Happy belated Canada Day, and Happy Independence Day to our neighbors in the South! I spoke with my brother last week who lives in Dubai and turns out Barry’s bootcamp reopened its Dubai locations. Whats more, we won’t be seeing shirtless men in fitness classes anytime soon (#petpeeves solved).
Canada lost its seat on the UN Security Council. The seat went to Norway and Ireland – must be quite a wide seat. The UN security council is in-charge of ensuring global peace and security. Ahem. There are 15 seats and 5 permanent members that include China and Russia. Permanent membership gives you the special veto right. Former Canadian Prime Minister Paul Martin had campaigned unsuccessfully for the abolishment of permanent membership. “We will remain committed to multilateralism, to engaging constructively and positively in the world“ said current Canadian Prime Minister Justin Trudeau (CBC News).
In early June, the S&P 500 recorded its best 50-day rally ever. In return terms, it amounted to 37.7% over 50 trading days (CNBC). However, June was a turbulent month for the markets with rising corona-virus cases in several States in the US where reopening phases were scaled back. On June 26, the US also set a record daily high of 40,000 corona-virus cases (CTV News). The index erased its June decline at the end of trading on June 30 after favorable US pending home sales data, and positive news regarding Boeing’s beleaguered 737 Max, hit the markets (Yahoo Finance). Needless to say, the market’s movements are as rational and predictable as a certain someone’s Twitter feeds.
One billionaire believes that the millennial day traders on commission-free trading platforms like Robinhood are doing stupid things. The platform hails 13 million users with an average user’s age at 31 years (Business Insider). Speaking of stupid things, Hertz stock rallied after the company declared bankruptcy on May 22. The stock rallied from a low of 56 cents to a high of $5.53 over a two week period ending June 8, and generated a circa 900% return during the short period. 43,000 day traders on Robinhood’s platform owned Hertz stock prior to the bankruptcy filing. That number went up to 73,000 after the bankruptcy filing. So yes, Stupid (Forbes). Interestingly, an analysis completed by Barclays found that there is a negative relationship between stock price performance and Robinhood ownership (Business Insider).
Deposits at US banks swelled to over $2 trillion amid the pandemic. The latest FDIC data showed that in April alone, deposits grew by more than $800 billion – trouncing the previous record for an entire year. The likes of JP Morgan, Bank of America, and Citigroup (with coast-to-cost retail operations) recorded the biggest gains. The big banks administered the US government‘s $660 billion Paycheck protection program (PPP) for small businesses, while banks that serve as custodians gained deposits when the Fed started buying billions of dollars worth of mortgage backed securities. The deposit figures were further buoyed by the national savings rate that hit a record 33% in April, and the stimulus checks ($1,200 a piece) that were distributed as part of the US stimulus plan. Bank of America CEO told CNBC that checking accounts that had balances below $5,000 had “up to 40% more money in them than before the pandemic”. Deposits serve as the cheapest source of funding for banks to extend loans and generate income, even in low interest rate environments (CNBC).
China passed a national security law in Hong Kong that allows the country to curb subversive and secessionist movements as well as foreign intervention in the city. Though the law invited international condemnation, Standard Chartered and HSBC were compelled to back the law touting the law will “help maintain the long term economic and social stability of Hong Kong”. The two banks have significant focus on Asia with HSBC tracing its origins to Hong Kong. The bank saw many of its branches vandalized during the Hong Kong protests, and its bronze lion statues outside its Hong Kong headquarters were defaced by the protesters (Reuters).
UK Prime Minister Boris Johnson stepped forward and offered a path to UK citizenship for eligible Hong Kong residents. The move comes after China’s controversial national security law was announced. The UK government called the law a “violation of Hong Kong’s autonomy and freedoms of its residents” (CNN).
