Tag: finance

Last September, when Martin Shkreli was doing his best to become the “most hated person in America” with his highly profiled 5000% price increase of a Turing Pharma toxoplasmosis drug, in an article titled “Dear Martin Shkreli: This Is How You Hike Drug Prices” we said hate him if you must, but not for his price hiking practices for one simple reason: everyone else does that.

Specifically we said that “what Shrekli did was not in any way unique: everyone else did it too, they were just much smarter about how to do it” pointing specifically at Valeant and saying that “this is where the difference between Valeant and Turing is to be found. While the entire US population was shocked, appalled and outraged at Shkreli for daring to boost the price of one drug by 5000%, apparently nobody had a problem with Valeant jacking up the prices of nearly 30 drugs by anywhere between 90% and 786% on the high end, with one solitary outlier, Ofloxacin ear drops seeing its price soar by 2288%.”

Our conclusion:

… boost the prices of dozens of drugs in the span of 1-3 years anywhere between 100% and 800% and nobody notices (thank you insurance companies). But hike the price of one drug by 5,500% and suddenly all of America thinks you are satan incarnate.

… to which Citron added that “in the Twitter-storm furor over Turing’s recent one-drug price gouge attempt, the media has overlooked the reality that Martin Shkreli was created by the system. Shkreli is merely a rogue trying to play the gambit that Valeant has perfected.”

In fact, perhaps the reason why Shkreli was so violently ostracized is because he “has put a face to the gouging of America by pharmaceutical companies.” And weighing in at about 140 pounds, a very conveient scapegoat.

 

Fast forward five months later when Shkreli’s career has been put on hiatus in the form of house arrest, when slowly but surely, others are admitting what we said in the summer of 2015.

Enter Bloomberg which writes that after Martin Shkreli raised the price of anti-parasitic drug Daraprim more than 50-fold to $750 a pill last year, he said he wasn’t alone in taking big price hikes. “As it turns out, the former drug executive was right” Bloomberg admits and adds that “a survey of about 3,000 brand-name prescription drugs found that prices more than doubled for 60 and at least quadrupled for 20 since December 2014.”

Here is a brief list of some of the other “gougers”:

Among the biggest increases was Alcortin A, a combination steroid and antibiotic gel to treat eczema and skin infections: The price soared 1,860 percent, or almost 20-fold, during the period. And a vial of Aloprim, a Mylan NV drug for cancer complications, more than doubled, according to the survey by DRX, a provider of price-comparison software to health plans.

Prices for three skin gels from the small company Novum Pharma LLC, including Alcortin A, have soared 1,700 percent of more. Novum, founded in 2015, is “focused on acquiring and licensing under promoted/mature products,” according to its website. DRX data show that the majority of the increases occurred in May 2015, after Novum acquired the drugs.

 

Among cancer medicines that doubled in price is leukemia drug Oncaspar, which Baxalta Inc. boosted by 125 percent after acquiring it from Sigma-Tau Finanziaria Spa. Baxalta said the price adjustment will help fund testing of new formulations, and that it plans to pursue clinical research to explore the benefits of Oncaspar in other cancer.

 

Valeant Pharmaceuticals International Inc., which in recent months has been under fire for its pricing was among the most aggressive, with 13 drugs that doubled or more since December 2014. That’s more than any other large company, the survey found. The heart drug Isuprel soared 720 percent over the period, including 525 percent right after Valeant bought the rights to sell it.

 

Even after soaring prices became an issue in the U.S. presidential campaign, the cost of many drugs has continued to rise at annual rates of more than 10 percent. Drugmakers raised the prices of products as wide-ranging as erectile dysfunction drug Viagra, heart treatments, dermatology medicine and even brands that long have lost their patents. While specialty companies have had the steepest hikes, giants such as Pfizer Inc. and GlaxoSmithKline Plc kept pushing through smaller rises.

 

“The data shows that price increases are an integral part of the business plan,” said Jim Yocum, executive vice president at DRX.

 

Precisely, and guess what Shkreli was to an industry in which what he did was ordinary course of business? Nothing more than a scapegoat, one meant to coalesce the entire public’s anger on just one diminutive person.

However, now that Shkreli is under house arrest and is no longer a conveniet scapegoat, and since nothing has changed in an industry in which the rising druh price continue explicitly because they are permitted by a government which is the single biggest recipient of lobby dollars from the pharma industry, and thus is really the culprit behind the “Shrekli” phenomenon, who will take the blame next?

