, his thoughts on race relations and America’s military leadership, details about his relationship with North Korean dictator Kim Jong-un, and damning observations from former high-ranking administration officials about the Trump presidency.
Here’s some of the reportage that is already making headlines.
Trump knowingly downplayed the threat posed by COVID-19
Perhaps the most inflammatory piece of news to emerge from the Rage excepts is Trump’s admission that he willingly tried to minimize the danger posed by the then-rapidly spreading coronavirus—a disease that has since gone on to kill nearly 200,000 Americans.
“I wanted to always play it down,” Trump told Woodward on March 19, mere weeks after he told reporters that the COVID-19 was eventually “going to disappear… like a miracle.”
Whatever the president was telling the public, Woodward’s book makes apparent the fact that he was fully briefed and aware of the threat presented by the highly infectious, airborne disease. At a top secret intelligence briefing in late January, national security adviser Robert C. O’Brien told Trump that COVID-19 would “be the biggest national security threat you face in your presidency.”
Trump acknowledged as much to Woodward on Feb. 7, describing the virus as “more deadly than even your strenuous flu”—even while he publicly declared COVID-19 as no more harmful than the seasonal flu. “This is deadly stuff,” he told Woodward at the time.
Still, despite recognizing the danger of a potentially lethal virus that “goes through the air,” Trump continued to evade calls for him to promote the use of face masks, and kept holding campaign rallies as late as early March.
Trump fails to acknowledge white privilege and the plight of Black Americans
On June 19—with the nation in the midst of the largest protest movement since the 1960s, and facing a reckoning on police violence and racial justice in the wake of the killing of George Floyd—Woodward asked Trump about white privilege. As white men of the same generation, both with privileged upbringings, surely Trump could understand his advantages and the need to “understand the pain and anger” felt by Black people.
“No,” Trump replied to Woodward. “You really drank the Kool-Aid, didn’t you? Just listen to you. Wow. No, I don’t feel that at all.”
Trump went on to note economic metrics, such as the unemployment rate among Blacks, in reiterating that he has done more for Black people than any president since Abraham Lincoln. In a later conversation, he told Woodward: “I’ve done a tremendous amount for the Black community. And honestly, I’m not feeling any love.”
Trump describes his ‘f—ing generals’ in lewd fashion, while top officials had their own reservations about the President
The president does not parse words in criticizing a military leadership that serves under him as commander-in-chief.
“Not to mention my fucking generals are a bunch of pussies,” Trump once told White House trade adviser Peter Navarro, according to Woodward. “They care more about their alliances than they do about trade deals.” This despite the fact that trade negotiations, of course, are outside the purview of the U.S. military.
The exasperation, according to Woodward, was mutual among the likes of former defense secretary and retired general Jim Mattis and former director of national intelligence Dan Coats. Such were Mattis’s concerns that he reportedly visited Washington National Cathedral to pray for the nation’s fate under Trump’s leadership, while also telling Coats: “There may come a time when we have to take collective action” against a “dangerous” and “unfit” president who “has no moral compass.”
Coats, likewise, reportedly agreed with Mattis, saying: “To [Trump], a lie is not a lie. It’s just what he thinks. He doesn’t know the difference between the truth and a lie.” And so perplexed was Coats about Trump’s deference to Russia, that he reportedly had “deep suspicions” that Vladimir Putin “had something” on the President.
Also quoted in the book is Dr. Anthony Fauci, who has seen his recommendations as the top infectious disease expert guiding the government’s response to COVID-19 constantly undercut by the administration’s actions. Fauci reportedly described Trump’s leadership as “rudderless” and his attention span as “like a minus number,” adding: “[Trump]’s sole purpose is to get reelected.”
Trump and Kim Jong-un have exchanged more than two dozen letters—despite nearly going to war with each other in 2017
Woodward reports extensively about President’s unorthodox relationship with the North Korean dictator, whom he once derided as “little rocket man.” But the pair have since patched things up—as evidenced by the 27 letters they have exchanged over the course of Trump’s presidency.
Woodward reports that the letters are filled with flattering language between the two leaders, with Kim repeatedly calling Trump “Your Excellency” and describing him as a “a powerful and preeminent statesman.” Kim also wrote of the pair’s historic meetings as a “precious memory” that established a “deep and special friendship between us.”
The flattery apparently worked, as Trump boasted to Woodward of Kim’s deference to him and described the North Korean dictator as “far beyond smart.” Trump also brushed off concerns that he had ceded too much leverage to Kim as a result of their relationship, telling Woodward that the CIA has “no idea” how to handle North Korea.
Still, tensions between the two countries rose to the point that there were genuine concerns among some in the administration about an armed conflict between the U.S. and North Korea. And in discussing those tensions, Trump apparently spilled the beans on a heretofore undisclosed, newly developed weapons system.
“I have built a nuclear—a weapons system that nobody’s ever had in this country before,” he told Woodward. “We have stuff that you haven’t even seen or heard about. We have stuff that Putin and Xi have never heard about.” Woodward says he was subsequently able to confirm the existence of that secret new weapons system, but was unable to procure additional details.
Alice in Wonderland is the key to understanding the Trump presidency, according to Jared Kushner
Kushner, the president’s son-in-law and one of the most influential figures inside his administration, is said to be quoted extensively in Rage. In the book, Woodward quotes Kushner as pointing to Alice in Wonderland—Lewis Carroll’s classic 19th century fantasy novel-turned-1951 Disney animated film—as an important text in understanding Trump and his presidency.
Kushner paraphrased the Cheshire Cat, in particular, as a particularly apt guide to grasping the haphazard mechanizations of the administration: “If you don’t know where you’re going, any path with get you there.”


fortune--2020-09-10--Palantir CEO to investors: Pick a ‘different company’ if you don’t like us

Palantir Technologies CEO Alex Karp told investors on Wednesday that the company is holding fast to its strategy of helping government agencies like the U.S. Defense Department digest and analyze data — even though those associations have stirred controversy in the past.
In the run-up to a hotly anticipated direct listing on the New York Stock Exchange slated for Sept. 23, Karp also said that if would-be investors want Palantir to change its client base or culture of U.S. government support, then they should “pick a different company.”
“We have certain beliefs and we will stick with those,” he said.
It’s unclear what valuation Palantir could fetch on the public market. Private investors last valued the company at $20 billion in 2015, but research firm PitchBook recently pegged its valuation at $8.8 billion, using revenue multiples from comparable companies.
Palantir makes money by selling data analysis and software to governments and private companies. During the investor presentation on Wednesday and during a livestream question-and-answer session afterward, company executives outlined the hybrid nature of its business — revenue is roughly equal between government and commercial customers — and Karp delved into the thinking that drives executive and board decisions.
Palantir Global Head of Business Development Kevin Kawasaki said that while smaller companies may find Palantir’s products useful, the company is focused on forging ties with the largest 6,000 global businesses. Since Palantir only recently began hiring sales staff — they make up just 3% of its 2,400 employees — “there’s a lot of room for us to grow,” he said.
Palantir has faced criticism from privacy rights groups, and even its own employees, because of its work with the U.S. government. The company has helped U.S. agencies carry out controversial data collection and surveillance policies, and it has recently doubled down on its pursuit of government work. In its filing to go public, the company said that it “has chosen sides.” Several company executives said that Palantir integrates customers’ data, but that it doesn’t own, store, share or sell it.
Palantir has been successful in bidding for government contracts, especially recently. In 2016, it successfully sued the U.S. Army over what it said was an unfair bidding process too focused on boutique, one-off projects. Thanks partly to that move, says Melius Research analyst Carter Copeland, the U.S. government shifted its spending habits. Palantir secured more revenue from the U.S. Army in the first half of 2020 than it did in the previous 10 years combined, according to a slide shown during the company’s presentation Wednesday.
Copeland thinks it would be “dangerous” to read too much into the revenue growth from Palantir’s Army contracts. Those increased to $78.8 million during the first half of 2020, up 47% from all of 2019. But he added that Palantir is well positioned regardless of who wins the Presidential election in November, and will be able to take advantage of a broader shift in how government agencies purchase technology. “I don’t think the election matters,” Copeland said.
Palantir has an unusual power structure, which has raised eyebrows from investors. Palantir’s chairman and major shareholder, Peter Thiel, along with two of the company’s other co-founders, Stephen Cohen and Karp, will control 49.99% of voting shares “for the foreseeable future,” according to the filing.
Palantir isn’t the first company to concentrate power into the hands of a few executives — Facebook Inc. is one of the first and most discussed. But Palantir’s structure sparked a reproach from the Council of Institutional Investors and a call for the company to shift to a one-share, one-vote model within seven years.
In the questions-and-answer presentation on Wednesday, Palantir did not address the issue of voting power. Executives also didn’t answer questions that were submitted about its work with U.S. Immigration and Customs Enforcement.
In recent years, the company has distanced itself from Silicon Valley, and has moved its headquarters to Denver from Palo Alto, California. Thiel also broke with other tech chiefs when he supported Donald Trump’s 2016 presidential bid, notable in an industry that skews heavily democratic. As if to underscore that the company does not plan to bend to convention even once public, Karp introduced Wednesday’s presentation dressed in cross country-training gear in a pre-recorded video. Taking off his helmet, he advised: “Be aware of the fact that we are going to keep our culture, and that we’ve not wavered from that.”
Unlike many technology startups that have gone public in recent years, Palantir will eschew a traditional initial public offering. By instead pursuing a direct listing, Palantir will let employees and investors cash out, but won’t issue any new shares or raise new capital, and will let the market choose the stock price. Slack Technologies, Inc. and Spotify Technology also went public via a direct listing.
So far this year, more than 95% of Palantir’s revenue came from existing customers, it said its Wednesday presentation. A large part of revenue has come from a relatively small number of customers — the top three together accounted for 28% of its revenue last year, the company said in the filing. The average revenue per customer was $5.6 million.
Palantir grew sales 49% during the first half of 2020 to $481 million, suggesting an annual revenue run rate of $962 million this year. It grew revenue 25% to $743 million in 2019, but still lost $580 million and has yet to turn an annual profit since it was founded in 2003.


