BofA/Merrill Issues Scathing Report on Regionals, Declares ‘Hope is Not a Thesis’

The math is simple for BofA: BREXIT means the Fed rate hikes are off the table, which means spreads will remain tight and banks will be under pressure. A super low rate environment is toxic for the banks. Look at the condition of the European banks, trying to deal with negative yields.

At any rate, they equate the seemingly low multiplies at many regionals to value traps and suggest avoiding them at all costs.

“Regional bank investors will remain mostly focused on higher rates, revenue growth, and M&A potential – Brexit negatively impacts all three,” writes Najarian. “As such, regional banks stocks are to us, as a group, potential value traps from here.”

For the large-cap regionals, Bank of America Merrill Lynch cut Comerica Inc. and Zion Bancorporation to ‘underperform’ from ‘neutral,’ lowering its price targets to $36 from $45 and $24 from $29, respectively. Najarian also reduced Regions Financial Corp. to ‘neutral’ from ‘buy,’ trimming her price target to $8.50 from $9.50.

“We anticipate one specific counterargument to our more cautious stance: history has suggested that the best time to buy bank stocks would be when they trade below tangible book value (TBV) – if there are no share count issues, which is our base case,” the analyst explained. “But, this post-crisis macro backdrop, marked by stubbornly low interest rates, is unprecedented. So, depressed valuation on TBV could persist near-term – as they have in Japanese bank stocks.”

Shares of Tesaro are the hottest thing in biotech today and will probably continue to be until the final results for their phase 3 drug are released in the fall. The stock is higher by $40, completely castrating any shorts found in the stock.

Via briefing.com

Tesaro (TSRO 74.40, +37.19) is a biotechnology company focused on providing transformative therapies for the treatment of cancer. Today its stock is having a transformative session, having doubled after Tesaro announced positive results for its Phase 3 NOVA trial of niraparib, an oral, once-daily PARP inhibitor for patients with ovarian cancer.

The salient news is that the Phase 3 NOVA trial successfully achieved its primary endpoint of progression-free survival.

Ovarian cancer is the fifth most frequent cause of cancer death among women. In the United States alone, approximately 22,000 women are diagnosed with ovarian cancer each year.

These cancer sufferers undergo platinum-based chemotherapy as part of their treatment regimen. Dr. Tom Herzog, M.D., Clinical Director, University of Cincinnati Cancer Institute and Professor, Department of Obstetrics and Gyneclogy at the University of Cincinnati, is quoted in the press release as saying the majority of women diagnosed with advanced ovarian cancer will suffer a relapse even if they respond to the initial chemotherapy.

Herzog added that, “New treatment options are needed to extend the time in between cycles of platinum-based chemotherapy for these patients, and the results from the NOVA study suggest that niraparib could represent an important new treatment option for many patients with ovarian cancer.”

The full results of the study are expected in the fall.

Tesaro notes that an ongoing development program for nirparib includes the Phase 3 trial in patients with ovarian cancer (NOVA trial); a registrational Phase 2 treatment trial in patients with ovarian cancer (QUADRA trial); a Phase 3 trial for the treatment of patients with BRCA-positive breast cancer (BRAVO trial); and a Phase 3 trial in patients with first-line ovarian cancer (PRIMA trial).

Credit Suisse upped their target to $90 and Wells Fargo to $122-$132.

In spite of the first minister of Scotland meeting with EU heads in Brussels to pledge allegiance to them, a move that can be construed as a signal that Scotland will try to breakaway from Great Britain again, the pound is surging–higher by 1.1%.

Weakness in the dollar has carried over into the gold miners, helping safe haven assets and inflating equity markets to no end.

European markets are racing higher by 2% and U.S. markets are higher by about 1%. Gains are fairly broad based, but most energetic in the basic resource sectors, as well as tech.

For the most part, gains in the banking sector are somewhat muted, considering the recent drop they’ve endured.

Alas, the prevailing wisdom is that BREXIT is behind us. The Fed is in front of us. Ergo, they’ll jerk this market higher, by hook or crook, through any means necessary.

I don’t get this. I really don’t. GE needed a regulatory body to strip it of the supposed ‘too big to fail designation’? I had no idea some cubicle living miscreant was encumbered with the duty to decide whether or not a company was too big to fail or not. Apparently, our bureaucracy runs deep.

The Financial Stability Oversight Council granted the idiots from GE a formal release from the ‘too big to fail club’, effectively saying it was no longer important and tantamount to being a floating piece of offal in some body of water…inside a sewer.

“GE Capital has made fundamental strategic changes that have resulted in a company that is significantly smaller and safer, with more stable funding,” Treasury Secretary Jacob Lew, who also heads the oversight council, said in the release. “After a rigorous review and engagement with the company over the last year, the council determined that based on these changes, the designation is no longer warranted.”

‘Congrats’ to GE.

The problem with Scotland is that it’s full of Scots.

Their first minister, Nicola Sturgeon, met with the EU head to swear fealty to him and inform him that Scotland intends to stay in the EU, which implies they are going to vie for independence from Britain…again.

