Thursday Watch

Earnings of Note
Company/Estimate
AM/.69

Splits
None of note.

Economic Data
Personal Income for November estimated up .2% versus a .6% increase in October.
Personal Spending for November estimated up .3% versus a .7% gain in October.
PCE Deflator for November estimated up 2.5% versus a 2.4% increase in October.
PCE Core for November estimated up 1.5% versus a 1.5% increase in October.
Durable Goods Orders for November estimated up .6% versus a 1.1% fall in October.
Durable Goods Orders Less Transportation for November estimated up .8% versus a 1.5% decline in October.
Initial Jobless Claims for last week are estimated at 335K versus 317K the prior week.
Continuing Claims estimated at 2736K versus 2737K prior.
Final Univ. of Mich. Consumer Confidence for December estimated at 95.7 versus a prior estimate of 95.7.
New Home Sales for November estimated at 1200K versus 1226K in October.

Recommendations
Goldman Sachs reiterated Outperform on MMM, FSL and underperform on FSS, SCS.

Late-Night News
Asian indices are mostly lower on declines in commodity-related shares. The value of hostile bids globally almost tripled in 2004 to its highest since 1999, the London-based Times said, citing a report by capital-markets data provider Dealogic Holdings Plc. DaimlerChrysler AG is seeking the Indian government's approval to sell trucks and buses in the country, the Times of India reported today. Opportunity Partners LP fund manager Phillip Goldstein filed a lawsuit to block a US SEC rule that requires hedge-fund managers to register with regulators, the Wall Street Journal reported. The number of Japanese companies at least 30% owned by foreign investors rose more than 70% to a total of 82 as of Sept. 30 from the same date last year, the Nihon Keizai newspaper reported. More than 140,000 Palestinians will vote today for local councils in the West Bank, in the first such elections since 1976, Agence France-Presse reported. Kohlberg, Kravis, Roberts & Co., the world's biggest buyout firm, agreed to buy Canadian building-products maker Masonite International for $2.5 billion, Bloomberg reported. CapitalLand, Southeast Asia's biggest developer by sales, said it will join a Chinese state-owned partner of Wal-Mart Stores to buy and manage retail malls in China, Bloomberg said.

Late-Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 indicated -.14%.
NASDAQ 100 indicated -.06.

BOTTOM LINE: I expect U.S. equities to open modestly higher on strong economic reports, short-covering and year-end positioning. The Portfolio is 125% net long heading into tomorrow.

Wednesday Close

S&P 500 1,209.57 +.34%
NASDAQ 2,157.03 +.28%

Leading Sectors
Airlines +2.56%
Gaming +1.4%
Retail +1.32%

Lagging Sectors
Iron/Steel -1.16%
Energy -1.39%
Oil Service -1.59%

Other
Crude Oil 44.15 -.20%
Natural Gas 6.84 +.29%
Gold 440.90 -.11%
Base Metals 122.17 +.36%
U.S. Dollar 81.96 +.02%
10-Yr. T-note Yield 4.19% +.05%.
VIX 11.45 -.87%
Put/Call .99 +23.75%
NYSE Arms .84 +23.53%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my security, software, restaurant and semi equipment longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. Several indices are now hitting ALL-TIME highs, making the bears' argument that the US markets are in a secular decline much tougher to make. I expect gains again tomorrow on favorable economic reports.

Mid-day Report

S&P 500 1,209.38 +.33%
NASDAQ 2,155.83 +.23%

Leading Sectors
Airlines +2.20%
Gaming +1.49%
Defense +1.36%

Lagging Sectors
Energy -1.21%
Iron/Steel -1.27%
Oil Service -1.42%

Other
Crude Oil 44.13 -3.56%
Natural Gas 6.82 -.53%
Gold 440.60 -.52
Base Metals 122.17 +.36%
U.S. Dollar 82.05 +.13%
10-Yr. T-note Yield 4.19% +.79%
VIX 11.43 -.87%
Put/Call .95 +18.75%
NYSE Arms .83 +22.06%

Market Movers

Economic Data
Final 3Q GDP rose 4.0% versus estimates of 3.9% and a prior estimate of 3.9%.
Final 3Q Personal Consumption rose 5.1% versus estimates of 5.1% and a prior estimate 5.51%.
Final 3Q GDP Price Deflator rose 1.4% versus estimates of 1.3% and a prior estimate of 1.3%.

Recommendations
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Mid-day News

Bottom Line: The Portfolio is higher mid-day on gains in my software, semi-equipment and RFID longs. I have not traded today and the Portfolio is still 125% net long. The tone of the market is pretty good and Banks are hitting ALL-TIME highs. Energy prices are falling, tech is outperforming and commodity-related stocks are underperforming. I expect this trend to continue in the intermediate-term. US stocks will likely move modestly higher into the close on optimism over economic growth, falling energy prices, short-covering and year-end positioning.

Wednesday Watch

Earnings of Note
Company/Estimate
CAG/.46
MU/.22
RHAT/.46

Splits
None of note.

Economic Data
Final 3Q GDP estimated to rise 3.9% versus a prior estimate of 3.9%.
Final 3Q Personal Consumption estimated to rise 5.1% versus a prior estimate of 5.1%
Final 3Q Price Deflator estimated to rise 1.3% versus a prior estimate of 1.3%.

Recommendations
Goldman Sachs reiterated Outperform on PAYX and RIMM.

Late-Night News
Asian indices are mostly higher on gains in semiconductor shares after Lehman Brothers' upgrade of Intel. Taiwan imposed a temporary ban on imports of US apples after a codling moth larvae was found in a consignment, the China Times reported. BNP Paribas SA and Morgan Stanley are in talks with Suzhou City Commercial Bank to buy a stake in the Chinese lender, China Business News reported. Nextel Communications may get more than $2 billion to vacate airwaves in order to improve communications for emergency services, Reuters reported.

Late-Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated -.06%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open mixed-to-higher and rise modestly throughout the day on a decline in energy prices, short-covering and year-end positioning. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,205.45 +.90%
NASDAQ 2,150.91 +1.08%

Leading Sectors
Airlines +2.83%
Broadcasting +2.48%
Gaming +1.96%

Lagging Sectors
Homebuilders +.28%
Papers +.26%
Defense -.03%

Other
Crude Oil 45.70 -.13%
Natural Gas 6.93 +1.02%
Gold 442.90 unch.
Base Metals 121.73 +.94%
U.S. Dollar 81.97 +.04%
10-Yr. T-note Yield 4.17% unch.
VIX 11.55 -2.37%
Put/Call .80 -13.98%
NYSE Arms .68 -35.24%

After-hours Movers
RENT +18.5% after saying Mark Cuban bought 500,000 shares of it for $4.5M.
INTV +5.4% after beating 3Q estimates substantially.
RIMM -4.1% on profit-taking after beating 3Q estimates and reiterated 4Q outlook.
SLR -6.5% after missing 1Q estimates and lowering 2Q guidance.
MERX -15.3% after missing 2Q estimates and lowering 3Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on BSC and UAL.

After-hours News
U.S. stocks finished higher today as the DJIA reached its highest level in 3 ½ years on short-covering and year-end positioning. After the close, Sony Corp. found parts for its PlayStation game consoles were being assembled in a Chinese prison during a five-year investigation to combat large-scale piracy, the Financial Times reported. Japan Airlines, the country's largest carrier, may buy as many as 58 Boeing airplanes to replace older planes in its fleet, the Wall Street Journal reported. Fannie Mae's board accepted the resignations of CEO Raines and CFO Howard, Market News reported. Importing drugs from Canada and other nations where prices are lower wouldn't generate enough savings for US consumers to justify the risks, regulatory costs or harm to the drug industry, a federal task force found. Research In Motion said third-quarter profit rose to $90.4 million and sales surges as it enlisted mobile-phone service providers in Europe and Asia to offer its products, Bloomberg reported. Nintendo boosted its shipment forecast for its new console amid high demand in the US and Japan, Bloomberg said. Qualcomm raised its fiscal first-quarter profit forecast amid rising demand for handsets that deliver Internet access and take photos, Bloomberg reported. Japanese export growth accelerated to 13.4% in November, easing concern overseas demand for goods made in the world's second-largest economy is faltering, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my semi equip., software and biotech longs. I added a few new longs from various sectors in the afternoon, bringing the Portfolio's market exposure to 125% net long. One of my new positions is SIMG and I am using a $16 stop-loss on this long. The tone of the market improved throughout the afternoon as most sectors rose, the advance/decline line finished near its daily highs and volume was healthy. Measures of investor anxiety fell again. The VIX is now near levels last seen in 1995. This is likely a result of the fact that the overall market appears the healthiest to me since 1995.

