It seems kind of strange, but the market for virtual goods has become red-hot. Basically, these are nothing more than digital footprints, such as cool graphics used as gifts on a social network or even weapons in online games.

So how big is this market? According to Atul Bagga, an analyst at ThinkEquity, the market is expected to double this year to $1.6 billion. And by 2012, the market may reach $3.6 billion.

Is the market overpriced? Maybe it is cheap, or perhaps it is fairly valued. This is the third in a series examining the issue. Still, it has been my contention that it does not make any difference because no matter how the market is valued as a whole, there are plenty of cheap stocks out there to accommodate a large amount of capital allocation even this deep into a bull run.

If you would like to follow along from the beginning, the initial post screened stocks for lower than market average P/E ratios: Serious Money: Market Looks Cheap to Me -- 35 Stocks. In the second installment, I looked at yield and PEG ratios: Serious Money: Still Cheap Market -- 35 Stocks + Yields & Growth.

Let's try and reduce the gambling by examining the facts and ignoring what the bulls and bears are chatting up at the moment. We started the process by screening for lower than market average P/E ratios, see: Serious Money: Market Looks Cheap to Me -- 35 Stocks.

Two more important criteria influence today's review: the yield, a favorite of "my pal Warren"; and the price-to-earnings-to-growth (PEG) a focus of Peter Lynch, the retired fund manager extraordinaire of Fidelity's Magellan Fund.

We frequently receive comments that the market is overpriced. Recently one of our active readers commented that the market P/E was 30, which it's not. The actual rate (S&P forecast) has been even higher at times due to the volatile market.

The average should trend closer to the long term P/E of 15.7 in the next few years. However, I have reviewed companies often covered on our site and come up with a list of 35 stocks that have price-to-earning ratios below the long-term average already. I think there are dozens of bargains regardless of the status of the overall market.

Here are some highlights from this past week's earnings coverage on BloggingStocks:

• Advanced Micro Devices Inc. (AMD) shares declined despite an earnings beat and a positive outlook
• Bank of America Corp. (BAC) reported that its Q4 loss widened more than expected by Wall Street.
• Capital One Financial Corp. (COF) reported better-than-expected earnings but shares declined.
• Colgate-Palmolive Co. (CL) is seen as on-track to record double-digit earnings growth in 2010.
• Cree Inc. (CREE) strong earnings and revenue growth sent shares to a new 52-week high.

Today started out on a weak note after the jobs data showed that the weekly jobless claims was heading back higher again after a reprieve. The huge 10%+ GDP in China did not add much other than the notion that serious rate hikes might be needed there. Then after a solid spate of earnings, President Obama introduced yet one more new attack on bank trading and investing activities. This immediately took a bite out of big money center banks, but added to regional banks. This is just creating more and more volatility, and more and more regulatory and political uncertainty that investors prefer.

Here are the unofficial closing bell levels:

Dow 10,389.88 -213.27 (-2.01%)
S&P 500 1,116.48 -21.56 (-1.89%)
Nasdaq 2,265.70 -25.55 (-1.12%)

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While eBay (EBAY) has had a mixed record with M&A, there is no doubt that the company did pull off one of the best deals in Internet history: the purchase of PayPal (I included it in my recent piece entitled "The Best M&A Deals of the Decade").

Just how good? In eBay's latest quarterly report released Wednesday after the bell, PayPal was the growth driver as the company reported a 16% jump in revenues to $2.4 billion. Net income came to $1.4 billion, which was a nice increase from the $367 million in the same period a year ago. Taking out one-time items, the earnings were 44 cents per share. The consensus was 40 cents per share.

U.S. stock market futures changed earlier direction and edged higher following several better-than-expected earning reports. Still, the market awaits a slew of economic reports, as well as results from Goldman Sachs. With concerns about China, futures move upward was muted.

Update 8:45 a.m.: After a disappointing jobs report that showed the number of newly-laid off workers seeking jobless benefits unexpectedly rose last week, stock futures fell, even as Goldman Sachs (GS) reported strong results.

On Wednesday, Wall Street markets sold off due to mounting concerns about China's efforts to tighten bank lending. As a global market driver and a major consumer of commodities, these moves could have international effects. Major indexes skidded over 1%.

