The investment world is filled with new theories about how best to make money. But over the years, I've found that the best way to produce solid, market-beating returns is to take advantage of the wisdom of history's best investors. That's why I created my Guru Strategy computer models, and it's why each week I take a look at what some of the gurus I keep an eye on are saying.

This week, a number of the gurus I follow weighed in. In general, most are finding opportunities in the market. But where they are finding those opportunities varies pretty widely.

For example, take two of the most successful investment gurus in the world: hedge fund manager John Paulson and the great Warren Buffett. Earlier this week, The Wall Street Journal reported that Paulson is making a big move into gold, launching a new fund that focuses on shares of gold miners and other gold-related shares and gold derivatives. This comes in addition to Paulson's already significant gold-related holdings.

Buffett, on the other hand, doesn't seem too keen on gold -- despite his belief that major inflation is coming. 

Governments around the world unleashed Keynesian-style stimulus in an effort to kick start their economies. And as expected, tax revenues plummeted while fiscal deficits soared.

Here in the United States, the deficit for fiscal 2009 came in at $1.4 trillion or 9.9% of GDP -- the highest since 1945. Among the OECD nations, the deficit is expected to peak at 8.2% of GDP in 2010. President Obama tried to head off  criticism this week by recognizing that indiscriminately adding to the national debt could undermine the nascent recovery.

It was always a race against time: Borrow and spend to get the economy growing again before the vigilantes in the bond market revolt, drive up interest rates, and force a cut in spending and an increase in taxes. For awhile, it worked. Interest rates fell. Government funds bolstered the economy via "cash-for-clunkers" and the homeowner tax rebate.

But now, unfortunately, it appears the bond rebellion has begun.

By Vitaliy N. Katsenelson, CFA

This presentation covers the main concepts discussed in the series and shows how we are positioning for this very different economy. 

The stock market’s recent rally followed a typical, by-the-book, coming out of recession trajectory – it was cyclical.  The stocks most sensitive to the economy appreciating the most. 

 Let me demonstrate what is priced into cyclical stocks by looking at Caterpillar (CAT) – your typical American blue chip industrial, cyclical stock – one that in theory should prosper during global economic recovery.  

 Third-quarter sales were down 44% from last year. China was its brightest spot as sales there dropped (only) 26%.  The stock is around $60, more than double its low in March and not far from $85, its all-time high, reached in 2008 when global growth was its oyster.  The company expects to earn around $2 this year (excluding recurring nonrecurring charges) and expects sales to grow in teens next year from this year’s base.  But even if CAT were to earn $3 next year, investors are not paying for next year’s earnings, as they’d paying 20 times next year’s earnings. 

 This cyclical stock is not worth that; investors are paying for what happens beyond 2010. 

Listening to the management team at Coach (COH) talk about the company's business is an odd experience.

This “fashion” company spends a lot of time talking about “engineering” its products and building production and distribution “infrastructure.” (Want to hear a sample of Coach-speak? Tune into the company's presentation at the Morgan Stanley Global Consumer and Retail Conference here).

And that's a major reason I like Coach shares in the current tough environment for luxury goods.