Wall Street Next Week JANUARY 19, 2004

WALL STREET, NEXT WEEK

Financial Astrology for successful investors and traders"

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WALL STREET, NEXT WEEK: JANUARY 19, 2003
FINANCIAL ASTROLOGY FOR THE SUCCESSFUL INVESTOR AND TRADER

1. JANUARY MARKETS
2. UP STARS/DOWN STARS
3. ASTRONUT
4. QUOTES
5. ON THE WEB
6. LETTERS
7. AFUND LETTERS

MAD BULLS VS. SAD BEARS
My take on current corporate earnings is, not surprisingly, that markets have risen TOO FAR, TOO FAST. Next week there could be even greater Nasdaq heights. I don’t know if it will stop at 2150, 2200 or if it will go hyperbolic as in March 2000, and eventually be 2500. I DO KNOW Nasdaq WILL correct early February. Will this be a bullish 5-10% correction, or a bearish 15-20%, I don’t know. Trailing stops and further reduction of market exposure is prudently mandated no later than early February. We twice have issued general market warnings. The first one when the US dollar dropped to 90, and the second, when testing 85. I expect to issue a third such warning in February. While I have acknowledged the first few times, behind the scenes arrangements hold things together, the probability lessens each time.

The Real Stock Market Story of 2003 Financial Health
”Morningstar assigns Financial Health grades to all the stocks in our database (A is the best grade, and F the worst). These grades are based on interest-coverage ratios and debt levels. Here's the breakdown of 2003 stock returns by Financial Health grade:
Grade      Average Return
A                55.6%
B                68.9%
C                94.9%
D              115.8%
F               110.7%
So it really does appear true that the riskier the stock, the better its return last year.”
HW: No comment is necessary beyond this is a forecasted repeat of late 1999 and early 2000.

TRADERS: GOLD PIVOTS 408, 400 & 395.

INVESTORS: REDUCE MARKET EXPOSURE NO LATER THAN EARLY FEBRUARY.
IF YOU ARE BULLISH AND/OR MUST INVEST, THEN INCREASE PORTFOLIO EXPOSURE TO JAPAN, AS IT WILL OUT PERFORM GLOBALLY.

KEYDATES:        JANUARY 21, 22
DJIA:                   10600 PIVOT
NASDAQ:          MARCH 2000 LIKE VALUATIONS
GOLD:                ACCUMULATE ON WEAKNESS

MARKET SENTIMENT: OPTIMISM, RETHINK AND THEN SKY’S THE LIMIT!
DON’T BUY AND HOLD: THE STOCK MARKET IS ON BORROWED TIME. ELIMINATE MARGIN DEBT, BE HIGHLY LIQUID, AND KEEP A BALANCED AND DIVERSIFIED PORTFOLIO!
12/31/2003 EOD:    SPX   1111 DJIA 10453 NASDAQ 2003.
FAIR VALUE:        DJIA <10,000,    NASDAQ <2000, GOLD >400

2. “A lot of smart money is distributing China, while accumulating Japan. Should global markets continue to rally, Japan will outperform. Alternately, in a bearish scenario, much of the internal Japanese risk is being reduced, unlike the US markets, where it is increasing almost daily.”
WSNW subscribers may wish to review our S: Japan 2004 premium post.

“Most gold movement today is due to its dollar hedging qualities, as well as its traditional role as an inflation hedge. More short term dollar strengthening ahead of the G7 February meeting would be a new buying opportunity for precious metals. Ideally, we would like to rebuy XAU 88-92, e.g. PDG between 14 and 15, although we may do a first buy slightly higher by early February. I also recommend buying AFUND client Gallery for a potential Spring 2004 move, shortly after its US BB listing is approved.”
WSNW subscribers may wish to review our S: 2004 Gold premium post.

Unlike gold, diamond demand generally increases in bullish stock markets. At such times, it doesn’t matter that jewelry investments do not provide income as does real estate, bonds or dividend stocks. Historically, diamonds were the object of choice for anyone fleeing a country and/or wishing to avoid taxes, due to its small size and worldwide demand. Mountain Province (MPVI), a former AFUND client, is one sector play we continue to monitor, given its strong horoscope in 2004 and 2005. Above $2, I find it too pricey, but worth reviewing should a good pullback opportunity present itself again.

3. China has been refunding its 4 big bankrupt banks. In addition, barbarian banks from the US and Europe are anxious to acquire stakes, which is all to the good. Last week, a new Chinese IPO record was made, as the small vegetable grower Green’s IPO was 1,605 oversubscribed in Hong Kong. I see this as a classic market-topping signal; similar to Internet grocer Webvan’s IPO was for the Internet bubble. What comes next after next week’s Chinese New Year? More monkey antics until…? Our recommendation is to avoid investing in Chinese stocks at this time, unless you enjoy Nasdaq-like risk, with even less fundamental underpinnings.

4. "There is no doubt that we are back in the old days with the Nasdaq leading the upside. The bubble is back and it is pulling all the other indices with it. The demand for tech stocks is high, and an army of day traders around the world is pushing the Nasdaq higher and higher on momentum-driven style trading.
Tom Hougaard, chief market strategist, financial bookmakers City Index
HW: I believe a 3-6 month top is/will be in place within the next two weeks.

"Companies really have to exceed some high expectations to get rewarded. Those that just meet estimates -- it's just not good enough."
Pete Boockvar, equity strategist, Miller Tabak
HW: I just can’t imagine why investors are being so demanding, given today’s “reasonable” market valuations.

"The bull market in oil and gas is on its last gasps, absent something really unusual, and prices can only go lower."
Michael Lynch, president, Strategic Energy & Economic Research (SEER)
HW: I am also an energy bear. While fundamental models suggest overvaluation, most markets today are crazed. In order to sleep at night, I prefer simply to under weight energy stocks.

5. Earnings Season Brings Angst to Investors
“"On a short-term basis, the market is probably a little stretched, and vulnerable to disappointment," said Richard A. Dickson, senior market strategist with Lowry's Research Reports in Palm Beach, Fla. "Obviously, positive surprises could motivate buyers, but unless it's a major surprise it would be difficult for stocks to make headway."

Gazing in the Crystal Ball: 2004 Preview of Socially Responsible Investing Performance

Don't Buy 20, 30 Stocks; Concentrate On The Best Ones

6. READER: I begin to learn about the position of the planets and I have read that the dollar may have problems through summer 2005. Here in Holland we have also to make another hole in our belt.
HW: One consolation: I am rather optimistic for Holland as a global out performer in March 2004.

7. HERE WE TALK ABOUT AFUND CLIENTS
READER: Your IHI EPS projections seem to be missing the most important issue. The EPS projections are purely production driven. You’re assuming whatever is produced can be sold. Why? Most business failures occur because of inability to sell, and IHI doesn’t seem to have much to show on that dimension either. Also, you claim most JV partners feel they can recover their investment in two years. Why then aren’t they queuing up to start the JVs? Can you enlighten us about the sales aspect?
HW: Two good questions. My answer is that most potential JV partners are waiting to see more production at the home factory. To address the second, sales and marketing teams are being recruited. Please enquiry me again, if needed, after their March or April press release.

READER: US of course... I've been buying this [IHITF] for a while. I'll keep my fingers crossed - would love to see the stock back over $2 before I die... :-)
HW: Is that $2 US or Canadian?
READER: US.
HW: Perhaps this doesn’t matter as the two currencies ARE moving a lot closer: I see an .80CD$ before end of 2004. We may see $US2 – after either major orders are accepted, or there is runaway inflation and a global US dollar dump, whichever comes first! I believe the former scenario is likely to occur well before you expire! If you have been buying more IHI recently, you should have a relatively low ownership cost, and potentially, a very happy retirement because of it.
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