Wall Street Next Week JULY 12, 2004

WALL STREET, NEXT WEEK
Financial Astrology for successful investors and traders"

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WALL STREET, NEXT WEEK: JULY 12, 2004
FINANCIAL ASTROLOGY FOR THE SUCCESSFUL INVESTOR AND TRADER

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

JULY MARKET REALITY CHECK:
GREAT EXPECTATIONS MET OR HIGHER INFLATION & SLOWER GLOBAL GROWTH?

Last week General Electric (GE) reported second-quarter earnings of 38 cents a share on revenue of $37 billion, beating Wall Street expectations of 37 cents a share. Yes, you guessed it, by a whole penny. Not only did GE report second-quarter earnings that exceeded Wall Street guidance by one penny per share, as chairman and CEO Jeff Immelt said, "This is the best economy we've seen in years.” Despite that earnings were flat with a year ago. GE believes it will achieve EPS growth of 10% to 15% in 2005.
Our view: GE is overvalued above 26. Short term we rate it market perform, intermediate term a slight out perform.

As for Yahoo’s surging revenue and profits, we cannot sanely justify any Internut at 100 p/e. Given our intermediate term Yahoo growth forecast is below 100% (75%? 50%%), Yahoo is currently one of our favorite trading shorts above our P1 target of 25.

NO INFLATION WATCH
Alcoa (AA), the world's largest aluminum maker, said Friday it raised all 2xxx and 7xxx sheet and plate product prices by 5% and all 6xxx sheet and plate product prices by 10 cents per pound.

Global household debt is at record levels, with the ratio of debt to disposable income in advanced countries ~110% TODAY vs. 90% in 1990. Some fear that the U.S. could now be facing the worst of all worlds with inflation pressures heading higher at the same time that economic growth slows.
The truth, as we see it, is that we have Bifocal inflation:
Clothing, furniture, computer & communications remain low, while the more important but underweighted essential items: food, shelter, energy, education, & insurance take an increasing toll on the average American consumer. Could this be one reason Gold is now (almost solidly) above $400- the classic “inflation” threshold?

TRADERS: Monday is a new Market Marker Day. The rest of the week is the usual option expiration games.
INVESTORS: We await Monday’s New Market Marker verdict before deciding whether it is worry and next stop Dow 9800 or Dow 10500 next, as investors return to the market in search of “bargains.”

KEYDATES:        JULY 12, 16
DJIA:                   10,200 PIVOT
NASDAQ:           1925 S1 1900 S2 1850 S3 1967 PIVOT 2000 RESISTANCE
AUSTRALIAN$: TRADING BUY
GOLD:                Accumulate under $403
HHH:                    SELL

NEW MARKET SENTIMENT MONDAY JULY 12th.
DON’T BUY AND HOLD: BE HIGHLY LIQUID WITH A BALANCED AND DIVERSIFIED PORTFOLIO!
12/31/2003 EOD:    SPX   1111 DJIA 10453 NASDAQ 2003.
FAIR VALUE:        DJIA <9800, NASDAQ <1800, GOLD > 402
While the internal Stock Market astrology, as in 2003, is mixed, the external risk potential is horrific!

2. Cell phones may damage sperm, study claims.
As if one needed another reason (besides extreme overvaluation and intense competition) to sell Motorola (MOT) and continue to under weight Nokia NOK)?

3. Malaysia keeps air pollution data a state secret because of fears that revealing how much smog from neighboring Indonesia had blanketed the country would hurt its economy. Deputy Prime Minister Najib Raza said pollution figures were “distorted” by the international media and gave a “grim picture of Malaysia”. It has therefore banned the release of specific air pollution figures for fear that the information might drive away tourists. To be on the safe side, I would continue to avoid the hotel sector e.g. Genting (GEBEY) and Shangri-La Hotel (SHGM:KL) as well as Selangor Properties (SGPBY), but might consider holding Road Builder (ROAD:KL) and Resorts World (RSWSY) if forced to maintain or hedge KLSE Composite weighting.

4. “Expectations are high now and it will be very hard for companies to beat forecasts”.
Jeff Erickson, money manager, Lowry Hill
HW: Yes and God forbid, if they miss by as much as a penny!

“There are still mixed signals out there. Not everyone believes this economy is recovering rapidly, so they’re more cautious in taking positions.”
Vincent Gallagher, comanager, Needham
HW: Welcome to the party of non-believers.

“The futures market is indicating the Fed will add 1.5 [percentage points] before the end of the year — they’ve factored in at least that.”
Charles Gra-dante, managing principal, Hennessee Group
HW: I think I can hear the sound of home prices dropping into H1 2005, well before Saturn leaves Cancer!

5. Ten Things to Watch During Market's Second Half

Rate rise: Not if, but how high – and what effect on economy?
“Mr. Kasriel, who expects the Fed to double the short-term rate to 2% by December and push it to 4% by December 2005, said real estate prices will be the first casualty.“ Right now, housing is a bubble, and interest rates are artificially low,” he said. “I suspect a real shakeout in the housing sector because today’s real estate prices won’t be justified by higher interest rates.”

Presidential Politics And Your Portfolio
“Stovall agrees with the notion that Kerry would be good for bonds and Bush good for stocks, but he's more cautious about strategies to play on the distinction. Already, one effect he expected the campaign to have has not happened. Because Kerry has said he will roll back the Bush tax cuts, including the dividend tax, Stovall thought that dividend stocks might be held back by the specter of a Kerry victory. But year-to-date through June, he points out, dividend payers outperformed non-dividend payers by a 2-to-1 margin.”

6. READER: I am an optimist, but I don’t trust it for a cent, this world scenario. I think a put will give some hope, and gold of course.
HW: I agree, not so much as an issue of hope, but for more practical insurance against other stock market holdings.

7. HERE WE TALK ABOUT AFUND CLIENTS

READER: Can you get me the date, place, and time when the first investor made an investment in IHI?
HW: First share sell when still a private company was January 12, 1991, approximately 1:20pm. Vancouver BC.

READER: Are you planning to do a write up on the [IHI] AGM very soon?
HW: Yes.

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PAST WALL STREET NEXT WEEK REPORTS
FRIDAY 11 am listen to our Internet radio program TRADING BY THE STARS. (c) 2004 All rights reserved. The Astrologers Fund "Always a Stellar Performance"
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Author: INVESTING BY THE STARS, THE STUDY OF ASTROLOGY,TRADING BY THE STARS (01)
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