Tag: Finance

It’s Called Fraud

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I am referring, of course to Tesla, and the efforts by the board of directors to temporarily pump up the stock price using accounting so that Elon Musk can cash in, because ethics and honesty are only for the little people.

It’s not just Musk though, it’s companies like Norwegian cruise lines, which is using accounting tricks to ignore the effects of Coronavirus so that it can hit the numbers so that its executives get their bonuses.

In the middle of a crisis that threatens to destroy the whole cruise line industry.

At its core is something called adjusted earnings before interest, tax, depreciation and amortization (EBITDA).

The adjustments use factors which are not considered acceptable under generally accepted accounting principles (GAAP), which allows for senior executives to loot the company.

What we are seeing are things like:

  • Not counting stock options grants as an expense so that they can issue those same stock options which the executives convert to cash.
  • Ignoring expenses like interest payments
  • Add in non-existent revenue, such as deferred revenue that results from merger activity. (“Ghost revenue”)

In the case of Norwegian Cruise Lines, it appears that revenue shortfalls from the current pandemic will be ignored because they are, “Not representative of our day-to-day operations and we have included similar nonrepresentative adjustments in prior periods.”

that is accounting speak for, “F%$# you, I want my money.”

The thing is, these are real costs, and real shortfalls, and when companies cook the books to hit numbers to justifiy bonuses, it sucks resources out of the company that otherwise would be invested in improving the business, or ***cough*** Boeing ***cough*** in maintaining a cushion in the event of an event impacting revenues or costs.

See this Twitter thread for a good summary of what is going on:

Stop the looting, and start prosecuting.

Look Out Below

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Wall Street’s record-breaking 11-year “bull market” came to an end on Wednesday as fears about the spreading Covid-19 pandemic hit stock markets again.

US stock markets have been on an unprecedented streak since 2009, a bull market of gains. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction” by governments in corralling the virus.

The Dow Jones Industrial Average closed down over 1,400 points, 5.8%. After days of wild fluctuations, the Dow has now fallen 20% from its most recent highs – finally signaling a bear market. The S&P 500 also fell and is now 19% below its recent high.

I would note that the bulk, if not the totality of all net stock purchases over that period has been stock buybacks.

This is long overdue, and luckily, it’s happening during an election year with an incumbent Republican.

It’s a Busy Day at the Dog Track

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The issue here is not risk, that is possibility quantifiable possibility of something bad happening, but uncertainty, where your numbers go ¯_(ツ)_/¯ :

U.S. stocks careened lower Monday, with major indexes swinging perilously close to the first bear market in more than a decade as a price war for oil and fallout from the coronavirus frightened investors.

The selling was heavy across markets and geographies, with investors seeking shelter in government bonds, sending Treasury yields to new lows. U.S. stocks fell hard enough at the open to trigger a circuit breaker for the first time in 23 years that kept trading frozen for 15 minutes. The Dow Jones Industrial Average suffered its worst decline since 2008 and at one point came within 65 points of touching a bear market.

For the day, the Dow sank 2,013.76 points, or 7.8%, to 23851.02. It was the first time the Dow lost more than 2,000 points in a session. The S&P 500 fell 225.81 points, or 7.6%, to 2746.56, also its worst day since 2008. And the Nasdaq Composite slid 624.94 points, or 7.3%, to 7950.68.

All 11 sectors in the S&P 500 were down, led by energy, which slid 20%. Financials were down 11%. Industrials and materials both fell 9.2%.

By day’s end, the Dow, S&P and Nasdaq were all down roughly 19% from record highs set earlier this year. A drop of 20% from those highs would halt a bull-market run that began after the financial crisis. Stocks bottomed out 11 years ago, on March 9, 2009.

As an aside, this is the time when I DON’T look at how my IRA or 401(k) is doing, 

Seriously, just don’t.

WSJ Editorial Page Draws Blood

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Unfortunately, the worst OP/ED page in the United States drawn blood from their own reporters, as reported by the Washington Post*:

The Wall Street Journal’s China staff is urging the newspaper to apologize for a headline that prompted the Chinese government to expel three of its journalists last week.

The email from the Journal’s China bureau to the top officers of the paper’s parent companies, in effect, sides with the Chinese, who have demanded an apology and retaliated with the expulsions last week.

The headline in question — “China Is the Real Sick Man of Asia” — appeared on an opinion column written by academic and foreign affairs specialist Walter Russell Mead in the Journal on Feb. 3. The column was a commentary on the health of China’s financial markets, rather than a reference to the coronavirus outbreak there.

Chinese officials and ordinary citizens have protested that “sick man” is a racist phrase once used by Westerners to denigrate China during and immediately after the era in which colonial powers dominated and exploited the nation.

This was egregious enough that Mr. Mead disavowed the headline to his own article:

Mr. Mead, the writer of the op-ed, suggested in a Twitter post on Feb. 8 that he was opposed to the headline, writing, “Argue with the writer about the article content, with the editors about the headlines.” He declined to comment for this article.

I don’t think that the WSJ can fix this problem, though its editorials are routinely called out as false by the front page of the WSJ.

Unfortunately, dishonest, hypocritical, and (quite frankly) insane editorials from the Journal have been baked into its DNA since well before Rupert Murdoch took over the paper

*Ironically, the Washington Post OPO/ED page is the 2nd worst editorial page among the major papers.

Who Says that Irony is Dead?

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Lloyd Blankfein, the former head of Goldman Sachs, who during the financial crisis received tens, if not hundreds, of billions of dollars of direct and indirect bailouts from the taxpayers, is now whining that Bernie Sanders would ruin the economy if elected President.

This guy is literally the biggest welfare queen in history, and he’s lecturing us about how to save the economy?

You nearly blew up the world, and because of the corruption and cowardice of two administration, you personally walked away with billions in taxpayer money.

Shut the f%$# up, you leech.

Same Old Same Old

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Following a SEC inquiry of Tesla being closed, the SEC opens up another inquiry, because stock fraud is kind of Tesla’s thing:

Tesla Inc. isn’t yet in the clear with the U.S. Securities and Exchange Commission.

On Dec. 4, the same day the agency closed its second investigation into the electric-car maker in as many years, the SEC sent a subpoena seeking information on a fresh set of matters, Tesla disclosed in a regulatory filing Thursday. The regulator is looking into “certain financial data and contracts including Tesla’s regular financing arrangements,” according to the company.

The investigation the SEC closed in December related to projections and public statements regarding Model 3 production rates. Earlier in 2019, the agency went to court with Chief Executive Officer Elon Musk over tweets he sent about how many cars the company would build for the year. A judge forced the two sides to shore up a settlement reached in 2018 over claims Musk made during his short-lived efforts to take Tesla private.

If we actually enforces securities law in the United States, half of the Silicon Valley masters of the universe would have gone to jail.

Time to Organize a Telethon for Overprivileged Youth

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Seriously, the whining over the small bonuses that Wall Street bankers are getting this year is not, and should not be, viewed as a catastrophe.

In fact, in a just world, it should be seen as a good start:

Most Wall Street banks announced their fourth quarter profits beat industry expectations last week. But by the end of this week, bank sources and compensation experts told Reuters, most of their staff will be underwhelmed by their bonuses.

Many dealmakers, traders and even one big bank CEO are getting flat-to-down bonuses and total compensation for their performance in 2019 even though overall profits grew, the sources and experts said.

Morgan Stanley reduced incentive compensation for staff and cut Chief Executive Officer James Gorman’s total compensation by 7% for last year compared to 2018, as the bank worked to reduce expenses, which climbed in the fourth quarter.

………

While some are disappointed by their bonuses, many admit they are still richly rewarded. Morgan Stanley’s CEO Gorman’s total pay for 2019 was $27 million, compared to $29 million in 2018.

Mt heart bleeds for the contemptible greed-head motherf%$#ers.

Your Mouth to God’s Ear

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California Governor Gavin Newsom has once again sent signals that he is seriously considering using his authority to end Pacific Gas & Electric as a going concern in the state of California if the embattled utility does not get its sh%$ together.
Because the California Public Utilities Commission has the authority to reject any payout from the state wildfire insurance fund, which would likely force PG&E into liquidation.
When that infrastructure is sold off, the buyers would be assured of EXTREMELY diligent oversight, so the market value will be relatively low, at which point takeover of those assets by state and local government becomes pretty viable.
Please, Governor, pull the trigger.
PGE has been a cancer on corporate governance for over 100 years.

Exactly one year after PG&E Corp. filed for bankruptcy, Gov. Gavin Newsom said PG&E “no longer exists” and doubled down on a state takeover if the utility doesn’t shape up by June 30.

“There’s going to be a new company or the state of California will take it over,” Newsom said at an event with the Public Policy Institute of California in Sacramento about the future of the state’s energy Wednesday.

“Because if PG&E can’t do it, we’ll do it for them. Period, full stop. We’re sick of excuses and delays,” he said.

………

“Bankruptcy turned out to be an extraordinary opportunity for the state,” Newsom said Wednesday. “I never would have imagined that a year ago today. I thought it was a huge burden, one I didn’t anticipate spending as much time and energy on.”

What it gave state regulators is the chance to transform the 115-year-old company into a 21st-century utility, he said.

………

But if the governor doesn’t like PG&E’s new plan, he made clear on Wednesday what the next step was.

“If they can’t do it, we have no choice but to do it for them, because the economic and human cost, not just the environmental degradation, is so great that we will be in peril if we just sit back and let the markets do it for us,” he said.

Seriously, if there is a company that merits the corporate death penalty, it is PG&E.

Have the states and localities reorganize the assets as either a government utility or a cooperative.

Self-Important White Guys Are Not a Good Investment

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In news that should surprise no one, hedge funds run by white guys under perform those of women and minorities by about 41%.

A reason is not given, but my guess is that members of the white guys club are more able to fail upwards, which is the very definition of white privilege:

Hedge funds not controlled by white men had returns almost double their peers the last three years, according to a Bloomberg analysis of hedge fund data.

Within Bloomberg’s database of 2,935 funds, the analysis found 35 managed by minorities or women and compared them with 908 peer funds. The database includes over 65% of the industry’s top 1,500 managers by assets under management.

Hedge funds either controlled or managed by a minority or female leader had a return of about 6.6% over the past three years, compared to about 3.9% for their peers, the analysis of Bloomberg’s hedge fund database found.

More of This Too

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John Stumpf, the disgraced former CEO of Wells Fargo, has been banned from the banking industry for life.

I’d like to see jail time, but this is a more aggressive pursuit of criminal bankers than we have seen in a long time:

Banking regulators pursuing what they describe as “systemic” misconduct in sales practices at Wells Fargo have reached an agreement with former chief executive John Stumpf that bars him from the banking industry and fines him $17.5 million.

The regulators continue to pursue civil charges, fines and prohibitions against five other executives for an array of oversight failures and deceptive methods at the bank.

The misconduct affected millions of bank customers from 2002 to 2016, according to a statement by the Office of the Comptroller of the Currency, which sought the charges. The regulators have found, among other things, millions of accounts opened for customers without their knowledge.

While the deceptive practices were carried out by salespeople, regulators said the executives caused the problems by pushing staff to meet unreasonable sales goals and turning a blind eye to the deception.

This is weak tea, but it is still a lot more than the team of Eric “Place” Holder and Timothy “Eddie Haskell” Geithner ever did.

Seriously, we need to stop the looting, and start prosecuting.

I’m Expecting a Government Bailout

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Between lost revenues, and penalties to airlines, I’m guessing that Boeing wishes that it hadn’t blown billions on stock buybacks to boost executive stock options:

Boeing Co. on Tuesday pushed back its forecast for when regulators will clear the return of the 737 MAX to commercial service, saying it doesn’t expect approval until midyear at the earliest.

The plane maker said its new estimate for the Federal Aviation Administration’s signoff—which people briefed on the matter expect in June or July—takes into account the need for approving training for pilots and “experience to date with the certification process.”

The global MAX fleet has been grounded since last March following two fatal crashes, with Boeing repeatedly revising when it expected regulators to approve changes to the flight-control systems implicated in the accidents, as well as new training regimes. It previously forecast the FAA would lift its flight ban and approve training by January, with the expectation that it would still take some months before the MAX again carried passengers.

The delays have extended far longer than most airlines and industry analysts expected, and leave the global passenger-jet fleet short of almost 5% of planned capacity for a second peak summer season in a row, adding to the hefty compensation Boeing owes its customers.

