Gravitas Spark CrowdFunding

Tag: Trump

  • Banks To SME Sector: It Is What It Is

    Banks To SME Sector: It Is What It Is

    Michelle Obama killed Donald Trump. No, this is not another QAnon far-right conspiracy theory. It’s just a turn of phrase. Here’s another turn of phrase which I usually hate – “it is what it is”. But when the former First Lady used that phrase after a brief critique of Trump’s leadership qualities at this week’s Democratic National Convention, it was perfect.

    It was a brutal reality check which not only trolled Trump, but also ridiculed his recent use of the same phrase to explain the horrendous US Covid-19 death toll. The contrast between reality check and abdication of responsibility could not have been made more stark. Closer to home, economic reality is beginning to bite but only at a micro level. Thousands of businesses are in survival mode, some are already dead. At a leadership level, the coalition government and the banks are promising SME support through credit guarantee funding worth more than €2 billion. Well, almost.

    The reality is that this ‘guarantee’ applies to 80% of the funding amount. The domestic banks are on the hook for the other 20%. Now step into the parallel universe of banking reality. Imagine a bank credit officer with a very large existing loan book exposure to say….. the tourism/hospitality sector. In what universe will a bank be looking to increase its lending exposure to a new customer in that sector? If you believe the banks have appetite for even a single euro extra of risk – 20%, 30%, 95% guarantee, whatever – I have a large bucket of bleach to sell you as a global Covid-19 vaccine. The brutal reality is that the very sectors and companies in urgent need of support come from the exact same sectors which are already killing our banks.

    The banker reality is that our banks are already fighting fires on multiple fronts as new business income dries up, costs rise and existing customers struggle to service loans. Banks are under obvious political and social pressure to play along with the proposed government support schemes. However, back in the real world, the daily headlines are quoting the banks and the challenges they already face. The phrases may be different but the indirect messaging is pretty stark. Check out the following selection of challenges:

    • ‘Scars from the crash give Irish banks 2.6 billion reasons for Covid caution” – Irish Times

    • ‘FSU refers Bank of Ireland proposed redundancies to Workplace Relations Commission” – RTE

    • ‘AIB swings to half year loss on €1.2 billion bad loans’ – Morningstar

    The €2.6 billion of loss provisions referenced in the first headline was about twice as big as market analysts expected. These are ‘expected’ losses which regulators now require to be quantified in market communications. Call it a window into the thinking of bank managements about the future. Clearly, the banks are messaging strongly that the chances of increasing risk exposures in already-challenged loan books are slim.

    Discussions between banks and struggling SME companies will employ different words and phrases but the end result will be the same – no support. The SME sector urgently needs new thinking and new funding solutions. And, some honesty.

    I do not choose the following words lightly. Perpetuating the current myth of government and banking SME support is a dangerous abdication of responsibility. The banks can’t help. It is what it is.

  • 2020 Vision or 10 More Surprises?

    I had a great rugby coach in school who used to always say “expect the unexpected”. The original quote has been attributed to Heraclitus in about 500 BC but Oscar Wilde a bit later tweaked the phrase with a conclusion that it “shows a thoroughly modern intellect”. Certainly, as a species, we are brutal at making forecasts so perhaps knowing one’s weaknesses does illustrate some intellect.

    Anyway, as 2020 approaches prepare to be bombarded with forecasts but then cast your minds back to 12 months ago. Did anyone forecast $15 trillion worth of bonds yielding negative rates of interest, a WeWork near-death experience or a Boris Johnson-led government to achieve the greatest Conservative electoral win since 1987?  Yep, whoodathunk. Financial and geopolitical developments will continue to surprise so it is probably good risk management to entertain the possibility of plenty more surprises in 2020. Here are 10 more potential surprises the team at Spark Crowdfunding have put together for those of a curious persuasion.

    1. Donald Trump resigns from the US Presidency for health reasons and global financial markets experience the best single-day advance in a decade.
    2. Softbank as WeWork’s largest shareholder and the world’s second-largest non-financial corporate debtor endures its own near-death experience and enters into credit restructuring talks with its bankers.
    3. Tesla’s market value exceeds $100 billion which is more than the combined value of General Motors and Ford.
    4. US 10 Year Treasury Bonds join their European peers in the negative rates yielding club.
    5. Deutsche Bank collapses and enters state ownership.
    6. Fianna Fail is the big winner in the 2020 general election and forms a coalition government.
    7. Kim Jong-Un dies in a horse-riding accident. South Korea and North Korea enter into peace/reunification talks 3 weeks later.
    8. Los Angeles is evacuated as multiple mega fires burn out of control fueled by unusually high wind speeds.
    9. Russian hackers cripple JP Morgan’s payment technology systems for 2 weeks. Republican party leaders insist the attackers could be Ukrainian.
    10. A coup in Saudi Arabia topples the House of Saud and Prince MBS. Brent crude prices rocket 30% in the first 24 hours after the coup. Two weeks later oil prices have retreated back to pre-coup levels.

