WALL STREET, NEXT WEEK
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WALL STREET, NEXT WEEK: AUGUST 8, 2005
FINANCIAL ASTROLOGY FOR THE SUCCESSFUL INVESTOR AND TRADER
 
1. AUGUST MARKETS
2. UP STARS/DOWN STARS
3. GOLDEN THOUGHTS
4. ASTRONUT
5. QUOTES
6. ON THE WEB
7.  LETTERS
8. AFUND CLIENTS

NEW MARKET ZEITGEIST: FIRST WORRY, THEN “WHAT ME WORRY”?
It seems enough investors continue to believe in economic fairytales, e.g. that the US has a “Goldilocks” economy. As such, the new market marker sentiment for the remainder of 2005 is:
“First: Worry, Then: What me Worry.” 

WERE EARNINGS REALLY GOOD ENOUGH FOR THE DOG DAYS OF SUMMER OR DOES IT EVEN MATTER?
Next week earnings season will be over. The new focus will be on interest rates and technicals. Complacent bullish investors will be comfortable as long as markets remain above their 20, 50, and 200 day Moving Averages. However, markets have been near the top and slightly above our 2005 top numbers, i.e.. in fantasyland. Buying cheap October puts or writing October calls should be profitable if markets again approach the NASDAQ 2200 and SPX 1245-1250 resistance levels that might force short covering. Current bullish consensus opinion, which is strongest among the most unsophisticated investors, is classically considered bearish by contrarian investors such as yours truly.  I acknowledge it is possible, and perhaps even probable, that there will not be a serious Major Correction until Q2 2006.  Conversely, strong market rallies are not economically justified any more than the Iraqi War was militarily or politically.  But will that matter next week?  It may not. Some positive Astro later this week suggests the need for bears to be very careful August 11/12 for a possible NASDAQ blow out. I wouldn’t fight this short term mental aberration trading, but would stand aside or hedge. Shortly thereafter, market will correct back. Astrologically, August 15 until November 14, Mercury will be direct.  It is possible that High OIL prices will begin to matter to the talking heads, even though they are not $80 or $90.  Personally, I see no more than our R2 number  $65 as a short term top.
Hence range bound performance and market hedging recommended between now and the usual September/October market declines.
BOTTOM LINE:
The “best” is past and not ahead. Although it may not happen on Alan’s watch, and he has been trying very hard to avoid it, the die is cast: Q2 2006 is coming!


TRADERS: As is often the case these days, we are short on WSNW Sell 11E. Next Thursday NASDAQ nuts could be BIDU-like, hence it is imperative that trades be nimble this FOMC meeting week. Hedge or use trailing stops after Monday. Be prepared to reshort again thereafter at appropriate astrological times and technical price points.

INVESTORS: Unless you like to stay at parties until the very end, you should maintain high cash levels. My long term view is well known:  focus on protecting against downside risk through most of the rest of 2005, and 2006 will be bleak. Finally, Make sure you own Summer Gold.

INVESTING MYTH OF THE WEEK: EMPLOYMENT IS UP AND THE US ECONOMY IS STRONG AND GROWING DESPITE HIGH ENERGY COSTS.
No comment needed. If you believe this, then you probably also believe there is little or no inflation.

GUEST GREEN SPEAK: HERE COMES THE SUN

KEYDATES:    August 11
DJIA:               10580 PIVOT
SPX:                1225 PIVOT   
NASDAQ:        2118 SUPPORT/2218 RESISTANCE
XAU:                93 PIVOT 95 R1 98 R2 100 R3 105 R4 113 R5
OIL:                  60 Pivot   R1 62.50 R2 65 R3 75
TIPS:                SECOND BUY

NEW Market Marker Sentiment: First Worry, then: "What me Worry?"
DON’T BUY AND HOLD: BE LIQUID WITH A BALANCED AND DIVERSIFIED PORTFOLIO!
2004 CLOSE:        DJIA 10784, SPX 1211 & NASDAQ 2175
2003 CLOSE:        DJIA 10453, SPX 1111 & NASDAQ 2003
DIJA:         2 ~ FV 0 UV; 6 offer 4%+ Dividends. 3 offer 5%+ Dividends.
While the internal Stock Market astrology is mixed, the external risk potential is high. Looking ahead, my question is whether 2006 will show less than 2% growth or be a classical recession?
PRESERVE CAPITAL: FOCUS ON PROTECTING AGAINST DOWNSIDE RISK. Before Q2 2006, reduce indebtedness as much as possible, as quickly as possible. 

