People have been bandying around the death, or not, of the U.S. consumer. I believe that the consumer is indeed in a secular retrenchment, and have been studying the idea the past two years, as part of my research into lucrative investing over the next decade.
I won't post all of the data, some of it is proprietary, and otherwise it's too much bother. The figures are approximate as they're from memory, but here is the result of my research for your enjoyment.
This assumes a US spending spree which started around 1982, and is presumed to have finally capitulated in 2008
Seems unlikely, but so did the credit crises last year, didn't it? Shoot away ...
I won't post all of the data, some of it is proprietary, and otherwise it's too much bother. The figures are approximate as they're from memory, but here is the result of my research for your enjoyment.
This assumes a US spending spree which started around 1982, and is presumed to have finally capitulated in 2008
- Average baby boomer (ABB) has saved (pre 2008 crash) $46k for retirement. Very few take advantage of tax advantaged saving, like 401k's and ROTH. Figures aren't handy, but predominately when somebody quits a job they cash out what is in the 401k.
- ABB has majority of wealth tied up in house, >70% of americans 'own' their home, which value is now crashing. Houses which are owned outright are only around 15%.
- ABB can't expect much in inheritance. Average inheritances have been around $40k, hardly a princely sum, and they go mostly to the already wealthy (wealthy parents tend to have wealthy kids). With longer lifespans, medical costs and greater charitable giving there's no boom in inherited wealth.
- Since 1982, spending (and thereby credit accumulation) has outpaced income by about 2% each and every year. Now the savings rate (however you want to measure it) is approximately zero. This is a very unusual situation, few countries maintain this situation for long. This one is in trouble from both ends, the credit giving and the credit taking.
- An in depth study I have of consumer wealth - after the dot.com/2008 crashes, and the housing crash, there's very little wealth left to tap to fuel spending. The last big piece consumers have, a few trillion in pension type monies, is in conservative hands and difficult to get at. Otherwise there's little to continue the spending spree, little in savings or, especially now, asset values.
- What wealth you do see out there is, guess what, concentrated at the top. Having $1M+ in assets places you in the top 10%.
- Demographically, there's a lot of data which clearly shows a spending slowdown when a person gets to their 50's. One, kids are/have moved out, so there's no more household building. Two, the next goal is retiring. Three, people have everything they need, or nearly. Four, people just want less generally. ABB is getting well into their 50's now, and they have been the big spenders the past few decades, what else do they need?
- MEW - Mortgage Equity Withdrawel, has been funding spending since 2000. Lots of data here, but that source has been cut off. Previously it was the dot.com boom.
- Credit crisis. After the biggest credit bubble the world has ever enjoyed, bankers are suddenly turning into Ebenezer Scrooge, and is withdrawing credit.
Seems unlikely, but so did the credit crises last year, didn't it? Shoot away ...