<p>Are you ready for this? We have a major storm coming our way according to James Quinn, the senior director of strategic planning, at the Wharton School, University of Pennsylvania. </p>
<p>“It is easy to ignore the storm if you look at the opposite horizon. When the storm reaches your location there can be no more ignorance.” </p>
<p>I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn’t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can’t get steroids from our dealer (banks) anymore. </p>
<p>*How Did I Get Here? </p>
<p>And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful wife
And you may ask yourself-Well…How did I get here? </p>
<p>And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful wife! </p>
<ul>
<li>Talking Heads, David Byrne lyrics to Once in a Lifetime By 2005 practically everyone had a large automobile and a beautiful house. By 2010 many of these people will be asking…*</li>
</ul>
<p>Warning if you read this you may not sleep well tonight.</p>
<p>[Guest</a> Commentary](<a href=“http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098]Guest”>http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098)</p>
<p>Buckle up, everybody.</p>
<p>If all these stores are closing, why is it that I still have to fight over a parking spot at the mall? All the restaurants had lines out the door today when I stopped for a quick bite. People are still spending money. I agree though, that people are living above their means and shouldn’t carry so much debt. People shouldn’t be just a paycheck away from bankrupcy; isn’t anyone advising them? What are they learning at school?</p>
<p>No kidding Celtic, I took my DD to town yesterday for an appointment and was blown away by the traffic at the mall and surrounding stores, not sure about the sales amounts, but the people were sure there</p>
<p>I was looking at the EIA petroleum numbers yesterday and came to the conclusion that demand for gasoline went up quite a bit last week.</p>
<p>It’s funny that you linked to a story at the Prudent Bear website as I’ve read that site and Doug Noland, in particular, since about 2000. If you know anything about the Prudent Bear mutual fund, BEARX, you’ll know that its performance has been miserable since the 1990s when it was started. It’s companion fund, PSAFX which is a negative currency fund has done reasonably well (I have a lot invested in PSAFX) since 2001 or 2002 (don’t recall when it was started). David Tice who started Prudent Bear is selling out to another company (I got the paperwork recently) and is trotted out on the financial shows during times of gloom and doom.</p>
<p>The housing bubble pop was predicted back in 2003, 2004, 2005 at many bear sites and housing bubble sites. No big deal - we just waited for it to happen. I think that most didn’t think that it would get as big as it did. The central bankers do have some pretty powerful tools to fight deflation but it will be a rocky ride whatever happens.</p>
<p>Our Sunday paper supplement did a thing on two families and how they can learn to be more frugal. One family was just making it but thought they could cut back a little more to save some money. The other family was just making it…and also had $30,000 in credit card debt! The article didn’t seem to see that as a problem. :eek:</p>
<p>Funny, the many people lining up to pay at Nordstrom Rack didn’t read Jame Quinn. Nor did the lunch time crowd at Fogo de Chao, happily paying for their $25/person lunches. All this on a weekday. </p>
<p>However, I am slogging through Howard Ruff’s “How to prosper during the coming bad years in the 21st Century”, bought from the bargain bin at Borders for $3.99. </p>
<p>Now I am wondering if I should get back into gold, store 5 gallons of honey and 6 months worth of food supply, and keep bars of soap around to barter when things get really bad. On my own I have started to hoard seeds. :rolleyes:</p>
<p>My perspective in precious metals is that you should have some around in case of a monetary crisis. If it turns out that you never need it, then great. Just hand it down to your heirs. After teaching them what precious metals are and why they may be useful in a crisis.</p>
<p>One guy I know many years ago bought a cabin in the mountains and stocked it with gold, silver, steel and lead. If you know what I mean.</p>
<p>In the malls around here it’s business as usual, although a couple of recent trips to Circuit City made me think they were in trouble (empty shelves, no salespeople). Turns out, I might be right: </p>
<p>[Now</a>, two is a crowd - The Boston Globe](<a href=“http://www.boston.com/business/articles/2008/08/22/now_two_is_a_crowd/]Now”>http://www.boston.com/business/articles/2008/08/22/now_two_is_a_crowd/)</p>
<p>Stores like Costco killed Circuit city as did online shopping at Amazon where you can dodge the sales tax which can be hefty on a nice tech toy.</p>
<p>There are always doom predictors out there. Every 10 years they get to be right for one year.</p>
<p>I will sleep just fine tonight. Both H and I were brought up by parents who lived through the depression and we have always lived well within our means. The savings rate can be deceptive. It only includes certain types of savings, if I recall correctly.</p>
<p>I think that the savings rate doesn’t include 401Ks and pensions. One might ask why someone would be so stupid to exclude 401Ks from savings. I read that the mutual fund industry funds the calculations for the savings rates so it’s important to scare everyone into sending their money to mutual fund companies so that they can invest it for you.</p>
<p>Well, I went to Barneys a few days ago (to “window shop”), and that store was admittedly rather empty… but I think it’s a bit of an exception. 
All the non-luxury priced stores were very crowded, and people were buying like it was about to go out of style.</p>
<p>People shouldn’t be just a paycheck away from bankrupcy; isn’t anyone advising them? What are they learning at school?</p>
<p>I agree that my kids didn’t learn about financial management at school- it isn’t on the federally mandated tests. ;)</p>
<p>our income is what it was 5 years ago, unfortunately our basic expenses are not.
[Business</a> & Technology | Local inflation rate outpaces other cities](<a href=“http://seattletimes.nwsource.com/html/businesstechnology/2008088360_sundaybuzz030.html]Business”>http://seattletimes.nwsource.com/html/businesstechnology/2008088360_sundaybuzz030.html)</p>
<p>[Business</a> & Technology | Higher food costs eat away at budgets | Seattle Times Newspaper](<a href=“http://seattletimes.nwsource.com/html/businesstechnology/2008115042_prices15.html]Business”>http://seattletimes.nwsource.com/html/businesstechnology/2008115042_prices15.html)</p>
<p>It might be possible to clear the housing sale backlog by changing US immigration policy: We could simply start admitting larger numbers of legal, well educated immigrants with the caveat that they need to buy a house within a year of residency. Given the immigration backlog, the economy would be back in shape in no time.</p>
<p>^. USA did this already thru the subprime and poor verification process by making Franny Mae loans to undocumented workers.</p>
<p>Savings rate deceptive because of exclusions? Interesting, but how does that explain the huge downswing in savings rate? Or the huge upswing in debt load? </p>
<p>The same folks who don’t know basic financial matters are the same ones who don’t have a clue about the state of things nor (or in the near future). It will only hit them when it hits them personally (e.g. they lose their job, can’t get more credit and can’t make ends meet, or foreclose). Until then, they’ll keep shopping at the mall.</p>
<p>JUst a quick guess, but if IRAs and 401K $ do not count as savings, when did we begin using them? When did they become widespread? Does the savings swing chart to that time period?</p>
<p>I thought that was that was the case and that’s why every time they started bemoaning the saving rate in the US I just changed the channel.</p>