This weekend, Dean Calbreath of the San Diego Union Tribune wrote an unusually good article

about the "sub-prime" issue which pretty much sums up my analysis of the situation. The whole article can be found here:

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The last three paragraphs are particularly insightful and appear to be made by Wells Fargo economist, Eugenio Aleman who I am not familar with. Following is the best of the paragraphs:

"The cheap cash that Greenspan and others injected into the world economy after the Asian economic crisis of 1997 helped fuel the stock market bubble of 1999. The cheap cash that Greenspan floated in 2000 helped fuel the real estate bubble. What new bubble will be created if too much cash enters the economy?"

Unfortunately Aleman doesn't tell us how much cash is "too much." And thats becaue he doesn't know. Not even the Federal Reserve board knows. And that is why we occassionally get bubbles. But even if we knew how much cash was "too much" we would then have to identify where it was going. Finding the next irrationally exuberant market and ridding it until just before everyone recognizes that it is irrationally exuberant can be spectacularly successful (as George Soros has shown us). Although finding this new bubble can be serendipitous, the only way I know to proceed is to watch the "bloodless verdict of the market."

Of course there are other markets besides the stock market where exuberance could bloom but the game dictates we focus on the stock market. All of the major indexes have broken the intermediate downtrend which began in mid-July and several appear to be building a new intermediate uptrend including the DOW, NAS and the S&P 500. As a result I am pursuing a bullish strategy.

Another good article this weekend written by Scott Patterson of the Wall Street Journal shows that if the FED begins lowering interest rates, history favors a higher market in the next six months 60% of the time since 1945. It also favors growth stocks rather than value stocks and that is where I will focus. My two latest investments are CADA and VSEA.

CAM Commerce Solutions, Inc. (CADA) is viewed as a small cap growth company providing business software and services to traditional and web-based retailers. Earnings growth in the past year has accelerated and the most recent quarterly EPS report was significantly higher than expected. This is traditionally a good season for retailers and should also be good for CADA.

Varian Semiconductor Equipment Associates, Inc. (VSEA) is a mid-cap growth stock supplying equipment used in the fabrication of semiconductor chips. Earnings growth is strong and its chart shows positive price and volume activity. My only concern is that it is already heavily owned by institutions which might limit future purchases. On the other hand, even institutions are susceptible to exuberance. This is historically a good season for semiconductor stocks as they have generally gone up in price from September to December.

As before, both stocks were turned up by my adjusted MSN Stockscouter screen. Here's hoping for a holiday season of irrational exuberance!!