by ilene - October 4th, 2015 3:49 pm
Courtesy of Mish.
A huge chunk of your tax dollars every year goes straight into the pockets of crooks. Nearly one in three earned income credits (EIC) is fraudulent. And the numbers keep getting bigger every year according to the Government Accountability Office.
Please consider GAO: Feds Made Nearly $1 Trillion in Overpayments Since Fiscal 2003.
Government waste took a significant turn for the worse in fiscal 2014, rising dramatically to $124.7 billion from $105.8 billion in fiscal 2013.
Since fiscal 2003, “cumulative improper payment estimates have totaled almost $1 trillion,” the Government Accountability Office (GAO) said in a new report.
U.S. Comptroller General Gene Dodaro testified Thursday on the GAO’s new findings (http://www.gao.gov/products/GAO-16-92T) before the Senate Finance Committee.
The GAO said three programs were most at fault: Medicare, Medicaid and the Earned Income Tax Credit (EITC).
The Earned Income Tax Credit program was the worst offender.
The Internal Revenue Service estimated that the program erroneously handed out $17.7 billion worth of “improper” payments. That amounts to a whopping 27.2 percent of the total $65.2 billion in EITC refund checks that the IRS sent out in fiscal 2014.
Medicare was nearly as bad. The program, which covers about 54 million elderly and disabled beneficiaries, incorrectly doled out $59.9 billion in fiscal 2014, which is about a tenth of its $603 billion budget.
So, one out of every $10 that Medicare spent last year was erroneous, the GAO found. Medicaid made $17.5 billion in mistaken payments out of its $304 billion budget, for a nearly 6 percent error rate.
Besides the EITC program, the federal programs with the highest reported error rates for fiscal 2014 included the School Breakfast program (25.6 percent) and the Farm Security and Rural Investment Act Programs (23.1 percent).
The GAO Report is called Addressing Improper Payments and the Tax Gap Would Improve the Government’s Fiscal Position…
More Pain For Biotechs Ahead: Valeant’s “Astronomical” Price Increases Take Center Stage; Pfizer Gets Dragged In
by ilene - October 4th, 2015 12:44 pm
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."
[Read these two Citron reports, if you haven't already: Citron Research Exposes the Information that Congress Will Find if it Subpoenas Valeant and Why a Congressional Subpoena to Valeant About Price Gouging on Drugs Should be Granted. ~ Ilene]
Conveniently, Deustche Bank laid out just what the average wholesale acquisition cost increases by Valeant for its universe 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's 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…
by ilene - October 4th, 2015 10:30 am
Courtesy of Bill Bonner at Acting-Man
$10 Trillion Goes to Money Heaven
What was the best place for your money so far in 2015? Cash! Compared to cash, almost everything is down. We are headed for the worst quarter for stocks since 2011, says the lead story in today’s Financial Times.
Global stock markets have lost $10 trillion of their value over the last three months. What? Where did all that paper wealth go? The old-timers say it went to “money heaven.”
One fine morning in money heaven….will it ever rain down again? Of course, no money has actually disappeared. Only make-believe values have.
Image credit: Salvatore Vuono
We’re not so sure. But we stop. We stare. We look at it as we would at a corpse. What happened to its life force? Where did it go? Why is it no longer there? We have no answer. But looking at a stock market sell-off is like standing over an open coffin: We are in awe at the power of the gods to take as well as to give.
They ask no one’s permission. They follow their own playbook (which they never reveal to mortals). And they are as much a law unto themselves as the NSA. But what’s $10 trillion that never actually existed anyway? Easy come, easy go, right?
Well… yes… and no. It’s usually a pleasure to welcome a baby, but a funeral can be painful. And every one of those dollars – now headed for heaven or hell – will be missed by someone.
On Wednesday, the Dow rose 154 points to 16,049. That left the stock market overvalued by about 8,000 points. At least, that is the assessment of billionaire investor and Wall Street legend Carl Icahn. The current price-earnings ratio for the Dow is 15, he says, and “half of
by Market Shadows - October 4th, 2015 1:02 am
Financial Markets and Economy
You have to risk money to make money. You have to make sure you don't risk so much money that you can lose your stake and go out of business as a trader. Bet too little and you never make a good return on your capital. Bet too much and you court career risks. So much of trading success boils down to taking intelligent risks.
Here is a useful calculation tool that can tell you the probability of hitting a drawdown threshold.
Forbes' Richest Americans list showcases dozens of private equity execs who have made billions doing leveraged buyouts.
But six men from two private equity firms share one common distinction.
Those shockwaves have wiped out 6% of the value from the S&P 500 so far this year.
Glencore had a crazy week — here's what analysts made of it (Business Insider)
Commodities trading and mining business Glencore has seen its share price destroyed over the last week, falling 29% on Monday alone.