More importantly, where is the outrage? Or with Shkreli wearing an ankle bracelet, does nobody care any more that drug prices continue to surge with every passing year now that “America’s most hated man” is looking at years behind bars?

We can’t help but wonder: was Martin Shkreli nothing more than a distraction to the real corruption taking place behind the scenes.

Finally, for those who want to root out the real cause of runaway US drug prices, look no further than your government:

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Submitted by Ken Wells via OilPrice.com,

“What we have here is a failure to communicate.” That’s what the warden says to Paul Newman in the movie Cool Hand Luke, right after he knocks him into a ditch. The oil and gas industry has its own failure to communicate and the longer prices bump along the bottom, the worse it seems to be getting.

Much of the communication problem centers on whether the world still needs oil and gas and how long that need will last. The additional source of confusion is what low oil prices have to do with the future energy mix. The best evidence of that failure to communicate can be seen in the comparison between President Obama’s State of the Union address on January 12th and ExxonMobil’s projections on energy use released less than two weeks later. Their perspective on the role that oil plays in our economy – no, actually in the lives of people all over the globe – is so radically different that there is no common ground.

In the President’s annual address to Congress, one of the big applause lines came when he pointed out that the U.S. has reduced oil imports by 60 percent under his administration and, “gas under $2 a gallon ain’t bad either.” Both Democrats and Republicans cheered for that.

Then he continued, “Rather than subsidize the past, we should invest in the future, especially in communities that rely on fossil fuels. We do them no favor when we don’t show them where the trends are going.”

What trend? The political and diplomatic efforts to address global warming. But the President missed, or chose not to recognize, another trend – the world is not decreasing its use of oil and gas; it is increasing it. That information was highlighted a couple of weeks later when the ExxonMobil analysis was released. That study looks ahead to the year 2040 and projects that fossil fuels will still provide 80 percent of the world’s energy need.

The Cliff Notes version of the analysis is that:

1. Undeveloped nations will become more developed,

 

2. Populations will grow (from 7.2 billion people worldwide today to nine billion in 2040), and

 

3. Global energy demand will increase by 25 percent. About a third of the energy used will come from oil. Natural gas will be the biggest winner, with consumption up by about 40 percent. Renewable energy use will increase substantially and coal will be the big loser.

That is a changed landscape to be sure, and not the sort of change that should cause policymakers to think they can ignore any energy source to fuel world growth. Interestingly, one of the biggest changes predicted in the report has less to do with energy sources and more to do with using our energy more efficiently. Where the study predicts that world energy use will go up 25 percent, we could see twice that increase if we don’t adopt efficiency measures. To put it another way, we need to be aggressive in implementing efficiency measures or we may not have enough energy to meet growth demands.

Looking at one measure, light vehicles are predicted to use about 40 percent less fuel, not because we will all be driving electric cars, but because stingier gas-powered vehicles could get 45 miles per gallon.

To some extent, the difference between the State of the Union address and ExxonMobil’s vision of the future is a tale of two cities, Washington and Houston. One is driven by the optics of politics and the limitations of the legislative process. The other is driven by the realities of the marketplace and the simple realities of statistical analysis. But it also sounds like a tale of two planets – one world in which energy sources can be changed with a flip of a switch and one world where people and governments continue to act in their own best interests.

So where is the common ground? How do we stop the massive failure to communicate? How about this:

• No one in the energy industry should believe that we live in a static economic model where oil continues to be king forever and there is no room for alternative energy sources. The costs of alternative energy will continue to decrease and the benefits of those sources under specific circumstances and for specific purposes will increase.
•  Oil and gas aren’t going anywhere. Petroleum engineers and geologists entering college next year will work their entire careers exploring for hydrocarbons.
•  While we are going through a historic down cycle in oil and gas, failure to plan for a future that includes those commodities risks shortages that could make the costs astronomical.
•  Somewhat higher (and predictably stable) oil and gas prices help every part of the energy pie. Low prices are killing the oil and gas sector, but they are also making it impossible for renewables to thrive without subsidies.
•  Incentives for efficiency promise to provide us with the greatest long-term bang for the buck.
• Government policies need to be grounded in the reality that fossil fuels are going to be with us for a long time to come and that renewables will take time to prove themselves. Policies need to reflect a mixed and balanced approach to the full array of energy sources, the “all of the above” policy that the Administration once talked about but never fully embraced. Let’s note that none of the Presidential candidates from either party are talking about a balanced energy policy either.

