A Stairway to Retail Heaven (Part 2) 47 comments
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Dude, Where’s My Retirement?
At the end of 2007, the average 401k balance was $65,500. The median 401k balance was $19,000. This divergence shows there are a few people with huge 401k balances, while the majority has virtually no retirement savings. These balances were at the end of 2007. Balances are likely to be 40% lower today. Almost 20% of 401k participants had borrowed against their 401ks at the end of 2007, with an average loan balance of $7,500. With plunging markets and home prices, the number of loans probably soared in 2008. A 45-year-old couple with an $11,000 401k balance and an entire net worth of $110,000 and annual income of $62,000 is in a precarious position. They would have to be living in complete denial if they think they will have a comfortable retirement.
Americans bought into the lie that their homes could fund a glorious retirement of cruises, golf, and traveling the world. That illusion has been shattered. It will likely take 10 years to get back to breakeven on the losses they’ve experienced in the last 18 months. Anyone who has retired in the last five years or has plans to retire in the next five years has had their plans upended. They will have to go back to work or work longer, if they can find a job. There are 1,000 Americans per day turning 65. Only an insane person, after experiencing the losses of the last few years, would continue to spend on electric gadgets and luxury cars. If they don’t start to save at a rapid clip, they will experience a miserable stress filled old age.
Deleveraging and How I Learned to Love It
Men, all this stuff you've heard about America not wanting to fight, wanting to stay out of the war, is a lot of horse dung. Americans traditionally love to fight. All real Americans love the sting of battle. When you were kids, you all admired the champion marble shooter, the fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. I wouldn't give a hoot in hell for a man who lost and laughed. That's why Americans have never lost, and will never lose a war... because the very thought of losing is hateful to Americans.
George C. Scott – Patton
Americans have gotten soft over the last few decades. It is time to fight and prove that we still have a backbone. The next decade will not be pleasant, but it will build character. The priorities of the country must be changed and it will be American consumers who will force the change. They have already begun the long trek back from a losing spending strategy to a saving strategy that could result in being a winner. The drop in retail sales in the last few months is the most dramatic in U.S. history. This is not a momentary blip in a long term uptrend. This is a paradigm shift.
From 1952 through 1982, consumer spending as a percentage of our economy ranged between 60% and 64%. The United States ran trade surpluses and manufactured things that other countries wanted. Since 1982 we’ve lived above our means, consumed 4% more per year than we produced, and borrowed the money from foreigners to live this way. In 2008, this ratio topped out at close to 71%, or $10 trillion of our $14 trillion economy. Since this was an unsustainable trend it will revert to the mean over the next decade. The reversion to 62% of GDP will reduce consumer spending by $1.3 trillion annually going forward.
To paraphrase famous American admiral John Paul Jones, we’ve only just begun to de-lever. When you accumulate debt over three decades, you don’t get rid of it in two years. Multi-decade expansions of debt are followed by a multi-decade deleveraging. The last time consumers pulled back for longer than one month was 1975. The consumer is in the process of collapsing. There will be false starts in a positive direction, but the overhang of consumer debt, relentless decrease in housing and stock values, and looming retirement funding will force Americans to dramatically cut their spending for decades. The retail industry will be devastated by this paradigm shift.
Knock, Knock, Knockin' on Heaven’s Door
The managements of most retailers in the United States are not prepared for $1.3 trillion less consumer spending per year. Their little expansion models were built upon an existing over inflated demand extrapolated at 5% or greater growth for eternity. We know how well bank models worked out. The good news is that retailer expansion models will not bring down the financial system. The bad news is that thousands of retailers will go bankrupt because they planned their businesses based upon false assumptions. Any retailer that used leverage to expand based on faulty pie in the sky assumptions is headed to retail heaven.
