China is Getting Ready to Convert Bad Debt into Bad Equity

Bad debt soared by more than 50% in China last year. As such, these arduous conditions are making life cumbersome for their banks. The solution?

How about a government commanded edict to force debt holders to accept equity and shut up?

When asked about the proposal at the Boao Forum last month, Construction Bank Chairman Wang Hongzhang said he needs to think of his shareholders and wouldn’t want to see a plan that simply converted “bad debt into bad equity.” Bank of China Chairman Tian Guoli said at the same forum that it’s “hard to evaluate” how effective debt-equity swaps will be, as so much has changed in China since the tool was used to bail out the banking system during a previous crisis in the late 1990s.

The bad debt in China is ballooning and it’s only getting worse.

When including personal debt, the debt to GDP is something in the order of 260%.

This is simply moving the pea from one shell to the next. They’re going to take government-run company debt and government run bank loans and simply wash them away by converting the loans into equity. This way the corrupt state run companies can keep the scheme going a while longer. Maybe they can bamboozle more American investors into taking stakes in their great state run enterprises?

More than twenty analysts have been chiseling away at Goldman Sachs’ earnings expectation, removing 94 cents from their profit expectations over the past month or so. These cuts are the largest since the grim days of 2008-2009, representing a 45% drop from last year.

The culprit?

Everything.

The IPO pipeline is all but shut down, following years of wanton depravity, wedding the monsters from the VC world and producing the stupidest looking babies the world has ever seen.

Other banks aren’t immune to the actual doldrums on the ground. Had you simply judged profit expectations by the lackadaisical trading action over the past month, you’d be coerced into believing all was well and good. As a matter of fact, I imagine this post comes as a great surprise to many of you.

“People were holding out hope that March would get better and partially save the quarter,” Glenn Schorr, an analyst at Evercore ISI, said in an interview. “That didn’t happen. There’s no saving this quarter.”

Investment banks are off to their worst start to a new year in over a decade.

I don’t know how this is good news. The company announced their ‘ad hoc’ committee completed its task to investigate the sheer fuckery that has been taking place over there. As such, they’re finally ready to file their 10-k for 2015 on APRIL the 29th, 2016. A little late, eh?

Nonetheless, the stock is screaming higher by 14% on this news.

The co announced that the ad hoc committee of the board of directors (the “Ad Hoc Committee”) believes that its review of various Philidor and related accounting matters is complete, and that it has not identified any additional items that would require restatements beyond those required by matters previously disclosed. Given the completion of the review, Valeant’s Board has determined to dissolve the Ad Hoc Committee and that the 12 independent directors on Valeant’s Board, including the members of the Board’s Audit and Risk Committee, will assume oversight responsibility for remaining work associated with the completion of the Company’s current and restated financial statements and disclosures, as well as its assessment of related internal controls and remediation matters. As previously disclosed, the company intends to file its Form 10-K on or before April 29, 2016.

“We appreciate the efforts of the Ad Hoc Committee and its independent advisors over the past five months. After conducting more than 70 interviews and reviewing over one million documents, the Ad Hoc Committee has not identified any additional items requiring restatements beyond those matters previously disclosed. We believe it is appropriate to transfer responsibility for any continuing work to the Board’s independent directors. We continue to work diligently and are on schedule to file our Form 10-K on or before April 29, 2016.”

The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company’s Form 10-K for the year ended December 31, 2015, which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016. The company believes that after giving effect to the restatement, it will have remained in compliance with all of the financial maintenance covenants in its credit facility at the end of each affected quarterly period

Now let’s see what’s on the 10-k. This upside down frown for VRX shareholders might just turn over again after its release.

European markets are diving lower, led by the DAX off by 2.4%. U.S. futures are indicating a tepid opening of -0.8% on the NASDAQ and gold and treasuries are up more than 1%.

There are a thousand and one reasons as to why stocks are lower. But know this: the market is like a glass kettle of rolling, boiling water. At any moment, the pressure from within can crack the kettle and release the contents onto your floor. Markets are, eventually, going to trade much lower. You will know so with the benefit of hindsight. But I am telling you now, as a courtesy for the many moons you’ve shared with me here.

My best advice to you is to turn off the kettle and go back to sleep.

Wow, I was gone for two business days and so much has occurred. The Panama Papers were released, exposing corrupt leaders and politicians of their money washing depravity. I will need to dive in deep into those documents in order to find some worthwhile news.

Bossman Secretary Lew is putting the smack down on the fuckers who pursue tax inversions. This is significant news and it bodes poorly for the companies who are trying to lie and cheat the American public.

