Leading economists and analysts are mixed in their outlook, but there is plenty of evidence to suggest continuing storm clouds up ahead. While the stock market may be celebrating, the larger economy still has a long way to go.

Here’s a few things to look out for:

• Unemployment is still worsening. When the national unemployment rate goes above 10% (which is already has in many states) will this further contract consumer spending? In the U.S. consumer spending still acount for 70% of GDP. In the U.K. that figure is only 65% of GDP, so perhaps we still have a ways to go down.
• The specter of inflation. The U.S. has $50 trillion (yes, trillion) in unfunded liabilities. Many analysts fear this will lead to significant inflation in the next three years.
• What about innovation? The credit crunch has most impacted small businesses and entrepreneurs, the seat of innovation in the U.S. The number of patents files has been declining, not a good sign for America’s future innovation.

So if the stock market rally isn’t indicative of the weakness in the broader economy, what’s causing it? Many argue that we’re simply seeing the effect of massive government spending. When that spending stops will the economy be able to pick up the slack?

While home prices have not yet reached overinflated levels, the enthusiasm (some would call it mania) and the speculation of the earlier housing boom have returned. Markets like Las Vegas which were once the epicenter of the foreclosure crisis are now bustling once again.

While home prices in Vegas are down a whopping 50% off their peak reached in 2006, the inventory of houses on the market is now down to a 3-month supply. Compare this to the national average of 8.5 months of supply on the market and it becomes clear that something is going on in Las Vegas and other foreclosure centers. In addition, 40% of all transactions in Vegas are all cash, indicating that deep pocketed speculators are entering the market.

All cash deals? Speculators? Dwindling supply and transactions completed in the blink of an eye? Sounds like mania has returned to Vegas. The only question is when and if this craziness moves on to other hard-hit housing markets.

In total, there are 84 U.S. markets in which the sample home price averages under $200,000. The monthly mortgage cost for homes in this price range could average less than $600, and down payments could amount to less than $4,000.

The survey found a price gap of more than $2 million between the most expensive and most affordable U.S. housing markets. In the annual comparison of similar 2,200-square foot homes in 310 U.S. housing markets, La Jolla, Calif. led the list as the most expensive real estate market in the country with an average home price of $2,125,000. Grayling, Mich., also known as the “canoe capital of the world,” ranked as the most affordable market in America, where a similarly sized home costs $112,675.

As in past years, California dominated the most expensive housing market list. Joining La Jolla in the top 10 were the California markets of Beverly Hills, Palo Alto, Santa Monica, San Francisco, Newport Beach, Palos Verdes, and San Mateo. Boston and Greenwich, CT were the only two non-California locations in the top 10.

In contrast, the midwest dominated the list of most affordable markets. Akron, OH, Canton, OH, Detroit, and Eau Claire, Wis. all placed in the top 10 cheapest housing markets.

The most expensive market outside the United States is Singapore, where an HPCI subject home averages $1.9 million U.S. dollars, ten percent lower than La Jolla. Coldwell Banker Real Estate compared a total of 57 markets in 29 countries outside of the United States, with those international home prices averaging $487,844 in U.S. dollars.

This latest bump comes on the heels of a a 1.4 percent increase for the previous month and is the third straight month that prices have risen. Despite the recent good news, prices are still down over 13% year-over-year for the composite index. Prices are lower in every one of the 20 cities surveyed compared with a year ago.

Analysts warn that a range of factors, including higher unemployment, a new wave of foreclosures, and the looming expiration of the federal tax credit for new home buyers on November 30th could put the brakes on the budding housing recovery.

Here is a chart showing the Case-Shiller Index over the last year, thanks to the San Francisco Chronicle:

The metro areas that saw the biggest price increases over the last month include Minneapolis, San Francisco, Chicago, and Atlanta. Seattle and Las Vegas were the only two cities that saw a decline in prices from June to July.

