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Hottest Deals of the Week

Sterling Weekly for December 12th, 2005

The Federal Reserve Board raised short term interest rates again 1/4% yesterday to bring the Fed Funds rate to 4.25%. By all indications the overall economy remains strong, despite the gloom & doom bantered about by various pessimists who seek opportunity by greater fear in other. A recent article by Brian S. Wesbury in the Wall Street Journal on Friday December 2nd titled "Pouting Pundits of Pessimism." page A10 of my copy of the paper addressed this sentiment. A copy of which can be read (here.) Well this has relevance because I was lucky enough to go to the Falcon's game Monday night and see them play the New Orleans' Saints. During which there were 2 interesting conversations.

The first was with one of the members of our group, Chris, who has his own money management firm. We were discussing where the Dow would go over the course of the next year or so. Well Chris took the pessimistic view and assured me that the Dow was headed towards 8,000 and I being the optimist that I am said it was going to 12,000. Ultimately a bet was offered up, and I thinking it was easy money took it. Here is our bet, I say the Dow is going to 12,000 in 2006 give or take a few months; Chris says it is going to 8,000 before it reaches 12,000. The looser buys the winner dinner at New York Prime in Buckhead. That's Atlanta for those of you who don't live in town. We shall see how it turns out, but personally I haven't lost a bet in a long time and don't plan on doing so anytime soon.

The second conversation of note was with my friend Erich about the direction of the economy and what is going to happen in November of 2006. Once again, hanging with a pessimist. So here is the short and sweet of my prediction. The economy is going to continue to grow at a strong pace and perform well, the Dow Jones Industrial Average will cross the 11,000 mark during the first quarter of the year; and in the late 1st quarter or early 2nd quarter we will see the President hit the road and get back on the political offensive and try to drive the Republicans to victory in 2006. Oh, and the situation in Iraq will continue to improve.


Recently the price of gold has been setting new multi-year trading highs. The current price of gold can be found (here.) The Philadelphia Gold/Silver Index 'XAU' is one of the older sector indices created to track the movement of the price of gold through underlying companies within the gold/silver industry. More specifically; The PHLX Gold&Silver SectorSM (XAU) is a capitalization-weighted index composed of 13 companies involved in the gold and silver mining industry. XAU was set to an initial value of 100 in January 1979; options commenced trading on December 19, 1983. The following companies are components of the index Barrick Gold 'ABX', Agnico Eagle Mines 'AEM', AngloGold Ashanti 'AU', Freeport McMoran Copper 'FCX', Gold Fields 'GFI', Goldcorp. 'GG', Glamis Gold 'GLG', Harmony Gold Mining 'HMY', Kinross Gold 'KGC', Meridian Gold 'MDG', Newmont Mining Corp. 'NEM', Pan American Silver 'PAAS', and Placer Dome 'PDG'. The chart pattern of nearly every company within this index is a near mirror of the chart of the 'XAU' posted below. I've actually posted a 3 day, longer term chart in order to show the long term cup pattern that has formed. Measuring the size of the pattern leads me to forecast a continuing movement upwards to the 145-150 level for the XAU, or about a gain of 20% from the current levels. So what does that mean for the price of gold and the components of the index. Well we will probably see gold somewhere north of $600 an ounce, but $700 might be a little out of reach.
Sterling Calendars for the Week of December 12th, 2005
Economic Calendar
Date Est. Time Release For

Briefing.com

Consensus Prior
12/12 2:00pm Treasury Budget Nov. ($82.0b) ($61.0b) ($57.9b)
12/13 8:30am Retail Sales Nov. 0.7% 0.4% (0.1%)
12/13 8:30am Retail Sales ex Auto Nov. (0.2%) 0.1% 0.9%
12/13 10:00am Business Inventories Oct. 0.5% 0.5% 0.5%
12/13 2:15pm FOMC Policy        
12/14 8:30am Export Prices ex. Ag. Nov. N/A N/A 0.6%
12/14 8:30am Import Prices ex. Oil Nov. N/A N/A 0.8%
12/14 8:30am Trade Balance Oct. ($62.0b) ($63.0b) ($66.1b)
12/14 10:30am Crude Inventories 12/09     2,720k
12/15 8:30am Empire State Index Dec.

