Following the release of encouraging second quarter 2011 financial results, majority of the analysts following Celgene Corporation (CELG) have raised their earnings estimates for fiscal 2011 and fiscal 2012. The impressive showing was driven by strong sales of cancer drugs Revlimid and Vidaza.

Second Quarter Flashback

Celgene’s second quarter 2011 earnings (excluding special items but including stock-based compensation expense) of $0.78 per share beat the Zacks Consensus Estimate by $0.01 and the year-ago earnings by $0.17.

On a reported basis (including special items), the company’s earnings increased 78% to $0.59. Higher revenues boosted earnings in the quarter.

Adjusted revenues climbed 38% to $1.18 billion in the second quarter of 2011. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza. Revenues for the quarter surpassed the Zacks Consensus Estimate of $1.10 billion.

Revlimid net sales came in at $795 million, reflecting an increase of 35% over

By Marshall Auerback

In the past, I have called the euro zone a “roach motel." But as usual, I’ve been outdone in the metaphor design department by the Italians: Guilio Tremonti, the Italian finance minister, last week compared Germany and its small-minded chancellor, Angela Merkel, to a first-class passenger on the Titanic. The underlying message is the same: You can be sailing in coach or you can be in the first class compartment. But when the ship hits the iceberg, everybody goes down together — Germans, Italians, Greeks, Irish and French alike. All euro zone members have an institution-wide problem of not being able to fund deficits, given that the countries of the euro zone have all acceded to impose gold standard conditions on themselves by forfeiting their fiscal freedom.

To repeat: This is not a problem confined to the periphery. The sovereign risk problem applies to the central core

By Marshall Auerback

Markets are celebrating the triumph of an anti-labor, pro-capital agenda. But is social unrest the consequence?

The Europeans genuinely must believe that they can get blood out of a stone. Or perhaps resort to a modern day equivalent of turning lead into gold. There’s no other reason to explain the euphoria now prevalent in the markets, in light of the approval by Greece’s lawmakers to pass a key austerity bill, thereby paving the way for the country to get its next bailout loans that will prevent it from defaulting next month.

The €28 billion ($40 billion), five-year package of spending cuts and tax rises was backed by a majority of the 300-member parliament on Wednesday, including Socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against. The European Union and International Monetary Fund had demanded the austerity measures pass before they approve the release of a

By Marshall Auerback

By Marshall Auerback

Larry Summers finally gets it right, warning that fiscal austerity harms the economy and pundits misdiagnose the problem.

I generally hold little truck with former Treasury Secretary Lawrence Summers. But today I have to give credit where credit is due: his article in the Financial Times, “How we can avoid stumbling into our own lost decade,” should be mandatory reading for the Obama Administration, and indeed all policy makers and mainstream economic commentators who continue to sing from the hymnal of fiscal austerity.

While US politicians (and politicians everywhere) emphasize the “costs” of continuing the sustaining of aggregate demand via higher government spending (on the spurious grounds that such spending creates the possibility of ‘national insolvency’), they ignore the fact that there are huge daily losses in foregone income, corporate tax revenues and output. These are accumulating daily as we economically chase our own tail.

The losses

By Marshall Auerback

Beyond being self-imposed, the debt ceiling may not even be constitutional. Why hamstring spending because of it?

Pat Toomey has called the Democrats’ bluff by indicating that a failure to extend the debt ceiling does not automatically mean a default. He is making the point that because debt payments are an executive priority, and tax receipts are more than sufficient for interest payments, the government can continue to make them to bondholders. It will simply mean shutting down other parts of the government to offset those payments. This is in fact the dream of the Tea Party supporters and other fiscal hawks, who have long fantasized about ways to substantially reduce the size of government and roll back programs dating from the time of the New Deal.

The reality is that Senator Toomey is probably correct in his assessment that failure to raise the debt ceiling would

By Marshall Auerback

If we keep pretending banks are just waiting for regulators to get out of the way, we’ll keep implementing the wrong policies.

Banks will likely have too much cash by 2019 as a result of the Basel III global banking rules, UBS AG Chief Executive Oswald Grübel said Thursday. "In the next 10 years, at the end of 2019, we will have overly liquid, overcapitalized banks," he said, addressing a business audience at a conference. "However this also means we won’t have a lot of growth." Mr. Grübel was discussing changes in the global balance of power and what the possible consequences would be. The CEO has said that investment banking could shift to the U.S. and Asia if stricter capital requirements are enforced in the U.K. and Switzerland. The basic economic tenet, however, remains that "power goes where the money is," he said.

