3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  38.91  and Brent: 41.15

3f Gold DOWN  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS  to 0.212%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.68%/: 

3j Greek 10 year bond yield FALL to  : 8.61%   (YIELD CURVE NOW INVERTED)

3k Gold at $1247.50/silver $15.88 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN 1/100 in  roubles/dollar) 68.25

3m oil into the 38 dollar handle for WTI and 41 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9687 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0923 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .212%

/German 8 year rate negative%!!!

3s The Greece ELA NOW at  71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.88% early this morning. Thirty year rate  at 2.67% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

The sarcastic highlight of the overnight session was the Chinese stock market, where just one month after injecting a record amount of new loans into the financial system, the PBOC lamented the danger posed by China’s tremendous debt load: “Lending as a share of GDP, especially corporate lending as a share of GDP, is too high” People’s Bank of China Governor Zhou Xiaochuan told China Development Forum yesterday.

At the same time he warned about dangers from a stock market bubble, and perhaps just to assure the bubble gets even bigger, at the same time China eased on margin debt limits, in the process sending Chinese stocks soaring higher by 2.2%, and pushing the Shanghai Composite over 3000 for the first time in months as China now appears set to attempt another housing bubble “soft landing” while at the same time restarting its housing bubble.

Aside from China, another key market followed by traders was crude which in early trading fell for a second day after the first increase in U.S. drilling rigs this year, sparking losses in currencies of commodity-producing nations and shares of miners and energy companies. West Texas Intermediate oil fell further below the three-month high reached last week, pulling down the Bloomberg Commodity Index. The South African rand and Norwegian krone were among the biggest casualties in currencies as the dollar extended its rebound into a second day after slumping to a five-month low last week. The Stoxx Europe 600 Index erased earlier losses.

“A lot of the movement in oil recently has been dollar-driven,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “The oil market needs a stronger economic performance in order to spur demand and absorb all that oil supply.” WTI futures fell 0.8% to $39.14 as of this moment, after sliding 1.9 percent on Friday to trim their fifth straight weekly advance to 2.4 percent. The Stoxx Europe 600 Index rose 0.3 percent after earlier falling as much as 0.9 percent.

Elsewhere, on the back of China’s margin debt-driven euphoria, European stocks and US equity futures have continued to levitate. “Investors are catching their breath after such big gains,” Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, told Bloomberg. “Stocks will probably move sideways in the next few days as the market gets more news from economic figures — from job markets, from companies — because the data we have been getting so far hasn’t been that great.”

As reported before, the S&P 500 has staged one of the biggest turnarounds in history, rebounding 12 percent from a Feb. 11 low amid rising crude prices and a weaker dollar. Energy and commodity producers have led recent gains, rising to three-month highs last week after the dollar tumbled.

Policy makers’ tempered outlook for rate increases has knocked down traders’ expectations as reflected in futures prices. Odds for a June boost are at 39 percent, compared with about 54 percent before the Fed’s statement on Wednesday. A report today on existing home sales, and releases later this week on jobless claims and durable-goods orders, may provide further indications about the health of the U.S. economy.

Among stocks active in premarket trading, Valspar Corp. surged 31 percent after Sherwin-Williams Co. agreed to buy the company for about $9.3 billion to become the world’s biggest coatings maker. Sherwin-Williams climbed 2.2 percent.

Market Wrap

• S&P 500 futures up 0.1% to 2039
• Stoxx 600 up less than 0.1% to 342
• FTSE 100 up less than 0.1% to 6194
• DAX up 0.6% to 10014
• German 10Yr yield down 2bps to 0.19%
• Italian 10Yr yield down less than 1bp to 1.25%
• Spanish 10Yr yield down less than 1bp to 1.42%
• MSCI Asia Pacific up less than 0.1% to 129
• Hang Seng up less than 0.1% to 20684
• Shanghai Composite up 2.2% to 3019
• US 10-yr yield down less than 1bp to 1.87%
• Dollar Index up 0.13% to 95.21
• WTI Crude futures down 0.8% to $39.14
• Brent Futures down 0.9% to $40.82
• Gold spot down 0.8% to $1,246
• Silver spot down 0.3% to $15.76

