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Posted: 12:03 PM Updated: 6:15 PM

The Associated Press

The Nasdaq composite index briefly broke through 3,000 on Wednesday for the first time since the collapse in dot-com stocks more than a decade ago. Stocks ended lower, but it was still the best February on Wall Street in 14 years.

click image to enlarge

Traders Thomas Donato, left, and James Lamb watch the action at the New York Stock Exchange.

AP

The milestone for the Nasdaq, heavy with technology stocks, came a day after the Dow Jones industrial average closed above 13,000 for the first time since May 2008.

Apple, the Nasdaq's biggest component, topped $500 billion in market value, the only company above the half-trillion mark and only the sixth in U.S. corporate history to grow so big. Apple might reveal its next iPad model next week.

The Nasdaq last hit 3,000 on Dec. 13, 2000. Its last close above 3,000 was two days earlier. It was only above 3,000 for seconds on Wednesday before closing down 19.87 points at 2,966.89.

The Dow lost 53.05 to close at 12,952.07. The Standard & Poor's 500 index fell 6.50 points to close at 1,365.68.

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Stocks finish off best February in 14 years

Youve heard about housing bubbles, commodity bubbles and the Internet bubble.

Are we in the midst of a dividend bubble?

After the big runup in dividend stocks over the past couple of years, a few people have started to throw around the b word. They argue that with bond yields at historic lows, income-starved investors have rushed recklessly into dividend stocks, pushing prices to dangerously high levels.

Some are even comparing it albeit loosely to the subprime bond crisis. Yikes!

Blue-chip dividend stocks are not subprime bonds. But theres an argument to make that, just as investors ran blindly into subprime bonds five years ago in search of yield, theyre running blindly, carelessly into dividend stocks today, Morgan Housel, a contributor to the Motley Fool investment website, wrote recently.

Its true that dividend stocks have become enormously popular with investors, and valuations in some cases may have become stretched. Price-to-earnings multiples for many classic dividend payers pipelines, utilities and real estate investment trusts, for example have jumped and yields have plunged to the lowest in years. Theres also been an explosion of dividend-oriented products particularly exchange-traded funds to meet the growing demand for income.

But its a gigantic leap to argue that we are therefore in a dividend bubble. Were not, and heres why.

First, lets define what a bubble is.

Most investment bubbles, or manias, share several characteristics. They are usually speculative in nature, meaning that investors buy with the expectation that they will be able to flip the asset for a large capital gain. Demand is often fuelled by leverage, which magnifies price increases, which in turn draws in more buyers.

As investors become increasingly euphoric, they ignore risks and throw traditional valuation methods out the window to justify the ascent in prices. There is often talk of a new era a feeling that prices will rise forever.

Read the rest here:
Dividend stocks are buoyant, but not bubbling

Youve heard about housing bubbles, commodity bubbles and the Internet bubble.

Are we in the midst of a dividend bubble?

After the big runup in dividend stocks over the past couple of years, a few people have started to throw around the b word. They argue that with bond yields at historic lows, income-starved investors have rushed recklessly into dividend stocks, pushing prices to dangerously high levels.

Some are even comparing it albeit loosely to the subprime bond crisis. Yikes!

Blue-chip dividend stocks are not subprime bonds. But theres an argument to make that, just as investors ran blindly into subprime bonds five years ago in search of yield, theyre running blindly, carelessly into dividend stocks today, Morgan Housel, a contributor to the Motley Fool investment website, wrote recently.

Its true that dividend stocks have become enormously popular with investors, and valuations in some cases may have become stretched. Price-to-earnings multiples for many classic dividend payers pipelines, utilities and real estate investment trusts, for example have jumped and yields have plunged to the lowest in years. Theres also been an explosion of dividend-oriented products particularly exchange-traded funds to meet the growing demand for income.

But its a gigantic leap to argue that we are therefore in a dividend bubble. Were not, and heres why.

First, lets define what a bubble is.

Most investment bubbles, or manias, share several characteristics. They are usually speculative in nature, meaning that investors buy with the expectation that they will be able to flip the asset for a large capital gain. Demand is often fuelled by leverage, which magnifies price increases, which in turn draws in more buyers.

