Stocks go nowhere and the Valeant story gets stranger -- What you need to know in markets on Monday

Stocks went nowhere on Monday after last week saw the major averages move back into the green for the year.

The biggest story on Monday, though, was the ongoing saga at pharmaceutical giant Valeant, which somehow took an even stranger turn to start the week.

First, the scoreboard:

  • Dow: 17,618, +16, (+0.1%)
  • S&P 500: 2,050, +1, (+0.1%)
  • Nasdaq: 4,805, +10, (+0.2%)
  • WTI crude oil: $41.70, +1.4%


Yes, this story gets stranger.

Here’s an overview of the latest news out Monday morning:

  • CEO Mike Pearson is on his way out but will keep the top post at the company until a successor is named. In effect, though, he’s now a lame duck.
  • Bill Ackman is joining the board.
  • CFO Howard Schiller was asked to step down.
  • Schiller declined.
  • Valeant also said that Schiller had engaged in “improper conduct” which contributed to the company’s misstatement of past financial results.
  • Schiller said he did not.
  • Valeant shares gained 7%; in the last year the stock is down about 80%.

But so as Bloomberg’s Matt Levine wrote on Monday, perhaps the oddest part of this latest twist is that as things seem to get worse for the company — Valeant’s disclosure on Monday contained a lot of details about what financial statements it would restate and why — executives keep trying to get closer to the company.

Schiller is being asked by Valeant to distance himself. And, despite the company being more or less the scourge of the corporate world right now, he’s not just saying no but doing so emphatically. Very odd! (Of course, Valeant is blaming Schiller for the whole thing, and what, really, do you think he’s going to do? Roll over?)

It seems like another life when we were sitting here writing about Andrew Left and his declarations that this weird specialty pharmacy company named Philidor was a major issue for what was then a massively successful feat of corporate engineering. (It was October.) Of course, in a way it was: that was $140 a share ago.

And so while much of the attention now is fixed on folks like Bill Ackman and Sequoia — who have taken an absolute bath on Valeant shares — Matt Turner re-upped some February commentary from investor Wally Weitz related to the company that outlined what caused him to bail out of the stock back in October.

“Enron” is mentioned.

Merger Monday

Before we knew that even weirder things were going to happen to Valeant the big news Monday morning was three mergers worth more than $37 billion crossing the tape before the open.

Sherwin-Williams and Valspar got us started on Sunday, announcing an $11 billion combination of coatings and paint companies. Sherwin-Williams shares fell about 6% following the announcement; Valspar gained 24%.

In the financial data space, Markit announced it would acquire US rival IHS in a $13 billion deal sending shares of IHS up about 9%.

The most interesting announcement Monday was Marriott’s new offer to acquire Starwood Hotels in a deal that would once again create the largest hotel chain in the world. This new deal, worth about $13.6 billion or $79.53 per share, follows news out Friday that Starwood received a binding and superior offer from Chinese insurance giant Anbang that valued the company at $78 per share.

Marriott had five days to respond. And they did.


Apple had event on Monday.

They announced a new iPhone and some new iPads.

Here’s the full rundown of new stuff, via Kif Leswing.

Shares of the company closed very, very slightly down on Monday.

Perhaps it is just my age, or that Apple now undoubtedly owns the consumer tech hardware space — so much so that whatever the company puts out next seems inconsequential: people will buy it anyway — but these events only get stranger and less interesting.

There was, maybe six or seven years ago, a sort of cult appeal to watching Steve Jobs pace on stage and talk with such effortless zeal about a cell phone. Perhaps it was Jobs himself, or that in 2009 and 2010 what the iPhone offered was so amazing you couldn’t wait to just see someone play with it onstage and talk about how great your life would be once you’d acquired this device.

(Heavily subsidized only after your extremely inflexible two-year phone contract was up. And only on AT&T.)

But the twice-yearly ritual of Apple executives in jeans and dark t-shirts using slides to reveal the latest product you’ll get a Baby Boomer family member this upcoming holiday just isn’t that exciting. Not anymore.

Or as David Aron Levine said on Twitter of Monday’s presentation: “When Apple became Dell.”

Sort of feels that way. Julie Bort agrees (I think).

Unrelated: Twitter turned 10 on Monday. Congrats, @jack!

Ray Dalio

Bridgewater’s Ray Dalio spoke with Business Insider’s Rich Feloni.

The interview is fantastic, wide-ranging, and a great window into the mind of Dalio, who is now — seemingly as forever — in the financial media’s view. After all, Dalio runs the world’s biggest hedge fund.

“The biggest challenge is that it can make people uncomfortable to have their mistakes and weaknesses so transparently shown,” Dalio said, which is about as on-brand as it gets.

“Since everyone has weaknesses, that experience happens to everyone who comes into this culture. Some people come to love it because they find learning about their weaknesses to be invaluable. It helps them guardrail themselves against their weaknesses, and they can be more themselves because they don’t have to continue to hide their mistakes and their weaknesses.”

And this is only a few sentences!

On the topic of weaknesses and what the big challenges are for folks that join Bridgewater, Dalio adds (emphasis mine):

Most people have a hard time confronting their weaknesses in a really straightforward, evidence-based way. They also have problems speaking frankly to others. Some people love knowing about their weaknesses and mistakes and those of others because it helps them be so much better, while others can’t stand it. So we end up with a lot of people who leave quickly and a lot of people who wouldn’t want to work anywhere else.

Of course, you don’t have to work at Bridgewater to know this is true.

I don’t, for example, read the comments on my posts, which would be a way of confronting my weaknesses in a really straightforward, if perhaps not always evidence-based way.

You should read the whole interview, obviously.

Helicopter Money

Bundesbank head Jen Weidmann told German media that helicopter drops from central banks is not a “manna from heaven.”

That is, the money doesn’t like, literally, fall from the sky. Or heaven. Either way.

But helicopter drops, a more recently whispered-about option for policymakers who have already doubled-down efforts to goose inflation and stoke economic growth by making interest rates negative and buying more and more assets, are seen as the next step. This would more or less involve central banks putting electronic money in your bank account.

It is not seen as desirable, but when nothing else you’re doing works, why not, right?

Here’s Weidmann (emphasis mine):

Helicopter money isn’t like manna from heaven — it would tear gaping holes in central bank balance sheets. Ultimately, it would be down to the euro-area countries, and thus the taxpayer, to shoulder the costs because central banks would be unprofitable for quite some time. The question of whether and how money is given away to the general public is a highly political one that would need to be addressed by governments and parliaments. Central banks don’t have a mandate to do so, not least because it would mean redistributing assets on a huge scale.

It would be nothing short of unreservedly commingling monetary and fiscal policy, a step which would be incompatible with the notion of central bank independence. Instead of raising the prospect of ever more daredevil feats, it would actually be wiser to pause for thought. Monetary policy isn’t a panacea — it can’t replace urgently needed reforms in individual countries, nor can it solve Europe’s growth problems. That would simply be too much of a tall order, and it would most certainly end in tears.

And so as we’ve written about here a few times, the thing with what’s happening at central banks right now — again, negative rates, asset purchases, and so on — is that we’re very much past the economic debate and more into a moral one. That is: while dropping money in private citizens’ bank accounts might increase inflation, is it achieving inflation targets the “wrong way”?

The other side of this, from a central banker’s point of view, is that what the bank values, over almost all else, is its political independence. That is: central banks right now can act accordingly to the economic conditions presented by global markets, not the political pressures of their governing bodies.

Federal Reserve officials, for example, have long been outspoken against bills to “audit the Fed” and other efforts to make monetary policy “rules based.”

On the European Central Bank front, president Mario Draghi has long been calling for fiscal action from its member states as a supplement to the ECB’s easy monetary policies. So the puzzle is: central banks can’t act alone to restore the economy but yet they must act alone in setting policy.

Weidmann also makes some interesting comments about the possibility of getting of the €500 note. In short, it’s a political decision, either way.


I wrote about housing.

Most Important Charts.

Schlumberger gave a very grim picture of the future of the oil industry.

The IMF on Canada.

Obama in Cuba.

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