A devastating toll
More of the Los Angeles area is ablaze on Thursday, after a new wildfire in the Hollywood Hills broke out as firefighters sought to contain others, including the 17,200-acre Palisades fire. Critical fire conditions are expected to continue for at least another day.
The blazes are already the most destructive in Los Angeles history. At least five people have died, and predictions of the economic devastation — in terms of damages to homes and landmarks, the film and TV industry and more — are steadily climbing into the scores of billions. And the California insurance market, already battered by a string of climate catastrophes, is taking another pounding.
The latest on damage estimates: AccuWeather estimated on Wednesday that the economic costs would reach up to $57 billion. That’s more than triple the forecaster’s assessment of the wildfires in Hawaii in 2023 ($14 billion to $16 billion), but less than the 2020 West Coast wildfires ($130 billion to $150 billion.)
The California fires have burned more than 27,000 acres, including parts of the upscale Pacific Palisades area, where the median house value is about $2 million. Shares in Edison International, the parent company of the power utility that serves the Los Angeles area, tumbled 10 percent on Wednesday. While the causes of the fires are unclear, investors appear worried about potential legal liabilities that cost other utilities billions in settlements tied to other wildfires.
California’s insurance market faces an existential test. The state had already been working to stop insurers from fleeing, given that fires in 2017 and 2018 wiped out a quarter-century of their profits. The most recent blazes may hasten that exodus, which could drive up already elevated rates.
More than 100,000 Californians lost coverage from 2019 to 2024, with State Farm — one of the state’s biggest insurers — dropping 70 percent of its customers in and around the Santa Monica Mountains last summer.
That has driven homeowners to the California FAIR plan, a state-backed system that’s essentially a last resort for homeowners who can’t obtain private coverage. If the plan needs additional funds, it can turn to the private insurers operating in the state to cover the difference. But that could lead to higher rates across the state.
Parts of Hollywood are at a standstill. Dazzling events, including Oscar nominations, the Critics Choice Awards and several movie premieres, have been canceled or postponed. More important, productions across the industry, one of the region’s biggest, have shut, including for the TV shows “Grey’s Anatomy,” “NCIS,” “The Price Is Right” and “Jimmy Kimmel Live!”
Disney closed its headquarters in Burbank, while NBCUniversal shut its Universal Studios Hollywood theme park.
HERE’S WHAT’S HAPPENING
The Biden administration plans new export restrictions tied to artificial intelligence. The rules, which could be issued as soon as Friday, would restrict where producers of A.I. chips can ship their most advanced technology and where A.I. data centers can be built. Two dozen adversaries, including China, would be put on a block list, escalating tensions between Washington and Beijing.
Dockworkers reach a tentative deal to avert a major strike. Their union, the International Longshoremen’s Association, agreed on Wednesday with the United States Maritime Alliance on the future use of automated machinery at ports on the East and Gulf Coasts. The sides faced a Jan. 15 deadline. In other labor news: The Service Employees International Union, which represents nearly two million workers, agreed to join forces with the A.F.L.-C.I.O., and a labor deal is set to end a ski patrol strike at a resort in Park City, Utah.
Constellation Energy is reportedly closing in on a deal to buy Calpine. A transaction, which is expected to value Calpine at about $30 billion, including debt, would be among the biggest in the power generation industry, according to Bloomberg. The utilities sector has soared over the past year as electricity demand for data centers is forecast to soar in the coming years.
Donald Trump’s inaugural committee sells out of tickets. The president-elect’s team has told major donors that it was no longer offering access to Trump’s swearing-in and some related events, as its haul topped $170 million, The Times reports. (Some billionaires have even been placed on a wait list.) The restrictions reflect in part the rush of deep-pocketed donors and companies to curry favor with Trump.
Global bond anxiety
Major stock exchanges in the United States are closed on Thursday as part of a national day of mourning for former President Jimmy Carter. But the bond market is open — and it is sounding alarm bells around the world.
The concern is that a steady sell-off in Treasuries could tie the hands of the Fed and President-elect Donald Trump. That’s muddying the outlook for rate cuts and his administration’s plans to promote economic growth through tax cuts and other measures.
The latest: The dollar is climbing, as are concerns about higher lending costs. Treasury notes and bonds have slumped amid fears of returning inflation. Minutes from the most recent Fed policy meeting, published on Wednesday, showed some officials worried that Trump’s plans for tougher immigration and tariffs could push consumer prices up and force the central bank to stop lowering rates.