Look, 2009 was a "flush" year. Market rallies were constrained by the low baseline set at the end of 2008, unemployment was high and caution defined nearly every corporate decision. The travel market sucked. The art market sucked. The financial industry labored on with the support of taxpayer money while 140 banks were forced to call it quits. So, we turn to the new year, as yet undefined, for excitement of the type we want ... and it seems likely to deliver. As Nero played from the rooftops, the social media industry inched forward to the climax we hope to see this year -- the initial public offering.

The action hasn't really begun, and the signals emitted are open to various interpretations. Nonetheless, Facebook's new dual-class stock structure is hard to miss, as it would protect the influence of early entrants to the company -- either as investors or options-compensated employees in the event that the 350 million-strong social networking site brings ownership opportunities to the public.

Jack Dorsey is accustomed to dealing in small. In 2006, he co-founded social media sensation Twitter, which traffics in content bites that are no more than 140 characters in length. He left his position as CEO a year ago (and remains chairman) and is now focusing on his newest endeavor: mobile payments. He came up with the idea for his new company, Square, a year ago and hopes it will revolutionize how money is exchanged.

The first product that Square is bringing to market lives up to its name: it's a small cube-shaped credit card terminal that can plug into an iPhone's headset jack. The problem that the device is intended to solve is the swift and easy transaction of credit card payments for anyone. It was inspired by the plight of Dorsey's friend, Jim McKelvey, a glass artist who lost a $2,000 sale because he couldn't accept credit card payments.

Craig Newmark testified on Thursday that he regretted getting into bed with auction site eBay (EBAY) almost as soon as his head hit the pillow. The founder of Craigslist, the online classified site that has decimated large chunks of the newspaper industry, sold 28% of his company to eBay in August 2004. Within months, he recounted, eBay began to pull back on its promises, causing him to regret the decision.

During the negotiations more than five years ago, Meg Whitman, who was the CEO at the time, told Newmark that eBay would be happy to sit back as a minority shareholder for several years and use Craigslist as its exclusive venue for classified ads. Yet, shortly after the deal closed, eBay pushed for a bigger piece of the company and acquired an online classified company outside the United States. Both Whitman and company founder Pierre Omidyar testified that eBay was clear about its intentions.

The lawsuit, filed by eBay against Craigslist, involves the size of the former's minority stake in the privately held, relatively low-tech and highly popular classified site. eBay claims that Newmark diluted its share to 24% through a "self-dealing" scheme to issue more equity.

The next month is the one that matters most to the retail sector. It will dominate the conversation when Q4 and full-year financials are reported. A strong Black Friday brought with it concerns that momentum will fade, but opportunity is not dispensed equally. Some retailers will come through the season better than others, and industry experts have already chosen their favorites.

Michael Dart, senior partner at Kurt Salmon Associates, says, "We are seeing a paradigm shift in the way consumer interprets value and what they are looking for." The winners will do more than pitch deep discounts to convince consumers to part with their hard-earned cash.

Online retail sales are expected to increase 3% to $28.8 billion for this year's holiday season. The analysts at comScore include traditional retailers, like Macy's (M) in this estimate, but don't count auction sites like eBay (EBAY), travel or corporate sales. The estimate compares favorably against the National Retail Federation's forecast of a 1% year-over-year drop for all retail sales and exceeds the industry's most aggressive holiday season sales estimates of 2%.

Last year, online retail sales fell 3% for the holiday season, the first decline since the industry started keeping score in 2001. Even if we don't hit the 3% growth level this year, 2009 is still expected to be better than 2008, now that the economy has stabilized (at least relative to last year).

Look for eBay (EBAY) to more than hold its own this holiday season, which is one major reason I'm reiterating my buy rating for the company, first recommended on May 14, 2009, at a price of $16.84. If you bought EBAY in May, you're up about 40%.

Earlier this year, eBay sold a 70% stake in Skype for about $2.75 billion, enabling the company to focus on core operations at eBay and at PayPal.

Last summer, eBay (EBAY) launched its iPhone app, which turned into an instant hit. If anything, it showed that mobile commerce was not a pipe dream as the downloads reached more than five million.

So, in anticipation of the Christmas shopping season, eBay has launched a new iPhone app. It's called "Deals."