As investors become increasingly euphoric, they ignore risks and throw traditional valuation methods out the window to justify the ascent in prices. There is often talk of a new era a feeling that prices will rise forever.

Original post:
Dividend stocks are buoyant, but are they a bubble?

The Chinese Internet stocks started out 2012 with a nice rally. The four stocks discussed here produced share price gains of 20% to 40% in the first six weeks of the year. However, the price gains were in general just a break in longer term down trends as these companies either try to maintain levels of profit growth to justify the share valuations or figure out how to grow profits along with growing revenues. Traders looking for short sale prospects should check if their analysis match the reasons below why these stocks are better short candidates than buy long investments.

Youku Inc. (YOKU) Youku is the Chinese answer to YouTube or Hulu in the U.S., offering Internet television and video services. Youku was a hot IPO in December of 2010 and the shares traded as high as $70 in early 2011. Then reality set in. The company has posted net losses every quarter for the last four and is expected to lose 38 cents per share when the 2011 fourth quarter results are released, putting the loss for the full year at a loss of $1.52 per share. The Wall Street analysts have been slashing their 2012 expectations: Ninety days ago the consensus estimate for 2012 was a loss of 10 cents per share. Currently the consensus is a loss of $1.42 with the most pessimistic analyst predicting a loss of $2.27. The most optimistic analyst expects a measly 15 cents per share profit. Price rallies on Youku, like the recent runup above $20 to $24 are short selling opportunities. Cover a short position at $15 and avoid being short during an earnings release announcement.

Sina Corporation (SINA) Sina is the owner of a Chinese micro-blogging weibo website. Micro-blogging is a growth craze in China and Sina reported 250 million users at the end of 2011 and was adding 20 million per month. Unfortunately, Sina has suffered from the curse of social media companies as a business: How to generate profits in the face of growing expenses to support the growing number of subscribers? Sina earned $1.74 per share in 2010, saw usership increase exponentially in 2011 and the consensus earnings estimate for 2011 is 94 cents per share, a 50% decline. The company reports 2011 fourth quarter results on February 27. The earnings estimate for the quarter is a profit of 21 cents per share, less than half the 46 cents earned a year earlier. The Wall Street analysts as a group have a little more optimism about 2012, forecasting earnings of $1.41. Over the last several months, the consensus earnings have been declining and Sina is trading at 44 times very iffy forward earnings. It is hard to see a good reason to be long this stock, so short it.

Renren Inc. (RENN) Renren is the Chinese answer to Facebook. The company went public in May 2011 and after the $14 IPO the shares peaked at $21.93 on the IPO trading day. The share value has been mostly downhill ever since. The share price dropped below $10 in early August 2011. Since the end of summer the stock's trading range has been $3.20 to $7. The share price popped 50% from $4 to $6 when the Facebook pending IPO was announced. As the forerunner to the Facebook IPO, Renren was not profitable who it went public, but was expected to soon turn profitable, after raking in that $700 million of IPO money. For 2012, the consensus earnings estimate is a loss of 7 cents per share with the most optimistic analyst forecasting a 4 cent profit. Sell Renren short above $5 and cover at $3.50.

Baidu.com Inc. (BIDU) Baidu is probably the most dangerous short selling candidate listed here. Baidu is the Chinese version of Google (GOOG), receiving 75 percent of the country's search results and is a large cap stock itself with a $47 billion market cap. Baidu operating profits were up 91% in 2011 and net income for the fourth quarter increased by 77%. The Wall Street consensus estimate has net income growing by 50% in 2012. So what are the reasons to short sell this growth stock?

These Chinese Internet stocks have mostly received positive press and share value forecasts over the recent past. Yet they all have vulnerabilities which could result in profits for short sellers. Traders who short sell often must go against the Wall Street crowd, which has a vested interest in stocks generally going up in value. As a final point, foreign stocks from a specific country often move in the same direction together. If a large company such as Baidu starts to lose value, many other Chinese tech stocks will follow along as investors sell of the country as a whole.

