Last month marked one of the best Septembers in years as the DOW rallied 7.7%, which made for the best September for the DOW since 1939. Bulls are excited about the rally and market while bears are wondering what is behind it. There are no signs of a big economic boom around the corner to justify the stock market going higher. In fact economic data continues to be weak and all of the talk is that the government needs to do more stimulus to boost the economy and the Fed may engage in more money printing.
In fact I do not think we’ll see a real recovery in the economy until real estate prices put in a final bottom. Historically economic troughs come when real estate bottoms and this should be more true now than ever before, because it is the real estate bust that destroyed bank balance sheets and has caused them to be cautious about lending out money.
Real estate futures contracts on the Case-Shiller real estate index are not projecting a bottom in real estate prices until later next year and a recovery in them in 2012.