Published CommPro.biz 2014.02.04

The Bad Apples

Every year Harris Interactive surveys Americans on our level of trust in a group of nineteen industries. Over the last ten years a dismal outlook has gotten worse. Harris asks, "Which of these industries do you think are generally honest and trustworthy – so that you normally believe a statement by a company in that industry?" Not a single industry met that standard in the minds of even half of Americans, not one in the last decade. Most businesses are trustworthy, it’s the few bad apples that drag everyone down

Supermarkets did best at 30%. That means 70% of us do not trust supermarkets. The list gets worse quickly. All but one of the remaining 18 industries scores in the teens or a single digit. Oil and tobacco companies are at the bottom of the list. Oil comes in at 4%, putting their distrust level at 96%, tobacco scores 3% putting their distrust level at 97%. Fitting for a couple of industries that have fed the grim reaper millions of people around the world? Tobacco is at the bottom. We can’t imagine how anyone could have a positive outlook when it comes to tobacco. It’s more like a criminal enterprise that has killed more people than all the dictators of the 20^th century combined. Imagine, more than the big three –Mao Zedong, Jozef Stalin and Adolf Hitler– plus all the minor tyrants of the last century. 

Hospitals came in second at 28%, dropping from 36% in 2012, a result of the wide range of healthCARE entities that have become healthGreed entities. Banks come in at number four with a trust level of 18%. That means eight out of ten Americans have no trust in anything our bankers say. In 2004 the banks had a 40% trust level. That collapsed with the recession and recognition by the public that the monster banks are out of control. We would guess the 18% who trust banks are referring to their local community bank. In the same poll the number of Americans who say banks should face stronger regulation jumped 50% in the last decade. No surprise given what’s happened since the banksters lobbied away the regulations that protected us for almost a century. 

Industries sharing a low trust level and support for more regulation are topped by two that are literally killing us, tobacco and oil. The health care industries follow close behind. Driving costs out of control are Big Pharma, insurers and hospitals focused on money in this industry group that is immune to competition. Any fix is being blocked by those we elect to protect our interests. Our legislative bodies, in the states and at the national level are controlled by the lobbyists who pour money into their pockets. That leaves all of us out in the cold, spending more by far than on healthcare any nation on earth and getting third world outcomes.  

"Am I wrong?"--"Am I Nuts?"--

"What do you think?"--"Do you agree?"

Published in CommPRO.biz 2014.01.24

 

Big Pharma Has Congress 

by the Jugular

Andrew Witty, Glaxo Smith Kline CEO, announced last month (December 16) that Glaxo will stop paying doctors to promote their products and stop paying their sales representatives based on the number of prescriptions doctors write. It would be nice to think that this action results from an epiphany on Glaxo’s part. It’s more likely a duck-and-cover move triggered by a nasty bribery mess in China and an upcoming Affordable Care Act disclosure requirement.

It is, however, welcome. This, we hope, will trigger moves (don’t hold your breath) by other Pharma Monsters to fall in line. Pay-to-prescribe -along with Pharma advertising- make up two of the more egregious practices Pharma uses that drive healthcare costs sky high in the United States. The biggie by far is the hold they have on our Congress. Their “K” Street lobbyists lay bucks by the bushel on members of the Congress. In return, those sworn to work in our interest instead work for the drug companies.

By manipulating patent laws and exempting Pharma from anti-trust laws, drug companies have driven costs for their products beyond belief. A drug that costs a few hundred dollars to make, costs a desperate cancer patient close to a hundred grand for each dose. The patient goes bankrupt and the taxpayers pick up the tab. There is no other drug. The doctor says take it or die.

Pharma would have us believe that these drugs cost over a billion dollars to bring to market. A cruel and blatant lie; a study published in the British Medical Journal shows that the average $1.3 billion dollars the drug companies claim it costs, is actually about $90 thousand dollars. The rest is part BS and mostly marketing expenditures. Worse, most of their research funds go to tweaking existing drugs in an effort to stretch out patents on their best sellers.

