Sunday, December 21, 2014

Maybe Oil Goes to $70 on its Way to $40

A retrace that fills open gaps and kisses the 50-day moving average surprises everyone who was confident oil was heading straight down to $40/barrel.


When the conventional media ordains oil inevitably dropping to $40/barrel, I start looking for something else to happen--like oil going to $70/barrel. There are number of reasons this isn't as farfetched as it might seem at the moment.

1. The huge gap begging to be filled on the chart of the Energy Select Sector exchange-traded fund XLE and a bunch of other energy-sector stocks and etfs. Gaps like this usually get filled sooner rather than later.


2. A bounce back to the 50-day moving average on the WTI oil index around $73 would be unsurprising. As the old saying has it, nothing goes down in a straight line, and since oil fell in a parabolic curve down, some sort of retrace to a key technical level of resistance is to be expected.

There are many ways to calculate Fibonacci levels, but a retrace to the 38.2% level equates to the mid-$70s. By my reckoning, the natural starting place is the recent high around $116 in 2011 to the recent low around $53. The 38.2% level is $24 + $53 = $77.

Maybe price doesn't retrace all the way to the mid-$70s, but the possibility shouldn't be discounted.

3. Too many punters have bet on oil dropping straight to $40/barrel, and all those put options offer the big financial players an incentive to spark a short-covering rally that outruns stops and scoops all the money by options expiration on January 16, 2015.

The more puts there are at $70/barrel (and equivalent levels in energy etfs, oil services stocks, etc., the greater the incentive to push the short-covering rally higher than expected.

4. The parabolic drop in oil resulted more from the panicky unwinding of a crowded and overleveraged trade than supply-demand. As I explained in my series on the financialization of oil, the financial pyramiding of oil is much less visible than supply and demand, so the mainstream media focuses on what's easy, i.e. supply and demand issues.

Crowded trades (trades where almost everyone is on one side of the boat) unwind in precisely this sort of freefall. Once the trade has been unwound, however, the selling cascade exhausts itself and insiders who know better start buying. Buying begets buying, shorts start covering, and voila, a retrace that fills open gaps and kisses the 50-day moving average surprises everyone who was confident oil was heading straight down to $40/barrel. 



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.


You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.


Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.


So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.


It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.


I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.


Test drive the first section and see for yourself.     Kindle, $9.95     print, $20


"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Sigma Metalyticks ($50), for your superbly generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Thursday, December 18, 2014

What Will It Take to Be a Superpower in 2025?

The solutions organized by the superpower become the dominant global system because they are far more effective, efficient, flexible and sustainable than the solutions organized by other nations and trading blocs.


There’s a popular geopolitical parlor game called Who will be the next superpower?

While the game excels at triggering a mind-fogging tsunami of nationalistic emotions, it doesn’t shed much light on the really consequential question: What is power?

These are important questions to ponder as, around the world, unsustainable policies from the 20th century are beginning to fail in earnest. What will the future geopolitical landscape look like in their aftermath?

Put another way: what will it take to be a superpower in 2025?

What Is Power?


In geopolitics, the conventional view is that Power is the capacity to coerce others to serve your interests at the detriment of their own.

This is a scale-invariant definition, meaning that it applies equally to the school bully, the drug lord, the dictator, or the Emperor. Each has the power to coerce others to do things that are counter to their own interests to serve the interests of the powerful.

While there is certainly truth in this definition, at the geopolitical scale it leaves much to be desired. General and Emperor Napoleon Bonaparte was well-positioned to understand the limits of coercive power, limits which he described in this truculent phrase: "Do you know what amazes me more than anything else? The impotence of force to organize anything."

The greater power than coercion, it turns out, is the power to align others’ interests with one’s own, so they willingly submit to your authority as a means of furthering their own interests. To do this effectively and sustainably, power must organize the transnational flow of capital and labor in ways that offer benefits to all participants.

