Hertz Bankruptcy Imminent After Massive Layoffs, Missed Lease Payment
Is an over-levered car-rental business “essential“?
You can bet your devalued dollar that is the pressure from lobbyists on Capitol Hill right now as The Wall Street Journal reports that Hertz is preparing for a possible bankruptcy filing after the rental-car company failed to make lease payments to preserve cash amid the Covid-19 pandemic, according to people familiar with the matter.
If a sufficient amount of creditors don’t agree to waive any default by the end of the grace period, “Hertz could be materially and negatively impacted” the company said.
For veterans of past credit cycles, it should be no real surprise that the rental car business is on its last legs, but CDS spreads this time are screaming default is imminent (and that recovery values for any debt are extremely low)…
Source: Bloomberg
Hertz has $17 billion worth of debt, which includes $3.7 billion of corporate bonds and loans and $13.4 billion of vehicle-backed notes. But despite that bankruptcy risk, the stock price remains ever hopeful that is has some value ($650 mm market cap)…
Source: Bloomberg
After laying off 10,000 staff, as government-mandated lockdowns and travel restrictions related to the Covid-19 outbreak have hit rental-car companies hard, Hertz and its advisers are negotiating with senior lenders and certain holders of its vehicle finance subsidiary’s notes with the aim of temporarily reducing payments, the company said Wednesday in a securities filing.
Recently I have been thinking a lot about the way the pandemic has necessitated all sorts of substitutes for ordinary experiences: You still go to church, but on Skype. You still have happy hours, but on Zoom. You still take an exercise class, but it’s on a laptop. You still bake bread, but now it’s with sourdough starter. And you still watch big, dumb action movies, but on Netflix.
Movies like Extraction, which, at its best, serves as a tolerable substitute for the theatrical experience. The thing about substitutes is not that they’re great, but that they work well enough. You can make do with them when the thing you really want isn’t available. That’s Extraction.
Starring Chris Hemsworth’s jawline, last seen as attached to the Marvel superhero Thor, it’s the product of a script by Avengers: Endgame co-director Joe Russo, and first-time director Sam Hargrove, who is mainly known for his work as a Marvel stunt coordinator. Russo and his brother Anthony were presumably too busy to take on a relatively small project like this; Hargrove, like so many substitutes, was what they had on hand.
As it turns out, he works fairly well: The story—about a mercenary who takes a job rescuing (hence, extracting) the son of an Indian crime lord who’s been kidnapped by a rival—is as thin as the generic brand toilet paper you’ve probably been stocking up on, but Hargrove’s action scenes exude real energy and dynamism. There’s an exuberance to the movie’s best moments, and a sense of speed and physical heft. It sometimes seems like Hargrove’s goal was to film cinematic punching and shooting as if no one had ever filmed punching or shooting before.
The standout sequence is a 12-minute single-take fight that moves through narrow buildings and out onto city streets: The camera moves furtively, in panicked bursts, like an endangered man looking around for signs of trouble, of which there are many. But despite the frantic motion and all the whips and pans, the continuous shot means it’s admirably clear and coherent; when Chris Hemsworth slams a stuntman’s head into something (and then slams it again, and again, and so forth), there’s never any question about what’s going on: Yes, you will think, that’s definitely Chris Hemsworth slamming a stuntman’s head into something. The single take isn’t a real single take of course, but a series of 36 smaller shots strung together to look like one; it’s a substitute, but an effective one.
As for Hemsworth, he’s the closest thing the movie offers to a genuine article, a non-substitute good: There are other, lesser Hemsworths available (Liam, for example), but Chris is the one you really want. As the ridiculously named Tyler Rake—which is perilously close to something like Jake Mancrush—he alone embodies the full qualities of Hemsworthiness, the sense of scale and fortitude, the glowering ruggedness, the consistent lack of vocal intonation.
Early in the movie, he leaps off a cliff into a placid lake, pausing at the bottom to strike a meditative pose, as if contemplating his own meaning, and inviting viewers to do the same. Extraction is a deep dive into his being: At times, his physical presence threatens to overwhelm the movie’s action: Here is a Hemsworth Hemsworthing, as only this particular Hemsworth can.
Still, he acts as a sort of substitute for the old action stars of the 1980s and ’90s, the hunks of muscle and brooding menace who were more bicep than man. With some small differences, Extraction is the sort of film some burly dude hoping to be the next Arnold Schwarzenegger might have made in 1986. It’s an old-school Dolph Lundgren picture, with slightly better choreography.
