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Hi Yogendra Mishra.Let me help you with a Step-By-Step process of analyzing a stock, let's start by understanding what Fundamental Analysis is.While the Technical-Analysis evaluates the price action of a stock, the Fundamental-Analysis evaluates the business operations to determine the financial health of the business, projects the future growth prospects and determines current and future valuations of the company. It can be performed quickly with various financial tools or be extensive depending on how much time and effort you want to commit.How Does it Work?It uses publicly available information usually disclosed by the company through their filings to build an accurate assessment of the business. It is believed that fundamentals are the key long-term driver for its prices. While short-term market fluctuations impact immediate prices, the market will eventually price a company correctly in the future. FA attempts to extract a fair valuation for the company to determine if the stock is overvalued or undervalued. Based on this, investors can decide if the shares are an attractive investment for now or wait for a better valuation later.Components of FAThere are various components of research, which includes analysis of the company's business model/strategy, earnings reports, catalysts, and financials which include assets/liabilities, credit facilities, financing/debt obligations, rumors & press release documents. Additional research on the company’s industry & peers can be performed. It also involves staying current on any executive changes with the board of directors and management. But Intensive FA can be tedious and time consuming for an individual investor.The Long-term investors benefit the most with the help of this since stock prices and valuations ultimately reach parity in the longer run.Step 1:Understanding the Business:The first step is to understand the business of a company.There are more than 5,500 companies listed in the Indian stock market, it is impossible to analyze all of them and pick a few and that is why you should invest in only those businesses that fall under your circle of competence.The concept of the circle of competence was introduced by Warren Buffett and this is how he has explained it,“I expect to make money from the things that I understand, where I can foresee how the economics of the business is going to look like 10-15 years in the future, I am not an expert in understanding everything so I stick to the businesses that I understand, and I call it my circle of competence, and try to stay around my circle of competence”It simply means that one cannot be an expert in understanding all types of businesses. There are some which you will understand better and others that you want. And those businesses that you really understand are within your circle of competence. So as an investor, it is always in your favor to invest in businesses that you understand. When you understand the business well, you also understand the inner workings of the company and the factors that may work in favor of or against the business. All of this helps you understand the future economics of the business and how business is supposed to pan out. But how do you know what is your circle of competence? It is often seen that businesses with simple business models are usually easier to understand and thus fall under our circle of competence.Let me give you a simple example.Well, do you understand the business model of Britannia Industries?Yes, they make quality confectionery products, such as cookies, cakes, and biscuits. They have a strong brand trusted by many allowing them to charge a premium price from their customers.How do you see Britannia 10 years from now? Since there is a demand for such products, and there are few players in the market that can compete with Britannia, I think Britannia will continue to grow for the next 5-10 years.Now let’s look at another business. Infosys.Do you understand their business model? Not very clear, but they provide software solutions to clients from various sectors.How do you see Infosys 10 years from now? It’s hard to say if they will remain market leaders 10 years from now as there are many other players like TCS, Tech Mahindra, Wipro, etc.If understanding business model Britannia is much easier than Infosys, Britannia fall under your circle of competence while Infosys does not.Understanding Management:Good management is always vocal about its business, its current situation, opportunities, future growth plans. You can find all the related information of business growth plans in the company’s annual report under the “Management Discussion and Analysis”A good business should clearly state its future expansion plans, how it’s going to achieve them and steps being taken in that direction. Management using vague statements while explaining its business, using a lot of complex jargon, should be carefully dealt with.For Example, if a company says “We expect to see exponential growth in the coming years” but fails to answer “How?” better be careful with such people, chances are they may not have any plans at all. On the other hand, if a company says “We expect to grow at 20% in the next 5-6 years” and then present a concrete plan on how it is going to achieve them, you can trust the honesty of the management.Also, it is always better to have the right mix of people running the business. Make sure that people in top management have sufficient experience in the relevant industry and have a successful track record. Companies that have directors with little or no experience may not be able to understand the intricacies business and thus may not be able to take the business forward. In order to understand who are the directors and their work experience look at the annual report and you will find all the relevant information under the heading “Corporate Information”.Step 2:Financial Statement Analysis:The next step in Fundamental Analysis of Indian Stocks is to analyze the past performance of the business, which can best be understood by analyzing its financial statements.It is usually believed that you need a degree in finance to understand the financial statements of a company.Trust me, you don’t have to be an expert in finance to analyze the financial statements. Today by using financial ratios, it has become much easier to analyze the financial performance of a company than it was many years back. You