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[TTHQ Staff]

Dr. Joe Duarte's Market I.Q.
2009: The Year of the LaserBeam
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U.S. stock index futures were flat inearly trading. Asia and Europe rallied.Crude oil was trading near $47 per barrel. Today's Economic Calendar: 7:00 a.m. ICSC Chain Store Sales Index For Jan 3:Previous: -0.5%. 10:00 a.m. Nov Construction Spending: Expected:-1.2%. Previous: -1.2%. News For Thought NASA: Beyond the Wildest of Dreams. Here's onewhere taxpayers are getting their money's worth five-fold. NASA's twinMars rovers, Spirit and Opportunity, have outlived their expected90-day lifespans twenty times over. Both rovers were expected to lastabout 90 days, but are still working, digging up samples, analyzingdata, and beaming it accross the galaxy. China and U.S. manufacturing data suggests slowingeconomic remain in place. China's equivalent of the U.S.'s ISMdata was slightly higher but still below levels which show that theeconomy is growing. But that's good news compared to the most recentU.S. data, where the ISM Index fell nearly four points in December to areading of 32.4. Painting a more gloomy picture were the particulars ofthe report, where eight out of the ten categories followed fell. Theonly two that climbed were customer inventories and imports. Both arecategories that you don't want to be climbing. According to the highlights of the report, some ISM members noted thatDecember had been the "slowest month" in years, while others noted that"North and South America are slow but not off substantially from plans.Europe has slowed down dramatically, while Asia — particularly China —has virtually shut down." Obama tax cut proposal seems to be good idea, yetdetails remain fuzzy. President elect Obama has announced a $300billion tax cut that, in principle, is being well received byexecutives and Republicans. There are no details available yet. But itis an interesting start to his economic stimulus plan, to be sure.

