What does Paul Ryan's vice presidential nomination mean for health-care stocks? Ryan has indicated he supports moving from a defined benefit program to a defined contribution program in Medicare (explain this) — by using a menu of private plan choices.
On the surface, this sounds like good news for HMOs, particularly those with a Managed Medicare component. It implies more enrollment in Medicare Advantage (Medicare benefits through private health insurance plans) down the road, even if those changes would only occur after 2022.
Right now, the penetration rate for Medicare Advantage is roughly 28 percent; that would grow substantially under the type of plan backed by Ryan.
The difference between Medicare and Medicare Advantage is that Advantage has a more restricted provider network and lower out of pocket costs. Big players in this space include Humana and UnitedHealth.
Of course, we do not know to what extent Mitt Romney supports the elements of Mr. Ryan's plan, but regardless, Mr. Ryan's nomination has been a big boost to those who have urged that the primary way to start curbing spiraling health-care costs is to move toward privatizing Medicare.
1) China's Shanghai Indexclosed down 1.5 percent on disappointment no immediate rate cuts or cut in the bank reserve requirement has been forthcoming.
Regardless: The worsening economic situation in China was the second-biggest topic among traders this weekend. The Chinese numbers last week were horrible: A mere 1 percent increase in exports, and new bank loans were at a 10-month low.
What will Chinese authorities do? This is way beyond loosening reserve requirements so banks can lend more money. It may even be beyond just increasing public spending on infrastructure. Robert Hardy and others have argued for easing up on current restrictions in the real estate sector. This is a dangerous game — China is still haunted by "ghost towns" built during the 2008 spree that are essentially empty — but it may get down to that.
And what about everyone's favorite — more infrastructure spending? The problem is that it is not clear how willing banks will be to lend for these infrastructure projects, even if the government loosens reserve requirements. An article in Forbes this weekend began with the headlines "China is Running Out of Money," noting that Chinese banks "are burdened by questionable loans and will have to scrounge for funding before they can make long-term commitments for stimulus projects."
2) Euro zone gross domestic product (explain this) is out tomorrow. Greek GDP contracted 6.2 percent, not as bad as some feared.
German Chancellor Angela Merkel returns from vacation this week, and there were reports over the weekend that members of her party — and from her coalition — were urging her to draw (yet another) line in the sand over Greece.
If this sounds hollow because it's been done before, you're right, but some kind of denouement is coming with Greece. The deputy parliamentary leader of Merkel's Christian Democrats, Michael Fuchs, suggested this weekend that if Greece was not going to fulfill the conditions of its bailouts, its exit from the euro would be inevitable, and that Greece might get some type of Marshall Plan to to help it return to its own currency and that it might stay a member of the European Union even after it left.
—By CNBC’s Bob Pisani
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