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Foreign institutional investment in India declined to a mere $172 million in April 2012, from $5 billion in February. Foreign direct investment in India is falling. It was down to $27.5 billion in 2011, with only $4.2 billion in Jan-Feb. 2012.

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This Economist magazine editorial says the Republican plan for health care with its roll back of Medicaid expansion by limiting funding to states after 2020, and by scaling back subsidies especially for older Americans and not basing them on income levels, is likely to have its own problems just as the Affordable Care Act. One concern is that keeping healthy people in the market with a mandate that everyone have insurance is present but in a milder form with premiums going up by 30% in one year if they change their mind. There is concern that this may not work among insurers leading to an increase in premiums, pricing people out of the market in "a death spiral." This could lead to more people being priced out of the market as premiums rise. About 12 million people were added to Medicaid by increasing eligibility level to $16400, or 138% of poverty line- this reduced the uninsured from 16% in 2010 to 8.8% today. The Economist concludes that the Republican health care bill has its own problems, and that this bill does not clear up the problems in Obamacare by substituting Ryancare as the Republican bill is called. Peggy Noonan writing in the WSJ says this may have negative consequences for the new Republican base shift to populist support. Critics on the right like Rand Paul see even the reduced subsidies as an entitlement program, yet the Republicans can only change parts of the Affordable Care Act as they need 60 votes in the Senate where they only have a small majority.   ...

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Krugman points out that without aid to state and local governments, cash strapped cities and states will be cutting back on services and employment, undoing much of the work of the stimulus. These cutbacks by local governments is showing up in the unemployment figures from the Commerce Department. And social cohesion is being strained as the outlook for those without jobs for more than 6 months looks worse with the economy slowing down.

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Elelven of twelve Fed Governors support the U.S. Federal Reserve's decision to keep rates low till unemployment falls below 6.5%, as long as inflation remains subdued at 2-2.5% and inflation expectations are low. Only the Fed governor of Richmond expressed a dissenting vote. The Fed in its policy statement said it was addressing the problems of the last three years in housing and joblessness. Charles Evans of the Chicago Fed put it this way in a Sept 2011 speech- suppose the inflation rate was 5% when the target was 2%, then central banksers at the Fed would have acted as if their hair was on fire to tackle inflation, then why shouldn't the Fed do the same for unemployment. He succeeded in convincing Bernanke, Yellen and other Fed governors. Bernanke emphasized the enormous cost in human potential and productive capacity of the U.S. economy from high unemployment and people dropping out of the labor force.

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The U.S. Federal Reserve's decision to extend Operation Twist beyond June to the rest of the year after the June 2012 FOMC meeting. By extending Operation Twist the Fed will buy $267 billion in long-term Treasury bonds and notes and sell short term Treasurys.

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Novartis is taking a new approach to drug research and drug discovery. The old one which was popular in the drug industry was to go directly for blockbuster drugs for large numbers of users, with a long time in the research pipeline because the area of research was largely an unknown. This was costly and becoming less and less productive. Dan Vasella who heads Novartis, is taking a different approach which comes from his understanding of medical science as a physician, in an industry run by accountants, lawyers and business people. This is to go after wellknown molecular pathways identified by Dr Fishman at Harvard in his research, and do this by taking on problems in diseases that afflict small numbers of people. These drugs have some established medical science to work with, and the research work takes a shorter period. Once the drug proves its effectiveness in one illness, it is tested for other illnesses that afflict a large number of people but which shares some of the same underlying phenomena that cause the disease in the two situations. Dr Vasella stumbled on this approach after the development of the drug Gleevec by Novartis. Gleevec was originally approved for a rare blood cancer, but has now shown to be effective against six other dieases. Gleevec brought 3.7 billion in revenues in 2008 for Novartis. In 2002 Vasella made a bold move to discard the old drug development model. The basis of this approach was to go after new drugs that were desperately needed and where the genetics of the illness were well understood. Whereas pursuing rare dieases is considered foolhardy by most drug company leaders, Vasella's idea is to use the common genetic underlying arrangements for that drug to go after other diseases that would be good prospects for the now proven drug. The known genetics makes it possible to complete the research in a shorter time. In 2009 Novartis has 93 drug candidates in the pipeline, 40% more than 3 years ago and 80% of Novartis' drugs last year made it from early testing to late stage development. This was a 60% improvement over 2005. The new approach fits the current regulatory climate, with regulators concerned more about safety, and Medicare and Medicaid and other payor less willing to pay for treatment with modest benefits or with uncertain outcomes. The approach had to be executed in terms of organization and staffing. Vasella moved the R&D global research operation from Basel to Cambridge, Massachusetts, and spent $4 billion on the move. He recruited a renowed researcher and cardiologist at Harvard University, Dr Mark Fishman, who had done research on the genetic mutations in the cardiovascular systems, to run the center and set the new direction for global research. Fishman convinced Vasella that medical research should focus on a small number of molecular pathways- the complex suquences of interactions among chemicals, proteins, and larger cell structures in the body that are behind all illnesses. Says Fishman, there are 24,000 genes in the genome, but only a few dozen pathways conserved through evolution. Fishman's theory is that you find all the links in a pathway and then locate the signals that can turn the genes on or off to develop medicines for illnesses. Bercause disease after disease share a common pathway, the knowledge gathered can then be applied across that region with more accuracy and directly, to address a range of illnesses. Fishman's approach means marketing and sales no longer make the decisions. There is a new method for doing things. Fishman focusses on clinical data and insists that commercial analysis comes after sufficient clinical data. A major restructuring in 2007 led to shedding 1260 sales and marketing jobs, as clinical science now takes precedence and medically trained scientists take senior leadership positions. The new approach is being used for a drug developed for Muckle-Wells syndrome. Computer simulations are shortening the time to late stage trials. The drug has applications for Type 2 diabetes and severe arthritis. The whole process will take many years, as its a sea change for the industry and for Novartis, a fresh approach when the approach used by the pharmaceutical industry for so long is failing. An oral drug treatment for multiple sclerosis is being developed along these lines. Afinitor. approved by the FDA for kidney cancer in March shows potential in six other diseases, including lymphoma where Afintor shrank tumors by 50% in one third of the patients in a trial. ...

