Housing Woes Will Help, Not Hinder

Here's a headline, in today's Wall Street Journal, that I have read for the umpteenth time. It's a plug-and-play headline:

"Housing Risks Called Big Threat to Stocks."

You could have run it last year. You could run it next year. The problem is that the conclusion is wrong. Housing risks may be the only hope for this market.

We have a supply-and-demand problem for stocks. We have a consistent supply coming, mostly from new companies coming public but also from secondaries now that stocks have moved up.

But our demand, beyond stock buybacks, doesn't cut it. We need to see the money flushed from the sidelines.

We can't get it flushed from the sidelines in the inflation data. A soon to be disastrous energy policy based on raising chicken and beef prices to sell more ethanol, coupled with Rest of World demand for all metals, will make it so we will not get good inflation numbers.

But the bond market, despite all of the negative prognosticators, is telling us to ignore those intractable problems. The Fed, in the less-worried-about-economic growth, more-worried-about-economic slowdown statement, is telling us it has an eye on weakness too.

However, the only weakness is in housing. I repeat, the only weakness is in housing. Given that somehow this administration promulgated the notion that everyone should get a house, plus the ease with which money was given out a couple of years ago because of the low short-end rates and a belief that a house was the best asset to own, we've got a national problem on our hands.

Only that problem -- many are calling it a crisis but I resist because I know, in the end, we are a growth economy with good employment -- can save us. Only housing's negativity can get the Fed to move, which will then get the money flushed from the sidelines, which will then get stocks to move, because we need that demand. That's how you get to "Housing Risks Called Big Help to Stocks," that we really need to believe in less we miss the big move that will come when the Fed cuts.

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