Consumers Hunkering Down

I gave a hypothetical example a couple of days ago about a baby boomer losing nearly half his or her retirement and virtually all home equity feeling the need to hunker down and start saving. As fate would have it, a survey was released today showing sentiment among future retirees is at a record low in terms of expecting a comfortable retirement - just 13%.

http://latimesblogs.latimes.com/shopping_blog/2009/04/worker-expectations-for-comfortable-retirement-plunge-ebri-survey.html

Now let's do 2+2 with this stat. 87% of the people do not have confidence that they will be comfortable in retirement. Now some of these are not that close to retirement so they probably do not count much. Nonetheless, the front end of the baby boom generation just started retiring, and this is a very large crowd. They do not by-and-large feel comfortable with what they have saved for retirement (I am at the tail end of that group and am not comfortable either), so what does this tell you about consumer spending? Consumer spending, after all, is roughly 70% of our GDP. What do you expect to come of this?

Giving money to banks so they can lend to consumers is only going to work if (1) the consumers qualify for credit - which is increasingly doubtful and (2) these debt laden consumers are seeking more credit. I suspect on (2) for the most part only those in desperate need for cash will seek credit and most of these will not qualify under (1). Go figure. At the end of the day, consumers are in a sink hole and will have a very hard time climbing out.

Now this 2+2 discussion did not include any review of Alt-A and Prime loan foreclosures, which now in $ figures are exceeding the subprime problems. It is not including new unemployment, which continues to worsen. And it does not include many other realities. I am trying to live in reality. Politicians should try to do so too.

Market Down

I read a blog noting that any climb or fall of 1-2% in the market is just business as usual in our current market. I agree. You could even raise the upper end of that range and be correct. Accordingly, I am not reading too much into today's drop. Nonetheless, let me note that the market has since March 9 had a meteroric rise - the best in many decades. A drop today - or any day - is to be expected. Given the rise, more could indeed happen. I have been predicting more doom and gloom but I am not attributing today's drop to that prediction - though the news that led to the drop was not a surprise to me. The next couple of weeks will be telling. You know my slant that the worst is yet to come.

Disclosures: None