Even before the pandemic, Netflix sometimes seemed to specialize in resurrecting these lost genres, the sorts of competent but mostly forgettable films that studios churned out on the regular before superhero movies and animated fare took over their slates. From rom-coms to thrillers to kids-at-camp adventures, these genre throwbacks are substitutes, fill-ins for something lost to a changing world. And if they aren’t always quite as good as their predecessors, they are frequently pretty decent—and far better than nothing at all.
The summer movie season usually kicks off in earnest around this time of year, with studios showing off their latest sequels. This year, we were supposed to see new a new James Bond, Black Widow’s first solo outing in the Marvel Cinematic Universe, and the ninth film in the Fast & Furious franchise.
But to a first approximation, no one in America has seen a movie in a theater in over a month. And even if states allow theaters to reopen in the near future, it’s unlikely that most theaters will open their doors before July, when the next wave of non-delayed studio blockbusters is set to arrive on big screens. In the meantime, we’ll have to subsist on substitutes like Extraction, the Zoom happy hour of action movies. It’s definitely not the real thing, but it’ll do.
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This was no secret on Wall Street. Surgery Partners’s majority owner, the buyout firm Bain Capital, had loaded so much debt onto the company’s books that when it went to the market last year to refinance maturing bonds, investors demanded a 10% interest rate to compensate them for the risk. The debt was rated CCC — eight levels below investment grade.
So by late March, with the economic effects of the outbreak in full force, frantic investors braced for default, pushing the price of those bonds below 55 cents on the dollar.
But then the Federal Reserve did something it had never done before. It pledged to buy risky corporate debt as part of its emergency financing package for the economy. The move was so aggressive and sparked a rally that was so powerful and broad-based that today those bonds are all the way back up near par value, and Surgery Partners was able to raise another $120 million from loan investors earlier this month.
Moral Hazard
This is yet another example of Fed-sponsored moral hazards.
The Fed encourages extremely risky behavior then bails out the risk takers.
Carnival Deemed Too Big to Fail, Rescued by the Fed
A Quarter Of All S&P 500 Companies Have Pulled Outlooks So Far
With the economy – and the future of corporate profits – now one giant question mark, more and more U.S. companies are pulling financial guidance as the spread of the coronavirus and subsequent rolling breakdown of economies around the world render previously issued forecasts moot.
According to calculations from Bloomberg’s Crystal Kim, at least 25 companies joined the list of firms withdrawing guidance over the past week with the reporting season unfolding. Since the start of the year, at least 130 firms, or 26% of S&P 500 constituents, have pulled or reneged on their quarterly or full-year projections for sales or earnings. That compared with zero withdrawals for all of 2019.
Consumer-discretionary companies have taken the biggest hit, with more than 61% of them scrapping outlooks as the virus outbreak has forced retail stores and restaurants to close. From airlines to chipmakers, few industries have been spared as the pandemic disrupts global supply chains and hurts demand in an economy that according to some economists is heading for its worst recession in decades.
Investors are taking notice, punishing companies unable to stick to their forecasts. Shares of those that withdrew guidance are down 29% year-to-date, on average, relative to the broad index’s 11% decline over the same period.
Below, courtesy of Bloomberg, is a list of companies that have withdrawn their sales or earnings guidance
Consumer Discretionary:
Advance Auto Parts Inc., Alaska Air Group Inc., American Airlines Group Inc., Aptiv PLC, Best Buy Co., Chipotle Mexican Grill Inc., Cintas Corp., Darden Restaurants Inc., D.R. Horton Inc., Delta Air Lines Inc., Ford Motor Co., the Gap, General Motors, Genuine Parts Co., H&R Block Inc., Hanesbrands Inc., Harley-Davidson Inc., Hershey Inc., Hilton Worldwide Holdings Inc., Kohl’s Corp., L Brands Inc., Leggett & Platt Inc., Live Nation Entertainment Inc., LKQ Corp., Macy’s Inc., Marriott International Inc., Masco Corp. McDonald’s Corp., Nordstrom Inc., O’Reilly Automotive Inc., Philip Morris International Inc., Ross Stores Inc., Royal Caribbean Cruises Ltd., Southwest Airlines Co., Stanley Black & Decker Inc., Starbucks Corp., TJX Cos Inc., Tractor Supply Company, Under Armour Inc., Ulta Beauty Inc., United Airlines Holdings Inc., VF Corp., Whirlpool Corp.
