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11Jun2015 Market Close: Markets Close Up In The Green Thanks To BTFDers, Friday's Session Might Put The Bears In Charge

Written by Gary

Like yesterday, indicators point to a weak market suggesting tomorrows session will be a down one. The BTFDers jumped in during the last 60 seconds to push the averages up fractionally changing the daily candle to a reversal one which has been accurate lately.

Todays S&P 500 Chart

Obviously, Mr. Market does not want to support our hypnosis, but what fun is it if you can't guess once in a while and besides, eventually we will be right!

The Market in Perspective

Here are the headlines moving the markets.

Wall Street rises after strong retail sales data

NEW YORK (Reuters) - U.S. stocks edged higher on Thursday led by defensive sectors, including healthcare, while retail sales data boosted hopes for consumer spending.

29-Year-Old Pulls Off Biggest Biotech IPO In History With Glaxo Throwaway Drug

In March we asked "Are We In A Biotech Bubble?." At the time, we pointed out a number of rather alarming statistics including the fact that there were 82 biotech IPOs in 2014, eclipsing 2000's record of 67.

We also noted that the number of biotechs with valuations that exceed $2 billion has quadrupled over the last four years alone.

On Thursday, we got what might fairly be characterized as definitive evidence that investors have now abandoned any pretense of sanity when it comes to chasing the next blockbuster miracle drug.

Enter Axovant Sciences. The company, which began trading today, is a spinoff Roivant Sciences, a shell created by 29-year old Vivek Ramaswamy after he left QVT last May. In December, Axovant bought an Alzheimer's drug (RVT-101) that GlaxoSmithKline shelved years ago after 13 clinical trials for â€" get this â€" $5 million. So, just to be clear, Glaxo basically gave this thing away.

(Ramaswamy)

What's a $5 million throwaway drug worth in Janet Yellen's "substantially stretched" biotech market? Billions, apparently. The company

Never before in the history of mankind, has so much been owed by so few to so many..

Most of the world's financial and economic problems would be solved if there was a healthy and sustainable level of economic growth. Growth is as important to economic health as blood is to bodily health. It is no good if it is patchy, erratic and anaemic, it has to be widespread, consistent and robust.

Good quality growth is what policy makers have been searching for ever since 2008, and it is proving to be very elusive.

Now you see it….

Growth has been playing hide and seek with the global economy for a long time, in fact so long that thoughts are returning to the possibility that the financial crisis has triggered a fundamental shift to a lower growth cycle.

Just as the probability of global warming being man made has a growing number of adherents, the possibility of a paradigm shift in growth potential is gaining ground. In arguing recently that the US recovery is still too weak to justify an interest rate rise, the president of the Boston Federal Reserve said that he saw signs of a profound change in consumer behaviour towards saving at the expense of consumption. Never has so much monetary ammunition been deployed for so long, for such a small return.

The OECD added to the gloomy prognosis last week. It issued its twice yearly Economic Outlook in which global growth for this year was downgraded from 3.7% to 3.1%, including cuts for the US from 3.1 to 2% and for China from 7.1 to 6.8%. These are big reductions in only a six month period.

The eurozone is forecast to turn in a disappointing 1.4%. Next year global growth is expected to reach 3.8% with the US at 2.8%, China at 6.7% and the Eurozone 2.1%. In the words of the OECD's chief economist "we give the global economy only the barely passi ...

The Warren Buffet Economy, Part 2: Why Its Days Are Numbered

Submitted by David Stockman via Contra Corner blog,

There is no reason whatsoever to believe that the financial carrying capacity of the US economy—-or any other DM economy—-has improved since the 1980s. In fact, it has gone the other direction in recent years due to aging demographics, declining competitiveness versus the surging EM economies, dwindling rates of productivity growth and a dramatic increase in the leverage ratio against both public and private incomes.

All of these adverse macro-trends mean that the US economy's ability to generate growth, incomes and profits has been significantly lessened. Accordingly, since its ability to service debt and equity capital at an honest market rate of return has diminished, the logical expectation would be that the finance ratio to national income would fall.

In fact, once Greenspan took the helm and his apparently atavistic embrace of gold standard money melted-down under the Wall Street furies of October 1987, the finance ratio erupted. As shown below, it has never looked back and at 5.5X national income has reached a point that would have been unimaginable on the morning of Black Monday.

