June 26, 2013
- “Even the pharmacists don’t know whom to trust”: The scandal — and dangers — of counterfeit drugs, plus your last chance to get clued in to the tiny company that can stop them
- Dozens of economists can’t be wrong… except when they are: Their big miss, and the only thing still propping up the U.S. economy
- “War on coal” declared: Picking the winners and losers from a presidential speech, and a special update for PRO-level readers
- An ugly milestone for gold… the return of a product nearly everyone (other than The 5) had left for dead… treasonous musings… and more!
We begin today’s episode in the dirt-poor region of Battambang, Cambodia…
In an area twice as large as Delaware, one government official contends with as many as 10,000 malaria cases per year. His name? Ouk Vichea.
“Standing in his cluttered lab only a few paces wide in the provincial capital, also called Battambang,” Smithsonian magazine writes, “[Vichea] held up a small plastic bag containing two identical blister packs labeled artesunate, a powerful anti-malarial.”
One of the blister packs contained the real drug. The other? “It’s 100% flour,” Vichea told the mag. “Before, I could tell with my eyes if they were good or bad. Now it’s impossible.”
This was in 2009, when the World Health Organization (WHO) estimated that counterfeit drugs were associated with up to 20% of the 1 million malaria deaths worldwide per year.
And it’s only gotten worse…
“Everybody in the developing world knows about this problem,” Muhammad Zaman, a biomedical engineer at Boston University recently told science blog PopSci, “but nobody ever does anything about it.”
Although Zaman grew up in Pakistan in the 1980s, he shares a familiar nostalgia for something the Western world used to also take for granted: always knowing which pharmacy to trust when he or his family fell ill.
“Today,” PopSci writes, “even the pharmacists don’t know whom to trust.”
The problem now is threefold…
1. Forged labeling continues to get more and more sophisticated…
2. Wholesalers are buying from multiple sources while shopping for the best price, jumbling up the product line…
3. A growing number of high-demand, but expensive new treatments allows forgers to rake in huge profits.
Besides an enormous profit margin, another factor makes the fake drug market attractive: “Criminals are attracted to the fake drugs business,” Akbar Baloch, a director at the Federal Investigation Agency in Karachi, Pakistan, told Bloomberg, “because it’s a low-risk, high-return area. And if we catch someone with heroin, he may get the death sentence, while fake pharmaceuticals may get him a few years of prison or he may get away with just a fine.”
What’s more, loopholes in regulation from country to country make it “very easy for unscrupulous individuals or organized crime to dive right in and exploit the situation,” says Laurie Garrett, senior fellow for global health at the Council on Foreign Relations. “Even if they eventually get caught, they will have made a lot of money before the drug gets pulled from the market — and then they just disappear.”
The solution? Plug the hole at the source.
And the tiny company on Patrick Cox’s radar is working to do exactly that. Their patented “botanical DNA markers” have joined forces with one big-league labeling company whose hands are already in a slew of different markets — including pharmaceuticals.
“This agreement,” the president of the company announced, “leverages [our] broad customer base of high-value brands and offers us a leading-edge, forensic anti-counterfeit solution to combat the growing problem of counterfeit and grey market goods entering the supply and distribution chain.
“Packaging is on the front line of fighting counterfeiters,” she goes on, “and we are excited to make DNA an integral part of our overarching package security program. Our core customers including major film studios, pharmaceutical manufacturers and fragrance and luxury brand companies all experience market erosion from counterfeit products and are searching for weapons to battle this multibillion-dollar problem.”
[Ed. Note: This new partnership could be huge for Patrick’s burgeoning pioneer. They already produce labels for retailers selling pharmaceuticals — such as CVS and Walgreens — as well as prescription and specialized pharmaceutical companies. Also, they have their hands in industries such as vitamins, cosmetics, perfumes, DVDs and others — all of which could use the patented DNA tech to fend off the relentless counterfeiters.
Act fast. Your last chance to learn how to get in before this company’s stock erupts ends tonight at midnight. You can click here to take one last look before this offer ends for good.]
This is the day the Commerce Department delivered its third and final guess on first-quarter GDP.
We’ve oft expressed our contempt for GDP as a meaningful measure of anything… but because so many people think it matters, we ignore it at our peril. So here goes…
The previous guess, issued a month ago, was an annualized 2.4%. The “expert consensus” among dozens of economists polled by Bloomberg was that the final number today would also be 2.4%.
Whoops… it was 1.8%. Just a slight revision.
Consumer purchases, business investment and exports were all revised down. Recalling that those are three of the four components of GDP, we’re left with the conclusion that government spending is the only thing propping up “the economy” in anno Domini 2013.
Aside from that, Mrs. Lincoln thoroughly enjoyed the performance.
Stocks are rallying this morning: The Dow has tacked on more than 100 points and is within spitting distance of 14,900. The S&P just crested 1,600.
Don’t be too quick to assume traders are cheering the rotten GDP number because it means the Fed will hold off on “tapering.” Yesterday, the Dow tacked on 100 points despite sunny numbers in durable goods, housing and consumer confidence.
“Investors want to assign a specific reason for every move,” says our resident technician Greg Guenthner. “But in reality, a lot of it is just noise.”
