The stock market/President-elect Clinton.

The stock market has fully recovered from its October doldrums. The Standard and Poor's 500 stock average has moved from around 400, its low for the year, to over 430, its annual high. This is remarkable in view of the numerous uncertainties that have been introduced, among which are the policies of the new Administration and the involvement of U.S. troops in Somalia. Nevertheless, many forecasters and economic observers are calling for a noticeable pickup in the economy, perhaps in the 3% to 3-1/2% range in GDP, which is positive, but still a rather anemic recovery. For the stock market, this type of recovery would not lead to a significant rise in the inflation rate. A relatively low inflation rate would lead to a steady bond market and encourage equity buyers.

While the market recovered, the nursing home group shot ahead, with many stock up over 30%. Beverly, with positive earnings, was up 33% from the beginning of the year. HCR achieved new highs in the last two months and double its IPO price. The stocks that were weak only a few weeks ago, such as Genesis, GranCare and Living Centers of America, showed big gains as investors searched for bargains in the group. As noted before in this space, several brokerage companies, including Kemper Securities and Merrill Lynch, have begun more intensive coverage of the group.

WSJ Articles

The Wall Street Journal, in two front page articles, published on consecutive days, highlighted the life style in nursing homes versus home health care facilities. The first article dealt with the dependency syndrome of nursing home residents, citing several recent incidents of residents fleeing their confines. The second article dealt with the search for alternatives to nursing homes, such as assisted living centers or home health care. The significance of these articles is that the Journal is raising questions about the role of nursing homes among a vocal and influential group. It is a fact that one-third of persons over 85 are in nursing homes and the number of Americans that will have a nursing home experience will continue to rise and accelerate, partly due to demographics, but also because of increasing use of Medicaid and of long-term care insurance. Despite the Journal article pointing out some problems, Wall Street at the moment is taking a positive view of the industry.

Clinton

President-elect Clinton has implemented some important programs in Arkansas that will provide a guide to his likely approach in Washington. Obviously, emphasis in policy planning will be on home health care. He established the ElderChoices program to give senior citizens an alternative to nursing home care including personal and home health care and adult day services. He sharply increased spending on home health care for people recovering from chronic illnesses and those requiring assistance with daily living. Vice-President-elect Gore sponsored a law creating Alzheimer's treatment centers. Health care will be a priority program area for Clinton, but with increased controls and demand for efficiency and equity. Also, the programs will be more inclusive, aimed at the homeless, AIDS sufferers, and people without even basic health insurance. Aid for the elderly will continue to get high priority with Clinton/Gore.

There are a number of important operating companies in home health care. Among the newer ones is NuMed Home Health Care, Inc., with operations both in Pennsylvania and Ohio. The company has made several recent acquisitions and is reporting growing profitability. The company has nearly 500 full-time and part-time nurses with a pool of nearly 2,000 professionals.

[TABULAR DATA OMITTED]