fortune--2020-09-10--Pfizer’s CEO is still hopeful for COVID vaccine progress by October—and says a sense of purpose is f

Pfizer’s CEO is still hopeful for COVID vaccine progress by October—and says a sense of purpose is fueling him

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Pfizer CEO Albert Bourla on Wednesday reiterated his optimistic view that the company’s experimental coronavirus vaccine is a strong contender and may potentially cross key barriers on the way to the public by the fall.
“I think by the end of October we have a very good chance to know if the vaccine works or not,” Bourla said during a virtual panel discussion moderated by Fortune CEO Alan Murray.
Bourla emphasized that the vaccine, which is being jointly developed with the German biotech firm BioNTech, would have to be validated through Phase III clinical studies in order to establish safety and efficacy. However, Pfizer believes through its modeling that there’s a more than 60% chance the companies will know by the end of October whether or not it actually works.
“We’ve vaccinated a very large number of people either with the vaccine or the placebo, and then we let them live their lives,” Bourla said.
This is the essence of drug development, the randomized clinical trial that helps determine whether or not an experimental treatment actually has a significant effect. In the case of a pandemic, letting people live their lives will inevitably mean exposure to COVID—and, as Bourla put it, it’s critical to measure the difference in infection between study participants given the placebo versus those given the experimental vaccine.
“I’m very confident,” said Bourla. “Within a month we’ve had almost 26,000 people vaccinated.”
The theme of the Fortune session was purpose-driven business, and Bourla spoke to that as well. “Every time my team told me we’d have to wait till mid-2021, I’d tell them, ‘Go back and calculate how many more people would die if we don’t have something by this fall,’” he said.
And while Pfizer says it has no plans to put profits before patients during a global outbreak, and will base its pricing on maximal accessibility, Bourla still feels it will help the company in the long run: “Bringing a vaccine will be a breakthrough; I’m not a saint, but by doing good science, we’ll also be making money.”


fortune--2020-09-09--‘Skinny stimulus’: Senate to vote on $500 billion package. What it does and doesn’t include

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On Thursday, the Senate will vote on a GOP proposed $500 billion stimulus package.
This vote comes as Democrats and Republicans have struggled for weeks to come to terms on a bipartisan stimulus package. The two parties are still $900 billion apart: Democrats have come down to $2.2 trillion, and the White House has come up to $1.3 trillion.
This week Senate Majority Leader Mitch McConnell announced he’s opted to move forward with a scaled back stimulus package as a result of the inability of the two parties to come to an agreement on the broader bill. Already this Republican bill has fierce opposition from Democratic leaders, who say it won’t do enough to boost the economy or contain the virus.
What’s in the $500 billion stimulus package? It includes more than $250 billion for another round of Paycheck Protection Program loans, just under $50 billion for COVID-19 testing and vaccine development, over $100 billion for schools, and it forgives a $10 billion loan to the United States Postal Service. Additionally, it would secure $300 weekly enhanced unemployment benefits through the week ending December 27.
The Republican bill would also provide businesses and schools with immunity from COVID-19 lawsuits—something opposed by Democrats—and tax credits for parents to cover costs of home schooling and private K-12 school tuition.
The scaled back stimulus package does not include funding for a second round of $1,200 stimulus checks—a proposal that for months Republican and Democratic leaders supported. A second round of direct payments would cost around $290 million.
In addition, the Republican’s skinny stimulus does not provide additional funding for state and local governments. Democratic leaders have asked for more than $1 trillion for state and local governments, which they say is required to prevent looming public sector layoffs.


fortune--2020-09-09--Elon Musk trades insults with Robert Reich over Tesla pay cuts

Elon Musk didn’t mince words after Robert Reich, the Clinton-era labor secretary who now researches public policy at the University of California, Berkeley, criticized the Tesla CEO over pay cuts earlier this year and called him a “modern-day robber baron.”
“All Tesla workers also get stock, so their compensation increased proportionately,” Musk said on Twitter Wednesday in a response to Reich.
All Tesla workers also get stock, so their compensation increased proportionately. You are a modern day moron. — Elon Musk (@elonmusk) September 9, 2020
Musk’s net worth plunged as much as $16.3 billion Tuesday, the largest single-day decline in the history of the Bloomberg Billionaires Index, as Tesla shares fell more than 20% before rebounding 6% on Wednesday. Even with this week’s rout, the company’s shares have more than tripled since the April pay cuts.


