Shhhhhhhhh........ LF, HOTT and ACAT have performed quite well in the past few months, hence no real update. I still like them a lot at their current levels. Buy and hold into 2009.

AAPL has been hit hard on multiple contraction and doubt. A buy anywhere close to $100 or $110 will be rewarded with a 50%+ gain in the next 6 months (probably sooner).

All 4 of the above have no debt, plenty of cash, and I don't see any of the 4 needing credit anytime soon......

GR is a steal anywhere near $40. Buy and hold for the rest of your life.

People talk like the markets are crashing or will crash.....but fail to realize we're down ~30% from nearly one year ago. The 'crash' has happened. Buy solid, undervalued companies. Till next time......shhhhhhhh......

Perfect timing for my next investment blog entry. Dow at lowest point in two years. Economy seemingly sputtering. Housing has major issues. Oil at all-time highs (Rita Coolidge sang it for Octopussy a few years back...). Sentiment near an all-time low. Unemployment rate above 5%. Etc. Etc. Etc. There can't be any good reason to own stocks, can there?

I disagree. We many not see an immediate turn-around in the stock market, but it will happen. For the bottom-fishers who've been picking up financials (hey, I picked up some Wachovia Bank calls a few months ago.....expired worthless), homebuilders, industrials and other stocks which keep on making new lows, at some point the strong companies will turn business around and stocks will reflect that.

There's never a 'good' time to speculate on a company's stock, but there are bad times to speculate and the past few months have been such times. The past few months have seen quality stock 'Blue Chips' like GM and GE collapse. I learned my lesson earlier this year and picked up other companies with no debt and a solid business model. LF, ACAT and HOTT are well off of their lows and my purchase prices. Again, no debt. These are three companies whose businesses will rebound quickly in a stronger economic setting. RL and AAPL are also in this category.

My financial play is still PRE, Partnerre Reinsurnace. I like the company, like their strength and like the stock. As financials have cratered due to bad loans and shenanigans galore, PRE continues to be a bedrock/mainstay. Once the financial sector turns, a stock like PRE with such low valuation should rebound nicely.

Finally, call option buying could be a good thing to do in the next few days. The headlines will read "Dow at 2 Year Low" and we'll also continue to read about Iran, Iraq, oil, Obama/McCain, guns, cancer, taxes, economy, etc. Looks like a great time to buy some short-term call options.

October, 2006 saw the S&P 500 climb through the mid-upper 1300s, on its way to the 1500s by mid-2007. 18 months later, the S&P 500 is again climbing through the mid-upper 1300s. Where does it end? Up. How long will it take to get there? That depends on the economy.....

In mid-2007, it wasn't the economy that began to fall apart and cause massive downturns and swings in stocks. Rather, if somebody poops in the pool, everybody has to clear out and so the lifeguards can shock the water. After ~1 hour, people are allowed back into the pool. The stock market is financial-centric, no two ways about it. All stocks swim in the pool, but if the financials are a mess, it's clear out time. I'm pretty sure you can figure out the players in my parable. I wish (really wish) I would have sat out most of the market for a while last fall and this past winter. Hindsight is always 20-20, but in the future, if I do see poop in the pool, I'll take some off the table and buy some market put options.

So here we are, still well below where the SP 500 started 2007 at 1418, well below last summer's 1550+, and ~10% below the MSCI World Index highs from last year. Money has been coming back into the market in the past month, which is nice. But, to me, the question still remains, is this a bear market rally? This past week, giddiness exuded from many areas, especially Friday with Cat, Citigroup and Google. How much poop is left in the pool?

While one can never be sure as to what is around the corner, examining what's left might be worthwhile. Let's assume home prices still have another ~15%-25% drop left. I firmly believe that. Home sales will revive when prices fall.....supply and demand, right? That's all it is....supply and demand. No question demand for homes has dried up across the nation (yes, I know there are a few pockets......), and supply has risen. Demand will not increase until prices decrease....or we allow an extra few million wealthy immigrants into the country. With credit conditions, fewer and fewer people will be able to afford/qualify for a house. Then, who in their right mind would want to buy one today when....odds are....they can get one cheaper next year. So, what would another ~20% drop in home prices do with financials? Then, how would it impact the market and the consumer?

