Economic situation

Economic situation

Summary

In this page we review the proximate economic situation. 

Economic trends are discussed. 

Introduction

Heath care markets are key aspects of the US economy. 



Dramatic economic shifts suggest major transformations of health care:




Economic change provides the potential to destabilize the US health care network. 

  • Americans are increasing their use of prescription drugs (Nov 2015)
  • Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
    • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
    • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
    • Federal Advisory Committee with twelve members
    • Single US currency - the Federal Reserve Note. 
    report argues: Economy is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche.  Economics models economies.  Robert Gordon has described the evolution of the American economy.  Like other CAS economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers. 
    robust allowing for interest rate increases, Wage growth sluggish due to poor productivity is the efficiency with which an agent's selected strategy converts the inputs to an action into the resulting outputs.  It is a complex capability of agents.  It will depend on the agent having: time, motivation, focus, appropriate skills; the coherence of the participating collaborators, and a beneficial environment including the contribution of: standardization of inputs and outputs, infrastructure and evolutionary amplifiers. 
    , Decline in work force participation among less educated Americans because of technology, Women providing child-care rather than entering the work force, Oil increasingly produced domestically reducing export of dollars, Trade war not mentioned as a significant risk (Jul 2018)
  • The financial network is betting on:
  • Can society afford to pay for the treatments?  US pricing is supported by the MMA is:
    • The Medicare Modernization Act of 2003.  It includes Medicare part D, the Medicare prescription drug benefit, which constrains Medicare from negotiation of its drug prices and created MAC and RAC.  It was sponsored by Senator Bill Tauzin and implemented by Tom Scully.  
    • Mammalian meat allergy which is induced by a month prior tick bite that introduced the allergen alpha-gal.  About 1% of bitten humans develop the allergy & prevalence is increasing.  Humans & old world primates & monkeys don't make alpha-gal (Jul 2018).  Symptoms can include: hives, anaphylactic shock, low blood pressure. 
    's legislative constraints on Medicare is a social insurance program that guarantees access to health insurance for Americans aged 65 and over, and younger people with disabilities and end stage renal disease or ALS.  Medicare is currently missing a cap on out-of-pocket costs and direct prescription drug coverage.  It includes:
    • Benefits
      • Part A: Hospital inpatient insurance.  As of Dec 2013 Medicare pays for home care in only limited circumstances, such as when a person needs temporary nursing care after a hospitalization.  Part A covers 20 days of inpatient rehabilitation at a SNF after discharge from inpatient care at a hospital. 
      • Part B: Medical insurance for non-hospital services including: doctor visits, tests, injectable drugs, ambulances, physical therapy;
      • Part C: Medicare Advantage 
      • Part D: indirect prescription drug coverage The MMA prohibits Medicare from directly negotiating drug prices. 
    • Eligibility
      • All persons 65 years of age or older who are legal residents for at least 5 years.  If they or a spouse have paid Medicare taxes for 10 years the Medicare part A payments are waived.  Medicare is legislated to become the primary health plan. 
      • Persons under 65 with disabilities who receive SSDI. 
      • Persons with specific medical conditions:
        • Have end stage renal disease or need a kidney transplant. 
        • They have ALS. 
      • Some beneficiaries are dual eligible. 
      • Part A requires the person has been admitted as an inpatient at a hospital.  This is constrained by a rule that they stay for three days after admission.  
    • Sign-up
      • Part A has automatic sign-up if the person is drawing social security.  Otherwise the person must sign-up for Part A and Part B. 
      • Should sign-up for Part B during the Initial Enrollment Period, of seven months centered around 65th birthday, online or at a social security office.  But if still covered by spouse's insurance or not yet retired then may only join during the 3 month general enrollment period (January to March) each year, with coverage initiated the following July.  Incremental yearly 10% penalties apply for not signing up at 65.  These penalties apply to all subsequent premiums. 
    • Premiums
      • Part A premium
      • Part B insurance premium
      • Part C & D premiums are set by the commercial insurer.  
    pricing actions.  Pricing pressure has already impacted Europe due to budget problems and austerity measures.  The US is expected to follow the trend.  Pressure (Jul 2015) from government, insurers and managed care contracts together its subscribing patients with particular groups of doctors and hospitals who agree to provide contracted care for a particular price which the managed care organization reimburses.  It was based on the group practice organizations: Kaiser, Mayo Clinic; operations.  The initial HMOs, supported by the HMO act and PPOs has subsequently been joined by other forms of managed care.  Original capitation based implementations were problematic with only Kaiser succeeding.  Managed care is now enhanced by inclusion of upside measures as in alternative quality contracts. 
    companies will undermine big price increases. 
  • Global competition between brand-name and generic pharmaceutical manufacturers becomes more complex:
  • Evolved amplifiers of trade flows:
  • Boom and bust has been the typical scenario in health care/biotech.  
    • Part of a broader trend with low rates (Nov 2016)
  • Patent evergreening describes how drug companies try to extend patent protection by introducing a new version of a drug with minor variations without much clinical benefit but that extends the patent.  The new drug is heavily advertised so that it replaces most of the still patented, but old, drug on the market.   and pay-for-delay is a practice used to extend the high profits of a soon to be off-patent protected drug.  The companies pay generic manufacturers to delay release of their generic competitor to sustain high pricing. 
    are under threat (Nov 2015).  
  • Payment and financial innovation have been slow to keep up.  But the 2015 health evolution summit sees a shift.  

  • Contents






    2007 Jun Bear Stearns mortgage finance restructuring shows economic catalyst

    NYTimes
    Two hedge funds is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
    aimed at avoiding both a fire sale in mortgage-securities market, and getting stuck with an exploding liability that could result in steep losses for financiers.  A melt down was avoided, but the New York Times wonders if the talks had just delayed an inevitable collapse over time. 

    The Bear Stearns investment bank was aiming to find out what they could obtain as payments from the market if the auctioned off mortgage securities with a face value of $2 billion.  The solicitations were hastily withdrawn when investors reacted with little enthusiasm.  However, by the end of the day some of the less risky securities had exchanged hands. 

    Bear Stearns was under pressure from other lenders who were worried about the effect of the sale on the book valuations of mortgage securities. 

    The week of escalating problems at the Bear Stearns's High Grade Structured Credit Strategies Enhanced Leveraged Fund and a related fund have jarred investors into confronting systemic risks in the once booming market for bonds that are backed by mortgages to homeowners with weak or subprime, credit.  Last year, more than $483 billion of such bonds were issued, up 5% from 2005. 

    The deal that JP Morgan Chase reached with Bear Stearns asset Management allowed it to sell $400 million collateral back to the hedge funds for cash.  It was not released what the price was. 

    Goldman Sachs and the Bank of America reached similar deals, though details remained unclear.  Also unclear is what price the assets will eventually fetch for the Bear funds and what types of losses investors, who have been unable to redeem their investments since May, will face. 

    The securities causing the most concern within the Bear Stearns funds are known as collateralized debt obligations, or C.D.O. is a:
    • Care delivery organization in health care. 
    • Collateralized debt obligation in finance.  The idea is to transfer the credit risk rather than the loan itself.  The bank enters into a CDS on the loans with a SPV.  The CDO allows the bank to shift its loans outside the reach of regulators.  The CDO also can distribute the risk unevenly by tranching.  Equity is most at risk.  Then any subordinated debt. 
    s.  Run by portfolio managers these complex instruments are akin to mutual funds in that they buy stakes in a variety of bonds backed by mortgages. 

    They often invest in the riskiest portion of the bonds, usually with a hundreds of millions or billions in borrowed money.  About $316 billion in C.D.Os specializing in mortgages were issued last year, up from $178 billion in 2005. 

    One worry about the possible unwinding of the Bear funds is that it will cascade into larger liquidations by other investors who hold similar securities at far higher prices.  Accounting rules require investment banks to mark the value of the investments to the price of similar assets trading in the market.  Many mortgage-related securities and C.D.O.s in particular, do not trade frequently, making them hard to value. 

    As a result Merrill one of the lenders who have seized Bear assets is quietly showing them to a small group of potential buyers.  Such an approach helps to keep the pricing of the securities under wraps, allowing Wall Street firms to avoid marking down their own stakes.  Keeping the sales price quiet also means that the firms may not have to add collateral immediately to shore up their portfolios. 

    Yet another worry is that the big investment banks that until now have generously lent billions of dollars on good terms to traders and portfolio managers are pulling back or demanding stricter terms. 

    One industry executive, said the banks involved in the Bear funds could collectively lose $1 billion on their lending to the Bear funds.  Lenders are already reducing the amount they are willing to lend against C.D.O.s. 


    Feb 2019 NYT The Dollar Is Still King.  How (in the World) Did That Happen?

    Peter Goodman reports a cursory assessment might find the United States a less than ideal candidate for the job of managing the planet's ultimate form of money. 

    It has built a $22 trillion national debt is a pool of payment promises developed to finance costly discrete and transient activities, Johnson & Kwak explain.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
    .  But he notes the US is the United States of America.   benefits from the status of the dollar, as the global reserve currency, which is:
    • Favored as a repository of global savings,
    • The key form of exchange for trading in global commodities
    • A safe haven in a crisis
    US uses the dollar to support its global policy aims detailed Paul Volcker's strategies for sustaining the US centric post Second World War economic network, once the US became a deficit generator & Bretton Woods could not be sustained.  Volcker's goal was to enable the US to use other country's surpluses to support the network's operation under US control, in place of the disappearing US dollar surplus.  The strategies included:
    • Push American interest rates up much higher than those of other linked economies, attracting global free capital to the US dollar. 
    • Ensure that Wall Street offered a more lucrative market for investors than London, Frankfurt, Tokyo, or Paris.  
    • Support US business that was impacted by this costly high interest rate environment by supporting the reduction of wage costs.  Once Volcker became chairman of the Federal Reserve in 1979, he executed the strategies. 
    :
    • Treasury has many potential buyers of US savings bonds, who are willing to accept low rates of interest
    • Trade sanctions are amplified by the requirement to use dollars in trading and leverage of the global financial network
      • Sanctions on Iran & Venezuela are more effective because banks will not jeopardize access to the US infrastructure
      • Sanctions on Russia
    The Dollar has been gaining power:


    May 2016 NYT A Choppy Year for Hedge Funds, but Chiefs Cashed In

    Alexandra Stevenson reports JPMorgan Chase paid its chief executive, Jamie Dimon, $27 million in 2015.  In another Wall Street universe, the hedge fund manager Kenneth C. Griffin [of Citadel] made $1.7 billion over the same year. 

    Institutional Investor's Alpha magazine reports the 25 best-paid hedge fund managers together received $12.94 billion in income.  This is even as the funds struggled to perform. 

    The hedge fund industry is now $2.9 trillion in size. 

    James H. Simons of Renaissance Technologies also took home $1.7 billion. 

    Leda Braga of Systematica Investments got $60 million.  Earlier she was at BlueCrest Capital

    Five fund managers which lost money for their investors were in the Alpha list:

    May 2016 NYT Hedge Funds Reach for Hard Hats in Year of Collapsing Mergers

    Leslie Picker reports while last year set a record for the amount of money spent on corporate mergers -- $4.7 trillion -- this year is so far setting a very different record: the dollar amount of deals that have come undone. 

    $400 billion worth of corporate mergers has been withdrawn.  This is three times the 2007 record.  Deals that have backed out include:
    • Staples & Office Depot $6.3 billion merger
    • Halliburton and Baker Hughes $35 billion merger
    • Pfizer and Allergan $152 billion merger 
    • Anbang Insurance and Starwood Hotels $14 billion acquisition 
    • Energy Transfer equity and Williams Companies $38 billion - no evidence of collapse of the deal but its being treated as backing out by markets. 
    • Abbott labs and Alere $5.8 billion acquisition - no evidence of collapse of the deal but its being treated as backing out by markets. 
    Hedge funds is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
    that focus on merger arbitrage is a hedge fund strategy where for stock mergers of companies, the hedge fund will simultaneously purchase the target and short sell the acquirers stock, while for cash mergers the hedge fund purchases the target stock; to speculate on the successful completion of the deal, when the target's stock should reach the offer price, leveraging pricing inefficiencies awaiting the event.  are seeing greater uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers.  This is different from Risk.   in their strategies.  In April macro funds is a hedge fund strategy where bets are made on the direction of global economic trends.   and merger arbitrage were the worst performing hedge fund strategies.  Ramius was impacted by the collapse in Allergan's share price. 


    Aug 2018 NYT The Stock Market Is Shrinking.  That's a Problem for Everyone. 

    Jeff Sommer reports the American stock market has been shrinking.  It's been happening in slow motion -- so slow you may not even have noticed.  But by now the change is unmistakable: The market is half the size of the mid-1990s peak and 25 percent smaller than it was in 1976. 

    Sommer notes:

    Oct 2018 NYT The Biggest Buyers of American Stocks Are on the Sidelines Right Now

    Matt Philips reports there are plenty of potential catalysts for the stock market sell-off that has swept through the markets this week.  They include rising interest rates, growing tensions with China, expanding federal deficits and increasing regulatory risks for technology companies. 

    But Philips notes the largest buyers: companies repurchasing their own stocks; aren't buying as they get ready to report earnings.  Some of the large market dips of 2018 correspond to these quarterly reporting periods. 

    Repurchasing has reached $770 billion this year.  That's twice the size of ETF is exchange traded fund, which tracks stock and bond indexes, adhering to a set of financial rules.  These methods can be used to track any financial market segment.  They are transparent, and low cost to operate, and invest in.  ETFs are priced during normal trading hours.  But their performance is impacted when they are forced by changing conditions to sell assets at a loss.  Selling of an ETF by one investor to another does not redeem the ETF's underlying investments, limiting the capital gains tax distribution (Jul 2018). 
    generated demand for stocks. 


    Jan 2019 NYT E.T.Fs Try to Lure Investors Into Ever Narrower Niches

    Conrad De Aenlie reports E.T.F. is exchange traded fund, which tracks stock and bond indexes, adhering to a set of financial rules.  These methods can be used to track any financial market segment.  They are transparent, and low cost to operate, and invest in.  ETFs are priced during normal trading hours.  But their performance is impacted when they are forced by changing conditions to sell assets at a loss.  Selling of an ETF by one investor to another does not redeem the ETF's underlying investments, limiting the capital gains tax distribution (Jul 2018). 
    s became the next big thing in portfolio management a couple of decades ago by being cheaper and easier to trade than mutual funds

    Now managers are offering E.T.Fs representing small 'thematic' parts of the stock market: gaming, Robotics, Medical devices, 5G, Big Data encompasses the IT systems and processes necessary to do population based data collection, management and analysis.  The very low cost, robust, data storage organized by infrastructure: HADOOP; allows digital data to be stored en mass.  Data scientists then apply assumptions about the world to the data, analogous to evolved mechanisms in vision, in the form of algorithms: Precision medicine, Protein folding modeling (Feb 2019) assumes coevolutionary methods can be applied to identify contact points in a protein's tertiary structure.  Rather than depending on averages, analysis at Verisk drills down to specifics and then highlights modeling problems by identifying the underlying CAS.  For the analysis to be useful it requires a hierarchy of supporting BI infrastructure:
    • Analytics utilization and integration delivered via SaaS and the Cloud to cope with the silos and data intensive nature. 
    • Analytics tools (BI) for PHM will be hard to develop.  
      • Complex data models must include clinical aspects of the patient specific data, including disease state population wide.  
      • A key aspect is providing clear signals about the nature of the data using data visualization. 
    • Data communication with the ability to exchange and transact.  HIEs and EMPI alliance approaches are all struggling to provide effective exchange. 
    • Data labeling and secure access and retreival.  While HIPAA was initially drafted as a secure MPI the index was removed from the legislation leaving the US without such a tool.  Silos imply that the security architecture will need to be robust. 
    • Raw data scrubbing, restructuring and standardization.  Even financial data is having to be restandarized shifting from ICD-9 to -10.  The intent is to transform the unstructured data via OCR and NLP to structured records to support the analytics process. 
    • Raw data warehousing is distributed across silos including PCP, Hospital system and network, cloud and SaaS for process, clinical and financial data. 
    • Data collection from the patient's proximate environment as well as provider CPOE, EHRs, workflow and process infrastructure.  The integration of the EHR into a big data collection tool is key. 
    , artificial intelligence, privacy & ciberthreats; supporting increased risk, is an assessment of the likelihood of an independent problem occurring.  It can be assigned an accurate probability since it is independent of other variables in the system.  As such it is different from uncertainty. 
    and reduced diversification. 

