© Henry Weingarten Last Updated:

Much of the following material has been serialized in WALL STREET, NEXT WEEK and our subscriber premium channels.
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This forecast was first posted on our web site in our premium channels for WSNW subscribers.

Will markets decline in the form of a single or series of downturns, failed rally attempts or even crashes?  Even so, any market rise will be accompanied by increased risk vs. declining reward attributes. If a crash in 2006, we have identified close to 40 potential looming crises (Pluto events).  A partial but not complete list of worries includes: China melt down, Yuan reevaluation after effects or Taiwan action, global biomedical epidemics, e.g. Avian Flu, or bioterrorism outbreaks, trade wars (China, EU), major hedge fund bankruptcies, a PBGC (Pension Benefit Guaranty Corp.) shortfall crisis, major junk bond or emerging market bond default, a bank derivative blowup, Fannie Mae issues plus possible assorted natural disasters. This list does not include problems arising from higher interest in consumer credit, energy costs, and costs and consequences of the ongoing conflict in Iraq. The list goes on and on. 

Alan Greenspan and his soothing reassurances will be gone in 2006. The New Fed Chairman Ben Bernanke can quickly expect a crisis to deal with as Alan and Paul before him.  A deep student of the depression, he will find little help post the May 17, 2006 New York Stock Exchange Solar Return. 2006 is likely to have more wars, rather than peace. The most ominous event we see intermediate term is the US dollar decline ahead and “America for Sale”, hopefully not a fire sale! 

As 2006 unfolds, the trend will be towards increased risk aversion. CASH WILL BE KING, with conservative investors seeking safety. Remember, the path of capital conservation entails a lower return: it is the conservative offset for the risk you are not wiling to assume.

WARNING: DANGER AHEAD
The worse R/R, i.e. greatest risk and lowest reward is with the Nasdaq market now. Shall we project less than Nasdaq 2000 by Summer? Why not!"

“In general, the broad economic outlook has not changed.  The 2005 to 2007 inflationary recession continues to deepen. This outlook is predicated on economic activity that already has taken place and does not consider any additional risks from exogenous factors…Significant deterioration also will be seen in corporate profits and federal tax receipts.  Lower tax receipts will combine with disaster recovery spending and the ongoing war in Iraq to accelerate deterioration in the federal deficit.

However, negative GDP growth will not surface in regular government reporting until at least next year, now that it is clear that Katrina's impact has been neutralized in official reporting, and that political manipulation of the GDP, employment and CPI is rampant.Risks of the current circumstance evolving eventually into a hyperinflationary depression remain extraordinarily high.” 

Many savvy investment advisors believe the next few years will be a decade of higher risk and lower market returns. I agree.

Long Term, we consider the long term economic fallout of the US Iraq invasion quite severe and believe that global markets can retest or break their 2004 lows. As forecast, more and more savvy international investors are moving some of their money out of the US stock market to invest in countries that they feel are in better shape than the US. International Equities will outperform domestic ones We still recommend US investors in 2005 have 50% of their portfolio outside of US dollar denominated assets, or use gold and currency hedges for similar protection.

 I recommend increase use of Exchange traded funds [ETFs], which are passively managed, low-cost,  efficient baskets of stocks that focus on countries, sectors, regions or indices. Even market bulls are concerned about specific asset classes and betting on individual sectors they prefer. My view remains that stock selection continues to be paramount and counts more than sector rotation. It is also as important as market timing! 

Looking ahead, my question is whether 2006 will show slow growth of less than 2%, no growth, or turn into a classical recession. America will be on sale then. Hence we advise PRESERVE CAPITAL: FOCUS ON PROTECTING AGAINST DOWNSIDE RISK.
Given that the traditional "Buy and Hold" investing strategy will continue to under perform, we again recommend trading 50% in "investing" portfolios in 2006. TAKE/PROTECT PROFITS CONTINUOUSLY.

BOTTOM LINE:
DON'T BUY AND HOLD. THE STOCK MARKET REMAINS A RISKY, DANGEROUS PLACE.
I ADVISE KEEPING A BALANCED AND DIVERSIFIED PORTFOLIO, AVOID MARGIN DEBT AND BE CASH RICH.

There are five primary celestial and terrestrial phenomena affecting world events and global markets in 2006:

• March 29, 2006 Total Solar Eclipse
• Jupiter, Saturn, Neptune T square with 3 Jupiter squares to Saturn December 17, 2005, June 22 and October 25, 2006 and Saturn opposing Neptune August 31, 2006, Feb 28 and June 25, 2007
• The continuing World War on Terror and the Iraq aftermath and US Debt crises
• Ben Bernanke becomes Fed chairman February 1, 2006
• EU Charter November 1, 2006
  

Big Investing Ideas

1. The US Dollar will weaken significantly in 2006 as the deadline for Corporate Dollar repatriation ends in 2005. The long term structural problem of the US current account deficit has yet to be addressed.  The dollar should remain in a secular bear market for years due to its negative fundamentals. Unfortunately, for Americans, US interest rates may rise not only for future inflationary worries, but also due to a lower US dollar.  Our US Dollar Index Fair Value today is 81.50, while .78 or lower  is possible. As previously forecast and increasinly ackowledged, the US Dollar will no longer be the world's sole reserve currency.  To minimize this danger, it has been necessary for the FED to defend the US dollar and outright intervention from the US Treasury in the currency markets may be necessary. Given the US dollar secular decline, we continue to recommend that All investors need to diversify their investments globally. Additionally, many blue chip foreign investments are more attractive investments with stock prices cheaper by most valuation measures: price to earnings, price to sales and price to book. 
Our recommended US equity portfolios international stock allocation remains 50%.      

