10 Bubbles?

Clutterstock has named these areas a bubbles in the making. Are they right? What bubbles other than the ten mentioned here, do you think are forming or about to burst? Let me offer my own ten suggestions.

1. The Treasury Bubble

2. The outrage at the evils of corporate America Bubble

3. The Social Media Bubble

4. The Meredith Whitney Bubble.

5. The Dollar Bubble

6. The Blog Bubble

7. The Return of Deflation Bubble

8. The private equity/hedge fund bubble

9. The Obama as Savior Bubble

10. The China is a Bubble Bubble

There's no direct way to short most of these things on my list, but you can still profit from just avoiding them.

What you should do if you think this rally is real?

This advice applies if you just think that there's a few tickets on the clock before it hits midnight. Personally, I think that what we've seen recently has been a sucker's rally. However, even if I'm right, it doesn't mean that someone can't make good or even great money in the short-term taking the other side of my trades.

If you think that the jig isn't up, I suggest stocking up on small cap crap stocks. Craps stocks come hurtling out of their bottoms during rallies like this. Take a look at two homebuilders who many thought would go under, Beazer Homes (BZH) and Orleans Homebuilders (OHB). Both these stocks were and still are heavily shorted and deservedly so. Look at a YTD chart of these stocks compareing with the S & P 500 and the ETF based on the homebuilder's index. While the former have been flat, OHB is up about 300% and the BZH is up about 150%.

Be careful, after all, you're going to be looking for crappy stocks, so don't be surprised if awful little banks and biotechs with no drugs that burn through cash pop up on the screen. A stock like that I think fits this bill perfectly is McClatchy (MNI). It's trading around $2. McClatchy used to be one the premier newspaper chains in this country. You can probably fill in the rest of the story.
Anyway, it has a terrifying debt to equity ratio of 25 and lost 22 cents a share last quarter, yet it is up 193% in the last six months! This is an extremely volatile stock, but I think it's got the legs for another big move up.

Is the S&P 500 breaking 1000 really important?

What about the Nasdaq breaking 2000? Yawn. It is non-stories like these that make me shake my head. It almost makes me want to learn more about the weird, sad end to Michael Jackson's life than read about what a milestone this is. Is it psychologically important? I don't really know what that means. I suppose it means that people are very attached to round numbers and get happy when you pass a big one. These stories always include an optimistic quote from a fund manager or two. This is a great example of Mr. Market changing his mind. Why? I don't know. People will point to stronger growth overseas or a boost from the manufacturing sector, but no one really knows exactly why. They just know that the bulls won today. Don't believe the hype. Use days like these to exit positions you no longer like on more favorable terms.

JPMorganChase's buy list

Last Friday,JPMorganChase published a list of sixteen stocks that they feel will outperform the general market in a global recession. The stocks were:

3M Co.
Baxter International Inc.
Colgate-Palmolive Co.
CA Inc.
Devon Energy Corp.
General Mills Inc.
Gilead Sciences Inc.
Google Inc.
Hewlett-Packard Co.
McDonald's Corp.
Merck & Co.
Monsanto Co.
Nucor Corp.
Philip Morris International Inc.
Union Pacific Corp.
Visa Inc

There isn't much surprising about this list. They are all megacap stocks with tons of cash on their balance sheets. It features defensive healthcare and consumer staples companies, some energy plays which will act as an inflation hedge, and commodities stocks that have recently hit 52-week lows.

Do not go out and immediately buy these stocks. They are fine candidates for a watchlist, but don't plunk down your hard-earned cash just yet. It's almost certainly too late for any short-term gain from this list. Besides, this is aimed at institutional investors, many of whom have to be fully invested due to the language in their charters. "outperform" is a relative term and not a guarantee of positive returns.

If you're dollar cost averaging into an index fund or a stock that's already on this list, then buy all means, continue to buy and lower your cost basis. However, please don't feel that you have to open a new position in a stock due to the gravity of this flimsy list.

Nothing lasts forever even cold November rain

September was awful and October is looking worse. Everywhere I look I see stories about the financial crisis and people wondering if we're going to see another Great Depression. I keep hearing people on CNBC talking about defensive sectors and stocks. This is a totally academic exercise when all equities are getting punished.

There is enough pessimism in the market to choke a horse. So have we reached a point of capitulation? I don't know. I don't care. I'm not a trader.

I've been preach for the last year or so that cash, gold, and Treasuries are fine, so I won't repeat those screeds. Today's post is going to be about psychology. The way to survive this market is change your attitude towards it. Start looking for bargains. Goldman Sachs is trading in the low 80s at slightly under book value. When do you think that will happen again? They are not going down. The Fed and the Treasury have decided that they will "bear any burden, pay any price" to keep the remaining big banks alive. Could it go down further from here? Certainly, maybe even probably, but I'll snap up more shares and wait for the storm to pass.

