Sears may be on the brink of bankruptcy

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It may be the beginning of the end for Sears 

The long-struggling retailer could file for Chapter 11 bankruptcy protection as soon as this week, the WSJ reported, citing unidentified sources.

Earlier yesterday, Sears announced that Alan Carr, an expert in financial restructuring, had joined its board. But the WSJ reports that the company could file for bankruptcy before Monday, when $134 million in debt comes due.

This isn’t surprising. Sears has lost $11 billion since 2011; sales have dropped 60 percent over the same period; and it has closed hundreds of stores. Its C.E.O., Eddie Lampert, has sold off businesses to raise cash, but critics argue that he has strip-mined the company.

Filing for bankruptcy is risky for retailers, as doing so tends to send customers and suppliers fleeing, making it hard to recover. There’s no reason to think Sears would fare any differently.

SoftBank may bet its Vision Fund on WeWork 

The nearly $100 billion investment fund is in talks to buy a majority stake in WeWork for at least $15 billion, according to the WSJ and Recode. If that happens, it would mean SoftBank has invested almost a quarter of its fund in the real estate company that hopes to become a tech giant.

That is a huge bet to place on a company with enormous growth, huge ambitions — and widening losses.

SoftBank’s Masa Son often makes big bets on gut decisions, and WeWork’s dreams of running offices, schools, apartments and maybe even wave pools apparently speaks to him. Whether they’re financially lucrative, or even possible, may be another matter.

The unknowable fallout of China’s nuclear option in the trade war 

Beijing is running out of options in the trade war. One extreme action it could take, as the holder of over $1 trillion in U.S. foreign debt, would be to buy back that debt — or even to dump it on the open market. Experts tend to dismiss that possibility, as it would severely damage both the American and Chinese economies.

But in my latest column, I consider what might happen if China did try it:

There is no proving ground. There is no predictable math, no scale model. If China were to use its nuclear option and the markets didn’t react, it would lose influence in stark fashion. If it worked — but was more effective than expected — China could inflict unintended damage on its own economy. And even a perfectly executed strike that left China unharmed would be perilous: A targeted attack on the United States economy would have unknowable repercussions. If the fallout cloud settled over Europe or emerging markets, would China be ready for that fight, too?

Coming up 

The Labor Department will publish its producer price index this morning. Analysts expect the metric, which captures the success of the wholesale, manufacturing and commodities markets, to have risen 0.2 percent in September, and 2.8 percent over the last 12 months.

The E.U. nears a decision on Brexit. Its top Brexit negotiator, Michel Barnier, is set to give an update today on the talks, ahead of a crucial meeting next week. The differences between the E.U. and Britain appear to be narrowing.

Mnuchin keeps a close eye on China’s falling currency 

Beijing’s latest effort to prop up its economy amid a trade war with the U.S. isn’t working yet. China’s currency, the renminbi, fell again this week, to below 6.93 per dollar.

But the currency doesn’t trade freely: It moves within a range set by the central bank. And a fall in its value can make Chinese exports cheaper for foreign buyers, which is handy when President Trump’s tariffs push up their prices in America.

Unsurprisingly, the Treasury secretary, Steve Mnuchin, says he’s watching closely. “As we look at trade issues, there is no question that we want to make sure China is not doing competitive devaluations,” he told the FT. “We are going to absolutely want to make sure that as part of any trade understanding we come to that currency has to be part of that.”

Nafta’s replacement would leave some American companies struggling 

President Trump has praised the new United States Mexico Canada Agreement as a win for farmers. That may be correct — but many businesses still face challenges as a result of tariffs on steel and aluminum that remain in place. More from Alan Rappeport of the NYT:

Among the sectors hardest hit by Mr. Trump’s approach are the beverage and auto industries, which rely heavily on foreign aluminum and steel to make cans and cars. PepsiCo, the drinks and snacks company, said this month that higher prices for aluminum imports from Canada were eating into quarterly profits and said it would raise prices as a result. The company lowered its profit forecast for the year and its stock slid. Similarly, the chief executive of Ford Motor Company said last month that the additional costs from the metal tariffs alone would shave about $1 billion off its annual profits.

The new trade deal won’t be signed until late November, and it could be amended before then. Some Republican lawmakers have been pushing Mr. Trump to lift the steel and aluminum tariffs. That may happen — or the whole thing could be thrown into limbo if Democrats take back the House.

Preet Bharara calls for overhaul of insider-trading laws

The former U.S. attorney for the Southern District of New York was an aggressive prosecutor of white-collar crime. But he and Robert Jackson Jr., an S.E.C. commissioner, think that U.S. insider-trading laws are a mess:

The uncertainty in insider trading law invites debate over the legality of misconduct that has no place in our markets. But this is a fixable problem: The law can be updated and made clearer. Ideally, Congress would take the lead. But bipartisan proposals to update the law have languished for years. The S.E.C., however, does have the authority to clarify insider trading law. The commission should use that authority before the next wave of corporate abuses.

Mr. Bharara has set up a task force to study the issue and come up with concrete solutions. Then he just needs to persuade Congress to take them up.

Revolving door 

• Saudi Arabia named Travis Kalanick, the venture capitalists Marc Andreessen and Sam Altman, and 15 others to an advisory board for its $500 billion Neom megacity project.
• SoftBank hired Christin Tinsworth Baker from Ford as its director of public affairs, and Brian Conklin from USAA as senior vice president of U.S. government affairs.
• JPMorgan Chase fired a broker accused of excessive and unauthorized trading.

The speed read 

Deals

• Bill Ackman’s Pershing Square Capital Management has taken a $900 million stake in Starbucks. (Reuters)
• Nelson Peltz’s Trian Fund Management disclosed a $700 million stake in the paint maker PPG Industries. (WSJ)
• Guggenheim Securities has climbed the M.&A. league tables, but its “eat what you kill” compensation scheme is raising red flags. (FT)
• Blackstone and Hellman & Friedman are said to be exploring bids for Nielsen, the market research company. (FT)
• The trucking businesses set to be spun off from Volkswagen and Daimler may become targets of activist investors. (Breakingviews)

Politics and policy

• Nikki Haley will step down as President Trump’s ambassador to the U.N.at the end of the year. Among her potential replacements: Dina Powell of Goldman Sachs.
• Gun-control advocates sued the Justice Department for its communications with the N.R.A. (Bloomberg)
• Taylor Swift inspired a surge in voter registration. (NYT)
• Bob Iger of Walt Disney still isn’t running for president. (Hill)

Trade

• The U.S. may block Britain from a $2 trillion global procurement marketplace. (Bloomberg)

Tech

• Google unveiled new versions of its Pixel smartphone, along with a new smart speaker with a built-in display and a laptop that doubles as a tablet. The company also announced that it would appeal a $5 billion E.U. antitrust fine over its Android operating system. And it is being investigated by Germany over its Google Plus security flaw.
• Some of the companies helping Facebook clean up misinformation think the social media company could do far more. (Also, the company may soon rely on Instagram for a majority of its ad revenue growth.)
• Amazon has reportedly scrapped an A.I. recruitment tool because it was biased against women. Why some Amazon employees think their pay hasn’t actually risen. And how the company might be stealing ad revenue from Google.
• The latest on the Bloomberg chip spying story: The news outlet says there’s now evidence that hacked hardware has affected a “major U.S. telecommunications company,” but the cybersecurity community still isn’t convinced by the news.
• Inside Darktrace, the $1.65 billion A.I.-centric cybersecurity start-up. (FT)
• Huawei is trying to take on Qualcomm and Nvidia with new A.I. chips. (CNBC)

Best of the rest

• Hong Kong plans to build an artificial island to cope with its housing shortage. (FT)
• U.S. intelligence reportedly got wind of discussions among Saudi officials to capture Jamal Khashoggi, a prominent dissident, before he disappeared. (WaPo)
• How workers are being retrained for new jobs (and lives) after prison and addiction. (NYT)
• A former assistant to Goldman Sachs’s C.E.O. jumped to his death. He had been expected to plead guilty in federal court to stealing $1.2 million worth of his boss’s wine. (WSJ)
• How the bond sell-off could shake up corporate earnings. (FT)
• California has $9.3 billion in unclaimed cash. (Merced Sun-Star)

Thanks for reading! We’ll see you tomorrow.

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