Six months ago, few would have guessed one of the most left leaning of states would hold the fate of the nation’s healthcare and a super-majority in its hands. But disappointingly, I am far from convinced a GOP win means the end of Obamacare.

I take Pelosi and her cronies at face value when they say they will cram this legislation down our throats at any cost. (I’m paraphrasing her actual words, but we all know that’s what she meant).

I can picture her and Barney Frank feverishly pouring through 234 years of laws, looking for any loophole to twist to their advantage in case Brown receives a concessionary phone call later tonight.

Healthcare and all the ways it will affect your life will be a popular topic for months, if not years to come. The majority of the healthcare sector today is trading in positive territory thanks to the brewing storm in the Bay State. It’s a small prelude of the volatility that is to come.

It is sad to think we only have a couple of more days to cover it all in Notes.

Because we’re operating on borrowed time, I’m going to put off the speculation of healthcare for tomorrow when we know (or at least hope to know) Massachusetts’ decision.

For now, let’s stick with what we know for sure.

One thing that is 100% going to happen is, in just a few weeks, Obama is going to unveil his latest budget proposal. In it is going to be increased defense spending (which I’ve already covered) and also decreased fiscal dedications to NASA.

Instead of giving cash directly to the top space agency, Obama wants to embrace his capitalism roots (there’s a line you don’t see every day) and give the cash to the private sector.

Now that the space shuttle fleet is up for sale, NASA needs a new way to get its astronauts into orbit. Of course, the big recipients of NASA-based money, Washington cozies like Lockheed Martin, Boeing and Raytheon, are not so keen on the idea.

After all, if NASA outsources the shuttles duties, they stand to lose a long-producing cash cow.

But that’s not the case for companies like Orbital Sciences (NYSE:ORB), SpaceX and Rocketplane Kistler that could be the recipient of healthy government contracts as Obama puts a toe into the private sector.

Unfortunately, Orbital Sciences is the only publicly traded of the three, but with a Street value of less than a billion bucks, it offers investors a shot at a “smallish” space-industry up-and-comer.

There are a couple of arguments against Orbital Sciences.

First, its price tag is inflated. With a trailing P/E of nearly 25, investors have obviously priced in lots of growth potential. But if Uncle Sam starts writing the company a couple extra checks each year, the current bottom line will look paltry in comparison.

But then there are the naysayers that believe the private sector cannot compete with the deep pockets and industry experience of NASA. They cite factors like national security and safety.

While I believe safety and quality is almost always better in the private sector, security is an issue Obama must measure before he goes and cuts NASA’s budget. Space superiority has been a significant ingredient in the country’s defensive success over the last 50 years.

The bottom line is if you’re looking for a place to put some speculative dollars and get your tax dollars back where they belong – in your pocket – than the aerospace sector is worthy of an in-depth look.

The same holds true for investing. Many investors who got beat up in the last “game” are still sitting on the sidelines, nursing their wounds – afraid to play.

But it’s clear – as evidenced in the markets recent 30% run-up that the best players are already back in the game. So what are they investing in?

Larger-cap healthcare stocks are often overlooked in any rally, as improving economic conditions – or the perception of them – often favor smaller cap stocks.

How do you pick a good healthcare company to invest in?

There’s no one better at investing in the healthcare sector than Venrock Associates, originally established as the venture investment firm of the Rockefeller family.

Venrock has been in the venture funding business for over 8 decades, investing over $2.3 billion in 430 companies with household names like Apple, Intel, Millennium Pharmaceuticals, and countless others.

The company pioneered healthcare venture funding way back in the 1960’s, and its historical portfolio contains five of the largest biotech firms ever created.

The average retail investor can’t invest with Venrock, but you can invest like them.

And a small-cap healthcare company you might want to consider is RehabCare Group, Inc. (NYSE: RHB). RehabCare is a provider of rehabilitation program management services in more than 1,200 hospitals nursing homes, outpatient care, and other long-term care facilities.

The company also owns and operates six rehabilitation hospitals and five long-term acute care hospitals.

