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" EARLY IN MY JOURNALISM CAREER, I wrote a short profile of a money manager who was making a name for himself courting clients--namely, from his own African-American community in Detroit--who had previously been ignored by professionals. Immediately after the story&amp;#039;s publication, this fellow&amp;#039;s local newspaper printed a gotcha story about this guy having once been looked at for underpaying his taxes.  Not long after that, my very favorite financial commentator, a hedge-fund manager named Jim Cramer who shared his real-world experiences for SmartMoney, was hit with charges that he was using his column to promote his own positions. It was a ludicrous charge; perhaps no one in America was more transparent about his own trading activities. Nevertheless, several of his journalism colleagues publicly tsk-tsked Jim. Writers are unhappy people. I know. And their censorious attitude is betrayed by the almost celebratory tone of any story that delivers bad news. But that&amp;#039;s not just an observation. It&amp;#039;s also a chance to make some money. The general cautiousness toward the stock market these days is fanned by a doomsaying press that finds a willing audience in investors who remain shell-shocked--not so much by 9/11, Katrina, or $70 oil, but by something much scarier and much simpler: prices that were forty times higher than earnings. All that&amp;#039;s changed. The economy is sizzling. (GDP has been up more than 3 percent for ten of eleven consecutive quarters.) Inflation has been kept in check by a series of rate hikes that now seems complete and leaves the Fed rate at very reasonable levels. Unemployment stands below 5 percent, and corporate profits are booming. But people are still suspicious, with far more Americans suspecting economic conditions are worsening rather than improving. They&amp;#039;re wrong.  Yes, at the beginning of the year, markets all over the world ran scared. Japan&amp;#039;s stock market was in literal meltdown, shut down early because sell orders so outnumbered buys. The politics in critical oil-supplying nations were, and have remained, even more screwed up than usual. And our own country still seems hopelessly downbeat, uncivil, and uncertain of our ability to chug forward. It&amp;#039;s easier--and safer--for journalists and commentators to make moderate or &amp;quot;on the other hand&amp;quot; market predictions. I&amp;#039;m going out on a limb here: The next two years will be great ones for the stock market. All the bummers that have dragged prices down--geopolitics, oil prices, scandals--are temporary. All the things that point to higher prices--technological innovation, enhanced integrity, the rise of economic freedom in vast population centers--will endure. Enough with the generalities. You either accept the premise or will not be persuaded. Either way, however, here are four trends that can make you money during the next two to five years, along with an investing idea or two for each. 1. FUEL PRICES WILL STABILIZE OR DROP. Four critical oil producers teeter on the brink of war or disintegration. Militants in Nigeria continue to kill Shell workers. The lefty Chavez regime in Venezuela and the lunatic president of Iran issue increasingly crazy utterances directed against the West and the U. S. And Iraq remains far below capacity three years after the war began. And yet . . . oil is still topping out under $70 a barrel ($68 as of this writing). As our economy has streamlined and modernized, we&amp;#039;ve become far more efficient than we once were. So it&amp;#039;s not the price of oil so much as the fear of high-priced oil that slows our economy. Much of the recent run-up is not demand related; rather, it&amp;#039;s fueled by speculators and big oil consumers who got burned by hurricane-related shortages. Indeed, unlike during the previous run at $70, current stocks of crude are now higher than average. I believe that our economy can grow nicely (3.5 percent or so) with oil up to $75 a barrel. Any less than that and we can really run. If even one of our oil-related problems abates, we can easily return to full steam. Proof? FedEx, as dependent on oil as any company in the world, saw a 33 percent jump in profits in its fall 2005 quarter, as all three major freight carriers experienced high demand. Again, it&amp;#039;s the economies that matter; if demand is there, companies will find the fuel they need. But as an investor, you gotta play this smart.  ExxonMobil is up about 25 percent over the past year and always does well when people are worried about oil. But at $62.75, it&amp;#039;s only a few bucks below its all-time high, which was set in September, just as Katrina was choking the nation. My favorite three oil-related plays are Valero, Marathon Oil, and Southwest Airlines.  While Valero (VLO) is trading at its fifty-two-week high, the leading oil and gas refiner is still relatively cheap on a forward price-earnings basis ($8.52 for a dollar of predicted earnings). Moreover, for a company that deals with a commodity--no one really cares about the brand name of his gas and certainly not the refiner of that gas--I look for efficiency. Valero earned $3.6 billion on $82 billion in revenue last year; Marathon (MRO) did $3 billion on $63.7 billion. Compare that with Citgo: Hugo Chavez&amp;#039;s personal cash cow had revenues of $31 billion in the first nine months of &amp;#039;05 but profits of only $419 million.  Success in the airline business has less to do with service and innovation than with labor relations and commodity trading. Southwest Airlines (LUV) is the best commodity trader in the business, having proven time and again that it can predict the price of oil and hedge its bets accordingly. Southwest is picking its spots, adding gates in cities where weaker airlines are suffering--United&amp;#039;s hub in Denver and US Airways&amp;#039; turf in Pittsburgh. It&amp;#039;s also adding gates in Philly and thirty-three new planes, but what I like best about this company is that it&amp;#039;s not adding more. It&amp;#039;s not adding JFK, as some are pressuring it to do, preferring to take on a weak sister like Frontier in Denver rather than a fellow low-cost bully like JetBlue. It&amp;#039;s also not going international, preferring to stick to its knitting. This is a measured approach by the low-cost leader, with a price/cash flow that&amp;#039;s very reasonable for the group, so I like Southwest&amp;#039;s prospects very much. 2. HOME-EQUITY-DRIVEN CONSUMER SPENDING WILL TANK. Goldman Sachs estimates that in 2005, Americans borrowed a staggering $834 billion against the equity in their homes. They expect that number to drop to $758 billion this year. What do people do with home-equity loans? Mostly, add to their homes and buy new appliances. If Goldman is correct in thinking that higher interest rates and saturated demand will suck a whopping $76 billion off the table, expect Home Depot (HD) and Lowe&amp;#039;s (LOW) to suffer. I just can&amp;#039;t see either company sustaining recent earnings growth (18.11 percent and 24.82 percent over the last five years, respectively).  I&amp;#039;m not crazy about Best Buy or Circuit City for the same reason, but there is an opportunity here. Makers of flat-panel televisions soared throughout last year as the conversion from tubes continued. Then the stocks hit a rough patch as computer makers (a big buyer) couldn&amp;#039;t interest people as they once did. There&amp;#039;s a lot of talk about overcapacity, as the big makers move into their seventh- and eighth-generation manufacturing plants. Bull. Capacity might be excessive for displays that cost $3,000. Once the forty-inchers get comfortably below $2,000 (twenty-six-inchers were going for $1,300 over Christmas), usage will morph from one per house to one per room. My favorites are Samsung, LG.Philips, and Taiwan&amp;#039;s AU Optronics. (Samsung trades as SMSN on the London stock exchange, LPL is the symbol for the joint display-making venture of LG and Philips, and AUO is the symbol for the American depository receipt of Taiwan&amp;#039;s AU Optronics.) 3. PARADIGM-SHIFTING TECHNOLOGIES WILL EXCEL, DESPITE POOR FUNDAMENTALS NOW.  After Nipplegate, I weaned myself from a long love affair with Howard Stern. It wasn&amp;#039;t just the FCC&amp;#039;s hassling him or the giant portion of time he spent complaining about that hassle. It was the relentless bloodsucking of the commercials, said to reach almost nineteen minutes per hour. I had already given up on commercial radio for music and news for the same reason. By mid-2004, public radio, audiobooks, and my iPod consumed 100 percent of my auto-audio time. When I bought a new car that offered Sirius, I became totally addicted. I actively began sampling new music for the first time in ages (the Hold Steady, Decemberists, Kaiser Chiefs, Matisyahu, the Dirtbombs), as well as all the NBA and NFL games. I bought some stock (the only stock I discuss here that I also own). And then Howard&amp;#039;s announcement. And then . . . Howard&amp;#039;s show. The sharpest, smartest, funniest I&amp;#039;ve ever heard him. By far. Not because of the naughty words, but because of the natural, unforced rhythms that allowed a long, thoughtful interview with Larry King&amp;#039;s young Mormon wife as well as the freedom to ask if her husband wore a sacred diaper. I bought more. And more. None of the fundamentals of this company (or its competitor, XM) make sense. Sirius lost $180 million in Q3 2005--almost three times more than it took in. Clear Channel&amp;#039;s revenues ($9.3 billion) are fifty times that of Sirius ($187 mil).  None of this matters. The potential for this business is roughly equivalent to the number of cars that currently have radios. And then some. Most analysts compare the competition between terrestrial radio and satellite to that of broadcast television versus cable. That&amp;#039;s apt, but it understates the case. For one thing, cable&amp;#039;s value has always been partially moored to the incredible cost of physically installing and maintaining wires to seventy-three million homes. Second, cable was seldom able to steal the biggest talent because the networks offered bigger reach. That&amp;#039;s not true in radio, where satellite fans of Stern and others are already able to hear them in markets where they couldn&amp;#039;t on old-fashioned radio. The point is not to expect a sudden spike for SIRI. (Although I think it&amp;#039;s going to $10 and beyond.) The point, recently underlined by Google, is that when a technology is truly transformative, standard metrics cannot reflect the value. Buy and hold. 4. CONSUMER HABITS ARE BECOMING MORE DIFFICULT TO CONTROL.  Inertia is irresistible. I believe that the pace of modern life actually makes it harder for corporations to change consumer habits. A big company cannot buy an evening ad on three networks and a few pages in the newspaper and count on most of the country hearing about its product. The proliferation of media makes it almost impossible for traditional advertising to start a trend or reverse one once it&amp;#039;s started. So when trends get going under their own steam, I find myself betting on their beneficiaries and betting against those on the losing end. As American alcohol drinkers favor wine and spirits over beer, I get excited about Fortune Brands and worried about what Budweiser might have to spend on marketing to win people back. When people start forgoing cola in favor of bottled water, I like Pepsi (whose Aquafina is number one) better than Coke (Dasani, Evian, and Dannon) because KO&amp;#039;s market share has slipped 2.2 percent. And I like Nestl\u00C3f\u00C2\u00A9 (its ADRs trade as NSRGY) best of all because its brands (Poland Spring, Arrowhead, Deer Park, et cetera) comprise six of the top ten and cover a variety of price points. Which is the same reason I&amp;#039;m willing to buy a share of Whole Foods (WFMI) at 52 price/earnings when the same dollar of earnings could be had from Kroger or Safeway for $14. Whole Foods has one tenth the revenue of either, but--as for so many other well-run companies in this economy--the future is theirs. "^^<http://www.w3.org/2001/XMLSchema#string>
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