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Let’s take a look at some of the solid fundamentals that are driving the recent strength in the US economy.

An article posted on MarketWatch just over a week ago highlights an interesting but very disturbing activity that has been on the rise in the US housing sector. What this article describes is the process of homeowners that are taking cash out of the equity in their homes during the recent increases in refinancings over the past year.  In other words, the zero rate , “crisis mode” monetary policy has managed to help home prices rise from their beleaguered levels in 2008 through 2010 which resulted from the pricking of the massive bubble that had been created in this industry up until 2007.  This zero rate policy has also managed to enable homeowners to refinance at very attractive rates.

The disturbing part that our team doesn’t have to explain however is that homeowners are increasingly using home values as ATMs once again activity that was prevalent during the bubble years of 2004 through 2007.  The more disturbing point to raise this time around is that homeowners are probably using the cash to meet expenses rather than spend on lavish life styles.

All one can do at this juncture is just shake your head.


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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