have to look at a few crucial ratios in order to understand the complete picture of the financial performance of a company.Earnings Growth:Earnings growth is a great measure to understand how fast a company’s business is growing. There are many parameters that can be used to assess the earnings growth of the company, but the most accurate is calculating the EPS growth.EPS means Earnings Per Share, it is calculated by dividing Net Profit by the number of outstanding shares of the company. And EPS growth is the % growth in earnings of a business compared to the previous year.To calculate EPS growth, you need to use the following formula:EPS Growth = EPS(current Year)-EPS(previous year)/EPS(previous year)*100Some of the conservative investors also look for the past 5-10 years of the EPS growth, based on their investment horizon.Please note that some companies can manipulate EPS numbers using creative accounting methods.For Example, a company may announce shares buyback, thereby reducing the number of outstanding shares in the market. Doing this boosts the EPS numbers without any real growth in earnings. Investors using EPS growth as a metric must always make sure that the company has not announced any buybacks recently.Liquidity Status:Liquidity is the ability of a company to meet its financial obligations, such as interest payments on loans, payment to its creditors, etc. It is an important metric as it determines if a company will be able to run its business smoothly after paying all its obligations. There are two types of liquidity, short term, and long term. Short term liquidity measures whether the company will be able to meet all its financial obligations that are due this year.The best measure of short term liquidity is Current Ratio which can be calculated using this formulaCurrent ratio = current assets – current liabilitiesAlthough you don’t have to go through the pain of calculating this number as it is easily available on websites like Moneycontrol.Simply search the name of the company and on the left sidebar and go to Financials > Ratios. You will get all the important ratios for the past 5 years of the company.As a thumb rule companies with a current ratio of 1 or above are supposed to be sufficiently liquid and the second is the long term liquidity ratios, which signifies of the company is able to meet its long term obligations.If a company has poor long term liquidity, it may default on its loans and even file for bankruptcy. There are many examples in the recent past where companies(such as Lanco Infra, Kingfisher Airlines) went bust as they were unable to meet their long term financial commitments.The best way to assess the long term liquidity of a company is the Debt to Equity Ratio.You can calculate by dividing total long term debt by shareholders EquityDebt to Equity = Total Debt/Shareholder EquityAn ideal level of debt to equity ratio is that it should be below 1. However, the debt to equity usually varies from industry to industry and is usually seen on the higher side in capital intensive sectors (such as Infrastructure, Iron and Steel, Power Generation, etc).Note: While analyzing Non-Banking Finance Companies or Banks, it is better to look at their NPA numbers rather than debt to equity.Again, you don’t have to calculate these numbers as you can easily find them on MoneycontrolPlease note that just like earnings numbers, even the debt to equity ratio can be manipulated if a company goes fro equity dilution, resulting in issuing more equity shares.Efficiency Ratios:Efficiency ratios are used to measure how efficiently the capital of the company is allocated. In other words, it shows how prudent the management is in terms of allocation money in such a way that it maximizes the return on invested capital.To assess capital efficiency, look at Return on Capital Employed(ROCE), which is calculated using the following formula.ROCE= Net Operating Profit / Capital Employed.Some analysts also use Return on Equity as a capital efficiency metric, but in my opinion, ROCE is a more conservative measure as it measures capital efficiency using both debt and equity of the company. An ideal level of Return on Capital Employed should be higher than prevailing interest rates and inflation of the country.Valuation Ratios:This is the most important step while performing Fundamental Analysis of Stocks as it not only helps you understand what the business is worth and how much are you paying for it (it is also called absolute valuation), this also helps you in peer comparison, that is it compares two or more similar companies in the same sector to understand which one is cheaper (also called relative valuation).Although there are many valuation ratios such as EV/EBITDA, Price to Book Value, etc, we are going to focus on the two most popular and efficient valuations ratios. The Price to Earnings Ratio and Price to earnings growth ratio (PEG ratio).Price to Earnings Ratio: popularly known as the P/E ratio, it is calculated by dividing the current market price of the share by EPS.P/E ratio measures how much price an investor is paying against each rupee earned by the company. For example, if a company is trading at a P/E of 10, it means that investors are paying Rs. 10 for each rupee earned by the company.Let us assume two companies in the same sector, one is trading at a P/E of 10 and the other is trading at a P/E of 8. It is very obvious, a company trading at P/E of 8 seems to be cheaper and hence a better investment. The problem with P/E Ratio is that it assumes that both the companies are growing at the same growth rate, which may not always be the case.Different companies, being in the same sector may grow at different growth rates and when a company grows rapidly, investors usually pay a higher price for perceived higher growth in the coming future, pushing the P/E ratio higher for such companies.For making a better comparison between companies with different growth rates, we use a better metric called PEG ratio,PEG Ratio: PEG ratio is a more advanced version of the P/E ratio that takes into account the expected growth of the company as well. PEG ratio is calculated by dividing the P/E ratio with the estimated future growth rate of the company.As a thumb rule, lower the PEG number, better it is. If the PEG ratio is below 1, the stock is assumed to be undervalued.For example, assume two companies, X and Y. While X is trading at a P/E of 5 and Y is trading at a PE of 8. By just looking at