Sir Richard Branson has been scrambling to save his Virgin empire and sold shares in his space travel company, Virgin Galactic, to provide much needed liquidity to other parts of Virgin. The company is facing challenges on several fronts that include its cruise line, hotel business, and airline. Virgin Galatic’s mission is to provide commercial flights into space. Virgin Group did confirm to CNBC that the company has enough capital to weather the crisis (CNBC).
Amazon partnered with Goldman Sachs to offer credit lines to its merchants. For Amazon, its a first collaboration with a third-party underwriter, and for Goldman, its the ”technology” firm’s latest foray into consumer lending. The credit lines will offer up to $1 million with interest rates ranging from 6.99% to 20.99% (Forbes).
Here’s a start-up that’s harder to get into than Harvard. German-based Blinkist maintains a starkly low acceptance rate of 4.6%. The Blinkist app “gathers key insights from over 3,500 nonfiction books and delivers them into snappy 15-minute reads and listens”. The UN recognized the app’s contribution to global knowledge. The app has amassed over 14 million users and maintains the highest rate of employee satisfaction in Germany’s start-up world (Blinkist Magazine).
More space and privacy offered in a new double-decker airplane seating design proposed by designer Jefferey O’Neill. Could this be the future of air travel? The design aims to create more space without sacrificing headcount by use of space reserved for the luggage compartment (CNN Travel). We could all use more leg room in those narrow aluminum tubes!
The 19-nation EU bloc’s economy is expected to shrink more than 8% this year. Employment expectations have improved in the Euro zone; however, some sectors remain 60% below pre-Covid level. Consumer confidence grew in June while sentiment across various industries took a positive stride. The ECB is buying $1.5 trillion of debt as part of its stimulus efforts with Euro governments pledging billions in support. Germany’s inflation rate rose 0.8% in June and its one economy in the bloc that is best placed for a V-shaped recovery with the virus under control (Bloomberg).
China’s recent tussle with India in the Himalayas isn’t the only news that’s raising eyebrows. Forbes reported satellite image evidence of a high security compound in Pakistan which hints at plans for a Chinese Naval base in the strategically located country. Analysts believe that a naval base in Pakistan would strengthen China’s grip on the Indian Ocean. The compound is located along the coast of the city of Gwadar where a major port is being developed as part of China’s ambitious belt and road initiative. The region borders with Iran and Afghanistan and has experienced a high degree of insurgency in recent years. However, in a positive move, the underutilized commercial port in Gwadar opened its corridor to Afghan-bound trade (Forbes).
HSBC predicts a swoosh-shaped recovery for the global economy with China and industrialized markets in Asia best positioned to lead the recovery. The bank’s global chief strategist, Joseph Little, believes that policy mistakes pose the greatest risk to recovery. Interestingly, China has only offered circa $366 billion of fiscal measures compared to other major economies according to the IMF. In case you forgot, the US pledged more than $3 trillion in comparison. HSBC’s Global asset management favors “global equities and high-yield bonds on a strategic, long-term basis, projecting that lower equity prices this year mean that investors willing to absorb short-term volatility will be compensated by higher prospective returns over the next two years“ (CNBC).
Three senators in the United States proposed a bill to end ’Qualified immunity‘, a controversial law in the USA that shields the police from accountability. The senators argue that the 40 year old law implemented by the US Supreme Court should not serve as a defense for the police or public officials. You won’t be surprised to hear that two of those senators are Elizabeth Warren, and Bernie Sanders. The proposal faces an uphill battle in the Republican dominated senate (CNN Politics). But that could all change if Democrats take the senate in November. Tik tok.
Northface’s boycott of Facebook advertising was followed by several other major brands that include Starbucks, Unilever, Best Buy, and Coca Cola. Big banks in Canada and Lululemon also pulled their ads from Facebook. The movement is a result of efforts from several civil rights groups who charged that Facebook has “not done enough to keep racist, and dangerous content off its platform“. Despite the boycotts, Facebook maintains a long list of advertisers so it wont be seeing much of a dent on its bottom line (CBC). However, the boycotts from major advertisers has sent a strong message to Facebook and other social media platforms during election year: that hate speech will not be tolerated!!