2. A Better Way to Value REITs
“How to value REITs has hinged on one major idea: Should investors value the buildings (NAV) or the earnings (discounted cash-flow)? In other words, can active REIT managers add value to the firms that they're running? Or, when investors sink money into a REIT stock, are they buying nothing more than plots of land and some boxes of bricks?
Which is better -- NAV or DCF? Morningstar believes the answer is DCF and just began applying a DCF model for valuing property REITs, replacing the NAV model it previously used. The company believes it is the first independent research firm to use this approach as a primary tool for valuing REITs.  The new DCF model will impact the analysis and fair value estimates for all of the
61 REITs the firm covers.  Before applying the new model, Morningstar considered all REIT stocks it covered overvalued. Under the new DCF model, Morningstar now considers 10 of the 61 stocks undervalued.
HW: I am not so sure this approach is right even though more REITs enter the SP 500 index. It surely is however a clear marketing advantage for Morningstar [MORN] to differentiate itself from the pack. Still with a p/e of over 128, I find MORN itself somewhat overvalued using traditional models.  Its recent IPO was a good buy but now a trailing stop is prudent.
WSNW subscribers can see our revised REIT prices at our premium subscriber post: S: REIT 2005/2006.

Baidu Shares More Than Quadruple in Debut
"Baidu.com Inc., the maker of China's leading Internet search engine, mesmerized Wall Street Friday as its stock more than quadrupled...The rapid run-up gave Baidu a market value of $4 billion - a lofty appraisal of a 5 1/2 year-old company that only recently became profitable. Baidu earned $1.8 million on revenue of $13.6 million during the first half of this year..."This is a 'son-of-Google' investor mentality," said David Menlow, president of IPO Financial, an industry newsletter. "Everyone remembers they could have had Google at $85 and don't want to let it happen again."
HW:  After such greed, can 2006 be that far off?  However, unlike GOOG, Baidu (BIDU)’s First trade horoscope [8/05/2005 11:40:00, 1500 shares at $66] promises to outperform in 2006.  Hence at some point in time, we may be pairing BUY BIDU/SELL GOOG!
 
3.  GOLD INVESTING 101
The junior mining exploration game is often an "area play": one company makes a big discovery and then others stake claims all around it, hoping to share in the bonanza find.  Another frequent story is buying older and often-abandoned mines that are now, or could be, newly potentially profitable due to either or both of a combination of higher resource prices and modern technology. One variation of this is to consider their mines a call option on precious metals, should prices rise to the point where the mines would become profitable to reopen. However, sadly most exploration companies will NEVER make a significant discovery. Generally speaking, their stock prices move in sync with precious metals pricing. However, unless they are cash rich and/or continue to raise money to continue drilling, many eventually end up virtually worthless. However, the few that actually discover mineral deposits that ultimately become mines [1-100 odds] or that makes a major discovery [1-1000 odds], can bring shareholders truly astronomical returns. [

The world seems to be getting used to $60 a barrel,'' said Sam Tilley, an analyst with Sucden U.K. Ltd., a London broker. ``With refinery problems at the moment and demand increasing in the fourth quarter, there is a chance prices could increase further. Gasoline stocks are currently an issue.''
HW: AFUND clients should know that owning yellow gold today entails less risk and even more future rewards than owning black gold.

4.Farewell Pluto?
Is it their most clever (or diabolical) act yet? Is the CIA trying to eliminate Pluto's influence as part of its war on global terrorism? Pluto does rule terrorism. If for some reason should it lose its planet's status, might it not also lose some of its power on humanity? I am not sure.  Q2 2005 and Q3 2006 should unfortunately be proof enough of Pluto’s power over global stock markets.