Allergen is swooning lower on the news.

Stocks closed very weak today, led lower by crude. I do believe crude will collapse at some point during 2016. I hope to be short when it happens.

In all, I feel invigorated and ready to get back into the mix.

Thanks to the iBC crew for filling in for me today. You did a great job, as always.

It was supposed to help the American taxpayer, wasn’t it? Come on son, you knew deep down the lobbyist had Obama and made him cede to their will.

There isn’t a rebuttal to the graphic I am about to show you. The cost for health insurance continues to rise, squeezing to death the embattled middle to upper middle classes.

The primary reason?

We are a center for profit.

I’m a capitalist. But this is disgraceful.

These scam stocks are diverging greatly from the Mother Hen, Facebook. While Facebook makes all the money, these other miscreants take up space with false hope and empty promises.

There was a time when YELP, ANGI and P meant something to the world. They offered excitement and growth and the American way. Then we came to find these companies to be nothing more than VC promoted Ponzi schemes and investors became reviled by them.

Today they’re running higher. Color me skeptical.

Aside from Facebook, what are the reasons that would cajole investors to own the above stocks? They’ve proven, without a shadow of a doubt, that they’re unable to operate efficiently as stand alone entities. Nonetheless, a new sucker is born every day.

Developing nations’ oddball currencies have just enjoyed their best run since 1999. The Grim Reapers at Goldman are here to tell you the party like it’s 1999 theme is lame and inexorably over.

Sell short the won and the yen is their best and most salient advice.

“These are good levels to short Asian currencies, especially the won, baht, Taiwan dollar, yuan and ringgit,” said Trivedi, Goldman’s chief emerging-market macro strategist in London, in an interview. “There are very direct implications for emerging-market currencies in Asia from yuan moves. We forecast more weakness across this currency complex.”

Goldman predicts a 14 percent plunge in the yen to 130 per dollar in the next 12 months, a level last seen in 2002, and a 7.4 percent drop in the yuan to 7 versus the greenback, which would be the weakest since May 2008. The won will decline almost 12 percent from current levels to 1,300 in the period, according to Trivedi, who recommends shorting the Korean currency as the best way to position for the projected reversal in Asian exchange rates.

Also, to hell with the ringgit. This is a subtle way of saying risk off friendo, in my opinion.

Alaska Air is buying Virgin? Really? The whole allure about ALK was the fact they flew routes that no one else cared for, or had a near monopoly on. With the VA albatross around their necks, ALK is just like the rest of the losers.

And look at the premium Sir Branson (the fuck outta here with the title) made those country bumpkins pay. You know a deal is shit when the acquirer’s stock  gets smashed.

Who even cares about Brocade buying RKUS, other than the 4 RKUS shareholders who just got lucky?

Trump would tell you that the Brocade people were low energy losers if he were blogging here.

Lastly, I’d like to touch on the genius of Elon Musk and his $35,000 iPhone. Not only is this new electric car capable of driving 215 miles without being plugged into the wall, but he created such hype around it that people are clamoring for the privilege  to own it,  treating the purchase of a car as if it were an iPhone. Truly amazing. The model 3 already has over 250k units sold, with the first 200k lucky lads getting a government tax credit of 7k to boot. Also amazing!

Sales have shattered expectations and the car isn’t even gonna be ready until 2017. This is one of the great brands to be reckoned with, a supreme standard in an industry rife with mediocrity. One could argue Tesla is the Apple of the automobile industry.

I don’t need an electric car; but I am tempted to buy the model 3, especially since the price tag is so low. I spend $35k on my asinine trips to Whole Foods every year. I could think of worse ways to spend 35 gs.

Overall, markets are slightly higher with a bullish bias.

Greetings from an undisclosed location, from vacation with the kids that has caused my feet to bleed. Nothing can keep me from posting this piece of news, so you know.

You are bearing witness of a great hedge fund manager blowing up, like a giant fireworks display in the sky. As spectators, all we can do is watch Bill explode and gawk at the pretty colors.

Right now, his fireworks display is flowing bloody red.

For the first quarter of 2016, Montauk Bill Ackman knifed lower by 25.6%, toppling over by 7% in March alone–a month marked by a most perverted and distinctive stock market rally.

His losses are so asinine, one has to imagine what’s going on inside of his big brain. Clearly, the man knows what he’s doing. Most people in the business have a hard time raising as little as 10 million. Bill was running nearly 20 billion at his heights.

But all good things come to an end. Pershing Square has been sacked by the catamites at Valeant Pharmaceuticals.