Retail top management is notorious for copying the strategy of other successful retailers. Wal-Mart (WMT) created the concentration strategy of dominating a market with multiple stores. Every retailer in America dreamed of replicating Wal-Mart’s success. Home Depot (HD), Bed, Bath & Beyond (BBBY), Target (TGT), and Lowe's (LOW), among others, have followed this same strategy. Every retailer does the same thing. They know how many households are in a market and they multiply that number by the expected spending per household. There are three major errors that have been committed by every retailer in America. They failed to recognize that the spending per household was 30% over inflated due to debt financed demand. They then extrapolated the spending per household using a 5% to 10% growth rate. Lastly, they ignored the fact that their competitors had the same strategy.
I consider Lowe's to be one of the best run retailers in the U.S., with beautiful stores and good service. But, its top management was clearly irrationally exuberant regarding its expansion plans. Lowe's has annual sales of $45 billion with approximately 1,500 stores. This averages out to $30 million of annual sales per store. Its operating margin has been 10%. It opened a store in Plymouth Meeting, 20 minutes south of my home. Since it was the 1st store in the market, it likely generated annual sales of $40 million with a $4 million profit. Next it opened a store in Montgomeryville, 20 minutes northeast of my home. This store likely generated $30 million in sales, while reducing the sales of the Plymouth Meeting store by 15%. Next it opened a store in Oaks, 20 minutes west of my home. This store likely generated $25 million in sales, while reducing the sales of the Plymouth Meeting store by 10% and the Montgomeryville store by 10%. Now for the final nail in the coffin. It will open a 4th store in Hatfield, 5 minutes from my home in April. It will cannibalize the sales of all three other stores. Below is an analysis of the likely profit implications for Lowe's.
000’s Omitted
This chart shows that Lowe's likely generated more annual profit with two stores than with four stores. These figures don’t take into account that Lowe's likely spent $20 million to build each of those stores. It has sunk $40 million into building the 3rd and 4th stores, while reducing annual profits. These figures have also not taken into account the future reduction in consumer spending. If Lowe's has replicated this error across the country, their future will not be bright. The hubris and overconfidence of top retail executives will result in thousands of store closings and retail layoffs.
I have experienced the incompetence and shortsightedness of retail executives firsthand. It is amazing to me that supposedly intelligent executives could gamble with a $100 million investment based on ridiculous assumptions and blatant lies. Many retailers have a winning concept, but few have top executives who do not get caught up in their own press clippings. When executives are driven by ego and diversity agendas, while disregarding unequivocal facts, that retailer is destined to fall. Understanding your external environment, your competitors and changing trends are essential to long-term success. These executives forget that Montgomery Ward and K-Mart were once premier retailers. The accumulation of bad strategic decisions by management will eventually bankrupt even the best retail concept. Bad decisions by retail executives destroy the lives of long-time employees when they are forced to close stores and fire staff. I’ve dealt with executives who couldn’t spell strategic let alone think strategically. The retailers listed below have either collapsed or scaled back in the last year. The worrisome fact is that the decline in retail spending has only just begun.
A smart retail executive should be analyzing the current situation with a critical eye. Any executive who is planning for an upturn in spending by consumers next year is in for a rude awakening. The environment has changed forever and if they don’t adapt immediately, their companies will die. Based on the balance sheets and cash flows of the retailers in the following chart, I’ve categorized them according to their risk level. Most of the information is prior to the dreadful holiday sales season. Balance sheets and cash flows continue to deteriorate. Some of the retailers on this list will be a surprise. Those with huge short-term debt obligations run the risk of not being able to rollover that debt. Banks in the U.S. no longer lend money they just beg the government for more capital. Many of these retailers will not be in business five years from now. Others will need to close hundreds of stores to survive.
The words of George C. Scott as Patton describe how retailers and nations sometimes have a limited amount of time on top of the world.
For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph - a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.
All glory is fleeting. The American conquerors have returned from the mall wars pulling carts laden with HDTVs, iPods, Rolexes, and other treasures. There is no more ammunition left to fight another war. Retailers and Nations alike can experience fleeting glory. The question is whether it is too late for lessons learned to be implemented in time.
