The Instability Has Not Stablized

At any given time there are reasons for the stock market to go up and reasons for it to go down. Sometimes the reasons turn out to be very insignificant like in 2002 when CEOs were going to have start signing off on their earnings.

At other times these reasons can be very important. The housing data this week was worse than expected. I'm pretty sure it was no secret that the rebate program was pulling a lot of activity forward but the drop off in the latest round of numbers, the first numbers post tax rebate, were worse than expected.

Like any data point this can be spun in any way someone wants but my take is demand for housing is simply not good and I'm not sure how it gets good anytime soon--extending the rebates will not create real demand that is healthy.

The initial and continuing jobless claims seem unable to budge off of 450,000 and 4.5 million respectively. Aside from this being bad for individuals who are either unemployed or underemployed in terms of paying their bills it is also bad for consumption and even worse for municipalities relying on income taxes for revenue; people tend to be willing to buy an iPod with a credit card but don't pay taxes beyond what is required (obviously).

Housing and jobs are very important building blocks for the US economy and the outlook for both stinks right now. Obviously equities can go up in that backdrop, they went up a lot for about year with that backdrop, but they are now up a lot from the lows and the fundamental picture (weighing the positives versus the negatives) is not good and with some numbers has not improved.

As long as this persists I think it makes sense to be skeptical of rallies and devote more portfolio space to foreign countries excluding big Western Europe and Japan.

Short post this morning, my brother and I are headed to San Francisco to see the Red Sox play the Giants tonight and tomorrow afternoon.