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December 31, 2018
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Global Market Comments
December 31, 2018
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
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October 5, 2018
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September 25, 2018
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September 24, 2018
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Some 40 years ago, when I was a biotechnology student at UCLA, a handful of graduate students speculated about how dangerous our work really was.
It only took us an hour to figure out how to synthesize a microbe that had a 99% fatality rate, was immune to antibiotics, and was so simple it could be produced in your home kitchen.
Basically, a bunch of bored students discovered a way to destroy the world.
We voiced our concerns to our professors, who immediately convened a national conference of leaders in the field. Science had outpaced regulation, as it always does. They adopted standards and implemented safeguards to keep this genie from getting out of the bottle.
Four decades later scientists have been successful at preventing a ?doomsday? bug from accidently escaping a lab and wiping out the world?s population.
That is, until now.
In 2010, Dr. Craig Venter created the first completely synthetic life form able to reproduce on its own. Named ?Phi X 174,? the simple virus was produced from a string of DNA composed entirely on a computer. Thus was invented the field of synthetic biology, better known as ?SynBio.?
Venter?s homemade creature was your basic entry level organism. Its DNA was composed of only 1 million base pairs of nucleic acids (adenine, thymine, cytosine, guanine, and uracil), compared to the 3 billion pairs in a human genome. Shortly thereafter, Venter one-upped himself by manufacturing the world?s first synthetic bacteria.
The work was hailed as the beginning of a brave new world that will enable biology to make the same dramatic advances in technology that computer science did in the 20thcentury. Dr. Drew Endy of Stanford University says that SynBio already accounts for 2% of US GDP, and is growing at a breakneck 12% per year. He predicts that SynBio will eventually do more for the economy than the Internet and social media combined.
You may recall Craig Venter as the man who first decoded the human genome in 2003. The effort demanded the labor of thousands of scientists and cost $3 billion. We later learned that the DNA that was decoded was Craig?s own. Some five years later, the late Steve Jobs spent $1 million to decode his own genes in a vain attempt to find a cure for pancreatic cancer.
Today, you can get the job done for $1,000 in less than 24 hours. That?s what movie star Angelina Jolie did, who endured a voluntary double mastectomy when she learned her genes guaranteed a future case of terminal breast cancer.
The decoding industry is now moving to low cost China, where giant warehouses have been built to decode the DNA of a substantial part of humanity. That should soon drop the price to $100. It?s all about full automation and economies of scale.
This technology is already spreading far faster than most realize. In 2004, MIT started the International Genetically Engineered Machine Contest where college students competed to construct new life forms. Recently, a high school division was opened, attracting 194 entries from kids in 34 countries. Gee, when I went to wood shop in high school it was a big deal when I finished my table lamp.
This will make possible ?big data? approaches to medical research that will lead to cures of every major human disease, such as cancer, heart disease, diabetes, and more, within our lifetimes. This is why the health care (XLV), biotechnology (XBI), and pharmaceutical (XPH) sectors have been top performers in the stock market for the past two years. It?s not just about Obamacare.
The implications spread far beyond health care. IBM (IBM) is experimenting with using DNA based computer code to replace the present simple, but hugely inefficient, binary system of 0s and 1s. ?DNA based computation? is prompting computer scientists to become biochemists and biochemists to evolve into computer scientists to create ?living circuit boards.? Alphabet (GOOG), Apple (AAPL), and Cisco (CSCO) have all taken notice.
We are probably only a couple years away from enterprising hobbyists downloading DNA sequences from the Internet and building new bugs at home with a 3D printer. Simple organisms, like viruses, would need a file size no larger than one needed for a high definition photo taken with your iPhone. They can then download other genes from the net, creating their own customized microbes at will.
This is all great news for investors of every stripe, and will no doubt accelerate America?s economic growth. But it is also causing governments and scientists around the world to wring their hands, seeing the opening of a potential?Pandora?s Box. What if other scientists lack Venter?s ethics? He went straight to President Obama for a security clearance before he made his findings public.
If we can?t trust our kids to drink, drive, or vote, then how responsibly will they behave when they get their hands on potential bioterror weapons? How many are familiar with Bio Safety Level 4 (BSL) standards? None, I hope.
In fact, the race is already on to weaponize SynBio. In 2002, scientists at SUNY Stonybrook synthesized a polio virus for the first time. In 2005, another group managed to recreate the notorious H1N1 virus that caused the 1918 Spanish Flu epidemic. Some 50-100 million died in that pandemic within 2 years.
Then in 2011, Ron Fouchier of the Erasmus Medical Center in Holland announced that he had found a way to convert the H5N1 bird flu virus, which in nature is only transmitted from birds to people, into a human to human virus. Of the 565 who have come down with bird flu so far, which originates in China, 59% have died.
It didn?t take long for the Chinese to get involved. They have taken Fouchier?s work several steps further, creating over 127 H5N1 flu varieties, five of which can be transmitted through the air, such as from a sneeze. The attributes of one of these just showed up in the latest natural strain of bird flu, the H7N9.
The World Health Organization (WHO) and the Center for Disease Control (CDC) in Atlanta, Georgia are charged with protecting us from outbreaks like these. But getting the WHO, a giant global bureaucracy, to agree on anything is almost impossible, unless there is already a major outbreak underway. The CDC has seen its budget cut by 25% since 2010.
The problem is that the international organizations charged with monitoring all of this are still stuck in the Stone Age. Current regulations revolve around known pathogens, like smallpox and the Ebola virus, that date back to the 1960s, when the concern was about moving lethal pathogens across borders via test tubes.
That is, oh so 20th?century. Thanks to the Internet, controlling information flow is impossible. Just ask Muammar Gaddafi and Bashar al-Assad. Al Qaida has used messages embedded in online porn to send orders to terrorists.
Getting international cooperation isn?t that easy. Only 35 countries are currently complying with the safety, surveillance, and research standards laid out by the WHO. Indonesia refused to part with H5N1 virus samples spreading there because it did want to enrich the western pharmaceutical companies that would develop a vaccine. African countries say they are too poor to participate, even though they are the most likely victims of future epidemics.
Scientists have proposed a number of safeguards to keep these new superbugs under control. One would be a dedicated sequence of nucleic acid base pairs inserted into the genes that would identify its origin, much like a bar code at the supermarket. This is already being used by Monsanto (MON) with its genetically modified seeds. Another would be a ?suicide sequence? that would cause the germ to self-destruct if it ever got out of a lab.
One can expect the National Security Agency to get involved, if they aren't already. If they can screen our phone calls for meta data, why not high risk DNA sequences sent by email?
But this assumes the creators want to be found. The bioweapons labs of some countries are thought to be creating n
ew pathogens so they can stockpile vaccines and antigens in advance of any future conflict.
There are also the real terrorists to consider. When the Mubarak regime in Egypt was overthrown in 2011, demonstrators sacked the country?s public health labs that had been storing H5N1 virus. Egypt has one of the world?s worst bird flu problems, due to the population?s widespread contact with chickens.
It is hoped that the looters were only in search of valuable electronics they could resell, and tossed the problem test tubes. But that is only a hope.
I have done a lot of research on this area over the decades. I even chased down the infamous Unit 731 of the Japanese Imperial Army which parachuted plague infected rats into China during WWII, after first experimenting on American POWs.
The answer to the probability of bio warfare always comes back the same thing. Countries never use this last resort for fear of it coming back on their own populations. It really is an Armageddon weapon. Only a nut case would want to try it.
Back in 1976 I was one of the fortunate few to see in person the last living cases of smallpox. As I walked through a 15th?century village high in the Himalayas in Nepal, two dozen smiling children leaned out of second story windows to wave at me. The face of every one was covered with bleeding sores. And these were the survivors. Believe me, you don?t want to catch it yourself.
For those who want to learn more about SynBio, or participate in the discussion, please visit the BioBricks Foundation by clicking the link:
Sure, I know this doesn?t directly relate to what the stock market is going to do today. But if a virus escaped from a rogue lab and killed everyone on the planet, that would be bad for prices, wouldn?t it?
I really hope one of the kids competing in the MIT contest doesn?t suffer from the same sort of mental problems as the boy in Newton, Connecticut did.
One has to be truly impressed with the selloff in biotech and health care stocks over the past year.
