May 21st, 2012
Islamabad — Iran, Pakistan and other South Asian countries are a fast-rising force in the global methamphetamine market, with drug cartels thriving off the weak governance and law enforcement that have long fueled the region’s heroin trade.
This environment has allowed criminals to tap into the countries’ relatively advanced pharmaceutical industries to get their hands on meth’s two main ingredients: ephedrine and pseudoephedrine. The drug is more valuable than heroin, and some say, more addictive.
Highlighting this scourge are U.N. figures showing that the number of meth labs uncovered in Iran rose from two to 166 in three years, while the supply of precursor chemicals in Pakistan has more than tripled over roughly the same period.
A Supreme Court case in Pakistan involving the prime minister’s son has drawn more attention to the problem. The case revolves around two Pakistani pharmaceutical companies that allegedly used political connections to obtain huge amounts of ephedrine and are suspected of diverting it to people in the drug trade who could have used it to make meth worth billions of dollars. The companies have denied any wrongdoing.
Ephedrine and pseudoephedrine are used to make common cold medicine, but either can also be used to manufacture meth easily at home or, in places like Mexico where the trade is most advanced, in huge labs indistinguishable from those of large pharmaceutical companies.
The greater South Asia region has a long history of drug manufacturing, but most of it has involved opium and heroin made from the vast quantities of poppy grown in Afghanistan and smuggled out through Pakistan and Iran.
As governments elsewhere clamp down on the availability of the precursor chemicals, this region is attracting more dealers, said Matt Nice of the Vienna-based International Narcotics Control Board, which enforces U.N. conventions regulating the manufacture and distribution of ephedrine and pseudoephedrine.
They look for a country with weak security and regulation “where you can obtain the chemicals because no one is paying attention, or it has never been a problem before,” he said.
Iranian police dismantled 166 meth labs in 2010, up from just two in 2008, according to the U.N. Labs have also been dismantled in Sri Lanka and India, one of the world’s largest manufacturers of precursor chemicals.
Worldwide, nearly 10,200 meth labs were seized in 2009, the most recent aggregate data available, according to the U.N. Most were small labs dismantled in the U.S. But the number of labs outside the U.S. has increased significantly in recent years.
Much of the meth produced in Iran is smuggled to East and Southeast Asia, which have some of the highest street prices and are facing an epidemic of addiction.
“Over the past five years, Iran went from a non-issue in the global synthetic drug trade to top 10 in the world in terms of seizures,” said Jeremy Douglas, head of the U.N. Office on Drugs and Crime in Pakistan. “They are also arresting Iranian meth couriers and traffickers throughout East Asia.”
There are up to 21 million amphetamine users in East and Southeast Asia, out of a total high-end estimate of 56 million worldwide, according to the U.N. Nearly half of all people seeking drug treatment in East and Southeast Asia in 2009 were methamphetamine users.
Pakistan also may be vulnerable to trade
There are signs Pakistan could be vulnerable to the synthetic drug trade and headed in the same direction as Iran.
Pakistani authorities arrested a Malaysian man last year at the airport in Karachi with a suitcase containing hidden compartments of meth that he admitted was made in the city, said Douglas. Thai officials have also arrested several Pakistanis carrying meth at the airport in Bangkok who flew there from Pakistan, he said.
“There are indications meth is being produced in Pakistan,” said Douglas. “It makes sense because the supply of the precursors is high, readily available and cheap.”
The chemicals are also being smuggled out of Pakistan to neighboring Iran and other countries.
Iran reported significant seizures of ephedrine originating from Pakistan and Syria — 294 kilograms (648 pounds) in 2010 and 375 kilograms (827 pounds) in 2011, the U.N said. Pakistan also seized 265 kilograms (584 pounds) of ephedrine in provinces bordering Iran in 2010.
Last year, Pakistan also intercepted 245 kilograms (540 pounds) of ephedrine at Karachi port, bound for Australia hidden in spice packages, said the U.N.