2. A WAR TIME ECONOMY: GUNS & CAVIAR REDUX  Nobel Econ: Iraq May Cost US $2 Trillion
At least some of the real war costs are being admitted, e.g. Veterans Administration and interest, ignoring the longer term effect of misguided capital lost opportunity.

These are extraordinary times, where geopolitical risk and outlook continue to outweigh normal stock market consideration trends. As this will take money away from more productive areas of the economy, we are far from bullish intermediate term. US government bond yields may rise due to weakening foreign demand, along with an increase in supply because of massive tax cuts underway, as well as military adventures and increased defense and homeland security spending. We could see a very nasty bear market in bonds.  Remember: Life jackets, Deadbolts, Smoke and Fire Alarms, etc. do NOT provide you with Financial security. Liquidity, Global Diversification and hard assets such as gold DO offer some protection.


3. More houses are for sale and will be staying on the market longer.The rise in home values will end in 2006 just as the average size of homes is no longer increasing.  We expect to see later in 2006 and early 2007 house prices declining, with a similiar astrological condition to 1989!

Housing, along with Commodities and Physicals, can be viewed as an Asset Class along with Stocks, Bonds and Cash by many investors. Positively, there is the enjoyment factor: most woman would prefer to have an additional 100K in a home than in a portfolio. Housing also appeals to safety concerns in times of trouble, but home buying is cooling. Record low interest rates have ended. Other negatives include the fact that the ratio of home prices to home rental rates is too high, while the value of individually owned residential property to disposable income is at a 50 year high. Classically, Real Estate weakens 12-24 months after a market collapse. Thanks to the Fed, this did not happen when individual stock prices returned to pre-1998 pricing.  Will this result in just slowing markets with a soft instead of hard landing? It is largely a question of interest rates: When mortgage rates increase, prices will fall. The question is how big will it be and how fast it will happen, not whether it happen.
Note: Optimists believe strong housing demand will help mitigate things, just resulting in a reversal of the McMansion trend of bigger housing, lower quality homes and 40 year mortgages eventually replacing 30 year ones. In other words, a housing slum and modest decline and not a significant correction or  crash lies ahead. Pessimists believe positive factors such as population growth, is already factored into housing prices, and shortly increasing subprime defaults will be the harbinger of things to come. Either way, buyers will benefit more than sellers.


4. INFLATION AND THE HOUR GLASS OR BIFOCAL ECONOMY
Stock markets will benefit less from low interest rates. US Bonds will take a  hit, unless there is more terrorism. Spin it as they may, the economy is not only slower than many Wall Streeters believe, but it will get worse before it gets markedly better. Also the CPI has been significantly understating inflation for years. Bill Gross of Pimco is quite correct in pointing out the CPI con job. It understates inflation (the cost of living as well this year as well as last year).  Commodities, especially gold, will be an appropriate hedge for many portfolios.  We expect to see $800 gold by 2008. Despite healthy dividends, we will continue to underweight REITS in H1 2006. The emperor has no clothes. Investors will become increasingly risk adverse and stop chasing yield. Over time, as the US Dollar continues to depreciate, it will bring higher inflation, lower real growth rates and a reduced standard of living for most American wage earners.  A sad but compelling reason to buy gold.

5. DEBT
Pension Deficits:  While Private plans have an estimated deficit of just $465 billion, Public plans of local, state and the federal government in the US are estimated to have something like $1.6 trillion! Individual investors are advised to reduce indebtedness as much as possible, as quickly as possible.


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WILL US FED POLICY PREVENT A JAPANESE OUTCOME OR JUST DELAY IT?
HOW WILL  FUTURE US MILITARY ADVENTURES HELP OR HINDER THE WAR ON TERROR?
WILL THE US DOLLAR JUST RETEST .80 OR REALLY TAKE A DIVE?

Global Stock markets in 2006/2007 will be determined largely by answering five questions:

Q1:  Will the US Dollar remain the sole global reserve currency?
Q2:  Will Energy Prices Stay High?
Q3:  Who will be helped/hurt the most by the lower/higher US dollar?
Q4:  What P/e's will investors be willing to pay for modest corporate growth?
Q5:  Where are interest rates headed and when and where will the Fed stop increasing rates?

KEY COMPANY TRENDS IN 2006


• Buy stocks of blue chip companies that pay dividends and/or have active share buy back programs.
• Buy companies that will benefit AND not be seriously challenged from globalization. Companies that benefit from globalization are properly hedged against currency risk.
• The best commodity and commodity stocks will be those in the gold and silver sector.


SHORTING AND MARKET NEUTRAL INVESTING FOR EXPERIENCED INVESTORS
In order to sleep soundly at night, I recommend a Hedge Fund style Market Neutral Strategy for H1 2006. This involves both buying under valued and selling short overvalued stocks. This is often best done in industry pairs: going long quality stocks and shorting lower quality ones, as it involves the smallest risk, but the most work. Alternately, stocks can be hedged against their individual sector membership or the overall market: Buying a stock and selling its sector or broad market index, or Selling a stock and buying its sector index or the overall market. 