Since May, there were signs that life was returning to this beleaguered sector. Then Mylan decided to raise the prices of it's EpiPen by 400% and it was back to the penalty box.
Let?s gouge poor small children who may die horrible deaths if they can?t afford our product. That sounds like a great marketing and PR strategy. NOT!
Once the top performing sectors of 2015, they went from heroes to goats so fast, it made your head spin.
What I called ?The ATM Effect? kicked in big time.
That?s when frightened investors run for the sidelines and sell their best stocks to raise cash. After all, no one wants to sell other stocks for a loss and admit defeat, at least in front of their clients.
It?s not that the companies themselves were without blood on their hands. Valuations were getting, to use the polite term, ?stretched? after a torrid five-year run.
Gilead Sciences (GILD) soaring from $18 to $125?
Celgene (CELG) rocketing from $20 to $142?
It has been a performance for the ages.
If a financial advisor wasn?t in health care, chances are that he is driving for Uber in a bad neighborhood by now.
Then there was The Tweet That Ate Wall Street.
Presidential candidate Hillary Clinton made clear in a broadcast on September 21, 2015 that the health care industry would be target number one in her new administration.
Her move was triggered by an overnight 5000% price hike for a specialty HIV drug by a minor player in the industry.
Among the reforms she would implement are:
1) Give the government power to negotiate drug purchases with the industry collectively.
2) Allow Medicare to import drugs from abroad to encourage price competition (which I already do with my annual trips to Switzerland).
3) Ban drug companies from using government grants to pay for sales and advertising.
4) Set an out of pocket limit for drugs bought through Obamacare at $250 a month, thus ending customers? blank checks.
5) Set a 20% of revenue minimum which companies must spend on research and development.
She certainly got our attention.
Competition in the drug industry? Yikes! Not what the shareholders had in mind.
Raise your hand if you think Americans aren?t paying enough for their prescription drugs.
Yes, I thought so.
Drug company CEOs aren?t helping their case by flying to press conferences to complain about the proposals in brand new $65 million Cessna G-5?s.
And that Mylan CEO, Heather Bresch? She took home $18 million last year, and she?s just a kid.
Here?s the key issue for health care and biotech for investors. It all about politics.
Even if Hillary does get elected, the government is likely to remain gridlocked for another 4-8 years. The Democrats will almost certainly retake the Senate in 2016, thanks to a highly favorable calendar, and keep it for at least two years.
But the heavily gerrymandered House is another story.
With the current districting map, the Democrats would have to win 57% of the national vote for them to regain a majority in both houses.
That is a feat even Barack Obama could not pull off in 2008, when a perfect storm in favor of his party blew in.
A Hillary appointed liberal Supreme Court could bring an end to gerrymandering, but that is a multiyear process. Texas hasn?t had a legal districting map since 2000.
Even with Democratic control of congress, Hillary won?t get everything she wants.
Remember, Obamacare passed by one vote only after a year of cantankerous infighting, and then, only when a member changed parties (Pennsylvanian Arlen Spector).
That means few, if any, Clinton proposals will ever make it into law. If they do, they will be severely watered down and subject to the usual horse-trading and quid pro quos.
Beyond what she can accomplish through executive order, her election may be largely symbolic.
Therefore, the biotech and health care stocks are a screaming ?BUY? at these levels, provided you ignore Mylan (MYL), now the poster boy for corporate greed.
It?s a political call I can only make after spending years in the White House and a half century following presidential elections.
It?s easy to understand why these stocks were so popular, and are found brimming to overflowing in client portfolios and personal 401ks and IRAs.
We are just entering a Golden Age for biotech and health care.
Profit growth for many firms is exceeding 20% a year. Hyper accelerating biotechnology is rapidly bringing to market dozens of billion dollar earning drugs that were, until recently, considered in the realm of science fiction.
And we have only just gotten started. Cures for cancer, heart disease, arthritis, diabetes, AIDS, and dementia? You can take your pick.
Most biotech and health care stocks have given up all of their 2015 gains. Here is a chance to hoover up the fastest growing companies in the US at 2014 prices.
If you missed biotech and health care the first time around, you?ve just been given a second chance at the brass ring.
