Healthcare is Big Business
Major indices were mostly unchanged yesterday after an early rally attempt could not pick up traction.
Part of the reason is that all eyes were thumbing through the long-awaited Senate healthcare replacement plan that was greeted with cheers on Wall Street.
Although four Republican senators opposed the plan, Wall Street understands a replacement to the Affordable Care Act has to happen for political and economic reasons.
Meanwhile, all that excitement vaulted the S&P 500 Healthcare Sector, ahead of technology for 2017.
Contradictions from the Market
Interestingly, all key segments of healthcare rallied, sending a seemingly contradictory message to Washington and to investors.
Healthcare Insurers soared on the notion of continued subsidies; I wonder if there were other reasons.
Let’s not forget there were several programs in Obamacare to protect insurance companies from losses, including risk adjustments and risk corridors. When those backstops expired, healthcare insurance companies bolted for the door.
Still, they haven’t fared too badly under Obamacare from April 1, 2010, to Feb 1, 2017:
· United Health Group (UNH) +286%
· Anthem (ANTM) +304%
· Cigna (CI) +431%
I still think CI goes much higher no matter how the Washington, D.C. saga plays out.
Hospital stocks were higher yesterday than any other part of health care; largely, they have been losers since the start of Obamacare.
Pharmaceutical and biotech were solid, although I prefer the latter because of those thin pipelines for drug makers.
Let’s Talk About Living
According to a recent Harvard study of our daily activities (thoughts and feelings), we are happiest when we live in the moment and unhappy when we are at work, resting, or using a home computer.
Reminiscing, thinking ahead and daydreaming makes us miserable even if we are thinking about something pleasant.
Ladies and gentlemen, we have all entered what millennials call YOLO: you only live once, which means we live for experiences. This mentality is having a profound effect on the economy and the stock market.
By the way, the Harvard study dovetails with a survey from the Fed back in 2010. Studies showed a profound twist in ways we saved money with the onus on buying stuff, giving up on education, retirement, and owning a home.
This trend will persist for some time even as the nation’s economic footing improves.
This means we are going to continue to play video games, go to amusement parks, and ride our motorcycles and jet skis. When we decide on vacations, we just might go on a cruise.
Year-to-date winners from all this living in the moment:
· Electronic Arts Inc. (EA) +43%
· Carnival Corp. (CCL) +27%
· Cedar Fair, L. P. (FUN) +11%
While on the subject of Millennials, 63% save money to live their desired lifestyle; many are into small recreational vehicles, and it reflects their actions in two of the biggest names in the industry for the month of June:
· Thor Industries (THO) +14%
· Winnebago Industries (WGO) +37%
Heck, maybe it’s all an anecdote to the dreary backdrop of anger and loathing that’s gripping this nation. For that reason, I think investors can buy any of the above names; partly because, well, you only live once.
I’ll be watching restaurants and apparel makers, two beaten down niches of the market that are beginning to act great for those looking for value.
Also on tap, new-home sales and the Baker Hughes rig count number- let’s hope it stops going up.
According to FT, the Trump administration is close to leveling an import freeze combined with higher tariffs on steel imports. The administration had already thrown out the possibility of using the Trade Expansion Act of 1962 (sort of ironic) to level the playing field based on the importance of steel and its role in America’s national security.
Siting Section 232 (see below), the administration believes it has wide authority and breadth to make a statement mostly related to China about dumping cheap subsidized steel:
(C)…In the administration of this section, the Director and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security.
One point brought up in the FT article is the impact of this move on other nations that export steel to the United States. China isn’t on the list of top ten sources of imported steel.
Ultimately, this will go to the World Trade Organization where the administration will have a chance to dismiss its legitimacy. The stakes are high, but there is no doubt China has abusively dumped a variety of products on America that have cost jobs.
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