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Arthritis drug Humira from Abbvie is shown in this NYT report as having made $114 billion from Humira using the US patent system to delay the introduction of competing products that would have lowered prices for Americans suffering from arthritis. NYT says the114 billion was made just since 2016 when competing products were coming to market. In 2022 this is ending as nine competitors including Pfizer come up with their competing products. In many ways the system of market competition does not operate in the way textbooks or free market advocates say. It is considered ok to engineer advantage within what is a supposedly a market competition system and to turn a blind eye to it. Is it acceptable when it comes to health products and when prices increase from the exorbitant to the outrageous. The Inflation Reduction Act of president Biden included efforts to prevent just such abuses of a market competition system to restore fairness after years of egregious behaviours.

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According to Bank of America $362 billion of of subprime Adjustable Rate Mortgages, mostly 2-28 loans which adjust after 2 years, will reset in 2008. And in 2008 another $152 billion of other loans such as jumbo mortgages of more than $417,000 and Alt-A loans (category between prime and subprime) also will reset. And all this is happening with falling prices which means less or no equity in the home and little chance of refinancing or selling the home. Upto now the foreclosures had been due not as muchdue to resets as to weak underwriting and falling home prices. Whats ahead is the crest of the reset wave. From the 1.35 million homes in foreclosure this year next years 2008 should see 1.44 million foreclosures according to the Morgage Bankers Association. According to Bear Stearns this will add about 4 months to the supply of existing homes and worsen the price situation. This itself plus the some 20% lower price of foreclosed homes compared to comparable homes in a neighborhood drives the prices down further and creates a vicious cycle. Fed's Ben Beranke sees this affecting the general economy in 2008....

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According to a study by Goldman Sachs, an supported by other experts, the USA is only half way through the housing crisis. Goldman estimates that there will be a 18-20% correction overall with about 11-13% further price declines expected. In some states a decline of 25% is expected. These are states that saw huge runup in prices- Virginia and Maryland, Florida, California and Arizona, and New Jersey.

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Interesting when 53 economists were surveyed by the WSJ 51% attributed the rising fuel prices to demand from China and India, only 15% attribute it to supply constraints, and 15% attribute it to foreign exchange issues and 11% attribte it to speculation. That is that 3 times as many economists think demand from China and India is the culprit compared to supply constraints, and twice as many economists think foreign exchange speculation and central bank issues are the cause than supply constraints. Why? Once you remove this outsize demand from China and moderate the growth there then the supply constraint does not become so critical. In previous years declining prices made exploration less attractive or the fact that price was not stable going up and then coming down making it difficult to invest based on a stable return. Now the basic component of additional energy for countries like India and China's people increasing demands could be accomodated within existing and new supplies coming onstream, without the red hot demand component of growth rates at above 10% and close to 10% in India and China exacerbating prices upto some current estimates of $200 per barrel. In effect the price spikes would reverse the demand growth, and the essential needs of more people needing everything from electricity and fuel and gasoline to improve living standards in China and India at a moderate pace would prevent oil prices from falling to levels that make aggressive search for new oil finds and increased production from more difficult locations unattractive. This would correct the previous imbalance where exploration at low prices near $30 or $40 a barrel and uncertain price levels made for little new exploration while consumers were on a consumption binge in the use of gasoline which created this present situation. And in future oil at sustainable price levels would make it easier to meet the needs of poorer people in countries like China and India as more aggressive growth resumes at some future date after this expected worldwide slowdown. So correcting the previous and current imbalances helps to create a better situation in the future to better meet the hopes and expectations of millions of people in the developing countries for better nutrition, better electricity supplies and other needs of modern living....

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The media fails to give a clear complete picture of effects, context, concept behind tariffs and AI won't know. Effects on inflation- June inflation is 2.7% compared to May inflation of 2.4%. The central bank head, Fed chairman Powell has not cut rates to gauge the effect on inflation with new data. Powell says the US economy is strong and inflation remains low. US Market access fee-The US and overseas media including WSJ has not pointed out that the tariffs agreed to by Japan, European Union and South Korea of 15% are really not tariffs but a fee these countries and their business sectors in major industries such as autos and machinery, pay to access the US market. DJT, USTR Greer, Treasury's Bessent expect these companies to not increase prices. Fairness: US had 2.8% tariff on cars EU had 10% since 1980's. Rebates will go to some income groups. Rebates- In the one third of products in clothing, shoes etc of the $50 billion in tariffs for first half 2024 where about 5% price increase is passed on to consumers as shown in WSJ report this is likely offset by rebates to certain income groups. DJT says- “The big thing we want to do is pay down debt, but we’re thinking about a rebate. We have so much money coming in from tariffs that a little rebate for people of a certain income level might be really nice.”     ...

