Tag Archive: Buy Low Sell High


“The problem with socialism is that you eventually run out of other people’s money.” — UK Prime Minister Margaret Thatcher (1925-2013)

If a private sector position with full benefits isn’t the greatest anti-poverty program ever devised … what on earth is?

In order to avoid saying she will raise taxes on the middle class for “Medicare For All,” Senator Elizabeth Warren (D-Massachusetts) is proposing federal confiscation of all pretax employer paid Medicare health care benefits for literally millions of working achievers.

Her plan will eliminate private health insurance for 150 million Americans or more, and nationalize the $530 billion private health insurance industry.

Isn’t the termination of $8.8 trillion in cherished pretax employer-paid health care benefits for millions of employees, the equivalent of a middle class tax increase on steroids? Keep in mind, the annual federal budget is only … $4.45 trillion.

Instead of Starbucks paying $20,000 for this benefit to each of its 291,000 employees for private insurance (e.g., Blue Cross, Kaiser …), the legendary coffee roaster would be compelled to turn-over a similar amount to the federal government. In turn, these employees would lose their Starbucks offered pretax Medicare benefits and choice of private health insurer, only to forced into government paid … and only government paid … DMV-style insurance.

The Bernie Sanders “Medicare for All” bill (which Warren supports) calls for a 4 percent federal income tax increase for middle class workers. In order to avoid saying she is raising middle class taxes, Warren proposes instead federal confiscation of pretax employer paid health care benefits.

“In practice this (redirection of employer-paid health benefits to the government) would be a tax on employment, which seems likely to hurt middle-class Americans.” — The Economist, November 9, 2019

Deciding which plan (Sanders or Warren) is worse is just as difficult as deducing which is better.

How about keeping and retaining private health insurance, and our ability to choose our own doctors, dentists and optometrists?

Almost DailyBrett has always exhibited a libertarian streak. If we empower our $4 trillion behemoth federal government to confiscate pretax employer-paid health insurance, and eliminate private health insurance for 150-million-plus souls, the obvious question is:

What’s next?

Tax On Billionaires

” … if she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge. And does that still suck for us?” — Facebook founder Mark Zuckerberg commenting on the spectre of a Warren presidency to the company’s 35,000 employees.

The public relations spin by Bernie and Elizabeth has focused squarely on the likes of Zuckerberg, Bill Gates, Jamie Dimon and Leon Cooperman, including Warren mocking the latter for his tearful concern about the future of our country.

Consider the Bill and Melinda Gates Foundation has given $36 billion to fight third-world poverty. Does no good deed go unpunished?

The centerpiece of the billionaire vilification campaign is a 2 percent wealth tax on those with assets exceeding $50 million (how many folks in blue states California, New York, Connecticut, Massachusetts … are included in this tax?), and 6 percent for those with $1 billion or more. We are not just talking about giving “two cents” (on each dollar) more.

How would the federal government determine the amount of wealth to be taxed and confiscated? When would it be paid? How much stock will needed (needlessly?) be sold (maybe even at loss) and how much will be immediately bought back? What’s the algorithmic multi-billion dollar impact on the 52 percent of the country investing in stocks and stock-based mutual funds for their retirement or children’s education?

Is this tax, constitutional? Are we talking about double taxation? More to the point, do we want as a nation to empower … there’s that verb again … our massive government to punitively confiscate wealth and with it, achievement? How about a tax on lower upper class wealth? Ditto for a levy on upper middle class wealth? And how about … ? The possibilities are limitless.

Three European nations still impose wealth taxes: Norway, Spain and Switzerland. How’s Spain doing?

Eleven European nations have rescinded their wealth taxes: Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, Netherlands and Sweden.

That’s right, wealth taxes didn’t work in Denmark and Sweden, why should it fly in Iowa, Michigan, Ohio, Pennsylvania and Wisconsin?

According to the stately The Economist, Warren’s all-government all-the-time programs include requiring Amazon, Facebook and Google to be regulated as platform utilities (before or after their breakups?), 40 percent of all board seats held by “public reps” (read, unions), bans on nuclear power and fracking, 75 percent lobbying taxes, 37 percent taxes on capital gains, and the imposition of taxes on unsold stocks (employing Enron-style mark-to-market accounting or MTM) … and the list goes on and on and on.