fortune--2020-09-09--President Trump threatens to cancel anti-racist training

The quiet part is officially a full-throated roar.
On Friday, the Trump administration directed all federal agencies to identify and eliminate their anti-racist, historical, or other bias trainings via a memo issued by the Office of Management and Budget.
The framing is ominous.
“It has come to the President’s attention that Executive Branch agencies have spent millions of taxpayer dollars to date ‘training’ government workers to believe divisive, anti-American propaganda,” the memo begins.
The memo specifically calls out training or material related to “critical race theory,” “white privilege,” where people are told that “virtually all White people contribute to racism,” or “benefit from racism.” The American dream is on the line, clearly. “[I]n some cases, these trainings have further claimed that there is racism embedded in the belief that America is the land of opportunity or the belief that the most qualified person should receive a job.”
The administration is stoking the flames of white grievance at a granular level—even choosing to capitalize the word “white” in the memo—while leaning into white fatigue on the issue of race. Although interest in and engagement on tough issues around race and justice has been extraordinarily high in the time since George Floyd was killed, a recent NPR/Ipsos poll published on August 27 finds that white people were less likely than any other ethnic group to “take concrete action to better understand racial issues,” or attend a protest than any other racial group.
We tend to agree that racism is, in fact, a deeply American issue.
“Most Americans acknowledge that there is racism built into American systems,” Ipsos pollster Mallory Newall told NPR, but “at the core there is still a significant gap in willingness to do the work between white Americans and people of color.”
And now, the president has placed himself atop the white anger-and-inaction food chain as the defender of the race.
In a tweet amplifying a Breitbart story on his critical race theory “purge,” the president added, “This is a sickness that cannot be allowed to continue. Please report any sightings so we can quickly extinguish!” Then, amid a tweet storm of images purporting to be BLM-led violence, Trump took the time to answer a fan complaining that the California school system had implemented the New York Times’s 1619 Project into their curriculum. “Department of Education is looking at this. If so, they will not be funded!” he tweeted.
Stepping once more (and more and more and more) unto the breach, are the anti-racism educators.
#ScholarStrike For Racial Justice has been unfolding online yesterday and today, a movement described as both “an action and a teach-in,” designed to call awareness to systemic racism in the U.S. and elevate the conversation around police shootings and other racialized violence. Right now, teachers in the U.S. and Canada are stepping away from their scheduled work to hold anti-racism Zooms, and post videos, syllabi, research, and other resources for anyone who wants to understand, teach, or support justice-themed material.
While not timed to answer the president’s remarks, the action is the response we need, functioning as a crowdsourced archive of necessary information, and a living directory of the educators, researchers, teachers, grad students and others whose expertise should be tapped and work elevated.
I look forward to seeing them on a corporate conference Zoom near you.
Here’s their YouTube channel. Looking for a place to start? I recommend University of Miami law professor’s Osmudia James six-minute video on the link between racist, anti-Black education and racist, anti-Black policing. (Quick preview: Segregated schools are bad for everybody.)
#ScholarStrike was started via tweet by Anthea Butler, associate professor of religious studies and Africana studies at the University of Pennsylvania, and launched with help from Dr. Kevin Gannon, director of the Center for Excellence in Teaching and Learning and history professor at Grand View University in Des Moines, Iowa.
The president’s attempt to shut down equity-themed dialog should alarm you—it’s a direct shot at the heart of the work that you do. But, I predict, if you spend some time following the #ScholarStrike hashtag, you will find the friends and resources you’ll need to press ahead through every breach yet to come.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On point
Hunger for justice Nearly one in eight American households are food insecure, and alternate sources of food—like food pantries—are strained to capacity. It's one thing to read these words, it's another entirely to see what this means in the daily lives of people who but for the grace of the higher power of our choice, could be any one of us. Brenda Ann Kenneally delivers the goods with this powerful photo feature for the New York Times Magazine. “Food insecurity is as much about the threat of deprivation as it is about deprivation itself: A food-insecure life means a life lived in fear of hunger, and the psychological toll that takes.”
New York Times
COVID-19 deaths among Black and Latinx populations in America rising sharply The APM Research Lab, part of the non-profit American Public Media Group, has an ongoing project called Color of Coronavirus, which monitors the impact of the virus on communities by race and ethnicity. Their most recent update on August 18 showed wide disparities by race, specifically Black and Indigenous people. Here’s the big reveal: 1 in 1,125 Black Americans have died from the disease, or 88 deaths per 1,000; 1 in 1,375 Indigenous Americans (73 deaths per 1,000); 1 in 1,575 Pacific Islanders (63 deaths per 1,000); and 1 in 1,850 Latinx (54 deaths per 1,000. Comparatively, some 1 in 2,450 white Americans have died, or 40 deaths per thousand. (Asian deaths are the lowest of all, at 36 deaths per 1,000.). Expect a (grim) update on the data on September 16. Johns Hopkins maintains a robust coronavirus tracker here.
Color of Coronavirus project
Wisconsin has some equity work to do I’m resurfacing this report from June of this year to help bring some of the many issues in the state into sharper relief. WalletHub, a personal finance website based in Washington, D.C., used publicly available government statistics and examined racial disparities in wealth and employment and compared them state-by-state. Wisconsin came in dead last of the states in racial equity/equality. Only the District of Columbia ranked lower. The racial gap income for the state is 107%, which means that on average, white residents median yearly income is double that of Black residents.
Milwaukee Journal Sentinel
The new Mulan is problematic The issues go beyond mixed reviews, unfortunately. Turns out, the new live-action remake of the beloved 1998 animated feature film has many of its troubles behind the scenes. According to columnist Isaac Stone Fish, the film was shot in regions across China and required the cooperation of numerous Chinese institutions. The details are in the film’s credits. “It’s sufficiently astonishing that it bears repeating: Disney has thanked four propaganda departments and a public security bureau in Xinjiang, a region in northwest China that is the site of one of the world’s worst human rights abuses happening today,” he says.
Washington Post
On Background
The Search for Racial Equity Series is an ongoing conversation hosted by Google, where some of the bright lights in the anti-racism space gather to discuss their work and the work. This episode finds Corey duBrowa, Google’s VP of global communications and public affairs, in conversation with Byron Allen, the multi-hyphenate CEO of the U.S. media company, Entertainment Studios / Allen Media Group. Allen is a fascinating person—once a 14-year-old comedic wunderkind—now a media mogul bent on justice. In June, he spent $1 million to buy two pages in eight major newspapers to host his opinion piece titled, "Black America Speaks. America Should Listen." I’ll also mention that duBrowa is no slouch as a conversation partner; he’s had groundbreaking careers at Starbucks and Salesforce before he came to Alphabet — all the while a Rolling Stone freelancer. (Whut?) He’s also been a dear friend to raceAhead. You can find all the Search For Racial Equity talks here.
Search For Racial Equity: Byron Allen and Corey DuBrowa
Here is a strange and utterly terrible story, wrenching to read but at the same time, utterly affirming. Jiayang Fan is an immigrant, daughter, writer, and now a witness to her mother’s illness with ALS. She is also the target of a Chinese propaganda campaign declaring the pair traitors to their homeland, one that has made her life a surreal misery. But the history of their survival in America is nothing short of extraordinary. Fan was barely 8 years old when she and her mother joined her father, who was studying at Yale. Shortly after, he abandoned them to pursue another relationship, leaving the mother and daughter adrift. “My mother knew that in a vastly unequal and under-resourced world she would have to secure whatever small advantages she could,” she writes, a spirit she clearly shares. Bring tissues.
New Yorker
Praying to St. Dymphna Writer Anne Thériault has written an extraordinary piece about a teenaged saint who accidentally created a humane and effective mental health system. It’s one Thériault herself would have relished, she says. “I fantasized about a system where care is ongoing and mental health isn’t treated as a binary of ‘fine’ and ‘crisis;’ where patients are considered complex individuals rather than a list of dysfunctions; where clinicians understand the difference between staying alive and actually living.” She found it in Geel, a tiny Belgian city who has a centuries-long tradition of taking in “boarders,” people with mental illnesses who come to get treatment while living happier lives integrated into the community. But Geel’s tradition of welcoming the mentally ill into their homes has a horrific origin story in the form of a seventh century Irish princess named Dymphna, a devout Christian who fled her homeland after her father went mad. What happens next is nothing short of a miracle.
Broadview
Now that ‘white fragility’ has gone mainstream…Slate’s Lauren Michele Jackson took the pulse of the white self-awareness movement, expertly stoked by whiteness studies professor, author, and now workshop guru, Robin DiAngelo. While her seminal book White Fragility still has value, it seems that adherents are having difficulty moving past the confessional phase to actual systemic change. None of this was new or surprising then—this story was from a year ago—and Jackson provides a helpful analysis of other “whiteness” thinkers, an area with a significant history. But she also offers an important critique: The typical lack of black scholarship in the white awareness community is a glaring omission in DiAngelo’s work. “Among all this work lies the suggestion that nonreciprocal expertise about white behavior, white history, white ethnics, and white sociality has always been mandatory for nonwhites in America,” she writes. Simply put, for the “conversation” to evolve, the whiteness movement needs to accept the insights gathered by its first and best observers, who are black.
Slate
“Dew glistens white on grass” today, soon it will be “crickets chirp around the door” The Japanese calendar beautifully honors the moments in nature that mark the passing of time, with 72 kō, or microseasons, that last around five days. Although the seasons were inspired originally by the Chinese, they were re-written in 1685 by the court astronomer to, one assumes, more accurately reflect the Japanese aesthetic. It’s a lovely way to think about the world; for example, U.S. tax day falls during “first rainbows” and my birthday is right in the middle of “peonies bloom.” Please mark your calendars.
Nippon
raceAhead is edited by Aric Jenkins.
Today's mood board
https://twitter.com/chr1sa/status/1303720401634123776?s=20


fortune--2020-09-09--Apple has developed special face masks for employees

Apple has developed masks that the company is beginning to distribute to corporate and retail employees to limit the spread of Covid-19.
The Apple Face Mask is the first created in-house by the Cupertino, Calif.-technology giant for its staff. The other, called ClearMask, was sourced elsewhere. Apple previously made a different face shield for medical workers and distributed millions of other masks across the health-care sector.
Apple told staff that the Face Mask was developed by the Engineering and Industrial Design teams, the same groups that work on devices such as the iPhone and iPad. It is made up of three layers to filter incoming and outgoing particles. It can be washed and reused as many as five times, the company told employees.
In typical Apple style, the mask looks unique with large coverings on the top and bottom for the wearer’s nose and chin. It also has adjustable strings to fit around a person’s ears.
The company, which confirmed the news, said it conducted careful research and testing to find the right materials to filter the air properly while not disrupting the supply of medical personal protective equipment. Apple will start sending the Apple Face Mask to staff over the next two weeks.
The other model, the ClearMask, is the first FDA-cleared surgical mask that is completely transparent, Apple told employees. It shows the full face so people who are deaf or hard of hearing can better understand what the wearer is saying.
Apple worked with Washington-based Gallaudet University, which specializes in educating deaf and hard-of-hearing students, to chose which clear mask to use. The company also tested it with employees in three Apple stores. Apple is also exploring its own transparent mask options.
Before designing its own masks, Apple provided employees with standard cloth masks. It also offers basic surgical masks to customers visiting its retail stores.


fortune--2020-09-09--Here’s how indoor dining will reopen in New York City

New York City restaurants can reopen for indoor dining at one quarter of their usual capacity on Sept. 30, Governor Andrew Cuomo said.
“Because the compliance has gotten better, we can now take the next step,” Cuomo said at a press briefing in Manhattan. The city will field 400 inspectors to police the mask use and social distancing, he said, and called on citizens to speak up about violations.
Cuomo’s decision will come as a relief to thousands of restaurants ranging from Michelin-starred sushi dispensaries like Masa, where a single meal can cost hundreds of dollars, to Gurra Cafe, an Albanian spot in the Bronx where three pieces of the grilled beef sausage called suxhuk will set you back $12.
The city is home to more than 24,000 eating and drinking establishments employing more than a 250,000, according to the New York City Hospitality Alliance, an industry trade association.
“It’s still a big scary mess, but at least now it’s a big scary mess in the right direction. An hour before the governor spoke we were talking about extinction,” says Alex Stupak, chef-owner of Empellon restaurants in New York. “As a business operator, I don’t love 25%, but I understand it. You have to dip your toe in the water.”
The announcement came after months of work to control the virus in a city that had been the epicenter of the U.S. pandemic. The rate of positive tests now remains below 1% in the state, Cuomo said. There were 463 hospitalizations and three virus-related deaths on Sept. 8.
As the outbreak eased, the New York State Restaurant Association had been lobbying state and federal government for rent relief, payment of business interruption insurance claims, the resumption of indoor dining in New York City, and an increase in the capacity for inside restaurants in other parts of the state.
In a survey released last week, nearly two-thirds of New York state restaurants said that they were likely to close by year end without government support. Of those that expected to close, 55% foresaw it happening before November, according to a survey of more than 1,000 restaurant owners across the state.
“I couldn’t be happier, it’s a huge relief,” said Drew Nieporent, who owns Nobu in Midtown and Lower Manhattan and Batard, a French restaurant in Manhattan’s Tribeca. “At least now we know where we’re going. Let’s hope we can do it successfully and healthfully. The way the industry has adapted so well to outdoor dining, with so many stringent rules, gives me confidence that we can get this done.”
Cuomo said Wednesday that restaurants must have temperature checks and enhanced air filtration systems. Customers must wear masks except when they’re seated, and diners must leave contact information for tracing, Cuomo said.
Bars must remain closed, but bar service will be available for those dining at tables, he said, and restaurants must close at midnight.
“If there is a spike in the infection rate, then we can always hit the emergency pause button,” Cuomo said. If the rate doesn’t increase, restaurants will be able to increase capacity.
Cuomo set a Nov. 1 deadline for deciding whether New York City restaurants can open at 50% capacity, but it could be sooner if all goes well, he said. He said he wants more capacity when cold weather sets in.
The city’s outdoor dining program has more than 10,000 participants, employing about 90,000, said Mayor Bill de Blasio, who had resisted calls for indoor dining. He said the city will reassess the program if the positivity rate hits 2%.
“Science will guide our decision-making as we continue to monitor progress and health care indicators over the next three weeks to ensure a safe reopening,” he said. “This may not look like the indoor dining that we all know and love, but it is progress for restaurant workers and all New Yorkers.”


fortune--2020-09-09--The University of Georgia’s COVID surge continues, with 1,400 cases reported this week

