The wealth effect orchestrated by Ben Bernanke and the Obama administration has been nothing but pure economic folly. The government’s decision to pump up the stock market and real estate market has helped the investor class, yet has left millions of Americans to fend for themselves. The monied class also happens to be the group that funds political campaigns and the group politicians want to work for when they leave office.
When the government promotes stocks it also attracts investors who seek to enjoy those benefits by playing in the equity markets and/or game the system. Companies like Valeant, Mallinckrodt, and Allergan have bought up healthcare companies, cut research and development (“R&D”) and raised drug prices to give the illusion of earnings growth. As long as the acquisitions kept coming these companies showed out-sized growth. The fear was that if something ever stopped the acquisition machine then they could have a problem.
That day of reckoning appears upon us. The public has been soaked with rising drug prices from price-gougers like Valeant, Mallinckrodt and Turing Pharmaceuticals (headed by “pharma bro Marking Shkreli). The government pushed back against rising prices in 2015 and for certain of the “hedge fund hotels,” their price increases have slowed or been reduced altogether. That’s problematic as these firms have tens of billions in debt that need to be repaid amid declining prices and increasing generic competition.
Valeant has over $28 billion in debt at junk levels. It has no assets to speak of other than $35 billion in goodwill representing premiums it paid for deals at the height of the market. The Shock Exchange estimates the company is insolvent by at least $8 billion, yet for some reason is allowed to continue to operate. He layed out his analysis at Trump And The Global Economy town hall on June 27, 2017 in Brooklyn. Shock Exchange explained how the hucksters – Obama, Janet Yellen, Bernanke, Mario Draghi, Angela Merkel, David Cameron – had rigged the market in the favor of their cronies and how it benefit firms like Valeant. The implications for financial markets and healthcare costs are daunting.