Communications
AT&T, Booking Holdings Inc., Discovery Inc., Expedia Group Inc., Interpublic Group of Cos Inc., Twitter Inc., Viacom Inc., Verizon Communications Inc.
Difficult circumstances are said to bring people together. But, if anything, COVID-19 has widened political and cultural fracture lines in the U.S., giving us more to fight over and less reason to trust each other in times to come.
In an election year dominated by two worn-out, mutually loathing legacy political parties, there’s no reason to think any of these tensions will be resolved by the outcome of the vote.
Sorted by culture, lifestyle, and political affiliation into two dominant tribes—“red” Republicans and “blue” Democrats—most Americans have declining contact with those outside their own camp, less in common with those who live differently, and slumping opinions of one another to match. Urban and suburban blues disdain those who don’t share their values, politics, and way of life, and rural and exurban reds return the sentiment.
Last year, U.S. News & World Reportpointed out that “Democrats and Republicans don’t just disagree, they hate each other.” Sad to say, the polling bears that out.
As of last fall, 80 percent of Democrats described the Republican Party as controlled by racists, according to Public Religion Research Institute polling. A similar percentage of Republicans see the Democratic Party as controlled by socialists.
Half of surveyed Democrats and Republicans alike consider each other “ignorant” and “spiteful” Axiosfound. More strongly, 21 percent of Democrats said Republicans were “evil,” and 23 percent of Republicans said the same about Democrats.
Worse, 18 percent of Democrats and 13 percent of Republicans said that “violence would be justified” if the opposing party wins the 2020 presidential election, according to Nathan P. Kalmoe and Lilliana Mason, political scientists at Louisiana State University and the University of Maryland. But the prospect of themselves winning the election actually increased support for violence. And that’s before Americans started arguing over the seriousness of COVID-19 and the proper way to handle the pandemic.
Now, we know the disease is just one more thing for us to argue about.
A working paper by economists from Stanford, Harvard, and New York University finds “substantial gaps between Republicans and Democrats in beliefs about the severity of COVID-19 and the importance of social distancing.” Specifically, “Democrats were consistently more concerned than Republicans about the spread of coronavirus.” The authors link the difference of opinion to the concentration of Democrats in densely populated urban areas, while Republicans tend to live in more lightly settled communities. That squares with other polling finding an urban/rural divide in experiences of the pandemic.
Democrats and Republicans also disagree over whether the worst is over, and over the wisdom of restrictive lockdown orders. Kaiser Family Foundation finds that “four in ten Republicans (38%) say such orders do more harm than good,” compared to five percent of Democrats.
So it’s no surprise that the resulting protests against stay-at-home orders around the country have become yet another partisan flashpoint setting Team Red against Team Blue. Participants who want to return to something resembling normal life, including making a living, are tagged as “covidiots,” while their opponents who prefer extended mandatory social-distancing efforts to battle contagion are charged with “pandemic panic.”
“Controversy over lockdowns has drawn people on both sides to demonize one another,” writes Arnold Kling, who in 2017 authored The Three Languages of Politics: Talking Across the Political Divides. “In Demonization Mode, we divide the world into people trying to do good and people trying to do evil, and we characterize those with whom we disagree as trying to do evil.”
And the thing about evil people is that you really don’t want to be under their control. Losing an election to somebody you disagree with on a few issues is disappointing. Being defeated by evil, though, is a threat to your very existence.
Politicians, being the creatures they are, have done their best to fulfill all of the fears of their enemies.
President Donald Trump, by his own admission, advised Vice President Mike Pence to ignore calls for help from Democratic governors who criticize administration pandemic efforts.
New York Gov. Andrew Cuomo threatened to steal ventilators from hospitals located in upstate counties where voters tend to oppose him and deliver them to New York City and its suburbs, where his supporters are concentrated.
Come November, in elections across the U.S., the partisans of one side or the other will lose to opponents they increasingly see as evil, ignorant, and spiteful. They will have to concede power to people they consider wrong on every important issue, including the response to COVID-19. And they will contemplate the prospect of continuing to be governed by people they know return the contempt, and who they’ve recently watched abuse position and authority to punish enemies and reward friends. Forget coming together—Americans will be more resentful of each other than ever.