    Happy Christmas everyone and best wishes for 2020.

  • The Most Important Poll In Markets Today

    As impeachment hearings begin in Washington this week one can’t help wondering what Roger Ailes would do. Ailes, the creator of Fox News, is the subject of the latest US blockbuster mini-series, The Loudest Voice. It’s a scary reminder of how Fox News dramatically changed the US political landscape and used TV, not just to shape audience views but to deliver a vision of the world demanded by its viewers. Ailes himself once said, “Truth is whatever people will believe”. It is already clear Ailes’s legendary truth-shaping genius would be sorely tested on Capitol Hill right now. However, it might not even matter.

    There seems to be an air of resignation that Donald Trump’s base support of Fox viewers are unmoved by their President’s daily dose of awful. Porn star pay-offs, Greenland annexation, Kurdish betrayal, North Korean love letters, Twitter tantrums and Putin puppy dog fawning have failed to erode core voter support of circa 44% in current national polling. Critical to this robust base is the cult-like devotion of almost 90% of Republican voters. Thanks to the electoral college voting system in the US it’s entirely possible Trump could be re-elected in 2020 with a sub-50% support base. However, wall-to-wall TV coverage of impeachment hearings in Washington is possibly the last chance for this core support to shift.

    The live TV depositions of the first two witnesses from inside the US State Department, George Kent and Bill Taylor, paint a very stark reality that the Prime Minister of an ally, Ukraine, was the subject of a mobster style shake-down. The foreign policy version of wise-guy extortion was the blocking of much needed military aid to force a false investigation into election rival, Joe Biden. There are multiple other witnesses due to testify with similar tales and the only accounts missing are White House figures defying subpoenas to appear. It’s TV torture for Trump and his Twitter account is exhibiting heightened levels of agitation. However, there is only one poll that ultimately counts.

    We are only in the impeachment hearings phase. The vote to impeach is still to come in the House of Representatives and will likely pass. Then it’s on to the Senate for a trial. The hurdle in the Senate to actually convict Trump and remove him from office is a two-thirds majority guilty vote. This is where Republicans failed in impeaching Bill Clinton. Most observers correctly believe it is currently almost impossible to see how the required 20 Republican Senators cross the aisle to vote with Democrat Senators for removal of the President.

    This reluctance of Republicans to convict is not driven by any devotion to the country, the presidency or the constitution. It is entirely driven by survival instincts. Republican political careers without the support of the Trump base are toast. But that Trump approval rating within the Republican vote needs to stay at 70% or above. Below that and Senators will know the numbers with or without the MAGA Trump base won’t stack up to beat their Democrat rivals in 2020 elections. So, this internal approval rating within the Republican/Fox base is absolutely critical for Trump’s survival. It also will be watched closely by financial markets.

    A Trump presidency in real trouble will encourage the Chinese to stall on trade war negotiations. That, in turn, will continue to hurt global manufacturing activity levels. One should also consider the impact of a chaotic exit of Trump from the presidency. There will likely be an electoral backlash and fears of a new less business-friendly occupant of the White House. Wall Street is already ringing alarm bells about a potential Warren or Sanders presidency. One should also not overlook the impact on US consumer confidence.

    It will not be easy for a nation to digest the likely truth that the 2016 election was manipulated to install a Russian foreign policy asset. One should be mindful of the performance of markets the last time the US suffered a crushing embarrassment. Arguably, the Nixon resignation and the Vietnam retreat in 1973-1974 had multi-year consequences rather than the Middle-East oil crisis of 1973. The Watergate Hearings were first televised in May 1973 when the S&P 500 was trading at 615 points. By June 1982 the S&P had more than halved to the 290 level after a multi-year bear market. This makes for sober reading but one could argue we are in a better place than the 70s. Globally, investors are enjoying a good year despite geopolitics and slowing economic activity. It’s all very Goldilocks – cooler economics, warmer money-printing/rates.

    Sure, the S&P 500 chart makes for cheerful watching as it reaches all-time highs. Also, TV screens will provide some amusing moments from Capitol Hill in the coming weeks. But…voter polls have the potential to present an uncomfortable truth whether they change or not. The first possibility is that the truth, as most sentient beings understand the meaning of the word, will be ignored and the Trump support belief/truth remains unmoved. In that case, the longer-term implications of constitutional chaos, geopolitical instability and continued illegal actions from the White House will be significant.

