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Good Morning. In today’s edition, President Trump and his administration consider measures to boost the U.S. economy, risky mortgages are making a comeback, and the truth about whether faster internet is really worth it. |
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President Trump said he is considering measures to bolster the economy, including a reduction in capital-gains taxes. He also continued to press the Federal Reserve to cut interest rates even as he played down warning signs of a possible slowdown. Mr. Trump said his administration is exploring cutting capital-gains taxes by indexing gains to inflation, which he suggested he could do through regulatory action rather than through Congress. Such a move would likely face immediate court challenges. Mr. Trump said that he has been thinking about a payroll-tax cut for “a long time” but that nothing was imminent on that front. |
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The government typically uses three tools to help ward off a recession: deficit spending, tax cuts and lower interest rates. But with these already in play to help prop up the economy, the Journal’s Gerald F. Seib says, the Trump administration could have reason to worry. The Fed is set to release the minutes of its July 30-31 meeting at 2 p.m. EDT today, which are expected to shed more light on its decision to cut rates. |
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Stock volatility has receded in recent days, and some investors are betting the tranquility will persist. Derivatives traders have increased positions that pay out if market swings dwindle and stocks continue climbing. The Cboe Volatility Index, also known as the VIX, has fallen by 21% since last Wednesday. Meanwhile, U.S. corporations are repurchasing their own shares at the slowest pace in 18 months—a potential sign of more volatility down the road as the buyback bonanza from the corporate-tax overhaul wanes. |
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What has alarmed some investors is that companies eased up on share repurchases even as volatility surged while trade tensions flared between Washington and Beijing. The S&P 500 slumped almost 7% in May, but the buyback data suggest companies didn’t step in to support their stock prices the way they did in late 2018—a sign they might be tightening their wallets. Banks are on the verge of getting some relief from Volcker-rule limits on speculative trading. Two financial regulators approved rule changes that will relax trading restrictions for midsize lenders and ease compliance for the biggest banks. If the changes receive the expected remaining approvals, they will be effective Jan. 1. |
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Risky mortgages are making a comeback. More than a decade after home loans triggered the worst financial crisis in a generation, the strict lending requirements subsequently put in place are starting to erode. Home buyers with low credit scores or high debt levels, and those lacking traditional employment, are finding it easier to get credit. Borrowers took out $45 billion of these unconventional loans last year, the most in a decade, and origination is on track to rise again in 2019. The loans have been rebranded. Largely gone are the names subprime and Alt-A. Now they are called nonqualified, or non-QM, because they don’t comply with postcrisis standards set by the Consumer Financial Protection Bureau for preventing borrowers from getting loans they can’t afford. From reporter Ben Eisen: The market for these types of unconventional loans really picked up last year as rates were rising and demand for traditional loans dried up, forcing lenders to look further afield for business. This year, mortgage rates have nosedived, and yet this business has continued to grow. It shows how lenders have started to loosen some of the restrictive standards put in place after the financial crisis, and could keep loosening them as they find a willing group of borrowers among those who have been shut out of the market for years. |
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Gun sellers are using a simple trick to do business on Facebook’s Marketplace. The private sale of many items, including guns, is forbidden under Facebook policy—but to dodge this, sellers simply list gun cases or boxes at inflated prices. Those postings have become code for actual guns—often evading Facebook’s efforts to keep out banned items. Using private messages, sellers describe the firearms to would-be buyers and hash out a deal. A spokeswoman for Facebook said the company takes immediate action against individuals caught selling guns on Marketplace and removes violating content. Both humans and machine learning are used to screen content, she said. Facebook will start giving users more control over what data is shared with the social-media giant from their other online activities, a step toward a pledge of enhanced privacy options CEO Mark Zuckerberg made more than 15 months ago. |
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The truth about faster internet: It isn’t worth it. | |
Americans are spending ever more for blazing internet speeds, on the promise that faster is better. Is that really the case? For most people, the answer is no. The Journal studied the internet use of 53 of our journalists across the country over a period of months. Our panelists used only a fraction of their available bandwidth to watch streaming services, even simultaneously. Quality didn’t improve much with higher speeds. Picture clarity was about the same. Videos didn’t launch quicker. For a typical household, the benefits of paying for more than 100 megabits a second are marginal at best. That means many households are paying a premium for services they don’t need. |
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Who’s afraid of the Big Bad Tech? | |
Fictionalized versions of big tech companies are being cast as the bad guys in a new crop of books, playing on fears about the pervasive reach of technology. Many of the tomes ask how much people are willing to give up in exchange for high-tech gadgets and algorithms that anticipate their every need. In the books, fictionalized doppelgängers with names such as Cloud, TheShop or Beetle have grown so big that no government can regulate them. Several are in development for film and TV. |
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What We’re Following | | Prime Minister Giuseppe Conte, center, was congratulated at the end of his address to the Italian Senate on Tuesday. PHOTO: ETTORE FERRARI/ASSOCIATED PRESS |
