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THE HEADLINES

 

… DON’T KILL MY VIBE

Summer Friday’s are for blue jeans and taking it easy. Apparently, POTUS, China, and Fed chair Jay Powell didn’t get the memo …

Markets took a nosedive on Friday following a proverbial sh*tstorm. All week markets have been anticipating Jerry Interest Rate’s speech in Jackson Hole. Yet, that barely moved the needle.

Before Jay could take the mic, China announced tariffs on $75B of US goods entering the country in retaliation against the recently announced US tariffs on $300B of Chinese goods. The 5 to 10 percent tariffs will take effect on September 1st and December 15th, coinciding with the US tariffs. Plus Beijing plans to re-implement 25% tariffs on US cars and car parts. That’s gonna sting for Zalinsky Auto Parts.

If that wasn’t enough, Donny Politics took to Twitter and called for US companies to pull production out of China and promised retaliation. That didn’t sit well with markets. In case you haven’t looked at a poorly made product recently, the US makes a lot of goods in China. Apple took the biggest hit, with shares falling nearly 5% immediately following the announcement.

But what about that Fed meeting?

Markets were looking for Jay Powell to hint at future rate cuts … and that didn’t happen. Powell said that the trade war was not “in the rulebook” and did not directly point to rate cuts in the near future, but did promise to “act as appropriate.”

Powell did get at least one visceral reaction. POTUS took to Twitter to ask who was a bigger enemy of the state … Xi or Powell.

The Dow dropped more than 2% on Friday.

Overtime

But wait, there’s more!

Given time to mull over China’s latest tariffs, and making good on his promise to retaliate, POTUS counter-punched after the markets closed. The damage? The US will hike 25% tariffs on $250B worth of Chinese goods to 30% as of October 1st and will tax the remaining $300B of Chinese goods at 15% (vs. the planned 10%) on September 1st (vs. December 1st).

 

STIFF KOCH

David Koch, the world’s seventh wealthiest person, and the richest person in NYC died late last week following a 27-ish year battle with prostate cancer.

David Koch was an industrial magnate who helped his older brother Charles grow their father’s $70M oil-refining business into a private company with annual revenue of $110B. A company which he owned 42% of.

Teamwork makes the dream work

David once called Koch Industries “the biggest company you’ve never heard of.”

The Koch boy’s conglomerate holds interests in a diverse set of companies, including those with a focus on O&G, electrical components … and ranching. Check your Beyond Meat at the door. And the purchase of Georgia-Pacific by Koch Industries for $21B remains one of the largest acquisitions of all time.

But it wasn’t all yelling at clouds for David, 79, and big bro, Charles, 83. The duo of MIT grads saw the writing on the wall, giving Charles’ son Chase, 42, the reins of Koch Disruptive Technologies which has invested in 3D printing and other Theranos-like tech plays.

Side hustles

Of course, the Koch’s will likely be remembered for their “extracurriculars” (for once, that’s not a not-so-subtle reference to drug use). The bash bros are credited with shaping the modern political landscape. Author David Schulman had this to say: “The Kochs helped to give rise to the age of the mega-donor, an era of unprecedented political spending in which wealthy individuals, as well as corporations, can influence politics as never before. His political legacy is huge.”

And D. Koch may be the only person who hates cancer more than Russell Crowe. During his lifetime, Koch gave away more than $1B to philanthropic causes, including a $150M gift to the Memorial Sloan-Kettering Cancer Center for an outpatient facility.

 

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IN OTHER NEWS

• The US and Japan have agreed to a trade deal (in principle) that may be the most lopsided deal in the history of deal-making. Japan has agreed to slash tariffs on US farm products and buy boatloads of US wheat and corn. So what does Japan get in return? Not a whole lot. The country hopes that the deal will keep it in DC’s good graces. Although there is no guarantee that Trump won’t put tariffs on Japanese automobiles, Prime Minister Shinzo Abe is really, really hoping the concessions will keep POTUS happy.

 

• Deutsche Bank and UBS explored forming an investment banking alliance earlier this year as the European banks continue to have trouble competing against stronger US banks … or literally any bank in DB’s case. Germany’s and Switzerland’s biggest banks weren’t able to close the deal (shocker!), as the two sides struggled to sort through the proposed joint operation’s corporate structure and capital allocation. Had the two banks combined, the new entity could have been in a better position to deal with the negative interest rate environment and slow economic growth in Europe.

 

• German insurer Allianz will purchase SulAmerica’s general-insurance assets in Brazil for $738M USD. Already Europe’s largest insurer, this is the company’s third deal this year, as Allianz bought 2 UK based insurance companies for $1B in May and sold its portion of a JV in Spain to BancoSantander for 937M euros in June.

 

• Walmart and Amazon teaming up? Say it ain’t so. Amazon is joining Walmart’s claims that Tesla’s solar panels started a fire at its Redlands, CA warehouse back in June 2018. Tesla, in response, commented that it has put out a remediation effort to limit the impact that the faulty connector may have had. Not to be outdone, hedge fund investor David Einhorn called for Elon’s resignation following the fires. Can’t wait for Elon Musk to tweet out a video of him karaoke-ing ‘We didn’t start the fire.’

 

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