Stocks Slightly Higher into Final Hour on Lower Long-term Rates, Buyout Activity

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, sector performance is mostly positive and volume is above average. HedgeFund.net reported on Monday that emerging market hedge fund assets have risen from $40 billion at the end of 2003 to $175 billion at the end of 2006 or a 337% increase. Emerging market hedge funds "have been springing up like the proverbial mushroom in the rain" and "countries from Romania to Vietnam became the focus of huge sums of hedge fund inflows in 2006," according to the report. The column concludes that the "fundamentals and the potential of these markets seem to outweigh any fear of volatility" and that even though "smart money has been in this space for a while," it "does not imply it is time to exit." Considering the general public's shunning of U.S. stocks and overwhelming affinity for emerging market equities, I would argue that this is just more evidence of the extreme complacency engulfing emerging market investors. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates, short-covering and stable energy prices.