2005/2006 MARKET FORECASTS
It is NOT WHAT you know, but WHEN you know it.
© Henry Weingarten Last Updated:
Much of the following material has been serialized in WALL STREET, NEXT WEEK
and our subscriber
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This forecast was first posted on our web site in our
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2006 IS COMING!
IT WILL BE BLEAK. BE PREPARED.
PRSERVE CAPITAL: FOCUS ON PROTECTING
AGAINST DOWNSIDE RISK.
2005/2006 STOCK MARKETS (From WSNW May 23, 2005)
optimists believe the worst may be
already over, I don’t. It is true that earnings for companies in
& Poor's 500 index have risen. However, the outlook for the months
in question, as many companies have issued warnings about future growth
prospects. What's more, there are worries over high energy prices,
inflationary pressures and rising interest rates - and the potential
those factors could have on the economy. The LEI (Leading Economic
declined in April, as it had in March, February and January. The more
are recognized to be range based, the more investors will slowly have
markets decline in the form of a single or series of downturns, failed
attempts or even crashes? [We note the possibilities of a summer
hunting rally as well as a year end one.] Even so, each market rise
accompanied by increased risk vs. declining reward attributes. If a
2006, we have identified close to 40 potential looming crises (Pluto
events). A partial but not complete list
includes: China melt down, Yuan reevaluation after effects or Taiwan
global biomedical epidemics, e.g. Avian Flu, or bioterrorism outbreaks,
wars (China, EU), major hedge fund bankruptcies, a PBGC (Pension
Guaranty Corp.) shortfall crisis, major junk bond or emerging market
default, a bank derivative blowup, Fannie
plus possible assorted natural disasters. This list does not include
arising from higher interest in consumer credit, energy costs, and
consequences of the ongoing conflict in Iraq. The list goes on and on.
Greenspan and his soothing reassurances will be gone in 2006. Whether
31 when his term expires, or later until May 11 to become the
Fed chairman ever, he won’t be of much help post the May 17, 2006
Stock Exchange Solar Return. 2006 is likely to have more wars, rather
peace, whether in North Korea, Iran, India/Pakistan, etc.
The most ominous event we see intermediate
term is the US dollar decline ahead and “America for Sale”,
hopefully not a
we approach 2006, be prepared for increased risk
and market drops. Decide what will be
the maximum loss you are willing to take. The trend
towards increased risk aversion. CASH WILL BE KING, with conservative
buying the bonds of blue chip companies, selected REITs, shorter term
income, etc. Remember, the path of capital conservation entails a lower
it is the conservative offset for the risk you are not wiling to assume.
DANGER AHEAD WHILE AN
INTERMEDIATE TOP IS IMMIMENT
investors sell US
Less interest in US shares by foreign investors is one of the greatest
facing the US stock markets in H2 2005 and 2006. Last month
investments in U.S. securities dropped to $45.7-billion from
February. This is well below the
$65-billion+ needed to cover the U.S. current account deficit. Even many bullish
that until the Fed signals it is at or near the end of interest rate
markets will not break out far above of their recent trading ranges.
R/R, i.e. greatest risk and lowest reward is with the Nasdaq market
we project less than 1900 by Summer Why not!"
"The real issue for investors
is whether the economy slows
significantly next year, and how fast corporate profits
grow." FT Lex Column
Many savvy investment advisors believe the next few years will be a
decade of higher risk and lower market returns. I agree.
Intermediate Term, the 2004 US Presidential election was only One
of Seven Market-Driving Forces in 2005. The others are Terrorism,
Iraq, Oil, Valuation, Interest Rates and the Economy. Just as
Democrats and Republicans were roughly and highly evenly divided,
so are market Bears and Bulls today. The former see the cup as half
full with continued worries about the three "I"s: Iraq, Interest Rates
and Inflation that will result in further economic slowdown and reduced
corporate profits overall in 2005. The latter, while acknowledging that
there are many dangerous and difficult challenges ahead, view the post
October 25 markets not as a bear market rally, but as the beginning or
continuation of filling up a half empty economic cup. The two
sharply different worldviews are likely to continue to clash in H2
2005.[However, no later than H2 2006, we believe markets will declare
the Bears clear winners.] In such a yo-yo market, it is not
much macro economic
the quality of individual companies and the individual prospects that
should determine most stock buying in 2005. Furthermore, active trading
and/or frequent profit taking is required in order to sustain portfolio
growth. Five favorite sectors are alternative energy, health
care, mining, nanotechnology and VOIP.
Long Term, we consider the long term economic fallout of the
US Iraq invasion quite severe and believe that global markets can
retest or break their 2004 lows. As forecast,
more and more savvy international investors are moving some of
money out of the US stock market to invest in countries that they feel
are in better shape than the US. International Equities will outperform
domestic ones We still recommend US
in 2005 have up to 50% of their portfolio outside of US dollar
denominated assets, or use gold and currencies hedges for similar
increase use of Exchange traded funds [ETFs], which are passively
low-cost, efficient baskets of stocks that focus on countries,
sectors, regions or indices. Even market bulls are concerned about
specific asset classes and betting on individual sectors they
prefer. My view remains that stock selection continues to be paramount
and counts more than sector rotation. It is also as important as
timing! Further, while the internal Stock Market astrology, as in 2003
and 2004, is mixed, the external risk
potential continues to be
abnormally high. Looking
ahead, my question is
whether 2006 will show slow growth of less than 2%, no growth, or turn
classical recession. America will be on sale then. Hence we advise PRESERVE
CAPITAL: FOCUS ON PROTECTING AGAINST
Given that the traditional "Buy and Hold" investing strategy will
continue to under perform, we again recommend trading 50% in
"investing" portfolios in 2005. TAKE/PROTECT PROFITS CONTINUOUSLY.