About 1.5 kilograms (3 pounds) of ephedrine or pseudoephedrine are needed to make 1 kilogram (2 pounds) of meth. A single gram (0.04 ounces) of meth can fetch more than $1,000 in Japan, according to the U.N.
Nice, the U.N. drug control official, said ephedrine and pseudoephedrine are often smuggled in pill form, and the smugglers mislabel the merchandise as something innocuous, like vitamins, to elude law enforcement in countries with little experience of meth.
“Once they do start seeing this stuff, you have to ask yourself how long has this been going on and how much bigger is it?” said Nice.
Smuggling may be peanuts compared with the amount of ephedrine and pseudoephedrine that is being acquired in bulk from pharmaceutical companies in the region and diverted to drug cartels through front companies — the kind of deception that is suspected in the case before the Pakistani Supreme Court.
Most countries, including South Asian ones, are signatories to U.N. agreements that require them to report their ephedrine and pseudoephedrine needs to the International Narcotics Control Board each year.
The spike in amounts submitted by Pakistan and Iran in recent years has raised suspicions among U.N. officials that significant quantities may be diverted to drug traffickers.
Pakistan’s need for ephedrine rose from 15,000 kilograms (about 33,000 pounds) in 2007 to 22,000 kilograms (nearly 50,000 pounds) in 2010, and pseudoephedrine from 10,000 kilograms (22,000 pounds) to 48,000 kilograms (nearly 106,000 pounds), according to the U.N. Iran’s estimate for pseudoephedrine increased from 40,000 kilograms (more than 88,000 pounds) to 55,000 kilograms (more than 121,000 pounds) in 2010. Its estimate for ephedrine is negligible.
“When you start to see those numbers go up quickly, or wonder why they need so much more than anyone else in the region on a per capita basis, that is when we start to get a little concerned,” said Nice.
The two pharmaceutical companies now before the Supreme Court were allotted 9,000 kilograms (nearly 20,000 pounds) of ephedrine in 2010 even though the country had already exceeded its annual estimate to the U.N., according to court documents. Neither company had previously been allocated ephedrine.
Pakistani Prime Minister Yousuf Raza Gilani’s son, Ali Musa Gilani, is accused of using his influence to help the firms obtain the ephedrine. He denies the allegation.
The companies initially said they planned to convert the ephedrine into tablets and export them to companies in Iraq and Afghanistan. But the amounts vastly exceeded those countries’ needs, and the Pakistani firms said they eventually sold the tablets domestically.
Berlex Lab International, which received 6,500 kilograms (14,330 pounds) of ephedrine, said its tablets were sold to Can Pharmaceutical in the southern city of Multan. But investigators discovered the address for the company was a residential house in Multan, and nobody answered the door. The owner of the company didn’t answer his phone.
The other firm, Danas Pharmaceutical, which received 2,500 kilograms (about 5,500 pounds) of ephedrine, said it sold its tablets to 14 customers in northwest Pakistan. But investigators indicated the “thin population” and poor infrastructure in the area couldn’t absorb that number of tablets.
“The case shows that the regulatory framework needs strengthening,” said Douglas, the U.N. official in Pakistan.
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May 21st, 2012
Granted, it was 20 years ago, but I ran a Syndicate group at an emerging growth investment-banking boutique and had previously worked in a Capital Markets group at a large investment bank. Syndicate/Capital Markets is responsible for managing an IPO. Many wonder why, after all the hype, Facebook really did nothing in trading on Friday. Perhaps my antecdotes will shed some light…
Before companies even start the process, they must file an S-1 with the SEC. On that S-1 is a price range. For companies with a history of financials and earnings, investment bankers tend to set that price at a 15% or so discount to the company’s valuation so that investors get some return on the first day of trading. Why? So that investors feel good about the investment and that sentiment will remain with them for the next offering. Generally, when companies go public, they only offer a limited amount of stock to whet the appetite of investors, and anticipate doing a follow-on offering sometime in the future.
