Archives for October 2015

Austria Announces Fence With Slovenia; Irony of German Whine; Cascading Fences; Mish Proposed Strategy

Courtesy of Mish.

Two months ago, Austria’s chancellor Werner Faymann criticized Hungary for building a fence along its border.

Faymann proclaimed “To think that you can solve something with a fence, I believe this is wrong.”

Today, Austria Announces Fence on Slovenia Border to Slow Refugee Flows.

Europe’s migration crisis escalated on Wednesday after Austria said it would build a fence on its border with Slovenia in a bid to create an “orderly” inflow of refugees and migrants into the country.

The move marks potentially the most serious fracture in the EU’s response to the crisis, which has seen nearly 700,000 people enter Europe since the start of the year, as it would mark the first time a physical barrier is built between two members of the continent’s passport-free Schengen zone.

Johanna Mikl-Leitner, interior minister, insisted that Austria would not totally shut its border with Slovenia. Instead, the plan involved “fixed facilities in the area of border crossings”, she said.

“It’s not just about a fence . . . it is about all technical possibilities to ensure a controlled, orderly influx into our country,” she told Ö1, Austria’s national broadcaster, adding that the plan was not “at all” an attempt to close the border.

Despite repeated meetings, leaders have so far failed to come up with a unified response. While some national capitals have introduced strict border controls, others have opted to let migrants and refugees straight through, despite EU rules dictating that they should be processed when they arrive.

The crisis has strained relations Germany and Austria which burst into the open on Wednesday.

In a significant toughening of German rhetoric towards the crisis, Thomas de Maizière, interior minister, on Wednesday blamed Austria for accelerating the movement of refugees and putting the German authorities under extreme pressure.

“Austria’s behaviour in all this in the last few days has not been in order,” said Mr de Maizière, immediately after a cabinet meeting in Berlin chaired by Chancellor Angela Merkel.

He added: “We have had to complain that the refugees have been taken to specific places without any warning and after dusk and from there they have come to the German border with preparation and without any warning.” …

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Goodbye Middle Class: 51 Percent Of All American Workers Make Less Than 30,000 Dollars A Year

Courtesy of Michael Snyder at End of the American Dream

The Middle Class - Public Domain

We just got more evidence that the middle class in America is dying.  According to brand new numbers that were just released by the Social Security Administration, 51 percent of all workers in the United States make less than $30,000 a year.  Let that number sink in for a moment.  You can’t support a middle class family in America today on just $2,500 a month – especially after taxes are taken out.  And yet more than half of all workers in this country make less than that each month.  In order to have a thriving middle class, you have got to have an economy that produces lots of middle class jobs, and that simply is not happening in America today.

You can find the report that the Social Security Administration just released right here.  The following are some of the numbers that really stood out for me…

-38 percent of all American workers made less than $20,000 last year.

-51 percent of all American workers made less than $30,000 last year.

-62 percent of all American workers made less than $40,000 last year.

-71 percent of all American workers made less than $50,000 last year.

That first number is truly staggering.  The federal poverty level for a family of five is $28,410, and yet almost 40 percent of all American workers do not even bring in $20,000 a year.

If you worked a full-time job at $10 an hour all year long with two weeks off, you would make approximately $20,000.  This should tell you something about the quality of the jobs that our economy is producing at this point.

And of course the numbers above are only for those that are actually working.  As I discussed just recently, there are 7.9 million working age Americans that are “officially unemployed” right now and another 94.7 million working age Americans that are considered to be “not in the labor force”.  When you add those two numbers together, you get a grand total of 102.6 million working age Americans that do not have a job right now.

So many people that I know are barely scraping by right now.  Many families have to fight tooth and nail just to make it from month to month, and there are lots of Americans that find themselves sinking deeper and deeper into debt.

If you can believe it, about a quarter of the country actually has a negative net worth right now.

What that means is that if you have no debt and you also have ten dollars in your pocket that gives you a greater net worth than about 25 percent of the entire country.  The following comes from a recent piece by Simon Black

Credit Suisse estimates that 25% of Americans are in this situation of having a negative net-worth.

“If you’ve no debts and have $10 in your pocket you have more wealth than 25% of Americans. More than 25% of Americans have collectively that is.”

The thing is– not only did the government create the incentives, but they set the standard.

With a net worth of negative $60 trillion, US citizens are just following dutifully in the government’s footsteps.

As a nation we are flat broke and most of us are living paycheck to paycheck.  It has been estimated that it takes approximately $50,000 a year to support a middle class lifestyle for a family of four in the U.S. today, and so the fact that 71 percent of all workers make less than that amount shows how difficult it is for families that try to get by with just a single breadwinner.

Needless to say, a tremendous squeeze has been put on the middle class.  In many families, both the husband and the wife are working as hard as they can, but it is still not enough.  With each passing day, more Americans are losing their spots in the middle class and this has pushed government dependence to an all-time high.  According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month.

Sadly, the trends that are destroying the middle class in America just continue to accelerate.

With a huge assist from the Republican leadership in Congress, Barack Obama recently completed negotiations on the Trans-Pacific Partnership.  Also known as Obamatrade, this insidious new treaty is going to cover nations that collectively account for 40 percent of global GDP.  Just like NAFTA, this treaty will result in the loss of thousands of businesses and millions of good paying American jobs.  Let us hope and pray that Congress somehow votes it down.

Another thing that is working against the middle class is the fact that technology is increasingly taking over our jobs.  With each passing year, it becomes cheaper and more efficient to have computers, robots and machines do things that humans once did.

Eventually, there will be very few things that humans will be able to do more cheaply and more efficiently than computers, robots and machines.  How will most of us make a living when that happens?

The robopocalypse for workers may be inevitable. In this vision of the future, super-smart machines will best humans in pretty much every task. A few of us will own the machines, a few will work a bit… while the rest will live off a government-provided income…the most common job in most U.S. states probably will no longer be truck driver.

For decades, we have been training our young people to have the goal of “getting a job” once they get out into the real world.  But in America today there are not nearly enough good jobs to go around, and this crisis is only going to accelerate as we move into the future.

I do not believe that it is wise to pin your future on a corporation that could replace you with a foreign worker or a machine the moment that it becomes expedient to do so.  We need to start thinking differently, because the paradigms that worked in the past are fundamentally breaking down.

So what advice would you give to a young adult today that is looking toward the future?

Inside the Secretive World of Tax-Avoidance Experts

Here's an enlightening look into the world of wealth managers aka tax avoidance experts. 

Inside the Secretive World of Tax-Avoidance Experts

A sociologist realized that if she were ever going to understand global inequality she would have to become one of the people who helps create it. So she trained to become a wealth manager to the ultra-rich.

By Brooke Harrington at The Atlantic

Shakespeare said that all the world’s a stage, but the sociologist Erving Goffman added that most of the interesting stuff lies behind the scenes, in what he called the “backstage” areas of everyday life.

Having spent the past eight years doing research on the international wealth-management profession, I have to agree with Goffman: The most revealing information comes from the moments when people stop performing and go off-script. Like the time one of the wealth managers I interviewed in the British Virgin Islands lost his composure and threatened to have me thrown out of the country. His ire arose from an unexpected quarter:  He took offense to my use of the term “socio-economic inequality” in the two scholarly articles I had published on the profession. I thought the articles were typically academic, which is to say, the opposite of sensationalizing and of little interest to anyone outside my field.  But my suggestion that wealth managers might be connected to inequality in any way seemed alarmingly radical to this gentleman.

I was lucky that he merely threatened me. A journalist from Newsweek actually was deported from a different tax-haven island (Jersey) for her reporting there, and was banned from re-entering the island, or any part of the U.K., for nearly two years. Even though her story was unrelated to the financial-services industry, it was expected to bring negative publicity to the island, threatening its reputation as a place to do business. The message was therefore quashed by banishment of the messenger. The wealth-management industry does not mess around.

Wealth management is a profession on the defensive. Although many people have never heard of it, it is well known to both state revenue authorities and international agencies seeking to impose the rule of law on high-net-worth individuals. Those individuals—including the 103,000 people classified as “ultra-high-net-worth” based on having $30 million or more in investable assets—pay wealth-management professionals hefty fees to help them avoid taxes, debts, legal judgments, and other obligations the rest of the world considers part of everyday life. The general public doesn’t hear much about these professionals, since there are only a few of them worldwide (just under 20,000 belong to the main professional society) and they strive to keep a low profile, both for themselves and their clients.

[…]

By the same token, when Oxfam estimates that just 1 percent of the world’s population will own more than 50 percent of the world’s wealth by 2016, it’s important to realize that such a state of affairs doesn’t just happen by itself, or even through the actions of individual wealthy people. For the most part, the wealthy are busy enjoying their wealth or making more of it; keeping those personal fortunes out of the hands of governments (along with creditors, litigants, divorced spouses, and disgruntled heirs) is the job of wealth managers.

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The Federal Reserve: Illusion Of Understanding, Illusion Of Control

Courtesy of Charles Hugh-Smith of OfTwoMinds

We live in an era of illusion: the illusion of understanding, and the illusion of control.

Few institutions reflect these illusions better than the Federal Reserve, though the Pentagon, Congress, the Imperial Presidency, the sick-care cartel and the higher education cartel are certainly giving it a run for its money.

The foundation of the illusion of understanding is data–Big Data. That the Fed has no idea of how the real economy actually functions is painfully apparent. But the state's vast flood of data, neatly organized into slop-troughs that suggest precision, creates a very compelling illusion of understanding: media shills go to absurd lengths to treat bogus or marginal data as the equivalent of the tablets brought down by Moses.

Sorry, Corporate Media: the unemployment rate and the official rate of inflation are not real. They are illusions rigged to lull the masses and enrapture the simulacrum experts living high on the hog in academia, NGOs (non-governmental organizations) and think-tanks.

Here is the reality, as expressed by IMF Chairwoman Christine Lagarde: what passes for precise data is a guesstimate at best, and a carefully executed distortion at worst.

The net result is nonsensical policies that fail to achieve their stated objectives. Even more tragicomic, the spokespeople tasked with presenting this failure to the Great Unwashed are forced to speak gobbledigook that borders on the psychotic if taken at face value.

For example, Janus Yellen must claim she is planning to raise interest rates while also proclaiming that she's keeping rates at zero for the indefinite future. If a non-Elite person rambled on in this fashion, they would be tossed in jail as a 51-50 (involuntary psychiatric hold).

Equally perverse is the illusion of control–the fantasy that the Federal Reserve controls the real economy. Note to Fed: hosting the financial feasting of the Power Elites for 7 long years had essentially zero positive effect on the real economy.

All the Fed's QE and ZIRP (zero interest rate policy) accomplished was the inflating of multiple bubbles (housing, stocks, bonds, student loans, subprime auto loans, etc.) and chumming the feeding-frenzy of financiers gorging themselves on income-producing assets while the dwindling middle class has been mesmerized into accepting debt servitude as the acme of middle class membership.

The notion that the Fed or the IMF understands the real economy is pure illusion. So is the notion that they control the real economy. All they control is the level of exploitation of the many by the few.

Charts Run Counter to Fed Talk of Rate Hike

Courtesy of Pam Martens.

GDPNow From Atlanta Fed As of October 27, 2015

GDPNow From Atlanta Fed as of October 27, 2015

The Federal Open Market Committee (FOMC) of the Federal Reserve will release its statement today at 2 p.m. (ET). It is widely expected that the Fed will be holding rates steady. The Fed has been signaling for more than a year that the U.S. economy is strong enough for it to raise interest rates gradually. Based on comments from various Fed speakers, many had expected the rate hike to come in September.

