The Fed's rate hikes fail to address the root causes of inflation in housing, education, and healthcare. These sectors suffer from structural issues like regulation and bureaucracy. Higher rates can even be counterproductive, for instance, by stifling new housing construction, which restricts supply.

A paradoxical market reality is that sectors with heavy government involvement, like healthcare and education, experience skyrocketing costs. In contrast, less-regulated, technology-driven sectors see prices consistently fall, suggesting a correlation between intervention and price inflation.

An early, painful experience as acting CFO for a surgery center that struggled to get paid—a deal nicknamed "Death by a Thousand Cuts"—directly shaped the firm's successful healthcare strategy. This scar tissue led to a vow to avoid direct care provision and focus exclusively on less glamorous but more defensible IT and data infrastructure.

The credit market appears healthy based on tight average spreads, but this is misleading. A strong top 90% of the market pulls the average down, while the bottom 10% faces severe distress, with loans "dropping like a stone." The weight of prolonged high borrowing costs is creating a clear divide between healthy and struggling companies.

While competitors like United and Aetna are prioritizing margins in a tough Medicare Advantage market, Humana is aggressively pursuing growth. This is a high-risk gamble, as new members are typically unprofitable in their first year. The strategy relies on a favorable, and uncertain, future change in government reimbursement rates.

Historically a Democratic focus, drug pricing policy has been co-opted by Republicans, making it a bipartisan political issue. This alignment creates a stable policy overhang and sustained uncertainty around pricing and innovation, deterring generalist investors regardless of which party is in power.

Widespread cancellation of medical debt, while well-intentioned, may remove consumer pressure on providers. If patients don't need to shop around or question prices because they anticipate forgiveness, it eliminates a key market force needed to control escalating costs.

The healthcare sector's current struggles are not a recent phenomenon but a five-year trend of underperformance. This has culminated in its market cap weight in the S&P 500 dropping to 9%, the lowest level in three decades, signaling a significant, long-term investor rotation away from the industry.

Healthcare prices have risen 2.5 times more than groceries, but consumers are less sensitive to these increases. Unlike the frequent, tangible cost of eggs, infrequent medical bills make people "numb" to rising prices, masking a major source of inflation that policy changes can suddenly make visible.