goog

Yesterday it was announced very loudly that "my pal Warren" was going to acquire the 77.4% of the Burlington Northern Santa Fe (NYSE: BNI) railroad, that Berkshire Hathaway (BRK.A) does not already own, for $100 per share, offering about a $24 premium to Mondays closing price.

Talk about putting your money where your mouth is -- yikes! Buffett has gone all in, betting the economy is healing, and silencing anyone that questioned his integrity or motives for cautious optimism saying it was all talk!

What a week it was and it is starting off with more of the same! The day before Halloween the market gets spooked. The Dow drops 200 one day, rises 200 the next, and falls 250 to close the week. Yes, financial pundits could point to meaningful stories about the dollars rise, consumer spending sagging, the recession ending and so forth to explain market reactions but there is more to it than that.

Even among the 15 positions discussed in Where should granny put $50,000? only the Vanguard Total Bond Market exchange-traded fund (NYSE: BND) and the Kellogg Co (NYSE: K) were up last Friday. Good thing I advised "granny" to put half her funds in the ETF.

For the past 48 hours people have been asking me if I thought the market would pull back after the Dow Jones Industrial Average surpassed the milestone of 10,000. Business journalist's and guru's alike have suggested that there might be some profit taking or "selling into strength" and the recent highs would not hold.

As the market proved yesterday, up about a half percent across the board, with the Dow closing at 10,062.94, up 47.08 in last-minute buying -- that is just a lot of noise.

In early May, I wrote about why I thought Williams Companies Inc. (NYSE: WMB) would outperform four other, more popular stocks. I compared it to Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Microsoft Corp. (NASDAQ: MSFT) and Berkshire Hathaway Inc. (NYSE: BRK.B).

It was May 11 that I last followed-up on my series of posts, and since then, for about half that period WMB indeed outperformed all four stocks. Since then, however, it has fallen back to second place, behind AAPL.

Money market accounts and certificates of deposit are safe, but they provide very little return on your investment. This fact, and the invigorated stock market, provoked one of my bankers, Dobrinka, at the local Santa Monica Wells Fargo branch, to ask for advice on how I would invest $25,000 if I was just starting out.

This is a common question although the starting point in terms of cash varies. It certainly makes a difference how old the person is, their general knowledge about investing and finance, and the particulars of their financial statement.

Here is what I suggested sticking to regular themes I have written about before and broadly speaking would be a conservative approach emphasizing safety, diversity, liquidity, dividends and the potential for growth far exceeding cash in the mattress or in a money market account. I also think that it is important for beginners to educate themselves so my suggestions include an educational aspect.

Let's face it, all those things you heard about efficient markets over the years were hogwash. In the short term, markets are not efficient and as we have learned on too many occasions, not even rational. If everything was always priced just right you would not have winners and losers and everyone would live happily ever after. For some things the short term might be as long as five to ten years.

Three years ago I lost out on the purchase of a property close to my office when someone decided it was worth 40% more than I did. At the time I told the broker the buyer was nuts and would lose money, if not more. I remember the broker telling me that the property was worth what someone is willing to pay. That is not true, but far be it from me too convince a broker that just made a terrific deal for his client that people often pay more than something is worth. To make a long story short, the property is now in default and I am trying to buy the note from the bank that made a bad loan accepting a silly valuation.

The market may be entering a more volatile period or it may just go sideways for a while. The last few weeks the market has been down. Maybe it is because the rapid rise mid-March through mid-June is forcing people to stop and take a breath, or perhaps it is because investors are having second thoughts about whether the "green shoots" Ben Bernanke spoke of in regards to a healing economy were really just weeds.

All in all, I still believe that there is opportunity in this market and I have been trying to point out how investors can get in with as little risk as possible, while being rewarded for their patience now, and when a recovery ensues ---- whenever that is. To this end, two weeks ago I posted Serious Money: Five high-yield, safe, diversified stocks and decided to follow up with another five I think will produce similar results.

In a race, when the yellow caution flag is out drivers are prohibited from advancing their position, and are subject to penalty.

In the stock market no such rule applies. When the caution flag goes up it is a sign you may be nearing an opportunity to advance your position, and it would be foolish not to do so. I think the market has definitely had the caution flag up the last two weeks as we enter earnings season.

I have written several articles regarding watch-lists encouraging our readers to be prepared for buying opportunities, and as I look at my watch-list it appears that many stocks are nearing prices that would make it attractive to add to my position.

After finding three stocks yesterday that were a good bet to beat the the S&P 500 index going forward, I decided to pursue this notion further. Each of yesterday's stocks was in a different industry that will have strong recurring revenue and pays a dividend; energy, food and booze.

Today's three stocks are in diversified mining, electric power utilities and high-tech defense. Going back ten years, they have all trounced the index and I'm betting they will continue to do so.

Despite what you here from almost all quarters about the market dropping ten percent or so, in what is deemed a bear market correction of our recent bear market rally, I will continue to buy into this market. Of course I will be selective, and as always be thinking long term. This has helped me substantially over the past ten months beating the market by a huge margin.

Keeping this in mind I examined my watch list for candidates that have been long term winners, and consistently beat the overall market using the Standard & Poors 500 index for comparison. The volatility in the market is certain to produce more buying opportunities.

Billions of investment dollars are sitting on the sidelines for fear of entering the market at the wrong time and losing more money after taking a bath last year. However, the market seems to have hit bottom last March and many investors missed the 40% gain from that point to now.

Market prognosticators are spewing out opinions faster than the public can grasp, or understand. I choose to stick with basic fundamental value propositions and ignore the noise.

I have been buying for the past eight months and riding the market waves, good and bad, to huge gains -- so far. Maybe I will be giving some back, maybe not, but I have also been encouraging readers to take something off the table, in several recent posts.

It was reported on Sunday, June 21, that Anglo-Swiss mining company Xstrata has proposed a merger of equals to the board of Anglo American ADR (NASDAQ: AAUK), hoping to create a new, more competitive mining giant. Rumors have been milling about for a while.

Together, Anglo American and Xstrata would have a market capitalization of approximately $68 billion, (AAUK's $35 billion + XTA.L's $33 billion) and be larger than Rio Tinto plc ADS (NYSE: RTP), which ended the trading day last Friday with a capitalization hovering over $42 billion.

Some of you may have heard this before if you have been in the stock market for a long time: The cheapest place to find oil is on the floor of the New York Stock exchange!

With the price of oil moving up faster than the price of oil stocks, and the high cost of exploration and developing new sources, I have been surprised that there have not been any mergers or acquisitions by the major oil companies. I would think now would be a good time to add to their proven reserves with far less risk than looking for new sources.

It also seems to me that the risks associated with exploration and developing new product would be easier to absorb by larger entities.

The stock market has enjoyed a strong rally the past ten weeks, even with a few very minor setbacks. If you were in the market, you enjoyed it too.

It is more likely that the market will become somewhat volatile for the rest of the year rather than continue to rise substantially, barring some outlier. For this reason I have been emphasizing to our readers that they focus their attention on creating a watchlist of stocks they would like to acquire, potentially at great discount for the long haul.

I started this recent series last week with Serious Money: Keep your eyes on UPS and FDX, focusing on large cap stocks certain to make it through these difficult times.

During the last eight months, with the market bouncing up and down, there have been times when I did not look too smart buying stocks through it all.

Of course I looked the most foolish on March 9, when I wrote the prophetic Nostradamus was a punk! Have we reached bottom? Some folks were commenting that they were staying in cash until the DJIA dropped to 5,000. Today that looks highly improbable, even if the market gives something back over the next few months.

There must be some readers that also have contrarian instincts and made good money this year. This is a reminder to take something off the table. It's time to book some gains. We all did great in 1999 and 2000 only to give it all back and then some. Don't let that happen to you again!