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Dollar rises to upper 96 yen level on continued hope for US economy
istockAnalyst.com (press release) But most market participants see the quarterly survey as having limited impact on currency trading, saying the dollar's rise had more to do with the recent … and more » |
Preamble: here is the original post… the supremely ironic thing is I didn’t even say anything negative about DK.
First, I ask readers to watch the following clip
I want to make a few points:
First, I have respect for Dennis - he lays out his beliefs (regardless if these beliefs are based on completely flawed foundations or not) and defends them, on prime time TV, in a “financial news” medium whose very existence every viewer realizes is contingent on not only the continued viability of massively bad debt-laden GE (due to its inextricable ties with GE Capital, which lent out more toxic second liens than virtually any other entity), but by implication, the well-being of the overall economy, as well as the continued financial support by PIMCO and other financial company sponsors who have explicit and implicit ties with the current administration, and who profit exclusively from a rising market. In retrospect, one can see where Dennis’ viewers may get confused by the blurry line between a hopelessly severe conflict of interest and honest personal opinion.
Second, I want to address some points that Dennis made in his monologue. Zero Hedge received an invite from Dennis’ producer Dave at 1:34 pm to appear on the show. Of course, our frequent readers realize this is a non-starter for anyone at Zero Hedge due to the nature of our operation. We countered by offering a telephonic interview at an indeterminate point in the future (and desirous of at least a 24 hour advance notice: again, frequent readers will attest that I tend to post constantly, for about 18 hours a day), and even offered Dennis a forum on Zero Hedge to directly address our readers, whom he, we assume affectionately, had some florid words for. Nowhere did we give the impression we would have a call today, and offered up a date in two weeks for an extended call, which would take place upon my return from a reconnaissance trip to Europe (ironically to check up on some of GECC’s major investments in the region: stay tuned for my observations). Our overture was denied, yet somehow Dennis decided to make a point of misrepresenting the communication that took place. We provide a transcript of the email exchange earlier for our readers’ convenience.
Third, I would be very happy to have a sensible, rational discussion with Dennis on any topic of his choosing, and to demonstrate my opinion, which he may or may not agree with, as to why I find his conclusion that the recession is now over laughable. However, this will not occur on CNBC’s 10 second sound bite terms: a good case in point is Dennis allowing the other blogger exactly 46 seconds of air time to justify his opinion, before cutting him off irreverently and turning off his microphone. Zero Hedge knows very well how prime time media operates. Which is why I, in turn, extend Dennis an invitation to appear on a podcast, or any other non-CNBC hosted venue of his choosing, for a deabte which will be as lengthy as necessary, without commercial or otherwise interruptions, without prepared notes, without tele- or ear-prompters, in which I am happy to deconstruct his thesis point by point, not having to worry about his producer cutting me off, or Fritz Henderson’s bathroom break at 1 Bowling Green causing an epileptic fit inducing bout of CNBC Breaking News.
Fourth, as pertains to anonymity, Mr. Kneale would be well-advised to read the Zero Hedge manifesto:
though often maligned (typically by those frustrated by an inability to engage in ad hominem attacks) anonymous speech has a long and storied history in the united states. used by the likes of mark twain (aka samuel langhorne clemens) to criticize common ignorance, and perhaps most famously by alexander hamilton, james madison and john jay (aka publius) to write the federalist papers, we think ourselves in good company in using one or another nom de plume. particularly in light of an emerging trend against vocalizing public dissent in the united states, we believe in the critical importance of anonymity and its role in dissident speech. like the economist magazine, we also believe that keeping authorship anonymous moves the focus of discussion to the content of speech and away from the speaker- as it should be. we believe not only that you should be comfortable with anonymous speech in such an environment, but that you should be suspicious of any speech that isn’t.
