Links 10/28/09 « naked capitalism

Wednesday, October 28, 2009

Links 10/28/09

Australia coastal living at risk BBC (hat tip reader John D)

Antipsychotic Drugs in Kids Linked to Weight Gain Bloomberg These comments from DoctoRx:

These drugs are wildly overprescribed because Obama’s new friends push and then push some more to get MDs to prescribe probably the single most overpriced class of drugs on the entire planet to helpless kids. The overuse of psychiatric drugs is a huge scandal-bad for national health and wealth.

In addition, the use of antipsychotics in the demented elderly has been proven wildly unsafe, but they continue to be widely prescribed. Guess why?

5 years ago a single Zyprexa tab- which costs 2-3 cents per pill to make at the most- went for $7. I know for certain that these drugs have over a 99% gross margin. Why? Because we have a lunatic system that let’s them get it! And then they know how to get them overprescribed on top of the overcharging.

40 States Ask FTC To Crack Down On Debt Relief Companies Consumerist

Why rich college kids can sell dope and you can’t Denver Westword (hat tip reader John D)

Former Chair of Citigroup: Restore Glass-Steagall Barry Ritholtz (hat tip reader Scott)

Got Perfect Credit? You Could Be Charged For It! HDTV (hat tip reader Alex G). This may annoy some readers, but the only way to have credit cards not be a product that has to feast of the chronically indebted is to have everyone pay an annual fee. That was the model until the late 1980s, and interest rates and fees were not rapacious.

Wall Street adds insult to injury Dean Bake. Guardian (hat tip DoctoRx)

Goldman Lobbies Senate, Says Full Transparency Sucks Matt Taibbi. God, I’d love to be on the distribution list for these Goldman lobbying documents. They are brazen. Goldman must be so confident of getting what it wants that is no longer concerned whether its arguments make sense or not.

Never Send a Boy to Do a Man’s Job Epicurean Dealmaker. A nicely done rant.

Antidote du jour:

28 Comments:

Richard Kline says:

October 28, 2009 at 4:52 am

So DoctorRx, I couldn’t agree more. Prescribing antipsychotics to _children_ should be criminal, and is assuredly malpractice in the real world. Therapy is hard work, tho, and fixing the parents seldom an available solution. And parents want their ‘little problem’ solved while the parents’ insurers want to throw a blanket over anything with lawsuit potential. Who loses most in a ‘fake your way’ solution? The kid.

It is difficult if not impossible to spend the half of an hour studying the pharmaceutical industry and retain any respect for the genus homo. Much of what is given is useless or of dubious value. Overprescription and underdiagnosis are epidemic. And in that environment, gross overpricing is easier than stealing candy from a drugged baby. This is an industry which for years has needed massive Federal intervention into its fraud, misfeasance, and gross profiteering. One look at the genuflections toward them by our Congresscronies and we see what’s become of America: a continent-sized profit opportunity with scruples not retained in nature preserves razed to the ground.

Peripheral Visionary says:

October 28, 2009 at 10:01 am

Richard, one other aspect frequently highlighted is the role of teachers and school administrators in pushing for prescriptions for children; most infamously for Ritalin, but certainly other mind-altering drugs would fall into that category. School administrators will be strongly tempted to use prescription recommendations to better control children, even as they have little incentive to minimize long-term damage to the child.

As such, the role of school employees in recommending prescriptions for children should be tightly circumscribed; they may be able to provide insights into behaviors that the parents are not seeing, but their conflicts of interest are such that they should not be a central part of the process. Ultimately it should be the pediatrician in consultation with the parents who makes the decision on prescriptions; and I certainly lean toward your position on dramatically reducing the prescription of mind-altering drugs to children.

attempter says:

October 28, 2009 at 5:29 am

Re Goldman’s lobbying against transparency and market information -

Of course we’ve long known that neoclassical ideology was lying when it assumed rational, well-informed market participants. But it’s still always funny to see the practical class warriors overtly arguing that their own proclaimed ideology is bunk.

Over the centuries it’s often been commented how street criminals actually tend toward a law-and-order ideology, and how they’d almost never offer an ideological defense of pure crime as such.

Yet with this kind of organized crime, examples like this document are novel not only in directly contradicting their public Chicago ideology, but in trying to ideologically justify capital crime in itself, without even any kind of fig leaf of idealism.

DownSouth says:

October 28, 2009 at 10:23 am

attempter,

An excellent example of how street criminals “almost never offer an ideological defense of pure crime as such” was cited in the PBS program “The Crash of 1929.”

“It’s a racket,” Al Capone said of the stock market. “Those stock market guys are crooked.”

KidDynamite says:

October 28, 2009 at 8:27 am

Taibbi has no idea what he is talking about with respect to dark pools:

http://fridayinvegas.blogspot.com/2009/10/calling-out-matt-taibbi-on-dark-pools.html

Did anyone even read GS’s presentation on market structure? it’s a great primer, especially considering that it’s obvious people have no clue how it works.

Yves – if you need a dark pool primer, read this:

http://fridayinvegas.blogspot.com/2009/10/dark-pools-are-not-scary-shady-places.html

Peripheral Visionary says:

October 28, 2009 at 9:55 am

I agree, and the reaction against dark pools is overwrought. There may be a small amount of shady trading going on in the dark pools, but generally speaking the reality is much more mundane: large institutional investors, primarily mutual funds, trading off-exchange to minimize their transaction costs. As those transaction costs get passed directly on to mom-and-pop investors, reducing those costs is in the public’s best interest.

The problem with putting everything on a public exchange is that any attempt to move a significant quantity of securities by a very large institution–say, a passive S&P 500 fund–will be massively front-run by day traders and prop desks as soon as it becomes visible. The benefits of pushing all trading onto public exchanges would go to the active traders and the penalties to the passive investors. Taibbi has it exactly backwards.

(P.S. And I rather suspect that the primary critics of the dark pools–the Zero Hedge crowd–are likely to be day traders who have an undisclosed interest in creating opportunities for easy trades by pushing unwieldy institutional traders onto public exchanges.)
- OrganicGeorge says:
  
  October 28, 2009 at 12:18 pm
  
  What part of open markets do you dislike?
  
  “The problem with putting everything on a public exchange is that any attempt to move a significant quantity of securities by a very large institution–say, a passive S&P 500 fund–will be massively front-run by day traders and prop desks as soon as it becomes visible. The benefits of pushing all trading onto public exchanges would go to the active traders and the penalties to the passive investors.”
  
  Bunk, what passive investors? Buy and hold is dead, everyone on the street knows it; so you must be the last person on earth to know about the death of passive investing.
  
  Why do we need open exchanges if the big boys want to do their trading behind closed doors? Have you even noticed that the majority of trading volume today are done by HFT’s, on average 70% of total market volume. The public has already deserted the equity markets, which they perceive a rigged in favor of the big houses.
  
  If you cannot see that the equity trading system is broken then there is little hope for solving this problem without pitchforks and angry mobs from middle class.
  - KidDynamite says:
    
    October 28, 2009 at 1:22 pm
    
    @organicGeorge – i’m honestly not sure which side you’re arguing here, but again, you are proving my point: people hate the fact that HFT dominates trading. HFT algo’s can better assess information in the market, and better trade than any individual.. Thus, we have dark pools, a pure marketplace where stock prices are driven by ACTUAL supply and demand, not other people’s PERCEPTION of YOUR supply and demand (ie, HFT algo’s buying shares when they see that you want to buy shares).. it’s a brilliant, pure marketplace, but the pitchfork wielding public thinks that just because it’s “dark” means that there is less transparency, and that they are somehow being cheated – which they are NOT. they are being flat out owned in the fully open exchanges because they are not smart enough to compete.
DownSouth says:

October 28, 2009 at 9:58 am

KidDynamite,

You seem to lack a basic understanding of how pools operate.

