The bulls also say that you just can't count out the effects of all the efforts that the Federal Reserve and Bush Administration are making to solve the credit crunch. They haven't gotten much return for their work so far, but man, at some point, you have to think that it will have an effect.

ISI points to 16 notable policy moves including interest rate cuts, the initiation of the new Treasury Auction Facility, the tax rebate checks coming soon, the lift on the limits of Fannie Mae ( FNM) and Freddie Mac ( FRE) loan sizes, and the fact that the federal funds rate is likely to be cut another half percentage point at the Federal Reserve Open Market Committee meeting next week. That will put the cumulative total at 2.75 percentage points over nine months, which is believed to be one of the sharpest, fastest cuts on record.

Now add the latest talk out of Washington for a $35-billion federal bailout program for mortgage holders facing foreclosure, and you can see why bulls see a light at the end of the tunnel within the next few months. It's all very inflationary, which is why gold has been soaring, but bulls believe these government dollars do have the potential to work their way into improved corporate earnings and, thus, higher stock prices.

Bulls also point to rising levels of investable funds around the world, from sovereign wealth funds to U.S. companies' cash hoards, which will put a bid under the market. ISI points out that a railroad IPO in China last week drew out $420 million; Visa announced plans for a $19-billion IPO of its own; IBM ( IBM) announced a $15-billion stock buyback; and Allstate ( ALL) announced a $2 billion buyback. Corporate cash is said to total at least $1.6 trillion right now.

Meanwhile, pension funds and banks worldwide are putting money to work. ISI logs these:
  1. The Inter-America Development Bank reportedly pledged $4.5 billion for projects in Brazil;
  2. Two Canadian public pension funds have pledged $1 billion to Asia;
  3. Sovereign wealth funds in the Middle East and Asia have $3 trillion to put to work;
  4. Vulture investor Wilbur Ross is planning to put $1 billion to work in the bond insurance biz;
  5. Carl Icahn put another $1 billion into car parts maker Federal Mogul;
  6. And the California state pension fund said it is putting $7 billion to work in commodities.
So while the banks are still in a lot of trouble as their screwup in subprime mortgages continues to harass their earnings potential, bulls say bears miss the real glimmers of hope emerging elsewhere.

That may be the case, but the really big problem that trumps all positives, in my view, is that commercial lending is contracting due to banks' need to husband as much money on their books to match the magnitude of their derivatives-related losses. That's why banks are issuing margin calls to fixed income hedge funds. That's why Citigroup ( C) fell to its 2002 bear market low last week. And that's why sovereign wealth fund investors in the Middle East, who normally suffer losses with silent stoicism, have begun complaining publicly about Citi and UBS ( UBS) management.

Bottom line: I'm the first person to want to be optimistic, but I continue to be skeptical of the bulls' arguments. In my last column, I mentioned that the only investment I favored -- based on seasonal work by Logical Information Machines -- was natural gas futures. The ETF that I recommended, U.S. Natural Gas Fund ( UNG) is up 26% since the start of February, so it's probably a good time to take profits now. Although a one-week broad-market rally is likely now, expect a material drop in equities after a cloud of increasingly serious credit concerns again blots out the sun.

Know What You Own: Natural gas is a segment of the energy sector. If you want broad exposure to this sector, an exchange-traded fund (ETF) to consider is the iShares S&P Global Energy Sector Index Fund ( IXC). This ETF was recently trading at $132.06.

The current top five stock holdings in the S&P Global Energy ETF are Exxon Mobil ( XOM), BP ( BP), Chevron ( CVX), Total SA ( TOT) and Royal Dutch Shell ( RDS.A).

These stocks were recently trading at $84.42, $64.72, $86.30, $74.80 and $69.16 respectively. For more on the value of knowing what you own, visit's Investing A-to-Z section, and to stay up to date on the energy sector, don't miss's Energy/Commodities section.
At the time of publication, Markman had no positions in stocks mentioned, although positions may change at any time.

Jon D. Markman is editor of the independent investment newsletter Strategic Advantage. He also writes a regular column for MSN Money. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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