Why I Shorted MRK: The Math $1Trillion

[TorontoTrader2]

Hmm, MRK up a almost point from its low of 27 today.

A 50% retracement of the down move would not surprise me, after that who knows. Depends how near term their liability is.

 

[fxpeculator]

Quote from TorontoTrader2:

Hmm, MRK up a almost point from its low of 27 today.

A 50% retracement of the down move would not surprise me, after that who knows. Depends how near term their liability is.

This "prop job" is only going to make the move into the teens more swift.

 

[Hydroblunt]

Quote from ElCubano:

Themirosal in vaccines will be the one to bring this giant down....peace

If Merck goes down in flames, then you can say goodbye to all pharmas. I just do not see that happening. At worst, they will turn this regular practice by the pharmas into a Merck only issue and sell themselves to someone else. Change the name, not the product.

Take a look at simple generics such as aspirin, nasal spray, throat sprays, eye drops (Visine), etc. All of them bring small side effects that accumulate over time. On top of that, some of these develop addictions. Eventually they lead to life threatening problems but not before you end up popping pills for the new "discomforts". When Pfizer was buying Warner Lambert for Lipitor, it was well known within the two companies that Lipitor has degenerative effects on the liver. They slap some warnings in small print and pump it out anyway since the profits are way worth the possible future liabilities. Plus, they are investing in a market for some "liver" pill.

The I-Banks made billions by scamming the public in 1999-2000, and got slapped on the wrist with what were comparably tiny fines. Big tobacco more than outdid Merck, yet the stock is by all time highs. Microsoft was declared a monopoly in court and convicted of violating anti-trust laws. And nothing, the giant continues doing what they always did, now moving into monopolizing information. History repeats itself.

 

[Htrader]

Quote from fxpeculator:

This "prop job" is only going to make the move into the teens more swift.

Anyone who calls the trading of a $60 billion dollar company a "prop job" is clearly letting their emotions override reasoning.

At the 28 level I don't think mrk has much upside, but its certainly not going to hit the teens unless some extraordinary event happens. Its probably dead money for the next few weeks until more news flow comes along. Certainly there are better places for your capital to be committed.

 

[fxpeculator]

Quote from Htrader:

Anyone who calls the trading of a $60 billion dollar company a "prop job" is clearly letting their emotions override reasoning.

At the 28 level I don't think mrk has much upside, but its certainly not going to hit the teens unless some extraordinary event happens. Its probably dead money for the next few weeks until more news flow comes along. Certainly there are better places for your capital to be committed.

If you think institutions don't defend their massive long exposure in stock and options to try to create a floor in the falling stock or trade it most advantagous to their risk exposure you my friend are letting your emotions and ignorance overide reasoning. If everyone sells as they wish, they all lose. Need a proper hedging and master risk strategy before they dump this trash. Its like an offense going into a huddle before the play.




BARCLAYS BANK PLC 141,748,259 6.43 $4,588,391,143 31-Mar-05
CAPITAL RESEARCH AND MANAGEMENT COMPANY 86,831,300 3.94 $2,810,729,181 31-Mar-05
STATE STREET CORPORATION 76,729,081 3.48 $2,483,720,351 31-Mar-05
FRANKLIN RESOURCES, INC 59,522,075 2.70 $1,926,729,567 31-Mar-05
VANGUARD GROUP, INC. (THE) 49,158,368 2.23 $1,591,256,372 31-Mar-05
DEUTSCHE BANK AKTIENGESELLSCHAFT 43,079,341 1.96 $1,394,478,268 31-Mar-05
FMR CORPORATION (FIDELITY MANAGEMENT & RESEARCH CORP) 40,313,711 1.83 $1,304,954,825 31-Mar-05
BRANDES INVESTMENT PARTNERS L.P. 39,732,183 1.80 $1,286,130,763 31-Mar-05
Mellon Financial Corporation 36,291,376 1.65 $1,174,751,841 31-Mar-05
CITIGROUP INC. 26,398,385 1.20 $854,515,722


FRANKLIN CUSTODIAN FUNDS-INCOME FUND 31,000,000 1.41 $996,340,000 31-Dec-04
VANGUARD 500 INDEX FUND 20,875,144 .95 $670,927,128 31-Dec-04
WASHINGTON MUTUAL INVESTORS FUND 20,500,000 .93 $663,585,000 31-Mar-05
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 19,522,741 .89 $627,460,895 31-Dec-04
INCOME FUND OF AMERICA INC 19,068,300 .87 $617,240,871 31-Mar-05
SPDR TRUST SERIES 1 9,759,499 .44 $322,063,467 30-Sep-04
VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD 9,509,043 .43 $305,620,642 31-Dec-04
PRICE (T.ROWE) EQUITY INCOME FUND 8,750,000 .40 $281,225,000 31-Dec-04
VANGUARD TOTAL STOCK MARKET INDEX FUND 8,473,711 .38 $272,345,071 31-Dec-04
FUNDAMENTAL INVESTORS INC 8,100,000 .37 $262,197,000 31-Mar-05

At least someone agrees with my teen analysis and he is a chartist, while my play is more driven by fundamentals. I love when he technicals line up with the fundamentals don't ya? My teen analysis came before his BTW.