    FundX Investment Group's chief investment strategist, Jason Browne does not recommend thematic E.T.F.s.  "We would prefer that someone build a portfolio around more diversified funds.  If you're an average investor, you will probably look back and think this is something you were sold and not something thoughtfully invested in that's aligned with our long-term goals."  FundX manages investments for wealthy individuals. 

    RegentAtlantic's chief investment officer, Christopher Cordaro, sees more fund managers using thematic E.T.F.s.  Bank of America Merrill Lynch's head of thematic investing, Haim Israel, sees some technologies covered by E.T.F.s as long-term opportunities. 

    Investment advisers are dubious about thematic E.T.F.s.  Most technology forecasts are speculative.  LJPR Financial Advisors Leon LaBrecque noted "We've been around long enough to see a lot of the "next big thing.  Remember Blockbuster or Boston Chicken?  Anyone remember the first search engine?  New tech becomes old tech." 


    Feb 2019 NYT What's Really in Your Index Fund?

    SEC is the Securities and Exchange Commission.  It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act.   commissioner Robert Jackson Jr. & UC Berkeley law professor Steven Davidoff Solomon review index fund use simple rules to decide what assets to include in an investment fund: mutual fund or ETF.  John Bogle leveraged the low cost and predictability of the approach to build Vanguard's index funds for consumer investors, explaining "My ideas are very simple.  In investing, you get what you don't pay for.  Costs matter, so intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course.  And they won't be foolish enough to think they can consistently outsmart the market."  University of Chicago economists: Renshaw, Feldstein, Samuelson; initially developed the indexing idea to obtain a diversified open-ended vehicle aligned with the assumed random operation of the market.  Complexity economics undermines these ideas, suggesting index funds are an evolved amplifier leveraging captive 401K funds.  Index funds are not guaranteed to be transparent and the selection process involves lightly regulated companies which can be open to conflict of interest - their selections will alter the demand for and price of the stocks (Feb 2019). 
    operations: John Bogle, the father of low-cost investing, once said that the index fund was the "most successful innovation -- especially for investors-- in modern financial history." 

    Jackson and Solomon note index funds:
    • Track a broad group of stocks
    • Investors can buy a range of businesses and hold them to capture the long-term growth of the market. 
    • Don't need great stock pickers, so they charge low fees. 
    But they assert index funds have a problem:
    • The indexes the funds are based on are not always transparent and neutral to bias.  Firms: MSCI; develop the indexes, with little regulatory scrutiny.  The WSJ reported MSCI was persuaded by the Chinese government to add Chinese issuers to the MSCI Emerging Markets Index.  MSCI asserted to the WSJ that its process for choosing firms for the index was "transparent and objective" and includes safeguards to maintain those standards. 
    • Customized indexes have been developed for use by a single fund - where the index and fund are frequently operated by the same managers, which Jackson and Solomon suggest look less like objective benchmarks that investors think they are leveraging. 
    The Libor scandal showed the problem of benchmark manipulation, where banks were able to derive excess profits while increasing costs for homeowners and students.  The CFTC responded to that scandal by setting up a group to reform that benchmark.  There is no such group for stock market indexes. 

    Jackson and Solomon propose the SEC study index fund issues and make necessary recommendations to Congress. 

    Jan 2019 NYT The Hidden Automation Agenda of the Davos Elite

    Kevin Roose reports they'll never admit it in public, but many of your bosses want machines to replace you as soon as possible. 

    Roose, attending the World Economic Forum, concluded corporate executives answers to AI questions depended on who was listening. 

    In private the corporate executives promise they are automating away their work forces agressively to stay ahead of the competition.  Billions of dollars are being spent to make corporations lean, digital and highly automated.  CEOs are measured by the quarter. 

    UBS sees the market for A.I. growint to $180 billion next year. 

    Consultants see aggressive plans being executed:
    • Infosys president, Mohit Joshi, noted "Earlier they had incremental 5 to 10 percent goals in reducing their work force.  Now they're saying, 'Why can't we do it with 1 percent of the people we have?'"
    • IBM's "cognitive solutions" unit, its second-largest division with $5.5 billion in revenue last quarter, provides A.I. to help businesses increase efficiency.  
    • Cognizant see profit driving automation, but CEOs are also worried about a backlash.  
    • McKinsey's Katy George noted the issue for corporations is "they will be disrupted if they don't" automate agressively. 
    Asian firms are less worried about society reacting.  China's JD.com has the goal of being 100% automated in the future.  Taiwan's Foxconn wants to replace 80% of its workers within 5 to 10 years. 

    Their are examples of companies agressively retraining workers whose jobs were automated away:
    • Accenture replaced 17,000 back-office processing jobs without layoffs in 2017
    • Amazon replaced 16,000 warehouse workers but retrained them into nursing and aircraft maintenance. 
    Most analysts see these as unscalable examples, with 1 in 4 being retrained at best. 

    MIT is Massachusetts Institute of Technology.  's Erik Brynjolfsson, suggests the CEO's choice is "between whether you use the technology in a way that creates shared prosperity, or more concentration of wealth." 

    Feb 2019 NYT As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

    Michael Forsythe, Walt Bogdanich and Bridget Hickey report the sins of Valeant Pharmaceuticals are well known.  Instead of spending to develop new drugs, Valeant bought out other drugmakers, then increased prices of lifesaving medicines by as much as 5,785 percent.  Patients had no choice but to pay. 

