The Weekend Edition is pulled from the daily Stansberry Digest. The Digestcomes free with a subscription to any of our premium products.
The ongoing boom in health care continues...
Our colleague Dr. David "Doc" Eifrig has written at length about how Obamacare and the aging "Baby Boomer" generation have created a
huge opportunity in health care for investors.
Shares of health-insurance firms have skyrocketed since the launch of Obamacare in 2010. Last week, health-insurance firms Aetna (AET), Cigna (CI), and Humana (HUM) hit fresh all-time highs.
And it's not just insurance companies that are soaring... Pharmaceutical giant Eli Lilly (LLY) hit a new 13-year high this week... while the Health Care Select Sector SPDR Fund (XLV) and iShares U.S. Health Care Fund (IYH) are up more than 100% in the last three years.
Doc has been all over this trend from the beginning. He has led his subscribers to triple-digit gains in medical-equipment giant Medtronic (MDT), drugstore chain CVS Health (CVS), and the Fidelity Select Medical Equipment and Systems Fund (FSMEX).
As Doc explained in the August 11 Digest Premium...
Back when I was in high school, health care spending accounted for less than 10% of gross domestic product (GDP). Today, it accounts for 18%... In 25 years, estimates project that number will rise to 24%.
One of the reasons for that increase is the aging Baby Boomer generation, which will lead to a 45% increase in the elderly population. That means more money will be spent on prescription drugs and on doctor visits.
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Doc noted that elderly people take three to four times more prescription drugs than people younger than 50... and pointed out that 90% of seniors take at least one drug per month...
Add to that the average nursing home stay is nearly 2.3 years and costs more than $200,000. According to financial-services firm Fidelity, the average retiring couple will need $220,000 to pay for health care costs if both partners live into their 80s.
Drugstore chains will fill more prescriptions. Health care technology is a growing sector, and certain firms are ideally positioned. And of course, pharmacy benefit managers that help manage the prescription process are a great way to invest in this long-term trend.
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All of this has led to a boom in health care-related job openings, as the industry tries to find new workers to keep up with demand...
In an article this week, Bloomberg noted that job listings in the health care sector have soared while hiring has failed to keep pace. That suggests that the U.S. workforce may not be able to meet the demand for health care workers. From the article...
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The 910,000 listings in the health care industry almost doubled the 513,000 who were added to payrolls, meaning there were about 1.8 jobs available for every person who was hired. Across all private employers, that ratio tilted in the job seeker's favor for the first time ever in April. Wages in the industry grew by 2.2% in the year through April after a 2.3% increase the prior month that was the strongest since the end of 2012, separate Labor Department figures showed last week.
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This trend is likely just getting started.
We've also been following the recent "rout" in the bond market...
Bond yields across the world have been rising again... hitting new multi-month highs this week.
The German 10-year bond ("bund") yield rose to more than 1% for the first time since September, while the benchmark 10-year U.S. Treasury yield hit just less than 2.5% for the first time since October.
Doc has been following these moves as well. In the latest issue of his Income Intelligence, he updated readers on his thoughts on the bond market...
Last month, the European Union announced that the region's GDP grew 0.4% in the first three months of the year. That was better than expected.
Investors saw strength in the region. They also figured this lowered the chances of deflation. They took appropriate action by selling off some of the super-safe German bunds they held.
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As Doc explained, the big moves in yields likely had more to do with valuation than anything else...
We like to call high-flying stocks "priced for perfection." When a growth company trades at many times earnings, it needs to perform perfectly. If it misses earnings estimates by even a tiny bit, it can see its price collapse quickly.
The same thing happened with the German bunds that paid 0.07% in interest. Investors bought these bonds because they were scared of risks in Europe and saw no better place to put their money. When the mood is that dark, even a tiny ray of sunshine can send investors flying to the exit.
In the U.S., we're in much the same scenario.
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Like us, Doc doesn't recommend owning most bonds today... particularly government bonds yielding next to nothing. But longtime readers know Doc has also been one of the most outspoken bulls on
municipal bonds. As we mentioned in the February 3
Digest...
Muni bonds are debt issued by state and local government used to fund projects. Because you're loaning money to the government, the yield is usually tax-free.
Munis are traditionally one of the least sexy sectors of the market. They pay safe income and rarely default. But some doomsayers took aim at muni bonds during the subprime crisis, saying we'd see loads of defaults.
Doc took the other side of that bet. And Retirement Millionairesubscribers who purchased municipal bonds when Doc originally recommended them in October 2008 (in the midst of the economic crisis) are up more than 100% – a huge gain considering the asset class.
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Doc is still bullish on municipal bonds today. Thanks to the recent rise in yields, the prices of muni bonds have fallen... and some of his preferred investments are now trading at their best values in years. Doc says it's an incredible opportunity every income investor should consider today.
If you'd like to learn more about Doc's recommendations on muni bonds – including his preferred way to invest in them today – there has never been a better time to try his Income Intelligence advisory.
In the May issue, he updated subscribers on all the important income markets – including dividends, master limited partnerships, real estate investment trusts, preferred stocks, and what's really going on in the bond market – and laid out a step-by-step plan to lock in huge income streams when the next crisis hits.