The party continues, dear reader. Stocks are making new highs, and people are spending like there is no tomorrow. Why? I really don’t know.
It seems as though the real estate market is the only place not having fun anymore… No, the real estate agents and brokers are not celebrating these days, at least not in the United States. All those tens of thousands of people who became real estate agents in the U.S. in 2005 will likely be changing careers soon, if they haven’t already.
But big stocks, they just continue going up. Wall Street bonuses are at record levels. Popular consumer goods? They are flying off the shelves. As soon as Apple comes out with a new iPod, a generation (or two) runs out to buy the latest version of the gadget. Designer clothes, fast and expensive cars, restaurants with one hour waits… people are spending in America today at an unbelievable clip.
1932, 1993… who remembers those years? Back then, the unemployment rate was 25%. The depression of the 1930s was the biggest bust of modern history. 2005, 2006… welcome to the biggest boom of same period.
But the depression shares one very important characteristic with the boom of today: A negative personal savings rate. The U.S. personal savings rate for 2006 was negative one percent — the worst it’s been in 73 years. And you guessed it: The last time we hit a negative personal savings rate was at the onset of the Great Depression.
Americans today are spending all the money they make, after taxes, and then they are either borrowing or dipping into their savings to spend more. You could say they are partying like drunken sailors once did.
When will it all end? When will the party-goers realize they need to retire soon and will need money to live during retirement? Soon, my dear reader. Soon. With almost one hundred million baby boomers getting ready to retire soon, reality is not far behind.