Archive for April, 2009

Scientists see this flu strain as relatively mild

Flu Watch Update – current genetic and other indications are suggesting the swine flu virus is typically contagious, but on the mild side in virulence.  - Ilene

Scientists see this flu strain as relatively mild

By Karen Kaplan and Alan Zarembo, LA Times 

As the World Health Organization raised its infectious disease alert level Wednesday and health officials confirmed the first death linked to swine flu inside U.S. borders, scientists studying the virus are coming to the consensus that this hybrid strain of influenza — at least in its current form — isn’t shaping up to be as fatal as the strains that caused some previous pandemics….

Flu viruses are known to be notoriously unpredictable, and this strain could mutate at any point — becoming either more benign or dangerously severe. But mounting preliminary evidence from genetics labs, epidemiology models and simple mathematics suggests that the worst-case scenarios are likely to be avoided in the current outbreak.

"This virus doesn’t have anywhere near the capacity to kill like the 1918 virus," which claimed an estimated 50 million victims worldwide, said Richard Webby, a leading influenza virologist at St. Jude Children’s Research Hospital in Memphis, Tenn….

The Centers for Disease Control and Prevention and the National Institutes of Health published genetic sequence data Monday morning of flu samples isolated from patients in California and Texas, and thousands of scientists immediately began downloading the information. Comparisons to known killers — such as the 1918 strain and the highly lethal H5N1 avian virus — have since provided welcome news.

"There are certain characteristics, molecular signatures, which this virus lacks," said Peter Palese, a microbiologist and influenza expert at Mt. Sinai Medical Center in New York. In particular, the swine flu lacks an amino acid that appears to increase the number of virus particles in the lungs and make the disease more deadly….

The swine virus does appear able to spread easily among humans, which persuaded the WHO to boost its influenza pandemic alert level to phase 5, indicating that a worldwide outbreak of infection is very likely. And the CDC reported on its website that "a pattern of more severe illness associated with the virus may be emerging in the United States."…

But certainly nothing that would dwarf a typical flu


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DOW 10,000!

Courtesy of Henry Blodget at ClusterStock

DOW 10,000!

cramer-bullhorns-tbi.jpgCelebrating the DOW’s best monthly percentage gain since 2002, CNBC has begun banging the DOW 10,000 drum.  Specifically, the network is asking guests whether they think we’ll be there by the end of summer.

In classic fashion, the prototypical CNBC guest these days is no longer talking about a "bottoming process." (That was three weeks ago.)  Now, seven weeks into a rip-roaring bull market, the guests are talking about… the new bull market.

We’re still skeptical.  We’re certainly grooving on those "green shoots," and we hope that the worst recession since the Great Depression is on its last legs.  We’re also glad we didn’t panic and throw in the towel at DOW 6500 when the Wall Street Journal ran that DOW 5000 cover story (which put in the bottom, by the way.) 

But we’re still not persuaded that stocks won’t suddenly head for the cellar again, especially as people realize that we still have a humongous bad debt problem on their hands.  Also, stocks are now almost back to fair value (see Robert Shiller’s chart below).

shillerpe430.jpg

So if you’re banging the drum about stocks soaring from here, you’re arguing that they’re going to charge right back to being significantly overvalued again.

At today’s levels, stocks are priced to return about 9%-10% a year over the next decade.  That’s a much better return than they’ve been priced to return at any time in the past 15 years (other than 7 weeks ago).  But we’d feel more comfortable about betting the farm if/when they’re priced to return, say, 17% a year, as they have been at the bottom of other major bear markets.  That would be a single digit P/E…

See Also:

Economy: Don’t Look Now, But Worst Is Over

 





Chrysler Chapter 11 Case Assigned To Judge Arthur Gonzalez

More on Chrysler’s impending bankruptcty, courtesy of Tyler Durden. – Ilene

Chrysler Chapter 11 Case Assigned To Judge Arthur Gonzalez

Update 2: Top unsecured creditors include:
  • Ohio Module Manufacturing – $70.3 million
  • BBDO Detroit -$58.1 million
  • Johnson Controls – $50.3 million
  • Continental Automotive – $47 million
  • Cummins Engine – $43.9 million
  • Germersheim Spare Parts – $36.2 million

Update 1: Chrysler says will produce Plan of Reorganization by August 28. Uhm, my math is rusty but that is a little longer than 60 days.