Wall Street on Parade has taken a skeptical view of the Fed’s happy talk about the economy – preferring to look at the cold, hard data coming from inside and outside the Fed. It now seems quite plausible that the Fed’s agenda all along has been to talk up the U.S. dollar to prevent capital flight while waving pom-poms to boost confidence and spur consumer spending.

Corporate media seems sycophantically willing to regurgitate the Fed’s optimistic prognostications on the U.S. economy, month after month, quarter after quarter. There have been a few courageous exceptions. On February 10, Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities USA, had this to say on CNBC, the cable business channel:

“…there’s also this wrong concept that I keep hearing over and over again in the financial press about this acceleration in economic growth. That isn’t happening. Last month we had a horrible retail sales number. We had a horrible durable goods number. We’re likely to have a very disappointing retail sales number coming forward. This month we’ve had a strong payroll number – we say everything’s great. It’s not great. It’s running where it’s been. It’s been the same thing for the last five years. There’s no improvement in the economy.”

The St. Louis Fed’s GDP chart below shows just how correct Ricchiuto is. Despite unprecedented fiscal stimulus and three doses of quantitative easing since the 2008 financial crash, the U.S. is still unable to sustain meaningful economic momentum.

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Slovenia Calls on Army, Private Security Forces, Ponders Article 222 for EU Military Aid to Halt Flow of Migrants

Courtesy of Mish.

Slovenia has a population of 2 million people. But in the last 10 days alone, 84,000 migrants have flooded the country.

In response, Slovenia has called out the Army and private security forces to help maintain order.

That did not stem the tide, so Slovenia Considers Calling for EU Military Aid.

Slovenia, the tiny Balkan state struggling to cope with the migration crisis, has raised the idea of invoking a never-before-used “solidarity clause” in the EU treaties to formally request European aid and military support.

Ljubljana [Slovenia’s capital] recently floated the option of triggering Article 222, which enables military aid to EU nations overwhelmed by disasters, according to two officials familiar with the talks.

It indicates the drastic steps under consideration to deal with a tide of asylum seekers arriving in Europe. One Slovenian government official said invoking Article 222 was a “viable option” as a last resort.

Alarmed by the potential for Slovenia pulling the bloc’s emergency cord, EU officials have sought to head off a request, in part by arranging for EU countries to provide 400 police to help Ljubljana manage the crisis.

Miro Cerar, Slovenia’s prime minister, had warned the EU would “fall apart” unless the “unbearable” pressure was not eased promptly. His foreign minister Karl Erjavec hinted at the potential for a fence, saying “impediments” could be considered to stem the cross-border flows.

The solidarity clause states that EU member states “shall mobilise all the instruments at its disposal, including the military resources” in the event the requesting country is subject to a terrorist attack or is the victim or a man-made or natural disaster.

It has never been invoked.

Some EU officials are keen for the principle not to be tested.

Barbed exchanges between the leaders of Croatia, Serbia and Slovenia have raised concerns in Brussels that tensions could open old wounds from the bloody break-up of Yugoslavia and rekindle various territorial disputes….

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The Pawn Isolated: Valeant, Philidor and the Annals of Fraud

 

The Pawn Isolated: Valeant, Philidor and the Annals of Fraud

Courtesy of , originally published at SIRF on Oct. 25.

The Southern Investigative Reporting Foundation's (SIRF) story looking at Valeant Pharmaceuticals' well-concealed relationship with Philidor Rx Services, struck a nerve.

Briefly, the story explored the ways in which Philidor, a specialty pharmacy whose sole customer is Valeant, used opacity and some misdirection to try and build a national pharmacy network. Additionally, SIRF uncovered how Valeant had sought to conceal its control of Philidor.

A Valeant conference call scheduled for Monday morning, October 26 is designed to explain these previously hidden relationships and, more importantly, calm the very frayed nerves of its battered shareholders.

But recently uncovered documents from a litigation between Philidor and R&O Pharmacy are probably going to have the opposite effect, in that they illuminate what can only be described as a bizarre effort to circumvent California regulations. Moreover, R&O's allegations have been known to Valeant management for a month.

Additional SIRF reporting reveals that Valeant has been closely involved with Philidor at every stage of its life-cycle, controlling it in all but name, since day one.

This pain isn't being borne for no reason, however.  Our reporting indicates that Philidor is almost certainly one of the most important parts of Valeant's business.

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On July 21 Russell Reitz, a 64-year old pharmacist and the "R" in R & O Pharmacy, was working in his office when a visitor dropped in unannounced. It was Eric Rice, an executive with Isolani, the company that had struck, what he thought, was a deal to buy the small compounding pharmacy back in December.

Rice had flown in from Philadelphia with several of the ranking executives of Philidor Rx Services. Which Reitz found odd since when he questioned Rice about it, he insisted he worked for Isolani.

It was a tense but professional meeting and both sides left it unfulfilled.

Eric Rice was unable to come to an agreement over securing $3 million in payments he felt were due his enterprise. Reitz, for his part, had a startlingly basic question that Rice hadn't satisfactorily answered, both in a series of emails, and in person.

Reitz wanted to clear up once and for all, why despite his insistence that he worked for Isolani, he was always professionally connected to someone from Philidor. What was the difference between the two companies, or were they one and the same?

Rice's colleagues, Phildor's CEO Andy Davenport, general counsel Gretchen Wisehart and controller Jamie Fleming, were to Reitz's eyes, in the middle of everything Isolani did.

Rice, whose LinkedIn profile left little doubt about where he worked, still couldn't answer to Reitz's satisfaction why, if he had agreed to sell his company to Isolani LLC, was Philidor the entity he always had to deal with? And what was Philidor's real agenda anyway?

Moreover, neither Rice nor his colleagues, whose emails to him were getting increasingly strident, had ever answered another question Reitz had posed: Where was Isolani's pharmacy permit? That they obtain their own, and not rely on R&O's was a core component of the sale agreement. (It does not appear they ever applied for one.)

To Reitz, the huge volume of Philidor's prescription drug sales, using R&O's National Council for Prescription Drug Programs number, was infuriating; that a good deal of the millions of dollars in volume were in states where R&O had no registration to operate in, with drugs he never had dispensed, and filled by a pharmacy he did not own, was nauseating. To pile insult upon injury, he had refused to sign the pharmacy's audit only to learn it was signed by Eric Rice.

This dispute had transcended the "he said-she said" realm of most business disputes a few weeks prior and was something Reitz hadn't supposed existed apart from movies featuring the mafia taking over a business. Apart from Ray Liotta and Joe Pesci's absence from this drama, it was in every sense a bust out.

Not that there weren't signs that R&O was more to Isolani than just a platform for compound pharmaceutical sales. Back in mid-December, shortly after the deal was inked, Reitz was surprised to see Jamie Fleming, Isolani's controller, show up at his office with boxes of inventory. He had a man with him who introduced himself as Gary Tanner, and who was clearly in charge. It all seemed on the up and up, if a bit sudden.

After meeting Tanner, Reitz went back and looked him up. He couldn't understand whatGary Tanner, a specialty pharmacy expert with Valeant's Medicis Pharmaceuticals unitwas doing involved with R&O. In July, Tanner's signing of an employment contract was something the company would later find it important enough to disclose to investors.

Reitz couldn't have possibly known that a few months prior to approaching R&O, Philidor executive Sheri Leon had signed a California State Board of Pharmacy Change of Permit request for West Wilshire Pharmacy, despite providing inaccurate answers to standard questions. Under oath, she answered "no" to questions asking if she had ever worked for an entity that had been denied a California permit, and if any other entity owned more than 10% of her company.

That May, Philidor had been denied a nonresident pharmacy permit and like Isolani, it controlled Lucena Holding LLC, the entity used to buy West Wilshire Pharmacy.

On January 7 Eric Rice would sign a similar document seeking transfer of R&O's license to Isolani.

Something Reitz might have looked into, was the origin of the word Isolani. It comes from the world of chess. To simplify a complex theory, it centers around isolating the pawn, the weakest and least consequential figure in the game.

Given Reitz's refusal to pay, Isolani sued him in September to obtain a judicial order to preserve what it alleged was at least $15 million out of a total of $19.3 million worth of checks written to it. In response, his lawyer Gary Jay Kaufman filed a 68-pagedeclaration. The next court date is set for the middle of December.

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What Gary Tanner was doing at R&O was his job, which includes being the overseer, for want of a better term, of Philidor and its network of affiliated (or captive) pharmacies.  Tanner's exact title is unclear but an ex-Medicis executive said that he is Valeant chief executive Michael Pearson's primary contact about Philidor's operations.

This source said that Tanner has often worked in conjunction with a lawyer, Michael Dean Griffen, and another (now apparently former) Medicis employee, Bill Pickron, to source these types of pharmacy transactions for Medicis and Valeant.

SIRF's reporting suggests that there is little to separate Valeant and Philidor beyond corporate word-smithing. Indeed, former Philidor employees said Valeant's executives were such a constant presence at the Hatboro, Pa. headquarters facility, that it was commonly supposed they had a block of rooms permanently reserved at local hotels.

Consider Philidor's launch in June of 2013. It's a safe bet that Valeant heavily underwrote or otherwise subsidized the company given the long lead times of insurance reimbursement, coupled with the stress on working capital of starting a business with rapid expansion plans.

According to former employees, Philidor places heavy productivity demands on its call-center and data-entry personnel, but pays them decently: SIRF found most employees earned between $20-$25 per hour, but in return a near 60-hour week was mandatory.

This is where the stress on working capital management factors in, since overtime would add at least $400 extra per employee paycheck. On top of that, from a late 2013 headcount of 250, Philidor added an average of 100 employees per quarter, as well as a 28,000 square foot lease, utilities, health care, insurance and the frequent "extras," like free lunches and coffee, to incentivize employees to stay at their workstations.

Eventually, of course, the reimbursements for the thousands of prescriptions roll in, but until then those bills have to be paid. Nothing about the economic profiles of Philidor's management group suggests they have the ability to personally absorb the millions of dollars it cost each month to get the company off the ground.

For example, Philidor chief executive Andy Davenport, while the owner of a five bedroom, 3,500 square-foot house in nearby Horsham, has had a series of municipal liens placed against him for unpaid county and state property taxes.

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At bottom, pharmacies like R&O were a way for Philidor to surmount the very big hurdle resulting from the California Board of Pharmacy rejection, in May 2014.

(It is quite a read, referring to several "false statements of fact" by Matthew Davenport–the CEOs brother–including the non-disclosure of Philidor's true owners and their real equity stakes.)

The headache existed because, as ex-Philidor employee Taylor Geohagan put it when interviewed last week, "Billing from a [pharmacy’s] license in one state, but shipping from a California location, is against the rules."

He would add, "Pretty much everything we did in the [Philidor] Ajudication department was use the [National Provider Identifier] codes from the pharmacies we bought out to get something [approved] in a pinch."  He described his Philidor experience in a website posting at PissedConsumer.com that said that paper copies of the NPI numbers of "sister pharmacies" were rarely handed out, and if they were, they were soon taken away and shredded.

Geohagan said that when he left the company in late summer, the practice of using multiple NPI numbers had stopped. (At least part of his animus toward the company, he wrote, resulted from resigning with two weeks notice and being fired the next day.)

The Philidor billing department manual actually has a page that discusses using the NPIs of these so-called captive pharmacies called "Our Back Door Approaches," according to another former employee. For example, when attempting to secure approval for a prescription with an insurance company Philidor did not have a relationship with, employees were instructed to use West Wilshire's NPI.

