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Negative savings rate


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#1 MangeMan

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Posted 22 December 2006 - 02:24 PM

savingsrate i still very negative, at the same time MEW and credit market borrowing has come down a lot so far this year, to keep up this negative savingsrate the almost only other way to do this is for consumers selling stocks and bonds, this would explain many of the "sentiment" indicators that have for most of the year shown the public being pretty bearish, I can't find any other explanation that would explain both these things at the same time To bad they are wasting their money on yet another flatscreen tv using up all their savings, I feel sorry for the next generation having to clean this mess up

#2 traderpaul

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Posted 22 December 2006 - 02:48 PM

savingsrate i still very negative, at the same time MEW and credit market borrowing has come down a lot so far this year, to keep up this negative savingsrate the almost only other way to do this is for consumers selling stocks and bonds, this would explain many of the "sentiment" indicators that have for most of the year shown the public being pretty bearish, I can't find any other explanation that would explain both these things at the same time

To bad they are wasting their money on yet another flatscreen tv using up all their savings, I feel sorry for the next generation having to clean this mess up

They opened up a store in the heart of the Sillycon Valley that will give you pay in advance.....They must charge a big fee for that.....Sign of the time?
"Inflation is taking place now. Prices may not appear to be rising because they are making packaging smaller. "— Rickoshay

#3 Sentient Being

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Posted 22 December 2006 - 02:54 PM

I know what you mean about all that borrowing, it's foolishness. My wife and I have only one credit card and pay it off in full every month when the bill comes due. We NEVER pay an interest charge on a credit card. Own both cars outright. Refinanced the house to a fixed lower rate and took out no extra cash. in 7 years we own the house which has doubled in value since we bought it about 13 years ago. We Save 16% or so from each of our paychecks each pay period to our 401K's. And then we read that people aren't saving anything. It hardly seems possible. We spend our fair share, but between the house and the 401K's we are also putting it away. And that doesn't include our company paid retirement funds. And we are worried we wont have enough to get by in retirement! Imagine having nothing but debt and depending only on social security! By the way, we bought ourselves a flat panel (32" LCD) TV for Christmas, hung it on the wall, and shoved the home theater into the Cabinet that the big old TV used to sit inside. Picked the New TV up a few months ago as we remodeled the living room. Of course, we didn't borrow to buy it. Never would borrow for a TV. I know that the Flat Screen has become a symbol of all who spend foolishly, but flat screens are going to replace the old Cathoid Rays. We waited for those 4 and 5k screens to hit the 2k range before we took the plunge. Which reminds me, need to pick up some Christmas classics for tonight.

Edited by Sentient Being, 22 December 2006 - 03:00 PM.

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#4 humble1

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Posted 22 December 2006 - 03:40 PM

friend: i think you are mistaken that the borrowing has come down a lot. i don't have all the numbers in front of me and i am too lazy to look them up, but i think you will find that billions and billions are still being extracted from homes through refi activity and that credit card total outstanding balances have been rising, though maybe not always at the same accelerated rate. few people are as wise or as well educated as sb. mass is a great state for too income top tier families. this is far and away the exception. the great masses live from paycheck to paycheck and use credit cards for "emergency" loans. these would include car repairs, health bills, funerals, weddings and all such things most of us pay for in cash knowing such bills will arise. the middle class simply does not have enough left over each mnoth to pay for these things or save for them. :(

#5 humble1

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Posted 22 December 2006 - 03:40 PM

friend: i think you are mistaken that the borrowing has come down a lot. i don't have all the numbers in front of me and i am too lazy to look them up, but i think you will find that billions and billions are still being extracted from homes through refi activity and that credit card total outstanding balances have been rising, though maybe not always at the same accelerated rate. few people are as wise or as well educated as sb. mass is a great state for too income top tier families. this is far and away the exception. the great masses live from paycheck to paycheck and use credit cards for "emergency" loans. these would include car repairs, health bills, funerals, weddings and all such things most of us pay for in cash knowing such bills will arise. the middle class simply does not have enough left over each mnoth to pay for these things or save for them. :(

#6 esther231

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Posted 22 December 2006 - 03:59 PM

When they are writing about savings, are they only using saving accounts for the numbers or do the numbers include 401K and IRAs?
When I see an adult on a bicycle, I no longer despair for the future of the human race. ~H.G. Wells

#7 traderpaul

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Posted 22 December 2006 - 04:03 PM

When they are writing about savings, are they only using saving accounts for the numbers or do the numbers include 401K and IRAs?

Saving and retirement accounts are different.....For example, you can use savings for vacation.....
"Inflation is taking place now. Prices may not appear to be rising because they are making packaging smaller. "— Rickoshay

#8 MangeMan

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Posted 22 December 2006 - 04:51 PM

credit market borrowing as % of disposable income is down from 15% last year to 11-12% now, and MEW is down from about 600 billion 2005 to maybe 400 billion this year and this will continue to drop as long as housing stays flat or goes down since personal income is up, there must be something else going on pushing the household deficit further down and we all know that the public have been quite bearish all year for sure it seems to me they are selling to be able to buy more stuff they really don't need

#9 James Quillian

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Posted 22 December 2006 - 05:06 PM

savingsrate i still very negative, at the same time MEW and credit market borrowing has come down a lot so far this year, to keep up this negative savingsrate the almost only other way to do this is for consumers selling stocks and bonds, this would explain many of the "sentiment" indicators that have for most of the year shown the public being pretty bearish, I can't find any other explanation that would explain both these things at the same time

To bad they are wasting their money on yet another flatscreen tv using up all their savings, I feel sorry for the next generation having to clean this mess up


It is not really a negative saving rate because the assets in which people invest are not adequatly counted as savings. On a global level what matters is that someone is saving somewhere.
The problems begin when assets become overpriced relative to the income they produce.
In bubble economics, asset inflation generates consumer spending. As long as asset prices continue to rise there won't be any consequences. One reason stocks are not selling at higher P.E. ratios is because the rising equity values are causing their own growth at least in part.

It is kind of like a guy who owns a store, borrowing on the value of his business, buying all of his own merchandise and counting that as sales and income. If the stock market drops, the economy is in trouble.

James

#10 pdx5

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Posted 22 December 2006 - 06:37 PM

JQ has touched on it alreadyt but basically the general public has proved themselves smart by NOT putting money in savings accounts which paid very meager rates, and instead they bought a whole bunch of housing which appreciated nicely over the last 4 years. The earlier buyer will be doing just fine, but those who joined the party late could be in trouble.
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