the P/E it seems X, being lower P/E, is a better bargain.Let’s now look at the expected growth rates of both the companies.Expected Growth Rate of X 5% CAGRExpected Growth Rate of Y 12% CAGRNow dividing the P/E ratio by its expected growth rate, here are the respective PEG Ratios.PEG Ratio of Company X 5/5=1PEG Ratio of Company Y 8/12=0.66.As you can see clearly, the picture has changed completely. Despite having a higher P/E Ratio, Company Y is still a bargain compared to Company X.While performing relative valuation, it is always wise not to rely on a single metric and cross-check your analysis using different valuation ratios to test your assumptions.Step 3:Macroeconomic Support:The next step is understanding the macroeconomics. No matter how good the business is, it cannot survive for a long time if it is not supported by the economy. The macroeconomic analysis involves the study of broader economic factors that support the growth of the business.You don’t have to be an economist to perform macroeconomic analysis, just ask a few simple questions such as:Is there a demand for the products/services of the company?Are Government Policies supporting business growth?Is the business well-positioned in the market to take full advantage of the growth in the sector?For Example, Let us analyze the food processing sector. Ask these questions to yourself.Is there a demand for processed food in India?The answer is yes, with more women joining the workforce(especially in urban and semi-urban areas), they may not have the time to cook food. In such cases, there will be a huge demand for semi-cooked to ready to eat canned food that can be consumed instantly.Is the Government Policy Supporting the Food Processing Industry?Yes, they are willing to offer land for food parks to various companies as these food parks also provide better prices to farmers produce.Is the Company well-positioned to take full advantage of the growth in the sector?Companies like Nestle have launched a new range of products to serve the market, also many companies like ITC have also entered processed food businesses offering frozen veggies that can last longer.All these answers show that food processing companies have a bright future ahead, and worth being invested for the long term. Hence the Macroeconomic factors like these play a significant role in the growth of any sector, but it’s hard to go by numbers while analyzing macroeconomics as there are too many variables that may lead to a lot of confusion. And the best way to perform the macroeconomic analysis is to keep it simple and do not bother about daily changes or fluctuations.So performing FA of stocks is not very difficult, but it takes some time to learn, but if you are dedicated to learning fundamental analysis of Indian stocks, it becomes much easier.As already mentioned earlier, discipline plays an important role in successful investing. So while performing FA of stock, you must not ignore the fact that no matter how good your stock picking skills are, it’s of little use if you are not disciplined or easily influenced by popular opinions of other people.This concludes our guide to fundamental analysis of a stock with an example, I hope you find this useful and knowledgeable.

Yeah, I know, stow the TLDR comments. I’m not an expert on pharmaceuticals but I do know a thing or two about politics and more than a thing or two about political history. So my take isn’t short because it’s based on facts and I’m not going to state facts here or anywhere else out of context.So this is a long one. You have been warned.They knew opioids were dangerous.Five and a half thousand years ago somewhere in lower Mesopotamia, human beings began to cultivate opium. The Sumerians named it Hul Gil, the "joy plant”, and they shared its properties with the Assyrians. The Assyrians shared it with the Egyptians, and on it spread. The Opium Poppy -- flourishing as it does in hot dry climates – made its way to China via that, 4,500-mile stretch of mountains that extends across central Asia from Turkey through Pakistan and Burma. The very same real estate it inhabits to this day.Opium's properties bordered on the divine. In Crete, the Minoan goddess of narcotics was adorned with a crown of poppies. In Egypt legend told of Isis offering opium to the sun God Ra to relieve the pain of a headache; bookish deity Thoth was said to have invented it. The Graco- Roman god of sleep Hypnos and his necrophile brother Thanatos were often depicted holding the flowers aloft. Across the ancient world, it was used as a symbol of sweet, nocturnal oblivion.Its earthly properties were no less impressive. It was occasionally mixed with hemlock to euthanize the suffering and more often used as an anesthetic to ease the agony of surgery. By the ninth century A.D., the Persian Doctor Abū Bakr Muhammad ibn Zakariyyā al-Rāzī recommended its use for the treatment of melancholy in what must have been one of the earliest examples of mental health advice known to man.There was just one catch.It’s hellishly addictive.Habit PawningIn 2016, in the U.S. alone, one person died from opioid abuse every 14 minutes. That comes to a total of 42,249 deaths a frightening number that even eclipses breast cancer fatalities. Some 11.5 million people misused prescription opioids during that same period and close to a million more-used heroin, (one hundred and seventy thousand of whom were using it for the first time). The total cost to the economy stands at around 504 billion dollars per annum or around $32 per week for every American man, woman, and child.The problem is quintessentially American.Not in the sense that other nations are spared the indignities of opioid abuse. Few places remain untouched. But in terms of sheer scale, America has positioned itself as the homecoming opioid queen. In 2015, U.S. consumption of Oxycodone stood at 194 mg/capita bucking the global mean of 11.4 mg/capita by several magnitudes. The explosion of misuse is no mystery; indeed, it can be traced back to a single metric; ubiquity normalizes that which is otherwise abnormal.Direct-to-consumer pharmaceutical drug advertising became a thing in 1997 when the toothless shill that is the Food and Drug Administration greenlit such marketing. Patients -- we were told -- have a right to know their options. The dangled carrot of ‘choice’ -- that darling watchword of high paid sophists and shit-shoveling marketing folk world over -- was ferried from talking point to