Investors are worrying how the company will deal with its huge net debt pile, worth $30 billion (£20 million), as copper prices fall. Glencore is not especially profitable.
by ilene - October 3rd, 2015 11:13 pm
Courtesy of Citron Reports (originally posted Oct. 2, 2015)
Valeant's Business Model is Broken:
Stock is Too Dangerous to Own: Short Term Price Target – $125
Over the past two weeks, shares of Valeant (NYSE:VRX) took a steep decline over concerns of price gouging that was recently expressed by Presidential hopeful Senator Bernie Sanders. In his plea for a subpoena of Valeant Sen. Sanders would like to see all communication regarding the price hikes and the reasons behind them.
Look no further Senator — Citron has done the work.
Over the past two weeks, shares of Valeant took a steep decline over concerns of price gouging that was recently expressed by Presidential hopeful Senator Bernie Sanders. In his plea for a subpoena of Valeant Sen. Sanders would like to see all communication regarding the price hikes and the reasons behind them. Look no further Senator — Citron has done the work.
Investors, Politicians, and Concerned Citizens must note that Valeant raised the prices on the two key heart drugs in question the very next day after they acquired them … just to cover up for a bad quarter.
Here's the proof — all done without wasting taxpayer money on a hearing.
by ilene - October 3rd, 2015 9:23 pm
Finally, one of the top republican candidates said something intelligent about Syria while the dreadful Fiorina explained how we need to defend our,…yes, OUR territory in the middle east by engaging Russia in a war. Yeah, something like that.
Courtesy of Mish.
Carly Fiorina Seeks No-Fly Zone
In the Fox interview show below, Republican presidential candidate Carly Fiorina says the US should enforce a no-fly zone in Syria, even if it means shooting down Russian aircraft.
Quote of the day: "Russian jets have been basically conducting dangerous and unpredictable maneuvers around our waters and our borders and our territory".
Can I have a definition of "our" territory please?
The other side of the story is Invading the Black Sea: Washington's belligerent military maneuvers in traditional Russian territory.
And what about NATO Conducts Military Maneuvers 300 Yards From Russia's Border?
So who's provoking whom?
But let's return to the main story. What right does the US have to enforce a no-fly zone over Syria?
Quite frankly this woman is a dangerous war-monger, at best. She is totally unfit to be president.
Obama Goes After Putin
The Financial Times reports Obama Attacks Putin Over Syrian Air Strikes.
Russia is being pulled into a “quagmire” in Syria and its military intervention is likely to boost the Islamist militants of Isis, a defiant President Barack Obama
by ilene - October 3rd, 2015 8:22 pm
Courtesy of Citron Reports (originally posted Sept. 28, 2015)
The Real Risk to the US Healthcare System is when Health Care Costs are controlled by Hedge Fund Billionaires
How Pharmaceutical Pricing Runs Amok While U.S. Taxpayers Are Looted
As well as a major threat to the integrity of our entire healthcare system, Valeant (NYSE:VRX) is now the most devious three-cornered tax avoidance scheme we've ever seen.
How Pharmaceutical Pricing Runs Amok While U.S. Taxpayers Are Looted
For the last 14 years Citron Research has specialized in stories fighting against the abuse of ordinary investors in the stock market. Of course, we have never been shy to expose the greed of the Wall Street establishment. The story we share today has the farthest-reaching social implications of any that we have ever exposed.
While the whole country is in an uproar about Turing Pharmaceuticals, a one-drug startup pharma company attempting to raise prices on a single AIDS drug, the real issue is a 100-billion monster only Wall Street could love -- an extremely leveraged company that set the standard for this type of abuse, while being cheered on by a cadre of Wall Street high-rollers too wealthy to fret over their own personal health care costs, and its posse of hedge fund operators.
The real problem with drug pricing in America is forged in a single word: Valeant
Don’t Hate The Player – Hate the Game
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. This article is not for you hedge fund managers who believe that this quarter's performance is more important than human decency or longterm viability; this article is for the millions of Americans who together can be strong enough to mandate change. Wall Street will understand in time.
While Citron Research analyzes the future viability of Valeant based on their highly levered portfolio of drugs, the main takeaway of this article is
the danger that Valeant’s corporate strategy jeopardizes the entire US pharmaceutical industry, and its status as a leader in the development of drugs for the entire medical system.
by ilene - October 3rd, 2015 6:26 pm
I rarely share letters we write to IMA’s clients, but I decided to share this “Value Investor’s Manifesto” I wrote for our clients in July. It should be a helpful tool to frame recent volatility in an appropriate perspective. It’s just eight pages long, but it’s probably one of the most important pieces of writing I have done in a long, long time. Here is the first part, the introduction.