Stated differently, under a regime of honest money and market determined financial prices, the combined value of corporate equities and credit market debt would not have mushroomed by 8X—- from $11 trillion to $93 trillion—- during the past 27 years. For crying out loud, the nominal GDP grew by only 3.5X during the identical span. In effect, the US economy has been capitalized at higher and higher rates for no ascertainable reason of fundamental economics.

...

Facebook shareholders shoot down 'one share, one vote' proposal

(Reuters) - A proposal to give Facebook Inc's stockholders one vote per share was rejected at the company's annual meeting, according to preliminary results.

Stocks, dollar gain on strong U.S. retail sales

NEW YORK (Reuters) - Global equity markets rose on Thursday on optimism over still testy Greek debt talks and on strong U.S. retail sales, which lifted the U.S. dollar and bolstered expectations the Federal Reserve will raise interest rates this year.

As Japan Battles Deflation, a Bitter Legacy Looms

Korekiyo Takahashi steered Japan out of the Great Depression but was criticized for the soaring inflation that ensued. Now, Prime Minister Shinzo Abe faces the difficult question of how far to follow Mr. Takahashi's policies.

Rupert Murdoch to hand over Fox reins to son James -source

NEW YORK (Reuters) - Rupert Murdoch, the 84-year old media baron, will hand over the chief executive reins at entertainment conglomerate Twenty-First Century Fox Inc to his 42-year-old son James, a source familiar with the situation said on Thursday.

Gazprom Seeks A Way Around Ukraine By 2019

Submitted by Nick Cunningham via OilPrice.com,

Gazprom has vowed to entirely cut out Ukraine as a transit hub for natural gas exports to Europe.

The conflict with Ukraine has scrambled the longstanding energy relationship between Russia and Europe. The European Union imports around one-third of its natural gas from Russia, but having seen those flows cut off multiple times in the past, European officials are pushing to rid themselves of their dependence on Moscow. The violence in Ukraine solidified that motivation.

Russia is also unhappy with the arrangement. In an effort to separate gas exports to the EU (a critical business relationship that Moscow doesn't want interrupted) from its ongoing conflict with Kiev (a geostrategic priority), Russia has a great incentive to cut out Ukraine. About half of Russia's gas exports to Europe must travel through Ukraine.

But that could change within the next four years, if Gazprom gets its way. "We will not export gas via Ukraine after 2019. The customers will get gas at (newly) agreed delivery points," Gazprom's Deputy CEO Alexander Medvedev said on June 9.

However, that would require major investments in new infrastructure in order to successfully work around Ukraine. Medvedev is pressing Europe to hurry up and decid ...

Why Bill Gross' Departure Did Not Roil The Bond Market: Pimco Sold To Itself

Back in September, following the shocking news that after building Pimco from the ground up, Bill Gross would depart the world's then biggest bond fund after some terminal office politics, there were concerns that as a result of a surge in redemptions and liquidation sales at the Gross-controlled Total Return Fund, the already illiquid bond market would suffer and potentially go bidless across various CUSIPs in order to extract the best price from the forced seller.

This did not happen even as said surge in redemptions, which has seen PIMCO's AUM tumble by 60% from its peak holdings of $293 billion in April 2013, took place just as expected. Why not?

According to Bloomberg, the reason is that while the TRF did indeed sell tens of billions in Treasurys and TIPS, it rarely actually faced the outside market. Instead, the fund's clearance sale was held in-house. "The firm sold about $18 billion of Total Return's assets to other Pimco funds and accounts between October and March, helping it meet more than $100 billion of redemptions that followed Gross's surprise exit."

Wait, is a fund allow to reallocate securities in an arms-length transaction without ever touching (and roiling) an already turbulent market? Turns out the answer is yes, thanks to a provision in the Investment Company Act of 1940 allowing funds within the same family to trade with one another under limited circumstances.

Such cross trades are tightly regulated because they pose potential conflicts of interest, and can only be done if they're beneficial to the buye ...

Deutsche Bank's new CEO Cryan seeks to steady nerves

FRANKFURT (Reuters) - Deutsche Bank's top managers have met with the bank's new chief executive John Cryan this week as he works hard to keep them on board, at least for now, following Sunday's shock announcement that he would replace Anshu Jain in July.

