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What had been rumored for days, was just confirmed by CNBC, which reported moments ago that President Donald Trump plans to name Larry Kudlow as his top economic advisor.

BREAKING: President Trump to name Larry Kudlow NEC chairman as early as tomorrow, sources say. https://t.co/SDzQDl7MGu pic.twitter.com/dxwkDNFhTj

— CNBC Now (@CNBCnow) March 14, 2018

Trump could announce his decision to choose Kudlow as his National Economic Council chairman as soon as Thursday. The CNBC senior contributor and on-air personality would replace Gary Cohn, who left the White House earlier this month amid disagreements about tariffs on steel and aluminum imports.

As has been the case in past days, when every time news of Kudlow’s role in the NEC emerged the market rebounded, today was no exception, and the S&P has managed a modest rebound on the news that a somewhat moderate economist will replace Gary Cohn.

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Less than two years after Theranos was exposed as a fraud by the WSJ, and not that much longer after its CEO Elizabeth Holmes was prancing around with Bill Clinton on the stage of the Clinton Global Initiative…

… the SEC finally woke up, and moments ago it announced that it has charged Elizabeth Holmes as well as Theranos’ former president Ramesh Balwani with “massive fraud” for raising $700M+ “through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

The SEC announced that as part of a settlement, Theranos and Holmes have agreed to resolve the charges against them, and “in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.“

“As a result of Holmes’ alleged fraudulent conduct, she is being stripped of control of the company she founded, is returning millions of shares to Theranos, and is barred from serving as an officer or director of a public company for 10 years,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “This package of remedies exemplifies our efforts to impose tailored and meaningful sanctions that directly address the unlawful behavior charged and best remedies the harm done to shareholders.”

And so the story of the brilliant entrepreneur, and was supposed to be the next turtleneck-clad Steve Jobs…

… but who ended up being nothing but a fraud, is officially finished.

There is just one loose end: it is unclear if the “investing” idiots over at Softbank will recoup any of their $100 million investment which they made just this past December as we profiled in “Busted Billion-Dollar-Baby Fraud Finds Another Greater Fool – Softbank Lends Theranos $100 Million!”

Full SEC press release below:

Holmes Stripped of Control of Company for Defrauding Investors

The Securities and Exchange Commission today charged Silicon Valley-based private company Theranos Inc., its founder and CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.  Theranos and Holmes have agreed to resolve the charges against them.  Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.

The complaints allege that Theranos, Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.  In truth, according to the SEC’s complaint, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others.

The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014.  In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.

“Investors are entitled to nothing less than complete truth and candor from companies and their executives,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.  “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”

“As a result of Holmes’ alleged fraudulent conduct, she is being stripped of control of the company she founded, is returning millions of shares to Theranos, and is barred from serving as an officer or director of a public company for 10 years,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “This package of remedies exemplifies our efforts to impose tailored and meaningful sanctions that directly address the unlawful behavior charged and best remedies the harm done to shareholders.”

“The Theranos story is an important lesson for Silicon Valley,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.  “Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”

Theranos and Holmes have agreed to settle the fraud charges levied against them.  Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares.  Due to the company’s liquidation preference, if Theranos is acquired or is otherwise liquidated, Holmes would not profit from her ownership until – assuming redemption of certain warrants – over $750 million is returned to defrauded investors and other preferred shareholders.  The settlements with Theranos and Holmes are subject to court approval.  Theranos and Holmes neither admitted nor denied the allegations in the SEC’s complaint.  The SEC will litigate its claims against Balwani in federal district court in the Northern District of California.

The SEC’s investigation was conducted by Jessica Chan, Rahul Kolhatkar, and Michael Foley and supervised by Monique Winkler and Erin Schneider in the San Francisco Regional Office.  The SEC’s litigation will be led by Jason Habermeyer and Marc Katz of the San Francisco office.

* * *

Finally, here is a “brief” recap of all the fawning coverage the objective media had given to Theranos and Holmes in the years ahead of her spectacular collapse:

August 30, 2013
“Theranos: The Biggest Biotech You’ve Never Heard of.”
San Francisco Business Times. By Ron Leuty.  Here.

September 8, 2013
“Elizabeth Holmes: The Breakthrough of Instant Diagnosis.”  

Video interview with Pattie Sellers.  Here.
For further details, see here.

December 8, 2014
“Here’s How the World’s Youngest Self-Made Female Billionaire Shows People She’s In Charge.”
Business Insider.  By Richard Feloni.  Here.

December 8, 2014
“The New Yorker on the Promise, the Secrecy, and the Challenges of Super-Startup Theranos.”
MedCityNews.  by Meghana Keshavan.  Here.