If you are bullish, I would recommend a long/short ratio of 2-1 for market neutral strategies.
If you incline more to the bearish camp as I do, then a long/short ratio of 1-1 and 1-2 (depending on the short term astrological trend) is preferable.

EIGHT, NOT THREE ASSET CLASSES
There are NOT three assets classes but EIGHT that savvy global investors should semi-annually reweight. Beyond the classic Stock, Bonds and Cash are:
Arts and Collectibles, Commodities, Currencies, Income Trusts and Preferred Stock, and Real Estate/REITs.
Diversification among at least five, not just within each asset classes is recommended.

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 HOW HIGH IS UP? HOW LOW IS LOW?


AFUND TRADING RANGES
DJIA: 8880 to 11120
SPX: 1050 to 1280
NASDAQ: 1770-2350

VALUE WITH GROWTH
We would be glad to be less active traders and more traditional buy and hold cosmic value investors if only....
In 2006, we recommend holding some [up to 20%] Blue Chip dividend stocks which offer a greater  total return beyond cash in the bank. Additionally, we look to commodities [10%-15%], currencies [10%], REITS [5%] and small cap trading [5%-15%], depending on account risk profile for double digit 2005 portfolio returns.  The mania for M&A will gradually be replaced by DISTRESSED INVESTING.


Capital Preservation remains important for global investors; hence, we stress caution. Flat and range bound markets will  favor quality issues. Alternately, Market timing is another key to above average returns.


Today most investors realize classic "Buy and Hold" is passé: Stock picking and market timing will continue to rule in 2006.
Successful investing depends on knowing: 
When all the good news has already been factored into the share price, at what price is the valuation just too high? 
When all the bad news has already been factored into the share price, at what price is the valuation too cheap?

• We believe only 25% of a portfolio should use the investment strategy paradigm of  BUY and HOLD Value or Growth stocks, with at least reasonable valuations based on current and future profits.
• Any and all investing profits need to be protected against future bear assaults in 2006. 
• Trade more (50% of  portfolio) and take/protect profits at 10%-20% profit points for long term non-core holdings.


1) Buy carefully and when stock valuation becomes super frothy again, SELL.
2) Be careful about owning stocks that are “priced to perfection”, they can only disappoint.
3) It is NEVER “different this time.”
4) Ultimately, profits matter.        

INVESTORS SHOULD BUY AND HOLD STOCKS IN 2006 THAT ARE:
1) Profitable, well managed companies,
2) P/E* under 14 for Growth and under 10 for Value.       
3) A PEG <1.3, or undervalued by 10% or more, or dividend yields of 5% or more.

*After allowing for pension liabilities and expensing options.

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I GLOBAL INVESTING

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BUY LITTLE
ACCUMULATE ON WEAKNESS: CANADA, JAPAN, KOREA & SWITZERLAND
TRADE AND SELL THE UNITED STATES




The Horoscope is a MAP of TIME and PLACE - here is a brief overview of selected global markets:
Country risk is real. Despite globalization, sophisticated investors today are rightly concerned about being overly invested in any one country or currency. 
Unfortunately, there are no really good places to hide in Q2 2006.


EUROPE - We recommended aggressive buying at 117.50 and continue to favor the long side of the Euros under 120, sellers above 133  Our Fair value is currently 122 but moves to 125 midyear. This is subject to upwards revision should the Yuan repeg more to the Euro or Oil ministers accept [demand] payment in Euros or a similar move by other countries to keep the US Dollar the sole world reserve currency.   We plan to trade accordingly. Note: WSNW subscribers can review our favorite S: Dow Jones Stoxx 50 stocks.  

        Switzerland (EWL) 2006/2007 may be a good time to 'THINK LIKE THE SWISS": Stepping Up To Swiss Quality.

        NORTH AMERICA - Traders paradise

• S: CANADA -CANADA IS FOR WINNERS One major reason is that Canada's trade and budget surpluses continue to contrast with large US deficits. We are delighted to have our northern neighbor remain our favorite G8 country in 2006. Canada's Competitive Advantages- The Economist Intelligence Unit states that Canada will be the best place in the G-7 to invest and do business between 2005-2009. We agree.As US investors diversify away from US dollar assets, more US investors should look at Canada as one attractive alternative: 15-20% of their North American portfolio next year. Equities [EWC] are cheaper relative to US markets. This should also keep Canadian investors happy, at least relative to the US in 2006. Resource rich, it will be the target of significant M&A to the extent allowed by the government. Fortunately for Canada lovers such as yours truly, 2006 will continue to outperform, and the loonie will reapproach .88+ in 2006 While a minority of Canadian economists forecast par with the US dollar, the damage to Canadian manufacturing would be too great. We recommend sophisticated investors buy Canadian Bonds and Sell US Bonds as US interest rates will grow faster than Canadian ones, as their Central Bank tries to stem the rising Loonie.  Also, I recommend researching Canada's Power Book of high dividend paying - 50 Top Income Trusts. Chasing Higher Yields Up North
  