This is consistent

By Marshall Auerback

States are being cut off just at the time they most need federal assistance. Revenue sharing would be a winning strategy for the economy and for Obama.

Our policymakers continue to believe that they must first ‘get credit flowing again’ to restore output and employment. Unfortunately the reverse is the case: restoring output and employment will restore the flow of credit. Creditworthiness precedes credit.

And yet, as we get closer and closer to D-Day on the debt ceiling limit, the negotiations continue to turn on how much income the government should drain from the economy

By Marshall Auerback

Though capital markets remain strong, the global economic backdrop continues to deteriorate as fiscal retrenchment takes hold. Commodity markets have rallied in tandem with the fall in the dollar even though there are signs that growth in the emerging world is slowing. Japan’s economy is in the soup, the U.S. economy has failed to pick up as many thought (with a mere 2% growth rate expected to be released for Q1 shortly), and the European economy is overdue for its own slowdown. The U.S. stock market has also rallied despite the threat of a very high gasoline price, disappointing economic growth data, and a fairly mixed earnings picture.

The new theme in the market seems to be that the Fed, unlike other central banks, will stick with super-easy money policies; hence the tendency to push the weak dollar, rising equity prices, and soaring commodity prices. But the

By Marshall Auerback

Bernanke’s QE2 program has hurt savers, done nothing for banks, and eviscerated middle class living standards.

The U.S. Federal Reserve signaled the end of its controversial $600 billion bond-buying program as planned. And not a moment too soon. This was probably the most over-hyped event since the launching of the Titanic. Frankly, I’m not surprised by the lack of impact of QE2. I’ve always regarded it as a slogan, rather than a policy, and contended that its effects were oversold and predicated on a fundamental misunderstanding of basic monetary operations. The Fed introduced a program whose central thesis was that the unprecedented central bank intervention would reboot bank lending. Yet three years later, total bank loans are lower than they were before the Fed undertook quantitative easing.

The inability of monetary policy initiatives to do anything more than stabilize a very shaky financial system was always clear

By Marshall Auerback

So ratings agency Standard & Poor’s revised the U.S. rating outlook to negative from stable after affirming its sovereign rating at AAA/A-1+ sovereign credit ratings. Why people give credibility to the organization that gave us “triple AAA rated” subprime toxic garbage is beyond me. And take a look at the history: Debt downgrades had no impact on Japan when Moody’s and S&P tried to pull the same stunt with them.

In November 1998, the day after the Japanese government announced a large-scale fiscal stimulus to its ailing economy, Moody’s Investors Service began the first of a series of downgradings of the Japanese government’s yen-denominated bonds, by taking the Aaa (triple A) rating away. The next major Moody’s downgrade occurred on September 8, 2000. Then, in December 2001, Moody’s further downgraded the Japan government’s yen-denominated bond rating to Aa3 from Aa2. On May 31, 2002, Moody’s cut Japan’s

By Marshall Auerback

We should put the recovery on solid footing by increasing wages and employment, not needlessly slashing government spending.

Just as everybody seems to be understanding the full implications of the U.K. government’s approach to fiscal policy, we may be on the verge of embracing it here in the U.S. This a very negative development.

Yes, we should eliminate wasteful and unnecessary spending (we can start with a large proportion of the defense budget). But when we are experiencing a shortage of aggregate demand (the total spending, private and public, that supports employment and output), it makes no sense to introduce further cuts by implementing fiscal austerity, which will simply drain more demand from the economy.

Current proposals from both the President and Paul Ryan for serious deficit reduction involve several trillion dollars of "savings" over the next few years. I put quotes around the word "savings" because

By Marshall Auerback

Someone needs to deal with the unemployment crisis. But that someone is not the Fed.

David Leonhardt has an interesting piece in the NYT this week that accuses the Fed of being too “timid” in its response to the jobs crisis. Leonhardt is actually on the right side of this issue, but his reasoning is flawed. The real problem is not the Fed’s timidity, but the misconception that central banks can do something about unemployment. That’s the job of fiscal policy. Arguably, the Fed’s zero interest rate environment has exacerbated deflationary pressures, as it robs savers of income. The argument that higher interest rates will destroy our economy because of debt servicing omits this income effect. Evsey Domar raised the counterargument in a paper he wrote at the Fed in the 1940s: higher interest rates equal higher payments to private credit holders, which increases the tax base,

By Marshall Auerback

We are the only ones who stand in the way of an economic recovery that puts Americans back to work.

