Pennsylvania Investment Observer

The Excitement Factor

by Daniel J. Nestlerode

The investment markets are trudging through a period of malaise with gurus and financial commentators lined up on all sides of the question, "where do stocks go from here?" The markets are fraught with volatility as disappointing earning cause stock prices to plunge (as investors flee these issues) and others fail to rise because just exceeding analysts expectations is not enough any more to get investors to commit their excess cash. If you follow stocks carefully, you can't help but be affected by the somber mood of the markets and the dire combative issues that are facing the civilized nations in a world populated by a group of constantly dissatisfied terrorists. I suspect that many people are turning off the television and radio and ignoring the investment markets to avoid the daily barrage of negative news and declining investment markets.

I noticed that I too had been caught up in the mood of the times where most of the electorate is dissatisfied with the status quo and yet doesn't have any better alternative. As Scrooge said in one of Dickens' novels, "bah humbug". This is not why I got into the investment business and why I am committed to finding ways to grow those accounts that have entrusted me with their money. So, I stepped back from the day to day battles in the world (and Wall Street) and ready Andy Kessler's new book, "The End of Medicine". Andy is a best selling author of books on investing and a hedge fund manager (before he retired) who turned in a ten fold profit for his clients. He knows something about making money.

The practice of medicine as we know it is nearly broken. Fifteen percent of the gross domestic product (GDP) is spent on dealing with illness and disease, especially the big three; strokes, heart disease and cancer. We spend billions of dollars treating these diseases as chronic and critical illnesses, yet we spend very little on the prevention of these issues. Our health care system is designed to treat illness, not avoid it. Nearly every disease is most easily (and cheaply in term of time, money and patient discomfort) treated in its most early stages. Yet, few payers (insurance companies and the government) reimburse patients for preventative medicine. They are happy to pay for those who are diagnosed with some dire affliction, but precious little goes into avoiding such situations. Drug companies spend billions developing drugs and treatments for those diagnosed with critical problems, probably because that is where the money is. Historically, we didn't have much hope of effectively employing an early detection model for most diseases.

That is now changing (and this is where I get excited) as technologically improved scanning and detection methods are beginning to enter the markets. We have cracked the human genome, which was of some help dealing with genetically caused diseases. We are designing and building much better scanning equipment that will allow sonographers and radiologists (think CT, MRI and PET scans and sonograms) to see smaller and smaller groups of cells in very specific places and to monitor bodily processes such as blood flow or the lack of it. The non symptomatic diagnosis practice is just beginning to take hold in medicine as we routinely do colonoscopies (looking for colon cancer and its precursors). We are beginning to scan it, scope it and test for it, long before we can feel the effects of a full blown bout of some disease. We are even dealing with the bird flu long before it becomes (or might become) a world wide pandemic. We are moving to get ahead of the problem, rather than treating its aftermath.

As a guy with a 63 year old body, that is all great stuff. I really appreciate all that is being done to make life longer, healthier, more productive and even happier. As an investment advisor, I am looking for the investment opportunities presented by the shift of medicine from treating major diseases to avoiding major diseases altogether. This I can get excited about, because it allows me to open a conversation that can lead to significant profits for my clients (and of course, my company and associates because we manage money). Who will financially benefit and who will be hurt by this shift in medicine? Will we put off retirement longer because we are healthier and more able to work? Will we play harder as we age? What changes will happen as cancer, heart disease and strokes become the footnotes of history and not concerns of the present? The shift in medicine opens a lot of great questions about how we will look as a society in the next twenty years. In the shifts of medical and societal practices lie enormous investment opportunities. Now I remember why I get up in the morning!

I've had a number of resounding investment successes in my forty-one years on Wall Street, as well as some real duds. There are new possibilities coming right around the corner, as technology is employed in preventative medicine. My job is to manage my mood so that I can find these opportunities and make the appropriate investments for some ten baggers (stocks that climb ten times in value). It isn't easy, but it is exciting. Not only that but it allows the possibility that my clients will be able to live a financially better life.

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