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Coronavirus infections continue to spread at the University of Georgia, with the school reporting more than 1,400 new cases of COVID-19 in the past week.
The numbers push the 39,000-student university close to 2,600 total infections in the past four weeks, according to the school’s data. Although Georgia College & State University still has recorded a larger share of infections among its campus community since Aug. 1, UGA’s outbreak is now the fastest growing among universities in the state that are publicly reporting numbers.
The surge is clearly reflected in the figures for the broader Athens-Clarke County community. Clarke County is 23rd among U.S. counties for the most new cases per capita in the past 14 days, according to figures kept by The Associated Press, although the university says some tests may come from students and employees elsewhere.
And a rising positivity rate suggests things could be getting worse, with 8% of surveillance tests conducted to keep an eye on the spread of the virus coming back positive last week, compared to 5% the week before.
The growing outbreak at the university comes as case numbers across Georgia continue to fall. The state is now recording about 1,800 newly confirmed infections a day, down more than half from its late July peak. That’s still above the national average for new infections, on a per person basis, but Georgia has fallen from the worst for new infections to No. 11 as of Tuesday. More than 285,000 infections have been confirmed and at least 6,070 people in Georgia have died from the virus.
The university announced Tuesday that it was increasing the number of daily surveillance tests available from 360 to 450, and inviting randomized groups of students to come take a test, starting with campus housing residents.
Georgia College & State University, with 645 positive tests since Aug. 1, still has the highest share of campus infections, but new cases have slowed there. Cases are still rising fast at Georgia Southern University, which has reported 942 infections in recent weeks. Georgia Tech, which has reported 717 cases since the beginning of August, is urging students who share dorm rooms to move into singles.
Dr. Garth Russo, executive director of UGA’s University Health Center, suggested in a news release that because only one faculty member tested positive last week, it suggests that the virus is being spread somewhere else besides classrooms.
Not all faculty members feel reassured, though. More than 350 faculty members statewide have signed a recent petition by the state chapter of the American Association of University Professors calling for the system or individual institutions to move to fully online instruction. The Board of Regents has a mandate that each university must have at least some in-person classes, with dorms and dining facilities opening at all the schools.
President Jere Morehead pronounced the trend “disturbing” after calling it “concerning” last week. He again told students it was their responsibility to follow health rules.
“Each of us must make sound decisions in the coming days and weeks so that we can turn the trajectory, as we have seen at other institutions in the state,” Morehead said in a statement.
But the student newspaper, The Red & Black, editorialized last week that “the blame should not rest entirely on students.”
“The University System of Georgia decided to have in-person classes this fall despite the blatant risk it poses to the residents of Athens-Clarke County,” the newspaper wrote. “Even bound by the guidelines placed on them by the USG Board of Regents, the administrators at UGA did not create a strong enough plan to keep students and Athens residents safe.”


fortune--2020-09-09--Fortune battleground poll: Biden leads on social unrest, Trump on economy

President Donald Trump and Democratic nominee Joe Biden both denounced the looting and vandalism in Kenosha, Wisconsin committed by protestors following the August 23 shooting of an unarmed black man, Jacob Blake, by police.
And both Trump and Biden see social unrest moving battleground state voters to their side. The Trump campaign argues the protest will push swing voters to the “law and order” candidate, aka Trump. Meanwhile, Democratic officials say social unrest will move undecided voters toward the candidate that can unite and heal the country, aka Biden.
But what does the data say? To find out, Fortune and SurveyMonkey teamed up to poll 2,725 U.S. adults between August 31 and September 1.* We also cut the data by battleground states.**
Keep in mind our polling data is for U.S. adults, not just registered voters or likely voters. And the Fortune-SurveyMonkey poll has a modeled error estimate of plus or minus 3 percentage points
We found that 52% of U.S. adults say Biden would do a better job handling social unrest, compared to 42% who say Trump. However, when asked who would do a better job with criminal justice, Biden’s lead over Trump falls to just 3 percentage points.
Biden also leads Trump by 51% to 43% on who Americans say would do a better job handling the pandemic response.
The bright spot for the Trump? Among U.S. adults, 49% say Trump would do a better job handling the economy, compared to 46% who say Biden. And our polling was conducted before the jobs report released on Friday, which saw the unemployment rate fall from 10.2% in July to 8.4% in August.
However, when only looking at battleground states, Biden’s lead on the issues drops. When it comes to handling the social unrest, 51% of battleground residents pick Biden over 46% who pick Trump. Meanwhile, 50% of U.S. adults in battleground states favor Trump on criminal justice, compared to 46% who say Biden.
And Trump’s lead on the economy grows even wider in battleground states. Among swing state residents, 53% say Trump would do a better job handling the economy, whereas 44% say Biden.
*Methodology: The Fortune-SurveyMonkey poll was conducted among a national sample of 2,725 adults in the U.S. between August 31 and September 1. This poll’s modeled error estimate is plus or minus 3 percentage points. The findings have been weighted for age, race, sex, education, and geography.
**Battleground States includes Arizona, Florida, Georgia, Iowa, Maine, Michigan, Minnesota, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania, Wisconsin


fortune--2020-09-09--Amid geopolitical tensions, ‘Mulan’ is a litmus test for loyalties

Perhaps it is the upcoming anniversary of September 11, 2001, that’s resurfaced this old College Humor video in my mind.
The skit—called Stormtroopers’ 9/11—opens with a trio of imperial troopers letting off steam at a bar. “I don’t want to be a downer, but you guys do know what tomorrow is?” asks one. “The anniversary of the Death Star,” another answers. “Bingo,” the first replies.
The skit compares the Death Star’s destruction to the heinous tragedy that befell America nineteen years ago. Following the sketch writers’ twisted logic, the U.S. could be viewed as an evil galactic empire and the rebels as terrorists. You may disagree with the framing, as I do, and still appreciate the dark humor.
I thought about the 9/11 skit while watching Disney’s newly released, live-action Mulan remake this weekend. The film is gorgeous, visually stunning. The martial arts dazzle. The “tulou” walled villages are a sight to behold, even if they are historically inaccurate.
Yet while watching the film, I could not shake an image from my mind. No doubt owing to an intensifying geopolitical rivalry between the U.S. and China—tit-for-tat trade wars, draconian tech bans, embassy closures—I kept picturing the emperor and his realm’s defenders —that is, Mulan and her loyal soldier companions—as stormtroopers. (Heck, they’re fighting to preserve an empire!)
The Mulan story is a source of national pride for China. The legend of the woman-warrior derives from a Wei dynasty poem circa the 5th century. The tale has been retold over the centuries. A 1939 domestic film adaptation found particular appeal with Chinese audiences who were captivated by the idea of repelling foreign invaders during the Second Sino-Japanese War.
Disney’s new take has had a rockier global reception. Some reviewers have celebrated the choice of an all-Asian cast. Some have called it Disney’s best live-action remake. But other critics are calling to boycott the film after the star, Liu Yifei, expressed support for Hong Kong police amid the city’s pro-democracy protests. More still are protesting the movie since parts were filmed in Xinjiang, a minority region of China facing cultural genocide from the government.
Disney has a lot hanging on this film. It is a test of the company’s Disney+ streaming service. It is a test of the company’s ability to satisfy the Chinese market, an increasingly important one for Hollywood studios. And it could affect the fortunes of one of the company’s marquee parks, Shanghai Disneyland.
Mulan represents a litmus test for people’s loyalties. Whether one sides with the U.S., China, or Disney’s capitalistic enterprise, it’s worth remembering that good and evil are not so easily delineated as the Star Wars universe—or political propaganda, for that matter—would have one believe.
Robert Hackett
Twitter: @rhhackett
robert.hackett@fortune.com
***
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THREATS
Walking through the valley of the shadow of silicon. The bottom has fallen out from the tech-stock rally as the market sector notches its worst sell-off since March. The Nasdaq index, which heavily weights tech stocks, fell 4% Tuesday, following similar drops on Thursday and Friday. That makes this the index's fastest-ever fall from a record into the valley of correction. To put the losses into perspective: The six biggest tech stocks—Apple, Microsoft, Amazon, Alphabet, Facebook, and Tesla—lost more than $1 trillion over the past few days. That's a lot of (vaporized) moolah; take solace in U.S. stock futures being up this morning.
Car won't start. The market's biggest loser? Tesla. The electric-vehicle maker's stock crashed 34% in the past week to $330 per share after reaching a historic high of just under $500 at the end of August. The whiplash-inducing fall from grace can be attributed to the S&P 500 index committee declining to include the stock in its hallmark index. Not so comfy now are those short shorts?
It's electric! Boogie-woogie-woogie. While Tesla boosters do the electric slide, other e-vehicle believers are rejoicing. Shares in Nikola, an electric-truck startup, supercharged 40% to $50 per share on news of a tie-up with General Motors, which took an 11% stake in the company. GM said it would help the firm manufacture and develop its planned Badger pickup truck, jolting the Detroit-based automaker's shares 8% to $32 per share. Seems the road is big enough for more than one electric-car business.
Quit slacking off! Shares in office chat app Slack slumped 20% in after-market trading after the company reported revenue growth not matching the success of pandemic star Zoom. Revenue grew about 50%, in line with previous quarters, but far off from Zoom's phenomenal 355% surge. Investors fear Slack isn't benefiting as much as it should from a pandemic-prompted shift to remote work, especially as the company battles Microsoft for market share. Slackers are no doubt commiserating at the water cooler.
If you wish to make an apple pie from scratch. Mark your calendar for Sept. 15 at 10 a.m. pacific time. That's when Apple plans to livestream its annual product show. Apple-watchers expect a new generation of Apple Watches, the Series 6, as well as a new iPad Air to be on the menu. Meanwhile, Apple is countersuing Epic Games, maker of Fortnite, for circumventing its payment systems. Epic says the video game has lost 60% of its daily active users since Apple booted the game from its App Store.
Bin Laden's hard drive.
ACCESS GRANTED
Kate Klonick is a speech expert; that is, she studies how social media companies enforce (often capricious) rules about what is permissible to say online. It might be surprising to learn then that Klonick—a St. John's University law professor who last year embedded with a content moderation team at Facebook—recently found herself running afoul of Twitter policy. In an op-ed piece for The Atlantic, she explains how a bad joke landed her, temporarily, in the penalty box. (She has since been reinstated.)
One morning last week, around 7:30, I woke up, rolled over in bed, and reached for my phone to check my email. With one eye open, I quickly scrolled through listserv messages, faculty notices, and some junk and then I saw something that made me sit up, open both eyes, and smile: a message with the subject line “Your Twitter account has been suspended.”
FORTUNE RECON
Want to understand why tech stocks are crashing? This one metric explains it all by Shawn Tully
Why last week’s great tech sell-off should make investors wary by Bernhard Warner
China's top chipmaker could be Trump's next target in the trade war by Eamon Barrett
Apple’s ‘most ambitious’ new store is a departure from its signature design by Clay Chandler
This is the best wireless carrier by far, survey finds by Aaron Pressman
Disco, bell bottoms, big hair…and cutting-edge A.I.? by Jeremy Kahn
PayPal’s CEO on why moral leadership makes clear capitalism needs an upgrade by McKenna Moore
(Some of these stories require a subscription to access.Thank you for supporting our journalism.)
ONE MORE THING
As a reporter, I have long bemoaned the iPhone's inability to record conversations. Apple declines to add the feature for security and privacy reasons—but also because recording a call without both parties' knowledge is illegal in certain places. (Looking at you, Montana.) Another iRritation: the iPhone's apparent inability to decline incoming calls from the lock screen; typically, only a "slide to answer" toggle appears there.
If this omission bothers you too, I've got good news. I've just learned that it is possible to decline inbound calls, though Apple hides the trick. Just double-click the power button on the side of your iPhone and you'll send any unwelcome solicitors forthrightly to voicemail.
Eat mailbox, robocallers.