Two ex-Philidor employees from the adjudication and billing departments told SIRF that the volume of prescriptions flowing into the company was massive, with billing unit workers expected to process at least 100 prescriptions daily. The former adjudication unit employee showed SIRF internal documents from November trumpeting the fact that 22,299 prescriptions were filled in the prior week. Additional documents showed other weeks that came in above 23,000.

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A strategic distancing from the controversial unit doesn't appear to be an option for Valeant.

The Isolani vs Reitz litigation reveals that Philidor's use of these captive pharmacies is a vital revenue stream for Valeant. Some digging around in its corporate filings shows that R&O, at least before Russell Reitz began to object in July, was poised to a material contributor to organic growth.

Screen Shot 2015-10-25 at 10.03.17 PM

A brief aside: organic growth, or the increase in sales apart from Valeant's acquisitions of other companies, is vital to the debate over its future. Short-sellers and other critics, for example, have argued that the company's drug brands are, in the main, declining; without the torrid pace of acquisitions, shrinking revenues and profits are a foregone conclusion.

Thus the importance of looking at what Philidor's newly exposed captive pharmaceutical network reveals. Here's what it shows: In the second quarter, Valeant's 8-K reported "organic" sales growth of 19%, with revenue growing $691 million, to $2.73 billion from $2.04 billion.

Of this $691 million, however, at least $392 million was attributable to acquisitions, with the $299 million balance organic revenue.

The Kaufman declaration's release of the Philidor/Valeant invoices to R&O imply a prospective quarterly sales run-rate of about $55 million (an average $4.6 million weekly shipment multiplied by 12 weeks.) This would have accounted for 18.5% of Valeant's total organic growth in the second quarter. From there, it's a sure bet that given the prominence of West Wilshire to Philidor's billing unit, its sales volume would easily surpass R&O.

Notionally, organic growth equal to 40% or more of that $299 million could have come from two pharmacies that even the most gimlet-eyed Valeant sleuth didn't suspect existed.

It also becomes much easier to understand why Valeant's management didn't immediately sever the relationship with Philidor.

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Renee Soto, a Valeant outside spokeswoman with Sard Verbinen, told SIRF last week the company would not comment.

A message left for Gary Tanner was not returned, and an attempt to contact Eric Rice and other Philidor employees named in the story by calling the company's administration went into the voicemail of Greg Blaszczynski, the chief financial officer of BQ6 Media, the pharmaceutical marketing effort where both Davenport brothers have served as CEO.

 

Why Are Half Of All 25-Year-Olds Living With Their Parents? The Federal Reserve Answers

 

Why Are Half Of All 25-Year-Olds Living With Their Parents? The Federal Reserve Answers

Courtesy of ZeroHedge. View original post here.

Back in 1999, a quarter of all 25-year-olds lived with their parents. By 2013 this number has doubled, and currently half of young adults live in their parents' home.

While the troubling implications for the economy from this startling increase are self-evident, and have been extensively discussed both here and elsewhere (and are among key factors pushing both the US and global economy into secular stagnation), a just as important question is why are increasingly more young adults still living at home.

While we admit there is something morbidly grotesque in none other than the Fed taking an active interest in this most devastating development (for the simple reason that it has been the Fed's own policies that have unleashed not only the $1.3 trillion wave of student debt but an army of Millennials in their parents' basement), it is the Fed itself that has been the latest to attempt an answer.

Here is the Fed's response to "Why Are More Young Adults Still Living at Home?"

Economist Maria Canon and Regional Economist Charles Gascon noted that many factors have been suggested for why young adults return to or continue living at home, including significant student debt, weak job prospects and an uncertain housing market. The table below breaks down the percentage of 25-year-olds who were living at home for the period 2012-2013 in each state in the Federal Reserve’s Eighth District as well as in the country as a whole.

Labor Market and Higher Education

One potential reason for the increase in young adults living with their parents is the labor market. The authors highlighted research showing that individuals at the beginning of their careers often need more time to transition into the labor market. This is reflected in the unemployment rates of those between 21 and 27, which are often higher than for other age groups.

Earning a college degree can help with labor market outcomes, as young adults with a college degree are more likely to live independently. However, additional research has shown that the underemployment rate for recent graduates was about 40 percent during the Great Recession. Canon and Gascon noted: “An implication is that a significant portion of recent graduates were earning lower wages than what they should have been, given their education.

Also affecting many young adults is that they started their post-education careers during a recession. Canon and Gascon discussed a study noting that those entering the job market during a recession pay a price for about a decade. They wrote: “That’s because they start work for lower-paying employers and slowly work their way up toward better-paying jobs.”

Housing Market

The nation’s recovery may also play a role in young adults remaining at home. As the economy has grown, so have house prices. Canon and Gascon pointed out that national house prices have increased 21 percent since 2012, and rental prices have grown even faster in many areas. They wrote: “Because most youth would be first-time homebuyers, they have no housing equity to regain from the rebound in house prices after the housing crash.”

In the Eighth District, housing generally remains more affordable. The authors noted that the median house costs 3.3 times the median household income nationally, but less than 3 times the median household income in most District states.

Student Debt

According to a 2014 survey, more than half of first-time homebuyers said student loan debt was delaying saving for a down payment for a house. A 2015 report from the Federal Reserve Bank of New York found that a $10,000 increase in a student’s average debt increases the probability of living with parents or other family members by the age of 25 by about 2 percentage points.

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To all the 25-year olds out there reading this from their parents' basement, all we can add is that these are actually all correct. There is just one thing left to add: for all of the above you can thank, who else, the Fed for blowing the biggest debt-funded asset bubble in history.

The Beginning Of The End For Theranos?

Courtesy of ZeroHedge. View original post here.

Image for the news result

It started off as a bad enough day for embattled, recently notorious, biotech startup Theranos which, after a series of reports by the WSJ, has found itself, and its $9 billion valuation, reeling.

First, citing New Yorker, WaPo, Economist and Fortune, the Verge reported that according to Theranos, it "earns a portion its income from large pharmaceutical companies Pfizer and GlaxoSmithKline which reportedly use Theranos' tech to conduct clinical trials. But according to representatives from both companies that spoke to the Financial Times, that information is factually incorrect."

"I cannot find any evidence that we've done business with them in recent years," a spokesperson for GSK told the Financial Times. Pfizer, on the other hand, said that the company's dealings with Theranos were limited. "We've done only very limited historical exploratory work with Theranos through a few pilot projects," the Pfizer representative said, "and we do not have any current or active projects with them."

Embarrassing yes, but hardly fatal: if the company has survived the recent spate of bad publicity, then its deep-pocketed backers will certainly ignore this latest discovery.

Much worse was the news released later in the day when in a Form 483, released by FDA, it was unveiled that the very heart of the company's business model, its 'nanotainers', or as it is also known as a Capillary Tube Nanocontainer (CTN) are essentially unacceptable for use.

For those unfamiliar, this is what a Form 483 is:

Q: What is the purpose of an FDA Form 483?

A: The FDA Form 483 notifies the company’s management of objectionable conditions. At the conclusion of an inspection, the FDA Form 483 is presented and discussed with the company’s senior management. Companies are encouraged to respond to the FDA Form 483 in writing with their corrective action plan and then implement that corrective action plan expeditiously.

Q: When is an FDA Form 483 issued?

A: An FDA Form 483 is issued to firm management at the conclusion of an inspection when an investigator(s) has observed any conditions that in their judgement may constitute violations of the Food Drug and Cosmetic (FD&C) Act and related Acts. FDA investigators are trained to ensure that each observation noted on the FDA Form 483 is clear, specific and significant. Observations are made when in the investigator’s judgement, conditions or practices observed would indicate that any food, drug, device or cosmetic has been adulterated or is being prepared, packed, or held under conditions whereby it may become adulterated or rendered injurious to health.

Here is what the FDA said today:

"You have not listed the [Capillary Tube Nanocontainer] as a Class II medical device, and you are currently identifying it as a Class I exempt medical device. You are currently shipping this uncleared medical device in interstate commerce, between California, Arizona, and Pennsylvania."

Is this transgression bad enough for the Feds to step in? We may find out very soon.

To be sure, today's FDA finding repeats what the WSJ had reported previously, although it is now clear that Theranos lied once again, explaining that its halt of the Nanotainer had been a voluntary decision, when it clearly was mandated by the FDA. From the WSJ:

The FDA inspection confirms an article published by The Wall Street Journal on Oct. 16 that said Theranos had stopped using the vials for all but one test under pressure from the agency, citing a person familiar with the inspection. After the Journal article, Theranos founder and Chief Executive Elizabeth Holmes confirmed the company had sharply curtailed its use of the vials, which it calls nanotainers, but presented it as a voluntary move.

That's ok: she lied again, something which appears to have been a recurring pattern for this 31-year-old paper multibillionaire. Sadly for her, following these escapades, "on paper" is where her young billionaire status will remain, as we doubt anyone, either in the private world, and certainly in the public one, will bother to invest even $1 more at a valuation anywhere approaching $9 billion, or even $0 for that matter.

As for Theranos and its young founder, we wish them luck with pivoting from a company that has problems with keeping the story straight to one that has actually cash flow. It will need it.

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In case you missed it last week, I posted this from Zero Hedge:

Embattled Theranos Founder Elizabeth Holmes Makes First Public Appearance Since Crushing WSJ Report

Courtesy of ZeroHedge. View original post here.

One day Palo Alto-based medical-laboratory-services company Theranos was worth $9 billion (with its 31 year old CEo Elizabeth Holmes owning about half of this), a day later – following a crushing review of the company's business practices – not only is the company (and Holmes) worth far less, but the venture investors who gave the company hundreds of millions in cash have quickly become the "due diligence-free" laughing stocks of Silicone Valley.

Moments ago, in her first public appearance since the WSJ article, Elizabeth Holmes started speaking at the WSJDLive 2015 conference.  Will she be successful in defending her company or will doubts about one of the biggest unidonkeys grow even more. Watch the video of the interview below. It's no longer live, but go here: WSJ's blog.

EU Rules Bitcoin is a Currency, US Says Bitcoin is a Commodity; Which Side is Correct? What About Gold and BitGold?

Courtesy of Mish.

European Court of Justice Rules Bitcoin is a Currency

Last week, the European Court of Justice ruled Bitcoin is a Currency and Exchanges are VAT-exempt.

The European Court of Justice (ECJ) has ruled that bitcoin exchange transactions should be exempt from VAT. The ECJ ruling stated that bitcoin transactions "are exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender."

The case involved a request regarding the tax status on exchange commissions and margins which came from a Swede called David Hedqvist who was looking to set up a one-man bitcoin exchange. He had approached Swedish tax authorities for an advanced decision on whether or not the exchange of bitcoin into Swedish Krona and vice versa should be considered as a VAT taxable or VAT exempt activity.

The tax authorities said Bitcoin trading should be subject to VAT, but Hedqvist thought the answer should be no, and he took it to court and eventually it reached the appeal court in Sweden. Since all VAT law flows from Europe, the appeal court passed the case on to the ECJ to decide.

There have been some limited decisions in the US involving criminal cases where bitcoin was viewed as money, for the purposes of money laundering offence. Meanwhile, the US Commodity Futures Trading Commission (CFTC) last month deemed bitcoin to be a commodity and closed down trading platform Coinflip in the process.

Commenting on the ruling, Sarah Buxton, a tax lawyer at the global law firm Bryan Cave LLP said: "The European Court of Justice, Europe's highest court, has ruled that exchanges of Bitcoin into fiat currency should be exempt from VAT under Article 135(1)(e) of the VAT Directive concerning transactions relating to currency, bank notes and coins used as legal tender.

