With Valeant down nearly 50%, and Pershing Square fielding an unknown number of margin calls and redemption requests as of this moment, Bill Ackman just did the only thing he could do at this moment: send a letter to anyone who still cares, defending his disastrous investment, yet again.

Pershing Square Holdings, LTD. Sends Communication to Investors Regarding Valeant

Dear Pershing Square Investor,

 

Today, Valeant reported preliminary unaudited earnings for Q4, updated guidance for Q1, full year 2016 and the next twelve months. In particular, management shocked the market with revenue and earnings guidance for the next twelve months (Q2 2016 to Q1 2017) which does not appear to foot with continued favorable prescription trends and management’s commentary on the call about the strength of the underlying businesses. Furthermore, the company’s 10-K has been delayed requiring the company seek a waiver under its credit agreement. While we believe that it is highly likely that the banks will provide a waiver, uncertainty about the potential for a default creates enormous investor fear.

 

The above factors have caused investors to lose total confidence in the company as reflected by the current 44% decline in Valeant’s stock price.

 

Last week, Steve Fraidin, our Vice Chairman, joined the board. We are going to take a much more proactive role at the company to protect and maximize the value of our investment. We continue to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price. Getting to those values, however, will require restoration of shareholder confidence in the management and governance of the company.

 

We will do our best to keep you promptly informed subject to any limitations that we have now that we have recently become insiders at the company.

 

Please feel free to contact the investor relations team or me if you have further questions.

 

Sincerely,

 

Bill

Translation:

I’ve made a huge mistake.http://pic.twitter.com/wKnaee5aIV

— Timothy Connolly CFA (@SconsetCapital) March 15, 2016

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Hold your real assets outside of the banking system in one of many private international facilities  –>  http://ift.tt/1M1FiG5 

 

 

 

Future Gold Prices

Posted with permission and written by Gary Christenson, The Deviant Investor (CLICK FOR ORIGINAL)

 

 

The internet is filled with predictions for the price of gold, from $500 to $50,000 per ounce. It depends on your world view.

 

If you are a central banker or a powerful financial player which often supplies loyal employees to serve as Secretary of the U.S. Treasury, the low gold numbers look good.

 

Or, if you understand the incredible $200+ Trillion of debt the world has accumulated and realize it can’t be repaid, then gold at $10,000 probably looks inevitable. Crashes occur and sovereign debt markets look like paper bubbles with disastrous potential to send gold much higher.

 

A better approach to estimating future gold prices, in my opinion, is to start with a world view and project relevant gold prices. I suggest three simple scenarios, as I stated in my article, “ Silver Prices in Five Years?”

 

Scenario One – status quo: The next five years could look much like the last 20 – 40 years. Politicians spend too much money, debt expands exponentially, central banks monetize debt and desperately inflate and reflate bubbles to maintain their power and continue the transfer of wealth from the many to the few. This is “status quo” or “more of the same” and indicates that gold prices will rise substantially, but not in a hyperinflation.

 

Scenario Two – deflationary crash: Deflationary forces overwhelm the financial system and central bankers and politicians can’t or won’t reverse those deflationary forces. In that scenario most paper assets crash while the purchasing power of gold increases far more. Central bankers will do almost anything to avoid this scenario.

 

Scenario Three – deflation and hyperinflation: Deflationary forces temporarily crash the financial system(signs are visible in 2016-Q1) , and eventually central bankers and governments inflate currencies, possibly to hyperinflationary levels in their heavy-handed reaction. In this scenario gold prices will go into the stratosphere – perhaps $5,000 or $50,000+ per ounce. The ultimate gold price in a hyperinflationary scenario is unpredictable since hyperinflationary forces feed upon themselves and destroy purchasing power unpredictably. Gold reached nearly 100 trillion Weimar Marks per ounce in 1923. Gold, if currently priced in 1945 (pre-devaluation) Argentina pesos would be over 10,000 trillion 1945 pesos. Hyperinflation is an ugly, destructive, and unpredictable process, even for a reserve currency.

 

In Scenario One – more of the same – we can reasonably expect:

 

Politicians and central bankers will manage the crisis of 2016-2017 as they have most other crises (such as 1987, 1998, 2000, 2008) by increasing spending, addressing an excess debt problem with even more debt, and pumping more “funny money” into the global financial system.

