While driving back from Lake Tahoe last weekend, I received a call from a dear friend who was in a very foul mood.

Following the advice of another newsletter that I won?t mention, he bailed out of all his stocks at the February 11 bottom. After all, wasn?t the Dow Average headed straight to 3,000?

Despite market volatility doubling, multinationals getting crushed by the weak euro, and the Federal Reserve now on a rate rising path, here we are with the major stock indexes just short of all time highs.

Why the hell are stocks still going up?

I paused for a moment as a kid driving a souped up Honda weaved into my lane on Interstate 80, cutting me off. Then I gave my friend my response, which I summarize below:

1) There is nothing else to buy. Complain all you want, but US equities are now one of the world?s highest yielding securities, with a lofty 2% dividend. A staggering 50% of S&P 500 stocks now yield more than US Treasury bonds (TLT). That compares to two thirds of all developed world debt offering negative rates and US Treasuries at 1.90%.

2) Oil prices have bottomed, but remain incredibly low, and the windfall cost savings are only just being felt around the world.

3) While the weak euro (FXE) is definitely eating into large multinational earnings, we are probably approaching the end of the move. The cure for a weak euro is a weak euro. The worst may be behind for US exporters.

4) What follows a collapse in European economic growth? A European recovery, powered by a weak currency. European quantitative easing is working.

5) What follows a Japanese economic collapse? A recovery there too, as hyper accelerating QE feeds into the main economy. Japanese stocks are now among the world?s cheapest. The Japanese yen (FXY) will probably FALL for the rest of the year, adding more fuel to the fire.

6) While the next move in interest rates will certainly be up, it is not going to move the needle on corporate P&Ls for a very long time. We might see a ?% hike and then done, and that probably won?t happen until the second half of 2016. In a deflationary world, there is no room for more. At least, that?s what my friend Janet tells me.

This will make absolutely no difference to the large number of high growth corporations, like technology firms, that don?t borrow at all.

7) Technology everywhere is accelerating at an immeasurable pace, causing profits to do likewise. You see this in biotech, where blockbuster new drugs are being announced almost weekly.

See the new Alzheimer?s cure? It involves extracting the cells from the brains of alert 95 year olds, cloning them, and then injecting them into early stage Alzheimer?s patients. The success rate has been 70%. That one alone could be worth $5 billion. I might be a user of this cure myself someday.

8) US companies are still massive buyers of their own stock, over $200 billion worth in 2015. This has created a free put option for investors for the most aggressive companies, like Apple (AAPL), IBM (IBM), Exxon (XOM), Wells Fargo (WFC), and Intel (INTC), the top five repurchasers. They have nothing else to buy either. American International Group, Inc. (AIG) has mandated the repurchase of an amazing 25% of its outstanding float.

They are jacking up dividend payouts at a frenetic pace as well, and are expected to return more than $430 billion in payouts this year.

9) Oil has bottomed, making the entire energy sector the ?BUY? of the century, dragging the indexes up as well, even though it now accounts for only 5% of total market capitalization. This is why I made energy my number one performing pick this year.

10) Ditto for the banks, which were dragged down by falling interest rates for most of 2015. Reverse that trend this year, and you have another major impetus to drive stock indexes higher.

My friend was somewhat taken back, dazzled, and nonplussed by my out of consensus comments. He asked me if I could think of anything that might trigger a new bear market, or at least a major correction.

The traditional causes of recessions, oil price and interest rate spikes, are nowhere on the horizon. In fact, the prices for these two commodities, energy and money, are near all time lows.

Then I thought of one big one. Donald Trump could get elected president in November.

With that, I told my friend I had to hang up, as another kid driving a souped up Shelby Cobra GT 500, obviously stolen, was weaving back an forth in front of me requiring my attention.

Where is a cop when you need them?

The Next Bear Market?

As many of you know, my oldest son, John, is an English teacher at a government university in western China. He is fluent in Mandarin, Cantonese, Japanese, Russian, Korean, and of course, English.