I'd still say there's plenty of financial mess, just not sure about how that will play out. Most homeowners, granted, have lived in their homes for quite some time and have enough equity where a loss of 20% more wouldn't be too much of a big deal, especially if they didn't realize how much they could have gotten for their home a year or two ago. That being said, financials are looking/hoping/praying for the bottom, bouncing whenever they report news which isn't as bad as it could be.

So what to do? Two things. First, buy quality stocks of quality companies, especially if they're on sale. Apple was in the $120 range a month or two ago; today it's in the $160s. Google was in the low-mid $400s, now in the mid $500s. Pick any quality company, and more than likely its stock has improved vastly in the past month or two. Those are the stocks you want to buy; ones of quality companies.

Second, buy damaged (cheap) stocks of companies with little or no debt and "worst case" scenario priced. Three of these I like and own myself are Leapfrog, Arctic Cat and Hot Topic. Valuations on all three are very low (though LFs valuations have improved since it was on fire-sale near $5 per share). All three have (or had) the gloom and doom consumer priced. All three have no debt. Bankruptcy won't happen anytime soon (good), credit ratings don't matter (good), business will likely turn around sometime (good for long haul) and all three are easy takover targets. LF, ACAT and HOTT. Buy now; I see all three doubling by later in 2008.

Until next time.

Our current Federal Reserve Board took plenty of heat late last year, probably warranted. But their actions so far this year have done the job, in my opinion. Lowering the overnight rate several times, and not by just 1/4 point, will help spur borrowing. Raising the amount available from their Terminal Auction Facility will help liquidity. Now, their brilliant move of accepting the mortgage paper nobody wants as collateral, and allowing more borrowers, will spur more loan deals. Folks, M&A activity will rise soon.

What to do? A friend of mine told me the Fed is making it nearly impossible for banks to not make money. We have a healthy yield curve in the U.S. Sure, we have a weak dollar, but that will increase exports. Unemployment is low by historical standards, as are borrowing rates. Buy stocks. You know the ones I like, but I'm sure if there's one out there you like, it could easily be a bargain still.

As I write this, Leapfrog (LF) is ~$7.50. It's going to double within a year, minimum. Hot Topic (HOTT) has bad news priced, and a wicked low P/S ratio. Get in below $5 or $6. Apple near $130 is a steal; they keep innovating and are never, ever going to be married to a business model. Apple (AAPL) will be back to $200 by the end of summer. You know the others I like. Looks like a strong spring for stocks. Enjoy.

What a month or two. Awful. What's ahead? Better times.

Mood is dour for the whole market. What is causing this market collapse? Financials and fear. Since financials got themselves into this mess, it'd be nice if they could contain the contagion, but that hasn't happened due to sympathy selling and liquidity issues. So, equities have hit the fan.

But what about fear? What is there to fear that the market hasn't already priced? A depression? I keep reading plenty of articles on the enormous amounts of ARMs to reset this year. Just a guess, but many savvy homeowners use the ARM to get a better rate on a regular basis. We did several times, and saved money monthly.

The economy? Well, here's the deal, at least to me. If employment stays strong, then I don't see a worry. I do see house prices coming down to more realistic levels. I read where the historical mean price for a house is 2.8x the household income for a neighborhood. I don't know about you, but that forecasts significant price declines. Some have already occurred, but most are yet to occur. When they do......no worries, mate.

Stocks? There is so much value right now out there. I dare you to find an fairly-valued stock. Double-dog dare you. There aren't many. Every stock I see has quite low valuations. Bad news and recession is forecast. What do I like? Apple (AAPL), Leapfrog (LF), Goodrich (GR) and Polo Ralph Lauren (RL) are four good ones. I bought two more stocks/call options recently that I think have good prospects and low valuation. Arctic Cat (ACAT) makes snowmobiles and ATVs, products which people will pass on in a pinch. But to me, nearly the worst was priced when I bought some ACAT in the $7s. I see it back to $15 or $20 by the end of 2008. Wachovia (WB) is a financial (boo, hiss). Wachovia is also headquartered in Charlotte, NC, possibly helping to isolate it a bit from the Wall Street shenanigans. Wachovia's dividend hasn't been cut, and it pays ~7.5% at $33 share price. That's value. Also, Wachovia just awarded it's CEO and other senior VPs lots of options. Here's the kicker.....the options are way out-of-the-money. Talk about incentive to get the share price up......

Those six should do well if you buy now and sit out the rest of the year (or even into 2009).

Better times ahead.