Warren supporters caution America’s Investor Class (52 percent of the entire nation) not to worry; her plan will eventually be watered down or not approved. If so … what’s the point?

Are Warrenites and Sandernistas supporting Republican control of at least one house to serve as a check and a balance to radicalism? Didn’t think so.

Some see Warren as a Socialist champion against Capitalism or buy low sell high.

Instead, Almost DailyBrett sees Bernie and Elizabeth as two peas in the same pod.

They are threatening our economic freedom. They will dip into our wallets, and deny us benefits and physician choices we already enjoy. The only winner? Big government.

Instead of wisely controlling the size and scope of government, some will be cool with a greatly empowered … there’s that verb again … carnivorous federal bureaucracy with even more power over our individual abilities to chart our own financial futures.

Be afraid … be very, very afraid.

https://www.nationalreview.com/2019/03/elizabeth-warren-wealth-tax-european-nations/

https://slate.com/business/2019/11/elizabeth-warrens-health-care-medicare-for-all-single-payer-unfair.html

https://www.economist.com/briefing/2019/10/24/elizabeth-warrens-many-plans-would-reshape-american-capitalism

https://www.economist.com/united-states/2019/11/07/how-would-elizabeth-warren-pay-for-her-health-policy

https://slate.com/technology/2019/10/mark-zuckerberg-said-elizabeth-warrens-presidency-would-suck-for-us.html

https://almostdailybrett.wordpress.com/2019/09/15/how-blue-cross-saved-my-bacon/

“When are we going to realize in this country that our wealth is work. We are workers. And by selling this idea, ‘Hey man, I’ll teach you how to be rich.’ How is that different than an infomerical?” — Jon Stewart to CNBC’s Mad Money host and former Goldman Sachs hedge fund manager, Jim Cramer

No truer words were ever spoken.

During the course of his 2009  infamous viral dressing down of CNBC’s “Mad Money” Jim Cramer, Comedy Central’s Jon Stewart took direct aim at the notion of get-rich-quick, particularly in times of an economic meltdown.

Some acquaintances of Almost DailyBrett have inquired and even critiqued your author’s daily devotion to CNBC, the repeated clicks on Charles Schwab’s retirement IRA platform, and the checking of the value of the Eugene, Oregon residence on far-less-than-perfect, Zillow.

Yours truly is a dedicated capitalist, devoted to maintaining and growing wealth under the banner of Buy Low Sell High.

Buying low and selling high generates … profits. Yes, profits. Sorry Bernie and Elizabeth.

Some vehemently argue that nothing-is-guaranteed Wall Street is more or less, gambling.

Almost DailyBrett disagrees with this conclusion, but clearly recognizes that gamblers are energized and engaged. No one plays poker and puts their chips on the roulette table and cavalierly accepts the verdict. They play to win the game.

As Herm Edwards said: “You play to win the game. Hello? You play to win the game.”

And more times than naught, gamblers lose. The staggering accumulated wealth and gaudy palaces along the Las Vegas Strip are monuments to the … losers.

Don’t investors want to win too? There are no guarantees on Wall Street. Invested money is placed at risk. Doesn’t that make Wall Street the greatest casino of them all?

Achieving the spread between buying at a lower price and eventually selling at a higher price is more … much more … than simply investing in a 401k or IRA and forgetting about it. ‘Ahh … just let the pension fund chiefs or the mutual fund managers worry about it.’ Don’t worry.

Ladies and gentlemen, we are talking about your nest egg. Growing, caring and nurturing your tomorrow is a business. In effect, it is the ultimate business.

You want to ensure that you live a long and happy life, and that you expire before your money runs out.

The Wall Street crash of 2007-2010 is still fresh for most of us. Ten years later, we are enjoying the fruits of the longest bull market in American history with a record low, full-employment Department of Labor unemployment rate of 3.5 percent.

Time to put up our feet? Hell, no.

Manage Rather Than Be Managed

“Stewart had no special Wall Street knowledge, as he was the first to admit. What he had was a nose for a scam, and an uncanny ability to articulate what the rest of us were feeling.” — New York Times columnist, Joe Nocera

Recognizing that Jon Stewart is a comedian, not a stock market analyst or technician, he is nonetheless still right: “Our wealth is work.”

Part of the task before us is to understand completely a very simple question: How does a company makes money?

Please allow Almost DailyBrett to speak ex-cathedra: If you do not understand how a publicly traded company makes mula (e.g., McDonald’s makes hamburgers and feeds 1 percent of the planet each day), then you are gambling on a stock, not investing.

Remember posing this question to my classes about Bitcoin.

Some students volunteered that Bitcoin is a crypto-currency … whatever that means. “It’s been going up” (and down). Currencies are associated with countries (i.e., greenback, USA; Euro, EU; Pound Sterling, UK). What country backs Bitcoin?

Nada.

Therefore in your author’s portfolio, there is no place for Bitcoin or any other Ponzi Scheme.

Stewart publicly undressed Cramer because the former believed the latter’s network (e.g., CNBC) was not doing enough to protect retail investors, particularly those who were experiencing the daily assault on their portfolios between 2007-2010.

Most of us wish to forget that time, and yet we took the steps to manage our accounts and protect our nest eggs. We chose to manage instead of being managed.

Maintaining and building wealth requires us all to work, to stay alert, and have a healthy batting average when it comes to making our financial decisions.

Stay alert. Stay engaged. Stay the course.

http://www.cc.com/video-clips/iinzrx/the-daily-show-with-jon-stewart-jim-cramer-pt–2

http://money.com/money/3982267/jon-stewart-5-best-money-moments/

https://almostdailybrett.wordpress.com/2019/09/15/how-blue-cross-saved-my-bacon/

Time is money.” — Founding Father Benjamin Franklin

“Time is money. Wasted time means wasted money means trouble.” — Shirley Temple

Very few things in life irritate Almost DailyBrett more than walking into a supermarket with 12 or more check-out lines, and only two are open.

Albertsons is a particularly notorious offender. The supermarket chain is essentially asking consumers to subsidize its cheapness by forcing customers to waste time in long lines.

Your author does not shop at Albertsons or any any other serial personal-time thief.

Some upscale supermarkets (e.g., Market of Choice) have checkers available at every checkout, but the prices are much higher.

Which brings us to the question du jour: What is more important: Your money or your time?

The cop-out initial answer: It all depends.

If one barely has two shekels to rub together, the answer is obvious … you stand in long lines, hopefully getting a better deal for your precious time.

If one has no financial worries with a steady salaried position, packed schedule or even is a billionaire entrepreneur, then time is obviously the choice.

What would happen if you have $100,000 in assets and $100,000 in liabilities (besides losing sleep)?

You are essentially running a precarious personal/family business. Naturally, one would want to grow the assets and decrease the liabilities. Does that mean opting for money over time is the priority? Or does that mean putting time effectively to work over money is the answer?

Everybody loves a deal. Right?

Think of it this way, no one goes on Amazon or eBay looking to pay full freight. Heck no, we want a bargain. We want the best bang for our cherished buck

Does that mean we wait in way-too-long lines to just secure a better deal? How about the pool souls who waited up-to-10 hours outside an Apple store, just to pay more than $1,000 for the Apple iPhone X?

Sometimes the questions comes down to return on investment (ROI). Is the “deal” worth the time? Is the time worth the “deal?” Is the time worth, paying full retail?

Infinite vs. Finite

“Time is more value than money. You can get more money, but you cannot get more time.” — Jim Rohn, author and entrepreneur

Well-run enterprises are constantly figuring out novel ways of saving customer time, reducing internal costs and delivering competitively priced merchandise.

ATMs have been a fixture for banks, conceivably since the Earth cooled.

Some supermarkets have self-checkout lines, allowing consumers with a minimum or no assistance to scan products, bag and pay, thus minimizing time.

Did you check out McDonald’s reaching an all-time high stock price of $221.93 last Friday? The fast-food leader accomplished this feat even as global markets were rattled with US/China trade uncertainty, Hong Kong tensions, and confusing public relations message by the Federal Reserve?

Investors detest FUD … Fear, Uncertainty, Doubt.

McDonald’s daily feeding of 68 million or 1 percent of the earth’s population (e.g., 75 burgers per second) has long been accepted by Wall Street.

What is new is McDonald’s commitment to customer IT, particularly self-ordering kiosks providing greater speed with the same expected Big Mac quality. Sorry Veggies, Almost DailyBrett is an admitted McDonald’s investor and consumer (NYSE:MCD) and has to call em as I see em.

When push comes to shove, what is more vital money or time?

