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Don't spend much time at MSN Money because, well, I don't spend much time using MSN, but I headed over and checked out some of the latest news on the US housing market as an antidote to Victoria euphoria.

Jim Jubak has written a detailed explanation of how tranches of sub-prime debt were sliced up and doled out. Jim then takes apart the careful assumptions that led to this debt being marketed as high grade paper in the first place, using the analogy of natural disasters like storms, to show how the risk that was priced into these collateralized debt obligations was understimated. The story is here.

Saw an interesting article by Bill Fleckentstein, in which Bill argues that even though the Dow is up, or maybe because the Dow is up in uncharted territory, he is skipping the party. The sentiment is not that different from the sentiment expressed by Warren Buffet at the height of the tech stock boom, when he focused on the fundamentals and refused to chase the trend or jump into what turned out to be a lot of over-priced tech stocks.

Anyway, Fleckenstein draws a nice distinction in between what the economic fundamentals point to, and what actually happens, and how the opinions and facts can diverge.

For instance, if sub-prime defaults have to wreak havoc in the US, and by extension, perhaps also the global markets, but meanwhile news stories tout the containment of any problems, prices of equities can initially evade ill-effects - as long as there is a divergence between the facts and the opinions of the stock buying public -- as long as they continue to believe that the problems are contained, or, as Jim Cramer said earlier, they believe it won't matter.

Unfortunately, facts do eventually have a nasty habit of exposing wrong opinions, and when that happens, the continued divergence of facts and opinions must reverse, and the congruence of facts and opinions is reaestablished again.

The Victoria housing market exists in an environment that is really not that different, when you list the facts:

1. A recession is looming in the US.
2. The Canadian dollar is going up.
3. Interest rates are going up.
4. Mortgage amortizations are getting longer, and loan terms are getting easier.
5. Inventory is going up.

• And the opinions? That the market is healthy and approaching a balanced situation for buyers and sellers. That a lot of people like it here, they will just keep coming here, we have the best weather in Canada and it is a sweet place to live.
• ...While prices are also going up.

Sorry, but I don't buy this analysis. Everything seems to point to a market that is blowing off steam - but opinions in general have not come into line with that fact yet - so you still do see prices going higher - even as more and more inventory becomes available, and interest rates rise, and affordability all time lows, based on multiples of median earnings.

Bill Fleckenstein did an excellent job of explaining the divergence that makes this possible, and it is all down to public opinion, in the end, as to how long this state of affairs can continue.