Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
The Upside to Low Savings Rate?
Old 03-29-2006, 10:08 PM   #1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,117
The Upside to Low Savings Rate?

Is our low savings rate a good thing?
By Mark Hulbert, MarketWatch


Numerous columnists over the years have lamented the incredibly low rate of personal saving in this country. Their moaning reached a fever pitch earlier this year, after it was reported that household spending in 2005 exceeded household income for the first time since 1933.

To be sure, now and then a commentator will argue that the picture painted by the savings rate isn't as entirely negative as it otherwise appears to be.

But I never came across someone who actually made a declining savings rate appear to be a good thing.

Until now.

The change came earlier this week when I read a "Strategy Note" prepared byThomas McManus, chief equity strategist at Banc of America Securities. In it, McManus takes issue with Federal Reserve Chairman Ben Bernanke's assertion that an increase in personal savings would be desirable.

"We do not know whether Mr. Bernanke or his staff at the Fed has studied the historical relationship of stock market returns to increases in the savings rate," McManus writes.

But, according to his analysis, "stocks have historically performed well as the savings rate was declining toward a meaningful low point. Afterward, in those instances where the savings rate moved back higher, we found that equity returns were significantly lower than average. So, while Chairman Bernanke may welcome an increase in the pace of savings on behalf of U.S. households even if it were combined with a moderation in housing prices and a weaker wealth effect, this appears to be a recipe for a stock market correction, in our view."


http://tinyurl.com/klalc
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Adjustable rate mortgage utrecht FIRE and Money 8 03-24-2007 12:51 PM
Japan's short term interest rate. CCdaCE FIRE and Money 13 02-22-2007 07:40 PM
Savings Rate - Negative or Not? REWahoo FIRE and Money 18 03-10-2006 07:26 PM
Low cost retirement living Skylark Life after FIRE 7 09-11-2004 04:26 AM
EE bonds to ??? cute fuzzy bunny FIRE and Money 1 12-24-2003 01:33 PM

 

 
All times are GMT -6. The time now is 11:08 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.