Another development that doesn’t help: Elon Musk seemingly scaling back expectations for his $2 trillion government expense-cutting initiative, which some deficit hawks had backed.
That said, Christopher Waller, a Fed governor, said he was unconvinced that tariffs would meaningfully drive up inflation, and reiterated that “more cuts will be appropriate.”
That did little to soothe investors. Traders this morning were penciling in just one cut this year, versus the Fed’s own forecast for about two. And bond jitters have gone global, as the rising yields on sovereign debt have coincided with central banks cutting rates, essentially undoing those officials’ efforts.
The last time yields rose to these heights, in 2022 and 2023, global stocks fell. At least this time around, the global economy is growing, dampening the risk of contagion. Still, the S&P 500 is down nearly 3 percent since its record high on Dec. 6.
Watch Britain. The pound has fallen, and the yield on 30-year bonds has jumped to a level last seen in 1998, driven by concerns about the country’s finances amid rising inflation. It’s reviving memories of September 2022, when a debt crisis led to the resignation of Liz Truss as prime minister.
The country is in better fiscal shape now. But the meltdown underscores the challenges facing the current prime minister, Keir Starmer — who reportedly may face increased political pressure from Musk and his allies, according to The Financial Times.
Behind the ad industry’s silence on Meta
Among those who loudly protested Meta’s plans to overhaul its content policies, including the elimination of its fact-checking program, one group was conspicuously absent: major advertisers.
That reflects the dominance of Meta in digital advertising — along with the potential ban in the United States of a rival, TikTok — leaves these companies with little leverage to push back. And the industry has already been licking its wounds after a bruising battle with Elon Musk and Republicans.
Meta is a juggernaut when it comes to ads, commanding about 45 percent of the market last year, according to the analysis firm Sensor Tower. (Much of the rest is taken up by Google.) That dominance has tilted the center of power on ad-spend conversations to digital platforms from advertisers, according to Brian Wieser, a veteran industry executive who runs the consulting firm Madison and Wall.
It wasn’t lost on marketers that Mark Zuckerberg didn’t mention them in announcing his company’s policy shifts, suggesting that the Meta C.E.O. was making his bombshell announcement from a position of strength. “I don’t think any of them are going to do much about” Meta’s changes, Wieser told DealBook’s Bernhard Warner.
Meta could become even more powerful. Sensor Tower predicted that Zuckerberg’s tech giant could gain market share this year should it introduce advertising on its Threads social network, as some expect.
More important, the potential U.S. ban this month of TikTok — a fast-growing draw for advertisers, which Wieser estimated collected $8 billion in U.S. ad sales last year — has already prompted some marketers to shift their spending to Instagram, which is also owned by Meta.
Clashes with Musk and Republican lawmakers have also taken a toll. The nonprofit group Global Alliance for Responsible Media, which included some of the world’s biggest advertisers, disbanded last year after the tech mogul sued it.
Musk had accused the organization, which recommended major brands to pause their spending on X after his takeover, of organizing an illicit boycott. (That was after the House Judiciary Committee’s Republican chairman, Representative Jim Jordan of Ohio, opened an investigation into whether the group, known as GARM, represented an illegal collusion seeking to take down conservative media.)
That’s why marketers have grown reluctant to speak out against platforms. “If you say you don’t want your ads to run alongside hateful content,” Wieser told DealBook, “you are now making a political statement.”
That said, Meta appears to have taken some steps to allay advertiser worries. Nicola Mendelsohn, who leads Meta’s relationships with top advertisers, wrote on LinkedIn that brand safety remained a priority. And even before Tuesday’s announcement, Meta reportedly offered its biggest ad partners stepped-up moderation processes, according to The Financial Times.
THE SPEED READ
Deals
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Blackstone agreed to invest in DDN, a data-management company for artificial intelligence applications, at a $5 billion valuation. (WSJ)
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An investor group led by the billionaire Frank McCourt’s Project Liberty formally submitted a takeover bid for TikTok’s U.S. operations as the video platform’s future remained in limbo. (Project Liberty)
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“The Return of Dan Loeb” (Institutional Investor)
Politics and policy
Best of the rest
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A company controlled by Saudi Arabia’s sovereign wealth fund is near a deal to partner with TKO, the parent of Ultimate Fighting Championship, to create a boxing league. (NYT)
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A public letter by Vivek Murthy, the departing U.S. surgeon general, urges Americans to “rethink how we’re living our lives.” (People)
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Elon Musk says he’s now one of the world’s top players of “Diablo IV.” Other gamers ask how the head of six companies and a prolific social media poster found the time. (WSJ)
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