May 27, 2008 - Consumer Confidence came out. It's at a 16 year low. Oil is taking a breather as this is written, off its all-time high of $133 recently. No one thinks it's going back to $100 or lower. Not ever. There's too much demand from China, India and Brazil for that. Housing stats are enough to induce stomach problems with first quarter prices down 14.4% from the same quarter last year. They were accelerating downward as the quarter ended, setting up for a miserable number for this quarter.

The Fed is done lowering interest rates. You can take that to the bank or to the stock market or to the barn or wherever else you want to go. Inflation is showing up in more than food and gas. The dollar is still bouncing along its bottom against most currencies. While exports have been robust, they aren't enough to compensate for slackened demand on the home front. Last quarter's GDP was saved from a negative number by inventory build-ups. Unless those goods are sold this quarter, we could have our first negative GDP. Two of those negative numbers in a row equals a recession. Like we need statistics to tell us what we already know.

The stock market is all over the place, but mostly down. After peaking in early October of last year, it's moved lower with a brief spurt higher, albeit in a very jagged pattern, between mid-March and early May. Since then it's been all downhill. In March the bottom was 11740, about 750 points below where we are as of this writing.

That's all backdrop for investors to understand that we're in the middle of a mess. Housing isn't going to jump back overnight; oil isn't going to crater; jobs aren't appearing any time soon in large quantities. Everything will take time to correct. Everything. There are no quick fixes. But there are signs to look for that will tell when we're starting on the right track.

The first will be jobs. They're the basis for demand. When people are employed, they spend more. They buy houses. They feel confident about the future. People who already have jobs feel better when their neighbors get a job. It makes them more confident, willing to spend. So when unemployment starts coming down and/or new applications for unemployment payments are extremely small, that will be a very positive sign.

Housing prices start to firm. While some house prices are going up, they are the minority. When every region reports higher average house prices, then we're getting somewhere. It means inventories are back to normal, that people are buying homes in large enough quantities where demand is exceeding supply. When housing shows strength, that will have a very positive domino effect on jobs, spending, demand for many goods and services.

Taxes stay the same or go lower. No matter who's in the White House, more taxes will hurt the economy, not help it. It's been proven over and over again that lowering the tax rate increases demand, increases tax revenues, and charges the economy on the upside. If both parties will embrace this idea and implement lower taxes, that will definitely get the stock market going again, big time. If we get out of the Iraqi and Afghan wars, much of that money can be used for domestic programs, making tax hikes totally unnecessary.

In the meantime, as we all wait for events to unfold, there's no reason for the stock market to get very excited, especially on the positive side. Too many negative events are hitting it at once, too much uncertainty (investors' worst enemy). So fasten your seatbelt. It's going to be a bumpy ride for a while. Only buy stocks with growing earnings and positive outlooks.

- Ted Allrich