To OTC Journal Members:

This is the first edition of 2004. You'll will note this is Volume V, Edition 1, signifying our first edition in our fifth year of publishing. I hope to do this for another 15 years. 

I have a few surprises planned in January. A couple of the companies I have been covering are going to be making blockbuster announcements, and I expect the stocks to trade extremely well on the heels of major fundamental progress.

Volume has recently improved quite dramatically in both Family Room (OTC BB: FMLY) and Action View (OTC BB: AVWI). Both stocks could be poised to break out if these volume surges continue.

We should have some fun before the end of the month with several of the smaller issues. Stand by for exciting future editions with great fundamental developments.
 

2004 Outlook- Bull Market or Bear Market Rally? History Offers A Clue

Welcome to 2004, a year I believe is destined to be great for equities. I am an avid reader of information about the market. Believe it or not, there is still raging debate about whether this is a new bull market, or a simple relief rally in an ongoing bear market.

One of my favorite newsletter writers is Adam Olensis of the Agile Trader. Adam's newsletter is chock full of techno mumbo jumbo, but the guy is brilliant when it comes to digging out historical market data. Adam published a fascinating edition last week with some eye opening market statistics.

Adam went back and took a look at how the market performed during the five year period following every bear market since the beginning of the 20th Century. Did you know that the best five year period to have your money in the Dow stocks during the 20th Century was June of 1932 (also an election year- thanks SM) to June of 1937? The Dow rallied 373% from 41 to 194.

Here are some key statistics to consider if you believe the current relief rally is played out:

• The average rally after a three year bear market has carried the Dow up 65% off the three year low. Currently, we have rallied 45% off the three year low.
• The worst rally after a three year bear market was 1972- the post Viet Nam era with wage and price controls, roaring inflation, the Middle East Oil Embargo, and huge deficits. The rally after this Bear Market took the S&P up 70%. A like performance from the three year low would give us a target of 1305 on the S&P (currently 1120).
• The same 1972 time frame for the Dow was a 57% rally, which would take us to 11,300 on the DOW.
• The average rally for the DOW off the three year low of a bear market historically has been 65%. If we have an average rally, this gives us a target on the DOW of 11,880, almost the exact previous all time high.

We can either implode (i.e. the savings and loan debacle of the late 80's), or grow our way out of deficits and debt. I believe the science of managing the economy has improved dramatically over the past twenty years, and the FED has successfully used its tools to smooth out the volatility of the economic cycles.

Look for job growth to send the last bear into hibernation in 2004.

November semi conductor billings were announced last week. The number continue climbing for the ninth straight month, and the rate of growth is accelerating. Are you still wondering why tech stocks are coming back in a big way?
 

Two I Forgot in the Year End Wrap UP- StockGroup (OTC BB: SWEB), and Calypte Biomed (OTC BB: CYPT)

• StockGroup (OTC BB: SWEB): Under performer? I first wrote about the stock in September of 2002 after a two year sabbatical at $.19. The stock is currently trading at about $.30, a 57% return over 15 months. You'll never go broke with returns of that magnitude. The company is growing at a solid pace of 10% to 15% each and every quarter. During 2003 the company reloaded its treasury, eliminated all its long term debt, and grew at a strong pace. They are currently cash flow positive from operations, and should make the transition to EPS in 2004. The stock is pretty boring- not a lot of volatility or trading activity. As long as the company continues on its current path, somebody is going to come along some day and want this stock. It's either a buy out candidate down the road or could simply appreciate on its own. Great long term hold without much risk, but like watching paint dry. Hold or buy the stock if you are a long term investor not interested in watching the quotes every day.
• Calypte Biomed (OTC BB: CYPT): I abandoned coverage of this one during the year because the management of the company was destroying its own market value with toxic issuances of stock. They got a legitimate $10 million financing, turned off the stock certificate printing press, and the stock rocketed ten fold. This is the only company in the world with a FDA approved urine test for the HIV Virus. Recent quarterly revenues doubled over the previous year. The stock has completed a perfect "head and shoulders" top, and could be poised to rebound. Look for this company to do extremely well in the coming years as the world health community begins to address the AIDS epidemic in third world countries.

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