That approach is the only way to replace our failure to communicate with the type of public policy that transitions us into the future. To borrow from a guy who was pretty successful in communicating his message to the America people eight years ago, that would be “change we can believe in.”

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Are stocks cheap? Is the 'Stock-Market' "priced-for-perfection"? Here is your answer…

The answer is – Yes and Yes-er!

h/t @Not_Jim_Cramer

 

Simply put, the S&P 500's forward earnings based valuation has never (in the history of the time series) been higher relative to consensus expectations of economic growth… ever.

So next time your "wealth"-taxer suggests you buy-the-f##king-dip, show him the chart above and have him explain how economists "must" be under-estimating growth, because equity analysts are never wrong.

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Earlier today, we documented the rather extreme steps Brazil is taking in what has so far been a futile attempt to combat the rapid spread of the head-shrinking Zika virus.

There have been nearly 4,000 cases of microcephaly in Brazil since the start of last year and the WHO has now declared “a public health emergency of international concern.” For her part, President Dilma Rousseff signed a decree authorizing health officials to essentially break into Brazilians’ homes even if no one is home in an effort to uncover mosquitoe breeding grounds. As a reminder, the Aedes mosquito is taking the blame on this particular pandemic.

On Tuesday afternoon, we’re reminded that you don’t have to be bitten by a South American mosquito to get Zika as Dallas officials confirmed the first Zika virus case in Dallas County acquired through sexual contact.

“Dallas County Health and Human Services confirmed the case Tuesday afternoon and said the patient was infected after having sexual contact with an ill individual who returned from a country where the virus is known to be present,” NBC reports, adding that “Dallas County health officials said there are no reports of the Zika virus being transmitted locally by mosquitoes [but] imported cases of the virus make local spread possible. 

“Now that we know Zika virus can be transmitted through sex, this increases our awareness campaign in
educating the public about protecting themselves and others,” said Zachary Thompson, DCHHS director. 

As NBC dryly notes, because there’s no vaccine and there are no available treatments, your best bet is to “avoid mosquitoes” and abstain from having sex with the infected.

We wonder if Washington will soon follow in Brazil’s footsteps and grant health officials the right to enter private property without obtaining a warrant in the course of hunting for mosquitoes.

*  *  *

From DCHHS

DALLAS (Feb. 2, 2016) – Dallas County Health and Human Services (DCHHS) has received confirmation from the Centers for Disease Control and Prevention (CDC) of the first Zika virus case acquired through sexual transmission in Dallas County in 2016. The patient was infected with the virus after having sexual contact with an ill individual who returned from a country where Zika virus is present. For medical confidentiality and personal privacy reasons, DCHHS does not provide additional identifying information.

“Now that we know Zika virus can be transmitted through sex, this increases our awareness campaign in educating the public about protecting themselves and others,” said Zachary Thompson, DCHHS director. “Next to abstinence, condoms are the best prevention method against any sexually-transmitted infections.”

Zika virus is transmitted to people by mosquitoes and through sexual activity. The most common symptoms of Zika virus are fever, rash, joint pain, and conjunctivitis (red eyes). The illness is usually mild with symptoms lasting several days to a week.

DCHHS advises individuals with symptoms to see a healthcare provider if they have visited an area where Zika virus is present or had sexual contact with a person who traveled to an area where Zika virus is present. There is no specific medication available to treat Zika virus and there is not a vaccine. The best way to avoid Zika virus is to avoid mosquito bites and to avoid sexual contact with a person who has Zika virus. “Education and awareness is crucial in preventing Zika virus,” said Dr. Christopher Perkins, DCHHS medical director/health authority. “Patients are highly encouraged to follow prevention recommendations to avoid transmitting and spreading Zika virus.” DCHHS recommends the following to avoid Zika virus: Use the 4Ds to reduce the chance of being bitten by a mosquito.  DEET All Day, Every Day: Whenever you’re outside, use insect repellents that contain DEET or other EPA approved repellents and follow instructions.  DRESS: Wear long, loose, and light-colored clothing outside.  DRAIN: Remove all standing water in and around your home.  DUSK & DAWN: Limit outdoor activities during dusk and dawn hours when mosquitoes are most active. Travelers can protect themselves by doing the following:  Choose a hotel or lodging with air conditioning or screens on windows or doors.  Sleep under a mosquito bed net if you are outside or in a room that is not well-screened

