David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Theresa May's Tories Are Engaged in Open Warfare

    This article by Flavia Krause-Jackson for Bloomberg may be of interest to subscribers. Here is a section:

    “In every negotiation, each side tries to control the timetable,” Brexit Secretary David Davis said on Sunday. “The real deadline on this, of course, is December.” That’s when EU leaders will meet to decide whether the U.K. has made sufficient progress to move on to the next stage of talks. The EU wants May to improve her offer on the divorce bill by the end of the month.

    The twists and turns of the Brexit legislation only serve to magnify May’s difficulties and provide an opportunity for her political enemies to make trouble for her -- not just those in her own party.

    The main opposition is seeking a route to power with polls showing Labour ahead. Exploiting Tory divisions on Brexit and testing May’s slim working majority is one way for Labour leader Jeremy Corbyn to score political points.


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    Saudi Arabia Is Putinizing, Not Modernizing

    This article by Leonid Bershidsky for Bloomberg may be of interest to subscribers. Here is a section:

    There's a strong temptation for Western commentators, especially U.S. ones, to portray MbS as a reformist trying to bring the House of Saud into the modern world and Putin as a retrograde dictator taking Russia into the past. But the only reason this temptation to differentiate exists is that Saudi Arabia is a traditional U.S. ally, and the enemy of an old enemy -- Iran. In reality, there are far more similarities than differences between the world's two most important oil dictatorships. Their interests align on their most important market. Together, they've talked up oil prices to a level that allows them to maintain spending on defense and mega-projects. Their geopolitical interests don't align today, but that won't stand in the way of their natural mutual attraction.

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    Therapeutic Categories Outlook: Comprehensive Study

    Thanks to a subscriber for this encyclopedic 2534-page (95.7mb) report focusing on evolving trends in the biotech sector. This is a very detailed report which I recommend downloading and saving because I anticipate it being a reference guide for me over the next year and possibly longer. Here is a section on pain medication: 

    There are so many lawsuits against opioid manufacturers that it is hard to keep track of all of them. These suits stem from all levels of government (cities, counties, states), as well as private parties and organizations (e.g. NFL). Opioid manufacturers today are viewed similarly in public opinion to cigarette manufacturers in the 1990s. 

    In October 2015 for the first time a doctor was convicted of murder for patient opioid overdose and was sentenced to 30 years. Other similar suits are in progress.

    Insys’s Subsys (sublingual fentanyl spray) began to decline after experiencing strong sales growth over the first few years since launch. In December 2016 several senior executives were indicted over fraudulent sales practice.

    The FDA has already approved one immediate release and nine extended-release opioids with abuse deterrent claims; with more likely on the horizon. As such, the field is becoming very competitive.

    Market leader OxyContin has been in decline for the last two years, from ~450k scripts/month to ~260k scripts/month currently.

    Newly launched abuse deterrent opioids are priced at 2-4x that of OxyContin before adjusting for discounting.
    In a July 2017 report, ICER found abuse deterrent opioids to not be cost effective.


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    Foreign Banks Invited to End of the Credit Party

    This article by Tom Orlik for Bloomberg may be of interest to subscribers. Here is a section: 

    In the 2000s, China invited foreign banks into the domestic market, as it tried to manage down a legacy of bad loans. HSBC bought a share of Bank of Communications, Royal Bank of Scotland took a minority stake in Bank of China and Bank of America purchased a piece of China Construction Bank – helping them on their way to listing. Fast forward to 2017 and the bang is bigger. Based on an announcement Friday, limits on foreign ownership of Chinese banks and asset managers will be removed, and foreign firms will be able to take a 51% stake in securities and life insurance firms. But the aim is the same – helping clean up a financial mess, and prevent it from happening again.

    Bloomberg Economics had flagged financial market opening as one of the possible deliverables from this week’s U.S. - China summit. Recognizing that the devil will be in the as-yet-unknown details, here’s our take on the implications:

    There’s potential for a grand bargain here. China’s financial system will receive an influx of foreign capital and expertise.

    That will help deal with the aftermath of a credit binge that has seen debt swell to 259% of GDP, and engineer efficiency gains that may help prevent a repeat occurrence. After paying the price of entry, foreign firms will get a piece of the Chinese market – the second largest and fastest growing in the world.


