Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Old Consumer Economy Faces A New Era Of Thrift

Economics / US Economy Mar 04, 2009 - 03:20 PM GMT

By: Guy_Lerner

Economics Best Financial Markets Analysis ArticleThe troubles in the financial markets over the last year will lead to a new era of thrift, and this will be radically different than the past 20 years of excesses as consumers change their habits. Consumers are already retrenching and increasing their savings amongst the economic uncertainty, but I think these changes portend an even deeper shift in personal behavior.


This is a story of three successful "40 somethings" who are cutting back not because they have to but because they want to. They have given up on the markets -not because of losses - but because it has failed them. These people are cutting back because they sense a long period of economic malaise that won't be fixed by increased spending or a new bailout program. And they believe that the economic malaise and dislocations will result in opportunities far off in the future, and they want to be in position, with cash on hand, to take advantage.

Tom is a mergers and acquisitions lawyer who made over $300,000 in 2007. He started his own firm in 2008, but looking ahead, he projects that his billings will be down, and he expects to be making about two thirds of what he used to make. Furthermore, being the only boss is losing its appeal. Tom is looking to downsize. He is going to merge his firm with another, and he is moving from a bigger house to a smaller one. Even though he lost over 50% of his net worth last year, he knows that he could ride out the storm, but what is the point. Tom can live a lot simpler without all the stress, and he never wants to put himself in that position again where his financial well being is dependent upon others. Tom is pulling back on his spending and his investments not because he has to but because he wants to.

Pete is a children's dentist with significant and stable investments in rental properties. He really hasn't taken a hit on his income from the practice or his investments. Pete is cutting back because he has too much on the table; his balance sheet is leveraged more than he would like especially when he considers the prospects for the economy. Pete doesn't have to downsize but he wants to because he wants to improve his cash flow.

Steve is a successful physician with a stable salary. In fact, Steve's wife also is a physician, so they have two very stable salaries. Yes, they lost in last year's market, but with 15 years of productive work life ahead of them, they are not too concerned. While retirement is far off, Steve and his wife see the current economic dislocations as an opportunity to plan for the future. They would like to buy a retirement home with a view of the ocean. Prior to 2008, this was just a silly notion, but maybe, just maybe, they now think it is possible. Of course, this will require savings, which means they will be cutting back too.

So there you have it. Tom is downsizing to simplify his life. Pete is cutting back to improve his balance sheet. Steve is saving more because he recognizes that the current dislocations in the economy will create opportunities. These folks don't have to cut back but they want to, and this dynamic isn't recognized by the pundits on Wall Street. If you listen to CNBC, you get the sense that all our ills will be solved by one more bailout or if not one more, than the right bail out. I got news for you: that game is over. It doesn't matter anyway, I believe the dynamic has shifted in this country from spenders to savers.

Furthermore, the financial pundits seem to imply that savings is only for those on the bubble - those who have lost a job or might lose one as they are downsized by their company. But what I see and hear is that financial prudence is for those who have the means as well and have been somewhat immune to the recession. There is no question that people are cutting back, and it just isn' t people who are on the bubble or who live their life in fear. People with means are pulling in their horns too.

The financial markets have failed investors. There has been a tremendous transfer of wealth from Main Street to Wall Street. Investors have made "bubkus" in this decade, yet CEO's and insiders have made millions for driving their companies into the ground. Wall Street has done little for shareholders. Tom, Pete, and Steve recognize that if they had acted so irresponsibly in their professional lives they would have lost their right to practice medicine or law. They are disgusted with the markets and bailouts to help those who acted recklessly and irresponsibly. They have turned a deaf ear to the financial pundits who clamour on about the need for just one more bailout to fix everything. Tom, Pete and Steve are taking matters into their own hands. Wall Street matters little as the wheels for a new era of thrift have been set in motion.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Guy Lerner Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in