By Tom Bradley

There have been a number of articles recently on U.S. homebuilders. There are increasing signs that housing activity is picking up (albeit from near-dormant levels) and the indexes that track stocks related to the industry have doubled over the last year.

This sector is a great illustration of how the stock market is always looking forward. When this latest run started last fall, the news on housing (resales, starts, prices, foreclosures) was dismal. There were no signs of a turnaround. But the stocks started to move up. The reality was, the stocks had factored in (1) most, or (2) all, or (3) too much of the gloom. As we like to say in the business, the bad news was baked into the cake.

While the news is looking more encouraging now, a big chunk of the stock price moves came before there was even a glimmer of hope. Even today, many of the companies are not making any money, or at least not enough to justify their stock prices.

If what’s happening in the stock market reflects the current headlines, it’s strictly a coincidence. Mr. Market is constantly anticipating what is going to happen a year or more from now. He won’t always be right (far from it), but that’s his time frame.