To give those who say disaster brings us together their due, that may be true for discrete events.
“It may be that ‘acute’ stress, i.e. a one-time stressful experience may lead to social bonding, as shown in the study, but that ‘chronic’ stress, i.e. repeated exposure to stress over a long period, might wear us out,” wrote Emma Seppala of Stanford University’s Center for Compassion and Altruism Research and Education in Scientific American.
America’s division into hostile factions isn’t a recent occurrence; the fractures have been deepening and the disagreements growing more bitter for years. This year, instead of being a one-off crisis, the pandemic became a continuation of an ongoing conflict. That’s as “chronic” as it gets, and there’s nothing to suggest that the stress is going away anytime soon.
The United States, write Thomas Carothers and Andrew O’Donohue for the Carnegie Endowment for International Peace, is one of several politically divided countries where “the pandemic has amplified the already dangerous effects of polarization, with serious ramifications for public health, democratic governance, and social cohesion.”
Americans will survive and overcome the pandemic, as they have so many other challenges in the past. Whether they can continue to put up with each other isn’t so certain.
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Given the COVID-19 pandemic, some officials have rolling back enforcement of low-level offenses. But many police continue to use force against nonviolent offenders, social distancing be damned.
A video shows one such interaction between a California cop and a teenager. The teen’s crime: possessing “tobacco products.”
The short clip shows a deputy with the Rancho Cordova Police Department (RCPD) detaining a 14-year-old on Monday. The deputy, who is already on the ground with the teenager, is seen attempting to flip the boy onto his stomach. When faced with resistance, the deputy shoves the boy’s face into the ground and then punches him repeatedly.
RCPD brutally tackled and hit my best friend’s 14 year old brother today over a swisher sweet! The officer had no reason to brutalize and traumatize this boy like this! He has a pre existing health condition which could be fatal under this kind of stress! Unjustifiable! pic.twitter.com/94fqyu3J28
New York criminal defense attorney Rebecca Kavanagh shared the video, saying that the deputy accused the boy of smoking marijuana earlier. A woman identifying herself as the teen’s older sister tweeted that he has a “serious heart condition that could be triggered very easily by being hit in his chest/back.”
Reason reached out to the RCPD on Tuesday for further explanation. The request went unanswered, but the department subsequently released a statement on its website and social media platforms.
“These are the facts as we understand them at this time,” the department wrote, adding that an investigation was underway and the story was “subject to change.” The officer (not named) had reportedly been “proactively patrolling” the area between Mills Station Road and Mather Field Road, due to complaints about the sale of alcohol, drugs, and tobacco to minors. Believing he witnessed such an exchange, the deputy approached the teen. (The statement says he lost sight of the adult conducting the sale.) The boy initially refused to provide identifying information, then later told the deputy he was 18. When the deputy tried to detain him, the teen knocked the deputy’s handcuffs out of his hands; the deputy then restrained him without handcuffs while waiting for his partners to arrive.
The teen was ultimately found to possess some “tobacco products,” and he was subsequently cited and released.
Because of the unique threat the COVID-19 pandemic poses to corrections facilities, several counties have reprioritized enforcement of low-level, nonviolent offenses. Evidently, the call has not extended far enough.
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Difficult circumstances are said to bring people together. But, if anything, COVID-19 has widened political and cultural fracture lines in the U.S., giving us more to fight over and less reason to trust each other in times to come.
In an election year dominated by two worn-out, mutually loathing legacy political parties, there’s no reason to think any of these tensions will be resolved by the outcome of the vote.
Sorted by culture, lifestyle, and political affiliation into two dominant tribes—“red” Republicans and “blue” Democrats—most Americans have declining contact with those outside their own camp, less in common with those who live differently, and slumping opinions of one another to match. Urban and suburban blues disdain those who don’t share their values, politics, and way of life, and rural and exurban reds return the sentiment.
Last year, U.S. News & World Reportpointed out that “Democrats and Republicans don’t just disagree, they hate each other.” Sad to say, the polling bears that out.
As of last fall, 80 percent of Democrats described the Republican Party as controlled by racists, according to Public Religion Research Institute polling. A similar percentage of Republicans see the Democratic Party as controlled by socialists.
Half of surveyed Democrats and Republicans alike consider each other “ignorant” and “spiteful” Axiosfound. More strongly, 21 percent of Democrats said Republicans were “evil,” and 23 percent of Republicans said the same about Democrats.
