Today, I’m going to share with you a health care investment you’ve probably never considered… one that’s set to grow in step with the aging population, returning hefty yields along with steady capital growth. Let me explain…

Today, health care accounts for 15% of U.S. spending, about $2.2 trillion. That already staggering number is set to skyrocket in the next decade as the waves of the “silver tsunami” wash ashore.

You see, regardless of how healthy you are as you age, the majority of your lifetime medical expenses – approximately 80% – will come due in the final years of your life. As you would expect, a large portion of these dollars will flow to hospitals and assisted-living centers. So, as an investor, you might be tempted to buy the companies operating these medical centers and nursing homes. It’s not a bad idea… But I’ve got a much better one…

The safest way to play this megatrend is to buy the landlords… the companies that own hospital buildings, medical offices, and other health care facilities. Here’s why…

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REITs, by law, must pay 90% of their income to shareholders. In return, these companies pay little to no taxes. Health care REITs lease their buildings to medical-service providers or “operators,” who sign 10- to 20-year leases and are responsible for all property taxes, utilities, and expenses.

So health care landlords are practically immune to rising energy costs. In addition, automatic rent escalators – about 2%-4% annually – protect landlords from inflation.

And people get sick and go to the doctor no matter what the economy is doing. That’s why medical stocks like health care REITs are the ultimate “defensive” stocks… investments that perform well regardless of tumultuous economic cycles.
Of course, the words “real estate” now make the average investor cringe… Nearly every REIT started to tumble early last year, and health care REITs were no exception. But consider this: While REITs in general have fallen another 15% in the last 12 months, health care REITs are about flat. And that’s not counting their 6% dividend yield, which is 50% higher than the general REIT industry.

Now take a look at this chart…

This plots the one-year performances of the Dow Jones REIT index (black) and bellwether health care REIT HCP Inc (blue). HCP is the market’s largest, most diversified health care REIT. And it’s led the charge into laboratory space in biotech hot spots like San Francisco and San Diego.

HCP is up about 20%, including dividends, since I introduced Growth Stock Wire readers to the idea of collecting “health care rent checks” in July last year. And it’s up 9% since I revisited the opportunity in November, while the S&P is down 4%.
HCP is one of four health care REIT recommendations I’ve made to my paid subscribers. Including dividends, we’re up an average 22% in just one year. But with America’s 60+ club adding 8,000 new members daily, I think this is just the beginning.

Good investing,

Rob Fannon
Source:The Safest Way to Profit as the Boomers Retire

The world’s second-largest producer, Russia, is now experiencing a production decline. The Saudis can’t pump any more oil.

So forget hedge-fund speculation and the value of the dollar, that’s what it really comes down to.

And it’s why one German political party’s answer to the high oil price is, frankly, utterly absurd…

Why oil futures are vital to the world economy

Uwe Beckmeyer, transport chief for the country’s Social Democrat Party, has told the German press that his party would call for joint measures by the G8 powers to prohibit leveraged trading on energy contracts. “It’s an extreme step but it has to be done,” he said.

No it doesn’t, my friend.

So, let’s get this clear: One of the major German political parties wants to ban the futures markets in oil and related products as a way to curb prices. It is an utterly stupid and inept way of dealing with inflation and it will end up causing crises in many industries across the globe.

Imagine if airlines weren’t able to hedge their exposure to rising energy costs… any up-tick in energy prices would create a wave of bankruptcies across the sector.

Then there are the farmers. If they do not know how much they will receive for their crops, it makes it impossible to plan properly. After all, isn’t this why futures were derived in the first place?

Futures are not a high-risk investment strategy for manipulative mega-rich bankers. They are a way of REDUCING risk for people operating in the business. Ban futures trading and market risk actually increases.

It is a vital market that keeps the cogs of the global economy turning in a well-oiled and efficient manner. It also improves price transparency going forward, allowing businesses and farmers to effectively plan their finances.

It is clear that these proposals come from people who do not understand the futures market or what it is for.

Of course it’s not just the Germans acting dumb, the Indians and Americans have got in on the act as well.

India bans potato futures

The Indian government has already suspended futures trading in potatoes, chickpeas, rubber and soybean oil in an attempt to combat food inflation.

The move was derided by anyone with any sense. Not only did the ban cover four foodstuffs that made up just 1% of the country’s inflation index, but the price of potatoes has actually FALLEN 27% this year. The move defies logic on so many levels.

