Mid-day Report

S&P 500 1,212.20 -.11%
NASDAQ 2,175.81 -.06%

Leading Sectors
Oil Service +1.02%
Semis +.82%
Disk Drives +.61%

Lagging Sectors
Wireless -.62%
Gaming -.72%
Defense -1.63%

Other
Crude Oil 42.00 +.55%
Natural Gas 6.38 +.54%
Gold 436.00 -2.09%
Base Metals 123.48 +.78%
U.S. Dollar 81.10 +.47%
10-Yr. T-note Yield 4.32% +.59%
VIX 11.77 -1.92%
Put/Call 1.36 +100%
NYSE Arms .90 +47.54%

Market Movers
TASR +4.1% on positive comments from President yesterday.
BIVN +9.8% after US regulators approved a cancer drug the company licensed to Genzyme, the first new medicine for children with leukemia in more than a decade.
CSPI +27.5% after reporting strong 4Q results.
SNDA +7.0% on no news.
PKZ +8.6% on bargain-hunting after saying oil production at Turgai Petroleum was curtailed by a dispute over marketing.
VIP +7.4% after the company received a 2002 tax claim that was less than analysts expected.
VSAT +8.5% after saying it won an order from the Space and Naval Warfare Systems Command expected to be valued at about $60 million.
REY +6.0% after raising its 1Q profit forecast because of stronger cost management and foreign exchange gains.
MSO -6.2% after reporting top shareholders have sold 4 million shares since mid-November.
*Oil Tanker stocks down across the board after supertanker rates fell to their lowest in more than three months, pushing shipowner's earnings below the $100,000/day mark.

Economic Data
Existing Home Sales for November rose to 6.94M versus estimates of 6.75M and 6.76M in October.

Recommendations
None of note.

Mid-day News
U.S. stocks are quietly lower mid-day on a slight rise in energy prices and interest rates. Lockheed Martin faces cuts in the production of F/A-22 Raptor stealth fighter-bombers as the Dept. of Defense seeks to lower costs, the NY Times reported. Manhattan District Attorney Morgenthau's office created a unit to target identity theft last month, Dow Jones Newswires reported. A US court upheld a ruling that barred Minnesota from regulating Internet-based phone calls, the NY Times reported. Resource Connection has gained from demand by companies seeking to comply with US accounting governance laws, the Wall Street Journal reported. Nucor may offer to buy Vitkovice Steel from the Czech government, Reuters reported. Ukrainian Prime Minister Yanukovych appealed his loss to rival Yushchenko in the Dec. 26 presidential election, as the winner met advisers for the first time to discuss forming a new government, Bloomberg reported. Oracle has taken control of PeopleSoft, ending an 18-month fight and making Oracle the world's No. 2 maker of business-management software, Bloomberg said. Time Warner's cable-tv unit said it may start offering mobile phone service through an agreement with Sprint, Bloomberg reported. Fannie Mae is considering two sales of preferred stock totaling up to $4 billion, Bloomberg said. Gold prices in New York fell the most in three weeks as a gain in the dollar's value against the euro eroded the appeal of the precious metal as an alternative to US stocks and bonds, Bloomberg reported. Relief agencies struggled to combat disease and homelessness as the death toll from the weekend's earthquake and tsunamis in Asia approached 80,000, Bloomberg reported. Crude oil is rising modestly after the Energy Dept. reported that US inventories of distillate fuels fell last week, Bloomberg said. US sales of previously owned homes rose to a record in November, buoyed by job and income growth, making 2004 the best year ever for the industry, Bloomberg reported.

Bottom Line: The Portfolio is unchanged mid-day as gains in my security and semi longs are offsetting losses in my internet and software longs. I took profits in a few longs from various sectors this morning, thus leaving the Portfolio 100% net long. The overall tone is a bit weaker today, however mild losses appear to be the result of a lack of buyers rather than significant selling. The Put/Call and Arms readings are spiking. The better-than-expected existing home sales report should put to rest the notion of an imminent decline in the housing market. I expect US stocks to trade modestly higher into the close.

Wednesday Watch

Earnings of Note
Company/Estimate
None of note.

Splits
None of note.

Economic Data
Existing Home Sales for November estimated at 6.75M versus 6.75M in October.

Recommendations
None of note.

Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in China and Japan. Thai tourist arrivals may fall by as much as 3.2 million next year should travelers not visit tsunami-hit areas until March, the end of the peak tourist season, the Bangkok Post reported. China's economy will grow by between 8% and 8.5% in 2005, from 9.1% this year, because investment and exports may slow, China Securities Journal said. Merrill Lynch, which is trying to catch up with Goldman Sachs setting up a Chinese investment banking venture, is in talks with Huaan Securities and other mainland firms, Bloomberg said. The US Postal Service said delays and problems that beset US airlines this past week also disrupted the delivery of thousands of letters and packages, the NY Times reported. Top stockholders of Martha Stewart Living Omnimedia have reported selling more than 4 million company shares since mid-November, valued at $90 million, the Wall Street Journal said. Goldman Sachs and JP Morgan are among banks financing buyouts that have left some European companies with debt levels that haven't been seen since the days of Michael Milken, Bloomberg reported. The Tel Aviv Stock Exchange will probably attract foreign investors because of better prospects for Israeli-Palestinian peace talks and economic "stabilization," Bloomberg said. Morgan Stanley and Lone Star Funds bought $2.5 billion worth of Tokyo office space in the second half of 2004, betting the country's three-year economic recovery will halt a decline in property values of 80% since 1990, Bloomberg reported. News Corp.'s Fox television network is charging a record average of $2.4 million for advertisements on the Super Bowl in February, 6.7% more than last season's NFL championship game, Bloomberg said.

Late-Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.12%.

BOTTOM LINE: I expect U.S. equities to open modestly higher and stay firm throughout the day on a decrease in energy prices, more optimism, short-covering, year-end positioning and a stabilizing US dollar/interest rates. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,213.54 +.72%
NASDAQ 2,177.19 +1.07%

Leading Sectors
Homebuilders +2.36%
Restaurants +1.8%
Biotech +1.71%

Lagging Sectors
Wireless +.37%
Disk Drives +.36%
Telecom +.31%

Other
Crude Oil 41.88 +1.36%
Natural Gas 6.6.21 +.86%
Gold 444.80 -.31%
Base Metals 122.53 +.76%
U.S. Dollar 80.72 unch.
10-Yr. T-note Yield 4.29% -.14%.
VIX 12.0 -1.15%
Put/Call .68 -19.05%
NYSE Arms .61 -45.05%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my security, restaurant and internet longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved throughout the day as volume improved and the advance/decline line finished at its daily highs. Every major sector was higher today with several making ALL-TIME highs again. As well, long-term interest rates fell in the afternoon and energy prices/US dollar stabilized. On the negative side, measures of investor anxiety fell again.

Mid-day Report

S&P 500 1,211.50 +.55%
NASDAQ 2,168.65 +.67%

Leading Sectors
Homebuilders +1.39%
Restaurants +1.19%
Biotech +1.19%

Lagging Sectors
Gaming +.05%
Hospitals -.17%
Airlines -.20%

Other
Crude Oil 42.10 +1.98%
Natural Gas 6.30 +2.27%
Gold 445.10 -.25%
Base Metals 122.53 +.76%
U.S. Dollar 80.70 -.02%
10-Yr. T-note Yield 4.32% +.50%
VIX 12.09 -.41%
Put/Call .73 -13.10%
NYSE Arms .70 -36.94%

Market Movers
AMZN +6.2% on Bear Stearns upgrade to Outperform.
JUPM +10.7% on optimism over internet stocks.
UNFI +9.6% after announcing a definitive 3-year distribution agreement with Whole Foods Market(WFMI).
UHS -3.7% after cutting 4Q forecast.
*Providers of equipment and technology that help protect against the effects of earthquakes are up across the board.

Economic Data
Consumer Confidence for December soared to 102.3 versus estimates of 94.0 and an upwardly revised reading of 92.6 in November.

Recommendations
-Goldman Sachs reiterated Outperform on JNJ.
-JP Morgan rated ENR Underweight.
-Bear Stearns raised AMZN to Outperform, target $55.

