UPDATE ON PFIZER INVERSION

More from the weekend about the Pfizer inversion deal.

Under the terms of the proposed transaction, the businesses of Pfizer and Allergan will be combined under Allergan plc, which will be renamed “Pfizer plc.” The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the “PFE” ticker. Upon the closing of the transaction, the combined company is expected to maintain Allergan’s Irish legal domicile. Pfizer plc will have its global operational headquarters in New York and its principal executive offices in Ireland. For more:

http://www.zerohedge.com/news/2015-11-23/its-official-allergan-pfizer-combine-biggest-ever-tax-inversion-defy-jack-lew

OVERNIGHT

Australian shares neared their highest level in months. Conservative wins in Argentina.

Conservative opposition candidate Mauricio Macri won Argentina's presidential election on Sunday after promising business-friendly reforms to spur investment in the struggling economy. Macri's supporters swarmed to the Obelisk in the heart of Buenos Aires' theater district for a giant street party as subdued ruling party candidate Daniel Scioli conceded defeat.

Argentina's election body said Macri had 52.1 percent of votes and Scioli had 47.9 percent with returns in from 91.5 percent of polling stations."The is the beginning of a new era that has to carry us toward the opportunities we need to grow and progress," Macri told supporters at his headquarters, which pulsed with Latin music and was festooned with white and sky-blue balloons, the colors of the Argentine flag.

www.reuters.com/article/2015/11/23/us-argentina-election

Aussie Stocks Soar.

Australian shares neared their highest level in a month as optimism about its economy drove consumer stocks higher and countered pressure from a stronger U.S. dollar and lower commodity prices.  The S&P/ASX 200 XJO, +0.39%  was up 0.4% to 5222.70 Monday, on track for its highest close since late October.Elsewhere, South Korea’s Kospi SEU, +0.69%  was up 0.7% and but the Shanghai Composite Index SHCOMP, -0.15%  was down 0.4%. Hong Kong’s Hang Seng Index HSI, -0.39%  slipped 0.3%. Markets in Japan are closed for holiday

TWO OF A KIND

Political asylum has become a political joke. Anyone with a warm pulse qualifies for political asylum these days. One doesn't even have to make up a good tale. It would be instructive to know how many jihadist are enjoying residence in the U.S. now owing to government granted political asylum.

Does anyone know? Does anyone really think the government knows?

Two people we think this question should promptly be put to is California Governor Brown and the current White House occupant. One of the few legitimate roles of government is to protect its citizens. That means the people who are already here.

Allowing 10,000 Syrian refuges into the U.S. is not only opening the door to trouble, it an in-your-face insult to all the innocent men, women and children already in this country. Where will the good governor and the White House occupant be when on some distant day if some of those innocents lay in the streets shrouded in coroner bags?

Will they appear on television giving another meaningless speech sprinkled with their insincere deepest condolences to the bereaved family members? The decisions of these and others like them have the power to affect millions of innocent lives, many of whom most likely will never even have heard of Syria.

Who is going it to be: You or me or your neighbor just because we decide to go to a certain market on a certain day or attend a sporting event on a certain weekend? There is an old saying that physicians bury their mistakes. Less you think otherwise, the same holds true for politicians.

We could cite a legion of historical examples, but we'll spare you the onslaught. If you trust politicians, right, left or otherwise, to keep you and yours absolutely safe, then pay no mind. Voice no opinion. Just gently put your hands in your pockets and quietly amble off into the good evening, maybe down the street to your favorite market or to a sporting event come the weekend.

Two of a kind who essentially are going to force their view point on the American people. You know they're gong to call you names if you come out against accepting Syrian refugees. But here's a quote to consider.

Here's a dose of math reality. The EU let in a million refugees, if just 1/10 of 1% of them are terrorists, that's 1,000 terrorists the EU has to deal with.

Do either of these faces look like those of someone you want to trust with your lives or those of your children?

.http://globaleconomicanalysis.blogspot.com/2015/11/obama-to-veto-bill-requiring-background.

                     

OUR VIEW

Oh my! Here's our view. We hope you know yours.

Any idea that the Federal Reserve Bank is or ever was, as one apparent conservative website,The Fiscal Times, recently reported, "fiercely independent" is laughable. Fiercely independent central banks are like silent thunder; they don't really go together.

Independent of whom and what? We disdain regulation as much as the next guy, but every time someone questions the Fed's so-called transparency, a term the Fed itself loves to toss around to brag how open-ended it is, these apologists roll out their same old, shopworn, carping rhetoric.

thefiscaltimes.com/2015/11/19/House-GOP-Trying-Cripple-Fed-Policy-Making

We are no friend of the GOP. In fact, both parties are like Mike and Ike--pitiful and pathetic.Take your pick. All one really needs to know about this article is the author spent 25 years at the Washington Post.