The latest projection isn’t in response to the emergence of any new technical problems or fresh friction with regulators, according to people familiar with the matter.

Right now, Boeing is seeking another $10 billion in cash after having spent $43 billion over the last 7 years on stock buybacks:

The first thing to know about Boeing’s mad scramble to line up “$10 billion or more” in new funding via a loan from a consortium of banks, on top of the $9.5 billion credit-line it obtained in October last year – efforts to somehow get through its cash-flow nightmare caused by the 737 MAX fiasco – is that the company blew, wasted, and incinerated $43.4 billion to buy back its own shares since June 2013, having become a master of financial engineering instead of aircraft engineering.

If Boeing had focused on its business – such as designing a new plane instead of doctoring an ancient design to save money and time – and if it hadn’t blown $43 billion on share-buybacks but had invested this money in a new design, those two crashes wouldn’t have occurred, and it wouldn’t have to beg for cash now. The chart below shows the cumulative share-buybacks in billions of dollars since Q1 2009. In Q2 2019, it belatedly halted the share buybacks (share buyback data from YCharts):

As is always the case with share buybacks, the idea is to buy high in order to drive shares even higher. This is what you learn on the first day of Financial Engineering 101. So Boeing stopped buying back its shares in Q1 2009 when its shares had plunged into the $35-range, at which point they were a good deal, and then recommenced share-buybacks in Q2 2013 when its shares had already risen to the $100-range.

The second thing to know about Boeing’s mad scramble to borrow another $10 billion is that it already has a huge amount of debt and other liabilities, and that its total liabilities ($136 billion) exceed its total assets ($132 billion) by about $4 billion as of September 2019, meaning that it has negative net equity, that the share buybacks have destroyed its equity, which is what share buybacks do to the balance sheet.

It also means that every dime in “cash” and “cash equivalent” listed on the balance sheet is borrowed. And this is about to get a whole lot worse. In October 2019, Boeing had already obtained a new credit line of $9.5 billion, which about doubled the size of its existing credit line. Credit lines serve as liquidity backup.

And now Boeing is scrambling to pile “$10 billion or more” in new loans on top of it.

Wolf Richter’s understated take on this, that, “Putting a priority on financial engineering over actual engineering can get very expensive,” gets to the core of the problem.

Why the Federal Reserve Needs a Tighter Leash

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I have no problem with the Federal Reserve taking away the punch bowl when the party gets out of hand, but these days, the Federal Reserve spends most of its time bailing out rampant and reckless speculation:

One hurdle to a possible fix for recent volatility in the short-term cash markets: hedge funds.

Federal Reserve officials are considering a new tool to ease stresses in the market for Treasury repurchase agreements, or repos. Through the repo market, banks and hedge funds borrow cash overnight, while pledging safe securities such as government bonds as collateral. In September, an unexpected shortage of available cash to lend sparked a surge in the cost of repo-market borrowing, prompting the Fed to intervene for the first time since the financial crisis.

One potential solution is to lend cash directly to smaller banks, securities dealers and hedge funds through the repo market’s clearinghouse, the Fixed Income Clearing Corp., or FICC.

Hedge funds currently borrow through a process called sponsored repo, in which they ask a large bank to act as a middleman, pairing their government bonds with money-market funds willing to lend cash. The bank then guarantees that the parties will fulfill their obligations—repaying the cash or returning the securities. Firms trading through the FICC contribute to a fund that would cover a borrower’s default. Critics of the new plan say if the Fed lends cash directly through the clearinghouse, it could end up contributing to a hedge-fund bailout.

The Fed’s aim, according to analysts, is to step back from temporary efforts to quell repo-market volatility and increase financial reserves. After September’s volatility, officials succeeded in suppressing year-end swings with temporary measures, such as offering short-term repo loans and buying Treasury bills.

Yet the new approach could also create political problems for policy makers, analysts said. The problem centers on the central bank lending directly to hedge funds, the little-regulated investment vehicles that tend to serve wealthy or institutional investors.

The political backlash that followed crisis-era bank rescues hangs over policy makers’ approach to the current problem, analysts said, even as officials work to ensure the smooth functioning of a key piece of the infrastructure underpinning financial markets. Some fear that lending directly to hedge funds could lead to the perception the Fed is fueling risky bets.