Worse, 18 percent of Democrats and 13 percent of Republicans said that “violence would be justified” if the opposing party wins the 2020 presidential election, according to Nathan P. Kalmoe and Lilliana Mason, political scientists at Louisiana State University and the University of Maryland. But the prospect of themselves winning the election actually increased support for violence. And that’s before Americans started arguing over the seriousness of COVID-19 and the proper way to handle the pandemic.
Now, we know the disease is just one more thing for us to argue about.
A working paper by economists from Stanford, Harvard, and New York University finds “substantial gaps between Republicans and Democrats in beliefs about the severity of COVID-19 and the importance of social distancing.” Specifically, “Democrats were consistently more concerned than Republicans about the spread of coronavirus.” The authors link the difference of opinion to the concentration of Democrats in densely populated urban areas, while Republicans tend to live in more lightly settled communities. That squares with other polling finding an urban/rural divide in experiences of the pandemic.
Democrats and Republicans also disagree over whether the worst is over, and over the wisdom of restrictive lockdown orders. Kaiser Family Foundation finds that “four in ten Republicans (38%) say such orders do more harm than good,” compared to five percent of Democrats.
So it’s no surprise that the resulting protests against stay-at-home orders around the country have become yet another partisan flashpoint setting Team Red against Team Blue. Participants who want to return to something resembling normal life, including making a living, are tagged as “covidiots,” while their opponents who prefer extended mandatory social-distancing efforts to battle contagion are charged with “pandemic panic.”
“Controversy over lockdowns has drawn people on both sides to demonize one another,” writes Arnold Kling, who in 2017 authored The Three Languages of Politics: Talking Across the Political Divides. “In Demonization Mode, we divide the world into people trying to do good and people trying to do evil, and we characterize those with whom we disagree as trying to do evil.”
And the thing about evil people is that you really don’t want to be under their control. Losing an election to somebody you disagree with on a few issues is disappointing. Being defeated by evil, though, is a threat to your very existence.
Politicians, being the creatures they are, have done their best to fulfill all of the fears of their enemies.
President Donald Trump, by his own admission, advised Vice President Mike Pence to ignore calls for help from Democratic governors who criticize administration pandemic efforts.
New York Gov. Andrew Cuomo threatened to steal ventilators from hospitals located in upstate counties where voters tend to oppose him and deliver them to New York City and its suburbs, where his supporters are concentrated.
Come November, in elections across the U.S., the partisans of one side or the other will lose to opponents they increasingly see as evil, ignorant, and spiteful. They will have to concede power to people they consider wrong on every important issue, including the response to COVID-19. And they will contemplate the prospect of continuing to be governed by people they know return the contempt, and who they’ve recently watched abuse position and authority to punish enemies and reward friends. Forget coming together—Americans will be more resentful of each other than ever.
To give those who say disaster brings us together their due, that may be true for discrete events.
“It may be that ‘acute’ stress, i.e. a one-time stressful experience may lead to social bonding, as shown in the study, but that ‘chronic’ stress, i.e. repeated exposure to stress over a long period, might wear us out,” wrote Emma Seppala of Stanford University’s Center for Compassion and Altruism Research and Education in Scientific American.
America’s division into hostile factions isn’t a recent occurrence; the fractures have been deepening and the disagreements growing more bitter for years. This year, instead of being a one-off crisis, the pandemic became a continuation of an ongoing conflict. That’s as “chronic” as it gets, and there’s nothing to suggest that the stress is going away anytime soon.
The United States, write Thomas Carothers and Andrew O’Donohue for the Carnegie Endowment for International Peace, is one of several politically divided countries where “the pandemic has amplified the already dangerous effects of polarization, with serious ramifications for public health, democratic governance, and social cohesion.”
Americans will survive and overcome the pandemic, as they have so many other challenges in the past. Whether they can continue to put up with each other isn’t so certain.
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Given the COVID-19 pandemic, some officials have rolling back enforcement of low-level offenses. But many police continue to use force against nonviolent offenders, social distancing be damned.
A video shows one such interaction between a California cop and a teenager. The teen’s crime: possessing “tobacco products.”
The short clip shows a deputy with the Rancho Cordova Police Department (RCPD) detaining a 14-year-old on Monday. The deputy, who is already on the ground with the teenager, is seen attempting to flip the boy onto his stomach. When faced with resistance, the deputy shoves the boy’s face into the ground and then punches him repeatedly.
