Lookout China! Here Comes Walmart. Again; To Brexit? Or Not to Brexit? That is the Question; Volkswagen’s Emission Impossible

Ni-hao, Walmart…

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Because Walmart isn’t big enough, the retailer has now teamed up with China’s number two e-commerce site to take on…China. Alibaba, in case you hand’t heard, holds the illustrious top spot. In any case, Walmart will be selling its commerce marketplace in China to JD.com and in return Walmart will gain about 5% of JD.com’s total shares, which comes out to about 145 million shares, give or take. Those shares are said be valued at about $3 billion, depending on whom you ask. By the way, in terms of revenue growth, JD.com has outpaced Alibaba for almost the last two years. Walmart currently has a marketplace platform in place in China called Yihaodian, but JD.com will be taking it over in hopes of finally achieving some solid retail love in China, which has eluded the mega-tailer, thus far. Walmart’s thinking positive thoughts that this deal will help increase its market-share in one of the biggest economies in the world. Walmart opened its first store in China back in 1996, yet it is a bit bummed because it only has about 430 stores there as expansion in China has been underwhelming.

Hail or not to the Brexit?

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June 23rd’s Brexit vote is just around the corner so it would be prudent to discuss why the U.S. should care about British politics, even if its politicians aren’t nearly as entertaining as ours. So, in case you hadn’t heard, at issue is whether Britain should exit from the EU. Hence, the term “Brexit.” Catchy, huh? Brexit advocates cherish their sovereignty and find that as a member of the EU, they don’t find themselves enjoying their sovereignty quite the way they’d like. While that is awfully patriotic, there are major MAJOR economic drawbacks to a Brexit. British Prime Minister David Cameron is worried that a Brexit will hurt wages and usher in an era of uncertain economic stability. Economists and other assorted experts on the matter are worried that the pound, Britain’s currency, will plunge in value, should Britain make a run for it. A plunge in value of a currency is never a good thing, especially for the country whose currency is sent plunging. Of course, tourists and others buying Bristish goods and services might not mind that so much since everything for sale there would become a relative bargain. It’s also important to consider the potential epic losses for Americans whose economic interests are heavily dependent on exports to the U.K. But there are also plenty of other Americans who might become inclined to ditch their investments and other economic opportunities in Britain as well. An exit from the EU would require all sorts of new trade agreements – for everyone  – and those things just take forever to draw up. Britain’s interests would almost certainly take a back seat to the bigger and more profitable interests of the loftier EU. As of now, there are no tariffs between the 27 members of the EU. A Brexit would change that for Britain and make tariffs a way of life, together with high tea and Harrod’s. So I guess it’s a good sign – just not for Brexit advocates – that polls show a Brexit isn’t likely.  The British sterling rose and one of its indexes, the FTSE  (rhymes with tootsie) also picked up some steam as a result of the anti-Brexit poll numbers.

Smelling a rat…

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Ex-Volkswagen CEO Martin Winterkorn is under investigation, which probably shocks no one. He is under investigation because German prosecutors suspect that Winterkorn violated securities laws since he waited too long to disclose to investors the potential cost of the ugly emissions scandal that continues to plague the auto maker. If you recall, the EPA is more than a bit peeved that Volkswagen manipulated results of emissions tests on its vehicles, with more than 11 million diesel vehicles poisoning the air we breathe. Winterkorn apparently knew about the emissions problems for over a year before he made any comments on it. He should have said something well before September 22, 2015. But he didn’t. And herein lies the problem. Even if he did resign days later. Of course, blame games in major companies have become somewhat of a sport, or in this case, a veritable comedy. Executives at the company are pointing fingers at a handful of mid-level employees – I kid you not – and assume that the public is going to believe them when they say that top management were completely oblivious to emissions manipulations taking place right under their executive-polished noses. Incidentally, there is another executive who is also under investigation but his/her identity has yet to be revealed. What has been revealed is that it is not ex-Volkwagen CFO Hans Dieter Poetsch. Lucky him.  According to the investigation, 17 people are said to be involved. But in the meantime, hundreds of lawsuits continue to mount against Volkswagen, and the car company has plans to pony up a $10 billion settlement in the U.S. come June 28.

