This blog post originally appeared on RealMoney Silver on Oct. 31 at 8:52 a.m. EDT.
The media were preoccupied yesterday with the drama surrounding Merrill Lynch (MER) and its chairman Stanley O'Neal.
While so distracted, the media missed some very important housing data -- the release of the S&P/Case-Shiller Home Price Index for August, which shows fresh signs of housing weakness.
When I link that release with the negative wealth effect stemming from an extended period of lower home prices (2006-10) and the stretching of the consumer's balance sheet into uncharted territory, the burden of economic growth, as I have previously written, lies increasingly on the shoulders of the stock market. Historically, this has been a slippery slope of dependence.Many bulls endorse micro analysis over macro analysis. And this often makes sense -- especially if one can recognize the "anointed ones" before they get anointed. Nevertheless, the headwinds expressed in today's opening missive -- similar to the identification of the housing slowdown in 2005 or the subprime mess in mid-2006 -- could save investors a lot of money by avoiding/shorting these sectors. I believe that the same applies to the far too optimistic economic, corporate profit and retail expectations by the body of market participants in the year to come.