Since the beginning of March, shares are up nearly 64%. And for good reason: RehabCare’s services are increasingly in demand by healthcare providers.

You see, rehabilitation is one of those things that few patients want to go through. It’s often uncomfortable and sometimes accompanied by a fair amount of pain. But the end result is quicker patient recovery, and less time spent in more expensive care facilities.

RehabCare recently announced quarterly results for the period ending March 31st, and results were outstanding. The company nearly doubled profits from the same quarter of the previous year, with revenue growth across all divisions.

Company President and CEO, John H. Short, Ph.D, commented: “We were very pleased by a strong quarter of consolidated revenue and earnings growth.”

Short indicated the company was reaffirming its fiscal 2009 guidance on all its divisions for the remainder of the year, on continued expectations of strong revenue and earnings in future quarters.

In light of the current financial environment, the company is taking positive steps to strengthen its balance sheet. Outstanding debt has been cut by two-thirds in the last year, and RehabCare continues to build a strong cash position.

Bottom-line, is that RehabCare has plenty of room to run for the rest of 2009, and likely beyond. Since this is a small cap stock, investors shouldn’t chase it. Look for a moderate It’s time to get off the bench and get back in the game…

RehabCare Group, Inc. (NYSE: RHB): Stock of the Day

Fortunately for us, the report wasn’t as bad as expected. However, the job losses are still significant and still approaching historical levels.

Before I get to the historical aspects of the job losses, there’s something else to consider when looking at the job losses: where the losses are occurring.

The losses aren’t simply blue-collar workers. They are also white-collar. And the hard part for many of the individuals who have lost their jobs recently is that their jobs may never come back. So it isn’t a matter of waiting around until a new job opens up when the economy turns around. The jobs will simply never be there again. For example, last month the economy lost approximately 149,000 jobs in the manufacturing sector. Many of the plants that closed will never open again. The same goes for some of the 110,000 construction jobs that were lost last month. Even white-collar employees are facing grim prospects. Last month, professional and business services lost 122,000 jobs. Whether the company went out of business, consolidated with another one, or simply trimmed ranks, these jobs are gone for a long time, perhaps forever.

Adding to the problem, many of these workers are not easily transitioned to ‘burgeoning’ job fields. For example, an autoworker who has worked for years in plants can’t simply transition over to the healthcare sector to find employment. They need time to take classes, learn, and become proficient in their new fields. Never mind older workers who have no desire to switch jobs at such a late stage in their careers.

So how historically bad have the job losses been? It depends on the comparison.

In terms of the shear number of jobs lost, the last 16 months have been staggering. We have doubled the previous number of jobs lost in consecutive months.

However, there are simply more workers today than ever before, so for an ‘apples to apples’ comparison, let’s look at the number of jobs lost in relation to workers. To do this, I pulled up the historical data, and looked at the number of workers the month before the losses started. For example, the number of non-farm workers in November 2007 was just over 139 million. The number of jobs lost so far is 5.73 million, so the economy has shed nearly 4.13% of the workforce during the last 16 months. As you can see, we are nearly identical to the percentage of jobs lost during the 1957-1958 time period. We would only need to lose 30,500 jobs in May to eclipse the 1957-1958 period, and become the worst percentage loss ever. Unfortunately, it would take a miracle for that not to happen.

So how do the huge monthly losses we have seen stack up? Surprisingly, not too bad. To determine this number, I took the number of jobs lost and compared that to the previous months payroll figures. For example, in April, the economy lost 539,000 jobs out of the roughly 132 million jobs that were on the payrolls in March. That’s 0.55% of the jobs that were available the month before. Historically, despite the huge numbers of jobs lost recently, only January ranks in the top 10 in terms of overall percentages.

Hopefully this gives you a good frame of reference to compare the mounting job losses we are seeing right now. In terms of shear numbers and percentages we are looking at the worst or almost the worst period in history. There have been much worse monthly losses, but not extended periods.

