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.

As I explained in an interview for Oxford Club members, we’ve witnessed seven similar stock market rallies of 25% or more in eight weeks for the Dow…

And guess what? Every time, the rallies have continued. For at least six months. And in six out of seven cases, they have lasted for another year.

My point is not to be the lone voice of dissension – or an unabashed, ignorant bull. I merely want to shed some truth on the subject. Because it’s perfectly possible the rally could continue…

Then again, it might not. Which brings up the real reason for writing today.

Whether you believe we’re in a new bull market, a bear market rally destined to collapse, or as one pundit put it oh so clearly, “A cyclical bull market in a secular bear market” (come again?) – I’ve got the perfect stock for you. Coinstar is positioned to rally no matter what the markets do next.

Coinstar Inc. – Profiting From Pocket Change and Cheap Thrills

While we can argue all day long about the next move for the markets, we can agree on two things.

• First, unemployment is destined to rise. It’s a lagging indicator, so even if the economy perks up in the second half of this year, as many expect, the layoffs will continue well into next year.
• Second, the severity of the current recession dramatically impacted consumer spending, presently and for the foreseeable future. That tends to happen when you lose your job, fear it’s imminent or see others around you coping with no income.

Both conditions play right into Coinstar Inc.’s (Nasdaq: CSTR) hands.

You see, the average U.S. household has about $90 of spare change just sitting around. The severity of the current economic slowdown will prompt many of them to convert it into cash to fund life’s mini-indulgences.

Coinstar eliminates the tedious and time-consuming task of rolling coins. The company operates more than 18,000 coin-counting machines in supermarkets and other retail stores. All you have to do is dump the change into a sorting basket. The machine counts it and then spits out a voucher, which can be redeemed for cash at the nearest register.

International expansion and the addition of 3,200 new machines in Wal-Mart stores this year will only make the company’s services more accessible.

Coinstar Positioned to Profit From Ultra-Thrifty Consumers

But Coinstar’s positioned to profit from the new class of ultra-thrifty consumers in yet another way. Thanks to timely acquisitions of DVD Express and Redbox, they also operate the largest network of self-service DVD rental kiosks.

Instead of shelling out $5 at Blockbuster, consumers can pay $1 a night at any of the company’s 12,900 kiosks located in supermarkets, drugstores and McDonald’s throughout the country. Each machine holds 150 titles (with multiple copies) at a time, almost all of which were released in the last six months.

And the recent results prove consumers are buying into the concept:

• Redbox’s sales soared 180% in 2008 to $400 million. And the momentum is continuing this year. In the most recent quarter, Redbox sales jumped another 156%.
• A bankruptcy filing by Blockbuster, which appears imminent, should only drive more consumers to the company’s kiosks.
• And they will be readily available, as management plans to almost double the number of kiosks to 20,000 in 2009.

To sum it all up, whether this stock market rally continues or falters, this recession will impact consumer spending for a long while. And more people will be forced, or choose, to look for cheap thrills and a way to “monetize” their pocket change. Coinstar is the only way to capitalize on both… and rally, regardless where the markets head next.

Source: Coinstar Inc. (Nasdaq: CSTR): The Perfect Stock for Bulls & Bears

For the first time in a long time, we can tell you today that the U.S. stock market is up year to date:

The major indexes rang in the new year with a 3% rally on Friday — the best first day of a new year in the last six. And a sharp contrast to 2008, when the Dow had its worst opening day since 1983.

To accomplish that feat, the market shrugged off the only piece of data worth noting… the Institute for Supply Management (ISM) manufacturing survey started off the new year at a new 28-year low.

We have to say we love the financial media chatter on this first business day of the penultimate year of the first decade of the new millennium. On the one hand, the president-elect is promising a $300 billion tax cut to accompany the now $775 billion stimulus package working its way through Congress.

On the other hand, a consortium of state governors are calling for Obama to expand his rescue package to over $1 trillion. Leaders of New York, New Jersey, Massachusetts, Ohio and Wisconsin petitioned the president-to-be Friday for around 300 billion extra bailout bucks, mostly to help offset state budget shortfalls.

Meanwhile, 40% of government debt held by public investors will mature in the next 12 months… roughly $2.5 trillion. Meaning they’ll have to roll it over at whatever rate the market will bear at the time.

“It’s curious,” one reader wrote, capturing our mystification over the weekend, “that full-grown adults are willing to bet their lives on a new medicine because it worked on 2-ounce mouse, yet they can’t believe that what happened in a ‘tiny’ economy such as a Zimbabwe or an Iceland can happen in a big economy like the United States.”

Happy New Year!

“Investors will initially welcome the promise of fiscal stimulus from the incoming administration,” writes Rob Parenteau, steward of The Richebacher Letter, “before realizing the nature of the challenge ahead. If Dr. Richebacher was correct in his assessment, nothing less than the entire global production structure needs to be reoriented.

“Asian production results point to a depression developing in that region. And the world is starting to realize it can no longer rely on serial asset bubbles and credit-financed consumption. But the apparent solution — so far — is for countries around the globe to reach for an increased public sector role in the economy. We are beginning to see hints of protectionism, as well. As the old regime breaks down, this is the solution developing before us… by accident.

“We sincerely doubt Dr. Richebacher would see public deficit spending and protectionism as a road back to sustainable economic growth. Rather, we would vastly prefer to see a rebalancing of the global production structure and a simplification of finance. Asian nations must become more domestic demand driven. And the Anglo-American nations, in particular, must save and reinvest earnings in tangible capital equipment, rather than mergers or stock buybacks. That is clearly a longer-term project requiring adequate changes in prices, incentives, income and capital, but it is a project he repeatedly championed for the length of his career.

“In the meantime, desperate fiscal and monetary measures around the globe during 2009 may help cushion the nightmarish blow wrought by the failure of the old global economic and financial arrangements. But they are unlikely to be a sound basis for the next leg of growth.”

“2009 should be a year,” Dan Amoss comments further, “when fundamental analysis should start to matter once more. That will be a welcome development, because 2008 was a year when the following strategy worked best:

1) Sell short any stock or ETF, without bothering to do any fundamental research
2) Invest the proceeds in Treasury bonds, preferably with as much margin as possible
3) Repeat Steps 1 and 2, over and over.

“Clearly, this ‘deflation trade’ strategy is not sustainable over longer time frames — not in an era of worldwide paper money standards. In fact, I’d expect that such a shotgun-based investment strategy of short S&P 500/long Treasuries could lead to big losses in 2009.

“The economy will remain weak, but I think the worst of the widespread market carnage is behind us. Future damage should be concentrated in sectors with horrible fundamentals.”

But for now, investors are happy to bid stocks up… AND buy the dollar. The dollar index is up a point and a half from Friday, to around 83 this morning, heading thus far in the direction of its credit crisis high of 88.4 set on Nov. 21, 2008.

“The dollar is kicking up its heels once again,” writes EverBank’s Chuck Butler, “and this is to be expected during this Obama bounce. The markets are swayed by the smooth-talking President-elect’s call for $300 billion in tax cuts, a job creation program and (possible) $1 trillion economic stimulus package.

“But all these things cost money, lots of money, and money we don’t have, unless… we just go and print more. This is why I believe that once all the euphoria of the Obama presidency has run its course, the markets will do a V8 slap to the forehead and realize we’ve just dug ourselves a deeper hole!”

Gold hasn’t been too pleased with the dollar’s uppityness. In fact, she’s downright depressed. The spot price fell $30 over the weekend… below $850 an ounce this morning.

“In 2009,” forecasts Ed Bugos, keeping his eye on her meds, “economic conditions will deteriorate. Unemployment will reach double-digit rates before the year is out.

“As the year wears on and investors sort out the fallout of 2008, I believe that there will be fewer plausible investment alternatives to gold, and that markets will begin to realize the errors of the government’s current policy. The big winners in all this will be gold shares, which will perform better than gold, as they have been absolutely cheapened beyond belief, and risk premiums fall.”

Despite dollar strength, oil has greeted the new year with glee. Light sweet crude jumped 23% last week. In dollar terms, that’s nearly a $9 leap, to $48 this morning.

Last week was the black goo’s biggest since August 1986, after… hmn… a global equity rally and strife in Gaza.

Mortgage rates have pickled to at least a 37-year low. The average 30-year fixed loan went for 5.1% last week, Freddie Mac reports, which is the lowest since the company started keeping track in 1971.

No surprise, then, mortgage applications are at a five-year high. Mortgage application activity stayed around 1,200 last week, the Mortgage Bankers Association said. That’s the most weekly apps since July 2003.

