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January 3, 2007!

The Markets

When asked what the stock market will do, J.P Morgan (1837-1913) replied: "It will fluctuate."

While 2006 will be remembered as a turn-around year, it didn't end with a celebratory party. The last week of the year was a bit of a roller coaster with indexes showing gains early on in response to declining oil prices and moderate retail sales; signs that could indicate a need for the Federal Reserve to ease interest rates, according to Barron's Online. By the end of the week, strength in housing sales dampened those hopes, and profit-taking eroded some of the earlier gains.

Despite uncertainties in 2006 over the geopolitical landscape, energy prices, interest rates and economic growth, foreign markets were hot, commodities surged, and the dollar dropped. US equities did put in an impressive nominal performance with the S&P 500 rising 13.6%, although that only placed it 58th out of 80 global stock exchanges as tracked by Bloomberg. 20 of 21 EAFE countries achieved double-digit returns. Peru, Venezuela, Vietnam, and China all rose at least 100%. Another 29 countries rose at least 30%. Gold rose 23%, while silver rose 46%. The Euro rose 11% and the British Pound rose 13%. The only countries that were meaningfully weaker than the US were Japan (with a flattish stock market and a currency which couldn't rise against the dollar) and a handful of countries in the Middle East—Kuwait, Lebanon, Jordan, Qatar, United Arab Emirates, and Saudi Arabia all saw their stock markets fall on the year.

The Wall Street Journal is optimistic in its predictions for 2007, reporting that strategists believe U.S. markets will gain 5% and 10% during the year with interest rates staying low and the economy growing slowly and steadily. These experts predict that U.S. large company stocks will benefit the most during a year marked by slower economic growth and a weaker dollar. Barron's Online's pundits expect that European equities will produce a fifth consecutive year of positive returns, and that emerging economies—which were contributing more than one-half of global growth recently—could produce attractive returns for investors in the new year.

A NEW YEAR'S RESOLUTION WORTH KEEPING
Avoid fees that take a big bite out of your wallet. Here are some of the fees we really hate to pay.

1. ATM Fees. According to Bankrate.com, ATM surcharges hit a new record during the fall of 2006. The average ATM fee assessed, if you didn't have an account at the bank whose ATM you were using, was $1.54! Plus, your bank probably charges you for using an ATM that is not part of its system. If your bank charges $1.25, then you've paid more than $2.75 in fees. If that doesn't sound like much, do the math. If you take out $20, you're paying almost 15% in fees! If you don't have a choice about which machine to use, make sure you withdraw an amount that minimizes the cost of the fee. If you take $100 out, a $3.00 fee is just 3%. A better solution may be to get cash when you pay for groceries or other items with your debit card.

2. Resort Fees. If you went on vacation and your hotel charged a 'resort fee' that significantly increased your bill, you weren't alone. According to Business Travel News Online, PricewaterhouseCoopers reported the hotel industry raked in $1.6 billion in resort fees during 2006, and they predict fees will increase by 7% for 2007. Fees range from $10 to $30 per person per day, according to CNNMoney.com. That can really add up, and many hotel chains don't tell you about the fee until you arrive. The only way to avoid paying a resort fee is to ask the hotel whether they charge one before you book a reservation, and to choose an alternate accommodation if they do.

3. Gift card activation fees. So, you thought it would be a good idea to give your child or relative a bank gift card that could be used anywhere. If they didn't have expiration dates and charge fees that reduce the card's value (including activation fees, transaction fees, monthly maintenance fees, balance inquiry fees, and replacement fees), gift cards would be a wonderful gift. Some even charge a fee for not using the card! According to ABC News, Visa and American Express charge activation fees of $3.95, while MasterCard charges $9.95 to purchase a gift card. What can you do? Read the fine print and know what you're buying.

Did You Know?

• Wall Street got its name during the 17th century, when an actual wall formed the northern boundary of the New Amsterdam settlement. The wall was dismantled by the British in 1699.
  
  
• The New York Stock Exchange began in 1792 when 24 brokers met under a buttonwood tree facing 68 Wall Street.
  
  
• The Dow has now gone over 900 trading days without even a 10% correction. The current advance is among the 5 longest uncorrected advances on record.
  
  
• Also, we're now in the fifth-longest streak since 1928 in which the Standard & Poor's 500 index, the benchmark for the U.S. stock market, has not experienced a 2 percent decline. The streak began July 13 and has lasted 115 trading days.

Weekly Puzzle

The ages of a father and son add up to 66. The father's age is the son's age reversed (e.g. AB & BA).
How old could they be? Click here to view the 3 possible solutions.

Happy New Year!

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.