Give Recession a Chance: Q1 GDP Comes in Light at 0.5% v 0.7% Expectations

The morons at the NY Fed had forecaste upwards of 1% growth, no? Jar my memory.

It looks like the Atlanta Fed’s GDPNow models worked, only missing by a tenth of one percent.

*ECONOMY IN U.S. GREW 0.5% IN FIRST QUARTER VS 0.7% FORECAST

Spin it however you like: these are abysmal numbers (thunderous lightning strikes spire atop castle).

Dow futs are lower by 133.

Abbot is buying St. Jude Medical for $25 billion. STJ is higher by 25% in the pre market.

More interestingly, ABBV is buying privately held Stemcentrx for $5.8 billion. Stemcentrx is a Peter Thiel backed company. That man had signed a deal with the devil, which explains his wanton success.

Stemcentrx, a closely held biotech firm based in South San Francisco, California, has five experimental drugs in human trials. The leading candidate is for small cell lung cancer, targeted at a protein called DLL3 that is expressed in 80 percent of small cell lung cancer patients’ tumors and not in healthy tissue, according to a statement on Thursday. Patients are enrolling in a final-stage test of the company’s lead drug, called Rova-T, which could be on the market by 2018 if approved, Chief Executive Officer Rick Gonzalez said.

“We have dedicated ourselves to oncology and we view it as our second major growth platform,” he said in a telephone interview. “Stemcentrx in particular fits well as a major platform play for us in solid tumors.”

Lastly, MDVN received a bid from SNY for $9.3 billion, a modest 8% premium to yesterday’s close. I am almost certain the primadonnas at MDVN will ask for moar.

I won’t make too much out of these deals, as the healthcare industry is rife with misdirection and convoluted motives. But the investment bankers must be glad to see activity.

Don’t worry, we’ll be up by 9:45am.

The Bank of Japan didn’t provide markets with additional crack-cocaine. Subsequently, investors are throwing infantile tantrums, selling off the NIKKEI and U.S. futures.

The yen is soaring v the dollar up by 2%. The NIKKEI had been higher by 2%, but is now off by 2.5%. S&P futures are down 10.

Poor Japan will have to make due with a paltry budget of just 80 fucking trillion yen, to buy up excess ETF supply.

The Chipotle CFO, John Hartung, is a smart man. He’s probably a great CFO and an even better merchant of Mexican styled chicken sandwiches. However, he has no idea how deep the rabbit hole goes, in regards to his brand being tarnished due to the recent spate of ecoli related illnesses, born out of his restaurants. Truth is, none of us know how Chipotle will end up, or where the stock will be in 6-12 months from now.

But this is what we do know. The stock is off by almost 50% since the outbreak occurred. Sales have plummeted to the tune of 30%, while costs have risen. The company is intent on leveraging into this maelstrom by opening up another 220 stores and also buying back $750 million worth of its stock.

For the quarter, the company lost $26 million, compared to netting $122 million the year prior.

Due to the share buybacks and operating losses, the companies cash position has dwindled to $250 million.

As of Q1 of 2016, the company had purchased $641 million worth of stock at an average cost of $463, for an unrealized loss of around $64 million.

Management is making a huge gamble with shareholder money, pretending they know what’s in store for the share price and gambling on whether or not another ecoli outbreak will be reported in one of their stores. Should that occur, this stock is going to get absolutely poleaxed. Why on earth is management taking on so much risk, when they themselves don’t even know the root causes of the contamination?

If they want to open another 220 stores, which will underperform by all historical CMG metrics, they should refrain from tossing money into a flaming barrel of garbage by buying back shares.

Here is a snippet of his testimony. Captivating stuff.

I hope the company bankrupts itself and everyone goes to prison…for life sentences.

Joe Papa aka Mr. Potato Head will be paid $67.4 million for the top spot at the retarded pharmaceutical company dubbed Valeant.

Papa, who is to take over the drugmaker next month, will get a $1.5 million salary, a target bonus of $2.25 million, and a special $8 million cash payment to compensate him for lost shares of Perrigo Co., which he ran until it was announced this week that he was taking over Valeant. In addition, he’ll get restricted stock and options worth $56 million. The value of the stock is based on Valeant’s April 27 closing price.

With the amount of options granted, should Papa be able to turn this disaster around, he stands to make an absolute fortune.

Never mind the inconvenient truth that Papa had failed to preserve shareholder value at PRGO over the past 3 years, whose share have scathingly fell lower to the tune of -50%.

Outstanding positions in the repo market has dropped by 18% this year, as Chinese bond traders scurry about like rats to unwind blockheaded high yield positions. With NPLs soaring by 50%, year over year, bond traders are facing immense pressure as the maturity wall looms.

“It looks like everybody is cutting their leverage, passively or pro-actively, as pessimistic sentiment continues to brew,” said Wang Ming, chief operating officer at Shanghai Yaozhi Asset Management LLP, which oversees 15 billion yuan of fixed-income securities. “Carry trades have become riskier.”