Jens Bader, chief commercial officer of Secure Trading said the ruling had far reaching implications for Bitcoin and other cryptocurrencies, as all EU states will now have to comply with the VAT ruling.

Bader said: "Many with a vested interest in cryptocurrencies will be overjoyed by the ruling. It is easy to see why an un-regulated currency not subject to sovereign states taxes is an enticing prospect. However, it is a shame to see the ECJ cave in on this issue, and for Bitcoin not to be held to universal VAT standards.

"The question of whether or not Bitcoin should be subject to VAT is a simple one – if it is considered a currency it shouldn't be subject to VAT and if it is considered a product it should be. In my mind, Bitcoin is not a currency. It is an exchangeable product – but a product none-the-less – and for that reason I am surprised by the ECJ's ruling.

"The distinction lies in the fact that Bitcoin exchanges, and cryptocurrency exchanges like it, are not regulated and licensed financial services. While we call it a 'currency', in fact Bitcoin is a tradable commodity, like gold and silver.

US Says Bitcoin is a Commodity

In the US, the Commodity Futures Trading Commission (CFTC), ruled on September 17 that Bitcoin Is a Commodity. …


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Free Trade Vs. American Jobs

With half of all 25-year-olds living with their parents as Zero Hedge reports, it is the perfect time to enact a mystery trade agreement that increases unemployment and puts pressure on already stagnant wages. 

Free Trade Vs. American Jobs

Courtesy of Dr. Paul Price at Market Shadows

Thursday’s Wall Street Journal included a feature article on the Trans-Pacific Partnership, commonly called the TPP. The headline read, “TPP is a surprising vote of confidence in globalization.”

The WSJ’s subtitle spoke about the bill’s limitations on national sovereignty. Member countries would give up control of their own laws while subjugating decision-making to unelected officials and business groups with vested interests in the results. The WSJ noted that political support for the TPP was strong, except here in the USA.

Americans should be opposed to this secretive, Wall Street-promoted trade agreement. Here's why:

Tariffs and patent protection periods would be reduced while most rules and regulations would be set and enforced by outsiders. Many of the new terms will be in conflict with exisiting American laws, but they will take preference.

[This aspect of the agreement is extremely important. As CGT at Zero Hedge writes in the comments, "The TPP includes arbitration to solve problems corporations have with, 1) EPA rules,  2) FDA approval or denial of new drugs and health products, and 3) sovereign, state and local laws concerning safe and unsafe products. This treaty subordinates sovereign legal systems and sets up an independent legal system outside a country's legal system to solve disputes. The arbitrators are employed by the same law firms on retainer to the largest mega corporations in the world. [The judgments of the arbitrators are binding outside the sovereign legal systems of the countries] that sign the agreement. Tax payers are held liable for the fines. And anything that can cause a loss of profit is cause for arbitration… This treaty does not represent free trade but the giving away of sovereignty of the USA and any other signer of this.” ~ Ilene]

The advertised intent of the TPP is to make international trade cheaper and easier. And it probably will — for large, international corporations. Some business will benefit, but others will lose. Not surprisingly, Wall Street strongly supports the agreement.

All the negotiations have been done behind closed doors. The public cannot see what is actually being agreed to. There has been no opportunity to openly debate the terms of the agreement and the likely effects of the TPP on the American economy. We are being asked (or ordered), once again, to approve a massive change in our economic system without knowing what we will be encumbered with. 

                

 Nancy Pelosi's line on March 10, 2010, when speaking about the Affordable Care Act (a.k.a. Obamacare).

There is one thing we know, however, and that is that historically agreements like the TPP have not benefitted the public.

The General Agreement on Tariffs and Trade (GATT) was hammered out and implemented between 1947 and  1956. Its tariff reductions jump-started the rise of international trade as a percentage of global GDP. It also facilitated the offshoring of US manufacturing jobs to lower wage areas.

The North American Free Trade Agreement (NAFTA) kicked in after 1992. Presidential candidate Ross Perot warned of the “giant sucking sound” from Mexico as US jobs migrated to south of the border.

The Canadian-US Free Trade Agreement brought more competition for American workers. Each expansion of ‘free trade’ gave US companies larger incentives and greater ease in moving jobs out of America. 

China was given World Trade Organization (WTO) privileges early in this century. Through permanently normalized trade relations and lower tariffs, China gained easier access for exporting goods to America. NAFTA was bad but the setting the Chinese free to sell goods here with little restriction was the final nail in the coffin for domestic manufacturing jobs.

It is not a coincidence that our own labor participation rate (the percentage of all working age people who actually hold jobs) peaked in the mid-to-late 1990s. As of Sep. 30, 2015, that very important measure had retreated to 62.4%, a 38-year low. 

Seeing the WSJ's  "Path to Free Trade" and America's Labor Participation Rate together shows how much damage was done to our industrial job base since the most significant [red framed on the chart below] trade agreements were put into force. 
 

 

You don’t need to be Einstein, or an economist, to realize that lowering trade barriers reduces domestic manufacturing jobs on a continual basis.

The chart below from The Atlantic shows that US manufacturing jobs have been starting to slowly improve since the 2008 financial meltdown. But the TPP will likely work against an already weak recovery. Considering that there has been no recovery in wages, further outsourcing will only add to the pressure on wages in the US:

Scott, of EPI, worries that the biggest damage from TPP could be to U.S. wages. The trade pact will increase the importation of competing goods, which will drive down the cost of U.S.-made goods, putting downward pressure on wages. It will open up countries such as Malaysia and Vietnam to foreign direct investment. It may be good for certain businesses and holders of intellectual property patents, but that doesn’t mean it’s going to be good for everyone.

“Make no mistake, it’s certainly going to increase income inequality, and it will, in all likelihood, lead to offshoring a job loss,” Scott said.

Perhaps what is most worrying, though, is the potential that TPP, or any trade agreement, could slow the reshoring of American jobs, especially in some fields such as auto-parts manufacturing, which states in the South such as Tennessee and South Carolina are competing to attract.

[…]

U.S. Manufacturing Jobs, in Thousands

There are many reasons to oppose the TPP including the likelihood of more job losses in the US, further eroding of the US middle class, the strong potential for increasing inequality, stronger intellectual property protections for pharmaceuticals, looser restrictions on corporations polluting the environment, and the undermining of democracy in favor of corporate rule. But the chart above is a powerful reason alone to reject the TPP.

 

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Is The Small-Cap Under-Performance A Big Deal?

Courtesy of Dana Lyons

After the initial pop off the September low, small-cap stocks have significantly under-performed their larger peers – is that trend as troublesome as some are claiming?

If you are closely involved with markets, you know that there are always items of concern among participants. One such concern presently is the recent under-performance on the part of small-cap stocks. In the initial ramp off of the late-September lows, small-caps performed in line or better than larger cap stocks. However, since that first week or so of the surge, smaller stocks have lagged, even as large-caps have continued to score higher highs. This has some observers worried about the “quality” of the current rally. Are those concerns warranted? We took a closer look at the situation to see if we couldn’t find a few clues.

First off, what sort of under-performance are we talking about on the part of small-caps? Well, the first pop off of the September “re-test” lows lasted about 7 days, rallying all of the indices by about 6-8%. In the roughly 2 weeks since, however, there has been quite a bifurcation in the performance of the various indices. The S&P 500 large-cap index, for example, has continued to advance, rallying nearly 3% over that time. Meanwhile, the Russell 2000 small-cap index is essentially unchanged. That dynamic has some folks worried that the rally may have run its course. Let’s check it out.

Since 1991, we have found 75 previous days in which the S&P 500 showed a 2-week gain of at least 2% while the Russell 2000 gained no better than 0.5%. We took those results and drilled down further, looking for instances that in some way matched our present circumstances. We zeroed in on 2 sets of circumstances to see if there was anything consistent in the market performance following such events.

image

As the chart shows, one of the factors we looked for were times, like now, when stocks were coming off of a 6-month low some time over the past month, at least in the Russell 2000. We found 20 such prior events (shown as blue dots on the chart). So did the Russell 2000 put a halt to the bounce? Not in the slightest.

image

Both the S&P 500 and the Russell 2000 consistently rallied in the subsequent week to 6 months. The 1-week marker was especially consistent as 18 of the 20 events showed a positive return in the of the indices. In terms of return, both indices showed stellar figures, peaking at the 3-month mark at a median +6.7% and +13.7% for the S&P 500 and Russell 2000, respectively. Needless to say, the small-cap under-performance did nothing to thwart the budding intermediate-term rallies.

It is worth noting one thing, however. Several of these occurrences were inclusive of the 6-month low within the measuring period. That is, the 6-month low took place during the S&P 500′s 2-week rally and the Russell 2000′s under-performance. That is a bit different than our present situation. The 6-month market bottom took place several weeks ago and, subsequently, both indices enjoyed a nice bounce. Thus, the 2-week measuring period has taken place after that initial bounce.

Looking at the data, those examples in which the 6-month low occurred prior to the past 2 weeks did not fare as well as the larger sample. In fact, 5 of the 6 2-month losses in both the S&P 500 and the Russell 2000 were accounted for by those occurrences when the market had bottomed prior to the past 2 weeks. Long story short – the current set-up has not been quite as bullish as those instances that included the 6-month low day in the 2-week measuring period.

Also along those “not so fast” lines comes our other study factor. We looked at those times in which the S&P 500 sat at a 2-month high following its 2-week rally (as was the case on Friday). The returns were not quite as promising. In fact, they were downright lousy.

image

The median return was negative from 2 weeks out to 2 months for the S&P 500, and from 1 week to 3 months for the Russell 2000. And while the Russell 2000 led way higher in the previous table, it led the way lower here, bottoming out at a median loss of -6.7% 2 months out.

So which of these studies will set the precedent for our present case? Unfortunately, the present case is the only occurrence meeting the criteria for inclusion in both categories. Therefore, in a way, it has no precedent. If we had to pick one period that showed perhaps the most similarities, it may be late November 1998. The indices had bounced strongly off of a re-test low before the under-performance of the small-caps began. While the S&P 500 was at a 2-month high, it had narrowly missed forming a 6-month low the month before. For what it’s worth, both indices were lower 3 weeks later before rebounding over the longer-term.

So is the hand-wringing over the laggard small-cap space justified? We frankly did not know so we examined the issue. Upon further inspection…we are still not sure as the results were quite conflicting. Like we have said before, however, at least now we know what we don’t know – and even have a reason for why we don’t know. That’s always better than assuming you do know.

You know?

*  *  *

More from Dana Lyons, JLFMI and My401kPro.

Regional Fed Reports Five for Five in Contraction; Texas Region Worsening, Richmond Negative Again

Courtesy of Mish.

Dallas Regional Activity Dives Deeper Into Contraction

Yesterday the Dallas Fed general activity index slipped further into contraction to -12.7, well below the Bloomberg Consensus Estimate of -6.0, and also lower than the lowest guess of -7.0.

Look no farther than to the Dallas Fed manufacturing survey for evidence on how severely low oil prices are affecting the energy sector. Contraction for the general activity index deepened to minus 12.7 in the October report from September’s minus 9.5. This is the 10th negative reading in a row. New orders are now negative for a 12th month in a row, at minus 7.6, while unfilled orders are on a similar streak, at minus 3.1. Production is positive for a second straight month, at plus 4.8 in a reading that, however, is very likely to return to the negative column given how low orders are. Hiring is flat with price readings, especially for finished goods, in contraction. This report joins those from Empire State, Philly Fed, and Kansas City which are all pointing to another month of contraction underway for the nation’s factory sector.

