Supply and Demand. So simple, yet we forget sometimes that supply and demand determine stock market prices and direction. Economic forecasts and investor sentiment have been lousy for the past few months, while dealing with the credit/subprime/financial correction. However....economic data has been coming back positive and consumers are strong, so I think demand will be increasing for equities in the next few months (at a minimum).

Just a quick note on subprime, writedowns, etc.

First, the older an argument gets, the less impact it has on the market. Subprime began in earnest this past summer. 6 months later, it's getting a bit stale. Huge writedowns have occurred, making that 800lb gorilla in the room a bit smaller.

Now, are more writedowns to come? Absolutely. But what is priced? I still think too much bad news is priced. It's almost as if the market expects 1 out of every 3 households to go belly up and stop paying their mortgage. Likely? Bah, humbug.

Remember, in the past month, major cash infusions have come from foreign funds to aid C, BSC, etc. I would imagine more 'minor' infusions as well. Foreign funds think the financial market is cheap and too much bad news is priced. I think the U.S. market is a bit myopic......

This past week, two significant market minds publicly questioned subprime's future impact and the state of financials. Bill Gross and Jeremy Siegel both believe too much bad news is priced. Neither are equity perma-bulls....

Finally, after catching plenty of flack, the Fed $ auction seems to be a success. True, the banks complain about having to pay 4.67% interest instead of 4.37% interest, but to me it shows demand for Fed $ is there......

Credit crunch days are wearing off. Subprime is overpriced (in my opinion); more writedowns will come, but I think those are priced. Housing will continue to decline, but that's priced as well. Until supply and demand get closer, would-be buyers are content to rent and still spend money (like us).

What does this mean? I've been wrong, thinking the duration of this 'correction' would have been only a couple of months, while it's been ~6 months. However, the bigger they are, the harder they fall (financials). Equities are very, very attractive right now. AAPL is going higher, around $210 by mid-January. After that, who knows. Plenty depends on the market, plenty depends on AAPL. I could easily see $300 by summer, assuming the S&P 500 gets to ~1600, which isn't a far stretch if the financials get in order....

LF, after bottoming out in the upper $5s in late November, has climbed back into the mid-$7s. This will be a $20 stock by this time next year if LF's team executes half as well as I think they can.

GR and PRE are both solid plays. GR should easily eclipse $100 this summer, as growth, technology and aerospace converge with this company. After being held down by financials and a competitive landscape, PRE will continue steadily rising in the first quarter, eclipsing $90 near earnings and $100 this summer.

Other stocks which look good right now, but I'm short cash to buy..... CHTT, RL, GOOG, GS, CSCO, WB, JEC, CELG.