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.

Mid-day Report

S&P 500 1,208.69 -.12%
NASDAQ 2,154.14 -.29%

Leading Sectors
Airlines +.96%
Drugs +.51%
Internet +.44%

Lagging Sectors
Homebuilders -1.28%
Disk Drives -1.38%
Oil Service -1.74%

Other
Crude Oil 42.00 -4.93%
Natural Gas 6.35 -4.77%
Gold 446.40 +.79%
Base Metals 122.53 +.76%
U.S. Dollar 80.63 -.80%
10-Yr. T-note Yield 4.29% +1.9%
VIX 12.04 +7.21%
Put/Call .81 -3.57%
NYSE Arms .94 unch.

Market Movers
AMZN +6.2% after saying it had its busiest holiday shopping season in its history during which time it set a single-day record with more than 2.8 million units orders, or 32 items per second.
DHB -7.9% on profit-taking after last Thur. rise.
WEB +20.1% on continuing optimism over demand for its tubing products.
NGPS +12.1% on continuing optimism over its GPS products.
DECK +5.22% on short-covering.
CRYP +4.98% on optimism over its on-line poker products.
SHRP -16.6% after cutting 4Q and 05 estimates substantially.
CALM -11.9% on disappointing 2Q results.
ALD -9.2% after saying it received letters from the US Attorney for the District of Columbia requesting information form the company and Business Loan Express in connection with a criminal investigation.
CTRP -5.7% on worries over travel in Asia.
*Oil Tanker stocks down across the board on worries over recent plunge in tanker rates.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Underperform on KSS.
-Citi SmithBarney reiterated Buy on NPSP, target $25.
-Deutsche Bank rated INPC Buy, target $32.

Mid-day News
U.S. stocks are quietly lower mid-day on profit-taking, concerns over the devastation in Asia and worries over rising interest rates. Computer terminals with a restricted number of functions that rely on servers and hard drives provided by companies such as Yahoo! are finding favor again with tech companies, the Wall Street Journal said. The number of leased local access telephone lines in the US rose 7% in the first half of this year as more carriers entered the market, the Wall Street Journal reported. Eastman Kodak's EasyShare digital camera brand has risen to almost 19% of US sales after the world's largest photography company designed and marketed products to women and first-time buyers, the NY Times reported. Plans to reduce pollution at the LA port complex, including fuel restrictions for ships and trucks, will be released this week, the LA Times said. Wal-Mart isn't close to getting its top 100 suppliers to ship goods with RFID tags, the NY Times reported. General Electric and MGM Mirage were among companies that sold $638.8 billion of debt in the US this year, little changed from 2003, as borrowing costs relative to Treasury notes shrank to the slimmest margin in eight years, Bloomberg reported. Amazon.com said consumer electronics outsold books for the first time during the holiday season, Bloomberg said. US Treasury notes are declining on signs holiday retail sales beat expectations, falling energy prices and a decline in the US dollar, Bloomberg reported. Shares of Sirius Satellite Radio and XM Satellite Radio are rising after both companies said they surpassed their subscriber goals for 2004, Bloomberg said. Natural disasters, including US hurricanes and Asian typhoons, made this year the costliest ever for the insurance industry, even before tsunamis struck tourist resorts in Thailand and Malaysia yesterday, Bloomberg said. Crude oil is plunging more than $2/bbl. in NY amid speculation that warmer temperatures in the eastern half of the US will limit heating oil needs, Bloomberg reported.

Bottom Line: The Portfolio is substantially higher mid-day on gains in my semi, software and internet longs. I have not traded today and the Portfolio is still 125% net long. Holiday shopping results, including internet sales and gift cards, were very strong and proved the bears' argument of a "spent-up" US consumer wrong again. Further declines in energy prices, free-elections in Iraq, decelerating inflation, relatively low interest rates, social security/tax reforms, an improving labor market and strong stock market should continue to boost sentiment and spending in 2005. I expect US stocks to rise modestly into the close on more optimism, declining energy prices, year-end positioning and short-covering.