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The next year stretches out in front of us like a nighttime road in an exotic country: beautiful and strange, yet not entirely unknowable.

At the end of December every year, I attempt to view this land through the prism of the past -- yet with eyes wide open for unexpected vistas. I peer into the dark for surprises and try to see around corners to find twists that might throw investors off track, as well as shortcuts that could make us a few bucks.

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Much of what will happen in 2005 will be a continuation of trends in 2004. But new trends will develop as well, sometimes as bizarre, misshapen progeny of the old.

Before venturing forth, let's consider briefly how well I did with

last year's predictions. They weren't too bad. My misplaced forecasts were mostly political and economic; my stock ideas were largely on target.

Misses:

Osama bin Laden was not conveniently captured just before the November election; job growth did stage a comeback, but then faded; Congress did not make the 2003 tax cuts permanent; the

Federal Reserve

did not keep interest rates at 45-year lows all year; government corruption did not emerge as the next wave of the mutual fund scandal; and rich-content Internet advertising did not emerge as a hot tech trend.

Hits:

Crude oil soared over $35 a barrel and stayed there; the price of gold did fade back to the $375-an-ounce area ($371 to be exact) before moving much higher; stocks that Standard & Poor's removed from the

S&P 500

did better than the index; small oil and gas drillers were the hot sectors for momentum traders in the first three quarters of the year; the stock markets of Chile, Brazil, Peru, Mexico and Argentina surged to new highs; and Mr. P, research director of a major East Coast hedge fund who has been highly accurate on tips in the last few years, was dead-on with his prediction of a 5%-8% advance in the S&P 500, concluding with a strong fourth quarter and big swings in commodity prices.

On to 2005

The great atomic physicist Niels Bohr is reputed to have said, "Prediction is very difficult, especially of the future." He was Danish, so maybe something got lost in translation there. Nevertheless, on that note, we move on to my surprises of 2005:

