Mixed Market News Explained

Up and up and up. Where does it stop? Stocks kept climbing again yesterday,
with the Dow tacking on another 45 points to post a fresh six-month high. Im not
one to complain when my brokerage balances are going up. Still, I have to wonder
how much longer this Yellow Submarine party can continue. Yesterday, before the
opening bell, the Commerce Department reported housing starts for December fell
4.1%, capping the worst year ever for construction of single-family homes. The
December count came in well below what economists had projected. Yet the SPDR
S&P Homebuilders (NYSE: XHB ) ETF, which tracks the homebuilder stocks in the
S&P, touched a new 52-week high yesterday, up 56% from its October low. UBS
(NYSE: UBS ) downgraded the homebuilder stocks yesterday, following on the heels
of Goldman Sachs (NYSE: GS ) last week, but the stocks rose anyway . Go figure.
At least we can say that three of my tech companies reported honest-to-goodness
healthy earnings after the close: IBM (NYSE: IBM ), Microsoft (NASDAQ: MSFT )
and Intel (NASDAQ: INTC ). If you own any of this trio, you should be very
happy. Hold onto them, but dont add to your stake just now theyre all well
above my buy limits. Gold mining shares, on the other hand, are looking more and
more tempting. Its now pretty obvious that the Midas metal formed a significant
bottom around $1,523 an ounce during late December. However, mining stocks have
lagged the subsequent rally. Relative to bullion, in fact, the widely followed
Gold Bugs Index of gold shares sank yesterday to its lowest level since March
2009. Yes, Im aware that mining poses certain risks that bullion doesnt: Bad
weather, equipment failure, surging energy costs, lower-than-expected ore
grades, labor unrest, government interference via taxes and regulations, etc.
But a rising bullion price covers a multitude of these sins. At 8 times
estimated 2012 earnings, a business like Barrick Gold (NYSE: ABX ) would be
cheap even if it were a stodgy, rusty industrial outfit. Which, of course, it
isnt! So, you dont have to be a gold bug to like Barrick. All you need is an
old-fashioned nose for value. Buy ABX at $48 or less. From here, Im projecting a
total return (dividends plus capital appreciation) of 30% or more in the next 12
months.