What should we conclude from theelection and the latest employment data. First the employmentnumbers. While the data seem good they are notgreat when you look at U6 and participation. Participation stillhas a ways to go to be vibrant. There are now a lot of peoplecollecting money from the taxpayers and not paying taxes. It isclear that this is not sustainable and raising taxes is clearly notthe solution, but would in the end be a loss of revenue. U6 hasanother 300 basis points to drop to be in line with an average goodyear in the US historically. That is a long way togo. At current levels of job growth, it is justbeating population growth, so to get where we need to be willrequire substantially better job growth. The latest Challenger datasuggest that large companies have slowed hiring and anecdotalreports suggest employees are being stretched to the limit. It isgoing to take awhile and some indication thatWashington can actually accomplish something useful beforeemployment steps up to where it needs to be.

GDP may grow at 3% plus or minuswhich is Ok but not what we need to really get a vibranteconomy. Muchmore is unlikely with Europe on the edge of deflation or a realrecession, and China slowing. The demand drivers are simply notthere and won't be for maybe a few years. With housing continuingto be slow, and the vast over regulation of banks, new mortgagesare simply not going to be available to really grow the new homemarket. The major big bank mortgage lenders are simply not going toexpose themselves again no matter what the administration says itis doing to reduce the hurdle for a qualified loan. Obama andHolder have managed to prove to the banks that government lies andcannot be trusted not to change the rules when it is deemedpolitically expedient. Major lenders are simply never going tobelieve anything the government says, and they are not going outaggressively to make mortgages. Multi may be good but single familyis in for a very long ride. In addition to the regulatory issuesrelated to banks, there are millions of homes now owned by fundsand investors which will come back to the market in the next fewyears. There will be an excess supply for an extended period andthen rates will rise.