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Opportunity in Health Care Crisis

Written By Brian Hicks

Posted March 27, 2010

Welcome to the Wealth Daily Weekend Edition – our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

At least we got the "change" we were promised.

You’d think that after Wall Street robbed us blind — turning the economy full-tilt into a depression — the government would understand that we’re a bit testy, and perhaps listen to what we have to say about our money.

Yep, despite American opposition, the "Washington Knows Best" bill had many feeling like it was rammed down their throats…

While millions were busy complaining about those large tax increases, $500 billion in Medicare cuts, and "dangerous interference in the doctor-patient relationship," we also managed to pay less attention to the new and massive powers that’ll be granted to the IRS.

Also, while the Congressional Budget Office believes reform could lower federal deficits by $138 billion, that’s not the case.

It’ll actually raise federal deficits, according to former CBO director, Douglas Holtz-Eakin:

Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual revenues from Social Security and long-term care insurance ($123 billion), and adding in the annual spending that so far is not accounted for ($114 billion) quickly generates additional deficits of $562 billion in the first 10 years.

If you already have insurance, be prepared for higher premiums… But the majority really wanted this.

And we won’t even get into how this program will impact unemployment.

But it’s not our job to be political here. Our job is to show you how to make money from the controversy.

Here’s how.

The reform will provide 32 million Americans basic health insurance by 2019. This will come as a result of cuts in Medicare and new taxes on investment income among other things, which will trickle down to the general public. And, according to the CBO, 94% of all non-elderly citizens will have health coverage by 2016, as compared to the current 84%.

And while private insurers have complained that reform will leave 23 million uninsured, cause big cut in Medicare, and induce a $70 billion tax hike on the industry, these groups still come out okay. Some of the biggest winners could be Aetna (AET) and United Healthcare (UNH) because they work in bigger employee markets, according to Some of the losers could be Wellpoint (WLP), which could take a hit on reimbursement costs.

Drug and biotech companies should prosper, too. Companies like Merck (MRK) and Amgen (AMGN) would have millions more insured customers who can now afford expensive medicine, according to reports. One of the best ways to get wide exposure to this group is by picking up some of IBB, or the iShares NASDAQ Biotechnology.

And beyond health care, here are some other places to make money:

  • Bank of America’s "partial bailout of troubled homeowners" is helping to spike mortgage insurance stocks. We believe the news could help forcefully push all of the companies in this arena after "Bank of America said it will reduce outstanding principal obligations for certain distressed homeowners." 

Some of these plays include PMI Group (PMI) and MBIA (MBI). These were the same companies that my longer-term Options readers were able to profit from on the short side. We may now have an opportunity to profit from them again — but on the long side. Options Trading Pit will look to issue buys shortly. We just want some of this euphoric buying to die down before we jump in.

  • Cree (CREE), as we discussed in Wealth Daily this week is still a screaming buy. But Pure Asset Trader is looking at two more that stand to rise just as much… if not more. Why anyone would be foolish enough to ignore a growth stock in a growth industry is beyond me — particularly growth stocks with billion dollar potential. We’ve been trading Cree since $18. It wasn’t more than a year ago that it was part of our 40-for-40 run in the Pure Asset Trader advisory… It’s now part of our recent 50-for-52 run.

  • Are there signs of impending doom for the Shanghai Index? As we covered in a recent issue of Options Trading Coach, a death cross simply refers to the crossover of a long-term moving average (100-day, for example) over its short-term moving average (50-day, for example). It can signal near-term downside. It’s the opposite of a golden cross, which can signal near-term upside. 

And that rare cross is forming on the Shanghai charts, as fears of tighter policy and popping bubble possibilities wreak havoc. The last time this death cross formed, Shanghai market fell about 60% shortly after. That’s not to say this will definitely happen here… but we should be ready for downside. You can always use the iShares FTSE/Xinhua China 25 Index (FXI) if you want to play downside with put options.

  • Investors take notice when Bill Gross places a market bet, according to my colleague Nick Hodge: "If you haven’t heard of the man, you’ve certainly heard of the billion-dollar companies he’s incubated and brought to market or the business models he’s created. Gross is also an expert at pioneering new ways to make money. His search engine was the first to introduce the concept of paid search to the Internet. The company was bought by Yahoo! for $1.6 billion and was the precursor to Google’s highly profitable pay-per-click advertising model." Now he’s involved with eSolar, a company that could eventually IPO. Find out why in Nick’s article from this week.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

P.S. In case you missed any of the week’s top-read articles from Wealth Daily and our sister publications, you can catch up on them now:

ObamaCare – The Thin Edge of the Wedge: A Look at our Happy, New Entitlement
Wealth Daily Editor Christian DeHaemer gives you the future of Obamacare as he sees it.

Investing in LED Growth with CREE (NASDAQ: CREE): Only Wall Street Fools are Missing This
Editor Ian Cooper revisits CREE, an old LED favorite, and explains why you should still buy it on dips.

Boise Basin’s Gold Fire Sale: Consider this Your Precious Metals Weekly Circular
$50.61 for an ounce of gold might seem outlandish, but for the next 48-72 hours, it’s a reality… This new report from Wealth Daily explains how you can sink your teeth into this bargain price — made possible thanks to one of North America’s greatest gold secrets — as well as the four ironclad reasons why the rush to buy gold has never been stronger.

Investing in Water Technology Stocks: From Droplets to Profits, Water-Tech Stocks are Proliferating
International Editor Sam Hopkins shares his takeaways from an exclusive meeting with Israeli and American water technology entrepreneurs and investors.

The GDP-21 Profit Algorithm: How to Make 57x your Money Before April 30
Wealth Daily reports on how shares of well-positioned resource firms in countries with rising Gross Domestic Products go up many times more than the corresponding increases in GDP.

The Natrona Challenge: Putting our Money where Out Mouth Is
A year and a half ago, we at Wealth Daily put our money and reputation on the line by offering a select group of investors a Challenge they’d find nowhere else in the world. Simply put, we promised to deliver 20 double-digit investment gains over the course of one calendar year — or we’d fork over $1,500 to each person who took us on. And guess what? We didn’t have to write a single check. We crushed it…. just like we’ll do again. Won’t you join us for this next Challenge?

Bill Gross Bets on Solar Thermal with eSolar: Profitably Fixing Solar’s Soft Spots
Energy & Capital Editor Nick Hodge discusses solar thermal technology, and how eSolar is using it to fix solar’s glaring problems.


Invest in Gold Now: Gold is Still a Screaming Buy
Wealth Daily Editor Greg McCoach explains to investors why gold is still a screaming buy.

Small Modular Reactors – A Nuclear Power Game Changer: A Billion Dollar Look into the Future
Editor Steve Christ takes another look at the nuclear revival and explains how small modular reactors will change the game.