This is The Wall Street Digest Hotline Update for Tuesday, January 9, 2007, at 6:00 p.m. EST.
Investors were not inclined to push stock prices in either direction today. At the close, the Dow lost 7 points, closing at 12,416; the Nasdaq added 6 points, to close at 2,443; oil closed down $0.45 to $55.64 per barrel; and gold closed up $5.60 at $615.00 an ounce.
Yesterday, the headlines proclaimed that Russia had shut down the flow of oil to Europe. Today, oil fell below $55 a barrel before closing at $55.64. The most significant market-moving force today is faster creation of money by the Fed to foster faster economic growth for the purpose of supporting the housing industry. There are increasing signs that housing has begun to bottom. The most important point, however, is that faster creation of M3 money by the Fed has always pushed stock prices higher.
The U.S. Dollar Index has moved above 84 on a technical bounce. Without central bank support, the dollar will resume falling. Currency traders expect the dollar to drift lower this year.
The stock market is undervalued by 31 percent. Add more liquidity to the banking system and stocks should move much higher in 2007.
You should be fully invested. Stay close to our telephone/e-mail/website Hotline Updates. We will continue to recommend additional global/international investments that will benefit from a falling dollar. At least 30 to 50 percent of your portfolio should be invested in global/international investments.
The next Hotline Update will be on Friday, January 12, 2007, at 6:00 p.m. EST.