Feeling better yet? Wall Street closed last week with its fifth consecutive up day. In fact, it was the biggest five-day rally in 75 years for the major averages.

The Dow Jones Utility Average rallied from below 330 to above 380. Even economically sensitive energy stocks were big winners. Super Oil Chevron (NYSE: CVX) gained more than 20 percent. Canadian trust Enerplus Resources (TSX: ERF-U, NYSE: ERF) rose by nearly a third.

On the other hand, the economic news from this week was hardly positive. Preliminary figures for third quarter US gross domestic product indicate the economy contracted by 0.5 percent, versus an already gloomy consensus forecast of 0.3 percent. Personal income did rise 0.3 percent, more than the expected 0.2 percent. And initial unemployment insurance claims were both below the prior week’s meeting and forecast. But personal spending fell 1 percent, even more than the 0.6 percent predicted.

Rounding out the numbers, durable goods sales fell 6.2 percent, more than the 2.2 percent consensus forecast. The Chicago Purchasing Managers Index came in at just 33.8, down from 39.5 percent projected and well off the 37.8 of last month. And both new and existing home sales were below forecast.

The upshot: The US economy is still slowing, and the numbers still look set to get worse before they get better. The stock market, however, always looks ahead, never behind. The question is are investors seeing something different now, or is this rally simply a temporary reaction to the selling washout of the past three months, to be followed by a resumption of the bear market in the coming weeks.

Think you need to take costly drugs to lower your blood pressure ?

Think again ! !

If you've got high blood pressure, your doctor's probably told you to take drugs to control it for the rest of your life. But not only are these medications often loaded with dangerous side effects, your average out-of-pocket cost can run as high as $1,116 a year!

Now there's a safer, less costly way to drop your blood pressure to normal.   Plus you're guaranteed to see results in as little as 4 to 7 weeks !

This new blood pressure breakthrough is 100% natural, yet it's NOT a supplement.  It's so effective, over 90% of people who use it are able to drop their blood pressure to normal.   What's more, at least 60% of those using medication to control hypertension are able to cut back on or get off drugs for good !

Find out why The Harvard Heart Letter in their December 2006 issue reports this proven therapy "has been shown to lower blood pressure as much as a first-line anti-hypertension drug" and "may be money well-spent..." It works so well, a growing number of doctors and cardiologists now recommend this therapy to patients and use it to lower their own blood pressure !

Get the full scoop on this breakthrough solution right now. It's just one click away...

There are some things we do know for certain about this market. First, stocks are cheaper on virtually any valuation measurement than they’ve been in six years. Commodity producers are back to prices last seen in the late 1990s, an historic nadir for natural resources of all stripes.

Second, virtually every company that posted solid second quarter earnings wound up with strong third quarter numbers. The economy, of course, sharply decelerated in October, which will make fourth quarter earnings much more difficult in some more sensitive industries, notably energy. But a large number of stronger companies in less sensitive industries are already guiding toward solid fourth quarter results, and in fact are steering toward a solid 2009 as well.

Third, the benchmark 10-year Treasury note yield ended Thanksgiving week below 3 percent. That’s lowest level ever recorded, a history that dates to the early ’60s.

Spreads between the benchmark and what even strong corporations can issue bonds for are immense, in large part due to the insatiable demand for US Treasuries around the world. But with the benchmark this low, the absolute rate paid by stronger corporations also remains low. That’s also starting to be reflected in consumer rates, as mortgage rates have also been coming down.

Recovery, When?

Of course, low interest rates and rising incomes don’t necessarily translate immediately into rising spending and economic activity. At this point consumers are deeply worried about how much worse things might get for the economy, particularly job losses. That’s apparently trumping the current reality of falling prices and lower interest rates, particularly in the retail business, as consumers focus on saving cash for a rainy day and cutting debt.

Historically, however, a point has always been reached where stimulus eventually reignites economic growth. The problem is figuring out where that will be. And although the market is generally the best indicator, there are often plenty of fits and starts before a bottom is finally reached for the economy and things start to pick up again.

Only time will tell if mid-November’s retest of lows in the stock market and oil market--now mirroring each other--will prove to be final bottoms. There is, however, one additional positive that’s appeared: The appointment of President-elect Obama of a lineup of heavy-hitter pragmatists for his economic team, closely followed by a similar announcement for his foreign policy team.

The economic team’s mission is also clear: to do whatever it takes to get the US economy back on track. Out are leftover worries from the campaign about immediate wealth redistribution. In are massive plans to invest in infrastructure projects nationwide and other stimulus measures.

What politicians promise and what they do are two entirely different things. And some critics worry that a team with so many great minds and points of view will prove unwieldy and get nothing done. Here too, however, there are grounds for optimism, oddly enough because of Mr. Obama’s experience as a community organizer.

