Longhorn Investment Team Weekly Insight: Independence Week Edition

If you think you deserve a “birth-week,” you better believe America (the home of the brave) gets its week too. It’s about time we stop focusing on Texas and discuss some critical headlines – beginning with a celebration!

S&P 500: 2,964.33 (+.77% and record close)

Markets soared Monday morning on the news that no new tariffs will be threatened after the G20 summit on Saturday. No timeline is in place for a trade deal yet, but the lack of disasters over the weekend still propelled the markets higher.

Taking the camera, and zooming out with the lens, we find that the S&P had its best July since 1955! Now we’ll kick off the month with a dirty scandal below…

Aye Deutsche Bag!

Deutsche Bank is basically the Goldman Sachs of Germany only much less scandal resilient. Once a bastion of multi-national finance, Deutsche Bank quickly became a Wall Street dweeb and recipient of the Black Planet Award (given to the least ethical company in the world).

So, what happened? $17 Billion in fines over ten years, one large resulting talent outflow, and now:

“At this point, Deutsche Bank AG’s biggest problem may be how many problems it has, how long they’ve gone on and how they’ve fueled one another. Four years of sliding revenue spawned four failed turnaround plans and a steady departure of senior executives.”

Steve Arons, Bloomberg

Scandal Highlights:

  • Selling whack Mortgage-Backed Securities in 2008 (financial crisis explanation here)
  • Manipulating LIBOR – an international interest rate used as the benchmark for calculating student loans to key financial products.

“cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix.”

Actual text from Deutsche Bank employee
  • Russian money laundering and involvement on the wrong side of the Mueller Investigation
  • Violating US sanctions against Iran, Libya, Sudan, and Syria
  • Criminal cartel charges in Australia
  • Involvement in the Danske Bank $200 Billion money laundering scandal in Estonia
  • Allowing employees to wave money out their windows over protestors on the street and throw fake money down at crowds of people protesting healthcare reform
  • Bribing clients
  • Failing to control workplace harassment in investment banking division
  • Hiring detectives to spy on critics

The moral of the story: financial institutions are built on trust. It’s no wonder rock-solid compliance is such a priority for banks now.

The Hong Kong Dilemma

Today minus 22 years, Britain ceded control of Hong Kong to China because that just makes way more sense on a map. ***there’s a huge but here***

BUT Hong Kong is not officially a Chinese city. Officially, Hong Kong is a Special Administrative Region. The only other region to receive such a specially administered title is Macau.

As Special Administrative Regions, Hong Kong and Macau largely share China’s diplomatic and national defense policies but have capitalist economies and independent political systems. There’s a lot of fine print involved, but that’s the gist.

BUT things could change because the PRC is trying to pass a law that would extradite criminals from Hong Kong. This would mean that if someone not from Hong Kong committed a crime there, they could be forced through the Chinese court system. As a result, chaos ensued…

While it seems nit-picky, human rights groups see extradition as the beginning of Chinese infringement of the “one country, two systems” paradigm that has lasted for 20 years. As I’m writing this, things have turned violent and protestors are storming the Legislative Council Building. We’ll post updates as the situation develops.

Other News:

Pier One doubled their losses in Q2 year over year – not because of e-commerce disruption but instead, flat out bad products. It will be closing 57 stores as a result.

Music mogul, Scooter Braun, purchased Taylor Swift’s former record label for $300 Million.

British theme park giant, Merlin Entertainments, was purchased by Blackstone and Canadian pension fund CPPIB for $6 Billion.

Reports surfaced of a poisonous substance (sarin) being shipped to a Facebook office. Last week, employees reported that employees were pooping on the bathroom stall walls at Facebook’s Tampa office. Take this news how you want.

That’s all for now! Be sure to like and share on Facebook if you think our writers should be allowed by their employers to keep making this content. #outsidebusinessactivites