    McKinsey is unique in operating a hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
    , MIO Partners, that invests for its current and former consultants.  401(k) plans make up make up 50% of MIOs assets.  The other $6 billion is capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty.  Capital includes: real property, financial capital and professional capital.  It is not immutable instead depending on the state of the society within which it exists.  It can be owned by governments (public capital) and private individuals (private capital).   of McKinsey's current and former partners.  MIO, managed by chief investment officer Todd Tibbetts, invested in Valeant (now Bausch Health) as McKinsey advised then CEO J. Michael Pearson, a former McKinsey consultant, on strategy. 

    MIO was initially setup to counter Wall Street hiring the best graduates, but it had built in conflicts of interest, providing advice to clients it could invest in or against. 

    MIO was incorporated in the Channel Island of Guernsey, opaquely through Barfield Nominees, but had to reveal, to judge Kevin Huennekens, that the head of the bankruptcy practice, Jon Garcia, was one of 9 current or former McKinsey consultants on the 11 person MIO board of directors.

    MIOs flagship fund is the Compass Special Situations Fund. 

    MIO invested in bonds in Puerto Rico as McKinsey advised the Island's oversight board, and McKinsey's conflict of interest statement, reviewed by Congress, was opaque about MIO links and activity. 


    McKinsey asserts "MIO and McKinsey employ separate staffs.  MIO staff have no nonpublic knowledge of McKinsey clients.  For the vast majority of assets under management, decisions about specific investments are made by third-party managers." 


    Jan 2019 NYT The $238 Million Penthouse, and the Hedge Fund Billionaire Who May Rarely Live There

    NIkita Stewart and David Gelles report in Manhattan, where multimillion-dollar real estate sales are downright routine, a hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
    tycoon has managed to set a new standard for conspicuous consumption by paying a fortune for an unfinished piece of property in the sky. 

    Citadel founder Kenneth C. Griffin, spent $238 million for a penthouse at 220 Central Park South that is still being built on space the landlord evicted the rent-stabilized apartments. 

    Griffin:
    • Is based in Chicago. 
    • Is now worth $10 billion.  Has three children
    • Invests in art: Jasper Johns, Jackson Pollock, de Kooning; philanthropy giving away $700 million: $150 million to Harvard, $125 million to University of Chicago; & as a board member of the Whitney, real estate


    Feb 2019 NYT It Started With a Jolt: How New York Became a Tech Town

    Steve Lohr reports Euan Robertson started his job with New York City's economic development team at an ominous moment.  It was Monday Sept. 15, 2008, the day Lehman Brothers filed for bankruptcy and ignited the financial crisis. 

    The Lehman collapse encouraged NYC Mayor Bloomberg's leadership team, to develop a "game changers" plan, including: start-up incubators, networking events, training, internships and development of a new graduate school; to build an 'applied science' Silicon Alley talent engine to draw coders and companies to New York.  These would help generate new technologies supporting its key industries: finance, fashion, design, advertising, law, consulting and media; to be developed in the city.  The plan encouraged new courses at Columbia, NY University & the Cornell Tech graduate school where graduate students work on real-world problems of local companies. 

    Lohr notes Silicon Alley, which emerged during the 1990s Internet boom, is fed by smart people's interest in coming to NCY to live well: museums, theater, opera, dance, jazz, art galleries, bars, restaurants; and work: entrepreneurs, technologists, corporate execs; in the city's key industries - there are twice the technology jobs in these than in the technology industry. 

    Google initially entered NYC to gain access to its advertising industry cluster, a move that was strengthened by its 2007 purchase of DoubleClick for $3.1 billion from its private equity is the pooling of commitments from fund investors, to: buy assets that are not publicly traded: companies, real estate, and debt; improve their acquisition's value and sell them again, returning the sale cash to the fund investors.  Private equity companies gain competitive advantage from being lightly regulated, and wealth from the fees and special tax privileges.  Private equity companies were initially corporate raiders. 
    company.  At this point digital advertising took off in New York. 

    Google engineers wishing to live in NYC joined an additional 'technology node' which linked in researchers from local companies including Bell Labs, Google research now employs 200 scientists in New York.  As these clusters grow, fed by Game Changers post graduates, VC is venture capital, venture companies invest in startups with intangable assets
    driven genetic operations occur enabling serial new startup formation.  Former DoubleClick CEO Kevin Ryan, founded six companies including: Zola -- built from the failure of flash sale site Gilt, Business Insider and MongoDB. 

    J. P. Morgan Chase has now hired Apoorv Saxena, an A.I. product manager from Google to lead the bank's A.I. product development and Manuela Veloso from Carnegie Mellon to head an A.I. research team.  Wall Street sees an opportunity to move beyond its 2008 cloud as Silicon Valley Social Media companies become the new misfits. 


    Jan 2019 NYT Health Care May Not Cure What Ails Portfolios This Time

    Ryan Derousseau reports health care stocks have traditionally done well during market downturns.  But whether they can repeat the feat with continuing uncertainty about the future of health insurance in the US is the United States of America.   is a big question. 

    Derousseau argues:


    Sep 2017 NYT How to Protect a Drug Patent? Sell it to a Native American Tribe

    Katie Thomas reports the drug maker Allergan announced Friday tht it had transferred its patents on a best-selling eye drug to the Saint Regis Mohawk Tribe in upstate New York--an unusual gambit to protect the drug from a patent dispute. 


    Allergan agreed to sell & lease back the patents for Restasis to the Saint Regis Mohawk Tribe.  The tribe will be paid $13.75 million by Allergan to claim sovereign immunity as grounds to dismiss a patent challenge filled by generic drug makers: Teva; under the AIA is the Leahy-Smith America Invents Act of 2011 which aimed to modernize the patent system.  A key provision of AIA was the creation of the Inter Partes Review process which third parties can use to contest the validity of a patent (for not being novel & non-obvious) within 9 months of its issuance to the Patent Trial and Appeal Board. 
    .  The lease back will provide the tribe with $13 million annually as long as the patents remain valid. 