By Vitaliy Katsenelson, CFA
Part One: Introduction
The relationship between a client and a money manager is like a marriage: even if you’re married to the right person, it’s just a matter of time before your relationship will hit hard times that test the strength of your marriage. After all, life is not linear, it’s full of ups and downs. The downs will ultimately test a couple’s commitment to one another.
Just like life, stock returns are anything but linear. Over the last one hundred-plus years, stocks returned about 11% a year on average. But if you were to look at stock market returns on an annual basis, they were usually anything but 11%. This 11% average is the culmination of a very combustible mixture of numbers that individually bear very little resemblance to the average they result in.
Side effects of nonlinearity of stock behavior clearly show up in investor returns. The financial services market research firm DALBAR studied historical returns of mutual funds and actual (realized) returns of investors who invested in those mutual funds. DALBAR’s findings were stunning. For decades fund investors had significantly underperformed the mutual funds they invested in, not by a percent or two but by a mile, capturing only a small fraction of the returns of those mutual funds.
For a civilian (nonprofessional) investor, understanding the investment process of a fund manager is usually difficult. Often, performance is the only thing investors can judge objectively, so recent performance overshadows all other metrics. Investors compare the most recent returns of their favorite new mutual fund…
Robot Taxis Starting 2016 in Japan; Self-Driving Trucks on German Autobahn; Millions of Truck and Taxi Driver Jobs will Vanish in US by 2025
by ilene - October 3rd, 2015 3:18 pm
Courtesy of Mish.
I predicted robot taxis and trucks by 2020. Most doubted it, but I maintained I was as likely to be too late as opposed to too early.
The future has arrived, at least in Japan. Autonomous taxis will operate in test mode next year with a goal of full production by 2020.
Reader Alain writes …
"Hey Mish, I saw this article and it reminded me of your self-driving cars posts some time ago. When I read your posts I thought your time frame on their arrival seemed a bit optimistic. But here we are."
Robot Taxis Starting 2016 in Japan
The Wall Street Journal reports RoboCab: Driverless Taxi Experiment to Start in Japan
Japan’s cabinet office, Kanagawa prefecture and Robot Taxi Inc. on Thursday said they will start experimenting with unmanned taxi service beginning in 2016. The service will be offered for approximately 50 people in Kanagawa prefecture, just south of Tokyo, with the auto-driving car carrying them from their homes to local grocery stores.
According to the project organizers, the cabs will drive a distance of about three kilometers (two miles), and part of the course will be on major avenues in the city. Crew members will be aboard the car during the experiment in case there is a need to avoid accidents.
Robot Taxi Inc., a joint venture between mobile Internet company DeNA Co. and vehicle technology developer ZMP Inc., is aiming to commercialize its driverless transportation service by 2020. The company says it will seek to offer unmanned cabs to users including travelers from overseas and locals in areas where buses and trains are not available.
The project is a part of the government’s effort to promote innovation and startup businesses.
Among companies trying to turn driverless cars into business is Google Inc., which started testing its system in Texas in July.
[Picture above from video in this article.]
Robot Taxis Image
by ilene - October 3rd, 2015 2:46 pm
If you’re a mega corporation, one of the most annoying things about employees is that they expect to be paid for their work and as if that’s not enough, they also tend to draw a parallel between the performance of the company and what their labor is worth.
Fortunately, the combination of ZIRP-assisted, EPS-inflating buybacks and the relative powerlessness of the American worker has served to preserve the divide between corporate management and everyday employees, but every once in awhile, beleaguered laborers start to get the idea that they’re entitled to a greater share of what they effectively create and that translates directly into calls for higher wages.
This situation is exacerbated when the peasantry gets together in the form of organized labor which unfairly seeks to deprive management of its capitalistic right to keep almost all of the profits from the widgets their employees produce.
Given the above, it comes as no surprise that the subprime loan-assisted boom in auto sales has auto workers asking for a larger piece of the pie. Here’s WSJ:
Automobiles flew off dealer lots last month at the fastest pace in 10 years, but the good times are stirring tension between U.S. auto makers and their unionized workers that threatens to undercut the industry’s rebound.
United Auto Workers union members at Fiat Chrysler Automobiles NV this week rejected for the first time in three decades a tentative agreement as inadequate, and Ford Motor Co. faces a walkout at a big truck factory as soon as Sunday.
As buyers flood dealer lots, snapping up pricey pickups and sport-utility vehicles that deliver fat profits to General Motors Co., Ford and Fiat Chrysler, factory workers are demanding an end to the concessions that put the U.S. industry back on its feet after near collapse seven years ago.
“We got a catered meal of hot dogs and hamburgers as our thanks while others, I’m sure, got big bonuses,” said Phil Reiter, a 44-year-old union member referring to a recent production milestone at Fiat Chrysler’s Toledo, Ohio, Jeep factory. That plant on Tuesday rejected a UAW supported contract by a more than 4-to-1 ratio.