The Big Picture: The Megabubble Poll

The Big Picture: The Megabubble Poll

A BULL LIKE ME LOVES TO READ ABOUT MEGABUBBLE POLLS!

The above article is the kind one is likely to read while the market climbs the proverbial wall of worry. There are lots of bubbles to be concerned about but the market keeps going up! I appreciate Barry for bringing the article to my attention. A contrarian must be thankful to those willing to share ideas just like any investor must.

Today, I needed a couple of good quality, high yield stocks for a portfolio. It didn't take long to spot Sara Lee and Rubbermaid. Each of these companies have been through trying times. Sara Lee, for example, has done major restructuring and is still in the process of cutting costs and rationalizing the business. My thoughts and prayers are with Travis Lazenby and others who are currently waiting to hear about restructuring decisions.

The balance sheets of these companies are strong. The dividend pay-outs are high. Low beta stocks that are out of favor are a bargain.

My portfolios are currently filled with high beta stocks. For example, I often write about my beloved airlines and indeed these stocks fly all over the place (pardon the pun). One of my big gainers today was NWAC. It has been going up and down like a yo-yo. The company continues to struggle with its attempt to get labor costs in line with competitors but revenue seat miles are growing. Airline earnings reports are due. CAL and others are likely to report very strong load factors and revenue seat miles. High fuel costs will hit the bottom lines (except for LUV) but I am buying for the future not the present. The future will see high fares. Fuel prices may go higher but the odds are good that current high prices will attract new supply and encourage conservation.

The SLE and NWL are nice stocks to have in a portfolio that includes airline stocks. SLE and NWL will go up when the high flyer's run out of steam. In one of the worst bear markets in history, 1969 to 1974, low beta high dividend stocks climbed about 20% in value while the average stock went down.

I continue to believe a big up move in stocks is in process. The bombs in London were no match for this BULL! A huge spending cycle is ahead in HDTVs, cell phones, wireless internet and more. The market is starting to discount the big boom in spending that will occur in the next few years. Businesses and consumers have money to spend. High tech and airlines should benefit.

SLE nor NWL are likely to be my big winners in the months ahead. However, substituting solid, high yield stocks for bond positions in this market makes sense.

PE ratios are inversely related to bond yields. This means that when bond rates go up, there is likely to be multiple contraction. The good news is that there is a lot of cushion in the current market. We could see a significant rise in bond rates without significant contraction in PE ratios. If bond rates do rise, the flight to quality should boost the price of companies such as SLE and NWL. With current tame inflation around the world, bond yields may stay low. An ideal situation for stocks to profit.

BUY THE BULL! FOLKS HAVE BEEN SKITTISH OF THE MARKETS EVER SINCE THE DOT.COM BUBBLE AND SINCE 9/11. THE MARKET HAS DONE WELL SINCE OCTOBER 2002. WAS TODAY THE START OF ANOTHER LEG UP?