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This article has 47 comments:
The savings rate actually jumped up recently. About time the public ended their obsession with monthly payment mentality and being a debt slave is the american dream. Thi sis not living.
Also the american public should start to take back their govt from these corrupt politicians and special interests groups wh are destroying our country's future. This includes dems and repubs they are all corrupt.
This budget is just a money grab for special interest. Where the F$%$# is the responsible spending.
Its going to be a very painful few years as America delevers and gets off the credit binge.
Meanwhile, get-rich-quick-dreamer... will be thinking of new ways to make fast money... maybe in China? I can already see a massive lending boom, construction boom, etc over the next decade there as the whole world piles into there for the next moneytree.
The massive credit losses have not yet been realized and obviously will increase dramatically. Thus driving down financials even further. On top of that we have piled $450,000 of national debt per household with no security attached when you calculate medicare and social security commitments. A complete embarassment of irresponsibility to hand to my children.
Where is the leadership, this charismactic President that has in the agenda only to cut the budget deficit in half by 2013. This won't solve the absolute certainty that the USA is bankrupt.Once the consumer reduces this amount of spending and the retailers reduce purchasing to China, India, Saudi Arabian oil and never mind Russia (who has its own problems) who carry 4 trillion plus of USA debt. They will have no reason to keep holding paper and buying debt. This will devalue the dollar to the point it is no longer desired as he world currency. Which in turn will drastically reduce purchasing power on a world platform.
Taken in context this acticle actually predicts not only a Paridigm shift in retail but as a entire way of life for the USA as a whole. it will certainly be a rude awakening.
My thoughts are on silver/gold, not in ETF's and not in stocks but in my hand. Peddle to the Metal! It truly is the safest bet.
Your chart excluded BBY. Where does that company fall, in your estimation?
It's true that the business is operating in the consumer discretionary category, but it's also true that it's the best of breed in that category. If BBY scales back its store opening plans for fiscal 2010, restructures to wring out costs, and maintains itself without expecting strong growth, I think it will do fine.
On the other hand, with the macroeconomic impacts you so brilliantly outlined, if the company fails to respond to them, the future could be grim indeed.
Thank you again for a great post.
On Mar 04 01:07 PM Paul&Shark Yachting wrote:
> the more charts. the more confusing, I know contraryinvestor website,
> whenever I seen it like 10 years ago they are always bears, if I
> would go short on their advise, I would lose 100 trillion $$$£££.
>
> This sickos are always bearish, Dow 1000 bearish, Dow 100, bearish,
> nuts.
On Mar 04 01:35 PM anarchist wrote:
> yeah, so you didn't consume and your pissed because a few who did
> will get a helping hand. What the hell did you do for "for a good
> time" all those years James, count your money?
The "mean" days ahead will be of a sort where people look at spending and saving and have to decide whether grandma or grandpa ought to go quietly into that good night, rather than putting every last dime on the line to keep tickers going. The bloated BMW driving iPod wielding hyper-yuppie house flipper is as real a story as the welfare queens of the 80s or the any number of other mythic stereotypes get wrongfully blamed whenever a downturn hits.
On Mar 04 03:20 PM donzelion wrote:
> Yes, Americans bought their share of monster-sized HD TVs in the
> last few years. But relatively few broke their backs on such extravagances.
> Most new spending went to health care and education - such spend
> thrift sensibilities! Most of the credit card debt is either roll-overs
> from folks without insurance after a disaster, accident, sickness,
> or other crisis; a fair number of the heaviest borrowers borrowed
> tens of thousands to make sure that their relatives could get proper
> treatment.
>
> The "mean" days ahead will be of a sort where people look at spending
> and saving and have to decide whether grandma or grandpa ought to
> go quietly into that good night, rather than putting every last dime
> on the line to keep tickers going. The bloated BMW driving iPod wielding
> hyper-yuppie house flipper is as real a story as the welfare queens
> of the 80s or the any number of other mythic stereotypes get wrongfully
> blamed whenever a downturn hits.
