Red Alert: The Craziness On Wall Street That Led To The Financial Crisis, Is Back And Canada Is Planning To Bail Out Too Big To Fail Banks With Your Deposits In 2013!

Wall-Street Craziness Is Back

US Savings Rate Near Record Low, Per Capita Disposable Income Almost Back To December 2006 Level

There was some good news for headline scanning algos this morning, when both personal incomes and spending came in modestly higher than expected, with incomes rising 1.1% compared to an estimated 0.8% increase, while spending was up 0.7%, also higher than the 0.6% expected. But while the superficial headline grab did indicate a modestly better climate for both spending and incomes, it was a look under the cover once again that revealed the full extent of the pain that US consumers continue to find themselves in, over 5 years since the start of the second great depression.

First, the bulk of the bounce in spending was driven by a surge in Non-Durable Goods, which rose by $48.5 billion in one month, and amounting to 61% of the total increase in personal outlays in February. This was the biggest monthly jump since the onset of the financial crisis: hardly inspiring much confidence for those companies which are wondering whether to ramp up capital expenditures and spending, especially since spending on Durable Goods declined by $400 million in February.

Second, while incomes did rebound after the plunge in January, the modest increase represented a rise in the personal savings rate to just 2.6% – the second lowest monthly savings print since 2007, excluding only the abysmal January 2.2% print. In other words, there is hardly much if any new room for additional spending with the savings rate nearly at record lows, and with US consumer continuing to reduce their outstanding revolving credit, the Q1 retail sales miracle will hardly be repeated in future months as US consumers seek to rebuild some cash buffer.

For those claiming there is something called a “recovery” underway, perhaps they can point out just where on this chart of Real Disposable Income per capita one can find said recovery. Because we are confused: with the average Real Disposable Income of $32,663 per person, or lower than where it was in December 2006 ($32,729), one may be excused for scratching their head.…

Cash levels nearing lowest in history and margin debt is high…why “its different this time!!!”

Earlier this month I shared that cash levels/negative net worth in brokerage accounts were nearing the lowest levels in history. (see post here) The last three times levels were this low the market fell in price.

My mentor Sir John Templeton said the four most dangerous words in investing are…”It’s different this time!”

The chart below reflects something “IS DIFFERENT THIS TIME!”

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