The Sickest Sector? Health Care Of Course. By Andrew Gordon 
I’m a boomer. Should I apologize for being healthy? Perhaps I should savor it. According to boomer statistics, it’s not going to last. Boomers are getting old ... heading for retirement ... and soon will be busy dealing with excessive weight, failing organs, and chronic diseases. I’d rather not think about it. It’s very depressing for somebody who can recall the Kennedy-Nixon election like it was yesterday. Thank gosh I’m not at the forefront of the boomer generation. That began when World War II ended. American soldiers came home with a serious case of, um, missing their wives. Nine months later – toward the end of 1946 – the first wave of boomers emerged from tens of thousands of wombs. The number of newborns remained high until 1964 when the birth rate finally waned. This marked the end of an 18-year stretch of procreative energy – the likes of which the U.S. had never before seen (or has seen since). There will be hundreds of thousands of boomers turning 64 before I do. The first ones are scheduled to hit the mark in 2010. I’ve had that date etched in the back of my mind for years. I can’t believe it’s right around the corner. As I said, I have been blessed with good health. Maybe with exercise and healthy eating, I can avoid all those chronic diseases the experts say my fellow boomers and I are going to get. The picture they’re painting ain’t pretty... - Soon more than six of every 10 boomers will be managing more than one chronic condition.
- More than one out of every three boomers – over 21 million – will be considered obese.
- One of every four boomers – 14 million – will be living with diabetes.
- Nearly one out of every two boomers – more than 26 million – will be living with arthritis.
- And eight times more knee replacements will be performed than are being done today.
Sounds like good times, huh? It makes me want to throw away my tennis shoes and reserve a permanent room at the local Delray Beach hospital. In nearly every sector, the health of the economy sets the floor and ceiling of what companies can reasonably hope to achieve. In the health care sector, it’s the health of the boomers that will increasingly define the business environment. And boomers are getting old fast. By the time you’ve read the end of this paragraph, another boomer will have turned 50. By the time you finish reading this issue of IDE, about a hundred boomers will have reached the half-century mark. And wouldn’t you know it, people 50 or over account for more than one-half of all health care spending in this country. And that number has nowhere to go but up. The good news? Having breached 50, the average boomer has a better chance than people in any previous generation to live past the ancient age of 65. (Did you know that people at the turn of the 20th century were expected to live only to the ripe old age of 47? Now, the average life expectancy is 77.) The over-65 population will nearly double as a result. It’s going to be a horror show: everywhere you go, there’ll be people hobbling along, with bad skin and grey gums, shiny scalps, and several organs they weren’t born with (okay, maybe I’m being a little overdramatic but you get the picture). But the real horror show could be in health care. Are health care providers up to the challenge? Can they take care of this onslaught of broken-down, worn-out, creaking old geezers? The signs aren’t good. There’s already a shortage of nurses and other health care personnel. Hospitals are unbelievably overcrowded. Just this past summer, for example, I had to rush my father to the hospital. We ended up at Mass General (Harvard’s teaching hospital). My father immediately went into triage. But then we spent hours in the corridors of the emergency ward. There was nowhere else to put him. Finally, about 12 hours later and well past midnight, he got a room. If the health care sector is having trouble meeting the needs of the general population today, I hate to imagine what it’s going to look like a few years down the road. It could be semi-chaos. The strains on hospitals could go from barely manageable to all hell breaking loose.
The number of people being admitted to hospitals is expected to skyrocket from 8.2 million in 2004 to 22.9 million by 2030. And hospitals of all stripes – general, community, specialty, acute-care, ambulatory surgery, etc. – can't gear up fast enough.
How to invest? The health care sector is a $2 trillion market and growing. There are 12 real estate investment trusts (REITs) out of a total of 115 that specialize in developing and/or owning medical properties. They're much less risky than picking a pharma you think might have the next blockbuster pill.
Look for REITs with the lowest price-to-earnings (P/E) ratios. Remember, the key metric for REITs is “funds from operations” or FFO. It excludes purchases and sales of properties that can skew how good a REIT is at making money off of its existing properties. FFO should show healthy growth. As money is so tight these days, make sure the REIT also has a recent record of expanding its property portfolio (without taking on excessive debt). If a REIT isn’t physically growing, chances are its share prices aren’t either.
To find more information on these companies, go to the U.S. REIT website (nareit.com) and type "health care REIT" in the search window. Plenty of useful links will pop up for your browsing pleasure. Good Trading, Andrew Gordon P.S. To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com. [Ed. Note: With a bear market looming, it’s more important than ever to select safe investments that produce monthly dividend income. Click here to learn about Andy Gordon's INCOME service that selects the best dividend-paying stocks available.] Banking on an Early Recovery?
Think Again. By Andrew Gordon Let’s get real, shall we? On Friday AIG reported another big round of write-offs. $15 billion in losses and write-downs and investors didn’t like it. AIG traded down 9 percent. On the same day Citi announced that they want to sell $400 billion of their non-core assets. Their stock dropped 3 percent by the end of the day.
Blue skies ahead? I don’t think so. The shake-out in the financial sector isn’t even close to winding down. Last week’s announcements by the stalwarts of their respective industries are emblematic of a financial sector still trying to find its footing. Today it’s Citi. Who will it be tomorrow?
Nobody knows. But we have a pretty good idea of what the headlines will look like.
Banks are even reluctant to lend to each other. So go ahead. Accuse banks of being a bunch of “nervous Nellies.” I won’t. They’re jittery because their world has been turned upside down. This financial crisis was years in the making. Do you really think it’s going to end in a matter of months?
Until recently, this crisis had been contained within the financial sector. It’s just now beginning to affect Main Street. Next stage: The contagion spreads. It’s going to hit the real economy like a ton of bricks.
When banks are this nervous, they stop lending ... to practically everybody. In the Fed’s Senior Loan Officer Opinion survey last week, lending standards which were already tight got tighter across the board. With unemployment, foreclosures and consumer loan defaults all rising, you really think banks are going to open up their precious money vaults anytime soon?
In your dreams.
It’s going to feel like a kick in the gut. That’s because – despite what people think – the U.S. economy is not driven by government spending ... nor by productivity (that was so 1990’s) ... and it’s certainly not export-driven (though a rise in exports is helping right now).
Our economy is import-driven. We’ve been on an import binge financed by debt. So you could also say our economy is debt-driven. It’s really the same thing.
Banks refusing to lend removes our most important economic engine. The economy will continue to go downhill until banks re-emerge on the other side of this financial crisis. But, right now, it’s slow-going. Getting to the other side won’t happen this year. INTERNAL ENDORSEMENT INVESTMENT PORNOGRAPHY To heck with men’s magazines… you’ve seen it all before anyway. Here’s what a real centerfold should look like. 373%... 233%... 220%... 159%... 153%... 100%... 185%...
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