26 August 2016

Robber Barons

I'm not a twit, but some who are post read access to their feeds. Adam Feuerstein, enfant terrible of Big Pharma and Fake Pharma (those many nano- and micro-cap companies that only take money and deliver nothing), does so.

He's been talking about Mylan/EpiPen and some related topics in the last couple of days. It's a hoot.

Have a gander.

24 August 2016

Out of the Mouths of Bastards

Regular reader may recall earlier musings where I put words in the mouths of Pharma CEOs with regard to monopoly pricing granted by FDA in the form exclusivity for some drugs for some period of time: "here's a life saving drug; so give me all your future life's earnings". Hyperbole, a bit.

Well, here comes Shkreli, again, weighing in on the EpiPen situation:
"Mylan sort of found themselves in my shoes in the sense that they bought a company, that company had a lot of old medicines, a lot of those old medicines had old prices that weren't reflective of modern prices," Shkreli said. "Three hundred dollars, they've been raising it slowly about 15 percent every six months which is relatively slowly -- not as fast as what I did. My guess is Mylan probably thinks that they could sell this thing for $1,000 a syringe. And with, now with these news reports, they probably won't."

Mylan paid a stupid price for the rights to EpiPen, and the rest of us get to pay a stupid price. They didn't invent the device or the drug that's dispensed, they just bought in both. And, by the way, the CxO crowd at Mylan have done rather well.
Proxy filings show that from 2007 to 2015, Mylan CEO Heather Bresch's total compensation went from $2,453,456 to $18,931,068, a 671 percent increase. During the same period, the company raised EpiPen prices, with the average wholesale price going from $56.64 to $317.82, a 461 percent increase, according to data provided by Connecture.

Vote for The Donald. He'll fix the problem, since it's the fault of all those Mexican rapists Obama has let in.

23 August 2016

I Have a Warrant For Your Arrest

A, allegedly large, subset of mainstream pundits muse that Joe Sixpack hasn't been active in the stock market since The Great Recession. Among the reasons given is that Joe figures the game is rigged against him, so why bother? To some extent Joe's right. One of the ways that rigging happens (mostly in small cap companies, to be fair to Big Capital) is how secondary offerings are structured. Among other things, they typically price from a bit to a lot below the current share price, and there's always the suspicion that the buyers knew enough ahead of time to short the stock and use the secondary shares to cover. Pure profit for a couple of days holding. Tough to prove, of course, but if it looks like a flock of ducks, it likely is a flock of ducks.

Another way is through attaching warrants to the secondary. Warrants, for those not in the know, are options to buy shares at a specified price for some term in the future. Often, but not always, the warrants are immediately effective. The trick to warrants: the specified price isn't carved in stone. The company can amend the deal any time it sees fit.

Here's an excellent example.

Original price: $2.25 to $6.00 per share
Today's price: $.35 and replacements at $.41

Such a deal. Of course, the share price of the company has been down below $.50 for some time.

19 August 2016

My Lack of Interest Will Continue

Once again, a pundit explains the Fed's lack of balls. As if, raising interest rates is somehow a good and macho thing to do. It ain't. On a similar vein (I'll explain in due course), is a semi-review of Klosterman's latest Right Wing jeremiad.

To explain why interest rates are low, one need only look at the amount of moolah sitting in corporate coffers. A difficult number to track, since it isn't gathered de jure, but it's well into the multiple trillions of $$$. And, while the Fed stopped its QE exercise a long time ago, the ECB and BoJ and BoE are all easing. The problem, asserted in these endeavors many times, is that monetary policy/actions is pushing a string from the point of view of economic growth. Or, as in old western movies, "you can lead a horse to water, but you can't make him drink". Why aren't the corporations, the "job creators", going hog wild building new plant and equipment? With money so cheap, the thought goes, the CxO crowd would realize that opportunity is knocking on the door, and seize the day. Hasn't happened.

Why?

Well, this is where Klosterman comes in. His book, according to the reviews, argues that human knowledge has always been wrong in the past, so it must be wrong now. Klosterman doesn't know his ass from an asymptote. New knowledge replaces old myth, nothing more. Comets don't really cause droughts, fur instance. As we've gathered more knowledge, fewer myths offer explanation. Well, except to Right Wingnuts, who only believe myths. And, of course, Einstein didn't "replace" or "prove wrong" Newton. Einstein, et al, worry about the atomic world, while Newton worried about the macro world. It was Newton, not Einstein, that got us to the moon and Mars and such. Except providing the abstract tools (and that wasn't Einstein, but Rutherford who provided the concrete ones) for building the A-bomb.

