.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

C.G., Joliet, Ill. Dear C.G.:

I think your broker is a smart lad. Many investors share his belief that the market could “crash,” others believe the market will trade in the 9,000 to 10,000 range for a few years, and still others believe the recent market turmoil is only temporary and that the Dow Jones index will reach 20,000 in the next three to five years. His reasons for a falling market make sense. But I’m afraid it’s a lot more complex than a falling dollar or high gas prices. Please read on.

E.I. du Pont de Nemours & Co. (DD-$47.74) reported lower earnings last quarter because its coating and color technologies unit was badly affected by weak demand for titanium oxide. Titanium oxide is a pigment used in house and auto paint that gives the paint durability. DuPont, the largest producer of titanium oxide, suggests that the low demand for titanium oxide is a direct result of the weak housing and auto markets. Who would ever have “thunk” that?

Back in February, I suggested there was a 35 percent probability that an exhausted housing market might cause a serious meltdown in the Dow Jones averages. I wrote that the construction industry is the largest employer in the country. Consequently a slowdown in home sales would reduce demand for microwave ovens, carpets, glass, plumbing, trucks, lumber, TVs, garden supplies, lawn mowers, insulation, paint and on and on.

Some say that the housing industry is almost in a free fall. According to Realty/Trac, “We could easily surpass 2 million foreclosure filings by the end of the year, a 70 percent year-over-year increase.” And, according to some, there’s a 60 percent chance that the Dow will return a large portion of its last 5,000-point gain.

Think of a refrigerator and its multiplicity of parts. American workers in Indiana make the chip assembly, workers in Ohio might make the shelving, a worker in Kentucky might make the knobs and handles, workers in Arizona fabricate the tubing, others build the freezer motor, the trays, the light switches and on and on. Then there are workers who assemble the parts, the truckers who ship the refrigerator, the inventory manager who warehouses it, the fellows who sell it and the people who install it. Because fewer homes are being sold, demand for refrigerators has fallen, so many of these workers are slowly laid off.

Meanwhile, unemployment is at 4.7 percent; an eight-month high, as the number of housing-related construction jobs has declined by 156,000 so far this year.

The United States has always had a consumer-driven economy. Now the consumer is having trouble consuming. This is unwelcome news for retailers, newspapers, hotels, e-commerce, advertising, trucking, railroads, banking, packaging, travel/entertainment, restaurants, etc.

I think it’s infinitely preferable to sell too soon, because selling too soon is a good defense against selling too late. And I think it’s a wise decision to liquidate your IRA account and stuff the cash in short-term CDs. I think long-term rates could be headed higher. Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service