Here?s a list of five top quality names to get your feet wet:
Gilead Sciences (GILD) ? Has the world?s top hepatitis cure, which it sells for $80,000 per treatment. For a full report, see the next piece below.
Celgene (CELG) ? A biotech firm that specializes in cancer cures (thalidomide) and inflammatory diseases. It also produces Ritalin for the treatment of ADHD.
Allergan (AGN) ? Has the world?s third largest low cost generic drug business. In addition, it has built a major portfolio of drug therapies through more than two dozen acquisitions over the last decade.
Regeneron (REGN) ? Already has a great anti-inflammatory drug, and is about to market a blockbuster anti cholesterol drug that will substantially reduce heart disease.
HCA Holdings (HCA) ? Is the world?s largest operator of for profit health care facilities in the world.
If you want a lower risk, more diversified play in the area, you can buy the Health Care Select Sector SPDR (XLV). Please note that a basket of stocks is going to deliver a fraction of the volatility of single stocks.
Therefore, we have to be more aggressive with our positioning to make any money, picking call option strikes that are closer to the money.
Johnson and Johnson (JJ) is the largest holding in the (XLV), with a 12.8% weighting, while Gilead Sciences (GILD) is the fourth, with a 5.1% share. For a list of the largest components of this ETF, please click: https://www.spdrs.com/product/fund.seam?ticker=XLV.
The other classic play in this area is the Biotech iShares ETF (IBB) issued by BlackRock (click their link: https://www.ishares.com/us/products/239699/ishares-nasdaq-biotechnology-etf ).
Their largest holding is Biogen (BIIB), followed by Gilead Sciences (GILD), Celgene (CELG), Amgen (AMGN), and Regeneron Pharmaceutical (REGN).
I?ll be shooting out Trade Alerts on biotech and health care names as soon as I think the coast is clear.
Until then, enjoy the ride!
It was known as the ?Tweet that sank Wall Street.?
When presidential candidate Hillary Clinton attacked the drug industry last summer, the entire pharmaceutical and health care industries were taken out to the woodshed and beaten like the proverbial red headed stepchild (my apologies in advance to red heads).
One of the principal victims was cancer drug maker Celgene (CELG), which dropped some 24.6% from top to bottom.
Never mind that Clinton is unlikely to get what she wants, even if she wins the election.
For that, you need a congress in your pocket, a probability that is at least 5-9 years away.
That is, unless Donald Trump continues his campaign for the Republican nomination.
However, in this nervous, twitchy, gun shy trading environment, it is shoot first and ask questions latter. So Celgene shares sank, whether it was warranted or not.
Celgene is really all about one drug, Revlimid, a blood cancer treatment that accounts for 75% of its sales. Last year, the company sold $7.6 billion worth of this complex molecule.
To wean itself off of its overdependence on a single drug it has embarked on a number of aggressive initiatives.
Since the spring of 2012, it has increased the use of its Abrazane drug to treat late stage pancreatic cancer, the disease that killed Steve Jobs. It has won regulatory approval for the psoriasis drug Otezla.
It has also pursued the mergers and acquisitions road to growth, picking up some two-dozen small drug makers in recent years. The $7.2 billion purchase of Receptos was a big one, which manufactures Ozanimod, a drug used to treat ulcerative colitis and multiple sclerosis.
Celgene also picked up Juno Therapeutics for $1 billion a few months ago, a maker of innovative cellular immunotherapies.
If this ambitious strategy works, Celgene?s net earnings should continue to grow at a 25% annual rate for the next five years. That means the shares should triple by 2020.
This is why the company?s shares command a lofty multiple of 18 times 2016 earnings, the higher end of the range for this industry.
So the next time Hillary opens her mouth, use the dip in (CELG) shares to load the boat. It would also be helpful if stock investors shift their focus from value back to growth.
I am going to continue to use this correction in the stock market as an opportunity to put new names in front of you for inclusion in your investment portfolio.
That way, when the markets turn, you can strike with the speed of a rattlesnake in returning to a ?RISK ON? posture.
Major turnarounds are not the time to engage in deep, fundamental research. It is when you should be pulling the trigger on Trade Alerts, which you have wisely spent time lining up.