The House Republicans’ solution to the problem is a complex bill dubbed the Fed Oversight Reform and Modernization Act (FORM) – a measure likely to pass the House today that Yellen warns would be a “grave mistake” that could seriously harm the economy and once again drive up unemployment.

To begin with, anything Fed Chair Yellen warns "would be a grave mistake," is worth considering implementing. The biggest grave mistake is having a Federal Reserve in the first place. Congress passes complex bills every year. Most of them are so complex, to paraphrase a Pelosi line, nobody reads them before or after they're passed.

That's what we love about Washington--their bipartisan consistency.

“The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people,” she said in a letter to House Speaker Paul D. Ryan (R-WI) and Minority Leader Nancy Pelosi (D-CA).

The only real thing detrimental to the economy and the American people has been the Fed. And it started way back in 1913, the same year the then ensconced privileged set birthed another disaster, the IRS. Talk about complex bills. Rumor has it someone has pledged ten million dollars tax free to any man or woman or illegal alien, jihadists excepted, who can prove he or she or them has read every word.

Among other things, the GOP bill that emerged from the Financial Services Committee last week on a straight party-line vote, would require the Fed to be more “transparent” about the stress tests it requires the nation’s largest banks to pass each year. It would require Fed employees to abide by the same ethical requirements as other federal financial regulators. And it would place new restrictions on the Fed’s ability to make emergency loans during periods of financial crisis.

Now there's a novel twist, hold Fed employees' feet to the same ethical flame as other federal financial regulators. Oh my! And damn those straight-party line votes. If one was only semi-literate, which most of are according to Washington, this author would have readers believe the GOP has cornered the market on them.

They key condescension here is requiring the Fed to let we semi-illiterates in on the secret ingredients of those big bank stress tests. Oh my!

OVERNIGHT

The prospect of rising interest rates by the Fed tossed an apparent life preserver to emerging market shares overnight, according to Reuters.

Even Japan, still in recession, got into the act.

In Asia overnight, the Bank of Japan surprised no one at its regular policy meeting by maintaining the current pace of asset buying, though many still suspect it will have to ease again at some point to force inflation higher.

Tokyo's Nikkei .N225 firmed 1 percent, brushing aside a disappointing report on exports and imports.

Soothing Fed sounds send shares, emerging markets higher

MSCI's broadest index of Asia-Pacific shares outside Japan rose 2 percent, with Australia's main index AXJO up by the same amount for a third straight session of gains.

After a slow start, Chinese markets caught the better mood and the CSI300 index .CSI300of the largest listed companies in Shanghai and Shenzhen added 1.6 percent.

INVERSION DEALS FACE GOVERNMENT OPPOSITION

 

                                                           
More on Pfizer. As we said the government will attempt to exert pressure on the company one way or another and in the process send a message to any other companies possibly entertaining an inversion deal.

There have been a flurry of pharma and biotech mergers this year, already surpassing last year’s record of $220 billion in deals, according to data compiled by Bloomberg. Buying Allergan, which has its legal domicile in Dublin, could let New York-based Pfizer relocate outside the U.S. for tax purposes, a transaction known as an inversion.

“We struggle to see what the Treasury can do to specifically curb” a combination of the two companies, Citigroup Inc. analysts said in a note Wednesday. Still, the “political noise” that would surround Pfizer’s relocation “constitutes the most material hurdle to consummation of a transaction of this nature.”

Allergan rose 3 percent in early trading after closing at $310.80 in New York Wednesday. The shares had initially dropped in extended trading after the Treasury’s letter, which said the department is reviewing ways to address overseas acquisitions and plans to issue guidance later this week.

Pfizer Said Near Agreement to Buy Allergan in Biggest Deal

THEY WANT THE MONEY

We've written about this before.

Did you expect anything else from the U.S. government in general and this administration in particular. Two times now in the last year Pfizer has instigated a move, totally legal as it were, to move it headquarters offshore to lower its tax rate on foreign earnings.

Is this presently illegal? No! Move your business wherever you can afford to move it? Seems reasonable enough. Here in the U.S. not just businesses but people do it all the time, moving from the onerous tax rate in one state to either lower or no state taxes in another.

In some circles it's called altering your behavior.  This is not about what is a fair versus an onerous rate. This is about liberty, the right to do with your business or yourself whatever you deem necessary to create a better life.

These moves in the business world are called inversions. The government and many politicians of all stripes call it something much more vile: tax evasion, un-American, corporate treason and so forth.

Here the story from MarketWatch noting the U.S. Treasury Departments response.