This is a dick move by Schultz and Juncker, a very punitive action by the EU with the explicit intend to injure the people of Great Britain.

It’s very clear by this meddling, and their childish tantrums since the BREXIT vote, that the EU does not respect the will of the English people and will do everything within their power to punish them for choosing independence.

“This is very much an initial meeting, a series of meetings in Brussels today, so that people understand that Scotland, unlike other parts, of the United Kingdom does not want to leave the European Union,” Sturgeon told reporters after meeting European Parliament President Martin Schulz.

“I don’t want to underestimate the challenges that lie ahead.”
Schulz said he had “listened and learned”.

Later in the day, the pro-independence Scottish leader will meet the head of the EU executive, European Commission Jean-Claude Juncker, and may try to probe the — hitherto flimsy — options a breakaway Scotland might have to somehow remain in the European Union once the United Kingdom completes its Brexit.

Juncker’s decision to roll out the red carpet for her on the day the 27 other EU leaders held their first meeting without Britain was seen by some diplomats as an attempt to pressure London to hand in its formal notice to quit.

But EU officials have stressed, as they did before Scots voted against independence in a referendum in 2014, that Scotland could not apply to, let alone join, the Union until it had become a sovereign state. Senior officials have dismissed the notion that Scotland could take over the empty British chair at the European Council table.

With the EU facing years of uncertainty in negotiating the withdrawal of its second-biggest economy, the Scottish factor is a complication most governments would rather avoid. Spain wary of encouraging its own Catalan separatists, and some other states could block any Scottish accession.

One senior EU official played down Juncker’s invitation to Sturgeon, noting drily that “the president likes the regions of Europe”, comparing Scotland to federal states in Germany. But some diplomats saw Juncker’s move as deliberate ploy to add pressure on Cameron and his successors to speed divorce talks.
“This is a way of putting pressure on London to trigger the exit clause,” a senior official in one EU government said of EU efforts to bounce London to the negotiating table while Cameron has insisted only his successor will set the clock ticking on a two-year deadline to withdrawal.

“This is a provocation by Juncker,” an EU diplomat said. “He can’t force the Brits to submit their notification so he plays these tricks.”

The Scots are probably too drunk to realize their towing themselves to the SS Titanic.

This is my final Faber post of the night. He’s so deranged, I could watch him all day, while eating popped corn. Faber let’s his Trump colors show, talking greasy about H. Clinton. Then he delves into a sundry of issues and offers ideas, in the final segment of iBankCoin’s Faber bonus round.

Seriously, look at the guy’s body language. CNN hires psychotics.

Dr. Doom, Marc Faber, paints a vivid picture of a world heading for a dystopian society, one ruled by greedy globins at central banks–propping up shares of worthless companies in a post-apocalypse era. In other words, BREXIT was a side note in the economic slowdown that has been occurring since 2014. It has been widely believed, hitherto, that central banks could be the end all answer to all of the world’s problems. However, and it goes without saying, the bull market in US treasuries have been the markets canary in a coal mine for the better part of the last 6 months, outperforming all asset classes with little to no media focus.

At the end of the day, we’re all passengers on the SS Titanic, but we should enjoy the drinks as they’re being served–because the fatal blow is somewhat in the distance. Meanwhile, entertain yourselves aboard the ark. Buy some gold shares and pray to the Gods that the Federal Reserve enacts QE4 to get the juices flowing again.

The stooges at Reuters made an error with this article. Instead of coming off slightly biased, with a tinge of honor imbued in their commentary to fool people into believing they’re really a news agency and not a propaganda arm for the Clinton campaign, they slipped with this one a little bit.

In my experience growing up in a very multi cultural area of Brooklyn, the people who made race an issue were often the most racist ones, pretending to be the opposite, sort of what Reuters is doing here.

XENOPHOBES.

Nice picture with the that exclusive, Reuters.

Cramer’s hairdresser, Sebastion, is an expert in analyzing the completely unpredictable and useless patterns in the VIX index, says the markets have bottomed because his VIX charts said so. In spite of the fact that volatility has been an infantile way to gauge the direction of stocks, bearing no mathematical correlation between it and the overall market, Cramer felt, in light of what he described as ‘Britain’s bonehead move to leave the EU’, promoting the advice of his hairdresser’s VIX opinions is, inexorably, the best course of action for him and the people who watch him every night–in search for clues as to what the market might do next.

After Cramer got done explaining what Sebastion thought of VIX, he pulled a triple lindy dive into the pool of stupidity and unveiled analysis on the VVIX–which is a derivative of the VIX. This is tantamount to playing with your own feces in the middle of the highway and then deciding to light yourself on fire in order to clean up after yourself.

Out of all the boneheaded decisions Cramer has made over the years, to borrow a phrase, this has to be the worst one of them all–maybe second only to his recommendation that Bear Stearns was fishing takeover bids–just prior to its demise.

Markets are set to fucking V shape the hell out of here.