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The unemployment rate drops to 6.3% in April 2014, as a significant number of Americans stop looking for jobs they cannot find. 288,000 new jobs were created in April 2014, according to the Labor Department. Yet the participation rate has declined to 62.8%, the lowest in three decades, and wages are up only about 1.9% from the prior year month. The unemployment rate which counts involuntary part-time workers and workers discouraged and not looking for a job was 12.3% for April 2014.

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All sectors of the U.S. economy see an increase in hiring, including retail, transportation, healthcare and manufacturing, as the economy adds 288,000 jobs in June, according to the Labor Department. Manufacturing added 16,000 jobs, transportation 17,000 and the public sector increased jobs by 26,000. Hiring also picked up for high school graduates compared to the poor record in 2013. In 2013 one Barclays economist says the jobs for high school graduates at this point were declining by 16,000 a month on yearly basis. He says employers are now adding 29,000 jobs for high school graduates a month in 2014. The unemployment for high school graduates declined to 5.8% in June 2014, for persons with some college education or an associate degree 5.0%, for college graduates 3.3%. Barclay's estimate is that the U.S. added an average of 231,000 jobs a month for the first half of 2014. The inflation rate remains at about 2%, giving the U.S. Fed more flexibility in setting rates to support jobs growth. The lower unemployment rate of 6.1% understates the underemployment, as a more accurate measure of employment which includes people working part time because they cannot find jobs is at 12.1%. The proportion of Americans in the labor force is also at a 36 year low of 62.8%. These two indicators for unemployment, unemployment including people working parttime, and the proportion of Americans in the labor force, combined with inflation, are the main indicators Fed chairmam Yellen is looking at....

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The Federal Reserve Open Market Committe voted 7 to 3 to carry out "Operation Twist." This does not involve printing new money as was done for the $600 billion QE II Fed program. This time the Fed will shift its holdings to hold fewer short-term Treasury bills and notes and increase holdings of Treasury securities with longer maturities. The overall impact would be to increase the average maturity of its Treasury securities portfolo to 8 years from the current 6 years. The idea is to put pressure to reduce long tem rates. The Fed says the impact on short term rates is expected to be small because of its conditional pledge made in August 2011 to hold short term rates near zero until mid-2013. The impact of the Fed's move is likely to be modest considering the fact that the average rate on 30 year fixed rate mortgages is already low. It is at 4.09%, according to the latest Freddie Mac survey.

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Rep. Paul and Rep Barney Frank call for cutting defense spending as they convene a Sustainable Defense Task Force of defense analysts. This task force recommends $1 trillion in cuts over the next 10 years. Defense Secretary Gates is preparing the Defense department for this change. Gates is looking for smart ways to cut costs while still keeping the defense capabilities intact, but cutting unnecessary overhead and unnecessary programs like the second type of engine for the F-35 fighter jet.

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The U.S. market has better prospects than emerging markets according to some analysts. This is because a large number of U.S. tech and blue chip companies have good earnings and cash positions, and lower valuations. Commodities prices are volatile because China is raising interest rates to control inflation, slowing growth. Many emerging markets like Russia and Brazil are dependent on commodities exports making them riskier as China's growth slows.