Wait Till the Teens to Buy Merck

By Gary B. Smith
RealMoney.com Contributor
8/22/2005 2:13 PM EDT
Click here for more stories by Gary B. Smith





Let me disclose right up front that I am long Merck (MRK:NYSE - news - research - Cramer's Take). Let me also disclose that I'm not happy about it!

The question on everyone's mind, however, is whether this latest drop is a buying opportunity. Some will argue that litigation will drag on, giving you a much lower entry price than you have now, and others will argue that Merck has more than enough cash reserves and that this is nothing more than Altria (MO:NYSE - news - research - Cramer's Take) all over again.

As usual, I defer to the chart and there the story is clear: Right now the stock is just starting another leg down and surely not bottoming out. That makes buying Monday morning not risky, but stupid.

Just calling 'em as I see 'em, and remember that's from someone who owns the stock!

What's not stupid? Trying to pick the stock up in the $15 area.
http://www.thestreet.com/_mktw/comment/gbs/10239079.html

 

[Rearden Metal]

Quote from Hydroblunt:

Merck's escapades are very similar to Altria's, remember all the panic selling due to the public news and what happens afterwards.

Comparing MRK to MO makes a case for the shorts, not the longs. When politicians, lawyers & judges went on their Jihad against 'Big Tobacco' in '99-'00, MO shares dropped over 70%.
MRK is currently down about 38% since Vioxx got pulled.
Also note that MRK's p/e is around 13.6. <b>MO got all the way down to a multiple of 5.5 before it bottomed. </b>

 

[fxpeculator]

Quote from Rearden Metal:

Comparing MRK to MO makes a case for the shorts, not the longs. When politicians, lawyers & judges went on their Jihad against 'Big Tobacco' in '99-'00, MO shares dropped over 70%.
MRK is currently down about 38% since Vioxx got pulled.
Also note that MRK's p/e is around 13.6. <b>MO got all the way down to a multiple of 5.5 before it bottomed. </b>

A.H. Robbins Co.



In June 1970, the A. H. Robins Company, manufacturers of pharmaceuticals, acquired rights to a new contraceptive for women. The Dalkon Shield, an intrauterine device, was a safer method of pregnancy prevention than the birth control pill and could be used by the vast majority of women, according to its designers. At that time under the terms of the Federal Food, Drug, and Cosmetic Act, the Dalkon Shield was not subject to rigorous clinical testing because it was not classified as a drug.

A flaw in the Dalkon Shield coupled with Robins's disregard of cautionary medical advice resulted in a long list of serious injuries to hundreds of thousands of its users. In June 1974, Robins suspended domestic sale of the Dalkon Shield (foreign distribution continued for another ten months) but stopped short of recalling it, defending its safety and effectiveness "when properly used." Eleven years later, the company declared bankruptcy in the face of claims filed against it as a result of the defective IUD.

http://tobaccodocuments.org/profiles/organizations/ah_robins.html

 

[Hydroblunt]

Quote from Rearden Metal:

Comparing MRK to MO makes a case for the shorts, not the longs. When politicians, lawyers & judges went on their Jihad against 'Big Tobacco' in '99-'00, MO shares dropped over 70%.
MRK is currently down about 38% since Vioxx got pulled.
Also note that MRK's p/e is around 13.6. <b>MO got all the way down to a multiple of 5.5 before it bottomed. </b>

I think you make a great point. I would not start buying Merck till $25. I can easily see it fall to $20 as well. Beyond that, I dunno, I put more faith into the BS "health" aspect of the pharmaceuticals rather than the cancer of tobacco. It really depends on whether they will stick with the dividend. I think of this as a chance to get in cheaply on the legit drug dealers of the world which in my opinion is a gem of an opportunity.

Hey fx, that's not a bad case., even though it was treated as cosmetic and not a drug. If you want to see my side of big business doing whatever they want, check out Abbott Labs case of their seal proof bottles back in 1970s.

 

[mark peckham]

Quote from Risktaker: "Why don't you just say that Merck will fork over the entire USA GDP to these greedy lawyers/claimants?