PBS has a wonderful program called “The Crash of 1929” that explains in great detail how pool operators manipulate the market. It starts at minute 42:00 with the history of Charles Mitchell, president of National City Bank, and how he first conceived of the notion of luring small retail “investors” into the stock market.

It then explains how the pool operators manipulated the market in order to fleece the small investors.

I highly recommend viewing the video. The entire segment dealing with pool operators only lasts about 10 minutes, and it would give you the basic knowledge you need to understand why all stock transactions must be transparent so that everyone knows who and which market participants are buying and selling stock at any given time.
- KidDynamite says:
  
  October 28, 2009 at 10:04 am
  
  sorry, DownSouth – that was a joke right? the pools they are talking about are nothing like the dark pools i am talking about. a dark pool is nothing more than an exchange that doesn’t show the size of the bid and offer, which means short term traders can’t capitalize on your order flow. that’s all. all trades are at the inside market, all trades are reported to the tape as usual.
  
  we absolutely do not need to see bid and ask size to have a fair and orderly market. In fact, all the brouhaha recently is about high frequency trading – which CAPITALIZES on exactly this open disclosure of bid and offer sizes. dark pools are not harming you or the markets integrity. really. in fact, they’re almost certainly helping you
- DownSouth says:
  
  October 28, 2009 at 10:07 am
  
  And in regards to Peripheral Visionary’s comment, it is he and Kid Dynamite who get it wrong.
  
  They both propose substituting one error with another error, so it’s error vs. error, half-truth vs. half-truth.
  
  If there is a problem with day traders and prop desks, then that problem needs to solved in a way that it doesn’t unleash pool operators upon the public, as was the case in the 1920s.
- Peripheral Visionary says:
  
  October 28, 2009 at 10:09 am
  
  DownSouth, for the reasons stated above, I disagree. I find the “retail vs institutional” angle to be misleading. The reality is that very few “retail” investment clients directly trade the exchanges these days; most invest indirectly through mutual funds or ETFs. As such, the small orders on exchanges are very often from day traders, while the largest orders are from mutual funds and pension plans. In other words, it is the *largest* trades whose cost directly impacts the smallest investors; the “small” trades are by and large from day traders and investment advisors, who comprise the middle of the market.
  
  I have spoken directly with the traders who work at the desks of major insitutional investors, especially mutual funds; and the universal message from them has been that their costs of trading have improved by orders of magnitude with the introduction of dark pools, as well as best bid/ask regulations. Prior to dark pools, they would regularly get fleeced by brokers, day traders, specialists, and other professionals who made a full-time profession of extracting transaction costs from institutions.
  
  Again, there are undisclosed interests at work here, and many of the critics of dark pools are financial intermediaries who would strongly prefer to return to the “good old days” of systematic fleecing of institutions.
  - DownSouth says:
    
    October 28, 2009 at 10:36 am
    
    Periferal Visionary,
    
    I’m not arguing that there might be a problem with day traders and prop desks.
    
    What I’m arguing with is the solution you propose, which is opacity in the markets, and the way you frame the debate.
    
    It’s like giving a person the choice between facing the firing squad or being hung.
    
    Hey, if given the choice, I might decide to live.
    - Skippy says:
      
      October 28, 2009 at 4:57 pm
      
      Hope its OK to chime in here folks.
      
      It seems to me, that the debate is much more than just HFT and dark pools. We have a problem of scale to the rest of the economy ie: what percentage should the financial have to the rest of it. Really now how much more can it, should it grow, how much sophistication is actually good for us all ie: the computerization that has allowed all of this and the speed it creates, quantum comps_are_coming and do you really wish to harness that speed…really.
      
      HFT and Dark Pools are just exploits with-in the gaming platform that wall st is, unavailable to all but the elite players and the promise of transactional cost reduction only helps institutional players/large volume types.
      