Richmond Makes it Five for Five

Today’s Richmond Fed report makes it five for five in contraction, albeit just barely, at -1. Bloomberg Econoday reports …

The Richmond Fed makes it five for five, that is five regional Fed reports all showing negative headlines for October. The Richmond Fed index did improve, however, to minus 1 from September’s minus 5. New orders came in at zero following the prior month’s steep contraction of minus 12. But backlog orders, at minus 7, are down for a third month which is not a plus for future shipments or employment. Shipments in October fell to minus 4 from minus 3 which is also a third month of contraction. Hiring is still positive, unchanged at plus 3, but continued growth here is uncertain. Price data are mute with prices received showing slight contraction as they are in other reports. This morning’s report on durable goods orders showed another month of broad weakness in September and this report, together with the other regional reports, point to another weak month for the factory sector in October.

Durable Goods Weaker Than Expected

Rounding out the manufacturing weakness, earlier today I reported Cracks in the Economy Widen as Durable Goods Orders Sink. Here are some additional charts.

Durable Goods New Orders

Durable Goods New Orders Excluding Transportation

Transportation, especially large aircraft orders can skew the numbers. The above chart separates out those orders, providing a different perspective.

Mike “Mish” Shedlock

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Cracks in the Economy Widen as Durable Goods Orders Sink

Courtesy of Mish.

The word of the day is "awful." That's the best description of today's durable goods report. Durable goods orders came in at -1.2% lower than the Bloomberg Consensus Estimate of 1.0%. And last month's numbers were revised lower across the board.

There is no way put lipstick on that pig.

Durable Goods Lowlights

The factory sector is showing cracks with orders contracting slightly more than expected, down 1.2 percent in September with August's contraction revised lower to minus 3.0 percent. Other readings are likewise weak with ex-transportation down 0.4 percent following a downward revised 0.9 percent decline in August and with core capital goods orders down 0.3 percent after falling a downward revised 1.6 percent in August.

Other readings include a second straight and sharp 0.6 percent decline in unfilled orders and a third straight decline in inventories, down 0.3 percent which is the sharpest decline since May 2013. The decline in unfilled orders suggests that factories, lacking new orders, are working down backlogs while the decline in inventories points to growing caution in the business outlook. But factories are keeping up shipments which is good for GDP, up 0.2 percent after August's 0.5 percent decline with core capital goods shipments up 0.5 percent after a 0.8 percent decline.

Motor vehicles are a positive in the report, showing a 1.8 percent gain in new orders and a 1.6 percent gain in shipments with both reversing similar sized declines in August. Also positive are electrical equipment and fabricated metals, with both perhaps getting a boost from construction, along with defense aircraft and defense capital goods.

Industries showing declines in new orders include primary metals, machinery, and computers & electronics. Orders for civilian aircraft fell 62 percent in September following a 23 percent decline in August.

This report falls in line with industrial production data where manufacturing in September slipped for the fourth time in five months. Weakness in exports is the balancing factor tipping the factory sector away from growth.

Durable Goods Month-Over-Month and Year-Over-Year

Year-over-year, durable goods orders are down for the eighth consecutive month, and tenth out of the last eleven. Manufacturing is clearly in recession.

Mike "Mish" Shedlock

 

Stock Trading System from Hell on Live Feed Today at SEC

Courtesy of Pam Martens.

CREDO Action Billboard Truck to Dump Mary Jo White at SEC

CREDO Action Billboard Truck Urges Dumping    Mary Jo White at SEC

The Securities and Exchange Commission will be holding a public meeting today on the structure of today’s opaque and deeply fragmented stock markets (without conceding that they are also rigged, as many informed voices contend). The meeting will begin at 9:30 a.m. and will be webcast on the SEC’s website.

The meeting is considered by many to be a few crumbs sprinkled about the corrupted landscape by Mary Jo White, Chair of the SEC, in the face of a growing campaign to oust her from office.

During the second week of September, CREDO Action had a “Dump (Mary Jo) Truck” making the rounds between Union Station, K Street and the White House. CREDO Action has also collected over 116,000 signatures on a petition urging President Obama to ask for the SEC Chair’s resignation. In June, Senator Elizabeth Warren sent a stern, 13-page letter calling White out on her serial broken promises.

And just a month ago, SEC Commissioner Kara Stein delivered a speech to the Securities Traders Association’s annual conference on market structure that appeared to be an indictment of White’s tenure as Chair of the SEC. One key area that Stein focused on was the dark pools that today dominate the Wall Street landscape. According to an October 1, 2015 list from the SEC, there are now an astonishing 85 dark pools trading stocks in the U.S. That compares with just 10 regulated stock exchanges operated by three holding companies: the Intercontinental Exchange, Nasdaq OMX Group, and BATS Global Markets.

Stein had this to say about the dark pools:

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Don’t Think The Status Quo Will Save You

Charles Hugh-Smith, Of Two Minds, argues that the Status Quo will not save you. Okay. But I'm not sure what the Status Quo is. Is it the Federal goverment? Is it the ultra-wealthy who control our politicians? Adding a third mind to Charles's two minds, I think the subject of this article, "Status Quo," needs to be thoroughly defined. Further, once defined, ways to change it from unsustainable to sustainable need to be explored.  

Don't Think The Status Quo Will Save You

The Status Quo transfers more debt and more losses to the taxpayers.

Many hold a naive faith that the Status Quo will save them even as the current system unravels. Why is this faith naive?

Let's start with this key question: does the Status Quo strike you as being even remotely competent?

If you answer "yes," we have to ask: what planet are you on? Mars? Here on Earth, no one that isn't a bought-and-paid for-shill of the Status Quo would even make the risible claim of Status Quo competence, except as a bitter joke.

The Status Quo assumes we can't deal with the truth like adults, and so it sugar-coats every unsolvable problem with false assurances. The Status Quo assumption is the Great Unwashed 90% will shoot the messenger, i.e. toss out our public leadership should they be foolish enough to tell us the truth: the promises issued to you cannot possibly be fulfilled.

Not because of an evil cabal, but because the demographics and financial realities render the promises impossible to keep, regardless of who's in office.

I'm going to get my Social Security, right? You'll get something that's called Social Security, but it will either be taxed to the point it only buys a loaf of bread or will only be worth a loaf of bread. So yes, you'll get Social Security, but not the one you were promised or the one you're imagining.

I'm going to get my Medicare, right? Sure, you are, pal. Just not the Medicare you're imagining, you know, the one that pays for everything.

The stock market will never crash, right?

Does this look like a stock market that will never crash again, or a stock market that's poised to crash again? Your answer is a measure of your faith in the Status Quo's false assurances.

Does this chart of federal debt look remotely sustainable to you? Don't be a chump, man–it's clearly not sustainable, no matter what rationalizations the Power Elites' shills are bleating.

Here's a chart that shows how the Status Quo "fixes" every problem: it transfers more debt and more losses to the taxpayers. Student loans out of control and poised to implode? No problem–just transfer all the uncollectible debt (i.e. losses) to the taxpayers.

If you believe that's an actual solution, I have a little 3-Card Monte game over here I'd like you to play until you have no more earthly (or Martian) possessions. Alternatively, just sink all your money into the stock market that's poised to crash. That will wipe you out just as effectively as the rigged 3-Card Monte game.

Don't think the Status Quo will save you, or make good on its vast multitude of promises. Naive faith in promises and fantasies isn't helpful in the real world.

Europe’s On A Road To A Very Bleak Nowhere

Courtesy of The Automatic Earth.



LIFE How to kiss 1942

On the day after a bunch of European countries headed into yet another -emergency- meeting, and as the refugee situation in Greece and the Balkans was more out of hand than ever before, not in the least because the numbers of refugees arriving from -in particular- Turkey are larger than ever, let’s reiterate what should always be the guiding principle driving the response to issues like this.

That is, the only way to approach a crisis such as this one is to put the people first. To say that whatever happens, we will do what we can, first and foremost, to not allow for people to drown, or go hungry or cold, or contract diseases. Because that contradicts our basic morals. The loss of lives and prevention of misery should be the most important thing for everyone involved, all the time, from politicians to citizens.

If we cannot approach both the issue and the people with decency and humanity, we are as lost as they are. If only because we have no claim to being treated better than we ourselves treat others. After all, if someone else’s life is neither sacred nor valuable, why should yours be?

Looking through the response across Europe to the growing numbers and the growing crisis, what’s remarkable is the difference between individual citizens and the governments that are supposed to represent them. Apart from outliers like Hungary PM Victor Urban and the ubiquitous fascist groups from Greece through Germany, citizens win hands-down and across the board when it comes to humanity.

The arguably worst record is set by the European Union, ironically the one body that claims to represent everyone in the 500 million strong continent. Individual politicians in leading nations like Germany, France and the UK are close behind. European ‘leaders’ are not looking for a European solution, they’re all only trying to deal with their own part of the problem. As long as the refugees don’t burden their nations, they’re satisfied.

After a year of increasing refugee arrivals it’s safe to say that the pan-European approach, to the extent that it can even be said to exist, is a dismal and deadly failure.

Yesterday’s ‘Balkan+’ mini-summit was no exception. The AP headline says it all: “EU Agrees To Tighten Border Controls And Slow Migrant Arrival”. Europe’s priority is not to fight or minimize the suffering, it’s to make the problems go away by making the people go away. The new deal that came out of the summit cannot possibly work because it is based on unrealistic predictions of stopping the flow of refugees.

Greece has agreed to ‘host’ 50,000 refugees, but with 10,000 arriving daily that is a meaningless number. Apart from that, this is supposed to take place in ‘holding camps’, and the term all by itself should make one shiver. The ‘hotspots’, another EU initiative, are already making the refugee situation even worse than they have been for months.

Moreover, these people don’t want to stay in Greece, because in Greece economic prospects are so bleak as to be non-existent for the simple reason that the EU itself has demolished the Greek economy. Those responsible for that demolition now seek to force Greece to keep refugees from traveling north in holding camps and severely undermanned fingerprint facilities.

Disgrace comes in spades. It was therefore good to see that Greece had the pretty perfect answer:

Greece Says Refugees Are Not Enemies, Refuses to Protect Borders From Them

Greece’s migration minister has rejected accusations by Germany and other European countries that Greece is failing to defend its borders against mass migration, insisting that the refugees and other migrants trekking to Europe constitute a humanitarian crisis, not a defense threat. “Greece can guard its borders perfectly and has been doing so for thousands of years, but against its enemies. The refugees are not our enemies,” Yiannis Mouzalas said in an interview.

Greece is under pressure from other European governments to use its coast guard and navy to control the huge influx of migrants who are making their way, via the Aegean Sea and Greece’s territory, from the Middle East to Northern Europe, especially Germany. [..] leaders from Greece and other countries on the latest migration route through the Balkans are facing allegations from Germany, Hungary and others that they are passively allowing migrants to pass through.

“In practice what lies behind the accusation is the desire to repel the migrants,” said Mr. Mouzalas. “Our job when they are in our territorial sea is to rescue them, not [let them] drown or repel them.”

Last week alone, Greece received about 48,000 migrants and refugees on its shores, the highest number of weekly arrivals this year, the International Organization for Migration said Friday.

Athens opposes an idea floated by European Commission President Jean-Claude Juncker to set up joint Turkish-Greek border patrols. Greece and Turkey have long-standing disputes over their territorial waters, which have led to military tension over the years.

“This was an unfortunate statement by Mr. Juncker,” Mr. Mouzalas said. “The joint patrols have never been on the table. They have no point anyway, as they wouldn’t help ease the situation.”

Mr. Mouzalas said Turkey should have been invited to Sunday’s summit. “Turkey is the door and Greece is the corridor; Europe should not treat Greece as the door..”

