A lot of people are saying that the Dow Jones is in a bubble. Right now we are within 40 pts of yet another new high. Surely this is a bubble. Surely it can't go up anymore. I get emails every day from people angrily insisting to me that this is INSANE and that at some point our Roman Empire-style drunkenness and
craze for blood in the form of ever-complex credit cards will cause the Dow to go down 20 or 30% or more.

But other than a few stocks here and there (most notably Vice Fund favorite, MO, which is up 237% since the dawn of the century), the Dow is not really up. In fact, I would argue the Dow is up to 20% undervalued. Lets break it down please and look at where we've been and where we're going.

Lets take a closer look at Stockpickr portfolio, The Worst Dow stocks of the 21st Century:

So far this century, Microsoft is down 48%, its P/E ratio has gone
from 53 to 21 and its Price/Book has gone from 10 to 5. The company is about to have its first major releases of its operating system, Office, and its server, of the past decade. In other words, its only profitable products are about to hit an enormous profit cycle. This is one of the largest components of the Dow, one of the fastest growing companies since The Wheel, Inc. and everyone treats it like DIRT. Shame!

Disney. Not only the home of The Incredibles and the Little Mermaid but also Lost and Desperate Houswives This little entertainment company had a P/E ratio of 62 in 2000 when everyone was pounding the table for it. Now: 16, below the market averages. Book value per share was 11.65 in 2000. 15.42 now. Return on equity was a trickle of 3.8% in 2000, 10.6% now. And ABC has gone from last in the networks to
first. And with all this, Disney is 3.3% down on the century.
Pathetic. Maybe Disney should go down another 20% before people finally learn to treat it with a little respect.

General Electric, creator of the best new TV show of the Fall Season, Heroes, is down 30% on the century.

Hewlett Packard, while increasing book value per share from $11 to $21 so its shareholders can live high off the hog knowing there's a solid cushion underneath, is down 11% on the century. Did you really hate Carly Fiorina that much?

Verizon is like that old guy lying drunk in the gutter muttering about
the old days when "I had 17 people reporting to me and a new a pair of shoes every four months." People simply don't trust it, giving it a P/E of 12 instead of the market average around 18. Down 34% on the century with its godfather, the Dow, hitting new highs thanks to MO and XOM. Did everyone really switch to Skype when I wasn't looking?

And my favorite, WMT, working hard on our behalf to get us practically free generic drugs, down 26% since January, 2000. And what did they do so bad? They increased their book value per share from $5.80 to $12.77 now. That's pretty hard to do when you have over four billion shares
outstanding. You try it.

XOM MO and UTX are having parties in their penthouses while 20 other Dow companies are lining up for the soup kitchen because nobody worth
a dime will buy any of their shares. The Dow bust that started in
February, 2000 is still marching on but I have a feeling it will end.
Not only do I think the Dow can easily hit 15,000 in 2007 but I think
the best bet is to buy the dreck that the world left behind - the 20
Dow components that are negative since 2000. And then lets work together to get our bubble back for 2008. Nothing better than a bubble!