THE FOLLOWING IS THE EXPRESSED OPINION OF THE WRITERS AND IS NOT ADVICE ON HOW TO BUY STOCKS OR WHICH STOCKS YOU SHOULD OWN. THIS COMMENTARY IS JUST AN OPINION!

January 2005

Positives

   Earnings are flat, but not down. Money supply remains high and the housing market has held up.  

Negatives

   The market is running at a good pace at this time. However,  earnings, the driver of stock prices, are going flat. The fed is tightening at the same time and war costs are high. If this trend continues, the market will likely head into a correction around fall 2005. 

Mergers and acquisitions seem to be dominating the market. As many companies become enormous and the law of large numbers comes into play, perhaps the large caps are played out for now. Mergers are expensive and they also inspire selling on the part of soon to be ex-executives. Take a good look at who owns the company being purchased,  insider selling will give you some idea whether executives are bailing (also consider the age of the seller - potential retirees will sell). 

Consumers appear to be slowing down when it comes to spending, retail stores have so far been disappointed with same store sales. With interest rates rising, how can the housing market continue to climb? Perhaps this is today's bubble. If consumers spend less and housing falls hard, then it is likely that we will see a consumer debt problem arise.

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