  
• S: MEXICO - Mexico sends 90% of its exports to the United States and its fortunes are increasingly tied to its northern NAFTA neighbor. The amount of money shipped to Mexican families from relatives in the United States today surpasses foreign investment as the country's second most important source of revenues after oil. In 2006, we continue to look for potential take over targets sporting reasonable valuations or companies that can compete in the US for the rising Hispanic consumer market share. 
• UNITED STATES - AMERICA WILL SOON BE GOING ON SALE!  Is a new era of low growth or a protracted Japan-style recession awaiting the US? Unfortunately, the US remains a nation at war, with terrorism concerns likely far into the future. THE US IS SIMPLY NOT AS ATTRACTIVE TO INVESTORS AS IT ONCE WAS! GMI - WorldPoll shows that unpopular U.S. foreign policies threaten  revenue and global market share for many American based companies such as American Airlines (AA) and McDonalds (MCD). Today, 20% of international consumers are  less likely to travel to U.S. or purchase American products and services due to U.S. war in Iraq and unilateral foreign policy. This degradation of US brands will increase in 2006. Also record budget deficits makes further tax incentives for consumers unlikely. The enormous US twin trade and budget deficits make the US Dollar a potential time bomb: It is no longer as safe a haven given massive budget deficits and the War on Terror.  Positively, thanks to the weaker US dollar intermediate term, select US exporters will benefit. Additionally, more American firms will become M&A take over targets. Ultimately, US stocks will appear to be global bargains when the US dollar has dropped further and/or the currency risk has been reduced. This could happen as soon as H2 2006. Still, overall, many former investor favorites will disappoint as investors sell rallies to "get even".  Corporate earnings are decelerating, energy prices are likely to remain high and interest rates are on the rise,  However, given one can trade stocks here for 10-25% appreciation/depreciation a day/week, this remains TRADERS HEAVEN. Forthcoming 2006: AMERICA ON SALE by which time Americans will have come to realize they are not as rich as they once were.
  

ASIA/PACIFIC - Intermediate term investment opportunities in India and China.
Long term, China and Asia could be the fastest growing area in the world 2010-2030. In 1820 China and India were 50% of the world's GDP. Intermediate term, the trends are indeed favorable for a return to such global weighting. It is only a matter of time before Asia is no longer so dependent upon American consumer markets to thrive.
• S: JAPAN - For too long, Japan has depended on the US consumer and is now partially substituting the Chinese consumer instead of domestic consumption. At the same time, expansion of Asian operations into China and Korea from today's base in Japan  Our mantra on JAPAN INC. is "You have Japanese products in your home; why don't you have Japanese stocks in your portfolio?"   Most believe that the Yen will strongly benefit from a Chinese reevaluation of the Yen. So there is also a strong currency kicker benefit here in 2006. Japan will continue to out perform.
• HONG KONG/CHINA - How strong will the Chinese market be to and after the 2008 Olympic Games in Beijing? More to the point, will its current slowdown end in a soft or hard landing? The 2008 Olympics not withstanding, too many of the mainland's industries are a mess and its stock market is overloaded with poor quality state owned companies. Increasingly, Chinese companies are being listed on the US stock market. I find this somewhat ironic. Until this is rightly addressed, we continue to recommend great caution.  On the plus side,  the Yuan will continue to move UP. China will be the third largest economy in the world before 2012, after the US and Euroland. Shanghai World Financial Center, with 101 floors, is expected to be the tallest building in the world when completed  in 2007.China's brand names prepare to go global. “The Chinese government has said it wants at least 50 Chinese firms in the Fortune 500 list of the world's largest companies by 2010.” Yet its public debt is over 100% GDP if you include "off-balance sheet" accounting. Non-performing loans held by China's banks are 25% to 50% of GDP making China highly vulnerable to an economic downturn. I prefer to wait and buy AFTER the collapse of a big bank or two, given my predilection for sound sleep. Abuses on China's stock markets are rampant and listed companies have long struggled with abuses by their controlling shareholders. Hong Kong is slightly more attractive, although fundamentals often seem to matter little on the Hang Seng, and its stock market acts closer to legalized gambling than any other major one in the world. On the bright side, Hong Kong benefits from a spill-over effect from Chinese mainland's trade. As for buying directly on the Shanghai and Shenzhen stock exchanges, good luck or should I say "good connections" matter! Bottom Line:  There are two primary ways to play China- Buying what China Sells and Buying what China Buys. I prefer
  the latter!
• KOREA - Even though growth is slowing, long term, we continue to like blue chip giants Korea Telecomm (KT), LG Electronics and LG Philips (LPL). We still anticipate a peace dividend in 2006 and a MAJOR benefit from Chinese Yuan appreciation. The easiest way for US investors to buy is through the Korea Fund (KF) or Country Ishare (EWY).  Like Taiwan, this is largely a bet on the US technology sector.
• INDIA - This story is now known to be much bigger than just computer and pharmaceutical blue chips. Growth of 7.5%+ is likely to make India the world's fastest growing economy after China. Global investors have finally noticed the giant sucking sound of thousands of US and UK jobs being outsourced to India. Goldman Sachs predicts that India will be the third largest economy by 2035.  IIF or IFN are two closed end India funds, and the best way for US investors to invest (not trade) in India. .
• AUSTRALASIA - Australia's growing trade deficit and the weakening housing market will continue to slow economic growth in 2006. However, resource rich, there are a record number of advanced development projects under way in Australia's mining and energy sector.  This combination makes this a slightly out perform country rating, but no longer a buy, for a much stronger Aussie $ as was the case until recently.
• OTHER TIGERS AND DRAGONS - We prefer Singapore, Thailand and Malaysia to Indonesia and the Philippines.
  

