Biden, Oil and the Middle East – The New York Times

JPMorgan Chase reported earnings this morning that were lower than forecasts, as it set aside bigger reserves to cover bad loans, a possible ominous sign for the rest of the banking sector. Its C.E.O., Jamie Dimon, said the bank was suspending share buybacks. Morgan Stanley’s earnings also fell short of expectations.

What Biden wants from the Saudis

President Biden, on his first visit to the Middle East since taking office, is embracing his predecessor’s approach to diplomacy in the region: deals as a path to peace. Biden has not been shy about his support for the Trump administration’s Abraham Accords, which normalized relations between Israel and several Arab countries. But he did vow during his election campaign to make Saudi Arabia a “pariah” for its human rights violations, and he refused to speak with Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler. Tomorrow, under pressure as tight oil supplies hurt the U.S. economy, he will meet M.B.S. on his territory.

“A more secure and integrated Middle East benefits Americans in many ways,” the president wrote in a Washington Post opinion piece on Saturday, explaining the visit. “Its waterways are essential to global trade and the supply chains we rely on. Its energy resources are vital for mitigating the impact on global supplies of Russia’s war in Ukraine.”

The U.S. wants Saudi Arabia to produce more oil. On Saturday, Biden will meet with leaders of six oil-producing states in the Gulf, including Saudi Arabia. Officials say oil won’t be the focus of talks with the group or the kingdom, though it is expected to come up, and they hope the Saudis will commit to increasing production soon after.

Even if that happens, there is limited spare capacity. Saudi Arabia and the United Arab Emirates are the only OPEC members that report significant unused output. President Emmanuel Macron of France told Biden at the Group of 7 summit last month that the U.A.E.’s ruler, Sheikh Mohammed bin Zayed, told him that both countries are at or close to “maximum” production.

But the oil crunch may already be easing. A report yesterday from the International Energy Agency suggests that the worst of the supply crisis may be over. The agency cut forecasts for demand for this year and next, pointing to high prices that would reduce consumption and slow the global economy. And gas prices in the U.S. have fallen, reducing some of the pressure on Biden. Still, Darren Woods, the Exxon Mobil C.E.O., last month predicted up to five more years of “tight” oil markets.

In Israel, Biden is emphasizing “integration.” Israeli officials have encouraged the president’s meeting with Saudi Arabia. It may already be yielding deals — an agreement to open Saudi airspace to commercial flights from Israel, a move that airlines have reportedly been lobbying for, is in the works and could be announced this week. But neither nation is the primary motivation for this tour. “We have to counter Russia’s aggression, put ourselves in the best possible position to outcompete China, and work for greater stability in a consequential region of the world,” Biden wrote. “To do these things, we have to engage directly with countries that can impact those outcomes. Saudi Arabia is one of them.”

HERE’S WHAT’S HAPPENING

Investors increasingly expect the Fed to raise rates by a full percentage point this month. After the sharp rise in consumer prices in June, the Fed is likely to continue increasing interest rates quickly, even if doing so risks tipping the economy into a recession. Inflation is likely to fall in July because of lower gas prices.

The crypto lender Celsius files for bankruptcy. The move comes a month after it froze withdrawals, raising the prospect that more than a million account holders will not be able to get their money back. An outflow of money from crypto investments has shaken the foundations of crypto banks and start-ups.

Higher fares and recession worries are not curbing the pent-up demand for air travel. Delta’s C.E.O., Ed Bastian, said yesterday that while demand was strong, the airline would limit its capacity, seeking to avoid cancellations and delays. Delta reported a profit of $735 million in the second quarter and said it expected steady demand into the winter.

The Gates Foundation will increase its giving. The foundation says it plans to raise the rate of its grant making to $9 billion each year by 2026 from nearly $6 billion before the pandemic. To put that in context, the Open Society Foundations, funded by George Soros and itself one of the nation’s biggest philanthropies, reported total spending in 2020 of $1.4 billion.

A senior executive at Alphabet leaves for Goldman Sachs. Jared Cohen, a founder and C.E.O. of Google Ideas, now known as Jigsaw, will join a new organization within Goldman, reporting to its C.E.O., David Solomon. The group, the Office of Applied Innovation, will focus on new technologies and will be headed by Cohen and George Lee, a veteran Goldman banker.

Why Netflix went with Microsoft

Yesterday, Netflix picked Microsoft to help build its ad-supported streaming service, which it says it will unveil by the end of the year. It’s been an ugly few months for Netflix, reports The Times’s John Koblin. The company has laid off hundreds of employees, and its stock price has gone into a tailspin.

Netflix appears to be betting that a lower-priced streaming service, paid for mainly by ads, can revive growth. But the move comes with risks, namely whether it will lure new subscribers, or just poach existing ones from its current offering. DealBook asked our colleague and longtime media watcher Ed Lee for insight on why Netflix chose Microsoft.

Netflix is taking a chance with Microsoft. Choosing Microsoft as its advertising partner over Google (whose business was built on digital advertising) and Comcast (whose NBCUniversal has sold ads for over half a century) could be seen as a deliberate snub. But it is also a risk. Those two giants were seen as front-runners to run Netflix’s new ad-supported tier because of their experience.

But the choice could also be seen as strategic. Both companies have competing streaming services. NBCUniversal owns Peacock, and Google owns the mother of all internet video, YouTube (as well as YouTube TV, a cable package delivered online). Netflix says it was looking for a partner to be able to grow its service with, not launch and then replace later on.

Microsoft is a big player in the world of online video and advertising. It sells ads on its Bing search engine and across its Xbox gaming platform. The choice also suggests that Netflix doesn’t yet have a ton of content available for its ad-supported service, because it will most likely take Microsoft longer to build out what is needed to start the service. The streamer has to renegotiate all of the licensed films and TV shows it carries to allow for ads. That process appears to be more fraught than Netflix first implied. That could delay its offering, but it could also have made it possible for Netflix to go with a relative newbie in the streaming space.

“It’s like the cancer was limited to certain parts of our economic body. And now it’s spreading.”

— Sam Khater, the chief economist at Freddie Mac, on how the housing shortage is an increasingly national problem.

The pandemic limits work friendships

Early-career friendships can be life-defining. But since the coronavirus pandemic, they’ve become “something of an endangered species,” writes The Times’s Emma Goldberg. And that may continue with return-to-office timelines being repeatedly stretched. Goldberg spoke with dozens of people about the magic of their first work friends, and why those connections are so important to work itself. Here’s what Goldberg told DealBook she discovered.

The pandemic disrupted “soft work” — the relationship-building part of work. What is lost? Should employers care?

What was interesting to me was a lot of the older workers I spoke with, spoke to really tangible ways in which their work friends influenced their identities, their sense of self in the workplace and their career trajectories. One woman I interviewed said she really wanted to quit her job, and it was her best friend at work who intervened and helped her stick it out.

So I do think that companies and executives are going to have to wrestle with how to help people form these relationships that are going to shape their careers.

How do companies that stay hybrid or mostly remote support work friendships?

Companies are trying out so many different methods. Salesforce just opened up this site where people can come together for nature walks and meditation and all kinds of other fun in-person activities. Airbnb is saying that even though people never have to come back to the office, it is going to make a big effort to have people come together at least pretty regularly throughout the year. Zillow is renovating some of its office spaces to make them look more cozy — almost living-room areas where people can hang out together. So right now, we are in that kind of experimentation phase of seeing what actually works.

What do you think is the real point of an office?

Historically the office has been the assumption in terms of, that’s where work gets done, that’s where people go every day. And the gossip and the hanging out and the friendships were a byproduct of that — an accident, but one that turned out to be really important for the work and for productivity and for people feeling connected and engaged.

When the office got displaced, that happy accident of relationships and friendships went with it. And now people are wrestling with, if you’re not going to be able to fully reinstate what the old normal looks like, how do you at least capture some of the good that came out of the relationships and how that contributed to the quality of the work?

THE SPEED READ

Deals

• Alibaba is reportedly cutting a third of its in-house deals team. (Reuters)

• Richard Branson bought a stake in Lightyear, a Britain-based stock trading app that aims to compete with Robinhood. (CNBC)

• Fresh Market and Justworks are the latest companies to put their I.P.O.s on hold. (CNBC)

Policy

• Economists beware: Recessions aren’t the inflation killers everyone thinks they are. (WSJ)

• The government said pharmacists who refused to fill prescriptions for pills that can induce abortion may be breaking the law. (WSJ)

• Michael Barr was confirmed as the Fed’s top banking regulator. (Reuters)

• The S.E.C.’s Gary Gensler said Chinese companies may be forced to abandon their U.S. listings. (MarketWatch)

Best of the rest

• How many spam accounts are on Twitter? That’s a tough one. (WSJ)

• Kids and teens spend an average of 91 minutes a day on TikTok, more than they spend on YouTube, one company’s data shows. (TechCrunch)

• Delta sent an empty plane to pick up 1,000 bags stranded at Heathrow. (NYT)

• “Victoria’s Secret and What’s Sexy Now” (NYT)

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