Crises of Years Past

One thing we can all agree on as investors is everyone loves a good crisis. They get the blood pumping and keep you on your toes. I’m kidding of course, but that’s what you’d think if you watched the news. With this years’ fresh batch of trade wars, political scandals, and elections playing out as we speak, we felt it would be interesting to revisit some of our woes and worries of old and see what came of them.

Brexit – This caused quite the stir back in 2016. If you remember, it was going to lead to the destabilization of the European Union and everyone else leaving. Thank goodness it hasn’t quite worked out that way. So, what has happened since the vote? Well there’s a schedule for Britain leaving and it’s March 29, 2019 at 11 p.m. That’s when the new rules will be final, and the involved parties will have until the end of 2020 to be in alignment. The biggest threat this poses at the moment is what they’re going to do with the border in Ireland. With immigration having been a key driver of the Brexit vote, how new policies will be enforced at the North/South Irish border could cause serious tension.

Greece – Here, we had another potential eurozone destabilizer that had folks selling out of foreign investments back in 2015. Since then Greece has received 96.3 Billion Euros in bailout money and has been credit upgraded to B- due to improved economic reports and increased political stability. So, not an issue at the moment.

Puerto Rico – Setting the stage, back in 2015 Governor García Pardilla said that Puerto Rico wasn’t going to be able to pay off it’s debt. Since then he’s been true to his word as the territory has defaulted on millions of dollars in bond issuance. Then along came hurricane Maria last year which caused such devastation to the island that many parts were still without power as of June this year. Since then the senate has prepared a bill called the “U.S. Territorial Relief Act of 2018” which would both cut debt and entitle Puerto Rico to government bailout dollars.  It would eliminate a large portion of their $73 Billion in debt and make $15 Billion available to pay out in what would basically be a bankruptcy proceeding for the debt that was included. This debt specifically would not include that held by investors in “greedy Wallstreet vulture funds”.

Deutsche Bank – Although still in business, these guys still aren’t doing so hot. In 2017 they were fined $630 Million for laundering money for Russia and they were fined $205 Million for manipulating currencies with inside trading practices this year. Though these numbers are a pittance compared to the $7.2 Billion the bank paid the Department of Justice for the mortgage backed securities scandals of 2008, it still makes you worry that they clearly aren’t getting the picture about how the world wants banks to act. The D.o.J. has amassed $60 Billion in fine money since the financial crisis in 2008. It says it’s being used to fund programs to help those effected.

So, there you have it. Some follow up on the world enders of the past 3 years. These all seemed like massive issues at the time, but really haven’t derailed anything or dramatically changed the investment landscape today. So, with talk of trade wars and impeachment swirling in the air, remember that we invest in companies, not countries or people and the market has been through it all before.