There is no shortage of opinion on the wealth effect and the degree to which home price swings impact consumer spending. A recent study suggests the impact on consumer spending from housing wealth is overstated. For us, it is hard to look past the results of the recent housing cycle and not see a direct and sizeable impact on consumer behaviour. For this reason we want to refresh where we believe housing stands. Moreover, given the broad reach of housing, it is little surprise this sector commands so much attention from the Fed. The October 2008 ascension of the Chinese as the largest owners of Treasury securities has propelled the Chinese investor base to the forefront of Treasury market psyche. And the recent discussion about the $2 trillion of the country’s FX reserves being diversified has left Treasury yields well off their lows. The idea of a wealth effect is appealing since it seems to fit neatly with straight forward thinking. If your most important asset is falling in price you are likely to pullback on spending. The problem is that the detailed analyses of this phenomenon are essentially all over the place.