New homes sales surged

April 27, 2006 -- News: Sale of new homes in April surged 13.8%. This increased the odds that the Fed would boost rates twice more, once on May 10 and then a second boost in June. Strange, on the housing the new home building stocks only budged higher, no big surge. On the housing news, the yield on the bellwether 10 year note rose to a new highs of 5.10%.

I just heard this morning's speech by Fed Chairman Bernanke. Just as I thought, Bernanke is zeroing in on the all-important housing market. Mortgage applications have suddenly plunged. The one thing that is clear is that Bernanke is afraid of ANY slowdown in the US economy. On that basis, Bernanke stated that the Fed is watching economic developments as we go along, and I thought that he even hinted that the Fed may not boost rates at the next meeting which will occur on May 10.

Up to now, another rate increase to 5% on May 10 was a given. Suddenly, Bernanke is saying that nothing is written in stone, that even on the May 10 Fed meeting they may not boost rates.

Let me put it strongly -- the Fed will do almost anything to keep the US economy from slowing. The Fed is mortally afraid of a consumer slowdown, and when you talk about the US consumer you are talking about housing. Housing is now the chief worry of Mr. Bernanke.