DON'T BUY AND HOLD. THE STOCK MARKET REMAINS A RISKY, DANGEROUS
I ADVISE KEEPING A BALANCED AND DIVERSIFIED PORTFOLIO, AVOID MARGIN
DEBT AND BE CASH RICH.
There are five primary celestial and terrestrial phenomena affecting
world events and global markets in H2 2005/H1 2006:
- Saturn moving into Leo July
16 and Jupiter into Scorpio
- Jupiter makes the first of 3
squares to Saturn December 17,
- March 29, 2006 Total Solar Eclipse,
- The continuing World War on Terror
and the Iraq aftermath and
- Alan Greenspan retiring from the
Federal Reserve in 2006.
Four Big Investing Ideas
DOLLAR REMAINS UNDER PRESSURE
The US Dollar will weaken in H2 2005. The long
term structural problem of the US current account deficit has yet to be
dollar should remain in a secular bear market for years due to its
negative fundamentals. Unfortunately, for Americans, US interest rates
may rise not only for future inflationary worries, but also due to a
lower US dollar. Our US Dollar Index Fair Value
today is under .82, while .78 or lower is possible. While there
was a tradable Spring rally as forecast, it
is only short term and not a long term trend reversal. This
will occur when either the US changes its economic policies
(unlikely), or the US dollar is trading below .82 with stability, i.e.
.80-82 support seems likely to hold. As previously forecast, the
US Dollar will no longer be the world's sole
reserve currency. To minimize this danger, it
will become necessary for the FED to defend the US dollar or that
outright intervention from the US Treasury in the currency markets may
be necessary. Given the US dollar secular decline, we continue to
recommend that All investors need to diversify their investments
globally. Additionally, many blue chip foreign investments are more
attractive investments with stock prices cheaper by most valuation
measures: price to earnings, price to sales and price to book.
Our recommended US equity portfolios international stock
allocation remains 50%.
2. A WAR TIME ECONOMY: GUNS AND CAVIAR REDUX
These are extraordinary times, where geopolitical risk and
outlook continue to outweigh normal stock market considerations
trends. As this will take money away from more productive areas
of the economy, we are far from bullish intermediate
term. US government bond yields will rise due to
weakening foreign demand along with an increase in supply because of
massive tax cuts underway, as well as military adventures and
increased defense and homeland security spending. We could see a very
nasty bear market
in bonds. Remember: Life jackets, Deadbolts, Smoke and Fire
Alarms, etc. do NOT provide you with Financial security. Liquidity,
Global Diversification and hard assets such as gold DO offer some
GLOBAL HOUSE PRICES and THE
US HOUSING BUBBLE
"The U.S. housing market has become a bubble which will burst in
mid-2005, forcing the U.S. Federal Reserve to cut interest rates and
exposing the economy to the threat of deflation once again. Prices are
10% to 20% too high and will take roughly five years to fall."
Ian Morris, HSBC Securities USA
Globally, property prices remain at very high levels. They have
risen exorbitantly in relation to average income. A return to fair
value could happen by 1) a
fall in house prices or 2) by a rise in wages and rents. A
third possibility is that housing prices will stagnate for as
long as eight years. It could be said [The Economist] that house prices
are over-valued by up to 33% as low interest rates have allowed more
and more people to borrow large amounts to buy a home or investment
property. The Bank for International Settlements (BIS) researchers have
found that historically, the bigger the boom in house prices, the
bigger the bust. Central bankers are as likely to be concerned about
this as financial astrologers. Saturn in Cancer (home) suggests it is
than past time to begin (accelerate) reducing exposure to the still
robust housing sector.
Housing, along with Commodities and Physicals, can be viewed as an
Asset Class along with Stocks, Bonds and Cash by many investors.
Positively, there is the enjoyment factor: most woman would prefer to
have an additional 100K in a home than in a portfolio. Housing also
appeals to safety concerns in times of trouble, but home buying is
cooling. Record low interest rates have ended. Other negatives include
the fact that the ratio of home prices to home rental rates is too
high, while the value of individually owned residential property to
disposable income is at a 50 year high. Classically, Real Estate
weakens 12-24 months after a market collapse. Thanks to the Fed, this
did not happen when individual stock prices returned to pre-1998 pricing.
I still see the probability of a housing drop of 10-35% [depending on
location and individual property]. Despite favorable tax
along with continuing demand, many english speaking global housing
markets have peaked just before Saturn leaves Cancer (home) for Leo in
July 2005. Will this result in just slowing markets with a soft instead
of hard landing?
Optimists believe strong housing demand
will mitigate things resulting in a reversal of the McMansion
of bigger housing, lower quality homes and 40 year mortgages eventually
replacing 30 year ones. Pessimists believe positive factors such as
population growth is already factored into housing prices. Either way,
buyers will benefit more than sellers.
4. INFLATION AND THE HOUR GLASS OR BIFOCAL ECONOMY
Stock markets will benefit less from low interest rates.
US Bonds will take a hit, unless there is
more terrorism. Spin it as they may, the economy is not only slower
than many Wall Streeters believe, but it will get slightly worse before
it gets markedly better. Also the CPI has been significantly
understating inflation for years. Bill Gross of Pimco is quite correct
in pointing out the CPI
con job. It understates inflation (the cost of living as
well this year as well as last year). I recommend an allocation of of
25%-30% of one's US Bond portfolio into TIPS (Treasury Inflation
Protection Securities) for non-taxable accounts and I bonds for
taxable ones and/or Canadian Real Return Bonds. Commodities, especially
gold, is another appropriate hedge for many portfolios. We expect
to see $500 gold perhaps as early as Summer 2005. Despite healthy
dividends, we will continue
to underweight REITS in H2 2005. The emperor has no clothes and is
Alan Greenspan: Playing
the Fool Or the Scoundrel? What would happen should the public lose
faith in Alan's credibility? I shudder to think. No matter, he is
retiring early next year.
WILL US FED POLICY PREVENT A JAPANESE
OUTCOME OR JUST DELAY IT?
HOW WILL FUTURE US MILITARY ADVENTURES HELP OR HINDER
THE WAR ON TERROR?
WILL THE US DOLLAR FIGHT BACK OR REALLY TAKE A DIVE?
Global Stock markets in 2005/2006
will be determined largely
by answering five questions:
Q1: Will the US Dollar remain the sole global reserve
Q2: Will Energy Prices Stay High?
Q3: Who will be helped/hurt the most by the lower/higher US
Q4: What P/e's will investors be willing to pay for
modest corporate growth?
Q5: Where are interest rates headed and when and where will the
Fed stop increasing rates?
TWO WILD CARDS
1) New rules
by the Financial Accounting Standards Board (FASB) call for publicly
traded companies to record employee stock options as an expensive
beginning with their first fiscal reporting period after June 15. This
could slash the reported earnings of many big companies, and this requirement for
expensing options is likely to result in a strong
Nasdaq midyear fall, as it would reduce up to 44% the profits of
a number of Nasdaq high flyers.
2) The partial privatization of social security would result in a stock
market bonus, but a US bond hit. Fortunately, this ill advised proposal
is becoming less likely to be enacted.
SHORTING AND MARKET NEUTRAL INVESTING FOR EXPERIENCED INVESTORS
In order to sleep soundly at night, I recommend a Hedge Fund style
Market Neutral Strategy for much of 2005. This involves both buying
under valued and selling short overvalued stocks. This is often best
done in industry pairs: going long quality stocks and shorting lower
quality ones, as it involves the smallest risk, but the most
work. Alternately, stocks can be hedged against their individual sector
membership or the overall market: Buying a stock and selling its sector
or broad market index, or Selling a stock and buying its sector index
or the overall market. For example, take our favorite 2005/2006
trading short Google (GOOG), which has a history very similar to Yahoo
mania. A GOOG short could be paired with Buying another Internut like
YHOO. Or one could buy the Internet Index (INX), for possibly
more profitability, Buy the Nasdaq 100 or SPX respectively, while
maintaining a GOOG short (until well past 108).
If you are bullish, I would recommend a long/short ratio of 2-1 for
market neutral strategies.
If you incline more to the bearish camp as I do, then a long/short
ratio of 1-1 and 1-2 (depending on the short term astrological trend)
HOW HIGH IS UP? HOW LOW IS LOW?
DJIA: 8850 to 10750
SPX: 985 to 1215
VALUE WITH GROWTH
We would be glad to be less active traders and more
traditional buy and hold cosmic value investors if only....
In 2005, we recommend holding some [up to 30%] Blue Chip dividend
stocks which offer a greater total return beyond cash in the
bank. Additionally, we look to commodities [10%-15%], currencies [10%]
small cap trading [5%-15%
depending on account risk profile] for double digit 2005 portfolio
returns. The mania for M&A will gradually be replaced by
Capital Preservation remains important
for global investors; hence, we stress caution. Flat and range bound
markets will favor quality issues. Alternately, Market timing is
another key to
above average returns.
Today most investors realize classic "Buy and Hold" is passé:
Stock picking and market timing will continue to rule in 2005.
Successful investing depends on knowing:
When all the good news has already been factored into the share
price, at what price is the valuation just too high?
When all the bad news has already been factored into the share price,
at what price is the valuation too cheap?
- We believe only 30% of a portfolio should
use the investment strategy paradigm of BUY and HOLD Value
or Growth stocks with at least reasonable valuations based on current
and future profits.
- Any and all investing profits need to be protected against future
bear assaults in 2005.
- Trade more (50% of portfolio)
and take/protect profits at 10%-20% profit points for long term
LEARN THE LESSONS OF 2000, THEY REPEATED IN 2003 AND 2004 WITH
EXCESSIVE SPECULATION AND WILL AGAIN IN 2005:
INVESTORS SHOULD BUY AND HOLD STOCKS
IN 2005/2006 THAT ARE:
1) Buy carefully and when stock valuation becomes super frothy
2) Be careful about owning stocks that are “priced to
can only disappoint.
3) It is NEVER “different this time.”
4) Ultimately, profits matter.
1) Profitable, well managed companies,
2) P/E* under 15 for Growth and under 12 for
3) A PEG <1.4,
or undervalued by 10% or more, or dividend
yields of 5% or more.
*After allowing for pension liabilities and
ACCUMULATE CANADA and KOREA ON WEAKNESS
TRADE THE UNITED STATES
The Horoscope is a MAP of TIME and PLACE - here is a brief overview
of selected global markets:
Country risk is real. Despite globalization, sophisticated investors
today are rightly concerned about being overly invested in any one
country or currency.
EUROPE - One
global alternative to the US
We are buyers of Euros under 126, sellers above 136 Our
Fair value is
131, but subject to upwards revision should the Yuan repeg to a
basket of currencies or a similar move by other countries to keep the
Dollar the sole world reserve currency. However, we also note that if
Gold targets $500, the Euro is likely to
target 136-140. We plan to trade accordingly.
- HOLLAND - Euro Market Out Perform.
