Table of Contents

1.  Market Outlook
2.  How a Falling Dollar can Make Americans Rich
3.  Housing Bust: There's a Way to Profit in Any Situation
4.  Additional Investing Ideas
5.  Investor Trivia -- Infrastructure Spending
6.  Featured Topic -- Investing in Today's Russian Economic Boom
7.  Free Investing Resources

Today's Top Stock Picks

How a Falling Dollar can Make Americans Rich
Many Americans fear the weakening dollar, but investors should know there is opportunity in the decline. Read More. . .

Housing Bust: There's a Way to Profit in Any Situation
The real estate market is on track to have its worst showing in 40 years in 2008, but there's a way to hedge yourself against this correction. Read More. . .

Market Outlook

The market had been on a roll lately, but that winning streak came to an abrupt end this past week as all the major averages lost ground.

Shortly after Thanksgiving, the Dow Jones Industrials slipped to a low near 12,700 amid further signs of trouble in the financial sector. However, as chatter for a rate cut began to reach a crescendo, the Dow recouped 1,000 points over nine trading days -- closing above 13,700 this past Monday. But that's when the wheels fell off.

As most expected, the Fed trimmed interest rates by a quarter-point and left the possibility of future rate cuts on the table. However, as troubles in the housing and credit markets have spilled over and threatened to derail the entire economy, many investors were hoping for a more aggressive half-point cut to stimulate growth. Wall Street voiced its frustration loud and clear, sending the Dow tumbling nearly 300 points, or about -2%, while the S&P 500 and Nasdaq Composite both suffered even steeper percentage declines.

While a half-point cut would certainly have provided a shot of adrenaline for weary consumers, the Fed must carefully balance economic growth with inflationary concerns. It takes time for rate cuts to take hold, and cutting too far too fast could spark inflationary fears. And judging by data released later in the week, their prudence may have been justified.

On Thursday, the Department of Labor announced that wholesale prices (as measured by the Producer Price Index) shot up +3.2% in November -- the sharpest increase in 34 years. While most of that increase was attributable to a spike in gas prices, core inflation excluding food and energy still rose +0.4%, about double what economists were expecting. Meanwhile, core prices at the consumer level rose at the fastest pace in nearly a year.

The twin threats of slowing economic growth and mounting inflation -- or the dreaded "stagflation" -- offset positive news elsewhere, including stronger-than-expected retail sales figures and a collaborative effort from central banks throughout the U.S. and Europe to inject cash into the credit markets. Against an uncertain economic backdrop, the mixed signals left all the major averages with heavy losses of more than -2.0% for the week.

Looking ahead, many are expecting yet another rate cut early next year, which will exert downward pressure on an already beleaguered U.S. dollar. Fortunately, Nick Lanyi, editor of StreetAuthority's new High-Yield International newsletter, explains why a falling dollar can be great news to investors holding foreign securities.

In the meantime, there looks to be more misery ahead for the homebuilding sector. However, High-Yield Investing editor Carla Pasternak shares her thoughts on a unique security that moves in the opposite direction of an index of 20 large domestic housing stocks. If you're looking for a way to profit from this severe downturn, then Carla just might have the answer.

Good Investing!

-- Nathan Slaughter
Co-Editor
TopStockAnalysts Digest

Compared to the S&P's +3.5% gain this year, one of the most popular foreign benchmarks -- the Morgan Stanley MSCI Europe, Australasia Far-East Index, or EAFE -- is ahead +10% in U.S. dollar terms.

What's driving these international stocks to new heights? Economic growth is the main force -- the International Monetary Fund (IMF) forecasts the world economy will grow more than +5% this year, slowing to a still healthy +4.8% next year. However, the U.S. economy is expected deliver economic growth of around +2.0% this year, and that figure should fall in 2008. That's a marked decline from the +4.2% growth it posted in 2004.

Then there is the falling dollar. As the U.S. economy cools and the Fed continually cuts interest rates, investors are moving capital out of Treasury bonds and into foreign assets -- helping to push them higher. And as a result, foreign currencies are continuing to strengthen against the U.S. dollar. The U.S. Dollar Index, which measures the value of the greenback against six major world currencies (the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc), is down nearly -10% this year.

