Healthcare is one of the few sectors in the U.S. that is creating jobs now and is projected to add more jobs in the future.

The Unemployment rate in the U.S. rose to 10.2% in October as per the latest data from the U.S. Bureau of Labor Statistics. The sectors which had the largest job losses were construction, manufacturing, and retail. Another 558,000 persons joined the unemployed rolls which now stand at 15.7 million in the U.S.

Breaking up the 1,800+ US companies that have reported third quarter numbers into sectors, below we highlight the percentage of stocks in each sector that have raised guidance this earnings season. Overall, about 11% of companies have raised guidance this season. As shown below, Technology has blown all other sectors away, with 18.5% of tech stocks raising guidance. Consumer Staples ranks second at 14.3%, and Health Care ranks third at 13.1%. It's a bit surprising to see that Health Care is one of the sectors seeing forecasts increased the most, given the uncertainty around reform. Maybe the Health Care companies are less worried about the impact of reform than investors are?

Prominent value investor Warren Buffett made a bet on the future of America with his purchase of Burlington Northern Santa Fe. While few are as rich as Buffett, it doesn’t mean you can’t play along with what he’s buying using ETFs.

Warren Buffett’s company Berkshire Hathaway (NYSE: BRK.A) announced this week that it plans to buy Burlington Northern Santa Fe (NYSE: BNI) for $100 a share, writes Jack Hough for SmartMoney. Buffett named rail car loadings as his favorite economic indicator.

The London-based think tank Legatum Institute has published “The 2009 Legatum Prosperity Index“. The U.S. is ranked at number 9 in this list.

The Top 10 Countries in the Prosperity Index are listed below:

Although I am not an aggressive buyer of stocks in general nowadays (the U.S. market has rarely been this overbought in the short term), that does not mean bargains do not exist. After analyzing dozens of third quarter earnings reports so far and listening to company conference calls this month, it is clear that certain sectors still have negative sentiment despite relatively strong cash flows. In an overextended market, those areas can still be a focus for investors on the long side.

Healthcare, Financials, and Telecommunications are three sectors in which I still favor searching for bargains. Fears over Healthcare reform are clearly overblown. Whatever final bill passes the Senate and is signed by President Obama is quite likely to increase the number of Americans enrolled in the health insurance market, which in turn means more people being covered and having access to doctors and medications. Given the current outline of the legislation, it is hard to see how the health insurers and the drug companies will be meaningfully hurt by this reform. If anything, the demand for their products and services will get a bump. And yet, investors can still buy leading firms in these two industries for single digit forward P/E multiples.

The third-quarter earnings season has, overall, been going better than many analysts have expected. As luck would have it, there are a multitude of ways to get exposure to this season’s winners via ETFs.

Although several sectors have demonstrated strong third-quarter performance, the ones listed below are among the standouts.

The Washington Post’s “Discrimination by Insurers Likely Even With Reform, Experts Say” subtitled “Economic Pressure Could Give Rise to New Biases Against Prior Conditions” sites many distinguished academics warning of cherry picking continuing under health reform. The professors predict that private insurers will employ a series of creative carrots and sticks to achieve the most favorable risk pool composition within the umbrella of guaranteed issue and no exclusions for preexisting conditions. I will argue that these practices might actually benefit the astute consumer.

Insurers are currently paid between approximately $800 and $2000 per month for Medicare Advantage seniors according to discussions in the recent Senate Finance Committee healthcare markup. Insurers are reimbursed the most for chronically ill seniors, but they cannot turn any senior away. The insurers maintain profitability charging a premium seniors are willing to pay by maximizing reimbursements and minimizing their actuarial risk. Humana (HUM) said during its most recent earnings call that they have to do a better job of identifying seniors in their risk pools that qualify for higher government reimbursements.

Public opposition threatens to crush President Obama’s healthcare reforms and wound his presidency, because his plans would do more harm than good.

What's even more amusing is that contrary to what the article claims, this will not have a negative affect on insurance premiums and may lower them for some young people. The fact is that most health insurance today is "community rating" as it is purchased through an employer. Because there is only one price for the young and old in employer pools, younger people who buy insurance in the individual market where there is some adjustment for age should get lower rates.