The U.S. Treasury Department will release new “targeted guidance” designed to reduce the tax benefits available to U.S. companies that move their tax address overseas. Treasury Secretary Jacob J. Lew informed lawmakers of the coming announcement in a letter on Wednesday. The letter provides no details on what the Treasury Department will do, though the government has previously said it was examining “earnings stripping,” a practice by which companies load up their U.S. 
operations with deductions and effectively push profits to low-tax countries.

“Later this week, we intend to issue additional targeted guidance to deter and reduce further the economic benefits of corporate inversions,” Lew wrote. “It is important to emphasize, however, that Treasury cannot stop inversions without new statutory authority. Unless and until Congress acts, creative accountants and lawyers will continue to find new ways for companies to move their tax residences overseas and avoid paying taxes here at home.”

The Treasury’s actions come as Pfizer Inc. PFE, +1.34% considers a merger with Allergan PLC that could be structured as an inversion, where the new company would be based outside the U.S.

They want the money.

FED APOLOGISTS ABOUND

In cruising the Internet, we from time to time encounter articles like this one proclaiming that holding the Fed's feet to any oversight flame is misguided. To be sure, the Fed has it apologists. Here's an example.

marctomarket.com/2015/11/democratizing-fed-or-politiczing.

Even the title of the article, "Democratizing or Politicizing the Fed," is disingenuous. Any notion that members of the Fed are not political appointees put there by politicians is laughable. And what stirs the ire of the Fed's apologists is folks are finally beginning to get it.

We don't think the Fed has abused its power, we know it has. And nearly anything that ruffles the ire of the current White House occupant and Fed Chair Yellen is a move toward more liberty, not the reverse. As far as more transparency goes and the Fed's denial of purposely obfuscating, one need only check out Robert Woodward's Maestro book on the Fed during Sir Alan's reign.

Woodward quotes Sir Alan when asked how Sir Alan will address the media over a possibly thorny
issue. Sir Alan, without any hesitation, calmly replies he will say this, then that to keep them confused. It pretty clear from the confidence of his remark, this is not something new or foreign to him.What the author proposes is more weekly Fed media meetings. Some people are gluttons for punishment. Being a glutton for pain is for now still permitted in a semi-free society.

Rumor has it that when they were interrogating prisoners at Guantanamo, the most effective method, notwithstanding media reports, wasn't water boarding, but piping into the inmate cells 24 hours of uninterrupted Fed speak. Even when they experimented with piping in periodic commercials, it's effectiveness only dropped one percent.

Economists profess to have a particular understanding of and body of knowledge. The more supercilious ones refer to themselves as experts. The article claims, "Monetary policy is not a technocratic process." If so then you might find this quote from Wikipedia interesting.

Technocracy is an organizational structure or system of governance where decision-makers are selected on the basis oftechnological knowledge. The concept of a technocracy remains mostly hypothetical. Technocrats, a term used frequently by journalists in the twenty-first century, can refer to individuals exercising governmental authority because of their knowledge.^[1] Technocrat has come to mean either "a member of a powerful technical elite" or "someone who advocates the supremacy of technical experts".^[2][3][4] Examples include scientists, engineers, and technologists who have special knowledge, expertise, or skills, and would compose the governing body, instead of people elected through political partiesand businesspeople.^[5] In a technocracy, decision makers would be selected based upon how knowledgeable and skillful they are in their field.

Econometric models, in fact all data today, is based on computers, highly technical ones run by people who claim a certain technological know how and understanding. If that sounds like a cadre of economists trying to connect the dots around a large table in the Eccles Building in Washington, you might be onto something.

Data itself is a technocratic process and who more the Fed lives by and sings the kudos of data more than economists. One could argue econometric modeling is the new addiction or slavery afoot. Then there is the now infamous Fed dot-plot; it's pretty simple, so much so one could suggest the author undermines his own argument about simple rules, something he accuses others of suggesting.

The author cites another example that is little more than a subtle subterfuge that the complexity of today is different from the past. The truth is the steamship, the automobile, the telephone, the television and the airplane all ushered in drastic changes of their time as did the advent of credit early in the last century.

Interstate highways destroyed old businesses and created new ones just as America's railroads did earlier. The Internet is an international information highway, nothing less, nothing more. That's the only real change here. People have more and in many cases better information to judge incompetence, partisanship and the like, not a venue entrenched MSM relishes.

The fear about tying the Fed's hands is a semantical scapegoat. These bureaucrats are about as dangerous as handing a loaded pistol to a four-year old. What they do effects millions of peoples' lives. The phony, triumphed up Fed data to claim there is no inflation that the Obama administration just used to screw the COLA crowd is a classic example.