On Mar 04 03:23 PM raytayzmd wrote:
> ..."the American consumer isn’t coming back" -- oh, cut me some slack!...the
> American consumer hasn't gone away -- he's just waiting...for deals,
> bargains, etc...for all the doom and gloom in the retail marketplace,
> I haven't found much in the way of price-cutting...for example, I
> went shopping for cars...what claimed to be "deals" on autos, upon
> closer inspection, looked more like "scams" -- take a 10,000 car,
> double the price, offer an "incentive" of $4000...I looked at computers
> -- Dell's and Hewlett-Packard prices don't look much different than
> they did a year ago; in fact, Dell a year ago was giving much better
> deals...housing?...7-8 years ago, $50 a square foot could buy you
> a pretty decent house; nowadays, tenements cost a $100 a square foot...when
> prices finally start catching up with the stock market, I suspect
> consumers will start migrating back...
Thrift is not the same as deprivation. There may be a theoretical "paradox" of thrift, but that is only a short-term phenomenon. Ultimately, living within your means produces less stress and more happiness.
There should be an IQ filtering test for posters on this thread.
On Mar 04 01:01 PM billddrummer wrote:
> Excellent article, and worth reading by every retail executive in
> the US.
>
> Your chart excluded BBY. Where does that company fall, in your estimation?
>
>
> It's true that the business is operating in the consumer discretionary
> category, but it's also true that it's the best of breed in that
> category. If BBY scales back its store opening plans for fiscal 2010,
> restructures to wring out costs, and maintains itself without expecting
> strong growth, I think it will do fine.
>
> On the other hand, with the macroeconomic impacts you so brilliantly
> outlined, if the company fails to respond to them, the future could
> be grim indeed.
>
> Thank you again for a great post.
Again, I can quibble with some of your minor points, but overall your thesis that our society is in for a massive reset in expectations and the way we live is absolutely spot on. People who don't realize this are delusional. The data are clear. We have lived way beyond our means for far too long.
I belive, the government should pay more attention on regulation and interest rate cap. Saving the Zoombie banks can buy some time, but the moment the interest rate is increased the Housing industry will be in shambles again.
Foundation is shaken when the president says that consumer need to spend more and more in order to save the economy. I really dont understand logic.
See economies around, all the countries depend upon US consumer a lot, it means that already US has consumers have consumed beyond their means......A balance is required...may be New power will emerge
I especially liked your quantitative assessment of retail overloading, using Lowe's as an example. I live in western Chester County, PA- not far from where you're describing- and we have three Home Depots and one Lowe's in a fifteen mile stretch of the same highway. I'm wondering if it's a better investment idea to short the cash-hemorrhaging companies you listed in the table or to short commercial real estate- seems like that sector will be on the hook for more due to the ridiculous leveraging they placed on each and every property these shops inhabit...
The question is--and here you (like everyone else I've seen look at this) are somewhat less persuasive--whether this new saving and prudent spending consumer will actually stick around for awhile after he/she has disgorged the debt and re-built (or actually built for the first time) real savings for retirement, education, vacations, whatever. Oh, and don't forget, the consumer as taxpayer will have to pay off all those federal debts rolled up to bail banks, businesses, and consumers.
It's clear you believe this will be the case, and so do I. But I'm a cold, hard empiricist. If I were in a movie, I'd be yelling, "Show me the money!"
Clearly, as you suggest, a more prudent consumer will slow the economic recovery and his/her savings/investment might help the markets move upward--if he/she trusts corporate America ever again (& why would he/she do that??). What's not clear to me is whether policy makers and economists accept that consumer behavior is changing in their prognostications of early economy recovery and consequent assumptions about the relative ease of paying off the massive debt they are building for us all.
Nice article. Loved the graphic eye candy. Almost brought out a toke or two to the music!
I’m hip to what you are saying. After reading Kevin Phillips’ “Bad Money” last April, I bailed on all the equities in my 401K. My friends laughed at me.
