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You Can Make Triple-Digit Profits in 2010 with This Idea

By Rob Fannon
Friday, December 4, 2009

If there's an emerging villain in health care reform, it's the insurance industry.

You see, the hospital and pharmaceutical lobbies are guaranteed to cash in on the "everybody wins" health care legislation. They've already scored big victories in the PR and profit departments. Both sectors have enjoyed positive news headlines for their "concessions." And both stand ready to receive awesome amounts of new revenue from 47 million new customers.

The insurance industry however, is still the villain. That's why I think you could triple your money here in the next year or so. Some history first...

In contrast to her group's stand during previous government attempts at reform, Karen Ignagni, the head of America's Health Insurance Plan (AHIP), offered an olive branch to Obama when he took office.

Two weeks after the election, she told the new president, "You have our commitment to play, to contribute, and to pass health care reform this year." Unlike its peer industry groups, the insurance sector is a strong advocate of invoking strict medical cost controls. The less it has to pay out for member services, the more it keeps as profit.

The outreach earned Ignagni and AHIP an unprecedented invitation in May to meet with Obama at the White House. Yet the relationship between Ignagni and the White House has since cooled.

In preliminary negotiations, AHIP agreed to eliminate the infamous practice of excluding patients with preexisting conditions... if the new reform bill includes a strong "individual mandate" – a clause that requires individuals to purchase health insurance (like auto insurance). It needs money from the healthy to pay for the sick.

But Ignagni and the insurers stopped short of pledging any specific cost savings. They also adamantly opposed any government-sponsored public insurance option. And they encouraged vocal opposition at the town hall meetings spearheaded by Democrats this summer. They've stopped short of any "shock and awe" publicity campaigns, but AHIP antireform ads have steadily increased.

The tension between the White House and insurers peaked in mid-October. On the eve of an important vote in the Senate Finance Committee, Ignagni organized a last-minute conference call with the press. During the call, she unveiled the results of an AHIP-sponsored study on the personal costs of the proposed bill. The study concluded the average family's insurance premium would balloon more than $400 a year.

The White House was quick to label the study "self-serving" and said it was "hard to take seriously." In his weekly radio address, Obama called the study "deceptive and dishonest," saying the reform criticism is nothing more than "smoke and mirrors." He also threatened to revoke the industry's exemption from antitrust laws. (Yes... contrary to what you might think, the health care insurance industry enjoys government-sanctioned protection from competition.)

So the vilification of the insurance sector in the ongoing health care debate is complete. As such, the cloud that's hovered over the entire health care sector is darkest over the insurance industry. The sector's three biggest players – UnitedHealth, Aetna, and WellPoint – are down an average 45% since Obama took office last January. That's roughly twice the drop Big Pharma, hospital, and medical-device stocks have seen.

It's one of the many reasons the insurance industry is the first sector you should invest in today.

You see, Obama's guiding principle on the pending health care reform is: "Nothing in our plan requires you to change what you have."

In other words, the "reform" moving through the halls of Congress is nothing more than an extension of the existing, expensive mess of a health care system we have right now. The only difference is, we'll add tens of millions of uninsured patients as new customers.

That's why each and every health care industry player will profit. Having taken the biggest hit, insurance stocks have the most to gain. And just about any major insurance company will see its bottom line – and its stock – balloon with ObamaCare. But for the truly spectacular returns, I'm looking at a particular subsector...

The Senate bill reduces the number of uninsured by approximately 31 million. The House bill is slightly more ambitious, extending coverage to 36 million uninsured. Importantly, both rely on the expansion of eligibility requirements for government-sponsored insurance programs.

Here's the thing: The government isn't actually in the business of health care delivery. As more uninsured patients land in government-sponsored programs, federal and state governments will turn to the private sector at an accelerating rate. Insurance players that focus exclusively on this market will see their profits explode with the influx of new customers.

I consider well-placed bets on these smaller insurance companies the best way to hedge yourself against the future liabilities of ObamaCare.

If you don't take your position now, everyone wins... but you. It's one of the only sure things from the pending health care reform.

Good investing,


P.S. I just issued a full report on my two favorite stocks to play the health care boondoggle. I believe we can safely book 50% over the next 12 months regardless of the outcome of health care reform. And if my worst nightmares come true – the reform makes our bloated health care system even more monstrous – we could easily double our money. Click here to learn more about a Phase 1 subscription.

Market Notes


The market is warming up to super investor Bill Gross' recommendation to buy utility stocks.

Last month, Gross recommended buying shares in regulated utilities that deal in basic stuff like electricity generation and municipal water supplies. Utilities are stable, recession-resistant businesses... and they're famous for paying dividends. Today's chart shows investors are taking Gross' advice. The big utility stock fund (XLU) just "broke out" to a new 52-week high.

Our point today isn't "Bill Gross is right." There's a much bigger trend at work here: The rallies in utilities... and gold... and silver stocks... and agriculture... and Visa are being driven by a global rush out of the dollar.

Sure, these assets "have something going for them" in a fundamental sense. But the major factor here is the federal government's reckless E-Z-Credit and money-printing program. It's driving folks to stick their wealth into anything but the junk paper dollar.

Well done, Ben Bernanke. Well done, Barack Obama. You're making speculators out of the widows and orphans of America. They will end up losing big in a game dominated by the lobbying geniuses of Goldman Sachs. You should be ashamed of yourselves.

We have inflated back to pre-crash copper

In The Daily Crux

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