Okay, I'm exaggerating but an overall gain of 6% when the broader indexes are up 14% for the year isn't exactly a shot in the arm.

For much of 2006, the health care sector, particularly the biopharmaceutical sector, found itself fighting myriad problems: anemic pipelines, widespread patent expirations; higher costs, and a slew of legal and regulatory threats that saw no shortage of industry lawyers in the courtrooms and in front of Congressional panels for much of the year. Not helping the industry was the election of a Democratic Congress, which triggered a four point drop in the American Stock Exchange Biotech Index in the days after the November election.

But that was then and this now.

With the stock market cratering last Tuesday, a recent series of iffy economic reports, and seemingly contrasting views on the direction of the U.S. economy between the current and former Federal Reserve Chairmen, health care looks like a strong defensive play in 2007. Analysts project that the S&P Healthcare index will post an earnings increase of 11% in 2007, compared with 5% profit growth for the S&P 500.

That, among other factors, could put a stake in a health care mutual fund or exchange-traded fund (ETF) in play – a good defensive stance when investors are taking a hands-off approach to more aggressive sectors.

Healthy Sector

There's more to the health care sector than just bad economic news and a spat between Ben Bernanke and Alan Greenspan. Sure, with U.S. economic growth faltering a bit, a defensive sector like health care should attract more attention. There is also plenty of good news coming out of the sector in 2007, most notably:

• Strong valuations
• Tighter cost controls
• A slate of impressive new drug development pipelines
• Solid balance sheets

A host of sector analysts see the same scenario I do.

Says Global Insight, the Boston-based analytical group: "Among the 10 sectors that comprise the U.S. stock market, the healthcare sector currently has the best attributes for an overweight position, from both the fundamental and risk perspectives. This is due to the robust prospects for strong growth in earnings and free cash flow that result from positive demographics, new technology, faster sales, and positive pricing power."

Much of the bullish attention on the sector is honing in on biotech, where the historically volatile industry seems to be calming down and shaping up in '07. "We see impressive pipelines and we've seen an increase in biotech's willingness to charge and receive premium pricing," says Eric Schmidt, a managing director at Cowen who is bullish on health care this year.

A good, safe fund like the Vanguard Health Care Fund fits well in this increasingly rosy scenario. Fund manager Ed Owens is a veteran, steady hand at the helm – he's been with the fund since 1984.

The guy knows the landscape. Take 2006 -- in  a year when health care stocks underperformed relative to other key S&P Indexes, Owens looked overseas to the fund's European and Japanese pharma holdings, such as Roche and Takeda Chemical, which helped pump up returns and help the fund outperform last year. (The fund returned 10.87% last year, well ahead of its benchmark S&P Healthcare index).

Adaptability is Owens' calling card – for example, the fund averages about 30% of its holdings from overseas companies – and it has paid off handsomely over the years for fund investors.

It all adds up to a major long-term buying opportunity in 2007. The key ingredients are all there – an economy expected to slow in 2007, a record-number of Baby Boomers hitting 60, and a market move away from aggressive stocks and into defensive ones.

Consequently, I see an unstoppable trend with health care stocks in 2007.

Any business owner worth his or her salt knows that time is as much a commodity as widgets or washing machines.

So when an opportunity arises to save some time -- and maybe some money -- a lot of small business owners will sit up and take notice.

The tax season may give them just such an opportunity.

According to the Conference Board, more people are electing to file their taxes online, apparently with speed and transparency trumping any security concerns on the part of filers. The Board interviewed 10,000
Internet users for its study.

The Conference Board reports that in 2007, about 39 percent of tax filers will file their 2006 federal taxes online. That's up from 28 percent in 2004. Make no mistake, filing one's taxes online is big and  getting bigger. About 65% of taxpayers elected to file their tax forms online for three or more consecutive years. Almost 50% of taxpayers have been filing online for more than five years, says the Conference Board.

"Speed, convenience and choice are compelling an increasing number of consumers to toss their pencils and papers and file their federal taxes electronically," says Lynn Franco, director of the Conference Board  Consumer Research Center. "Whether using professional tax services or do-it-yourself software, electronic filing continues to grow year after year. And, by far, direct deposit is the preferred refund method. This  year's ability to split refunds among up to three accounts is yet another choice that should broaden the appeal of electronic filing."

Just because more Americans are filing their taxes online doesn't mean  that they're not getting professional help to do so. The study reports that among online filers consumers, about 40% plan to use a professional tax service. The Board also reports that the amount of online filers using IRS e-file has declined since 2004, "as the pool of  eligible filers has likely shrunk due to increased complexity in returns and as more alternatives become available."

What really interests me about the study is the fact that Americans are finally getting over their security fears in using the web for personal  financial issues. The study reports that Americans are less concerned abou  security when filing taxes online. Today only 43 percent of Internet users are "extremely" concerned about filing taxes online, down from 52 percent in 2004.

Getting money back faster seems to be a big issue, too. In 2006, 70 percent of online tax filers elected to snag their refund by direct deposit while 18 percent opted for the proverbial check-in-the-mail. What was the main reason for those opting not to file online? Reason number one is that most taxpayers do not do their own taxes (34 percent). Coming in second (23 percent) were concerns about personal information on the World Wide Web.

A tough day on Wall Street, with stocks falling 400 points on increased credit concerns over the struggling mortgage lending market. And the news isn't getting any better.