Another record we will set very soon is the number of consecutive months of jobs lost. We currently stand at 16 months, one shy of the record. It will take divine intervention to not set the record in June.

Source: A Look At The Recent Employment Figures And How They Match Up Against Other Recessions

These days, the Obama Administration is putting together a plan to set up a so-called “bad bank” to clean up the many toxic loans eating through the American financial system. Doing this would effectively remove those loans from individual financial institutions’ balance sheets… and put them in the hands of the U.S. government instead.

Similar to the Resolution Trust Company that bought and disposed of failed savings and loans companies during the 1980s crisis, what the Obama administration hopes to do is put banks back in the position where they feel comfortable lending again. And once consumers are able to acquire loans, they’ll start spending and the economy can start growing once again.

It sounds like a solid idea, and if it works, some financial stocks could rebound.

So what should investors do?

The answer is: not a darned thing.

When A Bad Bank is Just A Bad Bank, And A Crisis Is Just A Crisis

While it’s true that crisis often brings opportunity, that doesn’t mean that you should blindly throw money at every catastrophe you hear of. Good investors understand both the risks and rewards of any venture they go into. In fact, the best investors focus more on the risk part of the equation than the reward.

And this is one crisis that bears careful scrutiny. Because right now, it’s impossible to understand the full risk in investing in the financial sector. There are simply too many questions that don’t have ready answers.

• Will the banks be nationalized?
• Which banks will emerge clean and ready to conduct business?
• Which ones won’t?
• Will they bear any responsibility for the garbage loans they underwrote?

Could financial stocks rip higher on any settlement of the issue? Of course they could! But prudent investors looking for real wealth-creating opportunities should stay as far away from the group as those families earning $50K per year should have stayed away from the interest-only $500,000 variable rate mortgages they can no longer pay.

Remember: If it sounds too good to be true, it probably is.

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Poor Statistics Continue Pouring In

The assault of statistics we’re bombarded with every day illustrates a picture-perfect, hindsight example of that… and they’re getting worse.

• More than 1.3 million Americans have lost their homes
• 6.9% of prime jumbo loans are at least 90 days delinquent, up from 2.6% a year ago
• 25% of prime jumbo loans are for more than the home is currently worth

I emphasize the word “prime” because it’s important to understand the specific kinds of loans that got us into this mess. Those prime loans weren’t mortgages handed out by reckless brokers to people with shaky credit and low incomes. The prevailing thought was that the mortgage crisis was a sub-prime problem.

Now it appears broader in scope.

If the Feds decide to set up this Bad Bank program as they seem likely to, I certainly hope it works. For that matter, I hope all of the other tactics we implement in the coming months work as well: stimulus packages,tax cuts, exorcisms, fire walking, and worshipping the Chinese God of Wealth, General Kuan Yu.

But while I’m hoping for good results in the future, I’m also keeping a wary eye on the here-and-now. I don’t believe that there are any “good banks” in this environment. Or at least there aren’t any good enough to offset the risk of all of the unknown factors facing the sector.

So for the time being, I highly recommend leaving playing around with the financial system to the Feds; find some other place to invest in the meantime.

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Forget Financials… Healthcare Is Looking Better Than Ever

If you’re looking for ideas, I believe healthcare will be the best performing sector in the market. We’re seeing consolidation in the group, which should garner higher profits as time goes on.

Pfizer (NYSE: PFE) recently announced a $68 billion acquisition of Wyeth (NYSE: WYE), while Swiss-based Roche Holdings is reportedly out talking to banks about obtaining a loan to complete its $44 billion buyout of Genentech (NYSE: DNA).

Additionally, you have biotech companies with rich pipelines that are starting to bring product to market, and an aging population that will require more medicines, procedures and services.

Look for companies that have lots of cash and little or no debt.  You don’t want to own companies that need to raise capital in this environment. Or, if you’re not sure which companies afford the best protection while simultaneously offering the highest returns, you can check out my service Access Research Group, which recommends small biotech companies with big potential.

Source: The Good Bank/Bad Bank And The Ugly