2009: The Year of the Laser Beam

2009 looks to be a year with thepotential for significant developments in thestock market and geopolitics where there is little room for error, evenfor themost astute and discerning investor. There are clearly two major themes underlying the two areas that willlikely shape the year. As the worst news about the financial markets indecades has surfaced, investors seem to have developed a "what else canhappen"" attitude, leading to the potential for higher returns instocks. On the geopolitical front, the U.S. withdrawal from Iraq, andits effects have yet to be felt. But there are hints about what'scoming there as well. Value, BrandLoyalty, and Responsible Management 2009 is likely to be a stock picker's year, which means that moneymanagers are likely to focus their efforts on individual stocks, notindexes. And while there are no guarantees that stock prices are goinghigher in w year following the worst returns in decades, there areplenty of reasons for prices to rally; lower interest rates,significant amounts of pessimism, and a Federal Reserve with theprinting presses on high. Still, investors should not expect to have aneasy time picking winners, as old-fashioned value criteria are back envogue. And that makes this a laser beam, not a shotgun market. The major influence will be consumers and businesses with tighterbudgets and an eye for value. It will be this demand for "good stuff"for less, and service with a smile that will rule the roost. That meansthat well run companies, with real, useful, reliable products and theability to manage their sales, assets, and future lines of products arethe ones that are likely to catch the eyes and wallets of moneymanagers, since they will be the ones that will be busy. More thananything, and barring a continued deterioration of the global eocnomy,management teams that can actually deliver substantial and believableresults are the most likely to be rewared with potentially higher stockprices. That means that companies with brand names and a loyal following arelikely to do better than the rest of the pack. Two good examples areMcDonalds' (NYSE: MCD) and Wal-Mart (NYSE: WMT), both components of theDow Industrials. Other such companies can be found in our Fallen AngelsPortfolio, including Hewlett Packard Compaq (NYSE: HPQ), and IBM (NYSE:IBM). To be sure, this isn't earth shattering stuff. But it is whatworks in the early stages of a new bull market, if that's indeed whatthe last few days of trading indicate. Nowhere was this concept, and its global presence, clearer to us thanover our recent stay in Disneyworld, where huge crowds of domestic andinternational guests battled long lines and high prices, just to be ina place that delivered what they perceived was of value to them andtheir families. Best of Sectors In 2009, investors will have to focus on the best stocks in the bestsectors, and our early picks for the year are: Energy - After a huge hit in 2008, the energycomplex started to show some strength in December. With OPEC cuttingproduction, and seeming to stick to it, combined with increasingtensions in the Middle East, the large integrated oil companies, aswell as key players in oil service should do well. We have beenestablishing positions in energy steadily since the fourth quarter of2008. Drug and Biotech - Steady earnings, new drugapprovals, and consolidation should boost this increasingly homogeneoussector of the market, which has had few supporters in the last fewyears. In keeping with our underlying theme, it's about quality, notquantity here, as not all players will do well in the currentenvironment. As with energy, we have been building positions in biotechand in large pharmaceutical stocks since the fourth quarter of 2008. Old Fashioned Technlogy - This will be a goodyear to stay away from concept stocks with no chance of making money inthe next five years. Instead, older established names, such as HewlettPackard and IBM are likely to outperform. We feature these companies inour Fallen Angels Portfolio. Steady Eddies - This is a grab bag category,in which companies share the key characteristics highlighted in ourfirst section, value, brand loyalty, customer service, and most of alllarge market shares, the one thing that will allow them to cut pricesmore aggressively than the competition if necessary. It's important to note the following. As the year progresses, theoverall dynamics of the market will also change. That means that whatlooks good now, may not look so attractive by the middle of the year.Much depends on what happens in Washington with regard to thedevelopment and implementation of stimulus programs, as well as howsteady President Obama is with the fiscal side of the equation. If heis a wild spender, as many expect him to be, any rally could be shortlived. GeopoliticalDanger On The Rise The one certainty for 2009 seems to be that geopolitical problems willrise. These will be related to jihadists, organized crimes, andgovernments such as Russia, China, Venezuela, and Iran who stand togain from perceived U.S. weakness in the global arena. As the U.S. pulls out of Iraq, and redeploys troops elsewhere, therewill be a reaction from jihadists and governments throughout the world,with the potential for conflict likely to rise along many disputedborders. Already, the attacks in Mumbai, and the surge in theIsrael-Hamas conflict are supporting evidence of our thesis. Yet, aneven more troubling, and thus far largely ignored aspect of theproblem, is the apparent increase in cooperation between jihadistgroups accross the globe. The hand of Iran is already palpable globally in this respect, as itsfunding of Hezbollah has allowed it to gain a foothold in Lebanon andSyria. Yet, there are now reports that Hezbollah has been aiding Hamas,financially, and with the training of soldiers. The corollary to thisdevelopment is the increase in the rally cry from jihadists around theworld with regard to the situation in Gaza, as several groups in othercountries outside of the Middle East. According to Israe's HaaretzIranian clerics were calling for volunteers to go to Gaza, whiledemonstrations supporting Hamaz popped up recently in front of theIsraeli embassy in Argentina. In Indonesia, the Islamic Defenders Frontwas reportedly planning to recruit fighters to enter in the Gazaconflict. And the British embassy in Tehran was also attacked byprotestors in response to the Israeli incursion into Gaza. With the U.S. out of Iraq, expect jihadist marketing and propaganda toportray that as a victory, and to use it as a method to increaserecruits. Also important, especially with regard to the U.S. will be what happenswith Mexico's drug war. Both the level of violence, and the frequencyof events in this arena are on the rise. The arrest of a large group ofmen allegedly involved with drug cartels, and the presence of areigning beauty queen in a drug bust that included a large cache ofweapons points out the scope of the problem. From an economic point ofview, the rise in crime and violence in Mexico will be a significantproblem for the U.S., whose southern border fence is reportedly aneffective detterent to illegal crossings. Russia's death grip on Europe's energy supply is another important cogin the geopolitical machine, as are China's internal problems and thepotential there for social unrest as a result of the global recession. And finally, as the price of oil has collapsed, countries such asVenezuela have felt the pinch on their political agendas. Hugo Chavezis increasingly unpopular in Venezuela, as a result of his socialagenda getting squeezed, and the potential for problems there is alsoon the rise. The Intangibles Finally, we get to the intangibles, those things that seem to pop outof nowhere to move markets and people. To be sure, many of these socalled "surprises" have been developing for years, and often decades.2008 gave us three major intangibles. One was the Obama electionvictory, while another was the fact that the U.S. actually began theprocess of pulling out of Iraq. On the financial front, the King ofKings development was the Bernard Madoff scandal, which until provenotherwise might have been the event that history will show was thebottom for the bear market, although it's too early to verify that atthis point. No one knows what will come out of the blue in 2009. But something, ormany things will surprise the world, and the media, although if youtake the time to think about things, you could see it coming. Conclusion 2009 will be a year with little room for error on the investing front,as many significant external variables are likely to influence trading.Internally, the market is very oversold, though, which raises thepossibility of a continuation of the rally that started in lateDecember for a few weeks into the new year. Investors who remain patient, have realistic expectations, and don'toverleverage themselves are likely to come out better than those whofail to do their homework and get greedy. The more things change, themore they stay the same. Trade the correct trend, every time. Get Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The TradingManuals for All Seasons.