But these historically low rates and the surge in mortgage applications aren’t doing diddly for the housing market. 83% of all applications recorded last week were for existing homes. And why not? If you can lock in for 30 years at or near 5%… go for it.

Meanwhile, the next leg of the real estate bust is already coming down. In nearly every major city, 10% of office buildings are now vacant.

“Virtually every market in the country will see a rise in vacancy rates of between 2-5% by mid-2009,” Bill Goade, head of CresaPartners, told The New York Times this morning. According to a report by Real Capital Analytics, an estimated $400 billion worth of commercial real estate loans come due this year, $107 billion of which are already delinquent.

Of course, you can leave it to Wall Street to make matters worse. Approximately 60% of all commercial property loans made in 2006-2007 were securitized into the same kinds of debt tranches and CDOs that set the credit crisis in motion in July 2007.

The banks sitting on them now? They rank among the only firms to escape calamity in 2008. Bank of America, J.P. Morgan and Morgan Stanley hold “tens of billions of dollars” worth of the stuff — each.

Oy.

“Imagine my surprise,” writes a reader headlining a smattering of random e-mails we received over the weekend, “upon finding the following clue in the Sunday crossword puzzle of The Miami Herald: ‘2 down: 2008 documentary about the national debt’

“It has a lot of vowels, so I predict I.O.U.S.A. will be the answer to many crossword questions for years to come. Would you have predicted a development like this for your film in your wildest dreams? What a country!”

The 5: Amen. And… we have an ‘in.’ The Miami Herald picked up The New York Times crossword puzzle from the week before. Will Shortz, the editor of The New York Times puzzle, played the role of lead protagonists in Patrick and Christine’s first film, Wordplay.

By the way, the Critics’ Choice Awards will be announced this week. After we published the link for audience votes , we blew the survey to pieces. At one point, we had over 80% of the votes. The only other movie or actor to get reviews similar was Heath Ledger for Best Actor, who clocked in at about 84%. The Dark Knight was up there too.

It’s all absurd, of course, but kind of entertaining to check out. You can do so here. There are a bunch of reader comments on the site too.

“It seems to be going on under the radar,” writes another reader, on a completely unrelated subject, “but there has been some serious buying action in the uranium miners since Obama was elected. Maybe these people think (or know) that uranium will be the new Green in 2009?”

The 5: We suspected as much as well… on Wednesday.

Source: New Year Rally, Obama’s Plan, Shorting in 2009, The Second Wave of the Housing Bust, and More!

This from Investment U:

It’s not official yet. Apparently the committee of “esteemed” economists at the National Bureau of Economic Research (NBER) doesn’t get paid for timeliness. But the statistics don’t lie… we’re in a recession.

And that’s got me giddier than an Obama supporter scoring an inauguration ticket. That’s right. I’m actually glad the economic data stinks. Because when a recession is here, a small-cap rally isn’t far behind.

Accordingly, I’m loading up on small caps in my own portfolio. I suggest you do the same, instead of joining the lemmings piling into Treasuries.

If you’re reluctant and afraid small caps are too risky, chew on this:

In the year following the six major bear markets of the last century, small cap stocks soared an average of 82%, according to Ibbotson Associates.

If the prospect of an 82% gain doesn’t excite you in these trying markets, check your pulse. If it does, read on…

Any Old Small Cap Just Won’t Do

There’s no denying the strong historical trend, but it doesn’t mean ALL small caps will soar. Nothing in investing is ever that easy. In order to really benefit from the imminent rally, we need to isolate the most compelling and innovative small-cap stocks.

To that end, let me share a disciplined approach that’s always served me well. When it comes to small caps, I focus exclusively on companies with these three characteristics:

• A pioneer on the verge of creating new trends. Companies can create products to compete in existing markets… Or they can create products that are so revolutionary and timely that they launch their own markets and trends. The latter obviously positions the company, and in turn investors, to reap the most profits. If you need help qualifying this factor think Intuitive Surgical (Nasdaq: ISRG), Google (Nasdaq: GOOG), even VMware (NYSE: VMW).

• Within three years of an initial public offering (or major index listing). Smaller and/or newer companies have more room to grow. Plus, Wall Street tends to overlook many of these firms. By focusing on these young and virgin opportunities, we can actually profit ahead of the Wall Street institutions and the trillions in capital they control.
• Increasing earnings by at least 30%. A market panic can only hold back fast growing stocks for so long. Eventually, share prices will follow earnings. By focusing on companies with the strongest growth profiles, we set ourselves up for the most dramatic gains. And yes, even in this market such companies do exist.

