I do not know the answer to those questions. But this I do know: being stubborn is how the greatest amount of money is made in a market. However, here is the rub; being stubborn is how the greatest amount of money is lost in a market.

As the final weeks of '06 come to a close and a New Year arrives, market participants need to do some serious self introspection to determine if they are being stubborn or not. This may be the, "season to be jolly" but, "tis not the season to be stubborn."

The yield curve inverted further this week, with 10 year bonds hitting new contract highs. A report showing US manufacturing contracted in November, sparked the rally. The same news item put downward pressure on the US dollar that hit a new 14 year low against the British Pound. The week ended with stocks and the dollar lower while bonds were sharply higher, hinting of economic weakness. The yield curve inverting as it is, is hinting of a recession.

Historically, the best indicator of a recession is an inverted yield curve. In September 2000, the curve inverted and we had a recession seven months later. If the timing this year is close to that of 2000, the US will be facing a recession in the 2nd Quarter of the New Year. Another historic fact is that stocks do poorly in a recession. The average drop for the stock markets during a recession is 40 percent, suggesting a Dow Jones of 9000 is entirely possible.

There are also unsettling economic signs in Asia where the Nikkei slumped for the week after crude oil prices rallied and retail sales fell. Media sources avoided mentioning Hong Kong's Hang Seng Index posted its biggest point decline since the Sept. 11, 2001 terror attacks, five years ago. If the economy slides into a recession it will be led by housing. Sales of existing homes in October, did post a tiny increase and the Dow rallied on the news. The same report showed the median price of homes sold declined by a record amount, 3.5 percent from a year ago. That was the biggest year over year price decline on record. It also marked the third straight month home prices have dropped compared to the same period a year ago. And that happens to be the longest stretch of such declines on record. An economist with Naroff Economic Advisors feels the report "does not point to a major housing meltdown," but did note there is a huge supply of unsold homes and condos on the market. He estimated the number of homes on the market is up 34 percent from a year ago, representing a supply of more than seven months at current sales rates. In the boom years of 1999 to 2005, the sales rate was four to five months.

Fed Chairman Bernanke stated the risks from inflation or a housing slump worse than expected would further complicate things for the US economy that is already slowing. He mentioned housing because that has been one of the nations outstanding performers for the past five years. The key to the economy and The Big Four: stocks, bonds, currencies and commodities does indeed seem to rest with housing.

Many analysts view the weeks debacle with the US dollar as being bullish for hard assets such as metals, grains and so forth. They could be correct. Still, the question has to be asked, "why is the dollar lower?" If the dollar is on the defensive because the economy is slowing in anticipation of a recession, that is not necessarily bullish hard assets of any kind.

Slamming the dollar late this week was a Commerce Department report showing construction activity in October falling one percent, the largest decline since the recession in 2001. Home building fell for the seventh consecutive month, a record string of declines. Once again, it all comes back to the housing market.

Buy? Sell? Hold? Hedge? Investors, traders and ag producers are staring in the face the distinct possibility the US economy will slip into a recession between now and Spring. There will be a great deal of money made by those stubborn enough to stick with deep felt convictions. Unfortunately, a great deal of money will be lost by those too stubborn to admit their deep felt convictions are wrong.

Call me at 406-682-5010 if I can be of help. I have few convictions of my own you may wish to hear.