Thoughts for Ending the Year

By Dr. Duru written for One-Twenty

December 16, 2005

In a few hours I will be on a jet plane on my way to other jet planes that will eventually get me to the land of my fathers, Nigeria. I know I have not exactly been a prolific writer of late, but I thought I would write this official "on vacation" notice anyway!

When I get back in time for the drama of a new year, there will be several things I will eagerly look to catch up on (while I am in Nigeria, I will likely be extremely unaware of what is going on with the rest of the world!)

#1: Has gold finally topped? As I mentioned before, I have no idea why gold has been racing the way it has of late, but I like it. I actually committed some sort of sacrilege and went short gold for a quick minute just because I saw a classic topping/stalling pattern. It worked, but I sure did not want to stick around in that position!

#2: Are housing stocks making a late inning last stand? I have spent some considerable time over the past several months dogging out the housing stocks and the housing sector. I have even joined the swelling ranks of new homeowners and jumped onto the deflating bubble/boom. While I am in the camp of bears who thinks that the slowdown in housing will accelerate next year, I am intrigued by the persistent bullishness from almost every management team in the homebuilders I follow. Only Toll Brothers has come clean and admit to a full out slowdown, but the way the stock has been soaring of late, it looks like the market is finally ready to bet that the worst of the news has already come out. Given the extremely low valuations on this sector, things could run long and far if the market gets that housing itch all over again. Some charts that look particularly juicy include KBH, PHM, CTX, and HOV. And of course I find the resurgence in housing stocks quite ironic given that the Fed has now admitted its rate hikes are no longer accomodating economic growth while at the same time giving zero indication when they will stop putting the screws to the economy.

#3: What is going on with steel? Analysts and pundits have been waging some pitched battles over the steel sector with bears and bulls trading blows. Most of what I have seen as been tugging and pulling over US Steel (X). I have written about them before. Given that US Steel supposedly relies heavily on GM as a major customer, their recent rise is a bit of a surprise - folks are wondering whether GM will be forced into bankruptcy in the near future. Regardless, if acquisitive minds turn their attention to steel, we could see some big price runs in this sector given the low valuations that abound. Follow my link for some interesting names in this sector.

#4: What is going on with GOOG? Targets are now running to $500 for this dynamo stock. The drip has been so slow lately that it is easy to forget that the stock may have put in a convincing "bottom" at $400. GOOG is already beyond my epxectations...Who knows where or when the party will end?

#5: Is the Winter cold? OK - I ask this one tongue in cheek. Nothing humored me more than all the idle talk and speculation about a "warm winter" that would suppress natural gas and other energy prices. The talk reached such a fevered pitch, you would have thought Mother Nature was deciding whether to skip Winter altogether. As I sat at home last weekend watching wintry, snowy football games, I knew that Winter had arrived just as it always does...about every 12 months. So the real question is whether the economies of the world will remain strong enough to continue sucking down energy at current rates? Methinks...yes!

#6: And the biggest question of all - will January, 2006 repeat the same pattern as January, 2005? The market put a serious fade on folks at the start of 2005, and the sour taste is only now clearing as the market looks to end the year essentially flat. I imagine we will get some scares as the timid try to get out before getting faded again. Overall, I do not expect more out of 2006 than we got out of 2005. with all these rate hikes, cash is finally starting to get interesting.

There is so much more I could note, but the above is top of mind at this late hour. Here is to a happy and peaceful holiday and a Merry Christmas to all of you. May the New Year bring a promise of better things to come for all the world's people and especially for those who suffer going into the end of this year.

As always, be careful out there!

DrDuru, 2005