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.