Mercantilism is often associated with Donald Trump's economic policies. Can reaching back into the past truly make America great again? That is up for debate.

 

For those few of us familiar with the term, mercantilism was the dominant economic system in Europe from the 16th to the 18th centuries. It was a world where it was believed that global wealth was fixed and finite. To become powerful, a nation needed to acquire as much wealth as possible. Back then, a nation's wealth was measured by how much gold and silver it accumulated.

 

If this period evokes visions of tall ships, the Spanish Main, and epic exchanges of cannon fire between Spanish galleys and English Sea Hawks, you wouldn't be far wrong. All nations strove to maximize their wealth by exporting more goods than they imported by any means possible. Those that could plundered far-flung lesser more undeveloped nations and carried back sugar, timber, cotton, cocoa, gold, minerals, and more.

 

It was a period where many European countries raced and fought to establish colonies. The extraction of raw materials fed a rapidly growing manufacturing system at home. The end products were then sold back to the colonies in exchange for precious metals and more commodities.

 

This resulted in a favorable trade balance under strict governmental control where sea-faring nations established protectionist policies such as tariffs, navigation acts, and quotas that limited imports while promoting domestic industries. It was a beggar-thy-neighbor approach to economic development. Exploiting others led to power at home, vast piles of gold and silver, continuous conflict among rival nations, and ultimately revolutions among colonies.    

 

Now that we have established the concept, fast forward to today. Is Trump truly a mercantilist in the traditional sense? Let's look at the tariff issue that occupies center stage and worries many economists. Trump argues that for decades various countries have taken advantage of America's goodwill in many areas from defense spending to trade balances. He has singled out China, Mexico, Canada, Japan, Germany, and others as targets of his tariff initiatives.

 

There is no question that these countries have been running sizable bilateral current account surpluses with the U.S. for decades. Many of his critics forget that Trump is certainly not the first president to have complained about this situation. In the 1960s, 1970s, and 1980s, Richard Nixon, Ronald Reagan, and John F. Kennedy were just a few of our leaders who attempted but failed to balance the terms of trade between us and other nations.

 

Given this background, one could argue that enough is enough and Trump's approach is long overdue. The question is whether it works in a mercantilist world where our trading partners can levy tariffs in response. Critics argue that a tit-for-tat response will only send global trade downward and the U.S. economy along with it.

 

That could happen but it is far more likely that our partners will settle for buying more of our imports and selling us less of their exports in exchange for a tariff break. It happened in round one of the Trump administration and could happen again. Next week, I look at how Trump's brand of mercantilism is far different than what came before him.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

More than 40 percent of Americans are now classified as obese while 75 percent of adults are either overweight or obese. A new group of drugs called GLP-1 receptor agonists have come on the scene to help in the battle to lose weight. Are they as good as we think?

 

You may have heard about them or some of their brand names like Zepbound, Wegovy, and Ozempic. The use of these drugs has exploded in popularity to the point where companies like Lilly and Novo Nordisk have had problems keeping up with demand. 

 

There is nothing magical about the science behind these drugs. GLP-1 mimics a protein naturally produced by our small intestines. The receptors for these medicines are located across the body. They help us lose weight because receptors in the gastrointestinal tract slow down and send signals to the brain that give us a sense of feeling full.

 

There are some side effects but nothing too serious for most patients. We are still learning how these medications impact the body. They are currently approved for treating diabetes, obesity, and those with a history of cardiovascular disease in people who are overweight. There are a few drawbacks to these drugs at present.

 

Typically, GLP-1 agonists are administered as injections in the abdomen, upper arms, outer thighs, or upper buttocks via a syringe and needle or a pre-filled dosing pen. The shots are generally taken once a day or once a week.

 

For many, this is a big turn-off. Fortunately, you will be able to take tablets soon. The typical weight loss is from 5-15 percent of body weight over at least 12 months. But GLP-1 is no quick fix. Like exercise, you must stick with it. If you stop taking it, most people regain the weight they lost. And you can't expect to magically lose weight while you continue to eat all that junk food you get.

