Yesterday’s brain-congealing tedium held the S&Ps within a three-point range for more than five hours, daring traders to take their eye off the ball for even a moment. But if past is precedent, we have to assume the whole boring day will turn out to have been a consolidation and that stocks will be pounding higher as usual when trading resumes this morning. Or is that scenario beginning to sound a little too pat?  We’ve made the argument here before that the deranged buyers who have been driving stocks higher seem to thrive on negative news -- and what news could be more negative than the looming specter of 7% mortgages?  Once rates have spent a little time above that level, household spending is bound to collapse, right? Whatever happens, we’re forced to acknowledge that consumers have shown rather more resilience in the last year than we might have expected, especially considering how much the real estate market has already deteriorated.

Speaking of real estate, we had a chat over the weekend with a guy we used to quote here regularly who qualifies as a true expert’s expert on the mortgage markets. We can no longer quote him by name because he’s working for a respectable Wall Street firm. However, he has been one of the more patient bears around, having gone on record a few years ago with the prediction that a housing bust would take much longer to materialize than most bears expected. His reasoning was that in a severe economic downturn, to keep a roof over their heads homeowners would continue to make mortgage payments long after they’d stiffed other creditors. Well, quite a few mortgage lenders are seeing borrowers walk away from homes in record numbers these days. But according to our astute friend, the economic pinch is still not severe enough to bring the whole system tumbling down within the next 12 to 18 months.

Statistical Scam

For that to happen, he says, unemployment numbers would have to rise substantially. “But the unemployment figures published by the government are a brazen fraud,” I pointed out. “Won’t the government simply continue to fabricate bullish numbers each month?”  His answer was that if the economy continues to lose steam, especially the real estate sector, layoffs eventually will will overwhelm the statistical scam. Which is to say, everyone will know how bad unemployment is because their neighbors will be losing their jobs. Even so, we should never bet against Uncle Sam’s statisticians to rise to their patriotic duty.  When was the last time droves of real estate agents went on the dole, anyway?  Like, 1932?