Barron's roundtable is having trouble discerning a strong trend in 2007's economy and securities markets. The Goldman Sachs Group's (NYSE:GS) market analyst Abby Joseph Cohen, who accurately guessed that the S&P 500 would end 2006 at 1,400 -- it actually closed at 1,418 -- expects a 9% rise to 1,550 by the end of 2007. This precision masks significant confusion about the factors driving 2007's prospects.

I always enjoy reading Barron's annual roundtable, which pits savvy money managers against each other to predict what will happen to the economy and the market before they pick stocks for the coming year. This year's debate pits Fred Hickey, a New Hampshire newsletter writer, who thinks that a housing collapse and sluggish tech sales will lead to a big correction, against Cohen and others money managers -- who believe that global liquidity will bail us out.

Alan Abelson, Barron's editor, spent much of 2006 supporting the housing collapse school of thought. As I've posted here, here, and here, the housing collapse theory seemed persuasive. But I am now questioning the housing collapse argument because, although the economy has slowed down, it hasn't collapsed. There are at least three possible explanations:

1. The housing collapse is too small a part of the overall economy to sink it;
2. The collapse is taking longer than expected and it will play out in the future; or
3. Global liquidity is offsetting the impact of the housing collapse.

At this point, I am leaning towards explanation three, with a dash of one and two thrown in for good measure.