Market Morning: Stocks Lurch, Drug Price Hikes, Trump Caves, China Threatens

2019 Starts Off With a Lurch

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Futures are down. Futures are way down. The Nasdaq (NASDAQ:QQQ) leads the pack down by 2.6%, followed by the S&P 500 (NYSEARCA:SPY) down by 2%, followed by the Dow 30 at 1.98%. Of course by the time you read this those number will be completely different, which will attest to the volatility that is likely to be a key feature of 2019 as the pyramidal Ponzi-like debt superstructure that has supported the global economy for 10 years begins to quake. Gold (NYSEARCA:GLD) is up, approaching $1,290 an ounce, oil (NYSEARCA:USO) is down again below $45 but has not broken its lows at $42.36, and Asia is down across the board, led by the Hang Seng in Hong Kong down 2.75%. Europe is also down across the board, led by France (NYSEARCA:EWQ), down 2.4%, as they are still trying to figure out how to calm down the yellow jackets upset about taxes. Not the killer bees, but the people. Cryptocurrencies though are having a good start, with Bitcoin (BTC-USD) up 2%, the complex led by Ethereum, up nearly 6%.

Here Come the Drug Price Hikes

It looks like drugs are going to get even more expensive this year, to the shock of everybody except most people. Allergan (NYSE:AGN) leads with 10% increases on 25 products. Price increases are outpacing inflation, at least official “hedonically adjusted” inflation measured by the government. About 40 pharmaceutical firms have raised prices on hundreds of medicines by an average of 6.3%, over 2x the level of CPI inflation. To its sort of credit, Allergan had promised in 2016 to limit its price increases each year to being under 10%. Comforting. Though it’s hardly their fault. A decade of massive money printing will do that sort of thing.

Trump Caves In On Wall

Surprise. With the government “partially shut down” for 10 unbearable days causing insomnia all over the nation among other things, President Trump is reportedly willing to end the shutdown with the $5 billion he insisted for the his signature Mexican border wall. For his part, Trump has not yet tweeted about whether this development is “fake news” yet.  In exchange for not getting the $5B for the wall, Trump will get $265B for shuttered government agencies that will be fired up again after the partial shutdown, expanding government once again. Funding will last until September 30th, which will probably be followed by another shutdown over something or other. The deal will probably pass the House, but not the Senate, where majority leader Mitch McConnell says that he will not pass anything that the President will not sign, which brings into question the entire assertion that Trump is open to a deal. Back to square one. Or zero. Depending on one’s point of view.

China Threatens Taiwan

In another bid to damage its own economy by spending resources on subduing an island, China’s now permanent leader until he dies, Xi Jinping, has indicated that he will use force to subdue Taiwan rather than let his citizens use those resources to expand the Chinese economy while it is under attack by Donald Trump in the ongoing trade war. At least Xi was open to conquering Taiwan peacefully, saying he is open to “peaceful reunification” which basically means he’s open to Taiwan paying taxes to Beijing without first resorting to war, which is encouraging. Taiwan’s President, Tsai Ing-Wen, rejected this proposition, and would rather not be under the control of China’s communist party. Meanwhile, China’s stock market (NYSEARCA:FXI) is doing really, really badly.

Business Insider Gets Coveted List of Bank of America 2019 Stock Picks

Business Insider somehow obtained a copy of Bank of America’s (NYSE:BAC) 11 stock picks for 2019. They supposedly have great fundamentals, though arguments could be made to the contrary. For a company that supposedly is awesome at picking stocks, the stock of the company itself isn’t doing well, having been static for over 20 years now, still stuck at 90’s levels. In any case, its top picks are Disney (NYSE:DIS), General Motors (NYSE:GM) , Molson Coors Brewing (NYSE:TAP), Exxon Mobil (NYSE:XOM), Morgan Stanley (NYSE:MS), CVS (NYSE:CVS), Raytheon (NYSE:RTN), Microsoft (NASDAQ:MSFT), and others you can find here.

Our commentary: Disney will follow the broader market, GM is reliant on ultra-low interest rates for sales, Raytheon depends on the federal defense budget, Molson Coors will also follow the broader market, Exxon Mobil is probably a good pick, Morgan Stanley will crash in a financial crisis, CVS may be alright relatively, and Microsoft will follow the Nasdaq.

 

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