Bubbles, Bubbles Everywhere... Which One Will Pop?

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September 10, 2009

"I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up." In the book Market Wizards, this is the philosophy which Jim Rogers credits with his success in the markets. Well, right now, there is a million dollars lying in the corner of the room. It is just waiting for you to come and pick it up. The only problem is that the floor is covered with bubble wrap. And the more bubbles you pop, the less money you get. You would be anxious to take a step, wouldn't you? Today's economy is playing the same game. Step wrong, and the next bubble pops. And governments across the globe have been so eager to get beyond the crisis, they have created more bubbles than ever. Emerging markets have risen 53% this year. Based on analyst earnings estimates this is the most expensive these markets have been in nine years. In the U.S., the markets are hitting new 2009 highs. This is on the back of corporate earnings which are still at least 25 percent lower than last year. Institutional investors are ecstatic. They're having a great year. And, as long as these new bubbles persist, they look forward to raking in the dough. Just listen to what the Chairman of the China Sovereign Wealth Fund, Lou Jiwei, says... "It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." Stock markets, commodities, and in some countries like China, even housing, are all in bubble territory. Tread carefully… The bubble got going in China because of a $1.1 trillion lending spree. Insane stimulus spending in the U.S. and many other parts of the world has contributed to excess liquidity. Where's all this money going? Too little is going to companies that can generate wealth and increase employment… and too much is going to banks and financial institutions that do little more than push money around. And what happens when all the spending and lending winds down? The bubbles start popping. The smart money has already made their loot. Unfortunately, now the stupid money is piling in. So what can you do to invest with the "smart money"? That's what we're here for – we will help get you across the room and to the other side without popping any bubbles. Right now, the smart money is moving out of garbage and into high quality companies. For example… How a Starving Peasant Went From Living at the YMCA to a Net Worth of Over $8.2 Million Ted P. was $40K in debt. He had to get a loan so he could eat. Now, with a net worth of over $8 million, Ted has agreed to share the powerful secret that helped him amass a fortune. A true aristocrat… Did you know that Coca-Cola has raised its dividend every quarter for the last 25 years? Had you bought just $5,000 worth of Coca-Cola stock in 1985 (about 80 shares) and re-invested the dividends, you would have over 3,100 shares today, worth more than $159,000. And those 3,100 shares would provide you with nearly $5,000 in annual dividends...a 100% yield on your original investment. I don't have to tell you that buying Coca-Cola stock back in 1985 would make you a very happy investor today. Our dividend expert Andrew Gordon has Coca-Cola in the portfolio of all his subscribers. And as a "dividend aristocrat" it is still set to make them very wealthy over the long haul. Another one of Andrews picks is up 47% since he put out a buy alert. But that's not even the best news for INCOME subscribers. The company also pays a safe 13.6% dividend yield. Things couldn't be looking better for this company. Their cost of borrowing is dropping and their interest rate spread is increasing. They are making more money now than they were a year ago! History shows us that the biggest and most reliable returns in the market come from the safest and most mature companies. Specifically, the key is to buy the highest quality companies you can find – companies that pay dividends and have a history of raising those dividends year after year. Buy these shares when they are cheap and reinvest the dividends. That's it. The combination of rising dividend payments and reinvesting those dividends invokes the magic of compounding. Andrew Gordon is building a world-class portfolio for his subscribers. He has identified the strongest stocks in the market, by far. He calls them the "Group of 88." Buying these companies is like walking over and picking up a pile of money in the corner of the room (with no bubbles on the floor). To learn more about INCOME, click here. How Would You Like to Pull the Handle on a $942,300 Jackpot? Investing expert Russell McDougal has developed a strategy to take an ordinary rise in two common resources… And turn it into an extraordinary fortune. (He turned $6,300 into a $167,460 windfall!) Now he wants you to see what kinds of gains are possible for YOU. In case you didn't hear it, the "employment bubble" popped 10 years ago… We have just come off the Labor Day holiday, a day of rest for the working stiff. Unfortunately, over the last 20 months, the number of us "working stiffs" has dropped dramatically. The U.S. has lost nearly 7 million jobs since the beginning of 2008. That's a staggering number. To give you an idea of how many people make up 7 million, that is the combined population of the cities of Los Angeles and Chicago. All without work. But the employment bubble didn't pop 20 months ago. It popped long before that. In the past 10 years, the U.S. private sector has lost 203,000 jobs. That means the U.S. has seen zero job growth for an entire decade. This comes from Barry Ritholtz via the Big Picture blog. Here's what he had to say: "In the 1940s, we created 10 million jobs. In the 1990s, we added 19 million new jobs. Even during the much-maligned 1970s, we added almost 16 million jobs." Yet here we are, nearing the end of the "0's" (or is it the "naughts"?) and we could be facing zero job growth in the private sector. Congress, please stop helping us! Congressional financial ignorance hit a new low this week (if that is possible). Elizabeth Warren, the Chairwoman of the Congressional Oversight Committee, noted that the government "drove a hard bargain" with the auto companies before the bailout. She also announced that the government will take a loss of around $40 billion on the first $55 billion given to bail out GM and Chrysler. And wait… it gets even better. Steve Rattner, who lead the administration's auto task force said, "We aren't trying to squeeze every penny out of this deal." Really? Losing $40 billion of taxpayer money isn't squeezing out the last penny? It's no wonder consumer sentiment is in the toilet and congress's approval rating along with it. How much of this stupidity are we supposed to tolerate? Of course, this type of performance is par for the course in today's Washington. What are your thoughts, dear reader? Have you reached your breaking point with government wastefulness and profligate spending? Or are you proud to pledge your grandchildren's labor to pay for these socialist redistribution schemes? We know the answer. But go ahead and tell us anyway… we'll publish your thoughts. Good Investing, Bob Irish Investment Director Investor's Daily Edge We want your feedback! Let us know your thoughts on this article. Email us at Email: feedback@investorsdailyedge.com Market Window FINANCIAL ADVISORY BOARD Bob Irish - Investment Director Andy Gordon - Editorial Contributor Jon Herring - Editorial Director Ted Peroulakis - Editorial Contributor Christian Hill - Managing Editor Dr. Russell McDougal - Editorial Contributor Steve McDonald - Editorial Contributor Michael Masterson - Consulting Editor

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