December 12, 2014
“Behind the Curtain at Theranos.”
NBC News. (Video).  Interview with Ken Auletta.  Here.
For more detail, see here.

December 14, 2014
“Blood Test Innovation: Less Cost, No Big Needle”
Information Week/Healthcare.  By Larry Stofko.  Here.

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Bank of Japan Governor Kuroda appeared to somewhat proudly proclaim last night during his address to government that the BoJ has bought 75% of JGBs issued in fiscal-year 2017 so far! (and yet we are reassured that this is not debt monetization… not all).

“Yields in Japan are stable” Kuroda added… One glimpse at the chart below and its clear how ‘stable’ the Japanese bond market has become – reminding us somewhat of Monty Python’s Dead Parrot sketch. As one veteran bond trader exclaimed, “they killed the biggest bond market in the world.”

This is “the result of YCC [Yield Curve Control] policy” he bragged, before admitting that it “would be hard to continue YCC if trust in debt was lost,” but Kuroda reminded his audience that “because BoJ has seigniorage, trust in yen won’t be lost.”

But is that trust starting to fade?

As Bloomberg notes, The Bank of Japan has vacuumed up so much of the government bond market — in excess of 40% — that it’s left fewer securities for others to buy and sell. Some other buyers, such as pension funds and life insurers, also tend to follow buy-and-hold strategies.

That’s the backdrop to Tuesday’s session, when not a single benchmark 10-year note was traded, according to Japan Trading Co. Naoya Oshikubo, a rates strategist at Barclays Securities Japan summed it up, with perhaps an understatement: “the JGB market was generally thin.”

Despite the total and utter lack of liquidity in the once most liquid segment of the JGB curve, Kuroda confidently went to explain the central bank could engineer a smooth exit from its ultra-loose monetary policy, but said it was too early to debate specifics with inflation still distant from its target.

“By combining various tools, it’s possible to shrink the BOJ’s balance sheet at an appropriate pace while keeping markets stable,” Kuroda told parliament, when asked by a lawmaker about a BOJ exit strategy.

Just one quick question Kuroda-san – how the fuck are you going to be able to step back when you bought 75% of JGB issuance this year so far?

As more market participants throw in the towel on a rigged, centrally planned market, the result will – no could – be a further loss of market function, and a guaranteed crash once the BOJ and other central banks pull out (which is why they can’t).

As the Nikkei politely concluded, “if the bond and money markets lose their ability to price credit based on future interest rate expectations and supply and demand, the risk of sudden rate volatility from external shocks like a global financial crisis will rise.”

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In his latest webcast with DoubleLine investors and the general public, Jeff Gundlach reiterated some familiar thoughts, first and foremost the recurring observation  that if yields on the 10Y break above 3%, there’s a “high chance U.S. stocks will end the year down.”

“My idea that the S&P would go down on the year would become an extraordinarily strong conviction as the 10-year starts to make an accelerated move above 3 percent,” Gundlach said.

Readers will recall that this is a claim which Gundlach has repeated at most of his other recent public appearances, notably in January when he predicted a similar impact of higher yields on stocks, although he used the far lower number of 2.63% on the 10Y.

In response to Gundlach, one can ask how realistic is it that the 10Y breaks above 3% when virtually the entire market is short duration in record amounts as of this moment: who will be the marginal short?

We said that this dramatic positioning imbalance makes it far more likely that some bad economic news – such as today’s poor retail sales – would result in an aggressive short squeeze, sending yields sharply lower, and sure enough the 10Y today is back down to 2.80%, the place it was one month ago just before the February CPI spike.

In other words, between the fundamentals on one side (where the inflation impulse appears to be easing), and technicals, it is much more likely that the 10Y yield will continue testing the lows rather than spike higher, absent some major inflationary shock of course.

Besides his comments on the 10Y and stocks, Gundlach made some other notable observations during his call, such as:

• The U.S. deficit is likely to exceed $1.1 trillion in fiscal 2019 because of a combination of tax cuts and rising entitlement expenses. “It’s going to be more like $1.2 or $1.3 trillion,” he said.
• Leading economic indicators show no signs of a recession within the next 12 months.
• Core inflation is likely to increase above the Fed’s 2 percent target.
• Be prepared for further weakening of the dollar. “The odds are good that the next big move in the dollar is lower,” he said.

But what was perhaps the highlight of Gundlach’s webcast, was his remarkable indicator for the “fair value” of nominal 10Y yields, which he calculates simply as the average of Nominal US GDP and the yield on the German 10Y bund. As shown in the chart below, there is an uncanny correlation between the two series, which would suggest that all one needs to trade the 10Y is to know the latest GDP estimate and where the German Bund is trading.

Commenting on this startling relationship, Gundlach said the following last month on CNBC:

Let’s start out with something people think I know something about, which is the bond market. And it seems that bond yields, let’s just talk about the ten-year treasury, are at a level that makes a pretty good of sense right now. I mean they’ve gone up a decent amount so far this year – ended last year at about 2.41% or so, they’re up 46 basis points or so. But one thing that people talk about is nominal GDP, and I’ve been talking about this for a long time. It’s a fairly good starting place, where you think about maybe the ten-year treasury should be.

Obviously there’s a lot of noise. I mean, they don’t track each-other anywhere close to perfectly. But it’s sort of like a dog that’s tied to a stagecoach that’s going across the country. It’s on a 100 foot rope, I mean, sometimes it will be behind the stagecoach and sometimes ahead, but if the stage coach is nominal GDP, and the not ten-year yield is sort of a dog, and yeah, there will be variation, one versus another, but they’re both going to end up going across the country together. There’s no way the dog can really stay that far away from the stagecoach.

So what’s going on now, nominal GDP in the united states is at 4.4%, which sounds really high compared to the 2.87 10-year treasury yield. But to be honest, it’s also manipulated. We should talk about Germany as a good starting place. The German yield is way down at a ridiculously low level because it’s manipulated. So the economic facts of Germany and the United States are not that different. The nominal GDP is about the same, the inflation rates aren’t that different, manufacturing is good in both areas, retail sales are good in both areas, but the German yield is being manipulated.

So when you think about a 10Y treasury yield, what we’ve been doing at Doubleline for the past few years really, is noting that it tends to reside in the average of nominal GDP and the competitor yield, which is the German yield.

So let’s look at where we are today.

The German yield is roughly 70 basis point, and nominal GDP is probably going to go up a bit, because GDP now from the Atlanta fed is 3.2% at present, and we’ll tack on a little bit of inflation, so let’s call it 5%. And so if you have 5% for nominal GDP in the U.S., and you have 70 basis points on Germany, add those together, you get 5.7. You divide by two, and lo and behold, you get 2.85%, which is within two basis points, even slightly less than that, as where you are today. So as long as bond yields do not break out to the upside, which is a clear and present danger right now, then you probably can keep some stability going in risk markets

And while we leave it to readers to agree or disagree with Gundlach’s shorthand, the chart above suggests that absent a dramatic spike in US productivity, or a plunge in Bunds (and spike in yields), any move above 4% – or even 3% – on the 10y bond is unlikely to be sustainable.

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Remember Friday’s ‘goldilocks’-payrolls data?

Well The Dow has given it all up…

Bond yields and Breakevens are also tumbling…erasing the spike from January’s CPI…

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Looks like Democratic Senator Heidi Heitkamp is getting her wish. After demanding that “somebody needs to go to jail” during a Congressional hearing about the Equifax breach late last year, the Department of Justice on Wednesday charged Jun Ying, the former chief information officer of one Equifax business unit, with insider trading, claiming he knowingly sold shares before the company revealed a massive data breach last year.

As has been reported, three Equifax executives sold shares worth almost $1.8 million in early August, during the period when the company had discovered the hack, but it had not yet been publicly disclosed, according to the Financial Times.

Ying reportedly sold $1 million on stock after learning of the breach, prosecutors said.

As we pointed out at the time, soaring put volume in Equifax shares ahead of the announcement was indicative of “massive insider selling” – which would suggest that the money disclosed so far is only the tip of the iceberg.

The SEC said Ying had avoided more than $117,000 in losses by disposing of his shares before the breach became public.

“This defendant took advantage of his position as Equifax’s USIS Chief Information Officer and allegedly sold over $950,000 worth of stock to profit before the company announced a data breach that impacted over 145 million Americans,” said Byung Pak, US attorney for the northern district of Georgia.

According to Bloomberg, Ying allegedly used confidential information entrusted to him by the company to determine it had been hacked, the SEC said. The US Attorney’s office in Atlanta has also filed criminal charges against Ying.

Sensitive financial data from more than 150 million Americans was stolen by hackers during the heist, which investigators swiftly discovered could’ve easily been prevented if the company had bothered to install one routine patch to its security system. Perhaps it would’ve been more careful about security if its chief information security officer had an appropriate background. Instead, the former Equifax executive had earned a degree in Fine Arts from the University of Georgia.

Back in September, the US DOJ opened a criminal probe into whether top Equifax officials had violated insider trading laws. As we’ve noted, three Equifax Inc. senior executives, Chief Financial Officer John Gamble, and Presidents Joseph Loughran and Rodolfo Ploder, sold shares in the days after the company discovered the breach. Ying’s selling was not previously widely known. In an internal probe, Equifax determined that none of the executives knew about the breach when they sold the shares, per CNN.

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