Golden passports and credit default swaps

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Howdy folks, it is Tuesday, October 4th, I'm Jacob Cohen, I've burned my tongue on some tea earlier, but I'm here with Robler so we're all good and this is the hustle daily show.

Today we're talking about golden passports, and the act of paying a hefty fee to become a citizen of a country that he used specifically is not much but fan and is taking them all to court.

But over the matter, Rob is going to break it down, I'm also going to briefly discuss the of lifting subject of credit default swabs and credit sweets potential liquidity probes.

But before we get into all that, let's look at what else is going on in the world of business of tech. Let's get crackle out.

Alright, first things first, Kim K. Kim Kardashian will pay a hefty $1.26 million fine to settle SEC allegations that she hopped crypto on Instagram without revealing that it was a paid promotion.

In the post that is all referring to if she wrote in all caps, are you into crypto? This is not financial advice, but sharing with my friends just told me about the varying a max token.

She also agreed not to promote crypto assets for another three years, and I'm appealing to you won't be doing that ever again.

I just love that it was in all caps.

Yeah, I also love when you look at an official SEC document and they're referring to Instagram followers.

Yes, also moving along Peloton and Hilton announced to deal to have at the chance 5.4,000 US hotels with at least one Peloton bike each by the end of the year.

Within the Peloton community 90% of members report that they are more likely to stay at hotels that have a Peloton bike.

I don't know, I think it's a really smart move. I think they already do a lot of that. I know there are a lot of kind of high end kind of mediums and stuff that have Pelotons.

But it's a good way for them to get rid of a lot of bikes really, really fast, probably at a lower price per bike than they usually sell for, but they got to get a roller too. They got to get the Peloton bike.

There we go.

All right. Also, Will Smith is back kind of so where to despite the 10 year Oscar's ban right after the famous slapper around the world.

You will see him this December an apples 120 million dollar budget civil war era film emancipation that is releasing in December. They apparently had some challenges deciding whether to release this winter release this because it's an Oscar contender, but he will not be at the Oscars.

Yeah, interesting pickle there. And then other news, Google discontinued Google translate the mainland China due to low usage.

No one else has low usage in China. Google, the search engine, which I stopped working in China in 2010.

I think it's due time for Google translate. Also, take talks of European branch reported 475% revenue growth between 2020 and 2021 reaching $990 million less year.

And apples, App Store saw revenue fall 5% in September. The biggest drop since Morgan Stanley who came out with that number started measuring the data in 2015.

I was talking about how that points to just decrease discretionary spending on things like games, people tightening the pockets a little bit totally.

All right, JC. So you dove into this recent news around credit Swiss, which people have compared this to Lehman Brothers during the financial crisis, right? Like what's going on here?

Yeah, the name Lehman Brothers has come up the last couple days.

Hello, I think we have to worry that much. Okay, that's what people are saying, right? That's probably what they said back then too. Yeah, we don't want to go back there.

Yeah, well, anyways, yes, shares in the Swiss banking giant credit Swiss have gone on a wild rock the last couple days.

Drop 10% yesterday, but then finished up 2% so they're going on a wild ride. It's all follows rumors about liquidity challenges at the bank that sent its credit default swaps surge it.

So I want to briefly touch on what credit default swaps are their term you may have never heard of you don't spend much time in the financial world.

Probably the only time you've ever heard of them is they'd be back in 2008 or in the movie The Big Show share about 2000. So credit default swaps are basically financial contracts that were kind of like insurance.

Take this scenario. You have party A who wins money to party B and then pays party C for insurance in case party B can't pay them back.

So they're basically swapping the risk right party A by paying party C. Exactly. It's like an insurance policy. So, okay, the difference is speculators can trade these swaps like playing cards and what they will do is buy swaps on companies that they think are in trouble.

So it's not so dissimilar from say you betting on a life insurance policy figure neighbor Jim who's 105 years old and will likely die soon chances are that's going to work out for you.

And you're not Jim's family, but you're just betting on that policy panning it.