I don't give a crap either way but this is an example of why medications are so ridiculously expensive. What a crooked system!"

MVIC stated: "All trading profits aside this sucks so bad, you know how many drugs will not be developed because of this shit! We all lose big time. There need to be some caps on these things. 24 million was enough, the 200+ million is ridiculous. This is not a cigarette company that puts out a product that kills people and nothing else, this is a company that puts out stuff that for the most part helps people. If there was intentional negligence that is one thing but when the problems didn't show up in the trials then that is another thing altogether. If there was a problem with the trials then the FDA should have caught it and that is what should mitigate the damages, the fact that the FDA has initial oversight and review.

At this rate it is no wonder that the rest of the world is pulling ahead of us, we have a president who doesn't believe in science and wants to hamper it at every turn(even Frist split with him about that) and we have a litigious society that wants to win the freakin lottery at everyone else's expense. Well, I guess that we are all too busy shopping in our malls and stuffing our faces to pay any attention. Laugh and enjoy countrymen, Rome is burning.

I am the husband of Christine Peckham from England who is quoted in this post as one of the people in the UK who have been looking to sue since October 2004. I would like to correct some inaccuracies in these posts concerning Vioxx.

1. Vioxx was so expensive because Merck charged that price for it until its patent is up in 2007 when everyone would be allowed to make it and thus competition would minimise the huge profits made. Also, Merck spent more than Budweiser and Pepsi in advertising Vioxx alone. The higher price of the tablets covered the higher costs of the advertising. It has nothing to do with lawsuits. The tablets could have been sold far cheaper at profit to the benefit of people who needed help. But the company had $ signs in its eyes at the expense of the sick.
2. The FDA pointed out to Merck in 2001 that Merck withdrew 4% of volunteers on the VIGOR study because they were at risk of cardiovascular and stroke problems. Out of the remaining 96% healthy people on the study there were still 101 people who had cardiovascular problems and 20 people who had strokes. This was 3% of the study population after the 4% at risk people were removed. This means that 7% of the study group would have had heart attacks and strokes. This information is available on the FDA website. Merck refused to do a study into cardiovascular problems or withdraw Vioxx when the results of the VIGOR study came out in 2000. Every further study showed similar results. This was not the act of a responsible company and it will be made to pay for putting profits before peoples lives. They had the power to withdraw Vioxx in 2000-2001 before my wife and many others like her had her stroke. They also refused to put the information they had in 2000 onto the package inserts listing heart attacks and strokes on the side effects. Your so called greedy claimants are actually victims who, because Merck will not accept responsibility, have to sue to make the company think twice about withholding serious health information from patients. How many other tablets do people take which have deadly side effects which have been left off the insert? How many of such tablets might you or your fellow posters be taking? The UK Taxpayer has had to pay for all the health care and benefits to those UK victims. It is only right that Merck should pay for all of this considering they did NOT withdraw the tablets when they first knew. Don't be fooled by their press releases. Check the FDA website. When you see this information you will realise that Merck's share value will drop. But, don't worry - there are several major pharmaceutical companies who produce the same tablets but in future will be more revealing about deadly side effects and not just skin rashes!
3. 90 % of drugs developed do not hit the market. Drug companies would still develop drugs because their main motivation is to make money for you shareholders not to help people. If they wanted to help people they would find cures - not temporary fixes which require repeated purchase of drugs. If they invented cures they would soon have no money for you shareholders. Their business is to keep people ill!
4. The FDA brought its concerns to Merck and Merck did everything it could to drag its heals because every extra day was worth $6 million revenue.
5. The only losers are the dead people. Raymond V Gilmartin, to whom the FDA Memo was sent detailing Merck's deceit in 2001, (which can be obtained from FDA website) has 829,891 shares according to this post. He is sitting pretty on millions of dollars for his ineptitude while people who continued to take VIOXX in ignorance are dead and maimed. More people have been killed and maimed by VIOXX than those in the Asian Tsunami Disaster. Vioxx has caused an international disaster and people like your posters are mocking the victims instead of being outraged that greedy men allowed them to die knowing that 7% of all users had heart attacks and strokes! This equates to 1.5 million people worldwide. SELL YOUR SHARES!!!!!!!

 

[Hydroblunt]

Please note that the FDA is very corrupt and controlled by corporate interests. If this organization had any righteous motives, fast food would be regulated and pharmaceutical drugs would be highly scrutinized being that they are man made chemicals that never mix well with the human system.

Don't put too much faith into the FDA as a driver toward Merck's demise. If they do their job as they always do (mainly PR), Merck will pay insignificant fines in comparison to the billions they raked in.