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- [00:01]
Viking Advertisement Voice
This message comes from Viking, committed to exploring the world in comfort. Journey through the heart of Europe on an elegant Viking longship with thoughtful service, destination focused dining and cultural enrichment on board and on shore. And every Viking voyage is all inclusive with no children and no casinos. Discover more@viking.com.
- [00:26]
Azhar Sucre
Ahead of Nvidia's earnings this week, we look at whether the tech rally is starting to fade, plus how banks and Eric Trump helped to drive the first family's rapid entry into the cryptocurrency business.
- [00:39]
Vicky Gehwang
The Trump family's crypto empire is really expanding at a rapid pace and it seems like every couple of months there is a new project on the horizon.
- [00:49]
Azhar Sucre
And Keurig Dr. Pepper says it's spinning off its coffee and soda businesses after snapping up a rival. It's Monday, August 25th. I'm Azhar Sucri for the Wall Street Journal. Here is the AM edition of what's top headlines and business stories. Moving your world today. After Federal Reserve chair Jerome Powell opened the door for rate cuts in September on Friday, sparking a rally that boosted sectors including real estate, banks and manufacturers, investors are wondering what's next for the tech rally, which has been showing signs of losing steam. Wall Street's most popular stocks, the Magnificent seven tech giants, have been hit recently by questions about potential for AI, concerns about their increasingly stretched valuations and competition from other market sectors. Journal European Finance editor Alex Frangos says the data shows how individual investors, often the most enthusiastic fans of tech firms, have grown more cautious.
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Alex Frangos
Individual investors did really well in the kind of trade war, panic. They stuck to their guns and rode the, you know, a lot of these Mag 7 stocks higher. You know, now some of them are getting excited about non AI parts of the economy that are doing really well in an environment where, you know, interest rates start to come down, especially things like real estate or other debt intensive industries. So starting to see some people move into those sectors, Alex adds.
- [02:21]
Azhar Sucre
Nvidia's upcoming earnings on Wednesday mark a key test for the tech sector.
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Alex Frangos
Well, I mean Nvidia is the kind of 800 pound gorilla, or the $4 trillion gorilla, most valuable company in the world. And its chips are what's powering all of these AI models to develop themselves and offer their services. And so what everyone's looking for is like what's their outlook? Not only are they meeting the incredible high expectations that people have for selling their chips, but what are they seeing in the Future in the next 3, 6, 9, 12 months in terms of demand for what they make?
- [02:53]
Azhar Sucre
We are exclusively reporting that Keurig Dr. Pepper has struck an agreement to buy European coffee firm JDE Peetz for roughly $18 billion. After the deal close, Keurig Dr. Pepper plans to reverse the 2018 merger of Keurig and Dr. Pepper by separating into two US listed companies, one focused on coffee and the other on refreshment beverages, including Dr. Pepper and 7Up Keurig. Dr. Pepper's coffee business has long struggled as competition among coffee companies has heated up. However, the company reported some improvement in the most recent quarter for its coffee segment, with CEO Tim Kofer saying the deal is happening at a time of financial strength for the firm. The Trump family's crypto footprint seems to be ever growing these days, and much of that can be attributed to the president's son, eric Trump. The 41 year old has been at the forefront of the first family's rapid entry this year into the world of digital assets, which has so far spanned meme coins, a stablecoin, bitcoin mining and other crypto ventures. A stake in one firm, World Liberty Financial, was recently valued at four and a half billion dollars. But in an interview with the Journal, the younger Trump told reporter Vicky Gehwang he once shared the president's early skepticism of cryptocurrencies.
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Vicky Gehwang
He said he really started to sort of realize the potential of crypto after the January 6 riot in 2021, and that was when several banks that the Trump Organization did business with closed hundreds of accounts that the family had with those banks, and he believed those accounts were closed for political reasons. And this has actually become a phenomenon known as debanking. And it has really become a rallying cry within conservative circles these days.
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Azhar Sucre
But Vicky says ethics lawyers have lambasted the Trump family's crypto endeavors.
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Vicky Gehwang
So most critics, ethnic lawyers and government watchdogs have really criticized President Trump's involvement in these crypto ventures because he's sort of regulating or setting regulations for this very new industry while also participating in the industry and benefiting from it. These critics have said that this is sort of an unprecedented conflict of interest and blurring of the lines between his presidential duties and business interests.
- [05:32]
Azhar Sucre
White House Press Secretary Caroline Levitt said, quote, the media's continued attempts to fabricate conflicts of interest are irresponsible, adding the president nor his family have ever engaged or will ever engage in conflicts of interest. We've left a link to the interview with Eric Trump in our show Notes Coming up, Europe's economic and cultural dynamism goes back centuries, but today the continent is losing economic, military and political clout. That story after the break.
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David Luno
It is eyes wide open. We do believe we are in a new era for fixed income.
- [06:11]
Azhar Sucre
Complexity built into the US Tax code is both a problem and an opportunity.
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Alex Frangos
I'm Joe Davis.
- [06:18]
Vicky Gehwang
And I'm Christine Kashkari.
- [06:20]
David Luno
And this is season one of BetterVantage.
- [06:22]
Vicky Gehwang
By Vanguard, an eight part video podcast.
- [06:25]
David Luno
Series hosted by custom content from WSJ.