For a “normal” IPO, a company that goes public in the normal course with little media attention, the first step is to build a strong “book” of orders for the offering. If a company wants to sell, for example, one million shares to the public, the order book needs to exceed that one million by some multiple. Back in the less frenzied days in less frenzied industries, having order demand exceed supply by 3-5 times was a good book. The reason why the demand had to exceed supply was that accounts that really wanted the stock would put in inflated orders to make sure they got “filled” on what their true demand. With this level of demand, underwriters would be confident that there would be enough demand in the after market (once the stock begins trading) to support the offering price.
For IPOs that have a lot of interest, the order book can get out of hand. In our first lead-managed IPO at the boutique, our order book was 26 times oversubscribed. This was back in the early 1990s and the company was an innovative technology company. At this level of exuberant demand, the offering price had to be increased because otherwise the company management would be certain to feel that they weren’t getting a fair deal. Companies don’t love to price their stock at $15 and see it open for trading at $30. That said, sometimes there are constraints on how high a IPO can be priced, regardless of demand, because institutional investors may have a limit on the valuation they can pay (ie, on some metric such as a multiple of projected earnings per share). So pricing a “hot” IPO is a bit of a balancing act to determine the “real” order book at what price.
The “book” comes together, generally, on the road show. The road show is usually a week-long tour of the country’s institutional investors with one-on-one meetings for the big accounts (ie Fidelity) and group lunches or breakfasts for the smaller accounts. It is grueling, often with 8 meetings each day. (It used to be that management teams wore suits on road shows…and I was a tech banker.) And, of course, there is retail interest that comes in through investment banks’ syndicate desks but, usually, retail investors get very little IPO stock.
It is important to know the book because pricing and the initial trading is so important. If the stock is priced too high and there is not enough demand to support it at its offering price, the underwriters should “stabilize” the stock, which is to say, put their own capital behind buying the stock to maintain offering price. So, when stocks trade at their IPO price, chances are that the underwriters are supporting the stock, and that there is insufficient demand for the stock at this price. It could mean that the stock was priced too high.
If the stock skyrockets, then many investors who received stock on the IPO feel compelled to sell or “flip” the stock. Once upon a time, flippers were considered a menace and were penalized by not being allowed to participate in subsequent IPOs. I believe that many retail investors who placed orders on Facebook’s IPO were asked to hold their stock for 30-60 days with this implicit penalty looming. Yet, if the stock trades up substantially, underwriters will need to have some flipping in order to have an inventory of stock to sell to those who want to build long-term positions once a stock begins to trade. Again, pricing is a delicate balance between knowing the real order book and what trades will be placed once a stock begins to trade.
What inferences can be drawn for the Facebook IPO?
It suggests that the underwriters priced the IPO at the highest price it could, leaving nothing to create buying interest after the stock began trading. Underwriters should have a view of at what price the stock can trade where there will be buying interest, and price accordingly to ensure that the stock can trade on its own the first day.
It appears that the underwriters had to pay for pricing Facebook at its limit. Because the stock closed at $38.23 on the first day, despite reported enormous retail interest, it suggests that the stock had to be supported by the underwriters in addition to retail buying. It suggests that institutions probably put in orders larger than they wanted to ensure they received IPO stock, but sold out of the offering when the stock didn’t pop. Institutions got out at whatever profits they could lock in (the stock did trade at $42) and retail investors bought in.
It brings into question institutional support, since many institutions were able to buy Facebook prior to the IPO on the private market.
This does not bode well for trading next week. Without a strong finish on the first day of trading, institutional and retail investors alike will approach the stock with trepidation and will most likely take a wait and see attitude. After all, according to Barrons, at $38, Facebook trades for 76 times projected 2012 profits of 50 cents a share and 89 times 2011 earnings. Without a buying interest, the stock could languish until it can engender investor confidence with strong earnings. The next earnings report is three months away.
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May 19th, 2012
Facebook could be a big LOSER if Google TV disrupts its social media dominance
Despite all of the hoopla over the Facebook‘s initial public offering it now appears that the stock will be an IPO dud. If you were able to get Facebook (FB) shares you might consider trading out of it in favor of buying Google (GOOG). That’s the advice Paul McWilliams, editor of Next Inning Technology Research is telling his subscribers. McWilliams- a former tech industry insider who counts George Gilder among his fans – says he wouldn’t touch Facebook stock as a long term investor. He thinks there is a big flaw in its advertising model.