Another name that I'm looking at is Altria. MO is selling at 4x earnings and under a 1 PEG. This is one of the greatest stocks of all time just being given away. It's also got a 7.1% yield. That's a nice chunk of change while you wait for the market to rebound.

GE is selling at single-digit multiples with a 6% yield. SunTrust Bank is selling under book value. In fact, right now, the cash on the balance sheet exceeds the market cap! It's yielding 7.4%. XOM is in the low 60s. FCX has a forward P/E of 3 and has PEG, P/S, and P/B all under 1. I could go on and on.

I can't guarantee that these stocks won't get cheaper or that ten years from now they will have fully recovered. Anyone who bought GM in the 80s when things really started to look bad has been spent twenty years watching things get worse. So there's always risk, but the risk reward ratio is in your favor when you buy blue chips like these that (unlike GM in the 80s) and hold them until the market comes to its senses.

This financial system is battered right now, but we aren't going back to bartering.

Shame on you, CNBC

The last year of coverage on CNBC has featured relentless cheerleading. With every downward thrust of the market, we find a CNBC reporter or anchor talking about the wonderful values being created in the wake of volatility. Well, the bargains kept coming. When they weren't encouraging you to snap up wonderful banks at fire sale prices, they were kvetching about the need for a rate cut or anything that might stave off the impending recession. I turned especially negative on the network in the last month, when they could offer nothing but parroting the breast-beating and wailing of their business friends and sources. The media is supposed to be in impartial conduit, not an unofficial mouthpiece. Were you watching the day Lehman went down? It was funereal. Now that they are past the depression phase of grieving, they have moved on to anger.

The vitriol at Congress for not passing the bailout almost comes through the screen. The Democrats could've passed this bill by themselves, but 90 of them voted against it. Americans overwhelmingly hate this deal. Do we need the $700 billion bailout? Yes. Will we get a deal done? Yes. My problem with CNBC is that they have led the charge in panic-mongering and rapping the knuckles of Main Street Americans for opposing the deal. They are doing Wall Street's light work.

Wall Street is like a panhandler who wants to dictate to you how much you should give him and in what denominations. They're going to get their money. They should try to at least appear grateful.

What now?

Uncle Sam is being especially generous. He has tried thrice to throw money at the problem(Bear Stearns, Fannie Mae/Freddie Mac, AIG) and failed. Now he is going to buy any and everything just about. Chairman Cox of the SEC has suspended shortselling in stocks. Of course, the stock market is eating it up. The question you must ask yourself is, "is it over?"

I don't think it is, but I am often wrong. I venture to guess that you are often wrong as well. So what do you do when your investment outlook is ambivalent? Put on some hedges. Raise some cash. I think that gold is great place to be right now. Or take a look at parking your cash in a more stable currency like the Swiss Franc. There are ETFs that allow you do both of these.

In yesterday's Washington Post, columnist Steve Pearlstein wrote that finally the U.S. was being forced by its foreign creditors to live within its means. Today's actions by the government would suggest otherwise. While, I am not as hawkish as Ann Woolner on this issue, I do want to see some bodies strung up. If you're not going to give me any money personally, can't I at least get a fall guy to tar and feather?

Nothing biting in the stock market

Maybe it's because I've been preoccupied with Christmas, but I can't seem to find any stocks worth buying. Many stocks are down from their 52-week highs, but are still expensive. I'm going to hang on to my money until things get cheaper, just hang up my spurs until a fat pitch comes along. I might consider adding to my E*Trade(ETFC) position. Citadel and I might be the only ones who believe that this company will survive.

Stephen Brown has sage advice to offer stock investors once more

Stephen Brown of NYU's Stern School of Business tells us how to remain safe and calm when the stock market seas get choppy. This is especially timely advice given the recent gyrations in the market.

Waterboarding and the market

There's been a lot written and said about waterboarding recently. The US Senate has been the locus of the discussion. Waterboarding is a torture technique that simulates drowning. It's also what investors and traders do to themselves when they follow the market too closely; they're drowning themselves in information. Living and dying with every tumultuous turn of the market is not only painful, but is less than profitable. I can't tell you how many stupid trades I've made based on bad news that ended up being noise. More information doesn't automatically lead to better decisions. Right now I have position in National Oilwell Varco(NOV) that I've been checking just about daily. I'm expecting it to keep pace with the price of oil. While this isn't a bad thesis, it's one that might not be evident on a day-to-day basis. It's completely counterproductive, worse than watching a pot boil or grass grow. So now I'm going to practice what I preach; I'm only going to check the price of stocks I own once a month. Just in case something happens, I'll set price alerts on my E*Trade account. I think that I'll make better decisions and ultimately make more money.