What is next year going to be like for investors and savers? Guess what, no one really knows, but there are factors that give us confidence in predicting what the coming year will bring.

First, 2006 was a very good year, although it didn’t seem that way for much of the year. Right after the summer, things began to improve and kept right on going. Unless there is some cataclysmic event between now and New Year’s, this will be a stellar year for investors and savers. Stocks delivered solid gains across the board, and savers enjoyed the highest rates in several years.

Our economy is awash in cash. Corporations have enjoyed another year of record profits. Pension plans and other retirement vehicles continue to be replenished with fresh cash. University endowment funds and other institutional investors are loaded with investible cash, as are a number of foreign governments.

Simply, cash has three places to go: stocks, real estate or bonds. We know that real estate is in a bit of a decline, particularly in the residential sector. While bond yields are better, they are still not at the point that it is worthwhile committing funds for long periods of time. So where has the cash been going? Sure, there is a lot of interest in private equity and even commodities, but these still make up a very small part of the economy. The answer is stocks.

There is no real pressure on interest rates to increase, so the bond picture should remain fairly steady and unexciting. Real estate will take at least a year, maybe more, to recover, so stocks should continue to lead as the most attractive investment alternative.

All predictions go out the window if some unforeseen and terrible event takes place, and there are certainly areas of concern. But, in general, things look very good for equities. It is unlikely that 2007 will be as good as 2006. Most likely, returns will be in the high single digit range, but that is still very good.

Share prices of domestic and foreign companies are positively impacted by emerging middle classes in many parts of the world. Economies in Southeast Asia, Eastern Europe, South Asia and Latin America are improving, and as they do, their fledgling middle classes grow and are able to purchase the trappings of an increased socio-economic status. Most of the new middle classes want what the American middle class have had for years.