RCPD brutally tackled and hit my best friend’s 14 year old brother today over a swisher sweet! The officer had no reason to brutalize and traumatize this boy like this! He has a pre existing health condition which could be fatal under this kind of stress! Unjustifiable! pic.twitter.com/94fqyu3J28
New York criminal defense attorney Rebecca Kavanagh shared the video, saying that the deputy accused the boy of smoking marijuana earlier. A woman identifying herself as the teen’s older sister tweeted that he has a “serious heart condition that could be triggered very easily by being hit in his chest/back.”
Reason reached out to the RCPD on Tuesday for further explanation. The request went unanswered, but the department subsequently released a statement on its website and social media platforms.
“These are the facts as we understand them at this time,” the department wrote, adding that an investigation was underway and the story was “subject to change.” The officer (not named) had reportedly been “proactively patrolling” the area between Mills Station Road and Mather Field Road, due to complaints about the sale of alcohol, drugs, and tobacco to minors. Believing he witnessed such an exchange, the deputy approached the teen. (The statement says he lost sight of the adult conducting the sale.) The boy initially refused to provide identifying information, then later told the deputy he was 18. When the deputy tried to detain him, the teen knocked the deputy’s handcuffs out of his hands; the deputy then restrained him without handcuffs while waiting for his partners to arrive.
The teen was ultimately found to possess some “tobacco products,” and he was subsequently cited and released.
Because of the unique threat the COVID-19 pandemic poses to corrections facilities, several counties have reprioritized enforcement of low-level, nonviolent offenses. Evidently, the call has not extended far enough.
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A new report from the Institute for Policy Studies found that, while tens of millions of Americans have lost their jobs during the coronavirus pandemic, America’s ultra-wealthy elite have seen their net worth surge by $282 billion in just 23 days. This is despite the fact that the economy isexpected to contract by 40 percent this quarter.
The report also noted that between 1980 and 2020 the tax obligations of America’s billionaires, measured as a percentage of their wealth, decreased by 79 percent. In the last 30 years, U.S. billionaire wealth soared by over 1100 percent while median household wealth increased by barely five percent. In 1990, the total wealth held by America’s billionaire class was $240 billion; today that number stands at $2.95 trillion.
Thus, America’s billionaires accrued more wealth in just the past three weeks than they made in total prior to 1980. As a result, just three people – Amazon CEO Jeff Bezos, Microsoft co-founder Bill Gates and Berkshire Hathaway’s Warren Buffet – own as much wealth as the bottom half of all U.S. households combined.
The Institute for Policy Studies’ report paints a picture of a modern day oligarchy, where the super-rich have captured legislative and executive power, controlling what laws are passed. The report discusses what it labels a new “wealth defense industry” – where “billionaires are paying millions to dodge billions in taxes,” with teams of accountants, lawyers, lobbyists and asset managers helping them conceal their vast fortunes in tax havens and so-called charitable trusts. The result has been crippled social programs and a decrease in living standards and even asustained drop in life expectancy – something rarely seen in history outside of major wars or famines.Few Americans believe their children will be better off than they were. Statistics suggest they are right.
Billionaires very theatrically donate a fraction of what they used to give back in taxes, making sure to generate maximum publicity for their actions. And they secure positive coverage of themselves by stepping in to keep influential news organizations afloat. A Decemberinvestigation by MintPress found that Gates had donated over $9 million to The Guardian, over $3 million to NBC Universal, over $4.5 million to NPR, $1 million to Al-Jazeera, and a staggering $49 million to the BBC’s Media Action program. Some, like Bezos, prefer to simply outright purchase news organizations themselves, changing the editorial stance to unquestioningloyalty to their new owners.
The spike in billionaire wealth comes amid an unprecedented economic crash;26.5 million Americans have filed for unemployment over the last five weeks, and that number is expected to continue to rise dramatically. While the super-rich are holed up in their mansions and yachts, the49-62 million Americans designated as “essential workers” must continue to risk their lives to keep society functioning, even as many of them do not even earn as much as the$600 weekly increase in unemployment benefits the CARES act stipulates. Many low paid workers, such as grocery store employees, have already fallen sick and died. The mother of one 27-year-old Maryland worker who contracted COVID-19 and diedreceived her daughter’s last paycheck. It amounted to $20.64.
