Business

As if the historic collapse of Valeant and his hedge fund crashing by 26% YTD was not enough, moments ago S&P added insult to injury when it warned it may downgrade Pershing Square, because "Pershing Square Holdings' net asset value has dropped substantially, largely because of a precipitous decline in the market value of Valeant  Pharmaceuticals"  and "as a result, Pershing Square's debt-to-total assets ratio increased to  above 20% as of March 15, 2016, from 15% at the end of October 2015.

Yesterday morning, after reading the latest Gartman letter, we reported that in what may have been the worst possible news for vol longs, Gartman said he had become a "buyer of the VIX." As a reminder this is what he said:

According to sources, Reuters reports that The Bank of Japan is asking market-participants about the cause of this morning's sudden 150 pip vertical rip in USDJPY. Hhmmm, we wonder? Given BoJ's "coincident" intervention in mid-Feb (marking the market bottom), we wonder who this mysterious knife-catcher is?

While everyone knows about failed rollup Valeant's equity troubles, which have sent its stock crashing to 5 year lows after the biggest one day drop in history earlier this week, a just as interesting development is taking place with its debt, which incidentally at $31 billion (and accumulated during the company's relentless acquisition spree over the past few years) is nearly three times greater than the company's equity capitalization, and is the locus of the biggest problem facing the company currently.

It was just over a year ago when we first observed a troubling development in the global currency funding arena: the global dollar funding shortage had come back after a 7 year hiatus, and "this time it was different."

The reason for this observations was predicated in the collapse of USD basis swaps. This is what HPM said at the time: