EpiPen scandal, incoming FedSpeak roil Thursday stocks

Pharmas, biotechs selectively hammered, oil attempts to stabilize, but most traders await the Oracle of Jackson Hole, Wyoming.

Waiting for Godot.
Markets are still "Waiting for Godot," just like Ian McKellen and Patrick Stewart are waiting for him here. (Image via Wikipedia entry on "Waiting for Godot")

WASHINGTON, August 25, 2016 –As Thursday’s stock markets head for the daily 4 p.m. (EDT) closing bell, markets have begun to tank again, albeit slowly and once again on very low volume. True, the EpiPen scandal is battering the biotech sector for a second day. But it seems everyone is hedging bets on which way Janet Yellen will go as she makes her latest oracular pronouncement Friday morning.

Media blowdries and other wealthy gasbaggers talking their collective book remain on pins and needles awaiting the incoming interest rate musings emerging from the Federal Reserve’s costly (for the taxpayers) but picturesque annual retreat out in breathtaking Jackson Hole, Wyoming.

You guessed it: Traders today are experiencing yet another example of the dozens of “Waiting for Godot” moments we’ve endured over the last two years from a Federal Reserve Bank that really, really, sincerely wants to start raising interest rates except that some internal or international excuse always pops up at the last moment making that move inadvisable. Again.

Current betting in most circles this time around is that Yellen will not announce a September rate hike, but will imply that December might be the right time to scotch rates up, say, 0.25 percent. Seriously maybe. Yellen isn’t as good at Fedspeak as was the legendary Alan Greenspan, whose opinings took armies of scholars and linguists at least a week or two to unpack. But she can still use Washingtonspeak well enough to earn a B+ in the art and science of verbal opacity.

Rather than fill the dead air here like CNBC’s pundits do on a slow day like this one, let’s head for a few brief observations via our ongoing…

Trading diary

As per the Maven’s remarks above, nothing much is happening to the portfolios. Except that both yesterday and thus far today, traders have been taking shares of his beloved Allergan Preferred A (AGN/PRA—your symbol may vary) out back and shooting them. Yet again, as when the Pfizer (PFE) – Allergan (AGN) love match was vetoed by the Obama Administration (likely due to below-quote campaign contributions), traders and short sellers are ripping apart select targets in big pharma and biotech.

Allergan common (AGN) is one of these unfortunate stocks, currently off nearly 4 percent this afternoon even after Wednesday’s equally sickening pasting. But, just as before, for some bizarre reason, the company’s preferred shares are getting pancaked, too, even though the dividend is highly secure and even though the entire preferred issue—already heavily discounted by the market—will be redeemed at par ($1,000 per share) in March of 2018, less than two years from now.

That doesn’t seem to matter, however, leading us to believe the panic selling in the preferred is just a few HFT supercomputers selling or shorting anything with AGN in it on the EpiPen price-gouging scandal, which, in fact, is a much deeper story than the MSM is reporting. (We’ll be writing a separate column on that one.)

As of 3 p.m. EDT, Allergan common is currently down nearly $10 per share, having just traded at $233 per share. AGN/PRA, meantime, is off a whopping $26.99 to stand at $832 and sinking, after vaulting briefly over the $900 mark roughly 10 trading days ago. This kind of move is laughable, longer term, although it’s making our largest portfolio look pretty sick today, even after Wednesday’s nearly-as-sickening decline.

But we’re in this one for the longer term hold as well as its now equivalent 6.21 percent dividend ($13.75 per share quarterly), so we’ll just grit our teeth and bear it, having bought some of our shares as low as $760 during AGN/PRA’s previous post-Pfizer bashing.

Currently at about $833 a share, this one ain’t cheap. We now have a lot of it for an average account, so we’re done buying in our largest account. But we might pick up a random few shares for a couple of our tiny IRA accounts at this price or lower. Unless the Boyz know something the Maven doesn’t, this one is one of the most conservative yet high-yielding investments one can make right now, despite its silly volatility.

Do the math. Each share theoretically bought at $833 will be redeemed in March of 2018 for $1,000. That’s a long-term capital gain of $167 per share. Plus, over the next roughly one and one-half years, owners of AGN/PRA shares will be collecting a quarterly dividend of $13.75 per share. What’s not to love?

Yeah, Allergan could go out of business, sure. But the odds of that happening are far less than the odds of this year’s Green Party candidate (whatever her name is) winning the 2016 Presidential sweepstakes. So we’re going with the odds and will continue to hold this stock during the current idiotic downdraft.

As for our readers: As always, travel at your own risk. We’re talking in this column about what we’ve done or may be about to do This market is not for the faint of heart.

And now… we await the Fed. Stay tuned.

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