This is The Wall Street Digest Hotline Update for Tuesday, September 18, 2007, at 6:00 p.m. EST.
The FOMC voted unanimously to cut both the Fed funds interest rate and the discount rate by 50-basis points today. Stock prices rallied strongly after the 2:15 p.m. announcement. At the close, the Dow surged 336 points, closing at 13,739, while the Nasdaq soared 70 points, closing at 2,651. Oil closed up $0.94 to $81.51 per barrel, and gold closed down $0.10 at $723.70 an ounce.
August home foreclosures were up 115 percent over the same period a year ago. Nevada, California and Florida had the most foreclosures. Bank repossessions jumped to 42,789 in August compared to 20,116 a year earlier.
The Bank of England (BoE) has nationalized the U.K.'s mortgage market. Last week, the Bank of England tried to stop the run on Northern Rock by providing emergency funding for the mortgage lender. When that didn't stop deposit withdrawals, the BoE yesterday guaranteed all the deposits of Northern Rock and all solvent banks in the U.K. The greatest monetary bailout of all time should work to sustain the global boom.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
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The next Hotline Update will be on Friday, September 21, 2007, at 6:00 p.m. EST