Below is a summary of sector performance for the week of September 14th-18th. Conglomerates, the smallest of the group based on the number of stocks, was the best performer. The sector was led by Gencorp and GE, up 14.4% and 13.17% for the week.

On a forward looking basis, healthcare still looks like the most attractive based on valuation. However, one should watch Washington closely in the coming weeks as any healthcare bill could lead to added volatility in the sector. (For momentum based portfolio strategies, please visit Scott's Investments.)

In today’s Boston Globe, the article “Health costs to rise again” makes the front page fold – and should be required reading for investors.

Amgen’s (AMGN) got a “Phase 3″ drug in its pipeline called, “Denosumab.” It has possibilities for a range of conditions from osteoporosis to treatment-induced bone loss to rheumatoid arthritis.

Genentech (DNA) has a “Phase 3″ hopeful with “Bevacizumab” (Avastin). This one’s designed to interfere with the blood supply to cancerous tumors. It is believed that if you cut off a tumor’s blood supply, you can cut off its ability to grow or spread.

In a little more than two weeks, the Intrade odds for the contract "A federal government run health insurance plan to be approved before Dec 31, 2009" have fallen to 15%, down from 30% odds only about a week ago, and down from 45% a little more than two weeks ago (see chart above).

Economic activity continued to stabilize in July and August, but problems remain below the surface. Let’s start with the consumer, which is 70% of the US economy. Consumer spending remained soft in most districts and retail sales were flat.

Most districts reported some improvements in residential real estate, but home prices continued to decline. This is the boost from the $8,000 first time home buyer tax rebate, which ends November 30^th.

By James Kwak

There are two crises commonly acknowledged in the health care debate. The first is that the cost of providing health care to the growing pool of senior citizens from the baby boom generation (as well as to those who meet low-income guidelines) will spiral out of control in coming years. The U.S. spends more on health care than other countries, with some regions charging far more than others (yet not producing better outcomes). With the cost of premiums far outstripping wage increases and inflation, there is a need for cost containment.

The second crisis is the large and growing number of uninsured people in the U.S.; as premium costs burgeon and unemployment strips workers of benefits, fewer people can afford health coverage. Indeed, the Gallup Poll finds more than 20% of Americans in a number of states are without health insurance entirely. By the time they seek help, uninsured Americans require costly specialty care and hospitalization that could have been prevented by timely visits to primary care providers.

For all insurance companies, the key to profitability is to take in the greatest amount of premiums possible, while paying out the fewest number of claims possible.

In the case of the U.S.'s private health-insurers, this literally means putting a “price-tag” on human life – every day. And in the particular example of California, private insurers have an especially low level of respect for human life.

Despite the title of this post I'm sure that most people that have read my stuff know that I am a huge fan of ETFs. They allow people willing to spend the time to build very sophisticated portfolios that by and large avoid single stock risk. The broader funds allow for simple and cheap beta for people who for whatever reason do not build portfolios with narrower funds in the capacity I write about.

All that noted, there are drawbacks to the product -- every product has drawbacks. One written about previously is that it can be more difficult to capture a good dividend yield. Some of the "dividend" ETFs are (were?) heavy in financials and quite a few of the WisdomTree funds have very lumpy dividends.

One of the fresh spectacles we're likely to enjoy this fall is moral outrage—real or feigned—over health insurance companies that may or may not be rapacious.

President Obama has already singled out insurers as the villains responsible for exorbitant healthcare costs that are bankrupting families and businesses and making care unattainable for millions. Rep. Henry Waxman, chair of the House Energy and Commerce Committee, has asked 52 insurance providers for detailed data on pay and perks for executives, junkets for employees, and other ways they spend the money that comes from premiums paid by policyholders.

A quick perusal of the following chart should raise a few questions in your mind. It shows annual premiums for a single person’s health insurance, ranked from the highest cost state to the lowest cost state [of the contiguous 48 states]: