This is The Wall Street Digest Hotline Update for Tuesday, June 10, 2008, at 6:00 p.m. EST.
Falling oil prices lifted stock prices today. At the closing bell, the Dow rose 9 points, closing at 12,289, while the Nasdaq fell 10 points, closing at 2,448. The S&P 500 closed 3 points lower at 1,358. Oil closed $2.68 lower at $131.67 per barrel, while gold closed $28.70 lower at $869.70 an ounce.
There is increasing evidence that an abundance of liquid cash is chasing oil futures and the energy ETFs, which is pushing oil prices higher. At the moment, oil supply and demand is balanced. However, we continue to use more oil than we are finding. Hence, oil prices will continue to move higher until the global economic boom peaks in late 2009 or 2010.
Interest rates have bottomed; hence, bond prices are falling. Market interest rates will be rising in 2008 because of inflation. The Fed Funds rate will be rising in 2009 because of rising inflation from the oil bubble and the commodities boom. There is no reason to own bonds today.
Let's continue to avoid the housing sector. Also, I would not purchase residential nor commercial real estate. The housing market will not bottom this year while housing prices are still falling and "for sale" inventories are still rising. Worse yet: Because of foreclosures, bank-owned homes are not included in the record number of "homes for sale" inventories, indicating that the true inventory of homes on the market is much greater than we're being told.
Let's also avoid the financial stocks and the banking stocks. And be sure to keep a 15 percent stop-loss on all positions. Rumors could sink Lehman Brothers in much the same way that rumors caused the failure of Bear Stearns.
Stay close to our Tuesday/Friday Hotline Updates. I will continue to trim our global/international holdings because of the dollar and I will also be adjusting our portfolio of recommendations to capture maximum profits from an eventual stock market rally.
The next Hotline Update will be on Friday, June 13, 2008, at 6:00 p.m. EST.