Says McWilliams, “The core ethos of social networking is nothing can even smell like paid advertising – social viral marketing must be genuine, spontaneous, etc. Sure, there are pros who make a good living triggering social marketing, but once it is sniffed out it is shunned. GM has realized this and others will too.”
McWilliams contends that Google is the much better option for investors and argues that it will leverage into social marketing in ways it can do better than Facebook. His focus :Google TV. Here is an excerpt from his newsletter.
Google’s (GOOG) Re-imagining of the TV Experience
In February we published a series of posts detailing what I view as evidence Google (GOOG) will move into the content delivery business. This would mark a huge change for GOOG, but as I see it, there is no better way for it to leverage its core assets and disrupt the social networking models of Facebook and other sites that have encroached on GOOG’s territory.
In short, TV viewing habits have changed radically during the last decade, but TV programmers and content delivery companies have not responded to these changes. As I see it, GOOG is uniquely positioned to leverage its core assets and, with that, deliver a new TV experience. If GOOG pulls that off in the fashion I think it can, the model would not only be very disruptive for social media sites like Facebook, it would also add radical new dimensions to broadcast TV that producers, advertisers, and performers would be quick to embrace.
In the aforementioned series of posts we published last February (please use the Next Inning search engine to locate these), we documented GOOG’s FCC application for an antenna farm in Iowa where it could pull down TV programming just like cable companies do today. We also documented license applications made in both Kansas and Missouri that would allow GOOG to deliver the programming across the 1Gbs fiber optic network it is building out on both sides of the state line in Kansas City. However, that isn’t the real story for GOOG – it’s just the tip of the iceberg.
In addition to documenting the fundamental moves GOOG is making, we also explored how GOOG is positioned to “channelize” content from sources like YouTube, Google Earth, and Google Streetview that people can already use to tour historic sites around the world, as well as 151 museums in 40 countries. However, that’s only the start – it’s the leverage of these assets that makes the story interesting and potentially a very high profit and disruptive model for GOOG. Unfortunately, not a single analyst on GOOG’s April 12, 2012 conference call asked about these ventures or what GOOG has in mind for them going forward.
Hollywood understands where GOOG is heading and is totally on board. In a front page story in the USA Today Money section Hollywood agents stated there is a “seismic shift” going on in show business, and explains how agents who used to focus on headline stars for their client base are now representing the new crop of YouTube “stars.”
YouTube has already channelized, and some of the content from some of its up and coming “stars” whose “programs” are already more popular than prime time network TV shows. This trend, however, has just started.
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May 19th, 2012
Columnist Chuck Jaffe can’t decide if he’s more surprised that 91% of the ‘active investors’ polled at a recent Fidelity Traders Summit expect to meet or beat the market over the next year, or that 9% of the group actually expects to lose.
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May 17th, 2012
The commentary surrounding the debacle at JPMorgan Chase has mostly been about the implications for banking reform. But were any existing laws broken?
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May 17th, 2012
Consumers who bought so-called Skechers “toning shoes” may be eligible for refunds.
The Federal Trade Commission announced Wednesday that the California-based company had agreed to pay $45 million to settle charges it deceived consumers.
The FTC alleged that the shoe company made unfounded claims that its Shape-ups fitness shoes, which retailed for about $100 a pair, would help people lose weight, and strengthen and tone their buttocks, legs and abdominal muscles.
Federal regulators also alleged Skechers made similar deceptive claims about its Resistance Runner, Toners and Tone-ups shoes.
Consumers who bought these “toning” shoes could be eligible for refunds either directly from the FTC or through a court-approved, class-action lawsuit.
The settlement with the FTC is part of a broader agreement that was also announced Wednesday resolving a multistate investigation, which was led by the Tennessee and Ohio Attorneys General offices and included attorneys general from 42 other states including Pennsylvania and the District of Columbia.