talking point and reiterated ad nauseam. Experts nodded, journalists, prevaricated.The FDA caved.Commodity FetishThe drug companies hit the ground running. The first year spend on TV adverts of $664 million was merely an hors-d'oeuvre. According to Kantar, pharma is now the 7th largest ad category in the U.S. in terms of total spending. Said spending hit $6.4 billion last year – a growth of 64% since 2012. Budgets – unmindful of the damage they have wrought -- continue to grow. The number of brands spending at least $50 and $100 million annually has more than doubled since 2012. The Corporate cash injection reaped predictable dividends. Among the top 10 prescription drug brands ranked via 2016 ad investment levels, eight had double-digit growth rates year-over-year and all of them spent over $100 million.The commodification of health became a fetish like any other. Whilst opioids represent a relatively small subset of big pharma ad spending, they knew full well that long-standing taboos can so easily become the new normal if enough money was thrown at them.Got a health condition?There’s an ‘app’, for that; just ask your pharmacist.(As a side note, there is no point in blaming conservatism for the damage that has been wrought. Bill Clinton laid the groundwork as he masqueraded as a conservative pretending to be a progressive who occasionally caved into the Realpolitik machinations of a mischievous GOP. Democratic short-termism was rarely more self-evident than in the 90’s. Clinton abandoned the blue-collar base and laid the groundwork for Trump in a thousand shitty ways. This was just one of them. )Still, the growth of Big Pharma ad spending was only part of the equation. The root cause of the epidemic lay in a concerted attempt by the pharmaceutical companies to allay the fears of doctors and patients alike. They knew two things. First, that irrespective of how it is packaged, an opiate is an opiate is an opiate and second, that to most people’s minds, that means one thing and one thing only.Addiction.It’s not like we had no prior warning.Royal BlackmailIn 1839, Lin Zexu – a Chinese scholar and official of the Qing (Manchu) dynasty, penned a letter to Queen Victoria, a 20-year-old woman recently come to the British throne. He began his ‘letter of advice’, with both an assurance and a warning. Yes, the Emperor of China understood the benefit of trade with so ‘great’ a nation but no, his munificence was not without limit:“If there is profit, then he shares it with the peoples of the world; if there is harm, then he removes it on behalf of the world.”The harm in question was a familiar concern since-- according to Zexu -- mixed in with those engaging in trade with China were those who:“Smuggle opium to seduce the Chinese people and so cause the spread of the poison to all provinces".Such persons he added:“Care to profit themselves, and disregard their harm to others, are not tolerated by the laws of heaven and are unanimously hated by human beings".What right did the United Kingdom have to inflict such indignities upon China? For Zexu knew full well that the smoking of Opium was illegal in Britain and knew too that access was restricted:“Because the harm caused by opium is clearly understood”.Zexu spoke from experience.Tea For TwoBritain’s love of tea was – and remains -- a bottomless cave of indiscriminate consumption. The same could not be said for a Chinese obsession with the fruits of English labor. China had little need -- and even less interest in procuring -- British goods. They refused to exchange tea for anything other than silver and silver was the one thing that the British were loath to part with.The opium trade offered a way out.The unfortunate combination of a porous border and widespread demand supercharged the trade. By the 1820s China was importing close to 1000 tons of opium annually despite the fact that the Emperor Jiaqing had banned the substance some twenty years prior. The drug was sold at market in Calcutta to accredited brokers, who transported it to British-owned warehouses in the free trade area of Canton. From here, it was smuggled by Chinese merchants – aided by corrupt customs officers – out of the British zone.But the British monopoly –which began in 1773 – ended in 1820 and as a consequence, the value plummeted. Expressed in Spanish silver dollars, the price of a chest of opium from Patna (Bihar) fell from $2,500 in 1822 to $585 in 1838. The increased demand was also expressed in terms of the area under opium poppy agriculture. In India, for example, cultivation increased from about 36,400 hectares in 1830 to 71,200 hectares in 1840. By 1900 it had peaked at 200,000 hectares.The War For DrugsThe effect of plentitude on the price of any given product is well understood but the cultural impact of a product rendered suddenly ubiquitous is always much harder to assess. Certainly in China levels of addiction soared as Britain monopolized and then flooded the market. Family patriarchs ate through savings at a rapid pace and then hawked their worldly possessions. Once denuded of valuables, they forced wives and daughters into prostitution.Two wars were fought by the Chinese to end the trade, the somewhat appropriately titled ‘Opium Wars’. The first of these began in 1839 as a response to Chinese authorities’ seizure of Canton’s opium reserve. The government's assertion of their own sovereignty saw British traders lose some 1,300 mt of the valuable drug; outrage followed. Britain declared war and -- after soundly defeating China's hopelessly outclassed navy -- forced them to cede Hong Kong in lieu of compensation.The second took place in 1856 as the British sought to force China into legalization of the trade. The result – predictably enough – was a second Chinese defeat. In both instances, Opium imports from India rose from some 2,500 mt at the time of the outbreak of the first opium war (1839) to 6,500 mt by 1880. In despair, the Chinese government opted for full legalization, and opium production in China exploded. It peaked in 1906 at a record high of more than 35,000 mt.Legally BlandLessons should have been learned. Ubiquity – indexed primarily by cost — creates a ‘culture of use’ that results in a never-ending feedback loop. The link between legality and use is a well-understood association. The net effect is always the same; it leads to permissiveness. Today, a drunk passed out on a bench is an object of ridicule at worst. The same man passed out with a needle