    Allergan's Brent Saunders siad that the company made the move to avoid what he described as the "double jeopardy" of having the same issue heard in two venues.  "We did this to really make sure that we can defend these patents in only one forum." 

    Restasis 2nd quarter 2017 revenues were $336.4 million. 




    Botox was Allergan's leading product by 2017 2nd quarter revenue. 




    The novel legal strategy was devised by Shore Chan DePumpo, following a similar successful defense they developed for the University of Florida which owned a patent being challenged by Covidien (now part of Medtronic).  Shore Chan argued successfully to the patent review panel that the University was an arm of the state of Florida and had sovereign immunity. 


    Allergan's patents on Restasis are being challenged under the AIA and in US District Court in Texas.  If the court finds the patents invalid the AIA avoidance strategy will be irrelevant. 


    Oct 2017 NYT Pfizer Considers Spinning Off or Selling Consumer Health Unit

    Amie Tsang reports the pharmaceutical giant Pfizer said [] that it had begun a strategic review of its consumer health care division that could result in the consumer health unit[] being spun off or sold. 


    The 2016 $3.4 billion revenue unit's products include Advil, Centrum supplements and ChapStick. 



    Ian Read has been reviewing Pfizer's business strategy alignment for over a year.  An extensive evaluation resulted in Pfizer concluding that it should not split up its Innovative Health and Essential Health divisions into separately traded companies. 


    Ian Read commented "Although there is a strong connection between consumer health care and elements of our core biopharmaceutical businesses, it is also distinct enough from our core business that there is potential for its value to be more fully realized outside the company." 





    Aug 2016 NYT Pfizer Pays $14 Billion To Expand In Oncology

    Andre Pollack and Lesie Picker report Medivation, which makes the big-selling drug Xtandi to treat prostate cancer is cancer of the prostate gland.  Genomics detected several common DNA variants associated with increased risk of prostate cancer.  Dr. Francis Collins explains that a cluster of these risk variants lies in a stretch of 1 million DNA base pairs on chromosome 8.  The cluster contains seven or more risk variants, each of which can raise the risk of prostate cancer by 10 to 30%.  The high risk variants occur more frequently in African-American men than European or Asians.  African-Americans die from prostate cancer at more than twice the rate of Europeans.  Research in mice may explain a link between obesity and prostate cancer (Jan 2018).  The average diagnosis is at age 66.  Worldwide in 2012 there were 1.1 million cases from which 307,000 died.  A common life-saving (Feb 2017) treatment is androgen deprivation therapy, but it has worrying side effects.  Various classically defined types of cancer can occur.  The most common is adenocarcinoma associated with the epithelial gland cells that generate seminal fluid.  Epithelial cell differentiation potency makes these significant cancer agents.  Other very rare types of cancer that can start in the prostate are:
    • Sarcomas
    • Small cell carcinomas
    • Neuroendocrine tumors
    • Transitional cell carcinomas
    , has finally found its buyer in a fellow American drug maker, Pfizer.  The deal is subject to regulatory clearance and Medivation shareholder agreement to tender their shares. 

    Medivation put its self up for auction to avoid a board takover threatened by Sanofi, after its bid for the company was rejected (Apr 2016). 

    Most pharmaceutical giants are pushing into oncology to leverage:
    Pfizer's oncology strategy has been weak until Ibrance became a hit.   Now Xtandi will add another hit, although the global sales will be shared with Astellas Pharma.  Xtandi competes with Johnson & Johnson's Zytiga and J&J's follow on drug development apalutamide is a non-steroidal androgen receptor competitive inhibitor developed to treat prostate cancer.  It is structurally similar to enzalutamide.  .  And Medivation's immuno-oncology uses the immune system to treat cancer.  Cancer cells often have different molecules on their cell surface.  Studies have shown that genetic signatures of tumors can help predict which patients will benefit from treatment with PD-1 checkpoint inhibitors.  Checkpoint inhibitor based treatments aim to make the immune system target these antigens.  Clinical trial results indicate they are prolonging lives - even if only by a few months.  They have reduced side effects relative to generic chemo therapy.  There are three main strategies: cellular, antibody and cytokine.  
    • Antibody therapies target receptors including CD20, CD274, CD279 and CTLA-4.  These therapies include MABs: Alemtuzumab, Ofatumumab, Rituximab; and may induce checkpoint inhibition.
    • Cellular therapies have typically involved removing the immune cells from the blood or a tumor, activating, culturing and then returning them to the patient.  Trials of these CAR and TCR therapies are proceeding, with some significant problems (Jul 2016). 
    • Cytokine therapies enhance anti-tumor activity through the cytokine's regulation and coordination of the immune system. 
    • Vaccines, including Sipuleucel-T for prostate cancer and BCG, classically a vaccine for tuberculosis, which is used for treating bladder cancer. 
    drug developments may allow Pfizer to attack BMS and Merck's leadership aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
    positions.  Its late stage PARP Inhibitor stops single stranded repair of DNA.  In cells with BRCA1/2 and PALB2 mutations this additional DNA repair inhibition will increase the likeliood that the cancer cells will die. 
    may allow Pfizer to attack AstraZeneca's breast cancer is a variety of different cancerous conditions of the breast tissue.  World wide it is the leading type of cancer in women and is 100 times more common in women than men.  260,000 new cases of breast cancer will occur in the US in 2018 causing 41,000 deaths.  The varieties include: Hormone sensitive tumors that test negative for her2 (the most common type affecting three quarters of breast cancers in the US, BRCA1/2 positive, ductal carcinomas including DCIS, lobular carcinomas including LCIS.  Receptor presence on the cancer cells is used as a classification: Her2+/-, estrogen (ER)+/-, progesterone (PR)+/-.  Metastasis classes the cancer as stage 4.  Genetic risk factors include: BRCA, p53, PTEN, STK11, CHEK2, ATM, GATA3, BRIP1 and PALB2.  Treatments include: Tamoxifen, Raloxifene; where worrying racial disparities have been found (Dec 2013).  International studies indicate early stage breast cancer typed by a genomic test: Oncotype DX, MammaPrint; can be treated without chemotherapy (Aug 2016, Jun 2018) lead (Lynparza). 

