iBooyah.com Investment Matters

1.  Oil Prices appears to have stabilized.  We believed given the recent decline, oil could be trading no more than $60/barrel this entire year.  If this prediction holds, consumer confidence will remain strong as inflation will be tamed.  The low price of crude should translate into strong consumer spending.  The automobile sector will do well if prices of oil remain at this level.  Companies such as Honda (HMC), GM (GM) and Toyota ™ should do benefit.  Heck, even Ford (F) might see the light at the end of the tunnel. Of course, oil affects more than the auto industry, it affects plastics, transportation and etc.

2.  The Real Estate market will remain weak in 2007 as predicted by most analysts and industry leaders that follow the Real Estate.  This is good news for the stock market as people will need to invest their money somewhere.  A few years ago, the stock market was stagnant because everyone and their brothers were investing in Real Estate.  Now that Real Estate has cooled, more capital should flow into the equities market.  Consider adding a small position of homebuilders into your portfolio as these stocks are near their bottom.  Companies such as KB Homes (KBH) and Dr. Horton (DHI) are attractive in our opinion.  Keep in mind, the stock market typically trade with 6 months view, meaning stock prices generally are reflective of where the market believe the securities will be in 6 months.

3.  The bond market is not very good.  The yield on bonds is relatively low and will continue to lag.  This again is good news for the stock market as it lessens the chances people will buy bonds, thus reducing the competition for capital.

4.  Employment is strong.  The nation’s unemployment is around 4.5% and should continue to remain at this level. In our view, a sub 5 percent unemployment rate is terrific. The strong profits from Corporate America will help keep unemployment rate low throughout 2007.  As more people are employed, they’ll have more money to spend, thus increasing consumer confidence.  As a result, more money will finds its way into the stock market.  Retailers such as Wal-Mart (WMT), Target (TGT) and Costco (COST) will likely benefit from strong employment the most.

5.  Short term interest rate will remain below 6 percent.  Our opinion is the Feds will have little reasons to drastically tighten in 2007 as inflation appears to be in check.  In fact, there is a good chance they will need to stimulate the economy to keep the Real Estate market from collapsing.  If that happens, the reduction in short term rates will always be viewed as a positive for the stock market. 

6.  Corporate profits are strong.  The bull market we are currently in is for real.  Unlike the dotcom economy in the late 1990s, today’s corporations are fundamentally sound with actual revenue to support future growth.  This is a stark contrast to the dotcom boom where companies were operating on borrowed time and money.  We believed the NASDAQ is poised for more gain.  This means technology stocks should do well.  We like industry leaders such as Ebay (EBAY), Yahoo! (YHOO), Microsoft (MSFT) and Cisco (CSCO).  These companies are still relatively inexpensive in our view.