Top Global News

• Monsanto Said to Seek Crop Chemicals Deals With BASF, Bayer: Monsanto approached its preferred partner BASF about buying its crop-science business, according to people familiar.
• Sherwin-Williams to Buy Valspar in $9.3b Paint Deal: Sherwin-Williams to pay $113/shr; price is ~35% higher than Valspar’s closing price on Fri.
• Fed’s Lacker Confident Inflation Poised to Rebound to 2% Target: Inflation will rise back to U.S. central bank’s 2% target once energy prices stabilize, dollar stops advancing: Federal Reserve Bank of Richmond President Jeffrey Lacker.
• Affymetrix Rejects $1.5 Billion Origin Bid, Favors Thermo: Co. said its board rejected a $1.5b acquisition bid from Origin Technologies Corp.; instead continues to recommend planned Thermo Fisher Scientific deal.
• Treasuries Probe Narrowing, Still Includes Goldman: NYPost: Investigation into whether financial firms colluded to rig Treasury markets has narrowed to focus on handful of companies, including Goldman.
• FlyDubai Plane Crashes at Russian Airport, Killing 62 People: Jet operated by FlyDubai crashed in Russian city of Rostov-on-Don on Saturday morning, killing all 62 people on board.
• ‘Zootopia’ Topples ‘Kung Fu Panda’ Record at China’s Box Office: Walt Disney’s “Zootopia” overtook “Kung Fu Panda 3” as the highest-grossing cartoon in China after taking in >1.1 billion yuan since it debuted March 4.
• Donald Trump’s Campaign to Add Rally Security Amid Violence: Campaign to add security to larger events so campaign staffers don’t assist in removing protesters.

Looking at regional markets, we start in Asia where equities
kick-started the week mixed, despite last Friday’s positive US close as
holiday-thin trade and weakness in energy dampened Asia trade. ASX 200
(-0.3%) was led lower by the oil names after WTI crude futures extended
its pull-back from YTD highs to break below the USD 39/bbl level.
Elsewhere, Chinese markets outperformed with the Shanghai Comp (+2.2%)
reclaiming the 3000 level and on course for its 7th consecutive gain as
brokerages were underpinned by reports China is relaxed restrictions on
margin lending, while the PBoC also upped their open-market operations
with a CNY 130bIn liquidity injection into the interbank market. As a
reminder, Japanese markets remained closed today due to Vernal Equinox
Day. China is easing curbs on brokerages’ margin trading, with the China
Securities Finance Corp to resume offering loans to securities firms
and will also reduce interest rates on debt to as low as 3%.

Top Asian News

• China Has a $590 Billion Receivables Problem as Bills Go Unpaid: It takes 83 days for typical Chinese firm to collect cash
• China Revives Support for Margin Trading That Fueled Boom- Bust: State finance agency to resume offering shorter-dated loans
• BlackRock Not Buying Aussie Rally: It’s Falling to 65 This Year: Call contrasts with bullish bets by hedge funds, speculators
• Philippines to Hold Banks ‘Accountable’ for Role in Cyber Heist: Theft of $81 Million of Bangladeshi reserves is under inquiry
• The High Stakes of India’s Dispute With the U.S. Over Visa Fees: U.S. doubled the cost of H-1B visas for high-skilled workers

European bourses head into the North American crossover in positive territory, with the DAX near session highs by mid-morning having tripped stops at the 10,000 level. Despite equities trading higher, energy names underperform once again, in tandem with the pullback from YTD highs in WTI and Brent. Additionally, outperformance has been observed in the FTSE MIB (+1.1%) amid gains in tech giant Telecom Italia (+2.1%) who announced that their CEO is to step down. Bunds have been extending on gains to move ever so closely to the 163.00 level following relatively dovish commentary from ECB’s Liikanen and Villeroy, alongside this the yield curve has seen some notable Barclays estimate pan-Euro aggregate month-end extensions of 0.07yrs and sterling aggregate extensions of 0.02yrs. Analysts at Citi suggest that month end extensions will be broadly supportive for EGB’s and most supportive for Spain. (BBG)