Time cannot buy groceries or love. The legal tender whether it be greenbacks, Euros, Pounds Sterling, Yen, Yuan etc. is a necessity of life. One must possess currency.

If one manages his or her personal and economic affairs correctly, there should always be the ability to make more money during the course of a lifetime. The key as you author is fond of pontificating and bloviating is … Buy Low Sell High. Discretionary revenues should be intelligently put to work.

Money can purchase groceries and many times love, but can it buy time?

That’s the rub. Money conceivably can always grow (Keith Richards makes money when he sleeps … royalties).

Time is finite. There is no arguing the point; one has only so much time. That’s why Almost DailyBrett always hopes that “Time Is On My Side.”

https://founders.archives.gov/documents/Franklin/01-03-02-0130

https://www.businessinsider.com/19-facts-about-mcdonalds-that-will-blow-your-mind-2012-4#mcdonalds-sells-more-than-75-hamburgers-every-second-2

 

 

 

 

 

 

 

“For the American generation which has grown up since the downfall of the USSR, socialism is no longer the boo word it once was.” The Economist, Feb. 16, 2019

The youngest of all Millennials were gestating in 1980.

Reagan called upon Gorbachev to “Tear Down This Wall” in 1987.

The Berlin Wall came tumbling down in 1989.

The Soviet Union collapsed under its sheer weight in 1991.

The last of the Millennials arrived in the millennial year, 2000.

The largely overlooked question: How many Millennials personally remember the USSR?

Alas, the answer is very, very few.

Only the oldest Millennials may have any memory of the Wall coming down when they were nine or the Soviet Union imploding without a shot being fired when they were 11.

For the vast majority of Millennials including all of the younger members of the Y-Generation, none of them remember the USSR and most of all, its authoritarian brand (being charitable) of socialism/communism.

To top it off, they are thus easily impressionable for exploitation by politicians, entertainers and academics who absolutely adore all things Karl Marx including some wearing red star hats and sporting Che Guevara t-shirts and posters.

Instead of “We the people” and liberty, it’s “Dictatorship of the Proletariat.”

When someone says government can provide a whole cavalcade of goodies – government-paid health insurance, college, jobs — for free, including Universal Basic Income (UBI) for those “unwilling” to work … don’t you just know there will be Big Brother Orwellian strings attached?

Back From The USSR

“I’m back in the U.S.S.R.
You don’t know how lucky you are boy
Back in the U.S.S.R. (Yeah)”
– Lennon (Not Lenin) & McCartney

For Almost DailyBrett, a 1981 two-week trip to Leonid Brezhnev’s “Evil Empire” was an eye-opening, life-changing journey.

Kevin in Moscow – 1981

The flood-lit Wunder of Red Square (Красная площадь) in Moscow, the Swan Lake performance of the Bolshoi, the splendor of the Czar’s winter and summer palaces in St. Petersburg (Leningrad at the time) are all must see for any student of history and politics, let alone art.

Your author has placed a return-venture to modern-day Russia on his Bucket List, particularly what has changed and unfortunately what has remained the same (tyranny).

It’s safe to say that Russia has transformed itself after attempted Glasnost and Perestroika into an authoritarian oligarchical capitalist state with widespread corruption.

You can take the Vladimir Putin out of the KGB, but you can’t the KGB out of Vladimir Putin.

Looking back to your author’s trip to the Soviet Union, there were the wonders of Russia. There was also the socialist/communist police state reality of the USSR.

There were the jammed horrible motor coaches,

There were the lines for food and the basics of life.

There were well-stocked Beriozka or “little birch” stores, which accepted all currencies except for Russian rubles. It must suck to be you, Ivan and Tanya.

There were the tiny little cars with lawn-mower engines for the fortunate few (10 years wait), while Zil limousines carried Communist big shots to their exclusive dachas.

The Most Equal Of The Equals

“In an ideal socialist society, “the people” own the means of production. Everyone’s basic needs are met. Leaders are elected democratically. When implemented, however, human nature intervenes. Powerful elites take charge.” – Alex Berezow. USA Today Board of Contributors

Bummer.

There is so much discussion about the haves and the have-nots of American society.

There are cries for social justice: Translated some all-powerful state entity must level the playing field.

The question, which remains: Did socialist/communist USSR really even the score for everyone?

Whattya think AOC? How’s Venezuela working out? Is history repeating itself?