But count on Brussels and Berlin to issue Athens with more threats. It worked over the summer, so… Still, Europe as a whole, the 28 nations that make up the EU, can and will not agree on the entire issue and all its aspects. And that is why Yanis Varoufakis is wrong in his approach, and his call to Britain (which he shares with Xi Jinping of all people) and the rest of Europe:

Yanis Varoufakis Says Britons Should Vote To Stay In Union

Yanis Varoufakis, the former Greek finance minister, has called on Britons to vote to remain in the European Union in the upcoming referendum. The bête noire of the European political elite was speaking at a Guardian Live event at Central Hall in Westminster, central London, on Friday night. He said: “You have a referendum coming up. My message is simple yet rich: those of us who disdain the democratic deficit in Brussels, those of us who detest the authoritarianism of a technocracy which is incompetent and contemptuous of democracy, those of us who are most critical of Europe have a moral duty to stay in Europe, fight for it, and democratise it.”

Yanis is wrong because the EU is not a democratic institution, and can therefore not be “democratized”. It’s a pipedream gone horribly awry. It should be exorcised. And even if “democratization” were possible in theory, before you can reform the EU, you’re 10-20 years or more down the road. And there’s no such time available. The problems exist in the presence, not just in the future.

The EU is a loose collection of separate sovereign nations that came together in times of plenty. These nations will always, when pressured, seek their own advantages, never that of the collective if it means a disadvantage for themselves. The whole idea behind the union has been, from the start, that of a tide that lifts all boats. And that promise has already been smashed into a corner, bruised and broken beyond repair.

After Greece there can be no doubt of that. And the other separate EU-member economies are not exactly doing well either. Mario Draghi pumps €60 billion a month into the eurozone engine, but it keeps leaking just as hard and the best it can do is sputter.

In institutions such as the EU, organized like the EU, power will inevitably flow towards the center. And at some point in that process, democracy will vanish into thin air. Draghi’s €60 billion will just as inevitably benefit the power center most, and leave the periphery ever poorer. This is not an unfortunate coincidence, it’s built into the union’s structure. Which is therefore not merely undemocratic, it’s inherently anti-democratic.

Nobody in Europe ever voted for Jean-Paul Juncker -or had the chance to- to represent them, at least not in any direct democratic fashion. And nobody outside of Germany ever voted for Angela Merkel -or had the chance to- . Yet, these are arguably the most powerful people in the EU. That in a nutshell is what’s wrong with and in Europe.

Financial and political power reside with the rich and powerful nations, and they acquire more of each as they go along. This is unavoidable in the present situation. It can only be corrected by decentralization of power, but since that would run counter to what Brussels and Berlin envision (more power for themselves), it’s not going to happen. Europe will not be ‘democratized’.

Or put it this way: the only way EU nations can regain democratic values is by leaving the union. That is also the only real vote Europeans have left; a vote within the EU structure goes wasted. Ask the Greeks.

Europeans need to acknowledge that the EU has failed, and inexorably so. Schengen is already dead, walls and fences are popping up everywhere. All the rest is just make-believe. There will never be a consensus on the ‘distribution’ of the numbers of refugees. Views and national interests are too far apart.

And the vested interests in the centers of power are too strong. Merkel may be Europe’s unelected leader, but she will always put German interests before those of the 27 other nations. This may be accepted in 7 years of plenty, but it won’t be in the 7 lean years.

Meanwhile, it’s the hundreds of thousands of refugees who pay the price for the fundamental faultlines in what was supposed to bring and hold Europe together. And an interesting additional issue, which so far flies largely under the radar, arises.

First, refugee numbers keep rising, as Reuters reports:

Immigration flows to Greece surged to 48,000 in the five days to October 21, the highest weekly total so far this year, bringing the number of Mediterranean migrant arrivals in Europe to 681,000 the International Organization for Migration said today. Amin Awad, the Middle East director for the UN refugee agency UNHCR, said Russian airstrikes and increased fighting around the Syrian city of Aleppo had contributed to the “dynamic of displacement”, with about 50,000 displaced, but had not contributed much to the refugee exodus. But he said the number of internally displaced people within Syria had fallen from 7.6 million people to 6.3 million, a decline that could be attributed to the refugee flows to Europe, as well as people being missed from the latest count.

48,000 in 5 days in Greece from October 17-21, 12,000 in one day in Slovenia. Over 5,000 in 5 hours on Lesvos Friday. 52 refugees died off Greece in 10 days. That’s five lives lost every day. While Brussels stand by and watches, as does Merkel, paralyzed by fears of losing votes and power at home. And when they do act, it’s most of all to try and quell the refugee flood, not to minimize the suffering.

Turkey gets offered billions to built camps on its territory, Greece is threatened into doing the same. Makes you wonder where Juncker and Merkel think the people they want to lock up in these camps will eventually wind up.

Slovenia is the latest bottleneck, after many miles of walls and and fences and razorwire have been installed elsewhere.

Last Tuesday, Slovenia was first reported to be asking for “additional police forces”.

Slovenia Asks For EU Police Help As Thousands Enter Country

Around 19,500 have entered Slovenia since Friday after Hungary sealed its southern border with Croatia. Speaking after a meeting with European Council President Donald Tusk and EU chief executive Jean-Claude Juncker, President Borut Pahor said:

We need fast assistance of the European Union. Slovenia will formally ask for additional police forces to guard the border between Slovenia and Croatia and for financial help.

The country has deployed 140 soldiers to the border to assist police and hasn’t ruled out building a fence as part of its efforts to control the influx of migrants.

And I thought: police? What police? There is no EU police force. At least not a ‘boots on the ground’ one. There’s Europol, Europe’s own Interpol, but they do intelligence. There’s the European Gendarmerie Force, but that’s a (para-)military police force. And we’re dealing with sovereign nations here, so any police force, let alone a military one, would face huge legal issues; at least if people pay attention.

Then a few days later, Reuters had this:

Worried Slovenia Might Built Fence To Cope With Migrant Crisis

Slovenia said it will consider all options, including fencing off its border with Croatia, if European leaders fail to agree a common approach to the migrant crisis as thousands stream into the ex-Yugoslav republic. Migrants began crossing into Slovenia last Saturday after Hungary closed its border with Croatia. The Slovenian Interior Ministry said that a total of 47,000 had entered the country since Saturday, including some 10,000 in the past 24 hours. Slovenian officials said the country is too small and does not have enough resources to handle such large numbers of people. [..]

According to Slovenia’s interior ministry, the cost of fencing off the 670-km long border with Croatia would be about €80 million. Slovenia has asked for the EU for assistance and officials said Austria, Germany, Italy, France, Hungary, the Czech Republic, Slovakia and Poland offered to send police reinforcements.

That’s 8 different countries offering to send policemen. But what status would these people have? Would they be allowed to bear arms? In a foreign sovereign nation? I’d love to see the legal documents that justify such a move. Would these foreign police officials also enjoy immunity, as Europol officers do? Under whose command would they operate?

I can imagine perhaps these new policemen, or border guards, could be Frontex, but Slovenia is not on Europe’s border. And Frontex already lacks the personnel to execute its intended policies (halt the refugees) in places where Europe does have borders.

This looks like a deep and dark legal quagmire. So perhaps it’s not surprising that Slovenia digs a little deeper still, as the Guardian noted yesterday:

Slovenia To Hire Private Security Firms To Manage Migrant Flows

Slovenia is planning to employ private security firms to help manage the flow of thousands of migrants and refugees travelling through the country toward northern Europe, a senior official has said. Bostjan Sefic, state secretary at the interior ministry, said 50-60 private security guards would assist the police where necessary. More than 76,000 people have arrived in Slovenia from Croatia in the past 10 days. More than 9,000 were in Slovenia on Monday, hoping to reach Austria by the end of the day, while many more were on their way to Slovenia from Croatia and Serbia. The emergency measure was announced by the prime minister, who described the migrant crisis as the biggest challenge yet to the EU.

If a joint solution is not found, [EU] will start breaking up, Miro Cerar warned. About 2,000 migrants waited in a field in Rigonce on the Croatian border on Monday for buses to take them to a nearby camp to be registered before they are allowed to proceed north. [..] Slovenia, the smallest country on the Balkan migration route, has brought in the army to help police. Other EU states have pledged to send a total of 400 police officers this week to help manage the flow of people. Over the past 24 hours, 8,000 people arrived in Serbia en route to northern Europe, the UN refugee agency, UNHCR, said.

Now I know it all perhaps depends on what tasks the various ‘additional’ crew are supposed to handle. Frontex could be doing registration and finger printing. Europol could do some stuff behind the scenes, like sniffing out alleged terrorists. But actual policemen and soldiers and even private security operating inside a sovereign European nation?

The overarching question is how this is different, how far removed is it, from German soldiers and policemen patrolling in for instance Greece? And what would be the reaction from the Greek people to such a development? Or we can turn it around: how would Germans react to Greek soldiers operating on German soil? Once you provide a legal justification for one situation, this should cover all 28 nations, and equally.

Another question is Slovenia once hires private security, how far away are we from employing some subsidiary of Blackwater to patrol the Aegean and/or other parts of the Mediterranean? Or land-based border crossings for that matter?

It will become clearer, fast, what an awful mess Brussels and Berlin have created here, because with winter approaching more refugees will fall victim to the conditions under which they’re forced to live once they’ve entered Europe. Which, in their own eyes, will still be preferable to the conditions in their homelands. And then what will we do, when dozens start dying from cold and diseases? Send in more police and military?

This is a road to a very bleak nowhere. We can only possibly return to what I started out with: “the only way to approach a crisis such as this one is to put the people first.” That is, pay for and send in aid agencies, not officers bearing arms.

And perhaps Europe should begin to ponder the possibility that this is not something it can stop at will. That the 500 million citizens of the EU may have to share their bounty with a few million newcomers. Who, on the whole, look a lot fitter, more determined and more motivated than scores of Europeans do, by the way.

Keen vs. Keen: Will the Real Steve Keen Please Stand Up?

Courtesy of Mish.

Economists Prove That Capitalism Is Unnecessary

Several readers sent me a link to Economists Prove That Capitalism Is Unnecessary.

The title was hardly surprising, given that is what many economic illiterates think. However, I was startled to find out it was written by Steve Keen, one of my favorite economists.

Did Steve Keen really propose such a thing?  Thankfully, he didn’t.

The first sentence of his article reads “Actually they’ve done no such thing. But they do effectively assume that it’s unnecessary all the time. … I’ve read this sort of nonsense in dozens of mainstream academic papers over the years, and railed against it in an academic sort of way.

With that, I was more than a bit relieved. And in regards to central planning and ability of bureaucrats to spot bubbles, bad planning, and instability, Keen says …

And how would economic agents notice this instability? They would realize that a pattern of relative prices that had occurred once before in the past happened again. Hmmm. O.K.A.Y.

Getting to the heart of the matter, Keen praises Hayek …

The strength of a market economy was how it let people combine fragmented and incomplete knowledge in a way that no centralized system could do. Hayek’s main target here were socialists who believed that a complex economy could be centrally planned—thus doing away with markets institutionally.

Keen vs. Keen

In his Debtwatch Manifesto Keen proposes three mechanisms for dealing with the debt crisis. The first is a debt jubilee. The second is a mechanism that would act to restrict share prices.

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Simple proof that Philidor has shipped drugs where it is not licensed

 

Simple proof that Philidor has shipped drugs where it is not licensed

Courtesy of , Bronte Captial

The Wall Street Journal has a fabulous article about Valeant's ties to Philidor – its captive specialty pharmacy.

In it they suggest that Valeant staff double under fake names as Philidor staff.