“There’s a strong aversion to fat cat bailouts,” said Glenn Havlicek, chief executive of GLMX, which provides technology to repo trading desks.

Many hedge funds trade in the cash market through sponsored repos. The clearinghouse sits between buyers and sellers to ensure that neither party backs out of the transaction. Records of cleared trades also are publicly available, improving the market’s transparency.

The solution is to wind down the Repo market by making it more expensive gradually, which is something that the Fed can do, and it would reduce the risks in the market, but it would also reduce speculative profits, which is antithetical to the Central Bank’s true agenda.

Instead, they are looking at refilling the punch bowl, and adding Everclear.

This will not end well.

Our Cousins in the UK

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It appears that much British banks were routinely forging documents for things like foreclosures, this strongly paralells what happened with the MERS and the foreclosure crisis.

It’s not a surprise. It’s what banks do in the absence of enforcement.

If Julian Watts is a conspiracy theorist, as his detractors would have you believe, he doesn’t exactly look the part. The former consultant, once an adviser to bosses of international companies, has the considered air of a regional accountant rather than someone who has taken leave of his senses.

Yet the otherwise mild-mannered Mr Watts, 56, has some extraordinary allegations to make. “The inconvenient truth,” he says, “is that several UK banks are engaged in persistent, serious organised crime against the public.”

From a bedroom in his modest family home in Guildford, Surrey, Mr Watts has been working around the clock for the past year or so to compile evidence that he claims suggests that banks and other financial firms are falsifying documents.

………

He alleges that his documents show they are forging signatures, including on papers used in court proceedings for cases such as small business disputes and mortgage repossessions.

So far his “bank signature forgery campaign” has produced 11 files of evidence. From these carefully indexed dossiers, he has compiled 136 separate “crime reports”, each relating to a distinct case of alleged signature forgery or document manipulation.

His claims are denied by the banks, yet he isn’t entirely out on a limb. Anthony Stansfeld, police and crime commissioner for Thames Valley, called the evidence “overwhelming”. Steve Baker, a Conservative MP and former member of the Treasury committee, said the files suggested that, at some banks, “anyone is signing” key documents, prompting concerns that home repossessions may have amounted to “fraudulent transactions”.

I have come to the conclusion that financial innovation and deregulation has fraud and corruption as its ultimate goal.

It’s not just a random consequence of policy, it is a goal.

It’s Called Stock Fraud

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This (paywall protected) article misses the point about “Unicorns” and private equity and similar schemes.

What is described here is not just an unrealistic valuation, it is fraudulent.

Here is how it works:

  1. A private company raises money from private investors, who (for example) purchase 15% of the company for $10 million, giving it a valuation of ($10M/.15=) $66 million dollars.  (Remember, this is the private investor setting this value. 
  2. The company invests in office space, hiring people, etc, and burns through money, and so needs more money.
  3. The same private investors invest $25million this time, the burn rate has increased, but they only get 5% of the company,giving a valuation of (25M/.05) = $500 million dollars.
  4. Rinse, lather, repeat.

After a few rounds, the investors own 50% of the company, and have set the valuation of the company at something like $10 billion dollars while contributing about $100 million dollars for a company has no path to profitability.

Analysts go crazy, and it goes public, and the investors pocket a $9.9 billion dollar profit off of a $100 million investment, a 9900% profit margin.

Even if this shell game fails 9 times out of 10, you still have a 1000% profit margin, and someone else is left holding the bag.

You just need enough money to flood whatever market sector the company is in, and keep the balls in the air until you sell your stake.

This is Uber, Lyft, WeWork, Blue Apron, etc.

A feature in startup investing called a liquidation preference also often gives the latest investor their money back plus a return before others, meaning the newest valuation often only applies to that investor. These preferences usually disappear after a company goes public. Pre-IPO valuations of unicorns are on average 48% higher than their fair value, according to a recent study by two professors at the University of British Columbia and Stanford University.

WeWork has had a sobering effect. But there’s a lot of capital to be deployed and hot startups can still make investors compete to give them cash. There will be more valuation illusions before reality sets in.