To this point, and this is where there is obviously major friction in opinions as I am not sure if Dennis, a TV pundit, can quite comprehend this, Zero Hedge is not about personalities, goatees or glasses - it is about ideas, facts and opinions. People come to Zero Hedge not because of my chiseled washboard abs, but because they appreciate my insight into things financial and economic. My personality is not relevant when discussing critical concepts. Who knows - maybe I do not care for being recognized while having diner at Campagnola. Zero Hedge realizes that a little individual humility when evaluating the trillions and trillions of debt which our children will inherit as a result of the current spending spree by the Administration (which may or may not end this immediate recession, only to result in a default of the US 10 years down the line), would come in useful: maybe Mr. Kneale should also consider that as he hopes to build credibility before his CNBC viewers.
Lastly, direct attacks by Dennis against Zero Hedge readers with pejoratives such as “digital dickweed” is somewhat beneath a person who, at least in his personal view, is sufficiently erudite to have an informed opinion on such critical issues as the end of a recession.
In conclusion, I have no bad blood with Dennis at all - I believe it would greatly benefit both Dennis’ viewers as well as my readers to have a sensible discussion on this very relevant topic. I have proposed several ways in which this can be achieved: if Dennis would like to take on the challenge, I am game. If not, I understand: after all Zero Hedge is at the forefront of the “anonymous, dark and cowardly” blogosphere, whose corners Dennis would be the last person to brave as we deal not with the ethereal, bright lights of “hope and fortitude” but scary, mysterious concepts like facts and substance.
There is nothing like a blockbuster drug—or the prospect of coming up with such a winner—to catapult a pharmaceutical company’s stock to lofty levels. That’s been the experience in the past few days of Watson Pharmaceuticals (WPI), whose stock jumped to a 52-week high of 33.97 a share on June 30 from 28 just two weeks earlier. The stock traded as low as 20 in mid-October.
The catalyst for Watson’s rise: The company will become an authorized seller of a generic version of Lipitor, Pfizer’s cholesterol-lowering product. Lipitor is the world’s largest-selling drug in dollar terms.
On June 16, Watson agreed to pay $1.7 billion for the privately owned Arrow Group, a maker of specialty and generic drugs which owns the U.S. rights to sell the authorized generic version of Lipitor after Pfizer (PFE) loses patent protection in November 2011. Lipitor generated global sales of $13.6 billion last year, according to drug research group IMS Health (RX). The combined Watson/Arrow companies (the purchase will close in the second half of 2009) will produce about $3.5 billion in annual revenues, with operations in more than 20 countries, according to Watson CEO Paul M. Bisaro. He says an Indian unit of Japan’s Daiichi Sankyo (4568.T) shares the U.S. rights to the generic Lipitor.
Here is how the marketing of the generic will work: Pfizer will supply Watson with Lipitor, which Watson will then place in its own bottle with its own generic label. Pfizer will get a yet-undisclosed amount in royalty fees.
The U.S. market for Lipitor is about half the total worldwide sales, so presumably the generic version could produce revenues of upwards of $6 billion a year for its makers. Bisaro notes that the generic versions usually fetch about 40% to 50% of the brand product’s price. Exclusive of the generic Lipitor sales, Watson expects sales for the combined Watson-Arrow to grow by some 10% a year.
Bisaro declines to estimate how much the generic version of Lipitor will produce in revenues when launched in 2011. But he figures profits for the combined companies could grow by more than 10% annually. Without a doubt, he says, Arrow and the Lipitor generic “will be very, very important to Watson’s sales in the U.S.”
Outside the U.S., Bisaro says, Watson will sell its own generic Lipitor without depending on Pfizer’s manufacturing capability. So far Watson’s other generic products have been selling well, he says.
Watson also produces its own branded drugs, which generate about $500 million in yearly sales. Among them is Rapaflo, a treatment for enlarged prostates. The rest of the company’s $2.1 billion in standalone annual revenue comes from its generic drugs. Watson markets more than 150 generic drug products, including oral contraceptives, analgesics, antihypertensives, diuretics, hormone replacements, and anti-inflammation products.
Part of the reason behind buying Arrow is to gain an international presence for Watson’s drugs. Around 70% of Arrow’s revenues of $647 million in 2008 came from sales outside the U.S.
Analyst Tim Chiang of , who rates Watson a buy, says Arrow has been investing heavily in research and development and has some 30 new products awaiting approval by the Food & Drug Administration. (FTN expects to do business with Watson.) Chiang figures Watson will earn $2.76 a share in 2009 and $2.84 in 2010, up from $2.03 in 2008.
