As you can see from the table above, the top 10 companies on the list represent 53.51% of the Index , so for example if all those 10 companies have a terrible day and the rest of the 20 have a decent day, the DJIA Index will still show a large loss.

Cummins (CMI), Caterpillar (CAT), 3M (MMM), Goldman Sachs (GS), Wells Fargo (WFC), IBM (IBM), Intel (INTC), Microsoft (MSFT), Apple (AAPL), Macy's (M), Home Depot (HD), Family Dollar (FDO), J.C. Penney (JCP), J.Crew (JCG)

This week the market is all gloom and doom. PIMCO’s Bill Gross thinks that the Dow’s fair value should be 7,000. GMO Chairman Jeremy Grantham also believes that the U.S. stock market is almost 25% above fair value.

I went through all DJIA component stocks (Dow 30) to find out what the fair value the Dow is.

Sees modest rise of 1.3% in 2010 as high unemployment continues to crimp consumer purchases.

Excerpts from Annual Outlook: U.S. Retail Outlook Is Stable But Consumers Are Still Pressured

VIX – CBOE Volatility index – Monday’s leap in the reading of Wall Street’s fear gauge was accompanied by one of those occasions when investors were left flat-footed during the trading day as stocks flashed from green to red. It was highly reminiscent of the trading pattern in 2008 and earlier this year when, try as they might, investors couldn’t shake off the recession blues no matter how economists tried to spin data points. Monday’s 10% rise in the Vix has been followed today by a further 0.5% rise to 24.43 only one week after the market volatility reading tried to dip below 20, effectively wiping risk aversion off the radar altogether. Today, however, one option investor appears to be looking for a substantial return to volatile sessions and sold at-the-money put options to back his bet that the Vix will return to a mid-30 reading by the end of 2009. Using the December contract some 24,000 call options at the 35 strike were bought for 79 cents, partially funded by the sale of almost 7,500 put options expiring at the same time for a higher 1.90 premium. One possible explanation for the actions of this investor, who expects the value of the puts to fall and the price of the calls to increase, is Tuesday’s return to deteriorating consumer confidence. With more than two-thirds of output origination from consumers, this trader is concerned about further market weakness ahead.

• The dollar surge continued and it took oil to the woodshed. Oil collapsed 3%.

• Dr. Copper fell over 2% on the day as investors begin to worry about the sustainability of the economic recovery.

• Goldman added Chicago Bridge & Iron (CBI) to their conviction buy list and upped their price target to $26.

• Citigroup upgraded AK Steel (AKS) to a buy and upped their price target to $21.

• Citi also upgraded Target Corp. (TGT) to a buy with a $61 price target.

• Brazil’s Bovespa declined 4.5% on the day and extended the decline to 11% since the trader tax was initiated. Watch out below if Congress tries to pass something similar here. The bottom would almost certainly come out of the market if we try to crack down on price discovery.

• In the credit markets we saw broad deterioration. Tim Backshall at CDR has the details:

The names having the largest impact on IG are United Parcel Service Inc. (UPS) (-1bps) pushing IG 0.01bps tighter, and American International Group, Inc. (AIG) (+75.63bps) adding 0.48bps to IG. HVOL is more sensitive with Home Depot Inc.(HD) pushing it 0bps tighter, and American International Group, Inc. contributing 2.06bps to HVOL’s change today. The less volatile ExHVOL’s move today is driven by both United Parcel Service Inc. (-1bps) pushing the index 0.01bps tighter, and Valero Energy Corp. (+13.5bps) adding 0.13bps to ExHVOL. [We also note that CIT (CIT) ended the day 100bps wider as the revolver extension seemed to be ignored by credit markets as nothing but a snub to Icahn; also the GMAC/RESCAP moves were dramatic after they got their $2.9bn TLGP issue off - we note that the GMAC-RESCAP spread recahed 1350bps recently (dramatically wider in a quick period) and we suspect that this 550bps plus rally in RESCAP is as much as about a busted compression trade as it is any sentiment improvements - look for a 500-600bps differential for any entry as a fllor level for a decompression trade].

I think Macgyver is the ultimate handyman. The way he is able to fix, create, or build whatever it is he needs under nearly any circumstances is amazing.

National Oilwell Varco (NOV), Whirlpool (WHR), Black&Decker (BDK), Fortune Brands (FO), Home Depot (HD), IBM (IBM)

"Why put your money into a 30-year U.S. government bond at 4% and wait 30 years to get your money back?"

Nvidia (NVDA), Hewlett Packard (HPQ), AMD (AMD), Microsoft (MSFT)

The Oracle of Omaha Warren Buffett is generally viewed as the most respected and successful investor in history, and many of our value-oriented readers follow the movements and purchases of Buffett rather closely and for good reason. Berkshire Hathaway (BRK.A), a conglomerate holding company, which Buffett built from a textile company into a major corporation, has averaged a 20.3% compounded annual gain in per-share book value from 1965-2008. There is no doubt about the success Buffett has achieved over the years, and there has even been a recent study done that shows an investor could have earned over 14% returns a year had they purchased each Buffett stock, a month after his investment company disclosed ownership.

