The Six Biggest Surprises of 2006

On Monday, Evo Morales, the newly elected president in Bolivia -- and a former coca farmer -- put the Bush administration on notice that there was a new sheriff in town. He has vowed to hike state control of Bolivia's natural gas reserves -- reportedly the largest in South America after Venezuela's -- and cut the exploration and production role of multinationals such as ExxonMobil(XOM Quote).

If U.S. access to landlocked Bolivia's 53 trillion cubic feet of natural gas is cut off, it might be a positive for North America-focused producers. So, consider laying in shares of leaders like Chesapeake Energy(CHK Quote) and Ultra Petroleum(UPL Quote).

For a serious sign of change, watch the upcoming re-election campaign of staunch U.S. ally Vincente Fox of Mexico. A setback could bring turmoil to the energy market. And if you don't mind one last issue, consider that state-sponsored, anti-American terrorism from the south is not a factor today -- but it is something experts consider an increasing possibility.

Google's Scent of Success

The ascent of Google shares captivated investors' hearts, minds and portfolios in 2005 for a lot of good reasons. The company figured out how to monetize the process of discovery. We were lost, and now we're found. As Google pressed forward, it surprised skeptics by revealing that the combination of unobtrusive, relevant text ads with email, search queries and video is a legitimately disruptive technology.

Over the next year, Google is likely to introduce free, ad-supported competitors to the Microsoft(MSFT Quote) Office suite and push its ad-supported Web email solution into much broader circulation. There should be little doubt that it will offer a music service to rival Apple's(AAPL Quote) iTunes and Real Networks'(RNWK Quote) Rhapsody.

The advance of Google shares to the mid-$400 area has discounted a lot of the expectations for this growth. Yet strangely enough, it may not yet be wildly overvalued. Its 2006 earnings multiple is 50, which growth managers do not consider ridiculous for a premier, well-managed company with solid earnings and strong prospects. Expect the price to move substantially higher by midyear on enthusiasm for the market-share devouring beast of the Googleplex, where it will stall at the $666 level after achieving a $200 billion market cap and the mark of the devil.

Shale for Sale

Last year, I proposed that $40 would become the new $25 for those who buy their oil in barrels rather than cans. That was an out-of-consensus guess, yet underestimated the strength of the commodity this year. As $50 became the new $40 as a minimum for per-barrel oil prices, the vast and obscure oil sands of Canada became big news for investors. Companies with major oil sands exposure, such as Suncor Energy(SU Quote), were up as much as 100% this year, as the sands only become profitable to mine and refine with average oil prices at $30-plus.