Every week I read Stephen Roach's article in Morgan Stanley's Investment Perspectives publication. Sometimes his analysis seems right on the mark, but other times he seems to be pursuing some hunch that the data just don't support.

For instance, here's a line from his October 16th article: "The carnage of a popped equity bubble spells a major adjustment for the saving-short American consumer." But it appears that Americans have been doing a great deal of saving since the start of the bear market.

For over two years, people have been putting their money into only three places: savings accounts, money market funds, and Treasury bond funds. They are rebuilding their balance sheets by adding cash and cash equivalents.

In the end, aren't people's spending habits affected much more by the strength of their income statements than by the state of their balance sheets? Unless there is a big jump in unemployment, or workers' real pay begins to trend down, I don't think that American consumers will stop spending, despite their crushed equity portfolios.

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