in his arm is viewed with considerable less mirth.The daily consumption of legal drugs would be described as epidemic were they illicit. Tobacco use remains the single largest preventable cause of death in the United States killing more than 480,000 Americans each year, 41,000 of whom die from exposure to secondhand smoke. Smoking-related illness in the United States costs more than $300 billion a year, including nearly $170 billion in direct medical care and $156 billion in lost productivity. The figures for alcohol abuse are no less sobering.Of course, not all drugs are equal. Some 85% of the U.S. population consumes at least one caffeinated beverage per day. The mean (±SE) daily caffeine intake from all beverages was 165 ± 1 mg for all ages combined. Caffeine is hardly good for us, but it’s not liable to see us fall into prostitution for want of a soy latte.Not even a pumpkin spice one.Studies that have examined the effect of legalized marijuana use suggest that legalization increases overall pot use and dependence for adults 21 and older. The findings suggest that allowing businesses to sell marijuana leads to more access and use, particularly for adults. Whether that’s a good thing or not depends mostly on individual persuasion but the word ‘dependency’, carries with it negative connotations, health risks, and societal cost.Opioids: Opium ReduxNot that Opioids are legal.The necessarily brief history explored within this answer focused on the Chinese use of raw opium by way of example only. Synthetic opioids such as Morphine and later Heroin and Fentanyl are many times stronger and as a consequence, far more dangerous both in terms of potential overdose and near-inevitable addiction.And yet, there is one more way to normalize the use of a drug, especially one that has a legitimate medicinal use. Anyone who has ever undergone a serious medical procedure is likely to have been given morphine or even the more potent diamorphine, a drug that those of us lucky enough to die quietly in a bed surrounded by loved ones will be almost certainly be given to ease our passing. Few of us come out the other side of a hospital stay with an eventual Heroin addiction.Because although addiction is complex and the human brain is more so by many magnitudes, one thing is clear: recreational use and the art of self-medication is a very definite factor in the spiral into dependence. Recent studies have even managed to index the euphoria of certain narcotics to specific environmental conditions.One does not simply decide to self-medicate with Heroin though.The decision to normalize opioid use – for a decision it was—came from a pharmaceutical industry who — I have little doubt — saw themselves as crusaders of a sort. The mustache-twirling villain of the popular refrain is often in reality little more than the intersection between loose morals and the desire to make a quick buck. The British did not necessarily want to position themselves as peddlers of misery in China; they sold Opium because it was lucrative. The big pharmaceutical companies were no different. A medicalized society represents near endless opportunity.Even Stranger DangerStill. they knew better than most that their product was dangerous. American medicine cabinets became overstuffed with prescription strength medication and generic names such as Vicodin, Percocet, Oxycontin and so on became as recognizable as any other brands: McDonald's. Snickers. Mickey Mouse. Xanax, you name it. Drug companies that don’t name the drug in question aren’t even required to list its potential side effects such as with the mesmerizing Lunesta commercials that showcase:An entire nation… on drugs as butterflies, indicated with thousands of illuminated specks, glow across a map of the United States as a voice softly coos, 'Join us'.Ermm, no thanks, I’m British.And yet, even though side effects are required by law to be explained to the consumer, medical professionals themselves are expected to use only their best judgment when prescribing. And their best judgment is often clouded by the pharmaceutical representatives who in turn rely on data provided by their own employers. The FDA approves medication, yes, but it doesn’t conduct its own studies.It can’t afford to.No prizes for guessing who can.The Integral AccidentThe question then is whether or not Big Pharma knew that the product they were peddling was harmful. There is a concept in political science known as the integral accident. An invention – any invention—brings with it unintended consequences. The Wright brothers invented the airplane and in doing so also invented the plane crash.Dick move Wilbur.But hardly malicious. Because they weren’t trying to sell a product with a faulty steering mechanism. They built the best vehicle they could and made clear via the example of gravity that a certain amount of jeopardy was included in its remit. Crashes happened; they did not insult anyone's intelligence by insisting that they had no prior knowledge of the damage falling from the sky might cause.Such was the tactic of the big tobacco companies who scoffed at links between smoking and cancer by utilizing tactics that fossil fuel lobbyists now employ to deny anthropogenic climate change. Jeffery Wigand’s damning deposition in a Mississippi courtroom that eventually led to the tobacco industry’s $246 billion litigation settlement is a case in point. His name – forever to be associated with whistleblowing –is a stark reminder of the depths to which corporations are willing to sink in the pursuit of profit. That they also sought to make their product more addictive and to market nicotine to an ever-younger audience is really just one of those accidents of history. A posteriori ‘fuck you’, to ordinary people whose lives were cut short by merchants of poison.They learned nothing from their time spent blinking back faux tears in the spotlight of corporate mass-murder. When the golden goose of cancer sticks was quietly euthanized via government efforts to curtail tobacco use they simply shifted focus towards peddling death to developing nations.Meanwhile, the pharmaceutical companies targeted the vulnerabilities of doctors who were simply looking for ways to ease the pain of their patients. Hard-working, well-meaning practitioners were inundated with:“Research that showed the drugs were safe and effective for short-term pain, such as after surgery, as well as cancer and end-of-life pain”.Which then led without rigorous