This market will drive a sane person batty at times, I have to tell you. Remember about 2-3 months ago, every day oil dropped people ran into technology stocks as a "safe haven"? We were shaking our head sadly and saying, how is this a safe haven... in time this will be proven to be a false assertion. But that did not stop the stocks from running up 5-10-15% each time oil dropped a few bucks as hedge funds had to find something to "play". Remember, as we always say, perception is reality. Until reality strikes. Lately we've seen poor earnings from Dell (DELL), we've seen bad news out of the semiconductor industry yesterday, Corning (GLW) is struggling, we've seen Qualcomm (QCOM) saying Americans & others in developed economies are not updating phones as often as they used to. Folks, you know the economic malaise is serious when Americans are not updating their phones and TVs- I mean we'd rather cut food out of our lives than upgrade to the newest electronic gadgetry. If you ever want anecdotal evidence of a weak economy...

• Qualcomm Inc (QCOM) is seeing some signs that customers are becoming slower to upgrade their cell phones, Chief Executive Paul Jacobs said in an interview with cable television network CNBC on Wednesday.
• Jefferies & Co analyst Bill Choi said the comment, which he believes could also be applied to the United States, fueled worries among investors who are already anxious to know whether phone demand would meet the typically high expectations for the upcoming holiday shopping period.

Why do I bring that up in a post about housing stocks? Because if a thesis has enough money behind it, it does NOT matter if its proven to be untrue -at least for a good amount of time. This is what drives someone who uses common sense up the wall at times. By the time the evidence comes to fruition that said thesis is simply silly, the hot money has moved on and onto the next "thesis" they want to advance. So they were wrong about technology as a save haven 60-90 days ago? Doesn't matter - still drove the stocks up for no good reason and made their money. Perception is reality.

So now the hot theories are as oil prices and commodities in general fall it will solve most (if not all) of the ills of the US consumer. I find it a myth. But does it matter? No. Because retail stocks are being driven up big time on this thesis. And if in 4 months we see this was all a big fairy tale? Doesn't matter. As long as enough money is behind the theme it does not matter if its correct or not. This is the lesson about sentiment. I fully expect the recent rallies in housing, retail and the like to be proven premature when we see evidence to the contrary this fall and winter. But that won't stop glib pundits from telling us "the stock prices are clearly showing us the future is rosy". Note - those same pundits pointed to technology stock prices pointing to "technology is immune" to slowdown 90 days ago.

I still haven't gotten to why I bring this up in a housing post. Part and parcel with the "as oil falls the US economy will bounce back; driven in large part by the booming consumer who now has $15 more a week in his pocket" is the "you need to invest in US stocks because as the rest of the world devolves into chaos you don't want to own stocks in countries falling from 9% growth to 6%, instead invest locally". Is this correct? I think not. But it does not MATTER - enough money is now chasing that trend to make it "work". For now at least. Until its disproved.

Case in point - let's look at 2 homebuilders - one in the United States of Subprime and one in that nation that is devolving into chaos as the US rebounds, Brazil. I can pick any homebuilder because in this market it doesn't matter what stock you buy as long as you are in the right sector - so I picked Pulte Homes (PHM) for kicks. We are now told, in anticipation of a rebound from the biggest housing bubble ever, we'll recover in just under 3 years and you want to buy a year ahead of time... so buy now. As I look at the year ahead for Pulte (using analysts estimates) I see a company that will grow in the next year... err, did I say grow... I meant SHRINK from $6.2B to $5.0B in revenue, or 20% (and this is one of the better run housing companies) and reduce its loss from $4 to just under break even.