State-owned China Railway Materials has suspended their bond trading schemes, citing ‘repayment issues.’ This has the bond nerds over at PIMCO pondering the very existence of life.

“When you have a large SOE who suddenly suspends its bond trading, you think: ‘How many more are there?’” said Raja Mukherji, the Hong Kong-based head of Asian credit research at Pimco, which oversees about $1.5 trillion worldwide. “It kind of leads to a bit of panic in the onshore market. Investors are likely to want to look at their portfolio and sell some of the bonds.”

Despite signs of distress, bond traders don’t think their will be extensive carnage in the Chinese corporate bond markets–because the government won’t allow it to happen.

“We don’t think there will be a big correction in the corporate bond market unless continuous and large-scale defaults trigger a liquidity crisis in the financial system,” said Wei, a money manager at Bosera Asset Management Co. in Shenzhen. “The probability of such systemic risks is very low given regulators’ good care for the market.”

I’ll bottom line it for you. A weak corporate bond market is oppressive for liquidity, which in turn is bad for stocks. As NPLs rise in China, there need for capital is greater than ever. This, of course, could become a problem.

“The volatility in funding costs, coupled with exposing credit risks, are draining the liquidity in the bond market,” Sun said. “Given the market expectation of a neutral monetary policy stance, investors may continue to be forced to de-leverage.”

As you were. The Facebook earnings were great and oil has bottomed and China has bottomed and Europe is picking up steam.

Aside from banging out 200-300 posts per month, I actively manage two twitter accounts. One of them is my personal @The_Real_Fly account, which many of you already follow. The other one is designated for breaking news flashes, earnings and analysts upgrades and downgrades.

Naturally, it’s free and has immense value for anyone in the stock racket. Follow @iBC_FN

Here is what you could expect to see on the Financial News feed.

If any of you clowns want me to follow you on Twitter or want other gentlemen of iBC to follow you on Twitter, drop your handle in the comments section. I promise that I will review each and every account and even promote it if I think it has value.

So, the news out of Washinton today is that Ted Cruz, after losing 5 primaries last night, has announced his VP pick, former HP boss Carly Fiorina. Moreover, judging by the photo of his speech below, the Rafael Cruz campaign must’ve paid some political marketing agency hundreds of thousands of dollars to strategically place all women behind him when unveiling this awesome plan. I am sure their research suggests that by doing this it would engender the trust of a certain percentage of women, in order to sway the election his way.

Scheming bastard.

Upon seeing this, I am reminded of all the reasons why I hate politicians with every fiber of my existence. All of that renegade talk by Cruz, as not ‘being one of them’, can easily be debunked after the shit he’s pulled this week.

A peace treaty with Kasich? Fucking why?

A VP pick while down by 400 delegates to Trump? Why?

The answer is straight forward: he intends to steal the nomination and circumvent the popular vote. You know, because the process of elections is about ‘grass root efforts’ and ‘political activists’ and ‘having a good ground game’.

I can’t wait for Trump to deport Cruz back to Canada.

FB is up 6.5% in the after-hours after annihilating earnings expectations. Metrics were great across the board.  Also, in an effort to maintain control of FB, while diluting the shit out of shares over time, the company has unveiled a plan to issue ‘C-share’, similar to that of Google.

FB announced that the board of directors has approved a proposal to amend and restate existing certificate of incorporation to create a new class of non-voting capital stock, known as the Class C capital stock. If the proposal is approved it will issue two shares of Class C capital stock as a one-time stock dividendin respect of each outstanding share of our Class A and Class B common stock. This proposal is designed to create a capital structure that will encourage Mr. Zuckerberg to remain in an active leadership role at Facebook. The adoption of the proposal is subject to the approval of our stockholders at our 2016 Annual Meeting of Stockholders to be held on June 20, 2016.

I love how they word it. They are simply stripping shareholders of their power in order to keep Mark interested in Facebook.

This is corporate governance run amuck. I am surprised people go along with this stuff without even protesting.

Via Briefing:

• Reports Q1 (Mar) earnings of $0.77 per share, $0.15 better than the Capital IQ Consensus of $0.62; revenues rose 51.8% year/year to $5.38 bln vs the $5.26 bln Capital IQ Consensus.
  • Advertising revenue increased 57% y/y to $5.2 bln.
• Daily active users (DAUs)- DAUs were 1.09 billion on average for March 2016, an increase of 16% year-over-year.
  • Mobile DAUs- Mobile DAUs were 989 million on average for March 2016, an increase of 24% year-over-year.
• Monthly active users (MAUs- MAUs were 1.65 billion as of March 31, 2016, an increase of 15% year-over-year.
  • Mobile MAUs- Mobile MAUs were 1.51 billion as of March 31, 2016, an increase of 21% year-over-year.
• Mobile advertising revenue- Mobile advertising revenue represented approximately 82% of advertising revenue for the first quarter of 2016, up from 73% of advertising revenue in the first quarter of 2015.
• Capital expenditures- Capital expenditures for the first quarter of 2016 were $1.13 billion.
• Free cash flow for the first quarter of 2016 was $1.85 billion.