Housing Prices Down, Stocks Up...No, they're down... No, they're up...

I'm not even going to read the whole articles. I can get the drift. And I only care about the big picture, anyway. Two articles posted under News Section on my website today:

• Bernanke Says Rebound in Economy Seen
• Economy Seems to Be Shaking Slumps Off

What's interesting is how the good news gets accompanied by the bad news, and the meaning gets lost in between. The bad news in the Bernanke article is that stocks fell as a result of Bernanke's talk! Why would stocks fall when the Fed says the economy is so strong??

They fell because when the economy is strong, the Fed keeps interest rates high. Why? Because if money was super-cheap, people would build business and commerce on easy borrowed money so fast, that the economy would then over-heat. The danger in an overheated economy is that prices begin to rise. (Inflation. I'll explain that connection in another blog.) Inflation out of control sends the whole house of cards tumbling.

So, while some sectors like real estate have been waiting for interest rates to come down, it ain't gonna happen for a while now. Good news, bad news. The message? Stocks are tumbling momentarily because some people want interest rates down and they're not happy. But interest rates are staying high because the economy is hot right now - and overall that's good for stocks, if a little rough for real estate.

Don't worry, it'll shift sometime later up the road. The two markets tend to see-saw each other. Right now it's stocks' day in the sun.