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There is a clear warning in this WSJ report by Jonathan Weil of the opaque manner financial reports of some private equity are done, which take the lack of transparency in general of private equity funds to an astonishing level. One private equity fund gives information on some transactions in footnotes that run 3 pages- actually shown here. The report highlights the practice of private equity of buying funds on the secondary market at hugely discounted prices and marking them up immediately by upto 1000% to show large returns. How on earth are private equity funds not going to damage their reputations if they take up the task of investing the retirement funds of American's 401 K's. Historically these funds have been kept away from private equity. As their returns dwindle private equity funds including Blackstone are trying to get the US president DJT to allow private equity to manage retirement assets of ordinary Americans who can ill afford such investments.   ...

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The economy slows and China's central banks cuts two interest rates. No major stimulus is planned as in Europe and the US after record debt levels that have accumulated over the last decade of hyper growth. Youth unemployment reaches 19%. The drop in demand for oil from China with the slowdown leads to a drop in the price of oil to about $93 for Brent Crude in August 2022, providing some relief for oil price to the EU and US. China is the largest importer of oil and it takes in 15% of the world's oil supply.

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Lawmakers in Congress finally get overwhelming bipartisan support behind a plan to help homeowners facing foreclosure. The rate of homeowners going into foreclosure is 8000 a day or 2,920,000 between now and the same time next year, with the burden falling more heavily in some regions or states like Nevada, Arizona, California and Florida, and in states where the economy is weak as in the auto industry states of Michigan, Ohio and Indiana. This took some time apparently as there was some hope a couple of months before that the economy would recover and taxpayer money need not be spent to rescue homeowners and lenders from their folly. Now the economy looks sure to go into a serious downturn and homeowner prices measured by the Case-Shiller index show a 16.5% drop in prices from this time last year. Lenders earlier had balked from reducing the size of the loans and balance owed by lenders as part of their contribution. Now with losses of 40-60% in foreclosure the new federally guaranteed mortgages which require reducing the loan money owed to 85% of current value are looking attractive. The new mortgages are 30 year fixed loans with a federal guarantee. Only borrowers wanting to stay in their primary home are eligible. Borrowers also have to pay hefty fees to save taxpayer money. Buyers who purchase unoccupied properties will get a $8000 refund tax credit. There is some concern that because the bill is fairly complicated homeowners and lenders would not make larger use of it....

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Con Agra is having to cut prices on its Pam cooking sprays, Wesson cooking oils, Egg Beaters and other produts to compete with growing sales of private labels . In its consumer foods segment the amount of food sold declined by 4% in its fiscal third quarter ended Feb. 22. Kraft Foods saw a loss of 2.5% of sales volume in the fourth quarter 2008 because people bought less Kraft products. And Kraft has lowered prices on some nuts,cheeses and coffee.Heinz saw sales volume decline by 6% in its most recent quarter. In 2008 food producrers pushed through price increases of as high as 10%. The situation now is that consumers are shifting to austerity spending and this will increase price competitive private lable products even more. And Nielsen data from the Private Label Manufacturers Association show private label sales of food and grocery products in the USA grew 10.3% in th 12 months ending Nov 2008 to $82.9 billion.

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Difficulties faced in winning the farm vote in Gujarat made it harder for Modi's BJP party to win Modi's home state in recent elections. This could lead to a more cautious approach from the BJP government. Price supports and subsidies were an issue for cotton farmers in Gujarat, leading to the loss of seats for the BJP party in Saurashtra region of Gujarat. The BJP resisted measures to boost price supports, subsidies and debt forgiveness leading to the loss of farmers support.

Modi remains popular in the country yet the election shows corruption, difficult situation of farmers facing inflation and water issues, and voters willingness to shift support, could make the ruling party more cautious in taking steps after the introduction of GST unified tax system and monetization slowed growth to 5.7% by mid-2017.

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Joshua Rosner of investment bank Graham Fisher thinks the Citi rescue plan still does not go far enough, as the toxic assets still remain on Citi's books, and as long as home prices are declining the losses are increasing. The ultimate level of losses will be higher as they are pushed forward in a world of declining home prices.