European Top News

• Casino’s Debt Cut to Junk at S&P Amid Muddy Waters Attack: Long-term debt rating was lowered by one step to BB+, highest non-investment grade: Standard & Poor’s.
• Telecom Italia CEO Discussing Exit Terms After Vivendi Clash: Marco Patuano hasn’t yet submitted his resignation and talks are under way for a consensual exit.
• U.K. House Prices Rise in March as Regions Outpace London: Average asking prices increased 7.6% compared vs year earlier: Rightmove.
• U.K. Tory Turmoil Worsens as Ex-Minister Questions Deficit Focus: Duncan Smith said Sunday he was no longer able to support cuts to welfare benefits while taxes for higher earners, companies are being lowered.

In FX, Early Monday trade has seen some mixed flow on the USD pairs, where the negative post FOMC theme seems to have faded slightly. GBP has been a notable sell after the resignation of the Welfare and Pensions Secretary (IDS), with suggestions that Brexit disagreement belie his actions. Cable has been sold through the Friday lows at 1.4400, but has found some support at these levels to reclaim the 1.4400 handle. AUD/USD has also come back from a sub .7600 dip, in line with a modest lift in the risk mood, which has also underpinned USD/JPY a little. Friday’s NY move to 111.75 seems to have set the upside target near term, but overall trade tight this morning. USD/CAD threatened 1.3300 early on, with WTI through $39.0, but has slipped again since. EUR/USD caught in the crossfire this morning, but also looks on the back foot.

In commodities, WTI and Brent May’16 futures are paring some of its losses made during the Asian session, both trading above the crucial USD 40/bbl handle. While gold is trading lower on the day by 0.8%, silver is not falling to the same extent, meaning it is managing to hold some of last week’s gains. Base metals are still performing well after the Chinese housing market continues to accelerate with Iron ore May’16 up 9.75%.

On the US calendar today \we have the Chicago Fed’s National Activity index (CFNAI) numbers for February (0.25 expected; 0.28 prior) due as well as the latest existing home sales data (5.31mn expected).

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities and Bunds both kicked off the week on the front foot following relatively dovish commentary from ECB’s Liikanen and Villeroy
• Highlights today include US existing home sales alongside speeches from Fed’s Lacker, Bullard and Lockhart
• Treasuries steady in overnight trading, global equity markets mostly higher with Japan closed for holiday, oil drops; U.S. fixed income markets closed Friday, early close Thursday.
• Crude oil fell for a second day after the first increase in U.S. drilling rigs this year, sparking losses in currencies of commodity-producing nations and shares of miners and energy companies
• The European Central Bank began charging banks interest on deposits in June 2014 to encourage them to lend more to companies and consumers. It hasn’t worked
• Five EU states — the U.K., France, Spain, Greece, and Croatia – will exceed the union’s deficit limit of 3% of GDP while Finland, Poland, and Romania are seen posting deficits at the threshold
• The world’s biggest bond dealers are getting saddled with Treasuries they can’t seem to easily get rid of, likely the result of investors dumping the debt on the firms, adding to evidence of cracks in the $13.3 trillion market
• The yuan traded offshore fell for a second day after China’s central bank weakened the daily reference rate by the most since January as a gain in the dollar drove declines in Asian currencies
• Not since 1999 have China’s companies had so much trouble getting customers to actually pay for what they’ve bought. Accounts receivable at the nation’s public firms have swelled by 23% over the past two years to about $590 billion
• Turkey blamed Islamic State for the fourth deadly bombing in its big cities this year, as militants expand their strikes on the country’s political and commercial core
• $13b IG corporates priced Friday; weekly volume $43.385b, March $129.805b, YTD $424.055b; $900m HY priced Friday, MTD 14 deals for $8.215b, YTD 40 deals for $23.07b
• Sovereign 10Y bond yields mostly steady; European, Asian equity markets mixed; U.S. equity- index futures rise. WTI crude oil, gold fall, copper rallies