This brings me back to my three core sectors for long-term investment, technology, health care, and energy. For a four cyclical play, you can add the financials as an interest rate play.
Which brings me to one of my perennial favorites, Gilead Sciences (GILD). Long-term readers will recall this big momentum name, which I first recommended last December at $75 a share. It hit $125 in June, last week, and could fly as high as $200 in 2016.
Obamacare is proving to by one of the greatest windfalls in the history of the health care industry. More than 45 million new individuals now enjoy government guaranteed payments for health care services for the first time. In addition, millions more are signing up for private insurance.
One of the cleanest shots at this new profit stream is Gilead Sciences. The ticker symbol seems so appropriate for this new Golden Age for the health care industry.
(GILD) is an American biotechnology company that discovers, develops and commercializes treatments for a range of different diseases. The California based firm initially concentrated on antiviral drugs to treat patients infected with HIV, hepatitis B, or influenza.
In 2006, Gilead acquired two companies that were developing drugs to treat patients with pulmonary diseases.
These are all expected to be huge growth areas in the future, and the company has become a favorite of hedge fund traders. Both the shares and the sector have been on fire all year.
Don?t rush out and buy (GILD) today. Rather, I?d wait until the last of the sellers get flushed out in this correction, which will probably not be until well into October.
Take a look at the charts below, and they suggest that the S&P 500 could reach as low as 1,976, or down another 160 handles from here.
That will give us another top to bottom pullback of 12.52%, which certainly qualifies as a healthy correction. This will be the time to load the boat with (GILD).
Keep close tabs on your text message service and email, and I?ll let you know when it is time to lay your cajones on the line once more.
Basking in the glow of the spectacular 22% profit by the Trade Alert Service so far in 2015, I sat down on a rock on a high mountain the other day to try and figure out what happened.
The last time I saw a move this healthy was back in 2013, when I clocked a 68% gain for the year.
During the 1990?s, we saw a perfect trifecta of the Internet going mainstream, cheap graphical user interface enabled personal computers, and an easy to use World Wide Web that conspired to create a Dotcom boom and send risk assets everywhere ballistic.
Sure, the advent of cheap domestic energy unleashed by the fracking and horizontal drilling of natural gas is a game changer of similar magnitude.
But that isn?t enough to suddenly convert every investor from a pessimist to an optimist, a Cassandra to a Pollyanna, or a bear to a bull.
So what else is helping to send stocks ever Northward?
Fortunately, I brought along an abacus with me to my high altitude retreat. So I ran a few numbers.
Approximately 18% of US GDP is derived from the health care industry in some form or another. In Europe they spend only 8%, live longer and certainly eat better food (I spent two months field testing it last summer).
So what happens when America?s Affordable Care Act, otherwise known as Obamacare, brings our spending down to European levels? The savings would amount to 10% of GDP, or $1.6 trillion. That is a handsome amount of change.
Where would all of this money go? The short answer is: to you and me. To be precise, I get half, and you get half, which works out to $800 billion for each of us, per year.
The reality is a little more complicated than that. We are not going to get our new found wealth in unmarked bills stuffed in a duffle bag left at a dead drop in the middle of the night.
Rather, the payoff will come in an indirect form. We will get better quality health care for less money, and more of us will get it, some 48 million to be precise.
Oh, and we get to live longer too.
What are we going to do with this windfall? Buy stocks, and lots of them. At least that?s what the stock market thinks. Hence, the ballistic move in equities. This year could be just as good.
In fact, we will be buying a lot of everything, which is why the auto industry is on fire, real estate is recovering, yet the bond market hasn?t crashed.
This amount of money hitting the financial system over the coming decade could well be the appetizer to an investment ?Golden Age? during the 2020?s.
This is fabulous news for asset owners of all stripes, and pretty good for everyone else as well. Companies with rising share prices are much more likely to hire and expand capital investment than those with falling ones, raising standards of living.
The way this happens is what makes Obamacare so interesting, unlike the purely government sponsored plans now in operation in Europe and Asia. It does this with a heavy reliance on the private sector to unleash free market capitalism on the health care industry for the first time in its history.
At last, they will be thrown into the merciless pit of dog eat dog, cutthroat competition where the rest of us have already been living for quite some time. They will be the losers, and we will be the winners.