fortune--2020-09-09--Amazon’s A.I. voice project gets help from Facebook, Dolby, and Garmin

Amazon’s quest to make digital voice assistants like its own Alexa work with others is getting some help from Facebook, Garmin, Dolby, and Chinese tech giant Xiaomi.
The online retail giant announced on Wednesday that several additional companies have joined its voice-interoperability initiative (VII), bringing the total number to 77 members, up from around 30 when it debuted last year. Those participants include Salesforce, Microsoft, and Spotify.
Amazon pitched its digital voice project as a way for companies to ensure that their voice-activated digital assistants understand each other when used on a single device. For instance, Facebook’s Portal videoconferencing device can be used with Amazon’s Alexa digital assistant so that people can do tasks like setting the timer of their Internet-connected coffee machine by asking Alexa via their Portal device.
In theory, people would be able to do more advanced tasks around the house if they could use multiple voice assistants on their devices, said Aaron Rubenson, a vice president for Alexa. For example, someone could ask their Internet-connected set-top box to play a song from their web-connected speaker. While the set-top box may have its own voice assistant that can turn on a television via a command, that assistant may otherwise be unable to play a song from a web-connected speaker.
Additionally, Amazon released best practices for others to use for creating products that use multiple voice assistants. The guide spells out how to design so-called wake words that are used to activate voice assistants. This is helpful if a web-connected microwave uses multiple voice assistants that each require their own wake word to activate them.
However, more digital assistants talking to each other could increase the risk of users unintentionally causing one of them to accidentally activate and eavesdrop on conversations. For instance, researchers have shown that certain common phrases can activate voice assistants like Alexa, Google Assistant, and Apple’s Siri, creating potential privacy problems.
“We and the others in the industry have worked quite hard to ensure that the wake word technology is accurate,” Rubenson said. Amazon “has seen a 50% decrease in unintended wakes over the last year,” he said, without revealing any absolute numbers.
Although tech companies bet that voice technologies will become the next big way people interact, it’s still “early” days for the industry in terms of adoption, Rubenson said.
One of the goals of Amazon’s voice-interoperability initiative is to popularize voice technology to both consumers and companies, and to improve “customer satisfaction,” Rubenson said. People may be hesitant to use voice assistants if the assistants routinely stumble when asked to do tasks.
Still, companies like Apple and Google that operate popular digital voice assistants have yet to join Amazon’s initiative. Those companies may view Alexa as a competitor to their own and may therefore be hesitant to partner with Amazon.
“Of course we would love to have participation from all companies that have voice assistants,” Rubenson said.


fortune--2020-09-09--Warren Buffett’s Berkshire Hathaway buys up Snowflake ahead of its IPO

