Chris, who edits the Weber Global Opportunities Report, started investing while in high school and made so much money he hasn’t had a “real” job in his life. He’s an investor’s investor. And that means when he makes a call we listen.

Chris says all the great starts of bull markets have certain things in common. And these can all be summarized with the words “Great Values.” Most important, new bull markets offer investors great dividend yields and low price-to-earnings ratio on most stocks.

Right now, the dividend yield on the S&P 500 is 2.46% — lower than the 3.58% yield the index offered was when this rally started in March.

At every start of a real bull market, dividend yields were much, much higher than just 3%. They were over 6% in 1982, over 7% in 1949, and over 10% in 1932. Those were the beginnings of real bull markets. The kind of markets that if you got in early and just held, and reinvested your great dividends, they made you rich.And that is why I have urged that everyone who participates in this rally use trailing stops. These stops can be staggered: some as low as 3%, others as high as 50%, and every gradation in between.

Yes, if the Dow reaches 10,000 or 12,500, or the S&P goes back to 1,000, or 1,100 or 1,200… there will be great rejoicing and optimism that the worst is over. But I will be looking at both the dividend yield and the price-to-earnings ratio on both indices. And from where I sit, if stocks do indeed go that high, it will only be a signal to tighten my stops. Bull markets begin with stocks trading at great values. And those values are not yet here.

Like we said before, there’s money to be made in the current rally… if you know what you’re doing. The folks at Today’s Financial News just bagged their 26th double-digit gainer since January – 30% on U.S. Geothermal.

They also see opportunity in the coming supply crunch in silver. Already, they’re up 17% on the iShares Silver Trust ETF (NYSE:SLV).

Today’s Financial News have just released a free special report featuring three undervalued silver stocks… and an options play that they think might bag gains of 1,100%. Notes readers can access it here.

A GM bailout would cost $200 billion, say the papers. Uh oh…that’s more than the feds have on hand. And right behind GM are cities, states, colleges…all with their hands out…

Yes, they are all of “vital national importance.” We can’t let them fail, can we?

Of course, it’s all nonsense. Automakers…governments…they go broke from time to time; it’s no big deal. And colleges…who needs them? You can get a much better education just keeping your eyes open. Right now, Mr Market’s Advanced Seminar on Economic Corrections is delivering one helluva lesson. Of course, the tuition is very expensive…

Stocks are down so much that dividend yields are beginning to look respectable again – averaging about 3.8%. For the first time in 50 years, you can get more yield from a stock than from a 10-year US Treasury bond. You remember, stocks were supposed to pay lower dividends because stockholders are supposed to earn capital gains as well as dividends. The combination of capital gains and dividends gives investors a total return greater than bonds; this is the “risk premium” that you get to compensate you for periods when stocks go down. What happened to the risk premium? Here it is!

When is the risk premium at its lowest? At the very moment when investors believe it is highest. That is, at the end of the ‘90s, investors came to believe that they couldn’t go wrong with stocks. They were so sure that stocks were the way to go that they willingly bought stocks that paid little or nothing in dividends. They thought the price of the stock would go up; so they didn’t need dividends.

But stocks have gone nowhere since the mid-‘90s. Now, investors want dividends.

Meanwhile, to those who have been given the most Mr Market takes the most back. No country got as much out of the credit expansion as Britain. Its leading industry – finance – was in high cotton for the last decade. Gone were the conservative old bankers with their derby hats and pin striped suits. The new breed of go-go moneymen in the City wore fancy Italian suits and came up with plenty of fancy investments too.
But just as the bankers were fashion victims, so were their clients.

Poor RAB Capital, for example. The hedge fund manager is traded in London. It’s seen its funds under management fall by 70%…and its share price is down 92%.

The pound is down 25% against the dollar over the last 90 days. Housing is down about as much as in the US. “Help wanted,” signs are disappearing from shop windows. And suddenly you can get a table at a good restaurant without a reservation.

But that’s the trouble with a downturn. Just when other people can’t afford to eat at fancy restaurants – neither can you!

“Everybody’s got to cut back,” we told the family again on Saturday. “This is a global financial crisis. We don’t know how long it will last or how bad it will get. But we’re saving every possible penny – just in case.”

This is what economists call the “propensity to save.” It’s what happens in a serious downturn. But the propensity to save is not necessary shared by all the members of the family alike. Edward, 15, put his finger on what economists call the “paradox of thrift:”

“Hey, Dad, but if we all stop spending…nobody will have any money, will they? Besides, you said you’d get me a new skateboard for my birthday.”

Edward is more civic minded than his father.

High rates of saving causes a recession to turn exceptionally nasty. People cut back…and all of a sudden…the cutbacks are magnified by millions of little decisions all up and down the economic ladder. The rich cancel their restaurant reservations…the poor buy a little less meat. But one man’s expense is another’s revenue. Pretty soon, money is getting tight throughout the whole system. That said, the man whose financial advisor tells him to keep spending in order to help the economy has a fool for a counselor. The smart thing to do is to cut back; let someone else go broke.

*** We are so happy to see Thomas L. Friedman back in the pages of the International Herald Tribune…and back in form too!

The NY Times columnist is always entertaining…and helpful. Unwittingly, of course, the only way possible for Friedman. What makes him entertaining is that he is perpetually in a state of emergency…and irrepressible alarm…that causes him to run around wildly and crash into things.

Remember the terrorism scare of the early 2000s? Friedman was right at the front of it…howling at the mob to mobilize…urging them to panic. Otherwise, the terrorists were going to blow up every public building and underwear store in Christendom. More recently, there was his fright about rising oil prices. Once again, we had to “do something!” He called for a massive, nationwide campaign, “similar to the Manhattan project,” in order to save America from the oil exporters.