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Oil supplies are not expected to go up with Mexicio and Russia's aging fields crimping production, non opec production barely budging with 1% increase this year according to IEA. Indonesia production down by half from its peak. Countries in the middle east like Iran are consuming more and have less available for export. And the Saudis plan to build huge chemical aluminium and other plants as well as cities in the desert, and increase electricity production. This will take up some of the oil production and make less available for export. Militant strikes have shut down over 25% of production of Nigeria's 2.5 million barrels a day of production repeatedly in the last few years. And Saudi Arabia has according to CERA only 2 million barrels a day of spare capacity or 2.3% that it can add, all of the safety cushion in one country according to Daniel Yergin. Yergin sees prices up to $150 barrel based on the supply constraints. The demand side is showing declining consumption in the USA but not by enough to compensate for growing consumption in China by 5% this year, and the increase in consumption in India, Russia, Brazil and other developing countries including Middle East. The reason for continuing consumption increases in the rest of the world is that price impact has been less severe in Europe because of the strong euro and oil priced in US dollars, and in China because Petrochina is required to put price caps so gasoline price increases are not that harsh. And India also cushions the price impact to some extent to protect consumers. And autos are just taking off in large numbers in China, Russia, India, Brazil and other countries. The drop in consumption in the USA has to be large enough to have an impact. And the shift to fuel efficient targets in the new fuel efficiency regulations in the USA are too modest and over a number of years to have any impact in the short term or in the next 1-3 years. In February US oil demand dropped to 19.7 million barrels a day, down 1 million barrels a day from the US average for 2007, but this insufficient conservation to impact price. Even though new cars are shifting to higher fuel efficient small cars the impact on the total fleet is gradual as cars on the road purchased in the last 5-10 years are still on the road. Even as the consumption falls in the US the offset is occurring in the other countries like China, Russia and India. Some of this is due to the euro and some to speculation but the supply constraints are real and demand momentum is still there in China, Middle east, Russia and India to keep offsetting savings elsewhere and keeping supplies tight. The euro increased in value by 2% while oil prices increased by 10% since the 1st week of April so there is more than the weakening dollar and some speculation to this surge, which may be why the normally cautious Yergin says the price rise to $150 is realistic and says, its not just that the genie is out of the bottle, a hundred genies are out of the bottle. That is to say for the immediate future of demand momentum and supply sluggishness which could run 6-24 months, to the Olympics and maybe a year or so from then. This ties in with the thinking behind the Goldman's estimate and CERA's estimate. ...

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Liquidators these days are doing a thriving business. With a glut of retail goods piling up at stores and stores liquidating, some of this merchandise is ending up in emerging market countries from Pakistan to remote parts of Russia. Hudson's Salvage, a 45 store discount retailer is selling women's bouses, pants, and dresses intended to sell at full price retailers at $140, at prices as low as $6.99. Some of this stuff is ending at stores selling to Hispanic shoppers in smaller US cities, central New Jersey, and more of the high end brand name merchandise is being discounted heavily.

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JP Morgan and Citicorp announced profits of $5.4 billion and $3.3 billion respectively in the second quarter of 2011. Christopher Whalen points to one area of serious risk on bank balance sheets, which is second liens or home equity lines of credit. FDIC data show U.S. banks holding $624 billion in second lien loans in the 1st quarter 2011. Core Logic data shows 11 million of the U.S. mortgaged properties - or 23% of all properties- being underwater in March 2011. Of this 4.5 million properties carry home equity loans. The average amount of negative equity for borrowers was $65,000. Whalen says the largest banks are pretending that the second liens are good because interest payments are being made. Borrowers pay only the interest for ten years on many of these home equity lines of credit. He says banks have written off $500 billion so far in assets related to housing, but this has not included much in the way of writing down second liens. If housing prices do not stabilize banks will need to make writedowns of first and second liens. Whalen says this loss is probably as large as the $500 billion already charged off by the banks. For the 1st quarter of 2011, the second liens were $136 billion for Bank of America, and it has written down $6.8 billion in 2010, Wells Fargo had $108 billion, and it had written down $4.7 billion in 2010. J.P. Morgan had $60 billion aso of the 2nd quarter of 2011. JP Morgan spokesman said the bank charged off $3.44 billion in 2010, and $1.3 billion in the first half 2011. Citibank had $46 billon in March 2010....