Speaking of Pluto’s influence, the Swedish eyeglass maker Polaris Optic will be selling a new collection of stylish yet discreet glasses for women attending funerals. "They do not want too flashy or gaudy glasses. The point is that they should be a bit subdued, but still elegant," CEO Preutz said. The company's Japanese branch came up with the idea, and the collection will be targeting the Japanese market. The funeral collection, the first of its kind in the world, will be launched at the International Optical Fair in Tokyo in October.
HW: The Polaris Manifesto begins: “We make glasses no-one else can, wants to, or dares to.”  The Swedish market is up some 30% over this past year.
Note: We recently downgraded our sector favorite, which is also up over 30% in the same time period. Bausch & Lomb (BOL) was a “Buy and is now an “Out Perform, but protect”.
Country views: Swedish stock performance while superior to US performance, pales with its and our more favored neighbor Norway whose market is up well over 50%. Hence, both the US and Sweden still deserve our “Under Weight” rating. As for Japan, it has our outperform rating, mostly due to future Yen appreciation vs. the US Dollar  

5. “The market is very fully valued and very risky. We expect trouble later this year, and we are trying to batten down the hatches.”
Barry James, James Equity Fund
HW: I agree.

"The market's being very selective about who they reward and who they punish. If a company comes through and literally trounces the numbers, the stock gets a positive reaction. ... If it isn't perfect, they beat them up."
Tobias Levkovich, chief U.S. equity strategist, Citigroup
HW: I just love S&M investing, don’t you?

"In general, earnings are not bad, but given recent gains, if a company misses a target the market is ready to punish the stock."'
Alfonso Trevino, comanager, Atlas Capital in Madrid
HW: It seems many Europeans also enjoy the New York "Far West Village" or S&M style of investing. It is often popular late in a bull market cycle.

6. No Green light yet for stocks
“The bargains extend beyond Europe. Asia is as cheap as any time in the last 30 years. And Japan, though still relatively expensive compared with its global counterparts, is as cheap as it's been in two decades. Either method you choose – my old-fashioned rule of thumb or the BCA's modified Rule of 20 – U.S. stocks are no bargain.”

Earnings Surprises Mask Negative Growth
"There have been only four quarters in the past 14 years during which the relationship between negative earnings growth and positive surprises resembled the second quarter's…. "Based on this history, the current combination does not appear to be a healthy one…."

Bank of England Rate Peak May Teach Fed a Lesson
1. “U.S. stock market volatility, as measured by the Chicago Board Options Exchange Volatility Index, dropped to its lowest in more than nine years last month.”
2. “The Bank of England had held its benchmark rate at 4.75 percent for a year before this week's cut, the lowest peak since 1952 when the benchmark U.K. rate was at 4 percent until a cut to 3.5 percent in September of that year.”
HW: 1) This VIX reading means that a rising stock market is viewed as less risky and a declining stock market more risky. Hence I view this as an indicator of a coming sell-off.
2) We have been saying that we expect 2006 to be the worst (or second worst) economic period since WWII. It seems the BOE may be in agreement!

7. READER: Precious Metals topping out soon? Should I worry about the trine of Jupiter and Neptune on August 17? RE: “History shows that the soft aspects of Jupiter and Neptune are bearish for the precious metals with the effect being most pronounced for silver.”
HW:  That is not my view. But like technical analysts, astrologers may weigh the importance of cosmic indicators differently.  Should NEW inflation pressures be mute this August with $60+ Oil, even accounting for 50% of the real 2005 inflation rate to date would rock the gold market skyward.  So perhaps it is best to ask me the same question again at the end of August. I usually find my forecasts have a stellar backwards success rate. It is only the forward part of forecasting that I sometimes have difficulty with! ;)

READER: Do you have an opinion about which foreign currencies (of say, Euro, Yen, Pound, Canadian $, Brit Lb, Australian $Swiss Franc) will appreciate the most relative to the U.S. Dollar?
HW: Yes, but we only provide time frames and targets to our platinum and institutional clients.  However, short term, up to late August to September, we like the Euro most.  In 2006, we prefer almost ANY currency to that of the US Dollar.  The few possible exceptions might be: The British Pound, Bangladesh Taka, Belarus Ruble, Ugandan Shilling, Zambian Kwacha and of course, the Zimbabwe Dollar.

8. HERE WE TALK ABOUT AFUND CLIENTS

FORMER SUBSCRIBER: I'll renew when IHITF gets over 30 cents a share or if I shake hands with Elvis...which ever comes first.
HW: Then I expect you will be renewing later this year either due to the former market event, or perhaps because you plan on visiting Graceland during the October 17 Lunar Eclipse (Full Moon)!
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PAST WALL STREET NEXT WEEK REPORTS
              FRIDAY 11 am listen to our Internet radio program TRADING BY THE  STARS.
(c) 2005 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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