In the 1989 film Field Of Dreams, Ray Kinsella, played by Kevin Costner, plows under his corn field in Iowa to build a baseball field. The story begins when Ray hears a voice in the middle of the night that whispers, “if you build it, he will come.” After debating the idea with his wife, she eventually agrees and Ray builds a baseball diamond. Time goes by, and nothing happens. All hope is almost lost until miraculously one day the long deceased baseball player Shoeless Joe Jackson appears on the field. Ray’s dream begins to become a reality. Without ruining too much of the story, we’ll just say that the figure referred to as “he” eventually comes, and Ray’s efforts are rewarded.

You are probably thinking why is this relevant to financials markets? Well, we have been focusing a lot on the implications of an improving housing market in the United States because we believe that if you build it (i.e., houses), growth will come. For the past 3 years, Ben Bernanke has tried to ease our pain by pushing interest rates down to historic lows. Although we’ve had our doubts and disagreements with some of the Chairman’s policies, the fact that homebuilder sentiment is now at a 5-year high is certainly an accomplishment of the Fed’s resolve. Housing is the economy’s shoeless Joe Jackson as it is the first link in the chain between Fed policy and economic prosperity. With Chairman Bernanke’s efforts now beginning to bear fruit, will the rest of the economy follow through? Today’s report highlights what we can expect now that housing sentiment has risen for a full year. We’ll be visiting Iowa this week, where home sales are up for a 13th straight month according to the Iowa Association of Realtors. Wonder if we’ll see any farmers plowing their corn fields to build a house … or maybe a baseball diamond?

The level of the WTLEI declined slightly last week despite a relatively good week for global equities. Thus far in August, regional PMI reports have been mixed with the Empire Fed ticking down and the Philly Fed ticking up. This week will be a quiet one for regional PMIs – the next PMI report to be released will be the Dallas Fed next Monday. Stay tuned!

Weakness in the WTLEI last week was driven mainly by a combination of mixed economic data and weaker sentiment readings. Both commodities and global cyclical equities remained relatively flat for the week. On the economic front, the policy outlook rose considerably, but was offset by weakness in credit conditions. Aggregate sentiment measures proved to be relatively lackluster last week.