In addition to $40 million for consumer refunds, the states will split an additional $5 million of which Pennsylvania will get $143,000.
An FTC official said Skechers’ claims went beyond stronger and more toned muscles. “The company even made claims about weight loss and cardiovascular health,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection, adding: “The FTC’s message, for Skechers and other national advertisers, is to shape up your substantiation or tone down your claims.”
Skechers’ CFO David Weinberg denied any wrongdoing but said the company agreed to the settlement to mitigate the “exorbitant cost and endless distraction” of continued litigation.
The settlement with Skechers – which follows a similar settlement with Reebok International Ltd. last year – is part of the of the FTC’s crackdown to stop overhyped advertising claims.
One of the Skechers’ advertisements challenged by the FTC included Shape-ups ads featuring celebrities Kim Kardashian and Brooke Burke.
Airing during the 2011 Super Bowl, the Kardashian ad showed her dumping her personal trainer for a pair of Shape-ups.
The Burke ad told consumers that the newest way to burn calories and tone and strengthen their muscles was to tie their Shape-ups shoe laces.
Under the FTC settlement, Skechers is barred from making certain claims for its toning shoes unless they are true and backed by scientific evidence.
Consumers can find out more about the settlement and how to file for a refund if they are eligible at www.ftc.gov/skechers.
Contact Michael Hinkelman at hinkelm@phillynews.com, or follow on Twitter @MHinkelman.
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May 15th, 2012
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May 15th, 2012
Big trade shows like Interop can be confusing. So many vendors, so much noise, so much spin, so little clarity. Searching for technology trends among the tchochke seekers, spokes-models and aggressive PR reps can feel like a hopeless task.
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May 13th, 2012
KELSEYVILLE — Lake County’s participation at several national wine trade shows proved to be a resounding success, according to representatives of the County’s administration and the Lake County Winegrape Commission.
A California Department of Food and Agriculture (CDFA) Specialty Crop Grant made it possible for the Commission to attend selected shows this year.
In January, a contingent of Lake County wine industry representatives traveled to the Unified Wine & Grape Symposium in Sacramento. Participation in two shows in February took the delegates to the Midwest Grape and Wine Conference and Trade Show in St. Charles, Miss., billed as the third largest wine industry trade show in the United States; and to the Texas Wine and Grape Growers Association’s annual conference and trade show in San Marcos, Texas.
During the month of March, people worked the commission’s booth at the Eastern Winery Exposition in Lancaster, Penn. and the Wineries Unlimited Trade Show and Conference in Richmond, Va.
Sharing information about Lake County’s wine industry and the county in general, commission President Shannon Gunier and Commission board members were joined by county representatives and commission committee members at the various trade shows.
The Lake County contingent obtained information about potential winegrape buyers and businesses interested in the area. Gunier said leads are available to qualified Lake County growers by calling the commission office, 995-3421.
“We
poured wine and talked to interested parties about Lake County and the grapes we grow,” Bill Brunetti, chair of the commission’s Industry Relations Committee, said. Brunetti and wife Patti attended the Pennsylvania and Virginia shows
last month.
“In general, (we) tried to sell our county and our grapes,” Brunetti said. “The county’s participation was well received. I think that the new booth pretty much outdid any other at the show. The wines spoke for themselves, and the presence of county government personnel talking about the desire of Lake County to attract business was a home run.”
County Administrative Analyst Alan Flora echoed Brunetti’s sentiments about the reception of the county’s presence at the expositions. “The interest generated in Lake County as a destination, a producer of fine wines, and as a place to do business exceeded all of my expectations,” Flora said.
“The breadth of questions and comments were phenomenal. Few people were able to pass our booth by. Our booth design focused on a dramatic presentation of the scenic beauty of our county, the substantial and impressive development of our most established wineries, education about what makes our growing region so unique and full of potential, and the bold, complex and delightful wines we produce.”
Budget constraints had forced the commission to cancel participation in out-of-state industry trade shows that had proven to be instrumental in showcasing Lake County wines in past years, according to Gunier. Receipt of the CDFA Specialty Crop grant allowed the winegrape growers organization to team with the county to continue marketing work at industry shows. The grant was awarded to increase the effectiveness of the pre-existing campaign, Gunier said.
