On an adjusted basis, January Industrial Production actually rose by 0.6% (more or less in line with consensus). On an annualized quarter-over-quarter basis, the January manufacturing output rose by 8%. The two-month gain in manufacturing production (the most representative indicator of economic activity) is at the speediest rate in over two and a half years, when the U.S. economy was coming off very depressed and recessionary conditions. Housing continues to show signs of recovery as the NAHB confidence index rose to 29 (consensus was 26), the best reading in four and a half years and substantially above the recent six-month average of only 20. This index has risen for six consecutive months, a feat not accomplished in 16 years. It is for the above reasons and others that I have continued to expand my short bond exposure, which is now substantially my largest position. Don't get caught up in the headlines (as I did yesterday); look deeper. Most observers are too negative on the prospects for domestic economic growth. At the time of original publication, Kass was long TBT shares and calls and short TLT shares.