Has anyone tried to buy a gun lately? I just ordered two and have a two month wait.
I wonder how firearms stocks are doing?
As the say in the Navy “Stand by for heavy rolls”
Wrong. I received, unsolicited, my first credit card in 1958 from the then San Francisco-based Bank of America. The "BankAmericard" (then so titled) morphed into Visa.
en.wikipedia.org/wiki/...)
No quarrel with your basic argument, although I did wonder at your basis for choosing whom to place at "heaven's door," or as dead men walking or sick.
In particular, it has looked to me from recent 10-Qs that A. C. Moore was not near-term endangered in the slightest. What am I missing?
en.wikipedia.org/wiki/...)
Also, perhaps I should explain that the BankAmericard was mailed to all or to selected BofA depositors. As I recall, it was activated by using it, and of course the card was not as variously useful as it has become.
On Mar 04 05:31 PM brombonz wrote:
> "The credit card wasn’t invented until 1967."
>
> Wrong. I received, unsolicited, my first credit card in 1958 from
> the then San Francisco-based Bank of America. The "BankAmericard"
> (then so titled) morphed into Visa.
>
> en.wikipedia.org/wiki/...)
>
> No quarrel with your basic argument, although I did wonder at your
> basis for choosing whom to place at "heaven's door," or as dead men
> walking or sick.
>
> In particular, it has looked to me from recent 10-Qs that A. C. Moore
> was not near-term endangered in the slightest. What am I missing?
there is a major slice of America that has, and will continue, to spend every penny they have & every penny they can borrow. this segment is the target of the government's attempt to get the credit lines open to them. this group distorts the mean from the average as much as the high rolling end,
unfortunately, the government may get a little traction from this end of the market - but of course it is not sustainable. i do agree we will go through a major de-levering which will go on for a long period of time.
On Mar 04 09:22 AM J. D. Swampfox wrote:
> Great post! Re: the question "would you buy or sell personal spending"...you've
> convinced me...I'd sell it ---- Now - which EFT is that?
Over the last five years or so academics and a few Wall Street economists would occassionally tut-tut on NPR over the trade imbalance and the reality that the US was driving global demand only on credit supplied by our trading partners.
Although outside the scope of this piece, we may soon have more effects beyond BK retailers in this country. China's export economy is falling off a cliff. Factories will be shuttered and its trade surplus will shrink. If so, will they be willing and able to buy all those new T-bonds to finance our fiscal stimulation?
I agree with your arguments but never undersestimate the ability of the government to alter expected behavior. If we have a period of inflation as an example people could conclude that it is better to purchase some things they need before they get too expensive. Also we all know the government wouldnt tell us it is patriotic to spend.
I had a moment of reflection several years ago when I went to collect rent on a house I own. My tenants couldnt pay rent but were living better than I was. A realization that saving and investment over a lifetime has advantages that far outweigh heavy spending later emerged.
But you sure can spend the $5,000 gift you will receive for being kind enough to pay your newly reduced mortage payment for a few months.
The fact that lots of credit was created is nothing interesting in itself. Credit is money in our monetary system. This just means that lots of money was created to purchase lots of new goods and services that were produced - i.e. the economy grew. What you refer to as "deleveraging" is really just a contraction of the money supply and, thus, the economy.
What matters is not the absolute amount of debt that a person has, but rather their ability to service the debt with their income. The reality is that there is necessarily enough money in circulation to pay off all the debt.
The problem is that some people borrow more than others, and some people have more earning power than others.
Those of us who have good earning power, who don't borrow much, and who spend less than we earn simply became richer at the expense of everyone else over the last few years.
Eventually (I won't guess when) either the wealth will be redistributed, or a lot of people will go bankrupt, and then we'll probably pick right up where we left off.
Waited until late to read this so I wouldn't be rushed. It was worth the wait.
