Jeffrey Saut: Random gleanings at 38,000 feet

Jeffrey Saut: Random gleanings at 38,000 feet




by Jeffrey Saut, Chief Investment Strategist, Raymond James

The past eight weeks have been a blur. We have been in Vancouver, Victoria, Alaska, Boston, South Africa (Zulu Nyala, Cape Town, Umhlanga, Stellenbosch, Franschhoek, Jeffreys Bay, Durban, Wilderness, etc.), Boston (again), and New York City. Reflecting on the months of travel as we wing our way back to Tampa at 38,000 feet, one of the more interesting encounters in those travels was spending time with Steve Forbes (Forbes Magazine). Although Steve is a staunch Republican, he suggested that Republicans worship at the altar of the CBO (Congressional Budget Office). Scoffing, he stated it is ridiculous for ANY government agency to attempt to predict what is going to happen over the next 10 years. Continuing, Steve theorized the Republicans believed that repealing Obamacare would raise enough money to give them more room for tax cuts. However, they lost the public relations battle because the CBO wrongly predicted 22 million people would be thrown off of the health care rolls with such a repeal. He said the CBO starts with the false premise 15 million folks would not pay for healthcare if there was not a mandate and that 5 million would be shoved off of Medicaid. A few more of his random thoughts included: the White House had no clear message in the healthcare debate, there are no real free markets in healthcare, under the current system it does not create an environment to foster medical breakthroughs, and he proposed the following:

1) Have flexibility on Medicaid.
2) There should be a nationwide shopping system for healthcare.
3) Level the playing field on taxes for healthcare.
4) There should be transparency on pricing by hospitals.
5) Have flexibility on healthcare insurance.

To point number four Steve mentioned that in comparing pricing for the same test at various hospitals showed the price varied from $1,400 to $7,300!

Moving on to taxes, he noted the White House, having botched the healthcare debate, will now move on to taxes, but will they really get tax reform? His answer was YES, but first you have to ignore the CBO guidance. Yet the window for big tax reform has passed because too much time was wasted on the healthcare “thing.” What should be done is to cut corporate tax rates, accelerate depreciation, and immediately give taxpayers a “double exemption” (puts an extra $1,400 into their pockets), cut individual tax rates, and make all of that retroactive.

Finally the conversation turned toward “regulations.” Steve averred that unnecessary regulations cost the economy $2 trillion a year and there are 15 bills currently in the House of Representatives to reduce said regulations. Moreover, we should scale back the EPA, FDA, and FAA. In conclusion he opined that regulations would not have prevented the 2008 debacle and the subsequently imposed regulations have prevented the banks from lending somewhere between $1.5 trillion and $2 trillion dollars that typically would have been lent.

We enjoyed spending a few days with Steve Forbes and hope to so again in the not too distant future.

We had another interesting meeting while in Boston with Arvind Navaratnam, portfolio manager of the Fidelity Advisor Event Driven Opportunity Fund (FMRMX/$13.76). We began by asking Arvind why there was a picture of a Boeing B-17 Flying Fortress in his presentation. He replied, “Because that airplane prompted the first “check list” for an aircraft. I like this story as scribed in Wikipedia:

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