I had a conversation with a friend a few months back (Dec 2005 to be precise) and he seemed convinced that the market would rally this year. While he has been right (albeit wrong on the magnitude of the gain), his reason at the time was that money from investment homes has to go somewhere. He felt that people with investment homes would sell, driving down the price of homes 15-20% this year (which is mostly true in the big markets of NY, CA and FL), and the cash would then be put in the stock market. With homebuilders putting a bottom here as
I tentatively suggested back on Sept 15th, I can't help but feel that while he was right about the market being up this year (so far), it is not investment home sales that are putting money to work in the market, rather it is money from the energy patch. If this is the case, I am afraid oil might be headed even lower in the short-term.
-- Faisal Laljee