18.0

18.4 22.8
12/15 8:30am CPI Nov. (0.5%) (0.4%) 0.2%
12/15 8:30am Core CPI Nov. 0.2% 0.2% 0.2%
12/15 8:30am Initial Claims 12/10 320k N/A 327k
12/15 9:00am Net Foreign Purchases       $101.9B
12/15 9:15am Industrial Production Nov. 0.5% 0.5% 0.9%
12/15 9:15am Capacity Utilization Nov. 79.8% 79.8% 79.5%
12/15 Noon Philadelphia Fed Dec. 15.0 14.0 11.5
12/16 8:30am Current Account Q3 ($205.0b) ($203.6b) ($195.7b)

  Misc. Calendar
Date: Comments:
Dec. 13 Best Buy 'BBY' announces earnings before the open. Est. $0.30
Dec. 13 Lehman Bros. 'LEH' announces earnings. Time N/A. Est. $2.64
Dec. 14 Winnebago 'WGO' announces earnings before the open. Est. $0.42
Dec. 15 Adobe Systems 'ADBE' announces earnings after the close. Est. $0.29
Dec. 15 Apollo Group 'APOL' announces earnings before the open. Est. $0.70
Dec. 15 Bear Stearns 'BSC' announces earnings. Time N/A. Est. $2.63
Dec. 15 Goldman Sachs 'GS' announces earnings before the open. Est. $3.35
Dec. 15 KB Home 'KBH' announces earnings after the close. Est. $3.34
Dec. 15 Oracle 'ORCL' announces earnings after the close. Est. $0.19
Dec. 16 Carnival Corp. PLC 'CCL' announces earnings before the open. Est. $0.41
Dec. 16 Piedmont Natural Gas 'PNY' announces earnings. Time N/A Est. ($0.12)
  The full earnings calendar for this week can be found (here)

Prime Update:

Sterling Investment Services is an investment research and money management firm publishing the Prime Stock Newsletter. The Prime Stock Newsletter is a daily comprehensive newsletter that is useful for investors and traders alike. Whether you are looking for short term trading opportunities ranging from day trading to a couple of weeks or if you looking to acquire a long term portfolio at smart entry points. Subscriptions are $50/month. A Free 2 Week Trial is currently being offered.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Advanced Micro 'AMD' Nov. 7th $24.63 $27.04 Nov. 21st

2.13

Should continue to move higher.
Alcoa 'AA' Nov. 2 $24.30 $26.71 $2.41 Should still move higher.
Starbucks 'SBUX'

Nov. 1

28.30 $31.90 Nov. 21st $3.60 Should continue to move higher.
* The per share PROFIT is a theoretical calculation based upon the opening price the day the recommendation is published and the intra day high (or low for short sales) on the exit day. The exit day is determined based upon the application of our "Rules for Trading", the implementation of "stops" within our stated policy, and may not reflect the complete or full movement of the underlying recommendation.

Dow Jones Industrial Average (INDU)

Current Opinion: Closed @ 10,823.72 Last Signal: Called Lower with the close of 10,805.87on November 30th. Current Expectations: I am expecting the Dow Jones Industrial Average to move lower and test 10,705.55 on a closing basis. Another up day with the Dow and I'll feel comfortable that the short term weakness is over.

The S&P 500

Current Opinion: Closed @ 1,267.43 Last Signal: Called higher with the close of 1,267.43 on December 13th. Current Expectation: I am expecting the S&P 500 to continue to move higher and test 1,312.54 on a closing basis.

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,705.77 Last Signal: Called Higher with the close of 1,705.77 on December 13th. Current Expectations: I am expecting the NDX to continue to move higher and test 1,720.91 on a closing basis.

CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 4.535% Last Signal: Called Higher after the close of trading on November 30th with a close of 4.500% Current Expectations: This index should move higher and test then 4.6579% on a closing basis. NOTE: With yesterday's trading there is a chance we may see a trend reversal in the TNX.

Disclaimer: The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: www.sterlinginvestments.com If you would like to contact us our fax # is (404)-816-8830 Email address is: enelson@sterlinginvestments.com Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.
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