health care Archives - the patient investor

June 12, 2021

ASX: Financials suffer, A-REITs advance on lower rates

The ASX 200 advance is tentative, with a short doji candle signaling hesitancy, and we expect retracement to test support at 7000. The Trend Index trough above zero indicates longer-term buying pressure. Respect of support is likely and would signal a fresh advance.

ASX 200

Financial Markets

Bond ETFs broke through resistance, signaling falling long-term interest rates.

Australian Bond ETFs

A-REITs advanced on the prospect of lower long-term interest rates.

ASX 200 Property

Bank net interest margins, however, are squeezed when interest rates fall.

Bank Net Interest Margins

ASX 200 Financials retreated to test support at 6500. The trend is unaffected and Trend Index troughs above zero indicate long-term buying pressure.

ASX 200 Financials

Mining

Mining continues to benefit from the infrastructure boom, with iron ore respecting support at $200/ton¹. Troughs above zero, flag buying pressure, and respect of support both signal another advance.

Iron Ore

The ASX 300 Metals & Mining index is again testing resistance at 6000. Breakout would signal another advance, with a target of 6500².

ASX 300 Metals & Mining

Health Care & Technology

Health Care respected its new support level and is advancing strongly. Expect resistance between 45000 and 46000.

ASX 200 Health Care

Information Technology recovered above former resistance at 2000, warning of a bear trap. Expect resistance at 2250; breakout would signal a new advance.

Gold

The All Ordinaries Gold Index (XGD) is testing resistance at 7500. Breakout would signal a fresh advance, with a target of 9000.

All Ordinaries Gold Index

The Gold price is retracing to test the new support level at A$2400 per ounce. Respect of support is likely and breakout above A$2500 would be a strong bull signal for Aussie gold miners.

Gold in AUD

Conclusion

We expect A-REITs and Bond ETFs to advance on the back of lower long-term interest rates.

Financials are expected to undergo a correction as interest margins are squeezed.

Metals & Mining are in a strong up-trend because of record iron ore prices.

Health Care is recovering well and expected to test resistance.

Technology had a strong week but the outlook is still uncertain.

We expect the ASX 200 to retrace to test support at 7000 as its largest sector (Financials) undergoes a correction.

Notes

Tons are metric tons unless otherwise stated.
Target for Metals & Mining is calculated as support at 5000 extended above resistance at 5750.

May 15, 2021May 15, 2021

ASX Technology stocks fall

The ASX 200 continues to test its February 2020 high at 7200. Narrow consolidation below resistance is a bullish sign but we need to keep a weather eye on the US and China.

ASX 200

Financial Markets

Bond ETFs, in a sideways consolidation, indicate that long-term interest rates are holding steady. Inflation remains muted and the RBA is following through on their stated intention to suppress long-term yields.

Australian Bond ETFs

A-REITs are testing resistance at 1500. Reversal below 1340 is unlikely but would warn of a double-top reversal.

ASX 200 REITs

Financials are testing resistance at 6500. A rising 13-week Trend Index — with troughs above zero — flags buying pressure, suggesting that a breakout is likely.

ASX 200 Financials

Health Care, Discretionary & Technology

Health Care is testing resistance at 42500. The rising Trend Index is bullish but failure to cross above zero would confirm long-term selling pressure. Breach of 40000 would complete a bull-trap (a bear signal for investors) and warn of another test of primary support at 37500.

ASX 200 Health Care

Technology broke support at 1900 to signal a primary down-trend, imitating the pattern in US markets. Breach offers a medium-term target of 1400¹.

ASX 200 IT

Consumer Discretionary is testing its rising trendline. We expect a test of support at 2900 as the impact of government stimulus fades.

ASX 200 Discretionary

Mining

Iron ore retreated slightly, to $210/metric ton. Chinese steel mills are stockpiling — due to rising tensions with Australia and anticipated production curbs in China (to reduce pollution levels). The boom is only expected to last as long as stockpiling continues. Then prices are likely to fall steeply as mills run down stockpiles. Reversal below support at $175-$180 would warn of a sharp decline.

Iron Ore

The ASX 300 Metals & Mining found resistance at 6000. A tall shadow on this week’s candle warns of short-term selling pressure. Another test of support at 5000 is likely.

ASX 300 Metals & Mining

The All Ordinaries Gold Index (XGD) continues to test its new support level at 7000. Follow-through below recent lows would warn of another test of 6000, while recovery above 7300 would signal a fresh advance. Breakout above the long-term descending trendline would strengthen the bull signal. Gold bullishness is fueled by rising inflation fears.

All Ordinaries Gold Index

The Gold price, in Australian Dollars, is testing its descending trendline and resistance at 2400. Breakout above the two would deliver a strong bull signal.

Gold in AUD

Conclusion

Technology stocks have commenced a primary down-trend. Metals & Mining look highly-priced and susceptible to a sharp reversal. They have looked that way for months but sooner or later we are bound to see a rapid re-pricing.

Steady long-term interest rates and a buoyant housing market are lifting REITs and Financials respectively. Health Care and Consumer Discretionary look hesitant, while Gold stocks are making a tentative rally.

Notes

Target for XIJ is its 2400 peak extended below 1900.

March 19, 2019

“Stocks rebound but sentiment soft”

From Bob Doll at Nuveen Investments. His weekly top themes:

1. We think the odds of a U.S. recession are low, but we also believe growth will remain soft for a couple of quarters. U.S. growth may bottom in the first half of 2019 following a relatively disappointing fourth quarter and the recent government shutdown. We expect growth will improve in the second half of the year.

Agreed, though growth is likely to remain soft for an extended period. The Philadelphia Fed Leading Index is easing but remains healthy at above 1.0% (December 2018).

Leading Index

2. Inflation remains low, but upward pressure is mounting. With unemployment under 4% and average hourly earnings rising to an annual 3.6% level, we may start to see prices rise. So far, better productivity growth has kept the lid on prices, but this trend bears watching.

Agreed. Average hourly earnings are rising and inflation may follow.

Hourly Earnings Growth

3. Trade issues remain a wildcard. The U.S./China trade dispute appears to be making progress, but the timeline is slipping and significant disagreement remains over tariff levels and intellectual property protections.

This is the dominant issue facing global markets. Call me skeptical but I don’t see a happy resolution. There is too much at stake for both parties. Expect a drawn out conflict over the next two decades.

4. We do not expect Brexit to cause widespread market issues. We think the risk of a hard Brexit is low, since no one wants to see that outcome. Some sort of soft separation or even a Brexit vote redo appears more likely.

Agreed. Hard Brexit is unlikely. Soft separation is likely, while no Brexit is most unlikely.

5. The health care sector may remain under pressure due to political rhetoric. Health care stocks in general, and managed care companies in particular, have struggled in light of talk about ending private health care coverage. We think Congress lacks the votes to enact such legislation. But this issue, as well as drug pricing policies, are likely to remain at the center of the political dialogue through the 2020 elections.

Health care is a political football and may take longer to resolve than the trade war with China.

6. Downward earnings revisions may present the largest risk for stocks. As recently as September 30, expectations for first quarter earnings growth were +7%. That slipped to +4% by January 1 and has since fallen to -3%.

A sharp fall in earnings would most likely spring from a steep rise in interest rates if the Fed had to combat rising inflation. That doesn’t seem imminent despite rising average hourly earnings. The Fed is maintaining money supply growth at close to 5.0%, around the same level as nominal GDP, keeping a lid on inflationary pressures.

Money Supply & Nominal GDP growth

7. Equity returns may be modest over the next decade compared to the last. Since the bull market began 10 years ago, U.S. stocks have appreciated over 400%. It’s nearly impossible to imagine that pace will be met again, but we feel confident that stocks will outperform Treasuries and cash over the next 10 years.

Expect modest returns on stocks, low interest rates, and low returns on bonds and cash.

March 31, 2016

Private health insurance fails to deliver

From Leith van Onselen at Macrobusiness:

The high financial overhead of private insurance in Australia means that only 84 cents in every dollar collected by private insurers is returned as benefits, with the rest going to administrative costs and corporate profits. By contrast, Medicare returns 94 cents in the dollar, even after the cost of tax collection is taken into account. In the United States, which is highly dependent on private insurance, only 69 cents in the dollar are returned as payment for health services.

More importantly, competing private insurers have less ability to control prices demanded by powerful service providers. If one insurer tries to bargain hard with hospitals to keep prices down, the hospitals simply choose to do business with another insurer.