- [06:28]
Azhar Sucre
And Vanguard Objective data driven insights for serious investors.
- [06:33]
Viking Advertisement Voice
Custom content from WSJ is a unit of the Wall Street Journal Advertising Department. The Wall Street Journal News Organization was not involved in the creation of this content.
- [06:45]
Azhar Sucre
Now, whether it's per capita gdp, the share of global stock market valuations, military prowess, or even the number of rocket launches, Europe lags behind the US And a combination of red tape, an aging population and the war in UKRA that economic prospects for the continent appear bleak, to the point where the Journal's UK Bureau chief David Luno writes that Western Europe's share of global economic output is now likely its lowest since the Middle Ages. David, how did the region get here given the fact that it gave the world the Renaissance, the Industrial Revolution, and more recently, Candy Crush?
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David Luno
So we're accustomed to sort of Europe punching above its weight. And I think after World War II, there was this extraordinary period of peace where the continent tried to get past its old divisions came together in what became the European Union broke down barriers to trade. It had favorable demographics. So it really boomed and it sort of regained its footing as really among the leaders of the world. But in the last two decades, it lost that footing for a lot of reasons, some of them sort of structural. It's the continent that's getting older. Europeans are quite a bit older than Americans. And so going forward there's just going to be a lot more retirees and fewer working age people to pay for them. But along the way, Europe has just sort of hit the limits of its economic model, really. Just in the last 15 years, the number of EU regulations have doubled. So, you know, it had a pretty good run there for a while recently. It kept going through a combination of cheap energy from Russia through the Germans, really sending a lot of industrialized exports to China, which was growing fast, and through Americans kind of subsidizing their security. So Europeans were spending a lot less on defense, spending more on welfare, and all through three of those things are now gone. And so Europe finds itself, the tide has gone out and we see Europe's kind of naked, the economic growth has just stopped.
- [08:46]
Azhar Sucre
Yeah, I mean, Europeans might argue, as you say, that they're comfortable with higher levels of regulation compared to the US if it means that they have tighter environmental controls, for example, or cheaper healthcare. But how sustainable are these levels of government spending and red tape? Do Europeans need to just accept that debt levels are too high and that governments will have to make deep cuts?
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David Luno
Yeah, I mean, both the US And Europe right now have really enormous quantities of debt. The difference is America has reserve currency in the dollar and it's growing. But if you're not growing, then suddenly your debt problems become pretty big pretty fast, especially if yields start to rise and lenders start charging you more. So here in the UK, the UK is now spending a good $150 billion a year just on interest for its income. That's about two times defense spending. So if you're going to try to raise defense spending to try off Russia in any kind of future conflict, where's that money going to come from? Because that interest bill is just going to keep growing. So it's sort of time for some hard choices. But again, it's been very difficult for governments to make these choices.
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Azhar Sucre
Let's talk about perhaps one success story, and I mentioned Candy Crush, and perhaps Sweden is an example of maybe one country in Europe that has gotten it right. From a policy perspective, what have they done right that the rest of the region could learn from?
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David Luno
Sweden, in the American popular imagination, is sort of the poster child of the European welfare state. Americans still think of Sweden as this incredibly high tax, generous welfare state. It still is high tax, but they've taken some sensible decisions. They've started to pare back a bit of their welfare state, revamp pensions, for example, and lower taxes on businesses. That's created a little bit more of a dynamic economy. They're not buying booming, but they're certainly doing a lot better than some of their peers in Europe.
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Azhar Sucre
And I just want to end on the fact that a lot of Europe's economic growth of the last few decades has been predicated on exports of manufactured goods. Given Europe's vulnerabilities, as we've been saying, are we likely to continue to see the U.S. for example, being able to dictate its terms to the EU on economic and possibly other matters like security?
- [11:03]
David Luno
Yeah. I think the short answer is yes, Unless if you don't have enough of a growing economy, if you don't have enough military power, then your diplomacy and your ability to shape world events is just going to decline in tandem with those. So we've seen that with tariffs, China was able to very much push back on the Trump tariffs, and that has yet to shake out. But Europe did not. And right now you're in a situation where European companies are going to be paying higher tariffs to the US Than US Companies will be paying it to Europe. It's shocking to me that Europe accepted that. But that's the situation it finds itself unless it decides that it is really going to get its act together and become a more meaningful player in the future. In the Ukraine war, right now you largely have the US And Russia negotiating about a war that is on the EU doorstep that has torn a scar of several thousand miles across the European landscape. And yet Europe is a supporting actor in this at best. So as far as the European Union goes, deepening integration, some joint capital markets making it easier for companies to do business across other European countries would unleash more productivity. Working together in the defense space might do that. And I think a unified Europe, a strong Europe, is good for the world. And I think a world with European sensibilities in it is good for the west, it's good for America. So they should be cheering for Europe.
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Azhar Sucre
Journal UK Bureau chief David Luno, thank you very much indeed.
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David Luno
It's a pleasure.
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Azhar Sucre
And that's it for what's news for this Monday morning. Today's show was produced by Kate Bullivant. Our supervising producer was Daniel Bach. I'm Azhar Sucre for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.
- [12:55]
Viking Advertisement Voice
Viking, committed to exploring the world in comfort. Journey through the heart of Europe on an elegant Viking longship with thoughtful service, cultural enrichment and all inclusive fares. Discover more@viking.com.