This Little Red Splotch Just Cost Investors Millions...

“I sold a third of my holdings today,” a young entrepreneur told me over drinks last night in downtown Santa Monica. “I just don’t feel comfortable with the markets right now.”

I didn’t have the heart to tell him that the major averages we ripping to new highs. In fact, I listened patiently to his concerns about the economy, politics and valuations.

As our conversation came to a close, I didn’t give my new friend a hard time. I simply told him that sometimes our gut—not to mention the mainstream financial media—has a tendency to push us into rash decisions when it comes to our money.

In fairness, this guy was no dummy. He’s building a business from the ground up. He has extra money that he’s investing for his future. And even though he feels uneasy about our current market conditions, he still has two-thirds of his portfolio in stocks. For someone who spends his time concentrating on making his startup a success, that’s not a bad start.

Oh, and my friend might be onto something when it comes to his concerns about the new administration transitioning to power…

These Stocks Just Got Trumped

The market is in the holiday spirit. All of the major averages blasted higher on Wednesday. We’re posting new all-times…again. Making bank is exhausting!

But there’s one group of stocks that have zero Christmas spirit. Take a look at this heat map of the S&P 500 and try to figure out what group I’m talking about:

healthcare

Unless you’re colorblind, you should have no trouble Identifying that patch of red on the right hand side of the heat map. That’s the health care sector. And it just caught a nasty cast of the Trump Mumps.

“Trump put the entire drug industry on notice on Wednesday in an interview with Time,” CNN Money explains. “’I’m going to bring down drug prices,’ the president-elect told the magazine, which named him its Person of the Year.”

Ouch.

Hillary Clinton (remember her?) took a big bite out of biotech stocks during the Mylan (NASDAQ:MYL) EpiPen pricing scandal. You’ll recall that EpiPens are used to combat life-threatening allergic reactions. And you probably also remember that some folks think EpiPens are too expensive—and the company had gradually raised the price for years.

Hillary was quick to jump on the outrage bandwagon. The campaign issued a statement back in August calling  the EpiPen price hikes outrageous. Clinton is also called on the company to “immediately reduce the price of EpiPens”.

Now Donald wants in on the action. And health care stocks (specifically biotechs) were just beginning to look constructive again. Bummer.

We have no idea if the president elect will stick to his word on the drug pricing front. But right now, investors have decided to stay away. We’ll do the same until the market tells us otherwise…

If You Aren’t Paranoid, You Aren’t Paying Attention
Only the paranoid survive…

This is the message a cyber security expert delivered to a small group of CEOs and investors late last night.

There are thousands of virtual pickpockets in the world—and they’re using computers to get your money.

Between 2013 and 2015, the world lost $1.2 billion to hackers. That’s a lot of dough. And it’s only going to get worse…

The worst part is—the industry insiders I met with explained that when a company gets hit with ransomware or a data breach, they typically don’t get all of their money back. Once it’s stolen, it’s gone.

Scary stuff— and yet another reason we’re bullish on the cyber security industry.

But I have no doubt that these stocks will march higher in the long run. Cyber security will become one of the most lucrative plays of the decade. We’ve told you before that cyber security is set to become a $200 billion industry in just five years. That’s absolutely massive.

Cyber security names haven’t been setting the world on fire lately. For now, we’re content to watch these stocks continue to build a base. All it will take is a little positive news to get the industry moving in the right direction again…

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning