Maybe you’ve heard, maybe you haven’t, but our stock market has improved about 25% in recent months, coming from the lows of 6400 on the Dow to a current level of right around 8000.  Great news, right?  Time to double-up on those 401K contributions, right?  Optimism and champagne are flowing freely in the streets, right?

Maaaaaaaaybe not so fast.

You see, the fun thing about the stock market is that the numbers can be doctored on a short-term basis by a ton of different factors.  For example, a company can come out with outstanding earnings and simultaneously announce a massive downsizing.  Great for short-term stock improvement, bad for the long-term job market.  Or, like Bank of America, they can report a bunch of one-time profits supported by a change in accounting rules (not necessarily a substantive improvement in real business) and a concurrent jump in loans going bad.  Not an overall improvement, I would say.

The moral of the story is that, while stocks may be improving modestly, the economy at large is not.  Without a true and lasting turn in job creation, housing, business lending, etc., we can expect stocks to bounce up and down like a sailboat in a squall.

And it is that very stock volatility that is keeping investors cautious and promoting low mortgage inter­est rates.  Stack on top of that the massive purchasing power of the Federal Reserve and their open willingness to buy long-term securities (like mortgage-backed securities) and we’ve got a recipe for a continuing low rate environment.  This is a good thing, because homebuyers are beginning to come out of the woodwork, coaxed by the $8000 tax credit and a large inventory of homes to choose from.

One piece of good news is that analysts are predicting a rolling bottom for the housing market in areas that have declined by 40% in value.  Yes, a 40% drop in your home’s value is a bitter pill to swallow, but finding a bottom will do wonders for home purchases and the economy at large.  So, I’ll take it.

To close on a depressing note (I always like to leave ‘em crying), the Chief Financial Officer of Freddie Mac (a governmentally sponsored entity that helps prop up the mortgage finance market) killed himself on Tuesday.  Yes, one of the few guys who has open access to what the balance books of a major mortgage player looks like felt it necessary to end it all.

Disconcerting, to say the least.