OTHER- Opportunities for savvy investors ONLY:

• S: ISRAEL - Israel's technology sector is desirable given its highly skilled labor force and favorable tax treatment. Unfortunately, it is best to buy only when there is blood in the streets, which happens all too often. 
• S: LATIN AMERICA - Accumulate on weakness for appropriate multi-year long term investment portfolios and longer term for multi-national corporate investments.

We continue to advise caution for emerging markets unless you monitor them very closely. There is always an uncomfortably large possibility of shocking negative "surprises."   They "behave like rich-country ones on speed, both up and down". It is very important for investors to distinguish between high and low risk countries. In addition to the obvious political and currency risk, many are too loosely regulated. By the end of this decade, many forecasters believe we will see greater economic growth coming from a combined India, China, Brazil and Russia, than from the established economies of the US, Canada and Europe.

Until then, one can expect plenty of geopolitical risk. For example, the actions against Yukos and Khodorkovsky should be an investor red flag about Russia's commitment to rule of law and protection of shareholder and investor rights.

Global analysts are forecasting high growth of the BRICs--Brazil, Russia, India and China--over the next half century.
Many believe China will overtake Japan as the world's second-largest economy in 2015, and become the world's largest around 2040. In H2 2006, the global investing landscape is likely to be dramatically different.

Current AFUND ratings on the BIG Four Emerging Markets are: Brazil (Accumulate), Russia (AVOID), India (Watch) and China (Wait). 

WSNW subscribers should periodically review our S: AFUND GLOBAL 12 - for our favorite global blue chip long term investments.

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II TIMING

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Traders believe that "Making money in the market is all about Timing".  The "Buy And Hold" climate we used to have in the US stock market is long PAST HISTORY.  Since 2000, it has become a "Market Timing" and “Stock Picking” environment.  Markets reward best stocks that have Value AND Growth. Corporate profits for more well managed and sufficiently capitalized companies should rise modestly, helped by the low interest rates.
  
For H1 2006, Be highly liquid and Trade for short term profits- 10-20% moves.
In the 4 year presidential cycle, this is often a down year (e.g. 2002, 1998 etc.).  March 29, 2006 is a Total Solar Eclipse in Brazil, Africa, Turkey, and Asia. In 2006 Jupiter squares Neptune 1/28, 3/16 and 9/24. Also we have the first pass of Saturn opposite Neptune 8/31 and again in 2007 (2/28) and 6/25). This could be more Avian Flu, Marburg, SARS outbreaks.


WHAT IS THERE REALLY TO LOOK FORWARD TO IN 2006/2007?

I am unsure at the time of this writing whether this upcoming period will be the worst of economic times in one or two generations. Appropriate press storylines could be. “Nero fiddles while Rome burns”, “Ship of Fools”, “Dancing on the Titanic”, etc.

From the viewpoint of recommended APPROPRIATE intermediate term stock market action, it matters little.
Consider the three major upcoming so-called market positives:

      1)      A decline in Oil prices,
2)      Money to be spent on the Katrina/Rita fix up and
3)      A pause in interest rate increases.

These are at best cups half empty. 
1) This will be due to decreased demand; sustained Oil price above $55 are detrimental to the broad economy sans the energy sectors.
2) Katrina/Rita is money that cannot be used elsewhere.  This type of bad news is not really that good. If it were, we would see DOW 13,000 instead of below 9000 before Bush leaves office, given the likelihood of more upcoming natural and man made disasters in 2006/2007) Interest rates are too low from the viewpoint of inflation.  However, I see the real estate market will decline even more. (Note: 2007 is similar astrologically to 1989!).  Yet if rates remain low or are lowered, the US dollar will drop or can potentially fall out of bed!


•  Jupiter is in waning square to Saturn December 17 (with subsequent passes in June 22 and October 25, 2006).
  
• The days of cheap US food and energy are long gone. Public enthusiasm to spend, spend, spend will be subdued as the US job market continues to go through structural changes and more better paying jobs are exported to China and India. This "wageless recovery" in most G7 countries results in economic growth that has failed to raise worker's pay above the rate of real inflation:  Consumers are still in a financially weak position with little pent-up demand. Further rises in interest rates will dampen consumer willingness to spend and borrow.  If/when the US housing markets corrects signficantly, the question will be whether the US enters a recession or worse. The bottom line: Our advice to individuals and businesses is to increase cash flow (profits/income - expenses) by 10% next year. 
• There is the highest likelihood that the US economy will start a recession in Q2/Q3 2006 and it will be "official" 2 negative GDP growth quarters sometime H1 2007.
Jupiter entered Scorpio on October 26, 2005, cosmically bestowing favor on the Business Intelligence, Health Science, Mining, Nanotechnology, Robotics, Waste, as well as grow Bankruptcy - a challenge for banking, business intelligence (spying) and pollution [classic Scorpio themes].


LONGER TERM


2007: Jupiter Square Uranus: 1/22, 5/11, 10/9 and then in December 2007: Jupiter will be conjunct Pluto. Two Total Lunar Eclipses March 03 and August 28, 2007.

The low point of the nodal cycle is reached in 2008, when Pluto ingresses into Capricorn with one Total Lunar Eclipse February 21 and a Total Solar Eclipse over China and Russia. 8/1/2008.  This is also the time that the baby boomers start to retire in mass from 2008 on- taking more money out of the market. Couple that with a practically non-existant US savings 

Jupiter conjunct Neptune in 2009: 5/27, 7/10, 12/21. Total Solar Eclipse July 22, 2009 (India/China).


The next epic shifting planetary configurations in 2010/2011: Jupiter conjunct Uranus AND Jupiter opposition Saturn, as well as Uranus entering Aries and Neptune entering Pisces, a total Solar Eclipse July 11, 2010 and a Total Lunar Eclipse December 21, 2010. We also have a rare transit of Venus June 6, 2012.  Then a Total eclipse of the Sun 14 November 2012. ALL precede the December 21, 2012 Mayan end date. Also we have 7, yes 7 Uranus-Pluto squares from June 24, 2012-March 17, 2015--Wowie! Some of the more extreme forecasts made for this time period include alien visitations/invasions, catastrophic asteroid impacts, violent volcanic eruptions and massive earthquakes. We will give our views here no later than midnight 12/20/2009.

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III SECTORS

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Sector based investing, while no longer replacing country based approaches to global investing, still is very important.
In H2 2006, we will be expanding coverage of BIG THEME INVESTING: Aging (Health, Leisure), Alternate Energy and Environment, Safety and Security, and Triple Gold (Black, Yellow and Blue).
Given our bearish views, we are also looking to Distress Investing and Safe Haven Investing, e.g. Dividend and Income.
Favorite 2006 future themes are: Biotechnology, Hydrogen/Solar Energy, Nanotechnology/Robotics and Wind/Water. 
The themes of Technology, Communications and Health Care continue to matter.
WSNW subscribers please note: we update our coverage on the following industry sectors on our premium Silver posting area: S: COMMUNICATIONS, S: COMPUTERS, S: ENERGY, S: HEALTH CARE, and S: MINING.             
Most of our 2006 favored sector themes are defensive:         
• Aging, Biotechs, S: Healthcare 
• Entertainment and Media
• Life Essentials: S: ENERGY, Food, Shelter and Water
• Nanotechnology 
• Natural Resources, S: Precious Metals
• S: REITS
• People are living longer and there will be growing demand for health products and care. US health care expenses total more than 14% of the total U.S. economy. This is more than Americans spend on food, housing and, or automobiles. The easiest way to play this sector is to buy the iShares Global Healthcare Sector Index fund (IXJ). Long term investors should look for companies that will benefit from the increasing baby boomer aging population: a baby boomer becomes a senior citizen every 7.5 seconds!  Healthcare, especially for retiring baby boomers will receive more attention and money as time goes by, e.g. Sunrise Assisted Living (SRZ), American Medical Alert (AMAC), Candela (CLZR), and Lifeline Systems (LIFE). These range from assisted living communities and medical alert notification to laboratory testing companies to companies that provide orthopedic care and dental products. Also look to select leisure companies such as Jacuzzi Brands (JJZ). Much closer to my heart and soul, are traditional SRI favorites such as Herbs, Natural Foods, Vitamins and Natural Healing Therapies, which will continue to grow market share as Cultural Creatives age. Personal care company Church and Dwight (CWD) is a safe and boring buy, but along with many natural food companies shares, are expensive, e.g. Hain Celestial (HAIN), Hansen (HANS), NBTY (NTY) and Whole Foods (WFMI). They should be considered when their share pricing again intersects with reality as demand for health foods and sustainable practices as part of a healthy lifestyle will fortunately continue to grow.
• Jupiter's move into Scorpio adds intelligence to holds in the military/police/homeland security sector. Four sector picks  are Armour Holding (AH),  L-3 Communications (LLL), Lojack (LOJN) and Magal Security Systems (MAGA). A Graham and Dodd like play is Lakeland Industries (LAKE).. 
• Long-range energy trends remain bullish, with expectations that demand from nations like China and India would keep supplies tight.  We see SRI favorite Fuel Cell, Solar and Wind companies as suitable intermediate term SRI  investments. For example the solar industry is currently growing at more than 50% annually and is predicted to grow 300% to $18.5 billion by 2010. Investments in global alternative-energy industry, including solar and wind power, are expected to grow to $ 100billion over the next 10 years, according to the International Energy Agency. One reasonable long term play is Fuel cell supplier Quantum Technologies (QTWW). Two interesting small caps we continue to watch are: Day Star Technology [DSTI] and Solar WorldWater Corporation (WWAT). As for shelter, we remain hopeful about International Hi-Tech Industries.  The number two and fastest growing beverage is Water. Growth has been spectacular in a number of countries, with bottled water fast becoming the norm for in home and on the move hydration. Health and wellness has been a big driver for the bottled water business. Also the demand for providing clean water and recyling dirty water is surging. Unfortunately, disputes over water are possible causes for war in the 21st century. German RWE and French SUEZ are serious global plays. One international niche player to watch is Consolidated Water (CWCO). Currently, America's water systems are in need of serious repair. American water plays Stat Water (AWR), Pentair (PNR), Southwest Water (SWWC), Vermont Pure (VPR) and Aqua America (PSC) are good alternative domestic choices in conservative portfolios. Treatment stocks Calgon (CCC) and Watts Water Technologies (WTS) are safe long term holds. [Environmental Power [EPG]  Nalco (NLC) and Waste management (Waste) are both likely to benefit from Jupiter in Scorpio. Calling water "Blue Gold" as in Black and Yellow, may not be much of an exaggeration.]   
• The Nanotechnology Research and Development Act authorizes $3.7 billion in federal funds for nanotechnology, the science of building new products and devices by manipulating molecules and atoms. Today, most Nanotechnology investments are largely venture capital plays or early stage R & D developments. However, the hype will grow, if not the reality. The prefix "Nano" in a company name will have a similar effect to the suffix ".com" last century.  Our big 2006 play here is our client Dais Analytic (DLYT). The Company generates revenues primarily from its first commercial product, ConsERV™. ConsERV™  is an HVAC [Heating, Ventilation and Air Conditioning] product that saves an average 30% on energy costs based on pre-Katrina/Rita pricing, while improving the indoor air quality. This represents only one of the several world-wide uses of its polymer platform, which extends to desalination, performance “Gortex-like” breathable clothing, and Marine paints and coating.
• The cheapest long term protection against a US Dollar decline is GOLD. Geopolitical uncertainty, war, global economic sluggishness and a weak U.S. dollar are usually good for gold companies. The major factor providing intermediate/long term support for gold is that a further decline in the US dollar is practically inevitable.  These are the times when we like to buy. We reached our $500 target in 2005 and expect $800 by 2008.  Just as IBM and GE are DOW bell weathers for DOW, so is Newmont (NEM) for gold in BIG money portfolios. My other favorite major is Barrick (ABX). Our Favorite Midcaps are Nova Gold (NG), Agnico-Eagle (AEM),  and Meridian (MDG). Another way to play this theme is with Metso (MX) , a top global supplier of equipment to the mining and forestry industries. Other commodities may also do well as a hedge . 
• REITS will be bought by the buckets but only AFTER there is blood in the streets in 2006 and/or 2007.
  