DB’s Jim Reid concludes the overnight wrap

The combination of dovish central banks and rising oil prices provided a further spark to risk assets over the past week. US equities finally edged into positive territory for the year as the Fed trimmed its rate hike plans, with both the Dow (+0.69%; YTD +1.02%) and the S&P500 (+0.44%; YTD +0.28%) ending the week in the green for first time in 2016. EM stocks also posted further gains as the MSCI EM Index rose +1.21% on Friday (+3.23% over the course of the week). This was actually the third consecutive weekly gain for an index that has now risen more than 20% since its low for the year back in January.

Looking over at our screens this morning, most Asian equities seem to be continuing their winning streak over the weekend. Chinese equities are leading the way so far in Asia with the CSI300 and the Shanghai Comp up +2.20% and +1.79% respectively, extending their gains from Friday (CSI +1.53%; Shanghai Comp +1.73%) while also posting positive returns every day of last week. Much of today morning’s market rally, while building on momentum from last week, is also driven by the fact that policy makers have loosened controls on margin trading. China Securities Finance Corp (CSF) said late on Friday that it would resume loans on certain durations of margin lending while also cutting borrowing costs. One might remember rising margin debt as powering the surge in the Chinese stock market last year, while later exacerbating the rout as investors deleveraged. It will certainly be interesting how market microstructure evolves in light of these changes; nevertheless, we can already see Chinese brokerages rallying today morning so the market reaction certainly seems positive. In other news out of China, we also had PBoC governor Zhou Xiaochuan pointing out risks posed by excessive corporate leverage, stating that corporate lending as a ratio to GDP had become too high (China’s current debt to GDP ratio is close to 160%).

Taking a look over at other equity markets this morning having both ended last week on a positive tone we see that the Hang Seng (+0.25%) is just about in positive territory as we go to print but the Kospi is marginally down on the day.

Not all equity markets were positive last week however: the Nikkei (-1.25%) and closed for a public holiday today was down for a second consecutive week while European equities were also softer. Despite closing up on Friday the Stoxx 600 was down (-0.15%) marginally on the week while Italian stocks (-1.98%) saw a more meaningful drop on the week. Some of the weakness in these equity markets can be attributed to the strengthening of the Yen and the Euro respectively over the course of the week. On the flipside, while the dollar index gained marginally on Friday (+0.34%), it still hangs around its lowest levels in 2016 after ending the week down -1.13%.

On the subject of Europe, in their latest Focus Europe our European economists point out that the ECB seems to have managed to reverse the deterioration in market-based financial conditions back to mid-January levels (though its impact on bank based financial conditions remains to be seen, and the bank lending survey on 19 April should be closely watched). Economic data also appears to be improving as DB’s proprietary SIREN-momentum indicator has risen to a 59-month high. So fundamentals do demonstrate improvement but other factors such as continued volatility of financial conditions, a strengthening Euro and higher oil prices may prove to be obstacles for European equity markets.

Switching our lens over to credit markets, we saw CDX IG and HY spreads end the week with a softer tone widening by 1bps and 3bps respectively on Friday as oil prices finally ran out of steam. While IG and HY spreads ended the week around 2bps wider and 5bps tighter respectively, these moves mask the risk-on impact of a dovish Fed as spreads tightened by nearly 4bps and 28bps respectively post the FOMC statement. In Europe iTraxx Main and Crossover were both marginally tighter on Friday but were actually wider on the week as a whole. However, tracking the roller coaster ride of US credit, current levels follow spread tightening of 7bps and 19bps respectively from intra-week wides.