Community organizers are only successful to the extent they can bring people of disparate interests and opinions together for their common interest. And their ability to do that rests solely on the moral authority. In contrast to his earlier life, the president-elect will be able to use his impressive power of persuasion with the weight of the White House behind him. He’ll also have a huge majority in the House of Representatives and at least 58 members of his party in the US Senate.

The five-day rally began with the appointment of Mr. Obama’s economic team. A good part of that rebirth of optimism was likely just relief that pragmatists--not ideologues--will be in power. And it’s only going to carry things so far. But it does make one thing perfectly clear: Over the next several months, the US government is going to accelerate the massive stimulus plan it’s already put in place. It’s going to be joined by nations the world over, and it’s not going to stop until the global economy does start to rebound.

There’s still plenty of fear in this market. Volatility remains at extremely high levels, even for what have historically been very steady investments with little real vulnerability to a weakening economy. The action has been recently to the upside. But it could just as easily reverse to the downside, as the stress tests of weak growth, tough credit conditions and volatile raw materials prices claim more victims.

Judging by my correspondence with investors, there are still potential sellers out there should stocks tie on another decline. And there will be plenty of others who will bail out on any rally, on the premise that the worst is yet to come as it did in the ’30s.

The five days ended Friday were the best for the stock market in 75 years. That year, however, was 1935, in the heart of the Great Depression, and it was followed by more bad times. The good news is the world is a far different place than in those days, and we’re still far from those depths.

Things may indeed get worse for the economy. But in 1935, the downturn was already six years old, and we already had full-scale bank runs, an outbreak of protectionism and 20 percent unemployment. We’re still a long way from that. Moreover, in the early years of that crisis, government was tightening the screws. This time around, there was never any hesitation about providing massive stimulus and continuing to do so until there are signs of life.

This is a fluid situation, to be sure. But the smart bet is still on recovery, both for the stock market and the US economy. It may take time. But at today’s prices, strong companies offer powerful upside, limited downside and very often high yields as well.

Sector Selector

It’s still no time to play the hero and try to time a bottom. But it is a fine time to be looking to invest incrementally in high-quality investments backed by companies with strong businesses from a wide range of industries.

Here’s my outlook on several on the utility and income front.

Utilities--Regulated utilities remain my favorite sector here in late 2008. First, the major utility averages are nearly a third off their highs. Dozens of strong companies fresh from reporting robust third quarter earnings are selling at barely book value and yielding up to 6 percent. Payout ratios are coming in around 60 percent or less, and there are few, if any, credit challenges.

The reason is basically the industry’s response to its meltdown in 2001-02, when the collapse of Enron and a mountain of debt threatened to push some two dozen companies into Chapter 11. Since that time, management has steadily cut debt and operating risk, with the result that the sector is at its financially strongest in decades.

When inflation does again raise its ugly head, the group will become vulnerable, as it has in the past. But until that happens, utilities are set to lead the eventual market recovery, and they’ll hold their own in the marketplace as well.

For more on how the November elections affected and didn’t affect the sector, see the December issue of Utility Forecaster, now available for subscribers at www.utilityforecaster.com. Note that water utilities are at their cheapest levels since early 2000, including newly spun off American Water Works (NYSE: AWK).

Energy Infrastructure Limited Partnerships--These are almost as secure as regulated utilities, as they control and operate assets that are almost always used. Limited partnerships (LP) have had their heads handed to them over the past three months, as investors wrongly assumed they’d be crunched by tighter credit conditions and falling throughput. There has been a reaction of management to the credit crunch, mainly a slight curtailment of some capital spending projects.

But through the third quarter at least, there’s been virtually no evidence of a business slowdown for the owners and operators of energy pipelines, storage systems, gathering systems and processing facilities, which are typically run on a fee basis. Dividend coverage by cash flow remains at very healthy levels and continues to rise as new projects come on stream.

We’ll know the jig is up in energy infrastructure when the LPs themselves begin to take a “build it and they will come” attitude about new projects. If anything, this credit crunch pushes that day further off into the future by raising the bar even for projects that are already contemplated. The only ones getting done now are those with a very high surety factor of earning an immediate return. The upshot is the dividends will keep flowing, and at these prices, LPs such as Enterprise Products Partners (NYSE: EPD) are ideal additions to any portfolio.

REITs--Real estate investment trusts are vulnerable to this bear market’s stress tests in two respects. First, a slowing economy means lower occupancy and slower rent growth, as well as a growing risk of renter bankruptcies and bad debt. Second, tight credit conditions make it more difficult to refinance the mortgages on properties.

Both of these conditions are already taking casualties in the sector, even in Canada, where the property market remains relatively solid. On the other hand, REITs’ prices are now back below where they began the decade. In some cases, it’s not hard to see why.

