In this slow growth environment, you want to focus on companies that can deliver the growth and that don’t need the economy to do well.
We track more than 110 stocks currently on GuerillaStockTrading that are part of our watch list. It is a broad and diverse group of stocks that are small cap, mid cap, large cap, and mega cap. We track earnings and revenue reports and all news for these stocks. A pattern has emerged this earnings season that you need to know about.
The Department of Veterans Affairs is on the cutting edge of IoT medical devices. This is great news for medical device stocks and more specifically telehealth companies like Koninklijke Philips (PHG), Teladoc (TDOC), Medtronic (MDT), and more.
Below is Susan Perez with the Department of Veterans Affairs talking about how IoT and medical devices a patient can have at home that sends vital statistics to that patients doctors are the future of healthcare.
Hillary Clinton and Democrats promised to wage war on pharmaceutical companies and do things like price controls on drugs and products of the biotechnology industry.
In California, there was a ballot measure to impose price controls on the sale of pharmaceutical drugs in the state.
Both Hillary Clinton’s probability of winning, and California’s ballot measure to impose price controls on the sale of drugs, weighed on pharmaceutical and biotechnology stocks leading up to the election.
Donald Trump did not promise a war on pharma. Trump promised increased funding for research and development and modernizing the FDA to ease the development, commercialization, and costs of bringing life-saving drugs to market.
Donald Trump won, and biotech stocks have been rallying ever since.
Democrats created shortages in the health care industry with ObamaCare, and they almost created the same shortages in pharmaceutical drugs. Let’s look at why price controls create market shortages.
A price control (or a price ceiling) occurs when the government puts a legal limit on how high the price of a product can be. For a price control to be effective, it must be set below the natural market equilibrium.
Using a hypothetical perfectly competitive market called pharmaceutical drugs, let’s examine the microeconomics of price control.
When a price control or price ceiling is set, a shortage occurs. The red horizontal line markets the price ceiling that is set by the government.
The price control forces the price down from P to P2. At the lower price, more people can afford the drug and so the quantity of the drug demanded goes up from Q to Q2 (point A).
The suppliers of the drug (pharmaceutical company) immediately cut back on supply (point B) as they are now paid below what the equilibrium market price established. Instead, these suppliers focus on supplying most of their drugs to other consumers, perhaps in other states that pay the full market price for the drugs they make. A shortage is created by the difference in the quantities of drugs demanded, versus the quantities of drugs supplied as illustrated by the shaded area. Shortages within the pharmaceutical industry would likely result in deaths, depending on the drugs needed.
The government set a price ceiling of P2 and so quantity supplied contracted to point B. However, at that supply level, consumers would be willing to pay a price of P3. Since P3 is greater than P2, deadweight loss occurs. The deadweight loss is the elimination of trading between both suppliers and consumers.
Price controls are a bad idea. If the government sets a price ceiling, there will be a shortage.
The less volatile sticky CPI confirms the uptrend.
ObamaCare has exploded the cost of medical care higher.
Medical care commodities, which are prescription and non-prescription medications, have exploded higher.
Inflation is finally trending higher which is what the Federal Reserve has been trying to engineer for years through monetary policy. The WSJ writes…
Fed Chairwoman Janet Yellen herself said last week that letting the economy run hot for a while might have some benefits… None of this is enough to take a rate increase at the Fed’s December meeting off the table. But it does mean that, even as prices pick up, further rate increases will be slow to come. Investors accustomed to inflation running below the Fed’s target may be in for some retraining.
Folks, this is another reason why we need to start getting more bullish on the stock market as we head into November and the start of the best six months of the year. Remember, a big part of the bearish scenario was a slowing US economy pressured downward by deflation as a result of Saudi Arabia destroying our shale oil industry. Lots of good jobs were lost and replaced by lower paying service sector ones as a massive wave of disinflation hit our economy. The latest inflation numbers suggest that the worst is behind us as the price of oil is in a slow fade upward, and more oil rigs are brought back online as evidenced by the upward trend on the weekly Baker Huges rig count.
All traders are watching this earnings season closely to see if the falling earnings streak is over. That’s the confirmation data point that is needed. In an inflationary environment, businesses are raising prices to keep up with the growing demand from a strengthening consumer. Traders want confirmation that the inflation we are now seeing is signaling a bottom in the earnings recession we have been in since Q1 of 2015.