Obama will stop his vacation and will announce the appointment at around 13:00 GMT (9:00 local time), official sources from White House said Monday.

“Ben approached with wisdom and calm a financial system that was on the brink, with bold action and innovative thinking that have helped efforts to break the free fall of the economy”, says a preview of the speech published by Reuters.

“Legacy” Bernanke’s first term included lowering key interest rates to near zero and flooding the financial markets with hundreds of billions of dollars to combat the credit crisis.

By giving Mr. Bernanke a second term, Obama signals that he has confidence in the Fed chairman’s ability to strengthen the economy in a period when unemployment and bankruptcies are increasing rapidly, notes Reuters.

Auto sales by the carmaking giant – owner of Mercedes-Benz – decreased by over 23% in the first half of the year to 38.29 billion euro from 50 billion euro in January-June period of 2008.

Daimler sales dropped by about 270,000 vehicles to 732,800 cars in the first half of this year compared to over one million units sold in the corresponding period last year.

Daimler eliminated over 17,000 employees and had 257,000 on staff as of June 30th. At last midyear, Daimler had 275,000 employees.

Mercedes-Benz, which generates over half of the business group’s revenues, registered a decrease of 22.7% in sales in the first half to 19.63 billion euro from 25.41 billion in the same period of past year.

Despite Goldman’s stellar quarter, the results of other banks are less encouraging. Georges Ugeux, Chairman of Galileo Global Advisors, is of the opinion that to assess the recovery of financial system we must evaluated health of commercial banks, not investment banks.

“To see if the financial system was repaired, we must analyze the impact of the crisis at banks that are engaged in private credits”, says Ugeux. “The bank results may be less encouraging.”

One example is CIT Group, which today is struggling with bankruptcy. For this reason, the financial results of JP Morgan and Morgan Stanley this week will be more telling.

Chairman of Galileo Global Advisors, Ugeux is Dr. in Law and Bachelor of Economics at the Catholic University of Louvain in Belgium. He was a banker at Societe Generale, Morgan Stanley, Kidder Peabody, President of the European Investment Fund and Chairman of International Division NYSE. Galileo Global Advisors is a bank and consulting business founded by him.

Here’s how it works: when you sell your policy to a stranger, that person pays you a cash sum and continues to pay the premiums on the policy to keep it current. Here’s where it gets weird: the stranger to whom you sold your policy only profits when you die.

These transactions are called life settlements and they are becoming more common. Huge banks like JPMorgan Chase and Goldman Sachs invest in packages of life settlements because the return is not correlated with the stock market. So as an investor, life settlements can be a great way to diversity and hedge your stock market exposure.

Investors in life settlement policies prefer people over 65 who are insured for at least $500,000 or more. So would you sell your life insurance policy to a stranger?

Major Banks in the United States say that they are on the point of return and is rushing to return money received from the state to make face the crisis broke out in September after the bankruptcy of Lehman Brothers.

The five of them were in first quarter on profit, shares and prices are rising, KBW Bank Index and the doubling of March 6. U.S. Treasury Secretary Timothy Geithner stated at the beginning of May, after implementation of stress tests designed to determine the capacity of 19 banks to face the deterioration of economic conditions, as Americans can be confident in the stability and soundness of banks.

However, this return could be short, writes Bloomberg. Analysts who have examined quarterly profits and government tests say that the changes made in terms of accounting rules and optimistic estimates make institutions to seem stronger than they are.

The reason of the Bank of America is the desire to eliminate the debts created by state aid collected. A good sign we would say, if keep in mind that the amounts are part of a plan to support banks in difficulty.

Reimbursement will be supported including the capital increase. Worth over 35 billion dollars, it would take place by the end of September, according to sources cited by the publication “Financial Times” taken by Reuters.

Through a bond issue, Bank of America has already obtained a capital increase of 13.47 billion dollars and concludes, therefore, an important step in the goal set by the U.S. government after the application of stress tests in the banking system.