The use of alternative names by workers at Philidor is one of a number of new details emerging about the relationship between Valeant and the network of specialty pharmacies it uses to distribute drugs. The relationship is at the center of questions that investors have raised about the strength of the drug company’s operations and the disclosures of its business ties.

Citron Research alleged that Philidor was used as a method of channel stuffing. However I think that it is more likely that it is used as a mechanism for customers to buy and insurance companies to pay for drugs that they would not have otherwise done so.

[See also Valeant — Could this be the Pharmaceutical Enron?]

Two methods are – it seems – used to do this. One has been widely discussed – copay assistance.

The other is using name of a pharmacist that is seemingly unrelated (or at least where the relationship has not been disclosed) to "fill" the prescription. That pharmacist essentially donates or lends their NPI number. The captive pharmacies are variable interest entities because they are controlled but not owned. Valeant would in this case wish to hide their ownership.

There is a court case between Isolini (almost certainly an undisclosed Philidor and hence Valeant subsidiary) and R&O pharma (a pharmacy with a license in California). You can find the Isolini documents here (warning large folder).

The usual explanation for why Philidor wanted to use R&O pharma was that Philidor had been denied a license to operate in California and R&O had such a license.

We however have our doubts. One of the Isolini documents (provided by the Philidor/Valeant side of the transaction) had an invoice for all the product that had been shipped in R&Os name and for which R&O owed money.

That list contained identification numbers. We discovered that those numbers were in fact UPS shipping numbers and each of these deliveries is traceable. This (linked) document is a list of UPS tracking numbers.

And those deliveries went all over the United States. They went to California – sure – but they also went to other addresses.

Some went to States where Philidor was licensed but not R&O. Some went to States where R&O was licensed but not Philidor. Some went to States like Oregon where neither R&O nor Philidor was licensed.

So here is the pertinent question: why would Philidor (which is staffed by Valeant staffers using false names) use the name of a two-bit pharmacy to send prescriptions all over the United States including to States where the two-bit pharmacy was not licensed?

The only explanation I can come up with – and one that the company should address in the conference call – is that they did it because they were getting rejections or audits from insurance payers when using Philidor's name. Hence they used the NPI number of another pharmacy and the payers paid without audit.

I expect the company to provide an alternative explanation in the conference call because this looks like deception using a mail service to deprive property from a financial institution: classic mail fraud. And because it is against an insurance company (a finacial institution) the monetary penalty is up to $1 million per instance. And each instance is separate and fines are cumulative.

Don't even try to work out the fine.

PS. These conclusions are broadly similar to Roddy Boyd's most recent article (which is excellent).

For reference here are the first hundred or so of many UPS numbers – used the linked document to see them all.

1ZX101A60240754571
1ZX101A60242624449
1ZX101A60241063100
1ZX101A60242658805
1ZX101A60241684752
1ZX101A60241980815
1ZX101A60242805208
1ZX101A60242086012
1ZX101A60240757121
1ZX101A60240758102
1ZX101A60242906831
1ZX101A60241155850
1ZX101A60242203715
1ZX101A60240602878
1ZX101A60240039648
1ZX101A60242264356
1ZX101A60242391594
1ZX101A60241428458
1ZX101A60342259486
1ZX101A60241293362
1ZX101A60240186677
1ZX101A60340954406
1ZX101A60242821655
1ZX101A60241770006
1ZX101A60242709296
1ZX101A60240831782
1ZX101A60242691331
1ZX101A60240019660
1ZX101A60242398873
1ZX101A60140680607
1ZX101A60241977427
1ZX101A60241013495
1ZX101A60241624398
1ZX101A60242433744
1ZX101A60340241560
1ZX101A60240482427
1ZX101A60242512695
1ZX101A60240122244
1ZX101A60242894854
1ZX101A60240029775
1ZX101A60140262096
1ZX101A60241940966
1ZX101A60241501752
1ZX101A60242341496
1ZX101A60242668910
1ZX101A60240097737
1ZX101A60242248374
1ZX101A60240482687
1ZX101A60241814950
1ZX101A60242882492
1ZX101A60241780068
1ZX101A60241667011
1ZX101A60241160193
1ZX101A60242731172
1ZX101A60341260396
1ZX101A60241699059
1ZX101A60240737849
1ZX101A60241162664
1ZX101A60242866698
1ZX101A60240670394
1ZX101A60242211448
1ZX101A60240978964
1ZX101A60240710162
1ZX101A60241348839
1ZX101A60240671231
1ZX101A60242518340
1ZX101A60242063582
1ZX101A60242699879
1ZX101A60241070718
1ZX101A60242438016
1ZX101A60242040249
1ZX101A60241181018
1ZX101A60240271897
1ZX101A60341132597
1ZX101A60241975116
1ZX101A60241652643
1ZX101A60240390311
1ZX101A60341236109
1ZX101A60240332777
1ZX101A60242258005
1ZX101A60342564468
1ZX101A60341206829
1ZX101A60240541934
1ZX101A60241997969
1ZX101A60241709001
1ZX101A60240386979
1ZX101A60240152999
1ZX101A60240300622
1ZX101A60241346322
1ZX101A60342328302
1ZX101A60240511887
1ZX101A60242099651
1ZX101A60241627260
1ZX101A60241694269
1ZX101A60242067668

 

News You Can Use From Phil’s Stock World

 

Financial Markets and Economy

The $67 Billion Prize On Offer as Japan Shakes Up Power Market (Bloomberg)

Spend a few minutes to fill in a single-page form from a government website. Mail it in. Thats all you need to register as a power producer in Japan as the countryopens its $67 billion retail electricity market.

The future of the bank branch is in trouble — here's why (Business Insider)

Millennials are increasingly turning to digital banking channels to perform their banking activities, and they're visiting their banks' branches less often than ever before. 

remittance volume

Global IPO Wars: Exchanges Wage All-Out Fight for Next Alibaba (Bloomberg)

These days, it’s not enough to be the symbol of American capitalism.

The IEA says oil and gas investment hasn’t been this bad in 20 years (Quartz)

The global energy industry is running on empty, with low prices sending investments plunging.

Marvell Technology's auditor resigned and now the stock is crashing (Business Insider)

Marvell Technology's auditor has resigned and now the stock is crashing.

In a filing with the SEC on Monday night, Marvell Technology, a $5 billion semiconductor company, disclosed that PricewaterhouseCoopers resigned as its auditor on October 20. 

Oil Heads East, Leaving Oklahoma Pipeline Unusually Un-Full (Bloomberg)

A pipeline to America’s largest oil hub is about to find itself in an unfamiliar position: not full.

Fed rate hike is a risk to stocks and corporate bonds, government says (Market Watch)

The government agency tasked with keeping an eye on financial stability in U.S. markets thinks a big risk to current U.S. asset prices is the Federal Reserve.

“It remains to be seen whether current U.S. asset price ranges can be sustained once the Fed begins to raise interest rates,” the Office of Financial Research said in its latest report on the markets released Monday.

UPS delivery trucks are seen in New York City March 6, 2014.  REUTERS/Mike Segar UPS counting on small retailers to save Christmas (Business Insider)

After two years of disappointing profits from the holiday season, United Parcel Service Inc <UPS.N> is hoping a network of mom-and-pop retailers will help it avoid a third blue Christmas.

Investors will be watching closely.

Tom Lee Says Only Ninjas Are Making Money in This S&P 500 Rally (Bloomberg)

For a stock market that’s gone up as fast as this one, there’s a lot of pain going around.

The Standard & Poor’s 500 Index has climbed almost 11 percent since falling to a 10-month low on Aug. 25, restoring about $1.4 trillion to share prices. Meanwhile there have been 13 instances in the past two weeks of companies posting one-day drops of 10 percent or more — one of the highest rates of single-stock crashes in four years.

George Soros' idea about how markets work explains what happened to Valeant last week (Business Insider)

What happened to Valeant Pharmaceuticals last week was about reflexivity.

Screen Shot 2015 10 26 at 2.57.59 PM

What to look for in Comcast’s earnings (Market Watch)

Cable and Internet provider and overall entertainment Goliath Comcast Corp. is set to report its third-quarter earnings before the market opens on Tuesday. Here’s what investors can expect:

Earnings: Analysts tracked by FactSet expect Comcast CMCSA, +0.32%  to report net income of $2.01 billion, or 80 cents share. That’s down from 73 cents per share in the year-earlier quarter. Comcast has beat EPS consensus seven times in the last ten quarters.

The Bitcoin Startup Boom Comes Back Down to Earth (Bloomberg)

Growth in venture capital flowing to bitcoin startups slowed substantially last quarter, and startups are feeling the pinch.

brown bears8 things frustrating stock market bears everywhere (Business Insider)

After a volatile few weeks, stocks are on the rebound.

The S&P 500 is now up a tiny 0.6% for the year, but at least it's up.

Last week, the S&P 500 scored its fourth straight weekly gain and the benchmark stock index is now up 11% from the depths of its most recent plunge in August.

Energy, metals companies lead list of issuers at risk of downgrade to junk (Market Watch)

The number of companies that are at risk of falling into the speculative rating category from investment grade rose sharply in the third quarter, led by commodities-related issuers, Moody’s Investors Service said Monday.

The number of potential fallen angels, those who are rated at Baa3, the lowest level of investment grade, that are either on review for a potential downgrade or have a negative outlook, rose to 41 from 31 in the quarter, according to Moody’s.

Apple Earnings Will Tell Us Whether to Expect Happy Holidays or a Long Winter (Bloomberg)

The iPhone maker will revealexpectations for the crucial end-of-year quarter, which should answer investors concernsabout growth after a record 2014.

Stock market experts are worried about bond market liquidity (Business Insider)

Barclays' US equity strategist Jonathan Glionna is worried about bond market liquidity. 

Screen Shot 2015 10 26 at 11.37.19 AM

October’s stock-market run-up may yield a bad ‘Santa Claus rally’ (Market Watch)

A torrid October rebound that pushed the S&P 500 back into positive territory for the year might have bulls feeling good again, but history shows the rally might diminish prospects for a “Santa Claus rally” at the end of the year, according to one market analyst.

The S&P 500 posted an 8.1% month-to-date rise through Oct. 23. According to Sam Stovall, U.S. equity strategist at S&P Capital IQ, that’s around eight times the size of the typical October rally, based on data going back to 1945.

Figuring Out China Monetary Policy Gets Even Harder for Analysts (Bloomberg)

Chinas monetary policy just got even harder to follow.

Two things that could keep this global stock-market rally going (Market Watch)

Investors’ appetite for riskier assets such as stocks came surging back in October, getting a big hand from promises of easier money by the European Central Bank and an actual rate cut from China’s central bank.

The question now is how markets can keep up the momentum. 

Politics

barack obamaWashington is on the verge of a massive budget deal — here's what it would tackle (Business Insider)

The contours of an emerging budget deal would provide Congress with a way out of most of the coming landmines ahead of the 2016 presidential election.

A House source, cautioning that there is no final agreement at the moment, sketched out the details of the agreement in an email to Business Insider.

Donald Trump Just Accidentally Gave His Opponents an Attack Ad (Mother Jones)

On Monday morning, GOP front-runner Donald Trump inadvertently gave his opponents a ready-made attack ad. During an interview with NBC's Matt Lauer on Today, the billionaire, who often gives the impression that he built his fortune from scratch, even though he hails from a wealthy background, explained the challenges of building his real estate empire. "It has not been easy for me," he said. "It has not been easy for me." He said his father, real estate developer Frederick Trump, had given him a "small loan," which he repaid with interest, and which enabled him to begin buying properties in Manhattan. The size of the loan? It was for a paltry $1 million dollars.

