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No. of Recommendations: 2

I own a few Dow stocks.....XOM, MRK and INTC. I don't own a lot and except for MRK I am short calls looking to capture those dividends but I won't sell if they go down.

The current "overvaluation" can be looked at in a number of ways...

(1) It will go away as earnings rise from here. You don't buy that one short term? Me either, but if I knew my name would be on the door...anyway, there is also....
(2) The current overvaluation will go away only after stocks wander sideways for perhaps a decade while earnings grow slower than in the recent past...stocks don't go up much but aren't that risky and pay as much current income as cash and have no more downside risk than bonds. Not a reason for you to buy, but............
(3) Current valuations reflect a recognition that for very long term holders, stocks are less risky than bonds and have greater returns and this is true no matter what level you buy 'em's the new paradigm. I don't buy this and I don't think you do either, but if a lot of other people do, then you and me are wrong, simple as that....
(4) Stocks are gonna get smacked hard and those stocks perceived as being "high quality" because they have been around for ever and pay dividends will simply be "the last shoe to drop". Buying GM here is a way for folks who missed buying the top of the new economy (and those who didn't) to buy the top of the old which case we should all be shorting GM and IBM and IP and CAT and MRK and PG and JNJ and BAX and 'cause the day of reaconing is coming and some day they are gonna sell at 8 times earnings again.....or..
(5) No matter how much the market sucks, some holders must, by their charter, own equities and some like pension funds have to own 'em because they absolutely cannot meet their actuarial assumptions any other, what did you expect these guys would buy....WorldCom?

Anywhoo, I own some of those stocks right now because they will be winners for me under most assumptions if I hold 'em long enough and the worst case ain't gonna break me. Lot of other people feel the same.
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