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BMO's Mark Steele is a man of few words, preferring pictures to make his points… but they matter:

Let’s just keep it simple. When bank risk breaks to the upside, it’s bad for equities…

European bank risk is breaking out…

 

which has arrested the pullback in U.S. bank risk – which is now soaring…

 

And that bodes ill for global stocks…

 

Stocks have had a nice counter-trend rebound on the back of a counter-trend rebound (from deeply oversold) in the price of oil. That rebound is also fading, with WTI eyeing the $30 mark once again.

We believe portfolios should be structured towards what the market rewards in this environment:

• As our relative strength breadth heat map points out, that appears to be Utilities and Staples, with a great divide between those sectors and anything else.
• Equities aside, treasuries look great.

Something systemic this way comes.

via Zero Hedge http://ift.tt/1mb9c3v Tyler Durden

Just 10 days after “Moody’s Put Over Half A Trillion Dollars In Energy Debt On Downgrade Review“, moments ago S&P decided it wanted to be first out of the gate with a wholesale downgarde of the US energy companies, and announced that it was taking rating actions on 20 investment-grade companies, including 10 downgrades.

The full release is below:

Standard & Poor’s Ratings Services said today that it has taken rating actions on 20 investment-grade U.S. oil and gas exploration and production (E&P) companies after completing a review. The review followed the recent revision of our hydrocarbon price assumptions (see “S&P Lowers its Hydrocarbon Price Assumptions On Market Oversupply; Recovery Price Deck Assumptions Also Lowered,” published Jan. 12, 2016).

While oil prices deteriorated over the past 15 months, the U.S.-based investment-grade companies we rate had been largely immune to downgrades. However, given the magnitude of the recent reductions in our price deck, most of the investment-grade companies were affected during this review. We expect that many of these companies will continue to lower capital spending and focus on efficiencies and drilling core properties. However, these actions, for the most part, are insufficient to stem the meaningful deterioration expected in
credit measures over the next few years.

A list of rating actions on the affected companies follows.

DOWNGRADES

Chevron Corp. Corporate Credit Rating Lowered To AA-/Stable/A-1+ From AA/Negative/A-1+

The downgrade reflects our expectation that in the context of lower oil and  gas prices and refining margins, the company’s credit measures will be below our expectations for the ‘AA’ rating over the next two years. We anticipate Chevron will significantly outspend internally generated cash flow to fund major project capital spending and dividends this year and generate little cash available for debt reduction over the following two years. We note that the company has significantly more debt than in the last cyclical downturn while oil and gas production are at similar levels. The stable outlook reflects our expectation that credit measures will improve over the next three
years assuming lower capital spending and higher commodity prices.

EOG Resources Inc.: Corporate Credit Rating Lowered To BBB+/Stable/A-2 From A-/Stable/A-2

The downgrade reflects increased leverage following the reduction in our oil and natural gas price assumptions, along with lower capital spending and a slight production decline in 2016. We now expect funds from operations (FFO)/debt to fall and remain below 45% over the next two years, which we view as too low for an ‘A-‘ rating, given the company’s strong business risk profile. The stable outlook reflects our estimate that FFO/debt will approach 30% in 2016 and improve thereafter as commodity prices rise under our price deck assumptions. We apply a one-notch uplift to the anchor for comparable rating analysis, given that EOG’s leverage is lower than many of its ‘BBB’ rated peers. 

Apache Corp.: Corporate Credit Rating Lowered To BBB/Stable/A-2 From BBB+/Stable/A-2

The downgrade reflects increased leverage following the reduction in our oil and natural gas price assumptions, along with lower capital expenditures and a modest year-over-year production decline in 2016. We now expect FFO/debt to fall and remain below 30% over the next two years, levels we view as too low for a ‘BBB+’ rating, given the company’s strong business risk profile. The stable outlook reflects our estimate that FFO/debt will approach 20% in 2016 and improve thereafter as commodity prices rise under our price deck assumptions.