I was Skyping with him the other day, and he mentioned something that piqued my interest. There were lines forming outside the country?s newly opened gold coin stores. Gold ownership in the Middle Kingdom carried a death penalty until very recently.

Furthermore, he learned that jewelry stores were packed while shopping for a birthday present for his new girlfriend, with newly enriched consumers loading up on not only gold, but silver and platinum as well.

Many had their heads handed to them last year in the stock market crash. Stocks are now considered too dangerous a place in which to invest ones? savings, so everyone is now pouring money into precious metals.

I thought ?Well, that explains a hell of a lot.?

Then I saw a news item flash across my screen that further focused my interest.

China?s Anbang insurance group was making a $12.2 billion takeover bid for the Starwood Hotel Group (HOT). This was a mere 24 hours after its $2 billion bid for my late wife?s former employer, New York?s Waldorf Astoria Hotel.

This is not the first time that Chinese capital has flooded into the US. Recent years have seen a $5.4 billion purchase of the GE Appliance Division, $3.5 billion for Legendary Entertainment, and $4.7 billion for Smithfield Foods.

So much money has poured into Napa Valley at wildly extravagant prices that a lot of very mediocre winemakers have suddenly found themselves billionaires. Locally owned vineyards have taken to posting ?American Owned? signs out front. You can see them when you go winetasting.

The cause for all of the above is the same.

Capital is pouring out of China at an unprecedented rate. It is departing the Middle Kingdom to flee a weakening economy, collapsing stocks, a weakening Yuan, a capricious government, political oppression, censorship, a crackdown on corruption, and the lack of local investment opportunities.

Fear of a revolution that strings up all the billionaires is another motivating factor. Today, China boasts more newly minted billionaires than any other country on earth.

It is fleeing towards the United States and towards the hard metal equivalent, gold. As much as this year?s political candidates decry the state of our economy, everyone else in the rest of the world wants to send their money here as fast as they can and bring themselves with it.

What is most important is for you and me is that this is a major macro trend that has only just begun.

Gold is a particular target of the Chinese because of the country?s long-term cultural affinity with precious metals. Look at any historical contracts between China and the west and quantitates of exchange are identified in taels of gold and silver.

This ended with the communist government, which forced citizens to turn over all gold and silver holdings to the government.

What we are seeing now is the unleashing of 67 years of repressed gold consumption by a newly rising middle class. It is highly reminiscent of the 39-year flood of gold buying let loose by President Richard Nixon's removal of the US from the gold standard in 1972.

As you may recall, that stampede lasted for eight years and took gold up from $34 to $900 an ounce. I was found standing in line in Johannesburg unloading my stash of krugerrands right at the market top.

China is already the world?s largest gold producer, the actual amount of production is anyone?s guess. It is also the second largest importer, after India, unable to sate domestic demand.

The yellow metal is a natural target for Chinese flight capital. We are still close to the bottom of a five-year bear market in gold created by an unremitting seven-year bull market in global stocks.

Only three months ago, the Federal Reserve was threatening eight consecutive quarters of 25-point interest rate rises, according to former governor Richard Fisher.

When the stock market threatened to commit suicide as a result, that was taken off the table. The latest rally will allow the Fed to give us one, or possibly two more quarter point rate rises this year, but no more.

In the meantime, the rest of the developed world, like Europe and Japan, has moved to negative interest rates, in some cases quite impressively so.

This is fantastic news for gold, and has given us some meteoric moves in both the barbarous relic and the miners.

There is more good news to come. Slowing global growth, the prospect of more sudden Yuan devaluations, and rising energy debt defaults in the US have all made gold sparkle more brightly than ever.

Not only that, we are starting to see the seeds of nascent inflation, long a major gold driver. Hiring has been on a tear in the US, with the headline unemployment rate plunging to 4.9%, a decade low.

Ratchet it down to 4.5%, and new wage demands will become irresistible. This has long been considered by economists to be the ?full employment rate?, where everyone in the country either has a job, or is in between jobs, except for my cousin Milton, who hasn?t had a job in his life.