Developing Story. Gonzalez previously worked on Enron and WorldCom (here is a list of the judge’s opinions)

Corinne Ball of Jones Day will legally represent the company in bankruptcy.

Some more updates as I try to track down Chrysler’s bankruptcy case # in SNY (reader input welcome).

- Treasury to get 8% of equity in new Chrysler
- VEBA to get 55% of equity
- Daimler agrees to give up 19% equity in Chrysler
- Cerberus forfeits equity in the company and will waive its share of Chrysler’s 2nd lien
- In February Chrysler told U.S. it had $51.4 billion in assets

Here is the administration’s just issued statement on Chrysler:

Also conference call to be held to discuss the filing:

On Thursday, April 30 at 2 p.m. (EDT), Bob Nardelli, Chairman and Chief Executive Officer, Chrysler LLC and Chrysler Office of the Chairman Members will hold a media conference call to address the state of the company in response to President Barack Obama’s news conference.

DIAL-IN NUMBERS:

USA Toll Free Number: 888-677-1046

International Toll Number: +1-773-756-0415

PASSCODE: CHRYSLERCOMMUNICATIONS

See also Senior Chrysler Creditors Revolt by John Carney in the favorites section – Ilene

 





Senior Chrysler Creditors Revolt

John Carney at ClusterStock reprints a statement by a group of Chrylser’s senior creditors complaining they have no voice in negotiations due to being shut out: "in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades."  Anyone surprised? For more on the Chrysler bankruptcy, see the Zero Hedge section. – Ilene

Senior Chrysler Creditors Revolt

Courtesy of John Carney at ClusterStock

As Maria Bartiromo just reported on CNBC, a group of senior Chrylser’s lenders made up of firms that didn’t take TARP funds have issued a statement saying that they have been shut out of direct contact with the government during the negotiations.

Instead, they have been forced to negotiate through JP Morgan, which they view as having a conflict of interest.

Here’s the statement:

As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end – although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with


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Debt and income inequality (with additions 4/30)

Here’s an interesting discussion by Benign Brodwicz with charts on income inequality and the implications to society. - Ilene 

Debt and income inequality (with additions 4/30)

Courtesy of Benign Brodwicz at The Animal Spirits Page

Observations:

  • Note the similarity between the graphs of income inequality and debt/GDP.
  • It took a war, not just a depression asset price collapse reducing wealth inequality, to reduce income inequality last time, supporting the hypothesis that a new social contract is required to cure this ill.  The war brought people more income equality, the New Deal didn’t.  Without the motivation to band together to fight a common enemy like the Nazis, will Americans tolerate deficits of 13 percent of GDP and inevitable tax increases, when there is no equalization of the income distribution and the highly compensated continue to receive outsized rewards?  This is the great risk to the social fabric, and why I think the social contract is [widely perceived to be, which is the same thing as being] broken.
  • All households took on more debt in the national run-up since 1980, but lower income households took on much more in a attempt to “keep up” with higher income groups.  Median household income stagnated relative to mean income during this period (U.S. Census Bureau).  The bottom half is deleveraging, implying that their standards of living will fall further behind the top income classes, implying further rending of the social fabric.
  • Fixing the banks won’t fix this; in fact, it will exacerbate the current quasi-feudal situation.

image

Source:  Emmanual Saez’ home page.  The income measure is personal tax return based, so is roughly based on household income.

image

Source:  Credit Suisse

 

 

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Source:  Boston Fed





Honey I Shrunk The Treasuries

Courtesy of Tyler

Honey I Shrunk The Treasuries

10Y UST just got the Friend-O treatment. The yield now is a Fed vomit-inducing 3.15%.

