$ES_F MOC SELL $650mil $$
$ES_F SPX moc implied imbal $1.3B for SALE $$
$ES_F 02:34:26 TRADINGDATA2: (bshepard) ESM moving the the favored direction of the imbalalce meter ... down $$
$ES_F 81% sell side $$
John_Monaco (13:41:50): 75% sell side on the close
One week ago, after Carl Icahn joined the legion of doomsayers launched in mid-September by none other than the former "balls to the wall" bull David Tepper, we wondered who would be next:
But what does Tepper think? ICAHN SAYS 'IN MY MIND, IT IS TIME TO BE CAUTIOUS ABOUT THE U.S. STOCK MARKETS'
— zerohedge (@zerohedge) July 10, 2014
On Friday we got the answer, when none other than the ascendant "Bond King", Jeff Gundlach, whose Doubleline Capital just recorded its 20th consecutive month of inflows (contrasting with 29 straight months of outflows for former bond Goliath Pimco) became the latest to join the dark side when shortly after an abysmal payrolls report, he warned that the U.S. equity market as well as other risk markets including high-yield "junk" bonds face another round of selling pressure.
While perhaps not as dire in his outlook as Icahn, Gundlach explained why far from the correction being over, the market still has a long way to go. He told Reuters that "the reason the markets aren't going lower is people are holding and hoping," Gundlach told Reuters in a telephone interview that "the market bottoms out when people are selling and sold out – not when they are holding and hoping. I don't think you've seen real selling in risk assets broadly. Markets need buying to go up and they need volume to go up. They can fall just on gravity."
So after taking a its biggest step lower since 2011 in the past month, why has the selling in the S&P500 stalled? Because, well, hope may not be a strategy but now with the Fed's credibility rapidly evaporating, it is all investors have, or as Gundlach puts it: "The reason the markets aren't going lower is people are holding and hoping." Incidentally, there is a reason why hope is not a strategy: in the end, it always fails.
It's not just stocks that Gundlach is bearish on: he is also not a big fan of junk bonds. "I'll think about buying when it stops going down every single day."
And speaking of the implosion in junk bonds, JPM confirmed as much on Friday when it looked at the latest ICI quarterly worldwide data for Q2'15 which showed that HY ETFs, which have increased sharply their dominance in the HY space over the past five years, just experienced their largest drawdown ever over the past few months. Since May 2015, 16% (or $6,6bn) of the AUM of HY ETFs was redeemed, which is 1.4x larger than the previous major drawdown of July 2014.
In other words, while investors may be terrified of wholesale sales in stocks just yet over fears such selling will launch a feedback loops where selling begets even more selling, they have no such qualms about junk bonds, which on Friday continued their selloff despite the biggest equity short-squeeze on record.
What does this mean for the big picture?
Back to Gundlach again, whose Los Angeles-based DoubleLine was overseeing $81 billion in assets under management as of the end of the third quarter, said: "Clearly what's happening is people are waking up to the idea that global growth is not what they thought it was."
Gundlach's damning observation on the current state of the world would make him a worth entrant into the "conspiracy theory tinfoil blog hall of fame": "People are acting like everything is great. Junk bonds are at a four-year low. Emerging markets are at a six-year low and commodities are at a multi-year low - same level as in 1995 ... GDP is not growing at a nominal basis."
Even International Monetary Fund Managing Director Christine Lagarde affirmed this, Gundlach said: "You talk about an important moment – when somebody who is traditionally a cheerleader for a bright future says, 'I have to downgrade my global growth forecast,' as Lagarde did."
It gets worse: Gundlach, who has maintained since May that the Federal Reserve will not raise rates at all this year, said the environment feels similar to 2007's, when a financial crisis was brewing.
"People want them (Fed officials) to increase because they think it is a signal that everything is secretly OK. If the Fed raises rates, that means everything is OK. But it is the other way around. If the Fed raises rates against this backdrop, it just makes things worse."
Gundlach's closing observation: "There's going to be another wave down in risk assets and it's happening globally."
Adding it all up: Tepper, Icahn and now Gundlach; not to mention a brutalized hedge fund world which just saw its worst 2 month stretch since Lehman. Oh yes, and Yellen who also several months ago said stocks are overvalued.
Aside from that, just BTFD, because some central bank, somewhere, will surely come to your rescue...
The following would be funny, if it weren’t so incredibly sad. The United Nations’ spiral into clownish insignificance continues unabated.
From the New York Times:
GENEVA — In a U-turn at the United Nations Human Rights Council, Western governments dropped plans Wednesday for an international inquiry into human rights violations by all parties in the war in Yemen that has killed thousands of civilians in the last six months.
The change of direction came as the Netherlands withdrew the draft of a resolution it had prepared with support from a group of mainly Western countries that instructed the United Nations high commissioner for human rights to send experts to Yemen to investigate the conduct of the war.
That proposal was a follow-up to recommendations by the commissioner, Zeid Ra’ad al-Hussein, who detailed in a report this month the heavy civilian loss of life inflicted not only by the relentless airstrikes of the military coalition led by Saudi Arabia but also by the indiscriminate shelling carried out by Houthi rebels.