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May 13th, 2012
Local officials like Salt Lake City’s chances of retaining the Outdoor Retailer’s winter show but acknowledge the summer version has grown so large it could be up for grabs by competing cities.
The Outdoor Retailer’s contract to stage summer and winter trade shows at the Calvin L. Rampton Salt Palace Convention Center expires at the end of 2014. The combined shows generate nearly $40 million in direct economic impact to Salt Lake City and the state annually.
<!– –>
—
Outdoor Retailer winter, summer shows
Events » Staged at the Salt Palace convention center, attracting 21,000 visitors during winter show and 25,000 for the summer show.
Purpose » Connect buyers from outdoor specialty stores with more than 900 manufacturers worldwide.
Revenue » Each show generates nearly $20 million for the Salt Lake City and state economies.
Survey » Stakeholders’ responses will help determine location of future shows, at www.outdoorretailer.com/collective-voice.
But it’s not only size that might decide the issue. There’s also the matter of adequate hotel space, logistics and politics.
There is no consensus but some involved in the trade show worry that Utah politicians’ efforts to take control of federal lands and sell federal property so a gondola can link Park City and Big Cottonwood Canyon ski resorts ould be hurting Salt Lake’s efforts to keep the summer showcase beyond 2014.
Salt Lake County Convention Bureau President and CEO Scott Beck, for one, says he hasn’t heard about political concerns. He is optimistic about keeping both shows. He said Salt Lake City’s strengths include its affordability and outdoor access. Beck also noted that about 30 percent to 40 percent of exhibit displays on the show floor are stored in the area year-round, saving exhibitors the cost of shipping items to new destinations.
But Outdoor Retailer representatives, whose not-open-to-the-public shows attract 7,100 retail attendees and connect buyers from outdoor specialty stores with 1,100 brands from around the world, have said the summer event is too large for available space. Structures must be erected outside the Salt Palace to accommodate participants.
The overcrowding has made adding new vendors problematic.
Salt Lake County officials have proposed using both the Salt Palace and Sandy’s South Towne Exposition Center during the summer market. That would add 243,000 square feet of contiguous space to the show. The biggest hurdle to that idea is that show organizers aren’t keen about having venues 15 miles apart.
Beck said Salt Lake City’s biggest disadvantage is the lack of a convention hotel and of convention-quality rooms within a two-mile radius of the Salt Palace.
“We have heard that there are many participants who stay in Utah, Davis and Summit counties,” he said. “People would rather be closer to the convention.”
On the other hand, Beck and others said there’s a possibility that the winter and summer shows could be staged in two different cities.
“You cannot find [elsewhere] the immediacy of the quality of outdoor access to the winter experience in Salt Lake City,” he said. “Summer is different. It needs water — and we are not the only destination that has great access to water.”
Show manager Kenji Haroutunian said Friday that although the shows could be split, such a move could undermine the trade groups’ power to negotiate prices for hotel rooms and other needed services.
Outdoor Retailer and the Outdoor Industry Association are asking stakeholders to rate convention centers nationally as the trade groups decide where future shows will be staged. Other sites under consideration are in Las Vegas, Denver, Anaheim, Calif., and Orlando, Fla. Results could be released in the next several months.
But at least one key industry player thinks other considerations are entering the debate.
Peter Metcalf, president of Utah-based outdoor company Black Diamond, said in an email that although the debate over lack of space for the growing summer show is not new, what has changed in the view of some outdoor industry leaders is the perception that they don’t have a place at the table with Utah politicians.
He cited concerns over issues such as litigation that would give the state more control over federal public lands, lawsuits involving 40,000 miles of backroad claims and Utah’s congressional delegation sponsoring a bill favoring the sale of more than 30 acres of federal lands to The Canyons Ski Area for a gondola to the Solitude ski area. In addition, state lawmakers have restricted access of anglers to stream beads on private property in Utah.
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