For example, a recommendation of mine from earlier this decade, ProLogis (NYSE: PLD) has collapsed from the low 70s to barely $3 a share, as its industrial property market has weakened sharply at the same time management was getting aggressive with expansion. Boston Properties (NYSE: BXP) has collapsed from a high around $200 a share to barely $50 on concerns about the office property market. Simon Property Group (NYSE: SPG) is back from above $100 to less than $50. Even BRE Properties (NYSE: BRE) is down from over $50 to under $30. Those are the kind of prices that have to get one’s contrarian blood boiling.

I’m particularly impressed with what I’m seeing in Canada, where prices seem to have come off hard despite little evidence of a dramatic slowdown and the lack of a blowoff top as occurred in the US. Simply, these REITS never went to the excesses of US REITs, they’re run considerably more conservatively and many of them yield upwards of 8 to 10 percent. The biggest in that country, RioCan REIT (TSX: REI-U, OTC: RIOCF), is an exceptional bargain selling under USD12. And the Canadians also have the benefit of being priced in Canadian dollars, a currency that’s highly leveraged to the recovery in oil prices I expect.

In the US, the best bet is still apartment properties, as the cost of renting is still much less than the cost of buying, and credit markets have made it difficult for new buyers. Home Properties (NYSE: HME) hasn’t weakened with this crisis, instead adding to cash flows like clockwork. It should maintain that balance going forward.

Energy--Energy producers have been clobbered across the board since summer, as oil has dropped from nearly $150 a barrel to less than $50. Natural gas prices too have fallen in half, while coal has also slumped. Many energy producing stocks, trusts and LPs now sell below where they did when oil was trading at $20 or lower and natural gas was around $2 per million British thermal units (MMBtu). Certainly, there are plenty of people who are talking as though they expect a renewed dive in energy prices, and commensurate damage to energy producer stocks. And that may happen if the economy really does defy efforts to revive it.

On the other hand, strong evidence is emerging that major oil producing nations can no longer survive on $50 oil. We already knew that reserve replacement cost for even conventional oil now was on the order of at least $80 to $90 dollars. Meanwhile, the shale gas so many are counting on to pump up US supply in coming years is only economic around $8 per MMBtu. And oil sands production costs continue to rise and will rise even more as pollution amelioration becomes a larger issue.

In short, oil may stay at $50 or sink even lower in a chronically weakening economy. But in a time of normal growth, $50 just isn’t possible. That makes oil one of the most leveraged ways to play a turnaround in the economy. And confusion about just what’s happening to growth is what’s behind the enormous volatility in prices of everything from Super Oils like Chevron and producer/utilities like Energen (NYSE: EGN) and MDU Resources (NYSE: MDU) to more aggressive plays like Canadian energy trusts (Enerplus), LPs (Linn Energy NSDQ: LINE), developers and service companies like Schlumberger (NYSE: SLB). In my view, the haircut these stocks have taken and their proven ability to survive as low as $10 oil limits real downside risk and the likelihood that economic stimulus will work means massive upside.

If you’ve held energy stocks this long, there’s no point in selling now. And if you’re light, you may never get a better chance to load up.

Other Canadian Trusts--Falling oil prices also triggered a selloff in petro-dependent currencies, notably the Australian dollar and, to a lesser extent, the Canadian dollar. The drop in the Loonie has in turn sent the value of Canadian trusts lower. The good news is dozens of trusts have continued to post strong and growing earnings, ensuring the safety of their distributions.

Today, more than a few trusts with minimal stress on their finances or revenues are selling with yields of 8, 20, 15, even 20 percent. And many have also positioned themselves to deal with pending 2011 taxation, when trusts will either to absorb additional taxes either by staying trusts or by converting to corporations. These have been as painful to own as energy producing trusts the past three months. But those that maintain their strength as businesses are set to maintain their dividends, and rally hard when the economy does turn up.

Telecoms--On the whole, the communications sector has proven itself better able to hold up to recession/credit pressures than almost anyone expected during this downturn. Consumers have continued to stick with wireless, data and entertainment services, while basic wireline losses for most companies have remained pretty much in line with historical trends.

On the other hand, the good fortune hasn’t extended to all companies. Upstarts like Vonage (NYSE: VG) have continued to slip toward bankruptcy, while a half-dozen others have broken a dollar in share price. No. 3 US wireless company Sprint (NYSE: S) is well off its 52-week low of just $1.35 but is still under $3, as it’s continued to spill red ink and lose customers. And some of the rural wireline companies have also begun to lose basic customers at a faster rate than they’ve been able to add users of advanced services.

3 Myths That May Be Holding You Back From Making Money In This Down Market

The Dow has become one wild and crazy roller coaster ride for most investors, but the wealthy are still making money –– why?

