In the third quarter 2007 the American consumer was way out of shape when it came to the percentage of debt payments to disposable income, hitting a 30-year high at 14%… Today the ratio is nearing 30-year lows! Could this be good news for the markets???
So writes Chris Kimble (http://blog.kimblechartingsolutions.com) in edited excerpts from his latest post entitled Consumer in much better shape…lowest debt service ratio in 30-years!.
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The last two times the consumer…[was] in this kind of shape was back in the early 1980’s and early 1990’s, [during] times of stock market lows. If the U.S. economy is a consumer driven economy, could this be good news for the markets???
(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)
The current move up over the past 4 years is being driven by the Fed’s loose monetary policies (just as other global markets have been driven by their Central Banks). Most bulls believe the loose polices will stimulate enough consumer demand to lead to a significant U.S. economic recovery. We, however, continue to believe the debt – laden consumer, along with the still other unresolved debt burdens, will be a major drag on the U.S. economy, (we are convinced that the market will turn down and make a triple top at levels below the peaks made in 2000 and 2007 while we resume the secular bear market that started in 2000) and that will have negative affects on the global economy. Read More »
Injecting massive amounts of liquidity into the banking system can spur dramatic economic growth if that liquidity is used. On the other hand, if public perception is negative and fearful, that liquidity remains untapped and no growth occurs. We are in a new earnings season and for the most part – based on lowered expectations – the numbers are looking OK so what should we expect based on these modestly improving numbers? Words: 2176