Even more to the point: Do Millennials in their lack of deep direct knowledge/remembrance of the USSR appreciate the stark dark truth of government provided socialism?

Karl Marx may be turning over in his grave but sorry to say, his idea did not work, and will not work regardless of the nation. Too many people want to achieve, and to do better for themselves and their families.

And yet there is hope for Millennials, and proof that many have not consumed the red cool aid.

It’s called Buy Low Sell High, and that beautifully simple concept applies to Millennials too.

https://www.economist.com/leaders/2019/02/14/millennial-socialism

https://www.economist.com/briefing/2019/02/14/millennial-socialists-want-to-shake-up-the-economy-and-save-the-climate

https://www.usatoday.com/story/opinion/2018/02/21/cnn-thinks-socialism-cool-my-grandparents-ussr-would-disagree/349830002/

https://www.marketwatch.com/story/millennials-communism-sounds-pretty-chill-2017-11-01

“Can’t decide whether you are a Democrat or a Republican …”

Bless these two students, who on separate occasions, refreshingly relayed their puzzlement to your author.

Almost DailyBrett does not believe that classrooms should ever be the venue for the indoctrination, let along the formation of young warriors in the fight between noble socialism and evil capitalism.

Gee … maybe … just maybe these students are smart enough to make up their own minds on these issues?

Even though long-time Almost DailyBrett readers and contemporaries know or at least suspect your author’s political predilection, it was rewarding to know at least some of my students weren’t so sure … and that is how it should be for all professors or instructors.

There seems to be a contagious disease among tenure-track or tenured academic types (e.g., professors and instructors) that university students are there to endure for hours on end their personal political pontifications and bloviations.

Is that why students are taking out loans averaging $30,000 each, waiting tables or asking mom and dad to dig deep … real deep … for their college education?

Don’t think so.

Buy Low, Sell High

As Almost DailyBrett fondly looks back to more than five years teaching public relations, integrated marketing, corporate communications and investor relations, one particular moment always brings back tears to the eyes.

More than 30 of my Central Washington University PR students chanted in unison … “Buy Low, Sell High!” … at my retirement party.

Upon receiving the Central Washington University Department of Communication Faculty Spotlight Award, they gathered around me for a group picture. Your author will always remember this moment.

Isn’t Buy Low and Sell High the essence of capitalism, particularly publicly traded corporate capitalism?

The answer is “yes.” Keep in mind that buying low and selling high is easier said than done. More importantly this phrase is the backbone to the practice of fiduciary responsibility on behalf of the 54 percent of Americans investing in stocks and stock-based mutual funds.

America’s investor class — planning for retirements, funding higher education for their children, opening up a new businesses — require accurate and complete communication about a company’s business plan, financials and simply … how does a corporation make money.

The highest expected communications professional compensation levels … usually in six figures … are directed to students adept at financial communications, who are studying at today’s schools of journalism and mass communication.

Almost DailyBrett believes wholeheartedly the purpose of universities/colleges is to prepare students to attain and sustain salaried professional positions with full benefits … and maybe even employee stock purchase plans (ESPP) and/or stock options.

Universities and colleges should be professional schools, providing students with lifelong learning skills and tools to succeed in our increasingly complex digital world … including beating artificial intelligence (AI).

If students wish to Occupy Wall Street that should be their choice, not their command.

By the way, how did that movement work out?

Students should always be fully aware of the imperfections of Capitalism. For example, watching The Smartest Men In The Room (Fortune’s Bethany McLean’s tome on the Enron bankruptcy) was required for each of your author’s Corporate Communications/Investor Relations classes.

In addition to the aforementioned Fiduciary Responsibility, a publicly traded company needs to complement this requirement with Corporate Social Responsibility (CSR). Besides doing well, a company should be mindful of doing good … including giving back to communities, protecting the environment … that make success, possible.

Certainly, students can be taught to live in tents, recite cumbersome theory or rail at the world back in their own bedrooms at mom and dad’s house.

They also can learn how to decipher an income statement, a balance sheet, a cash-flow statement and to understand the significance and formulas associated with market capitalization, earnings per share (EPS), and price/earnings (P/E) ratios and related multiples.

Looking back at your author’s professorship, there is no doubt about political disposition. There was also a comprehension that students are to be prepared for the professional world, and many of these graduates have done well, real well.

And if a couple of students or more, can’t tell whether Almost DailyBrett or any other professor/instructor, drifts left or right that’s the way … it should be.

