Ed’s Daily Notes for January 22nd   1 comment

Financial Times: Huge cash pile puts recovery in hands of the few

The pile of unspent corporate cash that has built up since the start of the financial crisis is being held by an increasingly concentrated pool of companies that will be crucial to hopes of a pick-up in business investment to stimulate the world economy.

About a third of the world’s biggest non-financial companies are sitting on most of a $2.8tn gross cash pile, according to a study by advisory firm Deloitte, with the polarisation between hoarders and spenders widening since the financial crisis.

…Of the non-financial members of the S&P Global 1200 index, just 32 per cent of companies held 82 per cent of the aggregate cash pile, the highest level since at least 2000. With nearly $150bn in its coffers, Apple alone was sitting on about 5 per of the total at the end of its fiscal year.

Such concentration has increased since 2007 when companies that held more than $2.5bn in cash or “near cash” items – not including debt – accounted for 76 per cent of the aggregate cash pile in 2007.

If you need to see the QE effect on this, here you go:

But the analysis of cash hoarding during the crisis is complicated by rising net debt levels since 2007, as companies have taken advantage of record low interest rates to issue debt. This in turn could affect willingness to spend on M&A or capex, or whether to return cash to investors.

With central banks keeping interest rates low, large businesses have every incentive to borrow. Unfortunately, they have no incentive to spend, with weak world demand. So these businesses will keep accumulating cash until demand turns around.

Yahoo News: In US, not all drugs are reviewed equally

Consumers may expect that medical treatments approved for the US market are safe and thoroughly tested, but a study out Tuesday said that is not always the case.

Some drugs undergo more rigorous testing than others, while most are never compared to existing treatments to see if they are better or worse, said the study by researchers at Yale University.

The study in the Journal of the American Medical Association reviewed the process by which 188 new therapies were accepted for US market by the Food and Drug Administration over a seven-year span.

Some 37 percent were allowed on the market based on the results of a single trial that was never replicated or confirmed.

Fewer than half were compared to treatments already on the market.

“Many other trials were small, short, and focused on lab values, or some other surrogate metric of effect, rather than clinical endpoints like death,” said first author and Yale School of Medicine student Nicholas Downing.

Although patients may think that doctors only dole out safe and effective medicines, a closer look at the FDA process raised doubts, said Downing.

“Based on our study of the data, we can’t be certain that this expectation is necessarily justified, given the quantity and quality of the variability we saw in the drug approval process,” he said.

In some cases, the FDA’s “regulatory flexibility” can pave the way for faster approval of “potentially effective therapies for life-threatening diseases, such as certain cancers, or those diseases for which there is no existing effective treatment,” said the study.

To insist that all drugs meet the same standard could result in higher costs and longer wait times.

This is a trade-off: Where there is no treatment for a certain life-threatening disease or condition, requiring full drug trials means putting lives at risk. If you let those potential treatments have a green light before testing is done, you are only risking lives that might be lost to the medical condition anyway.

However, the study does have a valid point about drugs treating conditions where there is already an approved drug. But there is also a problem with that idea: Drugs are already required to test effectivity and safety. The FDA could easily take the results of those tests and compare them between two drugs treating the same condition, unless one of the drugs was given a green light to skip testing. But the FDA could go back and then require more testing of an already approved drug. On the other hand, it would behoove drug companies to get independent studies on the comparative effectiveness of their drugs against their competitors.

Vocativ: Facebook May Lose 80% of Its User Base by 2017

Social networks function like infectious diseases, according to Princeton researchers. They spread fast—and then disappear

Like the bubonic plague, Facebook will eventually come to an end.

According to new research from Princeton, which compared the ”adoption and abandonment dynamics” of social networks by “drawing analogy to the dynamics that govern the spread of infectious disease,” Facebook is beginning to die out.

Specifically, the researchers concluded that “Facebook will undergo a rapid decline in the coming years, losing 80 percent of its peak user base between 2015 and 2017.”

This is an interesting theory. There is one other factor they didn’t consider: Plagues can mutate sometimes, increasing their infectiousness. Like plagues, Facebook could add features that keep their user base in place, or even add users.

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Posted January 22, 2014 by edmcgon in Economy, Federal Reserve, News, Politics, Stocks

One response to “Ed’s Daily Notes for January 22nd

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  1. It’s even worse:

    Many negative studies about our drugs are not published. We have a very biased “knowledge”.

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