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The Housing Recovery Bodes Well for Utilities

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As the nascent recovery in the housing market gains momentum, it will boost demand for utilities, which will flow through to their rate base -- and eventually their stocks

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In other words, if Mitt Romney becomes president and Republicans take both houses of Congress, we'll see far more cuts to non-defense spending, preservation of military spending and few if any tax increases. If the president is re-elected and Democrats capture both houses, we'll see more tax increases, some defense cuts and less reduction of non-defense spending.

But regardless who wins, odds are strong we will see a deal, and therefore no fiscal cliff in 2013. And even if for some reason Washington fails this test of self-preservation, the lower debt outstanding among American companies and consumers means they'll be better able to endure the fallout than in 2008.

Enter the rebound in the property market, which in retrospect has been taking shape for more than a year. Progress thus far is jagged, benefiting some regions like Northern Virginia far more than others like Las Vegas, Nevada. But the value of Americans' real estate holdings overall did rise 2.1% in the second quarter of 2012. That follows a similar rise in the first quarter, and is likely to be repeated in the third quarter as well.

Unfortunately, we've yet to see any large groundswell of consumer spending as a result of the nascent housing recovery. In fact, it's likely after the experience of the past few years that most Americans will take any signs of a rebound with a grain of salt, at least for a while.
No positions in stocks mentioned.
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