Providing Independent "Buy Side" Research

May 19th, 2003

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The 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 employees.

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.

Prime Update:

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 market.

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 for more information on the Prime Stock Newsletter.


The Dow Jones Industrial Average:

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.

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Disclaimer: The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: If you would like to contact us our fax # is (404)-816-8830 Email address is: Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.
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