Just when you thought it was getting easy again in the markets, one more tough week showed us that this seasonally rough period won't make it easy for anyone. Housing took center stage with a fresh batch of data that showed the housing market is rapidly becoming stale, renewing fears of a not-so-soft landing.

Once again,


bloggers were all over the market action, and we'd like to share the best of their commentary this week with readers of the


. These posts best capture the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.

Let's take a look at

Jim Cramer

on how a housing slowdown won't crush us,

Rev Shark

on when a dip is just a dip,

Cody Willard

on why he's advocating patience and


(MSFT) - Get Report


Steve Smith

on LEAPs and

Tony Crescenzi

on the chances for a U.S. recession.

Click here for information on


, where you can see all the blogs -- and readers' comments -- in real time.

Cramer's Blog: A Housing Slowdown Won't Be a Disaster

Originally published on 8/24/2006 1:18 p.m. EDT

Housing ripples. They are everywhere now.


(WSM) - Get Report

Pottery Barn doesn't get hit because it has the wrong merchandise. It's because it has merchandise at all. You don't get the kinds of selloffs we are seeing in the


(LOW) - Get Report

and the

Home Depots

(HD) - Get Report

when people are thinking that their homes are good investments.

But how bad are they as investments? Are they suddenly just stupid? No, they are simply correcting the bubble we have had the last few years. Three years ago,

Toll Brothers

(TOL) - Get Report

was at $9. It's still really high since then vs. every other stock during that period. I regard Toll as a great proxy for the industry, because it makes the homes that are in a way the least affordable.

I think that we don't wipe out all of the value Toll has created in the last three years, but we might come closer to it than anyone expects right now. More important, I think that we repeal a great deal of the increase in home prices that has gone on. It's been unrealistic, and it is what the


targeting. It won't go fast; the market's too illiquid.

But I also don't buy into the catastrophic scenario. For one simple reason: We are a huge growth country with good growth in employment and good growth in wages. While there have been a ton of jobs created by real estate -- some say as much as 30% of the new jobs in this economy are related to real estate -- I still don't expect a housing recession to cause a jobs recession. I don't expect it because in the end the Fed can reverse the direction. A couple of Fed cuts, a decrease in the supply, a more realistic attitude among the sellers, and you have something that's not a crash but is still a wake-up call that lower prices might be here to stay for a while.

Why not be more bearish? Because in the end, homes are not stocks. You can live in them. People always act as if they are some discretionary commodity. Some, such as condos in Florida, might be. The rest? Homes that people live in. They are tax-favored. They give you a chance to save up over time. They are still your No. 1 investment. That hasn't changed.

It won't until we trade them freely and we take away the tax advantages, and that's not going to happen anytime soon.

At the time of publication, Cramer had no positions in stocks mentioned.

Rev Shark's Blog: When's a Dip Just a Dip?

Originally published on 8/24/2006 8:15 a.m. EDT

Failure is more frequently from want of energy than want of capital.

--Daniel Webster

The biggest problem facing the stock market is lethargy, disinterest and good old fashioned laziness. There simply is not enough energy out there right now to build substantial upside momentum, which leaves us vulnerable as those with recent gains try to protect profits and pressure the market.

Market momentum can be surprisingly resilient as it develops and expands; it has a tendency to carry things much higher than seems reasonable. However, it is also a very fragile thing once it suffers from setbacks, because it can die a very quick and painful death. Momentum feeds on energy but once energy starts to fade, momentum not only fades but can also start to work in reverse.

One of the most powerful forces affecting the market is fear that prices are going to move higher without us. In many cases the fear of being left behind is even greater than the fear of buying too late and suffering losses. What drives this fear is a market that continually ticks higher and offers little opportunity to buy on pullbacks. The great irony is that when we do finally see a pullback after a strong move, the anxiety to buy is suddenly not as great.

Buying on a pullback, which seemed like such a great idea in theory when things were strong, doesn't feel nearly as good when weakness actually does occur and we start to wonder if it may actually be the start of a more significant correction. Buying dips is a fantastic strategy in theory when the market is going straight up and not pulling back; it is much more problematic when we don't have any great insight into whether a pullback is a minor, temporary thing or the start of something much uglier.

The market's big problem now is that it is on the verge of squandering the momentum it generated last week. If the market does not show some energy to the upside, the dip buyers are going to give up their quest quickly and the sellers will press harder. Unfortunately, we are in an environment with low volume, little news flow and a poor seasonal record. Conditions simply aren't good for an energetic rally at this time. Also, the longer we go without following through on last week's rally, the less likely it becomes that we will.

As I've noted numerous times lately I am maintaining a very cautious stance. I'd like to be more aggressive but I can't find many charts I want to buy, nor am I feeling comfortable with the conditions in place right now for the broader market. I'll continue to play strong defense until I see a good reason not to.

The early action is indicating another mixed open. Overseas market were mixed with Asia down particularly hard while Europe was broadly higher. We have durable good and new-home sales reports on the economic agenda this morning and that is going to help set the tone.

Cody Willard's Blog: Only Patience and Microsoft Fit This Setup

Originally published on 8/22/2006 1:59 p.m. EDT

The economy's cooling, but corporate bond spreads remain at historic lows. The savings rate is negative, but the consumer's cash flows and asset ownership are at all-time highs. Housing's cooled and home inventories are spiking the way inventories of optical components did back in 2000, but corporate net cash balances are at all-time highs. Tech inventories are stockpiling higher, but they've done exactly that each of the last two years and it turned out to be a great time to buy tech. The stock markets can't catch any traction, as evidenced by the puny single-digit performance results in the broader indices in the last couple years, but investment managers have more cash on hand than ever before. Rates have gone from "please take this money" to "ain't no such thing as a free lunch," but they're still at historic low levels.

A few crosscurrents for us to navigate and analyze? You betcha. Whether economically-, fundamentally- or technically-speaking, it's a tough juncture out there.

The markets have been acting poorly for a reason. The outlook for the economy and earnings is tough to decipher at best and ugly at worst. Not that it's every "easy" to decipher, but so much of the excess cash that is lying around had its roots in a profligate


juicing the economy with free money. That free money is over for now. And crossing that shift from free money to money that'll cost you if you want to use it is a big, tricky beast to burden this market and economy.

The popping of the tech bubble followed by the Fed's moves to never-before-seen real rate levels and combined with the free-flowing information and capital that the Internet has enabled puts us squarely in new territory. We're never supposed to say "it's different this time," but certainly nobody can argue that we've ever seen this type of setup before.

I don't like it. I just don't like this setup. I think the Fed's gonna have to cut the fed funds rate at some point to stimulate the markets and economies again, but it's anybody's guess as to when that might be.

Despite this setup, I spend hours each day digging for new stock ideas. Regardless of what the economy and broader markets are going to do, there will be some huge winners in every sector. Somebody's going to figure out how to take market share from incumbents. Somebody's going to create a brand-new market and become a secular grower. I want to own those, because even if the market won't expand multiples during this time of uncharted territory, stocks that continue to grow their earnings strongly will be rewarded.

I also keep coming back to Microsoft. Though the stock has really popped since I made it by far my biggest position back on

May 10 despite the tech market's major meltdown, I continue to hold it steady.

Microsoft Still Charms
The stock hasn't lost its attraction, unlike other names

Click here for larger image.

Source: StockCharts.com

The company's giant, growing cash flows aren't about to fade regardless of what the broader economy does. For the first time since it rolled out the updated and improved Windows system in 1996, the company has a brand-new operating system that's a major leap forward. It also has a bumbling competitor in


(SNE) - Get Report

, though Nintendo's trying to make some inroads, and I think Microsoft might actually start using that presence of the Internet-connected Xbox 360 in the living room to start allowing users to pull video and music content from the Web. And MSN is the most underrated property on the Internet, worth many tens of billions, in my estimation.