Other characteristics worth screening for include: recurring revenue streams, potential applications for products in parallel markets, new products in the pipeline, little or no analyst coverage and management ownership of 10% or more.

Granted, the process of actually finding such companies is tedious and time consuming. But as Abraham Lincoln quipped, “Things [profits] may come to those who wait, but only the things [profits] left by those who hustle.”

In other words, all the hard work we put into indentifying these small-cap stocks will be rewarded. But if we don’t grab the profits while we can, another investor will.

Short on Time? Buy These 2 Small Caps… And Call Me in a Year

I recognize not all of us can scour the markets each day in search of the most compelling opportunities. So let me make it easy for you. Here are two small-cap companies I’m convinced will be 50% higher (or more) a year from now. [Editor's Note: To get all of Lou's small-cap recommendations, you can sign up here.]

• Genoptix, Inc. (Nasdaq: GXDX) The economic cycle doesn’t impact business for this provider of bone marrow and blood-based cancer tests one bit. Sadly, when it comes to diagnosing cancer, people can’t wait for better times. But the company’s focus on community-based oncologists also provides ample growth opportunities. Earnings increased 198% in the last nine months to $26 million. And yet, the company still only controls 4% of the market.
• American Public Education, Inc. (Nasdaq: APEI) This West Virginia-based company provides online, post-secondary education to a very specific market – military personnel. Its niche focus is delivering impressive growth, with revenues and earnings up 56% and 72%, respectively, in the most recent quarter.

Whether you opt for these recommendations or seek out your own, it doesn’t matter. A recession is here, so a small-cap rally isn’t far behind. Before it’s too late, I recommend you position yourself accordingly.

Source: Small Caps: It’s Time to Think Small

More from Justice in Taipan Daily:

The 1920s – widely known as “the roaring twenties” – were a time of great dynamism and change in the United States.

The decade earned its nickname and then some. Car ownership took off… movies and radio captivated the nation… and the stock market went through the roof.

The Dow went from a trough of 63.90 in 1921 to a peak of 381.17 in 1929. That’s just under a 500% gain in a mere eight years’ time. To repeat such a feat today (from the 2008 lows on a closing basis), the Dow would have to top 48,000 by the year 2016.

Sounds hard to imagine, doesn’t it? And of course, we know how the roaring twenties ended. (Badly… very badly.) But rather than talk about the crash of 1929 – a topic most worthy of future discussion – let’s talk about how the roaring twenties began.

Grizzly Beginnings

What few realize is that the twenties kicked off with a raging bear market… not unlike the grizzly we’re wrestling with today.

We noted a low point of 63.90 in 1921, but didn’t highlight where the Dow had been before that point. The Dow had reached a previous peak of 119.62 in the year 1919. In the two years that followed that 1919 peak, the market saw a gut-wrenching 47% decline. (Sound familiar?)

Imagine how you might have felt as an investor in the year 1920. Would you have any notion that, in less than eighteen months, a stock market boom for the ages would begin? Not likely.

It’s far more likely you would have been in a state of mild catatonic shock, fretting over how your portfolio had been cut nearly in half after the 1919 peak.

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This remarkable secret—once known only by the elite money class—could help you pocket $20,000… $50,000… even $100,000 or more, per year in total bonus payouts without working extra hours, changing jobs or doing anything hardly different at all.

Exactly how much could you collect? Follow this link to find out now…

Full of Surprises

As we discussed just recently, history is full of surprises. Am I calling for Dow 48,000 by 2016? Of course not. I have no idea how things will look that far out.

It may be that a wholly different index – something more akin to the Nasdaq – captures the next boom, while the Dow gets left behind. It may be that the biggest action takes place on a foreign shore. We just don’t know… no one can look that far out.

But we can remember that “endless gloom” scenarios are just as foggy and unsupported as “endless boom” ones. And once freed from the bounds of conventional thinking, we can explore the realm of the possible.

Consider, for example, how technology – car technology in particular – served as the driver (no pun intended) for much of the 1920s optimism. Could technology play a similar role in the coming decade? It’s certainly possible.

