by Marc Lichtenfeld, Advisory Panelist
There are a number of health care reform plans on the drawing boards right now, and they all seem to come with mind-numbing sticker shock. The administration’s new plan and Senator Kennedy’s plan are both estimated to cost $1 trillion over 10 years.
I’ll believe that when I see it. When was the last time the government completed any project on budget?
And I’m not the only one with doubts.
Health Systems Innovations, a health care consultant that has worked with private health insurers, estimates that Senator Kennedy’s bill would cost $4 trillion over 10 years.
Ouch…
Should a health care plan be passed that even resembles anything like the current proposals, $2 trillion in final costs would be a minor miracle.
A trillion here, a trillion there. Pretty soon, you’re talking about real money.
As these health care reforms gather momentum, I’m going to explore a few more investments that should thrive in the face of a major health care system overhaul, regardless of any health care reform plan that may be passed…
Health Care Reform : Protecting Against Inflation With Bond Funds
Despite the President’s popularity, he’s not likely to get everything he wants. Some sort of compromise is to be expected. One thing we can assume is that the cost of any health care reform plan - regardless of whose it is - will be a 13-figure number (i.e. more than $1 trillion).
On a macroeconomic level, that would likely be inflationary and cause bond prices to decline. So if you’re a bond bear, here are two instruments for you…
- UltraShort 20+ Year Treasury ProShares (NYSE: TBT): This ETF is not for the faint-hearted. It seeks to perform at twice the inverse results of the Lehman Brothers 20+ Year U.S. Treasury Index. So if the Index drops 5%, TBT should rise about 10%.
- ProFunds Rising Rate Opportunity (RRPIX): This is a mutual fund that also seeks the inverse performance of the bond market.
