The story of the week, once again, is the stock market. Everyone is buzzing about the strength of stocks, and the widely held expectation that prices will climb even higher this year. A number of investment reports and media briefings from banks have touted the strength of the market.

Much of the talk has centered around the Dow Jones Industrial Index, which has been hovering around 12,000. (On Wednesday, it broke 12,000 in mid-day trading and I received several emails and phone calls from public relations people offering up their experts to talk about the monumental event).

These stock gains, plus increases in GDP, have led to the general sentiment that we’ve finally put the dark days behind us. To be sure, market gains and a Dow at 12,000 are promising signs. And for those who note that the Dow is one of the narrowest indexes and, consequently, not as indicative of the broader market, I noted last week that many of those other indexes are also at or very near all-time highs.

Still, I’m usually a proponent of parting from the herd and zigging when others zag. If, for no other reason, the herd often gets a rude awakening. In that vein, I have to question if now is the best time to jump into stocks, just as they are reaching these high points. But, you say, the economy is better now, and banks are in better shape than they were before the market plunged in 2008.

True, but if the conventional wisdom is correct, and the meltdown occurred because of a massive amount of misunderstood risk, specifically in the mortgage market, it’s hard to ignore the latest S&P/Case-Shiller Home Price Index. It shows that homes prices are weakening. In fact, the headline of the latest report, which came out this week, said that nine cities have reached new lows. Overall the 10-city composite tracked by the index was down 0.4% over the 12-month period ending in November. And the larger 20-city composite fell 1.6% in the same time period. Another study released this month from information company CoreLogic paints an even bleaker picture. Its data show prices falling 5% in that same 12-month period. Moreover, it was the fourth consecutive month that the survey showed losses.

One other disheartening note from CoreLogic: mortgage fraud is on the rise. In another one of its recent studies, it concluded that mortgage fraud, one of the culprits of the crisis, peaked in 2006, and then declined until early 2009. But since then, it has increased 20%.

Last week, in the midst of this stock-gain party, I suggested simply making sure that your clients weren’t caught up in the euphoria. But now I wonder of that is enough. I can’t help but cast my mind back to 1999. I remember pretty vividly the rejoicing that took place in May of that year as the Dow broke 10,000 for the first time. It was symbolic, but a milestone nonetheless. There was no stopping the market, it was all-knowing. And sure enough, about five weeks later, it had soared another 1,000 points to break 11,000. It hit a cyclical high the following January.

But with the benefit of 20/20 hindsight, would you want to be overweight equities in January 2000?

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