The good news for U.S. income investors is that a weaker dollar translates into stronger returns from overseas investments. For example, ADR shares of Italian utility Enel (NYSE: EN, $59.01) are trading at around $59 per share and provide an annual dividend of about $3.40. The share prices and dividends of Italian stocks are based on the euro. Right now, the euro is worth $1.44. That means EN's share price is equivalent to about 41 euros and its dividend equates to about 2.36 euros.

Going forward, suppose the dollar weakens, and one euro is now worth $1.60. Since Enel's share price is based on euros, its value would increase about +10% in U.S. dollars. EN would now be worth about $66, and its annual dividend would jump to $3.70. And keep in mind this takes into account no dividend increases or share price appreciation -- it is just the effect of currency exchange. Considering that shares of Enel have risen about +15% in the last year, your returns would likely be even more.

As you can see, investing in international high-yield securities can add an extra zip to your income stream. That's why we focus only on foreign securities paying the best dividends in our new newsletter, High-Yield International.

Whether they be in China, Italy, Brazil, or some other far-away destination, we make it our duty at High-Yield International to seek out the companies and securities paying the richest dividends. So while your friends may be stuck with the diminutive yields offered in the U.S. (the S&P 500 offers an average yield of only 1.7%!), you'll be earning a rich income stream and outsized returns by looking abroad.

And we've prepared a complimentary special report to give you a taste of our new international income-investing service -- High-Yield International. Read it today and we'll reserve your spot on our "V.I.P. List," giving you the opportunity to save an additional $100 off the already discounted charter rate. Only V.I.P. members will be entitled to this discount, so make sure you're on this list!  Visit this link to join the High-Yield International V.I.P. List and get your complimentary report.

The Morgan Stanley Capital Protected Bear Notes (AMEX: HPB, $13.53) are a bet that the U.S. housing sector will continue to deteriorate. Inversely tied to the Philadelphia Housing Index (HGX), HPB goes up when the index goes down and vice versa. The HGX itself is based on 20 large U.S. housing companies -- residential builders, mortgage lenders, and firms that supply construction materials -- in other words, a cross-section of the building industry.

The notes are capital protected -- that is, they are guaranteed to return $10 per note when they mature on August 30, 2010. There is no provision for early redemption, but they can be traded at any time. The notes do not pay regular interest, but rather give a one-time dividend at maturity.

Since the notes were issued in May 2005, the HGX has fallen from 264.33 down to 140.56, providing a nice return for current holders of HPB. However, the question now is: "Has the subprime basement been reached?" We believe the answer is: "Not yet."

Here are some reasons. The National Association of Homebuilders Housing Market Index assesses builders' beliefs about home sales. In November, it declined to 19 -- the lowest level since 1985.

Further, new home sales are expected to decline next year. In 2006, 1.05 million new homes were sold. That figure is expected to decline -24% to just 796,000 homes in 2007, and another -13% to 693,000 homes in 2008.

Moreover, mortgage originator Fiserv Lending forecasts that median home prices nationwide will fall -5.7% in 2008. That decline would make it the worst year for real estate in at least 40 years. The industry is expected to be hampered by tighter lending standards, rising defaults on mortgages and falling existing home prices.

Comments from the industry reflect the doom and gloom. Robert Toll, Chairman and CEO of luxury homebuilder Toll Brothers (NYSE: TOL), says U.S. conditions vary from "miserable to outright purgatory." Daniel Mudd, President and CEO of Fannie Mae (NYSE: FNM), predicts that there won't be "a bottom until the end of 2008, and then we have some period of time to work our way back up again."

Even late 2008 might be optimistic. Continued high oil prices and a possible recession would further dampen already battered consumer confidence and put off a recovery even further.

Homebuilding stocks typically anticipate a recovery in the industry between six and nine months before the recovery happens. Owners of HPB should therefore monitor first-quarter 2008 earnings reports of homebuilders to see if the outlook has become more upbeat.

Action To Take ---> Existing holders of the notes should hold their position. For new money, clearly the risks are higher. Still, the housing index may fall even further, making HPB suitable for somewhat more aggressive investors at this point.