Mid-day Report

S&P 500 1,211.20 +.14%
NASDAQ 2,162.00 +.23%

Leading Sectors
Oil Service +.87%
Drugs +.66%
Computer Service +.55%

Lagging Sectors
Homebuilders -.49%
Restaurants -.52%
Airlines -.65%

Other
Crude Oil 44.05 -.43%
Natural Gas 6.66 -2.35%
Gold 442.90 +.34%
Base Metals 121.73 -.36%
U.S. Dollar 81.48 -.55%
10-Yr. T-note Yield 4.21% +.46%
VIX 11.28 -1.48%
Put/Call .72 -27.27%
NYSE Arms .86 +2.38%

Market Movers

Economic Data
Personal Income for November rose .3% versus estimates of a .2% increase and a .6% rise in October.
Personal Spending for November rose .2% versus estimates of a .3% increase and a .8% rise in October.
PCE Deflator for November rose 2.6% versus estimates of a 2.5% increase and a 2.5% gain in October.
PCE Core for November rose 1.5% versus estimates of a 1.5% increase and a rise of 1.5% in October.
Durable Goods Orders for November rose 1.6% versus estimates of a .6% increase and a .9% decline in October.
Durable Goods Orders Less Transportation for November fell .8% versus estimates of a .8% increase and a 1.3% decline in October.
Initial Jobless Claims for last week were 333K versus estimates of 335K and 316K the prior week.
Continuing Claims were 2721K versus estimates of 2736K and 2730K prior.
Final Univ. of Mich. Consumer Confidence for December rose to 97.1 versus estimates of 95.7 and a prior estimate of 95.7.
New Home Sales for November were 1125K versus estimates of 1200K and 1278K in October.

Recommendations
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Mid-day News

Bottom Line: The Portfolio is substantially higher mid-day on gains in my software, semi and internet longs. I exited a Chinese ADR long this morning and bought ERES, thus leaving the Portfolio 125% net long. I am keeping a $14.75 stop-loss on this new position. The decline in New Home Sales is a bit worrisome, however I am not ready to conclude this is a trend, considering their recently elevated levels. The New Home Sales uptrend remains firmly in tact at this point. As well, I continue to expect Consumer Confidence will reach new cycle highs during 05. The overall tone of the market today is mildly positive. Measures of investor anxiety are reaching levels normally associated with a period of consolidation. However, year-end positioning, short-covering, falling energy prices, low interest rates, good corporate profitability, more optimism and reasonable valuations will likely result in strength through year-end. I expect US stocks to rise modestly into the close.

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.