Staying on the topic of European credit, last week certainly saw a further improvement in issuance volumes in the EUR non-financial IG market. Based on our data (includes fixed rate deals only) there were just short of €20bn of new bonds priced over the past week, which is a record weekly total. It’s worth pointing out though that more than half of the total was contributed by last Wednesday’s debt sale from AB InBev (€13.25bn total, €12bn fixed rate).

Heading to the other end of the risk spectrum, Gold is down again this morning having dipped further on Friday (-0.85%) to cap off its second week of negative performance (-0.40%). Elsewhere in sovereign bond markets yields dropped across the board with German, US and Japanese 10Y yields falling by -1.8bps (-5.9bps), -2.3bps (-11.1bps) and -4.9bps (-8.8bps) respectively on Friday (the past week).

There was limited data to conclude last week. February PPI numbers out of Germany disappointed at -0.5% mom (vs. -0.1% expected; -0.7% prior) while wage growth data out of France (+0.1% QoQ) came in line with expectations. In the US, the University of Michigan Consumer Sentiment Index for March came in well below expectations (90.0 vs. 92.2 expected; 91.7 prior) while also falling to a five month low. The current economic conditions index fell to 105.6 (vs. 106.8 expected; 106.8 prior) while the expectations index fell to 80.0 (vs. 82.5 expected; 81.9 prior). The softening was largely due to concerns about economic growth prospects as well as expectations that gas prices would steadily increase in the year ahead. On the back of the latter, inflation expectations over the short and long term rose to 2.7% (vs. 2.5% previous).

Turning over to this week’s calendar. It’s a quiet start to the week in Europe with no real data of note due today. In the US we have the Chicago Fed’s National Activity index (CFNAI) numbers for February (0.25 expected; 0.28 prior) due as well as the latest existing home sales data (5.31mn expected). Europe kicks into gear on tomorrow as we see the preliminary March PMI numbers for the Eurozone (manufacturing: 51.4 expected; services: 53.3 expected) as well as the regional prints for France and Germany, with most readings expected to hold roughly steady at their prior values. We also see the IFO survey indicator readings for March in Germany and the CPI and PPI readings for February in the UK, with expectations that the monthly numbers will climb out of deflationary territory. We also get a closer look at the state of US manufacturing with the preliminary March manufacturing PMI reading (51.9 expected) as well as the Richmond Fed Manufacturing index print (0.0 expected), with expectations of an improvement in both indicators. Wednesday is largely quiet across the board with the only data of note being the March consumer confidence reading for the Eurozone (-8.3 expected) and the February new home sales data for the US. Thursday will see the retail sales data for Italy (January) and the UK (February) as the primary data out of Europe. The ECB is also expected to publish its Economic Bulletin. It’s a bit busier over in the US with the preliminary services and composite PMI numbers for March due. We also get durable goods orders data for February as well as the usual weekly jobless claims numbers. We close out the week on Friday with consumer confidence and Q4 GDP numbers for France as the only major data out of Europe. Over in the US, we get the final revisions to real GDP growth for Q4.

In terms of central bank speak, we should hear from ECB Board members Coeure and Constancio as well as Fed Presidents Lacker and Lockhart on Monday. On Tuesday, we should hear from the ECB’s Nouy, who will also speak on Wednesday along with the Lautenschlager.

report on Japan

“Don’t Take The Public For Fools!”: China Hides Millions Of Layoffs, Jails Miners Protesting Unpaid Wages

(HARVEY:  SOE:  STATE OWNED ENTERPRISE)

end

Closing currency crosses for MONDAY night/USA dollar index/USA 10 yr bond: 2:30 pm

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

This afternoon, the Euro was DOWN by 20 basis points to trade at 1.1247 AS THE MARKETS CONTINUE TO REACT TO THE FAILED USA INTEREST RATE POLICY.