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Berkshire Hathaway is not known for its tech-investing chops, with Warren Buffett famously missing out on the sector’s enormous rally of recent decades and only investing in Apple and Amazon in 2016 and 2019 respectively—long after the duo had become established players.
Now, amid cries that tech companies are overvalued, in part due to a work-from-home rally, Berkshire Hathaway is not shying away.
The investing giant is leaping into one of the hottest initial public offerings of a tech company this year. Snowflake, a cloud database software provider, revealed on Tuesday that Berkshire Hathaway plans to buy some $250 million worth of shares at its IPO price and another 4 million shares from an existing investor also at the same price. At the midpoint of the estimated range at which Snowflake could debut, $80 apiece, Berkshire Hathaway would be buying a $570 million stake in the company that could be valued at over $22 billion.
While Buffett is better known for less exciting and more reliable bets on the likes of Geico and Coca-Cola, Berkshire Hathaway has been slowly digging into the tech space. At Berkshire’s 2018 annual shareholder meeting, Buffett declared that the largest companies by market cap were ones without net tangible assets, adding that he had made a mistake by not acquiring shares of Alphabet, Google’s parent company, earlier on.
For a sign of what Berkshire Hathaway may become then, look to Buffett’s younger lieutenants, who he has often leaned on to make the calls in tech. In 2018, Berkshire invested in two payments companies abroad, plowing $600 million altogether into Brazil’s StoneCo and India’s Paytm in deals that were largely attributed to Todd Combs, one of Berkshire’s portfolio managers. Similarly with Berkshire’s bet on Amazon, Buffett noted that “one of the fellows in the office that manage money” acquired some shares of e-commerce company, likely referring to Combs or Ted Weschler, another portfolio manager.
While they may not be helmed by Buffett, the bets still have features of the Oracle’s own investing style: StoneCo, Paytm, and Amazon are all leaders in their spaces, creating a moat against competitors.
Though unclear who led the latest deal, when it comes to Snowflake—well, a business with recurring revenue is just about as steady as it goes in tech.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Klarna, a Swedish payments firm, is in talks for a new round of funding that would value it at more than $10 billion, per Reuters. Read more.
- Zymergen, an Emeryville, Calif.-based science and material innovation company, raised $300 million in Series D funding. Baillie Gifford led the round and was joined by investors including Baron Capital Group and Perceptive Advisors.
- Snyk, a Boston-based developer-based security company, raised $200 million. Addition led the round. The raise pushes Snyk’s valuation to more than $2.6 billion.
- NotCo, a Latin American food-tech company, raised $85 million in Series C funding. Future Positive and L Catterton co-led the round.
- Truepill, a San Mateo, Calif.-based API-connected healthcare infrastructure company, raised $75 million in Series C funding. Oak HC/FT led the round and was joined by investors including Optum Ventures, TI Platform Management, Sound Ventures and YCombinator.
- Ouster, a San Francisco, Calif.-based provider of digital lidar sensors, raised $42 million in Series B funding. Investors included Cox Automotive, Fontinalis Partners and Tao Capital Partners. Read more.
- Inversago Pharma, a Montreal-based biopharmaceutical company focused on metabolic conditions, raised $35m (€32 million) in Series B funding. Forbion led the round and was joined by investors including Fonds de solidarité FTQ, Genesys, JDRF T1D Fund, Amorchem, Anges Québec Capital, and adMare BioInnovations.
- Pcysys, an Israel-based cybersecurity firm, raised $25 million in Series B funding round. Insight Partners led the round and was joined by investors including Awz Ventures and The Blackstone Group.
- Hasura, a San Francisco-based data access infrastructure company, raised $25 million in Series B funding. Lightspeed Venture Partners led the round and was joined by investors including Vertex Ventures US, Nexus Venture Partners, Strive VC, and SAP.iO Fund.
- Deel, a San Francisco-based payroll and compliance platform for international teams, raised $30 million in Series B funding. Spark Capital led the round and was joined by investors including Andreessen Horowitz.
- LightForce Orthodontics, a Cambridge, Mass.-based maker of a 3D-printed bracket system, raised $14 million of Series B funding. Tyche Partners led the round and was joined by investors including Matrix Partners and AM Ventures.
- Panther Labs, a San Francisco-based cybersecurity startup, raised $15 million in Series A funding. Lightspeed Venture Partners led the round and was joined by investors including S28 Capital, Innovation Endeavors, and Fathom Capital.
- Bruush Oral Care, a Canadian e-commerce oral care company, raised $6.5 million in Series A funding.
- BoostUp.ai, Santa Clara, Calif.-based sales and customer acquisition platform, raised $6.3 million in Series A funding. Canaan Partners led the round and was joined by investors including Emergent Ventures, BGV, MFV Partners, and Correlation Ventures.
- Salaryo, a New York-based fintech platform for U.S. freelancers and startups, raised $5.8 million in funding. Investors included Variant Investments, KEN Investments, Techstars Ventures and Michael Ullmann’s investment group.
- Behold, a Los Angeles-based platform connecting women personalized styles, raised $5 million in funding. Investors included Upfront Ventures, Greycroft, Troy Capital Partners, and TenOneTen Ventures as well as Zillow co-founder Spencer Rascoff.
- Partake Brewing, a Canadian craft non-alcoholic beer brand, raised $4 million in funding. CircleUp Growth Partners led the round and was joined by investors including Export Development Canada, Natural Products Canada, McLean & Associates, and Barrel Ventures.
- PopSQL, a San Francisco-based maker of an SQL editor for teams, raised $3.4 million in seed funding. Gradient Ventures led the round and was joined by investors including Y Combinator, and FundersClub.
- Swyg, a Dublin-based platform that seeks to use peer-to-peer interviewers and A.I. to reduce bias in recruitment, raised $1.2 million in pre-seed funding. Frontline Ventures led the round.
- Proov, a Boulder-based at-home hormone testing kit company, raised an undisclosed amount of funding. Lightship Capital and Texas HALO Fund invested.
- Trint, an AI speech-to-text platform for transcription and content production, raised an undisclosed amount of funding from The New York Times Company.
PRIVATE EQUITY
- Hellman & Friedman invested $200 million at a $2.7 billion valuation in Sprinklr, a New York-based provider of enterprise software for customer experience management. It also raised $150 million in convertible securities from Sixth Street.
- Warburg Pincus is investing in Infoblox, in a deal that values the technology company at more than $3 billion, including debt, according to people familiar with the matter. Vista Equity Partners backs Infoblox. Financial terms weren't disclosed. Read more.
- Chongqing Jiangxiaobai Liquor, a Chinese distiller aimed at younger generations, raised $300 million. China Renaissance Holdings led the round and was joined by investors including Baillie Gifford and China Merchants Bank International Capital. Read more.
- Investors led by the Carlyle Group invested $175 million in Grand Rounds, a San Francisco-based employee health benefits company.
- FTV Capital made a “significant” investment in 6 Degrees Health, a Hillsboro, Ore.-based provider of healthcare cost containment solutions. Financial terms weren't disclosed.
- Stone Point Capital became the lead investor in Bullhorn, a Boston-based cloud computing company. Financial terms weren't disclosed.
- Ardian acquired a minority stake in Wintics, a Paris-based company using deep learning algorithms to gather data from fixed cameras installed on roads and buildings. Financial terms weren't disclosed.
OTHERS
- Monkey Knife Fight acquired FantasyDraft, two fantasy sports services. Financial terms weren't disclosed.
BREAKUPS AND BANKRUPTCIES
- Taboola and Outbrain, two ad-based startups going up against Google and Facebook, called off a $850 million merger that would have valued the combined company at more than $2 billion.
EXITS
- KAR Auction Services will acquire BacklotCars, a Kansas City-based automotive platform, for $425 million. BacklotCars investors included Stripes, Origin Ventures, and Pritzker Group Venture Capital.
- North American Bancard acquired SALIDO, a New York-based hospitality technology provider. Salido has been backed by investors including Alumni Venture Partners and Great Oak Ventures. Financial terms weren't disclosed.
IPOs
- Advantage Solutions, an Austin-based sales and marketing firm backed by CVC Capital and Leonard Green & Partners, withdrew plans for an IPO and plans to go public via merger with Conyers Park II Acquisition, a SPAC formed by Centerview Capital. The deal will give Advantage an enterprise value of about $5.2 billion.
- American Well, a Boston-based telehealth company, plans to raise $525 million in an offering of 35 million shares priced between $14 to $16. Allianz Strategic Investments and Teva Pharmaceuticals back the firm. Google also invested $100 million. It plans to list on the NYSE as “AMWL.” Read more.
- JFrog, an Israel-based seller of software tools for app development, plans to raise $405 million in an offering 11.6 million shares (31% insider) priced between $33 to $37. The firm posted revenue of $104.7 million and losses of $5.4 million in 2019. Gemini Israel Ventures, Scale Venture Partners, and Sapphire Ventures back the firm. It plans to list on the Nasdaq as “FROG.” Read more.
- Chindata Group Holdings, a Beijing-based data center operator, filed to raise $100 million. Bain Capital backs the firm. It posted revenue of $120.7 million 2019 and a loss of $24 million. It plans to list on the Nasdaq as “CD.” Read more.
- Yalla Group, a Dubai-based provider of a voice-centric social networking platform focused on the Middle East and North Africa, plans to raise $100 million in an IPO. It posted revenue of $63.5 million and income of $28.9 million. SIG backs the firm. It plans to list on the NYSE as “YALA.” Read more.
- Sumo Logic, a Redwood City, Calif.-based provider of cloud log management solutions, plans to raise $281 million in an offering of 14.8 million shares priced between $17 to $21. Insider Tiger Global Management plans to acquire 10% of the shares. It posted revenue of $155.1 million in the year ending Jan. 2020 and a loss of $92.1 million. The company plans to list on the Nasdaq as “SUMO.” Read more.
- iHuman, a Beijing-based education provider, plans to raise $100 million. It posted revenue of $31 million in 2019 and a loss of $39.1 million. It plans to list on the NYSE as “IH.” Read more.
SPACs
- Cohn Robbins Holdings Corp., a blank-check company backed by Gary Cohn, raised $720 million after earlier targeting $600 million, per Bloomberg. Read more.
- Recharge Acquisition, a Sarasota, Fla.-based blank check company, filed to raise up to $200 million. The firm was formed by former Marathon Petroleum and MTC Technologies executives. Read more.
- Jim Murren, the former CEO of MGM, is considering raising over $300 million via a blank check company along with Morgan Stanley veterans Edward King and Daniel Fetters. Read more.
- Vector Acquisition, a San Francisco-based blank check company formed to acquire a tech, plans to raise $300 million. Vector Capital formed the firm. Read more.
- IG Acquisition, a New York-based blank check company targeting the leisure industry, filed on to raise $300 million. Read more.
- FinTech Acquisition IV, a blank check company formed to acquire a fintech business, filed for a $200 million IPO. Management of the Bancorp created the firm. Read more.
F+FS
- Stellex Capital Management, a middle-market private equity firm, closed Stellex Capital Partners II with $1.8 billion.
- Dawn Capital, a London-based enterprise tech-focused venture shop, raised $400 million.
- DNX Ventures, an early-stage VC firm focusing on B2B startups in the U.S. and Japan, raised a new $315 million fund.


fortune--2020-09-09--What to expect after a Nasdaq correction

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Tech investors who have enjoyed the most outsize returns over the past few months may now be starting to sweat it as the Nasdaq just posted a rapid three-day correction (down 10%) from its high last Wednesday.
Indeed, even as the tech-heavy index rallies on Wednesday, up nearly 2% in early morning trading, tech stocks have taken a massive beating in the markets over the past week as investors have sold out of increasingly expensive tech and so-called stay-at-home names, dragging down benchmarks like the Nasdaq.
But one chart may put investors’ minds somewhat at ease.
Another record for 2020 (and this one isn't one to be excited about).
It took the Nasdaq ONLY 3 DAYS to go from a new high to a correction (down 10%).
The good news? The other previous fastest corrections ever saw extremely strong returns out to a year later. pic.twitter.com/BGjwiBEX6N — Ryan Detrick, CMT (@RyanDetrick) September 9, 2020
According to LPL Financial’s Ryan Detrick, the previous fastest corrections in the Nasdaq ended up resulting in “extremely” positive returns one year later (in all cases since 1980 save for 2000).
Delving into the numbers, following a correction, the 12-month returns for the Nasdaq were in the double digits. The exception: the near –59% slump a year after the 2000 correction. In the short term, investors historically saw a bit more of a mixed bag, with the average return slightly negative at –0.24% in the following month.
To be sure, nothing about 2020 is normal, and with the two fastest Nasdaq corrections in 2020 (six days in February and three days in September), investors will have to wait until next year to see if history will repeat itself this time.
But according to some strategists, the recent selloff may not necessarily be such a tough pill to swallow for investors. “I think it was time for some rebalancing and taking chips off the table,” Charlie Ripley, senior investment strategist for Allianz Investment Management, recently told Fortune. “By and large, it looks kind of like a healthy little correction here.”
Meanwhile, although the Nasdaq may post positive returns in the months to come based on its track record, other strategists are calling on investors to look in another direction altogether: “Most investors right now are very focused on the tech selloff, but their focus is misplaced,” Morgan Stanley Investment Management’s Andrew Slimmon argued in a note Wednesday. “They should be focused on cyclical stocks, including materials and industrials, which were not only up last week, but have been the best performing sectors over the last month.”


