This is The Wall Street Digest Hotline Update for Tuesday, March 6, 2007, at 6:00 p.m. EST.
Stock prices soared today as the global stock market melt-up resumed. At the close, the Dow gained 157 points, closing at 12,207, while the Nasdaq added 44 points, closing at 2,385. Oil closed up $0.62 at $60.69 per barrel, and gold closed up $7.00 at $646.20 an ounce.
Record global liquidity may produce a stock price melt-up to match the recent stock price meltdown. This meltdown mess was triggered by comments from Cheng Siwei, Vice Chairman of the National People's Congress, which is China's highest legislative body. Cheng said 70 percent of the domestically traded companies were worthless and should be delisted. He said, "We must force bad children out." A nine percent plunge in China's Shanghai Index followed. Let's continue to avoid all investments in China.
The stock market correction was aggravated by problems in the subprime lending market, which the Fed will probably seek to isolate. One thing is certain: The Fed will not raise interest rates nor tighten monetary policy with subprime lending problems and a housing market that could be in the process of bottoming. Local realtors tell me they are now out of the ER and into the recovery room.
Global liquidity, including the U.S., is at record levels. In 2006, global M&A activity soared to a record $4 trillion. January and February are up 16 percent over last year. A great boom and bull market will continue to unfold in the months and years ahead. The total put/call ratio is giving one of the strongest market buy signals ever. Another major market bottom unfolded today. You should become fully invested immediately.
The U.S. stock market is still substantially undervalued at 35 percent. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, March 9, 2007, at 6:00 p.m. EST.