When it comes to the nonstop news stream around business and finance (and the political influences that often drive both), it’s hard to stay on top of all the stories that matter — to our country and to your bottom line. Here’s your cheat sheet to this week’s top business and finance headlines.
Week in Review
The S&P 500 closed on March 9 at 2786.57 and closed March 16 at 2752.01 for a loss of -1.24 percent. Weighing on the markets this week were concerns of changes within the Trump administration and the prospect of a looming trade war.
Of note, 10 years ago, on March 16, 2008, the Federal Reserve and JP Morgan engineered a takeover of Bear Stearns. Bear was previously the fifth-largest investment bank. Saddled with bad mortgage debt, the firm is considered today to be the first domino to fall in the financial crisis that subsequently gripped the nation.
6 of the Week’s Key Headlines You Should Know About:
1. Secretary of State Rex Tillerson was fired by President Donald Trump via tweet.
Tillerson, the former CEO of Exxon, was removed from his post as the nation’s highest diplomat and replaced by Mike Pompeo, the head of the CIA. Tillerson was often seen as viewing the Iran nuclear deal in a less harsh light than President Trump, and the ascension of Pompeo to the head of the State Department may presage the demise of the historic Obama-era deal, which the President has referred to as “the worst deal of all time.” Gina Haspel will replace Pompeo as the head of the CIA. She will be the first woman to hold this position.
2. Larry Kudlow was announced as Gary Cohn’s successor to head the White House National Economic council.
Initially, upon the departure of Gary Cohen, U.S. equity markets had a precipitous selloff. This selloff was short-lived as markets digested the initial departure news. Kudlow was most recently a contributor to the financial news network CNBC, and previously was the Chief Economist for the failed investment bank Bear Stearns along with a senior official in the Office of Management and Budget during the Reagan administration. Larry Kudlow is well known to CNBC viewers for refrains like, “Free market capitalism is the best path to prosperity,” “Earnings are the mother’s milk of stock prices,” as well as for his love of “King Dollar.” Kudlow may provide a competing view to Trump’s protectionist ideals and markets considered his appointment as a possible temper to the possibility of a trade war.
3. The Trump administration floated the idea of additional tariffs.
After introducing tariffs on imported steel and aluminum last week, word has come out that the White House is prepping additional tariffs, this time aimed directly at China. These tariffs are expected to penalize China for its theft of intellectual property from U.S. companies.
4. The White House killed the proposed merger of chip makers Qualcomm and Broadcom.
Had the transaction been allowed to go through, it would have been the largest tech deal ever. The deal was blocked on national security grounds and the perceived risk that the intellectual property of the combined company could fall in to the hands of enemies. Many see the blocking of the deal on national security concerns as having the potential to open a Pandora’s Box, with countries feeling emboldened to use national security as a way to undercut World Trade Organization regulations on free trade.
5. Elizabeth Holmes, the founder of Theranos, settled with the SEC over “massive fraud.”
Holmes was the founder and CEO of Theranos, a Silicon Valley startup blood testing firm. The firm had promoted blood testing technology that would be able to test a single drop of blood for multiple diseases. The SEC had charged that the technology was either non-existent or exaggerated and that Holmes had run a massive fraud, amassing $750 million from investors on these false premises. Holmes settled with the SEC, paying a $500,000 fine and being barred from being an officer or director of a public company for 10 years. Ms. Holmes had been touted as the next Steve Jobs and was a media darling before a series of 2015 Wall Street Journal articles called the operations of the company into question.
6. Toys “R” Us, the toy retailer founded in 1957, declared bankruptcy and will be liquidated.
The company plans to close all of its stores in the United States, which could cost as many as 33,000 jobs. In recent years, the company had been beset by multiple difficulties. In 2005, the company was bought out in a $6.5 billion transaction by private equity firms. In the ensuing years, as competition in the toy space grew from online-only retailers such as Amazon and traditional competitors such as Target and Wal-Mart, Toys “R” Us failed to invest in its stores or e-commerce operations. Much of this disinvestment has been attributed to the high debt burden the company had to service following its leveraged buyout.
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Joshua Streckert is the founder and managing partner of SJ Equity Partners, L.P., a private investment partnership focusing on short-term long/short equity-trading strategies. Previously he worked in fixed-income derivatives trading, valuations, and risk management for Lehman Brothers and Bank of America. A graduate of Northwestern University, he is passionate about supporting his alma mater, as well as the American Red Cross.