The deal makes sense, he says, and should further enhance Watson’s growth. Chiang expects the acquisition to boost 2010 earnings even before synergies are taken into account. He envisions merger-related cost savings of about $25 million to $35 million within the first 15 months to 18 months after the deal’s closing. Watson’s debt-to-capital ratio is expected to widen to 40% after the cash-and-stock purchase of Arrow, up from 28.8%.
Arrow will provide Watson with “critical mass” in key international markets, including France, Canada, and Britain, says Michael Tong, a senior analyst at Wachovia Capital Markets (WFC), who rates Watson overweight. (Wachovia has done business with Watson.) He believes the acquisition is strategically prudent, as it provides Watson not only geographic expansion but also increased capabilities in producing generic drugs.
Last year Watson launched 11 new generic products, including one for the widely popular heartburn medication Prilosec. This year the company expects FDA approval of generics for two heart medicines, Toprol XL and Cardizem.
The ultimate question now is what Pfizer’s strategy will be to make up for the loss of exclusivity on the lucrative Lipitor. One possible plan, according to some industry observers, is for Pfizer to acquire Watson. When asked about that possibility, Bisaro says Watson has a bright future and it would rather stay independent. “But we have a responsibility to our shareholders,” the CEO adds, and “we should do what’s best for them.”
Apart from Pfizer, another company that may be eyeing Watson, some analysts say, is Israel’s Teva Pharmaceutical (TEVA), the world’s largest producer of generic drugs. The acquisitive company has been busy snapping up generic drug producers with markets outside the U.S. A move to go after Watson, they say, could come even before November 2011, when Pfizer’s Lipitor patent expires.
The bright promise of generic Lipitor, with the added kicker of a possible takeover, make Watson an intriguing opportunity for pharmaceutical investors.
Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial’s 7 Commandments of Stock Investing.
Halfway into a tumultuous 2009, investors are no doubt ready for their summer vacations. The first six months of the year—which officially ended June 30—have seen some of the wildest swings in stock market history.
Stocks started 2009 with a strong one-day rally, but soon began a nose dive that lasted two long months. By Mar. 9, the broad Standard & Poor’s 500-stock index was down 25%—on top of the index’s 37% loss in 2008—and trading at levels not seen since 1996.
Then suddenly, as if a switch had been flipped, the market started rallying. The S&P 500 ended the second quarter at 919.32, 36% above the March low.
Like passengers on a roller coaster, investors now find themselves almost exactly where they started. The S&P 500 is up 1.8% for the year. “We’ve had a whole lot of drama, and we haven’t gotten a whole lot done,” says Richard Sparks of Schaeffer’s Investment Research.
Other closely watched but less representative indexes had slightly different results. The Dow Jones industrial average, which includes just 30 of the biggest U.S. companies, has fallen 3.8% in 2009. The Nasdaq composite has rallied 16.4% this year, reflecting the strength of technology stocks.
At the beginning of the year, there was a great deal of uncertainty about where the economy and markets were headed. Little has changed in this respect. “We’re looking for clues of what comes next,” Sparks says. “The future isn’t easy to see.”
Not that investors haven’t learned a thing or two from the past two quarters.
Market participants lost—and then regained— their confidence in the last six months. “We saw a crescendo of negativism about the state of the credit markets and the economy,” says James King, president and chief investment officer at National Penn Investors Trust.
The news is still bad—in some cases, terrible—but, King says, “The hopelessness seems to have been removed from the market.”
The bolstered confidence has been a vast improvement in credit markets, say fixed-income investors. Brian Reynolds, chief market strategist at WJB Capital Group, calls it the “the biggest rally in credit in modern history.”
“No one could get credit six months ago,” he says. Now, “we’re shoveling money at companies.”
At the beginning of 2009, credit investors were pessimistic while many equity investors thought the credit crisis was ending, Reynolds says. Now, it’s the opposite: Reynolds describes credit market participants as far more confident about a recovery than those in the equity market, where stocks have been stagnant for several weeks.