      Hell dark pools, 3 individual pools, privileged, major and full access, overlapping with liquidity pool, crossing networks, exchanges/ECN/dark order types, then all others. Complex structures are meant to limit access not provide it lol sophistry. In plain English first come, first served for both HFT and dark pools.
      
      Skippy…it would be helpfull if one could put up a system chart for all to see, but then all would see it eh.
    - DownSouth says:
      
      October 28, 2009 at 5:42 pm
      
      You got it Skippy!
      
      Karl Denninger is on the case too, and explains blow by blow how this latest Goldman Sach’s scam works:
      
      Remember that for every buyer there is a seller, and for every seller (even if the seller is selling short!) there is a buyer. Each and every trade that “advantages” one person through obfuscation and hiding of information disadvantages someone else by the exact same amount of money, and further allows someone to skim off a piece of the transaction without being detected.
      
      Goldman’s position on this is entirely self-serving. They not only earn fees by operating one of these “dark pools” they also are given the opportunity to exploit the hidden nature of price to skim off part of the transaction stream for their own benefit. That money always comes from one of the two parties – the actual buyer or seller – and if the “retail buyer” on one side benefits the retail seller on the other side is getting screwed.
      
      All “Dark Pools” and other means of gaming the system – that is, asymmetrical information – are without exception working against transparency and open markets.
      
      http://market-ticker.denninger.net/archives/1545-Goldmans-Dissembling-Dark-Pools-.et.al..html
      
      The whole idea is to create a means to skim more money off the sheeple.
      
      Of course anyone with two brain cells to rub together knows that GS doesn’t throw its well-oiled lobbying machine into high gear so it can help out the little guy and at the same time….(drum roll)……make less money for itself.
      
      The sad part is that blathering, incoherent nonsense like this will be accepted carte blanche by members of the senate, congress and administration, all who are bought and paid for by Goldman Sachs.
    - Skippy says:
      
      October 28, 2009 at 8:26 pm
      
      Dr. Richard J. Gatling (inventor of the gatling gun) said as much also, He wrote that he made it to reduce the size of armies and so reduce the number of deaths by combat and disease….and we know how well that worked out..eh.
      
      The speed at which the markets now move at is killing us, like the multi barreled gun, at first it was man powered then some one harnessed the recoil and finally an electric motor to spin it…can you say 4,200 round per min GUA-8 30mm PGU-14/B’s projectile aluminum body, cast around a smaller caliber depleted uranium round.
      
      Skippy…He was a prolific inventor and introduced many great inventions, but lamented the gun to his death.
      
      PS know some very intelligent people who work in fields of discovery like nanotech, but care not or do not consider the applications moving forward…rational players strikes again!

EUtaxpayer says:

October 28, 2009 at 9:15 am

Taxpayers fund Sarkozy’s shower

President Sarkozy reportedly preferred showering at the Elysee Palace EU taxpayers funded a custom-built 276,000 euros (£250,000) shower for French President Nicolas Sarzoky, auditors say – but he never used it.

The shower, in the Grand Palace in Paris, was for his sole use at a Union of the Mediterranean summit held during France’s six-month EU presidency.

But the leader preferred to wash in the Elysee Palace 10 minutes away. The new shower has since been dismantled.

The French European Union presidency was one of the most costly in history.

Details of expenditure have been revealed in figures published by the French national audit office.

Surround sound

The shower at the Grand Palace was custom built for the 5ft 5in (1.6m) president in a listed building and had massage and surround sound radio functions, the UK’s Daily Telegraph newspaper reported.

The three-day summit during which it was intended to be used cost 16.6m euros to stage in total. Other expenses included £90,000 for a carpet and nearly £300,000 for a conference podium.

The French Court of Accounts put the total cost of the presidency, which ran from July to December 2008, at 171m euros (£154m).

Usually the rotating presidency of the EU costs 70-80m euros. Only Germany has previously spent as much on it as France, the AFP news agency reported.