We all have cousin Miltons.

Followers of the Mad Hedge Fund Trader Trade Alert service have already coined it twice this year with my bullish calls on gold. More are to come.

All that is needed is a good entry point, always the million dollar question. Wait for the current rally in stocks to eke out a few more points, which will bring further gold weakness.

Then jump into (GLD) calls, call spreads, outright ETF shares, and gold miners like Barrick Gold (ABX) and Newmont Mining (NEM) with both boots.

It?s a trend even my cousin Milton can spot.

One of my favorite research pieces to read every year is Warren Buffet?s annual letter to the shareholders of Berkshire Hathaway (BRK/A),his gigantic holding company.

Not only does it paint an excellent broad-brush picture of the US economy, it is also witty, funny, and downright educational, even for old farts such as myself.

Warren and his long time partner Charlie Munger own such a big chunk of the US economy, about 3%, employing a staggering 361,270 individuals world wide, that he has a truly unique 50,000-foot view of what is happening.

For example, his BNSF railroad took it on the nose with the collapse of the US coal industry, but made it back with the rise of rail oil shipments.

Driverless cars promise to have a huge and negative impact on the insurance industry and car dealerships. Traditional print publications continued to be devoured by the Internet. Warren sees it all before anyone else.

Warning: Buffet doesn?t do technology, a sector that he has never understood, and which largely doesn?t pay dividends. Warren is definitely an old economy guy.

Buffet has also been reading my Diary of A Mad Hedge Fund Trader since its inception eight years ago.

He likes to tell his investors that he got the idea to take a 5% stake in Bank of America (BAC) while reading research in the? bathtub. What he DOESN?T tell them is that he was reading MY research in his bathtub.

My followers earned a 400% profit over a single weekend on (BAC) call options on that trade.

Berkshire Hathaway shares suffered an uncommonly difficult year in 2015, shedding some 1.2%, even though the book value per share rose by 6.4%. Over the past 51 years, the shares have rocketed from $19 to $155,501, a 19.2% return compounded annually.

It has been a performance for the ages.

Dad! Where were you?

Buffet starts out by listing his highlights for the year.

He invested $5.8 billion to improve the service of his BNSF railroad, which carries 17% of America?s rail cargo. It was one of the largest single capital investments in US history, and will bring substantially greater profits in years to come.

BNSF, along with Berkshire Hathaway Energy (power utilities), Marmon (manufacturing), Lubrizol (chemicals), and IMC (tools) were his five most profitable investments, seeing profits rise by $650 million to $13.1 billion.

In 2016, they will be joined by a sixth powerhouse, Precision Castparts (aircraft parts), which he picked up recently for a cool $32 billion.

Berkshire?s four largest holdings are in American Express (AXP), Coca-Cola (CCE), IBM (IBM), and Wells Fargo (WFC). In addition, he owns call options which can be exercised into a major position of Bank of America (BAC).

Buffet?s approach here is to take minority stakes in great business with steady earnings streams, rather than 100% ownership in so-so business. He then leaves them alone and lets them work their magic. Cash flow is king.

All of these companies consistently buy back their own shares, increasing the portion of profits paid to Berkshire.

Long time followers of Buffet are well aware of his love affair with the insurance industry. The ?float? or the premiums received and held in reserve against future claims, amounts to $87.7 billion and finance the rest of his operations.

GEICO, which Warren has been in and out of several times over the decades, has a gecko that appears to be everywhere.

Despite the rise of global warming, claims from natural disasters are actually falling, which is great for profits.

In the rest of his letter, Buffet delves into the esoterica of industries he owns as diverse as manufactured homes, rail car leasing, furniture, and running shoes.

All in all, it is a tour-de-force of US industry. I highly recommend it.

In fact, it you don?t mind the volatility you might pick up a share of (BRKA), that is, if you can afford today?s $211,115 price tag.

To read that last 51 years of Buffet?s letters, please click here at http://www.berkshirehathaway.com/letters/letters.html.