Stocks continue to inch higher as investors remain stumped. This is the most hated rally in my 29 years of managing money. Nothing in the economy supports these new highs, except of course one thing: Ben Bernanke is "making it rain," and so are his good friends at the European Central Bank (ECB) and the Japanese central bank (JCB). As I said last week, Ben is afraid of being lonely, and "You don't fight the Fed chairman."

Most investors feel the Fed will eventually have to quit printing money because it is creating hyper-inflation. The reality is that we are in a negative inflationary, otherwise known as a deflationary, environment. Yesterday's economic reports were eye-opening for many on Wall Street, although certainly not for readers of this newsletter. Factory output, manufacturing production, and industrial capacity utilization, all dropped like a rock as global demand is waning.

The alarming

Network switch maker Cisco (CSCO) reported solid fiscal third quarter results Wednesday afternoon, marked by strong revenue growth. Revenue increased 5% year-over-year to $12.2 billion, exceeding consensus expectations. Earnings were also above consensus estimates, growing 6% year-over-year to $0.51 per share on a non-GAAP basis. Free cash flow rose to $8 billion, up significantly from the $7.5 billion the firm generated in the first 9 months of fiscal year 2012 (Image Source: Cisco).

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Performance was strong across all geographies, with the Americas region boasting 10% revenue growth and robust gross margins. For the first time in recent memory, the firm's US public sector business grew at 5% thanks to strong demand from education and state/local governments. The firm's US commercial business was also up 13%, while its domestic enterprise business jumped 10% year-over-year. CEO John Chambers remains extremely optimistic about the next few quarters in the

It's been nearly a month now since Apple (AAPL) reported its quarterly results. While the numbers beat and guidance was low, investors seemed to be more focused on the dividend raise and huge stock buyback increase. Shares of the company, which hit a low of about $385 and were trading around $405 into and after earnings, rallied strongly over the next week or two. When Apple broke $460, I stated that a pullback was coming, and we've lost $20 since the recent highs, only after a $10 rally on Monday. We were a bit lower recently.

One of the thoughts being kicked around prior to earnings was that a huge dividend raise would ease investors' minds about the recent fall in Apple shares. Apple had not launched any new products in a number of months, causing estimates to be cut as it appeared that new products would be

"Be fearful when others are greedy and greedy when others are fearful"

--Warren Buffett

A major bubble is currently inflating in investment markets. Yet nobody is talking about it. It's not that the category in question isn't getting any attention. To the contrary, it is being talked about at length nearly every day. But what is missing from the discussion is the fact that all of the signs of a massive bubble are now falling into place.

For the purpose of this article, I have taken a different approach with the analysis. Instead of introducing the investment that is showing signs of a bubble, I will be exploring the evidence first in order to avoid any behavioral biases associated with the specific investment in question.

While the bull market for this investment has been underway for nearly two years, it has only recently entered into a parabolic advance over the

One of the fortunate things about getting older and having invested for several decades is I have lived through a lot of market cycles. Up markets, down markets, crashes, bubbles and go nowhere markets, I have been invested through all of them. Every one of those market cycles provided a lesson, sometimes a painful lesson, but a lesson nonetheless.

Secular Bear Market 1966 through 1982

Lesson - Well run dominant companies will outperform in flat markets.

I was invested during a portion of the secular bear market that lasted from 1966 through 1982. What happened during that period? Not much. During that period stocks lost an average of 1.18% a year. For much of that period stocks would begin to rally only to fall back to the bottom of the trading range. If you were an astute trader and were able to buy the dips and sell the rips

The S&P 500 (SPY) closed the week at 1,667 and again set a record high. A few weeks ago I wrote Can An Extended S&P 500 See Further Gains? and said that I was bullish. As the S&P 500 moved up I stuck with the bullish perspective, but made some small adjustments to my tactics to lock in some gains along the way. Every week I look at the S&P 500's earnings, valuation and estimates to get a sense of the fundamental framework of the market. Although the S&P 500's price chart looks very extended, it does not seem that the S&P 500's fundamentals are as stretched. In this article I will look at these dynamics and examine the top 100 companies in the S&P 500 in more detail.

S&P 500 Price Action

The S&P 500 traded through the top of a channel that has been supporting the rally

Charles Dickens had it right - "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness....it was the Spring of hope, it was the Winter of despair..."