Mid-day Report

S&P 500 1,200.58 +.50%
NASDAQ 2,142.83 +.70%

Leading Sectors
Transports +1.64%
Airlines +1.53%
Software +1.51%

Lagging Sectors
Foods +.16%
Energy +.13%
Defense -.24%

Other
Crude Oil 45.70 -.17%
Natural Gas 6.78 -2.40%
Gold 443.00 -.14%
Base Metals 121.19 +.49%
U.S. Dollar 81.89 +.27%
10-Yr. T-note Yield 4.17% -.32%
VIX 11.57 -2.20%
Put/Call .79 -15.05%
NYSE Arms .81 -22.86%

Market Movers
IACI +7.8% after saying it will spin off its travel-related assets into a new business named Expedia.
RMBS -14.28% after Infineon Technologies AG filed a motion to dismiss one case and said Rambus destroyed evidence.
ATYT -5.0% after missing 1Q estimates and raising 2Q outlook.
ANGO +17.7% after beating 2Q estimates and raising 05 guidance.
CMC +8.5% on continuing optimism over 1Q results.
UNP +5.1% after boosting 4Q estimates.
CVC +11.6% after suspending the spin-off of its Rainbow Media Enterprises unit.
YRK -12.15% after lowering 05 estimates and multiple downgrades.
LFUS -10.1% after lowering 4Q guidance substantially.
IVC -10.7% after lowering 4Q and 05 guidance.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Underperform on CVC.
-Citi SmithBarney reiterated Buy on HYGS, target $7.50. Citi reiterated Buy on SYY, target $42. Citi reiterated Buy on ACI, target $43. Citi reiterated Buy on CNX, target $49. Citi reiterated Buy on ILSE, target $24. Citi reiterated Buy on JBL, target $33. Citi reiterated Buy on NRG, target $45. Citi reiterated Buy on JNJ, target $72.
-UBS raised NEM to Buy, target $54.25. UBS raised ABX to Buy, target $27.50. UBS raised KGC to Buy, target $9. UBS rated ASCL Buy, target $18. UBS raised BVN to Buy, target $27.50. UBS raised PDG to Buy, target $22. UBS rated TIBX Buy, target $15.
-Lehman Brothers raised INTC to Overweight.
-JP Morgan rated MDC Underweight. JPM rated HOV Overweight. JPM rated RYL Overweight. JPM rated PIR Underweight. JPM rated PVN Underweight. JPM rated TOC Overweight. JPM rated COF Overweight. JPM rated AXP Overweight. JPM rated TSN Overweight. JPM rated PPC Overweight. JPM rated BZH Underweight.
-Moran Stanley downgraded HRB to Underweight.
-Legg Mason rated NILE Buy, target $34. Legg rated GSIC Buy, target $20.
-Prudential rated RBK Overweight, target $47.
-CSFB raised NXTL to Outperform, target $26. CSFB raised RIG to Outperform, target $53.
-Oppenheimer rated ENDP Buy, target $26. Oppenheimer rated MOT Buy, target $22. Oppenheimer raised CMA to Buy, target $68. Oppenheimer raised SMDI to Buy, target $8.
-Deutsche Bank rated NWL Buy, target $28. Deutsche rated DRL Buy, target $55. Deutsche rated NDE Buy, target $38.

Mid-day News
U.S. stocks are quietly higher mid-day on strength in transportation and software stocks. Comcast will boost the speeds of its broadband service in the first quarter of 2005 at no extra cost to customers, the NY Times reported. Acupuncture relieves knee pain in patients with osteoarthritis, the Wall Street Journal reported, citing a study published today in the Annals of Internal Medicine. Several popular Internet file-sharing sites shut down a week after movie studios sued more than 100 operators of sites in the US and Europe that host links to downloadable music, movies and books, the AP reported. Russian President Putin said state-owned companies may buy the former main oil-producing unit of OAO Yukos Oil from the company that acquired it in a government auction held on Sunday, Bloomberg reported. Morgan Stanley said fiscal fourth-quarter profit rose 18%, boosted by stock underwriting and a surge in fees for advising companies on takeovers, Bloomberg said. Tenet Healthcare agreed to establish a $395 million fund to settle litigation over allegedly unnecessary medical procedures performed at Redding Medical Center in California, Bloomberg reported. Iran will continue to enrich raw "yellowcake" uranium, a process that can be used to derive fuel for a nuclear weapon, through February, after signing a pledge to suspend all such activities, Reuters reported. Washington Post said it reached an agreement with Microsoft to acquire online magazine Slate, Bloomberg said. Pfizer's bid to head off a Celebrex recall may get a boost from new government data showing the painkiller didn't raise heart risks in a study, while naproxen, which is sold as Aleve, did, investors said.

Bottom Line: The Portfolio is slightly higher mid-day on gains in my software and semi-equipment longs. I have not traded today and the Portfolio is still 100% net long. The tone of the market is pretty good and improving. It is good to see the Transports making another ALL-TIME high today. As well, declining long-term rates, falling energy prices and a stabilizing US dollar are boosting equities. I expect the major indices to rise into the close on short-covering and year-end repositioning.