I believe the structural issues with the U.S. economy are getting resolved. Trees are falling in the forest, but what is sad, and mind-bogglingly frustrating, is there is nobody around to hear it. Everyone is focused on Europe. I have to admit I am being forced to become an expert in things I can barely pronounce; for example, I just found out that the way I said Bankia, the troubled Spanish bank, was all wrong.

Closer to home, however, the ultimate structural issue for the U.S. economy—the housing market—has mended itself to the point of growth and price appreciation, yet no one gives a hoot. Case-Shiller data is showing signs of an end to the down-leg in housing prices. Delinquencies have been trending lower for a long time. Home builders are telling us they saw heightened traffic during the spring season, and it is not petering out for a change. To cap it all off, a member of my team recently had to indulge in competitive bidding to buy a house. The last time I personally heard of a bidding war was back in 2005 or 2006.

The bottom line is that the housing sector is stabilizing, and this alone should cure a lot of the U.S. economy’s ills. I believe it will enable credit growth, restore labor mobility, increase consumer confidence (more than the appreciation in stock prices) and, in the end, will revive consumption. If the current fiscal crisis is to pass, these would be the first signs. But no one seems to hear—or care—as the trees fall in our forest…

Secondly, take a look at this chart from a recent Wall Street Journal and tell me you don’t like it.

For U.S. manufacturing to recover from the onslaught of Chinese and Japanese imports, the cost structure had to be revamped. And if this level of improvement in manufacturing productivity is not successfully revamping the cost structure, I don’t know what will. Again, trees are falling in the forest…

Thirdly, natural gas prices are around $2.00/Mbtu. Coal plants are being converted to burn gas left and right. Railroads are telling us that coal traffic on their systems is falling off precipitously. One company official told us that, in his view, it is quite conceivable the price of natural gas could fall to almost nothing. I know, it sounds preposterous. But his point is that overall prices are so low, producers are making enough money on liquid fuels that they don’t need to sell gas for a large sum. In short, the trade position of the U.S. economy (requiring a lot less imported oil in the not-too-distant future) and the energy cost of manufacturing are likely to continue to improve. Trees are continuing to fall in the forest…

I recognize that in the investment world, being too early to an idea is as much a sin as not having the idea in first place (I learned that lesson buying bonds of the telecom start-ups in 1999—2000), but I also have to be mindful of the alternatives. I believe investors don’t have to buy a lot of U.S. equities, but piling into safe bonds at this juncture—with all of the abovementioned trees falling—may prove to be problematic down the road. And that, coming from a core bond fund manager, is saying something.

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