Absolutely brilliant table on Briefing.com this morning explaining why the rally off the March 9, 2009 low is a great short-term bull market but why longer-term the bear remains in control.
The jargon for those who care is that this is a cyclical bull inside a secular bear. The last great secular bull market stretched from 1982-2000, Briefing.com points out. And the conditions that produced that huge long-term running of the bulls couldn’t be more different from today’s fundamentals.
I think Briefing’s chart shows that more convincingly than a truck load of words.
To quote:
“The table below encapsulates this concerning message with a presentation of what key data points revealed at the end of 1981 and what those same data points are showing today.
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(a) For individuals with taxable income over $212,000 (source: National Taxpayers Union)
(b) For individuals with income over $357,700
(c) This will jump to 20% after 2010
(d) Source: Fed’s Survey of Consumer Finances (1983 earliest publication)
(e) CBO’s Baseline Budget Outlook
Briefing.com’s Patrick O’Hare goes on to say that while the comparison doesn’t say that the current rally is about to end, it does cast doubt on the argument that we’re in a new long-term bull market.
Briefing.com is, in my opinion, one of the most valuable sites for investing news and commentary. Check it out. I think you’ll find it worth the subscription.
to : insguy The newsletter you mention is positivepatterns@prodigy.net..Bob howard is the writer… I’ve been a subscriber for about 7 years now…He can get a little wild on the political side .. But he can really come up with some very sound and usually conservative advise.. I highly recommend him…
Noting the comment from Christopher above.
I think I am seeing this from a different angle. The number of homes owned has essentially not changed. BUT. Something has changed in the home owners’ ability to manage the ownership.
Of note since the Reagan years is the ever growing disparity between incomes, the “gap”, and with it, the ability to pay for home ownership.. So probably the most significant statistic on this list [to me] is the Highest Marginal Income Tax Rate. Probably too high then, but probably to low now. Remember that a bigger piece of the pie is meaningless if the pie is smaller.
so… the moral of the story is…??
sells equities and buy gold or real estate ?
I only bother reading one newsletter – Positive Patterns – I don’t know if any of you ever heard of it, but my broker subscribes ($1900 a year) to this service. This guy has been right all along. He’s a little weird, but probably the most informative and profitable newsletter I have ever read. He is the only one I have heard of that pulled his clients out of the market before last fall’s crash and got them back in for this rally. I wonder if JJ has ever heard of this guy? I think he lives in Arkansas or something. Any comments?
Good work Jim, as usual.
As Mr Market runs amok on fear, rumors and greed on a dailly basis I think all we little folks can do is listen to Jim Jubak and follow his buy and sells. They do seem to do so much better than “Mr Market” ….being the total number of buy & sell on any given day.
Sign me
Following Jim
So this is a “cyclical bull inside a secular bear”. Or is it a cyclical bull inside a US secular bear? Can we still hope to make money over the next 10 years by investing in emerging markets?
To wallst.finance:
OMG, are you kidding? You think every employee should get $500,000 and that is a model employer for the country? What is the US made of – weapons grade plutonium?
The stimulus money has been well spent has it? How much did Lehman get? This money led the liars at big banks like Citi to go from the verge of bankruptcy (bringing the country with it) to riches again overnight. Well spent? I don’t think so and neither does anyone else that does not have “wallst” in their name.
Before you come jumping back in with a response to defend banks – let’s not forget you are in Jim’s blog and Jim himself called the banks liars when this rally started. Why do you read his material and post here if you think this is all baloney?
So what do we see from these numbers?
Households increased debt levels dramatically, nearly doubled.
Retirement accounts have doubled in number, and probably safe to say dropped an average of at least 25%
Next to no household savings.
Mortgage debt out of control
Baby boomers closer to retirement, (but with 401K’s having replaced most other company retirement plans, and 401K’s down at least 25% over the last year) that is debatable.
Fed deficit quadrupled.
US debt doubled and then some
So, if the consumer drives 75% of GDP, it looks like we better find a new driver fast!
Long live China! Long live India! Long live anybody who buys from the US!
Ohh, I forgot, the only thing we have been focused on exporting these last years is democracy.
Well, maybe some technology, but I can buy US technology cheaper in China…
I am guessing that by these numbers, it will take the US consumer many many years to recover from this hangover, and that the younger US consumer will have less and less (With rampant unemployment) free money to buy. I wonder where does this lead us?
So if we are indeed in a “cyclical bull inside a secular bear” what exactly does this entail?
Many years of bouncing between 8500 and 11000? Many years of hearing the things are looking up when they are not? (Port of Los Angeles, and Port of Long beach reported 28%+ fewer cargo ships arriving for the last quarter, and since these are two of the largest US ports, that says something loud and clear, and it’s not saying that things are better…)
So just for fun, for those willing to speculate with these numbers in mind (Not just ranting)
where does this indicate the US is headed, Where are the markets headed, what industries can benefit from where we are, and what in the world will recover without benefit of an over leveraged American ?
Certainly Brazil seems to be emerging OK, Australia has a good shot at it, If China can continue to build, and put more and more people to work, they may emerge as one of the strongest areas (And one of the largest consumer bases, so while the US individual may suffer in the “short” term, where are the opportunities in the market ? What points to trends that we don’t see yet..?
Anybody up for taking a crack at this exercise?
“Goldman Sachs, for example, has said it has set aside $16.7 billion for compensation so far this year, more than $500,000 per employee.”
This is the kind of company and employment we should have. Govt should not be spending money to create more min wage jobs. So far the gov stimulus has done exactly what it should do.
Wow the thing that really strikes me is look at the Household debt percentage increase (56% to 114%) for only an increase of 2 percent more people owning homes! Clearly the risk of giving all these risky home loans is not worth it, as the recent past has shown! And I noticed that for a short time the 0% down loans were off the table, but are now back, and even the variable interest rate loans are being offered, if not push as much. Talk about a short memory on the parts of banks, consumers, and the government.
PCE: personal consumer expenditures. It’s what you pay for things, goods and services, excluding food and energy.
southof8
PCE=Personal Consumption Expenditure
Jim (or anyone else), what does PCE mean, as in PCE as a % of GDP?