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Wages have gone up less in Europe than in the US. In the last 3 months of 2021 wages were up 1.2 % and inflation was up 4.7% for a fall in real wages of 3.1%, which has accelerated since then with the war in Ukraine and shortages of energy and food supplies. A YouGov poll shows that 15% of Germans cannot afford basic necessities and 53% are concerned about rising prices. Because basic things like food and energy where prices have gone up the most also take up large portions of the budget for lower income households. In Germany some unions are giving one off payments for energy bills and other costs to workers till negotiations lead to a settlement on increasing wages. The situation is similar in Greece, Italy and France. In Greece the government has given $3 billion for subsidies on gas and electric bills. Elections are now focusing on cost of living as in France where the second and third place winners in the first round Le Pen and Melenchon together took about half of the vote. ...

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Just as new ships to carry freight come on line after years of tight shippinf constraints the economy takes a dive and these ships will be used for what? Cruise ships? Now shipping rates reflect the economic crisis, the basic price of shipping a large container of goods from Asia to Europe was $2800, now its dropped to $700. Prices on the American routes where there is tighter harbor space has dropped to $1500 a container.

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A ban on foreigners buying homes in Canada by the Trudeau government is intended to put a lid on house price increases. Immigration is increasing to Canada as Canada needs more people. About 3.5 million new homes have to be built in Canada to achieve house affordability for all. The government has proposed 465,000 new permanent residents in 2023 and 500,000 in 2025. Immigration from India and China and other Asian countries is the main source of permanent residents. The new infusion is needed as Canada's economy grows.

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It took a long time for the banks to understand what is in their best interests is in the best interests of the country's economy and homeowners, something Sheila Bair has been saying since the beginning of this year and implementing at IndyMac. Its just too costly for banks to use the foreclosure process to recover their money and it makes much better financial sense on the bottomline of banks and for the economy to make home payments affordable. Because the worse home prices get the worse the economy and banks do and nothing drives home prices down like foreclosures. The Bank of America settlement for Countrywide with state attorney generals to modify loans for 400,000 homeowners because of predatory lending practices also set the direction. Chase Bank is now using the Bair template to get the monthly payments down to an affordable level which is about 40% of the current payment by reducing interest rates and using a smaller loan balance and keep homeowners in their homes. Chase's plan will help 400,000 homeowners and will also help homeowners who are having difficulty making payments. It will put a 90 day hold on foreclosures till the program is put in place. Yet there is one problem. Only $350 billion of the 1.5 trillion in home mortgage it services are owned by Chase, the rest are owned by investors in the form of mortgage securities. It can do little for homeowners covered by these securites that are owned by hedge funds and other funds as a few of these funds oblivious of the overall interest including their own have threated to sue if loans are modified, and it would take some time to figure out who owns each security and what the terms are for modifying loans for that security. Its this part of mortgage securitiization that has slowed down a rational process of unwinding this problem throughout housing by making homeowners monthly payments affordable. And Fed's Bernanke did not come to grips with this point in his talk about mortgage securitization to UC Berkeley on October 31,2008, that mortgage securitization done in a way that make loan modification difficult is dangerous as it is today, and makes a crisis bigger than it otherwise would be, and turn a USA crisis into a global crisis through ricotcheting effects and a series of bad decisons....

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US housing prices are seeing a decline in 2022 as a result of the Fed's interest rate increases even though there is no extra supply of housing. Renters are staying away from high mortgage payments at the higher rates, and families with a 3% mortgage are staying put rather than risk making larger mortgage payments for a new home. Fed's Jerome Powell has this to say- "You had housing markets go up at very unsustainable levels and overheating. Now the housing market is going through the other side of that and hopefully coming out at abetter place." This is more like the drop in demand for housing in 1979 which revived in 1983 after the Fed eased up on increasing rates, says the WSJ.

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Peers says Amazon's strategy is flawed and the new Kindle Fire tablet will cut into Amazon's already low margins. He points to the analysis of components going into tablets by IHS iSuppli, which found materials costs alone come up to over $262. For companies making hardware such as Samsung and Sony the tablets have to be priced higher. By pricing the Kindle Fire at $199, Amazon CEO Bezos, may be counting on the tablet boosting Amazon's retail business, the digital music, and the streaming of videos, and bookstores. Surveys show the tablet being used mainly for web surfing or email, and less for watching video or reading books. Amazon has the Kindle e-reader which is a better option for readers because of the price. And video sources include other suppliers including YouTube and Netflix. Apple still has the edge in resources- $76 billion in cash and investments in mid 2011- to support lower prices on newer versions of the iPad with more capabilities and design features. Apple with its supply chain experience may be able to obtain better costs from component suppliers than Amazon for future price reductions. Sony and Samsung also bring the manufacturing knowhow and expertise to do this, with Sony's added capabilities in designing devices. The H-P tablet experience shows how quickly a tablet can become obsolete in this market....