 

 

 

Ever wonder how Venezuela became … Venezuela?

Almost DailyBrett at one time expected that Amazon would announce Austin, Texas as the recipient of HQ2 with its estimated $50 billion total investment and upwards to 50,000 technology positions with full benefits.

As a major technology hub, Austin offers a well-trained workforce, the capital of a right-to-work state, no state income taxes, and politicians’ favorably predisposed to corporate capitalism. In addition, Amazon bought Whole Foods in 2017 for $13.7 billion, which is based in … Austin.

Instead, Amazon selected Northern Virginia with it well-educated workforce and proximity to the infinite wisdom emanating within the Beltway. The other choice, which raised more than a few eyebrows, was heavily unionized and über-taxed Long Island.

The original thinking was Amazon would be welcomed with the prospect of providing 40,000 real positions with annual salaries averaging $150,000 and full benefits – not strip mall jobs – and $27.5 billion in new tax revenues during the course of 10 years. Yes, there were $3 billion in tax incentives from the State of New and New York City and these are always controversial.

Let’s see $3 billion in exchange for $27.5 billion in new revenues and 40,000 direct high-paying positions, not counting all the indirect economic activity supporting Amazon HQ2 in terms of suppliers, vendors and utilities.

Buy Low, Sell High?

Alas the United States is a divided nation, not just Democrats vs Republicans … but more to the point: Socialism vs. Capitalism.

Some wish to punish Amazon and its wealthiest dude on the planet boss, Jeff Bezos, for pioneering digital retail, employing 613,300, generating $232 billion in annual revenues, and stimulating $798 billion in investor market capitalization.

Amazon was greeted to Gotham by a buzz-saw of those who disdain capitalism in favor of command-and-control socialism.

As a former gubernatorial press secretary, the author of Almost DailyBrett imagined what it would be like to be relaying really bad news to the boss – New York Governor Andrew Cuomo – and answering the flood of media calls.

The alternative of a root canal is looking real attractive right now.

Ever hear the one about banging your head against the wall?

It only feels good, when you … stop.

Is Amazon Serious?

Is Amazon just firing a shot across the bow?

“It (loss of Amazon investment) would certainly undermine confidence in governance. You can’t empower anti-capitalist ideologues and expect the capitalists to embrace them. I still think they will work this out, because the embarrassment would be severe.” – Joel Kotkin, Chapman University professor of Urban Studies

“You have to be tough to make it in New York City. We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world. Instead of working with the community, Amazon threw away that opportunity.” – New York Mayor Bill de Blasio

“Threw away” constitutes fighting words.

These provocative words make it more difficult for the City of New York and Amazon to “work this out.” Why did da Mayor challenge Bezos’ manhood (we know it exists) in the first sentence of his prepared statement, and then charge the company with throwing away an opportunity in the concluding sentence.

Hey Mr. Mayor ever heard of the words … “disappointed”? … “concerned? … “let’s talk”?

If New York bids adieu to 25,000-to-40,000 Amazon positions and $27.5 billion in tax revenues in Alexandria Ocasio-Cortez’ congressional district, will those who are cheering today be demanding social justice from New York state and city tomorrow?

Even China with its brand of authoritarian capitalism figured out that buying low and selling high is the best way to provide prosperity for its people.

New York had the prospect of becoming a lucrative technology hub … but it “threw away” that opportunity.

https://www.nytimes.com/2019/02/14/nyregion/amazon-hq2-queens.html

https://www.forbes.com/sites/alyyale/2019/02/13/leaving-long-island-city-what-losing-amazon-hq2-would-mean-for-nycs-future/#18d48f01127c

https://nypost.com/2019/02/14/de-blasio-amazon-threw-away-great-opportunity-in-nyc/

 

 

“This is a dangerous moment for the life sciences industry that is increasingly vital to the U.S. economy.” — Lead Wall Street Journal editorial, Sept. 23, 2015

There are dirty-little secrets out there …

If one buys low and sells high, there is a resulting profit.

If demand is high and supply is low, prices rise … profits are likely.

And some forward-looking companies may take those profits and plow them right back into R&D (research and development), resulting technological breakthroughs may ensue, which may lead to more profits … and more R&D. Sounds like a plan to Almost DailyBrett.biotech

There are some who just don’t agree with buy low, sell high. There are some who are not enamored with supply and demand. In fact, they are declaring war on capitalistic “profiteering.”

