October 21 2024

1. Brave New World: Startup Offers IQ Screening for Embryos
2. In Steward Health Care Collapse, a National Private Equity Trend
3. Disruption in Big Defense
4. Restaurant Chains Face Record Bankruptcies Amid Post-Pandemic Challenges
5. U.S. Intel Aids Israel While Creating Vector for Leaks
World Series Set: NY Yankees vs LA Dodgers
October 21, 1879: Thomas Edison first demonstrates his electric lamp

See the new Ad Astra Podcast! Released on Apple and Spotify around 10a CST.

Editors note: We’re still waiting on Israel’s retaliatory strike on Iran. It will come and when it does, we’ll cover it.

1. Brave New World: Startup Offers IQ Screening for Embryos

A US startup company is offering to help wealthy couples screen their embryos for IQ using controversial technology that raises questions about the ethics of genetic enhancement. The company, Heliospect Genomics, has worked with more than a dozen couples undergoing IVF, according to undercover video footage. The recordings show the company marketing its services at up to $50,000 (£38,000) for clients seeking to test 100 embryos, and claiming to have helped some parents select future children based on genetic predictions of intelligence. Managers boasted their methods could produce a gain of more than six IQ points.  Experts say the development represents an ethical minefield.

Article Source: The Guardian

2. In Steward Health Care Collapse, a National Private Equity Trend

Last month, Sen. Edward J. Markey (D-Mass.) released a report detailing what happens when a hospital chain runs out of money: In short, people suffer and die. The chain in question, Steward Health Care, is headquartered in Dallas but owned more than 30 hospitals throughout the United States and once billed itself as the country’s largest private for-profit hospital chain. Last May, Steward declared bankruptcy, which kicked off congressional hearings and Markey’s investigation. The company announced its intent to sell its hospitals, but finding new owners has not always been easy. That’s triggered massive distress in the communities these hospitals serve. The problems at Steward began long before the bankruptcy. Over the years, the company has closed some half a dozen hospitals, leaving patients without health care and providers without jobs. As chronicled in Markey’s report, patients at Steward hospitals were left without care at “vastly” higher rates than the national average; death rates for conditions like heart failure at Steward-owned hospitals increased even as they decreased nationwide. Then, there were the bat infestations, the sewage seeping from broken pipes, the lack of essential supplies like linens and IV tubing, and the barrage of lawsuits from vendors over unpaid bills. Markey’s report notes that at Steward-owned Carney Hospital in Dorchester, Mass., the quality of care fell so steeply that some workers began referring to the hospital as “Carnage” Hospital. A Boston Globe investigation found that Steward’s hospitals have been among the most troubled in the country, receiving a disproportionate share of warnings for dangerous safety lapses from federal authorities. Part of Steward’s financial distress can be traced to a series of deals it made starting in 2016 to sell all of the real estate once owned by its hospitals to a real estate investment trust called Medical Properties Trust, or MPT. From 2016 to 2022, according to a company report, MPT acquired a net $3.3 billion of real estate underlying 34 Steward facilities. MPT then leased the real estate back to Steward. This forced the hospitals to pay rent on land they’d previously owned. As a result, Steward had an annual rent burden of almost $400 million, according to Rob Simone, an analyst at Hedgeye Research who has followed the MPT and Steward saga for years. That deal was orchestrated by Cerberus, the private equity firm that formed Steward in 2010. Cerberus made its original investment — in Carney and five other Boston nonprofits — amid widespread investor enthusiasm for the profit gusher many thought would come from patients newly insured by the Affordable Care Act. But the expected gusher didn’t materialize, and the hospitals struggled. Selling the real estate allowed Cerberus to pay one of its funds a $484 million dividend, according to an investor document obtained by Bloomberg, thereby extracting a win from an investment that otherwise would have failed. If you let private equity buy a health care business, you run the risk that profits are going to come before patients. That’s the nature of private equity. And right now, private equity firms are buying health care companies in record numbers. Investments in health care have grown from less than $5 billion in 2000 to more than $120 billion in 2019, according to work done by the Eileen Appelbaum, co-director of the Center for Economic Policy and Research, and Cornell professor Rosemary Batt; private equity owned hospitals now account for approximately one in five for-profit hospitals in the United States.

Article Source: WaPo

3. Disruption in Big Defense

A. A generation ago, any list of America’s most admired manufacturers would have had Intel and Boeing near the top.  Today, both are on the ropes. Intel has suspended its dividend, slashed jobs and capital spending, and is a takeover target. Boeing has been hobbled by investigations into crashes and a midair mishap, production delays and a strike. A breakup or bankruptcy are no longer unthinkable.  In the past five years the combined market value of the two has fallen by half. More than just an ordeal for shareholders, this is a potential disaster for the nation. The U.S. is in a geopolitical contest with China defined not just by military power but economic and technological prowess. Leaders from both U.S. political parties say they are on the case, pushing for tariffs and subsidies.  

B. The Defense Department wants to bring Silicon Valley’s top talent deeper into the folds of the military by offering technology executives positions as part-time military officers. The department is considering asking chief technology officers and other senior tech professionals to take up high-ranking positions in the reserves. The tech reservists would be periodically summoned to help with short-term projects in cybersecurity, data analytics and other areas.   