The Yen FELL to 111.91 for a LOSS of 40 basis pints as NIRP is still a big failure for the Japanese central bank/also all our yen carry traders are being fried.

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for OIl, 5 pm/and 10 year USA interest rate:

end

Valeant plunged 4.5% pre market with new pending.  They need a waiver for non reporting on its  10 K breach.  The stock is heading for the 25 handle:

Valeant Plunges To New 6-Year Lows, Halted News Pending

The news is out.. and it’s disappointing..

• Initiates Search for New CEO; J. Michael Pearson to Remain as CEO Until Successor is Named
• William A. Ackman Joins Board of Directors; Katharine B. Stevenson Steps Down from Boar
• Ad Hoc Committee Review of Accounting and Financial Reporting Matters Nearing Completion
• Valeant Plans Restatement Based on Previously Announced Misstatements
• Valeant Explains Circumstances that Resulted in Delay in the Filing of 10-K
• *VALEANT:REQUESTED SCHILLER TENDER RESIGNATION AS A DIRECTOR

• *VALEANT: MISTATEMENTS WOULD REDUCE ’14 EPS BY 9C
• *VALEANT FOUND MISTATEMENTS THAT CUT REPORTED ’14 REV BY $58M

As we detailed earlier:

In the pre-open, Valeant shares were trading down 4.5% before being halted – news pending. We assume this will not be great news… maybe related to the waiver expected to come from lendersor is Anbang bottom-fishing in Biotechs?

A $25 handle… from August 2015’s $263 highs…

As Bloomberg expains,

the market expects Valeant is likely to get a waiver from lenders for missing the deadline for filing its 2015 10-K, breaching the reporting covenant in its bond indentures, but it may come at a steep cost.

The company is focused on paying down debt and intends to use $1.7 billion of its $2.2 billion in free cash for financing to move toward a 5x leverage ratio in 2016. An expensive waiver would cut into the $100 million in extra cash available after debt repayment.

And then the news hit:

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) today announced that it has initiated a search for a new chief executive officer, appointed William A. Ackman to its board of directors, and provided an update on certain accounting and financial reporting matters.

Back in October, we tried to “tie the Valeant roll-up together: Presenting The Goldman “Missing Link” in which we showed that Howard Schiller, Valeant’s CFO from December 2011 to June 2015, previously ran Goldman Sachs’ health-care practice until 2009, when he became the chief operating officer of Goldman’s investment bank. The next year, the bank advised Valeant on its breakout purchase of Biovail Corp.

As noted in October, after Schiller arrived at Valeant, in late 2011, the drug company orchestrated some of its most controversial deals. In the process, Valeant enriched its shareholders (on what now appears to have been outright fraud), as its market value soared from $14 billion to $70 billion during Schiller’s tenure as CFO, as one Wall Street analyst after another placed “buy” on its stock.

And, as Bloomberg wrote then, “Goldman Sachs and other banks brought in investors, making many millions in fees in the process.”

In short (and not so short – see below) it was an epic conflict of interest, one which enriched Goldman with hundreds of milliions in advisory fees.

As such we find it hardly surprising that as part of its stunning announcement earlier today, in which Valeant announced that CEO Pearson is out and Bill Ackman is joining the Board (in the process accepting liability if further fraud is discovered), the company – in looking for easy scapegoats – also threw its former CFO under the bus.

This is what it said:

Assessment of Disclosure Controls and Procedures and Internal Controls Over Financial Reporting

As a result of the restatement, management is continuing to assess the company’s disclosure controls and procedures and internal control over financial reporting. Management, in consultation with the committee, has concluded that one or more material weaknesses exist in the company’s internal control over financial reporting and that, as a result, internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2014 and disclosure controls and procedures were not effective as of March 31, 2015 and the subsequent interim periods in 2015 and that internal control over financial reporting and disclosure controls and procedures will not be effective at December 31, 2015.