 

a) Official US national debt increases more rapidly than its typical 9% per year compounded rate. (perhaps 10 – 12% per year)

b) Dollars, euros, yen and other currencies devalue against each other and against real assets. (currency wars)

c) Stock markets collapse further, and then, buoyed by central bank “printing” and currency devaluations, will rise.

d) Depressed commodity prices will move much higher as currency devaluations are aggressively pursued by central banks.

e) People and investors eventually realize that currencies are devaluing and they must avoid over-valued bonds, negative interest rates, crashing stock markets, and paper promises to preserve their savings. Gold prices will rally much higher based on increased investor demand in a supply constrained market.

 

Given the above “status quo” scenario, the VALUATON model I described in my book, “Gold Value and Gold Prices From 1971 – 2021” is relevant. The model is based on three variables, the official US national debt, the price of crude oil, and the S&P 500 Index. I used prices smoothed with moving averages since 1971 to define the basic trend of gold prices. The correlation of the calculated gold (using smoothed prices) with the actual smoothed annual prices was about 0.98 since 1971.

 

 

 

This valuation model works well within a broad range of economic conditions, including stock and bond bull markets, bear markets, crude oil bubbles and crashes, various forms of Quantitative Easing, Democratic and Republican Presidents, wars, and occasional peace.

 

Using “status quo” assumptions for future increases in official national debt and crude oil, and a collapsing S&P 500 Index, I created the following graph of “calculated gold” for the next several years.

 

 This is a model based on reasonable assumptions

but there is no guarantee those assumptions will be fulfilled. Strange and unexpected events have unfolded in the past decade. Examples:

• In 2007 few expected the S&P 500 to fall below 700.

• Who expected seven years of essentially zero interest rates in the US after the 2008 crisis?

• Three years ago who would have predicted that in excess of $7 Trillion in sovereign debt in 2016 would yield “negative interest?”

• Who in 2013 would have predicted sub-$30 crude oil?

 

 My Point is:

 

a) Strange and unpredictable events occur in a central banker controlled world dominated by overwhelming debt.

b) Secondary and tertiary consequences of stupidity, wars, QE, ZIRP, and negative interest rates are difficult to predict.

c) A deflationary collapse and hyperinflation are perhaps as likely as the four strange and unexpected examples above.

d) Gold prices in a deflationary collapse or hyperinflationary blow-off are difficult to imagine.

e) The more likely expectation, in my opinion, is a continuation of the “status quo” financial conditions we have experienced since 1971.

 

The model suggests that a reasonable “status quo” valuation for gold in 2021 is around $3,000. Prices will fall below and occasionally spike much higher than the valuation so a gold price of $5,000 in 2020 – 2022 is plausible. This is not a prediction! It is based on the observation that central banks devalue their currencies, governments spend to excess, and those actions affect the prices for crude oil, stocks, commodities, and gold. The model suggests that central bank devaluations and government actions could push gold prices to $3,000 to $5,000 in roughly five years, as central bank devaluations and government actions have pushed gold prices from about $40 in 1971 to about $1,200 in 2016.

 

CONCLUSIONS:

 

• How crazy will it get? The future price of gold is very much dependent upon the reactions of governments and central banks regarding the current deflationary forces.

 

• Status quo response: $3,000 – $5,000 per ounce is quite possible at some time in 2020 – 2022, if not sooner.

 

• Deflationary crash response: Gold will substantially increase in purchasing power, but its price in dollars, euros, yen, etc. is difficult to estimate, depending upon the economic damage that occurs.

 

       

• Hyperinflationary response: The price of gold will be unbelievably high.

 

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.

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Submitted bvy Patrick Buchanan via Buchanan.org,

Friday evening’s Donald Trump rally in Chicago was broken up by a foul-mouthed mob that infiltrated the hall and forced the cancelation of the event to prevent violence and bloodshed.

Brownshirt tactics worked. The mob, triumphant, rejoiced.

And the reaction of Marco Rubio, Ted Cruz and John Kasich?

All three Republican rivals blamed — Donald Trump.

With his “dangerous style of leadership,” Trump stokes this anger, mewed Rubio, “This is what happens when a leading presidential candidate goes around feeding into a narrative of bitterness and anger and frustration.”

Rubio implies that if Trump doesn’t tone down his remarks to pacify the rabble, he will be responsible for the violence visited upon him.

Kasich echoed Rubio: “Donald Trump has created a toxic environment (that) has allowed his supporters and those who sometimes seek confrontation to come together in violence.”

But were the thousands of Trump supporters who came out to cheer him that night really looking for a fight? Or were they exercising their right of peaceful assembly?

Cruz charged Trump with “creating an environment that only encourages this sort of nasty discord,” thus offering absolution to the mob.

Friday night cried out for moral clarity. What we got from Trump’s rivals was moral mush that called to mind JFK’s favorite quote from Dante: The hottest places in Hell are reserved for those who in time of moral crisis maintain their neutrality.

As news outlets have reported, Friday’s disruption at the University of Illinois-Chicago auditorium was a preplanned assault.

Behind it were the George Soros-funded MoveOn.org, Black Lives Matter, Occupy Wall Street, Hispanics hoisting Mexican flags and cop-haters carrying filthy signs to show their contempt for police.

People for Bernie, a pro-Sanders outfit, tweeted, “[This] wasn’t just luck. It took organizers from dozens of organizations and thousands of people to pull off. Great work.”

Now, Sanders did not order this assault on the civil rights of Trump supporters. But MoveOn.org has endorsed him and “Bernie” signs and T-shirts were everywhere among the disrupters. Hence, he has a duty to disavow this conduct and those who engaged in it.

If Sanders refuses, he condones it, and is morally complicit.

Can one imagine how the media would pile on Trump if working-class white males in Trump T-shirts invaded a Hillary Clinton rally and shut it down?

Can one imagine how the networks and cable TV channels that host town halls with the candidates would react if hell-raisers snuck into their audiences and shouted obscenities during discussions?

The keening over the First Amendment would not cease for weeks.

Some of us have been here before, and know how this ends.

When the urban riots broke out in the ’60s, Hubert Humphrey declared that, if he lived in a ghetto, “I could lead a pretty good riot myself.”

At his 1968 convention in Chicago, radicals baited and provoked the cops in the front of the Conrad Hilton, and as this writer watched, their patience exhausted after days of abuse, Chicago’s finest tore into the mob and delivered some street justice.

“Richard Nixon,” wrote Hunter S. Thompson, “is living in the White House today because of what happened that night in Chicago.”

Hunter got that one right.

That fall, Humphrey was daily assailed by the kinds of haters now disrupting Trump rallies. Everywhere he went, they chanted, “Dump the Hump!” At times, Humphrey came close to tears.

That fall, Humphrey realized the monster he helped nurture.

My tormentors, he said, are “not just hecklers, but highly disciplined, well-organized agitators … some of them are anarchists, and some of these groups are destroying the Democratic Party and destroying this country.”

In 1970, when President Nixon sent U.S. troops into Cambodia to clean out Viet Cong sanctuaries, and students rioted, Ronald Reagan called them “cowardly fascists,” and declared, “If there’s going to be a bloodbath, let it begin here.”

Not much Cruz-Rubio-Kasich equivocating there.

When radicals stomped down Wall Street desecrating Old Glory, construction workers came down from the building sites they were working and whaled on them.

Union president Peter J. Brennan was soon in the Oval Office — and in Nixon’s Cabinet. “Secretary Bunker,” we called him.

Prediction. Given their “victory” in Chicago, MoveOn.org and its allied nasties will try to replicate it, again and again. And as Americans came to despise the ’60s radicals, they will come to despise them.

And, as in the 1960s, the country will take a turn — to the right.

America has changed from the land we grew up in. But she is not yet ready to allow ugly mobs screaming obscenities at Trump and his folks inside and outside that hall in Chicago, or their paragons like socialist senator Bernie Sanders, to take over the country.

Those raising hell in the street in Chicago and that convention hall are unfit to be citizens of this democratic republic.

For as Edmund Burke reminded us, “Men of intemperate minds can never be free. Their passions forge their fetters.”

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Update: Confusion abounds as the government is now said to delay Lula’s appointment after Senator Delcidio Amaral’s plea bargain. According to Veja, Rousseff’s former chief of staff Aloizio Mercadante allegedly offered financial, political and legal aid in exchange for Amaral’s silence.

*  *  *

Just yesterday, we showed you Brazil’s stagflationary nightmare in one simple chart.

Here’s the amusing (or depressing, depending on if you’re a Brazilian) graphic:

Just last week, the BRL was riding high on news that former President Luiz Inácio Lula da Silva was detained in connection with money laundering. He was then charged with corruption by state prosecutors.

The scrutiny on Lula – who founded the Worker’s Party and handpicked his successor, current President Dilma Rousseff – triggered violent street protests in front of his home where supporters and detractors came to blows.

But the market hoped his arrest and possible prosecution would give momentum to the effort to impeach Rousseff, who has presided this year and last over a disastrous turn in the Brazilian economy where unemployment has spiked above 10%, inflation has soared into the double digits, and output has collapsed, in a veritable “worst nightmare” scenario.