Now, the big short examined the role of these swaps in the 2000 crisis and that all went to when the sellers were under capitalized the borrowers defaulted in the whole thing collapsed.

And so the question is, is this happening now with credit sweeps and it appears not the bank reassured its finances. They went on a whole PR spree.

Yo's been dropping memos like crazy, right? Lots of memos coming out with credit sweeps 11 and they said they have a hundred billion dollars to cover any losses. They have two hundred thirty eight billion dollars in liquid assets.

And the CEO said in one of these memos, I trust that you're not using our day to day stock price with the liquidity position of the bank. So it seems like they're okay for now.

Apparently they're working on a whole strategic plan to sell some assets and restructure the business coming out later this month so stay to definitely will do crazy.

All right, and Rob, you wrote about today this concept of golden passports.

I did have some drama that's been going on around golden passports. So first of all, what is a golden passport?

Yes, so I had absolutely no idea that golden passports existed. If you've ever heard of Malta, it's a Mediterranean island then is absolutely beautiful.

It's long been a destination for the ultra wealthy and they offer something other than postcard views. They actually offer this concept called investment citizenship.

So basically here's how it works for a hefty fee. Somebody can become a citizen of Malta and procure a Malte's passport, which is one of several golden passports that essentially allows visa free travel throughout all of Europe.

How much we talk?

Yes, so it starts at six hundred and seventy eight thousand dollars.

We're just talking about liquidity with credit squeeze. You've got to have a lot of liquid assets to be able to pay for this thing.

Since 2013, Malta has raised over a billion dollars through this scheme. So it's been kind of a boon for their economy.

But the EU is not a fan of this. The big news here is that they recently took Malta to court over this program.

And the other part of this is a lot of other places offered golden passports in the past, but once pressured by the EU have gotten rid of them.

The EU has a few arguments for why golden passports are wrong. And in the words of one EU official citizenship is a right. It's not a commodity to be bought and sold.

The other thing that they point to here is that it can be a security risk.

An investigation into Cyprus's golden passport program, which is default now found that there were 30 applicants between 2017 and 2019 who are under criminal investigation.

They found another 40 who I believe were government officials and at risk of laundry money.

But the bigger thing is just the optics of it don't look good.

The EU doesn't want people just being able to buy citizenship into European countries.

It sounds like something America would do.

Right, 100%. The crazy thing, so there was an investigation into a lot of those applicants in Cyprus.

And at the end of the day, it seems like most people that are doing this just want to travel more easily.

It's business people that want to be able to access Europe really easily.

People from countries that make it hard to open a bank account or get a mortgage want to be able to do that in European nation.

And this isn't easy way for them to be able to do that.

So it's kind of like boring when you actually get into the real reason people are doing this.

But it's kind of fun to dream up that this is like some international villain scheme like in a James Bond movie or something.

Is that interesting? The question I have is let's say Malta, it's banned from doing this.

Yeah, that's a billion dollars lost for their account.

Right. There are other options here like Portugal, for instance, offers this residence visa that allows non Europeans to pay 200 grand for the right to live work and study in Portugal.

And travel visa free to most EU countries for five years.

And after that five years, people who hold this residence visa are eligible to apply for full citizenship.

But Portugal's golden visa, not their golden passport, but their golden visa has raised six billion dollars since 2012.

So a massive business for the country could totally be an option for Malta.

It'll be interesting to see what happens there because I think when you talk about what the EU has an issue with here and you talk about like visas across different countries.

I think the rules are a little bit more obscure when it comes to visas.

I just don't think they're going to crack down as hard on that as they would just being able to grant full citizenship just for somebody paying you a check.

Yeah.

Hey, I'm about to bring about a boom.

That's going to do it for us today.

Folks, thanks for tuning in to the House of Daily.

Show where our proud part of the HubSpot podcast.

Network our editor today is Robert Harwin, our executive dozers there in Clark. I'm Jacob Cohen here with Rob Litters.

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And we'll see you tomorrow.

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