THE INVESTMENT STRATEGY LETTER

JUST ANOTHER DAY OF ALL-TIME NEW HIGHS
Another dull day, and yet the market made all-time highs once again.The DAX was up 1.6%, China down 1.1% and Japan recovered almost all of his 3% loss from yesterday. Apparently, markets were boosted by the healthcare sector. The New York Times reported that the Affordable Care Act has evolved into a powerfully mutual beneficial partnership and has led to a profitable increase in enrollment.At the same time health care cost are decreasing. United Healthcare group even helped the administration repair the government website. Insurers and the government have developed a symbiotic relationship, nurtured by tens of billions of dollars that flow to the medical insurance industry. Just think of how more successful Obama Care could be if the Southern states and various other Republican dominated states, had joined the union.
Because stocks are surging corporations are ambitious. Also debt is reasonably cheap. The result is that mergers and acquisition transactions are being booked at about $1.5 trillion, so far this year. This is the largest amount of mergers and acquisitions since the year 2000 during the.com bubble and in 2008 just before the financial crisis. The other thing that corporations are doing, is buying back their own stock, as treasury stock. Corporations are doing everything they can to spend their money on anything except creating new employment. This kind of exuberance for mergers and acquisitions, is usually unsustainable.
Just as a side note, China’s inflated and highly leveraged Real Estate prices are beginning to fall.

Carl M. Birkelbach 11/18/14

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