America’s lost oomph
Falling working force
- recession: only partly to blame, after some years of joblessness some people have given up looking for work;
- ageing of baby-boomers: they are now in their late 50s;
- policies: immigration system (getting into country has become much more difficult); Obamacare (helps people get health care without working); outdated social safety net (spent less on retraining jobless and helping them to find work);
Politicians have made matters worse
- reduce sky-high tax rate?
- start cutting the endless sprawl of job-destroying regulations?
- deterring Fed from raising interest rates too soon?
Thoughtful politicians have produce schemes for radical change in almost all of these areas, but their plans — like much else — have fallen victim to America’s polarised politics. The Republicans stand in the way of loosening immigration rules, while Democrats fear that supply-side reforms are a plot to hurt the average Joe. Both sides hoover up cash from special interests keen to anticompetitive regulations in place. Barack Obama, the least business-friendly president for decades, has devoted far too little attention to the problem.
The case for defense
Arm-makers are going through a lean period
- the Pentagon moved away from “cost-plus” contracts; squeezed in military spending;
- will not accept further consolidation (the same in Europe); big military contractors have to prepare and look at what else they can do to slash costs;
Any answers?
- find new, civilian markets – though only a small part of most arms companies’ business; also, may struggle to compete with nimbler Silicon Valley outfits;
- find customers abroad? but the market is highly fragmented, e.g. Brazil defense budget only 4% of the size of America’s; also the local manufacturing creates issues; some of them also prefer cheaper Russian and Chinese ones;
… the evidence is that an often unreliable, inefficient and over-rewarded industry is at last being forced to change its ways to survive.
________________________________
nimble: 灵活
An irresistible urge to merge
America’s 2nd and 3rd tobacco makers to merge
- the combined company also sells part of it to Imperial, bringing it back to U.S. market (but acquiring only brands, not liability-bearing legal entities);
- usually foreign companies kept their distance to America’s market partly due to the unpredictable payments to courts for sick patients;
- main holdout against tobacco globalisation is now China (40% of the cigarettes smoked): most of them sold by state-owned China Tobacco; they may someday acquire a big international firm – the last gasp in the round of tobacco globalisation
________________________________
feisty: 易怒的
holdout: 抵抗
gasp: 喘气
A new home for orphans
Abbvie buys Shire, not only for tax inversion
- “patent cliff”, too few new blockbusters and health insurers and governments become reluctant to pay a premium; M&A then becomes a solution to cutting costs;
- many firms redirect their attention to orphan drugs (for rare, severe conditions) since it is cheaper to bring to market (smaller clinical trials), and faster approval; Insurers tend to be more willing to pay more as well;
- Shire’s R&D drops 13% in 1Q14 compared to last year, and all its remaining is now concentrated on orphan diseases;
- might be good for long-term as well: thanks to genome sequencing, now “all diseases are turning into rare diseases“
- however, it is unclear how willing health insurer and governments will be to keep paying high prices for such drugs
gz64 