The target du jour is bio-technology, the very folks who produce cures (e.g., Hepatitis C) and management regimes to control diseases (e.g., AIDS). One would think these biotech superstars, such as Gilead Sciences (NASDAQ: GILD), would be regarded as heroes. Alas, you would be wrong.

Certainly, there is a poster-child villain in this story.shkreli

His name is Martin Shkreli, the chief executive officer of Turing Pharmaceuticals, guilty of raising the price of parasite infection drug, Daraprim, by 4,000 percent. The 32-year-young hedge-fund manager beat a hasty retreat last week in the face of a chorus of cat calls. He is a walking-talking, first-rate public relations disaster.

Having made this point, should the entire life sciences industry, its scientists and patients, some in desperate need of breakthrough drugs, be punished for the sins of a hedge-fund manager and presumably a few others?

Here are a few more troubling price-control questions:

  • Will after-tax R&D expenditures of life sciences and by natural extension, technology companies, become the subject of regulatory-imposed quotas (e.g., no more than x percent of net income can be used for R&D)?
  • What impacts will these Washington D.C., or Sacramento-initiated command-and-control limitations have on finding cures for diseases or next generation killer apps? Will there be fewer newer drugs on the market? Will there be less “destructive” game-changing technologies?
  • Will other operating expenses on the income statement also be subject to governmental expenditure controls, such as SG&A (selling, general and administrative)? For example, will life sciences, software and/or hardware companies be restricted in how much they can spend to market a breakthrough product? What impacts will these restrictions, if they become reality, have on the fiscal health public relations and advertising agencies?
  • What happens to heart disease, cancer, Alzheimer’s patients and others facing potentially fatal diseases, if the political class imposes draconian controls on new drug development … pharmaceuticals that potentially could save their lives?

Guess life’s tough, right?

Steve Jobs Turning Over in His Grave?jobsmemorial

There are ballot initiatives circulating in California – the home of Silicon Valley technology and some big league life sciences companies – that would impose price controls on pharmaceuticals and limitations on after tax R&D, marketing and presumably other operating expenditures.

Do you think that once emboldened the political elites will stop at the income statements of life sciences companies? Or would they march onto the next battle: social, mobile and cloud companies in Silicon Valley and San Francisco?

Let’s see, the price for an Apple 6s smart phone is $849.99. There are no deals or discounts on Apple smart phones. Is that price too high? Are we all entitled to have a smart phone? Should price controls be imposed on Apple smart phones, tablets, watches, Macs, iPods …?

Whattyathink Tim Cook?

Looking at the income statement for Q3, Apple generated $49.6 billion on the top line (Is that too much?).

The company paid $3.79 billion in taxes (Is that too little?).

Apple devoted $2.03 billion for R&D and $3.56 billion for SG&A (Are these figures simply way too much for research and marketing respectively?).

The company also devoted $29.9 billion for COGS or the cost to make its breakthrough products. (Does Apple really need to spend that much? Your collectivist thoughts, Sacramento and/or Washington?)

Worse yet, Apple produced a profit of $10.67 billion. Is the company (and many others) guilty of “profiteering.”

These figures are reflections of not only extraordinary success, but engineering breakthroughs, entrepreneurial spirit, calculated gambles of consumer acceptance, and of course, the risk of failure.

The whole notion of venture capital is to spend private equity on ideas that may stick to the wall, but then they may also flop. An idea may be good, but too early for consumer acceptance (e.g., HDTV in the 1990s).

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One of the distinguishing characteristics of America, which makes it the land of opportunity, is calculated risk-taking of entrepreneurs. Ultimately, they have the super ideas that may lead to landmark products and with them literally tens of thousands of new jobs – not family wage jobs (whatever they are), but career path jobs.

Should we literally kill the goose that is laying golden eggs?

http://www.wsj.com/articles/the-assault-on-drug-innovation-1442964103

http://www.wsj.com/articles/the-biotech-rout-1443484644

http://www.wsj.com/articles/hillary-vs-cancer-treatment-1443007218

https://gma.yahoo.com/company-lower-drug-price-critics-called-4-000-002025809–abc-news-health.html#

http://www.apple.com/pr/library/2015/07/21Apple-Reports-Record-Third-Quarter-Results.html

 

 

 

 

 

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