By contrast a single national insurer has the market power to push down costs and improve utilisation. The below chart of health costs across 18 OECD countries highlights this point: single national insurers provide cheaper (and often better) health care than systems heavily reliant on private health insurance:

This is an argument for abandoning private health insurance, not private health care. Experience of Italy’s Lombardy region suggests a level-playing field, with open competition between public and private health care providers, delivers superior results. From Margherita Stancati at WSJ online:

Like other European countries, Italy offers universal health-care coverage backed by the state. Italians can go to a public hospital, for example, without involving an insurance company. The patients are charged a small co-pay, but most of the bill is paid by the government. As a result, the great majority of Italians don’t bother to buy private health insurance unless they want to seek treatment from private doctors or hospitals, which are relatively few.

Offering guaranteed reimbursements to public hospitals, though, took away the hospitals’ incentive to improve service or rein in costs. Inefficiencies were rampant as a result, and the quality of Italy’s public health care suffered for years. Months-long waiting lists became the norm for nonemergency procedures—even heart surgery—in most of the country.

Big changes came in 1997, when Italy’s national government decentralized the country’s health-care system, giving the regions control over the public money that goes to hospitals within their own borders…..

In much of the country, regions have continued to use the standards of care and reimbursement rates recommended by Rome. Some also give preferential treatment to public hospitals, making it more difficult for private hospitals to qualify for public funds.

Lombardy, by contrast, has increased its quality standards, set its own reimbursement rates and, most important, put public and private hospitals on an equal footing by making each equally eligible for public funds. If a hospital meets the quality standards and charges the accepted reimbursement rate, it qualifies. Patients are free to choose between state-run and publicly funded private hospitals at no extra cost. Their co-pay is the same in either case. As a result, public and many private hospitals in Lombardy compete directly for patients and funds.

…..Around 30% of hospital care in Lombardy is private now—more than anywhere else in Italy. And service in both the private and public sector has improved.

State hospitals have improved their service levels while private hospitals have lowered costs in response to the increased competition. A win for all …..except private health insurers.

October 25, 2015

S&P 500 reporting in full swing

Of the 172 S&P 500 stocks that have reported for Q3 2015: 120 beat, 37 missed, and 15 met their estimates.

S&P 500 Q3 2015 operating reports

Sectors with the highest percentage of misses so far are: Materials, Energy and Financials. Lowest are: Information Technology, Health Care, Telecom and Utilities.

January 14, 2015

Health Care (Australia)

A chart of Australia’s ASX 200 Health Care [XHJ], compared to Financials-x-Property [XXJ] and the overall index [XJO] over the last 15 years, shows that outperformance of the Health Care sector is not just a recent occurrence.

ASX 200 Health Care

The sector also proved resilient during the GFC.

October 21, 2013

Inside the Nation’s Biggest Experiment in School Choice | WSJ.com

Stephanie Banchero at WSJ describes how state introduction of charter schools in New Orleans has lifted academic performance.

There is broad acknowledgment that local schools are performing better since Hurricane Katrina washed away New Orleans’ failing public education system and state authorities took control of many campuses here.

Graduation rates went to 78% last year from 52% before Katrina—surpassing Detroit, Baltimore, Washington, D.C., and Oakland, Calif., cities also struggling to boost achievement among lower-income students. The share of New Orleans students proficient in math, reading, science and social studies increased to 58% in 2012 from 35% before the 2005 storm, state data shows.

….About 84% of its 42,000 public school students attend charters, the largest share of any district in the U.S.

Charter schools are largely free to manage their own budgets and hiring, set curriculum and schedules, and select textbooks. The lowest performing schools are eventually closed by state officials or replaced with new operators.

For the school year that started in August, parents picked among 78 charter schools, as well as eight traditional campuses, one independent school with a board appointed by the governor and 38 private schools that are paid with state-issued tuition vouchers. To help guide the selection, public schools are issued grades of A to F, based on academic performance.

State-issued vouchers promote competition amongst schools and lift performance. The system not only empowers parents but also empowers staff in those institutions, judging them on performance rather than on conformity to strict regulatory controls.

An experiment in the Lombardy region of Italy has also demonstrated that similar competition between state and private institutions in the health care sector reduces costs and improves outcomes. Given the striking success of this model, expect to see growing adoption in both health care and education despite resistance from vested interests.

October 7, 2013

Claiming the $1 trillion prize in US health care | McKinsey & Company

Even within a single local market, we have found that the cost to deliver the same “episodes of care” [medical situations characterized by a relatively clear outcome and relatively predictable start and end points (for example, most hospitalizations, pregnancies, upper respiratory infections, and hip replacements)] typically varies by 30 percent to well over 100 percent, even after we held constant the prices that hospitals, physicians, and other providers charge and risk-adjusted the costs to reflect patients’ health status. The cost differences were unrelated to any discernible variation in care quality or outcomes. These results make it clear that some providers are dramatically more successful than others in addressing patients’ needs. The strong providers achieve good results not by cutting corners but by developing (or adopting) best practices that enable them to deliver high-quality outcomes at lower cost.

June 3, 2013

The U.S. Health Care System Doesn’t Need Price Controls. It Needs Price Signals | Reason.com

Peter Suderman discusses two articles which attack the high cost of health care in the USA:

Both pieces offer essentially the same thesis: The U.S. spends too much on health care because the prices Americans pay for health care services are too high. And both implicitly nod toward more aggressive regulation of medical prices as a solution.

…..most Americans don’t actually know much of anything at all about the prices they pay for health services. That’s because Americans don’t pay those prices themselves. Instead, they pay subsidized premiums for insurance provided through their employers, or they pay taxes and get Medicare or Medicaid……

What that means is that, in an important sense, the “prices” for health care services in America are not really prices at all. A better way to label them might be reimbursements—planned by Medicare bureaucrats and powerful physician advisory groups, negotiated by insurers who keep a watchful eye on the prices that Medicare charges, and only very occasionally paid by individuals, few of whom are shopping based on price and service quality…..

This is the real problem with health care pricing in the U.S.: not the lack of sufficiently aggressive price controls, but the lack of meaningful price signals.

The US spends about two-and-a-half times the OECD average for healthcare, while life expectancy at 79.7 years is lower than the OECD average of 79.8 years, according to PBS News Hour.

The Lombardy region of Italy offers the best health care solution I have come across, using price signals to control cost and quality of service in both state and private medical facilities.

Margherita Stancati at WSJ online writes:

Like other European countries, Italy offers universal health-care coverage backed by the state. Italians can go to a public hospital, for example, without involving an insurance company. The patients are charged a small co-pay, but most of the bill is paid by the government. As a result, the great majority of Italians don’t bother to buy private health insurance unless they want to seek treatment from private doctors or hospitals, which are relatively few.

Offering guaranteed reimbursements to public hospitals, though, took away the hospitals’ incentive to improve service or rein in costs. Inefficiencies were rampant as a result, and the quality of Italy’s public health care suffered for years. Months-long waiting lists became the norm for nonemergency procedures—even heart surgery—in most of the country.

Big changes came in 1997, when Italy’s national government decentralized the country’s health-care system, giving the regions control over the public money that goes to hospitals within their own borders…..

In much of the country, regions have continued to use the standards of care and reimbursement rates recommended by Rome. Some also give preferential treatment to public hospitals, making it more difficult for private hospitals to qualify for public funds.

Lombardy, by contrast, has increased its quality standards, set its own reimbursement rates and, most important, put public and private hospitals on an equal footing by making each equally eligible for public funds. If a hospital meets the quality standards and charges the accepted reimbursement rate, it qualifies. Patients are free to choose between state-run and publicly funded private hospitals at no extra cost. Their co-pay is the same in either case. As a result, public and many private hospitals in Lombardy compete directly for patients and funds.

…..Around 30% of hospital care in Lombardy is private now—more than anywhere else in Italy. And service in both the private and public sector has improved.

April 2, 2013

Mitch McConnell Prepares To Give Barack Obama The Political Shellacking Of A Lifetime – Forbes

Ralph Benko shares an insight on US healthcare from columnist Warren Brookes on Forbes:

Brookes shared an indelible insight. He observed that it was possible to provide good health care at an affordable cost through the free market, rationing it by price. And it was possible to provide good health care at an affordable cost by the government through state agencies, rationing it by thoughtful policy. And that America had managed to create a monstrous hybrid of the two, the worst possible system: lousy care at unaffordable prices.