We keep hearing about how much cheaper it is to buy drugs in places like Canada. Why is that? Because they have a single payer healthcare system that negotiates lower prices. In America, our Congress has forbidden Medicare to do anything like that. So a nation with fewer people than live in California can muscle the drug companies and we can’t. To make it worse the Congress has so limited fraud investigative funds that Medicare catches only a fraction of the bad guys. Like one doc in California who games the system by prescribing name-brand drugs to thousands of low income patients. Drugs’ costing as much as 30 times equally effective generic versions. There are thousands of these docs milking Medicare for Big Pharma and costing the taxpayers billions.

Big Pharma’s pill bill is killing us. Government controlled healthcare serves over half of Americans. With that kind of clout we can negotiate lower costs. Lower costs in drugs, lower costs in every aspect of our out-of-control healthcare sector. We spend more per-capita than any other nation on earth and yet our outcomes don’t even rank in the top 25%. We need to clean out the Congressional medicine chest.

"Am I wrong?"--"Am I Nuts?"--"What do you think?"--"Do you agree?"

Published in CommPRO.biz 2013.08.28

The Customer Is Not Always Right

Let’s review – America has been struggling to rise out of what has been called the Great Recession. A recession brought on by a systematic dismantling of safeguards that protected us for decades after the Great Depression. Engineered by lobbyists working for Wall Street banks and the super rich –the 1% of the 1%– this tearing down of the walls was not intended to cause a recession, just to allow those at the top to make more money.

The recession was an unintended consequence. The big banks had been buying up mortgages to create bundles that investors, pension funds and the like could stash away and collect interest on month after month. What could be safer, we all know real estate never loses value; it always goes up, right? Besides, the banks had these packages checked out; the credit rating services marked them AAA.

This new idea caught on like wildfire. Pretty soon the supply of mortgages wasn’t keeping pace with the need. So the banks pushed the mortgage brokers down the line for more and more mortgages. The brokers urged people to buy, coaching them and fudging the numbers when they didn’t qualify. The banks learned to pile the mortgages with the not-so-nice on the bottom. The rating services were overwhelmed. Under intense pressure from the banks to anoint the investment packages with top ratings, it appears that the services buckled. Soon packages the bankers were calling “Crap” were gaining AAA ratings and being sold by those same bankers to trusting customers.

To understand why the rating services would hang a AAA on what the bankers called “Crap,” we have to look at their business model. The banks asking for AAA ratings paid for them. The banks are the rating service’s customers. They feared that saying no to the banks would just send them to another rating service. They anointed the “Crap” AAA to keep the bucks coming through the door.

That’s pretty much what the Justice Department is saying that Standard & Poor’s did when they sued the rating agency for $5 billion. The DOJ and 14 states are suing S&P, the largest of the rating services. The other two, Moody’s and Fitch, are likely to be next. The $5 billion suit is moving through the California court of District Judge David Carter. S&P rated $4 trillion in various bank investment vehicles over the four years leading up to the collapse.

While S&P is facing the $5 billion lawsuit, keep in mind that the real bad guys are the handful of monster banks that put together the piles of crap and coerced an AAA out of the rating services. What’s more the same banks are back at it– gambling wildly secure in the knowledge that we will have to bail them out again when they stumble. We like to think that doing the right thing is easy. It’s not, what’s easy is taking that first step in the wrong direction

Published in CommPro.biz 2013.04.30

Whose $$$$s Anyway?

Two decades ago, John O’Shea, a National Institutes of Health (NIH) scientist at the taxpayer supported entity, was pursuing JAK3, a protein that attaches itself to immune cells. Dr. O’Shea and his team at the NIH thought JAK3 might be used to fight autoimmune disease, specifically arthritis. In 1993 the NIH contacted Pfizer to see if the Pharma giant might have an interest in partnering with Dr. O’Shea in this research. Pfizer said “no thanks” because under the rules in place back then they would have had to share any resulting revenue from the collaboration with the taxpayers who fund the NIH.

Big Pharma’s “K” Street lobbyists had that requirement removed in 1995 and so Pfizer signed on in 1996. Fast forward twenty years and the FDA (Food and Drug Administration) approves Pfizer’s new arthritis medication Xeljanz® (tofacitinib citrate). Three cheers all around says the NIH for the teamwork made possible by Dr. O’Shea’s discovery of JAK3, and his team’s collaboration over twenty years with the folks at Pfizer that led to Xeljanz®.