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IV STOCKS

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Markets in H1 2006 will continue to be more a stock pickers market, than a sector based one.

Having my Moon in Libra, my Stock Selection is both:
TOP DOWN: country/currency, bourse/sector, individual stock and
BOTTOM UP : strong astrological and/or fundamental/technical indications.

I like to begin with one or more of the following 4 criteria:

   A: CASH RICH, WELL MANAGED AND PROFITABLE,  

   B:  UNLOVED BUT UNDERVALUED, 


   C:  POSITIVE MOMENTUM AND MONEY FLOWS          

   D: GOOD HOROSCOPE OR IN AN ASTROLOGICALLY FAVORED SECTOR:   

     1) Saturn in Leo
     2) Jupiter In Scorpio [Alternate Energy, Health Care, Precious Metals, Nanotechnology, Robotics, Waste].
    
Our favorite strateges will be shorting or defensive Market Neutral Hedging: Buying a strong stock while shorting an appropriate index (SPX or Nasdaq), or Pairs Trading - buying a strong company and selling a weak one in the same sector usually makes money whether the market moves up, down or sideways. Until then, we will not so much be investing as short term trading such as buying January effect stocks or periodically shorting Nasdaq Internut-like fantasies.


We again are looking to some cash rich dividend paying global blue chips. These are companies that are prospering by gaining market share and buying "cheap" assets during this economic slowdown over small and midcaps.  These are companies that will become far stronger in the long term.  Our game plan is to invest conservatively, but due to recent high market volatility and increasingly compressed market cycles, we now advise trading all accounts more actively, at least 50% of portfolio holdings! Note: European and Asian stocks may NO longer rise and fall fully in sync with US markets as currency trading brings more wild short term swings, and also when the US dollar resumes its secular decline. WSNW subscribers should periodically review our S: AFUND GLOBAL 12 - for our favorite blue chip long term investments.
                                               
Nine selected Investing themes follow. For more and updates, WSNW subscribers may visit our AFUND premium channels.    

1.  The US dollar will fall again, select Country I-Shares or Foreign Blue Chip companies to hedge:

• Canada (EWC): Outperform. Barrick Gold (ABX), Encana (ECA), Enerplus (ERF), Prime West (PWI), SunOptica (SKTL) and TransCanada (TRP)
  
• Japan (EWJ): Outperform Honda (HM), Nippon Telegraph and Telephone (NTT), Shiseido (SSDOY), Sony (SNE), Toyota (TM). 
• Korea (EWY)- Outperform Korea Telecomm (KT), Lucky Gold Philips (LGL) and Samsung (SSNGF)
• Switzerland (EWL) - Outperform ABB (ABB), Nestle (NSRGR), Novatris (NVS), Roche (RHHBF),Speedel (SPDHF)
• S: AFUND GLOBAL 12                              
2. Share buybacks and dividend paying stocks are always desirable in our eyes. Historically, we always like undervalued stocks, especially if coupled with a yield greater than the classic value buy signal of 5%. Companies that pay dividends posted a total return of 18.35% vs. 13.65% for non-payers. We excpect the same relative out performance in 2006. We recommend only limited exposure to previously favored REIT exposure while we wait for more of a downward real estate price adjustment. Instead we recommend ishares Dow Jones Select Divident Index (DVY) and Canada's Power Book of high dividend paying - 50 Top Income Trusts. We also like stocks that are 10% or more undervalued or potential M&A acquisition candidates.
WSNW subscribers may wish to read our S: Income& Dividend stocks post for more.                
                                