Its report said France had organised 489 EU events during its presidency, including nine summits, 25 ministerial meetings and 328 seminars and symposiums.

http://news.bbc.co.uk/2/hi/europe/8329425.stm

chad says:

October 28, 2009 at 10:03 am

what a great picture, it reminds me of my favorite demotivator.

http://www.demotivatorblog.com/wp-content/uploads/yapb_cache/6xidkw3.69kxblgnmloo4og0c0ogcw8o0.ap2qhjyqp08cgc0c80ss4cco4.th.jpeg

fitting for the current economic climate hah

Advocatus Diaboli says:

October 28, 2009 at 10:04 am

The prescription of antipsychotics to kids with ‘ADD’ is one of the ignored medical scandals of our time.

Jon H says:

October 28, 2009 at 4:29 pm

“The prescription of antipsychotics to kids with ‘ADD’ is one of the ignored medical scandals of our time.”

FAIL.

Ritalin and other stimulant meds given for ADD are not antipsychotics.

DoctoRx says:

October 28, 2009 at 10:22 am

I was also unhappy that Bloomberg buried at the very end the point that there are non-pharmacologic means available outside of true schizophrenia or the like (see quote below), and that they ignored the other problems with the long-term use of these drugs, such as permanent movement disorders.

Final quote for convenience:

“Doctors in some cases should consider counseling and behavior therapy, as well as parental training, before prescribing the drugs, Correll said. Once the medicines are given to children and adolescents, doctors need to frequently monitor the weight gain and the patients’ blood sugars and blood fats, he said.

In the editorial accompanying the study, Varley wrote, “Given the risk for weight gain and long-term risk for cardiovascular and metabolic problems, the widespread and increasing use of atypical antipsychotic medications in children and adolescents should be reconsidered.””

Nick von Mises says:

October 28, 2009 at 10:46 am

A fisking of the silly BBC article on Australia’s coast
http://markwadsworth.blogspot.com/2009/10/australia-coastal-living-at-risk.html

Amos Newcombe says:

October 28, 2009 at 10:48 am

These drugs are wildly overprescribed because Obama’s new friends

I stopped reading that comment right there.

OrganicGeorge says:

October 28, 2009 at 12:22 pm

The line; “These drugs are wildly overprescribed because Obama’s new friends” does not exist in the Bloomberg article.

MyLessThanPrimeBeef says:

October 28, 2009 at 10:51 am

I am wondering if the first two stories are not related – rising sea levels and over weight kids (a sad story) or more generally, overweight couch potatoes (a shaking your head story)?

From a Zen point of view, it is not the water levels are rising as much as the continents are sinking from too many overweight couch potatoes.

john says:

October 28, 2009 at 12:56 pm

> “wildly overprescribed because Obama’s new friends push and then push some more”

I love how everything becomes the president’s fault the day he is elected. Everything was Reagan’s fault. Everything was Clinton’s fault. Everything was Bush’s fault.

Whose friends were they before Obama was elected? Were they overprescribing while he was a state rep? Whose friends were they before Bush or Reid or Pelosi or Delay or Frist or Tip O’Neil or Gingrich or Kennedy…

IF says:

October 28, 2009 at 1:52 pm

Re: Credit card.

How much administrative cost does a debit card create? I doubt it is much more than 20 dollars a year. The same is true for credit cards. But credit cards usually offer 45 days of “free” credit, followed by very expensive credit. As far as I can see the “free” credit is financed by the 2-3 percent fee the merchant has to pay for a transaction.

My stance is that I don’t need a credit card, I am even willing to pay a small yearly fee for a debit card, but the 3 percent transaction tax has to disappear from the system.

NYT: Credit Card Lending Tightens Ahead of New Rules « … And the cow goes moo says:

November 13, 2009 at 2:48 am

[...] from this article has broached this very important topic, and that’s the always-thorough Naked Capitalism (I’m sure she had earlier comments about this subject as well but they were embedded in [...]

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