I have been studying health care for about 40 years now. I was once destined to become a medical researcher at the Center for Disease in Atlanta. But the Defense Department found out I was pretty good with numbers, and I found myself in a bleak part of Northern Nevada now known as Area 51.
When improving relations with the Soviet Union wound things down there and all the aliens went home, there was nowhere else for me to go but the stock market. Suffice it to say, I still know which end of a test tube to hold up.
Health care is the last 19th century industry that operates in this country (except possibly for coal mining). It is fragmented into local monopolies spread amongst the country?s 3,141 counties.
I haven?t had health insurance myself for seven years. After paying on a Blue Cross of California policy for 20 years, they suddenly cancelled my policy claiming an alleged pre existing condition. My real pre existing condition was that I was a 55-year-old white male, and was not a great risk.
Since I was paying out of pocket for every trip to the doctor, I became an expert on what things cost. The first thing that I learned is that no one in a doctor?s office knows what anything costs. They deliberately don?t know. That way they can feign innocence when you get hit with a whopping big bill.
It was only with the greatest persistence that I was able to chase down the actual dollar cost of tests and procedures. Needless to say, my health care providers considered me a nut case and a pain in the ass and kindly offered a referral to a mental health professional. Some actually refused me care.
This is the land of the $100 plastic hypodermic needle, the $300 paper gown, and the $1,000 saline drip (its salt water). MRI Scans can cost $6,000, or $1,500 at the hospital down the street.
In fact, I?ve had friends show up for procedures at hospitals with a $3 gown they bought on Ebay, but were still forced to use the identical $300 version.
This is why the wealthiest guy in the county is often the one who runs the local hospital, or sells specialized prescribed treatments and procedures, to be reimbursed by the government.
From 1995 to 2012, dermatologists saw a 50% increase in annual incomes to an average $471,000 while most of America saw a steady decline in real take home pay. Oncologists and gastroenterologists did as well. This is especially true in rural parts of the country where there is a chronic shortage of doctors. Competition is anathema to these people.
What broke the health care system in this country is that there was a total absence of cost control, but an unlimited ability to get paid. If you?re having a heart attack, you don?t shop around for the hospital offering the best deal on surgery that week, as we might for a new set of tires (go to Costco) or a new computer.
Being the savvy consumers that we have become, if we don?t like the prices down at the mall we just go online. That?s tough to do with health care.
With insurers or the government picking up the tab whatever the cost, there was no incentive to do so anyway. Doctors excessively ordered tests to protect themselves from lawsuits, thanks to a tort system run amuck.
Drug companies kept inventing new diseases (do any of you male readers suffer from ?low T??). Indulgent lifestyles assured that ever-rising numbers of us got sick, driving prices skyward.
By creating national exchanges selling plain vanilla policies and setting rigorous standards on what they will pay for (?death panels? to opponents), American health care costs are now falling for the first time in history. 2013 saw the first year on year fall on record. This is only the beginning of that $1.6 trillion plunge in costs.
No one really knows what the marginal cost of an MRI scan is. But if you count the capital cost of buying a new $1.4 million machine, deduct the fee the specialist to read the scan, the $60,000 annual salary of the technician to run it, along with maintenance and depreciation, and I bet you get a number a hell of a lot less than $6,000. We are soon going to find out what the marginal cost really is.
This is why opposition to Obamacare has been so violent and vehement five years after it became law. Those who have been feeding off of the gravy train for so long will do anything to protect it. $1.6 trillion buys a lot of lobbyists in Washington DC. <
Most opposing Obamacare in the media are being paid to do so. Ask them exact details about exactly why it is so bad and they either mumble some lame ideological explanation or go mute.
States that support Obamacare and set up their own exchanges, like California, New York, and Kentucky, are seeing dramatic reductions in the cost of health care costs and insurance, up to 50% in some cases. Those that oppose it, such as Texas, are not.
The great irony in all of this is that the states opposing Obamacare need it the most. The 13 states of the old southern Confederacy suffer the worst health in the country.
Take three states out of the national averages, Georgia, Mississippi and Alabama, and the average male life span jumps from 78 to 82. I?m told they eat pure lard down there, not exactly a health food.
