At this point the "Decoupling" between reality and the stocks in some areas is reaching amusing proportions. I own 2 homebuilders, not because I believe in any imminent rebound, but because no amount of bad news can bring them down anymore. In fact, days like this are exactly why I own them - to counterbalance the commodity / global growth positions I own such beauties as Lennar (LEN) up 4%.

So when I put on my stock jockey hat I say "everything will be fine in 6 months, buy buy buy". And that's about the depth of my analysis.

When I put on my economist/strategy hat I continue my long held stance that we are still in the early innings (I've moved us up to 3rd/4th inning now that new home prices are being slashed) but if you look at the news flow, it is amusing when overlayed with the stock performance. You could say that for the whole stock market, but this group in particular. Remember, reality does not count in the stock market - only perception. Perception is things are going to be fine "in due time"... on the other hand MY reality is 2008 will be the year of the 'walk away" (people send it keys, and walk away from homes they are underwater on) , inventory numbers are at record levels but do not reflect the "trapped" people - people who want to sell but either (a) refuse to face reality and book their loss or (b) don't have enough money to bring to the table at closing to sell their underwater home, credit tightening so even less home owners are available to sap up inventory, people who feel like they are in a recession are not going to be rushing to buy homes, people whose real wages (adjusted for inflation) are becoming poorer by the day, so their buying power is falling (for homes as well), many potential buyers who should be ready to buy now were sucked in early in 2005-2007 by no down, cheap rate mortgages so that pool of people is nowhere to be found, foreclosures are just beginning as people begin to give up, and it still takes 6 months for inventory to come to the market, and median prices are still too high in most major urban areas for average people with average wages. That's 2008. 2009? Not much better. Get back to me in late 2009/early 2010.

But since none of that matters ("it's all priced in"), we have homebuilder stocks in our portfolio - and they go up on days like this when we see Case/Schiller Price Index shows nearly 13% year over year median NATIONAL price reductions (ouch), and foreclosures are at record levels.