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  • Evaluating Workday's competition from Oracle and SAP.
  • Six firms to know in cybersecurity.

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Dear Fed: Please Don't Strangle a Nascent Housing Boom

Posted May 27 at 12:04 p.m. EDT

Maybe you need to be a gardener, like I am, to know how big these days are for Home Depot (HD) and Lowe's (LOW). We are at the peak of planting season, and these two chains are the go-to stores for everything garden -- from seeds and fencing to flats and fertilizers -- that is, unless your garden is organic and natural, like mine is.

No wonder Home Depot brings on 70,000 new associates just for this period, which is the equivalent of the Christmas holiday season for sales. It even calls the second weekend in April its "Spring Black Friday" to note the traditional kickoff of gardening season.

It's also the season for refurbishing your home after a long winter. You paint, you fix the roof, you get the shingles, you upgrade the windows -- all the things that you don't do during the winter. It's worth the investment, given the sharp appreciation in home values, according to yesterday's latest from the Case-Shiller home price index, which showed a 5% appreciation in the month of March.

Housing, which we know punches well above its weight in the U.S. economy, is beginning to get back to where it was before the Great Recession, with the possibility of more than 1 million homes being built this year, double what as seen just a few years ago. Zillow's chief economist, Stan Humphries, was quoted in The Wall Street Journal today saying that he believes we need 1.5 million new homes to keep up with the growing population.

These trends are probably why the so-called disappointing Lowe's earnings number barely dinged the company's stock and now both Home Depot and Lowe's are on the upswing. Which brings me to the notion of the coming interest rate hike. We are beginning to hear chatter that if the Fed begins raising rates, there will be a surge of buyers who don't want to miss the bottom in mortgage rates.

I could not disagree more.

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