Indonesia's Widodo Talks Climate With Obama as Peat Fires Rage (Bloomberg)

With smoke choking Indonesia’s air, President Joko Widodo met Barack Obama at the White House in a visit curtailed by forest fires that have focused attention on climate change.

Technology

This Mini, Portable Wind Turbine Could Charge Your Phone Or Power Your House (Fast Company)

Gigantic wind farms aren't the only way to harness the breeze. Two brothers have created a simple device that anyone can use.

Einar Agustsson and his brother Agust Agustsson come from a long line of electricians. The family business is in making and fixing complex motors, like those at Iceland's many renewable energy plants.

The Craziest Concept Cars Ever Seen at the Tokyo Motor Show (Bloomberg)

Concept cars that are never going to make their way to production are a staple of any car show. With that disclaimer out of the way, it's fair to say the Tokyo Motor Show has become particularly well known for the boldest, strangest, most off-the-wall concepts the motoring world ever sees. Let's have a look at some of the highlights over the years.

Health and Life Sciences

bananaDrug from bananas may fight flu virus (Futurity)

Bananas contain a substance that, when changed slightly by scientists, shows promise to fight a wide range of viruses, including the flu.

And the process used to create the virus-fighting form may help scientists develop even more drugs, by harnessing the “sugar code” that our cells use to communicate. That code gets hijacked by viruses and other invaders.

Red meat causes cancer — unless you eat it like this (Market Watch)

If you’re a paleo fan or Atkins diet devotee — or simply a die-hard carnivore — you may be putting your life at risk, a new study reveals.

Eating processed meats like bacon, ham, hot dogs and sausage puts you at risk of getting cancer, according to a report released Monday by the World Health Organization. The WHO put processed meats — defined as meats that have been transformed through salting, curing, fermentation, smoking, or other processes to enhance flavor or improve preservation — in the highest of five categories in terms of their cancer-causing potential, along with cigarettes, arsenic, plutonium and asbestos.

Life on the Home Planet

Indonesia May Take Up to a Decade to Curb Annual Land Fires (Bloomberg)

Indonesia may take as long as a decade to permanently curb the plantation land-burning that sends choking smog across swathes of Southeast Asia each year, according to a research fellow at Nanyang Technological University.

Although Indonesia has ratified a regional agreement committing it to act to reduce the smoke “haze” caused by the land fires, the law has yet to enacted locally in its districts, said Jonatan Anderias Lassa, a research fellow at the Centre for Non-Traditional Security Studies at the Singapore university.

More than 200 dead in Afghanistan and Pakistan following Hindu Kush quake (Market Watch)

A major 7.5-magnitude earthquake struck in the Hindu Kush mountains in Afghanistan near the border with Pakistan on Monday afternoon, cutting a swath of death and destruction in both countries.

As night fell across the area’s rugged and, in some places, rebel-held terrain, Afghan and Pakistani authorities rushed to mount rescue efforts. The scale of the disaster was unclear, and officials said it could take days to assess the damage in remote villages.

Winter Scramble; Refugees Will Freeze to Death Warns Juncker; Tony Blair Apologizes for Creation of ISIS

Courtesy of Mish.

Scramble is On

November is less than a week away and nighttime temperatures are dropping rapidly.

What is Europe supposed to do with hundreds of thousands of migrants in need of shelter?

This is one of those things German chancellor Angela Merkel, Swedish prime minister Stefan Löfven, and EU head Jean-Claude Juncker should have thought about before welcoming economic migrants with open arms, essentially begging for this very crisis.

Those bureaucrats don’t admit their own foolish policies helped create this crisis. Instead, the EU Scrambles to Shelter Migrants as Winter Looms.

Europe is scrambling for ideas on how to detain and process the hundreds of thousands of migrants winding through the continent, yet after months of effort officials are still struggling to make headway before the onset of winter.

Heads of government agreed to come up with 100,000 places in shelters along the so-called western Balkans route after European Commission president Jean-Claude Juncker warned that refugee families could “perish miserably” during the journey from Greece through former Yugoslavia and into Austria and Germany without help.

At the moment, officials are suffering from a dearth of information on the ground as Greece and countries in former Yugoslavia — which often have strained diplomatic relations — either do not collect or fail to pass on information.

“I cannot tell you how many are on the move as we speak,” said one EU official.

Berlin has heaped pressure on its neighbours to deal with incoming asylum seekers before they reach German borders, as chancellor Angela Merkel attempts to quell a domestic backlash — among both voters and her own party — against the influx of refugees.

Under the proposals agreed on Sunday, Greece will become a temporary de facto refugee camp for the rest of the EU, with 30,000 places set up by the end of the year — despite vociferous opposition from Greek officials in the past.

Domestic Backlash

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Sales, Earning Estimates Contract First Time Since 2009; US Back in Recession?

Courtesy of Mish.

US Back in Recession?

Large US corporations posted their first decline in both earnings and sales since the great recession. Are we back in recession?

That depends on who you ask. Let's kick of the debate with the Wall Street Journal article U.S. Companies Warn of Slowing Economy.

Quarterly profits and revenue at big American companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending.

From railroads to manufacturers to energy producers, businesses say they are facing a protracted slowdown in production, sales and employment that will spill into next year. Some of them say they are already experiencing a downturn.

“The industrial environment’s in a recession. I don’t care what anybody says,” Daniel Florness, chief financial officer of Fastenal Co. , told investors and analysts earlier this month. A third of the top 100 customers for Fastenal’s nuts, bolts and other factory and construction supplies have cut their spending by more than 10% and nearly a fifth by more than 25%, Mr. Florness said.

Caterpillar Inc. last week reduced its profit forecast, citing weak demand for its heavy equipment, and 3M Co. , whose products range from kitchen sponges to adhesives used in automobiles, said it would lay off 1,500 employees, or 1.7% of its total, as sales growth sagged for a wide range of wares.

The weakness is overshadowing pockets of growth in sectors such as aerospace and technology.

Profit and revenue are falling in tandem for the first time in six years, with a third of S&P 500 companies reporting so far. Analysts expect the index’s companies to book a 2.8% decline in per-share earnings from last year’s third quarter, according to Thomson Reuters.

Sales are on pace to fall 4%—the third straight quarterly decline. The last time sales and profits fell in the same quarter was in the third period of 2009.

Wal-Mart recently warned its sales this year are likely to be flat, down from projection of as much as 2% growth, and cut its earnings forecast for next year as it raises wages. The retailer blamed the strong dollar for the weakening sales growth.

And truckload carriers have warned that they aren’t witnessing the usual uptick in retailer demand as the holiday season approaches, thanks to stubbornly high inventories, said Alex Vecchio, a transportation analyst at Morgan Stanley. “Transportation companies are typically a leading indicator, and our data is not good,” Mr. Vecchio said.

Sales, Earning Estimates Contract First Time Since 2009


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Precious Metals Starting To Produce Some Winners

Courtesy of John Rubino.

Everybody who’s owned gold and silver mining shares through a couple of cycles has their favorite story of the stock that took off and ran away. There was Glamis Gold, which rose from $1 to $40 in the space of a few years before selling out to Goldcorp. And Silver Wheaton, which soared from $3.45 in 2008 to over $40 in 2011. And many, many more.

That’s how mining shares — which are, as the industry likes to say, leveraged plays on gold and silver — behave when the underlying metals start to rise. And you only need to find and ride a few such moonshots to justify a lifetime of obsessing over your investments.

Now, after a brutal and interminable bear market, a few of the better miners and streaming companies are starting to show signs of that famous upside potential. Three examples:

Silver WheatonFranco NevadaSeabridge Gold

 

There’s no way to know whether this is a head fake in an ongoing bear market or the start of another (and long overdue) epic rise — which we don’t want to miss! Either way, when that next bull market does arrive its initial stage will look like these charts, so the current action at least bears watching.

Visit John's Dollar Collapse blog here.

 

On Leaders and Demagogues

 

On Leaders and Demagogues

Courtesy of Robert Reich

Among the current crop of candidates for president of the United States, who exhibits leadership and who doesn’t?

Leadership isn’t just the ability to attract followers. Otherwise some of the worst tyrants in history would be considered great leaders. They weren’t leaders; they were demagogues. There’s a difference.

A leader brings out the best in his followers. A demagogue brings out the worst. 

Leaders inspire tolerance. Demagogues incite hate.

Leaders empower the powerless; they give them voice and respect. Demagogues scapegoat the powerless; they use scapegoating as a means to fortify their power.

Leaders calm peoples’ irrational fears. Demagogues exploit them.

My list of great American leaders would include Abraham Lincoln, Susan B. Anthony, Franklin D. Roosevelt, Frances Perkins, and Martin Luther King, Jr.

In his second inaugural address near the end of the Civil War, Abraham Lincoln urged his followers to act with “malice toward none, with charity for all.”

In his first inaugural at the depths of the Great Depression, Franklin D. Roosevelt told Americans the “only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts.”

In 1963, as African-Americans demanded their civil rights, Martin Luther King, Jr. urged his followers “not to seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred.”

My list of American demagogues would include Senator “Pitchfork” Benjamin Tillman of South Carolina, who supported lynch mobs in the 1890s; Father Charles Coughlin, whose antisemitic radio rants in the 1930s praised Nazi Germany; Senator Joseph McCarthy, who conducted the communist witch hunts of the 1950s; and Governor George C. Wallace, the staunch defender of segregation.

These men inspired the worst in their followers. They scapegoated the weak and set Americans against each other. They used fear to stoke hate and thereby entrench their power.

Back to the current crop of Presidential candidates: Who are the leaders, and who are the demagogues?

The leaders have sought to build bridges with those holding different views.

Rand Paul spoke at Berkeley, for example, seeking common ground with the university’s mostly-progressive students.

Bernie Sanders traveled to Liberty University where most students and faculty disagree with his positions on gay marriage and abortion. “I came here today,” he said, “because I believe from the bottom of my heart that it is vitally important for those of us who hold different views to be able to engage in a civil discourse.”

Other candidates, by contrast, have fueled division. Ben Carson has said being gay is a choice. “A lot of people who go into prison straight and when they come out they’re gay,” he says, “so did something happen while they were in there? Ask yourself that question.”

Carson has also argued that Muslims should not be allowed to become President. I “would not advocate that we put a Muslim in charge of this nation.”

Donald Trump, meanwhile, has charged that Mexican immigrants are “bringing drugs. They’re bringing crime. They’re rapists.”

Trump has lashed out at those who he charges come to America to give birth, so that their children will be, in his term, “anchor babies” – arguing that “we have to start a process where we take back our country. Our country is going to hell.”

And after one of his followers charged that Muslims “have training camps growing where they want to kill us,” and asked Trump “when can we get rid of them?” Trump didn’t demur. He said “a lot of people are saying that” and “we’re going to be looking at that.”

Nor has Trump inspired the best in his followers.

At one recent rally, after Trump denigrated undocumented workers, his supporters shoved and spit on immigrant activists who had shown up to protest. At other Trump rallies his followers have shouted at Latino U.S. citizens to “go home” and yelled “if it ain’t white, it ain’t right.” 

Trump followers have told immigrant activists to “clean my hotel room, bitch.” They’ve beaten up and urinated on the homeless, and and joked “you can shoot all the people you want that cross illegally.”

America is the only democracy in the world where anyone can declare himself or herself a candidate for the presidency – and, armed with enough money, possibly even win. 

Which makes it all the more important that we distinguish leaders from demagogues.

The former ennoble our society. The latter degrade and endanger it – even if they lose.

[Picture source: Woodtv.com.]