- ENGLAND -Any further
City Out Performance over Wall Street will
be largely due to out performance of the British Pound. This is
primarily a currency hedge in H2 2005 only.
- SWITZERLAND: The worst is over, continue slow accumulation.
Note: WSNW subscribers can review our favorite S: Dow
Jones Stoxx 50 stocks.
NORTH AMERICA - Traders paradise
CANADA -CANADA IS FOR SALE: WHY NOT JOIN THE PARTY?
One major reason is that Canada's trade and budget surpluses
continue to contrast with large US deficits. We are delighted to have
our northern neighbor as our favorite G8 country in 2005. Canada's Competitive Advantages-
Economist Intelligence Unit states that Canada will be the best
the G-7 to invest and do business between 2005-2009. We agree.As
investors diversify away from US dollar assets,
more US investors should look at Canada as one attractive alternative
for at least 10% of their portfolio next year. Equities [EWC] are
cheaper relative to US markets. This should also keep Canadian
investors happy, at least relative to the US in 2005. Resource rich, it
will be the target of significant M&A to the extend allowed by the
government. Fortunately for Canada lovers such as yours truly, 2005
will be stellar for Canada, and the loonie will reapproach .85 again in
H2 2005. While a minority of Canadian economists forecast .90 and even
par with the US dollar, the damage to Canadian manufacturing would be
too great. We recommend sophisticated investors buy Canadian Bonds and
Sell US Bonds as US interest rates will grow faster than Canadian ones
as their Central Bank tries to stem the rising Loonie. Also,
I recommend researching Canada's Power Book of high dividend paying - 50
Top Income Trusts. Chasing
Higher Yields Up North
MEXICO - Mexico sends 90% of
its exports to the United States and its fortunes are increasingly tied
to its northern NAFTA neighbor. The amount of money shipped to Mexican
families from relatives in the United States today surpasses foreign
investment as the country's second most important source of revenues
after oil. In 2005, we continue to look for potential take over targets
sporting reasonable valuations or companies that can compete in the US
for the rising Hispanic consumer market share.
- UNITED STATES - AMERICA WILL
SOON BE GOING ON SALE! Is a new era
of low growth or a protracted
Japan-style recession awaiting the US? Unfortunately, the US remains a
nation at war
with terrorism concerns likely far into the future. GMI
WorldPoll shows that unpopular U.S. foreign policies threaten
and global market share for many American based companies such as
Airlines (AA) and McDonalds (MCD). Today, 20% of international
are less likely to travel to U.S. or purchase American products
services due to U.S. war in Iraq and unilateral foreign policy. This
of US brands will increase in 2005. Also record budget deficits makes
further tax incentives for consumers unlikely. The enormous US twin
trade and budget deficits make the US Dollar a potential time bomb: It
is no longer as safe a haven given massive budget deficits and the War
on Terror. US Bonds are by
and large unattractive except for Treasury Inflation
Protected Securities or a similar alternative I Bonds.
Positively, thanks to the weaker US dollar intermediate term, select US
exporters will benefit. Additionally, more American firms will become
M&A take over targets. Ultimately, US stocks will appear to be
global bargains when the US dollar has
dropped further and/or the currency risk has been reduced. This could
happen as soon as H2 2005. Still, overall, many former investor
favorites will disappoint as investors sell rallies to "get
even". Corporate earnings
are decelerating, energy prices are likely to remain high and interest
rates are on the rise, However, given one can trade stocks here
for 10-25% appreciation/depreciation a day/week, this remains TRADERS
HEAVEN. Forthcoming 2006: AMERICA
SALE by which time Americans will have come to realize they are not as
rich as they once were.
ASIA/PACIFIC - Intermediate term investment opportunities in
India and China.
Long term, China and Asia could be the fastest growing area in the
world 2010-2030 and the world's largest economy in 2050. It is only a
matter of time before Asia is no longer so dependent upon American
consumer markets to thrive.
JAPAN - For too long, Japan has depended on the US consumer and is
now partially substituting the Chinese consumer instead of domestic
consumption. As forecast, there has been a recovery in the Japanese
economy and the Nikkei reached our 12,000+ price target in early
2004. Our mantra on JAPAN INC. is "You have Japanese
products in your home; why don't you have Japanese stocks in your
portfolio?" Accordingly, we would accumulate Japan upon a
test of 10,600 and strongly buy 9800-10200 or
after any strong global stock market drop. Most believe that the Yen
will strongly benefit from a Chinese reevaluation of the Yen. So there
is also a strong currency kicker benefit here in H2 2005/2006.
- HONG KONG/CHINA - How strong will the Chinese market be to and
after the 2008 Olympic Games in Beijing? More to the point, will its
current slowdown end in a soft or hard landing? The 2008 Olympics not
withstanding, too many of the mainland's industries are a mess and its
stock market is overloaded with poor quality state owned companies.
Increasingly, Chinese companies are being listed on the US stock
market. I find this somewhat ironic. Until this is rightly addressed
and Chinese leaders make dramatic moves
to reform the country's financial system, we continue to recommend
great caution. On the plus side, sooner, rather than later, the
Yuan is going UP, whether a free float or just a one time appreciation.
China will be the third largest economy in the world before 2020, after
US and Euroland. Shanghai World Financial Center, with 101 floors, is
expected to be the tallest building in the world when completed
brand names prepare to go global. “The Chinese government
has said it wants at least 50 Chinese firms in the Fortune 500 list of
the world's largest companies by 2010.”
