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Profiting From Upcoming Economic Changes in 2014


NEW YORK (TheStreet) -- Hardly a day goes by that I'm not asked my thoughts on the market. Will we continue higher or face the music and get hit in the side of the head from a correction?

It's the wrong question to ask because a correct answer won't help most people. The answer isn't as easy as up or down. Regardless of the overall market, there are always opportunities. A better question to ask is, What are the potential risks and rewards available?

I'm not making predictions per se, which is often a useless exercise in isolation. More important for investors, I believe the odds favor an environment that, when combined with consideration of the overall perils and rewards, allows for better decision making.

Gold -- I nailed the fall in the price of gold during 2013. I didn't make a lot of friends among the gold bug community, but my objective isn't to fill the punchbowl -- it's to evaluate, analyze and report my findings. 

During 2014, gold will trade for under $1,000 for the first time in over four years absent a "black swan" event. Gold mining stocks see further declines. Don't expect gold falling to 2001 levels though. China, India and other growing economies will effectively place a long-term floor above $700. Once gold stabilizes against the dollar, it becomes even more attractive to Chinese because it no longer fears a rapidly falling price due to the Chinese yuan's strength.

Everyone and their brother has joined the gold bash party of late. It was pretty lonely when I recommended taking profits. It's far from too late, although the risk-to-reward profile isn't as strong.

Health Care -- In 2014, the first of many Affordable Care Act  ("Obamacare") exchange customers declare bankruptcy from medical bills not covered by their insurance. The news diminishes the argument that the ACA prevents families from financial ruin during a medical emergency. Congress side-steps responsibility by shifting the focus on health insurance policies. Media rhetoric from the upcoming employer mandate in 2015 and increased public frustration results in losses for several tightly contested U.S. Senate races, including Minnesota's Al Franken, in November.

Health insurance companies face a larger-than-expected selection bias, resulting in higher-than-expected claims. Federal funds to offset insurance losses are expended much quicker than anticipated. Medicare patients report nationwide difficulties locating doctors that will accept them and a much longer waiting time to be seen. Health Insurance stock volatility rise due to uncertainty of federal subsidies amounts.