 

 




Perspectives From The Great Depression

Courtesy of Tyler at Zero Hedge

Perspectives From The Great Depression

No less an authority than FDR’s Treasury secretary and close friend, Henry Morganthau, said in 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work…..I say after eight years of this Administration we have just as much unemployment as when we started, and an enormous debt to boot!" Similarly policy makers’ current aggressive actions remind me of the quote “Never in the history of the world has there been a situation so bad that the government can’t make it worse”.

And some comedy, compliments of the 1934 (now bankrupt) Chicago Tribune

hat tip Greg





Comparing Today’s Vegas Back Lot To A Real Bull Market

Tyler at Zero Hedge posts an analysis by contrary investor which compares our current market and economic situation to the ingredients that would support the birth of a real bull (not bs) market. - Ilene  

Comparing Today’s Vegas Back Lot To A Real Bull Market

Courtesy of Tyler at Zero Hedge

Zero Hedge has often been critical of the administration’s current policies, which are not unique or novel, or even sufficient, as many claim, to prevent a relapse based on a confluence of economic events that pushed the country into the Great Depression, and can be simply qualified as inflationary spending and credit bubble reflation. By peddling debt at even cheaper rates than the much maligned Greenspan did during the great initial credit bubble inflation, what is happening right now does not differ one bit from the scenario that brought us here. Attempting to set the basis for a true bull market by Obama would look totally different, most notably the elimination of massive amounts of debt to the pain of existing equity holders. Of course, that would never happen as those very equity holders are the bulk of his voting constituency and what politician cares about doing the right thing instead of getting reelected? But that is not news to anyone.

What would, however be newsworthy, is a comparison of the current market which has at this point become a speculative day trading casino, with the one, which in the early 1980s lead to a multi generational bull market, however ultimately fed by the same credit binge that has led us to our current predicament. For that purpose I present a great analysis done by highly insightful and contrarian folks over at contrary investor. The observations are stunning.

***

You already know that since “the bottom” in the equity market back in early March, the cries have grown ever louder with each passing point higher on the major equity averages that a major stock market bottom has been reached and a key turn in the economy is at hand as many an economic stat of the moment shows stabilization in rate of change deterioration for now. Moreover, we’ve seen a number of stock market extremes in recent months that we have to admit are generational in nature.

Has a major inflection point on the downside been achieved? It’s been a very long time since we’ve…
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Obama Official: Chrysler To Be “Surgical” Bankruptcy

Courtesy of Tyler Durden

Obama Official: Chrysler To Be "Surgical" Bankruptcy

According to an Obama official, the company will receive a $3.5 billion DIP from the U.S. government and up to $8 billion in total government financing, will file in NY bankruptcy court, and GMAC will take over financing duties.

The bankruptcy is expected to last 30-60 days (this is the biggest load of misguided garbage I have ever heard).

Other facts: Chryler will name a new board of directors and the Chrysler-FIAT alliance is expected to go through.

According to BO "Bankruptcy is not a sign of weakness." OK: are we talking about the same process where equity holders are wiped out and bondholders get pennies on the dollar?

Nothing like blaming Xerion Capital (a subsidiary of administration darling Perella Weinberg) once the UAW finds another 100,000 unemployed in its ranks in 3 months.

Anyone willing to take the under on the 30-60 days?

At least Bob Nardelli who single-handedly destroyed Home Depot and is now the proud supervisor of two massive corporate failures, is out . Great work Bob.

PS – Is it a sign of the apocalypse if one agrees with Dennis Kneale?

 
This article updates a previous post by Tyler on Zero Hedge:

Chrysler To File Any Minute, Hedge Funds Blamed

Of course, as expected, the White House is placing the full blame for the impending bankruptcy on the hold out hedge funds. Here is the stupendously hypocritical statement releaseed from the White House:

"[The hedge funds'] failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opporunity Chrysler now has to restructure and emerge stronger going forward."

How dare these hedge funds believe that debt covenants have any value under the current administration? After all, Obama himself is telling you that your economic interests have to align with the national ones. As long as they diverge, you can expect to pay 99% of all income as taxes in perpetuity compliments of soon to be implemented legislation out of Barney Frank.

By the way, isn’t it ironic that one of the biggest culprits


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Frontrunning: April 30

Tyler Durden’s Frontrunning: April 30

  • The quants are brewing real trouble at Morgan Stanley (WSJ)
  • Europe erases 2009 losses (Bloomberg)
  • Chrysler bankruptcy looms as deal on debt falters (NYT)
  • Howard Kagan sues Harbinger for $63 million of back pay (Dealbook)
  • Mexico plans partial shutdown to slow spread of flu (Bloomberg)
  • Japan’s industrial production up as Americans wait in lines to buy Toyota and Nissan cars (NYT)
  • Nasdaq follows SEC’ workaholic example and will take no action in Dendreon (Bloomberg)
  • Navigating toward Bretton Woods 3? (RGE)
  • Economy down, stocks up (Fundmastery)
  • What would Milton Friedman say? (Bloomberg)
  • US Protectionism takes its first bite (National Post)




 
 
 

Phil's Favorites

Legal cannabis celebrates its first anniversary in Canada: What's next?

 

Legal cannabis celebrates its first anniversary in Canada: What's next?

Montrealers hold up a Canadian flag with a marijuana logo on it outside a government cannabis store in the city Oct. 17, 2018. THE CANADIAN PRESS/Graham Hughes

Courtesy of Michael J. Armstrong, Brock University

This week marks the first anniversary of Canada’s recreational cannabis legalization. It’s an appropriate time to review what happened last year and consider what’s coming next.

Legalization brought big changes for some folks. About 9,200 employees now work at cannabis producers, with ...



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Zero Hedge

Pork-Panic Sends China CPI To 6 Year Highs As Factory Deflation Deepens

Courtesy of ZeroHedge View original post here.

China's producer prices deflated for the 3rd straight month, slumping 1.2% YoY - the biggest deflationary impulse since July 2016 - but, thanks to the explosion in pork prices (as 'pig ebola' spreads), Chinese consumers are facing the worst inflation since 2013.

  • China Sept CPI +3.0% YoY (2.9% exp and 2.9% prior)

  • China Sept PPI -1.2% YoY (-1.2% exp and -0.8% prior)

...



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Chart School

Review of Andrew CardWell RSI with Wyckoff price waves

Courtesy of Read the Ticker

RSI measures relative strength of price action of a set period versus prior set periods. It helps review the price swings or waves, the power of each price thrust into new ground, or lack of it. Price thrust like many things relies on energy, and energy is not a constant, it has a birth, a life and a death and relative strength helps us see that cycle. 

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Kimble Charting Solutions

Banks Should Send Critical Message To Stocks This Week!

Courtesy of Chris Kimble

Bank earnings could go a long way to impacting the broad market in a big way this week. Wells Fargo, Goldman Sachs, Bank Of America, JP Morgan, Morgan Stanley all announce earning the next couple of days.

As these earning announcements are to take place, the Bank Index (BKX) finds itself facing a key breakout test.

The index remains inside of bullish rising channel (1), as it has created a series of higher lows and higher highs over the past 8-years.

The index has little to brag about over the past 20-months, as it has created a series of lower highs and lower lows inside of falling chan...



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The Technical Traders

Daily Market Analysis and Trade Setups

Courtesy of Technical Traders

CLICK HERE TO GET REAL TIME TRADE ALERTS!

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Insider Scoop

22 Healthcare Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Reata Pharmaceuticals, Inc. (NASDAQ: RETA) stock surged 45.2% to $146.07 during Tuesday's pre-market session. The market value of their outstanding shares is at $2.8 billion. The most recent rating by Cantor Fitzgerald, on October 15, is at Overweight, with a price target of $180.00.
  • Aphria, Inc. (NYSE: APHA) stock increased by 18.6% to $5.16. The market value of their outstanding shares is at $1.8 billion. According to the most recent rating by CIBC, on July 26, the current rating is at Underperformer.
  • ...


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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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