The great superpower of the ancient world, the Roman Empire, showcased this form of inclusive organizational power: though the Legions were available to suppress outright rebellions, Rome’s long Golden Era was characterized not by perpetual wars of rebellion but by widespread peace and prosperity for even the far-flung members of the Empire.

This is not to gloss over the institutional slavery and oppression that enforced the Ancient Rome’s grip, but the point is that free participants accepted the dominance of Rome because it protected their opportunities to better themselves in relative safety, providing they did not undermine the Empire’s interests.

Even so-called Barbarians benefited from trade with Rome. Many tribes intermarried with peoples under Rome’s sway, and by the end of the Empire, the line between Barbarian and those living under Roman rules blurred.

Even as political and military control eroded and was lost, the organizational system created by Rome’s power—of roadways, waterworks, money, trade and commerce—continued to hold former dominions together. It was only when that complex system fell to pieces (for many reasons, a good deal of them resource-related) that the Empire expired.

There is a third form of power that is often overlooked, perhaps because it’s so obvious in functioning systems we don’t even notice it: the power to solve problemsThe power to solve problems with the resources at hand is perhaps the greatest power, far greater than coercive power and ultimately more powerful than organizational power, which erodes if power cannot solve problems with the available resources.

How does power solve problems?  Though the answer is complex, we can discern a few generalities:
  1. Power must accumulate capital and invest it productively
  2. Power must invest the capital where it has long-term leverage (i.e. in systems that conserve resources, labor and capital over the lifespan of the system)
  3. Power must enable the free flow of intellectual capital/knowledge and encourage experimentation as a means of solving new or emerging problems
The ancient world empires tended to accumulate capital in two ways: by taxing their own citizens, and by conquering the wealth of other regimes. 

Modern-day great powers tend to accumulate capital by taxing their own citizens and fashioning economic arrangements for profitable commerce and credit that attract capital, talent and profits that can be taxed.

In other words: power solves problems by attracting capital and talent, and then enabling their productive use in a system that is effectively organized to solve problems.

Capital and talent are two forms of wealth that don’t respond well to coercion. Capital and talent both flee dictatorial control; and in today's world, both are increasingly mobile. So the source of modern power’s wealth is not coercion so much as being more attractive to those with capital and talent than the alternatives. 

This has two facets:
  • enabling people to serve their own interests within the dominant power structure, and
  • maintaining an inclusive system that is organized to optimize solutions
If the system is too chaotic or rapacious to enable solutions to be implemented, capital and talent are both fruitlessly squandered.
If capital must be spent suppressing rebellion, there is less available for productive investments.  The empire soon collapses under its own inefficiency.

This is why empires based on coercion burn out quickly. And why empires without inclusive, well-organized systems also fail.

The Roman Example


The Roman Empire offers some useful examples of problem-solving via productive investment. Rome’s expansion of durable roadways and fresh water supplies were critical to the growth of trade and the expansion of healthy urban centers that fostered innovation, the sharing of knowledge, and the accumulation of capital.

Rome’s suppression of piracy enabled the free flow of grain from North Africa to Europe, and the extension of trade routes to faraway Britain. 

Technologies such as engineered concrete aqueducts and metalworking spread throughout the Empire due to the sharing of technologies and expertise.
Roman coinage enabled low-risk commerce all throughout its boundaries.

While the occasional drama of slave revolts and rebellions against Imperial might are the natural subjects of movie dramas, the day-to-day reality was spectacularly mundane: without the advantages of fossil fuels, Rome managed to extend relative peace and prosperity over much of the human world.

The same can be said of the Tang Empire in China, which provides additional validation that security, commerce, a unified money system and widespread prosperity go hand in hand.

What System Is Best Able to Solve Problems?


Virtually every nation and trading bloc faces the same set of entrenched problems: demographics, debt, energy and currency.  The problems created by aging populations afflict the entire developed world, and fast-growing developing nations face the opposite problem: not enough work for their burgeoning cohort of youth.

