DATA:Here's an interesting peice from Morgan Stanley about the current issues brewing in the economy. Again, it's the same things I posted on last time.
- Energy prices up
- National / Personal debt and Trade Deficit up
- Real Estate bubble
- Savings null
Here's the kicker paragraph from the article:
Just prior to the two oil price spikes of the 1970s, discretionary spending by US households had also gone to excess. The GDP share of consumer durables and residential construction -- the latter being a proxy for the discretionary demand for shelter -- was running at peak levels of around 14.5%. In the aftermath of those two earlier energy shocks, discretionary spending collapsed -- with the combined share of consumer durables and homebuilding falling to 11.5% in the mid-1970s and 10.5% in the early 1980s. These were the most severe consumer-led recessions on record in the United States. In the current expansion, discretionary household spending has moved into a similar zone of excess. The combined share of consumer durables and residential construction has averaged 14.3% of GDP over the past year -- virtually identical to peak shares hit just before the two energy-shock-induced consumption collapses of the 1970s. In other words, just as the energy shocks of the 1970s hit US households at a point when their spending behavior had gone to excess, the same is the case in the present climate. Yet unlike those earlier periods, today’s asset-dependent, overly-indebted American consumer is lacking any semblance of a backstop of income-based saving to shore up the downside. It would be one thing if American consumers were committed to defending modest lifestyles. It is another thing altogether in today’s era of excess -- there is much more room and greater urgency for consolidation.
The only investment Dan and I have in non-cash assets right now is investment in international bonds (Templeton Global Income Fund) because I just have a bad feeling about economy as a whole right now.
When is this government really, really going to get serious about energy policy? And, no, the latest pork-fest energy bill doesn't count.