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Macy's story is told by figures showing an increasing share in a shrinking department store business. Macy's increased its share of department store sales to 44% in 2013, from 33% in 2006 by acquiring other department stores. As a result the improvement in recent years disguises some serious weakness in the company's strategies. It took Macy many years before launching an off price chain to carry discounted merchandise- only now getting off the ground under the Backstage chain. The change in consumer buying habits after the 2008 recession continues today, buyers are frugal and waiting for markdowns which take longer at Macy's and come quickly at TJ Maxx. As a result Macy's sales are declining in 2015. This benefits discount retailers carrying name brands at lower prices such as TJ Maxx, which has about the same sales as Macy's and over 3 times the market value. Macy's share price has fallen about 40% so far in 2015. As other stores such as J.C. Penneys have shifted and adopted strategies offering more value and everyday competitive pricing Macy's faces the risk of being too slow to change....

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US president Biden's 2024 Budget places great emphasis on aid to workers and families in the US and shores up the Medicare hospital-insurance trust fund. He will do this by raising taxes on the wages, investment gains and self-employment income of people making more than $400,000 a year. Additional savings come from increasing the drugs on which Medicare can negotiate prices from 20 to 50 drugs.  Childcare- families making less than $200,000 a year will get subsidized child health care, the lowest income families paying nothing. Housing- Building and preserving 2 million housing units. Series of tax credits to make buying homes more affordable. College education- Reducing the cost of going to education with $12 billion allocated for this. Offering tution free community college. Family and Medical Leave- Federal paid family and medical leave program. Retirees- a $2000 cap on out of pocket cost of prescription drugs for retirees. Reduced taxes for under $400,000 income households- This would be done without increasing the deficits to extend the tax reduction from the 2017 tax cuts to households making less than $400,000 a year.     ...

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Lower volatility in oil prices as a result of a new stream of shale oil supplies at competitive prices is good for oil producers and for consumers. This report in the WSJ shows that volatility and swings in oil prices have gone down with the ability of shale producers to respond to price signals or geopolitical situations and increase supplies. Shale producers can increase supplies in months compared to the years it would take for oil producers in offshore drilling. The new technologies in shale rigs have tripled production since 2011 for the same number of rigs operating in the U.S. Permian Basin from West Texas to New Mexico. The core producers can now supply and be profitable at $40 a barrel.  Supply cuts from OPEC and Russia as currently the policy of both countries mean inventories do not rise too high. And geopolitical problems such as Yemeni attacks on Saudi oil facilities, the reinstated sanctions on Iran by the Trump administration that reduce oil supplies, Venezuela's problems, can be met by increased supplies from the U.S. shale industry in a short time to prevent inventories from dropping too much.      ...

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The new iPad coming out in March 2012 will be priced at $499, with the prior version being priced now at $399. Tim Cook, Apple's CEO, says the iPad sales in the 4th quarter of 2011 surpassed sales of PC's by any individual manufacturer. To give some idea of the impact Apple's sales of $9.5 billion for iPads in the 4th quarter were twice the sales revenue made by Microsoft for Windows software and close to the total revenue of Google during the quarter. This third generation iPad looks like the previous one. It has an A5X quad-core chip for faster processing and a higher resolution screen with 2,048 by 1,536 pixels. The new iPad also works on the new cellphone network technology called LTE. It works on AT&T and Verizon's networks. Users can dictate e-mail on this device.

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One bright spot even as the war in Ukraine continues is the recovery in Ukraine food exports. Ukraine's Food ministry says the exports of foodgrains from Ukraine reached 6.9 million metric tons in September 2022 compared to 7.1 million metric tons in September 2021 before the war. This shows how vital are the shipping lanes and agreements to keep shipping safe on the Black Sea ports as they are a lifeline for Turkey, Egypt and many countries in Africa. It also takes out some of the pressure on food prices all over the world.