The manufacturing sector ended the year with some decent momentum that should carry it through the first part of the year.

The points in my previous report [a 2003 study identifying threats to the domestic manufacturing base] have become more urgent in the three years since I wrote it. There are few indicators that would disabuse me of the positions I took then.

The pull back in housing remains orderly, at least in the existing market. But the red flags are up. Inventories continue to rise and that is a warning that prices cuts could be coming, and soon.

So far, the cracks in the housing market are not that great, but with inventories skyrocketing, that may not last long.

While we can be somewhat blase about goods [prices], at least for a little while longer, we cannot conclude that retail inflation is anywhere near under control.

With those kinds of prices, you can get on a plane and go to the Caribbean. And you don't have to bring linens.