Trump’s first budget was unveiled this week and in its wake left much to dislike. The talking heads are parsing the details and if enacted as is (which is certainly debatable) will result in probably the largest transfer of wealth between classes that I have ever seen. The obvious campaign promises (wall, security, etc.), the social welfare programs (which are garnering the headlines) and calculation errors (double counting on both sides of the ledger) will be the news. But as I prefer the more obscure, my questions are more aligned to the question of impact on investments. To this end, my focus is on two areas – farmland and healthcare REITs.
Back in 2010 the conservative movement took hold, united in their efforts to ensure Obama was not re-elected to a second term. One of their slogans was Are You a Producer Or A Parasite. Subsequently it was revealed that at least one individual was a recipient of government Farm Subsidies to the tune of $1 million. In a twist on the saying Be Careful What You Ask For, Republicans now control government and the Trump budget slashes subsidies provided to some of his ardent supporters (farmers). I’m keeping an eye on Farm Reits and Midwest banks (like FMBI) with this development.
Health Care REITs
I see this group as facing headwinds on two fronts, interest rates and reduced reimbursements. As long as rate increases are gradual these will be manageable. The real issue is the $800B in Medicaid cuts for FY 2018. These cuts, along with Obamacare repeal (per the CBO) will result in an increase of some 20 million souls in the ranks of the uninsured. Add to this the premium increases for Medicare (affordability issues) and the assumptions of CCP (for one) become suspect. Their recent presentation presumes increasing funding for both programs. To what degree is the question.
All this could change but events appear to be potentially ominous for some investors. Over the holiday, I’ll attempt to find some additional nuggets in the proposed budget.
Have a good, long weekend.