Kass: Beware of Bonds

American consumers are in better shape than is generally expected, as they are deleveraging their balance sheets and rebuilding savings faster than generally recognized. While debt/income is elevated, two key metrics -- household debt service as a percentage of disposable personal income is projected to drop from 120% in 2008 to an estimated 72% by 2012 (back to mid 1990s levels), and household debt as a percentage of disposable personal income is forecasted to decline from 124% to 107% -- indicate that the deleveraging timetable is nearly a year ahead of schedule.

Debt Service -- Close to a Serviceable Range Source: Federal Reserve Board; Bureau of Economic Analysis; Morgan Stanley Research

Looking forward, the plunge in mortgage rates will likely push debt service still lower, and a refi boom could put money in consumers' pocketbooks. So, the headwind to consumer spending from deleveraging seems to be becoming a smaller risk to the economic outlook, as consumers now can spend more of their income.

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.

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