Insurance giant AIG released a report today showing that borrowers in the category just above sub prime are showing increased residential mortgage delinquencies

AIG is a good position to know. The company is the world's largest insurance company and will have its hands full if lenders can't collect from borrowers. It's also one of the largest mortgage lenders in the world. The company says that more than 10% of its sub prime mortgages were 60 days overdue, while 4.6% in the category just above sub prime were late during the second quarter.

In addition, total delinquencies in AIG's $25.9 billion mortgage insurance portfolio clocked in at 2.5%.

Delinquency rates for first mortgages, which represent 90% of AIG's domestic mortgage business, also jumped to 3.89% in June, up from 3.56% in April, AIG says.

Although second-lien mortgages only made up 10% of AIG's mortgage insurance portfolio, it incurred $159 million in the losses during the second quarter.

These mortgages are susceptible to defaults and are especially sensitive to falling home values, the report adds.

With banks and lenders tightening credit, and with borrowers struggling to keep up with payments, the landscape for the rest of 2007 looks rough. The rest of us will just have to ride it out.

OK, I was afraid of this . . .

It's one thing to see a handful of homeowners crying in their beer over their adjustable-rate mortgage payments going up.

If my Dad taught me one thing, it's buyer beware. So I only have so  much sympathy.

But it's quite another when that guy's friends and neighbors start  fretting about the housing market - - and start putting the breaks on  their spending habits. That's what's happening with the all-important Consumer Confidence  Index, which is falling for the first time in a while. According to the Conference Board, its consumer confidence index fell sharply in August (to 105.0 from 112.6 in July), as home values continued to decline, stock prices dropped, and employment growth slowed.

A handful of other measures of investor confidence also declined during August, including the ABC/Washington Post consumer confidence index and the University of Michigan ’s consumer expectations index —  a key leading economic and stock market indicator.

That's disturbing news for small businesses, which could soon feel the pinch of decreased consumer spending. It's not going to help the stock market, either. Historically, when consumer confidence wanes, stock market performance suffers, as well.

I wish I could say that the economic environment will get any better soon. The most recent S&P/Case-Shiller home price index shows  that U.S. home prices fell by a record amount in the second quarter, as banks tightened their lending standards and home sales fell.

So what we have now is a perfect storm brewing that threatens the U.S. economy. Lousy credit, a decline in consumer confidence, and a struggling stock market all combine to spell bad news for the U.S. economy. To me, consumer confidence is particularly worrisome. The Consumer Confidence Index accounts for 70% of all spending in the U.S. -- to see it in retreat is a real red flag.

One sure sign that the Conference Board numbers are for real is in the second-quarter numbers from Wal-Mart and Home Depot. Both are bellwethers of consumer spending trends and both are reported lousy second quarter sales and earnings, as consumers significantly reduced their discretionary spending. Wal-Mart’s same-store sales rose by the smallest amount (1.9 percent) since the company began tracking same-store sales in 1980, while Home Depot’s second-quarter same-store sales fell 5.2 percent.

The storm is brewing. Could be time to batten down the hatches.

I'm blogging on the road today on the way to New York and noticed a nice piece from my old buddies at Newsmax.com (full disclosure: I used to write Newsmax's daily financial commentary from 2003-2005) on the jobs picture and on prospects for the U.S. economy.

I follow a wide variety of different business news and opinion sites and I'd slot Newsmax into the more right-of-center, pro-Wall Street publishers and that's perfectly fine. But lately, I've noticed a more bearish tilt coming from Newsmax, with more and more editorials touting tough economic times ahead. Again, no problem there - - I've penned a few blogs on these pages talking about the same scenario.

In today's editorial, Newsmax notes that  the U.S. Department of Labor reported that non-farm payrolls rose by 132,000 in May and that the unemployment rate held steady for the second month in a row at 4.5 percent. The payrolls report was cheered by Wall Street “experts” as an indication that the U.S. economy is healthy and that the bull market in equities is firmly intact.

But the financial gurus at Newsmax see these numbers as skewed, and  see any concuding U.S. economic scenario as anything but "healthy".

Says Newsmax: "While we agree that the employment report was favorable and that the U.S. economy is still expanding, a closer look at the payrolls report suggests the best days might already be behind us. And, the fact that the U.S. economy grew at an annualized rate of  only 0.7 percent during the first quarter of 2007 is certainly nothing to shout home about."

The editors point to the fact that the lion's share of May’s employment gains came from the service sector where 135,000 jobs were created, and the federal government, which added 40,000 jobs. At the same time, 24,000 jobs were lost in the retail sector, while the important manufacturing sector suffered a loss of 18,000 jobs.

Peering deeper into the future, the folks at Newsmax say that job growth is actually in full retreat, and the U.S. economy in full retreat mode right behind. "Job creation has slowed considerably since March 2006. Even more important, the number of hours worked by  manufacturing production workers has been trending significantly lower over the past year. Not surprisingly, we rarely (if ever) hear the major financial media or Wall Street “experts” comment on these trends."

The editorial also notes that the help-wanted sections of major newspapers are in decline, as well (although I would argue that's because fewer people rely on newspapers for their information these days, a fact reflected in subscription losses from major U.S. newspapers across the board.) But, as Newsmax points out, on-line job board ads fell by 2% last month, as well.

I'm inclined to agree with Newsmax that the rosy scenario painted by the U.S. Department of Labor, based on the last jobs report, ain't so rosy. We've had six years of sustained growth and we could well be topping out. And if we were, the jobs picture would be the first  place to go to verify that.

But, as Newsmax proves, you have to do a little digging first to get the real story.