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    Bitcoin Falls as Cancellation of Upgrade Prompts Misgivings

    This article by Camila Russo for Bloomberg may be of interest to subscribers. Here is a section: 

    While bitcoin soared to a record $7,882 within minutes of news that it would avoid another split on Wednesday, the gains have evaporated. Bitcoin is now trading more than $1,000 below where it was after a faction of the community scrapped plans for a so-called hard fork. Bitcoin was down 8 percent to $6,575 at 2:19 p.m. in New York.

    Some speculators are disappointed they won’t get the additional coins that would have been created by a hard fork. While bitcoin splits are potentially disruptive, they’ve so far amounted to free money for holders of the cryptocurrency. Bitcoin Cash, the result of a hard fork in August, has climbed to about $900 from as low as $565 on the day the split was canceled, while bitcoin has slipped almost 10 percent after touching a record right after the news.


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    America's "Retail Apocalypse" Is Really Just Beginning

    This article by Matt Townsend, Jenny Surane, Emma Orr and Christopher Cannon for Bloomberg may be of interest to subscribers. Here is a section: 

    Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys “R” Us Inc. served as an early sign of what might lie ahead. It surprised investors in September by filing for bankruptcy—the third-largest retail bankruptcy in U.S. history—after struggling to refinance just $400 million of its $5 billion in debt. And its results were mostly stable, with profitability increasing amid a small drop in sales.

    Making matters more difficult is the explosive amount of risky debt owed by retail coming due over the next five years. Several companies are like teen-jewelry chain Claire’s Stores Inc., a 2007 leveraged buyout owned by private-equity firm Apollo Global Management LLC, which has $2 billion in borrowings starting to mature in 2019 and still has 1,600 stores in North America.

    Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings Inc. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion. The amount of retail debt considered risky is also rising. Over the past year, high-yield bonds outstanding gained 20 percent, to $35 billion, and the industry’s leveraged loans are up 15 percent, to $152 billion, according to Bloomberg data.

    Even worse, this will hit as a record $1 trillion in high-yield debt for all industries comes due over the next five years, according to Moody’s. The surge in demand for refinancing is also likely to come just as credit markets tighten and become much less accommodating to distressed borrowers.


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    Volatility Spikes as VIX Tops 2017 Average Amid Tax Uncertainty

    This article by Sarah Ponczek for Bloomberg may be of interest to subscribers. Here it is in full: 

    Volatility roared back into the U.S. equity market as fresh concern about the prospects for tax reform sent the Cboe VIX Index to its biggest surge since August.

    “In terms of how we see the world and the impact to our strategy, to the extent this reform causes some uncertainty, that could lead to a pickup in volatility,” said David Jilek, chief investment strategist for Gateway Investment Advisers. “But we don’t have any keen insights as to how the politics is going to play out.”

    In a year that’s been characterized by record calm, Thursday’s two-point intraday jump in the VIX was enough to push it above the average level for 2017. The gauge, which uses options-trading data to measure implied volatility of S&P 500 stocks, still sits below the bull-market average of 18.3.

    Major U.S. equity benchmarks slid from record levels, with losses widening after the Senate revealed that its tax plan would delay lowering the corporate rate until 2019.

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    Rio Tinto joins race for stake in world's largest lithium miner

    Rio Tinto joins race for stake in world’s largest lithium miner – This article by Cecilia Jamasmie for Mining.com may be of interest to subscribers. Here is a section: 


    El Mostrador suggested Tinto Rio had already made a bid, potentially trumping Chinese companies Sinochem, Tianqi and GSR Capital, all of which had also expressed interest in SQM.

    The news came on the heels of PotashCorp and Agrium announcing Tuesday that China’s ministry of commerce had approved the merger, but required the sale of PotashCorp’s minority holdings in Arab Potash Company and SQM within 18 months of closing, and Israel Chemicals Ltd. within nine months.

    SQM, which has a market value at just over $15 billion, produced roughly 44 million tonnes of lithium carbonate last year and is developing new projects in Chile and Australia.

    Rio's current incursion in the lithium market is mostly limited to its 100%-owned lithium and borates mineral project in Jadar, Serbia, which is still in the early stages of development.

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