As I sit here writing this essay, Mr. Mark Haines, Co-Host of CNBC's Squawk on the Street, is disputing the need to "seasonally adjust" economic data. Although he's out-numbered, three to one, he hangs in there and says, "Just give me the number, all I want is the truth."

Lots of luck buddy boy. Mr. Haines is not a flashy, financial kind of guy, often seen on CNBC. He's a lawyer by training and consistently challenges his co-workers and guests on the credibility of what they say and the data they present. When last Wednesday's durable goods data was spun around to make a down report look like it went up, he said he'd like to have an economist keep score for his struggling Mets. Now he's accused of being an old curmudgeon.

Frankly, I feel a lot like Mr. Haines does. I'm tired of being lied to. I'm tired of hearing about durable goods orders, ex-transportation, and CPI inflation data, ex food and energy. I read an article in the Wall Street Journal this morning which explained why the CPI did not fully reflect the runaway housing prices during the bubble and will mask the drop in housing prices in the current market. The CPI does not include housing prices, actually. It uses a measure called "owner's equivalent rent," which is supposed to reflect what homeowners would pay to live in their homes if they were renters. Brilliant!

Regardless of what you hear or read, you've got to understand that a tidal wave of inflation is sweeping around the world and engulfing America. This month's CPI report of 3.9% inflation, year-over-year, is a joke. Everyone knows that the cost of living is going up much faster than that. Yes, I'm talking about the cost of living, not a phony number, conjured up by a slick government economist.

Crude oil prices have skyrocketed and gasoline is up 30% from a year ago. Food prices have soared, thanks in part to the ethanol fiasco, and now, Dow Chemical is raising prices as much as 20% on its products. USA TODAY says it's just the most recent of a flurry of price hikes affecting everything from tissues, to coffee to paint. I can go on and on with stunning examples of price increases on steel, copper, coal and so on, but where can we get the truth on inflation?

Many observers believe the price of gold is the best leading indicator of inflation. I have no reason not to believe them. When I created VectorVest, I used the CPI in my valuation formulas and I still do. But VectorVest also tracks the Commodity Research Bureau Index, which we report in the Investment Climate section of these Views. You may see an 11-year, weekly graph on the CRB Index by clicking on Graphs on the main toolbar, clicking on Market Climate Graph and selecting the CRB Indicators.

Note that the CRB formed a double bottom in 1999 and 2001; then made a long steady climb from 184.49 to a high of 338.64 in May 2006. It fell to a low of 290.62 in January 2007 and embarked upon a parabolic rise to 431.07 since then. That's a 48% increase in 16 months, i.e. an average of 3% a month, not a measly 3.9% per year. Coincidently, the price of gold has gone up an average of about 3% per month since the middle of 2001.

The thing I like about using the price of gold or the CRB Index to track inflation is that their prices are what they are. No B.S. No Lies.

P.S. You may also enjoy reading my essays of 06/08/2007 and 06/15/2007.

Old King Cole was a merry old soul, and a merry old soul was he. He called for his pipe and he called for his bowl, and he called for his fiddlers three. Old King Coal was a merry old soul, and a merry old soul was he. He raised his prices and made more dough, and laughed at the greenies with glee.

Indeed old King Coal is a merry old soul and you would be too if you were enjoying strong demand, record prices and all-time high stock prices. Coal, that black, dirty, dusty stuff that gives off carbon dioxide when burned is on a roll. Despite the best efforts of the greenies to abolish its use, coal producers are thriving. Look at a 1-year graph of the Energy(Coal) Industry Group and you will see that its price bottomed nearly a year ago at $20.14 per share. Now it's trading at $39.71 per share, up 97% in nine months. Add EPS to your graph. It's gone from $1.02 per share to $1.67 per share in six weeks. Wow! I thought coal was going out of style. What's going on?

Yes, the coal producers went through a rough patch a while back, but coal isn't going away. In fact, with crude oil hitting $133 a barrel, natural gas prices soaring, the cost of nuclear power plants going up to $10 billion dollars and the relatively small contribution of alternative energy sources like solar or wind power, it may be becoming more important than ever. There's no doubt in my mind that coal is going to remain a major factor in meeting our future demand for electric power. Moreover, the conversion of coal to gasoline on a large scale may also become a reality in this country. Ever hear of a company called Sasol Ltd, (SSL)?

Last week, I said that Patriot Coal, PCX had the best combination of RT and CI. As I write this essay, it still does. Its earnings are forecasted to soar. But PCX is only one stock in an Industry Group that's on fire. So take a look at some of the other hot stocks in this Industry Group. Buy a big winner, and you too can become a merry old soul. Thanks to Old King Coal.

I have said it before and I'll say it again, "Our subscribers are our best sales people." Thank you, thank you, thank you for the tremendous support you gave us at the Las Vegas Money Show this week. I was delighted to meet so many new subscribers and visit with so many old-timers.

One gentleman, a newcomer, stood up at our booth and said he made $20,000 during his trial period. Another gentleman told me he began using the "Money Machine" strategy since this rally started and he's up over 20%. Another old-timer is a walking testimonial of what can be done with VectorVest. He quit his job 14 years ago and has been living very well on his investment profits, thank you. He made a presentation to an IBD User Group some time ago and converted most of them to VectorVest users. How can you beat that?

It was a special pleasure to meet and visit with the Groves sisters, Daryl and Pam. They were the Second Place Winners of our 2003 Bear Market Beater contest and created the Marathon strategy, which I wrote about on April 25, 2003. Marathon is an excellent strategy and embodies the precise concepts one would want in building a Bear Beater. "It simply buys rising stocks in rising Industry Groups." It worked well five years ago, but it hasn't worked that well in this market. The question is why?