We thought it would be an interesting story to show how Buffett’s holdings would rank according to The Applied Finance Group’s (AFG’s) valuation model and Economic Margin Methodology. The companies we believe look the most attractive and that investors should pay the most attention to when searching for long investment opportunities are the companies that have both an attractive default AFG valuation and are expected to improve their Economic Margins at a greater rate than their sector peers.

Bullish Calls:

Spectra Energy (SE): "Why would you sell? It's got a 5% yield. The balance sheet's good. I'm a buyer, buyer, buyer... SE?... Not hold, not sell, but buy..."

HD has grown earnings at 6.62% annualized between 1999 and 2008. By the end of 2009 the annualized rate is expected to fall to 3.42%. When you compare two points in time ignoring the period in between, you get a good handle on annualized rates, but you do not get the trend. For example, the average year on year change in EPS for HD during the 1999 to 2009 period was 8.28%; the damage to earnings was inflicted on HD because of negative earnings growth during 2007, 2008 and 2009; it is pretty clear that the stock as suffered as a consequence of the popping of the property bubble. What is encouraging is how well they have held up in very poor industry wide conditions. HD has grown dividends at an annualized rate of over 23% 1999 and 2009. This is good, but the payout has risen to over 64%; not really a problem in that the dividend is safe, but it does hint at a slowdown in future dividend growth. HD uses a mix of dividends and buybacks to return shareholder value; the payout ratio including buybacks has run at a median of 40%.

As with the vast majority of buyback programs, HD’s program is disappointing; they have reduced share count by 3.35% annualized between 1999 and 2009 but they have purchased shares during 2004, 2005, 2006 and 2007 – years when the shares were trading at a premium to fair values. Buybacks are good; they boost earnings growth and it offer a tax effective method through which continuing shareholders in effect reinvest dividends with no tax consequences. But they are also bad, because they remove choice; personally I would not re-invest dividends in a stock which was trading at a premium to fair value; I would prefer to pay the tax and invest net proceeds elsewhere.

The catered food and hobnobbing between analysts and top brass are indeed on display at Lowe’s (LOW) annual conference in Charlotte. (Regulation FD is cute on paper, but a sharp analyst knows the correct questions to ask management at these conferences to obtain information unforeseen by the general public)

However, crumbs were tossed for those not attending in the form of short press release, which briefly detailed strategic priorities and FY10 financial guidance. I would say that it was a positive to observe Lowe’s management team conveying a sense of caution in their go forward sales and earnings outlooks. The Robert Niblock-led management team has been prematurely optimistic on more than once occasion (calling for a sales rebound in late 2007 for example) since the housing downturn began.

click images to enlarge

According to the National Association of Realtors (NAR), about 1.8 million people have taken advantage of the first-time homebuyer credit. They claim that the credit has increased sales in the stricken industry by 350,000 homes. The National Association of Home Builders (NAHB) agrees with the 1.8 million figure but calculates that the credit has increased total home sales by only 150,000. In determining who to believe, as to the difference in numbers, historically, I’ve always found the NAHB to be a more reliable source of statistical data. Just a few years ago, in 2005, the NAR’s chief economist was declaring that the housing boom would never end. NAR has little credibility left.

Both trade organizations are associations of persons whose businesses greatly benefit from such government largess. Both support the existing credit, and want to expand it. The first-time homebuyer credit phases out for a couple making more than $150,000 or a single person making more than $75,000. But, those who "qualify" can get $8,000 in “free” money from the government, if they buy a house, so long as they have not owned a home for a minimum of 3 years. The idea is to stimulate the sale of homes, and the economy, in the midst of the biggest collapse of home prices in history.

Apple (AAPL), Nokia (NOK)

Home Depot Inc. (HD) recently signed a deal with diversified media and merchandising company Martha Stewart Living Omnimedia Inc. (MSO) to create a new line of home improvement products.

The strategic move is aimed at outsmarting rival specialty retailers like Lowe Co.s Inc. (LOW). The new product line will primarily feature outdoor living, home organization and home decor items.

The actual private object of most skilled investment today is to ‘beat the gun.’ As Americans so well express it, to outwit the crowd and to pass the bad, or depreciating halfcrown, to the other. For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs – a pastime in which he is the victor who plays ‘snap’ neither too soon nor too late, who passes the old maid to his neighbor before the game is over, who secures a chair for himself when the music stops. Or to change the metaphor slightly, professional investment may be likened to those newspaper competitors in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors, as a whole; so that each competitor has to pick not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. We have reached the third degree where we devote our intelligences to anticipating what the average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.

Bet it surprises you that the aforementioned quote is from John Maynard Keynes’ legendary book “The General Theory of Employment, Interest, and Money,” written back in 1935. Read it a couple of times away from the maddening crowd, and reflect on it, because certain phrases will grab you with their wisdom. Bet you it also brings back memories of last year’s market machinations, and a wish that – if I had only “beat the gun,” or passed the “old maid” in time to avoid the final “snap.”