Bloomberg - Evening Briefing - ‘It’s a clown show’

Barring a last-second miracle, the US government will shut down at midnight Sunday—a once-extreme measure that’s become increasingly common in a Washington drowning in political vitriol. This will be the 15th shutdown since 1981, but unlike most of those, this one isn’t a fight among Democrats and Republicans, but between far-right Republicans and the rest of their party. House Speaker Kevin McCarthy has bent over backwards to keep happy those extremists who, after 15 ballots, finally handed him his gavel (and could just as easily take it back). One of them, Matt Gaetz of Florida, has threatened to seek McCarthy’s removal if he doesn’t get what he wants on immigration and spending cuts (proposals that would be dead on arrival in the Senate). The White House, which says Republicans broke their promises from May when they almost triggered a catastrophic default, has told its staff to prepare for furloughs. Pain will be inflicted on millions of everyday Americans as federal workers and contractors across the country either stop work or work without pay. “Can you imagine you go to your bank and say ‘I’m not paying my mortgage’. I mean, that is what we’re doing,” BlackRock Chief Executive Officer Larry Fink said, calling the shutdown an “irrational” move by Republicans. Indeed, the public has blamed the GOP before and will likely do so again. “In no other country does the government routinely incapacitate itself for the sake of political stunts,” Bloomberg editors wrote. Less charitable was Representative Mike Lawler of New York. “It’s a clown show,” he said of his fellow Republicans. “You keep running lunatics, you’re going to be in this position.”

The looming shutdown comes at a potentially precarious time for the US economy. While federal debt payments can continue and people who are deemed essential (such as air-traffic controllers) still report to work, many other functions will be on pause. National parks will close, many paychecks will be on hold and food stamps could be delayed. Treasury Secretary Janet Yellen warned a shutdown would hurt American families and cause economic headwinds that could undermine progress toward a soft landing. That warning came amid the good news that the Federal Reserve’s preferred measure of underlying inflation rose at the slowest monthly pace since late 2020. Sustaining low monthly core price increases is vital to building confidence among Fed officials that their war on inflation can come to a close. And that’s something the bond market is hoping to see. 

The United Auto Workers and Detroit’s Big Three automakers are still locked in negotiations over a new contract, including pensions and pay rises. The union, which has scored some early victories, plans to expand its strike against GM and Ford to more assembly plants, but it will spare Jeep SUV and Ram truck-maker Stellantis from additional walkouts. “We are excited about this momentum at Stellantis and hope it continues,” UAW President Shawn Fain said. The union is said to seek a 30% pay raise to make up for sacrifices since the financial crisis. Carmakers, which have been raking in profits in recent years, claim they could go bankrupt. As for President Joe Biden’s position, he made his sympathies plain this week.

US President Joe Biden joined a picket line with members of the United Auto Workers at a GM plant in Belleville, Michigan, on Sept. 26, becoming the first sitting president to join a picket line. Photographer: Jim Watson/AFP

Chinese leader Xi Jinping vowed in a televised speech to bring “more resilience and vitality” to the country’s faltering economy. But he left out exactly how he plans to do that. And while there are some signs of economic stabilization after government efforts to support the property market and spur consumer spending, China’s recovery remains fragile. Meantime, Hui Ka Yan, the billionaire chairman of beleaguered property developer China’s Evergrande, is said to have been placed under “police control.” 

Amazon’s plan to splash as much as $4 billion on a stake in the startup Anthropic revealed a key part of big tech’s roadmap for artificial intelligence: how to make money from it. AI’s current pay-to-play model for consumers is not where the real money lies. The prize is the new generation of startups that will be built on AI and convincing them to use your cloud. For scammers, AI is being used to turbocharge the cybertheft economy. 

Call it the Taylor Swift effect, NFL version. The pop star might or might not be dating Kansas City Chiefs player Travis Kelce, but the possibility (be it real or well-thought-out public relations ploy) was enough to double ticket sales for Sunday’s game in New Jersey between the New York Jets and the Chiefs, with fans hoping she’ll make an appearance. If you ask ChatGPT to confirm the romance, it can’t yet. The example was used by Microsoft this week at the Justice Department’s landmark antitrust trial against Google.

Taylor Swift at a game between the Chicago Bears and the Kansas City Chiefs. Photographer: Jason Hanna/Getty Images

• Deadline day for Congressional Republicans to avoid a shutdown.
• Rishi Sunak likely to set new agenda at a Tory party conference.
• Adipec conference in Abu Dhabi to discuss future of clean energy.
• The US jobs report for September arrives. 
• Australia, New Zealand, Sri Lanka and India monetary policy decisions.

They raised a mountain of money, they invested it, and a decade or so later they haven’t given it back. They’re zombie private equity funds and they’re multiplying–lumbering ever onward with a skeleton staff and little prospect of new funding. 

After years of ramping up allocations that helped launch numerous private equity firms, many pensions have maxed out how much they can devote to the illiquid asset class.

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