 

The second drawback is the expense. These medications' list price is around $1,000 to $1,400 a month. Without insurance, we are talking $12,000-plus per year for these drugs. Many insurance plans cover some portion of GLP-1 costs, but the extent of coverage can vary significantly. 

 

You probably are wondering whether Medicare covers GLP-1 medications. They do for certain medically accepted indications such as heart attack or cardiovascular disease but not for weight management. To qualify, you must have a BMI of 30 or higher, or 27 or higher with comorbidities like high blood pressure, high cholesterol, or type 2 diabetes. They are currently covered through Part D plans.

 

Coinsurance amounts are pegged to the list price of drugs. As such, Medicare beneficiaries who qualify could still face monthly costs of $250 to $430 before they reach the annual out-of-pocket drug spending established by the Inflation Reduction Act (IRA). The IRA  cap for out-of-pocket expenses was around $3,300 in 2024 and will be $2,000 in 2025. Most retirees living on modest incomes would still find the cost of GLP-1 prohibitive.

 

In November 2024, the Biden administration proposed that Medicare and Medicaid cover obesity medications. In doing so, they sidestepped a 20-year-old piece of legislation that prevented Medicare from covering drugs for "weight loss." The new proposal specifies that the drugs would be covered to treat the disease of obesity and prevent related conditions. Those conditions are serious and include diabetes, high blood pressure, cardiovascular disease, sleep apnea, fatty liver disease, and arthritis.

 

The classification would also mean that every state Medicaid program would be required to cover the drugs starting in 2026. Between the two programs, an additional 7.4 million Americans would gain coverage. The price tag would be high, at least $36 billion over a decade. However, there are more obesity drugs in the pipeline and prices should fall as competition heats up. Starting in 2025, Medicare will also be able to negotiate a lower price for Wegovy as well as many other popular drugs. 

 

As for the future, the costs and usage of GLP-1 medications could change significantly under the second Trump administration. An entirely new team of individuals, including a retired congressman, a surgeon, and a talk-show host could play pivotal roles in how the government goes about safeguarding America's health.

 

Under Robert F. Kennedy Jr., an environmental lawyer, politician, and anti-vaccine organizer, we can expect radically different views and actions in health care, medicine, food safety, and science research. Early indications are that Kennedy, who has been picked to run the Department of Health and Human Services, is not a big fan of Ozempic. He does not believe that using popular GLP-1 drugs is ever going to make America healthy again. His remedy would be to provide good food to Americans. He believes that providing three nutritious meals a day to all Americans would solve obesity and diabetes overnight. 

 

The problem is that for many Americans the admonition to change your diet, eat less, and exercise more has failed to dent the problem. Why not give the country an avenue that shows a much better chance of success over the long term?

 

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

As the cost to attend several Ivy League colleges approaches $90,000 per year, applications to obtain a college degree below the Mason-Dixon line have skyrocketed.

 

But let's not focus on the most expensive schools like Princeton and Harvard. The average tuition price across all the Ivy League colleges is almost $65,000 annually. Many Southern colleges charge substantially less with pricing ranging from $30,000 to $49,999 per year.

 

However, college costs go beyond the tuition and fees charged at schools. The costs are increased by several additional factors such as living expenses, graduate outcomes, and financial aid.

 

In these areas, southern schools also win since southern states offer a lower cost of living and housing costs in particular. Financial aid is a great leveler among colleges. The top elite schools have no-loan policies that allow some students to attend for free. Federal financial aid for those who can qualify brings down the cost per year to an average of $22,968, according to the U.S. Department of Education, in an Ivy League school. Of course, the same financial aid applies to all colleges and can drastically reduce the cost of a Southern college.

 

As for graduate outcomes, Ivy Leaguers generally still have higher average salaries and employment rates compared to their Southern brethren overall. However, it depends on the individual college and its programs and the student's chosen career path.

 

Times are changing, however. A Forbes magazine survey this year found that employers were less likely to hire Ivy League graduates than they were five years ago, while only 7 percent said they were more likely to. The survey also found that 42 percent of managers are more likely to hire public university graduates. Managers questioned were three times as likely to believe that public universities have improved in preparing students for jobs.

