The Compound and Friends
01:01:09 · Josh Brown, Daniel Clifton
[01:01:09] S2: Yeah. [01:01:09] S1: Okay. So we came in and we were bullish on health care, bullish on staples, which seemed insane in January. And it's all working exactly the way we thought it would work. [01:01:18] S2: Yeah. [01:01:18] S1: Okay? Now, when the Democrats come in, they want to do something called an increase in the National Institute of Health budget. It sounds stupid, right? Like, oh, whatever that means. Tick for tick, every dollar that goes out of NIH goes right in the life science tools earnings, okay? And the health care analysts are [01:01:35] S2: like, no, they're diversified. Thermo Fisher, Thermo Fisher, Agilent. All times. [01:01:40] S1: Agilent. Illumina, they just had bad earnings. But man, the stock's just been on fire. Yeah. So you look at this. Right? Like, my my colleague, Chris McGrath, every day, the federal government releases what they spend money on, every line item, and he matches it up to stocks. He can do retail sales proxy with this stuff. It's amazing. And it's tick for tick on life science tools. Then you throw in that AI is going to help with drug discovery. That's a direct beneficiary for these companies. [01:02:06] S2: Yeah. [01:02:06] S1: Okay? There's If they can get the compute. Right. So if you now you need the compute. Exactly. So now you have the Democrats winning. That's their ask. K? Their second ask is that they don't want the OBB Medicaid cuts to come in. K? These stocks didn't respond all election cycle. Centene, Molina, HEA, THC. These things are going nuts. Right? So it was up 12% the day after
01:02:06 · Daniel Clifton, Josh Brown
[01:02:06] S1: Okay? There's If they can get the compute. Right. So if you now you need the compute. Exactly. So now you have the Democrats winning. That's their ask. K? Their second ask is that they don't want the OBB Medicaid cuts to come in. K? These stocks didn't respond all election cycle. Centene, Molina, HEA, THC. These things are going nuts. Right? So it was up 12% the day after [01:02:31] S2: So the intermediaries that the government pays Pays. To deliver services to people. [01:02:36] S1: But what we didn't know on election day was that the Texas legislature was going to flip. Now that's a non Medicaid expansion state, which did the Obamacare Medicaid. If you... That's the largest segment of Medicaid expansion of any state. It hasn't done it. And if that governor does it, you've just increased the market share of [01:02:57] S2: So, all these your House view remains bullish on a lot of these areas of health care. Not indiscriminately, but like... Okay. [01:03:04] S1: Now, as you go into year three of the presidential cycle, health care is not that great. By the way, the worst sector for stocks in year three of a presidential term is tech, which is quite interesting given everything that else is going on. But we love the healthcare story right now. But I would just caution, and I think this is very important for your listeners to understand. Josh, listen up. The Democrats are going to come in and make healthcare their number one priority. It has been no part of this campaign. [01:03:35] S2: But what does that mean? What do want to do with it?
01:03:35 · Josh Brown, Daniel Clifton
[01:03:35] S2: But what does that mean? What do want to do with it? [01:03:37] S1: There's going to be two tracks. The first track is ambition. The ambition is what do we want [01:03:43] S2: to do? Well, national We're health going [01:03:46] S1: to tell people where we want to go in 2028, and it's going to have like 50 drug cram downs a year. They're going to get rid of orphan drug exclusion on drug price cram down. And all the generalists are all in this large cap pharma biotech trade, just as you said. And all of a sudden, this bill comes out and will be reported in The Wall Street Journal around Thanksgiving that we're going to do all this massive price control on drugs and people are going to freak out. It will never become law. But what happens with that bill is that the Democrats pull pieces of it and they're going to say to the president, Hey, we'll give you your money for the Iran war. But in exchange, we need these health care changes. We need these renewable energy changes, and it creates a deal. And so my guess is that you're... You might wind up doing something six months down the road on Medicaid. [01:04:31] S2: Like health care, but not necessarily all pharma because some of these pharma names are going to lose 20% of their value.
01:04:31 · Josh Brown, Daniel Clifton
[01:04:31] S2: Like health care, but not necessarily all pharma because some of these pharma names are going to lose 20% of their value. [01:04:37] S1: Yeah, I wouldn't say 20%. Think there's headline risk, and I just try and manage what's going to be in the headlines three months from now so that my clients are aware when they're making these investments. What will happen is the big pharma companies, Pfizer, Bristol Myers, Eli Lilly, they'll go into Washington. They'll lobby, and they'll say, Why don't you do it on Medicaid, which is a smaller portion? And then what you do is you start isolating out Gilead, which has a high AIDS Medicaid population, or Vertex, which is my favorite healthcare company in the world, and say, Oh, well, if we dig global prices on Medicaid, their cystic fibrosis drug is a lot less. [01:05:12] S2: You would think Trump would want to get behind that message. Why does The United States pay 10 times the amount that somebody in another country pays for the same drug? [01:05:20] S1: So we're so focused on data centers. Isn't that America first? Right? But this is it. He wants to do something on drugs. And so the Democrats want to do 50 cram downs. That's probably too much. Trump will want to do this Medicaid. Elizabeth Warren will want to do this Medicaid. And in six months from now, we'll probably end up with a global price on Medicaid drugs. It's very small. If you did Medicare, it's much bigger, and it hits the big pharma companies.
01:05:43 · Josh Brown
[01:05:43] S2: One more thing I want to do with you. So this is not to pass judgment on any particular party. Yeah. There's corruption. Corruption is... I read books about ancient Rome and Cicero dealing with Pompey and Julius Caesar. Like, this stuff goes back thousands of years. It'll never change. Never. However, one of the things that was most remarkable about the outcome in the election that we just had, people seem to really be pissed off about government corruption. I've been very cynical about this since the elect... Since the last election. I basically said, alright. So now we know these guys are gonna take whatever they could take, and everyone's just gonna live with it. They're not living with it. Put this chart 23. This is bipartisan. Which one of these two are the most important Yep. Issues facing the country right now? The people who responded... This is CNBC All America Economic Survey. 36% of respondents named government corruption as one of their two top issues, and that came at... That's number one. That's above the cost of food and groceries. That's above the price of gas. That's above immigration and border security, meaning a third of the people listed corruption. Now they might mean, oh, we don't like the Democrats who are trading stocks. Like, I don't know what they mean. Yep. But what do you think is, like, the legacy of this election? Are we gonna get serious about enough with the enough with the the congressional hedge fund shit? Is this gonna extend into, like, the gambling stocks Yeah. Which have been fueling the whole podcast economy? Yep. Like, what do you what do you think is gonna change as a result of this?
01:07:33 · Daniel Clifton, Josh Brown, Michael Batnick
[01:07:33] S1: So I think there's multiparts to answer your question. The first is I travel all over the country. I do one hundred and forty days on the road. [01:07:39] S2: So, you knew that people felt this way? [01:07:41] S1: Oh, but this is the key. This is Northwest Iowa, plus 15 Republican district. You go to Des Moines, you go to Cedar Rapids, there gasoline, groceries, fertilizer, data centers. You go to Northwest Iowa, and it's Don Jr. Crypto deals. Yeah. Okay? It's all the stuff that you see in the news about congressional trading and things like that. [01:08:06] S2: Oil deals, prediction market. They just they look at this from Iowa. They must be like, what? Are there even laws? Yes. [01:08:12] S0: Right. [01:08:13] S1: And by the way, it's all over the country. I walked out of Iowa. By the way, I've been doing this for thirty years. I walked out of Iowa in June, and I was... One trip, and I was like, we're gonna build fewer data centers, and the Republicans are gonna lose the Senate because you see... When you travel, you see what people are talking about. I literally make people tell me what's on their mind. Byron Wein taught me that. Always make people tell you what's on their mind because that's how you learn. [01:08:37] S2: It's a huge blind spot for me because I just figured people... Everyone knows what's going on. Yeah. And they're just like, I don't care as long as the border is secure. Yeah. But it's not true.