Is my pessimism in the direction U.S. economy and consumer founded?
I been watching the American consumer for the past 7 years. I remember the crash of 2001 in the stock market and how people lost a lot of there money in the market at that time. Then I saw the resurgence of the consumer after housing prices started to gain by double digits from about 2002 -2005.
Now I have been watching the Dow and it’s record setting pace for the last 2 years and everything for the most part looks to be hunky-dory on the surface. But I can’t help feeling that America is heading for a fall and a big one at that. Why you ask? It’s just some data I been looking at lately on the web.
1. U.S. Housing Sales to Tumble to Six-Year Low on Rates (Update3)
Bloomberg.com: News
2. May consumer credit rises $12.9 billion
May consumer credit rises $12.9 billion – Yahoo! News
3. BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
Bankruptcy Reform Act of 2005
I just have this feeling that because of the slump in housing (Most people biggest asset.) tied to a increased use of high interest revolving debt coupled with a lot of middle class not being able to file for bankruptcy, that the American consumer is in for a bad fall.
I do take into account that a lot of jobs are being created but I don’t know what types of jobs are being created? Are they good paying jobs? Or are they low paying jobs? Maybe you know.
Anyway do you fell that I’m founded in may fears? Or am I pessimistic for no reason.
Thanks in advance for all that answer.
IAN
LOREN
I think that the market can go either way right now. I sell technology products and am hearing mixed signals. One, I hear that semiconductor fab capacity will be full for the rest of 2007, which is a sign that demand for electronic equipment is still strong. However, we all keep seeing the consolidation of companies (buyouts, acquisitions, etc.), which means that the market isn’t really growing.
As an investor, I would cautiously look for opportunities. Greenspan said (about a year ago) that investors were not pricing in risk into today’s investments. Therefore, I would only buy strong companies that can endure an economic downturn at a price that includes a margin of safety (to account for any risk).
The housing bubble scenario has been around for a few years now. It could very much happen, but a major macroeconomic event like that is very hard to predict. I would again, proceed with caution.
Comment by Jeff L — September 23, 2009 @ 1:33 am
DARRELL
What did one economist say to the other? I don’t know either. Really nobody knows what will happen in the future. I hope that everyone is diversified in their holdings. They should have learned by now. All you can do is take care of yourself. If you think things are going to take a dive, prepare for it.
Are you sure that you aren’t depressed? When my thinking gets negative I stop and think whether it is depression talking and I increase my meds for awhile. Not trying to insult you, just a thought. Good luck!
Comment by P S — September 25, 2009 @ 11:20 pm