I just heard on the TV a disussion about the U.S. housing market these words: “There’s no hope of a recover in sight!”  As I hinted in my previous posting, this isn’t such a bad thing.  A maverick investor sees opportunity when things MIGHT get better.  Rest assured that when it is obvious that a housing recovery is underway – it will be too late to make the easy money.

Jennifer Lee, a strategist with BMO Nesbitt Burns published the following in her update this morning:

U.S. consumers lost a great deal of confidence this month, perhaps stemming from what was happening outside of the American borders—-Japan’s earthquake/tsunami/nuclear crisis, unrest in the Middle East and Libya—-and their resulting impact on gasoline prices. And within the U.S., higher prices at the grocery store and the gas station, an improving but too slow-for-one’s-liking job market, and a faltering housing market (see below)…..all of these factors combined were clearly enough to send consumers scurrying into the arms of something more comforting, whatever that may be.

This data is of course history already, so not particularly useful, but it does provide some perspective.

Dip in Consumer Confidence - A good thing!

Consumer confidence remains at relatively low levels – and since my own research over the years has concluded that this indicator is actually ‘inversely’ related to stock markets (without getting too anal about timing, I’d suggest it’s no co-incidence that confidence dropped following the market correction which was followed by the tsunami and continued unrest in the mid-east).  If consumer confidence will one day again climb to lofty levels, then so will the U.S. housing market.  What will it take to really get things rolling in the U.S. economy?  Corporate profitability continues to surprise financial analysts and strategists alike, but inflation is the real wild card.

 As I discussed towards the end of last year – the financial crisis hammered the global supply of money (liquidity) and since then central banks worldwide have been pumping liquidity into the system to compensate.  The verdict is still out, but fears of deflation are still evident, Japan needs to be rebuilt, higher rates would quickly bankrupt a number of countries and cause rapidly rising deficits that are already at record levels…..all these factors suggest that perhaps “expecting” a quantum leap in inflation (and therefore interest rates to combat the demon) are somewhat overblown.

I continue to believe that as long as there are worries, the stock market has legs.