Ukraine Bonds Plunge After 'American' FinMin Escalates Default Threat

In the last 3 days, Ukraine's short-term bond prices have crashed 9%. Specifically the 2017s are down 3.5 points today alone following Ukraine's (American) finance minister threats yesterday in Washington that it will default on its debt unless creditors (which include both Russia and the US taxpayer) acquiesce to their demands for more aid (more debt). As Bloomberg reports, the country will stop making payments on its debt if talks don't make progress, Finance Minister Natalie Jaresko told reporters in Washington Wednesday. Bondholders are "deeply concerned" about Jaresko's stance, a creditor group led by Franklin Templeton said in a statement today.

The comments suggest a two-month impasse in negotiations is only hardening as coupon payments come due this month and a $500 million bond matures in September. As Bloomberg goes on to note,

"The positions of Ukraine and creditors are far-far away," Gintaras Shlizhyus, a Vienna-based strategist at Raiffeisen Bank International AG, said by phone Thursday. "That makes me believe that we are talking about the prolongation of ta ...

IMF quits Greek talks; EU tells Tsipras: stop gambling

WASHINGTON/BRUSSELS (Reuters) - The International Monetary Fund dramatically raised the stakes in Greece's stalled debt talks on Thursday, announcing that its delegation had left negotiations in Brussels and flown home because of major differences with Athens.

As Goes AAPL, So Goes The Wealth Of America's 0.1%

Given this morning's jubilant celebrations over the surge in household net worth - which as we noted earlier reflects the riuch getting richer (and implicitly the poor getting poorer) - we thought a quick look at who (or what) is responsible for this. It turns out that the correlation between AAPL and the stock market has never - ever - been higher.

h/t @ReaperCapital

In other words, as goes AAPL, so goes the wealth of America's 0.1%...

Charts: Bloomberg

Did Greece's Time Just Run Out?

Early last month, negotiations between Greece and creditors took a decisive turn the worst when the IMF broke from the rest of the troika on the feasibility of a third Greek bailout program.

The split came when Poul Thomsen, head of the IMF's European department told EU creditors that Greece is so far off track economically, the Fund was not only against a new bailout for Athens, but in fact was considering whether or not to withhold its portion of remaining funds under the existing program.

Thomsen said the fact that Greece was on track to run a deficit when it should be well on its way to running a budget surplus suggests to the IMF that EU creditors should be prepared to write down their Greek debt so as to make the country's debt-to-GDP ratio more â€'sustainable.' Unsurprisingly, Europe wasn't particularly enthusiastic about the idea.

Thomsen's remarks â€" which were delivered to EU finance ministers at an April meeting in Riga â€" were followed up by reports that the IMF had informed the ECB and the European Commission that the Fund would not be participating in a third Greek bailout program.

Earlier today, those reports were confirmed as the IMF has withdrawn its team and sent its lead negotiators back to Washington. Meanwhile, a meeting between Tsipras and European Commission President Jean-Claude Juncker was billed by one EU official as a "last attempt" to convey the urgency of the situation to the Greek PM. European Council President Donald Tusk (who met with Tsipras on Wednesday) has also voiced frustration at Athens' apparent belligerence in the face of economic oblivion. FT

Another Tale From The Oligarch Recovery: Why The Poor Pay $4,150 For A $1,500 Sofa

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don't have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy's fringes

In some ways, the business harkens back to the subprime boom of the early 2000s, when lenders handed out loans to low-income borrowers with little credit history. But while people in those days were charged perhaps an interest rate of 5 to 10 percent, at rental centers the poor find themselves paying effective annual interest rates of more than 100 percent. With business models such as "rent-to-own," in which transactions are categorized as leases, stores like Buddy's can avoid state usury laws and other regulations...

By the next day, the Abbotts had a remade living room, two companion pieces, both of the same blended material, 17 percent leather. The love seat and sofa retailed, together, for about $1,500. Abbott would pay for hers over two years, though she still had paying the option to pay monthly or weekly. The total price if paid weekly: $4,158.

"I've never seen a customer base or an economy like this," Gazzo said in a telephone interview from the co ...

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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