    AbbVie similarly acquired Pharmacyclics for $21 billion in 2015 and Stemcentrx for $5.8 billion in Apr 2016


    Jan 2019 NYT Bristol-Myers to Acquire Celgene in Deal Worth $74 Billion

    Tiffany Hsu & Katie Thomas report Bristol-Myers Squibb said [] that it would buy Celgene, a maker of cancer is the out-of-control growth of cells, which have stopped obeying their cooperative schematic planning and signalling infrastructure.  It results from compounded: oncogene, tumor suppressor, DNA caretaker; mutations in the DNA.  In 2010 one third of Americans are likely to die of cancer.  Cell division rates did not predict likelihood of cancer.  Viral infections are associated.  Radiation and carcinogen exposure are associated.  Lifestyle impacts the likelihood of cancer occurring: Drinking alcohol to excess, lack of exercise, Obesity, Smoking, More sun than your evolved melanin protection level; all significantly increase the risk of cancer occurring (Jul 2016). 
    -fighting drugs, in a cash-and-stock deal valued at $74 billion, the first major pharmaceutical deal of 2019. 

    The combined organization will produce nine blockbuster drugs with sales of more than $1 billion.  It is hoped that combining will support their work in oncology, cardiovascular disease refers to:
    • Conditions where narrowed and blocked blood vessels result in angina, hypertension, CHD and heart attacks and hemorrhagic/ischemic strokes.  Mutations of the gene PCSK9 have been implicated in cardiovascular disease.  Rare families with dominant inheritence of the mutations have an overactive protein, very high levels of blood cholesterol and cardiac disease. Other rare PCSK9 mutations result in an 88% reduced risk from heart disease.  Inflammation is associated with cardiovascular disease (Aug 2017). 
    , immunology and inflammation. 

    BMS CEO & Chairman Giovanni Caforio said "We are very excited about this." 

    Celgene:
    BMS's Opdivo sales have lagged Merck's Keytruda



    Mar 2019 NYT Big Pharma's Hunt for New Drugs Is Pushing Up Cost of Deals

    Stephen Grocer reports acquisitions of American biotech companies are surging, and so are the prices that buyers are willing to pay. 

    In 2019:



    Nov 2016 NYT Rolling Up Deals While Rates Are Low And Confidence High

    Steven Davidoff Solomon reports world-changing corporate transactions just seem to keep coming.  It won't last, however. 

    Huge numbers of multibillion-dollar deals, $329 billion in the US, have been announced in October 2016:
    • AT&T's acquisition of Time Warner for $85.4 billion, to gain control of content to compete with Facebook and Google
    • General Electric with Baker Hughes. 
    • BAT $47 billion acquisition of Reynolds American. 
    • Qualcomm's $38.5 billion acquisition of NXP semiconductor.  
    Earlier in the year was the $56 billion acquisition by Bayer of Monsanto.  Microsoft acquired LinkedIn for $26.2 billion to maintain its Internet reach.  And soon should come the restructuring of Viacom and CBS. 

    Davidoff Solomon notes that cheap money (interest rates at a 400 year low and liquidity looking for any yield) is the conventional explanation.  Hence AT&T can easily borrow $40 billion.  He concedes the banks are limiting their leverage in lending.  But he asserts that confidence is high since all the major trading blocks are exhibiting stability.  He reasons that in this low growth economy is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche.  Economics models economies.  Robert Gordon has described the evolution of the American economy.  Like other CAS economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers. 
    , with massive technological transformations CEOs are using consolidation to justify their positions.  The acquisitions are an easy way to grow, capture products/services and reduce competition before additional anti-trust rules are introduced in response to the development of oligopolies: 
    • The pharmaceutical giants captured drugs rather than developing them. 
    • Snap's high valuation IPO will drive more activity in high technology. 
    But Davidoff Solomon worries that inefficient conglomerates are returning which may destroy capital if caught in a bursting bubble, as interest rates rise, a market destabilizes or another catastrophe occurs. 


    Nov 2016 NYT Swimming in a Rising Tide of Mortgage Debt

    Paula Span reports the proportion of older adults still paying off homes is climbing, as is what they owe. 

    Prior to the housing bubble and consequent financial crisis of 2008 a majority of older couples: 65 year old husband and 62 year old wife; would be expecting to retire in their fully paid for house.  But now increasing percentages are amassing ever more mortgage debt and see selling their house as the only way to escape. 

    Two recent studies: Urban Institute, Boston College group; indicate:
    • A growing proportion of older homeowners (35%) now carry mortgage debt.  This is particularly true of Black and Hispanics without college degrees. 
      • Three quarters of older Americans are home owners.  The homes are their largest capital asset.  But they have little equity because of second loans, or lines of credit, taken out on the houses. 
    • The average amount of mortgage debt has doubled ($82,000).  
    In 1998 less than 3% of homeowners were "under water."  But by 2012 8% are under water.  And 19.5% now owe 80% of the value of their house. 