But in the face of stiff resistance from Saudi Arabia and its coalition partners, and to the dismay of human rights groups, Western governments have accepted a resolution based on a Saudi text that lacks any reference to an independent, international inquiry.
“The result is a lost opportunity for the council and a huge victory for Saudi Arabia, protecting it from scrutiny over laws of war violations which will probably continue to be committed in Yemen,” said Philippe Dam, deputy director of Human Rights Watch in Geneva.
To the consternation of human rights groups, the consensus approach coincides with evidence of sharply rising civilian casualties in Yemen. Mr. Hussein’s spokesman reported on Tuesday that the number of known civilian casualties since late March had risen to more than 7,217, including 2,355 people killed.
The civilian toll from airstrikes was “starkly underlined” by report s that more than 130 people had been killed at a wedding party in Taiz, the spokesman, Rupert Colville, said. The United Nations was trying to confirm what had happened, he said.Mr. Dam of Human Rights Watch was disappointed.
“This was the time to put the parties to this conflict under scrutiny for human rights violations,” he said. “Human Rights Council members have failed to send a clear message to Saudi Arabia and to the Houthis that they have to change the conduct of hostilities.”
Well yeah, what did you expect to happen after the UN named Saudi Arabia to head its human rights panel?
Those who align themselves with despotic regimes, routinely bomb wedding parties and hospitals and purport to engage in "nation building" by means of havoc and human misery
are hardly in a position to lecture the rest of the world on human rights violations, the evils of despotism and the morality of war...
More Pain For Biotechs Ahead: Valeant's "Astronomical" Price Increases Take Center Stage; Pfizer Gets Dragged In
Two weeks ago, the biotech sector imploded after a piece by the NYT'a Andrew Pollack drew attention to the 5000% increase in the price of a toxoplasmosis drug by specialty biotech firm Turing Pharma, whose CEO Martin Shkreli promptly became the poster child for greedy biotech executives who seek to profit on the back of people's misery by gouging the price of life-extending/saving drugs.
However, as we subsequently pointed out, what Shkreli did was merely an extension of the far more gradual if far more aggressive hiking in drug prices by every other company in the sector. Indeed, according to a Citron report in which the bearishly-focused research boutique "in the Twitter-storm furor over Turing’s recent one-drug price gouge attempt, the media has overlooked the reality that Martin Shkreli was created by the system. Shkreli is merely a rogue trying to play the gambit that Valeant has perfected."
Conveniently, Deustche Bank laid out just what the average wholesale acquisition cost increases by Valeant for its univers of drugs in the past 3 years.
We compiled the data to show that even as the US is supposedly drowning in deflation, Valeant had not gotten the memo, and its average annual drug price increase had risen from 21% in 2012 to a whopping 66% YTD.
In fact, as shown in the table below, Valeant had clearly put all its biotech peers to shame when it comes to enforced price increases.
Then late last week, after looking at Valeant soaring default risk as measured by the price of its blowing out CDS, soaring to over 30% even as its stock prices was surging, we wondered - does someone know something?
It appears someone may have known that this weekend, the same Andrew Pollack whose NYT article exposing Turing's 5000% price increase resulted in Hillary Clinton promising to cap specialty biotech prices if elected, has come back for round two and after taking aim at Shkreli and Turing, much to the chagrin of Bill Ackman, Pollack is now taking aim at the biggest culprit: Valeant Pharmaceutcals.
Here are some of the highlights from his just released article: "Valeant’s Drug Price Strategy Enriches It, but Infuriates Patients and Lawmakers" which is certain to put the biotech sector right back in the crosshairs of regulators and legislators, not to mention presidential candidates, just as the market was hoping the biotech pricing scandal was about to fade from collective memory.
J. Michael Pearson has become a billionaire from his tough tactics as the head of the fast-growing Valeant Pharmaceuticals International. And consumers like Bruce Mannes, a 68-year-old retired carpenter from Grandville, Mich., are facing the consequences.
Mr. Mannes has been taking the same drug, Cuprimine, for 55 years to treat Wilson disease, an inherited disorder that can cause severe liver and nerve damage. This summer, Valeant more than quadrupled its price overnight.
Yes, Mannes' out of pocket expenses will soar, from the $366 he paid in may to $1,800, but guess who will be charged for the balance of the price surge? Why you, dear taxpayers: "Medicare will now have to cover about $35,000 for the 120 capsules he takes each month."
Which is also why biotech companies have been able to get away with such prices hikes for so long: courtesy of "buffers" such as Medicare and Obamacare, their impact has been diluted on the back of everyone else.
Whom should US taxpayers thanks for this sad state of affairs, in which drug prices are literally hyperinflating? Two people. As we explained last week, most of the reason for soaring prices "devolves from a backroom deal cut when the Bush administration set in motion the Medicare Drug benefit and inexplicably (if you’re not a lobbyist) gave away the rights of the US Government - the nation's largest buyer of pharmaceuticals - to negotiate drug prices with suppliers."
The other person: well, the name Obamacare should give you a hint.
Back to the NYT piece which having laid out the strawman, next goes for the emotional angle:
"My husband will die without the medicine,” said his wife, Susan, who is now working a second part-time job to help pay for health care. “We just can’t manage another two, three thousand dollars a month for pills."
And then goes for the jugular:
Valeant’s habit of buying up existing drugs and raising prices aggressively, rather than trying to develop new drugs, has also drawn the ire of lawmakers and helped stoke public outrage against the growing trend of higher and higher drug prices imposed by big drug companies. This year alone, Valeant raised prices on its brand-name drugs an average of 66 percent, according to a Deutsche Bank analysis, about five times as much as its closest industry peers.
Just as we showed above. The bigger prolem is that now even Congress understands what is going on, and Valeant's "valiant" stonewalling of Congress where it has shown a dramatic determination to not testify, will fail in the coming days:
For example, after Valeant acquired Salix Pharmaceuticals this year, it raised the price of one Salix drug, the diabetes pill Glumetza, about 800 percent, in two steps.
“How can they just do this?” said Gail Mayer, a retired computer systems analyst on Long Island, who said her monthly supply of Glumetza went from $519.92 in May to $4,643 in August. For now, her insurance is covering most of that increase, but she is worried that it will stop covering the drug altogether, as others have.
“I’m sure it didn’t cost them $4,000 more to make,” Ms. Mayer said. “You don’t just go buy a bottle of milk and suddenly the supermarket charges you $100.”
The irony is that what Valeant and its peers are doing is quite logical in the framework of the broken US healthcare system, whose failure has only been compounded with the insurtance free-for-fall that is Obamacare.
Mr. Pearson has told analysts that it is standard industry practice to raise the price of a drug shortly before it faces generic competition, which Glumetza might face in February.
The drug industry argues that list prices are typically not what health plans pay after discounts and rebates are negotiated, and there is evidence that these discounts are increasing.
But even if patients are often shielded, the costs are paid by insurers, hospitals and taxpayers and lead to higher premiums and co-payments for everyone, critics say.
There is much more in the NYT piece but the kicker is the chart which will soon make its way to a Congressional deposition room and the latest kangaroo court in which Congress demands a corporate CEO explain how dare he take advantage of the idiotic laws passed... by Congress.
As the NYT calls it, the VRX price increases are "astronomical" - an adjective that will stick with the company throughout the now-inevitable congressional hearings:
For Prescription Drugs, Some Astronomical Price Increases - Valeant Pharmaceuticals has made a business of buying prescription drugs and raising their prices when possible. Now some members of Congress are demanding information from the company about price increases on two heart drugs, one of which is Isuprel. Some examples of price increases in Valeant’s drugs over the last several years:
What happens next: "last week, Democrats on the House Committee on Oversight and Government Reform demanded that Valeant be subpoenaed for information about big price increases on two old heart drugs that the company acquired in February."
After this NYT article, one can be certain that the House will get its subpoena, but the bigger irony is the following:
Hillary Rodham Clinton, who is seeking the Democratic nomination, called for efforts to control “price gouging” after a public outcry over the actions of Turing Pharmaceuticals, which abruptly increased the price on a drug to $750 a tablet from $13.50.
Yes, it will indeed be great to have Hillary involved because as we said two weeks ago, we are very curious "to see how Hillary's populist outrage at [biotech price gougers] will be explained when the public realizes that it is only thanks to the benefits of socialized insurance programs such as Obamacare, of which Hillary is a staunch supporter, that such price gouging was possible in the first place."
Finally, just in case the rest of the biotech and specialty pharma industry thinks it is safe and that Valeant will be the scapegoat for everyone's shadow price increases, here comes Bloomberg with "Pfizer Raised Prices on 133 Drugs This Year, And It's Not Alone"
Pfizer Inc., the nation’s biggest drugmaker, has raised prices on 133 of its brand-name products in the U.S. this year, according to research from UBS, more than three-quarters of which added up to hikes of 10 percent or more. It’s not alone. Rival Merck & Co. raised the price of 38 drugs, about a quarter of which resulted in increases of 10 percent or more. Pfizer sells more than 600 drugs globally while Merck has more than 200 worldwide, including almost 100 in the U.S.
Pfizer's saving grace: it's average price hike according to Deutsche Bank was 9%, or "only" 5 times more than core inflation.
Will this be enough to placate Congress which is finally realizing the Frankenstein pricing monster the broken US healthcare system has unleashed? The answer will be revealed in the coming weeks.
If it feels like you’re reliving the market jitters of the Great Recession and eurozone crisis, it’s probably because you are. During this week, Marketwatch reports that global risk appetite dropped to "panic" levels for the first time since January 2012, according to Credit Suisse’s Global Risk Appetite Index.
That was back when investors feared a breakup of the euro bloc. Before that, the index reached "panic" state around the onset of the 2008 financial crisis, after the Sept. 11, 2001 attacks on the U.S., during the dotcom bubble and after Black Monday in 1987.
Get the picture?
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