When you consider the intertwining roles of computer processing power, biotech, healthcare and alternative energy – not to mention breakthrough concepts like cloud computing – there’s just no telling what could be next. (By the way, if you really want to blow your mind on this topic, check out The Singularity is Near by Ray Kurzweil.)

The Subprime of Yesteryear

Something else history teaches is that it’s really, truly, all been done before. Techno-wizardry aside, there is nothing truly “new” in markets. As Jesse Livermore observed, there can’t really be anything new because speculation is as old the hills – and human nature is the same.

We can see this by winding the clock back 90 years or so…

In the years leading up to the 1919 peak, the frenzy du jour was tied to commodity prices and farmland. In his excellent history, Money of the Mind: Borrowing and Lending from the Civil War to Michael Milken, James Grant tells the tale:

Like bull markets in stocks, the bull market in farmland engendered the belief that prices would rise forever. “Speculators who had no interest whatever in farming bought land for the 6 percent or 8 percent annual rise that seemed a certainty throughout the early years of the century…” The rise in farm prices had only begun.

The farmland frenzy – and a rising tide of commodity prices, spurred by an inflationary gold boom – went right on making speculators rich through World War I and beyond. Grant continues:

The price of wheat was 62 cents a bushel in 1900. It was 99 cents in 1909, $1.43 in 1916, and $2.19 at the peak in 1919. To put $2.19 in perspective, it was not a price seen again until 1947.

Is this starting to feel familiar yet?

The vastly expanded gold supply of those years acted like a money pump, having the same effect as “Easy Al” Greenspan’s money spigot. Farmland was the main speculation vehicle – not unlike today’s residential real estate. Commodities soared and swan-dived in all too familiar fashion.

And leverage (i.e. speculation fueled by debt) made it all worse, as Grant points out:

The collapse of prices in the early 1920s would have been devastating enough, but the damage was compounded by debt. By the summer of 1921, crop prices were down by no less than 85 percent from the postwar peak. Nebraskans, finding that corn had become cheaper than coal, burned it. As it does in every market, the fall in prices revealed the weaknesses in the structure of credit that had financed the rise.

The parallels are amazing. They were even burning corn at the end – much as America elected to burn corn in its gas tanks via loony ethanol subsidies.

And there were plenty of early warnings back then too. Doomsayers were calling farmland an unsustainable bubble as early as 1915 – four years before it all went bust.

National City Comes a Cropper

And here’s the icing on the cake: we even saw a major bank get a “bailout” as a result of the commodity bust.

Many a money house bit the dust after commodity prices caved. No fewer than 724 (seven hundred and twenty four!) banks failed in the three-year span of 1919 through 1921. One of the biggest players of them all, National City Bank, nearly went under too as the result of a bad sugar bet.

The price of sugar had rocketed higher in 1919, when Russia failed to deliver its expected sugar-beet crop. By 1920, the price of sugar had risen nearly five-fold on the strength of speculative buying. Nat City got a piece of the action by plowing 80 percent of its core capital into loans to Cuba (a big sugar producer).

To make a long story short, the price of sugar eventually collapsed… Nat City’s all-in Cuba bet went “toxic”… and the once-revered bank found itself on the brink of insolvency.

The bank only survived by pulling off a very slick accounting trick – a trick not far removed from the “special investment vehicle” peek-a-boo tricks of recent years. The move was a blatant violation of the day’s banking codes, but Uncle Sam averted his eyes. Later that same decade Ferdinand Pecora, Chief Counsel to the United States Senate Committee on Banking and Currency, referred scathingly to the move as “this $25,000,000 bailing out.”

(Alas and alack, Nat City made it through that carnage but not through 2008. The venerable old bank was scooped up by PNC Financial a few weeks ago in an all-stock deal worth $5.2 billion.)

Takeaways for Today

So what’s the point of this trip down memory lane? There are at least a few takeaways we can rummage up:

• As Mark Twain once said, “History doesn’t repeat, but it rhymes.” Some of what’s happening now is breathtaking in scope, but none of it is truly new. Bailouts, booms, busts… we’ve seen it all and we’ll see it again.
• It may be improbable to imagine equities going on an epic tear in the next ten years… but no more improbable than it might have seemed from the beaten-down vantage point of 1921.
• We can’t use the past to predict the future – every era has its own quirks – but we can sure as heck learn from it.

Source: The “Roaring Twenties” Began with a Commodity Bust – and a Bank Bailout

While things can always get worse, things are rarely as bad off as they might seem.