    The alternative scenario of a significant shift in Republican polling will deliver more immediate negative market reaction but hopefully undo 25 years of Fox News reality shaping and abdication of broadcasting responsibility. No doubt there will be short term pain and embarrassment for many but a restoration of truth to US politics can only be a good thing. The loudest voices have enjoyed too much airtime.

     

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  • Making America Great Again – Was Trump Necessary?

    Making America Great Again – Was Trump Necessary?

    Donald Trump’s signature slogan “Make America Great Again” would suggest that the world’s foremost sovereign power has suffered a dilution of its global influence.  Not for the first time, a pillar of Trumpian policy may not reflect actual reality.

    As recently as 2006 US companies’ market share of the operating systems(OS) which power mobile technology struggled to reach 10% globally. Today that figure, thanks to Apple’s IOS and Google’s Android, is sitting comfortably over 99%.

    Yes, private enterprise in America totally controls the functionality of perhaps the most revolutionary consumer device in the history of the planet.  The mobile phone’s ability to empower individuals to engage in media, finance, retail, education, travel and even health care activities is a concentration of consumer influence beyond the dreams of business 25 years ago.

    And, to this writer, the development of such market power, rather than the 1991 collapse of  the USSR,  marks “Peak U.S.A” .  Then again, that might have changed this week.

    In response to proposed US government sanctions against Huawei, the giant Chinese mobile company, Google has warned that Huawei mobile phone users may lose its operational support for its Google Maps and YouTube applications.

    Early financial market reaction focused on potential commercial damage to technology suppliers to Huawei and potential retaliatory action from China against the likes of Apple. Clearly, this US government initiative cannot be unrelated to the ongoing trade war/negotiations bewteen the world’s two largest economies.

    Irrespective of an ultimate trade agreement between both nations, this development should serve as an uncomfortable reminder to businesses and other countries that there are concentration risks associated with U.S. domination of the global OS ecosystem and the potential loss of valuable customers who fall foul of a somewhat erratic U.S foreign policy.

    Ironically, the populist backlash against globalisation led by Donald Trump could reverse peak global power for business interests in America.  This has implications for Ireland too.

    The consistently excellent commentary by John Kennedy on the Irish tech scene in Silicon Republic recently highlighted Ireland’s critical positioning as the place where companies with global ambitions tend to concentrate their scale-up efforts. He puts it well here –

    “Ireland has cultivated a crucial role at the heart of the global tech and internet world as the place to do business and hack growth.

    As Brian Halligan, co-founder of HubSpot, put it once, Dublin is seen in leadership circles as the scale-up capital of the world.  When Google came to Ireland in 2003, it was as a sales outpost for a handful of Googlers. Today, Google employs about 8,000 people here and is growing across a plethora of roles and functions, including sales and engineering. Similarly, Facebook came to Dublin in 2008 with a small outpost in mind and today it is hurtling towards 5,000 people. If you study companies such as HubSpot, which last year surpassed the 100-engineer mark in Dublin, it is clear that engineering is moving closer to the sales function because it is vital that products and actual customer success stories occur thanks to greater empathy by the people who make the products as well as those that sell them”.

    There is a danger that there are countries and companies watching developments from a strategic perspective and begin to put in place plans to reduce exposure to U.S. technologies.

    Ireland as a scale up base for companies could also be perceived as having an unhealthy dependence on investment from America and….. goodwill. Dublin’s political ability to take a principled stand on foreign policy initiatives is rather limited and in this upside-down Trumpian world it is difficult to know who actually is currently a U.S. political ally.

    Indeed, it has always seemed a little strange that the U.S. spends more on its military than the next 12 ranked countries combined – ten of whom are American allies!

    Now, former friends watch nervously as a succession of authoritarian leaders parade through the White House accompanied by fawning praise from the Donald.

    The global reality is that American power and influence through its technology and military has never been higher. It’s weaknesses are captured by any quick analysis of long-term domestic/social trends in health, education and income inequality which have triggered a flawed political backlash against globalism and the technological hegemony it currently enjoys.

    The Huawei story has possibly let the genie out of the bottle and given businesses pause for strategic thought.

    A reversal of U.S. dominance in technology and a de-risking by companies of concentration risk could have negative impacts on previous scale-up plans and development costs as companies factor in the potential requirement to cater for competing technology platforms and more complicated regulatory and market access conditions.

    Globalisation and scaling up is about to become tougher. However, the Chinese word for “crisis” features two characters signifying “danger” and opportunity”.

    If Huawei is forced to go alone on its OS platform then a reasonable question might be whether its Irish R&D centre, with circa 100 staff , is about to grow quite significantly?

    The thornier question might be… will America be pleased? Welcome to Trumpistan.