Those failures followed a decade of easy borrowing whose collapse left wounds to U.S. household net worth of some $13 trillion. Those will take years to heal but the GM failure seems analogous to the first step in a “Twelve Step” recovery program in which an addict admits an unmanageable life.

One immediate short-term impact will come from the substitution of Cisco Systems (CSCO-$19 on 6/2) and Travelers (TRV-$42) for GM and the almost equally hapless Citigroup (C-$4) in the much-watched Dow Jones Industrial Average. Unlike the weighted S&P 500 average, the Dow is an arithmetic average, thus the more probable higher numerical gains in the newcomers will assist the Dow in upward moves.

The Dow has a long history, begun by Charles Dow in 1896 with a list of 12 stocks of which only General Electric (GE-$14) remains as a member of the original cast. The Wall Street Journal makes these calls, having blackballed through the years such lost souls as National Lead and the U.S Leather Company.
As I write, the Dow still needs only about 40 more points to join the S&P 500 in positive ground for 2009. That should come soon along with the predictable jabbering on the financial channels. Momentum is important and I would not be surprised to see this wave continue through 10,000 by yearend.

With Gross National Product contracting to a negative 6% only a few months ago, it seems questionable that GNP can recover to positive figures by yearend. That would leave stocks ahead of the economic recovery but a pause rather than another panic seems the more probable outcome.

One highly probable outcome is an increase in energy prices. The energy stocks recommended in last week’s column are all up as oil prices moved above $65 a barrel.  Although the global economic recovery will continue to be irregular, it is rebuilding demand for energy, particularly from the developing world. Oil prices are still pegged in dollars and U.S. deficits will inevitably soften the dollar, further boosting oil prices.

The supply of more easily recoverable oil and gas is finite and exploration companies will prosper, particularly once the big producers hasten to revive their outputs. Noble (NE-$37), the offshore driller recommended last week at $31 is still reasonably valued with a forward P/E ratio of only 6. XTO (XTO-$44), Occidental (OXY-$59), Statoil (STO-$22) and Permian Basin (PBT-$12, among others, continue their growth.

Oil seems headed for $75 a barrel, a move that would take pump prices back to three dollars. This will not help struggling retailers. Stock of Wal-Mart (WMT-$51) is old merchandise with only minor growth ahead this year. Target (TGT-$42) looks just a bit better and Costco (COST-$50) is always pinched on its gas sales when oil prices go up.

Amazon.com (AMZN-$84) has a 5-year 29% sales growth rate, more than the combined rates of all three of those much larger traditional retail chains. It’s an expensive stock with a P/E ratio nearly 50 on estimated 2009 earnings of $1.63. But it’s unique. In an age where everyone seems to seek individuality at all costs, its very active customer reviews draw millions of participants.

Having gone well beyond books, Amazon offers the world’s largest selection of electronic and general merchandise. It is innovative and strives to be the most customer-centered company in the world. These concepts were foreign to the old General Motors and we must hope that new GM may profit from its example. After all, as taxpayers, we own 60% of GM. That rescue cost $50 billion and the other stocks listed here are better bets. Still, it helped save an economy.
I plan to skip this column next week while I’m on the East Coast.

Declining production coupled with a prospective return to increasing demand guarantees higher energy prices. Priced in dollars, these will get an extra boost whenever the dollar begins to weaken. Alternative energy and related stock prices will also regain support. The Saudi oil minister noted recently that lower oil prices always lead to subsequent price jumps after a period of underinvestment. He also predicted a price rise in the $75-$80 range.
The timing of these increases is more uncertain than their inevitability. For portfolio management, it seems sensible to build and hold a solid core of stocks keyed to a continuing long-term increase in energy costs. My top recommendations for several weeks have been XTO Energy (XTO-$41) in domestic natural gas and Flowserve (FLS-$71) in oil service equipment.
Occidental (OXY-$63), Statoil (STO-$20) and Petrobras (PBR-$42) have proven their ability to find and extract oil and gas in difficult places. Transocean (RIG-$75) and Schlumberger (SLB-$54) are the leaders in oilfield service although the current downturn in investment will subdue their earnings for a couple of quarters.
Noble Energy (NE-$31) is an exceptionally well-priced addition. This Texas-based offshore driller currently has 63 rigs working in the Gulf of Mexico, the Arabian Gulf, the North Sea and Asia. Analysts forecast 2009 earnings in excess of $6.00 a share, a P/E ratio of only 5. Management is conservative by industry standards with a relatively restrained long-term indebtedness of $750 million and sales of  $3.5 billion, growing at 28%.
Petrochina (PTR-$109), which we sold two years ago at over twice its current price, deserves a renewed look. Backed by the Chinese government, it is expanding aggressively. This accounts for its somewhat pricey valuation, as its 2009 earnings will be about the same as Noble’s. It is an interesting play on both China and energy prices as is CNOOC (CEO-$124). Both have 4% yields.
Income investors should continue to consider Permian Basin Royalty Trust (PBT-$10). This provides monthly payments from established fields in western Texas. They vary widely with the price of oil but currently yield 6% with prospects of price increases. Nordic American (NAT-$33) is a well-run owner of 16 modern supertankers, up from 3 in 2004. It has an even more variable yield that usually ends up in double digits. It just completed another public offering that further strengthens its finances.