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Roman Wrestling: Italy’s government collapsed, with Prime Minister Giuseppe Conte resigning, triggering a power struggle between right-wing nationalists and rival parties. U.S.-China Rifts: Huawei’s CFO argued in court documents that efforts by Canada to extradite her to the U.S. should be stayed because of misconduct by law enforcement in the two countries. Also, Beijing pushed back against actions by Twitter and Facebook to curb accounts said to be part of state-sponsored disinformation campaigns. China said the social-media posts were simply Chinese citizens overseas expressing their views. Syrian Conflict: Government forces captured a strategic town in the country’s northwest, as the Assad regime continued its push to retake the last opposition stronghold. High Energy: Hess has emerged as the best-performing U.S. oil company this year. The reasons are rooted in an offshore oil field in Guyana. Gun Debate: President Trump backed further away from calls for stricter background checks for gun buyers. Legal Heat: Walmart sued Tesla, alleging that some of the company’s solar panels sparked roof fires at a number of Walmart locations. Tesla didn’t immediately respond to a request for comment. Bayer Deal: The German drug-and-chemical giant agreed to sell its animal-health business to U.S. rival Elanco for $7.6 billion. |
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Join Editor in Chief Matt Murray as He Reveals the Top U.S. Colleges On Sept. 4, join us in New York for a conversation with the WSJ’s chief editor and education writers, who will discuss this year’s WSJ/Times Higher Education College Rankings, the admissions process and the current state of American higher education. Click here to register for the event. |
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Trending Stories at WSJ.com New trends in pain care: Innovative ways to measure, understand and treat pain are allowing doctors to ease suffering. (Read) In new recommendations, a government-backed task force said more women should be tested for gene mutations that could increase their risk of developing cancer. (Read) This year is shaping up to be the first in which women make up the majority of the college-educated labor force, a milestone already altering benefits packages offered by companies. (Read) |
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What Else We’re Reading Will Netflix’s “The Irishman,” a Martin Scorsese mob-world epic starring Robert De Niro, come to a theater near you? After months of talks, there is still no resolution. (New York Times) To satisfy regulators, YouTube officials are finalizing plans to end “targeted” advertisements on videos children are likely to watch. (Bloomberg) |
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Today’s Question and Answer In response to our question about what you think the purpose of a corporation should be, after the Business Roundtable said a company should take into account not only shareholders but also employees, customers and society: Joan Vieweger, California Clarity of purpose with objective and measurable goals is key to success; mission creep is the kiss of death. Corporations can achieve worthy and noble goals while making a profit, and thankfully there are many examples to follow. When run by greedy, selfish individuals, they are only soulless vessels. Jim Sullivan, Nebraska In a perfect world, I would love to see this trend expanded and continue to grow, a form of “Christian Capitalism.” However, I fear the human-nature mindset of “I need to get mine while the getting is good” will continue to prevail, and most captains of industry will stay focused on growing profits over people’s well-being. William Higgins, Florida Milton Friedman still has the correct guidance for a free-enterprise society. See Europe for an economy suffering from Business Roundtable advice. Jeff Templeton, Pennsylvania The subjects listed by the Roundtable are already part of most organizations’ guiding principles, but reminders are always valuable. However, the Roundtable needs to add another subject: total compensation of executives at public companies. More-reasonable compensation considerations could go a long way toward helping address the other four. Elizabeth Carlson, Michigan The purpose of a company is to provide something of value at a fair price, legally. I feel belittled when corporations feel as if they must support a cause in my stead. Do they think I can’t give money to causes on my own? If they charged less, I would have the money to do so. The more causes a company supports, the more reasons I have not to buy their products. I don’t buy certain cosmetics because their companies support radically pro-choice positions. Why can’t they use their own money to support their own causes? Why must they use mine? Mason Murray, New York A corporation, within the framework of capitalism, is tasked with providing goods and services, incentivized to do so by the opportunity for profits. U.S. corporations have become so integral, so sizable and so vital that their leaders must not only acknowledge corporations’ impact on the environment and population, but also make holistic decisions—taking into account employees, customers and all potential societal and environmental effects alongside, and sometimes despite, the opportunity for profits. Greg Hillson, Virginia Why can’t different companies have different purposes? And we’ll see which ones attract capital and survive. Question for tomorrow’s 10-Point: Fictionalized versions of big tech companies are being cast as the bad guys in a new crop of books. What are your favorite tech-themed or futuristic novels, films or TV shows? Email us your comments, which we may edit before publication, to 10point@wsj.com, and make sure to include your first and last name and location. |
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| The 10-Point was the name given to the news column that runs on the front page of The Wall Street Journal. Today’s newsletter was curated and edited by Eleanor Miller in New York and Keith Collins in Hong Kong in collaboration with Editor in Chief Matt Murray. Let us know what you think by replying to this email. The 10-Point is a WSJ member benefit. If someone forwarded you this email, we invite you to join us and enjoy the full breadth of scoops, analysis and great storytelling from our journalists around the globe. |
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