Money is also flowing into Treasuries this morning. The yield on a 10-year note has backed down to 2.53%.
“We applaud this announcement by the president,” says Mark Way, an executive with the insurance giant Swiss Re.
Mr. Way is talking his book when it comes to Barack Obama’s big speech yesterday laying out plans to cut greenhouse gas emissions. The Geneva Association, a global insurance trade group, says many coastal areas of the U.S. and United Kingdom are becoming “uninsurable” because of “climate change.”
Hmmm…
[Ed. Note: We don’t have a dog in the hunt when it comes to whether climate change is “real.”
We do, however, marvel at the hubris of politicians: Not only are they consumed with what Hayek called “the pretense of knowledge” when applied to the complex economic interactions of human beings… they’re possessed of the same conceit when it comes to the ecosphere — a system also shot through with complexity.]
“Everybody is waiting for action,” said Harvard geochemist Daniel Schrag before the president’s speech. He belongs to a panel advising the White House on climate change.
“The one thing the president really needs to do now is to begin the process of shutting down the conventional coal plants,” he told The New York Times. “Politically, the White House is hesitant to say they’re having a war on coal. On the other hand, a war on coal is exactly what’s needed.”
Double hmmm…
For the first time, new and existing power plants will be subject to limits on carbon emissions. How strict these limits are still has to be worked out. The limits won’t be subject to congressional approval.
Senate Minority Leader Mitch McConnell — from the coal state of Kentucky — says a “war on coal” is, indeed, underway.
Bad news for a basket of coal stocks PRO readers were warned about back on Jan. 8. If you have PRO-level access, scroll down for an update.
Gold has now given up all of its gains since Ben Bernanke signaled the advent of QE2 during his annual Jackson Hole speech in August 2010.
At last check, the bid is $1,238. The price got hammered last night as soon as trading opened in Hong Kong and took a further hit this morning when the GDP numbers came out.
This would be the “downside momentum” Greg Guenthner warned about here last Thursday. “Now’s not the time to begin looking for a move higher,” he cautions in this morning’s Rude Awakening.
Silver is now below $19.
Mark your calendars; Twinkies will return to shelves on July 15.
The announcement comes now that Hostess is firmly in the hands of two private equity firms — Metropoulos & Co. and Apollo Global Management. They picked up the company for $410 million.
Before that, the company had gone through two bankruptcy battles in four years after poor management and labor disputes. Ultimately, worker strikes brought the company down, and Twinkies disappeared from shelves.
But as we took pains to point out at the time, it’s not as if Hostess Brands’ recipes and bakeries were somehow vaporized, never to return. Now a leaner version of Hostess emerges to capitalize on a pent-up craving, even milking it on the new packages…
It will be easier to get your hands on a box too. Hostess will deliver its cakes to retail suppliers, rather than directly to stores, company president Rich Seban tells USA Today. The change will put Twinkies on the shelves of most dollar and convenience stores, so you won’t have to go too far.
“Your reader yesterday contended that countries shouldn’t provide asylum to Snowden or risk losing our foreign aid,” a reader writes today.
“It is not much of a deterrent. The president has not mentioned that to China or Russia. Both receive aid from us. Why is a mystery to me. That might be a good place to cut the budget.”
The 5: But to almost no effect. As we seldom tire of pointing out, foreign aid eats up a mere 0.4% of the federal budget.
“Putting things into perspective,” a longtime reader muses, “we need to ask whether Snowden is any worse than Ellsberg, the latter having released the now infamous ‘Pentagon Papers’ in 1971. Of course, even as I thought about this, several other news sources were discussing same.
“But then, organizing labor to fight for fair wages and better conditions was also a form of sedition once, for which people were executed. It’s an American tradition that harkens back to our Founding Fathers, a group of men who would likely have been all executed had we lost the Revolutionary War. Any attempt to expose the follies of the powerful is usually a crime. The serious question is why no one went looking for the person who ‘outed’ CIA operative Valerie Plame during the Bush years. Technically, also treason.
“However, Gen. Curtis LeMay (‘bomb them back to the Stone Age’) recognized that winners rarely get punished, citing his incendiary destruction of Tokyo and other Japanese cities during WWII as ‘war crimes’ — but only if we lost.”
The 5:
“In yesterday’s 5,” a reader writes, “you had a chart of the Fed 5-Year break-even inflation rate. I have been all over the Internet trying to find that chart, and I cannot find it. Can you please send me a link to where I can find the chart so I can track that information?”
The 5: Sorry, the Fed keeps that number close to the vest; it doesn’t even get published at the St. Louis Fed’s voluminous “FRED” chart site.
It is, however, available if you have access to a Bloomberg terminal. We do, and we’ll stay on top of it for you…
“I’m afraid all you would get if you left ‘zero dollar’ bills lying around,” reads another email following up from yesterday, “is a blank look from people not in the know AND a visit by Homeland Security and the Secret Service for counterfeiting.”
“By the way,” he adds with a follow-up from Monday, “it’s my understanding that tapir is quite the delicacy. Just ask any jaguar.”
The 5: Yes, but how about feral hogs?
Cheers,
Dave Gonigam
The 5 Min. Forecast