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Special Report

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There is a psychological barrier at a 10-year Treasury yield of 4.55%, with special bearing on the homebuilding and home-buying sectors. Homebuilding stocks appear to have bounced from their third and hardest correction since taking off last spring. I opined in another venue that the housing stocks couldn't stand another correction. Now, I'm not so sure. It may be time to buy the homebuilders again. These stocks trade at low price-earnings ratios (10-13), they own real property, and they have real orders.

Plus (see #1 above), people are making money, and will continue to make money. They will buy houses, just as they always have, and they will get used to somewhat higher mortgage interest rates -- rates which, after all, are still historically very, very low.

So here are my predictions for the three major market averages for the end of 2004:

Dow, 13,650; NASDAQ, 2,626; S&P 500, 1,430.

I haven't quite done a Tobias. These figures represent a 30% increase in the Dow and S&P, and a 20% increase in the NASDAQ. I figure some rotation away from small-cap and high technology companies to more established brick-and-mortar and industrial firms, as represented on the NYSE, and by the Dow average. This is strictly from a trader's perspective, and owes nothing to macroeconomics at all. One of Sally's acquaintances in the financial world interjected, in the middle of one of many ongoing gloomy discussions of the world money scene, the caveat, "Meantime, there's a rally going on." That's really all I'm qualified to pay attention to.

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Trade, Television, Economics, Business