Yet its public debt is over 100% GDP if you include
"off-balance sheet" accounting. Non-performing loans held by China's
banks are 25% to 50% of GDP making China highly vulnerable to an
economic downturn. China's banks have 4.14 trillion Yuan ($500
billion) of bad loans, or more than the
total at lenders in Japan, whose $4.6 trillion economy is almost four
times larger. Nursing the banking sector
back to health before foreign banks get unfettered access to China in
2006 is critical to maintaining China's rapid economic growth. I prefer
to wait and buy AFTER the collapse of a big bank or two, given my
predilection for sound sleep. Abuses on China's stock markets
listed companies have long struggled with abuses by their controlling
Hong Kong is slightly more attractive, although fundamentals often seem
to matter little on the Hang Seng, and its stock market acts closer to
legalized gambling than any other major one in the world. On the bright
side, Hong Kong benefits from a spill-over effect from Chinese
mainland's trade. As for buying directly on the Shanghai and Shenzhen
stock exchanges, good luck or should I say "good connections" matter!
Despite a far better economy, we also remain reluctant to invest in
Taiwanese markets, with the exception of world class computer maker
ACER (ACEIF), unless compensated for potential "war like" conditions in
- KOREA - Even though growth is slowing and a rising won is
we continue to like blue chip giants Korea Telecomm (KT), LG
Electronics and LG Philips (LPL). We still anticipate a peace dividend
in 2005 or 2006 and a MAJOR benefit from Chinese Yuan appreciation. The
way for US investors to buy is through the Korea Fund (KF) or Country
Ishare (EWY). Like Taiwan, this is largely a bet on the US
- INDIA - This
story is now known to much bigger than just computer and pharmaceutical
blue chips. Growth of 7.5%+ is likely to make India the world's fastest
growing economy after China. Global investors have finally noticed the
giant sucking sound of thousands of US and UK jobs being outsourced to
India. Goldman Sachs predicts that India will be the third largest
economy by 2035. IIF or IFN are two closed end India funds, and
the best way for US investors to invest (not trade) in India. Still,
for 2005, we maintain an Underweight rating.
- AUSTRALASIA - Australia's growing trade deficit and the
weakening housing market will continue to slow economic growth in
2005/2006. However, resource rich, there are a record number of
projects is under way in Australia's mining and energy sector.
This combination makes this a slightly out perform country
rating, but no longer a buy for a much stronger Aussie $ as was the
case until recently.
- OTHER TIGERS AND DRAGONS - We prefer Singapore,
Thailand and Malaysia to Indonesia and the Philippines.
OTHER- Opportunities for savvy investors ONLY .
ISRAEL - Israel's technology sector is desirable given its highly
skilled labor force and favorable tax treatment. Unfortunately, it is
best to buy only when there is blood in the streets, which happens all
LATIN AMERICA - Accumulate on weakness
for appropriate multi-year long term investment portfolios and longer
term for multi-national corporate investments.
We continue to advise caution for emerging markets unless you
monitor them very closely. There is always an uncomfortably large
possibility of shocking negative "surprises." They "behave like
rich-country ones on speed, both up and down". It is very important for
investors to distinguish between high and low risk countries. In
addition to the obvious political and currency risk, many are too
loosely regulated. By the end of this decade, many forecasters believe
we will see greater economic growth coming from a combined India,
China, Brazil and Russia than
from the established economies of the US, Canada and Europe.
Until then, one can expect plenty of geopolitical risk. For example,
the actions against Yukos and Khodorkovsky should be an investor red
flag about Russia's commitment to rule of law and protection of
shareholder and investor rights.
Current AFUND ratings on the BIG Four Emerging Markets are: Brazil
(Accumulate on Weakness), China (Wait), India (Watch) and Russia
(AVOID). In 2006, the global investing landscape may be dramatically
WSNW subscribers should periodically review our S: AFUND GLOBAL 12 - for
our favorite global blue chip long term investments.
Traders believe that "Making money in the market is all about
Timing". The "Buy And Hold" climate we used to have in the US
stock market is long PAST HISTORY. Since 2000, it has become a
"Market Timing" and “Stock Picking” environment.
best stocks that have Value AND Growth. Corporate profits for more well
managed and sufficiently capitalized companies should rise modestly,
helped by the low interest rates.
Despite the fact that we do live in interesting times, short term we
repeat last year's mantra:
VALUE plus GROWTH is BEST and Trade for short term profit
10-20% moves. WSNW subscribers can find trading ideas from our Stock of the Month Club
Both Jupiter and Saturn are changing signs in H2 2005
- 2005: The fifth year of each decade has been positive
since 1881. However, we believe we are still within a larger secular
bear market cycle. Jupiter is in waning square to Saturn December 17
(with subsequent passes in June 22 and October 25, 2006).
- Public enthusiasm to spend, spend, spend will be subdued as the
US job market continues to go through structural changes and more
better paying jobs are exported to China and India. This "wageless
recovery" in most G7 countries results in economic growth that has
failed to raise
worker's pay above the rate of real inflation: Consumers are
still in a financially weak position
with little pent-up demand. Further rises in interest rates
will dampen consumer willingness to spend and
borrow. If/when the US housing markets corrects signficantly, the
will be whether the US enters a recession or worse. The bottom line:
Our advice to individuals and businesses is to increase cash flow
(profits/income - expenses) by
10% next year.
- There is a high likelihood that the 2005 market top was in Q1
2005. Be that as it may, unlike 2004, we
believe the Dow will outperform the SP 500 in 2005. A Buy
DOW/Sell SPX as well as Buy DOW/Sell NASDAQ market neutral strategy
should result in a positive, above
cash in the bank conservative return on investment. If not, we
are likely to have only minimal
market exposure in mid Q2/Q3, especially to Nasdaq given upcoming new
FASB option accounting rules.