Chart Courtesy of StockCharts.com Market Moves Autonation (NYSE: AN) Rallies As CarWoes Rise Shares of chain car dealer Autonation(NYSE: AN) are nearing a key chartmilestone as car dealers experience a brutal form of economicDarwinism. Chart Courtesy of StockCharts.com General Motors (NYSE: GM) may be in trouble, but Autonation has beenquietly moving higher over the last few months. The latter owns 264dealerships, 73 of them selling GM cars. Yet, its dealerships arediversified including shops that sell imports, such as Toyota, Accura,Land Rover, Lexus and BMW, as well as having a significant presence inused cars, especially the popular used luxury cars. Still, business has been anything but good lately, with Auto Nationrecording huge losses in November, and expecting a grim 2009, unlesscredit conditions improve, which means that the company is not immune. So, why are the shares rising? Well, for one thing, Detroit isunleashing its latest round incentives, including 0% financing by GMAC(backed by the TARP funded government loans), as well as the usualtricks, such as rebates, discounts and so on. But here's the rub. We'veheard unconfirmed reports that dealers that have been offering rebatesare not getting reimbursed for them by the car manufacturers, which isone of the contributing factors in the rise of automobile dealerfailures of late, as dealers have reportedly been selling cars forlosses. But after it's all said and done, the key to Autonation's success isthe fact that it's the biggest of them all, and that it sells anythingfrom Chevys to Bentleys, new and used, and has the ability to maneuveron price due to volume and scale. In other words, where business isbleak for a small shop that owns one lot, Autonation has 263 lotsspread accross the U.S., and spread accross the entire demographicspectrum. In other words, in this case, size seems to matter, and thestock is rising on the expectation that when this is all said and done,there will be an Autonation in some shape or form still standing. The stock is nearing its 200-day moving average, just below $12, havingrisen from 4 in mid-October, which means that as the car industry hasimploded, Autonation has nearly tripled in value. This huge movesuggests that as the shares near $12, we should see some profit taking.If we see a surge, though, it would be a sign of significant strengthin the stock. If you've missed the move so far, this is no time tochase the stock. Yet, if it climbs above 12 in brisk volume, especiallyif there is no news, it would be a sign that higher prices are likelyfor the shares. Make money whether the market rises orfalls. Get Dr. Duarte's All NEW "Trading Futures For Dummies." The TradingManual for All Seasons. Updated, revised includes new charts, and fullchapter on ETF timing.

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