I appreciated that you presented some new views of the housing market with several graphs I hadn't seen before. (And I read everything I can find on the housing market.)
Just how hard the personal credit defaults will hit is uncertain, but I think it is certain that we are still working into the problem. If we keep piling up more months of employment losses over 500,000 (new Initial Unemployment Claims), credit defaults will get a lot worse.
You talked about consumer confidence. That can not turn up until the unemployment rate (real or government reported) turns down. Will that happen in the next couple of quarters? I expect not. Bernancke's projection that the recession could end in the second half of 2009 IF all economic programs work as hoped for, has been grabbed onto by too many people who just aren't clear headed. Even if everything the Fed, the Treasury and the stimulus get optimum results (at least as I can devine optimum), the best I can see is a recession bottom in the first half of 2010.
This is not comparable to other recessions in the past 50 years and some of the differences are seen in several of your graphs. Readers who didn't appreciate that should go back over the article again.
>The question is--and here you (like everyone else I've seen look at this) are somewhat less persuasive--whether this new saving and prudent spending consumer will actually stick around for awhile after he/she has disgorged the debt and re-built (or actually built for the first time) real savings for retirement, education, vacations, whatever.
The answer, I'd say, is provided by those who lived their adult lives through the last depression (for me, my grandparents). They were always very frugal, did for themselves their whole lives, lived well within their means. I'd say J.Q. is spot on in saying that the consumer (of the 2000s) is not coming back. When one faces the specters of unemployment, hunger, social unrest, a general lack of security, that tends to change behavior and outlook.
CEO's justify making multi-million dollar salaries by attempting to grow the business even when it's not prudent or sustainable, not make the business safe. It's basically like russian roulette. If they are lucky they won't shoot themselves in the head for 5-10 years. After that they can nurse their wounded pride in a multi-million dollar mansion and take therapy vacations to 5 star hotels.
We are set up perfectly for a repeat of the last depression- years of trickling along, a shadow of our former selves, only to be jolted out of it by a calamitous continent or world wide conflict. Some differences between then and now: nukes (which are entering less and less secure control); populations, now 3x higher than in the 30s, with all attendant shortages of vital commodities; debt loads of the bigger powers- our creditors are unlikely to have the desire or capability to provide for the kind of government spending that will be necessary to provide for the most basic social safety net if things tumble down on their present trajectory; without said net, 20-25% of 300 million people can sure create a bunch of unrest if they are sufficiently cold and hungry.
The state of the US retail sector may be a distant, minor afterthought given what the next 5-10 years may bring us. The staid, conservative Swiss may be in the best position with their mountain redoubts and fully armed populace.
All of the discussion so far has been centered mostly on America. But world wide suffering is going to dramatically increase, especially in third worlds. All of the talk about our retail sector going bankrupt doesn't mean much to the 3 billion people living in poverty in Liberia, Gaza, Haiti, Zimbabwe, etc.
But to the 200 million or so Americans who are going to "regress towards the mean" it means a few less trips to the mall, and a few more deposits of Obamabucks in our local savings and loan (previous US Post office.)
And a good description of the global crisis of capitalism, phaf.
Now, what is the solution going to be? In the choice between barbarism or civilization, who will choose barbarism?
Come all within,
You'll not see nothing like the mighty Quinn.
-Bob Dylan
My tax dollars are not their emergency fund!!!!
On Mar 05 12:35 PM InjunTrouble wrote:
> Preventing foreclosures and keeping people in their houses is not
> the same as providing the staircase to heaven or any shopping spree.
So true- your tax dollars and mine are paying for the Bush wars and tax cuts to the upper eschelon in the early 2000s. The future tax dollars of your sons' and mine are their emergency fund.
"It is amazing to me that supposedly intelligent executives could gamble with a $100 million investment based on ridiculous assumptions and blatant lies"
Actually, it shouldn't be amazing. Most of the 'investors' had no idea what Lowes was doing - or anybody else for that matter. They knew what the price of the stock was one day, what the price was one month before, and what the charts showed. Most of the rest of the 'investors' knew what the mutual fund was doing, and how it worked on a chart. A small handful of institutions tried to take a look at Lowes, but they didn't really care either.