Now, it’s the financial crisis that has the man in a sweat. What a delight to have his views on the financial world! He is such a shallow thinker that his errors are always right on the surface. It is reassuring too; if Freidman agreed with our position, we’d have to rethink it.

“If you are going to fight a global financial panic like this, you have to go at it with overwhelming force,” writes Freidman. How does he know that? How many of these things has he seen? Well, none. No one ever has…which he admits a few lines earlier.
But ignorance never stops Freidman. He may not know where the enemy is…but he gives the order anyway: “Charge!”

“This is no time for half-measures,” he continues. How does he know what is a half-measure and what is a full measure? And what about no measure at all? Again, he doesn’t explain. But this is no time for thinking – it’s once again, into the breach! What we need now is “an overwhelming stimulus that gets people shopping again. And an over-whelming recapitalization of the banking system that gets it lending again.”

“Go shopping,” he summarizes.

Anyone with half a brain knows that it was too much shopping and too much lending that got the US into this jamb. But that disqualifies Friedman right there. Not that he isn’t a smart fellow; but he’s determined not to let thinking get in his way. He’s smart enough to know that once you start thinking about things, they always turn out to be more complicated and nuanced than you had hoped.

But if you concern yourself only with appearances, you don’t have to worry about it. What do people in a healthy economy do? They go shopping. What do banks in a healthy economy do? They lend money. So, hey, this is easy. If banks would just lend and consumers would just buy things – we’d have a healthy economy, no?

Another charming feature of Friedman’s pensée is his willingness to chuck principles, rules and dignity whenever they get in the way. Dismissing the question of why the taxpayer should pay for Wall Street’s mistakes, he writes: “…fairness is not on the menu anymore. …we need to throw everything we can at this problem…”

And now we turn our attention to the White House. George W. Bush is said to be not merely a lame duck president…but a dead duck too. He cost Republicans a victory, say pundits: he ruined the country…he destroyed the empire…he wrecked the economy. Today, you could accuse the man of sorcery or child molesting and half the nation would believe you.

Before we come to our revisionist look at the man, we repeat our advice. Just this weekend, Barack Obama pledged to put an end to Bush’s disgraceful torture policy. Dubyah should watch his back and avoid foreign travel; otherwise he’s likely to arrested and slapped with a human rights violation. After all, most of the world would like to see him do the perp walk. Besides, he deserves it.

But here at the Daily Reckoning we always take the side of the underdog and the lost cause. Poor George is both. So, when we read the text of his speech last week in New York, we found it to our liking. Here is a man who has had some sort of brain operation or brain washing, we decided. They severed the connections, making it possible for him to think one thing and so something entirely different.

“History has shown that the great threat to economic prosperity is not too little government involvement in the market. It is too much government involvement in the market. … And the surest path to…growth is free markets and free people.

“Capitalism is not perfect. But it is by far the most efficient and just way of structuring an economy. Capitalism offers people the freedom to choose where they work and what they do, the opportunity to buy or sell products they want and the dignity that comes form profiting from their talent and hard work…

“The record is unmistakable: if you seek economic growth, social justice and human dignity, the free market system is the way to go.”

These insights are, to our mind, correct. But the US government with George W. Bush at the controls hardly favored free-market capitalism. Instead, the Bush administration presided over a “mixed economy” – both “innocent fraud,” as John K. Galbraith described the free-market’s excesses, and the government’s armed robbery.

… 36% of GDP was spent by government…and more than half of all eligible voters depended for their livelihoods – in whole or part – on government checks

…federally–chartered mortgage lenders – Fannie and Freddie – helped stimulate a huge bubble in the housing market

…the US government’s central bank – the Federal Reserve – led by Mr Bush’s appointee, Alan Greenspan, practically single-handedly caused a huge bubble in finance, credit, speculation and consumer spending

…when the bubble inevitably burst, Mr Bush’s own Treasury Secretary (recently one of the Wall Street bankers who had most benefited from the financial bubble) rushed in to use government money (aka taxpayers’ money) to buy up Wall Street’s mistakes…

…then, the feds partially nationalized the nations leading banks…

…and further lowered the cost of credit, in order to try to blow the bubble up again…

…and now, the US, along with the world’s other leading governments, is pledging to give the world what it least needs – more regulation!

Source: Mr Market’s Advanced Seminar on Economic Corrections

Apart from its well known ceramic designs, it also sells glassware, textiles, placemats, trays and candles.

Now you would think that such a business would just about manage to struggle on if it had everything made in the lowest cost manufacturing country it could find, and sold it back to loyal UK customers who did not mind paying a bit over the odds.

In fact Portmeirion’s business model is quite the opposite, and it is doing the business no harm. Two-thirds of its products are made in Stoke-on-Trent and rather than relying upon the loyalty of British customers, it makes 70% of its sales outside the UK with the principal markets being America which takes 39% of sales, and Korea which takes 17%. And Portmeirion is certainly not fading away. Last year it grew its sales by an eye-catching 16%.

With the stock market now offering some attractive dividend yields I have been drawing up a list of shares that could one day give me a nice retirement income, and Portmeirion certainly qualifies.

Having declared a dividend of 14.7p for the 2007 financial year the shares yield a net 5.7% at their offer price of 260p – down from a high of 350p a year ago – and there is every chance that the dividend will be raised this year.

So I am thinking of renewing my association with this company, having held the shares a few years ago. I gave up on them because the company seemed to be going nowhere. Sales were stagnating, the dividend although attractive was never raised from one year to the next, and Portmeirion seemed to be very slow to grasp the nettle of transferring at least part of its production to the Far East.

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A decline avoided

In short, Portmeirion seemed to be in slow decline, and making me even more dubious was the product itself, which struck me as the sort of thing that I might give to someone as a present but hope never to receive myself.