So Obamacare is basically a giant federal program that shifts money away from the two coasts toward the South and Midwest, or out of blue states into red ones. This is the same pattern for all large government programs. Why they are against Obamacare one can only imagine, except possibly the name.
I have been pointing out to the administration for years that they have greatly underestimated the long-term impacts of Obamacare on the economy, most of which are positive.
This has led them to unintentionally undersell the program. The impact on the world?s large economy is so enormous that it was impossible to foresee all of the unintended consequences. The only way to find out was to do it.
I?ll give you a couple of examples. Take the ?Obama lied? issue, where the president promised voters they could keep their existing doctors and insurance.
By setting minimal coverage and care standards the government put out of business the ?junk insurance? industry, which provides questionable policies with deductibles of $8,000 or more, low lifetime maximums, and boots you off your coverage as soon as you sneeze.
They had a bad habit of taking in your premium income and disappearing as soon as you made a major claim, with denials at some companies running as high as 50%.
Banning these rip-offs from the industry is all well and good. But nobody knew there were so many such polices, over 5 million. It turns out that no research had been done on this ugly little backwater, as it was purely a private sector enterprise. Then the cancellation letters all went out at once, to the shock and surprise of everyone.
When you are living paycheck to paycheck, about 20% of the country, even $100 a month is too much to spend. Many just don?t like doctors or hospitals and will only sign up after they are seriously ill, probably at the prompting of a social worker. Then they go to the emergency room and don?t pay.
I can tell you from my journalist days that 40% of the population doesn?t read newspapers at all, either the online or hard copy kind. Unless something appears on ESPN or the Golf Channel, they have no clue that it exists. There are those who still can?t operate a computer, as unbelievable as that may seem in the 21st century.
Then there was the website fiasco, the most easily preventable error in the entire rollout. I would bet big money that the former Health and Services Director, Kathleen Sebelius, has never built her own website.
For her, I highly recommend Websites for Dummies (click here for Amazon), which helped me get Mad Hedge Fund Trader off the ground seven years ago.
I was outraged when I heard that the lead contract for the construction of the website was given to a Canadian firm. I raised my hand and said ?Hey, we out here in Silicon Valley know how to build websites too.?
They should have just given the whole thing to Google (GOOG). But that would have raised conflict of interest questions, as founders Larry Page and Sergei Brin were two of Obama?s largest donors.
Corporations will get, thankfully, out of the health care business completely, offloading coverage to Obamacare as fast as they can. Small companies are already doing this in large numbers because workers can get better coverage for less money. This will level the playing field with foreign competitors for the first time in more than half a century, whose own governments cover the health care costs of their employees for free.
Those in the hedge fund, banking and oil industry luxuriating in $30,000 a year formerly tax free Cadillac insurance plans now have to pay ordinary income tax on benefits worth more than $10,000 a year. With most of the tax subsidy gone, there is little reason for employers to continue with these perks.
What is the bottom line for the shareholders in all of this? A substantial reduction in costs that drops straight to the bottom line, creating surging profits and stock prices. That works for me!
All of the above is a major reason why health care has been a major plank in my trading portfolio for the past two years, and may remain so for the next decade.
Followers of my Trade Alert Service cashed in on my long in the Health Care Sector Select SPDR ETF (XLV) and hepatitis drug manufacturer Gilead Sciences (GILD) multiple times. Those who took my advice joyfully watched them run away to the upside.
Expect this to be a recurring theme in my equity coverage. The SPDR S&P Pharmaceutical Index (XPH), Celgene (CELG), Biogen (BIIB), and the SPDR S&P Biotech Index (XBI) are also on the menu and looking tasty.
Every country in the world that has implemented national heath care has been successful. We are the smartest people in the world, so there is no reason we can?t make it work as well, if not better. Only political obstacles stand in the way.
It could well be that the stock markets are the first to see these momentous changes, far ahead of we mere mortals. Such is the wisdom of markets. So far, your investment portfolio agrees.
It will be at least a decade before we can judge the results of Obamacare, it is so vast and complex an undertaking. Up for grabs are individual markets for over 10,000 different treatments and services. It is far too early to call it a failure or a success. In any case, the earliest it can be repealed is 2025, after Hillary Clinton completes her second term as president. So get used to it.
