The Thinking: With the increased likelihood of an all-Democratic White House in 2008, the probability of an increase in taxes appears rather high. This, in turn, should mean increased demand for various “tax shields”, including municipal bonds, whose interest payments are exempt from federal as well as state income taxes. In addition, states are sitting on top of healthy budget surpluses (primarily due to pro-growth policies), and are looking so “fit” that investing in “muni’s” might be safer than U.S. Treasuries in the future (due to the possibility of U.S. Treasuries being more greatly impacted by a decrease in net inflows, which have elevated Treasury prices and surpressed U.S. interest rates for several years now). Thus, in the end, people begin purchasing more and more “muni’s”. This, in turn, means more and more municipalities will be investing in “insurance”, so as to increase the issuances credit rating, and thus decrease their issuance cost (in other words, they’ll purchase more insurance so they can look safer, and thus be able to get the funds they want/need at a lower cost). AMBAC is a “municipality” favorite. Thus, HELLO AMBAC!

The Thinking: With an aging boomer generation in need of a work force that produces enough output (aka generates enough income) to "feed their consumption needs", they decide to take it upon themselves, and postpone retirement another 5-plus years. Unfortunately, everyone's bones might not keep up with their active and healthy minds. So who does Uncle Bob go to when he needs a hip replacement? SYK... the best in the "medical device and equipment" business, and who specializes in orthopedic procedures. Caution: SYK has run tremendously recently. It would likely prove prudent to wait for this company to come in a good bit before investing in it. If you can't wait that long, JNJ is another solid "baby boomer play", one that is endorsed by Mr. Warren Buffett himself...

The Thinking: As discussed above, the US economy will have trouble producing enough workers to keep up recent growth rates, especially in light of having to support all the (possible?) retiring baby boomers in the process. Because America doesn't "naturally" have enough U.S. citizens to "supply" the growth needed to achieve the objectives just discussed above, the U.S. will eventually come to understand that - to compete - it must IMPORT workers. In other words, America must be more lenient when it comes to illegal immigration, which not only keeps the work force young, but also help support asset prices (which is of utmost importance of the asset-driven U.S. economy). In return, the U.S. will likely supply some degree of free health care. UNH would seem to be an obvious beneficiary of this...