As a former top investment banker to some of the wealthiest people in the world, I can answer that question and show you how to multiply your returns 5-10 times over.

Follow this link and I’ll uncover 3 common myths that will immediately give you a trading edge.

Selectivity, therefore, is more essential than ever for investment success in this industry. My three favorites are the same as they’ve been for several years: AT&T (NYSE: T), Comcast (NSDQ: CMCSA) and Verizon (NYSE: VZ). Frontier Communications (NYSE: FTR) and Windstream (NYSE: WIN) are as good as it gets in the rural wireline space, as both continue to cover distributions with free cash flow by wide margins as they successfully upsell customers to advanced services. The December Utility Forecaster features a long list of sells in the group.

Foreign Utilities and Telecoms--The massive jump in the US dollar versus other currencies over the past few months has hit the US dollar values of foreign utilities and telecoms. That’s multiplied the damage done by economic concerns. The underlying businesses of the best, however, remain undamaged and prices are again at bargain levels for a wide range of companies.

One of my favorites is Italian giant ENEL (Italy: ENEL, OTC: ENLAY), which has been punished in part because of a high debt level taken on to buy Spain’s Endesa (Spain: ELE, OTC: ELEZF) in a joint venture with Spanish conglomerate Acciona (Spain: ANA, OTC: ACXIF). The company’s third quarter earnings paint the picture of an extremely healthy and growing recession resistant business with a debt load perfectly in balance with operations and throwing off a huge yield. The company’s assets stretch from power plants in electricity-starved Russia to a lock on Chile’s low-cost hydropower and plenty in between.

Singapore Telecom (Singapore: Z74, OTC: SGAPY) has also come well off its highs, despite maintaining one of the strongest franchises in developing Asia. Maybe this region’s days of growth are over as the pessimists claim. But you don’t have to pay much to bet on growth.

Financials--The problems of the big boys are well known, as is the fact that Uncle Sam is there to bail them out. What’s less well known is the wealth of bargains among smaller banks, which I highlighted in a recent interview with two of my colleagues, Benjamin Shepherd and Peter Staas. I’ll have more from them when their upcoming report on small banks is released.

In the meantime, Arrow Financial (NSDQ: AROW) remains my favorite.

Bonds--Some truly incredible bargains are coming onto the market in the fixed income universe, as highly rated companies are forced to issue debt at very high spreads to Treasury paper. Investors can pick up bonds of very low risk, A- rated utility companies yielding 8 percent to maturity, maturing in five to 10 years.

The open-end bond funds offered by Vanguard are a good option for investors who don’t want to buy individual issues. They charge very little in fees and therefore have to take fewer risks to produce the same yield as other funds.

High-yield bonds are also interesting at these levels, due to very high yields. But investors need to be very careful not to take on too much risk, as the stress tests claim more victims. Those who thought auto industry bonds were bargains earlier this year, for example, have taken on a great deal of water since.

My favorites for individual high-yield bonds are those issued by utilities such as Sierra Pacific Resources (NYSE: SRP). But most will probably want to confine their efforts to the likes of proven funds like Northeast Investors Trust (NTHEX). Closed-end bond funds present a particular danger to investors in the form of leverage. Most borrow against their portfolios to pump up their yields and have had to cover that debt with asset sales in the current bad market. That’s why we’ve seen such sharp declines in the share prices of so many closed-enders in recent months. I suspect the trend may be drawing to a close. But for now, only a handful of closed-end funds are worth your while, such as PIMCO Strategic Global Government (NYSE: RCS).

Preferred Stocks--My rule with preferreds is the same as with individual bonds: Never own one issued by a company for which you wouldn’t own the common stock. My favorites are mostly from the regulated utility sector, though there are a handful of other very solid companies whose preferreds are worth a look.

Precious Metals--Natural resources (outside energy) were big-time losers as the financial crisis broke loose. Even gold prices and gold stocks didn’t benefit from the growing chaos, as investors instead flocked to the US dollar.

In my view, that will change with a vengeance once the US economy begins to recover. Even the most conservative income investors should have some, particularly if the recovery brings on more inflation. That’s a significant risk with so much stimulus flowing into the economy and with the size of the federal deficit in coming years likely to mushroom to once unimaginable levels.

Infrastructure--The common thread of most of the companies I cover is infrastructure, its development and ownership as well as the technologies and raw materials needed to construct and maintain it for a 21st century economy. That’s also the focus of my new web advisory New World 3.0, which I produce with my colleagues David Dittman, Gregg Early, Elliott Gue and Yiannis Mostrous.

As governments (including the US) spend more on these projects, the dollars will flow into a wide range of companies, even if the broad economy remains weak. Many of the companies we cover are developers of new technologies that will shape the 21st century world. But even more are already household names, companies that are using their current advantages to ensure they remain dominant for years to come.