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Published: February 22, 2010
"There has never been," President Obama
proclaimed this week, "a program of this scale, moved at this
speed, that has been enacted as effectively and as transparently
as the recovery act."
This is Mr. Obama's assessment of his $787 billion stimulus
package, which marked its first anniversary this week. The
President trumpeted it as a resounding success.
Republicans, for their part, variously counter that the whole
thing has been a boondoggle, an albatross or a fleecing.
I don't know which side you come down on. But whether you agree
with the stimulus or not, the fact of the matter is this:
You ain't seen nothing yet.
Fact: Most of the stimulus money hasn't been spent.
Fully two-thirds, in fact, is still waiting to be deployed.
About $20 billion allocated for digital medical records is about
to be unleashed. Another $4.5 billion in funds is about to go
gushing into the nation's electricity grid to update that
sector. The lion's share of this year's allocations, as much as
$180 billion will go to infrastructure projects and absolutely
deluge contractors with cash.
I mean, they're going to need to build another Hoover dam to
capture that Mighty Colorado of Cash.
In all, Washington's stimulus spending is expected to reach the
$300 billion range in the next year.
That's twice the gross domestic product of
Chile.
It's enough cabbage to buy a snazzy new iPad for every household
in the United States -- as well to purchase Apple itself
outright.
$300 billion is a phenomenal sum of money, a number one would
expect in an astronomy lecture to describe distance, not in an
economic text about a single government program.
What does it mean for investors? See above. As in: "Cash, Mighty
Colorado Of"
Here's the thing: Every dollar of that public money will
generate a private profit. That is an immutable law of the
economics of government spending. If every dollar of Mr. Obama's
spending were to go to a smart, profitable company like Cisco
Systems (Nasdaq: CSCO) -- and many of those dollars will go
to such companies -- it would add $60 billion to its bottom
line. That's great for business.
And boy oh boy is it going to be great for shareholders.
Just to be clear: When I said many of those dollars will go to
such companies, I meant in the direct sense. Indirectly, ALL of
those dollars will go to industry, as Americans spend the tax
cut dollars contained in the stimulus.
In the inaugural issue of
Government-Driven Investing last May, I made the case
for four companies that I predicted were likely to benefit in
the long term from Mr. Obama's medical-records initiative.
Since then, none of those picks has lost a dime and three of
them have resoundingly beaten the S&P 500 Index. And that was
before the actual money supporting the digital medical records
program has even been spent.
When hospitals, clinics, doctor's offices, diagnostic centers
and other medical companies begin to embrace digital medical
records in earnest, there's no limit to this sector's earning
power. It creates an entire new industry. It will mean massive
revenue streams for the companies that can provide the
technology. It will mean thousands of good-paying jobs.
As I wrote then: "It will be a massive undertaking … a mere 8%
of the nation's 5,000 hospitals and only 17% of its 800,000
doctors use digital records, according to the prestigious New
England Journal of Medicine. Mr. Obama has promised about $20
billion in federal spending to spark the transition; studies
suggest the plan will cost between $75 billion and $100 billion.
Dr. David Brailer, a former national coordinator for health
information technology who worked for President Bush from 2004
to 2006, said the system could save $200 billion per year."
Mr. Obama did not find success with his plan to change the
nation's health care system, but his push for digital records
could afford him a chance to salvage a win that would modernize
the delivery of medicine, streamline its efficiency and
ultimately save scores of billions in costs.
That's all well and good -- for patients, sure, but also for
shareholders of the companies I recommended, who are going to
see $20 billion stream into the industry this year.
The big winner so far has been QuadraMed (Nasdaq: QDHC),
an outstanding, innovative little company that has been the
brains behind the best digital medical records initiative in
history: The Veterans Administration's VistA system. This
software grants doctors access to our nation's servicemen and
women's medical records at any VA medical center.
QuadraMed has returned +38.6% since I added to the
Government-Driven Investing Portfolio, nearly 20 percentage
points more than the broader market. And, like the stimulus
itself, this exciting company is just getting warmed up!
And health care is only one area of the stimulus plan -- a
relatively small one. There are literally dozens of other
industries that will be affected by the enormous outlay of
stimulus money that Washington will make this year.
Remember: We're talking $300 billion. Think about it: Three
hundred billion U.S. dollars.
These forthcoming government actions by the largest financial
force on the planet, if leveraged by individual investors, have
the possibility to continue to deliver outsized returns.
Interested in how your portfolio can exploit them?
Click here.
-- Andy Obermueller
Chief Investment Strategist
Government-Driven Investing |