The impeachment bid rests on the idea that Rousseff cooked the fiscal books in 2014, but the fact that Lula was under fire seemed to suggest that the sweeping investigation into corruption at Petrobras could be getting closer to the President’s doorstep. Were she implicated in the Carwash probe on top of allegations she fudged the government’s books, the outlook for her presidency would darken considerably and that, market participants assumed, would be a boon for the beleaguered BRL, for Brazilian risk assets, and for the economy in general.

Well, no such luck.

In a dramatic turn of events, Rousseff invited Lula to accept a ministry post yesterday. Initially, reports indicated he would resist the idea of accepting, but that soon changed. Earlier today, Lula informed several party members that he has decided to accept according to Globo columnist Lauro Jardim. That is bad news for the BRL (which has nearly retraced the entirety of the Lula detention gains) and for Brazilian stocks:

Why is this so bad – besides the fact that it may insulate Lula just as a Sao Paulo state judge said a decision on his arrest should fall to federal judge Sergio Moro – you ask? Because apparently, the former President wants free rein over the economy and that could jeopardize the reform bid. 

“Lula in a ministry could give Rousseff short-term survival,” Camila Abdelmalack, chief-economist at CM Capital told Bloomberg over the phone. “The market knows that Lula advocates for stimulus measures and his Workers Party defends the usage of international reserves.” 

As we noted on Monday, if Brazil uses its reserves to finance infrastructure projects, they could end up jeopardizing the country’s ability to service its debt and that, in turn, could trigger capital outflows. Here are two more bullets which should give you an idea of why the market is concerned: 

• Lulaconsiders it fundamental thatBrazil has a new economic policy, but wouldn’t replace FinMin Barbosa right away: Folha
• Former president sees redirecting economic policy as needed to rebuild the govt’s social support base: Estado

And so, just like, whatever hope there was for the BCB to fight inflation and for the government to get a hold on its fiscal problems just went out the window as perhaps, did the bid to impeach Rousseff.

Of course this move will only anger the opposition and possibly the millions who took to the streets last weekend to call for change. Or, as CM’s Abdelmalack puts it, those opposed may see this as an opportunity to “aim at one to catch two.” 

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Circuit-breakers kicked in as  Pershing Square Holdings, the publicly traded vehicle led by hedge fund billionaire Bill Ackman, has been halted. With the stock down over 11%, Bill Ackman’s 30.7mm share personal holding means a paper loss of nearly $1 billion when the stock hit its intraday low of just over $3, down $32 on the day.

The stock trades on Euronext Amsterdam:

 

But there is a US tracker:

 

As Valeant is now down over 45% on the day.

Bye bye “tres commas” club?

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When BofA’s Michael Hartnett releases his monthly Fund Managers’ Survey, the one chart we always head straight to is the one showing what the “smart money” investors, aka those polled clients who make up the survey (and the same ones who we reported earlier have been selling this bear market rally for the past seven straight weeks) are most worried about, or as they put it: what are the biggest “tail risks.”

A brief walk down memory lane. 

The chart below shows that as recently as January, what kept everyone up at night by a substantial margin, with 45% putting it as their top fear, was a China Recession, followed by an EM debt crisis.

 

That changed dramatically just the next month, when the biggest fear in February had nothing to do with a Chinese recession or an EM Debt crisis, and everything to do with the dreaded “R” word right inside the gold ole’ US of A. In fact, four of last month’s top “tail risks” were brand news, and in addition to a US recession, these included energy debt defaults, quantitative failure and a topic we have been covering since mid-2015, China’s relentlessly encroaching capital controls.

 

Fast forward to today when once again a month makes all the difference in the world, and concerns of a US recession have receded dramatically, no doubt in response to the price action in the markets, which have seen a 200 point surge in the S&P and a 50% rebound in oil, and instead all eyes are on the Fed, where “quantitative failure” is now the top concern among 18% of those polled, just fractionally ahead of Recession with 18%, and China devaluation with 14%. While energy debt default has slid to fourth place with 14% of the vote, we are confident this will become a major topic in the coming months when the next, and biggest to date, wave of energy defaults hits the US market (incidentally, a China recession is nowhere to be found which probably means it is time to start worrying about China’s economy again).

 

And while recession fears have clearly receded, is a contraction in the US economy taken off the table? While a recession may no longer be the top “tail risk” any more, that too looks set to return at the top very soon because according to a separate poll, a great majority, or 59% of respondents, believe the global economy is now in its “late cycle”, the highest since August 2008 when the last crisis was unleashed. As a reminder, recessions always follow the “late cycle economy” transition.

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