Mid-day News
U.S. stocks are higher mid-day on a strong consumer confidence report. President Bush is likely to delay his proposed overhaul of the US tax code until at least 2006 as his administration focuses on social security and cutting the deficit, the Washington Post reported. US companies plan to boost hiring next year as economic conditions continue to improve, the Wall Street Journal reported, citing a survey by TEC Intl. of small and medium-sized businesses. US culinary schools have boosted enrollment by 40% since 2000, as aspiring chefs hope to duplicate the success of stars such as Emeril Lagasse, the Wall Street Journal reported. Year-end bonuses on Wall Street will likely rise to $15.9 billion this year, the highest amount since $19.5 billion in 2000 at the height of the bubble, the NY Times reported. PSS World Medical, which sells medical supplies to doctors, looks increasingly likely to go on hitting its target of 20% profit growth a year, the Wall Street Journal said. Texas Pacific Group, a buyout firm, expects to make at least three times what it paid for restaurant chain Burger King in the next three years, the Wall Street Journal reported. US Airways' weekend passenger delays and stranded luggage could put the company at risk, as passengers vowed to never again fly on the airline, the Philadelphia Inquirer reported. Home Depot and Lowe's are increasingly selling installation services, as time-constrained homeowners pay the stores to lay carpet and connect appliances, the Wall Street Journal Reported. OAO Yukos Oil missed interest payments yesterday on a $1 billion loan, leading S&P to cut its grade for the oil producer's debt to default, Bloomberg said. Sales at US retailers surged 4.3% during Christmas week, Bloomberg said, citing the Intl. Council of Shopping Centers. Lobbyists spent a record $1.1 billion in the first half of 2004 to influence US politicians, Bloomberg reported. The death toll from the weekend's earthquake and tsunamis in Asia crossed 50,000, making it the deadliest natural disaster in more than a decade, Bloomberg said. The Ukrainian Central Electoral Committee declared Viktor Yushchenko the winner of the Dec. 26 presidential election, Bloomberg said. Blockbuster threatened to make a $700 million hostile takeover offer for Hollywood Entertainment after saying the board refused to cooperate in negotiations, Bloomberg reported. US consumer confidence soared in December, reaching a five-month high and reflecting increased optimism about jobs and incomes, Bloomberg reported. The index of consumer expectations for the next six months rose to 99.9 from 90.2 in November, marking the biggest increase since the liberation of Iraq in May 2003, Bloomberg said.

Bottom Line: The Portfolio is higher mid-day on gains in my internet, biotech and security longs. I added a few new longs from various sectors this morning, thus leaving the Portfolio 125% net long. One of my new longs is NANO and I am using a $14 stop-loss on this new position. As I forecasted a few months ago, Consumer confidence is moving significantly higher on an end to the bitterly negative election, falling energy prices, better labor market, rising stock market, low interest rates, strong housing market and diminishing domestic terrorism fears. This trend should continue in 05 as confidence reaches cycle highs. I expect US stocks to rise modestly into the close on short-covering, year-end positioning and more optimism. I also expect energy prices to resume their fall tomorrow on a better inventory report, decelerating demand from Europe and Asia and mild weather.

Tuesday Watch

Earnings of Note
Company/Estimate
None of note.

Splits
None of note.

Economic Data
Consumer Confidence for December estimated at 94.0 versus 90.5 in November.

Recommendations
None of note.

Late-Night News
Asian indices are higher on a better-than-expected industrial production report from Japan and declining energy prices. Deutsche Telekom AG, Europe's biggest telephone company, has ruled out buying regional US companies to expand its T-Mobile USA business, even as two rivals plan to merge, the Financial Times reported. China will take measures to restrict construction of commercial and high-end residential properties, the official Xinhua news agency reported. China Telecom and China Netcom have begun to form strategic alliances with overseas equipment and networking companies including Motorola and Nokia, Beijing Morning Post reported. The US Transportation Dept. Inspector General will begin a review of the nation's airline service triggered by flight and baggage disruptions at US Airways and Comair during Christmas weekend, Bloomberg said. Ford Motor expects to sell a record number of its F-Series large pickup trucks this year, fending off a challenge from Nissan Motor and Toyota Motor in a market that accounts for more than a quarter of the No. 2 US automaker's domestic sales, Bloomberg said. The death toll from the weekend's earthquake and tsunamis in Asia may rise to more than double the current 23,000 estimates as devastation to more remote areas is uncovered and diseases spread, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.12%.

BOTTOM LINE: I expect U.S. equities to open modestly higher on a better consumer confidence reading, declining energy prices, stabilizing US dollar/interest rates, short-covering and year-end positioning. The Portfolio is 100% net long heading into tomorrow.

Monday Close

S&P 500 1,204.92 -.43%
NASDAQ 2,154.22 -.30%

Leading Sectors
Broadcasting +2.17%
Airlines +.64%
Internet +.56%

Lagging Sectors
Homebuilders -1.32%
Energy -1.78%
Oil Service -2.34%

Other
Crude Oil 41.20 -.29%
Natural Gas 6.16 +.02%
Gold 446.40 +.04%
Base Metals 122.53 +.76%
U.S. Dollar 80.72 -.69%
10-Yr. T-note Yield 4.29% +1.81%
VIX 12.14 +8.10%
Put/Call .84 unch.
NYSE Arms .84 +18.09%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my software and internet longs. I took profits in a few technology longs in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was mildly weaker today as stocks consolidated recent gains. Measures of investor anxiety rose and energy prices plunged, likely setting the stage for another push higher into year-end on Wed. and Thur. I do not expect the yield on the 10-yr. T-note to rise above the 4.92% hit in June during the first half of 05.