Return Of The Junk

If I had to put a movie title on 2003 for investors, it would be "Return of the Junk." The reason why I say this is that the biggest gainers in 2003 have been in the stocks that have relatively poor fundamentals and low stock prices. Today is no exception - the biggest winners this morning include Sycamore Networks (SCRM) and Sirius Satellite (SIRI).

I'm not saying this is bad, just that it would have served you well if you threw out your fundamental analysis and just bought stocks moving higher on the new 52-week high list. This was a year to go with what is working, not what should be working. Fighting the market was a recipe for disaster.

Next year will provide some interesting surprises, I believe. Nearly everyone expects a blockbuster year ahead for various reasons, yet I think the most realistic view is one where we have a market stuck in a wild trading range. Although, unlike everyone else, I'd readily admit that I don't know where the market is going for sure. The best I can do is play the trends and make bets of a change in direction when optimism and the pessimism reach extreme levels.

Corporate profits are indeed on the rise and I expect that to continue, but it will be at the expense of the employee. While refinancing has helped most consumers in the past year alleviate some of the pain, next year no such economic boost will be there. Tax cuts will help, but primarily it will be the wealthy who will benefit from them. We're already seeing a major divide between the rich and the poor (which will soon encompass most of the middle class) in the United States. Given the popularity of Bush and his views, that trend will continue and get even stronger in the year ahead. This is good news for the strongest and wealthiest of our society. It is bad news for nearly everyone else.