10/07) A High-Risk Market ...... Even before the twin hurricanes the consumer savings rate had turned negative, household debt was at record highs and home owners were using soaring home prices as huge ATM machines yielding hundreds of billions of dollars in cash. With housing prices starting to soften, energy prices still high and real wages under pressure, consumers’ ability to spend seems severely restricted in the period ahead. These trends have been further exacerbated by the two hurricanes that have created negative domino effects throughout the economy. So far consumers have felt the impact of higher gasoline prices, but with the coming of cold weather they will be facing heating costs that are estimated to be up by about 70% from last winter. At the same time minimum monthly payments on credit cards are rising while interest rates on the cards are also going up. All of these factors have resulted in a sharp drop in consumer confidence. The continuing problems in Iraq and Iran as well as the decline in the President’s approval ratings have also added to the general malaise. History strongly indicates that such low approval ratings and bull markets are usually not compatible.....
http://www.comstockfunds.com/screenprint.cfm?newsletterid=1203
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