C. In an antidrone technology competition earlier this year, Boeing showcased a futuristic laser weapon that can punch a hole straight through a hostile aerial threat. The multinational—and several other defense giants—lost to four college students who knocked drones out of the sky using sound waves. The rookies’ device was developed in the backyard of one of the student’s parents, using an old car speaker. The students’ success in the technology competition, hosted by the Canadian military, highlights a shifting dynamic in one part of the defense industry. While giant companies have long dominated the weapons business, the advent of drone warfare is giving minnows more of a chance to compete.

Editors note: this disruption is good, as long as big incumbent firms aren’t able to unfairly cling to their markets. My take on reforming the US defense industry. 

Article Source: WSJ

4. Restaurant Chains Face Record Bankruptcies Amid Post-Pandemic Challenges

Restaurant chains and operators this year are on track to declare the most bankruptcies in decades outside of 2020, when the global pandemic upended the industry’s operations, according to an analysis of BankruptcyData.com records. The firm tracked chapter 11 filings of restaurants that are publicly traded, along with companies holding more than $10 million in liabilities.   Restaurants declaring bankruptcy this year include sit-down chains Red Lobster and Hawkers Asian Street Food, along with a string of fast-casual operations such as Tijuana Flats and Roti. More eateries on the edge are likely to file for bankruptcy in the coming year, according to restaurant executives, attorneys and lenders.  Nearly five years since the pandemic hit the more than $1 trillion U.S. restaurant industry, the sector’s health has improved on many fronts. Hiring is robust and an average of 3,700 new restaurants are opening monthly this year, according to market-research firm Datassential.  But some chains are still struggling because customers have pulled back on dining out, and high interest rates have hurt companies that gave priority to growth over profit.

Article Source: WSJ

5. U.S. Intel Aids Israel While Creating Vector for Leaks

A. Days after Hamas attacked Israel on Oct. 7, 2023, the Pentagon quietly dispatched several dozen commandos to Israel to help advise on hostage recovery efforts, U.S. officials said. Those troops from the Joint Special Operations Command were quickly joined by a group of intelligence officers, some working with the commandos in Israel and others back at the C.I.A. headquarters in Langley, Va. For more than a year much of the attention, and criticism, around American support for Israel has focused on the U.S.-made bombs and weaponry Israel has used to attack Gaza. But the intelligence assistance to Israel has also been crucial. U.S. intelligence helped locate the four hostages who were rescued by Israeli commandos in June.  

B. U.S. officials are investigating the leak of two top-secret documents detailing American intelligence agencies' tracking of a potential Israeli attack on Iran. The documents, dated Oct. 15 and 16 and attributed to the National Geospatial-Intelligence Agency and National Security Agency, are marked with the highest level sharing restrictions. They were posted Friday on Telegram, a messaging app known for its encryption, by a channel that claims to be based in Tehran. U.S. officials say damage assessment is ongoing, with one official calling it "deeply concerning." The documents describe Israel's preparations for a potential strike against Iran, including moving munitions and conducting air force exercises, in response to Iran's Oct. 1 missile attack

Article Source: NYT, Flyover

World Series Set: NY Yankees vs LA Dodgers

From the Bronx to Brooklyn to Los Angeles, the Yankees-Dodgers rivalry has produced some of baseball’s most memorable moments: spectacular catches, batting fireworks, even a perfect game. The franchises have met 11 times in the World Series, the most of any two teams. It remains to be seen if Ohtani vs. Judge and Stone vs. Rodón can match Robinson vs. Berra and Koufax vs. Mantle. But after 43 years without a matchup, one of baseball’s most storied rivalries is back on the biggest stage.

Article Source: NYT

October 21, 1879: After 14 months of testing, Thomas Edison first demonstrates his electric lamp, hoping to one day compete with gaslight.

Sources

1. https://www.theguardian.com/science/2024/oct/18/us-startup-charging-couples-to-screen-embryos-for-iq

2. https://www.washingtonpost.com/business/2024/10/17/private-equity-steward-hospital-bankruptcy/

3. A https://www.wsj.com/business/crises-at-boeing-and-intel-are-a-national-emergency-093b6ee5?st=VYgyZY&reflink=article_copyURL_share
B https://www.wsj.com/tech/wanted-weekend-warriors-in-tech-3b3a7513?st=Y2iqrw&reflink=article_copyURL_share
html
C https://www.wsj.com/tech/antidrone-tech-competition-college-students-4765a6ed

4. https://www.wsj.com/business/hospitality/restaurant-chain-bankruptcy-500b4692?st=AKTqVC&reflink=article_copyURL_share

5. A https://www.nytimes.com/2024/10/19/us/politics/us-military-intelligence-israel-hamas.html?smid=nytcore-ios-share&referringSource=articleShare
B The Flyover newsletter

6. https://www.nytimes.com/2024/10/21/sports/baseball/yankees-dodgers-world-series.html?smid=nytcore-ios-share&referringSource=articleShare