BALTIMORE – “The Donald” – still in Manhattan, and still largely ignorant of the nasty critters and perverse ecosystem on the banks of the Potomac – is catching whiffs of swamp gas.
Talking to the New York Post, the president-elect said he expected to repeal Obamacare “sometime next week.”
Its replacement, he said, would come “very shortly thereafter.”
In the business world, you can get things done like that. But in the world of the Deep State, it won’t happen.
America’s health care system is bread, butter, meat, potatoes… and Dom Pérignon with caviar… to a substantial and growing part of the elite.
When we were growing up, we had no health insurance. When we had to go to the doctor – which was rare – we paid the bill in cash. (When we needed an operation in 1961, we negotiated with the hospital and the surgeon to pay in installments.)
Back then, the total yearly cost of health care ran about $600 per family of four. Last year, it was more than $40,000.
By comparison, a basic Ford F-150 pickup truck cost about $4,000 in 1961. Today, it costs about $27,000.
Today’s pickup truck and today’s health care are probably better than they were in 1961. But how come the former is only seven times more expensive… while the latter is 66 times pricier?
The answer is simple: The feds – with their zombie-crony allies – are far more active in health care than they are in the auto industry.
The auto industry is lean, global, and competitive; the health care industry is fat, domestic, and heavily controlled to avoid price competition.
Through regulation, paperwork, third-party payment systems, lawyers, licensing, tax incentives, subsidies, and crony deals with insurance companies and the pharmaceutical industry, the feds have created a glutton that now devours more than 17% of national GDP – up from just 5% in 1961.
That represents $36 trillion in excess spending over the last 55 years. And it’s a large part of the reason federal debt is slated to go from $20 trillion this month to $30 trillion a decade from now.
Another softball question: What happens to the money?
Little of the extra spending pays for better health care. Instead, it goes to middlemen and parasites, the cronies in the medical-pharmaceutical-insurance-legal complex.
In Baltimore, for example, billboards invite people to imagine they have been victims of medical malpractice – a jackpot for the law firm, if not for the victim.
TV ads offer myriad new drugs, available at someone else’s expense. Even though the lifestyle habits of much of the Baltimore population are so bad, offering “health insurance” to them is like offering fire insurance in Atlanta just as General Sherman marched into town.
Mr. Trump and the Republican Party say they will provide a “better deal” for Americans.
Any cut to health care must come out of the pockets of the elite who run the system. They’ll fight hard – in the media, in Congress… and in the swamp – to protect their gains.
And that’s just the beginning of the problem. Obamacare has enrolled 20 million new people, lowering the uninsured rate to 9% from 16%. The newly insured, too, will fight to protect their benefits.
The same phenomenon is at work in France.
The Financial Times reports that the frontrunner in the country’s presidential election this year, François Fillon, has touched the dangerous “third rail” of French politics.
He dared to suggest reforming French health insurance – or Sécu – to cut costs.
The idea set off such political blowback that Fillon was forced to retreat. He promised he would never dare to privatize the French health care system… not even a little of it.
No matter where you are, it’s hard to renege on solemn lies. And once underway, some things – war, empire, fake money, and real love – are almost impossible to back away from.
Further Reading: The president-elect will face his biggest opponent once he takes office… the Deep State. And in his latest warning, Bill explains exactly how this shadowy group of unelected elites is corrupting our financial system… and pushing the U.S. economy closer and closer to an imminent breakdown. Watch here now.
BY Chris Mayer, Editor, Chris Mayer’s Focus
Editor’s Note: Chris Mayer is one of Bill’s star analysts.
Bill even invested $5 million from his own family trust into following Chris’ stock picks.
“Dividends are an expensive luxury.”
You’ve heard me say that before. It’s a quote from Thomas Phelps in 100 to 1 in the Stock Market (1972).
Phelps found that if you’re hunting for stocks that return 100-to-1 (what I call “100 baggers”), you should look for companies that reinvest the cash they generate rather than paying out dividends.
It’s a powerful idea… if you follow the important caveat I’ll explain to you today.
Say you have two companies, with $1,000 invested in each. And both earn a 20% return on that money invested.
Now, say Company A pays all of its profits in dividends. But Company B reinvests all the profits.
After five years, Company A is still worth $1,000. But you have $1,000 in your pocket in dividends (leaving out taxes for the moment). Not bad.
Company B, however, is now worth $2,488. You’ve got almost 25% more.
Over longer periods of time, the accumulated results are staggering. After 25 years, for example, Company A is still worth $1,000, and you have $5,000 in dividends. But Company B is worth $95,396.
