7 Stimulus Trades That No One is Talking About

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Trade #3:
Big Pharma

Americans think less of Big Pharma than they do Congress, the media or Michael Vick.  Obama is going to try to put together a health care plan and is going to pay for it -- or try to pay for it -- by squeezing other federal health care programs, especially Medicare Part D, the part that stands for (overpriced) drugs. The Democrats will pass new regulations allowing Medicare to negotiate drug prices -- Medicare currently pays a lot more than the Veterans Administration for many drugs. 

Obama is going to be ferocious in trying to jawbone the big players in the industry to keep a lid on health care costs -- especially Big Pharma. His new Medicare payment regs have come out and already whacked regulated providers and insurance companies. This is going to happen next to Big Pharma. And Obama plans to have his negotiations on C-Span -- no kidding.

Recommendation:  I would buy puts on the industry granddaddy, a company that is also facing a $10 billion dollar-plus patent expiration (Lipitor) in late 2010 -- Pfizer (PFE). Also, they are buying shareholder loyalty with ridiculously high dividends and a change in taxes will make these dividends a bit less valuable.

Next: Trade #4 - The Health Insurers