 

How much of the present hiring mood of managers has to do with last year's student protests over the war in Gaza at many Northeast colleges remains to be seen. Many student applicants have been turned off by the political polarization of campuses over abortion, diversity, and antisemitic activities. Southern schools seem to have a better track record on free speech, according to the Foundation for Individual Rights and Expression, with 25 of the top schools in the South and six of the worst institutions in the Northeast.

 

Thanks to the great migration southward by Americans and corporations over the last decade, many smaller cities in the south are looking for college-educated, entry-level job candidates. Cities such as Atlanta, North Carolina's Charlotte and Raleigh, and Austin, Texas, offer good salaries and benefits plus affordability on housing and living expenses.

 

In a happy, if rare, meeting of the minds between parents and their college-bound children, high school students have long been advocates of attending southern schools. Teens on social media rave about the warm weather, football Saturdays, lively campuses, and school spirit they have found on southern campuses.

 

Over the past two decades, there has been an 84 percent increase in the number of kids in the Northeast who have flocked to colleges such as Duke, Tulane, Emory, and Vanderbilt, according to the Wall Street Journal. The University of Alabama saw three times the number of applications received by Harvard University over that same time.

 

There is some good news for some Northeast colleges. Forbes recently named 20 colleges — 10 private and 10 public schools — as their "new Ivies." The average tuition at the 10 most affordable new Ivies is $42,233. Some of these schools are in the Northeast, although not many.

 

Overall, the facts are that college tuition in Ivy League colleges is not going down anytime soon. The number of applicants to top schools continues to surge regardless of the new interest in all things Southern. If anything, over time Southern schools will probably close the gap with the Northern competitors. For parents, a college education will still be an investment wherever your child chooses to go.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

After several years of price increases, consumers have come to expect that the typical Turkey Day dinner will cost more this year. Depending on how astute a shopper you are, you could get away with paying less this year.

 

Some items on your dinner agenda may be more expensive than in 2023 but others may have dropped in price. The price may also depend on where you shop and whether you insist on buying only name brands or are willing to buy store brands instead.

 

Every year since the COVID pandemic, grocery store prices and costs have been going up with the largest contributors to the cost being transportation, labor, and climate change. In 2020 (plus-3.5 percent), 2022 (plus-9.9 percent), and 2023 (5.8 percent) food prices rose and continue to go up. Overall, food prices are expected to increase by 2.3 percent in 2024.

 

And while the trend of rising prices still has not changed, what has changed is the consumer's willingness to pay higher and higher prices. To rein in food costs, shoppers are buying cheaper store brands over the last few years instead of name-brand food items.

 

You have probably noticed how store brands now have as much a share of shelf space as name-brand items. The trend has been a boon for supermarkets and the brightest light in the grocery food and nonfood business. Last year sales of store brands rose to $152 billion from $142.4 billion a year earlier, a 6.7 percent increase. The share of grocery shelves for store brands versus national brands rose to 26 percent from 25 percent last year. That is a historical record.

 

What does that have to do with the price of turkey? Plenty. A Thanksgiving dinner for 10, including turkey, stuffing, salad, cranberries, dinner rolls, and pumpkin pie would cost you $90 if using only name-brand labels. That is down 0.5 percent from last year. But if you only bought store-brand products, the total cost for the same dinner would be $73.

 

However, like everything, there is a catch. Store brands have done so well over the recent past, that grocers have started increasing prices. The Wells Fargo Agri-Food Institute which tracks prices of Thanksgiving dinner staples, discovered that the gap between the cost of a full meal using generic brands and one prepared with national brands is narrowing. In several categories, the report found that name brands are less expensive or almost the same.

 

Fresh turkey prices, for example, are largely unchanged since last year, but name-brand birds (that still account for three out of four turkeys sold), fell in price by 2 percent since 2023. Store-brand turkeys, although still cheaper, have increased in price by almost 5 percent over the same time.

 

And yet name-brand stuffing is up 9 percent, compared to only 3 percent for store-brand versions. Name-brand cranberries fell by 3 percent, while store brands rose by 6 percent. In every category of the typical Thanksgiving dinner, there were substantial price differences between the two brands. That means shoppers need to compare prices closely.

 

In further good news for consumers, price wars have developed among grocers and others providing turkey dinner deals. Walmart, for example, is offering a 29-item dinner for eight for $55. Target has one that feeds four people for $20, while Aldi has a dinner for $47. Around here, one grocery chain offers a meal similar to Walmart's at twice the price. Most of these promotions are substantially less than last year's price tag.

 

My dog, Atreyu, and I love the holiday season. I just finished cooking my second 99 cents/pound turkey of the season. My wife, Barbara, only likes the drumsticks and wings, so I eat some of the white meat, freeze the rest, save the carcasses, and make turkey soup. The rest becomes healthy dog food for Atreyu.

 

Go ahead and laugh but consider this. The price range for a pound of popular healthy dog food at Walmart ranges from $1.92/pound to $5.67/pound.  Turkey is healthy and the cheapest protein around. It is on sale during the holidays for dogs and humans. The promotions are kicking in at this point. I intend to buy another turkey this week  (only 49 cents/pound) plus a large ham/shank at 79 pounds (pea and bean soup) and maybe a big spiral sliced ham (at 99 cents/pound). Bon appetit! 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Investors appear to be "dancin' to the Jailhouse Rock" ever since the election of President-elect Donald Trump. Private prison stocks have roared back to life as the deportation of immigrants becomes a reality.

 

Day One, according to the Trump team, the new administration will launch its promised plan to deport millions of illegal immigrants. Criticisms that the cost of such an endeavor would bankrupt the country have gone largely unheeded. Trump has responded that he has "no choice" and "no price tag" when it comes to what the media terms as the largest deportation in U.S. history. 

 

Wall Street believes that the appointment of hardliner Tom Homan as Trump's "border czar," could mean expanded contracts on the back of increased US Immigration and Customers Enforcement (ICE) enforcement combined with partnerships with U.S. Marshals and the Federal Bureau of Prisons.

 

Some policy groups that specialize in immigration have predicted GDP could shrink by $1.1 trillion to $1.7 trillion but according to most voters that would be a small price to pay to rid the country of the estimated 11 million plus illegals in the country. As a result, with investors' belief that the sky's the limit in spending, it is no wonder that the shares of the two largest prison stocks, GEO Group and Core Civic, have gained more than 80 percent in a matter of days.

 

These companies own and operate a nationwide network of prisons, immigration detention centers, and correctional facilities under government contracts. The latest figures (2022) of those incarcerated were just under 91,000 U.S. residents and upwards of 55,000 migrants. That was during Trump's first four years.

 

Thanks to lobbying efforts by both firms, there exists a hand-in-glove connection between the industry and federal policy decisions. That was worth $1.05 billion in sales (43 percent of revenue) from ICE for the Geo Group in 2022.

 

Core Civic received $552.2 million from ICE during the same period equaling 30 percent of total revenue. Both companies have been working with the Trump transition team to expand their capacity. Pro-private prison government benefactors argue that these companies, structured to generate profit while operating like public institutions, reduce overcrowding throughout the penal system. They reduce costs and offer specialized management expertise as well.

 

On conference calls last week, the management of both companies used words such as "unprecedented opportunity" and, in the case of Damon Hininger, CEO of CoreCivic, "It feels like with this election this year, we're heading into an era that we really haven't seen, maybe once or twice in the company's history." That was music to the ears of traders and investors alike.

 

Building prisons, especially given the number of illegal immigrants targeted by the incoming Trump administration, will not be built overnight. A 500-bed facility in San Diego, for example, costs $118 million to build. And running a 1,000-bed prison can cost as much as $143 million a year. However, the plan is to deport illegals, not just throw them in jail where taxpayers will be required to foot the bill for their incarceration.

 

As such, behind the scenes, there is much discussion among planners of "soft-sided" detention facilities ( tents with jail cells in them) as an interim step. That could reduce costs considerably. How this could be accomplished and still provide basic humanitarian treatment is another discussion. Given the present mood of the country, many might not even care.

 

Before you decide to buy into this jailhouse rock as well, know that there was a similar mood of euphoria surrounding these stocks back in the early days of Trump's first term. At that time both companies' stocks traded at or near long-term highs. Today, however, despite their gains, they are still trading far below those 2017 gains.  

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.