Devon Energy Corp.: Corporate Credit Rating Lowered To BBB/Stable/A-2 From BBB+/Negative/A-2

The downgrade reflects our expectation that in the context of lower oil and gas prices, the company’s credit measures will be below our expectations for the ‘BBB’ rating through 2018. Devon outlined steps to reduce debt following acquisitions announced in December 2015, including selling assets. However, we anticipate that the company will outspend internally generated cash flow over the next two years without further limiting capital spending or reducing dividends. The stable outlook reflects our expectation that Devon’s credit measures will improve over the next three years under our rising commodity price assumptions.

Hess Corp.: Corporate Credit Rating Lowered To BBB-/Stable/– From BBB/Stable/–

The downgrade reflects our expectation that in the context of lower oil and gas prices, the company’s credit measures will be below our expectations for the ‘BBB’ rating over the next two years. Hess enters 2016 with ample liquidity, including $2.7 billion in cash and has sharply curtailed capital spending. However, we forecast that the company will outspend internally generated cash flow to fund capital spending and dividends through 2018. The stable outlook reflects our expectation that credit measures will improve over the forecast period. We note that proceeds from assets sales, operating cost reductions, or other sources of funding could provide an opportunity to improve the company’s balance sheet.

Marathon Oil Corp. Corporate Credit Rating Lowered To BBB-/Stable/A-3 From BBB/Stable/A-2

The downgrade reflects our expectation that in the context of lower oil and gas prices, Marathon’s credit measures will be consistently below our expectations for the ‘BBB’ rating. Marathon enters 2016 with ample liquidity, including $1.2 billion in cash and has substantially reduced capital spending and dividends. We estimate that the company will outspend generated cash flow to fund capital spending and dividends this year and that cash flow coverage of debt has declined meaningfully. The stable outlook reflects our projections that credit measures will improve over the next two years. We note that proceeds from assets sales or other external sources of funding could provide an opportunity to improve the company’s balance sheet.

Murphy Oil Corp.: Corporate Credit Rating Lowered To BBB-/Stable/– From BBB/Negative/–

The downgrade reflects our expectation of increased leverage and worsening credit measures following the reduction in our oil and natural gas price deck assumptions. Despite the company’s recent reduction in planned capital spending for 2016, we expect debt to EBITDAX to remain above 2x and FFO to debt below 30%, which we view as too high for a ‘BBB’ rating, given the company’s satisfactory business risk profile. The stable outlook reflects our expectation that debt to EBITDAX will remain below 4x under our base case assumptions.

Continental Resources Inc.: Corporate Credit Rating Lowered To BB+/Stable/– From BBB-/Stable/–; Recovery Rating ‘3’ (high end of the range) assigned.

The downgrade reflects our expectation of increased leverage and worsening credit measures following the reduction in our oil and natural gas price deck assumptions. Despite Continental’s reduction in capital spending for 2016, we expect FFO to debt to fall below 20% and debt to EBITDAX to exceed 4x over the next two years. We view these credit measures as too high for a ‘BBB-‘ rating, given what we view the company’s business risk profile as satisfactory. We now view Continental Resources’ financial profile as aggressive. We also assigned a ‘3’ (high end of the range) recovery rating to the company’s senior unsecured notes.

Hunt Oil Co.: Corporate Credit Rating Lowered To BB+/Negative/– From BBB-/Negative/–

The downgrade reflects our expectation that in the context of lower oil and gas prices, Hunt Oil’s credit measures will be below our expectations for the ‘BBB-‘ rating over the next two years. In addition, the company is challenged by continued suspension of liquefied natural gas (LNG) shipments from Yemen due to ongoing fighting in the country. Hunt has an interest in the Yemen gas liquefaction plant and receives substantial distributions when the project is operating. The negative outlook reflects the likelihood that we will lower the rating if we do not expect LNG shipments from Yemen to resume by end of third quarter of 2016, or other factors occur that result in weaker than currently anticipated credit measures.

Southwestern Energy Co.: Corporate Credit Rating Lowered To BB+/Negative/B From BBB-/Stable/A-3; Recovery Rating ‘3’ (low end of the range) assigned.

The downgrade reflects our expectation of increased leverage and worsening credit measures following the reduction in our oil and natural gas price deck assumptions, and incorporates our assumption of significantly reduced capital spending and a moderate production decline in 2016. We now expect FFO to debt to fall and remain below 20% over the next two years, which we view as too low for a ‘BBB-‘ rating, given that we view the company’s business risk profile as satisfactory. We now view Southwestern Energy’s financial profile as aggressive. We also assigned a ‘3’ (low end of the range) recovery rating to the company’s senior unsecured debt. The negative outlook reflects the potential for a downgrade if we no longer expect FFO/debt to improve to above 20% in 2018.

LONG-TERM CORPORATE CREDIT RATING PLACED ON CREDITWATCH WITH NEGATIVE  IMPLICATIONS; SHORT-TERM RATING AFFIRMED

Exxon Mobil Corp.: ‘AAA’ Corporate Credit Rating Placed On CreditWatch With  Negative Implications; ‘A-1+’ Short-Term Rating Affirmed

The CreditWatch placement reflects the expectation that credit measures will be weak for the ratings through 2018 under our price assumptions. We will assess management’s financial policies and strategies for mitigating the potential impact of the downturn, as well as review the company’s 2015 financial results and the implications for credit quality. We currently expect to resolve our review within 90 days. We currently anticipate that if we lower ratings, we would not lower them by more than one notch.

RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS

ConocoPhillips: ‘A’ Long-Term And ‘A-1’ Short-Term Corporate Credit Ratings Placed On CreditWatch With Negative Implications

The negative CreditWatch placement reflects the potential that we could lower ratings over the next 90 days pending a review of expected 2016-2018 financial results, and ConocoPhillips’ ability to fund expected negative free cash flow without materially increasing debt leverage. We currently expect to resolve our review within 90 days. We intend to review the company’s ability to achieve expected cost savings and substantial asset sales and its ability to lower capital spending without significantly affecting production levels.

Newfield Exploration Co.: ‘BBB-‘ Corporate Credit Rating Placed On CreditWatch With Negative Implications

The CreditWatch placement reflects our expectation that credit measures will be weak for the current rating over the next one to two years. We will assess management’s financial policies and strategies for mitigating the potential impact of lower commodity prices over the next several weeks, as well as review the company’s 2015 financial results and the implications for credit quality. We expect to resolve the CreditWatch placement within 90 days. We currently anticipate that if we lower the ratings, we would not lower them by more than one notch.

 

RATINGS AFFIRMED; OUTLOOK REVISED

Anadarko Petroleum Corp.: ‘BBB’ Corporate Credit And ‘A-2’ Short-Term Ratings Affirmed; Outlook Revised To Negative From Stable;

The outlook revision reflects increased leverage following the reduction in our oil and natural gas price assumptions, along with lower capital spending and a modest year-over-year production decline in 2016. The negative outlook reflects our estimate that FFO/debt could fall below 20% and debt/EBITDAX could exceed 4x for a sustained period if the company does not complete additional noncore assets sales, as we currently anticipate.

National Fuel Gas Co. (NFG): ‘BBB’ Corporate Credit Rating And ‘A-2’ Short-Term Ratings Affirmed; Outlook Revised to Negative From Stable.

The negative outlook reflects our expectation that the company’s credit measures will be weak for the ratings over the next two years because of lower oil and gas prices. NFG has curtailed E&P spending, but we expect spending and dividends to exceeds internally generated cash flow over the next two years, in part, due to investment in a pipeline expansion. We forecast that the company’s credit measures will return to acceptable levels for the rating in 2018 due to higher expected commodity prices, increased E&P production, and lower capital spending.

Noble Energy Inc.: ‘BBB’ Corporate Credit Rating Affirmed; Outlook Revised To  Negative From Stable

We revised our rating outlook to negative from stable, reflecting our expectation that credit measures will remain weak for the ratings over the next one to two years. Although we expect the company to remain cash flow neutral for the year under our revised price assumptions, we expect FFO/debt to remain below 30% in 2016 and 2017, and adjusted debt/EBITDA to rise slightly above 3x in 2017, but we believe both measures will improve in 2018. We could lower the rating if we project that the company will sustain adjusted debt/EBITDA above 3x for a prolonged period.