  • Sirius Satellite Radio (SIRI) - Get Report does another secondary offering to raise $250 million and offers the bulk of it to outgoing Secretary of Defense Donald Rumsfeld for a seven-year broadcasting deal. In a press release, Sirius management says it believes the devotion of Rummy's global audience will translate into millions of subscriptions. Sirius stock soars on the news.
  • Apple Computer (AAPL) - Get Report releases two new handheld devices in an attempt to follow up its iPod mega-hit, but they fail to gain traction. iPods begin stacking up at electronics stores when it is discovered that, after a Christmas buying frenzy, there are now 2.7 iPods for every American over the age of 6. Apple turns to Philips Electronics (PHG) - Get Report for a bailout and is sold to the Netherlands-based consumer electronics giant for $80 a share.
  • For the per-barrel price of crude oil, $40 is the new $25, as energy demands from emerging markets and constrained supply put a new floor on the commodity. Although economic growth is sluggish during the year, various supply scares push the price to spikes as high as $75. Small energy producers such as Goodrich Petroleum (GDP) - Get Report and Harvest Natural Resources (HNR) continue to run.
  • China manages to effectively clamp down on industrial production, pushing its annualized growth rate below 7%. This chokehold on the construction of power plants and industrial facilities stymies the advance of basic building materials, such as steel. Yet China's multiyear drought continues to constrict its ability to grow food, and commodities such as fertilizer and soybeans continue to rise on world markets as farmers in Brazil, Argentina and the U.S. work overtime to take up the slack. Ammonia producer Terra Industries( TRA) soars past its all-time high of $15, set in 1996, by midyear. Potash Corp. of Saskatchewan (POT) , which set its own all-time high in mid-2004, climbs another 50% by midyear and announces a 3-for-1 stock split. Mosaic (MOS) - Get Report, the combination of the old IMC Global and Cargill Fertilizer, doubles by the end of the year. Monsanto (MON) , which quadrupled from its 2003 low through the end of 2004, rises another 60% in 2005.
  • China has to eat amid an economic slowdown, and China also has to turn on the lights. Recent rumblings out of Beijing suggest that its mandarins are forcing local governments to stop building power plants. But the current ones are barely able to keep the factories, televisions and streetlamps humming. To feed the plants' hunger for fuel, U.S., Chinese, Korean and Australian coal miners continue to perform well, as do the makers of copper, due to its use in electricity distribution. Continuing their two-year rallies are BHP Billiton (BHP) - Get Report and Peabody Energy (BTU) - Get Report. Recent IPO Foundation Coal( FCL) doubles by year-end. Miners Phelps Dodge( PD) and Southern Peru Copper( PCU) also advance another 40% past their lofty 2004 highs by year-end.
  • Fiber-to-the-premises finally takes off as an investment theme, as Baby Bells such as Verizon (VZ) - Get Report and SBC( SBC) spend like drunken sailors in an effort to bring fiber-optic broadband speed to their residential customers. Street-diggers such as MasTec (MTZ) - Get Report and Dycom Industries (DY) - Get Report led the way in 2004, and they are followed in 2005 by fiber-optic component makers JDS Uniphase (JDSU) , Avanex( AVNX) and Bookham( BKHM), all of which double and more amid rising sales, earnings and stock-momentum buzz.
  • The hit retail phenomenon of the year is Build-a-Bear Workshop (BBW) - Get Report, which went public at $20 in November and rises to $60 by the end of 2005. The teddy-bear customization chain rides a wave of new popularity after it introduces iBear -- a stuffed animal with built-in satellite radio, MP3 player, cell phone and digital camera.
  • By the end of the year, a study reports that the U.S. is experiencing a "creativity crisis" spawned by the intense focus on homeland security. Researchers discover that a clampdown on immigration is keeping out foreigners who see old things in new ways. Jim Williams, of the Williams Inference Center, is quoted in the study saying that "immigrants like Albert Einstein and Intel founder Andy Grove bail us out in hard times." He adds: "If immigration continues to decline, we aren't going to come back the way we have for a century. We can't trade protection for imagination."
  • Federal Reserve interest rate hikes halt in February and are not resumed until late summer as policymakers become more data-dependent. The economy disappoints, with less than 2.5% annualized growth, but stocks begin to discount a stronger recovery in 2006, and the S&P 500 defies skeptics to end the year up 15%. Moderately low rates allow the housing bubble to continue to inflate, and companies such as Orleans Homebuilders( OHB), William Lyon Homes( WLS), KB Home (KBH) - Get Report and Toll Brothers (TOL) - Get Report continue their multiyear march on aggravated short-sellers for most of the year.
  • After a year on the outs with investors, makers of generic drugs stage a stunning comeback. The catalyst is a growing belief among investors in Big Pharma names that Merck (MRK) - Get Report and Pfizer (PFE) - Get Report really are down for the count and won't come back without hooking up with innovative small drug and generic drug manufacturers. Companies like Par Pharmaceuticals( PRX) and Barr Labs( BRL) advance 50% by the end of 2005 as they catch a whiff of their old speculative fever.
  • Congress repeals sections of the Sarbanes-Oxley Act of 2002 as companies persuasively complain that they are spending more on nickel-and-dime securities compliance than on research and development.
  • Hewlett-Packard's (HPQ) - Get Report board ousts Chief Executive Carly Fiorina and replaces her with a former top executive at Dell (DELL) - Get Report. The new management team pares down the production and distribution infrastructure, revamps sales and marketing and produces a comeback in just six quarters. Growing acknowledgment that the change is working catches investors by surprise, but the stock ultimately becomes a leading name in the Dow Jones Industrial Average for 2005.

Of course, the biggest, and most important, surprises are the hardest to see from the vantage point of a single observer. So let me know what you think the biggest surprises of 2005 will be. Email me at

jon.markman@gmail.com, put SURPRISE in the subject field, and I'll compile the most creative and provocative reader ideas into a column in late January.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Goodrich Petroleum, Avanex, Bookham and Orleans Homebuilders to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Jon D. Markman is publisher of

StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication he held positions in the following stocks mentioned: Terra Industries. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at

jon.markman@gmail.com; please write COMMENT in the subject line.