fortune--2020-09-09--Tiffany sues LVMH after $16 billion deal collapses

The luxury industry’s biggest takeover is unraveling as LVMH moved to call off a $16 billion purchase of Tiffany & Co., which countered with a lawsuit to try to keep the deal on track.
The Louis Vuitton owner cited delays related to a U.S.-France trade dispute, while the jeweler said the French giant was trying to leverage the protests against police brutality and the COVID-19 pandemic to seek a lower price.
Tiffany shares plunged as much as 11% in New York, while LVMH gave up gains to trade 0.3% lower in Paris.
The deal, struck in November 2019, ran into trouble after coronavirus-related lockdowns closed shops around the world and curbed international travel, hitting demand for luxury goods. Adding Tiffany was seen as a way for LVMH Chairman Bernard Arnault to bolster the French company’s U.S. presence by adding an iconic label known for its robin’s egg blue packaging.
Backing away from the deal would be a rare setback for Arnault, who built his empire through a string of acquisitions, amassing a conglomerate encompassing everything from Dior fashions to Dom Perignon Champagne. Tiffany offered a rare opportunity to gain a major brand in the jewelry market, which remains largely splintered among artisanal manufacturers, while other global names like Richemont’s Cartier are already owned by competitors.
Tiffany’s global net sales fell 29% in the quarter ended July 31, though that was an improvement from a 45% drop reported the previous period. The turmoil in the luxury market since the coronavirus spread had prompted speculation that LVMH would seek a lower price.
“It’s a great way out for LVMH,” said Keith Temperton, a trader at Lombard Forte Securities, in an email. “They had paid a top-of-the-market price ahead of the pandemic for Tiffany. It’s not surprising, their efforts to wriggle out of it.”
Deadline extended
The jeweler last month extended the deal deadline by three months, to Nov. 24, prompting LVMH to say it reserved the right to challenge the new closing date.
LVMH said the French government in a letter had asked the company to delay the deal beyond Jan. 6, 2021, citing a U.S. move to impose tariffs on French goods.
“It’s a governmental order—we have no other choice,” LVMH Chief Financial Officer Jean-Jacques Guiony said on a conference call Wednesday, adding that advisers told the company the government has the right to ask for a postponement.
After that comment, LVMH was forced to cut the call with Guiony short because of a technical problem. It’s scheduled to resume at 3:45 p.m. Paris time.
In July, the U.S. announced 25% tariffs on French goods including makeup, soap and handbags in a long-running battle over taxing global technology firms. The implementation of the levies was delayed for 180 days while France suspended collection of its digital services tax, which the U.S. says unfairly targets American firms.
A month before LVMH and Tiffany struck their deal last year, Arnault traveled to Texas to join President Donald Trump at a ribbon-cutting ceremony for a new Louis Vuitton factory, part of a plan by the French tycoon to hedge against trade tensions.
After reaching an agreement to buy the jeweler, Arnault described it as an “iconic, emblematic brand of America, with a great history,” and said the deal would boost its prospects in Europe and China.
Delaware suit
The government’s request to LVMH for a delay in the closing date has no basis in French law, Tiffany said.
The lawsuit, filed in Delaware, “refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect or breached its obligations under the merger agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation,” Tiffany said.
The reason advanced by LVMH, notably the letter from the government, is “convenient,” but it’s not an “excuse you can invent,” Sanford C. Bernstein analyst Luca Solca said by phone.
The price LVMH would have to pay to walk away wouldn’t be a “very material amount,” Solca said. That’s because typically U.S. courts would look only at the negative impact for the company, not shareholders. The courts would probably assess the costs of the legal and financial advisers and any third party that advised Tiffany.


fortune--2020-09-09--As the U.K.’s coronavirus testing system struggles, the health secretary blames too many ‘inappropri

As the U.K.’s coronavirus testing system struggles, the health secretary blames too many ‘inappropriate’ tests

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The U.K.’s coronavirus-testing system is overloaded, and the government’s health chief has identified the culprits: people who get tests despite having no COVID-19 symptoms.
“In the last couple of weeks we have seen an increase in demand including…from people who are not eligible for tests, people who don’t have symptoms,” Secretary of State for Health and Social Care Matt Hancock said in a Wednesday interview with Sky News. “About 25% of people who are coming forward don’t have symptoms, and aren’t eligible.”
These, apparently, are the people responsible for a situation in which others are being asked to travel hundreds of miles to get tests, and many of those trying to apply online—symptomatic or not—get an error message.
A leading figure in the U.K.’s testing regime has also indicated that the problem is not a crunch in testing-center capacity, but rather in the country’s capacity for processing samples.
Hancock cited examples of “inappropriate” testing, such as a school sending an entire year-group for tests, and people getting tests ahead of vacations. Health officials around the world have another name for it: “assurance-testing,” and they think it’s one of our best tools to fight the spread of the virus in the absence of a vaccine.
In the U.K., it has been the case since mid-May that anybody experiencing COVID-19 symptoms—a new and persistent cough, high temperature, loss of smell or taste—has been able to get a test to confirm whether they have the virus or not. In processing as many as 200,000 tests per day, the U.K.’s testing rates compare well with those of neighbors such as Germany, where a little over 1 million tests are being conducted each week.
The tests are central to the National Health Service’s (NHS) Test and Trace program, which aims to locate and isolate those who came into contact with carriers.
But it has long been known that many carriers of the novel coronavirus display no symptoms, yet remain contagious. In June, Hancock himself presented figures from the Office for National Statistics that showed, in his words, “that around 70%–80% of people who test positive don’t have symptoms.”
“That is quite a significant finding and one of the important things about this disease,” he said at the time.
Also in June, Prime Minister Boris Johnson and Dido Harding, the head of the Test and Trace program, complained that not enough symptomatic people were booking coronavirus tests. “We have excess testing capacity, and we have excess tracing capacity,” Harding said then, while Johnson also said there was “plenty of capacity.”
That situation now appears to have changed. The British press has recently been full of stories about symptomatic people who tried to book tests with the NHS but were told to visit entirely different parts of the country to get them—one as far as 600 miles away.
Meanwhile, those who try to book a test online are currently greeted with the following message: “There are no tests available right now. We are experiencing very high demand for testing at the moment. Please try again tomorrow.”
“Verge of collapse”
Hancock said Wednesday that the government had “already put in certain solutions” to make sure no one has to travel more than 75 miles for a test. He said capacity was continually increasing but there is “a problem with a couple of contracts” that is holding up further expansion. The secretary of state said this would take a couple of weeks to resolve.
Sarah-Jane Marsh, a deputy to Harding, explained Tuesday that the problem was not one of capacity at testing sites, but rather “it’s our laboratory processing that is the critical pinch-point. We are doing all we can to expand quickly.”
Keir Starmer, the head of the opposition Labour Party, said Tuesday that the Test and Trace system was “on the verge of collapse.”
“[We’re seeing] heartbreaking stories from people who need a test being told no tests are available, or the website is crashing, or people are being told to go miles and miles for a test. Nobody can argue that that is good governance,” Starmer said.
Like several other European countries, the U.K. has seen its coronavirus infection numbers shoot up in the past couple of weeks. It is now back to thousands of new cases being added to the statistics each day, and that’s without the testing of asymptomatic people.
On Tuesday, Hancock’s health department issued its latest localized coronavirus restrictions, this time affecting the town of Bolton, near Manchester in the North of England. Restaurants in Bolton are now able to serve only takeout, and no one is allowed to socialize with people outside their household, even if they are outdoors.
From Monday, all social gatherings of more than six people will become illegal across England, not including gatherings at workplaces, schools, weddings, funerals, and organized team sports. Hancock said the new rule will be “rigorously enforced by police,” who currently have no powers to intervene when up to 30 people gather.


fortune--2020-09-09--It’s official: The Xbox Series X will launch in November

The next-generation Xbox game console finally has a price and release date: The Series X will be out Nov. 10 for $499.99, Microsoft Corp. said on Wednesday.
The device, which Microsoft calls “the world’s most powerful console,” will support 4K graphics and feature a solid-state drive, allowing for faster loading times than previous video-game hardware.
On Monday, following a leak, Microsoft announced that its lower-priced model, the Xbox Series S, will be $299.99. That console, which is all-digital and less powerful than the Xbox Series X, will also go on sale Nov. 10.
Microsoft had planned to release Halo Infinite, the next installment in the multibillion-dollar Halo game franchise, alongside both consoles, but it instead delayed the game last month due in part to challenges of working from home during the pandemic.
Microsoft’s biggest gaming competitor, Sony Corp., hasn’t yet revealed a price or release date for its upcoming PlayStation 5. Sony has sold more than 110 million units of its last console, the PlayStation 4. Microsoft doesn’t disclose how many Xbox consoles it’s sold.


fortune--2020-09-09--The race for a COVID-19 vaccine shows the power of ‘community intelligence’

Over the past three decades, public perceptions of information technology have taken some wild turns. In the 1990s, many were swept up by the dream of the Internet weaving humanity into a single community. More recently, however, concerns about misinformation, disinformation, and worse have left many much more cynical. Lost in the sweeping generalizations and the legitimate concerns is a more nuanced reality: For all its shortcomings, the software now powering our personal and professional lives has the potential to do incredible good for the whole of humanity.
By now, the problems are well known. While in theory the Internet once seemed poised to pull humanity closer together, in practice information technology has burnished old divisions. Filter bubbles, cyberterrorism, and now the broad spread of conspiracy theories have proliferated as our lives have migrated online. Many dreamed that instant access to information would improve our ability to discern truth from lies and good from bad. But in many cases, those distinctions have been blurred instead. Still, the possibilities of interconnectivity and information-sharing as forces for good are on display in every aspect of our lives, and they speak to a path forward for the companies and industries of the future.
Today, science is fighting COVID-19 not as a series of individuals or labs, but as a community. Thousands of genome sequences have been shared across boundaries and borders. Progress is being made in record time. By combining their wisdom rather than searching for cures in silos, the community of scientists and researchers is speeding the progress exponentially. As epidemiologist and inventor Larry Brilliant recently told me, “Pandemics by nature divide, but we have to come together as a community to prevail.”
When we finally have an effective vaccine, researchers will rightly get credit for their ingenuity. But a large part of that outcome will result from what I term “community intelligence.” The vaccine will have been created through the wisdom that emerged because individuals were willing and able to share information dynamically. Those on the front lines of the fight against COVID-19 are tapping into the reality that none of us is as smart as all of us.
Community intelligence as a concept certainly isn’t new. Bell Labs, the iconic company that developed the laser, the transistor, and many of the 20th century’s most innovative technologies, offers an example. It succeeded by putting researchers working on disparate projects on the same campus in New Jersey and harnessing their collective power. What’s changed since then is the amount of data at our fingerprints, the ability and willingness to share it, and the supporting information technology that allows for unprecedented dynamic collaboration. Today, green shoots of community intelligence can be seen all around us. It shapes our daily decisions, whether it’s where to go and how to get there, where to eat, what to buy, or how to stay fit. By helping us get smarter together, community intelligence holds untapped potential of which we are just starting to scratch the surface.
The public’s excitement about global interconnectivity may be waning. But there is certainly reason for hope. It is on those of us who are building companies to protect the wisdom gleaned from community intelligence, to use it responsibly, and to build platforms that advance us all. And it’s up to the community to hold us accountable and ensure we progress. At a time when the world is yearning for a greater sense of community, what could be more important?
Rob Bernshteyn is the CEO of Coupa and the author of the new book Smarter Together.


