December 2006 Market Timing Update

"The stock market is a device for transferring money from the impatient to the patient"...Warren Buffet"


All is looking pretty fine indeed!

What is kind of surprising is the length of this Bull Market in the midst of a secular Bear Market Trend.

My Guru's timing model indicators continue to point to the positive.

And what  variables are considered when evaluating a Bull Market Trend?


 Economic Growth: 

    Slow economic growth in a range of 1.5 - 2.5%  is expected to persist through 2007.
    Average growth is somewhere between the usual 3 - 3.5% we have come to expect.   
    No dot.com manias on the horizon.
    Housing weakness should persist well into next year.
   
Fed Policy:

     The general opinion is that the fed went to far raising rates - again.  It is expected there will
      be two to four rate cuts next year to stimulate housing and new jobs figures.  The crystal ball
      says fed rates will be lowered to the 4.25 - 4.75% range in the year to come.
Inflation:

     The latest CPI is full of good inflation news, in fact year over year headline inflation numbers
      have come down 1.3%. The core inflation rate annualized, has only risen 2.1% over the last
      four years.
     It is disappointing to see FOMC members still harping about inflation fears when their attentions
     could be directed towards something a bit more productive, like stimulating housing and economic
     growth.  I think it is safe to say the housing boom is busted.

Interest Rates:

    Interest rates should remain well in hand due to slow economic growth, weak housing and very
    low inflation numbers.  Rates will be cut, if anything.
Summary:

    Gridlock in Washington!  Perfect weather for investors!  
    The libs should cause minimal economic  impact during 2007 - 2008.  
     
    Those looking to invest considerable chunks of cash should dollar cost average at this juncture.
    A buying opportunity would come after a decline of 5-10% in the market and at this point in time
     it is too early to call anything like that.

      The 60 day Put-Call ration is still firmly in the bearish camp, which is a contrarian indicator.
      This is kind of amusing since the S&P 500 index is now 75% above the level it began at
      back in March of 2003.

Market Timing Portfolio Changes:

       No changes

Personal Portfolio:

    Well, well ,well.  It looks like I actually made a pretty good call a couple months ago when
     I thought Asbestos related   stocks emerging from bankruptcy and perhaps a housing stock
     might do pretty well.

   
09-26-06 - Buy USG at 48.67.

US Gypsum has returned me over 16% since purchase.  I think it still has room to run.
10-18-06 - Buy DHI at 23.67.

Second in the list is DR Horton, the home builder I settled on.  It is up a little over 14.5% and given all the recent upgrades in the sector I think this is worth holding.

From Market watch the other day:
Citigroup says time to buy builder stocks; raises target prices
 Analyst ups targets on expectation worst is behind housing market

By John Spence, MarketWatch  Last Update: 10:59 AM ET Dec 6, 2006

BOSTON (MarketWatch) -- Citigroup on Wednesday raised its target prices  on several recovering home-builder stocks, saying in previous housing cycles the shares tend to rally well before the housing market turns the corner.

"While many wait for an improvement in fundamental data such as prices or  inventory to signal an 'entry point' in the stocks, we urge investors to look back to prior cycles, when the group rallied far ahead of fundamentals," analyst Stephen Kim wrote in a note to clients Wednesday.

The Citigroup analyst said he expects home-order trends to turn around by  the first quarter
of 2007, therefore "the time to buy the stocks is now"  even if profit estimates continue to decline.

"The rally thus far has already occurred sooner than many expected,
and we believe the group is about to accelerate its ascent," Kim wrote.
11-01-06 - Buy OC at 27.74

And last on the stock list is Owens Corning, the latest company affected by asbestos litigation. So far it has returned almost 13% .  This one I think would be worth purchase even at these higher prices.
09-22-06 -  Buy PSPFX at 15.15

So, how did the US Global Investors Fund do since my buy recommendation?  Not too bad.   It has returned about 15.5% so far and I think is poised to go higher.  This fund as I said before, I would not consider a core holding but when oil, gas and metals have taken a substantial downturn.....might be worth a look.

 That's about all worth mentioning.  The rest I will cover in the year end review.

  I am planning on doing away with the quarterly updates in favor of expanding on the monthly
  market timing reviews.

  I also am going to add a section that tracks my holdings and their performance throughout the year
  so visitors I have to these pages might have something to gage their own performance against and
  perhaps get an idea or two for their own portfolios.  

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