Dr. Ben Bernanke, Head of the Fed, left the target interest rate for Fed Funds unchanged at 2.00% last Wednesday. Is that good or bad? Oil futures shot above $142 per barrel yesterday. Is that good or bad? Japan's inflation hit a ten-year high in May. Is that good or bad?

These and a myriad of other things happen every day and stock investors have to decide whether each item is good or bad. News which is deemed to be "good," causes them to buy stocks and drive prices higher. Investors sell their stocks, causing prices to fall, when news items are deemed to be "bad." So what are they thinking? What causes them to decide whether something is good or bad?

In the VectorVest System, we believe that stock value goes up when earnings go up and inflation and interest rates go down. So the key to deciding whether anything is good or bad is what it does to earnings, inflation and interest rates. Rising earnings cause stock value to go up, so that's good. Rising interest and inflation rates cause stock value to go down so that's bad. OK, so now that we know how to decide whether something is good or bad, how do we keep track of all this stuff?

It's impossible to examine each and every item separately, let alone decide whether it is good or bad. In fact, we can't even identify the thousands of things that affect stock prices each day. So we don't even try. But we can gather, track and analyze the cumulative effects of these events in the form of earnings, inflation and interest rates. This information then allows us to assess whether the sum total of all things that are happening are good or bad for stock prices as shown in the VectorVest Investment Climate Report.

This report tracks two measures of inflation, three measures of interest rates, one measure of earnings, two measures of stock price performance and one measure of investment advisors sentiment. The Name, Current Level and Trend of each Indicator is updated and reported each week. The Trend for each indicator is given on a scale of 0.00 to 2.00. Trends above 1.00 are good and those below 1.00 are, of course, bad. Currently, only one of the nine indicators is above 1.00. So that's bad and is reflected in the Composite of Investment Climate Indicators which is at a level of 0.87.

So was Dr. Bernanke's decision to hold the Fed Funds rate at 2.00% a good one? Maybe yes and maybe no. A low interest rate is good for stock value, so that's good, but it also cheapens the U.S. dollar which encourages inflation and that's bad. So we will have to see how Dr. Bernanke's decision plays out. My bet is that he has breathed new life into the Inflation Dragon and that's not good. In any event, the answer will be revealed by The Investment Climate.

P.S. Next week I'll write about how we use the Investment Climate Report to define the Truth Chart and identify Bull and Bear markets. We saw this Bear market coming many, many months ago and told you when it arrived. We will also let you know when the next Bull market is back in town.

About 10 years ago I bought this book, 100 Ways to Beat the Market by Gene Walden. The blurb on the cover said, "Anyone can beat the market. That's right. You can beat the market with nothing more than patience, persistence, and the simple insider strategies revealed in 100 Ways to Beat the Market." I was enthralled. I couldn't wait to read the book.

The table of contents was full of tempting topics. The introduction was inviting and encouraging. It said that in the stock market, the odds of winning were in favor of the investor because the vast majority of stocks increase in value over time. It sounded good to me, so I read with relish.

It didn't take long, however, for me to realize that this book, like so many others I had read, was chock full of good advice, i.e., what to do, but totally lacking in substance, i.e., how to do it. Take, for example, the topic of "Buy low, sell high" on page 73. The very first sentence said, "What could be easier?" The next few sentences said, "As elementary and logical as it may sound, buying low and selling high is much easier said than done. What makes it so difficult is that it clashes with every fiber of human impulse and emotion," i.e., to jump into the market when it is hot and pull the plug and sell when it's not. "It takes nerves of steel to buy low and sell high, to put your money on the line when the market is floundering, and to sell out when everyone is buying in."

Yup, this was good stuff alright. But how does one buy low without getting caught in a suckers rally, and sell high at the right time?

This is where VectorVest comes in. It has all the tools, training and information you need to have to know when stocks are low or high. Virtually, everything VectorVest does, from Timing-the-Market, to searching for the right stocks, to giving Stop-Loss prices is geared to buying low and selling high. We even start our Investment Clinics, as described above, with a presentation on "Buying Low, Selling High." We don't just talk about it. We show you how to do it.

If you can't attend an Investment Clinic, visit the VectorVest University. It has all the training courses you need to beat the market. In particular, view our "Strategy of the Week" presentations. They will show you how to Time-the-Market and apply this information to a wonderful strategy such as "Climbing the Golden Staircase." This strategy tells you when to buy, what to buy and when to sell. You're in stocks when the market is going up and in cash when the market is going down. What could be better than that?

Well, I'll tell you what's better than that. It's being short when the market is going down. You don't like to sell short? Then buy Contra Funds or use one of our Bear Beater strategies. The one I suggest is Stalwarts. Its performance is unbelievable. To say the least, it's Beating the Market.

The Reuter's headline shouted, "Stocks jump as data eases inflation worry." Indeed, Wall Street's spin on May's CPI report triggered a typical Pavlovian response this morning as investors bought all kinds of stocks.

Totally ignoring the news that the Consumer Price Index, CPI, rose in May at the fastest rate in six months, 0.6%, investors chose to react to the performance of the core CPI, which rose at a moderate pace, 0.2%. This increase was "right in line with expectations and should relieve worries that the big increases in food and energy could be breaking through to more widespread inflation."

This generally accepted, but fallacious, view is important to investors because a moderate core rate of inflation, which excludes the costs of food and energy, will allow the Fed to maintain low interest rates and supposedly hasten the return of solid economic growth. A strong economy will, of course, lead to higher corporate earnings which, in turn, will support higher stock prices. So buy now and cross your fingers.

Let's see how this works: On January 22nd, Dr. Bernanke, Chairman of the Federal Reserve Board, lowered the Federal Funds target rate a humongous 75 basis points. In typical fashion, stock prices soared on the belief that this move would stimulate the economy. I tracked the evolution of this rally by using Industry Viewer and Quick Test. Upon opening Industry Viewer that night, I saw that the interest sensitive Groups, i.e., Retail, Building, Financial, REIT, etc., had gone up the most. This was a classic, text book response to a cut in interest rates.

On the evening of the second day of the rally, January 23rd, I was stunned to see that Transportation(Truck) had the highest RT rating. Yes, I had seen where one of the large investment banks had recommended trucking stocks that day, and the Group went up 7.81%? On that same day the Price of the Building(Residentl\Comml) Industry Group rose 10.96%. The economy was still sinking and the credit crunch was worsening, but people were buying trucking stocks and homebuilders. I couldn't believe it.

Nevertheless, I continued to track the Industry Groups daily for RT Ranking and the %PRCs. This process gives me more of a feel for what's going on inside the market than anything I can think of. Curiously, Chemical(Fertilizers) popped 8.54% on 01/24/08 and Energy(Coal) led the pack on 01/25/08 with a gain of 5.78%. Transportation(Truck) was ranked number one by RT on Friday 01/25/08. Go figure.

In addition to working with the Industry Group screen, I like to track the progress of all the groups with Quick Test. On January 24th, two days into the rally from the 01/22/08 low, the Building(Residentl\Comml) Group was still the biggest Price percentage gainer with a total gain of 12.73%. Chemical(Fertilizers) was in fourth place with 8.22%. Transportation(Truck) was in 26th place with a gain of 5.84%.

Lo and behold, on 01/28/08, Energy(Coal) showed up in first place with a total Price increase of 16.31%. Building(Residentl\Comml) was in second place with a 14.81% gain and Chemical(Fertilizers) was gaining ground at 13.60%.

The Building(Residentl\Comml) rally peaked on February 1st, only eight days from the bottom. But it had an incredible gain of 26.68% by that time. Imagine an industry in total distress going up 26.68% in eight days. The annualized rate of return was 973.76%. But it was a suckers rally. There was no reason other than sheer speculation for those stocks to rise. The industry was in deep trouble and it was going to be years before it was well again. As of yesterday, the Building(Residentl\Comml) Group is down 0.55% from its 01/22/08 close.

The Transportation(Truck) Group was up 12.92% as of yesterday and I can't imagine why. Take a look at a 1-Year graph of this Industry Group. Show EPS in the bottom portion of the graph. With forecasted earnings nose diving, why would you want to buy any trucking stocks?

Just for the fun of it, look at the 1-Year Industry graph of the Chemical (Fertilizers) Group. Show EPS in the bottom portion of the graph. Note that EPS is up 100% over the last 12 months and is still rising. This group is up in Price by 40.54% since 01/22/08. Now look at a graph of the Energy(Coal) group. The EPS is up only 40.1% in the last 12 months, but EPS is now climbing at an amazing clip. This group is up 87.88% in Price since the 01/22/08 close.

So, here we have four Industry Groups. The two worst performers from 01/22/08 to current broke out of the gate the fastest. The best two performers showed their stuff a few days later, but they didn't crash and burn. They just kept moving higher. Why?

The answer lies in the direction of EPS. If EPS is rising as it was with the best performers, Price will rise. If it's going down as it was with the laggards, Price will fall. Speculators often push stock prices higher on phony numbers as they did today. But these phony rallies don't last long. It takes good, solid earnings growth to push prices higher and higher over the long-term. If prices rise without earnings growth, you're looking at a Suckers Rally.

Are you getting tired of watching all those high priced stocks you can't afford to own go higher and higher? Yeah, so Potash is up another $1.77 and pushing $221/share. So what am I going to buy with a thousand bucks? Four shares?

Never fear. VectorVest is here. Low-priced stocks -- we love 'em. Just take a look at this week's Strategy of the Week: Teeny Boppers. This is a great strategy -- one of my favorites, actually. It's been around a long time and has worked well over many years. Glenn Tompkins will show us how they're doing in the current market. Just visit the VectorVest University.

I've made some remarkable discoveries with this strategy. Read my essay of 01/17/03 and see what I mean. I suggested to my readers to take a look at SINA.com when it was at $9.37/share. It hit $42. I had discovered it with Teeny Boppers in July 2002 when it was under two bucks a share. Here's what I said in my 01/17/03 essay: "The biggest winning trade, a $1,415,445 gain, was made with a little stock called SINA.com. Take a look at its graph. It's a true Teeny Bopper."

The following week, 01/24/03, I posted the following notice:"ATTENTION TEENY BOPPERS FANS: Take a look at SOHU.com, (SOHU). I will be giving a brief presentation on last week's Overview at the San Diego Seminar." SOHU was at $9.75/share on 01/24/02 and it was on its way to $40.90. Just like SINA, Teeny Boppers found SOHU at a very low price, $1.70/share on June 28, 2002. So what was there to talk about at the San Diego Seminar?

First of all, you can find some incredible winners with Teeny Boppers. I've been doing it for years and can give numerous examples. Secondly, and very importantly, you can find some great winners even in the worst of markets. These guys have a life of their own. Take SINA and SOHU, for example. They were going up during the summer and fall of 2002 when the market was getting killed. So Teeny Boppers is a strategy you can run all the time. Thirdly, there are some secrets to picking the best stocks. The first and most important secret is to wait until the stock hits successive highs before buying it. SINA hit a new high five weeks in a row in July/August 2002. I believe Teeny Boppers found NutriSystems fifteen times as it broke out from $2 to above $5 in January 2005. Another important trick is to always favor nice smooth chart patterns. You want to see it flat-lining for a long time; then breaking out. SINA and SOHU are perfect examples of what I'm talking about.

Finally, I must say it's so easy to run Teeny Boppers with our current software. UniSearch does all the work. You just have run it once a week and remember the stocks with the repetitive new highs. Then pick the ones with the highest CI ratings. They have the best chart patterns. Do this and you'll have fun and you'll make money with Teeny Boppers.