[EE-BO]

What is going on right now is that there are lots of plenty of positive economic indicators- but they do not necessarily benefit most Americans. With so much growth abroad, improved business for many US companies does not always mean that other companies are doing well. If a US steel fabricator has a boom year, it does not mean that construction in the US is doing well- it means construction is booming in some other country. So the good news for many US companies does not have the traditionally expected benefit for the US at large.

A few months ago I predicted the Dow would fall to the upper to mid 10,000s and then shoot back up very quickly when investors woke up and realized what great investments are out there right now. It has not gone quite as low as I predicted, but the volume on the rally today was huge- close to 7 billion shares on the NYSE.

That is very significant. A lot of the market volatility in the last few months has been on very low volume. What we have observed in the last 2 weeks is far more indicative of reality. I still think we will test a new by August, but maybe not. Either way, today proved that I was right 3 months ago that there is a LOT of money on the sidelines ready to pounce into the markets.

GM is suffering, but US Steel is doing great. For every staple American manufacturing company that is facing gloomy prospects, there is another that is experiencing a historic resurgence. Life in Michigan may not be so good, but Pennsylvania is having some great times like they have not in many a year.

For the first time in history there is truly a global economy in which the United States is a key player as both an exporter and an importer. It is not just about globalization but about the fact our currency has declined in value so much. We are exporting raw materials and manufactured goods in a way that has never happened before. It is a complete reversal of our trend of importing such things. And kudos to Bush's team in the Fed for devaluing the US dollar. If we had not devalued our currency to incentivize exports, we would be in far worse shape than we are in right now. International growth is about the only bright spot for a huge number of US companies.

We are entering into a period that has been coming for a few years now where there will be a fundamental shift in what US industries will be innovative and which will be stable long term investments. That is what is going on, and while it is very good news for a lot of Americans- it will be disastrous for many more.

But we are all going to have to suffer the fallout of constricted credit and a falling housing market for at least the rest of this year.

However this is a good thing. Housing prices have fallen, but they are still very far above where they were just 2-3 years ago in many markets. Prices went up very fast not because people were making more money, but because credit was made easier to obtain.

So a crash in housing and the resulting crisis in consumer spending is a good thing since it will get prices back to where more Americans can afford to buy homes that are priced where someone can buy one using a conventional mortgage. If the government does any housing bailouts it will merely artificially prop up real estate prices and- for most who receive aid- it will just delay inevitable financial ruin.

As for the auto markets- it is hard to say. The US automakers got hit, but Toyota got hit worse. Still, the US is behind the curve on many quality measures and on really actively promoting fuel efficient vehicles. And that is their fault. Chevy delayed the hybrid Tahoe by 2 years- and that is the kind of thing that is hurting them now. They did a very bad job of being innovative and forward thinkers.

I know that does not put food on the table for a lot of people, but there it is.