decision by the US Supreme Court regarding the Maine law on
prescription drug pricing cast a very negative cloud over the
pharmaceutical and biotech industries. It also brought the topic
of health care back into the spotlight, at least temporarily.
I believe that one of the main problems facing our health care
system is the lack of competition in choosing your health care
provider caused by our tax system.
It is real simple. Companies can write off
the cost of providing health insurance and other associated
expenses, but individuals cannot. This dates back to World War
II when the government imposed price and wage controls during
the war. Companies were unable to offer higher wages to attract
employees, so they began to offer health insurance as a benefit
to attract employees. The result is that today, almost everyone
receives health insurance as a benefit through their employment.
What this has done has concentrated the buying/selection decision
. into the hands of a relatively small number of people, those
who decide what coverage to offer at these companies.
I believe that if our tax laws were changed
to allow individuals to write off, deduct, the cost of health
care from their taxes it would result in a vast improvement
in our health care system. What changing the tax laws to allow
individual people to deduct their health care expenses from
their taxes would do is to allow them to decide if they want
their company to decide what their health care coverage is or
if they want to pick their own coverage provider. Companies
could then offer their employees a choice of insurance companies
or the option of extra pay towards buying their own insurance
coverage. This might prove particularly attractive to companies
if they were spending hypothetically $5,000 per year plus administration
costs per employee and some employees could buy health care
coverage on their own for far less. It would result in a cost
savings for the employers and potentially a pay raise for the
Insurance companies would have the incentive
to market their coverage more towards individuals instead of
the current over emphasis on marketing towards employers. This
would create more choice and competition among insurance companies,
which in turn drive prices lowers. After all increasing competition
always drives prices lower, and lower prices would reduce the
costs people pay for health care.
This is not the only problem facing our health
care system today, but it seems like it is the easiest and best
place to start.
Currently we are in the process of updating
our subscription software for the Prime Stock Newsletter. During
this time we are providing the Prime Stock Newsletter free of
charge to all who would like to view it through the Sterling
Investment Services home page. The Prime Stock Newsletter provides
daily buy and sell recommendations on short term trading opportunities.
These are stocks that we expect to be able to trade in and out
of any a time period of consisting of 1 day to approximately
2 weeks. In addition to our daily stock recommendations we provide
the options recommendation for those who want to take advantage
of the expected movement of the selected stock through the options
Recent successful recommendations have included
Marvel Enterprises 'MVL' with a movement of $4.80/share, Dell
Computer 'DELL' with a movement of $3..33/share, a Short Sale
recommendation on Maxim International 'MXIM' that has produced
a gain of $2.56/share within 3 trading day (This position is
still considered open). Please visit www.sterlinginvestments.com
for more information on the Prime Stock Newsletter.
The Dow Jones Industrial
The Dow Jones Industrial Average closed Monday
at 8,493.39 down 185.58 points. The sell off was broad based
after comments from Treasury Secretary John Snow indicating
that the US was abandoning its long standing strong dollar
policy and the US Supreme Court in a very narrow ruling upheld
a Maine law mandating price controls on the state's Medicaid
program and the homeless and uninsured. There are two things
the stock market hates; uncertainty and price controls. John
Snow provided the uncertainty and the Supreme Court provided
the price controls. For the last 2 weeks the Dow has been
stuck between two converging trendlines that indicate the
Dow will make a sharp move to either the upside or the downside.
The difficulty in determining what the upcoming move will
be is that some trendlines are easier to draw than others,
and those that are difficult to draw usually see the stock
or index oscillate around them. In other words those trendlines
tend to be a little fuzzy. This seems to be the problem we
are currently having with the Dow. The recent highs haven't
significantly broken above the downward sloping trend line,
and today's drop in the market did not significantly break
below the supporting trendline. Our indicators did generate
a "Sell Signal". In additional our nightly review
of the activity of individual stocks showed that most of them
were starting a retracement from their recent run ups a/k/a
a round of profit taking. The Bottom Line:
The overall market should move lower.
Today's Opinion: Closed @ 8,493.39
Current Expectations: Downgraded
with a Sell Signal on May 19th, with the close @ 8,493.39
The Index should move lower and test 8,303.78 and then 8,197.94
The S&P 500:
The S&P 500 (SPX) closed Monday @ 920.77
down 23.53 points. The sharp move lower in the yesterday in
the S&P 500 appears to have broken the recent upward trend
in the SPX. Additionally our indicators generated a Sell Signal
indicating the SPX will move lower.
Today's Opinion: Closed @ 920.77
Current Expections: Sell Signal with the close of 920.77
on May 19th. The market should continue to move lower and test
895.90 and then 875.40 on a closing basis.
The NASDAQ 100 (NDX)
The NASDAQ 100 Index closed Monday @ 1,112.50
down 41.98 points. The sharp move lower in the NASD 100 (NDX)
yesterday appears to have broken the upward trend in the NDX.
It now appears that the NDX has generated a Sell Signal and
will continue to move lower.
Current Opinion: Closed @ 1,112.50 Current Expectations: Called Lower with a Sell Signal
with the close on May 19h @ 1,112.50. The NDX should move lower
and test 1,093.12 and then 1,023.52 on a closing basis.