Apparently, the only inflation around around today is over at the U.S. Senate where policy makers recently voted themselves a raise. We could go on, but you need to do your own homework, decide for yourselves because after all that's really what true liberty is about.

IT'S BACK

Well, so much for rock stars and other high profile sets.

The news is out: "Rock stars helped convince the international community to write off more than $100 billion of African government borrowings a decade ago, " according to the WSJ. Now like a noted Jack Nicholson's movie character, it's back.

The key phrase here is a decade ago. Accompanying the article is a picture of Kofi Annan, the former Secretary General of the UN and Irish Rock star Bono celebrating the debt relief. In the words of the Journal: "Now the big debts are back, and it's getting tougher for countries to pay them off."  Debt levels of GDP ranged from 86% to 73% and after forgiveness sank to 9% in the case of Mozambique only to rise again to the current 61%.

In the case of Ghana its debt level of GDP hit 82% in 2005 before the IMF relieved the country of half the debt burden. Quoting a British economist who specializes in African economics, referring to the debt relief program, the Journal notes, "In some cases like Ghana, the increase has been quite alarming. This certainly isn't the future the international institutions had in mind."

Some of these economies are commodity based and have swooned along with the commodity markets, after initially doing well in the previous commodity run-up.  Most central banks are so-called lenders of last resort. Raising funds in capital markets is tough, but that was the announced hope when the debt relief went into effect. In short, make them more independent.

Ghana exports cocoa, gold and oil. Like that old saying, it worked for a while. But the while is now over. A strong dollar cuts many ways. And emerging markets is just one of them, especially when coupled with slowing growth.

But there's another lesson here: debt relief at best has a checkered past. Research shows over and over what one gets for nothing is never appreciated. It also sets up the old moral hazard. If we get in trouble, they will bail us out again.

The African situation is further evidence of the dangers meddling bureaucrats at places like the World Bank and the IMF pose. And, oh yea, let's not leave out those well-meaning rock stars and members of  the high profile set.

OUR VIEW

If investors have a speck of contrariness in their beings, they should take a look at big oil stocks in particular and energy in general.

Sure investment firms and nearly everyone else are sounding the gong of cheap oil and increasing  prospects of even cheaper crude on the horizon. And there is also those alternative energy options market savants and climate change fascists keep talking about. No doubt sooner or later some of those will have some impact. But that is then and this is now.

And then there is reality. The world is quite unstable. And rightfully so. There is a deeply ingrain ugliness afoot and it's not just in the Middle East. Frustration abounds. Despite all the do-good phony political palaver and convoluted, ridiculous legislation, with its endless red tape, it's getting more so. The all-too tragic recent Paris event will strike louder, more strident calls for even bigger hurdles against continued open borders and mass immigration. And rightfully so.

Open borders has been an abject failure. Restoring border integrity is a move toward preserving national sovereignty. Something the elites deplore. Further, it's a move toward respecting and honoring cultural differences. Open borders along with globalization is one of those unintended consequences that seemed like a good idea at the time.

Globalization was never about free markets. It's about more centralization, less individual liberty wrapped in bountiful bureaucratic promises from a ruling elite. And that's the paradox. In the days of kings the masses were known as subjects. The popular con term today is citizens. It's designed to make you believe you have a voice. You do not.

Frustration grows. Central bankers around the globe who are more economic astrologers than people with real knowledge and know how. If you're placing you're lives in the clutches of these bureaucratic puppets, we hope you stock pile your benzodiazepine supplies before they are proscribed entirely. England's Mr. Carney and his recent diatribe about the dangers of global warming--towing to the party line of half-truths and twisted facts--is a case in point should you need one.

There is a growing distrust among even younger people about politicians and MSM in general; about the phony, agenda-driven fanaticism surrounding climate change with its scaremongering zealots who seek to silence any and all critics. Stick your head somewhere on these issues were the sun never shines and you'll most likely live to regret it.

Take a look at the issues dividing the two U.S. political parties in the upcoming circus called a free nation presidential election. Part of the outcome will rest on which party can truck in more illegal immigrants to vote not once or twice but three of four times, an electoral practice the good souls of Chicago are quite familiar with.

Take a look at both party's candidates. There's more bankruptcies there than one would find at a Chapter 11 hearing in a month. The fact that these candidates are even remotely what the best that America has to offer should frighten you more than a Freddy Kreuger movie. It tells you just how bankrupt the nation is. You have a do-nothing, fence-straddling, lame-duck leader who was handpicked to set an historical precedence. Well, that precedent has been met. Time to move on.

The globe is quite unsafe. Frustration continues to fester. Energy is still the name of the global game.

That's our view. We hope you know yours.