Barron\'s - 09.09.2019

(Kiana) #1

14 BARRON’S September 9, 2019



Dow Industrials:+394.

Dow Global Index:+7.

10-year treasury note:+0.


Argentina in Crisis Again

Argentina imposed capital controls on

businesses, after the peso lost a quar-

ter of its value. Revoking capital con-

trols had been a signature reform of

President Mauricio Macri’s govern-

ment when it came to power in 2015.

Macri has also frozen gasoline and

some food prices, with inflation hit-

ting 55% and foreign currency re-

serves draining away. Peronist candi-

date Alberto Fernández is widely

expected to defeat Macri in the runoff

for the presidency in late October.

Freeing Freddie and Fannie

The Trump administration released a

plan to privatize the two mortgage

giants Fannie Mae and Freddie Mac.

The two have been under government

conservatorship since being bailed out

during the financial crisis in 2008.

Both parties had promised to abolish

the pair, which back more than half of

all U.S. mortgages.


Litany of Woe

The shares of drugmaker Mallinckrodt approached

penny stock territory last week, after Bloomberg re-

ported that it had hired restructuring advisors. Analysts

say the company denies that it is close to filing for bank-

ruptcy. But there’s not much that could go wrong that

hasn’t gone wrong for Mallinckrodt stockholders.

Mallinckrodt (ticker: MNK) shares have dropped

99% in the past five years and the company’s market cap

has shrunk from $15 billion to $200 million, as the

Irish-domiciled, St. Louis-based outfit found its opera-

tions at the center of some of the pharmaceutical indus-

try’s biggest controversies. Steep price hikes? Check.

Questionable sales practices? Check. Opioids? Check.

While the pricing and marketing of Mallinckrodt’s

lead product, Acthar Gel, brought the business its first

unwelcome headlines, a crush of opioid lawsuits now

threatens a balance sheet already leveraged with net

debt that’s nearly five times Mallinckrodt’s annual cash

flow. Current cash just about equals debt that comes

due next year.

The company sells more than $3 billion a year worth

of drugs, but it’s fair to say that its most urgent busi-

ness is to get out from under a mountain of lawsuits.

At last count, Mallinckrodt says it was aware of 2,

opioid-related cases. The company says it can’t esti-

mate its possible losses in these suits, but on Friday it

agreed to settle two of them for $30 million. One other,

over Acthar Gel sold to Medicaid programs, could cost

it as much as $600 million, the drugmaker warns.

—Bill Alpert

$3.8 T

The current size of the Federal

Reserve’s balance sheet, down

from a peak of $4.5 trillion.


Decline in chip sales in the first

half according to IHS Markit, the

biggest drop since 2009.


Labor force participation rate in

September, up from 63% in



The price of gold rose 1% on

Tuesday, hitting a six-year high.

The reason: trade and recession


A Post-Labor Day Rally

Global manufacturing contracted,

while the Chinese yuan, the Argentine

peso, and the Brexit-battered British

pound fell, and on Tuesday the Dow

industrials lost 285 points. Stocks

then rallied on news of trade talks

resuming, and were undeterred by a

below-expectations jobs report. On the

week, the Dow industrials rose 1.49%

to 26,797.46; the S&P 500 gained

1.79% to 2978.71; and the Nasdaq

Composite advanced 1.76% to 8103.07.

Dorian Moves Slowly On

A slow-moving Hurricane Dorian,

which had been upgraded to Category

5, with wind speeds up to 185 miles

per hour, killed at least 20 people in

the Bahamas. The Abaco Islands and

Grand Bahama weredevastated when

the storm stalled. Dorian then fell to

Category 2 but grew larger, then lum-

bered toward the Florida coast, ham-

mering the coastlines of Georgia and

the Carolinas with wind, rain, and

storm surge.

See You in October

The U.S. and China hiked tariffs on

each other, deepening trade tensions

and bolstering the belief that Presi-

dent Trump wants to decouple the two

economic giants. Trump, in fact,

warned China not to delay resuming

negotiations because he’d double tar-

iffs “when he won [reelection].” After

a Thursday phone call between Chi-

nese and American trade representa-

tives, the two countries agreed to meet

in October.

Chaos in Commons

Boris Johnson returned after the Au-

gust recess to find he had lost his

one-member majority—the defecting

Tory walked across the floor while

the PM was speaking—and over 20

members of his Conservative Party

joined the opposition to vote to delay

Brexit on Oct. 31. Johnson had sus-

pended Parliament until mid-Octo-

ber, raising fears he would trigger a

hard exit. The PM, in turn, threat-

ened a snap election, and to ban de-

fectors from running as Tories. The

House blocked that attempt, and the

thrust and parry continues.

To get Numbers by Barron’s

daily, sign up wherever

you listen to podcasts or at



“I’d rather

be dead in


United Kingdom Prime Minister

Boris Johnson on his feelings

about a Brexit delay.

Joel Arbaje (Mallinckrodt); Jeremy Selwyn/Getty Images (Johnson)
Free download pdf