A Christmas-Comes-Early Portfolio

The market may seem pretty confusing right now, but trust me, by the time Christmas rolls around, it will all become crystal clear. When you've got a fire warming the hearth and Andy Williams ballads rocking your iPod, you're going to think back on missed opportunities this summer, slap yourself on the forehead and let out a big "D'oh!"

So what is it that will be obvious in hindsight? It's probably a devilish blend of three positive and two negative events. Take your pick, and combine as appropriate:

• Unexpected armed conflict in Lebanon and Israel pushed U.S. stock prices down to levels that discounted way too much pessimism over the potential impact of higher crude oil prices. Shares of American capital goods and industrial manufacturers got too cheap. Should have scaled into them over the summer.
• Seventeen straight interest rate hikes by the Federal Reserve led wary investors to become overly pessimistic on monetary policy. Rising rates have smashed shares of U.S. homebuilding companies to levels previously seen only during recessions. Should have scaled into homebuilders that were priced around book value.
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