Influential journalists are making persuasive cases that austerity is the wrong approach in fragile economies. That’s good news. But discussions still get muddled in ways that can have perverse effects.

Take the case of Japan. Last week Bill Mitchell wrote an excellent blog post discussing Martin Wolf’s article on Japan’s fiscal position following the earthquake. Wolf suggested that the “national insolvency” threat allegedly posed by the earthquake was vastly overstated. He argued that the sums involved were too small to matter. Mitchell agreed, but went further, challenging Wolf’s implicit suggestion that the Japanese government faced a solvency risk of any kind:

The reality is that the Japanese government has no solvency risk at all in relation to its net spending position and the debt issuance that matches

By Marshall Auerback

Let’s not add insult to catastrophic injury. Japan must reconstruct its country and has the funds to do so.

There is no doubt that this terrible earthquake is worse than the Kobe tragedy of 1995. Kobe was a 7.4 on the Richter scale, but the quake that hit Sendai was 8.9 - many hundreds of times more powerful. And then there was the tsunami. The devastation is so great that no one knows how catastrophic it is likely to be in the end. But the worst of it lies ahead.

Consider: In the case of an 8.9 quake, the odds are there will be one aftershock of more than eight on the scale and 10 of more than seven. So far we have only had one that has been more than a seven. Meanwhile, aftershocks are moving toward Tokyo. The quakes so far have weakened buildings far,

By Marshall Auerback

If the fiscal austerity fad continues across Europe, Germany’s economy (ETF: EWG) — already feeling the impact — may tank.

It’s very courageous to write something contrary to the prevailing mainstream “conventional wisdom” (which is actually hysteria), but thankfully some people are beginning to recognize basic facts. One such voice is David Leonhardt of the NY Times, who has dared to challenge the prevailing narrative that “reckless government spending” is now endangering growth. Quite the contrary, as Leonhardt points out in the context of “fiscally responsible” Germany:

By Marshall Auerback

Anybody who had hopes that an election in Ireland would provide at least the beginning of change from the current ruinous set of policies has to be disappointed with the Opposition Party Fine Gael’s proposals for “reform.” The objectives sound absolutely marvelous, but one wonders how the new government will achieve them.

As reported by the Irish Times:

Fine Gael today published its election manifesto, which party leader Enda Kenny claimed would help transform Ireland.

Among the proposals contained in the document is a promise to create thousands of new jobs, an overhaul of the health service, a reduction in the number of national politicians, protection of State pensions and payments to the most vulnerable members of society and public sector reform.

“Every section of the manifesto has been prepared with a view to maximising job creation, growth, and the transformation and modernisation of our public services,”

By Marshall Auerback

Much could be done to help state budgets and reduce unemployment. None of them will happen.

Business Week reports that President Obama is considering seeking aid for state unemployment insurance programs burdened by debt because of high unemployment rates. At the margin, no complaints here about the idea, but it’s fairly limited in scope and may not make that much of a difference.

The President is likely to encounter a political problem here because his proposed policy may well prevent things from getting worse without actually generating significant gains in employment or the condition of state finances. So he will encounter the same difficulty he experienced when he passed his $800 billion fiscal stimulus bill in 2009: he will be in the invidious position of trying to prove a negative (i.e. “things would have been much worse had we not passed this legislation”). Meanwhile, the GOP will

By Marshall Auerback

If we’re forced back to square one by the Supreme Court, why not get it right?

My colleague, Bo Cutter, has noted the likelihood of continued challenges to health care reform in the wake of the recent Florida State Supreme Court decision to invalidate the entire health care bill. Frankly, the legal attacks on the bill, even if driven by highly suspect and selfish motives, are unsurprising. They represent the inherent flaws of a bill that entrenches private insurance as the basis for our health care system.

Randy Wray and I have argued previously (pdf) that the health care reform plan represented primarily a huge and unprecedented mandate to benefit private insurers. Under the new “reform,” 50 million people are being told they must turn over their paychecks to private companies. Of course this was bound to lead to court challenges. And it is hard to fault