My guess is because this market is so much more focused. Just open Stock Viewer and you'll see that most of the top ranked stocks are in the Steel, Coal, Fertilizer, Oil, Mining and Shipping Industries. If you have been buying stocks in these groups, you should be doing very well. Yes, but high VST stocks aren't restricted to the best performing Industry Groups and that's what I want.

Enter Stalwarts. The RT*CI criteria is all about performance and nothing but performance. As of last night, Patriot Coal, PCX, had the highest RT*CI rank of all the stocks in the database. I own it and it's up 50% since the April 3rd C/Up signal. Currently, it has the best combination of short-term and long-term performance of all the stocks in our database. In the same vein, Steel(Basic), Energy(Coal) and Chemical(Fertilizers) were the top three Industry Groups last night ranked by RT*CI. Look at the 5-Year, Weekly graphs of these groups and you will see why.

As I said last week, Stalwarts finds the best performing stocks in the best performing Industry Groups. It's performed well in recent back-tests and it's given me some super winners over the past few months. So why not give it a shot? Starting tonight we will have a "Stalwarts - 2008" Portfolio in the VSA Model Portfolio Group of Portfolio Manager. It will be a $100,000, real money, 10 stock portfolio. Of course, it will be empty when you see it tonight, but we will begin filling positions sometime next week. I'm not telling you exactly when because the designated stocks could be marked-up substantially before we wanted to buy them.

Once the 10 positions have been filled, we will manage the portfolio as illustrated in last week's "Strategy of the Week." Portfolio management will be very easy to do since we'll examine the portfolio for trades only on weekends and make our trades only at Monday morning opens. My only concern with this little experiment is that of "moving-the-market." It has happened before, so be careful if you want to try to replicate The Stalwarts Portfolio.

How would you like to have a portfolio of stocks that is so strong and sturdy that it could beat any bear market and make money year-in and year-out? It would be easy to manage and essentially worry-free.

Sound too good to be true? Not if you have a Bear Market Beater strategy that is doing what it's supposed to do, i.e., finding stocks that are strong enough to go up in bear markets and sturdy enough to weather any storm. Yes, these stocks are relentless in their quest to move higher. They don't go up in a straight line, mind you, but they snap back from draw-downs and move to higher ground. So how does one create such a strategy?

Think about what we want to accomplish: We want to have a portfolio of stocks that are going up in value. So we have to have individual stocks that are going up in price. Each of the strategies presented over the last three weeks employed this principle. Silber's Singles and Blyar's Bottom Feeders were bottom-fishing strategies that captured profits from the inevitable bounces these stocks made. Richard's Rangers was a high momentum strategy that found stocks in strong price patterns which were expected to continue to go higher. Both camps, the bottom-fishers and the momentum players, proved themselves to be right. Which do you prefer?

Silber's and Blyar's strategies are best suited for active investors who enjoy trading a lot. Richard's strategy is more attuned to more passive investors who want to hold their stocks for a longer time. Although Richard's strategy made Third Place in our contest, it's the kind of strategy I prefer.

Here's what I said about it in my April 18th essay, "Richard's strategy captured the single most important trait a great Bear Market Beater strategy should have. It is the ability to find stocks with outstanding price growth persistence. In the VectorVest system, these stocks are identified by high Comfort Index, CI, ratings. In my opinion, high CI stocks have the best chance of going up in both good times and bad. If they do go down in a sell-off, they also have the resilience to bounce back strongly when the market rallys. To give his top ranked stocks a kicker, Richard sorted them by RT*CI. Momma mia! He's finding the hottest stocks with the best price growth persistence."

Richard came very close to building a great Bear Market Beater strategy. Unfortunately, he forgot that one should buy rising stocks in rising Industry Groups. VectorVest makes this easy to do. Just ask UniSearch to select stocks from the Industry Groups ranked highest by RT. Oh, there's an even better way to rank Industry Groups. Ask UniSearch to select stocks from the Industry Groups ranked highest by RT*CI. Momma, mia squared!!

THIS SEARCH FINDS THE HOTTEST STOCKS WITH THE BEST PRICE GROWTH PERSISTENCE IN THE HOTTEST INDUSTRY GROUPS. Sounds good, but how well does it work?

To test this strategy, which we call Stalwarts, we set it up to run weekly and to exit on Rec = 'S.' We've run hundreds of tests on Stalwarts and found that it produces the best results when we sell on the first weekly Rec = 'S' in a bull market and sell on the second weekly Rec = 'S' in a bear market. In any event, Stalwarts makes money virtually all of the time. Here are some results:

From 01/03/07 to 05/08/08, when using sell on the first Rec = 'S', Stalwarts produced a gain of 138.19% with 22 winners and 20 losers. The max drawdown was 22.55% and the annualized rate of return was 102.80%.

From 11/01/07 to 05/08/08, when selling on the second consecutive weekly Rec = 'S', Stalwarts produced a gain of 35.77% with 11 winners and 8 losers. The max drawdown was only 15.69% and the annualized rate of return was 69.14%.

From 01/01/08 to 05/08/08, when selling on the second consecutive weekly Rec = 'S', Stalwarts produced a gain of 11.49% with 10 winners and 4 losers. The max drawdown was only 16.24% and the annualized rate of return was 33.06%.

I urge you see Mr. Gordon White's VectorVest University presentation of this strategy. He will provide much more information than I can here. Simply click here for further demonstration of this strategy.
Also, detailed instructions on how to back-test Stalwarts are shown below.

After watching Gordon's presentation, and perhaps, running some back-tests of your own, I hope you would see why we named this essay, Stalwarts: The Ultimate Bear Market Beater.