About the author: Vatalyst articles are written by a team of independent traders from around the world. All of our articles provide actionable investing ideas you can use to make money. Visit Vatalyst.com's Website

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4 Chinese Internet Stocks to Short Now

OMAHA, Neb. (AP) -- Billionaire Warren Buffett said Monday that stocks remain relatively cheap compared to other investments as the economy continues to improve. He also said that the company he heads is prepared to replace him whenever the need arises.

The chairman and chief executive of Berkshire Hathaway Inc. addressed a variety of topics during an interview on the cable TV network CNBC, two days after his annual letter to the conglomerate's shareholders was released.

Buffett said even though stocks aren't as cheap as they were during the depths of the recession in 2008, they're still a more attractive long-term option than bonds, gold, cash or anything else.

"Equities are still cheap relative to any other asset class," Buffett said. In his letter, he devoted two pages to explaining why he prefers owning a piece of a productive business instead of bonds or gold.

Houses are another attractive investment at current prices, Buffett said. He added he might buy a couple hundred thousand homes if only he could figure out a way to manage them effectively. He said he isn't very handy.

"Single-family homes are really cheap now too," Buffett said.

Buffett conceded in his letter released Saturday that he was dead wrong to predict the housing market would recover by now. He said Monday that he believes conditions will improve in 2012.

The reports Buffett gets from Berkshire's roughly 80 subsidiaries, including utility, insurance, retail and railroad firms, show the overall economy has been steadily improving since the summer of 2009 in every area except businesses related to housing construction.

Over the weekend, Buffett created a stir by writing that Berkshire's board had chosen someone to succeed him as CEO someday with two backup candidates. Previously, Buffett had said only that the board had three internal candidates to replace him.

None of the CEO candidates have been identified, and Buffett said Monday that the likely successor doesn't know he would be the board's pick.

Buffett said Monday that the new language he used to describe the succession plan in his annual letter to Berkshire shareholders wasn't a sign of change but was only trying to clarify the plan.

Buffett, who is 81, said he doesn't think investors should worry that much about who will replace him. He pointed out that Berkshire owns sizeable stakes of more than 5 percent of Coca-Cola Co., International Business Machines Corp., American Express Co. and Wells Fargo & Co., yet he has no idea who would replace the CEOs of those companies.

"I know they have wonderful businesses, and they are developing great talent," Buffett said.

He also said last year's departure of a top executive, David Sokol, did not affect the board's choice for successor. Many investors had speculated that Sokol was the likely successor before he resigned amid questions about stock he bought in the Lubrizol chemical company Berkshire later acquired.

Buffett was also asked about the news business because Berkshire just bought a second newspaper last fall to go along with its sizeable stake in the Washington Post Co. Monday's interview was conducted in front of the presses for Berkshire's newest paper, the Omaha World-Herald.

Buffett says newspapers face challenges because of competition from Internet news sources and the rising cost of newsprint, but they will have a decent future if they continue delivering information that can't be found elsewhere. And they need to stop offering news free online.

"You shouldn't be giving away a product you're trying to sell," he said.

Buffett reiterated his call for tax reforms and a higher tax rate for wealthy investors like himself. He has said for years that he believes his tax rate is too low compared with what middle-income wage earners pay.

"The real question is whether this is a tax code that the United States can be proud of," Buffett said. But he says neither Democrats nor Republicans want to talk about reforms now because it is an election year.

Buffett said the nation's $1.2 trillion deficit won't be fixed by contributions from individuals. He said the country is simply spending too much and bringing in too little revenue, like a rich family that has promised too much.

Buffett said Congress should vote on the proposals developed last year by the deficit-reduction commission led by Republican Alan Simpson and Democrat Erskine Bowles. That package included cutting about $4 trillion from budget deficits over a decade, but few of its recommendations have been embraced.

Buffett said Europe's debt problems remain a concern, and he doesn't think those countries have solved their problem yet.

"The basic problem is they gave up their right to print their own money," he said.

___

Online:

Berkshire Hathaway Inc.: http://www.berkshirehathaway.com

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Buffett says stocks, homes are fairly cheap now