Is Deutsche Bank The Next Lehman? Plus It’s Prime Time For Gamers On Amazon

By 10.03.16


“I don’t buy that for a minute” — Costco CFO Richard Galanti, who has some criticism for an analyst calling his company “Amazon-proof.” If you’re a C-suite executive, you should probably keep your head on a swivel—Amazon is coming in hot everywhere.

Market Snapshot

·       U.S. stocks surged on Friday to close out the month—and the quarter—strong on some much-needed positive news from Deutsche Bank (more on that shortly)

·       Software company Nutanix went public on Friday, and shares skyrocketed 130%, a feat that hasn’t been accomplished since Castlight Health in 2014

·       Cognizant Technology dropped 13% after reporting an internal corruption probe citing possible violations of the Foreign Corrupt Practices Act in India—not ideal

Is Deutsche Bank the Next Lehman?

…Nah. Last week, the German bank was hit with a massive $14 billion fine from the Department of Justice that caused a handful of large clients to pull funds from Deutsche and run. The market still has a little PTSD from the “too big to fail” debacle, but when push comes to shove, the general consensus is that there’s far less systemic risk in the market than ’08. Phew. So when a report came out on Friday that Uncle Sam would be willing to settle for a mere $5.4 billion, it sent Deutsche shares ripping higher 14% off all-time lows. In other news, CEO John Cryan is reportedly cutting 1,000 jobs in an effort to rebuild the bank’s profitability. You certainly can’t call Deutsche complacent in the face of adversity.

It’s Prime Time for Gamers

…And just another casual release for Amazon. On Friday, Amazon announced its newest addition to Amazon Prime: Twitch Prime. Wait, what’s Twitch? Only one of the largest video game live-streaming services in the world, with over 8.5 million daily active users. Amazon manifest destiny-ed it for $970 million in 2014, revamped it and debuted it in what felt like Amazon’s fifth major release last week. Twitch Prime will bundle Twitch’s premium features (like ad-free viewing) into any Amazon Prime membership, also offering free in-game “loot” and one free channel subscription per month. The move illustrates a few strategic shifts by Amazon. Visibly, it only makes Amazon Prime a more enticing membership to purchase. But it also gets more eyeballs on Twitch and further cements Amazon’s penetration into gaming—and everything else, for that matter.

Thought The VW Scandal Was in the Rearview Mirror?

…Think again, amigo. Quick reminder: last fall, Volkswagen got caught for cheating emissions tests on its diesel vehicles. The fallout from the scandal has been slamming the car company over and over again ever since, and last Friday was no different: VW reached a settlement with its U.S. franchise dealers worth a kidney-punching $1.2 billion. The settlement is a major win for all 652 VW dealerships, since it’ll help them make up some of the losses they suffered as a result of the scandal. Is there another brutal beating on the horizon for VW? Why yes—as a matter of fact, there is. Next, it has to settle with a little entity called the U.S. government, and we’re betting that one’s going to be a doozy.

Another Yuan…

…Just as DJ Khaled foretold. Secure the bag alert: on Friday, the Chinese yuan officially became an IMF global reserve currency. It joins an exclusive all-star group—the yuan is only the fifth currency to enter the basket, and the first to be added since 1999. Awesome, but what does it really mean? Well, up to $1 trillion may now flow into the Chinese bond market over the next five years…or it could just be largely symbolic (depends who you ask). Regardless, the inclusion is a hard-fought victory for the Chinese government, which had been trying for years to get the yuan included to legitimize its currency—which has often been criticized for being manipulated by the government—and boost its global usage. The yuan is still fifth in global payments, but that’s up from 30th in 2011. And you know China ain’t content with fifth place.

Other Stories

·       California approves unmanned self-driving car trials

·       Apple is building $45 million research center in Beijing

·       Facebook is testing a clone of Snapchat stories inside Messenger

·       Theresa May vows to trigger Article 50 by March and be out of the EU by early 2019

Economic Calendar

·       Monday: ISM Manufacturing Index; September Auto Sales; Construction Spending

·       Tuesday: Micron, Darden Restaurants Earnings

·       Wednesday: Monsanto, Yum! Brands Earnings; ISM Non-Manufacturing Index; Factory Orders; Private Employment Report

·       Thursday: Weekly Jobless Claims

·       Friday; September Jobs Report

The Startup Startups

We’re tired of seeing the word “startup” everywhere too, but we’d all better get used to it, because these pesky hipster companies are the future of business in America. What’s the point? Colleges are catching on, and some of them have become regular breeding (or rather, funding) grounds for young business founders. CrunchBase researched private companies that raised seed or venture capital this year, and looked at their founders’ university affiliations. So where do startups start up?

·       Stanford led the pack with 225 startups founded this year by alumni or faculty. MIT was second with 145, and UC Berkeley took home the bronze.

·       Rounding out the top, in order, were: Harvard, Columbia, UPenn, Cornell, Carnegie Mellon, Yale and UCLA. Each of the top ten have over 50 funded companies this year with alumni founders.

·       Perhaps more interestingly, the founders of the five most valuable venture-backed private U.S. companies attended UCLA (Uber), Rhode Island School of Design (Airbnb), Stanford (Palantir), Stanford again (Snapchat) and Baruch College (WeWork). Surprised? Neither are we.

Interview Question of the Day

How do markets account for systematic risk? (Answer)

Business Person of the Day

Former billionaire Sam Wyly agreed to pay the SEC $198.1 million to settle a long legal battle over his hundreds of millions in assets that were claimed to be “illegally stashed in offshore accounts.” Thus the phrase “former billionaire.” Hey, on the bright side, Mr. Wyly is eligible to receive a tax credit for his $181 million in federal income tax liabilities.

Food for Thought

Scared of global economic meltdowns? Don’t trust the banks? Solution: Swiss Alpine gold vaults. Originally military bunkers, these prime gold storage facilities are in high demand by the wealthy who see owning gold as a hedge against economic collapse. As gold continues to appreciate in value (up 25% since the end of 2015), companies who specialize in this mountainside gold storage are looking pretty secure themselves.

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