Big surprise, Pfizer doesn’t see it that way. They say that the good doctor’s work moved into the public domain when it was published in 1994, that anybody could have used it. So far as the cooperative research with Dr. O’Shea goes, Pfizer didn’t end up with anything they could patent, so it was of no value. It was all the work and the more than a billion bucks Pfizer invested that resulted in a new arthritis drug, Xeljanz®. Pfizer is charging Medicare over $2,000 a month for each and every patient on Xeljanz®, a mind-numbing $25,000.00 taxpayer bucks a year.

This whole scenario is so outrageous you wouldn’t believe it if you didn’t know it’s true. A private entity takes the work of a government researcher; brushing a deal aside they made to work with the NIH. They take all the credit for developing this drug, adding the standard boilerplate claim that they sunk a billion bucks into the effort, yada, yada, yada.

A figure debunked last year in a British Medical Journal study. All these billion plus drug development claims start with a half billion they might have earned had they invested in some once-upon-a-time index fund over the same twenty-year period. Then there is $300-$400 million they get in tax credits. At the end of the day Pfizer has maybe a couple hundred million in Xeljanz®, no small amount but nothing close to a billion. Talk about corporate welfare or voodoo economics. It’s time for this nonsense to stop. Without Dr. O’Shea’s team at the NIH there would be no Xeljanz®.  We want our share of the bucks.

The stranglehold Big Pharma has over the Congress is shameful. From endorsing the theft of taxpayer funded science to an outrageous ban that prevents Medicare and Medicaid from negotiating what they pay for drugs, the corrosive impact of corporate spending in our democratic process is overwhelming. It has to stop.

Banking 101

The “K” Street Banker Boys are pouring millions into the political arena in a desperate effort to hold on to the massive Las Vegas style gambling enterprise that characterizes too much of our banking sector today. Banking differs from Vegas in two important ways, however.

1)  When the bets the Wall Street Bankers place against the suckers (AKA “us”)  go against them, they just run to the taxpayers (us) who cover their losses. So they can’t lose. That’s too-big-to-fail banking.

2) The banks managed to get themselves immunized from the state lottery laws, so they can bet on anything. For instance, they could legally bet whether you will make your mortgage payment on time when they have no connection to you or your mortgage.

This set some of our biggest financial institutions onto a path focused on profit and the outrageous bonus structure that this gambling hall culture has spawned. A culture defended haughtily by JPMorgan Chase “Whiner-in-Chief” Jamie Dimon, who chose newspapers to justify the banker’s insane paychecks.

Duded out in his trademark 1950’s “Ducktail” do, Jamie is quoted, “Obviously our businesses have high capital and high human capital,” implying that nobody in newsprint land could compare. What nonsense. And, their capital –cash, that is– is not theirs, it’s ours, the billions we gave the banks to stabilize our economy. So what are they doing with our money? They are rolling the dice again, confident that we will bail them out again, when the dice come up snake-eyes again.

 “Proprietary Trading,” as the bankers like to call it, was a principle cause of the recession. This practice is a recipe for disaster. Here and there the milk-toast mild Dodd Frank Act does have a tooth left. The one dealing with proprietary trading, called the Volcker Rule, is facing a firestorm from the banking lobby. It would pretty much take gambling out of the banking business, push the bankers back into the real world where they can fail, and when they do, fail without taking the country down with them.

When Bill Clinton signed “The Commodity Futures Modernization Act” opening up Wall Street to gambling, Washington unleashed a chain of events that resulted in the collapse of the world economy eight years later. Wall Street began leaping one ethical barrier after another and today everyone but the bankers is suffering.

The folks who actually toil day in and day out for a living, like those struggling to find a workable journalism model, shouldn’t have to put up with sneers from a second-rate punk like Jamie Dimon. Banking at every level has but one reason to exist, to provide the capital that sustains our economic life. Dimon and his lot are clueless when it comes to that kind of banking.

What's Fair

What's Fair

 

A Bloomberg Businessweek focus on wealth inequality (11.16.11) came up with some stunning conclusions. Using Census numbers –and a wide variety of past and present expert opinions– they point to the existing and growing disparity of wealth in America and conclude that it is bad for our economy. The gridlock we are experiencing leads those who are slipping behind to conclude that they have no hope, that they are at the mercy of the rich. The two ends of the economic ladder slip into bitter blame game positions.

Here’s where this game goes wrong for the rich. Income inequality leads to social instability. That leads to the belief that the system (read Stock Market) is rigged in favor of the ultra rich and you lose as much as a generation of investors. They point to the stock market following the crash in 1929. It took until 1954 for it to regain its pre-depression level, more than a quarter century. One wonders how long an extended downturn of that nature might last if we do not find our way out of the gridlock now engulfing us. Unlike the ‘30s, ‘40s, and ‘50s, in the era of the 401k etc. there are lots of middle class folks with a stake in the stock market these days.

We keep hearing that the rich create jobs. But the research shows that jobs are created by small businesses. Those folks are not the rich; they are what’s left of the middle class. They are looking for loans to grow and hire, but the banks that we all bailed out are not lending to small businesses. Instead they are back in the risky games that got us into this mess. Worse, small businesses are paying the high corporate taxes –not the big guys.

Speaking of taxes, it makes no sense for the poor and middle class to shell out a bigger piece of their income than the rich. Everyone seems to understand this except those in DC who hold to the job creation myth, and of course the rich who haven’t been able to do the math. When you talk to the savvy wealthy folks, you find that they favor a more equitable tax system. They understand that you can’t build a healthy economy on the backs of the poor. The smartest investor on the planet, Warren Buffett, figured it out years ago. No matter how big your slice is, you can’t do well if the pie keeps shrinking.

In the meantime, if the rich are not creating jobs with their wealth, what are they doing with their money? Well, their investments seem focused on commodities, where they speculate and drive up prices on food and oil; thanks for high gas prices. And they are driving the luxury market; if it’s expensive, they’re buying. Even the price of first class air travel – would you believe aircraft fitted with showers and private compartments? After all you have to look sharp when you arrive in some exotic locale. And what’s $15,000 or $20,000 for a plane ride. There are some pretty obvious ethical issues in all this. Too bad they don’t seem to matter much in our world where the Lobbyists rule in DC. How many of them do you think work for the middle class and the poor?

Surely, You Jest?

High-frequency traders account for between 60% and 80% of the couple billion trades on the NY Stock Exchange every day. They are also deep into commodities and other markets. Using computers and sophisticated algorithms these modern-day “Highwaymen” ride the capital market highways and byways, ducking in and out in nanoseconds to pick up a couple pennies here and there.

And they gallop alongside large institutional block-traders pushing the price up on the block, cashing in when it executes. The “Highwaymen” are long gone with their profits when the pricing drops. The institutional trader (read- Grandma & Grandpa’s pension fund) is left holding an over-priced stock paid for with the hard earned savings of their pensioners. While it isn’t always the old folks who suffer, at the end of the day the high-frequency traders, day-traders, and other bottom feeders have pumped up the prices paid by regular investors-- the “losers,” as those who game the market call them.

None of this has anything to do with the stated purpose of the markets, putting  funds into the hands of business, funds to create jobs. The high-frequency folks, however, are emerging into the daylight. They showed up first on “K” Street doling out hundreds of thousands of dollars to candidates and lobbyists. Well north of a million and a quarter last year according to published reports. Big bucks, but well within their means, given the six billion they are reported to have skimmed off the markets last year.

The high-frequency folks have also laid claim to a positive impact on the market. They feel they’ve made it more competitive and lowered trading fees. They have to be joking. Experts argue that by using their speed to duck in and out of the market, they have taken the edge off competition and destabilized the market. And it seems much more likely that trading fees have been driven down by online trading and the brokerage houses featuring low fees.

None of the fun-and-games trading schemes that have emerged since the markets were opened up to pure gambling plays have anything to do with providing the capital American business needs to create jobs. Laws exempting traders from gambling laws and allowing banks to wander out of their traditional role created this mess, and triggered the economic collapse we are still staggering from.

Restoring sanity to this sector is no big secret. Repeal the gambling exemptions, and set up tax rules that will encourage capital development. Start with a 95% tax on gains from investments held less than a day, 80% on those held less than a week, 60% on those held less than a month, and so on until those held more than a decade are tax free. Let’s take our capital markets out of the hands of the Highwaymen and their ilk and return it to “Investors” and the companies they own. Let’s focus on what’s best for our people in the long term, not the next quarter. Let’s put the market to work providing capital for our economy and jobs for our people.