Is Fed's Bailout Going To Be Dramatic?

Companies with blockbuster earnings, little to no debt, and with the strength to gobble up the weak companies and expand their market share and their profit margins will be the biggest winners of all. Specifically, the oil and gas sectors will rise along with transportation and utilities as the dollar strengthens around the world. You’ll also see big gains in chemical and fertilizer companies as the Fed’s action will have no effect on rising food inflation. Surprisingly, you’ll see strength in niche tech stocks as these companies continue to increase sales and earnings light years away from the financial mess on Wall Street.

If today’s BIG GAINS in National Oil Well Varco (12%) Weatherford International (+12%), Fluor Corporation (11%) Cameron International (10%), Apple (+4%) and Rimm (+4%) are indicative of mammoth sector shift that’s headed your way, this is a situation that you simply cannot ignore. And the shift may have already just begun!

As a result of the Fed bailout, interest rates on 30-year mortgages enjoyed their biggest weekly drop in 28 years, from 6.35% to 5.95%—spurring home sales throughout the U.S. While housing continues to collapse, we’re beginning to see signs of a rebound. In Southern California, for example, homes sales jumped 13.8% in July—the biggest jump in three years. We’re not just talking about California real estate rebounding. Some of the toughest states, like Ohio, are seeing a rebound in home sales as well. We’re not out of the woods yet, but thanks to falling mortgage rates, experts are estimating that a rebound in the housing sector could take place nationally in the early months of 2009.

U.S's top-performing consumer stocks, with 292% and 105% earnings per share growth, could easily deliver 30% to 40% profits in the next 12 months. And that’s just in the short term. The long-term effect of the Fed plan could result an even bigger sector shift in the commercial services sector as well—thanks to a stronger dollar—which surged against the euro, the franc and the yen again.

When you consider that a weak dollar was one of the key factors behind rising fuel costs, a rising dollar will continue to push fuel prices lower, crimping inflation. In fact, today’s collapse in oil prices to $94 a barrel—and the rise in U.S's two top transportation stocks (+7% and +3%)—could be just a sneak preview of what’s headed your way. When you consider that U.S's two top transportation stocks are up 38% and 28% over the past 12 months, you can only imagine how much more profitable these companies will be in the weeks and months ahead.

The bottom line is this: In a world where bank failures, a weak dollar and worldwide illiquidity have been the driving force behind the market’s decline, the repercussions from the Fed’s new bailout are not only going to be quite dramatic……but will also favor a new set of stocks in new sectors.