Nobody really cares, and management has to do something to justify their salary, and thus, $100 million gets thrown down the drain. When investors start to care about what their investments do, they'll creep away from funds, and start asking questions. If management won't answer those questions, and investors wil linvest anyway, then it's our own darn fault.
the artful practitioners of "COLLECTIVIZATION" gleeful in their scams, illusions, and deceptions while this takes place.
i'm reminded of the person's comment per last election--"i'm voting for him. he has CHARISMA"
we elected the fools[POLS] for years and got what was demanded by us.
signed: GERRY MANDER
On Mar 04 09:05 AM The Hammer wrote:
> The american public is realizing the last 10-20 years was a mirage.
> I life of living big on expanding credit. The party is over and the
> economy is going through a dramatic retructurings before our eyes.
> We are going from and excess spend and excessive leverage economy
> to one that will be more balanced between savings and spending.<br/>Th...
> savings rate actually jumped up recently. About time the public ended
> their obsession with monthly payment mentality and being a debt slave
> is the american dream. Thi sis not living.
> Also the american public should start to take back their govt from
> these corrupt politicians and special interests groups wh are destroying
> our country's future. This includes dems and repubs they are all
> corrupt.
> This budget is just a money grab for special interest. Where the
> F$%$# is the responsible spending.
Why all the criticism of the American public when their are many average working people out there who put their trust in bankers who say they can afford a loan, or sales people promoting add on sales. You assume all people have financial wisdom and are educated enough to know that they are being "sold" something they should not buy. There are more "indians" out their doing the mundane work of society, then "cheifs" who are sophisticated and savy in the workings of finance, politics, and the world in general. If you are the later, perhaps you lost sight of this, or worse, look down on people who are working so hard to just provide for a family that they don't have time to get savy. Or they just don't have the academic talents and abilities of the rest of you. If you drive a Mercedes, or even aspire too, maybe that's part of your perception problem.
Finally, I have always put money away and saved regularly. I always tried to instruct my kids to live well within their means. I also put away in a few IRAs, 401K, and 401B plans. Fortunately, I also have a defined pension plan and am retired. Anyone who thinks having just a 401K, 401B, IRA etc will positively provide a decent retirement for them may be mistaken. Part of working for many companies after WWII included the provision of PART of a persons compensation being put into a defined pension plan. We have laws to protect and establish levels for those plans. It worked. Are 401K's and IRA's based on stock market raiding (1999 to 2001) and mismanaged mutual funds working so well? I don't see it. I have had some of those since 1982, and if I depended solely on them for my retirement guess where that would put me. If I had depended completely on a 401k,IRA, etc, I would be in sad shape today wouldn't I?
Perhaps more than a few writers here and elsewhere want to believe that personal investment should be sound and viable, and therefore trustworthy for a retirement. This world is too full of opportunists that have ways of letting the stock market get pumped up, and then raid the cookie jar. Maybe we do need some actual regulations that stay in place. But not in my life time. We are/were a nation of consumers. To excess I am afraid. And business loved it and encouraged it. Now there is crying going on about people actually saving more for a change. So it was greed and opportunism that got us here. Yes, some of it individual and personal. But largely egged on by a greedy business world.
Another superb article. The fact that your logic eludes so many,however, tells me that the battleis over. The over leveraged negative net worth individuals crying for help due to their poor andirresponsible decisions will wind up being subsidized by your paycheck and retirement savings.
What has happened to an average person's IQ in this country?? When you see people, carrying Gucci Bags and wearing Prada shoes, barely make enough money to pay for their rents, you know that sth. has gone terrible wrong...
What has happened to an average person's IQ??? Not only have we become softies, we have become stupidies.
The "good" thing that comes out of this financial meltdown: people will stop buying junks they do not need with money they do not have.