That’s theoretically true… but often doesn’t work out in practice.
A new paper by Newfound Research called “Is Dividend Investing Dangerous?” shows that companies with higher reinvestment rates lag behind those that reinvest less (and pay out more in dividends).
The reason for this, the authors conclude, is that “companies are generally not good at reinvesting free cash flow.”
But wait… Doesn’t this go against what I just said about reinvesting profits?
Yes and no.
It’s theoretically true that reinvesting will compound your gains faster, assuming the company can earn returns higher than you can earn with a dividend. Yet it also seems undeniably true that most (or at least many) companies are poor investors of their own capital.
The bridge here is that “most” does not mean “all.”
And this gets to something critically important about how my team and I pick stocks: management.
Most management teams are corporate types. They got there for a lot of reasons – charm, political savvy, leadership skills, whatever – but not because they were great investors.
This is why we spend so much time thinking about how the management team will invest the cash the business generates. One of my favorite Warren Buffett quotes makes this point:
The lack of skill that many CEOs have at capital allocation is no small matter: After 10 years on the job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business.
And that’s just reinvesting 10% of annual earnings. Most firms retain more than 10%. (Buffett also said, “If earnings have been unwisely retained, it is likely that managers, too, have been unwisely retained.”)
To guard against unwise investment of earnings, then, we want to see that the company has ample opportunities to reinvest cash and earn high rates. We don’t want management teams having to find new ways to invest in cash because that means they’ll likely squander it – often on an acquisition.
In my newest advisory, Focus, we invest only in companies that have ready opportunities to deploy capital… and skilled leadership that knows how to deploy it.
The bottom line: If you want to shoot for 100 baggers, the most important thing is to look for companies with the ability to reinvest profits and earn a high return on equity – again and again and again…
Otherwise, for the typical firm, you’re probably better off taking the dividend.
Editor’s Note: Thousands of Diary readers have already tuned in to learn an investment strategy Chris calls “the biggest breakthrough of my career.”
Chris Mayer’s Focus is all about his secret for identifying “the next Starbucks,” “the next Apple,” and “the next Wal-Mart” years in advance of anyone on Wall Street. But don’t wait. This presentation – and Chris’ special offer – ends tomorrow. To find out more, go here.
Half of the World’s Stock Markets Are in a Bull Market
Donald Trump’s news conference yesterday didn’t exactly sound market friendly. Nevertheless, half the world’s stock markets are now in a bull market – that is, they are up more than 20% from a 52-week low.
98% of Adoptions in Japan Are of Adult Men
In Japan, there is a several-hundred-year-old tradition in which businesses adopt their executives so companies or institutions can be “family-run” groups. In other words, bosses adopt their employees.
When You Should Never Sell… And Other Lessons From One of the Greatest Minds in Investing
The investing expert who beat Warren Buffett’s Berkshire Hathaway shares the most important advice he learned from studying history’s greatest investors.
Yesterday, Bill argued that one thing the Trump team will fight hardest to prevent is a stock market correction. And it’s provoked a mixed response from readers…
You say that President Bush brought war to the Middle East. You forgot to mention why. Something called 9/11. And almost 3,000 dead Americans.
– Ron T.
I believe the jury is out on Trump being the “King of Debt.” After all, Obama created more debt than the first 43 presidents combined. That’s a tough record to beat, notwithstanding that we are facing a disaster of unprecedented proportions.
– Greg S.
I believe it is going to take some time before President-elect Trump really has a “handle” on those who would sabotage his presidency; these detractors and below-the-belters will reveal themselves from the most unlikely cellars and back alleys of the political establishment.
Money and power is still the byword of the shadow government.
– Lowell N.
I can’t wait to see the mailbag tomorrow in reference to “The One Thing Team Trump Will Fight Hardest to Prevent,” with the 320 million moronic views and the reason for the attack on Fort Sumter.
It is amusing to me how all these “freethinking” readers bloviate with backlash when you write about something they disagree with and order you to cancel their free subscriptions. You can let them know there is a “click here to unsubscribe” link at the end of every free newsletter you send out.
– Mike H.
Loved your comment on economists. As a former stockbroker, we used to say that “if you laid all of the economists and analysts end to end, they would never reach a conclusion.”
– Jerry L.
On his first day of presidency, Donald Trump will issue an executive order that will wake a sleeping giant… and send this tiny stock through the roof.
The Casey Report Editor E.B. Tucker just put together a video with all the details of this opportunity. Click here to watch it now.