fortune--2020-09-09--Scientists see an upside to AstraZeneca halting its COVID-19 vaccine trial

On Tuesday, the British vaccine maker AstraZeneca announced that it had temporarily halted its Phase III vaccine trials after one participant injected with the vaccine came down with a serious, unexplained illness.
AstraZeneca, which is developing the vaccine in partnership with Oxford University, said its “standard review process” triggered the pause “to allow review of safety data.”
“This is a routine action which has to happen whenever there is a potentially unexplained illness in one of the trials, while it is investigated, ensuring we maintain the integrity of the trials,” the company said in a statement.
Investors seemed to lose confidence in the company’s vaccine effort immediately.
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Shares of AstraZeneca fell by 6% in after-hours trading in London. In China, shares for BioKangtai, a Chinese pharmaceutical company that signed a licensing deal with AstraZeneca in August to distribute the vaccine in China, fell by nearly 20% in Wednesday trading in Shenzhen.
Scientists, however, have a different outlook. They say the trial pause shouldn’t diminish hope in AstraZeneca’s vaccine. In fact, they say AstraZeneca’s decision to halt the trial demonstrates that the vaccine maker is valuing science and public safety over speed, even as the race to develop a COVID-19 vaccine becomes politicized in the U.S., where President Donald Trump has repeatedly tied a vaccine’s approval to his reelection bid.
“I’m not alarmed,” Faheem Younus, chief of infectious diseases at the University of Maryland’s medical school, wrote on Twitter. “Side effects, stops and re-starts are part of a GOOD careful process.”
News that AstraZeneca paused its trials, which are taking place in the U.S., U.K., Brazil, and South Africa, came a day after the company signed a pledge with eight other major vaccine developers to commit to “high ethical standards” and “sound scientific principles” in their efforts to rapidly develop and produce a COVID-19 vaccine.
Halting the trials shows that AstraZeneca is “prioritizing science over politics,” says Nicholas Thomas, an expert in infectious diseases and health governance at the City University of Hong Kong. “Given the large size of any Phase III trial, it is not surprising that there would be some adverse reactions. But it is only by gathering the negative results that the final product can be made safer.”
Eugene Hung, molecular virologist at the Hong Kong University of Science and Technology, was more cautious, saying the scientific community and the broader public should reserve judgment until AstraZeneca discloses more about what caused the volunteer’s illness.
Stat broke the news about AstraZeneca’s trials on Tuesday night before the company issued its statement. It’s not clear whether the vaccine maker would have publicly announced the pause in the trials otherwise. The U.K. government requires vaccine makers to report “serious adverse reactions” in vaccine trials to government regulators within seven days of them occurring. Thomas says that vaccine makers usually publicly disclose such developments at the end of a trial.
He argues that the revelation now may ultimately increase public confidence in the company’s ongoing efforts.
This “bolsters [AstraZeneca’s] reputation in taking a more careful approach” in developing a vaccine, Thomas says.
He argues that the Stat scoop also underscores the importance of the press in serving as an additional check on the vaccine race, especially as inoculations are developed and tested in countries with little government transparency or accountability.
Scientists like Thomas see the AstraZeneca news as an ordinary part of trials, but the pause is the first major hiccup in what’s arguably the most-watched drug development process in history.
Until now, the leading COVID-19 vaccine makers—AstraZeneca, Moderna, Pfizer, Johnson & Johnson, CanSino, Sinovac—have sped their candidates through early-stage trials with encouraging results. In the meantime, the coronavirus has sickened 27.5 million worldwide and killed nearly 900,000. Second and third waves of the virus have underscored the limits of low-tech containment strategies like face masks and social distancing and bolstered the need for a vaccine.
The case for a COVID-19 vaccine is clear, yet public confidence in one remains delicate, especially in the worst-hit country, the U.S. In August, a Gallup poll found that 35% of Americans would not be willing to take a COVID-19 vaccine even if it was approved by the U.S. government and provided for free.
In halting its vaccine trials, AstraZeneca appeared to make the prudent decision, but health officials may have to persuade skeptical members of the public to see the delay as some scientists do—as a positive.


fortune--2020-09-09--Lagging stocks, a battered pound: investors get a painful glimpse of ‘no-deal Brexit’ Britain

In a year that’s featured a global pandemic and a tidal wave of liquidity from central banks, investors are bracing themselves for a risk they’ve ignored for most of 2020: Brexit.
The prospect of the U.K. and European Union reaching a trade agreement by an October deadline is looking less likely, with Britain saying this week it’s willing to walk away and break international law in the process. That risks the pound falling to a 35-year low, stocks that lag international peers, and bond yields turning negative for the first time amid bets on Bank of England interest-rate cuts, fund managers say.
“If we have a big selloff in risk assets, and a bad Brexit outcome, then there’s no reason the pound couldn’t fall back through the March lows,” said Mike Riddell, a portfolio manager at Allianz Global Investors. That would mean a 12% slump to around $1.14, the lowest since 1985.
The stalemate in discussions has already seen the pound suffer its longest losing streak since March when Covid-19 started to rip through the country, and has sent the yield on haven short-term bonds to record lows.
Until recently, the risks associated with failed trade talks had been in the background, overshadowed by the economic fallout of the coronavirus. The pound, which has acted as a market barometer to Brexit since the 2016 referendum, had been rallying along with other currencies in Group-of-10 nations against the U.S. dollar.
No-Deal Odds
Complacency around Brexit prompted Riddell to add to a short pound position in recent months and use sterling as a risk-off hedge, mainly against the U.S. dollar and the yen. NatWest Group Plc has upped the chances of no deal to 40%, a result it sees dragging sterling down to $1.20. Nomura International Plc sees the odds rising to 50% over time.
By contrast analysts in a Bloomberg survey expect only a mild drop in the currency to $1.30 by end-2020 and then gains next year. Economists from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley all still anticipate a deal on commerce will be in place for the end of December.
But with formal talks between the U.K. and EU resuming this week, the risks are back on investors’ radar. Prime Minister Boris Johnson signaled he would let the talks collapse if a deal isn’t made before mid-October rather than compromise. Officials have also drafted a law that risks undermining the negotiations, a move that Northern Ireland Minister Brandon Lewis conceded would break international law.
The EU’s chief Brexit negotiator Michel Barnier is “worried and disappointed.”
The flare-up in trade tensions has increased the cost of hedging swings in sterling over three months to the highest level since April, while Johnson’s comments spurred the biggest jump for six months in options betting on a fall in the currency by December.
Value Trap
Brexit has been a drag on the nation’s equities, with the FTSE 100 falling to a record low against the MSCI World Index. While a slide in the pound may provide a boost for exporters, investors are more underweight on the U.K. than on any other country examined in a Bank of America fund survey for August.
“We see the U.K. as a value trap,” said Seema Shah, chief strategist at Principal Global Investors. “Valuations might be attractive but fundamentals are not.”
In addition to Brexit, the U.K. is suffering one of the biggest hits to growth in Europe from the pandemic, and must decide next month whether to keep supporting millions of furloughed workers or face a surge in unemployment.
That could mean more pain for U.K. Plc, which combined with concern over a painful transition from the EU, may further fuel demand for the safety of gilts. Benchmark yields have fallen near a record set during the pandemic shock in March, and the rate on two-year bonds dropped to an all-time low of minus 0.156%.
John Roe, head of multi-asset funds at Legal & General Investment Management, expects government bonds to rally if fears that trade talks will collapse drive up the possibility of U.K. interest rates going negative. No deal could lead the BOE to slash rates to minus 0.5%, said Ross Walker, NatWest’s co-head of global economics.
Money markets have already brought forward pricing on a BOE cut below zero to March, compared to September earlier this week. The potential for turmoil also raises the chances for more central bank bond buying.
“It’s worth remembering that the Bank of England’s forecasts are based on the U.K. reaching a full trade agreement with the EU,” said Daniela Russell, head of U.K. rates strategy for HSBC Holdings Plc, who sees 10-year yields falling to zero by the end of the year.
There’s a 40% chance yields could go below that to turn negative in the next year, said Jan von Gerich, a chief strategist at Nordea Bank Abp.
Bare Bones
A ‘bare-bones’ free trade deal would be enough to avoid such a scenario and lead Aberdeen Standard Investments to be underweight gilts, said Aaron Rock, an investment director.
And Citigroup Inc. foreign-exchange strategist Adam Pickett said the market hasn’t priced in the likelihood of the U.K. and the EU moving toward a last-minute agreement, targeting a pound climb back to $1.35.
Brexit fatigue could be one reason why markets are so far mostly positioned for a deal. Either way, fund managers will be glad to see the back of an issue that has forced them to work nights after late votes that flipped markets, defeated two prime ministers and divided the country.
“It has dragged on long enough,” said Rock at Aberdeen Standard. “It will be better for all concerned if we can move on.”