Health Care, Google and Greece
Apologies for a cursory blog. I’ve been very busy with work this week. Lots of market moving news coming in the following days.
So it looks like there will be some big events unfolding in the following week. Barring any major defections from the Democrats, it looks as though the revised Health Care plan will pass this Sunday evening. There are articles pointing to higher Medicare payroll taxes for high income earners through their investment income as the primary means to fund the plan. While this may cause an initial sell off in the markets, I believe that making health care more affordable is a net positive as it allows lower income households to have more discretionary income. There may be companies which develop medical technologies that will benefit from government spending. eResearch Technology [ERES], a firm that primarily specializes in technologies which analyze cardiac related medical data is one such company that comes to mind.
Google [GOOG] is leaving China. It’s a bold move for them and I applaud their convictions. Google is fortunate in that it is profitable enough that it may choose to leave China’s growing internet user market. I’m sure there will be a lot of case studies about their departure, but three of my reasons (in no particular order of importance) why Google had difficulty in China are:
- Baidu [BIDU] enjoyed competitive advantages over Google. Yes, both search engines were subject to censorship over political and news materials. However, did you know that if you’re in China, you can easily lookup and download MP3s and videos via Baidu, but can’t do so with Google?
- China’s users rallied to support Baidu because it became a thing of national pride. There are still hints of pain from the Boxer rebellion and other clashes with foreign nations which linger with some Chinese.
- Google’s simplistic interface that appeals to Americans does not have the same positive response with China’s users. If you look at www.google.cn you can see that there is a little bit more functionality on their page. Yahoo China remains popular. If you look at their site, it is very busy with lots of images and links. The same with Sina.
Is there still an opportunity to buy Baidu at these levels? The stock has already run up 47% since Google initially mentioned the possibility of leaving China. I think there’s still room to run, but expect some pullback next week due to profit taking and concerns with higher taxes and Greece.
Finally, regarding Greece, it appears to be a game of chicken right now between Greece and some of the more stable EU countries like Germany. Greece needs a bailout and appears to be seeking aid from the IMF as a way to pressure other EU countries to help bail them out instead. In the end, I believe the EU countries will step up to assist Greece in order to protect the Euro currency. With all this bailout uncertainty, look for Gold to continue rallying and ETFs like GLD and DGP may gain momentum these next few weeks. I would advise the less volatile GLD over DGP.
