HNFC Newsletter 26.03-01.04. Tesla's incident with 22% plunge. Financial crisis penalties for Barclays and other banks.
Barclay accepts to pay 2bn fees
Barclay agreed to pay 2 billion dollars fine to settle a lawsuit over the sales of Mortgage-Based Securities before the financial crisis of 2008. To simplify what happened, the banks issued Mortgage-Based Securities, through securitization, offering to investors an ‘exceptional high rate’ without mentioning the quality of the mortgages’ borrowers which were subprime (people with less financial means and therefore with higher risk of unpaid back loans.).
During this period, interest rates were low. Banks as HSBC tried to make money by any means (e.g. lending to more risky people) without paying attention to the risk of bankruptcy (as the state supported financially banks). All of these (and other factors) led to the financial crisis.
The US Justice Department sued the banks that created that financial bubble through securitization. In 2013, Bank of America was also sued. In order to escape from civil charges, Barclay has agreed to pay the 2 billion. More precisely, Paul Menefee, the former head banker for subprime MBS securitizations at Barclays, and John Carroll, the former head trader for subprime loan acquisitions, will pay the combined total of $2 million.
Tesla’s shares lose 15% in two days
March 23rd, a Tesla Model X crashed in California. The National Transportation Safety Board has started an investigation to understand the causes of the crash. It is still unknown if the automated control system was active at the moment of crash.
Immediately, Tesla publicly stated:
“We have been deeply saddened by this accident, and we have offered our full cooperation to the authorities as we work to establish the facts of the incident.”
Yet, it was not sufficient to avoid the impact on their share price. Indeed, in two days, the Tesla’s share price has dropped by 9%. The total drop of the share prices last month was 22% attaining their lowest price since February 2017.
Self-driving cars: ready or rushed to the market?
In addition of the Tesla’s accident, another drama occurred this week. On March 18th, a 49-year-old woman passed away after she was struck by a self-driving Uber car in Tempe, AZ.
Uber was doing better since Mr. Kalanick stepped down and was replaced by Dara Khosrowshahi back in August of 2017. However, the tragic death of a 49-year-old woman struck by a self-driving Uber car in Arizona has left Uber facing fierce criticism once again. Not only is Uber concerned, but so are self-driving cars in general.
That is why we thought it would be interesting to debate on whether self-driving cars are rushed to the market or not.
For about slightly more than a year now, self-driving cars have been progressively tested on the roads. Although a majority of people do not feel ready to get in a driverless car, there has to be a time when we start getting people used to it. Otherwise, it will never happen. I mean, if you think about it, there have been too many accidents involving driverless cars for people to believe it’s safe, especially since it’s natural for us not to trust a computer behind a wheel.
For instance, back in 2016, a man named Joshua Brown died in an accident while “driving” a Tesla Model X. After further research, it was confirmed that the autopilot system was partly at fault, but not entirely. More recently, a Tesla Model S smashed into a stopped firetruck in California and the driver stated that the car was on “autopilot mode”. Last but not least, the Uber car crash. All these accidents clearly don’t make the case for self-driving cars and for the past week, a lot of people have been criticizing the pace at which these cars develop in the market, calling it a “rush”.
Personally, I don’t believe we’re rushing driverless cars to the market. Eventually, we are going to have to test these cars on real roads. And that time is now. The thing is, people expect self-driving cars to be perfect.
The whole purpose of these cars is to make roads safer, not perfect. Bear in mind: it is not perfect. It will probably never be perfect. Let’s compare self-driving and ordinary cars.
According to the National Highway Traffic Safety Administration (NHTSA), there are around 15,913 car accidents daily in the U.S. (average from 2005 to 2015). Compared to that, driverless cars are a whole lot safer.
Here are two key priorities:
Rushed to the market or not, one thing is sure: self-driving cars are going to take over the market and will change our driving habits. It is just a matter of time.
Black lives matter… Again
On the 18th of March, in Sacramento California, Stephon Clark, a 22 years old American has been killed by the local police.
Was he a dealer? A gangster? Or carrying a gun? No. He was just in his grandmother’s backyard with a Smartphone…
Policemen in charge of his arrest shot 20 times and, according to the autopsy, 8 bullets found the target. Stephon Clark died after being hit 8 times in the back and the flank. He was suspected of breaking car’s glasses in the neighbourhood by the police thanks to a call from an anonymous source.
Despite last year’s scandals in Dallas, Louisville etc President Trump has never taken publically position against those crimes, which leaves a legitimate feeling of abandon for the black community.
The peaceful Californian Capital is now facing a series of demonstrations to protest against the police and, maybe, spark a reaction at the White House.
Samuel Chaineau, Louiz Domoutschieva, and David Benayoun
Edited and Corrected
by Vee Venski
This article is not a promotion of financial investment. Investing money in financial instruments is risk-reward process. Losses and gains are part of financial investment process. Only invest money you can afford to lose.