Panama Paper Scandal Just Getting Started; Riding into the Pac Sun-set; How Victoria Secret Plans to Stay on Top

Paper fail…

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The Panama Papers continue their entertaining journey of embarrassing plenty of world leaders. For instance, British Prime Minister David Cameron has been haplessly defending himself after some documents in the Panama Papers unflatteringly revealed how he profited from his late father’s offshore investments, set up by scandalized Panamanian law firm, Mossack Fonseca. His father’s investment fund, Blairmor, shrewdly avoided paying taxes in the United Kingdom by having company board meetings in Switzerland and the Bahamas. Four months before David Cameron became the Prime Minister, he had the good sense to sell his stake for a not-so-whopping $42,000. The Prime Minister called the revelations a ”private matter” but then went on to say that all of his assets are totally legit.  Except it was said eloquently and with a British accent, which always makes things sound even better. Chinese Communist Party Leader Xi Jinping’s brother-in-law, in addition to a few other party members, also owned a piece of a Mossack Fonseca created shell company. But it’s doubtful Jinping’s power and status will be affected. Especially because the (shell) companies in question were conveniently gone with the wind by the time he assumed his leadership role. Interestingly, only one American has been spotted, so far, amongst the 11.5 million documents. It belongs to that of Chicago-based author Marianna Olszewski. But like I said, there are millions of documents to sift through so it could take awhile before other misbehaving Americans are discovered. Or not. These documents were from one but one firm out of hundreds or thousands of firms, both American and foreign, that perform these types of services. Besides, the U.S. is itself a tax haven. Just look no further than Nevada and Delaware. In fact, the U.S. is ranked as the world’s third most popular tax haven. Panama is much less popular, ranking way down at number 13.

Not so gnarly…

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SoCal-based company PacSun is the latest retailer to file for Chapter 11 bankruptcy after posting a $10 million net loss in its fourth quarter. The retailer only managed to nail a profit in just one quarter out of the last six. Add to that increased competition and you’ve got a whole big fiscal mess. But fear not, if you’re a frequent PacSun shopper, as there will be “no immediate impact” on customers at any of the chains approximate 600 stores. As for the retailer’s 2000 employees, their jobs are safe…for now, anyway. Pac Sun, incidentally, also carries the Kendall and Kylie Jenner line, just in case you felt like handing over your hard-earned cash to the Kardashian/Jenner/Kanye clan. Private investment firm Golden Gate will be the lucky group to take PacSun back to being a privately-held company. The investment firm previously lent Pac Sun $60 million back in 2011 and will now magically turn 65% of the company’s debt into equity. Okay, so there’s no magic involved, but there’s definitely some creative math at work. After its bankruptcy reorganization, the company will secure a $100 million revolving line of credit from Wells Fargo. The skate/surf California retailer owes plenty of cash to creditors including $5.7 million to Nike and another $3.8 million to Simon Property Group Inc., the mall operator that is home to many a PacSun stores. Shares of the company plunged as much as 97% in the past 12 months and took another nasty dive today, losing over 40% of its value at one point, as it hit 5 cents. The retailer will join a long and less-than-illustrious list of retailers who also recently filed Chapter 11, including Quiksilver, American Apparel, Wet Seal, Delia’s, Sports Authority…well, you get the grim picture.

In on the secret…

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Victoria’s Secret (VS) is one retailer that is most definitely NOT filing for Chapter 11 bankruptcy. The company is actually at the top its fiscal game, posting a 3% sales gain over the previous year and record sales for 2015. But that isn’t stopping the insanely recognizable brand from making some pre-emptive changes, lest the retail climate fiscally change at some inconvenient point. Unfortunately, those changes involve some restructuring that will leave 200 employees without jobs in both the company’s New York and Ohio offices. Victoria’s Secret, whose parent company is L Brands, wants to streamline its operations by separating and concentrating on its top three units: lingerie, beauty and, of course, teen-centric brand, PINK. So what becomes of all the rest of Victoria’s Secret’s other categories of merchandise? They’re going buh-bye. VS, which also owns Bath & Body Works, plans to gradually shift gears away from its iconic catalog. Apparently, the internet managed to make the catalog, among other sales methods, a virtual relic – no pun intended.