So, we see interest rates in the real world not budging, and knowledge by some accounts going obsolete. Why are interest rates refusing to rise? It's Econ 101, children. There's more moolah sitting idle than is demanded by business to build out new plant and equipment. And the reason for that is we're on that pesky asymptote of knowledge where there just isn't a steamboat or internal combustion engine or transistor or ... to soak up moolah for investment. The semiconductor vector is about spent; on two fronts. First, node size is approaching the limit of reliability at the minimum number of electrons needed for deterministic execution. No, quantum computing is another cold fusion. And second, battery tech hasn't provided much increase over the last century. We've already exploited the lightest element we know we can control; that is, without burning or blowing up. Smaller nodes mean, to some point, lower power usage (offset by extra power needed to control leakage and such). We're near the stage where smaller doesn't mean lower total power. Until some chemist figures out a battery with at least 2 times current energy density, that part of the equation won't change. Again, that pesky asymptote.

Raising interest rates by fiat, that is, absent increase in real demand for investment, is simply the Damn Gummint passing taxpayer moolah to the 1% in order to satisfy their demand for idle income. That would be the end of western civilization.

"A man's got to know his limitations."
-- Dirty Harry

12 August 2016

Shake Your Booty

OK, so it's not new, but once again (with feeling): events drive data, not the other way round. Of course, that's human events, particularly financial ones. Comes along the most most spectacular story in the world of quant.

Why? Bill Miller is a dinosaur, in that he's been able, on the whole, to pick good stocks. But this coda to his career is just too much:
When pitching investors, you normally don't want "hedge fund" and "earthquake" in the same sentence. But Bill Miller, already known for quirky investing methods, is starting a hedge fund that will make bets based in part on a computer model designed to predict natural disasters.

This is totally nuts, as more than a few other experts quoted in the article state. The probable macro effect of an earthquake of sufficient magnitude in a sufficiently important city, Los Angeles for the sake of argument, can be gauged. But Miller was blind to Viagra at the Home some years back, and at that time the data showing the folly of the market was in plain sight.
He said, "Here we make decisions
And we trade commodities
So if you tell me where there's famine
I can make you guarantees"
-- "What About the Love", Janis Ian/1988

Bill is about 30 years late. Senility appears to have set in.

05 August 2016

Just Deserts

Recall the expectation that Brits, being heavily into financial services, put themselves into dire jeopardy with Brexit. The problem with basing an economy on FS is that not only money is fungible, but so are the jobs which move it about from hither and yon. The computers that do the actual work can be anywhere. As can the terminals which talk to them. From today's news:
The U.K.'s job market is in "freefall," according to the Recruitment and Employment Confederation. The organization said that permanent hiring fell to the 2009 lows.
-- briefing.com

The rats, along with the London Whales, are fleeing The City for Paris and Frankfurt and such. Cheerio, mates!!

27 July 2016

Rules?! We Don't Need No Stinkin Rules

These endeavors have been 99.44% about those events and topics which are interesting to those of us who indulge in relational database and quant activities. Unlike many such blatherings, they are not about demonstrating technique which is readily available to read in texts, both dead trees and on the innterTubes. The macro concerns, in a nutshell.

One of those concerns, which pops up Whack-a-Mole style where one might not expect, is The Tragedy of the Commons. As capital continues to overwhelm labor in production, the greater the proportion of production depends on mass consumption, if capital is to earn a return. That problem, starkly put, is why corporations are sitting on trillions of idle dollars, which dollars are auctioned into "risk-free" Treasuries. The result is cratered interest rates. The result is further concentration of income and wealth. The result is slower (or, negative) growth in aggregate demand. As to this last, one need only search the innterTubes to find weeping and wailing by capitalists that there just isn't demand anymore, "and we just don't know why!!". My my.

So, today's news brings us the the story of California and solar. Rather than offer quote after quote, just go read it.

The main point of the article is simple: social/public goods are difficult to provide. Allow unfettered private monopoly, one gets little to no growth and wide-spread hardship. Install either direct government provision or regulated private monopoly, and one has to juggle and balance the need to provide some level of monetary return on the capital infrastructure against tech innovation and consumer protection. This former, inevitably, means supporting inefficiency of production for what might be far longer than the technical worth of said infrastructure. It was this friction which led to the breakup of Ma Bell; the idea/theory was that competition would drive up innovation and down costs. What actually happened is we got effectively private unregulated monopoly. Now, one might argue that Ma Bell would never have implemented cell phones. Yet nearly every other country has public telecom and iPhones, so I doubt that.

Why this is relevant to the quant cabal:
But some ratepayer advocates say that linking solar bill credits to retail rates is the wrong strategy.

"The changes are so significant and unknowable that right now it's impossible for a solar customer to look at that equation and have any sense of what they're likely to save on their bill over time," said Matthew Freedman, a lawyer at the Utility Reform Network, which works on behalf of California residential customers.

Mr. Holtmann said he felt misled.

He installed his panels "with the understanding that the rules were going to be the rules," he said. "And then they changed the rules."
[my emphasis]

If you're in the business of modelling electric use, infrastructure, innovation, and so on, you're just as hobbled as Mr. Holtman. Unless, of course, you're the one who can change the rules to your benefit.