The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (35612)	7/8/2005 3:13:59 PM
From: Crimson Ghost	Read Replies (2) of 110194

Surging home prices more than offsetting soaring energy bills. So low bond yields (supposedly reflecting fears of deflation) have sent real estate prices surging which, in turn, enables consumers to shrug off $60 oil. Again unfounded fears of deflation are being used to support an inflationary boom. BCA Research Consumers: Shrugging Off Rising Energy Prices It will take much higher oil prices to cause a U.S. consumer retrenchment if house prices keep rising. we have previously highlighted that low bond yields had offset the negative impact of higher oil prices on spending. One of the ways lower borrowing costs have stimulated growth is through soaring real estate values, which have fueled the withdrawal of home equity. The Chart shows that the annual change in home equity extraction has dwarfed the annual increase in consumer spending on energy products. It is likely that about one-half of the equity extracted in recent years was used to pay down debt. Still, the increase in households’ spending power flowing from the housing market has been larger than the drain from high energy prices, suggesting consumer spending growth will remain solid.

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