research, to their application to a:“Much larger population with long-term pain, such as low back pain and fibromyalgia”.The Big Lie DownIt was as the LA Times later reported the ‘Big Lie’ noting that OxyContin -- America’s bestselling painkiller, and one that has brought in over $31 billion in revenue for its manufacturer Purdue Pharma – was administered as the result of faulty data adding that:“The Federal Food and Drug Administration approved OxyContin based on evidence that the two-pills-per-day regimen worked for half or more of the patients in a test group. But sealed court records and internal company documents… showed that the company knew that the relief wore off for many patients well before 12 hours.”A chemical cousin of Heroin, excruciating symptoms of withdrawal, coupled with an intense craving for the drug was the inevitable result.In the face of mounting evidence, Purdue advised that Doctors stick to the dosing schedule but prescribe higher-strength pills. The result was ever more profound pain relief, tempered by the fact that cravings, pain, and withdrawal would still occur before the 12-hour cycle was up. And yet it was the 12-hour cycle that was the drugs single unique selling point. Without it, Oxy offers little advantage over less expensive painkillers.Some patients burned through supplies that were supposed to last months in a matter of weeks. Adding to the problem was the fact that the very presence of such strong narcotics was an inevitable temptation. A few pills were stolen from the medicine cabinet here and there could lead to an addiction that spiraled out of control with frightening rapidity. A black market in prescription pills sprang up almost overnight. Those not caught in the grips of dependence soon found that pills sold for $20 a pop. The numbers of people arrested for selling on prescription medications increased at an alarming rate.Pharmer’s MarketConvincing medical practitioners who saw opioids as best reserved for the relief of the terminally ill did not come cheap.Purdue alone spent $207 million.Sales representatives were sent out in force to push the message. The drug was safe, the addiction problem had been solved. Opioids – doctors were told – were reliable and effective treatments of some of the most common pains known to man; muscle strain, abdominal issues, swollen joints and problems with the back. They were relentless.Indeed, according to the LA Times:“Sales reps showered prescribers with clocks and fishing hats embossed with Q12h. The company invited doctors to dinner seminars and flew them to weekend junkets at resort hotels, where they were encouraged to prescribe OxyContin and promote it to colleagues back home.”It worked of course. Marketing spends that approach the quarter billion mark usually do.That quarter of a billion brought in many billions more. Other drug companies desperate for cash cows of their own fast-tracked versions of opioid hell that had been wallowing around in corporate bilge tanks for years.By 2010, according to a Johns Hopkins University, 1 in 5 trips to see a Doctor in matters relating to pain resulted in narcotic painkiller prescriptions.The eventual criminal investigation of Purdue saw three top executives plead guilty to fraud for downplaying OxyContin’s risk of addiction. Purdue and the executives were ordered to pay a grand total of $635 million. A little more than a half-billion dollar fine for creating a problem that costs half a trillion per annum. It was akin to fining a billionaire arsonist $1000 for burning down the Amazon rainforest.Election FeverBy the time the 2016 election rolled around, it was clear that government responses were proving to be woefully inadequate. Then-candidate Donald Trump promised to tackle the crisis and indeed, won big in those areas where prescription abuse rates were highest. But less than a year on and even his own voters were split over the way he was handling the epidemic. In a Gallop poll, only 38% indicated that his public health emergency order has been sufficient; 36% said that it was insufficient to the task of combating the crisis.Coupled with subsequent revelations that President Trump’s personal attorney took money from Swiss drug giant Novartis -- a major player in the opioid market and the recent subject of an investigation over allegations of corruption and bribery – and Trump’s promises of action began to look ever more dilute. Indeed, executives from Novartis were forced to hand over documents detailing the payment of bribes to thousands of doctors in exchange for them boosting prescription numbers.Meanwhile back in March, Reuters was reporting that at least one U.S. lawmaker had had enough.Democratic Senator Claire McCaskill’s call for an investigation was motivated at least in part by the unequivocal fact that:"This epidemic is the direct result of a calculated sales and marketing strategy major opioid manufacturers have allegedly pursued over the past 20 years to expand their market share."Because – you know – they knew it was dangerous.Mother’s Little HelperThe actions of Purdue and others are no different from those of Big Tobacco.Actually, scratch that. They are worse.The smoking gun has been found. The documents released by the LA. Times demonstrate the promotion of sloppy, inconclusive clinical trials. They illustrate a deliberate attempt to propagandize pharmaceutical benefits. And worse, they show a willingness to obfuscate the one basic flaw in the premise of treating pain with substances that are basically heroin.Few people in the pharmaceutical industry can wallow in protestations of innocence. Knowing – as they most assuredly must know – the history of past abuses they were culpable. The monstrously addictive Diazepam -- better known as Valium -- was introduced in 1963 and marketed in much the same way as latter opioids would be. Between 1969 and 1982, Valium was the most prescribed drug in the U.S. Sales peaked in 1978 with more than 2.3 billion pills sold. In 2011 treatment facility admissions for Valium or Valium like tranquilizers stood at 58,953. The number of people in America that have used Valium during their lifetime for non-medical reasons alone stands close to 24 million.Fines registering in the tens of millions for Big Pharma drug pushing is no punishment at all. Trump’s public health disorder proclamations have laughable quantities of money attached to them. Just as one cannot turn the ocean brown by adding a thimble of iodine, cash-starved