3. S: DJIA We fully expect to see the Dow below 10,000 in 2006. The key question becoming which Dow stocks to sell, and which to buy and hold into 2006. Companies such as Merck (MRK) will be highly challenged in 2006 as GM was in 2005 for obvious reasons. It is not surprising that financials such as AXP will  under perform or even Dupont (DD), but that JNJ will be like GE was in 2005, could be to many non-financial astrologers! Saudi Prince Alwaleed bin Talal's astrologer is right that Citibank (C) will outperfrom. Other Dow astrological outpeformers are ATT (T), 3M (MMM), GE, IBM,  JPMorgan (JPM) and Pfeizer (PFE) which is likely to outperform H2 2006, although IBM may be a contrarian hedge as early as Q2 2006. Note: Both MSFT and HPQ are expected to do rather poorly in Q4 2006.  Remember, these days even Blue Chip stocks have to be traded, not "buy and  held" for better than 10% returns in 2006. 
4.  STOCKS FOR UNCERTAIN TIMES
Gold, entertainment and consumer staples have often outperformed in bad times. Such stocks are to be watched and accumulated on weakness before market bulls become concerned. Also considered traditional safe havens in times of uncertainty are utilities and property trusts. However, deregulation and future interest rate increases will make them less attractive in 2006/H1 2007.
Our S: Stocks for Uncertain Times is a defensive, lower risk value oriented portfolio that allows one to sleep better at night even if there is more terrorism or the "recovery" takes time and is not on "TV" time. Also included are income oriented stocks as well as an SRI component to feel good about, even if one is not making a ton of money. These, along with Health care, are our favorite sectors to buy and hold during market weakness.

5. JUPITER IN SCORPIO
Business & military Intelligence, Health Care, Mining, Nanotechnology, Robotics, Waste Managment.

6.  LONG TERM THEMATIC INVESTING
Current Big themes include the aging of baby boomers, alternate energy and energy recovery, Triple gold (Black, Yellow and Blue) Value, and unfortunately, increased safety and security demands

7. FUTURE EMERGING TECHNOLOGIES
Even before we became one of the first Apple dealers in NYC, we historically have liked betting on emerging technologies. This we recommend doing in a basket of stocks, because this is a high risk-high return investment that is best done in a diversified manner. Also, I don't like to pay too much of a premium over value for longer term holding. 
Note: Given an inevitable future boom-bust cycles, the "safe" play is the equipment sellers who always make money. After the Klondike and California gold rush, most miners went home broke. The real money was made by freighters and merchants who brought and marketed supplies. So too with Biotechs, the Internet and Nanotechnology today. For example about 1,200 of the roughly 1,500 companies involved globally in nanotechnology are start-ups, and obviously many will disappear.

Our 2006 four favorite FT sectors are:                            

BIOTECHNOLOGY: e.g. BBH and IBB or heavyweights Amgen (AMGN) and Genentech (DNA) can be trading buys on strong pullbacks.  I prefer to invest in companies that have multiple products in clinical development. 
     
CLEAN AND SUCCESSOR ENERGY: e.g. The WilderHill Clean Energy Index [ECO], Vestas and Gamesa.
Watch: DayStar Technologies (DSTI), FuelCell Energy (FCEL), Energy Conversion Devices (ENER), Hydrogenics (HYGS), Intermagnetics General Corporation (IMGC), Mechanical Technology (MKTY), Quantum Technologies (QTWW).

NANOTECHNOLOGY: e.g. NNZ or Veeco Instruments (VECO), FEI (FEIC) and watch Altair Nanontechnologies (ALTI) and Lumera (LMRA). Also you can research either Harris & Harris Group (TINY) or its portfolio of companies as well as its microcap cousin Advance Nanotech (AVMA) and of course client Dais Analytic (DLYT). 

S: ROBOTICS For some time, we have argued there is no labor shortage, but a robot shortage.  Long gone are labratory curiosities or SFI fantasies from Robbie the Robot to R2D2..  Medical Surgery which is minimally invasive is one hot application. One winning company has been Intuitive Surgical (ISRG). Their system allows surgeons to perform the complete reconstructive surgery laparoscopically with higher precision than with the traditional laparoscopic procedure.[more] Also thanks to three-dimensional imaging surgeons can perform more precise and complex surgical proceedures. 

Another potential winner is iRobot [IRBT] which develops robots for the consumer, military, government security and law enforcement markets

8. SRI STOCKS 
Given the increasing risks to global sustainability, we believe there is a corresponding increasing need for increasing exposure to SRI stocks in one's long term investing portfolio.  One list to refer to annually for an initial stock screen is SustainableBusiness.com's annual list of the 20 World's Top Sustainable Stocks. 

9 AFUND STOCK OF THE MONTH CLUB PICKS
Our Stock of the Month Club pick philosophy is to look for a minimum of 15-20% appreciation within four to six month. Thereafter, we take profits or use trailing stop losses. Conversely, as intermediate term investments (not trades), if there is a 15-20% loss, we either double up or exit depending on any news, market conditions and astrological factors at the time.
These monthly stock picks are emailed in real time to all Wall Street, Next Week Subscribers and will be resumed sometime in 2006.
More aggressive investors and traders may wish to also follow our new SEASONED SPECULATOR picks.

 9. AFUND CLIENTS
Business Astrologers know that the best way to predict the future is to create it.
With strong Disclaimers and with an informed but obviously biased view, I am doing my best to help create investor wealth for client companies we consult for such as Dais Analytic[DLYT].

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Since May 2, 1988 I have established a superior forecasting record primarily due to my knowledge of financial astrology. While not perfect as some critics would demand, my precision and accuracy is appreciated by many professional traders and investors.  As more of our forecasting is now private and contracted to money managers, it is my intention to have other financial astrologers and money managers contribute more on my web site in the future.
Latest sample performance figures at AFUND Performance.
Henry Weingarten


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