Even in that bastion of the free markets, the USA, politicians want to interfere.

Democratic Representative John B Larson has asked Congress to pass legislation which would prevent speculation within the sector from those who do not intend to acquire the commodities on which they bid. He argues that it is speculation that is driving the oil price, while completely ignoring supply issues.

The amount of speculation in the oil price is an unknown, but one thing is very clear…

Oil supply is extremely tight

Over the weekend, Lloyd’s Marine Intelligence reported that Opec oil shipments had fallen by 1m barrels a day in the four-week period to 4 May. Another oil pipeline in Nigeria was also blown up and a Norwegian oil rig operating in the North Sea was shut down after a leak was discovered.

What the Germans, the Americans and the Indians have to remember is that you cannot tell farmers or businesses what to sell and whom to sell to. That is a Stalinist way of running an economy that puts businesses in a straightjacket.

The derivatives markets also play a proper and important role in signalling the need to expand investment in production capacity. Vitally, it provides liquidity to hedgers.

Banning futures trading is a knee-jerk reactionary move by dumb politicians wanting to grab a headline. It is not the way to make markets work efficiently and the G8 should dismiss any proposals tabled.

I would be astonished if the US proposals were passed into law – it is just so “un-American”. Banning futures trading is an utterly preposterous idea. The only way that any limits on futures trading should be considered is when speculation becomes manipulation. This is certainly not the case at the moment.

Regards,

Garry White
Editor
Smart Commodities UK

Source: Why a Ban on Oil Futures And Speculation Will Devastate the Markets

The fact is that ever-rising energy costs will alter American driving and dietary habits with no government intervention at all. $7 gasoline (or $12, now that Robert Hirsch of Hirsch Report fame has repeated Charlie Maxwell’s $12 forecast on CNBC) will make the 40-mile one-way commute unsustainable. And to some degree, we already see this reflected on a nationwide map of foreclosures, county-by-county, as put out by RealtyTrac.

In the places where foreclosures are highest, writes Wall Street Journal columnist Holman Jenkins (yes, I know I excoriated him a few weeks ago, but this most recent column isn’t half-bad)…

…Many of these homebuyers are underwater not just
because they bought more house than their incomes could support, and
not just because prices are falling. They were also betting on commute
patterns and demographic expectations that are proving invalid.

These were bets on location, location, location –
premised on the idea that people would be willing to live hours from
anywhere for a chance to own a single-family home they could actually
afford. No federally sponsored haircut can put these housing bets back
in the money, or stop these houses from coming back on the market at
distress prices.

And the reason for that, although Jenkins doesn’t say so, is that rising fuel costs are making the exurban lifestyle increasingly unsustainable.

So let’s examine the map as Jenkins did. The worst of the bleeding is in an arc reaching from Sacramento to Vegas to Phoenix, plus a goodly chunk of South and Southwest Florida, plus the tier of counties just east of I-25 in Colorado.

Now Florida’s a peculiar case; so much of the malinvestment there went into second/vacation homes. But that big Western arc sure looks like an unconscious bet that car culture would last forever. And it’s especially true of those Colorado counties — cheap land on the plains east of the Front Range, where housing was more affordable than in Denver or Aurora or even Fort Collins. It was a wonderful thing — as long as gas stayed under $2.50 a gallon.

Looking at the lighter shade of bleeding reveals more problem exurban areas — like the region 40-50 miles southwest of Chicago, including Kendall County, home to 77% population growth between 2000 and 2007, highest in the nation. Much of the state of Ohio is in the pink as well, including the I-71 corridor where new arrivals made long-distance commutes to Cincinnati and Columbus de rigeur during this decade. The parts of Florida that aren’t in the red are mostly in the pink, including the I-4 corridor that would likewise be unsustainable without cheap gas. (Can’t afford Tampa or Orlando? Move to Lakeland or Winter Haven and commute. Seemed like a good idea at the time…)

I don’t necessarily buy into all of James Howard Kunstler’s near-apocalyptic predictions about what’s in store during the Peak Oil era. But the map tells one part of the story that’s undoubtedly true: there’s a whole lot of fairly new housing stock out there, 40 or 50 miles from major cities, that’s being steadily abandoned… and may never be occupied again.

Source: An Ominous Map

Also, welcome back 6,000. Won’t you stay awhile this time? There were quite a few new 52-week highs set last week, including BHP Billiton, Coal and Allied, Oil Search, Fleix Resources, Macarthur Coal, Australian Worldwide Exploration, Western Areas, and Steamships Trading Company.

Do you notice a trend there?

The All Ordinaries finished last week at 6,006. That’s a 16% rally from the March 18th lowly low of 5,163. It erases most of the 20% year-to-date deficit. But it’s still down 12% from last year’s all-time high at 6,835 (on November 1st) and 6.46% for the year.

Does the index even matter? If you own a share portfolio that passively tracks the performance of the All Ords, we suppose it does. But you have to wonder if the All Ords are doomed to indirection, like Siamese twins trying to run in opposite directions at the same time. For investors, maybe the smartest thing to do is cut them apart and let them go their own way.

By “them” we mean the resource, energy, and basic material stocks in the one camp, and the consumer discretionary, listed property trusts, and financial stocks in the other camp. The energy sector is up on the year by nearly 20%. Materials are up about 14%. Meanwhile, consumer discretionary stocks are down by 26%, financials down by 17.4%, and listed property trusts (now called A-REITS) down 19.4%. Industrials are down 17.3% as well.

You don’t need to be DaVinci to decode this performance do you? Resource and energy producers are up with higher oil and bulk commodity prices (and probably some hot foreign money). Financials are down as investors wonder how banks will grow earnings in 2008. The consumer discretionary sector is the market shrieking in horror at the effect of all the interest rate rises on the Aussie consumer (not to mention food and fuel inflation).

The two sectors with the most questions are the A-REITS and industrials. Bottom-fishing contrarians would be attracted by the dismal performance of each. But let’s not forget the two big issues that hover over the property market: valuations and leverage. If property prices slump or simply grow less fast, this hurts the A-REITs. And leverage? You’ve seen what happens when it works in reverse.

The industrials—more than any other sector—show us the effects of rising energy costs in the real economy. These companies are unable to pass on the rising costs to customers. Margins are crunched. A fall in the oil price that lasted for a quarter or so might lead to a nice recovery in these stocks—or at least a tradeable move.

“Hey Gabriel?”

“Oui?”

“If you had to make one long and one short trade on ASX sectors today, what would they be?”

“May I have a moment to look at the charts?”

“Bien sur.”

After a few moments, he replied.

“ LONG on the Industrials sector. The Index has lost 32% between November and March, found a good support and rebounded on the previous low that was posted before the strong rise between August and November 2007. Here’s the chart:

“The decrease of 32% occurred in a bearish channel. The price action cleared this channel on the upside recently, which argues for a further momentum up. The 14-day RSI is well-oriented, therefore more upside to come before a potential overbought situation. 5,650 pts then 6,000 pts the next targets (23.6% and 38.2% retracement levels).

And short?

“The Utilities sector. The Index has rebounded 23% in 2 months, now the momentum is slowing and a few indicators argue for a shift in the price action in the near-term. Look at the chart.”

Starbucks, the coffee house chain, on Wednesday blamed a “sharp weakening” in the consumer economy for an unexpected decline in its US sales, sending its shares plunging more than 10 per cent in after-hours trading.

Howard Schultz, who returned to the role of chief executive in January, said “the current economic environment is the weakest in our company’s history”, citing the housing slump and rising energy and food costs.

The company’s history goes back to 1971, the year Bretton Woods fell apart and Nixon closed the gold window. So for Schultz, things are worse now than the double-dip recession in the early 80s, the worst of the postwar era. Grim stuff indeed for a company whose entire business model is built on an “affordable luxury.”On the subject of historical comparisons, Robert Shiller — he of the Case/Shiller home price index — is going all the way back to the Great Depression, when housing prices dropped 30%. He says an even bigger drop is possible now (with prices having already fallen 15% in his estimation).

Home prices rose about 85% from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Mr. Shiller said. “Basically we’re in uncharted territory,” he said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.” Many people became convinced that housing prices would increase 10% annually, a notion Mr. Shiller called crazy.

And there’s another property time-bomb looming. In fact, it’s one of five “super shocks” about to hit the U.S. economy and stock market in the very near future. For a seven-part defense strategy, check out this special report.