The markets have continued to rise for several reasons. First, investors feel that the complete collapse of Citigroup and Bank of America are off the table. They also feel that Chrysler and GM are not going to pose a systemic risk to the overall economy. More specifically, they feel that the restructuring of the auto industry will be exactly that and not a cause for a rapid collapse of the economy. At the same time money markets are paying very low rates and the view that the economy is not going to collapse implies that it will some day improve, so why not buy something as a long term investment. This "buying something" has created enough demand to push equity prices higher.

At some point, reality will once again set in. We may discover that real housing sales have not turned to any great extent and lending remains at very low levels. We may also realize that the low interest rate environment has been orchestrated by heavy fed involvement and market manipulation on behalf of the Fed. It is unknown how long they could play this game. Also, the massive amount of debt being issued by the government will ultimately put further pressure on interest rates to rise. This rise in interest rates will in turn slow the "recovery" and stifle any growth in stocks.

We also have a rise in commodity and oil prices which is the exact scenario that got us here in the first place. This has to do with pressure on the U.S. dollar and the security that some traders have in owning hard commodities as a form of currency.

So after the 1500 point run up in the Dow, there is a lot of risk still facing us in the future and this quick market rally remains fragile.  I still feel however, that dividend paying investments across the board are the best way to approach this market. This includes preferreds, dividend paying stocks and bonds on the corporate and municipal side. I think it is time to remain conservative but I also feel that as long as interest rates on money market instruments remain relatively low over the next year or so there is still room for the markets to go higher and buying on dips will remain a good strategy.  

To sum up, the money has to go somewhere and investors simply can not tolerate low single digit returns when other alternatives exist.

Please note: The above is not a recommendation or a solicitation. Please study any investment before considering it and consult with your investment advisor before making a decision.

The economy is showing some signs that it is stabilizing. Housing sales seem to have turned the corner. Sales are up, from 1963 levels, if you call that up, and unemployment is stabilizing with now over 6 million unemployed and rising but maybe at a slower rate.  The news isn't good but it is not as bad as it has been and maybe better than people expected.

The bottom line is that investors feel this is not the end of the world and the worst is over. They feel that the programs that the Fed and the World governments have put into place, although controversial,  will prevent a complete systemic collapse at least in the short term.

So, as they say "Don't fight the tape" and the tape is moving up which translates into buy now before you miss out on the opportunity of a lifetime. This is the psychology that is driving the markets this week.

I think we have to buy but at the same time keep a good reserve of cash on the sidelines. We could see a continuation of this pretty significant rally but there will still be lots of opportunities even if we miss out on the "bottom".  I prefer corporate and municipal bonds of somewhat lower quality. I think the best way to enter the high yield market is through an ETF or a fund. Yields run from 8-12%. Preferred funds are also paying about 10% in dividends. Beyond that - just about everything is a good buy as long as stocks continue to rise. In other words, everything has been beaten down. I like the dividends simply because in a flat or downward market, at least there is some offset and I have a big tendency to be conservative.  

Please note: The above comments are simply opinions of the writer and do not represent a recommendation or solicitation. Please do your own research or consult with your trusted investment professional before making any investment decisions.

Over the past few weeks the feeling that the "systemic" risks that plagued the markets back in the fall are now over. Although this may or may not be true, investors have become much more confident in the survival of the financial system. With this belief in place they continued to buy stocks that by historic standard seem cheap.

As I tried to point out in my last newsletter, it is widely believed that high unemployment normally occurs at the end of an economic downturn. It is generally termed the result of a recession not the cause of one. This is why rising unemployment has been ignored by most investors. This time around, however, things could be different and this is the risk that continues to loom. The growing unemployment situation and the continued strain it will put the whole economy may end up feeding on itself and become the cause of a new downward wave. It may be a contribute to a more prolonged recession.

Also, as stated in this weeks "Barrons" We also have a commercial real estate problem that has been widely ignored. The decline in the values of commercial property could add to the problems of the banks and their portfolios.

The only bright spot remains to be the enormous cash sitting on the sidelines. It wants to get invested and hopefully the optimistic money will continue to buy on the dips and keep the markets or stock prices somewhat stable.

I think the best way to play this market now is to get some income from corporate bonds with various qualities and maturities. Stocks that pay dividend continue to be a conservative move. Stocks with low debt structures in tech and health could prove to be good buys for those that are more brave.

It has been a long time -way too long- like last Summer - since I got into updating this commentary. I will again try to renew my commitment to this web page.

It seems like I was actually optimistic at the end of the summer of 2008. Then all hell started to break loose. By the middle to the end of September and early October I went through all of my managed accounts and eliminated just about all positions. I brought everyone up to about a 70% to 100% position in cash. I did this not to time the market. I did it because I have a lot of clients, as a matter of fact, most of them, that need this money. That may sound strange - because you may be thinking that who doesn't need this money? - but it isn't. There are some people that could weather a big storm like this simply because they have the resources to do so. They have earning power or they have other cash or - if they lost half their money, they would still have enough to carry them for a lot of years. For those that were not in that situation - which was most,  I took the conservative approach.

I felt that  I would be better off losing a client because they only lost "some" money than lose a client and have to tell them to go out and find a job in retirement because we lost 50-60% of their account or more. In the end, if you want to call this the end, I did a good job ( pat myself on the back) of preserving principal. I do not want to publicly quote specific numbers because that is a slippery slope but i will say that I am finding that I have done significantly better than those that just held onto whatever they had.

But the above is only temporary. Now I am in a situation where my clients have a lot of cash and the question is "What do we do with it?"  I am taking it slow but trying to get some of the cash reinvested. I think that the markets are low and there is opportunity. But, at the same time the banking thing is still little understood and GM, Chrysler, AIG and Citi are still sitting out there. They are all making deals with the government and they are all in completely uncharted water. Individually or combined those companies control so much of the economy it is difficult to be overly committed to anything. So I am trying to buy into a few of the more broadly diversified indexes along with the financials, the preferred stocks, bond funds and bond ETF's including junk bond indexes and maintain a stance where preservation of principal is the primary objective. Bonds and stocks that pay significant dividends are the most conservative way to approach this. But at the same time, tech has been in an uptrend so we shouldn't ignore the NASDAQ for the more aggressive investor.

In conclusion, I think for now, we are in rally that has weak underpinnings. I think it is somwhat of a relief rally in that the banks seem to be in a position where they may dissapear into some form of goverment control  - but they will not completely collapse and cause a domino type financial collapse accross the entire system. Since investors feel that we will ultimately survive - they fell that "good" companies are good buys. 

That is all for now. I will update this thing much more often - My objective is once per week. please check back!    

I have set up this web page some time ago and have since made little commitment to keep it up. So my new resolution is to post my current views on this page to keep readers informed. Here are a few things to keep in mind:

I do not believe that anyone can predict the future or select an isolated investment that is going to generate stellar performance. For this reason the reader should keep in mind that although specific investments may be mentioned or discussed, I would never recommend that anyone invest a significant percentage of assets in any one position or into anything where the results appear too obvious. In other words, take everything written herein with a grain of salt.

Also, keep in mind that the opinions in this blog do not represent a solicitation or recommendation of any investment. Before selecting an investment all the literature, prospectus annual reports and other pertinent data should be reviewed and it should be discussed with your financial advisor where appropriate.

Good Luck!