Saturn enters Leo in July 16th, while Jupiter
will enter Scorpio
October 26, 2005 which will cosmically bestow favor on the Business
Intelligence, Health Science, Mining, Nanotechnology, VOIP/Wireless
sectors as well as grow
bankruptcy - a
challenge for banking, business intelligence (spying) and
pollution [classic scorpio themes].
2006: In the 4 year presidential cycle, this is often a down year
(e.g. 2002, 1998 etc.). March
29, 2006 is a Total Solar Eclipse. In 2006 Jupiter squares Neptune
1/28, 3/16 and 9/24. Also we have the first pass of Saturn opposite
Neptune 8/31 and again in 2007 (2/28) and 6/25).
2007: Jupiter Square Uranus: 1/22, 5/11, 10/9 and then in December
2007: Jupiter will be conjunct Pluto. Two Total Lunar Eclipses March 03
and August 28, 2007.
The low point of the nodal cycle is reached in 2008, when Pluto
ingresses into Capricorn with one
Total Lunar Eclipse February 21 and a Total Solar Eclipse over China
Jupiter conjunct Neptune in 2009: 5/27, 7/10, 12/21. Total Solar
Eclipse July 22, 2009 (India/China).
The next epic shifting planetary configurations in 2010/2011 of
Jupiter conjunct Uranus AND Jupiter opposition Saturn as well as Uranus
entering Aries and Neptune entering Pisces and a total Solar Eclipse
11, 2010 and
a Total Lunar Eclipse December 21, 2010. We also have a rare transit of
Venus June 6, 2012. Then a Total eclipse of the Sun 14
November 2012. ALL precede the December 21, 2012 Mayan end
date. Also we have 7, yes 7 Uranus-Pluto squares from June 24,
2012-March 17, 2015--Wowie! Some of the more extreme forecasts made for
this time period include alien visitations/invasions, catastrophic
asteroid impacts, violent volcanic eruptions and massive earthquakes.
We will give our views here no later than midnight 12/20/2009.
Sector based investing, while no longer replacing country based
approaches to global investing, still is very important.
Favorite 2005/2006 future themes are: Biotechnology, Hydrogen/Solar
Nanotechnology/Robotics and Wind/Water.
The themes of Technology, Communications and Health Care continue to
WSNW subscribers please note: we update our coverage on the following
industry sectors on our premium Silver posting area: S:
COMPUTERS, S: ENERGY, S: HEALTH CARE, and S: MINING.
Most of our 2005/2006 favored sector themes are defensive:
- People are living longer and there will be growing demand for
health products and care. US health care expenses total more than 14%
of the total U.S. economy. This is more than Americans spend on food,
housing and microcap Guardian Technologiies (GDTI), or automobiles. The
easiest way to play
this sector is to buy the iShares Global Healthcare Sector Index fund
(IXJ). Uranus re-entered Pisces in late December 2003, which helps
Biotechs. The best biotechs to buy are those with revenue generating
products increasingly close to launch. The easiest way to play this
sector is to either market the market leader Amgen (AMGN) or to buy a
basket of 20 with the Merrill Lynch Biotech HOLDRS (BBH). Another way
is our March 2005 Stock
of the Month club pick Enzo Biochem (ENZ), which in addition to
biotechnology has several other profitable health businesses. Long term
investors should look for companies that will benefit from the
increasing baby boomer aging population: a baby boomer becomes a senior
citizen every 7.5
seconds! Healthcare, especially for
retiring baby boomers will receive more attention and money as time
goes by, e.g. Sunrise Assisted Living (SRZ), American Medical Alert
(AMAC), Candela (CLZR), and Lifeline Systems (LIFE). These range from
assisted living communities and medical alert notification to
laboratory testing companies to companies that provide orthopedic care
and dental products. Perhaps most important, and certainly closer to my
heart and soul, are traditional SRI favorites such as Herbs, Natural
Foods, Vitamins and Natural Healing Therapies, which will continue to
grow market share as Cultural Creatives age. Personal care company
Church and Dwight (CWD) is a safe and boring buy, but along with many
natural food companies shares, are expensive, e.g. Hain Celestial
(HANS), NBTY (NTY) and Whole Foods (WFMI). They should be considered
when their share pricing again intersects with reality as demand for
health foods and sustainable practices as part of a healthy lifestyle
fortunately continue to grow.
- Jupiter's move into Scorpio adds intelligence to holds in the
sector. Two potential picks are L-3 Communications (LLL) and
LOJACK (LOJN). While
still expensive, especially before Microsoft enters, computer security
companies we are watching are Checkpoint (CHKP), Trend Micro
(TMIC) and VeriSign (VRSN).
- Long-range energy trends remain bullish,
with expectations that demands from nations like China and India would
keep supplies tight.In
future, we hope to see SRI
favorite Fuel Cell, Solar and Wind
companies as suitable intermediate term SRI investments. One
reasonable long term play is Fuel cell supplier
Quantum Technologies (QTWW). Two interesting small caps we
continue to watch are: Day Star Technology [DSTI] and Solar
(WWAT). As for shelter, we remain hopeful about our smallcap
client International Hi-Tech Industries.
The number two and fastest growing beverage is Water. Growth has been
spectacular in a number of countries, with bottled water fast becoming
the norm for in home and on the move hydration. Health and wellness has
been a big driver for the bottled water business. Also the demand for
providing clean water and recyling dirty water is
surging. Unfortunately, disputes over water are
possible causes for war in the 21st century. German RWE and French SUEZ
are serious global players, while American Stat Water (AWR), Pentair
(PNR), Vermont Pure (VPR) and Aqua America (PSC) are good alternative
domestic choices in conservative portfolios. Treatment stocks Calgon
(CCC) and Watts Water Technologies Inc (WTS) ,Waste management
(Waste) are safe long term holds. Calling
as in Black and Yellow, may not be much of an exaggeration.]
