The Water Coolest is a free daily business news and professional advice email newsletter created for weekday warriors that is delivered fresh daily at 6 AM EST. Signup here to receive The Water Coolest every weekday.

 

THE HEADLINES

 

PRE-RECESSION LIT

The FDIC and the Office of the Comptroller of the Currency approved an adjustment to the Volcker Rule, which would ease proprietary trading regulations for banks.

Come again?

The Volcker Rule was put in place in 2010 by the fun police following the financial crisis as a part of the Dodd-Frank Act. The rule which prohibits Wall Street banks from speculative trading with their own funds remains confusing AF … even for the masters of the universe.

How confusing is it? The Chairman of the FDIC claims that regulators penned 21 sets of FAQs within 3 years of adoption. Banks to regulators: “You know what else was confusing? Mortgage-backed securities.” Too soon?

The tweak in the rule would clarify the issues around prop trading and adjust the ban that prohibits banks from investing their own capital to make short term gains. What could possibly go wrong?

So what are the new rules?

Midsized institutions, aka any bank with less than $1B in trading assets and liabilities, would no longer have to show proof that they are following the Volcker Rule, but instead, be given the benefit of the doubt. Wait, what?

The biggest banks, such as JPMorgan and Bank of America, would no longer have to show proof that trades held for less than 60 days weren’t made for the bank’s own short-term profit. Firm CEOs must personally sign off on compliance programs, however.

The update will also make it easier for banks to invest in hedge funds or PE funds for clients.

Coming up

The Federal Reserve, SEC, and Commodities Futures Trading Commission are expected to also endorse the changes. The updated Volcker Rule could be effective as soon January 1, 2020.

 

OUT TO PASTURE

Bayer is shedding its animal-health business. The struggling drug manufacturer announced a sale to rival business Elanco Animal Health for $7.6B. Bayer will walk away with $5.3B in cash and a $2.3B stake in Elanco, which it plans to exit … if it doesn’t wind up six-feet under.

Recently, Bayer has been selling off assets including its shares of Dr. Scholl’s foot-care products, Coppertone sunscreens, and a 60% stake in industrial park operator Currenta. One of these is not like the other.

This is the latest move by the Aspirin maker to focus on the core pharmaceutical and agriculture businesses and cut into its $39.5B of debt.

Where did we go wrong?

Move over mesothelioma, there’s a new class-action lawsuit in town.

Trouble started in 2016 when Bayer purchased Monsanto for $63B to become the largest agricultural chemical manufacturer in the world. The deal itself finally closed in 2018 after a litany of roadblocks from regulators, and lawsuits claiming that Monsanto’s Roundup caused cancer. One California couple was awarded a $2B settlement by a jury this year. Coincidentally, the number of open lawsuits increased from 8k in April 2018 to 18k in July 2019.

The company is appealing the verdict … and CEO Werner Baumann, who orchestrated the Monsanto deal, should probably start updating his LinkedIn.

Adopt, don’t shop

Meanwhile, Elanco is a very, very good boy. With the purchase, the combined company now owns ruff-ly 13% of the animal health market, making it the second-largest player in the space, which is estimated to be a $44B industry, globally.

 

---

IN OTHER NEWS

• Walmart is suing Tesla for breach of contract due to fires caused by solar panels on seven of the retailer’s stores in NY. Elon Musk and Co. are also being asked to remove solar panels from more than 240 Walmart locations and pay damages related to the fires, according to the lawsuit. What can you expect from a guy whose side hustle is selling flamethrowers?

 

• Qualcomm has reached a new deal with LG to license patented technology to the tech firm. LG will be able to build and sell Qualcomm’s technology for the next five years and will pay royalties on sales. Financial terms were not disclosed. Of course, Qualcomm is still under fire for its business practices, and claims of antitrust activity. That’s what you get when you make a smartphone chip that actually works.

 

• DJT said he’s looking into ways to prop up the nation’s economy. Donnie Deals is looking at reducing the capital-gains tax while issuing a full-court press on the Fed to reduce interest rates. The move comes as economists worry that signs are starting to point to an upcoming recession.

 

• Apple will join Disney+ in rolling out a new subscription streaming service in November. To meet the company’s goal of hitting $50B in service sales by 2020, the firm is evaluating a $9.99 per month pricing plan, after a free trial. According to reports, included in Apple’s new arsenal of programming options will be up to $6B in originals. They can’t be any worse than what Amazon Prime’s trotting out there.

 

• Facebook revealed that it’s launching a new “Off-Facebook Activity” feature that will cut users data off from third-party targeted ads … if they opt-in. For you, that means no more weirdly accurate t-shirts about your childhood address and favorite collegiate baseball team, and for Facebook, that means potentially pissing off a lot of advertisers. Oh, and don’t worry, Facebook won’t delete your data entirely, it’ll just hold onto it until it gets hacked again.

 

Ready to become the most well-informed bro in any room? You can subscribe here.