Debt has long been the solution to all problems: just borrow more money (or borrow it into existence) and throw it at the problem of the day. But since debt accumulates interest, and interest siphons off productive capital, this “solution” has run into rapidly diminishing returns.

The foundation of the modern global economy is abundant, cheap energy. And the traditional source of that abundant cheap energy—fossil fuels—is no longer cheap (despite the recent drop in price, the production cost for oil remains near all-time highs), or it comes with real-world limits on its expansion.  

Declining supply and rising costs crimp growth of consumption and the expansion of capital, the twin foundations of the status quo arrangement.

Currency—paper money—is the financial basis of that arrangement.  The ease and appeal of printing money (or credit) becomes increasingly compelling as diminishing returns set in, but the rampant expansion of money and credit undermine the system just as fatally as the decline in cheap, abundant fuels.

The temptation is to create money out of thin air to solve the other problems: just create money (or borrow it into existence) to pay for old-age social security, youth unemployment, higher energy costs, and every other problem facing the status quo.

But this “solution” generates its own problem.  Even more damaging, issuing money and credit doesn’t actually solve any of the other structural problems; it simply papers them over, allowing them to fester behind the fa├žade of freshly printed money and debt.

Power and Superpower


We can now formulate a preliminary answer to the parlor game question Who will be the next superpower?

Any nation or trading bloc that sustainably solves its pressing structural problems will qualify as a Great Power, simply by avoiding the consequences of not solving these problems, i.e. collapse. Muddling through is not a sustainable solution.

There is no law or rule that mandates the existence of superpowers.  The world can go on quite well without a dominant global power.  That said, what qualifies a nation or trading bloc to be labeled a superpower?

Within the context outlined above, the answer is: the solutions organized by the superpower become the dominant global system because they are far more effective, efficient, resilient, flexible and sustainable than the solutions organized by other nations and trading blocs.

In Part 2: Who Will Dominate This Century?, we look at the key requirements for sustainable power in this new century and which countries are best-positioned to exert their influence going forward.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

This essay was first published on peakprosperity.com, where I am a contributing writer. 



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.


You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.


Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.


So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.


It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.


I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.


Test drive the first section and see for yourself.     Kindle, $9.95     print, $20


"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 





NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.


Thank you, Troy T. ($50), for your supremely generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Wednesday, December 17, 2014

What Is the Gold-Oil Ratio Telling Us?

Based on historical gold-oil ratios, oil appears extraordinarily cheap right now.


One way to establish if a commodity or asset is relatively expensive or inexpensive is to price it in something other than a fiat currency--for example, gold. Gold goes up and down in value relative to other commodities and fiat currencies, so it is itself a volatile yardstick. Nonetheless, it provides a useful measure of the relative value of gold and whatever is being measured in gold--in this case, oil.

The prices listed are approximate, i.e. rounded to averages in the time frame listed. Of the various measures of oil, I am using WTIC.

According to SRSrocco REPORT, the average gold-oil ratio in the period 2000-2014 is 12. That is, on average, one ounce of gold bought about 12 barrels of oil.

For historical context, in 1976, following the first oil-shock in 1973, oil was $12.80/barrel and gold was around $124, for a ratio of 9.7.

In 1986, the average price of gold was around $368 while oil fell to $14/barrel, for a ratio of 26.3.

At gold's peak above $1,800/ounce in 2011, oil was around $90/brl, for a ratio of 20.

At oil's peak above $140/barrel in 2008, gold was around $950/ounce, for a ratio of 6.8.

As a rule of thumb, oil is relatively expensive (and gold is relatively inexpensive) when the ratio is below 9, and oil is relatively inexpensive (and gold is relatively expensive) when the ratio is above 20.

When oil fell below $55/barrel a few days ago, the ratio reached 22. By historical standards, oil is cheap.