Amazon staff, directly employed by Bezos, also risk their lives for measly pay.One third of all Amazon workers in Arizona, for example, are enrolled in the food stamps program, their wages so low that they cannot afford to pay for food. The vast contrast in the effect that COVID-19 has had on the super wealthy versus the rest of us has many concluding that billionaires’ wealth and the poverty of the rest of the world are two sides of the same coin: that the reason people working full-time still cannot afford a house or even to eat is the same reason people like Bezos control more wealth than many countries. Bezos’ solution to his employees’ hunger has been to set up a charity and ask for public donations to help his desperate workers.
The majority of millennials, most of them shut out from attaining the American dream,already prefer socialism to capitalism, taking a dim view of the latter. The latest news that the billionaire class is laughing all the way to the bank during a period of intense economic suffering is unlikely to improve their disposition.
It all started in late 2017, when we reported that JPM was quietly trying to sell the world’s oldest gold trader after a massive money laundering scandal terminally crippled the reputation of one of the most iconic names in the business, resulting in Canada’s Bank of Nova Scotia exploring options for its gold business ScotiaMocatta. As reported at the time, Scotiabank made the decision to sell ScotiaMocatta following a massive money laundering scandal centered on a US refinery that involved smuggled gold from South America, a fascinating story which we profiled here several years back.
For those unfamiliar, the ScotiaMocatta business better known as the world’s oldest gold trader and a mainstay in PM trading since its founding in 1684 as Mocatta Bullion, was a precious metal and base metal trading company that operated as the metals trading division of the Bank of Nova Scotia.
A few months later in February 2018, we reported that JPMorgan’s attempt to sell the business failed, and one year later, in January 2019 Bank of Nova Scotia quietly dropped the “Mocatta” name from its metals-trading business, shedding the last vestiges of a firm dating back nearly 350 years as the Canadian owner tried to absorb the platform into its capital-markets division.
The restructuring attempt lasted a little over a year, until its failure this week when the Scotiabank told staff on Tuesday it would close its metals business, drawing the curtain on one of the most venerable names in precious metals trading, Reuters reported citing two sources.
Scotia was for years the world’s biggest lender to the physical precious metals industry, with a history stretching to the founding in 1684 of London gold dealer Mocatta Bullion, which it bought in 1997. Once a global player with more than 100 staff in offices from New York and London to India and Hong Kong, the bank effectively exited the business in 2018 following the abovementioned strategic review and unsuccessful attempt to find a buyer.
“Scotia had a global call with all its metals staff and said it was shutting down its metals business,” said a Reuters source. “The plan is to unwind the metals business.”
Gold bars on display during the inauguration of the ScotiaMocatta eStore in 2009. Photo: Bloomberg.
Scotiabank’s exit of the metals business ends an end of an era that began in 1671 when Moses Mocatta opened an account with one of London’s most famous goldsmith bankers, Edward Backwell. Mocatta and his descendants would go on to build what became one of the world’s largest metals-trading businesses and the oldest member of London’s bullion market. The firm has long participated in the London gold auction, where an industry benchmark price is set twice a day.
Scotiabank came onto the scene in 1997 when it bought the Mocatta Bullion and Base Metals unit from Standard Chartered and renamed it ScotiaMocatta. The Toronto-based bank gained a business with 180 employees and 10 offices worldwide, including in New York, London, New Delhi, Hong Kong, Shanghai and Singapore.
It all came crashing down in 2018 however following a historic money-laundering, metals rehypothecation scandal that wiped out nearly 350 years of good reputation overnight.
Sources told Reuters Scotia would not take on new business and would wind down existing activities by around the beginning of 2021. Some staff would be kept on over that period while others would be made redundant. Around 15 people worked in Scotia’s metals business, Reuters reported,around three-quarters of them in precious metals and the remainder in industrial metals. That compares to around 140 five years ago.
Even after exiting the metals business, Scotiabank will remain one of the five banks that settle gold trades and one of 12 market makers that provide liquidity in the London market. The bank is also a participant in daily auctions that set a globally used gold benchmark price.
That said, without a dedicated metals business, Scotia’s presence in the London gold market will be only symbolic, as the bank hands over the bulk of the business to HSBC and JPMorgan, the two titans who currently dominate the London PM business, and for a good reason: gold trading in London is estimated to be worth more than $5 trillion a year, resulting in some fat commissions for all involved.
