Saturday, August 08, 2009

Bio-engineered Teeth!

Yesterday, in response to the cash for clunker program and the dying post office monopoly, I wrote the following: In 1911, Thomas Dixon completed "The Root of All Evil", his third novel in a trilogy that attacked populist socialism. History does not actually repeat itself but it certainly does rhyme with itself. Today, US citizens are collectively borrowing billions of dollars and raising future tax requirements by billions of dollars to buy old autos from individuals for $4,500 each. It is wonderful and ironic that "The Root of All Evil" can almost instantly be downloaded onto an Amazon Kindle for only 99 cents or onto a Sony Reader for FREE! Once again, FREEDOM will triumph over socialism! The "Group Think Socialist" incorrectly believe that the purchase of the clunkers will help the environment. In fact, this car buying subsidy will increase the number of miles driven and the gasoline burned for many years to come. On the other hand, the total savings, including environmental savings, from electronic delivery of news and mail will be enormous. (visit to read the entire article) Today, I call forth the ghost of Thomas Dixon in response to socialized medicine. There will never be enough money to provide all the health care we would like. We cannot repeal the law of scarce resources. We can only hope to make the most of the resources we have. If one objectively looks at the trillions of dollars that have been lost and the environmental damage that has been done because of the US Postal Service Monopoly, one must appreciate the silliness of proposing increased government control of health care. (The postal service monopoly would have lasted many more decades if the AT&T monopoly continued.) Our socialist leaning, power hungry, elected officials want to direct the spending of trillions of dollars. Their latest "land grab" is to fix the health care "crisis". The "crisis" that they have created in reality and in perception by throwing money at a financially busted Medicare and Medicaid system and by repeating the mantra that 45 million Americans are uninsured. In the meantime, publicly funded and privately funded research is rapidly discovering health miracles. For the first time, scientist have bio-engineered an organ, a mouse tooth. In only 45 days, they can now grow a tooth from a few cells extracted, engineered and replanted. Before long, growing other replacement organs will be achieved. Yes, eventually, even the human heart. That is, unless the government gets in the way. People are healthier today because the knowledge of good sanitation practices has been spread and because we have discovered treatments and cures for diseases. In preparation for "going back to school", millions of children are getting physical check-ups. Many of them are being seen by nurse practitioners and their parents are paying about one third the "doctor rate". The price of quality medical care will fall if the market is allowed to work. From the investment angle, we should note that at the bottom of the recession, the ten year growth in manufacturing jobs in America was negative 3.7% and the ten year growth in Health Care jobs was 2.4%. Home Health Care jobs increased by 5% and auto manufacturing jobs fell by 6.7% (Pew Research). For long term growth, it is clear that heath care growth will exceed manufacturing growth, but growth and profits often diverge. Ford Motor shares have increased about 500% since hitting bottom. The rebound in auto sales will continue even after the cash for clunker deal is over. During the past three years, the fleet of cars on the road has aged and it will be replaced. Manufacturing jobs in America have declined for one reason only, labor priced itself out of the market. As a result, Ford and others have been forced to jettisoned labor and to substitute capital. The classic rules of economics do not go away. Monopolies, including labor cartels, are seldom "natural", markets adjust. The auto situation is one of higher sales with lower costs, which means fat profits. In a few months, shares of GM and Chrysler will come to market. Brokers will be pushing those shares. The time to buy is now. It will be years before grown teeth will be a service delivered at a profit. If you know of a good way for investors to participate in health care delivery, I'm all ears. In the meantime, I will encourage investors to purchase Ford and other consumer cyclical stocks. The recession is over; the world did not end. The in-trade betting is that the congress will not find the votes to raise the massive amount of taxes that their health care proposals would require. Indeed, the in-trade odds that the massive cap and trade tax proposal in any form is less than 50/50 for passage. The future is bright because innovations are flowing forth. Government imposed monopolies and oligopolies stifle innovation. The change from $3 per minute long distance calls to free long distance calls would never have happened if the AT&T monopoly had been allowed to stand and the price of postage today would probably be double. Sure the change has not been all fun and games. Change is naturally hated by most of us. It is difficult to move outside of our comfort zones, but it is important to keep moving in the right directions as best we can. Keep in mind that in today's dollars those $3 phone calls are the equivalent of perhaps $10 or more. Jack