The month of June saw Canada lose not only its seat on the UN Security Council, but also its AAA rating. The country’s sovereign debt was downgraded by Fitch rating agency. The rating change comes amid Canada’s COVID response that will elevate the country’s public debt to 115% of GDP – for perspective, it was 88.3% in 2019. The downgrade comes with a stable outlook and Canada’s parliamentary budget officer called the downgrade “not that big of a deal” (BNN Bloomberg). Needless to say lower ratings generally make it more expensive to borrow money. I’m keen to see what happens to sovereign debt ratings of other G7 countries who have also piled up billions of dollars in debt in response to the pandemic.
The New York Police Department will be buying fewer doughnuts after Mayor Bill de Blasio announced a $1 billion cut in the force’s budget. The famed NYPD is America’s largest force and employs more than 55,000 people – its 2020 budget was almost $6 billion. “This marks the beginning of the Council’s efforts to not only limit the size and scope of the NYPD, but also reimagine how we structure criminal justice and public safety in this city” the New York City council said (CNN). While living in New York I always wondered who was paying for the multiple police cars that would come blazing with deafening sirens to respond to a 911 call. In full view of 5th Avenue from my apartment, I was confounded by the questions: “is this really necessary ? And who pays for all this commotion?”. Lots of bluster and not much substance. It’s time the city of New York set its priorities straight!
Brazil is hard hit by the coronavirus with the second highest cases and fatalities after the US. The country’s President, Jair Bolsonaro has flip flopped on his response to the pandemic by first admonishing it as a hoax and calling it the “little flu”; and recently employing a somber tone to pay tribute to victims of the virus. The president’s nonchalant attitude faced rebuke from a judge who ordered Bolsonaro to wear a mask when out in public. The country recorded over a million virus cases and close to 54,000 deaths. The country’s health minister post is being occupied by an army general after the firing, and resignation of the two predecessors during the crisis. Brazil’s death toll is expected to surpass that of the United States by mid-August. The lack of a coherent national strategy, allegations of corruption, and public censorship have manifested in the debilitating condition of the country’s public health and economy (Al Jazeera). Interestingly, like Donald Trump, Bolsonaro also promoted an unproven anti-malaria drug as treatment for the virus, and downplayed its spread. Both countries are now the world’s two hot spots in the fight against the pandemic. Brazil and USA’s response from the top offers a case study that underscores the importance of responsible leadership in times of crisis.
Corporate America woke up to the social justice movement and made some bold moves in June. Bank of America pledged $1 billion to fight racial inequality, and L’Oréal removed words like ‘whitening’ and ‘fair’ from its advertising. But while these moves are a welcome step, there is a lot of work and awareness that needs to take place before visible change can be observed. Who could have predicted that the current President of the United States would preside over the country’s worst health crisis in a century, a stimulus package that dwarfs the TARP stimulus witnessed in the 2008 financial crisis, and a long overdue social justice movement one would have expected in the Obama-era but instead its happening now. Just something to reflect on.
In closing, here’s a noteworthy statement from the CEO of TIAA, the trillion dollar money management firm: “All of us who are people of color have faced discrimination one way or another,” Roger Ferguson said. “And even as a CEO, I cannot walk down the street without sometimes having unusual things happen that might be attributed to race. Here in New York, trying to get a cab heading uptown continues to be a bit of a problem. So let’s be clear there is discrimination still” (Yahoo Finance).
References: CBC, CNBC, CTV News, Yahoo Finance, Forbes, Reuters, CNN, Business Insider, Blinkist Magazine, BNN Bloomberg, Bloomberg, The New York Post, and Al Jazeera. Please note that this briefing contains paraphrased summaries and attributes the original content to the news sources. Readers are encouraged to visit the links to access the full article in its original form for a thorough and complete view. You may need to subscribe to the news agency and source for access.
Featured image: NASA.