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To: Condor who wrote (16589)	12/21/2003 12:04:46 PM
From: Bucky Katt	Respond to of 48461

The Easy Money Is Gone, But Next Year Could Still Pay Off If You're Picky It was a knock-your-socks-off year in the stock market for Mark Ciborowski, 47, head of a real estate management firm in Concord, N.H. He racked up nearly 125% gains by buying mostly small, beaten-down stocks, riding them up steadily as a ski-lift, then jumping out with a tidy profit. Most investors didn't make such nosebleed returns in 2003, but it's doubtful you'll hear complaints. After three years of the most grisly bear market since the Great Depression, many investors are thrilled to see double-digit gains in their 401(k) and brokerage accounts. Through Dec. 16, the Standard & Poor's 500-stock index was up 22%, the Nasdaq Composite Index popped 44%, and the Dow Jones industrial average -- which recently topped the 10,000 mark -- had risen 21%. In fact, if you weren't in stocks, you're probably feeling like a geek hiding by the punch bowl at the high school prom. Money-market accounts have averaged well under 2% this year, barely keeping up with inflation. The party's not over, but it may be thinning out a bit. Many strategists think stocks could reap low double-digit gains in 2004, but a repeat of 2003 is highly unlikely. Because stocks have rallied so strongly, many aren't cheap anymore. Besides, interest rates will likely start rising in 2004. Then there are tougher earnings comparisons and a chronically weak dollar, and despite the recent capture of a bedraggled-looking Saddam Hussein, the occupation in Iraq continues. All these factors make Ciborowski merely "cautiously optimistic" about 2004: "The easy money has been made." Still, a 10% gain for 2004 would not be bad at all; in fact, over the past 50 years, that has been the market's average annual return. To best that, investors need to saddle up with stocks poised to benefit from economic recovery. It's likely that investors' love affair with bonds has gone the way of most courtships spawned on reality-TV shows like Joe Millionaire. If rates rise by as little as 1%, the price of a 10-year Treasury will plunge about 8%. And if you hope the price of your house will continue to outpace the stock market, think again. Rising rates could huff and puff and blow your house value down...or at least sideways. The good news is there's no question that the economy is building muscle. In the third quarter, gross domestic product grew 8.2% -- the fastest spurt since 1984. A stronger economy will translate into healthy corporate earnings. Analysts estimate that fourth- and first-quarter earnings will come in at about 22% and 13% higher than the same periods a year earlier, according to earnings researcher Thomson First Call (NYSE:TOC - News). For 2004, analysts expect earnings to rise about 12%. Companies are increasingly flush with cash, and that's likely to fuel earnings. Both operating and free cash flow for the S&P 500 are at their highest in five years, according to StockDiagnostics.com, an equities-research firm. Because earnings tend to lag behind cash flow by about six months, StockDiagnostic's research director, Michael Markowski, thinks stocks will be strong at least through the first half of 2004. "When cash flow starts going up like this, it's telling you that companies have plenty of money to pay down debts and are preparing to make capital expenditures," he says. biz.yahoo.com