What about my own insurance? I am waiting for my Medicare to kick in, which is only a year off. Until then, they are going to have to come after me with handcuffs and a taser. I bet many other Americans plan on doing the same.
By then, the website should be working and the costs brought in line with reality. Then I?ll buy the cheapest possible policy, the popular ?Bronze? plan, because I never get sick.
Who has time for doctors?
After all, who needs health insurance if they are going to live forever?
Mad Day Trader Jim Parker is expecting the first quarter of 2015 to offer plenty of volatility and loads of great trading opportunities. He thinks the scariest moves may already be behind us.
After a ferocious week of decidedly ?RISK OFF? markets, the sweet spots going forward will be of the ?RISK ON? variety. Sector leadership could change daily, with a brutal rotation, depending on whether the price of oil is up, down, or sideways.
The market is paying the price of having pulled forward too much performance from 2015 back into the final month of 2014, when we all watched the December melt up slack jawed.
Jim is a 40-year veteran of the financial markets and has long made a living as an independent trader in the pits at the Chicago Mercantile Exchange. He worked his way up from a junior floor runner to advisor to some of the world?s largest hedge funds. We are lucky to have him on our team and gain access to his experience, knowledge and expertise.
Jim uses a dozen proprietary short-term technical and momentum indicators to generate buy and sell signals. Below are his specific views for the new quarter according to each asset class.
The S&P 500 (SPY) and NASDAQ have met all of Jim?s short-term downside targets, and a sustainable move up from here is in the cards. But if NASDAQ breaks 4,100 to the downside, all bets are off.
His favorite sector is health care (XLV), which seems immune to all troubles, and may have already seen its low for the year. Jim is also enamored with technology stocks (XLK).
The coming year will be a great one for single stock pickers. Priceline (PCLN) is a great short, dragged down by the weak Euro, where they get much of their business. Ford Motors (F) probably bottomed yesterday, and is a good offsetting long.
Jim is not inclined to stand in front of a moving train, so he likes the Treasury bond market (TLT), (TBT). He thinks the 30-year yield could reach an eye popping 2.25%. A break there is worth another 10 basis points. Bonds are getting a strong push from a flight to safety, huge US capital inflows, and an endlessly strong dollar.
A short position in the Euro (FXE), (EUO) is the no brainer here. The problem is one of good new entry points. Real traders always have trouble selling into a free fall. But you might see profit taking as we approach $1.16 in the cash market.
The Aussie (FXA) is being dragged down by the commodity collapse and an indifferent government. The British pound (FXB) is has yet to recover from the erosion of confidence ignited by the Scotland independence vote and has further mud splattered upon it by the weak Euro.
GOLD (GLD) could be in a good range pivoting off of the recent $1,140 bottom. The gold miners (GDX) present the best opportunity at catching some volatility. The barbarous relic is pulling up the price of silver (SLV) as well. Buy the hard breaks, and then take quick profits. In a deflationary world, there is no long-term trade here. It is a real field of broken dreams.
Jim is not willing to catch a falling knife in the oil space (USO). He has too few fingers as it is. It has become too difficult to trade, as the algorithms are now in charge, and a lot of gap moves take place in the overnight markets. Don?t bother with fundamentals as they are irrelevant. No one really knows where the bottom in oil is.
Jim is friendly to the ags (CORN), (SOYB), (DBA), but only on sudden pullbacks. However, there are no new immediate signals here. So he is just going to wait. The next directional guidance will come with the big USDA report at the end of January. The ags are further clouded by a murky international picture, with the collapse of the Russian ruble allowing the rogue nation to undercut prices on the international market.
Volatility (VIX), (VXX) is probably going to peak out her soon in the $23-$25 range. The next week or so will tell for sure. A lot hangs on Friday?s December nonfarm payroll report. Every trader out there remembers that the last three visits to this level were all great shorts. However, the next bottom will be higher, probably around the $16 handle.
If you are not already getting Jim?s dynamite Mad Day Trader service, please get yourself the unfair advantage you deserve. Just email Nancy in customer support at firstname.lastname@example.org and ask for the $1,500 a year upgrade to your existing Global Trading Dispatch service.