Many indexes of riskier credit products, such as high-yield corporate debt or municipal bonds, are up almost 30% so far this year, notes Bill Larkin, fixed-income portfolio manager at Cabot Money Management. If often-skittish fixed-income investors are willing to take on more risk, that’s a sure sign that confidence is returning to financial markets.
But confidence is one thing, and facts and data are another. At least some economic data have showed, as Sparks says, that “the economy has stopped contracting.”
The discussion, King says, has shifted from “Are we ever going to recover?” to “When are we going to recover?”
When indeed? Other key gauges of economic activity continue to worsen. Economists expect the U.S. jobless rate to rise from 9.4% in May to 9.6% in June when the government’s employment report for June is issued on July 2.
“We’re at a fork in the road,” Larkin says. “The timing of this recovery is still in question.”
A key example is U.S. gross domestic product. In the first quarter, the U.S. economy shrank 5.5%, while GDP is expected to drop at a slower 2.5% pace in the second quarter. But economists offer a wide array of predictions about the third quarter, some positive and some negative. As more data comes in, “people are going to start to move in one direction or the other,” Larkin says. And that could be decisive for financial markets, he says.
Although stocks rallied strongly from March to early May, major indexes have been stuck in a narrow trading range for the past two months. “It’s going to be hard for the market to make another huge rally without some pretty clear evidence [of] improvement,” King says.
Thus, in many ways, the last six months of 2009 now look as cloudy and confusing as the first six months looked to be as the year began.
A recovery may be on the way. Credit markets have improved. Stock indexes have stopped falling and even recovered some losses. But nothing guarantees that the second half of 2009 will be any quieter or calmer than the first half. For investors, frazzled by the last six months and preparing for more craziness, maybe a brief vacation isn’t such a bad idea.
Steverman is a reporter for BusinessWeek’s Investing channel.
Two odd press releases after the close today, both pertaining to our favorite REIT focused fund. According to the first, Cohen & Steers Advantage Income Realty Fund, Inc. (”RLF“), Cohen & Steers Worldwide Realty Income Fund, Inc. (”RWF”), Cohen and Steers Premium Income Realty Fund, Inc. (”RPF”) and Cohen & Steers Quality Income Realty Fund, Inc. (”RQI”) have all merged with and into RQI. It apeears that even despite the magical ramp of all REITs this quarter, those pesky “size matters” issues have reared their ugly heads for the 4 various closed-end funds (all four combined represent less than half a billion in net assets):
In approving the mergers, the directors considered, among other things, each fund’s investment objectives, net asset value and stock price performance, income-generating strategy and expenses, and potential cost savings based on operational efficiencies. The mergers will permit fund shareholders to pursue substantially similar investment objectives in a larger fund that has similar investment policies and anticipated lower expenses.
Zero Hedge is anxiously waiting to see the proxy information that will accompany this transaction in order to get justification for the move.
And in another almost idential press release C&S announce the merging of its REIT and Utility Income Fund with the Cohen & Steers Select Utility Fund. An interesting tidbit from the PR:
The board also has approved removal of UTF’s 20% limit on investing in foreign securities, so that the fund can invest without limit in foreign securities, including securities of companies in emerging market countries, to the extent consistent with the fund’s investment objective and other investment policies. The changes will broaden UTF’s geographic investment universe and open up potentially higher-growth sub-sectors while maintaining similar investment characteristics.
Nothing like having no size limits in a $1.4 billion fund. Visions of Bill Ackman’s PSIV (Target) adventure, and its dramatic returns, start floating. Of course, one needs dry powder for when Merrill strats upgrading and issuing secondaries for the Honduras mall REIT that is ‘almost’ guaranteed to generate 1000% return once the Honduras SEC pulls all borrow.
In Forex trading there are two ways of predicting the price movement. One is fundamental analysis and second is technical analysis. The most popular tool in technical analysis is candlestick chart patterns. They come in existence some time in 18th century in Japan. Many commodity traders there were using such candlestick charts to identify the price movement. That’s the reason why we call it candlestick charts.
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