    Economists is the study of trade between humans.  Traditional Economics is based on an equilibrium model of the economic system.  Traditional Economics includes: microeconomics, and macroeconomics.  Marx developed an alternative static approach.  Limitations of the equilibrium model have resulted in the development of: Keynes's dynamic General Theory of Employment Interest & Money, and Complexity Economics.  Since trading depends on human behavior, economics has developed behavioral models including: behavioral economics. 
    are looking at if this situation is likely to persist over time or is a onetime phenomenon. 

    It is already clear that the people in this situation are avoiding retirement. 


    Nov 2016 NYT Wells Fargo Asks Federal Court to Force Customers to Arbitration in Fake Accounts Cases

    Reuters report Wells Fargo has asked a Federal District Court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court, according to legal documents. 

    Wells Fargo files the motion in the Utah US District Court in response to the first class-action lawsuit about it opening up 2 million deposit and credit-card accounts in customers names without asking their permission. 

    Wells Fargo has agreed to pay $185 million in penalties and $5 million to customers so far.  And then CEO John Stumpt was eventually forced to resign. 

    In response to questions from lawmakers, Wells Fargo wrote it would stand by its arbitration policy but is offering free mediation services for affected customers.  Mandatory arbitration rules inserted into account-opening agreements prohibit customers from joining class actions or suing Wells Fargo. 

    In Apr 2011 a Supreme Court decision validated the practice of mandating arbitration. 

    Mandatory arbitration is beneficial to large enterprises since it:
    • Denies customers legal protection of a court preceding including a right of appeal
    • Helps conceal corporate misconduct from the public and regulators with no documents or hearings becoming public. 
    • Disuades customers with small claims if they have to fund an arbitration lawyer
    • Cases do not set legal precedents
    In 2015 a court dismissed a lawsuit against Wells Fargo because the customers had signed arbitration clauses when they opened their accounts. 

    The CFPB is the Dodd-Frank act's Consumer Financial Protection Bureau. 
    is developing rules to prohibit banks, credit card issuers and other companies from forcing customers to arbitration.   The Trump administration is likely to restrain the CFPB. 





    Apr 2016 NYT E.C.B. Is Worried, but Not Enough to Try 'Helicopter Money'

    Jack Ewing reports with the eurozone is the group of countries within the EU that use the euro currency.  Economic decisions regarding the euro are centralized through the Eurogroup. 
    economy is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche.  Economics models economies.  Robert Gordon has described the evolution of the American economy.  Like other CAS economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers. 
    still listless, despite the aggressive stimulus measures being taken by the European Central Bank, economists is the study of trade between humans.  Traditional Economics is based on an equilibrium model of the economic system.  Traditional Economics includes: microeconomics, and macroeconomics.  Marx developed an alternative static approach.  Limitations of the equilibrium model have resulted in the development of: Keynes's dynamic General Theory of Employment Interest & Money, and Complexity Economics.  Since trading depends on human behavior, economics has developed behavioral models including: behavioral economics. 
    at a conference [in Frankfurt] were full of advice on aggressive next steps. 

    E.C.B. officials pushed back against one proposal arguing that helicopter money was a thought experiment by Milton Friedman to apply when conventional policy tools no longer work.  Central banks could print money and toss it out of helicopters to eager citizens who would spend the money and stimulate the economy.   was not even a discussion topic. 

    The central bank acknowledged its deep concerns about the risk to the eurozone's situation.  It recently released a summary that noted it was alarmed that inflation showed a decline even without factoring in energy prices.  "The decline recorded in February was a new element."  "Eurozone growth momentum would be slower and inflation lower for longer than previously anticipated."  The bank does not expect inflation to reach 2% until after 2018. 

    The bank has already taken measures to stimulate the zone including:
    • Printing money to buy bonds issued by corporations
    • Offering to pay banks to lend money. 
    • Penalizing banks for hording cash. 
    Economists doubt the current measures are enough to counteract the global slowdown. 

    Charles Bean, of the LSE, said Britain, arguably, has already distributed helicopter money.  The Bank of England printed money to purchase government bonds, and the government in turn has made tax cuts.  





    Jul 2018 NYT Fed Plays Down Trade Woes and Suggests Rosy Economic Outlook

    Jim Tankersley reports Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
    • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
    • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
    • Federal Advisory Committee with twelve members
    • Single US currency - the Federal Reserve Note. 
    officials presented a rosy economic report card to Congress on Friday, playing down risks to growth from trade tensions and declaring that the financial system is "substantially more resilient than during the decade before the financial crisis." 

    Inflation was high enough that it is no longer seen as indicating a risk, is an assessment of the likelihood of an independent problem occurring.  It can be assigned an accurate probability since it is independent of other variables in the system.  As such it is different from uncertainty. 
    of deflation. 

    The semiannual Monetary Policy Report asserted:

    2008 Mar A fed bailout crosses a line

    NYT Gretchen Morgenson
    Potential consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess:
    • Weaker currency
    • Rampant inflation
    • Continuation of the slow bleed we have witnessed at banks and brokerage firms over the last year. 
    Or all of the above?  Morgenson argues we don't need to guess because it will be answered soon, since the Federal reserve by agreeing to guarantee a 28-day credit line to Bear Stearns, by way of J P Morgan Chase, conceded last Friday that no sizeable firm with a book of mortgage securities or loans out to mortgage issuers could be allowed to fail right now.  It was the most explicit sign of the new Fed doctrine which has already forced the marriage of Bank of America and Countrywide

    Morgenson argues that Bear Stearns is ill deserving of help with its winner take all high risk positions that have failed.  However, that is part of the issue - a