initiatives promising to tackle the crisis are doomed to abject failure.The problem is just too big.Following SuitWhat to do then?Companies like Purdue would do well to not only read up on Lin Zexu’s warning but to pay more heed than Queen Victoria ever did. They should also foot the bill for the cleanup operation. The cheque they are going to have to write is going to be truly horrendous to their bottom line. The prospect of criminal prosecutions should also be investigated.And therein lies a potential silver lining. Since the damage that was done outweighs the profits made by many magnitudes they might be faced with the prospect of negative equity. Only by rendering their work ultimately profitless will such companies take pause. On May 15th, attorneys general in six states filed lawsuits on Tuesday against the maker of OxyContin and other pain medicines, for pushing what the Texas Attorney General Ken Paxton described as:“Misleading marketing tactics that are fueling the nation's opioid epidemic.”Fueling. Not fueled.Because yes, they are still at it.The suit claims:"Misrepresentation or failing to disclose the risk of addiction of opioids. Misrepresenting the notion that there is no “ceiling dose” of their opioid drugs. The false representation that doctors and patients could increase opioid doses indefinitely without risk. This was coupled with unsubstantiated representations about pseudoaddiction. The states also took issue the idea that signs of addiction in patients signaled a need to up the dosage. And lastly that Purdue made false claims that their abuse-deterrent formulation of OxyContin reduced the drug's risks".In 2007, Purdue Pharma admitted:“No wrongdoing when it paid $19.5 million to settle lawsuits with 26 states and the District of Columbia after being accused of aggressively marketing OxyContin to doctors while downplaying the risk of addiction”.This time neither the absolving of guilt nor the paltry sums of money are sufficient.Because they knew opioids were dangerous.But not even that will be enough. America is a wonderful country and it is entitled to its own culture but the idea that business is the business of America has to stop. It’s great to see a healthy economy but 4% growth figures require context. There’s profit to be made in deregulation. It’s easier to make money in a country without labor laws, easier to make a buck if you’re allowed to let someone else deal with toxic by-products. Fast food, pharmaceuticals, tobacco you name it, they all have advertising money to burn and without specific restrictions burn it they shall.It is to Congress that America should look. Yes, vested interests will argue their case and yes, media networks will bemoan the loss of revenue but those challenges have to be offset by the potential harm to society. We no longer allow advertisers to promote smoking in the way they once did. The USA is the most medicalized society in the world and perhaps they aren’t aware that in most places companies are not allowed to advertise prescription medicine in any way shape or form. The reasoning is simple. Brand awareness is not necessarily a good thing when it comes to human health. Adverts are the product of propaganda and listing side effects does little to offset that fact.It’s time America followed suit with the rest of the developed world.For general musings or indeed if you want to contact me / yell at me or ask for my phone number, you can contact me via Twitter. If you just want to enjoy my accent— I host a regular podcast called the Sanfu Revue where I discuss having forced myself to watch terrible movies so that you don’t have to.

The coronavirus is going global, and it could bring the world economy to a standstill.An epidemic that began in the depths of China’s Hubei province is spreading rapidly. There are now significant outbreaks from South Korea to Italy and Iran, and the first deaths have been reported in America. The economic fallout could include recessions in the U.S., euro-area and Japan, the slowest growth on record in China, and a total of $2.7 trillion in lost output—equivalent to the entire GDP of the U.K.That’s the most extreme of four scenarios developed by Bloomberg Economics, drawing on the experience in China, the distribution of cases in other countries, estimates of risks to global supply chains, and a large-scale model of the global economy.With so many unknowns surrounding the trajectory of the epidemic, and the response from government and business, forecasters cannot aspire to precision. But these four scenarios offer a way of tracing the potential effects through countries and industries, and assessing their order of magnitude.China Business Survey Shows Growth PlummetThe starting point for our analysis is what’s happening in China, where automobile sales have plunged 80%, passenger traffic is down 85% from normal levels, and business surveys are touching record lows. The economy, in other words, has practically ground to a halt.Bloomberg Economics estimates that GDP growth in the first quarter of 2020 has slowed to 1.2% year on year—the weakest on record. If China doesn’t get quickly back on its feet in March, even that forecast could prove optimistic.Scenario 1: Major blow to China, and spillover to rest of worldValues indicate the percentage point change in 2020 GDP growth relative to baseline of no virus outbreakFor the rest of the world, China matters as a source of demand, a source of supply, and a focus of concern for financial markets:► In 2019, China imports came in at $2.1 trillion. From Starbucks lattes to Yum’s crispy fried chicken, sales in China are a major earner for multinationals. And Chinese tourists staying home hits everyone from South Asia’s beach resorts to the boutiques of Paris.► China is the world’s biggest producer of manufactured components. When Chinese factories shut down, the widgets that go into everything from Apple’s iPhones to construction machinery become harder to find.► The impact reaches small businesses too. In Hong Kong, a jewelry designer found that his automated, digitized Chinese suppliers have gone offline. They could churn out 1,000 rings in a day. His workers just spent a week hammering out a single one. “I’m back into, like, pre-historic jewelry making,” he lamented.