Drama in Brazil

The week kicked off with little ‘ordem e progresso’ in Brazil, as the impeachment of President Dilma Rousseff – an almost foregone conclusion – hit a stumbling block, fueling a reversal of what have so far been the best performing stock market and currency.

Brazil’s benchmark index, the Ibovespa, fell as much as 3.5% on an intraday basis. The Brazilian real fared even worse, dropping as much as 4.6%, in a move not seen in almost 5 years. The selloff was triggered by a call for a new vote on the impeachment by Brazil’s lower house, after an argument by the attorney general that the previous ballot had ‘procedural illegalities’ was accepted.

The sharp nature of the selloff is a stark indicator of market psyche – investors were clearly relieved that the present government would be removed, maybe overly so. Indeed, while investors were quick to sell after the headlines hit the wires, analysts remain split about how much of a threat the new vote is for the immediate future of Brazil. The Senate’s official website states the vote scheduled for the 11th of May will still go ahead, and many are positive there is sufficient evidence to back the President’s impeachment.

Rousseff is accused of using state banks to shore up government accounts, and many were hoping that a new government would speed up the introduction of new policies needed to pull Brazil out of the worst recession in a century. A global economic superstar up to a few years ago, Brazil has fallen victim to the collapse in commodity prices and plunging business confidence.

LendingClub Plunges on Loan-Sale Abuse

In yet another blow to the lending and borrowing industry, LendingClub revealed abuses related to the sale of loans, and a failure by its founder and CEO to disclose a personal interest in an investment fund. The revelations prompted a 37% drop in the stock price and the departure of current CEO Renaud Laplanche.

LendingClub was seen as a standard-setter in the industry, pioneering the business model whereby borrowers are matched with investors willing to finance loans over the Internet, so much so that investors may be worried about other players in the industry. The findings could also trigger stricter scrutiny from the Securities and Exchange Commission according to some analysts.

The company has now said it will not be providing revenue or earning guidance at the moment, as it is focusing its energy on resolving the now apparent major shortcomings in internal controls. Steps taken so far include the termination of three senior managers involved in the sale of the fraudulent $22 million in loans, and a review that found “personal interests held in a third-party fund while the company was contemplating an investment in the same fund.”

Guess who’s back? McAfee

John McAfee, the creator of the popular antivirus software bearing his name, has returned to the security software industry that he helped pioneer, as he takes on the role of chairman of MGT Capital Investments, a US company which invests in fantasy sports. The deal sees MGT buy security assets from D-Vasive – a company controlled by McAfee – leaving D-Vasive with 47% control of MGT. The move will also see MGT change its name to John McAfee Global Technologies.

John McAfee sold his namesake antivirus to Intel for $7.6bn six years ago – one of the biggest ever software deals. Earlier this year he had publicly criticized the FBI’s attempt to arm-wrestle Apple to grant access to its iPhone in the San Bernardino terrorist case. He said the newly-formed would “shortly” launch anti-spy software designed to give smartphone greater control over their devices and prevent malicious apps from accessing their microphones and cameras remotely.

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd. has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.