second half outlook 2006

I think the market will do fairly well for the third quarter, and slide in the fourth.

Here's what I see: The economy is stronger than everyone thinks, so earnings will be strong. Commodities will remain at or above their current strength, especially metals. The housing market will hold steady or post a small decline over last years' price levels, but the cracks in the foundation will continue to widen.

This is the third week in a row that Barron's has had bearish articles to the detriment of the bulls. My favorite is this week's title "A Bear Market Expert Sees the Bottom-in 2014." Even if that's true, I'd bet on a nice bounce, at least through the third quarter.

This being said, if the economy shows more strength than Wall Street and the Fed give it credit for (don't forget 5.6% GDP growth last quarter!!) then we should see 6% fed funds rates by year end. In other words, don't buy bonds yet.

6% will make for a sticky 2007, when the economy starts to run out of momentum. Also, look for the liberal media to run daily stories on people losing their houses to ARM raises and blame it all on George "W" Bush.

What kind of negativity or panic will that create?