Here is a listing of various highs and lows in gold and oil:

Oil priced in gold: how many barrels of oil can be purchased with one ounce of gold?

2000: Oil $30/brl, gold $275
Ratio: 9.2

2006: Oil $70/brl, gold $600
Ratio: 8.6

2008: Oil $140/brl (at the peak), gold $950
Ratio: 6.8

2011: Oil $90/brl, gold $1,800 (at the peak)
(note that oil traded above $100/brl earlier in 2011, but at gold's peak was around $90/brl)
Ratio: 20.0

2014 (1st quarter): Oil $105/brl, gold $1,300
Ratio: 12.3

2014 (current): Oil $55/brl, gold $1,200
Ratio: 21.8

Here is a chart of gold from 2012 to the present:


Here is a chart of oil (WTIC) from 2012 to the present:


And here is a chart of the gold-oil ratio from 2012 to the present:


While the gold-oil ratio exceeded 25 three decades ago, in the era of rising demand from the emerging markets of China, India and other nations, the ratio has only touched 20 when gold was trading above $1,800/ounce.


Based on historical gold-oil ratios, oil appears extraordinarily cheap right now. Could oil fall further? Of course. Could gold go up or down? Of course. There are a great many factors that influence the ratio, which is simply a short-hand method of measuring the relative value of two important commodities.




Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle edition
Are you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 


NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.


 Thank you, David H. ($100), for your outrageously generous subscription to this site-- I am greatly honored by your steadfast support and readership.

Read more...

Tuesday, December 16, 2014

Here's What's Wrong with Corporate America--and the U.S. Economy

Will we ever tire of navigating the multiple layers of intermediaries between the customer and the provider, while corporate profits soar to unprecedented heights?


If we had to summarize what's wrong with Corporate America and the entire U.S. economy, we can start with all the intermediaries between the provider and the customer. There are a number of examples we're all familiar with.

One is healthcare, where a veritable phalanx of intermediaries filters the interactions between doctors and patients so heavily that the traditional practice of medicine has been nullified.

By traditional I mean the arrangement that was conventional a few short decades ago: you went to the doctor of your choice (typically, the same doctor your family used), he/she treated you, and you paid the doctor's bill in cash. Only hospitalization was covered by the minimal (and minimally limiting) healthcare insurance plans of the time.

The second example is home appliances purchased at a Big Box retailer. Here's the list of interactions between Corporate America and the customer:

1. Customer enters Big Box Store and is sold a high-margin appliance, unless customer insists on the sale item. Either way, the appliance was assembled in China for a few hundred bucks and shipped to the U.S. for a few more bucks. The difference between the low cost and the price the customer pays is gross profit for Corporate America.

2. Customer and salesperson both know the reliability of the appliance, regardless of brand or price, is low, so an extended warranty is an easy sale. The manufacturer's warranty is typically one year, and the extended warranty tacks on a couple years to the minimal manufacturer's warranty.

(Recall that not too long ago in America, any major appliance was expected to last a few decades, not a few years.)

3. Customer shells out $1,000 for the appliance and another $300 for the extended warranty, and a few more bucks for delivery.

4. Corporate America to customer: we're done with you, bucko. The delivery is subcontracted to another company, the extended warranty is handled by another company, and should the appliance fail during the manufacturer's warranty, the customer has to contact the manufacturer directly.

The only interaction retail Corporate America has with the customer is the initial sale. Everything after that is handled by other companies. So Corporate America has no interest in customer satisfaction or happiness after the sales experience.

5. Calls made to Corporate America--the Big Box retailer or the manufacturer--will be directed to somebody else. The job of taking care of the customer has been shunted to intermediaries that the customer cannot contact directly.

Compare this with the traditional arrangement between the retailer and the customer: whatever the problem, the retailer took care of the customer. If the appliance broke down, the retailer's repair crew would go out and fix it. The retailer was accountable to the customer all the way down the line; if there was a warranty covering the repair, the retailer handled that bureaucratic layer as part of their service.

6. The appliance fails two days after the manufacturer's warranty expires, i.e. one year after purchase. (True story.)

7. Customer calls Corporate America retailer. Response: we're done with you, bucko. Call the manufacturer or the extended warranty company.

8. Customer calls Corporate America manufacturer (or the U.S. office of a global appliance manufacturer). Response: Since your appliance is off warranty, the service call will be (insert outrageous fee): $99.99 (that's our special price for good customers, pal.) Parts will also be marked up triple from what you could buy them for on the Internet, and our labor charges are so high that the repair, even if it is modest in scope, will cost a third to a half of the original price of the appliance.

If the repair is serious, the cost might exceed the original purchase price a year earlier.

Stripped of phony solicitude, the manufacturer's response: we're done with you, bucko. You bought our appliance, but we're under no obligation to make you happy beyond the 365-day warranty period--and well, to be honest, we don't really care if you're happy with our service under warranty, either. Our repair people will get to you when they get to you, and there are plenty of loopholes in the warranty.

Here's the view from Corporate America: we can get these appliances assembled in Robotic Factory #2 (yes, the appliance was stamped with this phrase) in China for an absurdly low cost for an order of thousands of units, and if 10% of those fail within a year due to defective parts, that's just the cost of doing business.

We can grind the customer down with lousy service to the point that many will give up and not even pursue repair or replacement under warranty.

Since Americans have been trained to buy the lowest price, a.k.a. The Tyranny of Price, or the currently fad (over-hyped, overpriced) model, we don't care if they're happy or not. They'll buy the lowest cost appliance or the over-hyped brand next time anyway.

9. Customer calls the extended warranty provider. The extended warranty provider is in a distant state and contracts with a local firm to handle the repair. The customer cannot contact the repair outfit or person directly; everything must be handled through the extended warranty provider.

10. Two weeks later, the repairperson shows up, takes apart the appliance and presents the customer with a bill for $900 which must be paid before he can order parts. But I'm under the extended warranty, the customer says, and the repairperson shrugs. "That's not what the paperwork says." (True story.)

11. Customer calls back extended warranty provider and gets the paperwork straightened out. Boxes of parts start arriving shortly thereafter.

12. A different repairperson comes back in two more weeks, takes a look at the disassembled appliance and the parts that had arrived, and declares the repair will cost more than a new replacement appliance, so the customer should contact the extended warranty provider for a voucher to buy a new appliance.

13. The repairperson leaves the disassembled appliance and the parts. The customer has to call the extended warranty provider again to demand the broken appliance and the new parts be hauled off. Three weeks later, somebody shows up to haul off the useless appliance and the new parts.

14. Customer reads that corporate profits for the Big Box retailer and manufacturer just hit record highs, and has a seizure. Corporate America doesn't make money making the customer happy, beyond the few moments needed to collect $1,300 from him/her. That's how you reap record profits: make the sale and you're done with the customer.

Nobody is tasked with making the customer happy--that's some other intermediary's job. The customer is denied contact with the actual person who ends up with the job of making the customer happy--all communications must go through multiple corporate intermediaries, guaranteeing frustration and wasted time and money.

Will we ever tire of navigating the multiple layers of intermediaries between the customer and the provider, while corporate profits soar to unprecedented heights? The two dynamics are intimately linked: once we book the sale, we're done with customers. 



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Patrick M. ($5/month), for your astoundingly generous subscription to this site-- I am greatly honored by your steadfast support and readership.


Read more...

Monday, December 15, 2014

The Great Generic Drug Rip-Off

Big Pharma has followed the only avenue left to reap billion-dollar profits: jack up the price of generics.


What happens when rapacious cartels run out of billion-dollar-profit products? They jack up the price of what was previously low-cost. And why are they able to raise prices by 388% to 8,000% at will? Because they can. That's the whole point in having a cartel that is enabled and enforced by the cartel's toadies and apologists in the central state (federal government): price increases can be imposed on the government and the private sector at will.

I was alerted to the extraordinary price increases in widely used generic drugs by Ishabaka (M.D.), who forwarded this fact sheet issued by the office of Senator Bernie Sanders: (Chart is reproduced below)

"Rep. Elijah E. Cummings and Senator Bernard Sanders sent letters to 14 drug manufacturers requesting information about the escalating prices of generic drugs used to treat everything from common medical conditions to life-threatening illnesses. Data was provided by the Healthcare Supply Chain Association (HSCA) on recent purchases by group purchasing organizations (GPOs) of ten generic drugs."

Here are Ishabaka's comments:

"I'd like to focus on the top one - doxycycline. This is a very effective antibiotic for pneumonia, bronchitis, and sexually transmitted diseases (chlamydia and gonorrhea). Throughout my medical career, it has been a cheap generic drug I used all the time. It's cost has gone up from $20 a prescription to over $1,600 a prescription in the last 12 months.

Low-income people used to be able to afford doxycycline, which would stop the spread of these serious, sometimes life-threatening infections. Now they can't, and there is no drug as good as doxycycline available cheaply. I think this is an outrage. Imagine if a generic bottle of aspirin increased in price from $10 a bottle to $800 a bottle in 12 months - Americans would be marching in protest."

DrugUseAverage Market Price Oct. 2013Average Market Price April 2014Average Percentage Increase
Doxycycline Hyclate
(bottle of 500, 100 mg tablets)
antibiotic used to treat a variety of infections$20$1,8498,281%
Albuterol Sulfate
(bottle of 100, 2 mg tablets)
used to treat asthma and other lung conditions$11$4344,014%
Glycopyrrolate
(box of 10 0.2 mg/mL, 20 mL vials)
used to prevent irregular heartbeats during surgery$65$1,2772,728%
Divalproex Sodium ER
(bottle of 80, 500 mg tablets ER 24H)
used to prevent migraines and treat certain types of seizures$31$234736%
Pravastatin Sodium
(bottle of 500, 10 mg tablets)
used to treat high cholesterol and to prevent heart disease$27$196573%
Neostigmine Methylsulfate
(box of 10 1:1000 vials)
used in anesthesia to reverse the effects of some muscle relaxants$25$121522%
Benazepril/
Hydrochlorothiazide
(bottle of 100, 20-25 mg tablets)
used to treat high blood pressure$34$149420%
Isuprel
(box of 25, 0.2 mg/mL vials)
used to treat heart attacks and irregular heartbeat$916$4,489390%
Nitropress
(50 mg vial)
used to treat congestive heart failure and reduce blood pressure$44$215388%
Digoxin
(single tablet, 250 mcg)
used to treat irregular heartbeats and heart failure$0.11$1.10884%

The murky world of drug pricing is attracting some much-needed attention:



What politicos and the mainstream media cannot dare state openly is obvious: the system of drug development and generic drug pricing/distribution is broken in the U.S., and the core cause is the cartel-like structure of Big Pharma and the rest of the healthcare system.

Though nobody in officialdom or the mainstream media can say this publicly, the reason for these outrageous increases is painfully obvious: As Big Pharma's stable of billion-dollar drugs slip off patent, their profit pipeline is weakening.

The pipeline of potentially billion-dollar-profit drugs (so-called blockbuster drugs) is thin. So Big Pharma has followed the only avenue left to reap billion-dollar profits: jack up the price of generics, and push the government to pay the outrageous increases via Medicare and Medicaid and force the increases on private insurers and providers. If we just roll over and accept 8,000% increases, we deserve the corrupt, rapacious system we have. 



Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.
You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.


So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.


It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.


I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.


Test drive the first section and see for yourself.     Kindle, $9.95     print, $20


"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.


Thank you, Christopher M. ($5/month), for your monstrously generous subscription to this site-- I am greatly honored by your support and readership.

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