I expect I'll be getting aggressive in the market -- perhaps long, perhaps short, perhaps hedged -- sometime in the next few weeks as we start getting more clarity about where the economy and rates are going. But in the meantime, I'm sticking with patience and Mister Softee as my places to be.

At the time of publication, the firm in which Willard is a partner was long Microsoft, although positions can change at any time and without notice.

Steven Smith's Blog: LEAPs of Faith in Homebuilders

Originally published on 8/23/2006 12:34 p.m. EDT

Another weak data point for the housing market has sent the group sharply lower today, and is now dragging the broader market down as concerns that a "hard landing" in real estate will slow down consumer spending, which of course will have a negative impact on the economy as a whole.

The put/call ratio has popped to 1.32, mostly on the back of heavy put volume in index products whose P/C is running around 2.9 this morning. That is nearing the highest levels of the year. The increase in put activity in index products over the past two days is a good sign of the type of broad market portfolio insurance

I was hoping would get established and would bode well for the market being able to make a run-up toward the May highs.

But the clouds over the housing sector are not likely to clear in the near future. As I mentioned in

yesterday's video, homebuilding stocks went nearly straight up for three years and have now been going nearly straight down for almost a year.

And as evidenced by comments from Bob Toll during the

Toll Brothers

(TOL) - Get Report

earnings call, even those in the industry see no bottom in sight, so trying to pick a bottom is a dangerous game.

The fact is, these stocks could barely get awarded a double-digit P/E multiple when they were showing 30% annual earnings growth, so the notion of a floor being in place because P/E's are in the 5 to 6 range, and the stocks have already declined some 50% to 70%, could be a value trap.

If 2007 earnings also decline at the 20% to 30% rate that is occurring this year, then the stocks could certainly fall another 25% over the next six to 12 months.

Because of the trending nature of this group, I would look at using long-term equity anticipation securities, or LEAPs, for establishing a directional bet in this sector. In most names, whether it be Toll,


(BZH) - Get Report



(LEN) - Get Report

, one can buy a spread that is one strike out-of-the-money and has width of $10 between strikes, for around $3 for the spread.

For example, with Lennar trading around $45, one can buy the $50/$60 call spread with a January 2008 expiration for around $3. Or if you are bearish and think this downtrend can continue, you can get the $40/$30 put spread with the Jan '08 expiration also for around a $3 net debit.

Tony Crescenzi's Blog: Can the U.S. Avoid Recession?

Originally published on 8/21/2006 at 9:55 a.m. EDT

I will be on CNBC at 12:30 p.m. EDT today discussing ways the U.S. will avoid a recession.

Here are the top factors:

  • High levels of corporate cash
  • Extremely lean inventories
  • Sharply growing exports
  • Strong U.S. banking system
  • Hearty government spending
  • Strong productivity trend

There are negatives to a slower pace of growth for the U.S., but for now it's a good thing because it will help wring out inflationary pressures. A couple or so quarters of this growth is desirable, but if it continues beyond that -- say into 2007 -- it will create the risk of a self-reinforcing weakness in the economy. So for now the economy is "in the zone."

One risk is a "growth recession," which is where factors such as gasoline prices weaken growth but do not cause recession, yet the slower growth seems like a recession, with unemployment rising and business spending weakening.

This happens when GDP grows below its potential. For example, if GDP potential is 3.5% in a given year, this means companies can produce 3.5% more goods and services that the year before, because of a 2.5% gain in productivity and a 1% gain in the labor force. If demand increases -- say 2.0% -- companies would have excess capacity of 1.5% (because they are capable of producing 3.5% more in goods and services yet the demand has increased just 2.0%) and would have to cut workers or capital spending.

I would watch the yield spread between T-bills and 10-year notes for signs of weaker economic growth. I would also watch the TIPS market, which continues to signal a relatively high inflation rate, which would be uncommon in a recession.

The Treasury market is unattractive in this context. It would take a rate cut for rates to fall much more, given that dealers are financing their large inventories of bonds at about 5.25% -- they are incurring negative carry.

David Morrow is editor-in-chief of TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

click here

to send him an email.