Confirmation bias is the human tendency to remember most clearly those things which confirm our preconceived notions, to notice only things which support our biases and to interpret ambiguous evidence to support conclusions we have reached in advance. It is a notoriously powerful delusion and has had disastrous effects in military strategy, criminal law, intelligence, and, perhaps worst of all, financial decisions.

In the stock market, this is a particularly serious problem because most events, developments, data, rumors, and even market assessments are subject to multiple interpretations. The same piece of data can easily be used by both bulls and bears with minimal creativity. When we start to see

Shares of Cisco Systems (CSCO) are trading with gains of up to 14% in Thursday's trading session. The internet infrastructure giant reported its third quarter earnings on Wednesday after the close.

The company reported solid third quarter results coming in a slightly ahead of consensus estimates. Given the weak results of some of its colleagues in recent weeks, the market was positively surprised by the report.

Third Quarter Results

Cisco Systems generated third quarter revenues of $12.22 billion, up 5.4% on the year before. Revenues were up 1.0% compared to the second quarter and beat consensus estimates of $12.19 billion. Net earnings rose by 14.5% to $2.48 billion. Diluted earnings per share rose by a similar 15.0% to $0.46 per share.

Non-GAAP earnings rose by merely 4.7% to $2.7 billion, coming in at $0.51 per diluted share. Non-GAAP earnings beat consensus estimates of $0.49 per share.

During the

I have been bullish on Cisco Systems (CSCO) for a while, so yesterday's 12.5% increase in its share price was gratifying for me to see. CSCO's big surge came on the heels of better-than-expected quarterly earnings. Even with the surge in its stock price yesterday, however, CSCO is still very undervalued due to GAAP earnings that understate the true profitability of the company.

My analysis of the financial footnotes to CSCO's Form 10-K for 2012 revealed that CSCO's GAAP net income actually understated its profitability and growth. A variety of unusual expenses hidden in operating items totaling $530 million (over 5% of net income after tax) caused CSCO's GAAP net income to be $8 billion, while its true net operating profit after tax (NOPAT) was over $8.5 billion. In addition, CSCO's true economic earnings per share grew by 58% in 2012, more than double

The Fed is not going anywhere, at least not right now and certainly not anytime soon. When they finally can and do make a move it will not be a fast move, but a move made slowly so as to wean the market off of its bond buying program while also keeping it from causing systemic shock to the system. When stories such as the Fed moving out of their current role begin to surface, no matter the sources, we think it is time to buy and not sell. It has been a trend which has worked numerous times on the way up and has yet to fail. Remember, do more of that which is working and less of that which is not.

Chart of the Day:

For those wondering about the Fed's balance sheet, yes it has been growing, and its latest trend mirrors the market's movements.

(click to

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday May 16.

MVP MLPs: Kinder Morgan Partners (KMP), Enterprise Products Partners (EPD), MarkWest Energy (MWE), Plains All-American (PAA), Williams (WPZ), Hornbeck (HOS), Ensco (ESV), Transocean (RIG), Seadrill (SDRL)

At a time when many are worried about where the market is headed, it might be worth considering an MLP for high dividend and relatively low risk. The domestic oil and gas revolution is underway, but that does not necessarily mean prices are headed up. In fact, with the drilling boom, commodity prices are likely to fall because of increased supply, and therefore, it might be risky to buy drillers which are levered to the price of oil or gas. Cramer discussed MLPs, most of them are pipeline companies which have fee-based businesses and are not as vulnerable to commodity prices. MLPs don't work well in IRAs because

Another quarter is in the books and Cisco (CSCO) continues to affirm its resurgence as a technology bellwether. Upon completing its ninth consecutive earnings beat, Cisco is once again looking more like the company that dominated the 90s and could do no wrong. Still, the company is not without its share of detractors.

The Street remains broadly unimpressed by what the company has been able to do dating back more than eight quarters. But you can't keep a good stock down, especially one with a chip on its shoulder. As the stock currently sits right at its 52-week high of $24.24 (as of this writing), the major question for analysts continue to be, where is the value? If Cisco's third quarter serves as an indication, patient investors will be rewarded with more gains than they expect. $40 is where the stock is heading

A Dominant First Quarter

Despite