We are touching 13000 in the Dow Jones. We haven't been here in four years. What is the market telling us? In a sentence or tell, we are continuing to come out of recession. Earnings for America's companies continue to be robust and Europe has calmed down with the TEMPORARY settlement of the Greek financial accords.

Does this mean we will run substantially higher from here? The answer is not known to anyone, but this we do know. At the moment and for the last year there has been a natural bias to the UPSIDE. This is because of the huge amount of cash available to both individuals and businesses. This cash powers an upside move and it really has nowhere to go.

The periodic crisis we have gone through in the last year including Europe caused big periodic downside moves, and thus at the end of 2011 we made no ground for the year. This year should be different. We have a Presidential election in the wings and the President will pull out every stop to get this country moving in order to obtain another term in office. Every President justifies his actions because he believes he is indispensable especially compared to the alternative.

In our opinion what we will see will be an upside bias to the market with moments of 500 to 1000 point declines with events like Europe blowing up again, oil disruptions, political turmoil somewhere in the world, and other things we simply cannot imagine or provide for. We remain bullish, besides all we need is a sideways market for our stocks to work out.

During the month of October which is the latest period available, sales of house were up 1.4% from the previous month. This is a seasonably adjusted rate of 4.97 million units. Last year's level was 4.91 million units, and that was the lowest number in the last 13 years. In the meantime, mortgage rates are collapsing at under 4%. It's been 60 years since we have seen that low a mortgage rate.

Now here's the kicker, the median price of a house is currently $162,500. This is down 4.7% from a year ago. This means that the sheer number of homes being sold is UP, but they are being sold for less because prices are down.

So how do you figure out what's happening. The answer is that in October a disproportionate number of contracts fell through. The deal simply could not get done. The answer is two-fold. Appraisals are coming in under the agreed value between the buyer and the seller and therefore – no deal. The second reason is that many buyers upon putting in their paperwork are not getting the deal approved. Lending standards are getting stronger.

CONCLUSION

What you need to know is this. Housing prices must turn around because this country cannot have a major economic recovery without housing coming back. Too great a segment of the economy is dependent upon housing. The sheer number of industries involved in the housing industry is mind boggling. Buying furniture, paint, and new sheets, appliances, all of it without a housing recovery imperils the economy. At best we will move along at a weak 2% or lower growth rate, and that doesn't spell well for America.

When a house sells, 25 different
unrelated industries benefit directly