These are not, “Valuation illusions,” this is fraud, pure and simple.

The goal is not to invest in a profitable company, it is to foist it all off on the next chump.

It Never Is

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A study in the New England Journal of Medicine shows that hospital mergers do not improve patient outcomes.

In fact it results in worse outcomes.

This should surprise no one.  It is the way of mergers and acquisitions:

Hospitals continue to turn to M&A to navigate tricky industry headwinds, including lowering reimbursement and flatlining admissions as patients increasingly turn to alternate, cheaper sites of care. Provider trade associations maintain consolidation lowers costs and improves operations, which trickles down to better care for patients.

………

Thursday’s study analyzed CMS data on hospital quality and Medicare claims from 2007 through 2016 and data on hospital M&A from 2009 to 2013 to look at hospital performance before and after acquisition, compared with a control group that didn’t see a change in ownership.

American Hospital Association General Counsel Melinda Hatton took aim at the study’s methods to refute its findings, especially its reliance on a common measure of patient experience called HCAHPS.

………

The results contradict a widely decried AHA-funded study last year conducted by Charles River Associates that found consolidation improves quality and lowers revenue per admission in the first year prior to integration. The research came quickly under fire by academics and patient advocates over potential cherrypicked results.

A spate of previous studies found hospital tie-ups raise the price tag of care on payers and patients. Congressional advisory group MedPAC found both vertical and horizontal provider consolidation are correlated with higher healthcare costs, the brunt of which is often borne by consumers in the form of higher premiums and out-of-pocket costs.

There is nothing that the finance industry, which makes bank on fees from M&A activity, cannot ruin.

It’s Called Shoe Leather Journalism

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It turned out that they were dealing with a community that was hard to reach and dubious of journalists, but instead of throwing up their hands in despair, their team rolled up their sleeves, went to work, and listened to potential sources.

This is an anathema to journalists who dream of meeting “Deep Throat” in a parking garage, or who want make stories out of trial balloons from politicians, but they got their story, and the abuse stopped:

In August, we spent an evening hand-addressing more than 200 letters, mostly to residents of Memphis, Tennessee. The city is the second-poorest large metropolitan area in the country, with nearly 1 in 4 residents living below the poverty line. About half of the letter recipients had been sued by a private-equity backed doctors group because of unpaid medical bills. The other half had been sued by a separate company.

Our team, led by reporter Wendi C. Thomas of MLK50: Justice Through Journalism, was investigating the way large institutions profit off people who are poor in Memphis. She had already reported that Methodist Le Bonheur Healthcare, the area’s largest hospital system, had aggressively sued poor people — and the hospital quickly suspended the practice.

Several other companies also were filing lawsuits against people unable to pay their bills. Court records showed us who these people were, but we didn’t know what these debts meant for their lives. We knew letter-writing alone wouldn’t be enough to connect with people, but it was a start.

After we put our letters in the mail, we continued to try to reach people who had been sued by posting flyers in neighborhoods, making dozens of calls (and getting hung up on plenty of times) and speaking to community leaders.

We understood, through research, that many journalists have historically covered these communities in extractive and self-serving ways, partly because of resource constraints and partly because many aren’t from the communities they cover. Our partners launched MLK50 to break patterns like these. We hoped deliberate engagement would result in real change for the people we reached.

It worked. Even before our story on the doctors group was published with MLK50, the company said it, too, would stop suing its patients.

………

Lessons

  1. You can still do engagement reporting on a topic people don’t like to talk about. But don’t underestimate the amount of work it takes to do it right.
    ………
     
  2. Be specific about who you’re trying to reach. Don’t expect to reach everyone. They don’t owe you anything.
    ………
     
  3. Be specific about who you’re trying to reach. Don’t expect to reach everyone. They don’t owe you anything.
    ………

Read the whole thing.

It’s not just a demonstration of good journalism, it’s an indictment of how much of journalism is practiced today.

Welcome to the Post Antibiotic World

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The perverse incentives of our drug exclusivity regime looks to result in the collapse of antibiotic research and development, because, unlike things like cholesterol and diabetes meds, antibiotics are only taken for a few days, so the profits are not there to get financing for drug development.

The pharmaceutical industry will demand higher prices, extended exclusivity periods, and other subsidies.

