Up & Down Wall Street

Market was down sharply early Friday morning on news that the US was bombing the Islamic State terrorists in Iraq. But when news broke later that Russia was withdrawing troops from the border with Ukraine the market rallied.

Geopolitics has started to impact the markets with problems in Ukraine, Gaza and Iraq. The DAX is down abut 10% and there are record low yields on government securities in Germany, France and Finland. The Euor economy does not look good.

Meanwhile in the USA, the bottom line is healthier but a lot of that has to do with financial engineering from repurchases, M&A, tax inversions, etc.

Randall Forsyth’s column closes talking about closed-end funds for bank loans. Generally, they are selling at discounts of around 8% meanwhile they have had increases in net asset value. Example – FCT.

(disclosure – Long AFT)

Triple Trouble for Valeant

Problems for VRX – if the US prevents American companies from playing the tax inversion game, it would lower the chances and the prices someone would pay to take over VRX. Also, as VRX shares continue to fall in price it reduces the attractiveness of a stock offer in VRX takeover attempts.  And VRX has reduced revenue and earnings guidance in 2010. Thomas Tobin of Hedgeye says VRX can hit $200 if they can dodge US taxes and acquire Allergan, or it can fall to $70 otherwise (see also Vito Racanelli’s comments on 6/9/14).

(disclosure – Short VRX).

REVIEW

The US hit rebels in Iraq and a US General was killed in Afghanistan. Bank of America agrees to pay $17b to settle mortgage claims. Russia has implemented import bans in reaction to US and European sanctions over Ukraine. The Ebola virus has now killed almost 1,000 and has been declared a public-health emergency. The Sprint/T-Mobile deal falls apart.