- The Nanotechnology Research and Development Act authorizes $3.7
billion in federal funds for nanotechnology, the science of building
new products and devices by manipulating molecules and atoms. Today,
most Nanotechnology investments are largely venture capital plays or
early stage R & D developments. However, the hype will grow, if not
the reality. The prefix "Nano" in a company name will have a similar
effect to the suffix ".com" last century.
- The cheapest long term protection against a US Dollar decline
is GOLD. Geopolitical
uncertainty, war, global economic
sluggishness and a weak U.S. dollar are usually good for gold
companies. The major factor providing intermediate/long term support
for gold is that a further decline in the US dollar is practically
inevitable. These are the times we like to buy. We have a $500
target rise possible in/by August 2005. Just as IBM and GE are
bell weathers for DOW, so is Newmont (NEM) for gold in BIG money
portfolios. My other favorite major is Barrick (ABX). Our Favorite
Midcaps are Nova Gold (NG), Glamis Gold (GLG) and Meridian (MDG). Other
commodities may also do well as a hedge . While
I do not favor the housing industry at this time, three related stocks
that may outperform are: Cemex (CX), Lafarge (LAF) and Plum
Creek Timber (PCL).
- Wireless and VOIP.While the
three rich dividend
paying baby bells BLS, SBC and VZ still maintain good financial
profitability, they currently offer somewhat limited growth potential.
The new hot
key application continues to be Voice over IP (VOIP). Accordingly,
we are watching with interest Cisco, the obvious major winner here,
much smaller companies that stand to benefit: DDDC, TRIN, VOII and
YAKC. Additionally, the wireless area is growing and we are
watching infrastructure plays such as ICOA and Gigabeam (GGBM)
Markets in 2005 and 2006 will continue to be more a
stock pickers market, than a
sector based one.
Having my Moon in Libra, my Stock Selection is both:
TOP DOWN: country/currency, bourse/sector,
individual stock and
BOTTOM UP : strong astrological and/or
I like to begin with one or more of the following 4 criteria:
A: CASH RICH, WELL MANAGED AND
B: UNLOVED BUT UNDERVALUED,
C: POSITIVE MOMENTUM AND
D: GOOD HOROSCOPE OR IN AN
ASTROLOGICALLY FAVORED SECTOR:
1) Saturn in Leo
We again are looking to some cash rich dividend paying global blue
chips. These are companies that are prospering by gaining market share
and buying "cheap" assets during this economic slowdown over small and
midcaps. These are companies that will become far stronger in the
long term. Our game plan is to invest conservatively, but due to
recent high market volatility and increasingly compressed market
cycles, we now advise trading all accounts more actively, at
least 50% of portfolio holdings! Note: European and Asian stocks may NO
longer rise and fall fully in sync with US markets as currency trading
brings more wild short term swings, and when the US dollar resumes its
secular decline. WSNW subscribers should periodically review our
S: AFUND GLOBAL 12 - for our favorite blue chip long term
2) Jupiter In Scorpio [Mining, Health Care,
Summer/Fall 2005's favorite strategy will be defensive: Market Neutral
Buying a strong stock while shorting an appropriate index (SPX or
Nasdaq), or Pairs Trading - buying a strong company and selling a weak
one in the same sector usually makes money whether the market moves up,
down or sideways. Until then, we will not so much be investing as doing
short term trades such as buying January effect stocks or periodically
Nasdaq Internut-like fantasies.
Nine selected Investing themes follow. For more and updates, WSNW subscribers may
visit our AFUND premium
1. The US dollar will
fall again, select Country I-Shares or Foreign Blue Chip
companies to hedge:
2. Share buybacks and dividend paying stocks
are always desirable in our eyes. Historically, we always like
undervalued stocks, especially if coupled with a yield greater than the
classic value buy signal of 5%. Companies that pay dividends posted a
total return of 18.35% vs. 13.65% for non-payers. We excpect the same
relative out performance in 2005.Given
Saturn remains in Cancer, we
dramatically reduced our previously favored REIT exposure
while we wait for more of a downward real estate price adjustment.
Instead we recommend ishares Dow Jones Select Divident Index (DVY) and
Canada's Power Book of high dividend paying - 50
Top Income Trusts. We also like stocks that are 10% or more
undervalued or potential M&A acquisition candidates.
- Canada (EWC):
Outperform. Barrick Gold (ABX), Enerplus (ERF), SunOptica
(SKTL) and TransCanada
- Japan (EWJ):
Shiseido (SSDOY), Sony (SNE), Toyota (TM) and Trend Micro (TMIC)
- Korea (EWY)- Korea Telecomm (KT), Lucky Gold Philips (LGL)
and Samsung (SSNGF)
AFUND GLOBAL 12
WSNW subscribers may wish to read our S: Income&
Dividend stocks post for more.
DJIA Our FAVORITE H 2005 stock
will be Intel (INTC). Others are defensive:
Pfizer (PFE) and secondarily, American International Group (AIG) and
Johnson and Johnson (JNJ). While companies
such as General Motors (GM) will continue to be highly challenged in
2005 for obvious reasons, it is perhaps surprising that Dow bellweather
General Electric [GE] will also under perform. Citibank (C), Intel
(INTC), JPMorgan (JPM) and possibly Merck
(MRK) are likely to
outperform H2 and Q4 2005. However, these days even Blue Chip
stocks have to be traded, not "buy and held" for better than 10%
returns in 2005.