I will suggest reducing the subsidies on drugs for chronic conditions, which is what pulls money from antibiotics.

Also, ban antibiotic use in livestock, which contributes to the evolution of antibiotic strains of microbes:

At a time when germs are growing more resistant to common antibiotics, many companies that are developing new versions of the drugs are hemorrhaging money and going out of business, gravely undermining efforts to contain the spread of deadly, drug-resistant bacteria.

………

Experts say the grim financial outlook for the few companies still committed to antibiotic research is driving away investors and threatening to strangle the development of new lifesaving drugs at a time when they are urgently needed.

“This is a crisis that should alarm everyone,” said Dr. Helen Boucher, an infectious disease specialist at Tufts Medical Center and a member of the Presidential Advisory Council on Combating Antibiotic-Resistant Bacteria.

The problem is straightforward: The companies that have invested billions to develop the drugs have not found a way to make money selling them. Most antibiotics are prescribed for just days or weeks — unlike medicines for chronic conditions like diabetes or rheumatoid arthritis that have been blockbusters — and many hospitals have been unwilling to pay high prices for the new therapies. Political gridlock in Congress has thwarted legislative efforts to address the problem.

The challenges facing antibiotic makers come at time when many of the drugs designed to vanquish infections are becoming ineffective against bacteria and fungi, as overuse of the decades-old drugs has spurred them to develop defenses against the medicines.

Drug-resistant infections now kill 35,000 people in the United States each year and sicken 2.8 million, according a report from the Centers for Disease Control and Prevention released last month. Without new therapies, the United Nations says the global death toll could soar to 10 million by 2050.

………

Public health experts say the crisis calls for government intervention. Among the ideas that have wide backing are increased reimbursements for new antibiotics, federal funding to stockpile drugs effective against resistant germs and financial incentives that would offer much needed aid to start-ups and lure back the pharmaceutical giants. Despite bipartisan support, legislation aimed at addressing the problem has languished in Congress.

“If this doesn’t get fixed in the next six to 12 months, the last of the Mohicans will go broke and investors won’t return to the market for another decade or two,” said Chen Yu, a health care venture capitalist who has invested in the field.

Well, Chen Yu would say that, wouldn’t he?

He’s in the business of extracting money from monopoly rents and subsidies, so he is calling for additional monopoly rents and subsides.

What he really wants is this times 10:

Many of the new drugs are not cheap, at least when compared to older generics that can cost a few dollars a pill. A typical course of Xerava, a newly approved antibiotic that targets multi-drug-resistant infections, can cost as much as $2,000.

The problem is that no one can see beyond the for-profit model, looting, and subsidies:

Some of the sector’s biggest players have coalesced around a raft of interventions and incentives that would treat antibiotics as a global good. They include extending the exclusivity for new antibiotics to give companies more time to earn back their investments and creating a program to buy and store critical antibiotics much the way the federal government stockpiles emergency medication for possible pandemics or bioterror threats like anthrax and smallpox.

The solution to this is, dare I say it? Socialism.

As opposed to government subsidies, government ownership.

Not Enough Bullets

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After running a transparent scam, and engaging in some of the most egregious self-dealing that has not ended up inside a criminal court ever, Adam Neumann’s looks set to make millions more in addition to his $1.6 billion payout from Softbank to eject him from WeWork:

WeWork co-founder Adam Neumann, who left the lossmaking office-space provider with a $1.6bn exit package, could earn hundreds of millions of dollars more under an agreement struck with the company and its top shareholder in October, according to documents reviewed by the Financial Times and people briefed on the matter.

The deal revised the terms of a class of shares held by Mr Neumann — known as profits interests — that were created by the company’s complex restructuring this year and had little value after plans for a WeWork initial public offering fell apart.

But a future flotation — even at a valuation significantly lower than the company was seeking this summer — could result in Mr Neumann receiving hundreds of millions of dollars if he sells the stake.

In October, a month after Mr Neumann stepped down as chief executive, he agreed with WeWork and SoftBank, its biggest investor, to forfeit some of his profits interests, while receiving improved terms for his remaining stake, positioning him for future gains.

Seriously, if we have the space in prisons to lock up some low level junky for decades, why can’t Neumann get a couple of years?