► China shocks have spread across global financial markets before, including the surprise yuan devaluation in 2015. The coronavirus is repeating the pattern, and on a larger scale, as equities plunge around the world and deliver knock-on blows to household wealth and business confidence.If China can quickly get the outbreak under control, and the world’s factory rumbles back to life in the second quarter, then the impact on the rest of the global economy could be contained.That’s a real possibility. A survey —one of the main platforms connecting Chinese suppliers and global buyers—found that by late February, 80% of manufacturing firms had resumed operations. By late April, says general manager Li Lei, production capacity should be back to normal.If that happens, a severe shock in the first half would be followed by recovery in the second. For the world as a whole, and major economies like the U.S., the impact would then be hard to see in the full-year GDP data.A month ago, an epidemic confined largely to China, with other economies suffering from knock-on effects but not their own outbreaks, seemed like a plausible base case. In early March, with more than 6,000 cases in South Korea, closing in on 4,000 in Italy, hundreds in Japan, Germany and France, and concerns mounting in the U.S., it’s starting to look optimistic.It’s true that no other county has anywhere near China’s 80,000 reported cases—and that democratic countries might balk at the containment steps taken by China, which locked down a province of 60 million. While a less draconian approach could potentially increase the ultimate cost to public health, it could also result in a smaller short-term impact on the economy.Still, a lighting company based in China’s Zhejiang province illustrates how the problem is changing shape. The firm has more or less overcome the domestic shock: All workers are now back at the factory. But now they’re preparing to face a different problem: Weaker orders from overseas.Scenario 2: Outbreaks cause localized disruptionValues indicate the percentage point change in 2020 GDP growth relative to baseline of no virus outbreakWhat happens if the problem gets worse? In scenario two, we assume that China takes longer to return to normal—a ‘U’-shaped recovery instead of a ‘V’.“Even when factories are back to work, it’s not like all the problems are solved” said Mr. Li, the supplier manager. “Many factories don’t have enough inventory… the supply chain obstacles cap production capacity.”We also assume South Korea, Italy, Japan, France and Germany—the major economies other than China that have seen the most virus cases—take a hit. In our calculations, that takes global growth for 2020 down to 2.3%—some way below the pre-virus consensus forecast of 3.1%.Scenario 3: Widespread contagionValues indicate the percentage point change in 2020 GDP growth relative to baseline of no virus outbreakWorse than that?In scenario three, we layer on a more severe shock to South Korea, Italy, Japan, France and Germany. And we add a smaller shock to all the countries that had reported any cases as of the start of March. That includes the U.S., India, the U.K., Canada and Brazil—meaning that all of the world’s 10 biggest economies suffer a slowdown as they fight to contain the domestic spread of the virus.In this scenario, global growth for 2020 slides to 1.2%. The euro-area and Japan go into recession, and U.S. growth drops to 0.5%—enough to see election-year unemployment moving higher.Scenario 4: Global pandemicValues indicate the percentage point change in 2020 GDP growth relative to baseline of no virus outbreakWorse still?To capture the economic impact of a global pandemic, we assume that all countries in our model face a severe shock—equivalent to the drop in growth China is suffering in the first quarter.If that happens, global growth for the year goes to zero. The U.S. joins the euro-area and Japan in contraction—potentially changing the dynamic of the presidential election. China’s economy expands just 3.5%—the slowest in records back to 1980, when Deng Xiaoping’s reforms were just getting underway. Worldwide, lost output hits $2.7 trillion.China GDPQuarterly year-on-year forecastsOther forecasters are also sounding the alarm.The OECD cut its expectation for global growth to 2.4% from 2.9%, and warned that it could fall as low as 1.5%. Goldman Sachs expects a global contraction in the first half of the year. Recent forecasts for first-quarter GDP growth in China range from 5.8% all the way down to -0.5%, underscoring the high degree of uncertainty.Policy research predating the coronavirus outbreak suggests there’s a downside risk to even the most pessimistic of these forecasts. A 2006 paper by the World Bank put the potential cost of a severe flu pandemic at 4.8% of global GDP—a tailspin that would rival that seen in 2009 after the financial crisis.Fed Funds FuturesImplied fund rates have taken a nosedive since the outbreakAll of that makes the case for urgent rate cuts, extra public spending, or both. At an emergency meeting on March 3, the Federal Reserve lowered rates by 50 basis points, and markets expect more to come. That followed hard on the heels of a G-7 conference call in which finance chiefs of the major advanced economies vowed to “use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks”.At the epicenter of the crisis, the People’s Bank of China has so far been more measured, cutting rates by just 10 basis points, and instructing lenders to go easy on stressed business borrowers rather than adding to the problem by calling in bad loans. In neighboring Korea, the central bank has been similarly cautious—calling an emergency meeting, but failing to deliver the rate cut the markets expected. Governor Lee Ju-yeol said he saw limits to what monetary policy can do to counter the virus.That view might not win Lee many friends among investors. In the economics textbooks, it has a solid foundation.The virus is at least in part a supply shock—closing factories, and forcing workers to stay at home. That’s not something policy makers can do much about. Rate cuts and higher spending will help put a floor under fragile financial markets, and revive demand once the crisis is over. In the heat of the outbreak, stimulus risks stoking inflation without accelerating growth—making the problem worse, not better.Add on the world’s historically low level of interest rates, and high level of debt—which limit the room for maneuver—and it’s clear why economic policy makers, like everyone else in the world, will be hoping the outbreak can rapidly be brought under control. Their own toolkit is ill-suited for the task.