4. STOCKS FOR UNCERTAIN TIMES
Gold, entertainment and consumer staples have often outperformed in
times. Such stocks are to be watched and accumulated on weakness before
market bulls become concerned. Also considered traditional safe havens
in times of uncertainty are utilities and property trusts. However,
deregulation and future interest rate increases will make them less
attractive in 2005.
Our S: Stocks for
Uncertain Times is a defensive, lower risk value oriented portfolio
that allows one to sleep better at night even if there is more
terrorism or the "recovery" takes time and is not on "TV" time. Also
included are income oriented stocks as well as an SRI component to feel
good about, even if one is not making a ton of money. This,
along with Health care, are our favorite sectors to buy and hold
during market weakness.
5. JUPITER IN SCORPIO
Business Intelligence, Health Care, Mining, Nanotechnology and
6. FUTURE TECHNOLOGIES
Even before we became one of the first Apple dealers in NYC, we
historically have liked betting on emerging technologies. This
we recommend doing in a basket of stocks, because this is a high
investment that is best done in a diversified manner. Also, I don't
like to pay too much of a premium over value for longer term
Note: Given an inevitable future boom-bust cycles, the "safe" play is
the equipment sellers who always make money. After the Klondike and
California gold rush, most miners went home broke. The real money was
made by freighters and merchants who brought and marketed supplies. So
too with Biotechs, the Internet and Nanotechnology today. For example
about 1,200 of the roughly 1,500 companies involved globally in
nanotechnology are start-ups, and obviously many will disappear.
Our 2005 four favorite FT sectors are:
BIOTECHNOLOGY: e.g. BBH and IBB or heavyweights Amgen (AMGN) and
Genentech (DNA) can be trading buys on strong pullbacks. I prefer
to invest in companies that have multiple products in clinical
development. Another is our March 2005 Stock of the month
pick Enzo (ENZ), which also has a stable health business unit as well
as undervalued IP (Intellectual Property) in addition to the usual
potentially risky biotech home run.
CLEAN AND SUCCESSOR ENERGY: e.g. The WilderHill Clean Energy Index
[ECO], Vestas,and Gamesa.
Watch: DayStar Technologies (DSTI), FuelCell Energy (FCEL), Energy
Conversion Devices (ENER), Hydrogenics (HYGS), Intermagnetics General
Corporation (IMGC), Mechanical Technology (MKTY), Quantum Technologies
NANOTECHNOLOGY: e.g. NNZ or Veeco Instruments (VECO), FEI (FEIC)
and watch Altair Nanontechnologies (ALTI) and Lumera (LMRA). Also you
can research either Harris & Harris Group (TINY) or its portfolio
VOIP/Wireless: Voice over IP (VOIP). The new hot
key application continues to be Voice over IP (VOIP). Accordingly,
we are watching with interest Cisco, the obvious major winner here,
much smaller companies that stand to benefit: DDDC and
VOII. Additionally, the wireless area is growing and we are
watching infrastructure plays such as microcap ICOA and GGBMW.
Forthcoming in 2006/2007 we plan to add ROBOTICS coverage.
7. SRI STOCKS
STOCK OF THE MONTH CLUB PICKS
Given the increasing risks to global sustainability, we believe there
is a corresponding increasing need for increasing exposure to SRI
stocks in one's long term investing portfolio. One list to refer
to annually for an initial stock screen is SustainableBusiness.com's
annual list of the 20
World's Top Sustainable Stocks. Another is to periodically
check our Neptune Fund selections.
Our Stock of the Month Club
pick philosophy is to look for a minimum
of 15-20% appreciation within four to six month. Thereafter, we take
profits or use trailing stop losses. Conversely, as intermediate term
investments (not trades), if there is a 15-20% loss, we either
double up or exit depending on any news, market conditions and
factors at the time.
These monthly stock picks are emailed in real time to all Wall Street,
Next Week Subscribers.
More aggressive investors and traders may wish to also follow our new SEASONED SPECULATOR picks.
9. AFUND CLIENTS
Business Astrologers know that the best way to predict the future
With strong Disclaimers
and with an informed but obviously biased view, I am doing my best to
help create investor wealth for client companies we consult for
International High Tech Industries [IHITF],
Surfnet (SFNM) and TNX Television (TNXTE).
Since May 2, 1988 I have established a superior forecasting record
primarily due to my knowledge of financial astrology. While not perfect
as some critics would demand, my precision and accuracy is appreciated
by many professional traders and investors. As more of our
forecasting is now private and contracted to money managers, it is my
intention to have other financial astrologers and money managers
contribute more on my web site in the future.
Latest sample performance figures at AFUND Performance.
(c) 2000, 2001, 2002, 2003, 2004,
2005. Please read our Full Disclaimer:
The Astrologers Fund. No part of this report may be
reproduced or distributed in any form or by any means, except for brief
passages quoted for review without the prior written permission of the
ALWAYS CHECK WITH YOUR LICENSED FINANCIAL PLANNER
OR BROKER BEFORE BUYING OR SELLING ON THE RECOMMENDATIONS OF THE
DISCLAIMER: PAST RESULTS ARE NOT NECESSARILY
INDICATIVE OF FUTURE FORECASTING ACCURACY OR PROFITABLE TRADING RESULTS.
At the time of this writing AFUND clients IHITF, TNXTE and SFNM are
currently paying AFUND clients. Please read our full Disclaimer
for past payments and more information.
The Astrologers Fund Accepts No Liability Whatsoever
For Any Loss Arising from Any Use Of Its Report Or It's Contents. The
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and/or Market Instruments Mentioned And May Buy Or Sell At Any Time
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Or Sell Securities, Bonds, Options Or Futures .