Regardless, trend projection gets heavy weighting in my model, and so I am very optimistic for the 1st half of 2005

That's at least until something comes along to change my mind. I believe that predictions are subject to intervening events, and must be updated regularly.

50% in U.S. stocks
15% in U.S. bonds
25% in international stocks
5 % in cash
5 % in other (specify) Commodity funds, including precious metals.

That’s my current asset allocation. But I am watchful for a mid-year correction that is potentially severe. I may very well rotate out of U.S. equities in that timeline -- vcut them back dramatically, holding only Energy and Utility in the event of any internal decay in the market, if my indicators suggest it.

Again, my optional choice this year is the same as last year -- Commodities -- and they will continue to do well, as long as the dollar is weak and the economic recovery in the US is  anemic to modest. China’s demand has only decreased slightly from last year. I note that (once again) Precious metals are a good hedge to both dollar weakness, and general market risk, too.

Financials are what I expect to be the strongest sector. The IPO market is in full swing, secondaries and pipes continue to hum along. Energy is sector number 2 and utilities 3.

Even though the easy money has been made in Energy -- it was my top sector selection in 2004 (one of only 3 out of 65 who picked it), I believe there is still more upside for the long term. So while I move that out of the top slot, I expect more strength there in 2005.

Heathcare continues to be the most vexing of all the sectors. Demand and pricing continues to soar, with little risk of adverse government intervention. Whether that’s ultimately good for consumers is a different story, but the corporate environment is a good as its been in years.

I took the Consumer and Retail out of my equation. Oil cannot fall fast enough to compensate for the rise in interest rates. People’s homes will no longer be an ATM machine for them. Consumers are likely to slow their spending ways in 2005; The Consumer Durables cycle has likely run its course.

Domestic terrorism remains an overlooked risk.

My least favored stock sector for 2005 is technology. Its fantastic run will reach its end sometime late first half 2005. It’s the most expensive sector by far, and it has been primarily momentum driven. As such, it remains the most dangerous for the individual investor (who typically lack the discipline to cut and run when necessary). The FASB changes will negatively impact tech dramatically.

The investment environment in 2005 will differ from that of 2004 significantly: 2004 digested the huge gains of 2003, off of the pre-war lows in March. It was a year of consolidation, as the investor coped with Oil, the election, the war & insurgency, amongst other factors.

They all get pushed off the screen -- at least for now -- and that’s what allows the markets to rally, in some cases dramatically, in 2005. However, Presidential 2nd terms tend to be problematic for the market. An ugly bottom may occur in the 6th year of a President’s term-which will be a great buying opportunity. That suggests a peak in 2005, leading to much ugliness the following year.

The bulk of stimulus that was at work in 2004 will be gone. Rates will be higher, tax cuts may expire.

Despite all this I remain positive for the first half of the year. Its Q3 and Q4 -- and 2006 -- that I find more worrisome.