The Stock & Bond Markets -
Business activity in October grew at the slowest pace in more than a year as the effects of a weakening housing market took its toll on the economy. Conversely, gas prices fell which provided welcome relief to consumers who drive (no pun intended) 2/3 of the economy through their spending. It is this kind of tectonic dicotomy of economic data that makes predicting a rise or fall in stock prices more challenging. One place to take the "temperature" of consumers is by measuring their confidence in the economy since people tend to spend based on their optimism or pessimism. To that end, consumer confidence dropped in October as more and more people began to have concerns about the employment outlook. This, of course, would imply they are more reluctant to spend which would result in a slowing of the economy and corporate earnings. Our strategy of diversifying and rebalancing portfolios regularly helps to take some of the risk out of the investing equation, not just through diversificiation but by lightening up on sectors as prices get ahead of themselves and adding to sectors offering bargain values.

CELEBRATING 26 YEARS
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Real Estate Bubble? -
September marked the first back-to-back monthly declines of home resales and prices of real estate since 1990. Homeowners have started adjusting (aka "dropping") prices while buyers either wait patiently or demand "extras" (e.g. garages, stairways, landscaping, appliances ...) from new home builders. Toll Brothers, the nations's largest home builder, saw 3rd quarter profits decline by 48%. What does this all portend? That's anyone's guess. Those in the industry predict a "soft landing" and a resumption of "sustainable" price appreciation beginning next spring. Others don't have their ever-optimistic perspective, either because they look at different sets of data or their incomes are not dependent upon the continuing appreciation of the real estate prices - and those on the other side of the aisle are predicting sharp declines for a sustained period. One of the two perspectives is correct but the divergent perspectives of smart people further support our policy of diversifying among asset categories.