By: Doug Fabian Editor, Successful Investing President, Fabian Investment Resources

IN THIS ISSUE OF THE ALERT:

• CREDIT BUBBLES AND MARKET HIGHS
• BLOGS AWAY
• FROM A LAND DOWN UNDER
• THE COACH IS IN
• TRUTH'S UNPOPULARITY

CREDIT BUBBLES AND MARKET HIGHS

There's simply no denying it. The Dow Jones Industrial Average and S&P 500 have been on a roll lately. Well, at least they were on a roll before today's action. On Tuesday, the Industrial Average broke above the psychologically significant 14,000 mark for a brief time. But by the end of Tuesday's session, the index had retreated to close below 14,000.

Why didn't stocks resume heading higher today? Well, one reason is that markets this extended are bound to pull back at some point. But perhaps the more substantive reason was the news out of Bear Stearns.

The investment bank announced this morning that some of its hedge funds now are essentially worthless due to bad investments in subprime mortgage debt. In the past, we've warned you about the potentially hazardous side effects in the financial sector due to problems with bad mortgage debt. I think that if this subprime mortgage debt mess becomes contagious, we likely will see it have a deleterious effect on the entire market.

Perhaps as interesting as the warranted pullback today in stocks is the rather perplexing reasons why this market has become so overbought. Check out the following quote that I read this morning from an Associated Press article about today's market action.

"With no major catalyst behind the advance, the record run has perhaps been puzzling to market watchers trying to determine if it has room to build or has run its course."

I think this comment pretty much tells it all when it comes to this market.

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I can say honestly that predicting what may happen with stocks lately has been a real challenge. Stocks continue climbing, and the usual catalysts have not been the chief reasons for these new highs.

What we have to ask ourselves here is will this rally continue or is today's pullback the beginning of what I think is a much overdue correction? Of course, nobody knows for sure, but let me share with you part of a conversation that I had with David Tice, portfolio manager of the Prudent Bear Fund (BEARX).

"We believe that the environment is getting much worse, and this recent rise in equities is completely undeserved," said Tice, commenting on the current condition of stocks.

The real concern that David has right now -- a concern that I certainly share -- is the subprime mortgage fiasco and its potentially negative effect on the markets.

"The subprime mess is a microcosm of the greater credit system. The Bear Stearns hedge fund mess is a great example. We expect there will be lots of institutional players asking for redemptions from hedge funds which played in this area, which will cause more forced sales," Tice predicted.

David thinks that now is a great time to short this market, especially with stocks at such vaunted levels. My feeling is that if the S&P 500 can remain above 1,520, then we have a good chance of stocks climbing higher despite these record levels. If, however, we fall below 1,520, then it could spell big trouble for stocks ahead.

Right now in my High Monthly Income advisory service, I am in a fund that is profiting from the current conditions in the credit markets. I also am positioned to take advantage of rising energy prices and the falling U.S. dollar. Finally, in the event that the equity markets start to fall back down to earth, one of our funds is set to go sky high.

For more on my High Monthly Income service, click here.

BLOGS AWAY

Most of you probably already know that I am no longer broadcasting a daily radio show. But that doesn't mean I no longer have much to say about the markets and all matters financial. In fact, I now record a special message to Alert readers each week on my new, free audio blog.

To listen to this week's audio blog, simply click here

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Do you come from a land down under?
Where women glow and men plunder?
Can't you hear, can't you hear the thunder?
You better run, you better take cover.

—Men at Work, "Down Under"

Ever since I heard the 1981 hit song "Down Under" by Australian rock band Men at Work, I have been interested in almost all things from Australia. Up until now, I kept my niche interest in the country to things such as surfing, Foster's beer and the late Steve Irwin's "Crocodile Hunter" television show.

Well, I am happy to report that now my interest in Australia can be applied to my favorite subject -- making money.

Take a look at the 52-week chart of the Aberdeen Australia Equity Fund Inc. (IAF). This fund's performance is enough to make even the most xenophobic domestic investor abandon such chauvinism.

The principal investment objective of IAF is long-term capital appreciation primarily through investments in equity securities of Australian companies that are listed on the Australian Stock Exchange. IAF's secondary objective is current income, which the fund derives mainly from dividends and interest on Australian corporate and government securities.

Aberdeen normally invests at least 80% of the fund's net assets in equity securities that consist of common stock, preferred stock and convertible stock. The fund also may invest up to 10% of its total assets in unlisted equity securities, and in the debt securities issued by Australian companies and the Australian government.

What I really like here about this "wonder from down under" is the combination of both growth and income. I also like to invest in countries whose economies are in a bull market.

If you are looking for some international market exposures, or if you are looking to get both income and growth from your international allocations, you owe it to yourself to check out the Aberdeen Australia Equity Fund.

Now excuse me while I go put another "shrimp on the barbie."

THE COACH IS IN

Once again, I am really happy to report that so many of my Alert readers have taken me up on my offer for a free annuity coaching session. The issues you've brought to my attention have really helped me learn about the difficulties annuity investors face in this current market.

Your input also has helped me to see the kind of marketing and sales pitches many of you are subjected to when trying to make annuity decisions. I probably don't have to tell you, but there are a lot of promises being made out there that, well, let's just say are laced with too much optimism and not enough realism.

If you are an annuity investor, or if you are planning on buying an annuity anytime soon, you owe it to yourself to take advantage of my offer for a free coaching session. I know I can help you learn more about this often complex investment tool.

One thing you've got to realize is that understanding annuities requires experience and knowledge. I want all of my Alert subscribers to know their options before making decisions. If I can help you with your annuity questions, please just send me an e-mail and let me know.

If you want to request your FREE annuity coaching session with Doug Fabian, simply send an e-mail here.

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TRUTH'S UNPOPULARITY

"The truth, indeed, is something that mankind, for some mysterious reason, instinctively dislikes. Every man who tries to tell it is unpopular, and even when, by the sheer strength of his case, he prevails, he is put down as a scoundrel."

—H. L. Mencken

Perhaps the greatest journalist and social critic ever, H. L. Mencken knew that sometimes telling the truth can be a dangerous proposition. The next time you're confronted with a sticky situation, remember that the truth may be unpopular, but it's also the only reality that exists.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.

Click here to Ask Doug