The improper conduct of the company’s former Chief Financial Officer and former Corporate Controller, which resulted in the provision of incorrect information to the Committee and the company’s auditors, contributed to the misstatement of results. In addition, as part of this assessment of internal control over financial reporting,the company has determined that the tone at the top of the organization and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company’s improper revenue recognition.   

In connection with the Ad Hoc Committee’s work to date, certain remediation actions have been recommended and are being implemented by the company, including placing the company’s former Corporate Controller on administrative leave. The board and the talent and compensation committee, based on recommendations of the Ad Hoc Committee, have determined that the deficient control environment, among other things, would impact executive compensation decisions with respect to 2015 compensation for certain members of senior management. The company is in the process of implementing additional remedial measures.

And then this:

Valeant today announced that William A. Ackman, CEO of Pershing Square Capital Management, L.P., will join its board of directors, effective immediately. Mr. Ackman, whose firm has a 9.0% stake in Valeant, will join Pershing Square’s Vice Chairman, Stephen Fraidin, on the board.  As the maximum size of Valeant’s board currently is fixed at 14 directors, Katharine B. Stevenson voluntarily resigned from the Board to create a vacancy to permit Mr. Ackman’s appointment. The Board requested that former chief financial officer Howard Schiller tender his resignation as a director, but Mr. Schiller has not done so.

And so the amicable relationship between Valeant and Goldman is over, which probably means that Valeant will not hire Goldman’s restructuring team to advise it on its imminent Chapter 11 bankruptcy case.

* * *

For those who missed it last time, here again is “Tying The Valeant Roll-Up Together: Presenting The Goldman “Missing Link””

end

As we wrote first thing this morning, while the fate of Valeant CEO Pearson was largely known (he is now out) and that Ackman will go down with the Valeant ship was largely as expected, what was a complete shock in the copmany’s press release was that the decision to throw its former CFO, Howard Schiller who formerly ran Goldman’s healthcare group, under the bus and accuse him of cooking the company’s books.

Moments ago Schiller responded, with an even more surprising announcement, saying he did nothing wrong (as expected) and that since he did not engage in any “improper conduct” he refuses to resign from the Valeant Board, which means upcoming VRX board meeting which include both Ackman and the former Goldmanite will be particularly unpleasant.

This is what he said:

Valeant has 22,000 incredible employees and a collection of very strong franchises.  While the challenges facing the Company are significant, I am confident that Valeant will prevail and emerge again as a very strong company.

As former CFO of the Company, I want to be very clear that the 8-K filed by the Company today, and the Company press release issued today, contain an incorrect statement.  Contrary to the statement in the 8-K and press release, at no time did I engage in any improper conduct that relates to any restatement of revenue the Company is considering.  In addition, at no time did I ever provide any incorrect information to the Audit and Risk Committee or the Company’s outside auditors regarding this accounting issue.

As a result of the fact that I did not engage in any improper conduct regarding this proposed restatement, I have respectfully declined the request from the Company’s Board to resign from the Board. 

The Philidor sales transactions in Q4 2014, and the subsequent accounting treatment, was the result of a careful and reasoned accounting decision made by the Company’s Corporate Controller based on what she considered to be complete and accurate facts, and I was told by the Corporate Controller that the outside auditors reviewed the transactions in question.  The accounting decision was not my decision, but I was advised of the decision and the rationale behind the decision by the Corporate Controller, and I agreed with the decision.  The now-former Corporate Controller was incredibly experienced, she was trusted and respected by the Audit and Risk Committee, and she consistently received among the highest employee rankings inside the Company and strong support from the Company’s outside auditors. 

My hope at this point is to see the Company recover from its challenges and for its employees and shareholders to once again prosper.

Much awkwardness and revealing of dirty laundry  to follows.

After January’s hopeful spike to 6 month highs, Chicago Fed’s National Activity Index plunged back into contraction (at -0.29) near 2 year lows.

A shockingly large 58 of the 85 individual indicators within the index made negative contributions to the overall index which printed notably below the lowest economist’s expectations.