RATINGS AFFIRMED

Occidental Petroleum Corp.: ‘A’ Corporate Credit Rating And ‘A-1’ Short-Term  Rating Affirmed; Outlook Stable

We have affirmed the ratings on Occidental, reflecting our expectation that the company will continue to maintain conservative financial policies such that FFO/debt will average above 60% through 2018, albeit modestly below 60% in 2016. Our expectations include the receipt of about $1 billion from Ecuador in 2016 for the recent settlement awarded by the International Centre for Settlement of Investment Disputes, which is a key support underlying our expectations. Cash flows are supported by the start of the Al Hosn gas project in the United Arab Emirates and the low decline rate of the company’s Permian enhanced oil recovery operations.

EQT Corp.: ‘BBB’ Corporate Credit Rating Affirmed; Outlook Stable

We have affirmed the ratings on EQT, reflecting our expectation that it will continue to maintain conservative financial policies, such that FFO/debt will not fall below 45% for a sustained period. EQT should continue to benefit from its midstream operations that allow it to capture more favorable pricing to help buffer the negative price differentials typical of Marcellus shale producers.

Cimarex Energy Co.: ‘BBB-‘ Corporate Credit Rating Affirmed; Outlook Stable

Although credit measures should weaken for Cimarex Energy Co. in 2016 under our revised price assumptions, we expect them to remain adequate for the rating. We project FFO/debt above 40% in 2016 and commit the majority of its capital in the Permian and the Mid-Continent region, albeit at reduced levels in response to the current hydrocarbon prices. The stable outlook reflects our view that the company’s leverage will improve in 2017 and liquidity will remain strong.

Pioneer Natural Resources Co.: ‘BBB-‘ Corporate Credit Rating Affirmed;  Outlook Stable

The affirmation reflects our view that Pioneer will maintain FFO/debt above 45% over the next two years, as it continues to invest and grow production in the Permian Basin. Our estimates incorporate the reduction in our oil and natural gas price assumptions, a modest year-over-year increase in capital spending, about 10% production growth in 2016, and the company’s recent $1.4 billion equity offering.

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Year-to-date, BofAML's Baraby Martin notes that the market narrative has swung wildly. "US recession…", “global recession…", "China devaluation…", "commodity bust…" and "energy defaults…" have all been blamed as the major drivers of risk assets thus far in ‘16. The bearish concoction has left markets way down from their January levels. In credit, investment-grade spreads widened 16bp last month, and high-yield 36bp – the worst start to the year since 2008.

Over the last week, though, the "central banks to the rescue" narrative has also resurfaced. Not only has the BoJ embraced NIRP policies for the first time, but the ECB has strongly hinted at QE3 in March, and the Fed has added a dovish tinge to its outlook. “Yield”, as a secular theme, continues to stand tall, a full 7yrs after the GFC event. While the growth of negative yielding assets is now well flagged, it’s the other side of the coin which is talked about less: namely the decline in positive yielding opportunities.

Chart 1 shows that the global stock of positive yielding fixed-income debt has shrunk from a peak of $37.6tr in mid-2014 to just $32.5tr now, despite total debt levels rising by $4tr. since.

And yet, the market’s response to the salvo of central bank action lately has been a shallow bounce. On Friday, the Nikkei’s intra-day performance was up/down/up. And in Europe, our equity team’s “low risk” dividend basket has been lagging behind the jump in negative yielding government debt lately (chart 2).

Yield “fatigue” may be overtaking yield “euphoria”.

The further central banks go down the rabbit hole of unique monetary policy, the greater the fear factor of how normality will eventually be restored. And as Michael Hartnett highlights, the risk of “quantitative failure” in markets grows.

via Zero Hedge http://ift.tt/1PT0JzU Tyler Durden

How do you go from this one year ago…

h/t @ShaunKing

To this today…

 

The answer is simple…

h/t @ZH_Crown

via Zero Hedge http://ift.tt/1RYHlS3 Tyler Durden

Via Stratfor,

Less than a month after being sworn in, Venezuela's new opposition-controlled National Assembly is digging in its heels for a fight with President Nicolas Maduro and the ruling United Socialist Party of Venezuela (PSUV). On Jan. 22, a parliamentary committee overruled a decree that would have granted the president broad powers over national spending and economic planning for 60 days. Maduro has dubbed the decision unconstitutional, and the Venezuelan supreme court has declared his decree to be legally sound. At the very least, Maduro will try to shift the blame for Venezuela's deteriorating economy onto the opposition. The opposition, for its part, will likely use whatever legal measures it can to erode the Maduro administration's clout.

The PSUV has three main courses of action it could take.

First, it could simply ignore the opposition, using the judicial branch to nullify any controversial legislation the National Assembly passes.

 

The PSUV's second option is to try to further dismantle the opposition's legislative majority by citing inconsistencies during the December 2015 elections. This would also require the support of the supreme court.

 

The ruling party's final option is to expand its control over the Venezuelan economy and public finances, which would increase the risk of more heavy-handed attempts by the government to centralize economic power.

The opposition also has several approaches it could take in the coming weeks.

First, it could start the process of impeaching Maduro, something opposition figure Henry Ramos Allup has threatened to do since the new National Assembly was sworn in Jan. 5

 

Its second option would be to pass a constitutional amendment that would limit Maduro's tenure, eventually forcing a new presidential election.

 

Third, the opposition could try to use a new constitutional amendment to override the judicial branch's organic laws. But the supreme court could substantially delay such a move, since it would first have to undergo legal revision and be adhered to by the executive branch.

 

The final step the National Assembly could take would be to write a new constitution. But this is the least plausible scenario. Replacing the constitution would spur resistance from the PSUV and carry the risk of political upheaval on an unprecedented scale. Therefore, even if some of the opposition's factions find this option tempting, it is unlikely that the military — the main arbiter of power in Venezuela — would back it up.

Either way – things are getting worse in a hurry…

via Zero Hedge http://ift.tt/1P3WFch Tyler Durden

It’s been just a few weeks since the head-shrinking Zika virus exploded onto the scene after spreading “explosively” in South and Central America, but officials are already warning that the fallout could be far-reaching.

WHO, which warned last month that the “level of alarm is extremely high”, has declared that the spread of Zika in Brazil is a public health emergency of international concern. “Members of the committee agreed that the situation meets the conditions for a public health emergency” director Margaret Chan said after meeting with WHO’s international health regulations emergency committee.

“It is important to realise that when the evidence first becomes available of such a serious condition like microcephaly and other congenital abnormalities, we need to take action, including precautionary measures,” Chan added, referencing the nearly 4,000 cases of microcephaly that have popped up in Brazil since the beginning of last year.

“Brazil has dispatched hundreds of thousands of troops on mosquito-eradication campaigns in the the worst affected areas, but the government is struggling to comprehend let alone cope with the epidemic,” The Guardian writes. “We do not have a vaccine for Zika yet. The only thing we can do is fight the mosquito,” Dilma Rousseff  told reporters during a visit to the emergency headquarters of the anti-Zika campaign. “As long as [the mosquitoes] are reproducing, we are all losing the battle. We have to mobilise to win it”.

So with no vaccine it’s Dilma versus the mosquitoes and she’s brought 220,000 troops to the fight.

Troops who, thanks to a new decree signed by Rousseff on Monday, will be able to enter private property even if no one is home in order to “eradicate breeding grounds.”

“The emergency measure will mainly open doors for state and municipal health workers sent out to destroy mosquito-breeding grounds—stagnant water typically left in buckets, drains or ditches,” WSJ said yesterday. “In other cases, Brazilian law requires authorities to obtain a warrant from a judge to enter private property without the owner present.”

Right. But no warrants are necessary when it comes to eradicating the Aedes mosquito, which is widely blamed for the scourge.  

“This is the first time I remember since the start of last century, when we had the so called Vaccine War, that the government adopted a measure like this,” said Luiz Flavio Gomes, a former judge and a legal expert. “But the situation right now is dangerous and people are aware of the problem and likely to support the government’s decision.”

Yes, “people are likely to support the government’s decision,” until they come home one day to find troops and health workers donning scary-looking yellow hazmat suits rummaging through their belongings looking for mosquito “breeding grounds.”

So much like France suspended some civil liberties in order to combat “terror” in the wake of the Paris attacks, Brazil has now made it legal for authorities to enter private residences at will if Dilma thinks there may be some mosquitoes hanging out inside. 

Of course there are mosquitoes everywhere in Brazil, which means there will almost always be an excuse for officials to enter private homes on a whim if they so choose. 

We imagine the new law could come in quite handy should Brazilians start protesting in the streets for Rousseff’s removal again. As for Rousseff’s many vociferous political oponents, don’t get caught with a bucket of standing water on your porch or you just might find your house ransacked.

via Zero Hedge http://ift.tt/1TAF2Ek Tyler Durden