The Apple Doesn’t Fall Far From the Tree
Monday, March 13th, 2006
By Michael Lombardi, MBA for Profit Confidential
As hard as it may seem to believe, every once in a while in this dry business you hear or see something that just makes you laugh. And I was definitely laughing last week when I read this on a newswire:
U.S. Vice President Dick Cheney told a conference in Washington last week “The American dream begins with saving money and that should begin on the very first day of work.” Mr. Cheney was telling Americans to do a better job saving.
But is it not the Bush and Cheney Administration that is setting records for the biggest budget deficits in history? Yes, they are. So how can Mr. Cheney tell Americans to save more when our own government spends so much more than it takes in?
My dad once told me that “the apple doesn’t fall far from the tree.” So how can Americans save in light of their non-saving, big spending country? There’s no good example of constraint for consumers to follow these days. What does exist is plenty of debt consolidators and banks hungry to lend consumers more money.
So consumers are spending their hearts out. It’s sad to report that the U.S. savings rate hit negative 0.7% in January, 2006. The last time the U.S. savings rate was negative was in 1933, during the great depression.
The experts are telling us not to worry because households have accumulated wealth in their homes. But I do worry, because people need their homes to live in–they are not going to sell their big homes until they retire. What will their homes be worth when they retire? With the baby boomers hitting 60 this year, will housing demand stay strong? How much will an adult community home (retirement home) cost upon retirement? Nobody knows. All we do know is that the savings rate in the U.S. today is negative… that between one-third and half of all Americans didn’t save a penny last year.
A low saving rate was eventually blamed for the length of the Great Depression. Consumers just didn’t have enough money to spend their way out of the depression. With today’s savings rate being so low, a recession could have a profoundly negative effect on over extended consumers.
NEWSFLASH-Lehman Brothers Inc. has announced it expects the Federal Reserve to raise interest rates by one quarter point four month times by the end of the summer. This would bring the Federal Funds Rate to 5.5%– raising the borrowing costs of millions of Americans significantly. There goes that savings idea again.
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Tags: interest rates, U.S. economy
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
