Sunday, February 25, 2007

Weekly look ahead

This week will probably be all about signs of slowing growth, which has better than even odds of boosting the markets as it allays concerns of rate increases.

Yes, the upside down market continues. We have seen for months now that slowing earnings are nowhere near as scary to the market as inflation and interest rate increases. This weak should help reduce signs of inflation significantly. We should see a downward revision in 4th quarter GDP growth, lower consumer spending (after adjusting for the effect of gift cards moving spending from Dec to Jan), and all the housing and construction reports.

Frankly, if housing continues to be weak the fed seems unlikely to boost rates. My contacts in the industry tell me there still may be 6 more months (+/-) of mortgage agencies losing money and tightening loan requirements -- which will dry up the number of buyers even further than it has already. So housing should stay down and the fed won't have too much reason to raise rates.


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